Best of CoBiz: A top-notch leadership model
Editor’s note: Here is another valuable excerpt from the new success book by national business consultant Laurence B. Valant and partner Gayle W. Hustad, “Lead and Manage! The definitive guide for getting the results you want.”
I am often asked to speak at various business functions, and following one particular luncheon presentation, I was contacted by the president of a consulting engineering services firm who was facing organizational challenges that had become aggravated by his rapid growth. Don’s company provided engineering consulting services to a client base that included large international banks and mega-sized utility companies for capital projects involving hundreds of millions of dollars and requiring several years to complete. Their world was highly challenging, a high-stakes work environment in which the competition was fierce. They became our client.
Bright, confident, unassuming, Don outlined an aggressive vision for growing his company. He saw his enterprise evolving from its current levels to becoming the fastest growing company in its market. He believed they could become the preferred service provider in their markets. He knew that the drive to greener sources of energy would provide unusual opportunities for his firm. They would need to be nimble and react quickly to the shrinking of traditional sources of power and the changes in the mix of energy generation that were imminent.
Don outlined the new markets they would enter where their technological superiority would give them a competitive advantage and provide an opportunity for sustained rapid rates of growth. I challenged Don to define how his organization would need to grow if he were to achieve his vision. Don’s vision of his organization included a combination of youth and experienced management competence, a combination he felt was critical in achieving superior levels of customer service.
When I asked Don the same question I ask every new client, “What does success look like in five to 10 years?” His reply was a staggering challenge, “I believe we can grow our revenues 400 percent in the following five years.” We went to work with Don to help him formalize this vision.
To reach his aggressive objective, Don’s overarching strategy was based on leveraging his organizational and technological capabilities for entry into new markets, while continuing to support his base business to provide the cash flow for new market entry. He identified the product types and the kinds of returns such products would deliver to their customers, and developed a product-based value proposition to be communicated to his business unit managers.
This was an important step. The value proposition specified the returns that could be expected by a customer on their investment. Don gave his business unit managers the basis on which to develop their specific product plans as well as the parameters of their expected financial returns. Guided by the value proposition, Don’s managers understood what would be required to satisfy their target market, customer requirements, and the requirements of the firm.
Using the value proposition, Don was able to develop broad budget targets and return goals for each of the market entries so his business unit managers would understand to what they were committing in terms of quantitative deliverables and budget performance. Don defined his deliverables for each market entry and investment in quantitative terms for the next five years and then again for the five years following.
When challenged to create his organization strategy, Don determined that he would maintain a hierarchical structure to assure accountability, every entity in his organization would be subordinate to a single other entity. By organizing his company into business units (profit centers), he was able to hold strict accountability for managing the capital investment required for their startups and entries into new markets. He was able to project planned residual income by business unit and then sum those projections in the overall definition of success for his firm. Finally, Don created a holding company which would be responsible for overall company growth in value and performance and for corporate governance.
After completing his organization structure, Don was able to clearly define the roles, responsibilities, and authorities for his top management and business unit managers. This structure and layering of accountabilities provided the basis for day-to-day management of the operations as well as defining roles for planning and measuring performance and holding people accountable for results based on the firm’s commitments.
Don settled on a structure in which he reported to a board of directors whom he knew and trusted and who had extensive and successful business experience. He then specified a COO position which reported directly to him. This COO would have direct responsibility and accountability for each business unit. The business units in turn would be run by VP/general managers who would have complete P&L responsibility.
Once these broad determinations were determined, Don provided the company with his formalized, written vision statement:
The firm will grow from its current level to four times its size in revenues and four times its value in residual income over both of its five-year planning periods.
We will support our growth by entering new markets where we have technological and organizational superiority, giving us the opportunity to manage our risks, grow successfully and to maintain acceptable marginal returns, based on expected values.
We will build a profit-center based organization, led by competent leaders and managers with clearly defined roles, responsibilities, and objectives by profit-center.
The profit-centers will report through a COO to the Holding Company, which will be directed by the CEO.
We will recruit young competent engineers to join our seasoned technical managers to create a mix of talent that will provide new, creative and practical solutions to the challenging energy problems which face us today.
In implementing his vision for the company, Don filled the COO position and three of the business unit positions from inside his company. Because of Don’s and his COO’s relationship with key people in the industry, they were able to gain recommendations of qualified people to fill the fourth business unit leadership position. Seeking recommendations from a trusted source who knew the details of the candidate’s performance, Don limited his risk substantially and did subsequently find a good candidate to lead this division.