Monthly Archives: August 2012

The Top Nine Causes of The Plateau Pattern™: Fear of Losing Control

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Steve is the President of a 25 person company. Somehow the fun seems to have been replaced by long hours, worry, and increased tension.  A variety of reasons are given by each person, but it also seems that talented employees are leaving before their potential has been realized.

What do you think?  Is the company positioned for growth? A plateau? Implosion?

Although such a short vignette can’t possibly convey the whole story, incredibly there IS enough information here to prompt some relevant questions.

The fact is there is a dramatically increased risk of a plateau when a company hovers around 25-28 employees.  It is a matter of human behavior, span of control, and the time available.  The classic scenario is that important decisions are still being made by the President despite the existence of a handful of managers. As the demands of the business increase, employees look to the managers to set direction, prevent problems, update marketing & sales, and upgrade systems. But decisions don’t come quickly enough through the group of managers. Ambitious employees get tired of waiting, conclude that their suggestions are being ignored or discounted, and start to look elsewhere.  Sometimes a small group of employees convince themselves that they could run the business a whole lot better and leave to create a competing company. The classic 25 person company quickly drops to 18 employees.  If the President cannot or will not see that his/her control issues probably created the exodus, the company will simply refill vacated positions…only to hit 25 people and bounce back to 18 again.

So, the first round of questions would be related to the President. Is a fear of lost control involved? The second round of questions would be related to the composition of the group of managers.  If the company follows the classic pattern, the group of managers will be hard “workers” who are really “followers” rather than leaders.

The fourth top cause of The Plateau Pattern™ is fear of losing control.

 

[video] The Top 8 Causes of The Plateau Pattern™ – #4 – Fear of Loss of Control

[video] The Top Causes of The Plateau Pattern™: Drift Into Misalignment

The Top Causes of The Plateau Pattern™: Drift Into Misalignment

Bob is the majority owner and President of a $16 Mil/year technology firm. The scope (complexity and size) of their client projects has steadily grown. A core group of people has been with Bob for several years.  One employee who started as a receptionist went back to school and now does the book keeping and invoices. The guy who used to lead installation teams now does purchasing and handles the equipment & parts rooms. Increased recruitment, training, and certification of client facing technical staff seems to be paying off, but lately it seems like everyone is just stretched too thin and spending too much time putting out fires and reacting. People don’t know what Bob will do next.

What do you think?  Is the company positioned for Growth? A plateau? Or implosion?

Although a vignette can never convey the whole story, there is enough information here to prompt some questions.   How much of the growth to $16 Mil has been intentional and strategic? At $16 Mil/yr of gross revenue, a technology firm with $10 Mil/yr in hardware/software sales and $6 Mil in service fees is very different from another technology firm with $6 Mil/yr in hardware/software sales and $10Mil/yr in service fees.  How intentional has the staffing been? It’s great that the receptionist was willing to go back to school to learn how to do book keeping, but at $16 Mil/yr, does Bob’s business need a Controller? How intentional has the organizational structure of Bob’s business been? Is he still the primary or only decision maker?  Are employees feeling scattered in part because Bob is also too busy?

There are several versions of the third top cause of The Plateau Pattern™.  Drift into misalignment is consultant-language.  I’ve also heard people describe it as a rudderless organization where the owner does not know how to approach truly Presidential decisions.  This can be viewed as The Peter Principle where a key person is promoted to a position over his/her capabilities.  Bob may have inadvertently promoted himself from “Owner of a Start up Business” to “President of a Midsized Enterprise” with insufficient preparation for the promotion. Bob may understand the clients’ technology needs far more than he understands his own company’s strategy, finances, and management. Bob may wish that he had gone back to school to earn his MBA when the receptionist was learning about book keeping.

 

The Top Nine Causes of The Plateau Pattern™: No Felt Pain

Joyce is the President of a $35 Mil multi-location distribution company. They utilize dashboard management so they know that their inventory turns, picking accuracy, order fill rates, average order size and other industry metrics are within acceptable ranges. The company participates in an industry buying group.  They even get money from manufacturers to help fund their marketing.  Joyce has been pleased that they have been gradually recovering from the downsizing that was forced on them in 2008/2009.

What do you think?  Is the company positioned for growth or a plateau?

Although a vignette can never convey the whole story, there is enough information here to prompt some questions.

$35 Mil can become a comfortable size for a distribution company.  The branches can usually be served by a single hub. By the time a distributor reaches that size, decisions have been made about order entry systems, EDI, bar coding, etc.  The blend of commercial & residential, projects & products, and outside & inside sales has become well established.

So what would prompt Joyce and other executives in this business to consider taking this business to the next level?  The second top cause of The Plateau Pattern™ is “no felt pain.”  Ironically, these are the business leaders who get blind-sided because they can’t see that they are getting “behinder” and “behinder” with each passing day.

What are other companies doing with e-commerce that threatens the very existence of distribution companies like Joyce’s? Which Baby Boomer owned competitors are being sold, participating in roll ups, or becoming part of a larger industry consolidation? At what point will the bright, young, ambitious managers in Joyce’s company realize that she isn’t investing in growth, become bored, and start to look elsewhere?  Which value-added services are other progressive distribution companies quietly developing and offering to Joyce’s customers?

Joyce may be comfortable and feel no pain now, but it is probably short lived.

[video] The Top Causes of The Plateau Pattern™ – #2 – No Felt Pain

The Top Nine Causes of The Plateau Pattern™: #1 Key Business Leaders Become Risk Adverse

At age 45, Tom has worked long hard hours to get to where he is today.  As the Founder and President, Tom is the majority owner of a 15 year old $20 Mil/year multi location B2B service company.  The company serves a core group of long term loyal customers. The business has generated a net profit every year (albeit small some years) despite the attacks on the World Trade Center in 2001, the implosion of the financial industry in 2008, and lingering uncertainty that has followed.  Tom lives in a nice house on a hill overlooking a scenic lake and he drives a great car.  Tom’s daughter’s college tuition has been paid off.

What do you think?  Is the company positioned for growth or a plateau?

Although a vignette can never convey the whole story, there is enough information here to prompt some questions.

How much risk did Tom (and perhaps his family) take on to get to where they are today?  Perhaps they waited to buy their first home as his fledgling business took hold.  Maybe they carried a second mortgage when the bank didn’t view a service company as sufficient collateral for a business line of credit.  Is Tom divorced now?  The stress of business ownership can take a toll on marriage and parenting.  How old are the people who helped grow the business with Tom? Are they still working at the company?  Are the loyal long term customers comfortable with low (or no) tech? Although the business has generated net profit, have Tom and the other owner(s) ever “taken a hit” from a disappointing product launch, a failed branch location, or a manager who didn’t carry his weight? How tired is Tom? What would Tom need to take on to lift the business to the next level?

Market opportunities exist. Money is out there.

The number one cause of The Plateau Pattern™ is that the key business leader has become risk adverse.  He/she now has more to lose.  Choices can’t possibly feel the same as when Tom was 30 years old in 1997 and he was starting a new business during a strong economy.  I call it “The House on the Hill” effect.

 

The Top Causes 9 of The Plateau Pattern™ – #1 Risk Aversion

[video] What Constitutes a Plateau?

What Constitutes a Plateau?

When the financial industry imploded in 2008, a variety of other industries went into freefall.  If your business is related to construction or mortgages and your sales remained flat in 2009/2010, had you “plateaued”? No. The phrase “flat is the new up” became popular in ’09 -’10. Whether flattened top line revenue is a plateau is contextual. It’s relative.  If your industry or niche was continuing to grow and your business was flat, you had “plateaued.”  If industry-wide numbers were flat or down, you hadn’t.

Example:  The mobile and social communications industries continued to grow as APPLE led the way with its I Phones and I Pads.  Think about:  Blue Tooth & 4G and apps. like Angry Birds and Quick Office.  Think about Skype and YouTube.  Think about Facebook, Twitter, and LINKED IN. If your business plays in this space and your top line revenues flattened in 2009 – 2012, YOU “plateaued.”  The market provided ample opportunity.  Apparently, money was sufficiently available.  YOU failed to grow… for some reason.

Plateaus SCREAM information to attentive business leaders.  Their data forecasts growth or freefall.  One of our current clients had steady growth across 20 straight years, but they had plateaued in recent years.  Fortunately, their leadership started to ask tough questions about leadership succession, advances in technology, threats to their industry, and growth opportunities.  It turns out that their business model had played out and is not sustainable. They MUST change to survive and thrive. WOW!

If you have had steady growth followed by a plateau, ask yourself if growth or freefall is next.

 

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