Be the Change

Build 100 is an Inc. Magazine list of companies that have been able to grow year after year, even through the Recession.  In, Grow Hire Repeat, they summarized what those  sustained growth companies have in common.  One of the top factors is:

A “big change in senior management or leadership” was among the top three factors credited for triggering company growth “breakouts” ahead of six other factors.

While this study focuses on mid-size companies with 85-999 employees, this statement is equally true in small business.  I have often said that one of the biggest reasons I can grow an existing business is that the change in leadership allows the business to get what it needs to grow today.

The leader of any business is fully vested in every decision he/she has made.  Sometimes a bad decision is continued so the mistake doesn’t have to be acknowledged.  A person’s ability to troubleshoot a new problem is influenced by everything they already know about it and every choice they have made up to that point.  When a new leader steps into a company, they are not clouded by all the past failures or successes, they can objectively look at the what the business needs today.

Many years ago, I needed new accounting and inventory management software for one of my businesses.  I researched all the options on the market and finally made my decision, the software I needed had a price tag of about $20,000 (clearly pre-SaaS days).   We installed the software and within a year, I realized it was a mistake, but I was still making payments. We continued to use the software and developed many work arounds to address the areas where it was lacking, but I couldn’t let go of how much I had already invested.  Even once I had paid it off, I still found myself hiring developers to make it work because I couldn’t just walk away from my bad decision.   This is the ‘sunk cost effect’ where we have  a greater tendency to continue an endeavor once an investment in money, effort, or time has been made.  Sunk costs should be irrelevant to current or future decisions, but unfortunately human nature won’t let us forget.

If a new person took over the company, they would immediately spot the weakness in the software and find a new solution – they would have no bias as to the money already invested.  However, I was unwilling to search for a solution because I was committed to my last decision.

Successful decisions can equally haunt you and make you continue on the same path instead of exploring new ideas or opportunities.  A big prior success can paralyze the leader of a company out of fear of failure, so they play it safe for years after a big win.  A new leader can easily see all the opportunities and wants to make their mark so they explore them without abandon.

As an entrepreneur, your past decisions greatly influence the company you lead which is exactly why a change in leadership can be a trigger for significant growth. How can we prevent our blind spots and reinvent ourselves as new leaders regularly?  Here are some ideas that have helped me:

1.  Take a one month vacation.

For me, this has been the most effective thing that I have done!  While planning for my business to run without me, I spotted several areas that I was involved in that I did not need to be.  Make this a non-working vacation and only have the office contact you if there is an emergency.  Not only will you find out if your business can run without you, but you will also will learn a lot about yourself and your co-workers.

If you are planning on selling your business, this is one of the best ways to get your business ready to hand off to someone else and you will have proof to prospective buyers that you are not necessary in day to day operations.

2.  Ask yourself and your team “What are we doing dumb?”

Gary Friedman from Restoration Hardware calls it getting rid of the unimportant.  He said:

“One of the things I learned at the Gap is that Mickey Drexler is a great ­listener who asks great questions: What are we doing smart? And what are we doing dumb? The things that will make a difference are on the margins: things that are really, really important and things that are really, really unimportant. You want to focus on the important things and get rid of the unimportant. What are the dumbest things we’re doing? We have to stop doing those things. Great organizations are able to edit.”

3.  Disrupt Something

Last winter, we had an unusual ice storm here in coastal NC.  A tree limb fell directly on our overhead power lines at the office and we did not have power or internet for four days. Luckily, I still had service at home, so I packed up our server and printers and set up shop there.  I had to create an entirely new workflow since orders and labels were no longer being printed  in the warehouse by the shipping staff.  This total disruption of how we accomplished our core activity gave us the opportunity to think about it differently.  To attack the same daily activity from a new paradigm allowed us to disrupt what already worked and we boosted productivity by more than 30% once we moved back to the office.

The process of physically taking apart and relocating all of our technology shined a light on my blind spots.  My business had been growing rapidly for four years, but some of our processes and systems had not been updated.  Nothing was broke, so we didn’t fix it, but there was plenty of room for improvement.

While totally disrupting your operations may be an extreme way to ‘act like a new leader’, it is effective.  Try working from a different location for a week just to see if you can get a new vantage point.  Or take a key process or area of your business and imagine it in another location and the changes you would have to make for it to work.

4.  Find your Sunk Costs

If you are telling yourself you can’t quit or change something because you have already invested time and money in it, then meditate on it.  Mindfulness meditation is a proven method to help avoid the sunk cost fallacy.  Read the summary of this study – Debiasing the Mind Through Meditation: Mindfulness and the Sunk-Cost Bias

5.  Ask “What would the new owner do?”

In his 1996 book, Only the Paranoid Survive, Andrew Grove, CEO of Intel told the story of this conversation with Gordon Moore at a critical point in Intel history:

… Grove asked Moore a question.

“If we got kicked out and the board brought in a new CEO, what do you think he would do?”

Gordon answered without hesitation, “He would get us out of memories.”

I stared at him, numb, then said, “Why shouldn’t you and I walk out the door, come back and do it ourselves?

If you can honestly answer that one question like Grove and Moore did, you might not need to change leadership to ignite a growth spurt.