Mindset Matters
WHAT IS MINDSET
There seem to be no shortage of factors to complicate advising business owners. Let me add a personal favorite: Mindset. Mindset is an intangible that resides beneath the surface and, in my experience, drives business performance for good or bad.
So what exactly is it? Caution: Exactly may be a stretch. Like most abstractions, mindset is open to interpretation and difficult to pin down. Usually you’ll hear definitions like mental model or assumption. Mine is simply: ideas and beliefs leaders have about their company.
WHY IT MATTERS
Mindset is a function of how we think and often defies logic.Recently, I encountered stunning but all-too-familiar examples of this in a distress company headed toward insolvency. Ideas and beliefs like, “I can trust my family.” Or, “My team is fantastic.” Or even, “All we need to do is add sales people.”
These sound reasonable but only if divorced from the context. And this seems to be the problem. Leaders, like many of us, often find it difficult to “revert to logic.” Especially, when there’s not six degrees of separation between them and their companies.
Prevailing mindset is strongly conditioned by past experience. Leaders encode what’s worked in the past and often try to force fit lessons to the present, whether warranted or not.Cognitive scientists call this a “prediction by matching error.” It happens a lot and not just in middle market companies.
Research from the Corporate Executive Board on Fortune 100 Companies spanning the last 50 years indicates that even those with stellar revenue growth rates encounter stall periods that diminish value.
The good news is this: 87% of stall events are due to either strategic or organization factors like innovation breakdowns, neglect of core markets, and thin talent.
Two things about the findings are notable. Strategic and organization factors are undeniably controllable…provided leaders think deeply about their companies and take decisive and urgent actions well before performance levels off or softens.
The second is what the factors suggest: An untenable comfort with the status quo or said differently, complacency. Decline cycles begin when leaders and their company cultures stop thinking creatively about the business.
WHAT TO DO
Due to its impact, capturing mindset should be part of any thoughtful diagnostic process. For advisors, it’s a matter of developing an inquiry framework for capture and then listening to owner and leader comments about their business. The task is to discover the key leadership drivers behind current circumstances and performance.
I use a simple framework to understand what I call the “Leadership IQ” of a company. There are four leadership intangibles I pay attention to:
- Leader mindset and intent-ideas, beliefs, and intended actions
- Financial sophistication-knowledge and use of financial information
- Strategic and market clarity-company direction and opportunity
- Organization understanding-structure, processes, culture
Mindsets are powerful and not easily countered. Integrating mindset into your diagnostic, ongoing dialogue with owners and collaboration with colleagues is a great first step. Equal value is secured by challenging the material directly. Putting long-held beliefs under the microscope may seem risky to some but there’s no other way to peel the onion and move things forward.
About the Author: “Through his company TSG Advisors, LLC, Todd Greenberg uses innovative diagnostic and implementation methods to help business owners and leadership teams build valuable companies. Todd’s 30 year business career includes executive positions in technology and publishing services industries and consulting assignments across diverse organizations. He is a longstanding faculty member of the Center for Creative Leadership and develops next generation leaders in Fortune 100 Companies. Hear Todd’s Genius Talk at the Summit based on his development of an innovative online music education product that teaches kids to compose music.
“This post is part of a series of posts that the upcoming speakers of the 2013 XPX (Exit Planning Exchange) Summit are contributing. The theme of this year’s summit is The Art and Science of Collaborative Innovation. The event will be widely attended by business owners and trusted advisors to privately-held companies who are preparing for a successful exit.
Originally posted by Todd S. Greenberg on April 11, 2013 at 10:18am
