Good to Great Advisors
May 6, 2010 by Harvey Wigder · 3 Comments
In my view there are two essential characteristics of Great Advisors. The first is broad experience coupled with analytic skills, an understanding of how operations impact results and the ability to identify trends, opportunities and issues. Progress results when the right problems are solved. The second is the skill to work within the frame of reference of the client to help the client identify a solution that he or she believes in and will implement. I will discuss each of these characteristics below.
Scope of Knowledge and Wisdom to Select the Right Problem
Most advisors have been well trained as specialists in their disciplines. The good ones are on top of their profession and supply the contracted product and service with precision and at the state of the art. However there is also parochialism that comes with their training. What if they provide an excellent solution to a problem their client asked them to solve that was really the wrong problem for the client to expend resources on? That wastes resources. Worse, what happens if the advisor knows that this isn’t an essential issue but provides a solution in any case? Is that ethical?
Like a well trained advisor, an entrepreneur who has developed his or her business has been trained by success and has habitual ways of responding to business situations.
Most of the time, the good advisor will be solving the right problem and most of the time the owner’s solution to a problem will be the right one. It is at the margins where interesting situations occur. These margins occur at those moments that call for “out of the box” thinking. In those cases, wisdom involves stepping back and identifying the right problem as a precursor to solving it. The Great Advisor can stand back and identify critical issues.
An owner should look for an advisor who challenges him or her to find the right problems to solve. Advisors who meet that criteria might be ones who have run businesses or who belong to multi-discipline groups such as I have mentioned previously, Exit Planning Exchange or The Family Firm Institute. This exposure to other disciplines and ways of thinking helps train them to step back from the problem a client presents and help identify a deeper or more fundamental problem. This directs resource to solving problems that will benefit the business.
As good as this broad knowledge is, it not enough for Greatness. I think a second characteristic is needed for a person to qualify as Great Advisors.
Respect for and Acceptance of the Client
Because of the broad experience in dozens or even hundreds of companies a good advisor brings to any one client, that person will often see opportunities for improvement. It is very common for advisors to be frustrated because their client doesn’t get it! Why is he or she resisting good recommendation?
I am going to make my point by asking you to drawn on your own experience. Let’s say you have a problem bothering you and you talk to a few people about it. The first person doesn’t have the patience to let you “get it all out” and gives advice on how to solve the problem. How annoyed and frustrated are you? The second listens and asks a lot of questions. After awhile you solve the problem yourself (eureka) or are more open to discussing alternative solutions. Does that feel better to you, and are you more likely to go with the decision made in that situation?
The Great Advisor takes the time to explore, understand, and respect the psychological and cultural context and then works within that framework to get done what the person or system is capable of doing. The Great Advisor has developed skills as an active listener and has learned to understand and explore before jumping to action.
Trust
You will notice that a Great Advisor doesn’t always get great results. However, the Great Advisor does build relationships and acts in a trustworthy manner. They understand that they can be influential but in the end, the decision is with the client and that the client has the right to do “the wrong thing”. At the end of the day, The Great Advisor has the satisfaction of knowing that he or she worked in the client’s best interest, has not been self serving, has done no harm and hopefully has helped the client make progress. The Great Advisor stands ready to provide greater value when the client is ready to take a broader view.
The books I recommend are Dirty Rotten Strategies: How We Trick Ourselves and Others into Solving the Wrong Problems, Precisely by Ian I. Mitroff and Abraham Silvers, and Helping: How to Offer, Give, and Receive Help, by Edgar H. Schien.
The Advisor’s Dilemma
May 4, 2010 by Harvey Wigder · 3 Comments
I belong to two professional associations that consist of seasoned advisors who consult to family and private businesses. To get the juices flowing, we sometimes discuss cases that highlight issues and make us think about common concerns and ways we can collaborate to provide the most value to our clients.
Let’s look at the structure of a typical case. The case starts with the history that resulted in the company’s origins and place in its market. Generally the cases present a company that is a going concern and has, at its core, a foundation for a good future. However, there are problems. It almost always is declining profits. Underlying and contributing to this are problems with funding, sales, marketing, customer service, and operations. There will also be further underlying concerns about family dynamics, the quality of owner leadership, and the quality of the management team.
The advisors who discuss these problems offer different perspectives:
- Those who are accounting oriented, analyze the content and nature of financial data to get to the issues that seem to most affect the bottom line.
- The M&A specialists talk about what has to improve to make it more attractive for buyers and fetch a higher price.
- The business and turnaround consultants focus on the strategies they implement to turn the company around.
- The lawyers offer up the legal tools to draw up buy sell terms and related succession plans, but usually need to hold off until other issues are resolved.
- Estate planners outline strategies to preserve and grow wealth.
- The money manages optimize security and investment income.
- The organizational development people will see problems with leadership and will propose programs or coaching to improve planning and communications to better link human resources together to better achieve the mission of the company.
- Insurance people think of how to provide a financial safety net for the owners.
- I, as a recruiter, see opportunities to strengthen the company by introducing new talent.
We come out of these discussions with two conclusions:
The first is that the situation is much too complex for any single discipline, and in an ideal world, several would collaborate to help the owners solve complex and interrelated problems.
The second is a desire for, what I will call, the Holy Grail. By this I mean each discipline knows it has an important role to play with a focused successful company. What we all seek is company leadership that has an intelligent, well implanted business plan which leads to growth along with leadership who has an exit or transition plan to ensure the continuity of the business for the long haul.
Result: This can lead to the ultimate win-win. The owner has the experience of meeting business and life goals and advisors have the satisfaction of providing valued support along the way.
As advisors, our thinking about the company is not limited by its culture, and we know all companies go through cycles and leadership strengths in earlier stages can be weaknesses in later stages. We understand there is strength in coming to grips with change and being open to new ways of thinking necessary for the company’s present reality. We also know the owner who plans for the future dramatically increases the odds of achieving the highest quality result.
Put another way, our client may benefit from a changed way of thinking but doesn’t see the need or resists taking the risks inherent in implementing change.
The dilemma is tantalizingly simple:
How hard (or perhaps, in what way) should a trusted advisor push the owner to take a broader perspective and engage the support of other advisors and coaches who will help incorporate new ways of thinking and a more planning oriented approach to the transition that is inevitable?
The best advisors put their clients first and are consistent advocates for what is best for their clients and their clients businesses – but how can they do this if the client simply does not see the forest because of the trees? What do you think?
Machiavelli’s Take on Advisors
May 4, 2010 by Harvey Wigder · Leave a Comment
The word Machiavellian is often regarded as synonymous with manipulation. But, is that really what Machiavelli was about?
I recently read The Prince and was taken with Machiavelli’s sensible and straightforward message. He showed how applying an understanding of human nature would allow a ruler to increase power and territory. The manipulation inherent in the concepts was based on strategies that increased the ruler’s power through providing influence and wealth to supporters.
When he classified states in terms of how they were governed, it was clear to Machiavelli that democratic states were more lasting than despotic ones. They found a way to balance extremes and give each class a piece of the action. Sooner or later, he observed, a ruler in a monarchy would get caught up in himself and forget to govern for the common good. This would alienate subjects, leading to revolution and vulnerability to ambitious rival regimes.
Leadership requires wisdom and knowledge and no one individual has a monopoly on it. As a result, Machiavelli understood how important it was for a Prince to have advisers who could help him stay grounded in reality. Sustained power required that policies and decisions spread rewards and minimize discontent.
He cautioned that the price of choosing advisors who were sycophants would sooner or later be high. Conversely, he documented that Princes who had the wisdom to use advisors with knowledge and skill and the backbone to be truthful had a better chance of survival and enhanced success.
These insights are as relevant today for a business owner as they were for a Prince in Machiavelli’s time. (Read more.)
The business owner whose advisors are cronies or dependent vendors and employees without the background and insight to provide needed advice or who have been trained not to offer it will lose out in the end. If you are an owner, it might meet certain human needs to have your judgment reinforced by yes men. (We will review the tale of the Emperor’s New Clothes on the right hand side bar.) However, it isn’t good business practice. Here are ways you can evaluate your advisors and your ability to benefit from good advice:
- Does the advisor have experience and success in an area where you need help and where you are seeking guidance? (This could be in domains as distinct as general management, whether to invest in new plant or technologies, or financial management.) You should seek people with the resume to provide guidance and bolster your strengths.
- When you ask for advice, are your views reinforced or are you challenged (respectfully) to see things in a new way, think out of the box, examine prejudices, or question past policies?
- If you take the risk of following advice and doing something that is out of your comfort zone, does following the advice lead to hoped for improvements?
- If yes, you are probably on the right track and have a valuable advisor and should followed his/her advice literally and in sprit. Treasure that person and your collaboration.
- If no, there is a problem. Then you need the wisdom to find out if the problem was the advice or the way you implemented it or something else. Whether the problem was with you or the advisor, the business will be preserved and enhanced if you show the courage to deal with reality.
Machiavelli remains pertinent today because human nature remains the same. We can get caught up in our technological world and forget the universal principles that tend to repeat themselves through recorded history. One universal principle is that self insight and the ability to learn and change behavior remains problematic. People are complicated.
Six Keys to Successful Hiring in Private Businesses
May 4, 2010 by Harvey Wigder · 1 Comment
Companies have traditionally defined successful executive hiring as finding and hiring an executive with the requisite skills, experience and personality for the position. From this perspective, if the executive fails, it is because the wrong executive was hired. Unfortunately, over 40% of executives leave within the first 18 months, proving time and again, that hiring the ‘right’ executive does not necessarily guarantee success.
At Fulcrum, we take the common sense view that success is not achieved the day an executive is hired, it is achieved over time. We define success as hiring an executive who helps a company achieve its objectives and the company becoming stronger after the executive is hired.
It is easy to blame performance failure on a new executive when it is clear that objectives were not achieved and the person and situation did not match as well as hoped. A more honest view looks at the executive and the organization to diagnose the causes of failure.
At Fulcrum, we believe that the owner and new executive must collaborate and plan for success. We list the six keys to successful executive hiring below.
1. Prepare Yourself for Change
One of the saddest failed executive hiring I witnessed was by an owner who hated running his company, and was unsuccessful selling it because his asking price was too high. Rather than improve his business to increase its value, the owner decided to hire an executive to run the company for him. Unfortunately, since the owner did not understand the need to build value, he set out to hire an executive with the contrary objectives of: 1) having significant talent and 2) behaving like a clone by operating the business the same way he did.
A proactive person was hired and every idea for change was knocked down. The relationship lasted six months. It was a disaster for both the company and new executive.
The truth is there are opportunities for change in any organization. Sometimes the important opportunities will be in sales and marketing: what is sold, how it is sold and to whom. Other times change will be in capitalization, improving internal operations or building a strong management team.
The hiring owner or CEO should understand that hiring a seasoned, proactive executive implies change. During the hiring process, the owner needs to understand: 1) what the executive candidate will seek to change, and 2) buy into how the company might be different as a result. If not, the relationship starts off with a basis for conflict and failure in place.
2. Gain Commitment of Management Team Early On
Too often, an owner or CEO decides to hire and then postpones getting the balance of the management team involved in the process. Whether this is due to lack of management skill or impatience to get the job done, this is a crucial mistake for two reasons. First, the wisdom of the team is not utilized to define needs and objectives, the skills to achieve them, or evaluate executive candidates. Second, the team loses an opportunity to gain a consensus on the problems that the candidate will seek to solve, and a commitment to any of the programs the candidate will seek to initiate. A lack of consensus forces the new executive to work in an environment in which the balance of the organization does not understand their mandate, or the role they need to play in achieving the company’s objectives.
It is essential for owners to channel the insights of their management team and key employees when initiating the hiring process and engaging them in the selection process.
3. Commit to Each Other’s Goals
Both the hiring executive and the new executive bet an important part of their future on the success of their new working relationship. Often, the hiring executive focuses on their own goals, without understanding that the goals of the new executive will drive their own actions and/or satisfaction with results.
Both parties need to understand what the other wants to accomplish, and be committed to achieving mutual success. This implies a literal contract and a psychological contract with fair and proper terms built on a foundation of mutual respect.
Owner-Managed Companies Have an Advantage in the War for Talent
May 4, 2010 by Harvey Wigder · 1 Comment
In more than 20 years of advising business owners of private companies on hiring and retaining top talent, I’ve witnessed unique problems they face in building their management teams as they grow their companies.
In his seminal book Good to Great, Jim Collins stresses that getting the right people on the bus is paramount to building a great organization. While hiring the best people is a challenge for both private and public companies, it’s a more daunting task for smaller, privately owned companies that must compete with larger, public companies for the same talent pool. Smaller, private companies are at a competitive disadvantage when it comes to hiring top talent for three reasons:
1. Lack of large recruiting budgets to find top talent;
2. Lack of brand name recognition and prestige to woo top talent; and
3. Lack of competitive compensation and benefits packages to hire top talent.
That said, I’m about to contradict myself and argue that these hiring challenges are no longer hurdles. This exact point in time — the early years of the 21st century — offers the greatest opportunity in modern business history for private companies to find, hire, and retain top talent. In fact, I’d wager that as a result of a dramatic and fundamental shift in the world of work, private companies are in an increasingly powerful position to attract top talent. Two phenomena are bearing out this prediction.
First, members of Generations X and Y are seeking alternative employment to large, publicly traded corporations because they are suspicious of corporate America: Not only did they grow up in a world rife with corporate scandals, but many of them experienced first-hand how their baby-boomer parents were scorched by big corporations – they’ve either seen their parents suffer the financial and psychological blows of being laid off, or watched their parents practically work themselves into their graves to obtain the corner office. In this regard, the younger generations are redefining work and what it means to them. Instead of adopting the work ethic of their parents, they are seeking a quality of life and work/life balance that go beyond monetary compensation, fancy-sounding corporate titles, and climbing the corporate ladder.
Second, in an ironic twist, many baby boomers who have been successful in corporate America are growing tired of the corporate rat race. Since many of them want to continue working, they’re turning to the private sector as a place where they can add value and have a more profound and an immediate impact on a company’s bottom line. For many baby boomers, being a big fish in the small pond of a private company is more appealing and satisfying by mid-career; they no longer have to prove to themselves that they’ve made it.
My predictions are already being supported by a recent survey conducted by Burson-Marsteller, a leading public relations firm. The survey, 2005 CEO Capital™, reveals that “64 percent of workers from around the world say that a poor work/life balance is their top reason for not wanting to become a chief executive or other corporate bigwig.” Lesley Gaines-Ross, chief knowledge and research officer at Burson-Marsteller, further commented that “recent college graduates looking for jobs say that balancing work and home is important to them and work/life balance in general is a big issue that might give [them] pause before taking advantage of an opportunity.”
As a hiring consultant to privately owned companies, this survey is music to my ears and may be the most exciting time in my career because, as I’ve said before, the opportunities for private companies to grow by hiring top talent have never been greater than they are now. Thus, I’m motivated more than ever by the challenge of helping business owners “get the right people on the bus,” so they can take advantage of this shift in attitude and mindset.
Looking Outside the Family for New Leaders
May 4, 2010 by Harvey Wigder · Leave a Comment
When executive members of a family-owned business decide that the time has come to hire an executive from outside the family, the reason for doing so is usually precipitated by a significant disruptive event such as increased marketplace competition, a changing business model, a financial crisis, foundering leadership within the family ranks, lack of a succession plan, lack of vision or strategic direction, or simply the need for new blood and a new way of doing business.
It’s one thing, however, to arrive at this decision, it’s quite another to have the will and courage to execute what will inevitably become one of the most profound decisions in the history of the family’s business. For this reason, it is critical that the family executives take the time to understand the implications and ramifications of making this decision. Below are important issues that should be addressed before the family business owners set the hiring process in motion.
Put Business Matters Before Family Relations
Unlike other types of businesses, a family business is a complex, dual system that consists of two distinct and often contradictory parts: the family and the business. Thus, before a family business owner can set out to hire, he or she must come to terms with the fact that a new hire will fundamentally change both the family and business dynamics.
In effect, the decision to hire outside the family suggests that the business owner has already made a conscious decision to not only separate business goals from family relations, but also to put the goals of the business first and foremost. In other words, with this decision, the overarching goal to maintain family harmony or at least family order has shifted to promoting the business, knowing the risk of disrupting or altering the family dynamics. At this point, some family stakeholders may object and try to thwart the hiring process. One way of dealing with a family crisis is to bring in a family business therapist who has experience dealing with just this type of situation and who is able to provide useful third-party perspective to avoid long-term family dysfunction while still meeting the business needs.
Step Back and Reassess the Situation Before Proceeding
Not rushing into the hiring process is the first rule of thumb. While hiring mistakes are costly for any business in terms of time and resources spent, a bad hire in a family-owned business comes with an emotional cost, and it takes doubly the time for a family-owned business to regroup and begin the process again. Thus, time and care should be taken upfront to analyze the business operations, the business objectives, and goals to ascertain what skills, experience, and expertise are needed to bring the family business to the next level.
Come Face-to-Face with Your Blind Spots
Also at this stage, it’s important that the family business owners be aware that they may have professional and personal blind spots that they must address in order to understand the kind of executive capabilities that will be required to move the family business forward. For example, while the family business owners may know the mechanics of their trade, they may not have a good understanding of how to run a business, especially a business that is on the cusp of change. Even though the business has been operating in a certain way for a period of time and has achieved a certain level of success, the operations may need to be re-examined and overhauled to make way for the new talent who will be brought in to implement new processes and systems.
Obviously, the best and probably the only way to come to terms with one’s blind spots is through the help of an outside expert who can work with you to determine how the new hire will compensate for your shortcomings.
Understand That Executive Power Comes with the New Position
The decision to hire an outside executive must also come with the realization and an acceptance that the new position has to have a level of executive power that is unprecedented in the history of the family business. For this to happen, the business owners must be willing to relinquish the reins of authority to the new executive. Without this willingness, the case to hire an outside executive will be closed. What executive would be willing to come into an organization without the authority to make decisions that would effect change in the business operations? This is, by far, the most difficult decision that family-owned business members will have to face when making the decision to hire outside the family.
Accept That a New Executive Hire Will Change the Organizational and Personnel Dynamics
Family business owners must understand and accept that when a new executive is brought on board, the organizational structure, from day-to-day operations to personnel, will undergo fundamental changes. In particular, the business owners must realize that their existing relationships with their employees, including family and non-family employees, are not sacrosanct. The new executive will invariably form his or her opinion on how competent and effective the staff is and make adjustments accordingly, which will surely result in staff restructurings.
Making a successful executive hire in any business is a challenge under the best of circumstances. But for a family-owned business, the challenge is even greater: The hiring decision is compounded by the fact that the executive not only understand the business, but he or she must also mesh with the family dynamics. At the end of the day, what’s most required when making the decision to hire outside the family is the courage to do what is best for the business’s long-term success. It all begins and ends courage to act.