The power of Why

People don’t buy what you do; they buy why you do it.

This statement got me thinking.  When I’m facilitating strategic planning with a client we define a mission or purpose for the business. The formula is:

  • What do you do?
  • Who do you do it for?
  • Why do you do it?

The ‘Why” has always come last and is invariably the most difficult to define. I now realise it’s the most important.

Why does your business exist? Can you verbalise it? Practising what I preach…

  • Stimulus thrives on realising business potential (Why).
  • We support the owners of privately held, medium sized companies within New Zealand (Who).
  • We engage as an independent director or advise and stimulate action in the areas of strategy, succession and governance. (How/what)

On a slightly (!) different scale let’s look at Apple. Just another computer company? No way, yet they have the same access to resources and ideas as their competitors. But look at the start of how they describe their business:

“Everything we do, we believe in thinking differently.”

The Why. They then go on to describe the how, who and what.

Here’s a real life example from a company I’m on the board of. Which sounds better?

PSL is proud to promote the quality of clinical research in Australasia and of our contribution to improving the health of New Zealanders (WHY). We achieve this through the provision of personalised clinical management and regulatory services (WHAT) to the pharmaceutical industry (WHO).


PSL provides personalised clinical management and regulatory services (WHAT) to the pharmaceutical industry (WHO). We are proud to promote the quality of clinical research in Australasia and of our contribution to improving the health of New Zealanders (WHY).

A subtle change but one that I believe is very effective.  I am now a strong advocate of leading with ‘why’.

A lot of my thinking has been inspired by Simon Sinek and particularly his Start with Why video.  Viewing the whole 18 minutes is worthwhile but if you are time poor, watch the first 5 minutes.

One final snippet from Sinek that resonated with me:

“Martin Luther King made an ‘I have a dream’ speech, not an ‘I have a plan’ speech.”

Your challenge for February – communicate ‘why’ twice as often as you communicate ‘what’.

Thanks to Richard Wright at Federation Media for alerting me to the Simon Sinek video.
Posted in Strategy | 2 Comments

So things aren’t so great with your GM?

I currently have three clients who face challenges with their General Manager. Maybe it’s something in the water?

In all cases there is misalignment between the GM’s ability and the owner’s expectation. This, combined with soft leadership, has led to a gradual breakdown in communication and respect between the parties.

Let me outline some of the advice I have shared with my clients over recent weeks. However, it’s worth remembering that for every challenge an owner is having with their GM I can guarantee there is a GM having challenges with their owner!


Are you expecting your employee to act like an operations manager, a general manager or a CEO?  In return does the person have an internal focus (attune to an operations manager), a broader capability (akin to a GM) or a deep and visionary skill set (needed by a CEO)?

There has to be alignment.  Issues arise when owners want the output and accountability of an X yet employ the ability and experience of a Y.

Interpretation of senior roles and responsibilities based purely on titles is dangerous given the wide variance from business to business. However for the NZ SME environment I personally see a GM as a strong people manager, capable of supporting the business internally and externally and reporting to the Board; a CEO needs greater credibility, strong sales, deep industry experience, a strategic focus and would typically be a member of the Board.

Document Delegated Authorities

It’s important for each party to understand who can commit the company and when.  Failure to document this may lead to the GM assuming more authority than you are comfortable with, leading to an ‘incident’.  Equally frustrating is when a GM feels obliged to run all the bigger decisions past the owner for fear of over stepping their mark. Structured correctly, delegated authorities are a very effective mechanism.

Agree clear reporting

Formalise the reporting you, as owner, receive. Is it daily, weekly or monthly? Sales, financial or HR based? This clarity will go a long way to ensuring you have the confidence to step back, lessening instances of micro managing (or perceived micro managing).

GM Development

In general people are not born leaders. It’s a skill that develops through experience and osmosis.  Where is your GM getting their leadership stimulus from? Are you providing it to them? If not then consider engaging a coach or encourage the GM to actively develop themselves in this area with groups like Leadership NZ or SpringBoard NZ.

Maintain influence

The position between a rock and a hard place is never comfortable: your relationship with the GM is unhealthy and expectations aren’t being met but they hold major client relationships, key staff loyalty and undocumented intellectual property.

Always be aware of the balance between empowerment and autonomy and the possibility of having to one day re-engage more actively in the business. Delegation of management responsibilities to the GM does not absolve you of the need to maintain some degree of staff and key client familiarity and communication.

Address issues early

As an owner, you have a responsibility to provide clear and timely feedback when you experience behaviours that do not meet your expectations.  Address these early, however difficult this may be at the time, and do not let an incident become a habit.


Ensure the person you engage as GM has very similar personal values.  This tends to happen naturally but take the precaution of being proactive in this area of your interview questioning.  Matching of values will go a long way to ensuring a successful and healthy relationship.

Owner Leadership

If you are smart you will have hired a person better than you and one that will, through their desire to grow the business, challenge you.  That doesn’t however mean that you need to acquiesce with every idea and request.  Leadership, on your part, involves saying “no” as well as saying “yes”.

Leadership also involves communicating a clear direction and vision to the senior management team.  While the GM will plan the route and move the troops it is you who will have selected the destination.

Posted in General Business, Owner Managers, Privately Owned Businesses | Tagged | Leave a comment

When own goals are good

How clearly defined are your personal goals? I ask because any major issue brought to me by business owners invariably leads to that question.

Personal goals, also referred to as primary aims, are the bedrock upon which all subsequent business planning is built.  When they are clear it allows business owners to put their company in to context with life’s bigger picture.  Major company decisions, including strategy, succession and governance, should be referenced against these personal goals. Ask the question: “Will the planned outcome of this decision get me closer towards achieving my primary aims?”  In this way, personal goals can also provide a compass when the going gets rough – similar to a set of values.

Multiple own goals

When there are multiple business owners, individual goals need to be openly shared and discussed.  Is there general alignment between the parties? If an obvious conflict exists then steps to address this need to start as soon as possible.  Delay will only exacerbate the problem in future years.  A combination of the most relevant personal goals leads to the formation of an agreed set of shareholder goals.

Goalless draw?

Clients I advise tend to fall in to one of three categories:

1. No personal goals.  Clear business goals.

    Sometimes manifests itself as “my business is my life”. Can eventually lead to disillusionment or burn out.  Personal goals are enduring while business goals should be finite. What happens one day when the business isn’t there? Or, when the business is there but other parts of their life are not?

    2. Clear personal goals. Lack of business goals

      Sometimes results in a “love/hate” relationship with the business. The company hinders the achievement of personal goals due to its insatiable thirst for money and the owner’s time.   A sense of frustration ensues as the owner struggles to break out of groundhog day.

      3. No personal goals.  No business goals.

        A tricky situation, but not as rare as you may think. Owners experience resentment, stress and bouts of demotivation.  The business can veer from new idea to new idea or, inversely, stay rooted in the past as the market and competitors gradually pass them by.

        Well done if you fit in to the Clear Personal Goals, Clear Business goals category!

        Scoring your own goals

        I am not a life coach nor profess to be one. All I can suggest is a few tips based on observing a dozen or so clients go through the goal setting exercise:

        • Define your personal goals without reference to the business – at least initially
        • Seek support from family or confidants who can provide stimulation or a sounding board
        • Think about your goals on holiday or at the bach – not at your desk in the office!
        • Take time to reflect and refine your initial ideas over a number of weeks

        Post match analysis

        Once you are clear on your personal goals ask yourself “What is the relationship between my business and these goals?”  Is it supporting them? Detracting from them?  Neutral?

        The result from this reflection and analysis provides a good platform from which to embark on some business goals definition or longer term strategic planning.

        If you would like to receive a complimentary Scoring Your Own Goals think sheet, please drop me an email.
        Posted in Owner Managers | 1 Comment

        Why this strategic plan worked

        Let me share with you a strategic plan that one year on is alive, well and far from gathering dust in the bottom drawer.  As my client says “It is a great feeling to know my team is enthusiastic about the future – they can now see what I see.”

        So, what went right?

        Personal goals were nailed down

        The business owners spent a couple of months thinking, documenting and refining their personal goals.  What they deemed important included good health, flexibility to travel, passive revenue streams and to remain commercially active and involved. These personal goals were the foundation on which the rest of the strategy was built.

        Key business themes were identified

        The shareholders defined five high level themes for the business.  They believed focus on these would be required to ensure the business supported the achievement of their personal goals.  The themes were:

        • Remaining true to the Company values
        • Increasing turnover & profitability over next 5 years
        • Strengthening internal systems & procedures and external governance
        • Removing owner responsibility for staff and operations
        • Readying the company for a change of ownership in 2013

        Careful choice of planning team members

        The team had breadth and depth, understanding that two people with similar ideas are, in effect, one person. Strength was derived from the team consisting of an employee, a customer and an independent facilitator, as well as two shareholders.

        Customer wants and needs crucial

        The customer was always at the forefront of the planning discussions. Their wants and needs were researched and discussed at length. This client distilled it down to three key needs: speed, quality and reliability.

        Concise output resulted

        Although the benefit from planning derives as much from the process (journey) as it does from the final document, the strategic plan itself is seven pages in total. It is clear, concise, relevant and real.

        Staff engagement continues

        Employees were fully engaged in the strategy’s initial roll out and this has continued via company workshops, three times a year. Examples of involvement include employees defining the BHAG (Big Hairy Audacious Goal), allocating responsibility for actions plans and regularly being asked to present examples of the Company values being put in to action.

        Accountability established early

        The owner managers were under no illusion that an external, independent individual would be required to ensure accountability and monitor progress of the execution of the strategic plan.  The plan is regularly referred to at Board meetings and the strategic goals drive real decision making around resource allocation and priorities.

        The plan was durable

        Almost a year in to the 4 year planning period the Company is still some way off achieving their strategic goals. This is a good thing. A robust strategic plan is not a glorified “to do” list – it took much thinking and discussion to ensure the goals were stretching yet achievable.

        And the client is happy!

        “As an owner / manager I had a vision for the future but it was clouded with many different options of how to get there. The strategic planning has given me a clear and concise focus for the immediate and long term future. It encompassed the entire company – we are now all working toward the same vision.”

        Posted in Privately Owned Businesses, Strategy | Leave a comment

        Employees as shareholders?

        Would sharing ownership with all of your employees make your business more successful?

        It’s a question most owners of medium sized, privately owned businesses consider at various stages along their journey.  I’m not convinced it’s a sensible path to take.

        Aligning interests?

        The key argument for a company wide Employee Share Plan (ESP) is that, by sharing ownership, employee interests will be more closely aligned with those of shareholders.

        My experience shows the five most common employee interests are:

        • Opportunity to learn and grow
        • Positive and pleasant work environment
        • Recognition and encouragement from management
        • Competitive remuneration
        • Job satisfaction

        Here’s an example of 5 possible shareholder interests:

        • Consistent dividend payments
        • Eventual liquidation of investment for capital gain
        • Strategic holding to support other investments
        • Inter generational ownership
        • Deeply rooted belief in the company’s mission or vision.

        This shows employees and shareholders wearing their own hats have little alignment.  So by granting a small shareholding to each of your employees, should we realistically expect a change in their interests, to any significant degree? My experience would suggest not. Most employees instinctively take a shorter term ‘what’s in it for me’ attitude (which is fine). This contrasts with a typical shareholder approach of “the Company’s success will lead to my success”.

        Stimulate Employee Performance?

        A second argument for ESPs is that staff will work harder/smarter. A blip may occur upon the implementation of the plan or upon communicating increased valuations. Otherwise my experience is that employee drivers revert back to type (as above). Sustained and material behavioural change based on the implementation of an ESP is unrealistic.

        Longer Term Employment with the Company?

        This is the third argument. ESPs may bring about a longer term focus, but if the employee has lost job satisfaction, isn’t learning and they don’t respect their manager how long is an employee going to hang on for an eventual pay out?  Instead, employers should focus on the five key employee interests above to increase longevity, but not at the expense of performance.

        As an aside, employee tenure (length of time they stay with a company) as a yardstick of organisational success has had its time. While not dismissing the numerous benefits of staff retention, it’s employee contribution that should be celebrated, not their number of anniversaries.

        Other ESP pitfalls

        Company wide ESPs can come in a number of shapes and sizes but generally they are expensive to implement – not just the cost of accountants or specialist advisers but also the management time taken to define and implement the programme.  Also, do not underestimate the time requirement of administering the plan once it is in place.

        A Discerning Solution

        If you choose to share ownership with your employees:

        • Give more shares to far fewer people
        • Those fewer people should be individuals that truly make a difference
        • Ensure those fewer individuals will still be adding huge value in 3-5 years time
        • Sell shares rather than giving them away (or do a mixture of both)
        • Award equity on achievement, not simply tenure

        Despite my reservations above, I am an advocate of equity participation for senior management or select individuals. Such management involvement can also help germinate an MBO, giving another possible exit opportunity for privately owned business owners.

        If shared ownership isn’t for you then consider setting a Big Hairy Audacious Goal and base rewards for its achievement on $$$. Like many things financial, when it comes to employee incentives, cash is king.

        Posted in Employee Shares & Incentives, Privately Owned Businesses | 1 Comment

        Words from the wise

        Last week I attended a three day Qualified Director workshop where 20 subject matter experts shared their thoughts on governance. There’s nothing quite like quality professional development to refresh your enthusiasm and focus.

        Hot off the press, here are my Top 10 takeaways:

        Directors are extremely reliant on the honesty of their CEO. Choose him or her wisely. This is the most important job of the board.

        Don Brash – Former Governor of the Reserve Bank of NZ

        Good news is written succinctly. Bad news is wordsmithed.

        Prof Jens Mueller – Waikato Management School

        If executives are continually involved in board meetings there is a “Death Star” gravitational pull to operational matters.

        Sandy Maier – Professional Director

        Your directors should not be friends, their friends or accountants and lawyers (too risk focused). Your board should reflect your customers.

        Don Jaine – Partner at Seqel Partners

        Set aside blue skies thinking time at board meetings at least once a quarter.

        Prof Gregor Coster – Chairman CMDHB

        Beware of joining a board with ‘founder’s disease’. Protective and passionate, it’s their baby and only they know what is best for it.

        Greg Cross – Chairman at Icehouse

        Sustainability, to be truly successful, requires authenticity. Consumers see through ‘greenwash’.

        Phil O’Reilly – CEO Business NZ

        New Zealand needs less financial regulation and more financial literacy. Education is key.

        Bruce Sheppard – Chair of NZ Shareholders Assn

        Now is the time to re-read your loan and OD banking covenants. Ask your bank where you are in their risk chain.

        Sam Shuttleworth – Partner at PWC

        As a shareholder remember 75% is key. Parting with more than 25% equity means you have lost effective control of your company.

        Shelly Cave – Partner at Simpson Grierson

        If you have questions about forming your own board or simply bringing on an advisor, let me know. I’m happy to help guide you through that process.
        Posted in Governance, NZ Business Environment | 1 Comment

        Under Pressure: 2009 Business Barometer

        Each year I look forward to ANZ’s release of their Privately-Owned Business Barometer. It’s a great insight in to the current thinking of around 2,000 medium sized kiwi companies.

        Here’s what caught my eye in last week’s release of the 2009 Barometer:

        Businesses in the transport, finance and communication sectors are more optimistic than others

        • If your business allows, consider allocating resources to target these specific sectors.

        Reducing costs (49%) was the primary response to the downturn, followed by more actively engaging with clients (34%)

        • Remember you can only cut so much cost. While this can have an immediate impact and provide a longer timeframe for riding out a downturn, it’s revenue generation based on solid client relationships that will ensure true business viability.

        79% of the businesses undertake long term strategic planning and 73% document the plan

        • I couldn’t discern if this was a 6% or a 27% difference but either way: if it ain’t documented it ain’t a plan.

        Only 11% of businesses have a formal succession plan in place

        • Given that 62% of shareholders surveyed are 50+ and 23% are 60+ am I the only one to see trouble looming?

        54% of respondents feel management are interested in taking over and that 60% are capable of taking over. But only 7% of respondents rank sale to management as their number 1 choice of succession.

        • I’m surprised at 7% particularly given there was appetite elsewhere in the survey for owners to make a graduated exit. Transition of ownership to management makes graduation much more feasible than an external sale.

        48% of businesses with turnover less than $5 million have no Board

        • There was direct correlation between size of companies and prevalence of a Board. Do bigger companies find a greater need for a Board or do companies with Boards become larger businesses?

        37% of smaller businesses (< $5m turnover) are unlikely to separate Board and management meetings

        • Separation of management and governance has been shown as a key plank of successful businesses. Elsewhere in the survey formulating strategy was seen as the key role of a board – this is very difficult to do when strategic and day to day operational items are on the same agenda.

        Desired attributes of a trusted advisor were strategy (24%), independence/different thinking (15%) and trustworthiness (12%).

        • These three attributes scored higher than industry expertise, being well connected, and, interestingly, maximizing shareholder value. I made my notes!
        Posted in NZ Business Environment, Privately Owned Businesses | Leave a comment