Success or Failure: Its the little things
Success or failure in business is sometimes determined by circumstances and timing out of our control, rather than expertise. But many realize that within our control, we can determine success in some part by doing a bunch of things which individually may not seem all that important. Operating a consulting business, I get to see a wide array of small to midsize companies who need to improve their performance and a fair number of early stage businesses struggling to obtain needed capital to grow. For the most part these are private companies trying to get to the next level. Inevitably, there are more failures in this space than success stories, and over time, I’ve come to realize that upon first encounter, there are signals or telltale signs which provide insight directionally in regard to strengths and weaknesses or whether the problem is the management team or a dysfunctional board of directors.
There are a myriad of specific reasons for failure or underperformance in this sector and it often takes a close examination to really pinpoint the problem. In my business, paying close attention to little things that a key executive or board member says, does or doesn’t do is critical. When first assessing a situation, inevitably one notices certain small details in a conversation or in preliminary information, which more times than not are ignored or excused. But over time, one learns to pay attention to these passing observations because invariably, upon review, they provide a valuable piece of the profile of that business way before having the opportunity to dig deeper into the numbers or the operational performance. The uncanny thing is how, more often than not, these early indicators are accurate in drawing a ring fence around a particular problem or in identifying a propensity for success or failure within an organization. Here are five common sense items to keep in mind.
Success or Failure: Show up on time
I know this may sound like a little nit to some but you can tell a lot about a person if he/she can’t make meetings on time or chronically has to reschedule. Woody Allen is credited with saying, “85% of success is just showing up” and that is particularly true in business. It is not about time management per se but about respect for yourself and the individual you are meeting. And it goes a step deeper into organizational skills and attention to detail. If it happens consistently, it’s a red flag of sorts because it implies an inability to keep commitments and that reflects directly on the business. More often than not, that executive cannot be depended upon to achieve results or perform in a crucial situation. Or if you are contemplating a venture with someone that is chronically late, know that you may be in for some drama along the way. And tardiness particularly is not a good trait to observe within start-up management teams where most things are being fashioned out of whole cloth and the next meeting might be the one chance to meet and impress a key investor or potential client.
Success or Failure: Respect your commitments.
This is the companion piece to the previous point. In the process of forming a relationship, whether hiring someone to analyze your business or choosing to enter into a joint venture, it is important to follow through on commitments. I’m talking here again about little things. Following up on a promise to place a phone call after the first meeting on a certain day and time or to send some information overnight is important because it conveys a sense of seriousness, purpose and a commitment to the person on the other side of the table. Forgetting to call or send that information generates a negative feeling about you and by extension, your enterprise. By meeting expectations you underscore the initial impression, paving the way for a more substantial relationship. But if you routinely don’t keep these seemingly unimportant commitments, a negative perception begins to form in the other person’s mind, which if not directly addressed will more times than not scuttle your desired result. Unfortunately, many people in business, some quite successful, don’t treat these commitments seriously. Maybe they don’t have to because others in their organization cover for them. But for those executives in companies that want to improve performance or attract needed capital, following up promptly and doing what you promise will always be good for your career and business.
Success or Failure: Don’t focus on the glory.
This is endemic in the digital space where you encounter many entrepreneurs, still in pre-revenue stage, who seem more consumed with news about all the companies that have been sold or IPO’d in their space and how much money potentially their venture could be worth down the road rather than concentrating on how to gain traction and prove out their revenue model. It is always curious to meet these people because it is so quickly evident that they really don’t have a clue about what they are doing. And in almost all cases with serious people, talking in this way turns people off. For every Facebook or LinkedIn success story, there are hundreds or even thousands of startups that have burnt through hundreds of millions of dollars because they failed at the hard work of implementation. It is essential to be optimistic and visionary but the real successful startup teams stay focused on their SWOT analysis and establishing the key metrics of their business. And they leave the business gossip to others.
Success or Failure: Avoid getting defensive.
This problem usually occurs in the process of problem solving, primarily with CEOs and CFOs, particularly in companies that miss their budget projections. Companies miss numbers all the time and most skilled executives deal directly with their boards about the reasons for underperformance. Steps are taken and the business moves forward. But frequently, I run across a company whose CEO or CFO reacts poorly in these critical situations by getting defensive in response to questions or requests for further information. Either in words, attitude or lack of objectivity, these executives do a great disservice to themselves and their company by putting barriers between the management team, their board and the solutions. This makes a tough situation that much tougher and in some extreme cases, can lead to the replacement of that executive. I always tell my clients, if there is a problem, deal with it quickly and openly. Accept responsibility but don’t own the problem exclusively by getting defensive. If you need help to solve a problem, ask for it. The skilled executive knows how to place the problem in the middle of the table and solicit suggestions, realizing his/her job depends on arriving at the right solution, regardless of the source for the inspiration. The weaker executive gets defensive or tries to obscure facts, which creates the unintended perception among peers or the board that he/she is the problem.
Success or Failure: Pay attention
Weak management teams can kill any chance for success. But by the same token, dysfunctional board of directors can also add problems especially when they fail to pay attention to results or delay making decisions in a timely manner. I’m not addressing the specific challenges of managing public company boards. But in the private market, I frequently find a company whose board, usually made up in some part by funds or individual investors lose a lot of time and money because they don’t pay attention or place more importance in words rather than actions. Again, it’s simple things that provide clues to a business. How and when information is presented. Do the books close each month by a set date? Is the information in the board packets easy to follow and does it provide a clear basis of comparison between projected business and results? If the answer is no to the majority of these questions then there are bound to be major problems with the business. Furthermore, is the board organized so that members can easily communicate with the CEO and each other? Again, a simple thing which if not structured correctly, can lead to costly problems. In one recent situation, I was asked to look at a struggling business and was provided the current board package. I knew going in the company had problems but a quick review of the CEO’s explanation and numbers provided to his board told me volumes about the inefficiency of the business and the lack of expertise of the management team. In less than an hour reviewing the information, I had already formed an opinion that most of the management team had to be replaced. It wasn’t that they missed budget by 40% but clues came from the way they laid out the information. It was disorganized, obscure, hard to square and filled with general industry platitudes rather than specific observations about their business. This five year old company had never come close to its original 5 year projection and yet the original group of investors still let themselves be lulled into inactivity by the CEO’s baloney. It wasn’t too difficult to determine where the problems resided, so why hadn’t the board taken actions sooner to reduce costs and find someone else to run the business? Why couldn’t these investors, who had regular access to information and presumably were far more familiar with the problems, figure things out sooner especially since the business was losing millions annually? This was a situation where the board made a bad situation worse and wound up losing a lot of money. With a different client, this one with a VC dominated board, the management team had been overpromising and underperforming from the start. The board was financially adept but lacked operating expertise. 24 months into it, the board still hadn’t found its way to replace these executives even though they knew the young management team hadn’t performed as expected and had obscured the extent of the problems and missed opportunities. The CEO and COO were eventually replaced but it was too late to right the ship and within 9 months the business shut down leaving the investors in the hole for $11 million. The point being, investors, even the seemingly savvy ones, do silly things. Utilizing common sense and a discipline like paying attention and making decisions expeditiously can mean the difference between success and failure for a new or struggling business.
Running a business is difficult but success sometimes depends a great deal on luck and timing as much as skill. And more often than not, in business, luck is manufactured to some degree by the little things, in our control that we do or fail to do, each day.