Whose money is it and what does good look like?
The great thing is that the even the greatest organisations spend years doing things that should take months or weeks because that is the norm and they don’t have any idea how to move any faster.
Private Equity / VC (it’s all about money) Mckinsey showed that PE backed companies with revenues greater that $250m recovered their margins typically up to 18 months faster regardless of their size than their publicly owned counterparts. The positives are accountability, specific targets, and explicit timescales and a focus on whether the team have the mindset and capabilities to make it happen. The blind spot corporate suffer from is recognising and knowing how to shift behaviour from normal working to crisis mode. From then the bar has to be set high enough to remain ahead and make immediate execution the norm. Many corporate jus set the bar too low, and deliver too slowly creating a nasty hamster wheel. Over the last 10 years I have worked with private equity firms many times and have been astonished how little they do to transform organisations beyond the financials. Their portfolios are left dependent, flat and without energy or adequate succession to build value. The PE/VC myopic focus on financials comes a natural disregard to the people side of the business. On the positive side but there is much to be learnt from PE on financial analysis, getting governance right and but the speed of execution is still far too slow. Jon Moulton would make a big deal about completely replacing the existing management but that just the easy part. When you have put the right people in place that’s when the challenge begins that goes well beyond project management and results focus PE/VC firms are so good at.
Owner managed (it’s my money) have their own unique trait in that the owners often become the limiting factor to their businesses growth and they spend 0 time on personal development: making them experts at creating more work with an ever reducing reward. Some leaders manage to break out of these but PE will almost certainly never have a view beyond the financials. I discovered that the people side of the business was critical success and transforming organisations remarkably rapidly and just how results can be achieved and cash generated
Public (its not my money) corporate even those that Win awards is often the very worst thing that can happen because the business reverts back to a complacent “we are the best” generalisation and modus operand and how much money people in these successful organisations spend yet it delivers no value. The tragedy is that many corporate just see a slow decline and don’t even recognise distress or move to slowly to stay ahead. I think this has a lot to do with the fact employees have a different view of spending organisations money rather than their own, and the more successful they are the more they can justify spending?
Summary: Put profit and relationships first Public (its not my money), Private Equity / VC (it’s all about money) and Owner managed (it’s my money) seem to be mutually exclusive groups? The common missing link is people: without people on board you will have one horrendous challenge and unnecessary fight on your hands. The over fight is so common and employees become so punch drunk that this goes unnoticed. What is key is that energy, urgency and hands on involvement are central to owner assisted transformations. What truly changes the game is robust governance, simple targets, devolved accountability at all levels. What PE owners get completely wrong is assessing the management capability: they embed more of the same: why? VCs are are risk adverse and have no clue about people: how to get the type of engagement and support right because guess what they care 100% about money. The environment of lower growth, reduced employment levels long term, shifts in globalisation and speed of change accelerates the need to act to retain value.
The corporate “mirage of success” only becomes apparent and gets addressed when things get tough. Before a crisis the issue remains completely unnoticed and is accepted. There is a huge cost in rationalising everything on the financials because it puts the cart before the horse. What’s better is to focus on profit relationships and speed and teamwork: creating cash comes down to effective teamwork.
The missing links are the ability to move at speed and building businesses upon great relationships. This is why I potted what we learnt in the 60 minute MBA program and why this approach comes free of charge when you engage with us.
