06
May
2011

Chief Executives and End Game Strategies

When I begin working with a new client , one of the first things I ask the foundering CEO is “Why did you start this company and what‘s your end-game?”  They have no problem telling me why they started; but few can tell me their ‘end game’.  Maybe it’s because they are so focused on growing year over year and aren’t thinking long-term.  But quite possibly they don’t know how to grow.

There are two reasons why many people start companies: opportunity (e.g., commercialize a cool technology) or necessity (e.g., been laid off or can no longer stand to work for someone else.)  And sometimes it’s a bit of both!  As the company grows, the founder makes decisions that will impact the future development of the company.

For instance, if you decide to use the company as a cash cow to fund your personal life style, you’ll try to grow it a bit each year, pay yourself as much as possible and run a lot of “personal” expenses through the company, and show very little profit.  If you want to create a legacy that you can pass on to your children, you’ll be more willing to make investments with a long pay-back period.  If you’re planning to sell the company or go public, you’ll try to ramp sales, grab market-share and focus on top line revenue growth as quickly as possible. 

Why is end-game so important?  Because you make different decisions and manage differently, depending on whether you’re trying to maximize your personal income, build a legacy, or position the company for sale.

For anyone who’s gotten good at operating day-to-day in reactive mode, looking ahead several years can be a daunting task. But when they begin to think in terms of 36 – 60 months, with 12 month chunks, and quarterly reviews, the process becomes more manageable.  And once they have clarified the mission, values, and vision, they can think through the strategies and develop the plans that enable them to grow.

There’s a downside to waiting too long to articulate your vision and end-game.  After going through this process, two partners who’d been in business together for 20 years realized they didn’t have the same vision for the company and wanted different “end-games”.  Working together became intolerable, and one bought out the other. It’s too bad they didn’t realize that sooner, so they could have pursued other alternatives.  The sooner a CEO recognizes the lack of alignment with a partner, personal strengths and weaknesses, or which people are unable to go to the next level, the better it is for the company. 

My mother was very wise and often said, “Life is a series of trade-offs.  You trade-off one set of problems for another set that you believe are more manageable at this point in time.”  Growth – and planning for growth – requires the ability to envision, the courage to assess where you are vs. where you want to be, and the discipline to make the decisions and the trade-offs required to get you to the “end-game”.