Rick Williams, a partner in Newport’s New England practice, recently published this article on the web site of the Boston Business Journal.
The founding team of a new company will only succeed if they are committed to each other and committed to the success of the company. One of the most difficult barriers to growth is the transition of the leadership team from loyalty to performance as the essential qualification for leadership in the company.
New companies find customers and become profitable, but most don’t. Of those that achieve initial success, few are able to break through the barriers at $5 million to $15 million in revenues and grow to significant scale. We know the Bill Gates, Ken Olson and Steve Jobs examples of founding CEOs who grew their companies to big successes. They are exceptions to the more common pattern of companies growing to significance only when a new CEO with different skills takes over the company. Even when the CEO can make the transition, other key leaders will have to change.
Whether you are the CEO who wants to build your company to the next growth stage or a division or department head deciding whether your team is up to the challenge of material growth, you are faced with “Am I willing to fire my best friend. This is the gal or guy without whom this company and I could not have gotten to where we are.” Leaders who cannot make these changes will not be successful taking their companies through the next stage of growth.
These choices seem harsh and unfair. Not making key staffing changes limits the growth potential for the company. Other employees will not have opportunities that come with growth. Valuable contributions to the company’s customers and its community will be lost. Value creation opportunities for investors in the company and other stakeholders will also be lost.
Friendships with our colleagues grow when we work together over long hours to overcome the endless problems in any growing company. What could be more unfair than to say that those who were essential to the success of the team must move on once the company becomes successful. We all know the stories of new investors in the company gaining control and installing a new CEO to run the company.
Here is another perspective. Does the VP of sales who is very effective dealing directly with clients really want to become VP of a Sales and Marketing organization where she will have little direct client contact? Does the CEO who likes the excitement of founding a new company with a great new product really want to spend much of his time dealing with investors, HR issues, financing and process improvements?
Firing your best friend may be required. But the successful leader will also endeavor to find what is best for the loyal team members.
What You Must Get Right to Grow to Scale
- Start with where you want to go – a reality based plan with buy in from your board and leadership team.
- What are the capabilities needed to execute on the plan including the skills, style and temperament of the key leaders? What are the gaps?
- If you are the CEO or division leader, be honest with yourself. Are you the right person to lead the team through the next growth phase or should you have some other role?
- Are you prepared to select the team and measure their contribution by reasonably objective performance criteria rather than by their commitment to you and the company?
- Have you had a deep and honest conversation with your key leaders on what they want to be doing over the next 2 – 5 years – and how they will fit in?
- Does your company and its leadership team have the culture and values needed for challenges required for the next 2 – 5 years? Culture is very hard to change. If cultural change is required, how will you make that happen?
Only a no-holds-barred dialogue – with yourself and your team – can set the foundation for growing your company to significant scale.
About the Author
Rick’s expertise includes medical devices, financial services, real estate and high tech. He is Board Chair of Point Care Technologies a medical device company selling proprietary instrumentation and reagents for HIV-AIDS testing across the developing world. Rick also serves on the board of Amorphex Therapeutics, an innovative drug delivery company.