Strategic plan planning horizons. Are yours as short and chopped up as a horizon seen between downtown buildings, or are they like an open prairie that lets you see for miles and miles?
It is November, coming up on Thanksgiving. Are you taking this time to reflect on the year and review your strategic plan?
Imagine this: A business contact of yours calls you and says, “I have a great opportunity that is going to present itself in the second quarter of next year. I need to know, quickly, whether you want to participate in this. It will take about a half-million dollars, but it is a golden opportunity.” As he outlines the opportunity, it does sound good. But you say to him, “My budget isn’t ready for next year. We’re just in the budget process right now. I don’t know if I’m going to have room in my budget to participate in this venture.”
If your budget is an annual calendar budget that runs through Dec. 31, you have no way of objectively testing the impact—financial or operational—of an opportunity that won’t arise until the second quarter of the next calendar year. Your strategic plan planning horizon is too short.
Start putting together a 36 month rolling horizon for your strategic plan goals. Don’t limit your planning horizon to budgets, but also set a three-year rolling horizon for staff, markets, capital formation—everything that has importance to your strategic plan goals.
At the end of the first three months, the details for the next 12 months are adjusted or revised with a new starting point. You are always maintaining between 12 and 15 months of a detailed plan, and you add an additional 24 months of a non-detailed plan beyond that. If you never have a horizon of less than 36 months overall, you will be able to test the impact of your decisions before you make them.
How do you test the impacts? If you have a financial model of your business, you plug the decisions into the modeling. You project the investment level the decision will require; you project whether you can afford those dollars in your capital structure; you project whether your cash flow is sufficient. Try out the decision in your operation plan to see whether it would take people away from other critical parts of your operation to the detriment of those operations.
Your planning team should create options that supplement the goals set forth in your company’s strategic plan. The team must identify each of its members’ responsibilities. Collectively, these responsibilities should integrate into all the activities needed to achieve your company goals. Once the planning team has reached a consensus on the goals that collectively make up the strategic plan, the team can focus on the specific activities needed for each area of the company to reach those goals.
Your planning team must identify the critical success factors required to reach each goal. Each proposed success factor must be challenged as to why it is critical in attaining its specific goal. There must also be clear time frames for achieving each success factor. Otherwise, there is no way to monitor whether you are making adequate progress toward your company goals.
Your company might have a brilliant strategic plan in terms of growth and competition. But does it take your manager incentives into consideration?
Denise’s company, for example, implemented an incentive plan for top management that was tied to improving the company’s per-share earnings on an after-tax basis. The company had an opportunity to grow by acquiring another business in a synergistic field. But by structuring it through a stock swap, the acquisition would dilute the per-share earnings of Denise’s company. Is it any surprise that management found ways to foil the acquisition? How can you expect managers to make a whole-hearted effort to follow a strategic plan when it will cost them money out of their wallets? Russ’ company’s strategic plan called for 10% growth in annual revenue each year over five years. After the plan had been in place six months he realized that projected growth wasn’t occurring, even though profits were improving significantly. Why? In formulating the plan, Russ made rewards contingent solely on improved profit. It didn’t take management long to realize that the way to get greater compensation was to reduce expenses, even if those expenses could have led to future growth and profit. As a result, research and development were slashed, as was investing in hiring additional salespeople.
The message of both examples is that performance measurements must be based on a business’s strategic plan.
Measurements for incentivizing performance must support the broader objectives and goals of the company. At the same time, performance criteria should lead managers to focus on the company’s objectives as well as their own. Identical performance measurements cannot be used for every aspect of the company. As measurements affect different people and departments, different goals must be set. But each goal should lead in the same ultimate direction. Each element of the company must be united in achieving the strategic plan. A good strategic plan takes into account the managers’ best interests as well as the company’s goals. Furthermore, managers’ performance measurements and compensation need to align with the company’s strategic plan and goals.
By Dave Scarola, Chief Marketing Technologist
The impact of technology on society is a polarizing topic. You either think that technology innovation positively impacts society or you think it’s making us worse as a society. In my technology consulting and day-to-day conversation, I rarely come across people who are neutral to this topic. While some folks might perceive technology to be a relatively new topic, the controversy of innovation has been around for a very long time:
- Archimedes was a supporter of technology progress. He wrote: “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world”.
- In the 1940s, Albert Einstein, haunted by the impact of the atomic bomb, said: ”It has become appallingly obvious that our technology has exceeded our humanity”.
- Aldous Huxley was not a fan of technology. In 1956, he wrote “technological progress has merely provided us with more efficient means for going backwards”.
I worked in Artificial Intelligence (AI) in the 1980s. It was an exhilarating field to work in. We were developing linguistic systems to understand written language, expert systems to run complex processes and diagnostic and simulation tools to tackle highly complex problems with countless alternatives. The sky was the limit.
For all the promise of AI, its true impact has always seemed to be 20 years into the future. AI’s founders were profoundly optimistic about the future of the new field: Herbert Simon predicted that “machines will be capable, within twenty years, of doing any work a man can do“. Marvin Minsky agreed, writing that “within a generation… the problem of creating ‘artificial intelligence’ will substantially be solved“. Both were written in the 1950s. Along the way, B.F. Skinner quipped that “The real problem is not whether machines think but whether men do.”
So, Who Is Right?
Is technology good or bad? I’m in the “technology is good” camp. The ability to communicate constantly with my children, the sense of community that social media provides and the brain exercising that video games stimulate are all positives in my book. All in moderation, of course.
But I will admit to one overriding fear of how rapid the progress has been. It’s the impact of jobs. Think about the industries that have been obliterated by technology. Prior to music being digital and online, you went to a record store to purchase music. People worked there. People also worked to manufacture the records (or CDs) and distribute them. The entire manufacturing backbone, supply chain and service system for music are gone – along with those jobs. The combination of digital technology and the Internet collapses entire industries down to being innovated and run by a relatively small number of people. As each industry gets fully or nearly automated, there will be less and less jobs to go around. Not everyone is equipped to be a knowledge worker. This is what economists call “creative destruction,” and it has been going on for a very long time. It’s going faster now.
Despite the concern on jobs, I am a very big supporter of technology progress. Working in AI was fascinating. However, in time, we came to realize that the problems were too complex for the machine itself to fully tackle highly complex problems on their own. Instead, we realized that the model we should be working towards is to find ways that humans and computers can work together to do what they are each best at. As this recent Wired article on the future of AI points out, computers are in fact helping humans achieve more – for example, there are more chess grandmasters now than before Deep Blue defeated Kasparov.
Minecraft Helps Kids Read
Despite the positive societal impact of technology at times being over-promised, I have come across several stories recently where technology is having a major positive impact on individual lives. Take the game Minecraft as an example. When I first started playing this game with my daughter, I found it to be underwhelming. The graphics of most games these days are unreal yet Minecraft has these boxy characters that look like they are out of 1980s video games. The beauty of the game comes from how involved it is. It allows you to design and build almost anything. Even though kids often expect resources to just be available to them, you have to work for your resources in Minecraft. You need to generate food to keep your characters alive. You don’t just have building materials available to you. You have to work for them.
The game is great. But what’s caught my attention about Minecraft is that it is helping kids learn to read. Some kids are not internally motivated. They will only invest themselves in things that interest them. Clever teachers are integrating Minecraft projects into their lesson plans. While most kids expect software programs to be obvious to use, Minecraft has so much depth that when combined with a school assignment, kids are motivated to read dense user manuals and books to learn the intricacies of the game that will help them get a good grade.
‘A Love Letter to a Machine’
I’ve now come across another truly amazing story about the positive impact of technology that I can’t stop thinking about. It’s a New York Times article on how Siri has become the friend of an autistic child. It is both heart-warming and heart-breaking. The author, Judith Newman, explained that her autistic son Gus would ask her endless questions about topics such as the weather which she often could not answer. It would test her patience. Once when they were in the car together, in response to a question from Gus, she asked Siri which planes were flying directly above them now. Siri listed off the flights one-by-one. When she asked Gus why he wanted to know this he said “so you know who you’re waving at”.
Gus discovered Siri at this point and they’ve had an incredible bond since then. Newman explains that an autistic child requires one thing that very few adults have: unlimited patience. When Gus speaks, he is hard to understand. Siri asks him patiently to repeat what he is saying until she understands this. This back-and-forth has helped Gus’ speech improve. Autistic kids are often infinitely curious about a narrow array of topics that interest them. Even though we parents should cherish the faith that kids have in our “wisdom” when they ask us endless questions, instead, we often get frustrated by our lack of answers and shut them down. Siri doesn’t get tired of the questions. And, she is able to do something that machines are particularly good at: return facts based on pouring through massive amounts of data. Siri is a perfect fit for an autistic child. As Newman explains, her son now has a friend.
There are many great stories like these where humans and smart machines are working together to do much more than either could alone.
I find myself reading a lot about hunting these days. First, I just finished Born to Run by Christopher McDougall. “A Hidden Tribe, Superathletes, and the Greatest Race the World Has Never Seen”. What could be better than that? This book is about the Mexican Tamahumara Indians and their secrets to long distance running. The book is a page turner. My favorite quote is from a runner in his 90s who said “you don’t stop running because you get old; you get old because you stop running”.
One of the questions McDougall explores is The Running Man theory: whether humans were designed to run long distances. He cites research from evolutionary biologist Dennis Bramble, of the University of Utah, and Daniel Lieberman’s team at Harvard, that provides evidence, including unique human physical traits, that would confirm this theory.
I’ve also been slowly reading Lieberman’s Story of the Human Body. This book is part evolution of the human body and part healthy living book. I’ve really struggled with the dryness of evolution texts in the past but Lieberman has created a very interesting account. His thesis is that humans are experiencing so many diseases now because we did not evolve to deal with many of the environmental or lifestyle challenges facing us now. He does explain that while humans are not particularly fast or strong, we are designed to run long distances. As one example, the fact that we sweat rather than pant give us a unique advantage over other animals.
Even though Bramble & Lieberman provided a compelling argument that humans had many adaptions suited to running, the big question was “what advantage does the running man theory provide humans?” Their research found that humans became carnivorous well before sharp spears and bows and arrows were available. So, how did they track down their prey? Lieberman calls it “persistence hunting”. They literally run them to death. Even though their prey can significantly outrun humans for relatively short distances, they need to stop to recover. Humans are able to run long distances & this persistent pursuit is what enables them to ultimately overtake their prey.
Lieberman also addresses the transition from hunting to farming. It ultimately lead to our continually evolving culture which is where humans are now “evolving” most rapidly. But the transition to farming also introduced many health-related issues for humans. Jared Diamond called the transition to agriculture “the greatest mistake in the history of the human race”. Wow, that’s harsh! His position was based on farming leading to a more restricted diet. Because of the narrow human diet, famine would cause starvation because we became so dependent on a limited diet. The other downside was that farming allowed humans to live closer together, which introduced the spread of infectious diseases.
The last book that I read in my hunting series is Hunters in a Farmers World by John Dini. Dini, a prolific writer and also a legendary TAB Business Owner, explains that present day entrepreneurs are the equivalent of historical hunters. While “persistence hunting”, where a group of humans pursues their prey, may make it seem like all humans were hunters, clearly not all hunters were equal. Someone was leading the group of the hunt and directing each participant where to go. They were developing strategy and calling the shots to give the group the greatest chance of having dinner that night. These are the hunters Dini is referring to. Hunters build the business; farmers run the business.
Hunters in a Farmers World is a multi-faceted book. On one hand, it is a celebration of entrepreneurs and the risks they’ve taken and the accomplishments they’ve made to our economy and the lives of others. Dini takes care throughout the book not to take the perspective of “hunters are good & farmers are not”. As a proud farmer myself, I found Dini’s perspective to be balanced. In order for a business to run successfully, it involves hunters and farmers working together in balance.
This book is not theory. It provides one real business example after another involving successful hunters. It also provides unsuccessful examples to teach how not to approach an opportunity. Unlike any other book that I’ve read on this subject, “Hunters” takes on the real issues that entrepreneurs face in starting and running their business. This book is clearly written by someone who is a hunter, has worked with many hunters and intimately understands the complexity of decision making facing hunters. For example, how do you compensate new sales people? What should your role as owner be in the day-to-day of the business? What loyalty should you have to your employees? And even, how much money should you be earning from the business?
Here are a few bits of wisdom for entrepreneurs that resonated with me:
- Hunters don’t defend their failing solutions.
- Hunters never quit. There are no defeats, only setbacks.
- No one is really, really good at doing something he doesn’t like doing.
- Successful hunters hunt. They decide what needs doing and they do it.
- If owning your company is a lousy job, the uncomfortable reality is you made it that way.
- Great employees make you money. Poor employees cost your money.
There’s one bit of wisdom after another throughout this interesting book. If you wonder whether you are a hunter or not – wonder no more. Read this book and it will become very clear. A great example of a hunter that Dini explains is Chaz Neely who had to sell his house twice in the interest of his business – the first to save it during the S&L crash in the 1980s & the second to grow it once he survived the recession. Now that is a hunter!
In recent years there’s been an ongoing debate in business circles regarding Leadership vs. Management. While the concept of visionary leadership has been trending positively, the once noble role of management has become somewhat maligned. But before you throw out your copy of (outdated management book name – any suggestions?), let’s get past the semantics and cut to the core of which traits realistically help business owners get the best results from their team.
What makes you a leader?
Let’s begin this analysis by defining what we mean by “leadership” as it relates to modern business owners and CEOs. The late management guru Peter Drucker wrote, “The task is to lead people. And the goal is to make productive the specific strengths and knowledge of every individual.” In this regard, we will refer to private business owners or executives who are tasked with inspiring their direct reports – and consequently, the entire organization – as leaders.
You might envision a dynamic business leader as someone who is full of charisma, with the ability to convince their team to line up behind them and accept orders. But as management author Tom Peters so eloquently put it, “Leaders don’t create followers, they create more leaders.”
Convincing your staff that your vision is worth following is a key element. But rather than enforcing subordination, a gifted leader will seek to spread their message virally by empowering every department head to lead their own division with the same enthusiasm and dedication.
Employees often emulate the values and standards they see displayed in the actions of their leaders, so creating a company culture of integrity and mutual respect will strengthen a company from the top down. To expound on the importance of respect, David Scarola, vice president of The Alternative Board, spoke to journalist Nicole Fallon for a recent Fox Business article entitled 5 Leadership Weaknesses and How to Fix Them.
“The best leaders have learned that if they make the right decisions for their business, even if unpopular, and also take the time to explain their reasoning, they will earn the respect of their employees,” Scarola said. “In the long run, this is the best outcome a leader can aspire to.”
When did “management” become a bad word?
In some ways, visionary leaders are portrayed as the new heroes of the modern business era. But every hero needs a villain and, as the management vs. leadership discussion gained traction in business articles, managers were often portrayed in a less than favorable light. In other words, being a mere manager was seen as unfashionable or tied to the past, while striving to be a leader was admirable. But is this just semantics and the evolution of business language, or is there more to it?
Traditionally, many business managers ruled their subordinates based on fear and control, reward and punishment. As the psychology and technology of leadership evolved, the old ways became outmoded. Bosses who cling to the bully tactics of intimidation are becoming less common in the modern work environment.
While it is still important, and natural, to have an established hierarchy within certain organizations, the methods of getting the best results out of your staff have become less draconian. Certainly, managers are not all heavy-handed in the ways they impose their authority. In fact, a common managerial trait is the desire to not rock the boat.
According to an article at ChangingMinds.org entitled simply, Leadership vs. Management, “An interesting research finding about managers is that they tend to come from stable home backgrounds and led relatively normal and comfortable lives.” The piece goes on to clarify, “This leads them [managers] to be relatively risk-averse and they will seek to avoid conflict where possible. In terms of people, they generally like to run a ‘happy ship.’”
So for the purposes of this article, we will refer to managers as those who are appointed to a position of authority within a company and given a specific set of tasks to implement while overseeing a designated group of employees.
Analyzing the Differences Between Leaders and Managers
In what’s become one of the most socially-shared articles on leadership, Stanford professor Bob Sutton said, “I am not rejecting the distinction between leadership and management, but I am saying that the best leaders do something that might properly be called a mix of leadership and management.”
In June, 2014, The Alternative Board surveyed 336 business owners to get a street-level view of what leadership actually looks like in practice. When asked what the most important trait was in terms of dealing with their employees, 63% of owners said their role was to inspire action. Yet when the same owners were asked which function matters most to running their company, 46% of participants identified accomplishing goals as most important vs. just 38% who said setting a vision comes first.
In other words, the real leaders feel their role is to inspire the team, yet realize that all of the motivational speeches in the world won’t mean a thing if their team doesn’t ultimately see successful results. This illustrates how a hybrid of forward-thinking leadership traits and a proven managerial skill set is likely the best combination for business owners to both inspire and provide for their organization.
Warren Bennis, author of Learning to Lead: A Workbook on Becoming a Leader, summed up the management vs. leadership distinction succinctly. “To manage means to bring about, to accomplish, to have charge of or responsibility for, to conduct. Leading is influencing, guiding in a direction, course, action, opinion.”
This chart outlines the differences between leaders vs. managers:
Management vs. Leadership: What are the dangers of becoming one at the exclusion of the other?
While it’s obvious that eschewing modern leadership traits in lieu of an old-fashioned managerial style could put business owners behind the times, heading too far in the other direction has its drawbacks too.
As Bob Sutton put it in the aforementioned article, “Some leaders now see their job as just coming up with big and vague ideas, and they treat implementing them, or even engaging in conversation and planning about the details of them, as mere ‘management’ work that is beneath their station and stature.”
Also, not every business will be perfectly suited to implement the most forward-thinking leadership strategies. For example, Drake Baer recently reported in Business Insider how leaders like Virgin’s Richard Branson followed the lead of Netflix founder, Reed Hastings implementing a policy of unlimited vacation time for all salaried employees.
While this policy seems to be working for certain Silicon Valley tech startups like Netflix—who have been “rigmarole-free” since 2002—such liberal ideas may not play as well with all business institutions. The Business Insider piece also points out, “Slate writer Matthew Yglesias says that the only companies that would dare ‘offer unlimited vacation do so because they’re confident their employees won’t choose to take much time off.”
This comparison shows that in the leadership vs. management debate, there may be times where traditional, tried-and-true management systems work best in the short term. That’s not to say leaders should ever stop innovating and taking risks with potentially groundbreaking ideas. But as with many things in life, moderation is likely the key to finding the right balance between experimental leadership concepts and functional management practices.
However, for a company to truly rise above its competition risks must be taken. TAB CEO and President Jason Zickerman boldly states, “Visionary Leaders will look for the best thinking, not the safest. The most creative solutions, not the most cautious.”
How can you become a better leader?
In his book, Scaling Up Excellence, Bob Sutton says, “Spreading and sustaining excellence depends on skilled leaders throughout an organization– not just the top dogs.”
Jason Zickerman has some specific advice for business owners in his newest white paper — “Forget no one in the company as you convey what’s ‘in it for them.’ Whether it’s someone doing research, analysis, administrative duties, sales or presentation development, your job is to make sure each person on the team sees, understands, accepts, knows and embraces what they can do personally to help achieve the vision. Then, you need to make them feel good about it.”
If you’re looking for additional resources on ways to improve your leadership techniques, the four business owner books TAB founder Allen Fishman penned will open your eyes to new ways of successfully running a business.
Better yet, explore how joining a TAB board will give you the benefit of learning from other business owners who know what you’re going through and know how to help you overcome obstacles to enjoy greater success!
Do you have a long-term plan for financial growth? Without a plan, you will have stress. If your plan is high risk, you will have stress. Financial growth should be built on a long-term plan. Most of those who gamble for the quick riches in the stock market or other places live with a stress that makes it hard for them to focus on their business. A plan that looks many years in the future is the way to achieve freedom from financial concern so that decisions are not impacted by current financial needs.
As a business owner, is there anyone who can say that he or she is personally successful without his or her company being successful? Do you know a business owner who could have a failing business and say “I’m successful” or “I’m happy?” I would guess the answer would be no because the owner’s business is integral to the owner’s happiness.
To have freedom from financial worry, you need the ability to meet financial emergency contingencies. You must not be desperate to make deals that are high risk.
One manufacturer took a contract with a large retailer that resulted in over 50 percent of his revenue coming from the retailer. He financed a major expansion of plant and equipment to serve the retailer. When the retailer switched to another supplier, he was hurt. Why did he take the risk? He did it because he said that it was his chance at big money.
Financial freedom is the ability to buy what you want without worrying about it. This is different for everyone. To some, this means tens of millions of dollars to buy planes. To others, it means taking great trips when you want. This will be determined by what is meaningful to you.
When you look at yourself, do you see a person who is managing his or her life or a person who reacts to challenges and opportunities without a plan for getting you where you want to be? Business owners starting up are rarely debt free. They are generally going to be personally guaranteeing loans for some of their expenses. One thing I constantly hear from business owners who have been in business for 10 or more years is that they would like to eliminate or cap their financing guarantees. They are at a different time in their life.
What do you think money is all about? Is it to bring you financial freedom? To change your relationships with people? Question your belief system about money. If money means the ability to have a mountain home, make it part of your plan. If it means buying a Mercedes, make that a goal.
Pick no more than five material things that are important to you, and make a goal to obtain them. There is nothing wrong with it. Whether they bring you lasting pleasure or not, they may help you to see, once you get them, what actually is important to your feeling of personal success and happiness.
If money was not a factor, imagine yourself in the future. Say you won $10 million in a lottery. How would your life change? Right away, everybody says, “I’d buy this or that,” but what about your family involvement? What about your spiritual life and your hobbies? There is no right or wrong answer but there must be honesty.
How often have you heard successful entrepreneurs and professionals say that, if only they had it to do all over again, they would take more time for themselves? Of course, it is much easier wishing you had taken the time to smell the roses during the climb to business success once you have achieved your goals — but those who are still on the road to success should take note. Get to know your passions and start planning for tomorrow.
Allen E. Fishman founded The Alternative Board (TAB), the world’s largest franchise system providing advisory board and executive coaching services to business owners, Presidents and CEOs. TAB’s worldwide business advisory network operates in over 1,000 cities in the United States, Canada, the UK, Czech Republic, New Zealand and Venezuela.
Fishman is also the author of several books in which he shares his business insights to help business owners, including two best-sellers:
- The Alignment Factor: Unlock Potential, Boost Employee Performance and Increase Profits
- 7 Secrets of Great Entrepreneurial Master: The GEM Power Formula for Lifelong Success (McGraw-Hill, 2006) and
- 9 Elements of Family Business Success: A Proven Formula for Improving Leadership & Relationships in Family Business (McGraw-Hill 2008).
One of the biggest obstacles to growth in a small business arises when the owner is unwilling to delegate. At a certain point, a successful business becomes too large and too complex for one person to manage, regardless of how smart, industrious and passionate that individual is. And while on an intellectual level business owners know when the time has come to loosen their grip, they still have a hard time putting that idea into action. Here are four things to consider that will make delegating an easier pill to swallow:
1. Mistakes Won’t Kill You
Attention to detail is a good quality in any business, but when it turns into perfectionism, an intolerance or fear of any error whatsoever, this good quality becomes an enormous handicap.
Owners are sometimes reluctant to delegate because they fear others are more likely to make mistakes. They don’t know the business as well. They don’t care as much. They aren’t as smart. But even if this is true, the only way to gain experience and smarts and passion is to have responsibility.
Very few mistakes are fatal to a business. Very few are irreversible. In fact, many mistakes can be turned into opportunities and every one of them can be a teaching moment. This is the mindset an owner must have in order to delegate comfortably – along with doing a few other things that we will touch on now.
2. Put a System of Checks in Place
Delegation is not an all-or-nothing proposition. For instance, an owner should not completely disengage from the purchasing function simply because he or she has appointed a purchasing manager. This approach has gotten a lot of potentially successful businesses in a great deal of trouble. Instead, the owner should put in place an organized system of regular reviews and spot checks to ensure that work is being executed properly and diligently.
For a manager to get into perfect alignment with an owner—to understand how he or she thinks and what is expected in terms of creativity, initiative and results—can take months or even years. Without regular interactions with the owner over time, any manager is being set up for failure, and by the time the failure is recognized, it may be too late for the manager and the business.
The art of being the owner of a midsized business involves transitioning from managing all of the details to directing all of the details by managing only a few of them. When an owner has this skill there are no limits to how large the business can grow or how successful it becomes.
3. Invest in Training
The smartest of the smart owners surround themselves with people who are even smarter. Moreover, such owners are continuously seeking ways to make their management teams even smarter, with outside training programs, internal mentoring programs, cross-training and scores of other approaches.
If a newly appointed manager is working at “C” efficiency on day one, this is a minor concern. However, if the manager is working at “C” efficiency six months into the job, then this is a serious problem and one that may have been solved—and may still be solved—through training.
4. Delegate to the Right People
Training is not always the answer, because lack of training is not always the problem. Many owners are comfortable delegating only to people they trust which, in and of itself, is not a bad thing. Many times, though, the person to whom they entrust an important part of the business lacks the background, skills and raw talent to fill the role adequately.
Trust is certainly a big part of the delegation equation, but business qualifications must also be given a great deal of weight. To prevent putting square pegs into round holes, establish a clear set of qualifications for the position before considering any candidate, no matter how loyal.
The Real Fear
Reflecting on these ideas, it may be apparent that what is to be feared is not delegation but, rather, delegation without tolerance for error, without review, without training and without a sensible hiring/internal promotion strategy. This latter situation is indeed something to be feared — but is entirely avoidable for owners who recognize the pitfalls of a poorly organized approach to building a management team.
Rather than dwell on the (avoidable) downsides of delegation, owners can happily consider its many upsides. When a strong management team is in place, owners gain more time to interact with customers and suppliers, think about the big picture, develop new ideas to make the business thrive, and even take some well-deserved vacation time. All of these activities—even the vacation— serve to make a business prosper year in and year out.
Brad Shorr is the B2B Marketing Director of straightnorth.com, a digital marketing agency near Chicago. With agency and freelance experience, he writes frequently about business and marketing strategy.
Unless you’re a serial entrepreneur who started a business with the sole motive of selling it, passing the reins of your company to someone else can take an emotional toll. If you happen to also be part of America’s largest generation of retiring business owners—the baby boomers—finding the right successor has probably been on your mind in recent years.
Perhaps you’re a family business owner deciding how to fairly split assets and responsibility among heirs. In a recent feature for Family Business Magazine, editor Barbara Spector keenly observes some telling statistics from The Alternative Board’s survey of small business owners.
“Less than half (43%) of the family business owners who participated in the TAB study say they are satisfied with their succession plan. About a quarter (24%) admitted to being dissatisfied with their plan, and 33% said they don’t have a succession plan.”
Spector postulates about the 62% of respondents who doubt their business will even remain in the family when they exit, “Perhaps these business owners plan to sell because they doubt their family members are viable successors.”
While it’s estimated that 80% of businesses worldwide are family-owned, there’s a 20% chance yours is not. You may simply be a hard-working sole proprietor seeking a worthy buyer for the company you worked so hard to build. Regardless of who the next owner of your business will be, your focus should be on making decisions now that will set you up for the comfortable retirement you’ve earned.
Executive business coach John F. Dini is the author of Beating the Boomer Bust, which focuses on the unique challenges faced by retiring baby boomer entrepreneurs. Since he’s an expert on succession planning, we asked him the following questions to help provide you with a better exit strategy for your business:
1) What should you consider when choosing a successor?
A successor is often very different from a second in command. For a key employee, you want skills that compliment yours. For a successor, they should be more similar. Often, however, founding owners had the opportunity to learn different aspects of the business as it grew. It may not be reasonable to expect someone who is up to speed in as many areas as the seller currently handles.
2) How can you determine the amount of money you should take when you “cash out”?
Valuation is determined by the industry and the type of buyer. Appraisals are well worth the cost. Many owners lose good opportunities because they value their businesses based on what they need for retirement, what they heard about someone else at a trade show, or because they misunderstand the formulae (for instance, “All small companies sell for five times revenue.”) That’s simply not true.
3) What documents should be part of a succession plan?
If you are planning an internal succession (to family or employees) you will need new employment agreements, stock buy/sell documentation, probably a promissory note defining conditions of payment and security, and perhaps a non-qualified deferred compensation plan for the seller, the prospective buyer, or both.
4) How can you impart the values and culture of the business you’ve built to the next generation?
That is a broad leadership question. In relation to succession, understanding why you run the business the way that you do should be a prerequisite to consideration as a successor.
5) How can you begin stepping away from the business during succession planning?
You need not only a financial plan, but a management succession plan. Ideally, each year that you are still involved should have goals for passing on responsibility for portions of the business.
6) What role should you play in the business once you’ve retired?
As little as possible, and preferably none. Every time you come in the perception of authority shifts. If you trained your successor well, being available as an advisor should be sufficient.
As Mr. Dini points out in his award-winning book, Hunting In A Farmer’s World, “Buyers of any type will pay more for a business that has documented systems, skilled management, and a history of executing according to plan without the owner’s intervention.”
In other words, don’t spend too much time working in your business. Rather, begin phasing yourself out of the daily activities as early as possible and with strategic succession planning. After all, wouldn’t you rather enjoy your golden years on the golf course or at a resort than worrying about every stressful detail that kept you up at night as the owner?
You’ve heard the saying “great minds think alike,” but as a business owner, the solutions to problems that are holding you back are more likely to come from someone who thinks differently than you do. This is why mastermind groups (also known as peer-to-peer mentoring) are such an effective tool to overcome problems in your business.
What is a Mastermind Group?
While the term “mastermind group” has become a trendy business buzzword in recent years, the concept of forming business owner advisory boards to solve problems is as old as tribal history itself. It’s widely accepted that the “modern” definition of a mastermind group began with author Napoleon Hill and the release of his Andrew Carnegie-sanctioned correspondence course, The Law of Success in 1928.
Dr. Hill interviewed over 100 of America’s most innovative leaders, including Thomas Edison, Alexander Graham Bell, Henry Ford, John D. Rockefeller and J. P. Morgan, to discover their secrets for success. One key finding of Hill’s research is the phenomena of a mastermind group consciousness or “a mind that is developed through the harmonious cooperation of two or more people who ally themselves for the purpose of accomplishing any given task.”
When asked how the mastermind group concept is superior to the problem-solving process of an individual, Dr. Hill expounds, “No two minds ever come together without thereby creating a third, invisible intangible force, which may be likened to a third mind [the mastermind].”
So when it comes to forming a focused mastermind group or “think tank” for the purpose of helping business owners broaden their decision making perspective, two heads are, indeed, better than one – and naturally boards of multiple business owners will increase the effectiveness of each of the board members.
You might be asking yourself how business theories from nearly a century ago are relevant to the dilemmas you face as a business owner in the modern era. The truth is, the same mastermind group techniques that helped America’s early industrial entrepreneurs brainstorm their empire-building strategies are just as effective today.
While you may be surrounded by a devoted staff, financial and legal consultants, or perhaps even a trusted business partner, there are times where straight-shooting advice from unbiased experts who’ve walked in your shoes will cut to the heart of your issue faster.
In two of the TAB articles that preceded this one, we discussed understanding the value of peer boards as well as how to incorporate lateral thinking to stimulate creativity. If you’re a veteran business owner you might already appreciate the value of a peer-to-peer mastermind group. If you’re new to the entrepreneurial game, you should know that finding creative solutions to business problems could determine whether your private business is one of the 20% that survive or the 80% that “crash and burn” within the first 18 months.
Three Things Mastermind Groups Offer Members:
1) Trusted Advice
What’s different about the advice you’ll receive in a facilitated business owner advisory board is that the people offering their professional opinions to you have no bias or agenda other than helping you work through your issues. Often the advice you receive from your staff, family or even hired consultants will be colored by their relationship to you.
A properly organized business owner advisory board will be made up of fellow business owners and CEOs who are not in competition with your company and do not have a financial or emotional stake in your future. This creates a pure system of helpful peer coaching that based in reason and experience – and not tainted by the desire for potential favoritism or fear of punishment. Members inspire and encourage one another in an open (but confidential) forum without threat or fear of reprisal.
In other words, in the sanctuary of the group you can open up about real-life problems that are hurting your business without worrying that a competitor will exploit your weakness or that an employee will fear for their future. Because the issues are discussed in a confidential setting, you will benefit from the experience and creativity of your peers who aren’t limited by the same biases as your staff or inner circle of friends.
2) New Business Ideas
Group mind works differently than the thought process of a single entrepreneur — no matter how smart he/she is. The synergy that Napoleon Hill wrote about is easier to understand when experienced than it is to describe. But regardless of the special power a collective mind creates, the shear diversity of backgrounds and experiences an organized think tank brings to the brainstorming sessions is enough to open completely new thought processes.
The lateral thinking that is so effective in helping you tackle your own problems is multiplied by the number of professional peer advisors who are sharing their experience and perspective with you. It’s likely that one or more members of your mastermind group have already experienced and overcome the obstacles you’re currently facing. Although each business is unique, more often than not, the problems that they face are common. The direct coaching from someone who’s already worked through a similar problem saves valuable time and stress.
Meeting regularly means you better be ready to follow up on the promises you made at the last meeting. It comes as a surprise to some that fiercely independent entrepreneurs—who often get into business because they want to be their own boss—are also extremely grateful to have peers hold them accountable for the goals they set in the mastermind group setting.
Some business owners find that after they become the boss, there are few within their organization who will challenge them. This can lead to complacency. But with the support of an organized business owner advisory board, each member is responsible to live up to the level of excellence set by the facilitator and the fellow members. No board member wants to be the one that shows up to a meeting of their peers unprepared.
In fact, a savvy group will know when to jettison a habitually underachieving member from the mastermind group. This small bit of peer pressure is part of what leads to such remarkable improvement in the performance of most board members.
Simply put, your ability to successfully work with a mastermind group will strengthen your leadership skills.
It may sound strange that a business owner’s leadership skills are so closely tied to how well they perform as part of a mastermind group. But the lessons a business leader learns in these valuable, regularly scheduled meetings are, in essence, a form of leadership training.
Private business managers place a very high level of importance on their ability to accomplish goals. In fact, a recent survey of business owners conducted by The Alternative Board found that accomplishing goals was the number one task a leader should focus on. Here’s how the stats break down:
- 46% identified the most important leadership quality is Accomplishing Goals
- 38% of participants identified Setting a Vision
- 9% selected Establish Rules and Structure
- 7% selected Setting an Example
So it becomes apparent that the benefits business owner advisory board members enjoy also help them become more efficient leaders. The expert advice and outside the box business solutions offered by trusted peers who will hold their fellow members feet to the fire helps the business owner set visions and accomplish goals. These two things are what define superior leadership in the minds of most private business owners.
In addition to receiving advice, each member of the mastermind group is also expected to help their fellow group members solve problems. Taking on the role of a trusted peer advisor strengthens the leadership and coaching skills of every board member. This new skill set is a beneficial byproduct of the think tank process which each member can bring back to their own respective company.
The Unexpected Benefits of Joining a Mastermind Group
While the professional benefits of business owner advisory boards have been discussed at length, it’s worth noting that most members also enjoy the social aspect of the meetings. Many business owners are too busy to have much of a social life outside of their work and family. Being part of a mastermind group not only benefits the business by brainstorming solutions, it offers busy CEOs a chance to be social with others of like mind.
It can be lonely at the top, and business owner advisory boards offer that additional perk of being a support group for business leaders. Traditionally, C-suite executives and business owners feel more comfortable around people that share their passion and understand the unique challenges of being an entrepreneur.
Networking is not the focus of these group meetings, but members have been known to benefit in secondary ways such as finding partners for new ventures, exchanging leads and possibly sending additional business to one another through mutually beneficial alliances.
Now that you have a better understanding of how a mastermind group can help you gain a competitive advantage in your industry, you might be wondering how to find the business owner advisory board that’s right for you. Since you’ll be sharing sensitive, personal information vital to the future of your company one major concern you should have is the reliability and reputation of the organization you join. Beware of fly-by-night groups that may just be trying to capitalize on the recent popularity of peer-to-peer network groups.
The Alternative Board (TAB) was formed in 1990 by best-selling business author Allen Fishman who was the president and co-owner of a consumer electronics chain, which after attaining great success became a NASDAQ-traded public entity. TAB not only pioneered many of the techniques other business owner advisory boards use today, but has perfected a system of unique proprietary business tools that have helped over 15,000 business owners around the world achieve greater success.
The certified executive business coaches who facilitate TAB board meetings are among the most successful business advisors in the world. What makes The Alternative Board’s system unique is a combination of facilitated peer advice sessions as well as private one-on-one consultations between each business owner and their TAB advisor. This additional coaching strengthens the individual plans outlined in the mastermind group setting.
If you feel you’re ready to experience the transformative power that mastermind groups bring to thousands of successful TAB members worldwide, click here to find out where the closest business owner advisory board is to your business.
With the daily onslaught of information being thrown at business owners, it’s easy to feel overwhelmed, especially when it comes to deciding which expert sources offer the most credible advice. Adding to the confusion, several news outlets offer completely contradictory advice from that of their peers and often, maddeningly, publish conflicting advice from one post to the next within their own blog!
It’s refreshing to find a bit of helpful advice that business journalists across the board seem to unanimously agree on. One such piece of rare advice is that mastermind groups help business owners achieve greater success by holding members accountable. Let’s explore how three different news outlets view the subject of mastermind groups.
For the purposes of this article, we’ll look at three of the top business magazines, each with its own distinct flavor that appeals to different demographics:
- Forbes – the established authority on business since 1917, popular with Baby Boomers, famous for their annual list of billionaires
- Inc. - came onto the scene in 1979, serves as the Gen X of biz rags, trusted by older entrepreneurs but respected by younger ones
- Fast Company – the feisty upstart that launched in 1995, focuses on innovation and appeals to Millennials
On October 21, 2013 Forbes published an article by CEO Chic founder, Stephanie Burns, called “7 Reasons To Join A Mastermind Group.” In less than a year, Stephanie’s post has been viewed 17,000 times and shared over 500 times on Facebook alone. This speaks volumes to the resurgent popularity of mastermind groups in the entrepreneurial community.
Although it was ranked second on her top seven list, it’s worth pointing out the lure of “Advisement.” Even business owners who have achieved their dream of running a company may find it lonely at the top once they’re looking at the business from the executive vantage point.
Ms. Burns explains, “Once you are involved in a mastermind, that feeling of ‘being alone’ while running your business is gone. The other members of the group turn into business advisors of sorts and vice versa.” This symbiotic bond leads to a sense of accountability for the members, each relying on the other for the group to succeed overall.
Rewind a couple more years to 2011 and observe a post at Inc.com called “How Accountability Creates Success.” While the article is not solely focused on mastermind groups, as the title suggests, author Marla Tabaka credits peer advisory boards as being a primary catalyst in the success of their members.
“Successful business owners most often engage a coach and/or participate in Mastermind groups or the like. There are so many benefits to these relationships that I can’t even go into them all, but one that seems to be a common denominator for many entrepreneurs is the accountability factor.”
Finally, esteemed business scribe Gwen Moran recently wrote a feature for Fast Company entitled, “Why You Should Build A Mastermind Group.” In this article she interviews Bill Hibbler, founder and CEO of the marketing agency Gigtime Media.
Hibbler is quick to point out that a key factor in the success of mastermind groups is accountability. “In addition to having the right mix of people who are willing to go above and beyond to help each other, members need to be committed and hold each other accountable.”
This insistence on group member accountability is explained further in TAB’s post, “How Does a Mastermind Group Help Your Business Succeed?” An outsider may think that the last thing a stressed-out business owner wants is more peer pressure to accomplish set goals. However, the opposite is generally true. The extra nudge a CEO gets from their board members or executive business coach is seen as a welcome reminder to stay on task and achieve the results that led them to the group in the first place.
If you’re a business owner or CEO experiencing that “lonely at the top” feeling or simply want to explore a proven method to expand your company’s horizons, joining a TAB board might be a good fit for you. Established in 1990, TAB has helped over 15,000 business owners achieve greater success. To find out if you qualify for membership and where the nearest certified TAB board is to you, click here.