Are you building a management team or just lining up vice presidents?

by IdeaTransfer on March 22, 2012

We recently met the new CEO of an iconic American corporation. He radiates a competitive charisma that surely will take the company to a new level of success. Luckily, he is surrounded by a loyal team of executives—many he brought from his previous company. Or is that actually unlucky?

In working with private businesses we’ve seen management teams who give hearts and souls to the boss, acting without hesitation or second-guessing their leader’s directions. Loyalty is powerful. No doubt most wars are won that way—but they can be lost that same way on the other side. And when you look at politics, you can see loyalty doing as much damage as good. When a new CEO brings his posse from the last company, it’s worth questioning why he needs it.

So when we help build management teams for small-to-midsize businesses, we prefer to aim the power of that loyalty at something bigger than the magnetic personality of the founder. We start by giving them some excerpts from the code of the Navy SEALS to think about.

My loyalty to country and team is beyond reproach. I humbly serve as a guardian to my fellow Americans always ready to defend those who are unable to defend themselves. I do not advertise the nature of my work, nor seek recognition for my actions. I voluntarily accept the inherent hazards of my profession, placing the welfare and security of others before my own…. Uncompromising integrity is my standard. My character and honor are steadfast. My word is my bond…. We expect to lead and be led. In the absence of orders I will take charge, lead my teammates and accomplish the mission. I lead by example in all situations…. I will draw on every remaining ounce of strength to protect my teammates and to accomplish our mission. I am never out of the fight.

We don’t have military backgrounds, but the sentiments of the code affect everyone. Once we can get the team to apply ideals like those to themselves, then the next question is what bigger something gets their loyalty? The first thought is to insert the word company where the SEALs say country. But there is something even bigger than the company.  We get them to think about the value the company provides—not just customer value, but the whole complex of people who receive its value.

If Value Complex sounds a little abstract, put real faces to it. Faces of customers, employees, vendors, distributors, advisors, investors, lenders—the founder, of course—but don’t forget the lunch wagon that comes each day and the restaurants down the street, the day care facilities and schools, the utilities and the public works, the churches and temples. All these people intersect with the people benefitting from the company, and the value keeps flowing and expanding. In fact, add the whole community and our country and the world economy. The value complex of a small business is huge!

Now ask who controls that value complex?  The management team. Because when one component of the company falls below the level of excellence, somewhere in the value complex it will be felt. So that’s where we want their loyalty directed. That’s where we want to apply the SEAL code. The responsibility of the management team is as vast as the value complex.

But enough idealism. Let’s get practical. What makes the management team effective? Three things are absolutes.

Interdependence.  If every component of the company has an impact on the value complex, then we want every executive to understand every component at least well enough to speak its language and measure performance, so each member of the team can help the solve problems and leverage creativity for all the members. In other words, In the absence of orders I will take charge, lead my teammates and accomplish the mission.

Trust.  Distrust arises from two sources—what you don’t know about someone and what you do know. We devote a portion of each team-building meeting to members sharing something positive about themselves that others don’t about them. It amazes them to find out how much more they have in common and yet how completely different experiences create meaning for each of them. That’s what you don’t know about them. What you do know about somebody is harder, because it means people have to express objections and justify actions—face to face. Surprisingly, the rest of the team almost always finds a supportive way to resolve the differences. In other words, I voluntarily accept the inherent hazards of my profession, placing the welfare and security of others before my own.

Mutual accountability.  There is no CYA. If one member of the team loses, they all lose—when one wins, all win. That standard requires the right to question each other and the responsibility to hear each other. It includes sharing data and reports so every member can pay attention to productivity and profitability of all areas of the company. In other words,  I will draw on every remaining ounce of strength to protect my teammates and to accomplish our mission–I am never out of the fight.

The analogy between a management team and an elite military team includes one more factor. There is always a chain of command. We don’t mean to imply team commitment overrides the authority of the company founder/leader. But that caveat seems to go without saying in the small to mid-size company environment. Yes, at the top of mega-corporations ordinary people can turn into Renaissance courtiers, but the people at the top of Main Street companies seldom lose touch with humility.

Finally, as valuable as the management team may be right now, there is also a future value to building this interdependence, trust, and mutual accountability. At some point the founder must face a game-changing business and personal decision. What’s next? In some cases the sale of the company to an outsider, in other cases family succession, as well as the possibility of selling to internal buyers.

In an outsider sale, one of the critical value-drivers is an experienced, committed, effective management team. Owners can’t magically achieve that just before the sale, and without it the price drops and the offer may not even materialize.

Family succession will be covered in the next post, so we turn next to an internal sale. Owners have to realize with so many Baby Boomer entrepreneurs expecting to sell on their terms and their timetable a buyers’ market is here to stay. Currently M&A firms say that only 5-10 out of each 100 firms they analyze are viable sale opportunities. If the remaining 90-95 could develop a management team like what we have described,the team would be the ideal buyer.  Businesses would not be lost and the whole Value Complex could be sustained.

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