Midsized companies can’t be run like an old-world family with one all-powerful matriarch or patriarch. Growth requires an empowered c-suite who are actively growing the leadership capabilities of their teams.
Originally posted on Forbes online.
After 45 years in business, In-Common Laboratories in 2012 was suffering from a revolving door that no company wants to face: three CEOs in three years. Many challenging issues precipitated a 2010 board decision to find a new CEO for the not-for-profit provider of medical laboratory tests. In 2011, the board realized it hired the wrong CEO (No. 2) for a variety of reasons, including precipitous losses. But it wasn’t until the third CEO, Kris Bailey, showed up in 2012 that the board realized the problems ran much deeper: a “Mother May I” culture that had turned the top team into powerless managers whose ingenuity was running on cruise control.
When Bailey first came on board, the company’s systems, IT, processes and go-to-market approach hadn’t changed in over 20 years. The management team had grown up in the firm, with prior CEOs being top-down, directive managers. Bailey says, “When I started, everyone would keep coming to me asking for permission to make the smallest decision. It was a recurring game of ‘Mother May I.’”
Some CEOs in this situation resort to increasing their level of dominance. They build a board they can control (or scrap it altogether if they can). They fire leadership team members who dare to challenge them. They issue more orders and micro-manage even more closely. Good leaders and team players won’t tolerate this, and leave the company. The CEO spends all their waking hours managing, leaving them with no time to lead. No time to get fresh ideas or devise fresh strategies. No time to get out of the office and see industry changes firsthand. They become myopic.
The CEO’s leadership style must attract other strong leaders.
Midsized companies, those with revenues between $10 million and $1 billion, can’t be run like an old-world family with one all-powerful matriarch or patriarch. Like thousands of other firms coming into midsized, In-Common killed its own growth and profitability by being run this way. Decay had set in deeply by the time they found a CEO willing to attempt a dramatic step-up in performance. Such dramatic changes always start at the top, and require a team of strong leaders with a shared vision and plan.
At In-Common, it was clear to Bailey that she couldn’t do it all herself. To return to positive cash flow, she needed a strong leadership team to modernize the way the business operated. Years of infrastructure neglect made numerous initiatives all critical priorities. The organization was on the edge of failure. Early on, she chose to address leadership frailties by dismissing a few staff members and recruiting four interim leaders whom she personally knew were great developers of people and could help drive change. Bailey said, “We needed leaders who would grow their garden.”
A great leadership team is always a prerequisite to growth. The leadership team must be the architect of the strategies and activities that spur growth. They must have a vision and plan of how they will get there, and be well qualified to execute the plan. They can’t be overwhelmed. They can’t be in training. They have to lead. They have to be proactive and excited about taking on the hard work of growth. This is true in turnarounds, like In-Common was, and in growth firms that need more from its leaders as the firm grows.
Senior leaders must focus on developing the rest of the leadership team by engaging them and encouraging problem solving from the bottom up.
At midsized, it is not enough to have a strong c-suite; senior leaders must also rely on managers and others on the team. But at In-Common, the staff had learned over many years to be seen but not heard. They were not encouraged to speak out. To change this mindset, Bailey held daily and weekly huddles where she presented problems and challenges, and asked for ideas and input. For over a year, she stimulated collaborative thinking, often resorting to calling on her team the way a schoolteacher calls on pupils, requiring an answer and opinion. She was reprogramming the staff to participate in joint problem solving. She assiduously avoided solving the problem herself and issuing instructions. Slowly, they got the hang of it.
Bailey also worked on building a strong, permanent leadership team. She needed “fixers, like me,” who were good with people and had the right industry experience. It took 18 months to retain four new leaders, during which two gems, already in place, were coached into high-performing top leaders. One was a receptionist, now the human resources leader, and the other was a PhD lab director, now the firm’s scientific leader.
Smart leaders help their teams see the bigger picture (the challenges), then engage them in figuring out the solution. This can feel wasteful at first, especially since the leader has often already figured out what to do. But the best execution of a decision comes when people have solved the problem themselves and connected the problems with the solutions themselves. Then, and only then, do they own the solution. When they own the solution, they are best positioned to adjust during execution as the situation changes.
Many CEOs are tempted to strong-arm the business a bit longer, believing they can “fix it” in less time than it would take to be collaborative. This is nonsense. The leadership approach that delivered disappointing results in the first place isn’t likely to have a different effect with more of the same. Other CEOs lament that they don’t have the budget to hire good leaders. But midsized businesses can nearly always afford one more good leader—even if other cuts have to be made. If that leader adds value, soon the firm will be able to afford another leader. Too many firms skimp on hiring strong leaders, then pay all that and more cleaning up mistakes (or losing the upside from missed opportunities).
At In-Common, in addition to overhauling the leadership team and changing the way decisions were made, over a million dollars were invested into infrastructure upgrades between 2013 and 2015. A new IT system was put in place, headquarters were relocated, and they began addressing a changed industry, working on new services and approaches. 2015 brought 3% top line growth, and in 2016, it jumped to over 10%. The most recent six months have run appropriate surpluses (profits) sustainably, to assure a modernized business that delivers great service and value to clients. The most rewarding of all is that Bailey has built a leadership team that can run the business without her. She will retire in 2017.
“Mother May I” management doesn’t work at midsized. One leader is not enough. Growth requires an empowered c-suite who are actively growing the leadership capabilities of their teams. Together, a powerful team pursuing a clearly articulated business plan will deliver ongoing growth.
