Who's to Blame When Growth Stalls?

This excerpt from "When Growth Stalls," a new book by BusinessWeek.com columnist Steve McKee, highlights the importance of maintaining a healthy state of mind when things aren't going well.

When my company's growth stalled back in 2003, I spent a great deal of time feeling downcast, certain that I had done something wrong. Because we had been on such a positive upward trajectory for so long, I really thought we had figured out the special sauce that would enable us to generate consistent growth. When things slowed down, I naturally looked in the mirror and blamed it on the chef.

With the benefit of hindsight, I now know that while not all my decisions were correct, the break in our company's fortunes was largely due to conditions beyond my control. Since then, I have come to understand that leader's guilt is common when growth stalls. However, that attitude is not only unhealthy and unproductive, in most cases it's just plain incorrect.

tectonic forces

If you're in a position of leadership, you obviously have proven talents and capabilities. You've gotten to where you are through a series of smart, successful decisions. But you can't be all-seeing or all-knowing. There is no way to anticipate exactly what, when, and how tectonic forces will shake your company, nor to know which windows may crack or ceiling tiles fall when the tremors arrive.

Planning for adversity and future challenges is an essential duty of any leader. But as the U.S. Army Leadership Manual knowingly states, "No plan survives initial contact with the enemy." In other words, stuff happens. Economies crater. Competitors innovate. Technology advances. People leave. There is simply no way you can keep tabs on every piece of information, every shift in the playing field, every risk that could threaten your organization. As long as you're using valuable brain cells stewing about what you may have done wrong, you can't fully focus your energies on getting it right.

My partners and staff are a talented bunch, and together we do good work. Occasionally we screw up, and when we do, we apologize for our mistakes, take our medicine, and set about fixing things. Still, we work in a collaborative, fast-paced industry in which problems arise literally every day through no fault of our own. Sometimes it's a printer that goofed and has to put a project back on press, delaying our promised delivery date. Sometimes it's an interactive programmer who, in fixing one bug, unwittingly creates two more. Sometimes it's a cable TV network that runs the wrong commercial or a research firm that can't get its interviews done. Sometimes critical staff members are out sick, effectively halting work on key projects.

who better to solve this problem?

In all these cases, I tell my people to remind themselves of a simple six-word axiom: "Not my fault. Is my problem." The principle behind this statement is that they shouldn't waste time feeling culpable because something went wrong. Sure, they may have to be the bearer of bad news, and that's no fun. And getting things turned around may in fact blow up their schedule for a day or two (or longer). I encourage them to not get angry or frustrated but instead take a more optimistic view and say to themselves, "Who better to solve this problem than me?"

You can take the same perspective. In fact, if you're going to pull your company out of its stalled-growth morass, you have to. Regardless of how circumstances came to be, you must dispense with unproductive emotions and focus on the challenge if you're going to turn your organization around.

It may not be easy. As long as your people are disengaged or divided, things are not going to get any better. Our research demonstrates that when growth stalls, management teams are not only less likely to be aligned on strategy but also more likely to have problems with human fundamentals like mutual trust and respect. Those are essential matters, and they're not going to fix themselves.

No Heroes, Please

Some CEOs are famous for leading by dictatorial resolve or sheer force of personality. Jack Welch at General Electric (GE), Steve Jobs at Apple (AAPL), Richard Branson at Virgin Group, and a handful of others are so intelligent, so focused, and so charismatic, it seems they have little problem ensuring that their visions are achieved. But leaders like these are rare, and their companies will be no better off than yours once they move on. And I suspect that, if you were to ask them, each of these leaders would be the first to tell you that they can't do it all alone.

Several years ago, I had an afternoon to kill in Seattle and called on an executive at Starbucks (SBUX) whom I'd met at a marketing conference. She graciously offered to give me a tour of the company's corporate headquarters and spent a couple of hours with me as I peppered her with questions while we wound our way through the building.

As a student of marketing, I wanted to make the most of this opportunity to peek behind the curtain of one of the greatest brands in the world. I wanted to learn about the foundation of Starbucks' success and how the people on the inside lived and breathed the brand. I wanted to know what informed them, what drove them, what the master template was. Surely it had to be set in stone somewhere. Surely there must be "the three truths" or "the four pillars" or some sort of marble pedestal on which the Starbucks brand sat.

But I searched and searched and asked and asked and came up empty.

a sign of trouble

I don't know if I was more surprised or disappointed. Just as Dorothy discovered in her Emerald City, it all came back to the man behind the curtain. That's not a complete surprise; everybody knows Howard Schultz is the visionary behind the Starbucks brand. It's also not to say that there aren't legions of talented people at Starbucks executing his vision. But I was stunned how non-institutionalized the internal understanding of the Starbucks brand was. It convinced me there were some tough times ahead for the company, because at that time Schultz had recently stepped down from his CEO duties.

Sure enough, things subsequently got rough for Starbucks and, in 2008, Schultz returned to help refocus the company and turn around its declining U.S. same-store sales.

Despite their larger-than-life stature, even leaders like Schultz, Jobs, and Branson can't do it all. And they certainly can't do it forever. To once again quote Peter Drucker: "No institution can possibly survive if it needs geniuses or supermen to manage it. It must be organized in such a way as to be able to get along under a leadership composed of average human beings." (Note, too, that investment genius Warren Buffett uses a similar philosophy to guide his stock picks, counseling investors to look for a company that is so good an idiot can run it because sooner or later one will.)

Your people are, of course, not idiots, but I suspect that, like you, they are average human beings. That means they bring to the table their own strengths and weaknesses, their own ideas and opinions, and their own biases and perceptions. If you've done your recruiting job right, they also have a great deal of intelligence and motivation. What they may not have, when growth stalls, is confidence—in you, in the company, and even in themselves. Self-doubt isn't a disease that strikes only CEOs or those in the executive suite. Anybody who has been psychologically invested in your company's historical success—and its current trials—is struggling with it emotionally, no matter how well they hide their feelings.

vicious cycle

The problem, to quote a philosopher a few thousand years older than Drucker, is that "illness strikes men when they are exposed to change." (Herodotus, 484-420 BC). Going backward is unfamiliar terrain to businesspeople who are accustomed to success. It's frightening, it's confusing, and it's decidedly unrewarding. As long as denial, doubt, and fear—and in some cases, sniping, finger-pointing, and other destructive behaviors—are wreaking havoc with your internal dynamics, you'll remain stuck in the vicious cycle.

It's easy to overreact in this situation. Although bad management apples may cause some of the harmful conduct, your first reaction should not be to lop off heads. As your company struggles, everyone on your team is trying to muddle through in their own unique way. Take a deep breath and reflect coolly on the situation before making abrupt personnel moves that may end up making matters worse. And be prepared to give grace.

Sounds a little touchy-feely, doesn't it? But it should not be a surprise. A company is not only the source of its staff's livelihoods, it also represents a considerable amount of their personal identity. If it's failing, they're failing, and their natural reaction is to act out of fear or defensiveness, which is why your corporate culture may not seem as fun and functional as it once was.

the power of emotion

Management consulting firm Accenture (ACN) has done significant research focused on "high-performing companies," those at the opposite end of the spectrum from the stalled companies we studied. Their research provides an interesting reinforcement of our work. One of their findings emphasizes the importance of what they call a company's "emotional field." Accenture's Jane Linder says: "Emotion is the silent partner behind organizational success, especially when it comes to the capacity for continuous renewal. Although executives may regard effective project management as something that demands rationality in the extreme, Accenture research has established a direct link between employees' emotional engagement and their performance."

That's as true on the downside as it is on the upside. Linder explains that denial of workplace emotion doesn't make it go away but instead causes it to go underground. This is the situation in which many companies find themselves when growth falters, and it's the root of much internal conflict. Arguments over strategy and tactics abound as members of the management team cope with their emotions and view the stalled growth elephant from their individual perspectives. Even the best-intentioned people can pinball between an honest desire to right the company as a whole and their interests in protecting their own turf and budgets. Should we lower prices or stand pat? Announce layoffs or hold tight? Use cheaper ingredients or move upscale? Cut the marketing budget or invest to grow?

Because the destructive internal dynamics associated with stalled growth are psychological, the first step of the solution is psychological as well. Job one is to ensure that trust, consensus, and clarity are reestablished among your senior management team. It doesn't sound sexy, but you can not effectively address the tectonics shaking up your company, let alone the issues of loss of focus, loss of nerve, or inconsistency, without first getting everybody to the same table, literally and figuratively. It begins with a common understanding of the task at hand.

Excerpted from "When Growth Stalls" by Steve McKee, copyright 2009. This material is used by permission of John Wiley & Sons. When Growth Stalls is now available at all major booksellers.

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