“Rank does not confer privilege or give power. It imposes responsibility.”
– Peter Drucker

The problems we encounter in closely held businesses often stem from the fact that most of the business owners are experts in a professional discipline but are not trained and experienced businesspeople. They might be engineers, physicians, electricians, attorneys, accountants or any of a number of other disciplines. They know how to manufacture a great product or provide a critical service, but they usually do not have the broad business expertise to manage change or fend off aggressive competition. Many of these companies do all right as long as the economy is strong and their team, even if mediocre, remains intact. However, the slightest turbulence in the marketplace or the loss of a key employee can send the organization into freefall.

Justin’s business is a good example of a scenario we see frequently. He was a talented architect who founded his own firm at the age of 31. He was also the sole breadwinner for his family of four. They lived in a fairly expensive home, belonged to a country club and had not saved much money. Justin was living as though the business would be profitable forever. As with many, he became complacent. However, business had been relatively flat for more than two years and Justin’s income had been decreasing. Both his business and personal lines of credit had grown to the point where he was facing difficult choices that would jeopardize the futures of his firm and his family. He came to Grenell for help in turning things around before it became too late.

During our first meeting, I asked Justin what his vision for his firm was. He couldn’t answer my question. Oh, he fumbled around with words for awhile but he had no clarity as for his vision for his firm. As an architect he understood immediately that if he could not envision it he could not build it. However, he had been so busy just trying to run the day-to-day business and thought that, because his firm had been around for over fifteen years, the future would take care of itself. Wrong!

It quickly became apparent that most of his business came from a relatively small number of accounts, making the firm very vulnerable. We also learned that Justin not only had no business plan, he didn’t have any businesspeople in his organization. He had hired people based purely on their resume and whether or not he liked them. He did not know how to hire properly. His interviews were shallow and he used no rigorous process to determine goodness-of-fit. Once he hired someone he also had no idea how to manage his people. He did almost no mentoring or coaching. He did not know how to manage his cash and relied on a “bookkeeper” who had almost no background in financial management and was “supervised” by a very hands-off accountant. Most importantly, he did not know how much he didn’t know. It was pretty scary.

We immediately implemented the discipline of planning to help Justin articulate a vision for the firm and objectives for the year to align his staff toward some goals. We conducted talent assessments of all of his people to determine the total skill set within the organization and identify individuals who could be developed into stronger contributors. We put financial disciplines in place and helped Justin hire a new accountant who could serve as a hands-on external CFO. We also implemented a disciplined monthly planning review process to help Justin stay on top of the firm’s progress toward its goals. Over several months three weak employees left and a careful and a structured hiring process was implemented and more talented and disciplined staff joined the team that was forming around Justin’s new & clearly articulated business plan. Regular team meetings were held as were routine one-on-one meetings with his key staff. Sloppiness was being replaced by engagement, accountability and discipline.

The bottom line is that his costs have been reduced and several poor performers have been eliminated. There’s more financial discipline, everyone in the firm understands what is expected of them, and the organization has a clearer vision of what Justin is trying to build for the future. They’ve turned the corner and they are moving forward in the right direction.

Fortunately, Justin recognized that his firm was in serious trouble early enough for a successful pre-emptive turnaround. Had he waited even another six months before beginning the process, his story might have a sad ending.

How does the future look for your organization? Are you building a solid future or is it time for a pre-emptive turnaround to get your business back on the path to success?