We all see significant economic changes taking place around us. The financial crisis, emerging markets, new technologies are putting their stamp on our economies, on market places, and on businesses. Organizations face changing circumstances that require different approaches. Yesterday’s success formulas are no longer a guarantee for future success. Leaders will need to adjust, review, transform, innovate their business performance models. And maybe that requires a new way of thinking about financial growth.
I work internationally with executives and their leadership teams on how to address these challenges. What should be our direction, strategy and focus for the coming years? Why is this so important for our future success? What do we need to change in our business performance to create that success? How should we lead this transformation within our organization? How do we stimulate motivation and commitment of our management and employees for these changes?
I know it may sound a bit harsh but I see a growing divide between leaders who are successful at this and those who struggle with it. And a great part of this divide is related to what I call ‘one-dimensional financial growth thinking’.
The other day I had a conversation with an executive. He explained to me how difficult it was for him to lead his division effectively. “I see significant changes coming towards us. One, the economic forecast for the coming two to three years is showing a decline in customer spending in our sector. Two, we face a clear trend in the marketplace where customers expect us to deliver our services in a different way. Much more customized, more flexible, faster, using new and customized channels. They want us to deliver our products under specific conditions. Almost as if our products are uniquely made for them. Our operating model, our supply chain and our customer service organization are not responsive enough to those needs. On top of this we’re in the middle of our annual budget cycle and the board has requested me to further increase turnover with 20% as we did the last three years. And they want us to keep up our margin target. In the last executives meeting with the board a number of executives stressed that it would probably be very difficult to meet these figures and that the company needed to think about innovating and changing our going to market model for the future. The answer was ‘yes, you are right and we will make time for this, but we don’t want this to take energy and resources away from our core purpose, and that is to focus on maintaining our financial growth’”. He continued: “I know how to run a business and I have always been very successful, but I honestly do not see anymore how we can meet these financial expectations for next year. It is very hard to keep people motivated under these circumstances. My management team is a great group of experienced people but they start losing faith in the direction and future of this company. They feel the company is losing ground on the competition every day because we do not invest time in defining the required changes in our organization that allow us to stay successful in the medium and long-term.”
Does this example sounds familiar to you? It is just an example but I could give you many more examples of leaders who suffer from this ‘one-dimensional financial growth focus’. Now don’t get me wrong, there is nothing wrong with wanting to create financial growth! Especially in times of change it is vital not to lose sight of finance. I’m for instance always very cautious when people show ‘hockey stick’ charts to support their claim that making less money in the short-term is the only way to create financial growth in the future. But that is not the point.
The point is: triggering and pushing people to focus on short-term financial growth will never allow you to create the breakthrough transformation that might be necessary to guarantee your future business success. It will prevent people from seeing opportunities for new ways of value creation and they will get stuck in the past!
Companies that follow ‘one-dimensional financial growth thinking’ are becoming more and more easy to recognize these days. They suffer from:
- A growing risk aversion
- Sticking to old success formulas
- Lack of clarity among managers and employees about the vision and strategy of the company
- High level of resistance to change
- Decreasing self-confidence of people because it is costing more and more energy to get the same results
- Incremental improvements creating mediocre results
- Becoming known in the market place for being old-fashioned and not innovative compared to the competition
- Decreasing customer satisfaction and loyalty
This is a vicious circle that can create serious problems if leaders are not capable of breaking it.
Successful leaders don’t follow the ‘one-dimensional financial growth focus’. They approach financial growth differently. Their companies use the following principles:
- Growth is much more than financial growth alone
- Creating added value towards customers, colleagues, shareholders is the focus, and this has as much to do with quality as with quantity
- If we deliver added value, financial growth is one of the logical outcomes
- Having a good understanding throughout the organization on each level (divisions, departments, teams, individuals) of what our added value is, how and where we deliver it, is therefore a critical success factor
- Striving for excellence has everything to do with increasing our ability to increase our added value
- Challenging our way of working is a continuous process and is crucial to be able to adjust our added value to changing expectations and needs around us
- Performance management should stimulate innovation, not only incremental improvements
Take a look around you. It is inspiring to spot these successful leaders and the companies they create.
Feel free to join the discussion by sharing your ideas and experiences below. I look forward to reading your comments. Thanks for stopping by!If you liked this article and would like to receive upcoming articles for free, you can register at the top of this page. Photo: alancleaver_2000/Flickr (Creative Commons)
As international business consultant, change leader, leadership facilitator and executive coach Aad supports executives and leadership teams of multinational companies. Over more than 20 years he has acquired a vast experience and expertise in leading complex change, cross-cultural leadership, post-merger integration, and amplifying business performance. If you are interested, find out more about Aad and his services. If you would like to hire Aad, don’t hesitate to contact him here.
- Leading Change: What About the Coaching Skills of Senior Leaders? (leadershipwatch-aadboot.com)
- Cross-Cultural Leadership: How Will China Influence The World? (leadershipwatch-aadboot.com)
- Leading Change: How Great Leaders Deal with Criticism (leadershipwatch-aadboot.com)
- Post Merger Integration: Cultural Alignment is a Prerequisite for Value Creation. (leadershipwatch-aadboot.com)
- Leading Change: Three Major Misconceptions That Hinder Innovation (leadershipwatch-aadboot.com)
- Cross-Cultural Leadership: How to Create People Alignment (Part 2) (leadershipwatch-aadboot.com)