The Culture Nerds - A Leadership Podcast

15 Growth Tips for Founder-Run Businesses

• Simon Thiessen & Kirralea Walkerden

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15 Growth Tips for Founder-Run Businesses

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SPEAKER_00:

Before we get into today's episode, we want to acknowledge the privilege of living and working on Aboriginal land, and we pay our respects to the elders, past, present, and emerging. Hello listeners, and welcome to another episode of The Culture Nerds, a leadership podcast. My name's Simon Tyson. I'm your host for this episode. As with every month, we have a theme for the month, and that theme is supported with a lot of free resources we create for our listeners, our followers, our subscribers. It includes this podcast, it includes a Plenty and 20 on-demand webinar, again, a free resource. It includes some other resources that will be uploaded on our website under the same topic. It includes a product page, and that's the only thing that isn't free. It's free to look at. But for those of you who feel you want more support with this particular topic, then there's a product page on our website. All of this will be linked in the show notes. And there's an end-of-month newsletter which summarizes all the resources for you and provides links. So it's one place you can access everything that we talk about here. So this episode is specifically for organizations that are struggling with the journey that growth takes them on. Growth is a difficult thing and it's a wonderful thing. We're going to use those as the platform, but this is relevant for any organization that is finding that those growing pains come about as they continue their journey onwards and upwards. So the specific focus today is on founder-owned or founder-run businesses. Sometimes they're family-owned or family-run. And businesses that have hit that critical place where there's a tension between what made the business what it is today and what it needs to do and to become to cope with its present and to prepare for the future. Now, I'm not talking about those thousands of wonderful micro businesses out there with the bookwork being pushed aside so the dinner can be put on the table. We're talking about businesses that maybe started there but have grown and now have 50, 100, 200, 500 employees. They're well beyond those family business beginnings, you know, working out of a shed, like the body shop did, you know, when when we worked with them many years ago, they'd just moved out of the shed in the founder's backyard. Like our own business, we started, I used to call it the bungalow. The reality it was a shed with a bit of cedar siding on it. And that's where our business started. Now we haven't grown as much as that, but we've still grown significantly beyond that. Those businesses that started out with a single location and now have 10, 20, 30 locations, those businesses that started out with the founder and one or two team members in a simple office, and now they're in big offices, and there's there's dozens, perhaps even hundreds of staff. They're the ones we're talking about. They're the businesses that are no longer in the child stage yet. They're potentially not yet an adult, they're going through that adolescence. Although they could also be the adults that are still clinging on to adolescence, because this is something that's really symptomatic of founder-run, family-owned businesses, even if they're not still owned by all of the original founders, even if they've evolved from there. Like some adolescents, some founder-run businesses never grow up. They're hanging on to that old favorite hoodie from when they were a teenager, even though they've grown out of it. They're still playing the same playlist that they got all sentimental about as adolescents, even though the reality of the organization has moved on dramatically. It's okay to be an adolescent when you're an adolescent, but when you're an adult who's still being an adolescent, it's just awkward. And that's what we see so often with these businesses. Really, it's different, but not that much different from any business, no matter what its origins, that's going through this awkward phase of growth, from going from being one thing to becoming another and that transition, that tension it creates. So we work, we seem to have a real affinity with organizations that were that are founder run or or family started and have become larger. We seem to speak their language, um, we seem to know how they tick and how to help them evolve. And I thought I'd share that in this podcast and in this month's resources. So I'll tell you a little bit about what we've seen. I am going to conclude this episode with, I'm just going to scroll down my notes here, 15 tips. Now, I I jotted these down off the cuff, and so how unique each of the 15 are, some there'll be some overlap. But I'm going to start by telling you what we see. As I say, over three decades we've worked with many businesses of this type. The strengths and the struggles, the challenges and the opportunities, the frustrations and the passions are consistent and they're predictable. Not every one of them is identical, but everyone that we work with seems to draw their dynamics from the same pool of dynamics. So not everyone has all of the dynamics in that pool, but they seem to be pulling their dynamics from the same pool. So let me tell you, and if you if you are one of these businesses, listen in and see if some of this resonates for you. The first thing is there'll be enormous pride. There's pride in what they do, there's pride in where they started, there's pride in what they've become. And that pride doesn't just reside in the founder or the owner. Many of the staff, many of the team members, especially the long-term ones, the ones who've been there since the really, really formative years, you know, to extend that analogy I talked about before of adolescents and adults, you know, they were there in the childhood years. They were there in the very early years. They share that pride. They share the pride in being part of the business, and they share the prior, they have pride in having been on the journey. Another thing that we see is there'll be admiration and respect for the founder, or at least for some of the founders. So it's not always universal, but there's normally one or two founders that have become sort of iconic in the business. And there'll be enormous loyalty to the founder. People will be working as much for the founder as they are for the business. And we see this even in organizations that have grown to that two, three, four hundred staff, even more that their real passion or their real connection is with the founder. They love the business, but they've got this real loyalty to the founder. The founder's mark will be very visible in the business. Now, normally that's because they're still there, they're still active, but even if their role has changed, that they're now less active, now less involved, or even not involved, the founder's mark is still there. And that's a good thing and a and a bad thing. It's sort of an anchor, and and the anchor is great because it holds you in a place that's important, but the anchor also holds you in place. And maybe if the world's changing and you're being held in place and not able to go with the change in the world, that can be challenging. There are some downsides as well, and I sort of touched on one of them there. This next one is really blunt. And if you are a founder listening to this, this is really uncomfortable for us to accept as founders. And I'm a founder of a company, so I get this. There will be some people taking the piss. There's just no doubt about it. They'll be taking the piss and they'll be getting away with it because of the loyalty of the organization and of the founders to their people. There'll be some people not doing their job properly. There'll be some people with work ethic issues. There'll be some people who aren't evolving, despite the fact the business and often the founder has, but the founder who was visionary enough to create the business is also visionary enough to see the need for change. But sometimes people are dragging the chain. They don't want to change. And they get away with it because of this highly admirable, but sometimes misplaced loyalty from the founder or from the very early people in the organization. They feel a responsibility, they feel an obligation to the people who were there early in the journey. And that sometimes allows people to get away with things they shouldn't. Don't get me wrong, some of the long-term people, some of the original people, are still some of the best people, but it's not universal. So there's almost certainly going to be some people taking the piss. There'll be some untouchables. There'll be some things that can't be changed, some ways of doing things, some people that are untouchable. And some of those are really important because they're the heart and soul of the organization, but some of them are harmful. And that that sort of leads back to the previous point of there are some people taking the piss. There can, and not always, but there can often be real or perceived favoritism. The people who, you know, again, this leans into the previous point, who are the untouchables, who seem to get away with with a different level of accountability, who's who are not held to the same standards, who get opportunities because they've been around a long time. As the business grows, it's really important to address that because real or perceived favoritism can be quite cancerous. One of my favorite things I see in these businesses, and it sort of evolves, when the founders started the business, what they did, because they had a passion for it, they did everything. And then they grew a bit. And so it they didn't just now need to do things, they needed to manage things. And so they employed a process called management by running around. And that's they just got busy. That is they were everywhere. And then they grew again and they evolved to a new process called management by running around even faster. And then they grew again, and they could no longer run around fast enough to keep up with the growth and the size. But very often we still see those ingrained habits and the effectiveness of management by running around, which was highly effective in those early days, being on top of everything, being in touch with everything has started to diminish, and that's started to open up some gaps. There are some issues with letting go. So uh very often, and again, this can go back to the untouchables, the things that we've always done a certain way, or certain people have always done them. So there's a sense of there's certain things that are still controlled in ways that are outdated, um, potentially from very top down instead of some of that being disseminated. And as a result, there's a failure of people to step up because there's no space for them to step up into. As a business grows, then what happens is it stretches. And between top management and next level of management, the gap widens and more needs to be done. And either we put more people in there, which becomes an overhead and becomes another layer and can reduce the sort of the in-touchness of the business, or that gap gets filled either by senior people stretching downwards or by the next level stretching upwards. Very often in founder-owned businesses, we see the top level stretching down, which means there's no space for that next level to step up into. And not because of the perceived punishment from the founder, but more because of an obligation to do the very best for them. Again, it's this whole loyalty thing. So often we see a failure to delegate because delegating is a risky behavior. It might not go so well. Someone else might make a mistake that I don't make, and therefore I'll hold on to it and I won't let the founder down. And often decision making will be really fragmented. So people tend to reach out to whoever they want to because that's it's sort of grown organically. It hasn't grown in this really structured way. So growth has often outpaced the systems. So people reach out to whoever they want to. They bypass levels, they bypass managers, they bypass processes, and it's got a really sort of family feel to it. But the cost is that people don't know what's going on. People get frustrated. Too many people are involved in different parts of a decision and they they're all contributing something different to that decision. I'm not talking in terms of a strength, I'm talking the left hand doesn't know what the right hand's doing. So these are some of the things we see. There's some real upsides and some real downsides. Hopefully, as I've highlighted those, it's suggested to you some solutions, but I'm also going to go through a specific list. So, what does all that mean in terms of the culture? Well, what we see is a clash of cultures. We see this tension start to build between the long-termers who are hanging on to the what we've always been. We were one big family, and this is the way we always did it. There's all this stuff that's precious to them. And these new people coming in with ideas, with fresh perspectives, with new ways. And we start to see this tension. Both of them believe they're right. One, but the old termers, the the long-termers, believe the new people are destroying the fabric of the business, what made it what it was. And the new people believe the old people, the long-termers, are destroying the business by not allowing it to evolve and become fit for the modern environment. And they're both right. If either of them gets their way completely, then it's going to be destructive for the organization. Failing to adapt will be terminal. Abandoning your roots is likely to be terminal and certainly will change the whole character of the business. So it's the tension between them that's a problem, but it's also the tension between them that's a solution. So if that tension becomes a waste of energy, a waste of effort, a battleground, then it's going to be destructive. If it becomes a process by which one pulls the other one forward, but the other one reminds the newer people of where we've come from and tries to maintain, tries to build both into a solution, then you can get the best of both worlds. And again, I will come to some specific ways in a minute. Essentially, this is a tension between the threatened and the frustrated. And it's because there's this sense of I'm here because I'm passionate. I've got this loyalty to the founder, I'm passionate about what we do, but there's all this stuff that drives me mad. There's all this tension, there's all this disagreement about things. There's some really unhealthy cultural norms that build up around, you know, pecking orders and the original versus the blow-ins and the way communication works and favoritism and all that sort of stuff. But there's also some really healthy cultural norms that we don't necessarily see as strongly elsewhere around the loyalty and the sense of belonging. As I say, it's likely to produce a mediocre to moderate culture with people wanting something better, which of course means change, but having apathy for the actual change required to make it happen. What happens as soon as someone starts to change things? Some people applaud and others accuse them of selling out, of forgetting where you've come from, of selling the soul of the business, of destroying what's been created over all these years. One of the realities is what made you successful up until today is not necessarily what will make you successful in the future. But you can't throw it all out. You've got to work out which parts we keep and which parts we evolve. Another thing, so what we often find in these organizations, and this is often driven from the higher levels, often from the founder, they want bruise-free change. They want to evolve, they want to get better results, but they don't want to make things uncomfortable, they don't want to upset people, etc. And unfortunately, those two dynamics don't go together. You either have change or you keep everyone comfortable. So it's about finding the right balance of how much change can we tolerate, how much discomfort can we cope with creating and making it a slow and steady process rather than I'm at A and I can C B and go straight there. It might have to be a progress. Something that's really positive in these organizations is they're often outperforming their culture. So when we look at the causal factors that sit below the culture and how they look, they often predict a less favorable culture than the culture actually is when we measure that. And that doesn't often happen. It really strongly happens in these founder-run businesses. But there's a price because that's not sustainable. And it means the organization could be producing even better results than it than it is. One of the dangers here is that there's sort of this illusion of everything being fine because often these organizations are producing pretty good results, but they could be doing even better. It's like they're revving the engine too hard to get the outcome that they're getting. And right at the heart of this is the tension that I referred to. That how do I retain the soul while embracing the future? How do I resolve keeping what made the business what it is today while also building in what it needs to become to embrace the future? How do I keep the essence of the organization without compromising both the profitability, the stability, and a whole bunch of other things? So here's my 15 tips. I know I'm 20 minutes in, but I hope that that has given you a really good over overview, and I hope that you've jotted down a few notes that you've thought, right, that is a dynamic that does happen in our organization and I need to be aware of. So I'm going to punch through these. The first thing I'm going to suggest is define the culture you want to have. Now be really clear on what that looks like. So, and I get it, it's going to be some sort of compromise between the past and the future. But don't leave that to chance. Don't leave that to the competing forces. Don't leave that to the tension. Use that tension to come up with a definition and then communicate that really well. This is what we look like in the future. This is what we take forward from the past with us. This is our heritage. But this is what we need to move on from and this is what we need to embrace. Remember, great cultures achieve three things. One of our definitions of a great culture is it must be simultaneously achieving those three things. The experience of the people who work there must be excellent. The experience of the people you serve, whatever you call them, should be excellent. And the results. So the profit, the compliance, the quality, whatever metrics you measure, they should be excellent. So we should have excellence on all three of those. They're a really good place to start in talking about. So what is that going to look like for each of those three? You know, what is the experience of our people? What is the experience of our customers? What do our numbers look like? The second tip, tip number two, is about values. And if you've listened to our pods in the past, if you've accessed our resources, you know that I've got a very strong belief that values have the capacity to be culture-defining or total and utter bullshit. And it all comes down to whether you live them. Are they something pretty on a poster on the wall, or are these things you live? What I would suggest you do is that you should define values that both build accountability but also encapsulate the soul of the organization. This is a really great place to build in the history, the heritage. So I'm not going to name the organization, but one organization in particular that we've worked with, we actually helped them define their values, had two values, whether you agree with these or not is irrelevant. They work for them and they speak to their heritage and they carry forward what they've been. One of them was around mateship because they believed mateship is what had made the place what it was. And another one was a phrase that the founder had said over and over that they were famous for within the organization. That is do it once, do it right. Those two became part of their values. Now, there was some explanation around each of those, so the team knew what they meant. But to be honest, of the five values they defined, those were the two that needed no explanation because they were in the DNA of the organization already. I think you've got to define, and don't glaze over and switch off when you hear me say this. I think you've got to define your vision, your mission, and your purpose. But I'm not sure I would do them that way. There's a really effective framework, and again, this is something we can assist you with. The what, the how, and the why. What we do, how we do it in a way that's special, and why we do it, why it's important. You know, what's what's the uh the phrase I'm looking for is if we didn't do this, what would the cost be? Well, why should people bother doing this well as opposed to doing it averagely? And if your why doesn't say that to them, then it's not effective. Again, you can build a lot of your heritage into the what, the how, and the why. Now, the how obviously needs to embrace the future as well. But the why in particular can speak to the very reasons the organization existed in the first place. They should be simple, relatable statements. These are not marketing things, they're not to go in some glossy brochure or whatever. They're things that you can hold people accountable to and that you can hold yourselves accountable to. My fourth tip is to capture and tell the story of the organization. So make it visible. Um, talk about that story in recruitment so that you're recruiting people who are, yes, part of shaping the future, but who also find their their the past, the history, the heritage appeals to them. Build it into induction, build it into team meetings, build it into coaching conversations, make it visible around the organization. So don't lose that stuff because it just gets buried by by layers and layers of new things that come into the organization. Capture it and tell it. But again, be selective. Work out which parts should be carried forward and which parts need to be let go. Decide what has to be, this is my fifth tip, and this sort of is similar to the previous one, but not completely. Decide what has to be bottled and kept forever, what defines the essence of the organization, and identify what's harmful that you've grown out of. That you know, that that's something that might hold that adolescent nostalgia like the hoodie or the the playlist I talked about before, and and get rid of them. So, for example, in some organizations, the founder, this could be an organization of four, five, six hundred people. Any team member can pick up the phone and call them anytime. And they'll answer and they'll have that conversation with them. Now you have to decide in your organization, is that something you want to keep? Is that really the essence of the organization? Would it change the character in a really bad way if that if that wasn't the case anymore? And if that's if that is true, then keep it. But if you find that that's actually now undermining processes and systems, it's undermining accountability because you know people, when they don't get the answer they want from their manager are calling the founder and getting a different answer, then maybe that's something that you've got to change. But you've got to look at those things that are unique to your organization and decide which ones you've got to bottle and keep forever and which ones you've got to move away from. What defines the essence and adds value, and what defines the essence and and and creates problems. Number six is stay true to your business, stay true to your core business. So don't get in this in this whole growth phase. Don't get sucked in by all the shiny things. But at the same time, also recognize that you will need to evolve the core business, that you will need to change. But don't grab on to every new thing. Don't go through this phase where where people are coming into the business who are potentially the first senior real outsiders, because often in these businesses, most of the upper levels are people who've come through the ranks. And so you know they're all on the singing from the same hymn book because they've had it all of their working lives or for a significant period. Then you get these new people come in who want to shake that up, and that's brilliant. That's a really healthy thing to do. But don't chase every new shiny thing. Ask is this really related to, and this is one of the other reasons you should define your what, your how, and your why. Because if if the new shiny things don't fit with the what, the how and the why, then don't do them. And if they do, if they enhance it, then do them. This next one is so, so important, and this is one of the most painful ones for businesses going through this evolution. Accountability. We typically see lower accountability in founder-run businesses because they've got that family feel. There are some things that you don't do to family. In reality, we see families treat each other much, much more harshly than people do in workplaces usually. But there's that sense of their family, I can't do that. We can't compromise on accountability. When we allow someone not to behave appropriately in the workplace, we we go easy on them, but we go tough on the people who have to put up with them. When we allow someone not to perform at the level they should, we allow them to put pressure on all their colleagues. We allow them to undermine the success and viability of the business. So we shouldn't compromise on accountability, but it should be really fair and it should be really supportive. And what I mean by that is we're un we're we're clear on the standards we expect, we're clear on our values, we're clear on the performance we expect, and we'll support you really strongly to get there. But if basically your behavior, your choices tell us that you're not taking it seriously, then we have a major issue and we have to we have to up the accountability dial. So it's not about ruthlessness and callousness, but it is about saying I'm not going to be prepared to let people take the piss. I have had a conversation with at least a dozen founders where they've told me that people aren't doing something that was expensive. Expected of them. And this is going to be a really blunt comment. So if there's kids in the car, you might just want to pause for a moment where someone's not doing what's expected of them. And I've said, so hold them accountable. What does that look like? And we've talked through it. And they've said, yeah, but the point gets to where they just don't do it, and just don't do it no matter what I say. And the honest the honest comment is, I'm not prepared to sack them for that. And I my answer is, well, you shouldn't. You shouldn't sack them for that. But what I want you to imagine, and this is the the mute moment, and I'm going to try and clan it up as much as I can, is I want you to imagine them looking you in the eye and saying, get fill the blank and use your name. So get Simon to me as the founder, I'm not doing that. Now, how would you react to that? And founders say to me, I'd be furious. And my comment is, well, that's what they're doing. They just don't have the courage to actually say it. They're passive aggressive by just not doing these things. We can't allow that to happen. That's cancerous in the organization. I want to support people as much as I can, but when they simply won't do what's reasonably asked of them, they don't have a place in the business. Let go. This is tip number eight. Learn to let go. Learn to create space below you so the people at the next level down can step up into it. And yes, that is risky. They will make mistakes, but they will never get better and stop making mistakes unless you allow them the opportunity to make a few and then coach them to do things better. So disseminate decision making, expect people to do more, to step up, to solve their own problems, to take responsibility. We often see, in again, in these sort of organizations, people being paid to do a job that they're not doing. They're being paid to do a job one level above the job they're actually doing. So ask people to do the job they're paid for, but that will mean that you've got to get out of the way. You've got to give people room to step up into. Number nine, recruitment. At senior levels, find people who can bring the business edge but whose mindset isn't alien because that will be destructive. So they've got to be able to come in and challenge, but not destroy. And they've got to accept that in this environment, it's not I can C B, so I'm going straight there. They might need to be more patient in that process. At the front line, make sure character is a really big part of selection. Now it should be in every organization. We should never recruit people whose character doesn't fit. They should have the character that either represents the culture that we're trying to preserve or the one we're trying to create. So make that part of your recruitment. Number 10, the human resources systems. Things like performance management, appraisals, etc., are often alien for founder-run businesses. They just weren't a thing. They need to be introduced. They help people do their best work. They help them get the feedback they need. But a way to make sure that they they retain the character, the spirit, the soul of the organization is make sure you're appraising people for their cultural alignment, for their fit to the values that represent both the culture you are becoming, but also your heritage. Number 11 is around technology, and I'm not a tech expert. I enjoy it in our business, but that's that's the level of my expertise. We often find founder-run businesses are slow to embrace technology and people are slow to accept it. And again, this goes back to that accountability. Don't let people's resistance to it slow down your transition to it because there's a cost to the business. I mean, I worked in one organization recently where people were still submitting timesheets on a notepad and expecting to be paid because they refuse to use the payroll system. Just not okay. Don't half do your transitions. If that's what you've decided to do, that we're all in. I'm not saying that today we'll one and tomorrow we're the other. There's got to be a reasonable transition, there's got to be support and training, but don't end up in limbo. Number 12, communication. I can absolutely guarantee it will outgrow the old strategy that used to be used. And that was probably heavily reliant upon the grapevine. So you need to be much more strategic, much more deliberate in communication, both upwards and downwards. I'm not going to dig into that too much here, but you need to have strategies that are heavily reliant upon layers of management because the best way to communicate in an organization is in person. And so if your managers know stuff, then they should be relaying it. If they don't know stuff, you should be telling them stuff because they can't relay it if they don't know it. So that don't confuse that with being the grapevine. That's a deliberate dissemination of information through the structure of the organization. The grapevine is much more random. People who happen to walk past at the right time know and others don't, regardless of level. Number 13, customers might also find the transition challenging too. And so I would be really mindful of that. And I would be making sure they understand why those changes are occurring and how it gives them a better outcome, whether it keeps prices down, keeps quality high, keeps reliability high, etc. etc. So your new customers, not going to be fast. They're not used to the old way. But some of your older customers, make sure you're communicating with them. It's likely that if you've got long-term customers and long-term staff, there's some sort of relationship there. So you've got to make sure that your long-term staff aren't undermining the changing organization to the long-term customers. And again, it's simply not okay to do that. So hold them accountable to that. Hold them accountable to communicating the changes in a really positive way. Maintain visibility is my number 14 tip. So get around the staff. Keep contact, but it might not be in the same way. I literally got off a phone call today with a with a CEO who said that some of his some of his two steps down managers complain they don't see him anymore. And I said, mate, they do. They've just got a different name now. That's the manager that sits you between you and them. That's the reality of growth. You can't hang on to all the old ways. But as a manager, make sure they still see you in some way. Make sure if you're the founder, make sure that they have some connection with you. It might not be as frequent, and that's okay. And you don't have to add all those other things. You don't have to fill all the roles that all those other managers do. It's just the connection. And the same with your oldest and biggest customers, of course. They need to know that you're still there, that they're still important to you. And number 15 is actively remove the business's focus and dependence upon you. So I'm going to use me as an example here. When I first started the organization, it was Simon centric, is the way I would describe it. So customers would ask for me. Everything that was associated with the business centered around me. As we grew, one of the mistakes we made is we didn't challenge that quickly enough. So we had all these people, but it was still very Simon-centric, and customers still wanted to work with me, customers still knew me, etc. We've made a real effort. Now we've been around for over 30 years now, and over the last 10 or 12 years, we've made a massive effort to de-simonize the business. I'm still active in it, I still work more than full-time in it. I still work with a lot of our clients and customers, but so many other people can as well. And so we're much less dependent upon me, which is great for me as a founder, but also great for the long-term health of the business and great for the opportunity for other people to step up. So if there is a dependence upon the founder or a certain number of core people because you've always been associated with the business, that's something that you've got to actively challenge and change. Now, if you've got the three or four hundred employees, you might have already done that to a large degree. If you're in that 50 to 100, you might still be going through the same transition. So that got a bit long. We're just under 40 minutes. I hope there's a bunch of value there. If you access the other resources with plenty in 20, we'll cover some of these same things, a briefer summary of it because it's only 20 minutes long. The other resources will summarize some of this in different formats. The team will work on them over the next week or two and make them available on our website. And there's also a page on our website specifically for the way we can help and support family businesses. Would love to work with you. We'd love to just have a chat with you if that's all you need. And of course, that first chat is always complimentary. Looking forward to talking with you all in the next episode. In the meantime, be authentic.