Overcoming Stage II Stall

Part 2

By Chuck Violand

Starting a business is so easy that every month more than 500,000 are launched in North America. The tough part is sustaining profitable growth once your business moves beyond the start-up phase. Even more challenging is sustaining growth and profitability when your company moves beyond Stage I (typically defined as generating less than $1 million in annual revenue) and into Stage II (usually defined as generating between $1 million and $50 million in annual revenue).

Sadly, this transition is where many small business owners realize that the competitive strategies, management systems and leadership skills that helped them grow their companies in the formative years aren’t enough to keep them growing as they get larger. This is where small businesses typically encounter what I call Stage II Stall.

In October, I covered two of the four reasons for Stage II Stall: loss of focus and checking out. In this issue, I will discuss the final two reasons, arrested professional growth and swollen ego.

Cause III: Arrested Professional Growth

“We demand discipline. We expect innovation. The lives of my teammates and the success of our mission depend on me. My training is never complete.”
—from the Navy SEAL Creed

According to Navy SEAL combat veteran Brent Gleeson, becoming a Navy SEAL involves some of the most physically and mentally demanding training the United States military has to offer. You’d think that once you’ve completed this training and joined this elite group, you’d be home free. Instead, it only gets tougher. You quickly learn that you’re just another new guy in an already well-established organization.

Only a fraction of the candidates who enter Navy SEAL training—the best of the best—complete it, and still they believe their training never ends.

The same principle holds true in any endeavor. Only a select few attain the ranks of the elite—be it the military, sports, the arts or business. Joining the elite is only the beginning; staying there requires growth and continual refinement of your skills. If you don’t work to stay on top of your game, there’s always someone faster, better, cheaper or just plain hungrier who’s eager to take your place. It should come as no surprise that failing to continue your development as a leader can cause your business to stall.

In some cases, in spite of an owner’s best efforts to keep up with his business, it outpaces him. This frequently happens in hyper-growth companies. In these situations, it’s easy for the demands of the business to outstrip the skills of the owner. Because of the extreme rate of growth, the owner doesn’t have time to learn the skills needed to continue leading his company. To avoid stall, owners often bring in highly talented managers from outside the company to drive their businesses forward.

At the other end of the spectrum, owners sometimes resist developing themselves as leaders because they fear the unknown. If they continue to develop themselves as leaders, what changes might this bring to their companies and what new and uncomfortable demands might this place on them as the owners?

When things are going well in your company, it’s easy to convince yourself that you have all the answers and don’t need to continue growing as a leader. Rather than exploring new ideas, investigating promising markets for your services or driving more efficient ways to deliver those services, you play the mental equivalent of solitaire. You play the same game over and over and settle for an occasional win. When this happens, it doesn’t take long for competitors, market changes or technological advances to catch up and send companies into a stall.

People fear change. While this may not be a major factor when a company is young, it’s not uncommon for it to occur as the business owner ages. The exhilaration felt from trying new things and rapid growth can sometimes wane as you get older. As a result you may not be as willing to gamble the groceries on a new idea. In the later stages of business, you usually have more to protect or more to lose if your gamble doesn’t pan out.

During a presentation Tim Hull and I do on mastering Stage II growth, we explore a concept Tim coined that is inherent in all small businesses: the short ladder. In large businesses, it’s common for managers and executives to be motivated by “climbing the corporate ladder.” In small businesses, the ladder is still there, but there usually aren’t as many rungs to climb before you bump up against the owner. This situation can present challenges for small business owners.

Not everyone is driven to be the top person in an organization. Many prefer to be great sidemen, which can actually bring greater value to a business. At the same time, most competent people want to continue to learn, be part of a winning team and see their company succeed. It’s this professional growth and the feeling of being part of a winning team that brings meaning and excitement to our jobs.

Great employees look for opportunities for professional growth. If those are limited because of a short ladder, and if candidates who sense the growth of the company won’t provide enough opportunities to exercise their professional skills, they may pass on your company and opt for another where such possibilities exist.

Some employees will give their employer the benefit of the doubt and assume the growth of the company will compensate for the lack of growth on the part of the owner. Unfortunately this can be short-lived for two reasons: Failure to grow on the part of the owner can ultimately lead to stall in the company, thus limiting or eliminating the employee’s opportunities for professional growth or advancement.

Secondly, owners who don’t see the value in developing themselves frequently don’t appreciate the value in developing their people beyond what’s absolutely necessary to deliver rudimentary levels of service. You don’t have to look too deeply to see how this can turn into a vicious, downward spiral of Stage II Stall brought on by the departure of top people. It’s not a happy prospect for any company when you understand that business growth is facilitated through the engagement of talented people.

As with the two previous causes of Stage II Stall, arrested professional growth is avoidable. Surrounding yourself with competent people who are motivated and capable of challenging you is a great first step.

Cause IV: Swollen Ego

Perhaps no story in history better demonstrates the tragic consequences of arrogance driven by a swollen ego as that of the murder of Julius Caesar. Caesar went to the forum on the Ides of March, apparently unaware he was to die there that day. But how could he not have known? A soothsayer warned him to “beware the Ides of March.” There were signs any superstitious Roman would have recognized: an owl hooting during the day, a lion running through the streets. Even Caesar’s loving wife, Calpurnia, begged him to stay home.

If all that wasn’t enough, consider that Artemidorus, a teacher in Rome, wrote down the names of the conspirators and tried to give the note to Caesar—three times! The last time was just moments before Brutus and the boys attacked.

Caesar felt he was invincible and he paid for his arrogance with his life. While the story of Caesar is tragic, it’s not unique. The corporate landscape is littered with the names of once-great business leaders whose careers were destroyed and their companies seriously compromised because they allowed their success to turn into arrogance.

Making decisions while under the influence of a swollen ego is like getting behind the wheel of a car when you’re drunk. Your reasoning is clouded.
While you may have convinced yourself that your decisions aren’t being affected, everyone around you knows better. You put your company and yourself at great risk when making decisions that are distorted by your ego rather than basing them on informed data.

I call this “situational blindness,” where business owners don’t see situations as they are, but rather as they want them to be. They bend reality to fit their needs—in this case, their egos. They don’t do their due diligence, they fail to consider the long-term consequences of their decisions or they simply ignore input from their chief advisors because they think they’re above all that.

The good news is that, as Julius Caesar had, you have warning signs that your business and the decisions you are making are being overly influenced by an inflated ego.

Unfortunately, just like Caesar, the alarms are too often ignored. Oh, sure, you still go through the motions of asking people for their opinions, but everyone has learned to recognize this for what it really is—a thinly veiled attempt to have them nod their approval as they rubber-stamp the decisions you have already made.

So, now your company is hit with what might be called a double whammy. Not only are your business decisions being made blindly, but your best people lose motivation when they find their input is no longer valued. Rather than feeling like respected members of a vibrant team, they start to feel like voiceless cogs in a spinning wheel. It doesn’t take long for them to begin searching for a place where their opinions matter.

Author Warren Bennis sums it up when he writes, “Authentic leaders, by contrast, don’t have what people in the Middle East called ‘tired ears.’ Their egos are not so fragile that they are unable to bear the truth, however harsh—not because they are saints but because it is the surest way to succeed and survive.” What business leader couldn’t benefit from that kind of thinking?

Recap and Resolution

The lucky ones in life are often reminded by the people who love them that it’s “not all about you.” While you may not like hearing it, you need that reminder from time to time. It helps you to stay grounded and to maintain perspective.

When it comes to your business, it’s a little different, as in many ways it really is all about you. Your business is a reflection of who you are—your beliefs, talents, passions, even your ego. On a larger scale, it’s about your ability to develop the disciplines you need to lead a growing company. As the demands of your business increase, the demands on your ability to lead increase as well.

When your company grows beyond Stage I and into Stage II, you usually have the technical end of what you do figured out pretty well. Otherwise you probably wouldn’t have survived long enough to become a Stage II company. This is not to say there won’t always be refining to be done: efficiencies to be gained, new markets to explore and industry trends to stay on top of. But overwhelmingly, the greatest challenges you will face will be driven by the behaviors of the people in your company— especially your own.

As leadership expert James Kouzes writes in Business Leadership, “How you lead your life is how people judge whether or not they want to put their own lives in your hands.” Since many of the major contributors to Stage II Stall are really about the personal behaviors of the CEO, it’s something completely within your own control.

In your efforts to lead your Stage II company forward, it isn’t necessary to have fancy mission and vision statements hanging conspicuously throughout the office or pasted all over your website. It is important to have a clear sense of where you’re headed—and you, and your employees, should be passionate about going there.

It isn’t a requirement that you open the door to the store every day or deny yourself the rewards of your sacrifice and hard work, but it is important that your presence and commitment to the company is felt throughout the organization.

You don’t always have to be the smartest guy in the company, nor should you be. But, you do have to demonstrate a commitment to learn and grow to better face the increasing demands of your growing company.

Finally, you don’t have to possess the humility of Gandhi or Mother Teresa to succeed in business or in life, but you do need the self-awareness to recognize when your ego becomes an obstacle to your company’s continued growth, rather than a contributor to it.

Society, economies and businesses have been evolving to the point where today the people who work for them pretty much do so on a voluntary basis. People no longer have to work for companies as much as they choose to work for them. At least that’s the case with the talented, motivated people who want to make contributions and on whom you depend to grow your business.

One of the main challenges you face as leader of your company is being aware of the symptoms within yourself that can lead to Stage II Stall. Only then can you help your company avoid stall and achieve sustained Stage II growth.


A PDF version of this article from C&R Magazine can be downloaded by clicking here.