Most business failures, whether defined as inconsistent or flat earnings, poor financial management, underperforming teams, etc., can be traced back to a dysfunctional management team. And trouble at the top usually affects and infects the whole business.
Growing Pains
In my experience, management problems are most commonly realized at the point where a business moves from the infancy to maturity stage within the mid-sized enterprise tier – and hopes for continued growth.
A company can quickly outgrow the individuals running it, and if those individuals have been with the company since inception, replacing them with more experienced and skilled individuals can be difficult emotionally and possibly, financially and legally, too.
So, what are the definitive signs of dysfunctional senior executives (even of a CEO)? And how can you avoid conflict or poor performance at the top?
Many Aspire, but Few Succeed
While many competent and ambitious middle managers aspire to the C-suite, the unique mix of skills, experience and temperament needed to succeed at this level means failure is more likely than success.
Real leadership requires that the management team serves those on the front line. This requires senior executives to be leaders who listen. They must be equally adept at collaboration, communication and delegation.
Aloof senior managers who issue directives from afar aren’t visible enough to their subordinates to lead effectively. This is especially true of CEOs. Good leaders put themselves in front of their employees all the time. It doesn’t matter how large the company is, if the employees don’t know the CEO’s face, voice, sense of humor, and overall vision for the company, they won’t feel genuinely vested in its success.
Similarly, senior leaders must know how to delegate and trust the employees who work for them. Leaders who can’t delegate restrict the ability of their divisions to expand in capacity and performance by not developing their teams’ capabilities. Failure to delegate undermines and demoralizes staff, which often leads to high levels of turnover.
Education doesn’t necessarily mean the candidate possesses the “hard skills” needed for an executive job. A C-suite-ready executive also requires the often-forgotten “soft skills” that can lead a whole team to success. These soft skills include self-awareness, which can be indicative of a willingness to learn and evolve – a crucial requirement in a good senior manager. Good senior executives will be constantly identifying their own skills gaps and working/training to bridge them. They will also have the capacity to set personal goals and challenges.
Under the heading of “experience and skills” desired in top-level managers, you should also include being well-known and engaged in your industry. Top executives and CEOs should be engaged beyond their organizations, with deep industry-wide networks and relationships with suppliers, competitors, as well as regulators and subject matter experts.
Warning Signs
Dysfunctional habits don’t appear overnight, but more often than not, the problems they cause slowly escalate. Clues a senior manager isn’t up to snuff include:
- Lack of vision: Without vision, strategy and measurable objectives, you will effectively have the blind leading the blind. Senior executives should be able to articulate team goals that are inspirational, achievable and aligned with the business’s overall strategic plan.
- Failure to meet goals: If a senior executive doesn’t come to the company with a proven record of success or doesn’t develop a consistent one as they move up the ladder, then it’s pretty safe to assume they have ascended a rung too high.
- High turnover rates among subordinates: If you are seeing a revolving door of subordinates to a senior manager, this may be a sign that they do not inspire loyalty by being an encouraging mentor and team captain.
- Poor communication: The ability to listen, arbitrate, inspire and articulate problems and solutions with every stakeholder up, down and outside the chain of command is a hallmark and indispensable quality of a strong leader.
- Lack of self-awareness (aka “arrogance”): This quality presents itself among those who refuse to take the blame for any mistakes but always take full credit for successes. It is the antithesis of confidence, which is a necessary attribute for leadership.
- Customer tone-deafness: Effective leaders always have their ears to the ground, gauging the market and proactively responding before crises occur. They create a culture of care throughout their divisions that is reflected in customer service and in employee relations.
Coachable vs. Non-Coachable Dysfunction
The bar is high for valuable senior executives, but failing to meet all the criteria does not have to result in termination. Some shortcomings can be corrected with coaching. The CEO will need to make a value judgment on the executive in question to determine whether the “juice is worth the squeeze.”
Ultimately, you can coach technique. You can coach certain behavioral patterns—how people deal with conflict, for example, or how they motivate teams. But coaching has its limits, and it must be accompanied by benchmarking, goal setting and a thorough evaluative process.
On the flip side, there are things that cannot be improved through coaching. You cannot coach character, integrity or basic intellectual capacity. You cannot bring about fundamental changes in personality traits, like arrogance, timidity or laziness.
If a senior executive is a “dinosaur,” someone who struggles with change and adaptation in the workplace and is “stuck in their ways,” it may be time (or past time) to consider termination. In a business world defined by constant change, evolution on a professional level is critical to being an effective manager or executive. If you see a division pushing against the same problem again and again and failing to adjust, this is a clear sign that something is wrong at the top.
Conclusion
If your company has suffered from senior management failure, you are not alone. But the best way to guard against it is to have documented expectations and collaboratively developed goals for each executive that are evaluated frequently, candidly and openly with other members of the senior management team. Members of a governing board and experienced outside advisors can provide more objective feedback on the executive team — as well as the Chief Executive Officer. With their help, you’ll have the ability to spot dysfunction and act swiftly, long before a problem player(s) can cause an existential crisis for your company.
About the Author
Tom Springer has over 20 years of experience providing strategic planning, business development, interim management and technical advisory services for private equity firms, portfolio companies and public and private enterprises. Tom is skilled at growing enterprise value by creating highly productive sales and service teams, developing new lines of business and fostering client relationships. He is known for solving complex business problems by aligning technology with business and operations.
You can contact Tom at [email protected].
About SD Capital
SD Capital is a premier, full-service, value advisory and investment banking practice that assists middle-market companies in creating and maximizing business value. We provide strategic evaluation and execution of various downstream sales and monetization pathways. With decades of combined executive experience running, owning and advising private companies our team is uniquely positioned to guide owners through the complex process of growing and selling their companies.
Learn more at www.sdcapital.com or contact the team directly at [email protected].
Schneider Downs Capital LLC is a subsidiary of Schneider Downs & Co., Inc.
