Leaders Who Rapidly Scale Companies Are 'Wired' for Success. Are You?
Have you ever wondered why some fast-growing companies are destined to become the next Apple or Google, while others flounder, struggle or bite the dust?
According to a study by the Kauffman Foundation of the 5,000 fastest growing U.S. companies, two-thirds (or about 67 percent) either shrank in size, went out of business or had been disadvantageously sold five to eight years later.
Related: 50 Rules for Being a Great Leader
Why such a high "failure" rate among companies once unstoppable?
The truth is ventures don't fail. Leaders do. If a company has cash flow or profitability problems, it's a leadership failure. If customers are leaving for a competitor, that's a leadership failure.
For companies to scale, so must leaders. That means, leaders must have the right mindset, thinking capacities and capabilities to scale a company to its next level. The leadership capacity required to scale a company to $10 million is different than that required to scale to $20 million or $50 million.
Why leaders fail at a high rate
1. You hired your leaders based on past performance, not future capacity.
As a former statistician/mathematician, I know that statistical predications using past data break down quickly, except in the short term. Predicting your leaders' performance based on the past, also breaks down. In a fast changing business world, leadership success factors change just as fast to respond to new challenges.
2. Not all leaders are "wired" to grow a company.
In the heated debate "are leaders born or developed?" there is no absolute answer. Some leadership capabilities can be developed. However, not all leaders are "wired" with the right cognitive capacities to grow a company. Such capacities include conceptual thinking, goal orientation, big picture, future thinking and more.
3. Leaders' thought processes are often blinded by cognitive biases.
While all of us are susceptible to cognitive biases, leaders are especially prone to the success bias. Past success can be a leader's greatest enemy, causing him or her to become over-confident, take high risks and/or become complacent.
The secret to scaling your company: unlocking your leaders' motivation codes
A Kauffman Institute article, "The Constant: Companies That Matter", states that "only 125-250 companies (out of 552,000) ever reach $100 million in revenues." That's only four out of every 10,000 new startups. Why so few? What makes the leaders of those companies different from the rest?
For over 25 years, I have been seeking such answers. About 10 years ago, I met another leadership and organizational development expert, Dr. Carl Harshman, who opened my eyes to the big gun of leadership performance -- attitude and motivation drivers.
This new disruptive methodology -- called motivation profiling -- identifies hidden motivation "hot buttons" that drive as much as 60 percent of performance. These "hot buttons" drive focus, decisions-making, thinking styles, work preferences, behaviors and ultimately outcomes.
After using motivation profiling with hundreds of organizations, here's what to look for in terms of leadership MAPs -- that is, motivation and attitudinal patterns -- associated with venture success for early stage and mid-growth companies. Also provided are behavioral indicators to help you assess which of your leaders are likely to possess those critical leadership drivers.
Leadership MAPs associated with early stage success
Breadth: High breadth leaders think from and prefer working with an overview of information, rather than the details. They are quick to spot the critical issues and want to understand the big picture.
Behavioral indicators: Thinking and communicating in broad generalizations, abstractions and global terms.
Goal orientation: All behavior is motivated in a certain direction -- either toward gain or away from pain. High goal-oriented leaders are motivated by what they can achieve or gain, rather than what problems to avoid. Note: Goal orientation is not the same as goal-setting. A leader can set goals and still not be goal-oriented.
Behavioral indicators: Words like "achieve," "gain" and "goal."
Power: Power is one of three core motivations defined by McClelland. A leader high in power likes to be in control and have the power to make a difference.
Behavioral indicators: Focus on prestige, authority and control; direct communications.
Initiation: High initiation leaders have a bias toward action and want to make things happen -- often without evaluating possible consequences. In early stage companies, generating initial sales and getting traction require high levels of initiation.
Behavioral indicators: Short crisp sentences. Faster speech. Verbs in active voice.
Leadership MAPs associated with growth stage success
Structure: A leader with high structure is motivated to organize resources, develop plans and schedules and create order within projects.
Behavioral indicators: Organized. Creates checklists and structure to achieve outcomes.
Future-oriented: Future oriented leaders are motivated to pay attention to the long term, value visions and focus on future potential.
Behavioral indicators: Thinks, focuses on and talks about the future.
Breadth (see above)
Goal orientation (see above)
Achievement: Achievement is another one of three core motivations defined by McClelland. A leader with high achievement is motivated to excel and put his/her focus on performance and results.
Behavioral indicators: Focus on success, overcoming challenges and competition.
Initiation tempered with reflection/patience: In successful growth stage companies, leaders must still have an action bias. However, it is equally important for leaders to take time to reflect on possible consequences prior to taking action.
Behavioral indicators (reflection/patience): Tend to use longer and/or incomplete sentences. Pauses to think. Passive verbs.