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Figure 1 - Business Leadership Maturity Model
Business Maturity - Sample Comparison Model PDF
White Paper - Challenges to Leadership

 

TITLE:             Challenges To Leadership: Business Maturity
AUTHOR:          Paul G. Leslie
 
 
The Business/Leadership Maturity Model provides an evolutionary framework in understanding leadership development relative to business maturity.
 
A business organization develops and grows through a lifecycle of constant change. The Chief Executive Officer has to quickly adapt to changing environments or be ready to transition the reins of the firm to a successor. Founders, Entrepreneurs, CEO’s, Investors, and Board Members often ignore leadership philosophies, traits, and even leadership evolution as it relates to the lifecycle of business maturity. Quite often, the founder or entrepreneur that was tremendously successful while the company was a start up or in an early stage of maturity cannot be as successful when the company reaches a point where customers, employees, and shareholders expect a more mature level of performance. As businesses climb to new levels, change at the top is in order if the expected long-term growth objectives are to be met. To help recognize the relationship of the stages of business maturity, to the stages of leadership/CEO maturity, let’s look at a five-stage model that captures the attributes of a maturing business. Borrowing from the Software Engineering Institute’s, Capability Maturity Model for Software, the Business/Leadership Maturity Model is defined in Figure 1. In describing the business environment and leadership factors for each stage, the revenue/sales ranges are used for guideline purposes only. They reflect service company revenue rather than product revenue, which would typically be higher.
 
Level 1 - Start Up
 
The Start Up stage for a business is filled with passion and excitement. The business is typically characterized with revenue/sales up to $10M and little profitability. The business is focused on business plan development, concept to product development, and investment development. The culture is best defined by fast-paced activities, spontaneity, chaotic start - stops, and ad hoc procedures. Minimal functional processes exist, if any, and business roles are multi-functional. The organizational structure is loosely defined and extremely flexible due to the frenetic nature of decision making and direction setting.
 
Key Leadership FactorsLeadership demands passion for the vision. The Start Up has identified a market niche with customer needs and has developed a product/service to satisfy that need. The Founder/leader has direct hands-on involvement in the day-to-day “nuts and bolts” of business operations. There is incredible heroic individual effort in running, what can be termed, “The Rodeo”: capital investment round up, customer round up, and employee round up. The image of cowboys, the “Wild West”, and fun and games best describes the Start Up stage.
 
 
Level 2 – Emerging
 
Businesses in the emerging growth stage of maturity are usually expanding very rapidly. Business revenue/sales range from $10M to $100M, and they begin to show some profit. Rapid expansion requires business infrastructure. This includes new or additional space, financial and operational systems, and added business and IT infrastructure and support. Basic business metrics, policies, processes, and procedures have been defined and are in place. The organization is loosely structured along functional needs. Roles are now defined by the organizational structure, yet multi-functional roles still prevail. The culture reflects controlled chaos with some basic discipline, but it remains unpredictable. Routine or repeatable processes are created to gain business efficiencies, and this begins to create a monotonous business environment for some employees from the Start Up stage. This transition often means that key employees begin to look for that “Start Up excitement” somewhere else.
 
Key Leadership Factors – Leadership experiences the demands of entrepreneurial growth. The product/service has been piloted, tested, refined, and aggressively deployed. The Founder/entrepreneur is directly dealing with many managerial problems. Their leadership style is participative yet autocratic for key business decisions. They now spend most of their time on the “Cattle Drive”: herding staff, and herding organizational resources. Still the image of the cowboy persists. However, the “Cattle Drive” is nothing like the “Rodeo” event in the Start Up stage. The work is no longer considered fun and games; it is very hard, tedious, repeatable, and routine. Roles and responsibilities need to be defined. Strategy must be discussed and implemented in terms of goals and objectives, and accountability needs to be shared. It may just be the time for a transition in leadership.

Level 3 – Defined 
 
The third level of business maturity is where a company truly defines itself in the marketplace. Typically, revenue/sales are in the $100M to $200M range. There is a significant transition to a professionally managed enterprise with a real focus on thinking and planning strategically for long-term growth.
 
 
Consistent and standardized business procedures for operations and finance are in place to support the enterprise management team. The organizational structure is functionally defined, and roles and responsibilities are aligned along those functions. Organizational development (management development, career development, performance appraisals, and employee welfare) begins in earnest. The foundation of the company’s corporate culture is constructed through agreed upon shared values and operating principles. The culture is communicated through new employee orientation, company history, tales, and legacy stories.
 
Key Leadership Factors – A major transition in leadership takes effect. A shift from the entrepreneurial managing model to a professional general management approach is now needed due to the company’s scale and scope. The founder/entrepreneur leader either needs to adapt to this new leadership style or needs to take on a new role. Often founders/entrepreneurs will move into a Chairman’s position, Senior Marketing role, or as Chief Technologist. Change needs to take place! The original business plan concept and model has been validated and accepted. Leaders spend a significant amount of time on growth strategy and an adherence to more formal administration and controls. The leadership style is supportive by consensus, with the organization coping with lots of change.
 
Level 4 – Managed
 
The well-managed business model means capturing metrics and measuring performance with consistency and predictability. Businesses in this stage have revenue/sales in the range of $200M to $500M. Leadership is provided by an experienced professional team that uses well-managed enterprise-level processes and procedures. Strategic goals are explicitly linked to corporate operational objectives that feed directly into the annual budget cycle event. The organizational structure is usually market-focused with multiple business units or operating divisions. Accountability is pushed onto the general managers where performance measurement of their unit is critical to meeting annual corporate objectives. Organizational development is fully engaged and tailored to the human capital needs of each business unit. The corporate culture is heartily embraced by employees, and well understood by customers and other stakeholders.


Key Leadership Factors – The “MBA influence” for the Managed stage helps the CEO to measure performance against objectives and forecast expectations with predictable results. CEO’s further evolve during this stage as they delegate their enterprise management roles into newly created operational and financial categories. The transition creates a new executive team with the CEO identifying and promoting a Chief Operating Officer (COO) and a Chief Financial Officer (CFO) to manage the enterprise. The success of this executive level transition hinges on the effort of the CEO to elevate his or her role, while enabling others to effectively manage the business. The success of this executive level transition will determine whether or not a business achieves the next level of maturity. The leadership team decentralizes some administration and control to the business unit or division management teams, but manages strong vertical lines for performance reporting. The CEO focus is on corporate and investment strategy, and in dealing with both internal and external communications and visibility. The leadership style runs the gamut from lassez-faire to autocratic, depending on the business decision or event.
 
Level 5 – Optimized
 
The optimized level of business maturity allows companies to continually improve methods to develop organizational competency. In general terms, revenue/sales are greater than $500M, with profit being a factor of management’s ability to grow the business, control costs, and leverage investments. Independent leadership within business units is the norm, with the executive team (CEO, COO, and CFO) strategizing growth, diversification, and consolidation. Even though the organizational structure is vertically defined, it remains flat from a reporting standpoint. Emphasis is on collaboration for new business ideas, products, or services. Corporate culture is well managed and communicated but segmented due the independence of each business unit or division. 
 
Key Leadership Factors - Outstanding executive level team leadership defines the CEO’s success. The executive team orchestrates corporate growth through investment strategies, diversification into new growth markets, and business unit consolidation. There needs to be a controlled renewal of the entrepreneurial spirit, similar to the Start Up and Emerging stage, as new ideas and concepts are proposed. Constant communication to employees, customers, and shareholders is critical for setting expectations and gaining “buy-in.” The executive team focuses on continuous corporate improvement and managing the transformation to a new business vision.
            
Conclusion
 
It is critically important for business stakeholders to recognize the need to change leadership styles and management methods as a business achieves different levels of maturity. The skills and expertise needed from a CEO can, and will be, distinctly different for each level of business success. Understand the difficulty for the entrepreneurial CEO, who has played the leadership role bringing a company from Start Up through the Emerging stage, to realize that he or she may not have the right skills and expertise to take the business to the next level. Understand, as well, the difficulty for the professional CEO to delegate and enable an effective team, with the COO and CFO, to run the business enterprise in the latter stages of maturity. Changes do need to occur! Leaders either need to adapt to changing roles or move on to a newer one. The leadership challenge then is to effect a positive change with minimal impact while achieving the ultimate vision of business success and creating value for the company’s shareholders.
2010 Sydalco Consulting