Dr John Colley, director of MBA and executive programmes at Nottingham University Business School and a former FTSE 100 group managing director, explains how the leadership needs of a business change over time.
Steve Jobs, Sam Walton, and Bill Gates were exceptional leaders. They created businesses, navigated during strong growth and effectively led their business into maturity. Considering that 90% of start-ups disappear within two years, this is a major achievement. A few of the survivors may progress into the rapid growth phase. However it is very rare that the original entrepreneur who started the business will remain at the helm as it grows.
Few leaders have a broad enough set of skills to guide a business through all the stages of the life cycle. The leadership requirements of each stage: start up, rapid growth, maturity, turnaround and ultimate demise, are all very different.
Typically entrepreneurs are highly driven people who enjoy creating new products and businesses. Many are serial entrepreneurs who continue creating businesses, some successful, some less so. They are characterised by frenetic activity, normally leading a small team of colleagues with informal relationships and little structure who work towards designing and producing and then marketing new products. Vision, creativity, passion and energy are critical.
However should the product be successful and demand escalates, usually very quickly, then the business needs to expand rapidly. Producing adequate product to meet demand and delivery service levels becomes critical. This requires systems, procedures, and organisational structure. A methodical person, market focussed and with good communication skills is necessary to keep the increased number of interested parties informed.
Few entrepreneurs either have this skill set or are motivated by the very different demands of rapid business development. Furthermore, accelerating expansion requires additional capital which usually results in control passing to venture capitalists. They normally want an experienced CEO to look after their investment, resulting in the entrepreneur being moved aside.
Once maturity is reached then skills requirements begin to change again. CEOs need to communicate extensively with investors, customers, employees and the media. They need to disrupt the status quo of a mature business by setting new challenges, and creating forward momentum. Evolution, not revolution, is necessary to build market share and continue to drive efficiency.
Should business fortunes decline then a turnaround leader is usually needed. This is someone who is not married to past decisions, does not have deep relationships with the staff and workforce and can make difficult decisions about what to cut and what to grow. A change agent with a new vision, objectivity and independent outlook is needed. Association with previous decisions in the business could hamper effectiveness and hence an outsider is usually selected.
Finally, businesses do have a finite lifespan and may need a resolution which could be merger through sale, or winding up. Specialist CEOs or Receivers are normally appointed to facilitate this process. Indeed some businesses are designed for limited life, such as the various organisations associated with creating and running the London Olympics. Motivation of employees needs to be maintained until the best solution can be found for the business.
The approach we take at Nottingham University Business School is to develop as wide a portfolio of-leadership skills as possible in our students. For example, self-awareness and self management are key to highlighting limitations, understanding strengths and identifying areas for personal development. These skills may also need to be augmented through careful selection of team members. For example, our entrepreneurship programmes attracts people from major businesses in addition to those wishing to start and develop businesses. Some are serial entrepreneurs who start businesses and if the venture is successful then sell up and start another business. However others may wish to develop with their business. This will be dependent on skill acquisition, whether through self development, or team selection.
Objectivity in understanding the skills needed for a particular business, coupled with developing self awareness are important capabilities for any leader. In early stage businesses these are particularly important because the pool of people engaged in developing the business tends to be small and there may be critical gaps. These same gaps pose future risks. In larger businesses, understanding the leadership implications of changing business challenges is equally as important, as many leaders have discovered to their cost.