The Facts of Business Life

by Bill McBean

  If you are already in business and re-creating your company’s DNA, the leadership goal is the same—visualize how the company will operate, make it happen, and earn your employees’ respect by the way you act and react in both adversity and success. In a situation like this, though, you have an additional challenge—your employees already know you and you know them, warts and all. Opinions will also have long since been formed, and everyone will have gotten comfortable in their jobs and their surroundings. DNA re-creation, though, means change, and it’s some of those tenured employees who are most likely to put up the most resistance. That resistance can, of course, be overcome, but it’s an uphill battle, and you can be sure that when you find yourself in this situation your leadership skills are going to be tested. Again, though, as the leader it is your responsibility to make whatever changes in the company and its DNA are necessary in order to keep up or get ahead of the market, and serve your customers.

  Building and Maintaining a Team at Level 2

  Once a company has created its DNA and is maintaining it appropriately, the chances are that it will be performing relatively well and generating decent profits. And, in fact, a good number of businesspeople are satisfied at that point, and don’t make any further efforts to build their companies. However, those who are willing to work on their businesses by building a team can take their companies to heights of profitability and performance that are experienced by only the most successful owners. Doing so, though, requires the owner to make sure that three important elements are present in the company: leadership, a sense of purpose, and chemistry.

  Leadership plays a role in team building in several ways, perhaps the most important of which is making sure the business is running smoothly on all cylinders. Let’s say, for example, that a Caterpillar franchise parts department is great at selling compressors and generators, but the repair side of the business is awful. Although good sales are clearly a plus, the poor performance of the repairs department is likely to have a negative effect on future sales. And since the parts department will get the heat for that, the two departments will have a rocky relationship, and it will do a lot of damage to the effort to establish team unity. In fact, if this problem is allowed to continue, it will be a drag on the rest of the company and make it even more difficult to create a cohesive team. However, if the owner demonstrates leadership and makes the tough choices needed to improve the repairs department, a team can be developed. This is very important to understand because it pinpoints why teamwork in business is so important and so rare. When the team does well, everyone does well, but the opposite is true as well.

  Once a team is built, it is held together by two elements, the first of which is a sense of purpose. A team’s sense of purpose is essentially a reason for the group to work together, and there are any number of things that can serve to provide such a sense. It could come from the team’s being dominant in its market, from its having the highest customer satisfaction rating, or from taking pride in being the most knowledgeable and professional in the way it represents your product. This is extremely important because your marketplace reputation will not only help drive prospects to your business but will help convert them into loyal, long-term customers.

  The second element that holds a team together is chemistry. Unfortunately, a lot of owners struggle with chemistry because they don’t understand it. Building chemistry starts by defining what it is. The dictionary defines it, in this sense, as “a strong mutual attraction, attachment, or sympathy.” What it means in terms of a business team, though, is a connection that’s felt by a group of people working together, a connection that has developed because they’ve learned they can count on each other to do their jobs so the group can achieve its desired results. It’s not about everybody being friends or holding hands and singing “Kumbaya” or Louis Armstrong’s “What a Wonderful World.” Creating chemistry is about performance, and about knowing you can rely on the person beside you to do what has to be done.

  There are several ways this kind of chemistry can be developed. One way is through fighting marketplace battles together. Another is by facing adversity and succeeding. In the end, though, creating this type of chemistry takes leadership. It takes a strong leader to get all the company’s employees on the same page and thinking along the same lines. It’s not easy, but it is essential. And the best way to do it is to create leaders throughout the business who will help everyone focus on what’s important to ownership and take pride in the job they are expected to perform. In the end, that’s how teams are built, how they win, and how they continue to win.

  Developing the Individual at Level 2

  “If we are going to win this championship, the leaders on this team are going to have to step up and get it done.” Every year, on every team where something important is on the line, the team’s coach says this, or some version of it, to his or her players. Coaches said this to me when I was playing hockey in high school and college, and they still say it today. Owners who are successful leaders do the same thing, and they do it because they know the not-so-secret secret that the more leaders a team has, the better the overall performance will be. They know, too, that when any of a company’s leaders step up and lead the business’s performance to another level, it puts pressure on other leaders in the company to do the same. In sports these types of teams don’t just win—they win championships. In business when employee/leaders step up and help the owner lead, the result is a truly great company, and everyone knows it, including the company’s employees, its competitors’ employees, and its customers.

  Even at this early stage of your business, there are ways to determine who the company’s future leaders are, and things you can do to help them develop their leadership abilities. There are essentially three ways to identify these people. First, they consistently perform at a high level and inspire others by their actions. Second, they are 100 percent committed to the team concept and exhibit it by doing things like stepping in to help a struggling employee or helping a new employee settle in. And third, they have certain character traits, essentially the same ones I discussed earlier for leaders in general, including flexibility, the ability to communicate well, courage, patience, tenacity, humility and presence, honesty, fairness, and a willingness to take responsibility. Again, these are not all the characteristics of a leader, but they include the most important ones. Once you have identified which individuals in your company have the necessary leadership skills, the next step for you is to find ways of helping them develop those skills. There are several ways you can do this, including empowering them, asking for their opinion on how to improve a particular situation, or getting their help in identifying and recruiting the best talent in the area.

  Level 3: From Survival to Success

  Level 3 is the period during which an owner moves his or her business from fighting to survive to becoming successful as he or she has defined it. And, as such, it’s where all the work the owner did at the previous two levels is implemented. It is also, though, the hardest level to master—it’s certainly the one where the largest percentage of business failures occur. A significant number of these failures occur because the owner has not provided the leadership necessary to succeed. Part of the reason for this is that as a company moves along the spectrum from survival to success, the changes it goes through are the most dramatic of any in the business life cycle, which means the owner has to adapt his or her leadership style in order to lead and control the change.

  When a business is at the survival stage, owners have to focus almost exclusively on the short term because if they can’t develop positive cash flow and at least a little profitability, they are not likely to remain in business for long. Companies at this stage tend to have very uncertain atmospheres, because employees know when they join a start-up business or an expanding one, or are working in a business that’s going downhill, the future is tentative at best. In a start-up or expansion situation, this tentativeness actually works to the company�
�s benefit, because owner and employee optimism translates into positive enthusiasm and energy. However, in a business that’s sliding backward toward the survival end of the spectrum, this tentativeness reinforces negative energy and helps foster an equally negative attitude. At the same time, sales, gross profit, and expense forecasts are clouded with doubt and cautiousness. Processes are followed inconsistently, and accountability for results is rarely questioned. Crisis seems to be more the norm than the exception, and the owner’s leadership ability is consistently challenged as he or she tries to navigate through his or her day-to-day, month-to-month existence.

  At the success end of the spectrum, though, the situation is very different. Short-term planning is still important, but the focus has turned toward the future, and short-term plans are now a by-product, or factor, of the long-term success goals and objectives the owner has defined. The atmosphere is businesslike, and the anxiety employees felt over losing their jobs has long since disappeared. The owner is showing leadership by preparing and setting up the company for the future. Sales, gross profit, expenses, and net profit forecasts are done with confidence that’s driven by the company’s success in the past and a positive outlook for the future. Processes have become a habit, performance expectations are in place, and some future problems are visualized and corrected before they even materialize. Finally, the owner is leading the company forward with a quiet confidence, some employees are helping with leadership, and others have become leaders themselves.

  There are, however, numerous obstacles and significant traps along the way from survival to success, and unless you provide the kind of leadership that’s needed, and when it’s needed, instead of moving along a straight and steady path, your business will move in a continuous circle of chaos and never get anywhere. Some of these obstacles come from outside the company, such as a new competitor who moves in down the street, consumers whose needs or wants change, a landlord who decides not to renew your lease, a long-term road project that blocks customers’ access and severely impacts sales, or any number of other problems. There are also, however, interior traps that a company can unwittingly fall into at this level, and which must accordingly be guarded against. Among these are your becoming arrogant due to past successes, employees who develop a negative attitude toward management and ownership, ongoing resistance from employees to following processes and performing as expected, the business sliding backward along the survival–success spectrum after experiencing some initial success, and the company sliding backward even after years of success. All these obstacles and traps can, of course, be dealt with, but it takes leadership to do it.

  The Benefits of Leadership at Level 3

  Being a leader enables you to provide your company with the drive and the means of controlling change that are particularly important at Level 3.

  Being a leader helps you create the kind of urgency needed to help the company break through the survival barrier and generate the consistent profits that will enable it to attain its success goal.

  Being a leader forces you to define success and describe what the company will look like when it gets there, in the process bringing structure and order into what would otherwise be chaos.

  Being a leader helps you provide a map showing how the company can overcome the obstacles that can keep it from reaching the success end of the spectrum.

  Being a leader helps you prevent managers from managing to the status quo rather than pushing themselves or their employees to become better.

  Being a leader helps you get your employees to not only focus on the quality of their work today but recognize how it builds a foundation for the company’s success tomorrow.

  Being a leader enables you to prepare others in the company for leadership roles.

  Achieving the Objective or Goal at Level 3

  Every successful company needs goals and objectives. They are the scorecard of business and are among the first things leaders implement in their companies. They do this because they understand that goals and objectives represent much more than just targets, and can make the difference between success and failure. In fact, the goals and objectives determined by a company’s leader tells everyone else in the company where they are heading and the steps they must take to get there, which is essentially the blocking and tackling of business. Attaining these objectives isn’t always easy to accomplish, but it’s where real leaders shine and where prior experience shows its value.

  Experienced owners know the bottom line is making money, and that profit has to be the focus. There are, of course, other things that are important as well, but they won’t happen if the business can’t sustain itself. A business that can’t produce profit is of no benefit to its owner or to society. The overall goal is to make money; however, in order to attain that, other goals and objectives need to be created. Over the years, I’ve found it best to break up goals and objectives into two types, internal and external, for ease of managing and determining the kind of leadership and support the owner needs to provide in order to attain the goals and objectives.

  Internal Requirements for Meeting Goals and Objectives

  Ample cash to operate the business as well as support the objective, that is, to pay for products, marketing, operating expenses, accounts receivables, capital equipment and facilities, and so on.

  Processes to support the objectives, and employees assigned responsibility for operating those processes.

  Expectations of employee output that match the company’s objectives.

  Adequate high-demand product and sufficiently trained personnel.

  A scorekeeping system that tells the owner where the company is compared to the objectives and will alert leaders to possible problems and/or additional opportunities.

  Employee enthusiasm for exceeding objectives.

  An overall understanding that nothing happens without the customer and the money they spend.

  External Requirements for Meeting Goals and Objectives

  Competitive products for which there is adequate consumer demand and sufficient availability to support sales objectives.

  Competitive pricing that can produce sufficient gross profit to support profit objectives.

  Developing ways to make your product or service easier to find and buy than your competitors.’

  An appropriately financed and targeted marketing plan to attract customers now and in the future.

  A program to continuously reinforce in your customers’ minds why they bought from your business in order to protect them from your competitors.

  These are by no means all the elements needed to support objectives, but they do provide a framework. More important, since it is ultimately the owner/leader who must make sure all these requirements are met, they emphasize the fact that leaders do not only have to create goals and objectives for their businesses, they also have to support them if the company is ever going to meet, much less exceed, those objectives. Even then, though, as a leader you have an additional responsibility, which is to follow up on the company’s efforts, regardless of how successful it was in attaining its goals. There are obviously two possible outcomes to your efforts—either you have met or exceeded your goal, or you have failed to do so. And depending on which one has occurred, you have different questions to ask of yourself and your staff.

  When you have met or exceeded your objectives, you are, of course, entitled to a certain amount of self-congratulation. However, even in circumstances like this one, there are questions you need to ask. Among these are:

  Was our objective aggressive enough?

  Could we have done better or worked smarter?

  What did we do well?

  Where can we improve?

  What did we learn about ourselves, the marketplace, and our competitors?

  What were our strengths and weaknesses?

  Raising these questions can only help you ensure meeting or exceeding your objectives in the future.

  You may, however, have failed to meet y
our objectives. If you have, the important thing to remember is that missing an objective is not the end of the world, unless you fail to learn something from it. In this situation, the questions you should ask yourself include:

  Was the objective the right one, or were we overly optimistic?

  What went wrong?

  What were the problems encountered?

  Do the decision makers all agree on what went wrong and the problems to be solved?

  Can we all agree on the remedies?

  Can the remedies be easily implemented? If not, what needs to happen?

  Does our overall goal need to change and be revised?

  What effect does this have on our financial picture?

  What did we do well, and how can we build on it?

  Raising questions like this will help make sure these mistakes won’t happen again.

  Regardless of the outcome of your efforts, however, there are two questions it is imperative you ask about every completed objective: (1) what is our next objective, and (2) can we increase the objective and, in turn, increase our expectations and profit goals? In fact, asking these two questions should become habit forming. That is, it should become part of a regular pattern of creating the objective, analyzing the outcome, and then asking the two questions. And you have to keep doing it over and over again, because it’s the only way you will be able to develop a rhythm of results that will enable your business to maintain and build on its success.