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The Risk Of No Planning (Part II): Establishing Leadership Infrastructure At The Right Speed

This article is more than 10 years old.

Last week I discussed a pair of entrepreneurs who grew their startup firm to $100 million in revenues in just 13 years with no planning or any formal management processes—what I refer to as “leadership infrastructure.” Leadership infrastructure comprises the processes, systems and leaders which collectively guide the growth of a company. To grow year after year, firms need a high-functioning executive team that plans diligently and formalizes communication processes.  If you missed that post, you can read it here.

Naturally, no amount of leadership infrastructure can make a bad, ill-timed idea for a business successful.  Nor do small businesses and startups need a lot of leadership infrastructure—they simply have to find their niche and start growing.  However, once they grow into a midsized firm (at least $10 million in revenue), they need to introduce leadership infrastructure in small doses, one step at a time as the business scales.  Adding too much too fast will slow down an organization, which will spend too much time on systems and processes.  Adding it too slowly will result in a business that grows wildly and inefficiently.

As a CEO coach, I have brought leadership infrastructure to many midsized companies. In the last six years, I have found the following approach establishes leadership infrastructure at the right speed:

  1. First, add simple business planning and monthly plan governance.  Read my approach here. Create a rhythm of disciplined thinking around strategy and routine governance.  Add a shared escalation roster (list of outstanding issues), identifying one person responsible for pursuing each issue.  Share an overview of the business plan with the entire company.  Begin leading the whole team with regular communications. In the case of our example—the $100M retail chain—we put together a one page plan for the company, with supporting plans for each of the 16 people on the leadership team. This required several meetings and much collaboration between leaders, but it clarified everyone’s activities, objectives and priorities.  We initiated a set of three monthly plan-governance meetings—including the two largest departments and the top team—to stay on track and held a monthly owner’s meeting—much like an informal board meeting.
  2. Hire talented executives who have “done it before” to fill in knowledge gaps.  Bring in consultants or interim executives as needed to act as guides and teachers for those maturing within the firm.  The overall quality and experience of the executive team must keep well ahead of the growth of the company. In our example, the retail chain hired a consulting CFO to help develop the plan. They subsequently hired a very experienced CFO full time to build a detailed forecasting/budgeting model, take over the finance function, and—since he’s operationally savvy—to guide the firm as it expands outside the USA.  The very able controller will stay in place, running the accounting department as she has for the past ten years.  She is delighted to have the CFO as her guide, and to take on more challenges.
  3. Begin or ramp up leadership skill building, so the top team as well as the CEO become leaders of leaders.  Part of this process is becoming highly skilled at leading productive meetings, always following the Meeting Bill of Rights.  At the retail chain, I helped initiate weekly 1:1 meetings between each leader and their direct reports, quarterly all-hands meetings, and monthly casual “brown bag” meetings so the staff could hear from ownership.
  4. Make sure that everyone in the company has clarity about their own objectives.  Deliver performance reviews to every employee (my approach here) which delivers honest, two-way feedback, or better yet—when the firm is ready—implement a simple system that outlines clear measurable objectives for each employee. At the retail chain, I recently led a training session (slides here) for the leadership team of 30 on how to do quality performance reviews. They have initiated a focal review process in which everyone is reviewed in the same month.  I used this video.
  5. By surveying the performance environment, get an objective measure of the perception of leaders and non-leaders at each level of the organization and in each functional area.  Make appropriate adjustments. (read about my favorite tool/approach)
  6. Pull the top people– CEO and or founders—toward strategy, innovation and marketplace work, replicating the entrepreneurial activities that inspired them and got them started.

The leadership team at the retail chain is excited by the changes in planning and across the company.  They are hungry for leadership infrastructure, clearly perceiving how it can help get their company to the next level.  Since they were already quite busy, it requires a new level of discipline to follow through on these added activities.  Some take to it more readily than others, but by and large—as they invest in leadership infrastructure activities—they are gaining ground through less chaos, less unexpected headaches and better results.  In all, it is less frustrating to run a department in a company where plans are laid and followed and where communication and systems are strong.

If your scrappy, innovative startup is growing into a midsized company, it is likely time to start building leadership infrastructure, one of the keys to building your growth to 100 million revenues and well beyond.

What do you think:  How big can a firm grow without leadership infrastructure?  When is the right time to move past free-form entrepreneurialism?

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