Business Strategy and Great Leadership A Focus on 5 Questions and 7 Click to edit Master Thoughts title style Presented by: Scott Becker, JD, CPA, Partner, Publisher Beckers Healthcare, Beckers ASC and Beckers Spine June 24, 2017 15th Annual Spine, Orthopedic and Pain Management-Driven ASC Conference + The Future of Spine www.mcguirewoods.com
Business Strategy and Great Leadership A Focus on 5 Questions and 7 Thoughts I. Business Strategy A Focus on 5 Key Questions 1. What is Working? Where is the Business Coming From? What is Doing Well? Where Can We Expand Success? In essence, in every business strategy situation, we advise clients and companies to start with the questions of what is working and where are revenues and profits coming from? For example, what are high-, medium-, and low-revenue generators? Then, which ones are high-, medium- or low-margin? Then, we prod the business to spend more and more time on the highest margin and revenue areas. I.e., we encourage the business to focus its efforts towards the medium to high margin and revenue areas. In another letter or article, we can discuss the concepts of threshold targets for revenues and margins. I.e., a target contribution amount where a company does not target or put resources into an area unless it can meet or exceed that target. Low Revenue High Margins Medium Revenue High Margins High Revenue High Margins Margins Low Revenue Medium Margins Medium Revenue Medium Margins High Revenue Medium Margins Low Revenue Low Margins Medium Revenue Low Margins High Revenue Low Margins Revenues McGuireWoods LLP 2
2) Should We Double Down on What s Working? We advise companies that before looking into the next new thing or next great endeavor, they should protect or double down on their base, particularly if there is still growth or serious profit there. There is a concept that profitable businesses can be boring. It is often more exciting to take a business in many different directions. However, it is often more profitable to constantly double down on strengths and what is working well. Many people don t like to do this, because it is not as exhilarating compared to starting and looking at new things. In general there is an old concept that a business should spend 75% to 85% of business time, strategy and energy on core businesses that generate profits and 15% to 25% on newer types of endeavors and initiatives. We think this rule still largely makes sense. 3) Probability of Winning; Is it Worth Winning? When examining new initiatives, we look at a handful of starting questions. Can we win in an area? What is the probability that we can win, and if we do, is it worthwhile? In essence there are lots of small initiatives that you can win, but the ultimate impact will be small. In contrast, there are big initiatives where big market share and profits are available, but those can be divided into two areas those in which the competition is so steep that it is very hard to win or those where it's quite winnable. In general, you want to spend time on areas where you can win and where it is worth winning. McGuireWoods LLP 3
4) What Initiative or Areas Should Be Abandoned? One of the most important business concepts comes from how Peter Drucker defined different businesses. He said there were certain businesses that you are a winner in, much like Boston Consulting Group would say there are cash cows and rising stars. Then Peter Drucker would refer to other businesses and areas as investments in managerial ego. These endeavors may be exciting, but are so hard to win in that a company should rarely be in them. Here, if certain areas cannot generate the profits or margins you target, absent very special reasons, a business should abandon them. 5) Who Are Your Key People and What is Your Key Strategy for Doubling Down on People. There is a concept from Jim Collins, one of the other great business authors and business thinkers of our time, that basically says you can win in a lot of things once you have the right people in place. You can develop a lot of different strategies as long as you have great people. We agree with this concept. It is critical to have a great people strategy to go with a solid business strategy. The two should go hand in hand. McGuireWoods LLP 4
II. Great Leadership 7 Key Thoughts 1. Great leaders are passionate about success and engaged, excited and enthused. Great leaders remains enthused and excited about what they are doing and what their team is trying to accomplish. Teams sense whether a leader is engaged and excited or not. It is the unusual leader who can stay enthusiastic and in top form in a position for more than 10 to 20 years; for many, the attention span is less. When a leader senses himself or herself losing excitement or engagement, it is time to step down from leadership or take time to rediscover oneself. The phrase "lame duck leader" often applies to those that are still in office despite losing their spark. In any event, an excited and engaged leader is critical to success. We should not confuse passion and excitement with a huge or "rah-rah" personality. A great leader can have a big personality, and most have great people skills, but that is only part of the picture. Great leaders are engaged with their teams. They are constantly talking to, communicating with, seeing and visiting their teams. They know what is going on with their teams, they know what is going on with their key customers and they know what is going on with the business. McGuireWoods LLP 5
2. Great leaders build teams and the next level of leaders. The greatest accomplishment of a leader may be building the next level of leadership such that he or she is less needed. This is so important to the organization and requires tremendous energy from current leadership, yet it is not always a top leader's first goal. An elite team can go exponentially further and accomplish a great deal more than a great leader. Anyone who has built an organization beyond a few people understands the importance of great teams and colleagues. When a high-performing team is built, the leader remains important. However, more and more, you can identify a great leader or manager by how special their team is. When a team is magnificent, it is a lot easier to be a great leader or manager. A core concept in Jim Collins' Good to Great is to build great teams and then set plans. I.e., if one has great people, a company or team can then accomplish all kinds of things. As a key point to building great teams, great leaders emphasize great recruiting (and retention). A key point for recruiting and retention is developing a culture that attracts and retains great people and allows them to thrive and develop personally and professionally. Many great leaders ascribe to the concept that it is far easier to be a remarkable leader and achieve goals if you recruit great people. Nick Saban, head football coach of the University of Alabama, for example, states that he is a fine manager, but that his teams win because he is a magnificent recruiter. McGuireWoods LLP 6
3. Great leaders have serious goals and set clear plans. Great leaders set goals for their teams and organizations that are exciting, interesting and far bigger than themselves. The leader needs a goal that one can point to as, 'This is what we are trying to be,' or, 'This is what we are trying to accomplish.' There is nothing worse than a leader who transparently appears to get ahead for themselves or accomplish their own goals versus organization or team goals. The late Apple CEO and Cofounder Steve Jobs and former GE CEO Jack Welch are examples of great leaders who set big goals. Mr. Welch had the core goal to be No. 1 or 2 in any market or not be in the market at all. Here, it is also critical that the plan or goal is well communicated to the team, and that key decisions are consistent with the goals. No plan or strategy is ever perfect. However, most organizations and teams do far better with a plan and strategy than without. Often, the plan is imperfect but adjusted over time. Either way, in almost all situations, a not-great plan is far superior to no plan at all. McGuireWoods LLP 7
4. Great leaders generally don't micromanage. High-caliber leaders develop great leaders and teams and allow their teams to excel, perform and grow. They do constantly look at benchmarks, hold people accountable and follow up with them. However, on a day-to-day and moment-to-moment basis, their teams are given lots of latitude and autonomy. This is coupled with follow up and looking at what is accomplished. Warren Buffet may be the world's best example of a leader who has great CEOs, holds them accountable and doesn't micromanage them. Some of the best leaders we have seen recognize when they have an amazing leader working with them. In those situations, the best of leaders can take their ego aside and largely allow the next in line to take credit and lead. 5. Great leaders praise often and recognize contributions. A great leader understands that part of team-building is constantly looking for what people are doing well and encouraging more of that behavior. Great leaders provide praise, recognize what is done well and motivate more of that to be done. They look for what people do exceptionally well and they look to promote those doing great things. They are constantly looking for the next opportunity for people. McGuireWoods LLP 8
6. Great leaders are not afraid to make hard personnel decisions. The best leaders understand that not everyone is a fit for every job. They are not willing to tolerate mediocrity. This doesn't mean they have a quick trigger. It does mean that they constantly compare current performance to great performance, and try to fit people in spots where their performance can excel. For example, someone who is not great at something might be given another try at a difference role where they may shine. One of the best leaders I ever witnessed ascribed to the view that it was very hard to change people. He counseled to be very fair and patient, but that it was easier to "change the person than change a person." In essence, sometimes it's easier to replace the person than change how a person behaves. 7. Great leaders are emotionally mature. Great leaders do not fly off the handle or make rash decisions, but they do follow their instincts strongly. A remarkable leader does not react to every issue with a great deal of stress. Rather, he or she can take things in, move forward and keep a team on board. A leader's ability to manage emotions both his or her own and as those of team members is critical. McGuireWoods LLP 9
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