Why do some successful owner-managed companies eventually fall on hard times, while others improve year after year?In my experience, the CEO’s approach toward the four areas discussed below can be the critical difference. “I’m great at…” How do you finish that sentence? The choices are:
“I’m great at sales (or engineering, production, etc) and therefore I don’t want to distract myself by spending too much time focusing on the rest of my business”; or
“I’m great at sales (or engineering, production, etc) and therefore I have to spend more time focusing on the rest of my business.”Every business has an Achilles heel. And it’s not likely to be what you as the CEO are great at. Your competitors probably have a pretty good idea of what it is. How about you? Can you identify your biggest weakness? Are you paying enough attention to it? Or are you too busy doing what you’re great at to bother yourself thinking about what your company’s weaknesses might be? Growing without changing. Can you successfully manage a busy family of six or eight the same way you would if it was just the three of you? No way, right? Silly as it sounds, many CEOs try to do just that in their companies.As a business grows, its continued success almost always requires changes in the way it is being managed:
Maybe “management by objective” needs to replace “management by walking around.”
Maybe the intercom has to give way to an Intranet.
Maybe it is time to replace a plant manager who has always succeeded by doing exactly what he’s told with a vice president of manufacturing who’s capable of thinking for himself.What’s certain is that when the CEO of a growing company fails to make enough of an effort to sort out the “maybes,” chaos and eventual failure are the most likely results. Junior will get it. Would you agree that if the next generation in a family-owned company is lazy, or simply disinterested, the business is going to suffer? Clearly, installing a non-family management team is sometimes a necessity.But who is at fault if today’s generation fails to invest enough time and effort in properly training tomorrow’s? I’m talking about training that is focused on why the business works, instead of how it works. In my experience this second problem is much more common than the first. Lots of second- and third- generation CEOs have been shown how to follow the old family recipe. Far fewer have been taught what to do when the customers begin saying that it’s time to change some of the ingredients. Looking but not seeing. The problems that derail most businesses are seldom hidden far below the surface. Usually it’s more a case of the CEO refusing to recognize something that is obvious to the rest of the management team. Why? Well, if you don’t see a problem, then conveniently you don’t have to deal with it. A few examples from my recent clients include:
A sales manager who’d been “retired” on the job for several years;
An original, but now thoroughly obsolete, product line that was causing the entire company to hemorrhage cash; and
A management information system that produced horribly inaccurate product cost information.In each instance most everyone else in the company was aware of the problem, but the CEO consistently refused to see it– and to deal with it. How could anything but serious trouble logically follow?Can every owner-managed business failure be explained by the CEO’s attitude or approach in these four areas? Obviously not. But after having spent 15 years revitalizing well over 100 such entities, I believe they definitely cover the vast majority of them. Jim Rudnicki is the president of Rudnicki & Associates, LLC. The firm specializes in revitalizing financially stressed businesses and is headquartered in Aurora, Ill.