Saturday, October 1, 2016

How Leadership Styles Evolve To Match Business Stages

leadership-style-businessBy Ernst Gemassmer, Chairman, Startup Professionals

As a retired executive I now reflect on my own leadership styles in different situations during my extensive career. My leadership style has evolved over time and I am wondering whether this is related to increasing experience or different situations. I have concluded that leadership styles must be in line with the ‘life cycle’ of companies, as discussed below.

Early start-up stage:

The vision of the founder or founders prevails during the initial stage. The founder clearly sees the future of the company and overlooks near term obstacles or road- blocks. Leadership at this point is very personal and carries a lot of empathy, needed to convince early employees and VCs. The leader is readily accessible to all employees and ‘leads from the front’.

I was the founder of a hardware company in the communication space. The technology was licensed from a European company, which also provided the start-up funding. The team succeeded in all functional areas, but we found it difficult to generate sales for our new and innovative technology. After a number of challenging years we determined that the market did not develop as expected and I closed the operation down. Even though this decision was hard for my team members, it turned out to be the correct move. The market did not evolve.

Mature start-up stage:

Having convinced VCs or Angels to invest, the company enters the next stage. Functional areas are staffed and headed by experienced managers. The initial vision becomes reality and is being tested by customers and partners. Leadership at this point is shared between the founder and key functional managers. The founder is clearly in charge of each final decision, but seeks advice and council from experienced functional managers and the Board.

Successful Operating Company:

At this stage the company has assured its near term survival, is profitable and growing. An exit strategy is being discussed by senior management and funding partners. In numerous instances the founder has stepped up to the Chairman role, the company is run by professional managers, in a cooperative style. Consensus management tends to prevail at this stage.

This hardware company had achieved a significant market share, had gone public but the rate of growth became nominal. The management team was in total agreement to merge with a global software company. All key managers remained with the merged company.

Distressed Company:

Competition may have eroded a company’s market position, technology may have made its products or service obsolete, staffing and expenses may be out of control. Specialized groups tend to acquire companies, which have encountered this stage. A turn-around interim CEO is brought in with the mandate to ‘fix’ the company within a specified time period. An experienced turn around CEO quickly develops a vision for the company and its survival. The leadership style for this role is tightly focused, hard driving and results oriented. If consensus can be readily obtained it is helpful. Lacking consensus the interim CEO must and will make autocratic decisions to ensure financial viability of the company.

I was interim CEO of a Europe based systems software company. Over 70 percent of the development team was working on a new product. There was no consensus as to when the product would be completed, what the definitive specs were and what revenues could be generated. Since the management team was unable to reach consensus, the project was terminated. Decisions of this type must as fast as possible to avoid internal confusion, lack of direction and ongoing losses.

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