February 01, 2015
Strategy Tinkering Can Stop Your Growing Business in its Tracks
by Robert Sher
Building a business through the direct selling channel can be a powerful strategy for rapid growth. Creating innovative products and services, along with leading-edge approaches to connecting with the field and motivating performance are similarly efficacious strategies. However, even great strategies aren’t enough to sustain success.
In-depth research has shown that there are seven silent growth killers that are particularly harmful for midsized companies (generally regarded as those with $10 million to $1 billion in revenue) that can offset the success coming from a great strategy. While each of the killers is deadly in its own right, this article will focus on the danger of “strategy tinkering at
First, let’s start with an overview of the seven growth killers:
1. Letting Time Slip-Slide Away
Time—or rather, lack of appreciation for it—is the first silent growth killer. Midsized companies have big, complex projects they never experienced when small. As a result, projects seem to take too long, or get stuck altogether.
2. Strategy Tinkering at the Top
For midsized firms, tinkering with the business’ core strategy can be deadly, particularly when changes are made without proper research, planning and testing. Founders and entrepreneurial leaders are at risk of over-innovation, distracting the core business from scaling.
3. Reckless Attempts at Growth
In the effort to scale, organizations face increased risk and expense. If the attempt at growth costs too much and the revenue doesn’t match the expense, growth won’t materialize, but a cash crunch will.
4. Fumbled Strategic Acquisitions
Acquisitions can be vital to a growth strategy, but they can also derail an organization. Successful less than half of the time, acquisitions are less about the deal and the closing and more about selection and what happens afterward: the integration process and execution of the acquisition plan.
5. Operational Meltdown
A rapidly growing bottom line and a rigorously lean operation can be a death sentence under the cover of success. Leaders must be able to recognize early signs that an operational meltdown is looming. The magical time when the field hits the tipping point can be tarnished or destroyed when operations fails to deliver.
6. The Liquidity Crash
Running out of cash can happen to any organization—particularly those making reckless attempts at growth and those suffering financial erosion or a shock to the system.
7. Tolerating Dysfunctional Leaders
Having a strong, high-performing leadership team in place is critical to growth and to overcoming the other silent killers—or better yet, avoiding them in the first place.
These growth killers often grow out of sight and out of mind for midsized firms, and can drive even successful firms into extinction. Firms looking to survive the killers must proactively guard against them.
Let’s dig into the second growth killer: Strategy Tinkering at the Top. In theory, an entrepreneurial CEO is a dream-come-true. What executive wouldn’t want a boss who gets excited about good, new ideas and is willing to back them? But in reality, an entrepreneurial CEO can be a nightmare—especially for midsized companies, which simply can’t afford to experiment with too many new ideas and strategies at once.
Consider an online publisher whose CEO was highly innovative and in tune with his market. Every month, he would dream up two or more “fantastic” ideas and would order the team to give these new ideas top priority. When his staff would ask him about his previous month’s priorities, he gave them no guidance. His focus was squarely on the new idea of the moment.
This forced his team to steer from guardrail to guardrail as they tried to refocus on their new task. Of course, they couldn’t implement any of the new ideas; as soon as any headway was made, the ideas were discarded in favor of bigger, better ideas the CEO had cooked up. This is a classic case of strategy tinkering. As is typically the case with strategy tinkering, the team was demoralized, and the CEO’s most talented executives fled. The firm stagnated.
Some of his “fantastic” ideas were in fact fantastic, but due to the constant change of direction, they never got executed. While no one—not the board, the management team, or investors—should ever try to stop the CEO from generating ideas, there must be a process to select the best ideas from the CEO and test them without diverting the business’ operating team from their core mission.
Strategy tinkering becomes disastrous when the company and its leadership are driving hard toward a specific goal or mission. Complete focus on execution is required to reach the goal, and hard decisions must be made on allocating resources to this primary goal. Then comes talk of a different objective. Of a new competitive threat. Or a new opportunity. Some of the teams scatter to reconnoiter the new strategy. Another team thinks the core goal has already been replaced, so it begins work on the new one. Resentment builds when employees’ hard work feels wasted. Progress toward the core objective is slowed or stopped, and significant effort will be required to get everyone reoriented in the proper direction.
Such CEO strategy tinkering can be a bad habit, perhaps the product of an overactive urge to chase squirrels or pick up shiny objects. In addition, it may be a reaction to seemingly intractable problems like inconsistent revenue generation or low profitability.
An important indicator of CEO strategic tinkering is resistance from the executive team. Hard-headed, passionate CEOs often struggle to listen to the counsel of those around them—usually to their detriment.
Most CEOs won’t admit it, but oversight makes us better executives. The worst cases of strategic tinkering come from CEOs with complete freedom. Boards should act to require the CEO to stay within the firm’s approved vision and mission. CEOs who understand how a strong, involved board can help them will make sure their boards are stocked with experience and talent.
Of all the C-Suite executives, CFOs have the greatest chance to reign in a tinkering CEO. They are acutely aware of the effects of distraction and bad decisions on the financial statements. And it’s the CFO’s fiduciary responsibility to sound the alarm when targets are missed. Yet most CFOs won’t sacrifice their relationship with the CEO (or their jobs) in the face of a CEO who won’t listen. In fact, almost no one (other than a strong board) can deal with a CEO who refuses to listen.
CFOs need to understand that they’ll never be able to completely dissuade their CEO from tinkering, but even winning a 20 percent tinkering-reduction is a big win. CFOs should be persistent, and CEOs must remember to seek the CFO’s advice and listen carefully. This will encourage the CFO to keep presenting his or her opinions, even if the CEO doesn’t accept them all.
But CEOs can help curb their own tinkering impulse in a very simple way: by putting their vision for their company down on paper. Writing it down makes it real.
I’ve sat down with over 100 CEOs and asked them what their company’s most important priorities are. Generally, they quickly can outline the crucial key performance indicators (KPIs), the critical projects that must be executed and the three to five differentiators that make their business thrive. Unfortunately, most have never shared their insights with their team in a concise written document.
These simple plans, often just one page, can create clarity and agreement. They promote focus, and make it easy for everyone to assess the company’s performance and progress each month. As targets are missed and the team focuses on achieving them, the group becomes increasingly intolerant of the tinkering that gets in the way of execution. And when the tinkering starts, the CEO will face a team that will be able to ask how the tinkering fits into the CEO’s own written plan. And, if the new ideas are truly superior to those that preceded them, they can ask what parts of the original plan should be reprioritized.
This will stop many CEOs in their tracks as they remember the conviction with which they created and wrote down their plan in the first place. Again, even if this only stops 20 percent of the tinkering, it is still a major win.
Even at startups with relatively small leadership teams, being clear about the organization’s priorities and what work should be done first is essential. Operating plans, progress tracking and prioritization do not have to be bureaucratic or cumbersome. If the CEO is to be free to innovate, he or she must know that the rest of their team is getting the right things done each day. Yet planning and organization don’t come naturally to many founder-CEOs, and that job falls to their senior leaders.
One of my clients was a self-acknowledged tinkerer. She loved spotting new opportunities and chasing them, and found running the core business to be boring. But she understood that building value in her own company required that she slow down her tinkering. In fact, she became so excited at the prospect of formal planning as a tool to limit her own tinkering that she made a large poster showing the company’s one-page plan and posted it prominently on an office wall. She reasoned that if she started to tinker, it would be clear to everyone that she was violating her own plan.
So how can CEOs and their teams find the proper balance between strategic intransigence and the alluring temptations of tinkering? No CEO and no top team should ever stop thinking strategically. But they should keep such thoughts and discussions from the execution team. Top executives should be able to discuss strategy—and changes to it—without confusing it with or negatively affecting current execution priorities. For those leaders striving to have a more transparent organization, produce a brief and very high level summary after strategic off sites, just enough to stop misunderstandings and supposition.
If the reconnaissance work to explore a new strategy requires more than discussion, a separate team should be assembled to do just that. And keep it low-key. Most strategic ideas that at first appear to be brilliant are discarded upon review and testing. It’s best that this happens in the background until one new strategy rises to the level of a roll-out.
Disciplined processes such as business planning and monthly reviews of the plans, combined with broad visibility throughout the firm, will also play a strong role in keeping tinkering at bay, and keeping midsized businesses the healthier for it.
Robert Sher is Founder of CEO to CEO and the author of Mighty Midsized Companies: How Leaders Overcome 7 Silent Growth Killers (Bibliomotion; hardcover; September 2014). A regular columnist on Forbes.com, Sher has worked with executive teams at more than 85 companies to improve the leadership infrastructure of midsized organizations.