Making Consistently Good Decisions

The Five Challenges

We have seen CEOs and owners struggle to meet the challenges to building sustainable value in their companies. These challenges are shown as a progression from low value at the survival stage to a high value exit plan at the top of the stairs.

Challenge Number Three—Making Consistently Good Decisions

All companies’ structures and performances are the result of past management decisions. To paraphrase Peter Drucker, when he started his work, he thought that management was responsible for 85 percent of the problems in companies. After years of research, he found that the number is approximately 95 percent.

The typical middle-market business owner is alone. No one in his organization is a true peer. He cannot tell others of his real fears. There is no forum to truly vet his thinking. Without challenge or input, his decisions are often not optimal.

As private companies grow, many owners tend to shy away from seeking external counsel. They believe they have the answers. Owners make decisions and design strategies in a vacuum, fearful of revealing the supposed secrets of their business. They fight for short term survival instead of long-term success. Decisions are embedded in the corner office and not vetted internally or externally. Owners make decisions either too quickly or too slowly. Often, there is no active strategic plan or planning process. If this plan is absent, then decisions are made without a clear view of their impact on future value.

How to Meet the Challenges

Overcome the challenges with a strong internal team supported by an advisory board and the governance process it brings to the company. The authors have created an effective advisory board process called the professional advisory board process or PABoard process. Learn more in Game-Changing Advisory Boards, available soon.

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Escaping the Value Creation Trap

The Five Challenges

We have seen CEOs and owners struggle to meet the challenges to building sustainable value in their companies. These challenges are shown as a progression from low value at the survival stage to a high value exit plan at the top of the stairs.

Challenge Number Two—Escaping the Value Creation Trap

According to The Wall Street Journal, the companies in the S&P 500 lost over $7 trillion dollars in value from the end of 2007 to 2010. Middle-market companies were hit just as hard. An owner may now find himself or herself trapped in the company. Often the owner cannot see how the company’s value can be increased doing business in the same outmoded model. The company does not have enough value for the owner to sell and retire.

How can the owner devise a new strategy that will build enough value over the next three to five years? What new internal processes and disciplines must be added? What team can make this happen? How can the owner get out of this trap and gain his or her freedom?

Owners and management often fail to design strategies that will create value that is attractive to lenders, investors, or buyers. In other words, they “fail to plan” to create sustainable value.

How to Meet the Challenges

Overcome the challenges with a strong internal team supported by an advisory board and the governance process it brings to the company. The authors have created an effective advisory board process called the professional advisory board process or PABoard process. Learn more in Game-Changing Advisory Boards, available soon on Amazon.

Fighting for Survival

The Five Challenges

We have seen CEOs and owners struggle to meet the challenges to building sustainable value in their companies. These challenges are shown as a progression from low value at the survival stage to a high value exit plan at the top of the stairs.

Challenge Number One—Fighting for Survival

Between 2008 and 2011, 11,740 significant middle-market companies filed for Chapter 11 bankruptcy. Whole industries related to residential and commercial construction were decimated. Businesses that depended heavily on state or federal discretionary spending saw revenue streams disappear. Retail book chains closed from loss of sales to Internet retailers like Amazon. Empty buildings were everywhere.

Many of the companies that comprise these statistics did not see what was coming. Then, and now, middle-market company leadership and management often fall into a trap of working in the business but not on the business. They continually fail to ask the question “what if?” and do not properly plan for the contingencies they might face.

Survival challenges are both external and internal. External challenges come from economic changes, marketplace dynamics, competitors’ actions, government policies, customer departures, or pricing challenges. Internal challenges usually involve poor strategic direction, weak teams, high employee turnover, inadequate systems, poor decisions and lack of financial resources.

People challenges involve hiring, firing, retaining the management team, and improving workforce efficiency.

Systems challenges come from the cost of keeping up with technology changes and designing a knowledge-based infrastructure that can give management actionable information.

Internal decision-making processes are often weak. The complexity of the business environment has outpaced the owner’s ability and his company’s processes to manage effectively and efficiently.

Financial challenges may be shrinking margins, deteriorating balance sheets, or inability to generate working capital. The evaporation of working capital will sound the death knell of a business. Running out of cash means you are “out of options.”

Any of these challenges, when coupled with a weak economy and aggressive competitors, can kill a company.

How to Meet the Challenges

Overcome the challenges with a strong internal team supported by an advisory board and the governance process it brings to the company. The authors have created an effective advisory board process called the professional advisory board process or PABoard process. Learn more in Game-Changing Advisory Boards, available soon on Amazon.