If you look at the CEOs of some of the UK’s top companies, you might think that they are a complete mix of individuals with very different leadership styles. However, while their methods may be very different, the most successful leaders all share some core characteristics. These core traits are applicable for all businesses but are particularly pertinent to the leaders of SMEs. In this article we take a look at three core attributes of a successful leader and the role they play in the long term growth and success of a business.
1. Deciding with speed and conviction
Making good decisions is critical to the success of a business; a study by Bain & Company revealed that decision effectiveness is 95% correlated with financial performance. While the outcome of a decision is clearly important, how a decision is made is, in fact, just as significant. In many cases a drawn-out decision-making process can actually cause a business more long-lasting damage than a poor decision made quickly.
Indecisiveness can damage a business in several ways. First there is the financial cost. Projects which run on and on while employees wait for a decision from the top can result in overrun budgets and huge amounts of wasted man power. There is also the psychological impact to consider too. Businesses need momentum in order to keep growing at speed. Delayed decision making is likely to sap an organisation’s energy and the good will of its employees.
The impact indecisiveness can have on employee morale can be extremely damaging
When a leader displays uncertainty and indecisiveness it not only creates bottlenecks in the business but it can also undermine confidence in the ability of the CEO. This is turn can make it more difficult for the CEO to implement change in the business.
The impact indecisiveness can have on employee morale can be extremely damaging. When a leader displays uncertainty and indecisiveness it not only creates bottlenecks in the business but it can also undermine confidence in the ability of the CEO. This is turn can make it more difficult for the CEO to implement change in the business.
While time is spent debating a decision, competitors are gaining ground on the business, launching new products, adopting new technology, improving their business processes or entering into new markets. All of which results in lost opportunity for the business. One of the advantages that SME’s have is their ability to move more quickly than larger competitors. But those advantages can only be seized if decisive action is taken quickly. Similarly, there are also continual challenges that an SME will face in the form of new regulation or economic and political changes and a business must adapt quickly to mitigate the impact of these challenges. Again, this can only be done with decisive, quick action.
It’s important not to lose sight of the bigger picture. By being constantly aware of the long-term objectives of the business, leaders will find it easier to assess what actions need to be taken in the short term. Of course, there will always be a balance between managing urgent issues and supporting long term goals but keeping a clear eye on the vision will help to reduce time spent deliberating on issues which are not critical to the long term objectives of the business.
The 40/70 Rule
It is also important to accept that as CEO you will never have all the information you want when making a decision. Waiting until you have 100% of the data you need in order to make a decision will put a huge delay on the decision-making process and place a big burden on your employees in the process. Of course everyone’s data threshold will be different. One famous guideline comes from former U.S. Secretary of State and Chairman of the Joint Chiefs of Staff, Colin Powell who coined the 40/70 rule which dictates that after you have obtained 40% of all the information you are likely to get, you should start thinking of making a decision and by the time you have 70% of information the decision needs to be made.
An important thing to note is that bad decisions can often be rescued or fixed. A classic example of this is Coca Cola’s decision to replace Coke with New Coke in 1985. After a public outcry the company were forced to do a u-turn and put normal Coke back on the shelves. Ironically, due to the quick action taken by the company to address the situation, many believed that it was in fact a PR stunt and sales increased despite the error in judgement.
Mistakes are an important source of learning
A successful leader understands that mistakes are an important source of learning and can be used to strengthen the business and help inform decision making in future. Making the wrong decision won’t necessarily impact your business negatively long term but indecisiveness can damage your organisation and reputation beyond repair.
When a quick decision is required one of the most useful things you can do is to seek outside counsel from a trusted objective party. This will help you to take a step back and focus purely on the critical aspects of a decision. This is where speaking to an advisor can really help.
2. Understanding employee motivations
Everyone knows that motivating your staff is vital to productivity and the health of your business generally.
A high staff turnover rate can have a damaging impact on the business, causing the business to spend valuable time and resourced on recruitment and training new staff. This can be particularly damaging for SMEs with a smaller headcount which will be significantly impacted by staff turnover and unmotivated individuals.
As we’ve discussed before, creating a consistent company culture as the business grows is vital to supporting your company vision but this can only be done if employees are motivated. Motivated employees can lead to increased productivity and allow an organisation to achieve higher levels of output. However, understanding how to motivate your staff can be challenging. While you can provide on the job training to upskill employees, improving motivation levels can be more challenging.
The good news is that money is not the top motivator for employees. According to a study by Psychology Today, camaraderie, recognition and professional growth, all top the list ahead of remuneration. The important thing is that CEOs take the time to understand what the key drivers are for their workforce and how those particular needs can be met.
The workplace is constantly shifting and evolving
When trying to understand the needs of your employees, it’s important to appreciate that the workplace is constantly shifting and evolving. This is particularly true for SMEs which are in growth phase and regularly taking on new staff. A study by recruitment firm Robert Walters found that 75% of Millennials considered an engaging and fun workplace, including work perks like social events, important or very important, compared to just 58% of Generation X or 45% for Baby Boomers. It is important that leaders consider the different needs and motivations of their employees, particularly as new people join the organisation,
Communication is the key. It is important that leaders take the time to find out about their employee’s circumstances, what their aspirations are, what they like and dislike about their roles. By establishing regular communication, leaders will get a clearer view of how to motivate employees to perform to the best of their abilities. For ideas on how to motivate staff, have a look at our recent blog on 8 ways to motivate your staff.
Often it can be difficult to get completely honest feedback from employees and so this is where an external advisor can also play a vital role in bridging the gap between CEO and employees, giving you genuinely objective feedback on how your employees view their roles and the business so you can decide how best to motivate them.
3. Adapting proactively
We live in a rapidly changing environment. Recently we’ve seen political uncertainty around Brexit, changes in global trade tariffs and agreements, the adoption of new AI technology and that’s only the last few months. Now more than ever, leaders must be flexible and able to adapt proactively to changing environments in order for the business to succeed long term.
Adapting proactively means handling new situations for which there isn’t a process to follow and steering the company through unchartered territory. This is particularly important for leaders of SMEs which are growing quickly. As a business grows, it will constantly need to change and adapt, whether that’s expanding into new markets, adopting new technology or restructuring departments. The CEO will need to be able to manage these changes and seize opportunities and adapting proactively is key to this.
Leaders who adapt proactively will constantly monitor new developments and changing market conditions, not just in relation to how they apply to their specific business but in the broadest context. By doing this they are able to pick up on new trends earlier and make strategic moves to adapt and take advantage of opportunities. There are plenty of examples of companies such as Kodak and Blockbuster which were too inwardly focused and did not adapt to changing consumer preferences and saw their businesses suffer as a result.
Adopting a growth mindset is key part of adapting proactively. Businesses which have a growth mindset tend to be run by leaders who are not solely focused on figures but take a more long term view and encourage employees to adopt critical thinking, take calculated risks and learn from their mistakes without the fear of repercussions. This growth mindset can be seen in many companies which have revolutionised our lives such as Amazon.
Jeff Bezos has previously said that Amazon is “happy to invest in new initiatives that are very risky, for five to seven years, which most companies won’t do…It’s the combination of the risk-taking and the long-term outlook that make Amazon, not unique, but special in a smaller crowd.” For an SME, this could mean regularly reviewing assumptions made about the market, customer base or business processes to see where there are new opportunities for growth. Creating a company culture in which employees are encouraged to think creatively and take ownership of their ideas is another way in which SMEs can adopt a growth mindset.
The Infinite Game
Creating safe environments where employees are encouraged to take calculated risks is also a theme in Simon Sinek’s writings on Game Theory. Sinek argues that good leaders know how to build what he refers to as Circles of Safety that promote trust and cooperation throughout their organisations. He argues that really successful companies such as Apple play an infinite game which means making long-term, value-based decisions over short term interests. CEOs must be clear on their values and objectives and adapt proactively so that the business moves towards these long term goals, instead of becoming distracted by short term gains. Again this has to be done in tandem with monitoring the wider market and the changing needs of consumers.
When your business is growing and you have multiple issues and challenges to deal with, it’s easy to become focused inwards on what your business is doing and lose sight of what’s going on in the wider world. In order to thrive, companies must always be looking at how the landscape is changing. This is where an external advisor can really help. An advisor can act as your eyes and ears in the market, updating you on the new trends and developments in your industry.
These three characteristics are all vital traits of a successful leader but they also overlap. For example, adapting proactively will make it easier for CEOs to make decisions with speed and conviction. Similarly understanding what motivates your employees will make it easier to put the necessary frameworks in place to allow you to adapt proactively. Crucially, these are all characteristics which a leader can learn and develop over time and an external advisor can be an indispensable source of objective guidance and support throughout this process.