by Dan Adams, founder of The AIM Institute and author of “Business Builders: How to Become an Admired & Trusted Corporate Leader”
If you’re a CEO, a member of the executive team, or any flavor of high-ranking leader, I have a question for you: Are you a Builder… or are you a Decorator?
On the surface, it seems like an easy distinction. Builders drive profitable, sustainable growth by delivering differentiated value to customers, as they brush aside business fads, short-term distractions, and financial gymnastics. Decorators focus on looking good to investors, quarter after quarter after quarter. But the question isn’t as clear-cut as it seems.
No leader wants to admit to being a Decorator. While there is nothing wrong with looking good to investors, when it’s a leader’s primary goal and constant focus, it slows growth, alienates employees, and weakens the company. Who wants to admit to being responsible for that?
While every company was (by definition) founded by a Builder, research conducted by The AIM Institute suggests only one-third to one-half of them are still led by one. At some point, the reins were turned over to a different type of leader. And if you’re that leader, the numbers suggest there’s a good chance you aren’t a Builder — even if you think you are.
The best way to decide if you’re a Builder is to take a good hard look at your behaviors. Being a Builder is a mindset, but that mindset is revealed in your day-to-day actions. And there are certain things that Builders just don’t do.
That said, here are ten of the most egregious Builder “no-nos”:
1. Kowtow to Wall Street.
This is the Jack Welch approach: to live and die by short-term shareholder value. As CEO of General Electric (and a notorious Decorator), he was known for downsizing, outsourcing, offshoring, and “financial engineering.” Yet 20 years after his 2001 retirement, GE’s stock value was at a quarter of its peak — and the company’s reputation for manufacturing leadership, employee loyalty, and breakthrough innovation was greatly tarnished.
Our research found that maximizing shareholder wealth is almost always the top goal for slower-growth companies. For faster-growth companies, the top goal was to grow by meeting customer needs.
2. Constantly talk about the quarterly financial report.
This is the all-important metric for Decorators who will do anything to keep short-term investors happy. Builders know that delivering real value to customers takes time. Better to stay focused on the strong, profitable, sustainable growth that builds value for everyone (including shareholders) over time.
3. Let financial types call the shots.
If you’re not happy with your company’s financial reviews, look to the past. What you’re seeing is the result of decisions made years ago. Running a business based on them is like driving a car by staring into the rearview mirror.Builders know that finance is not a participation sport, but a spectator sport.
If you’re a Builder, you get out in front of the financial folks and narrate your long-term growth strategy. This makes it more likely that rather than being adversarial, the CFO becomes a willing partner.
4. Fixate on cost-cutting measures and spending freezes.
When carelessly applied, these can damage a business’s growth capabilities and have a negative — not neutral — effect on sustainable growth. Why? Because they’re just the “first domino” that slows dozens of new product projects, delays future revenue, leads to poor earnings growth, and ends in more cuts and/or spending freezes (second, third, fourth, and fifth domino).
5. Implement knee-jerk mass layoffs.
This is a form of cost-cutting Decorators resort to in order to appease Wall Street. It’s not that layoffs never happen under Builders, but they happen far less often. Builders understand the true cost of layoffs, both to employees and the health of the business. It takes engaged, confident employees to keep innovating for customers, not a nervous workforce worried about their personal security.
6. Rely on initiatives like quality improvements and sales training to drive growth.
Quality improvements may help, but not to the extent they did a few decades ago. Today, reliable quality is considered table stakes. Sales training, too, can boost revenue growth and lead to better pricing for increased profitability— but if a business doesn’t keep delivering new value, customers will eventually buy from competitors’ well-trained salespeople.
7. Downplay and underfund market-facing innovation.
Builders know that if they aren’t continuously working to deliver superior, differentiated value to customers, their products and services become interchangeable with those of competitors. They end up being forced to compete on price — and fall into the “commodity death spiral.”
8. Neglect the company’s growth capabilities.
Strong organic growth driven by market-facing innovation doesn’t “just happen.” Builders obsess over shoring up the capabilities that enable such growth: customer interviewing skills (to figure out their real needs, rather than relying on self-serving guesswork), R&D capabilities, new talent management, and — perhaps most important — a culture that prizes innovation above almost everything else.
9. Promote middle managers based solely on financial performance.
The truth is, quite often today’s numbers are based on either a predecessor’s hard work or their own short-term financial engineering. Better to promote based on their passion for making things better, coupled with evidence that they’re strengthening the company’s long-term growth capabilities.
10. Betray the CEO’s “first duty.”
What’s that? Leave your business stronger than you found it. If you’re thinking of retirement as the finish line, you are not a Builder. Instead of crossing a finish line, leaders should focus on passing the baton in a never-ending relay race. Think of it this way: Your retirement speech should indicate that the best years of your company lie before you… not behind you.
Here’s the good news: You can shift your mindset and start leading like a Builder. It’s not easy, and it won’t happen overnight, but it’s doable.
It’s never too early, or too late, in your career to make sure you’ve got the correct mindset. Don’t think of your leader position as a gift you’ve been handed or a prize you earned. You haven’t been handed a laurel wreath. You’ve been handed a trowel. What will you build with it? How will you leave your business stronger than you found it?
Dan Adams is the founder of The AIM Institute and author of “Business Builders: How to Become an Admired & Trusted Corporate Leader”. He is a chemical engineer with a listing in the National Inventors Hall of Fame. Dan has trained tens of thousands of B2B professionals globally in the front end of innovation and works with senior executives on driving profitable, sustainable growth.
