When 8-track tape players were introduced as modern technology, they couldn’t play LPs. Nor could these 8-track tapes fit into the next innovation, the cassette player. Similarly, cassettes could not be played in CD players, and there is no slot to fit any of them into an iPod.
Each was the best of its time, and they could all still be good products. But changes in technology, expectations, compatibility and competition have left LPs, 8-tracks, cassettes and CDs behind. Similarly, changes over time also may have made obsolete some of the leaders who were right for their original mission and for earlier versions of their businesses.
As with many changes, acknowledging the need for change may be the thorniest element. It’s not easy. And it’s not uncommon for businesses to try and endure a leadership mismatch by substituting simple business or other staffing adjustments to avoid stepping up to the need for a more substantive change.
It’s important for owners, boards and senior executives to recognize if and when leaders are no longer right for a changing industry or organization and to also acknowledge the current leader may not have been the best choice at the outset. Adequate or lesser leaders can survive, but the damage they may do can’t be ignored.
They’ll be compensated hundreds of thousands of dollars for which the organization may realize little if any return. They may miss new offerings, markets or customers and opportunities for operating improvements may go unrealized. On the mergers and acquisitions front, the interest of a company’s potential suitor may be dampened by unimpressive executives, and the opportunity to acquire another business won’t wait if the acquirer does not already have its own right leadership in place.
Mediocre leaders sustain mediocre businesses, which are not a match for evolving markets, fast-moving competitors or demanding customers.
The Right Leader
Different leadership traits are demanded by each stage of a business’s evolution — conception, launch, growth and maturity — and also by changes in corporate structure or ownership.
To begin, if an organization is a $10 million-business, it will not realize its full growth potential if led by $10 million talent. That is to say, a leader for this growing business should have the experience and ability beyond the size and complexity of a $10 million company. The right leader has previously lived and understands what a successful business valued at $20 to $30 million needs to look like, and what it takes to get there.
A leader should never be someone whose selection is settled upon. Weak leadership is a competitor’s dream. A solid executive will not only lead, but will complement and expand the skills and experience of his or her team. If not stretching the business and the team to be the best they can be, it may be time to take a look at what the leader is bringing to the table.
Beyond a leader’s business acumen, a more intangible but still critical trait is the ability to first fit into — and later to develop — the organization’s culture. Without this ability, a leader will have difficulty collaborating with peers, marshaling the support of subordinates and establishing his or her own credibility.
A leader should be organizationally committed, goal-oriented, selfless and confident enough to hire others of equal talent to help build an exceptional team. The multiplier impact of joining a solid culture with a cohesive team is stunning.
When It’s Time for a Change
Most companies have not constructed talent pipelines to develop and provide internal talent that will be ready as replacements for key leadership positions. Thus, it’s easy to understand why an organization wouldn’t be in a rush to replace even an underperforming leader. An executive search takes time and costs money, whether a company hires an outside firm to handle the search or tries its hand at the search with internal resources.
And following the search, it will take even the best new executive about six months to get up to speed in a new position and organization. This is all part of an important investment that should only be measured by its quantifiable returns.
After about six months, though, new executives should begin to more than pay for themselves. But, if the search has not been well conducted, a missed fit for whatever reasons will drive costs rather than profits — and this comes atop the costs sunk into conducting the search and the new executive assimilation.
In addition, a failed search will generally be redone, further delaying the organization’s repositioning and multiplying both the hard and intangible costs of the process.
When assessing the performance of a faltering leader, it’s too often tempting to hope that maybe in another one, or three, or six months the executive will finally click. But in each passing month the company overpays for mediocre results and delays or loses intervening opportunities.
It’s critical that the final output of an executive search be right the first time.
Mid-size and smaller businesses in particular — but some larger companies too — can retain people in their jobs too long, especially in rapidly transitioning environments where the business changes are outpacing the capacities of its leaders. When selecting leaders, or determining how long to retain them, an organization has to remember that the individual’s qualities must satisfy tomorrow’s needs, not just those of today.
Taking financial leadership as an example, in its earliest stages a new company will need a bookkeeper to develop and retain records and to assure adherence to basic accounting requirements. As the company grows it will require controller expertise to keep score, analyze results and provide substantive reports for management’s use.
As the organization’s growth in size and complexity continues, its financial intricacies will demand a chief financial officer to deliver financial counsel; assure solid record keeping, analysis and compliance; and to provide financial direction to build the business strategy. The right people in one stage of a dynamic business may not be best people in the next stage.
Each company needs to calculate the cost of retaining leaders who aren’t taking the business where it needs to go. In every stage of a company’s development — and in its competitive deployment of strategy, capital and people — the right leadership will be the ultimate tie-breaker.
Stanley H. Davis is a recruitment industry veteran who recently launched Standish Executive Search, an executive search advisory firm to mid-sized and smaller businesses located throughout New England.
This article first appeared in Financial Executive magazine.