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Ideas for Leaders #030

When Growth Fails: Managing the Dark Side

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Key Concept

Fast growing businesses are susceptible to failures. To sustain the enterprise executives must know how to manage the aftermath of an organizational failure. Specifically, the authors point to mindset shifts that can improve leadership in volatile environments. These include: collaborating with critics, making sure everyone is on the same page, and above all remaining grounded in a strong set of personal values.

Idea Summary

In high-growth companies, it is a fact that periods of expansion are often punctuated by sudden and severe challenges. Noting the extreme tension between success and failure in businesses today, the authors set out to research how “the dark side” of growth can be managed appropriately. They describe this as the often sour situation that emerges when a business’s attempts to grow fail. Managing these moments correctly is what makes the difference between sudden death and long-term survival. According to the authors, this oft-forgotten dark side of growth affects the whole firm, but particularly the CEO, who is under pressure from all sides.

They tracked more than 110 CEOs of young, innovative companies from more than 20 different countries for more than five years. Amongst their findings was the fact that successfully managing the ups and downs of growth depends on more than luck. The ability to shift from growing mode to crisis mode and back again requires a strong set of personal competencies.

Specifically, the authors identify four shifts of mindset that leaders in volatile work environments need to make if they are to be effective. One factor that appears as a constant in all four is the need for a strong system of values instilled in an organization by CEOs from the beginning; this enables them to deal better with crises and bounce back to the growth path more rapidly. 

Business Application

The authors identify four shifts of mindset needed to avoid the most undesired outcomes of organizational failure:

  1. From fighting non-believers to collaborating with attackers: while it is important to remain persistent and goal-orientated during difficult times, it is also vital to be open to outside input and to embrace those who attack, instead of hiding in a shell. To do so, it is useful to depict reality as soon as possible to all the people involved. Remaining open to external input, especially from critics, also requires humility.
  2. From protagonist to enabler: CEOs need to conceive themselves as “enablers” - people who are part of a given system with uncontrollable or only partly controllable variables and outcomes, who try to stimulate positive reaction, development or change with these given factors, while acknowledging that they are not almighty.
  3. From different mental time zones to one mental time zone: though many conflicts seem to arise over strategic issues, more often they are related to the problem of being in different mental time zones. This prevents effective decision-making from adapting to new situations. It is vital that mental time gaps between, for example, CEOs and management teams or board members, as quickly as possible.
  4. From rollercoaster to steady track: it is the CEO’s job to keep him/herself and employees inside a certain ‘green zone,’ buffered as much as possible from the shellshocks of growth. It is also desirable for CEOs to have at least one trusted individual inside the organization whom they can talk to. If they cannot be found inside the organization, leaders should seek them outside.

To conclude, the authors comment that CEOs with a strong set of personal values and who are able to make the four key mindset shifts described [above] will be well-positioned to lead their companies through times of turbulence.

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Authors

Institutions

Source

Idea conceived

  • 2010

Idea posted

  • January 2013

DOI number

10.13007/030

Subject

Real Time Analytics