Watching client companies fight their way out of the recession recently has made me think about the difficulties associated with inventing and reinventing ourselves. Whether it's a personal reinvention, a corporate overhaul, or a professional transformation, change can be very tough. Adding to the complexity is the fact that you can never roll the clock backwards and revert to a 'pre-change' state once the evolution has begun.
My clients are companies in the start-up, growth or turnaround phases, and they face the challenges of change everyday. Although the industries, products, services and faces vary with each case, most of my clients struggle with the same core issues. Last week I spoke with a potential client who asked me if I see the same problems recur over and over again. My response was that, yes, 8 out of 10 clients were usually coping with a handful of issues that seem to crop up in almost every transformation situation. That conversation prompted me to take a moment and delineate exactly what those few key hangups are, and how I advise clients who are working through them. It's a short list of tips that we can all use.
Embrace change and uncertainty. Most of us naturally live our lives trying to eliminate uncertainty, but when you are in the midst of a mandatory shift - you can't do that. During periods of change and transformation, uncertainty is your friend and it offers you an open window into a bright future that you can design consciously today.
Live an examined life. We're on autopilot 90% of the time. Evolutionary times present an opportunity to reassess every area of your life and your business - and change long-held habits. When change is thrust upon you, take the time to do a double take on the cards in your hand. If you can get past your initial knee-jerk reaction, you will probably see opportunities you never knew existed.
Commit yourself to operating in the present moment. 'Now' is a very loaded word. For most of us, how we view 'now' is all wrapped up in the past we've experienced and the future we expect. That understanding of 'now' doesn't work so well during periods of uncertainty and change, so commit yourself to living each day to it's fullest capacity.... no strings attached. Sometimes when people stop resisting change they discover their true path for the first time in their life.
Set your intentions on a positive outcome. Just because you have no clear vision of what's ahead - of how you or your company will end up - doesn't mean you can't control your personal intentions. Change doesn't happen to you. It happens with you, and you are a key part of the equation. Even if the path is unclear, focus your mind on the particular outcome you seek. Visualize the feelings of accomplishment, success and peace when the change is done.
Let go of what you are losing. We all have baggage: emotional baggage, professional baggage, relational baggage... it doesn't really matter. External things that aren't as important as we think they are. Change can't be all about acquisition. There is a strong element of letting go as well. You can free yourself to live your best life by surrendering what's going away and aligning yourself with the new state of affairs that is coming into focus before you.
Never give up! This is the secret to mastering the art of transformation and the psychology of uncertainty: do not underestimate the power of your spirit. Everyday, all around the world, people are tested. And it is in these moments that they discover their fortitude, courage, raw strength, kindness and heroism. Whether you are revamping your business model, changing locations, dumping a bad partner or reinventing yourself - your ability to believe in yourself and restore your faith will determine how your future unfolds.
So my advice all of you out there who are facing big changes, is to make a commitment to stay positive, be proactive, let go of the past and embrace the future. We live in an ever-evolving world. Remaining the same is not an option.
Good luck as you discover the next iteration of your life and build a new world!
Tuesday, June 28, 2011
Monday, June 13, 2011
The Scoop on Angel Investors
Lots of businesses think that angel investors may be a good way to get money (doesn't 'angel' sound sweet?). Sometimes they are, but... (the old BUT!) Working with angels and VCs has its challenges, and hopefully this article will give you some insight into whether or not that fund raising route is right for you.
Angel investors are individuals who invest in businesses looking for a higher return than they would see from more traditional investments. Many are successful entrepreneurs who want to help other entrepreneurs get their business off the ground or to the next level. Usually they are the bridge from the self-funded stage of the business to the point that the business needs the level of funding that a venture capitalist would offer. Funding estimates for angels vary, but usually range from $10,000 to $1 million.
The term 'angel' comes from the practice in the early 1900's of wealthy businessmen investing in Broadway productions. Today "angels" typically offer expertise, experience and contacts in addition to money. Less is known about angel investing than venture capital because of the individuality and privacy of the investments, but the Small Business Administration estimates that there are at least 250,000 angels active in the country, funding about 30,000 small companies a year. The total investment from angels is estimated to be far higher than the $3 to $5 billion per year that the formal venture capital community invests. In fact, the potential pool of angel investors is substantially larger. There are about two million people in the United States
The Center for Venture Research at the University of New Hampshire
- The "average" private investor is 47 years old with an annual income of $90,000, a net worth of $750,000, is college educated, has been self employed and invests $37,000 per venture.
- Most angels invest close to home and rarely put in more than a few hundred thousand dollars.
- Informal investment appears to be the largest source of external equity capital for small businesses. Nine out of 10 investments are devoted to small, mostly start-up firms with fewer than 20 employees.
- Nine out of 10 investors provide personal loans or loan guarantees to the firms they invest in. On average, this increases the available capital by 57%.
- Informal investors are older, have higher incomes, and are better educated than the average citizen, yet they are not often millionaires. They are a diverse group, displaying a wide range of personal characteristics and investment behavior.
- Seven out of 10 investments are made within 50 miles of the investor's home or office.
- Investors expect an average 26% annual return at the time they invest, and they believe that about one-third of their investments are likely to result in a substantial capital loss.
- Investors accept an average of 3 deals for every 10 considered. The most common reasons given for rejecting a deal are insufficient growth potential, overpriced equity, lack of sufficient talent of the management, or lack of information about the entrepreneur or key personnel.
- Investors included in the study would have invested almost 35% more than they did if acceptable opportunities had been available.
For the business seeking funding, the right angel investor can be the perfect first step in formal funding. It usually takes less time to meet with an angel and to receive funds, due diligence is less involved and angels usually expect a lower rate of return than a venture capitalist. The downside is finding the right balance of expert help without the angel totally taking charge of the business. Structuring the relationship carefully is an important step in the process.
What Does an Angel Investor Expect?
There are almost as many answers to what angels expect as there are angels. Each has their own criteria and foibles because they are individuals. Almost all want a board position and possibly a consulting role. All want good communication although for some that means quarterly reports, while for others that means weekly updates. Return objectives range from a projected internal rate of return of 30% over five years to sales projections of $20 million in the first five years to the potential return of five times investment in the first five years. Most are looking for anything from a five to 25 percent stake in the business. Some want securities - either common stock or preferred stock with certain rights and liquidation preferences over common stock. Some even ask for convertible debt, or redeemable preferred stock, which provides a clearer exit strategy for the investor, but also places the company at the risk of repaying the investment plus interest. Additionally, the repayment may imperil future financing since those sources will not likely want to use their investment to bail out prior investors.
Some angels ask for the right of first refusal to participate in the next round of financing. While this sounds eminently reasonable, some venture capitalists will want their own players only or certain investment minimums so this strategy may limit who future participants might be.
Future representation of the board of directors also needs to be clarified. When a new round of financing occurs, do they lose their board right? Or should that could be based on a percentage ownership - when their ownership level drops below a certain level, they no longer have board representation.
In order to protect their investment, angels often ask the business to agree to not take certain actions without the angel investors approval. These include selling all or substantially all of the company's assets, issuing additional stock to existing management, selling stock below prices paid by the investors or creating classes of stock with liquidation preferences or other rights senior to the angel's class of security. Angels also ask for price protection, that is anti-dilution provisions that will result in their receiving more stock should the business issue stock at a lower price than that paid by the angels.
To prepare to solicit an angel, several critical factors will aid in making the approach successful. First, assemble an advisory board that includes a securities accountant and an attorney. Two important functions of the board are to recommend angels to contact and to work with the management team to develop a business plan to present to the angel. The business plan itself should define the reason for financing, how the capital will be spent and the timetable for going public or seeking venture capital funding. It should include: an executive summary (description of the business, opportunity and strategy, target market, projections and competitive advantages); the industry, the company and its products and services (including entry and growth strategies); market research and analysis (customers, market size and trends, competition, estimated market share and sales); the economics of the business (including gross and operating margins and break-even analysis); marketing plan (overall strategy, pricing, advertising, promotion, and distribution); design and development plans (product/service improvement and new products/services); manufacturing and operations plans (geographic location, facilities and capacity improvements); management team (organization overview, biographies and compensation plans for key employees); financial plan (tax returns, profit and loss forecasts, pro forma cash flow analysis and balance sheets, 5-year projections); and proposed company offering (desired financing, securities offering, capitalization, timetable).
Most of all, take your time in forming a relationship with an angel. You are going to be spending a number of years together at a critical time in your business' life. Take the time to assure yourself that this is a person who you are comfortable with through both the ups and downs the future will bring.
Thursday, May 19, 2011
Money is NOT the Problem
Many thanks to Richard Male and Associates for this insightful take on the ever-pervasive nonprofit poverty mentality!
Our nonprofit consulting work often involves a snapshot assessment of an organization's current status. How are the board, staff, and programs functioning? What sorts of fundraising strategy and tactics are in place? Do internal operations and external communications seem appropriate and healthy? In addition to conducting personal interviews, reviewing documents, and observing meetings, we frequently use electronic surveys to gather peoples' opinions on what is--and is not--working.
Not surprisingly, when we ask about an organization's weaknesses, popular answers from board and staff include "We need money," "Lack of funds," "Not enough money," and so on.
You know the old saying, "There are no wrong answers"? Well, this is the exception.
Nonprofit leaders often think that their lack of funds is their primary challenge.
They're wrong.
A lack of money is not the problem. It is a symptom. The problem is always something else.
Without exception, we have seen over and over that "the problem" is actually one or a disastrous combination of the following:
1. The board is too small. This invariably means that the board does not contain the range of skills and perspectives needed for sustainable success.
2. The board governance is weak. Attendance, participation, understanding, trust, accountability, engagement: entire books are written on this subject. If this were an easy issue, we'd all be wealthy. Sadly, too many well-meaning people have never experienced a nonprofit board functioning properly, so they don't even know what they're missing.
3. The mission is unclear or poorly defined. There must be a vision of why you exist and where you are trying to go. This statement of purpose needs to be concise, clear, repeatable, and memorable.
4. There is no road map, i.e., how that mission will actually be accomplished. Nonprofits that are struggling are often trying to do too much on too many projects.
5. Leaders, both paid and unpaid, fail to recognize the critical distinction between leadership and management. You need both on your team, and these people need to know when to demonstrate each as situations dictate.
6. Planning is unrealistic or nonexistent. Operating by crisis and hand-to-mouth feels like the way the game is played, as if being frantic and operating on the thinnest shoestring keeps you credible and authentic.
7. There is no strategy to fundraising. There is a rich tapestry of ways that nonprofits can tell their story to those who would be inclined to support them, but weak organizations get stuck trying the same ineffective tactic over and over.
8. Relationships have not been cultivated with the "other two" sectors (private and public). Yes, these things take time. Start before you're broke. You won't have a harvest of food for tomorrow if you don't plant something today.
9. Media or community relations are weak. See explanation for #8.
10. The impact of the organization is not being measured or evaluated properly. The funding world, from individual donors to international foundations, doesn't essentially care how small you are or how lean your budget is. They want to see that you make a demonstrated, credible difference.
Every one of these factors contributes directly to whether dollars are coming in. The next time you find yourself thinking or saying, "We just need more money," consider that your energy is better spent on something besides staring wishfully at your balance sheet. Remember that nonprofits do not close their doors because they "...have no money." They end up closing their doors because they failed in some other respect - which ultimately resulted in no money.
Our nonprofit consulting work often involves a snapshot assessment of an organization's current status. How are the board, staff, and programs functioning? What sorts of fundraising strategy and tactics are in place? Do internal operations and external communications seem appropriate and healthy? In addition to conducting personal interviews, reviewing documents, and observing meetings, we frequently use electronic surveys to gather peoples' opinions on what is--and is not--working.
Not surprisingly, when we ask about an organization's weaknesses, popular answers from board and staff include "We need money," "Lack of funds," "Not enough money," and so on.
You know the old saying, "There are no wrong answers"? Well, this is the exception.
Nonprofit leaders often think that their lack of funds is their primary challenge.
They're wrong.
A lack of money is not the problem. It is a symptom. The problem is always something else.
Without exception, we have seen over and over that "the problem" is actually one or a disastrous combination of the following:
1. The board is too small. This invariably means that the board does not contain the range of skills and perspectives needed for sustainable success.
2. The board governance is weak. Attendance, participation, understanding, trust, accountability, engagement: entire books are written on this subject. If this were an easy issue, we'd all be wealthy. Sadly, too many well-meaning people have never experienced a nonprofit board functioning properly, so they don't even know what they're missing.
3. The mission is unclear or poorly defined. There must be a vision of why you exist and where you are trying to go. This statement of purpose needs to be concise, clear, repeatable, and memorable.
4. There is no road map, i.e., how that mission will actually be accomplished. Nonprofits that are struggling are often trying to do too much on too many projects.
5. Leaders, both paid and unpaid, fail to recognize the critical distinction between leadership and management. You need both on your team, and these people need to know when to demonstrate each as situations dictate.
6. Planning is unrealistic or nonexistent. Operating by crisis and hand-to-mouth feels like the way the game is played, as if being frantic and operating on the thinnest shoestring keeps you credible and authentic.
7. There is no strategy to fundraising. There is a rich tapestry of ways that nonprofits can tell their story to those who would be inclined to support them, but weak organizations get stuck trying the same ineffective tactic over and over.
8. Relationships have not been cultivated with the "other two" sectors (private and public). Yes, these things take time. Start before you're broke. You won't have a harvest of food for tomorrow if you don't plant something today.
9. Media or community relations are weak. See explanation for #8.
10. The impact of the organization is not being measured or evaluated properly. The funding world, from individual donors to international foundations, doesn't essentially care how small you are or how lean your budget is. They want to see that you make a demonstrated, credible difference.
Every one of these factors contributes directly to whether dollars are coming in. The next time you find yourself thinking or saying, "We just need more money," consider that your energy is better spent on something besides staring wishfully at your balance sheet. Remember that nonprofits do not close their doors because they "...have no money." They end up closing their doors because they failed in some other respect - which ultimately resulted in no money.
Friday, April 29, 2011
The Five Stages of Innovation
1. People deny that the innovation is required.
2. People deny that the innovation is effective.
3. People deny that the innovation is important.
4. People deny that the innovation will justify the effort required to adopt it.
5. People accept and adopt the innovation, enjoy its benefits, attribute it to people other than the innovator, and deny the existence of stages 1 to 4.
©AC 2005. Inspired by Alexander von Humboldt's 'Three Stages Of Scientific Discovery', as referenced by Bill Bryson in his book, 'A Short History Of Nearly Everything'.
* Not applicable (of course) to courageous early adopters of innovation everywhere.
2. People deny that the innovation is effective.
3. People deny that the innovation is important.
4. People deny that the innovation will justify the effort required to adopt it.
5. People accept and adopt the innovation, enjoy its benefits, attribute it to people other than the innovator, and deny the existence of stages 1 to 4.
©AC 2005. Inspired by Alexander von Humboldt's 'Three Stages Of Scientific Discovery', as referenced by Bill Bryson in his book, 'A Short History Of Nearly Everything'.
* Not applicable (of course) to courageous early adopters of innovation everywhere.
Thursday, April 28, 2011
The Scoop on Focus Groups
I held a focus group for a client researching a new business model recently. The experience reminded me just how much misinformation exists about this handy market research tool. So, I thought it would be worth a quick blog post to share more balanced information with the world.
Focus groups are one of the most misused market research methods. First and foremost, many people have strong fears that the respondents will lie or subconsciously share false views. It can happen, but it's not a huge issue. Most clients want focus groups to yield hard data, but that's not what they are designed for. A lot of people don't even consider a focus group because they assume it will cost ten thousand dollars. Again, it's possible to host a very productive focus group without breaking the bank.
So, what are focus groups?
Focus groups are a type of qualitative research. Qualitative research gathers in-depth responses from a few people as opposed to quantitative research which gathers large amounts of projectable data from many respondents.
Qualitative research lets an interviewer interact with a few people at length, which is great for asking questions and then probing the answers. For example, a focus group can gather far more detailed and complex information on a new package design than a survey. The survey will only tell you that X% of people like the new design, X% of people hate it, and X% are neutral. Good to know... but if lots of respondents hate the new package how do you know what to fix?
That's where focus groups are fantastic. In a focus group you can discover exactly why package A is liked more than package B? Which features are eye-catching, and why? Which colors or design elements are important, and why? And so on. By asking these types of probing questions you can get a clear sense of the opinions of your target consumer. It's not statistical and you can't lay it out neatly on a graph, but it allows you to define objections and refine specific features and concepts.
Focus groups can help you avoid huge market blunders. We all remember certain key stories of a company responding to a huge blind survey by changing their name or logo only to be greeted with outcries of 'foul' by their core customers. Hosting a few focus groups could have helped those companies truly understand where there was push back and what elements of their brand they should have left alone. Rather than guessing or basing decisions solely on gut instinct, focus groups let you see into the mind of your audience and leverage their knowledge.
WHEN ARE FOCUS GROUPS HELPFUL?
Focus groups can give you guidance and information on a wide range of business concepts, product and/or service issues and brand criteria, including:
WHEN ARE FOCUS GROUPS NOT HELPFUL?
Focus groups cannot yield specific data (i.e. percentages of consumers who like a perfume, or who consider long-term durability important in a weed-eater). You simply can’t project the views of ten people onto a massive target audience. However, the results of focus groups can be excellent help in crafting surveys or identifying important issues to look at more closely.
SETTING UP A FOCUS GROUP
A typical focus group has 6 - 10 people in it.
LEARNING BEYOND LISTENING
It's great to hear what consumers say, but it's just as important to read between the lines. Real insight is not easy, but here are some suggestions to help you make wise observations at focus groups:
HOW MUCH WILL IT COST?
Everyone wants to know exactly what a focus group will cost (and many marketing experts will try to throw figures out) but it truly varies from group to group. Experienced moderators cost money. Fancy facilities that organize everything for you cost money. I've seen focus groups cost over $7,000, but I've also helped clients host a focus group for less than $1,000. If you have to pay respondents, that adds to the costs... If you have to pay extra for documentation and taping of the sessions, that adds to the cost... Urban locations will generally have higher costs than rural areas... There are so many factors at play that I can only tell you the areas to examine to tally your total expense.
Focus groups are one of the most misused market research methods. First and foremost, many people have strong fears that the respondents will lie or subconsciously share false views. It can happen, but it's not a huge issue. Most clients want focus groups to yield hard data, but that's not what they are designed for. A lot of people don't even consider a focus group because they assume it will cost ten thousand dollars. Again, it's possible to host a very productive focus group without breaking the bank.
So, what are focus groups?
Focus groups are a type of qualitative research. Qualitative research gathers in-depth responses from a few people as opposed to quantitative research which gathers large amounts of projectable data from many respondents.
Qualitative research lets an interviewer interact with a few people at length, which is great for asking questions and then probing the answers. For example, a focus group can gather far more detailed and complex information on a new package design than a survey. The survey will only tell you that X% of people like the new design, X% of people hate it, and X% are neutral. Good to know... but if lots of respondents hate the new package how do you know what to fix?
That's where focus groups are fantastic. In a focus group you can discover exactly why package A is liked more than package B? Which features are eye-catching, and why? Which colors or design elements are important, and why? And so on. By asking these types of probing questions you can get a clear sense of the opinions of your target consumer. It's not statistical and you can't lay it out neatly on a graph, but it allows you to define objections and refine specific features and concepts.
Focus groups can help you avoid huge market blunders. We all remember certain key stories of a company responding to a huge blind survey by changing their name or logo only to be greeted with outcries of 'foul' by their core customers. Hosting a few focus groups could have helped those companies truly understand where there was push back and what elements of their brand they should have left alone. Rather than guessing or basing decisions solely on gut instinct, focus groups let you see into the mind of your audience and leverage their knowledge.
WHEN ARE FOCUS GROUPS HELPFUL?
Focus groups can give you guidance and information on a wide range of business concepts, product and/or service issues and brand criteria, including:
- Reactions to ideas for new businesses, products and services - and reactions to prototypes or mock-ups of ideas in development.
- Perceptions of a particular brand or product. Focus groups let you measure overall feelings about problems or benefits, and understand views about reliability, pricing, quality, cool-factor, etc. You can also get a sense of how your brand is perceived compared to its key competitors.
- Reactions to advertisements and promotions. Using focus groups to assess responses to television ads, radio spots, direct mail offerings, print ads, etc.
- Reactions to point-of-purchase experiences and merchandising.
WHEN ARE FOCUS GROUPS NOT HELPFUL?
Focus groups cannot yield specific data (i.e. percentages of consumers who like a perfume, or who consider long-term durability important in a weed-eater). You simply can’t project the views of ten people onto a massive target audience. However, the results of focus groups can be excellent help in crafting surveys or identifying important issues to look at more closely.
SETTING UP A FOCUS GROUP
A typical focus group has 6 - 10 people in it.
- Meet with a moderator and agree on objectives for the focus group(s), and on exactly what results you want and how will you use them. Understanding the actions you will take based on the results is key. Those objectives will shape the methods used, issues explored, and types of participants interviewed.
- Next, create specifications for the people you wish to include in the group(s), and for the locations to conduct your group(s). For instance, you may want to find users of a specific product or category, or users of a particular brand, or fans of a particular activity in a specific metro area. It all depends on the results you want to discover and what you will do with that information.
- Work with the moderator to map out a discussion guide which they will use during the group(s) containing all the key issues you want discussed. Also discuss how certain responses might need to be probed to gather more in-depth feedback on critical points.
- Find a focus group facility. There are many good ones that will recruit respondents that meet your specifications, and will host the groups on the dates and times chosen. Groups are audio taped or video taped, and you can typically watch from behind a mirrored wall to observe the session. You can certainly host your own group, but it's best to meet at a neutral location and allow the moderator to control the interactions with you out of the picture.
LEARNING BEYOND LISTENING
It's great to hear what consumers say, but it's just as important to read between the lines. Real insight is not easy, but here are some suggestions to help you make wise observations at focus groups:
- Observe facial expressions, hand movements and body language. Respondents don't typically intend to lead you astray in a focus group, but they have the same tendency we all do to make promises and get caught up in the moment. Look to see if respondents look bored, if they show true emotion behind comments, if they frown in confusion or twitch their hands with uncertainty. The body and face can count for more than actual spoken words. Watch respondents all the way through the session and even as they leave the room. After the videotape stops running you can learn a lot by people's body language and small talk as they walk away.
- Push respondents to get at the truth. Humans are herd animals and we tend to follow in a group situation. If all of the participants in a group say they want to buy what you're selling, someone might be going with the flow, but not experience true excitement about the product. Near-unanimous consensus is extremely rare. Make certain your moderator challenges both positive and negative reactions and does what they can to uncover the reasons behind those reactions.
- Trust your instinct. Even though the entire point of a focus group is to listen to consumers, you also have to weigh what they say on the scales of your own instinct. If what the focus group reveals is blatantly counter to everything else you've experienced in the marketplace, you may need to reassess. Here's a good example... if everyone in the US changed their oil at exactly 3,000 miles (which everyone would WANT to claim when pressed) the size of the oil change category would be double in size. Intentions are good, but are often counter to reality. By challenging assertions you'll get closer to the truth.
HOW MUCH WILL IT COST?
Everyone wants to know exactly what a focus group will cost (and many marketing experts will try to throw figures out) but it truly varies from group to group. Experienced moderators cost money. Fancy facilities that organize everything for you cost money. I've seen focus groups cost over $7,000, but I've also helped clients host a focus group for less than $1,000. If you have to pay respondents, that adds to the costs... If you have to pay extra for documentation and taping of the sessions, that adds to the cost... Urban locations will generally have higher costs than rural areas... There are so many factors at play that I can only tell you the areas to examine to tally your total expense.
Wednesday, April 6, 2011
Drive: The Surprising Truth About What Motivates Us
This is a fantastic video from RSAnimate, adapted from Dan Pink's talk at the RSA, illustrating the hidden truths behind what really motivates us at home and in the workplace.
Friday, April 1, 2011
What Can We Learn From the World’s Most Admired Companies?
By Jeff Shiraki, Vice President at Hay Group.
FORTUNE magazine recently released its annual list of the World’s Most Admired Companies and as we do every year, my colleagues and I at Hay Group took a deep look at the companies that made the list to determine what makes them “tick,” how they earn the admiration of their peers, and what organizations and leaders can learn from the practices of the “Most Admired” companies.
This year, three key leadership principles emerged that can be learned from these first in class organizations:
- Executing the ‘basics’ is critical – but today, the ‘basics’ include identifying and addressing problems before they occur and fixing things that aren’t yet broken
- Efficiency is important, but in order to increase productivity over the long-term, you must involve your employees in the effort
- Investing in employee development isn’t a “one and done” process. Organizations must focus on the growth of their employees as an ongoing process
Executing the ‘basics’ is still critical
When I talk to leaders from the Most Admired, what I often hear is that great leadership is not about doing extraordinary things. Instead, great leadership is about executing the ‘basics’ very well. This is backed up by the practices of the Most Admired: Apple, Google, Southwest Airlines, FedEx, McDonald’s – different companies in different industries, ‘old economy’ businesses and ‘new economy’ businesses that all have learned to focus their attention on executing some core business practices very well.
Our research found that the World’s Most Admired Companies do a better job than their peers of ‘addressing problems before they occur’ and ‘fixing things that aren’t broken.’ While you may think all companies should have learned that the best way to solve a problem is to prevent it in the first place, this is apparently still easier said than done. Most leaders I talk to say that great leadership isn’t about discovering ‘the next big thing’ – it is about executing the ‘small things’ consistently every day.
Increasing efficiency is important, but you must involve your employees in the effort
Surprisingly, the Most Admired actually rate simplifying work processes to increase efficiency as a slightly lower priority than their peers. However, there is a lesson to be learned from ‘how’ the Most Admired companies go about squeezing more productivity out of their operations. For example, the Most Admired are more likely to solicit ideas from their employees than their peers. When I talk to leaders in the Most Admired, they really do see people as their most important asset, and they leverage their human capital to get the most from their fixed capital.
One of the biggest differences identified in the research is that the Most Admired companies report that they are more likely than their peers to encourage managers and employees to take reasonable risks to increase effectiveness. That is not to say that companies are ignoring safety, security, quality, and other important risk management activities. Rather, as one executive said it, “My primary goal is to teach my employees to understand what a ‘reasonable risk’ is and to empower them to act in the best interests of their customers, fellow employees, and the company.”
Investing in the development of your people should be an ongoing process
It looks like people still do matter – and not only to the Most Admired. Almost all companies believe they are doing a good job hiring and placing employees. However, there is a big difference when it comes to ongoing training and development. The Most Admired place more emphasis on ensuring employee skills keep up with changing job demands. That’s because the Most Admired see their workers as assets worth investing in, and are paying more attention to the continuous improvement in the skills and capabilities of their employees. As one executive I know says, “We weathered the downturn not by slashing and burning our workforce, but by figuring out what skill sets we needed for the long term and continued to invest in building the skills of our employees to position us for greater strength as we exited the recession.”
So what did we learn?
Well, you can be encouraged to know that what it takes to make a company a Most Admired one is not ‘rocket science.’ Executing the basics, involving your employees in improving the efficiency of their work, and investing in training and development are concepts that have been around for a long, long time.
You don’t have to be a large, global company to implement these practices – the principles are equally applicable to small, family-owned businesses, non-profits and government agencies. However, what might be discouraging is that so many companies still struggle with getting these practices right. That said, we should be encouraged that many leaders have figured this out, are willing to share the secrets of their success, and continue to put competitive pressure on other companies to catch up.
To learn more about the Most Admired companies and how they stand out from their peers, you can visit Hay Group’s microsite on the study at http://bit.ly/hFy2d0.
FORTUNE magazine recently released its annual list of the World’s Most Admired Companies and as we do every year, my colleagues and I at Hay Group took a deep look at the companies that made the list to determine what makes them “tick,” how they earn the admiration of their peers, and what organizations and leaders can learn from the practices of the “Most Admired” companies.
This year, three key leadership principles emerged that can be learned from these first in class organizations:
- Executing the ‘basics’ is critical – but today, the ‘basics’ include identifying and addressing problems before they occur and fixing things that aren’t yet broken
- Efficiency is important, but in order to increase productivity over the long-term, you must involve your employees in the effort
- Investing in employee development isn’t a “one and done” process. Organizations must focus on the growth of their employees as an ongoing process
Executing the ‘basics’ is still critical
When I talk to leaders from the Most Admired, what I often hear is that great leadership is not about doing extraordinary things. Instead, great leadership is about executing the ‘basics’ very well. This is backed up by the practices of the Most Admired: Apple, Google, Southwest Airlines, FedEx, McDonald’s – different companies in different industries, ‘old economy’ businesses and ‘new economy’ businesses that all have learned to focus their attention on executing some core business practices very well.
Our research found that the World’s Most Admired Companies do a better job than their peers of ‘addressing problems before they occur’ and ‘fixing things that aren’t broken.’ While you may think all companies should have learned that the best way to solve a problem is to prevent it in the first place, this is apparently still easier said than done. Most leaders I talk to say that great leadership isn’t about discovering ‘the next big thing’ – it is about executing the ‘small things’ consistently every day.
Increasing efficiency is important, but you must involve your employees in the effort
Surprisingly, the Most Admired actually rate simplifying work processes to increase efficiency as a slightly lower priority than their peers. However, there is a lesson to be learned from ‘how’ the Most Admired companies go about squeezing more productivity out of their operations. For example, the Most Admired are more likely to solicit ideas from their employees than their peers. When I talk to leaders in the Most Admired, they really do see people as their most important asset, and they leverage their human capital to get the most from their fixed capital.
One of the biggest differences identified in the research is that the Most Admired companies report that they are more likely than their peers to encourage managers and employees to take reasonable risks to increase effectiveness. That is not to say that companies are ignoring safety, security, quality, and other important risk management activities. Rather, as one executive said it, “My primary goal is to teach my employees to understand what a ‘reasonable risk’ is and to empower them to act in the best interests of their customers, fellow employees, and the company.”
Investing in the development of your people should be an ongoing process
It looks like people still do matter – and not only to the Most Admired. Almost all companies believe they are doing a good job hiring and placing employees. However, there is a big difference when it comes to ongoing training and development. The Most Admired place more emphasis on ensuring employee skills keep up with changing job demands. That’s because the Most Admired see their workers as assets worth investing in, and are paying more attention to the continuous improvement in the skills and capabilities of their employees. As one executive I know says, “We weathered the downturn not by slashing and burning our workforce, but by figuring out what skill sets we needed for the long term and continued to invest in building the skills of our employees to position us for greater strength as we exited the recession.”
So what did we learn?
Well, you can be encouraged to know that what it takes to make a company a Most Admired one is not ‘rocket science.’ Executing the basics, involving your employees in improving the efficiency of their work, and investing in training and development are concepts that have been around for a long, long time.
You don’t have to be a large, global company to implement these practices – the principles are equally applicable to small, family-owned businesses, non-profits and government agencies. However, what might be discouraging is that so many companies still struggle with getting these practices right. That said, we should be encouraged that many leaders have figured this out, are willing to share the secrets of their success, and continue to put competitive pressure on other companies to catch up.
To learn more about the Most Admired companies and how they stand out from their peers, you can visit Hay Group’s microsite on the study at http://bit.ly/hFy2d0.
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