We have heard in the news recently that Yahoo is joining the list of firms that has lost momentum and is now reducing headcount in a big way. Many other firms are in this box as well, including names like IBM, HP and Cisco.
The path to events like this is paved by organizations that avoid the clear, tough strategic conversations about right projects. By keeping the dialogue “nice,” and in the framework of optimization rather than performance, hardening of the arteries sets in. This happens over a long period of time, and truthfully, it’s very hard to see from the inside out.
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I’ve been a veteran of those long and terrible layoff days. What most people don’t realize is that for the leadership team, the event actually begins 90-120 days earlier, when the business plans are set, and it’s clear that the plan simply just does not support the investment level. Restructuring plans are called for and meetings run long and over weekends. Ultimately, lists are made, and the HR and legal teams go to work. PR teams prepare spin and memos. Security teams are put on standby.
Then, one Friday morning at 7:00 am, everyone that is involved in the “meetings” somberly gather for the briefing and get the final set of lists and talking points. Then it begins, session after session, sometimes via phone or video call, people receiving confirmation of what they probably already knew – lives are disrupted, both on the sending and receiving side. There are moments when it borders on the absurd…people waiting in line outside a conference room waiting to be laid off.
The truth is that this is a drama that started way before this event – when the white hot focus of the founder was lost
The people taking part in the above drama are usually passengers in a value delivery vehicle that is built out of bad or outdated strategy. Many times you hear people in the hallway of these firms say that “we don’t have a strategy.” The truth is that there is a strategy they come in and execute every day – those decision-making patterns, expectations and results they have all mutually agreed are ok. When they say they don’t have a strategy, what they are really saying is that the current strategy is insufficient to provide a path forward that has vibrancy and growth.
Friends don’t let friends get caught in companies with outdated strategies.
The term strategic margin is used to describe a firm’s ability to make independent decisions and execute against them based on leadership’s agenda. A firm that has sufficient financial assets, capable leaders and capacity to grow is said to have strategic margin. Once those assets are depleted, the firm is out of strategic margin and becomes reactive to outside demands, i.e. the board of directors, shareholders and customers demanding performance.
In a healthy firm, there are typically less than half a dozen really core profit centers that carry the weight of the firm. These profit centers are built by pioneering teams, usually led by someone with a white hot vision, that also knows how to find a market, create strong differential value, and establish a winning overall structure. There is a school of thought that says if you cannot name the leader of a core profit center, then it is in decline. (think Bezo’s and Zuckerberg)
I have rarely seen a “founding” team lose the torch and have headlines like the recent ones from Yahoo, IBM and Cisco. They have the scars and the education that occurred during the establishment of the business unit – both of which inform really good critical thinking and decision making. The issue arises when the founder either goes “up” or “out,” and someone who knows the playbook is installed in their place. The problem here is that the founder knew when the playbook applied, and when it was time for a new one.
So what can be done to proactively avoid headlines like the one cited above?
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- Hold the bar very high on succession. Be very concerned when visionaries are replaced with vision keepers. One of the key tasks of leadership is to spot leaders who are independent leaders in their own right and bring them along in a real succession plan. It is very rare to find the founding leader’s replacement on their staff – great leaders have a very hard time building people while conquering the world. One of the best acts of leadership a founding member can do is to embed talented visionaries inside the business unit prior to their departure.
- Rebuild the challenge function of the firm. Another area that leads to the headlines above is when a pattern of “good enough” is allowed to subtly embed itself. Great performance is always developed in a crucible of high expectations, and this requires deep curiosity and an attitude of continuous good deep questions around the performance and alignment of products and services.
- Re-install a capacity for critical thinking. Be sure that every decision is weighed with the customer’s best interest in mind. It is very common to hear the impact to the firm and its history as the key benchmark for decisions – versus a ruthless focus on delivering customer value.
If you resonate with the above and would like to have an objective view on how you might become part of the solution, I would be happy to talk to you about how Right Project, Right Team Right Plan can help you move forward. You can email me at scott@scottpropp.com, or give me a call at 847-651-1014.
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