Growing Talent Management Firms: Strong Management

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Another element for industry success in growing talent management firms is a strong leader and management team with deep bench strength. In fact, this is one of the most important criteria that acquisitive businesses, whether private equity, venture capital or strategic pursuers look for when evaluating a company.

Another element for industry success in growing talent management firms is a strong leader and management team with deep bench strength. In fact, this is one of the most important criteria that acquisitive businesses, whether private equity, venture capital or strategic pursuers look for when evaluating a company.

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Many firms are surprised to learn that value alone is not enough—despite the importance of creating value and its impact on customer retention. Why? If the business does not possess the leadership to operationally execute value, then it is highly unlikely the talent firm will be leveraged for growth.

Many firms are surprised to learn that value alone is not enough—despite the importance of creating value and its impact on customer retention. Why? If the business does not possess the leadership to operationally execute value, then it is highly unlikely the talent firm will be leveraged for growth.

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So, how do you assess whether a firm has strong management and leadership. A few questions come into play that must be answered affirmatively if the business is going to succeed long term:

So, how do you assess whether a firm has strong management and leadership. A few questions come into play that must be answered affirmatively if the business is going to succeed long term:

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  Has the leadership in the firm demonstrated its operational expertise?

  Has the leadership in the firm demonstrated its operational expertise?

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  Do leaders have the experience and capability to help the firm grow?

  Do leaders have the experience and capability to help the firm grow?

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  Does the firm understand the business and industry it is in?

  Does the firm understand the business and industry it is in?

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We all know of many examples, either personally or in the press, where strong leaders and their teams turned around an otherwise failing organization—just by giving focused direction, setting clear expectations, instilling strong confidence, providing empathetic support, and rewarding excellent performance. This is certainly true of the talent management industry as well, where businesses often grow only as far as they can with their founder in charge.

We all know of many examples, either personally or in the press, where strong leaders and their teams turned around an otherwise failing organization—just by giving focused direction, setting clear expectations, instilling strong confidence, providing empathetic support, and rewarding excellent performance. This is certainly true of the talent management industry as well, where businesses often grow only as far as they can with their founder in charge.

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However, the very qualities that make a founder/entrepreneur successful often come up short-handed when it comes to growing and leading the firm further. Take, for example, operations. The very detail required to install and evaluate disciplined processes that help scale a business can be an anathema to a right-brain big thinker who deplores the very thought of process.

However, the very qualities that make a founder/entrepreneur successful often come up short-handed when it comes to growing and leading the firm further. Take, for example, operations. The very detail required to install and evaluate disciplined processes that help scale a business can be an anathema to a right-brain big thinker who deplores the very thought of process.

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Where and when exactly a firm needs more professional leadership is debatable. At some point, though, the founder is not the person to take the business to that next level—except in unusual cases such as Bill Gates and Steve Jobs. But even in these cases, while the entrepreneur was an integral part of the company’s growth, it was with the support of “professional” management that helped them exceed on a grand scale.

Where and when exactly a firm needs more professional leadership is debatable. At some point, though, the founder is not the person to take the business to that next level—except in unusual cases such as Bill Gates and Steve Jobs. But even in these cases, while the entrepreneur was an integral part of the company’s growth, it was with the support of “professional” management that helped them exceed on a grand scale.

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There also are many examples when the management team flounders—even though the founder is not in the picture. Case in point: I sat on a Board that needed to replace the CEO because he simply could not take the company to the next level. After a long search, we found a professional manager to replace him, who had never even been in the industry but had major experience leading organizational growth. It took the new leader less than one year to make the necessary changes in the business, fill out his management team, and start what turned out to be an incredible five-year growth curve. At that point, the company sold for more than three times the top revenues and nine times EBITDA.

There also are many examples when the management team flounders—even though the founder is not in the picture. Case in point: I sat on a Board that needed to replace the CEO because he simply could not take the company to the next level. After a long search, we found a professional manager to replace him, who had never even been in the industry but had major experience leading organizational growth. It took the new leader less than one year to make the necessary changes in the business, fill out his management team, and start what turned out to be an incredible five-year growth curve. At that point, the company sold for more than three times the top revenues and nine times EBITDA.

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What exactly does this so-called professional leader and management team need to succeed, especially if the founder or some of the previous management team remains?

What exactly does this so-called professional leader and management team need to succeed, especially if the founder or some of the previous management team remains?

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The firm needs a very special person who not only has the operational skills and experience to grow the company, but also is sensitive to (and appreciative of) the past, which has served as the foundation for the company’s existence in the first place. And certainly, a balance of creativity, innovation, and discipline is the most favored mix. But what might such leadership look like?

The firm needs a very special person who not only has the operational skills and experience to grow the company, but also is sensitive to (and appreciative of) the past, which has served as the foundation for the company’s existence in the first place. And certainly, a balance of creativity, innovation, and discipline is the most favored mix. But what might such leadership look like?

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Jim Collins and Morten Hansen concluded from their research that long-term sustainable growth firms possess a management team demonstrating a sufficient amount of what they call 10X Leadership . This construct is defined by the four capabilities:

Jim Collins and Morten Hansen concluded from their research that long-term sustainable growth firms possess a management team demonstrating a sufficient amount of what they call 10X Leadership. This construct is defined by the four capabilities:

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  fanatic discipline

  fanatic discipline

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  empirical creativity

  empirical creativity

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  productive paranoia

  productive paranoia

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  Level 5 ambition.

  Level 5 ambition.

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In Great By Choice , Collins and Hansen explain that long-term, sustainably successful businesses enjoy leaders who possess much more of these qualities than do their less successful industry counterparts. Sounds like a very balanced formula for success, right?

In Great By Choice , Collins and Hansen explain that long-term, sustainably successful businesses enjoy leaders who possess much more of these qualities than do their less successful industry counterparts. Sounds like a very balanced formula for success, right?

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As noted above, examples abound in the talent management industry of leaders who could only take their firms so far before they were unable to cross the next threshold of growth—from guru-founded firms whose leaders were either uninterested or incapable of leading growth, to relatively competent leaders who were seriously deficient in their understanding of the industry to make the right growth decisions and investments. They lacked the foresight, insight, and cross-sight required to create sustainable value.

As noted above, examples abound in the talent management industry of leaders who could only take their firms so far before they were unable to cross the next threshold of growth—from guru-founded firms whose leaders were either uninterested or incapable of leading growth, to relatively competent leaders who were seriously deficient in their understanding of the industry to make the right growth decisions and investments. They lacked the foresight, insight, and cross-sight required to create sustainable value.

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Where is your firm in its growth cycle? Has it stagnated more recently? Is the founder still calling all the shots? Had your CEO passed his/her prime? Is it time to consider bringing in professional leadership to take your firm to the next level?

Where is your firm in its growth cycle? Has it stagnated more recently? Is the founder still calling all the shots? Had your CEO passed his/her prime? Is it time to consider bringing in professional leadership to take your firm to the next level?