Newport Board Group, a Nationwide Firm of CEOs Serving Middle Market Companies, Releases a 6 Step Guide on Positioning a Private Company for Growth

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Firing Your Best Friend is Sometimes the Best Solution

Am I willing to fire my best friend? This is the gal or guy without whom this company and I could not have gotten to where we are.

The founding team of a new company will only succeed if they are committed to each other--and committed to the success of the company. One of the most difficult barriers to growth is the transition of the leadership team from a culture of loyalty to a culture of performance as the essential qualification for leadership in the company.

New companies can find customers and become profitable, but most don’t. Of those that achieve initial success, few are able to break through the barriers at $5 - $15 million in revenues and grow to significant scale. We know the Bill Gates, Mark Zuckerberg and Steve Jobs examples of founding CEOs who grew their companies to big successes. They are exceptions to the more common pattern of companies growing to significance only when a new CEO with better management skills takes over leadership of the company. Even when the CEO can make the transition, other key leaders of the company often have to be replaced.

Whether you are the CEO who wants to build your company to the next growth stage or a division or department head deciding whether your team is up to the challenge of significant growth, you are faced with “Am I willing to fire my best friend? This is the gal or guy without whom this company and I could not have gotten to where we are.” Leaders who cannot make these changes will not be successful taking their companies through the next stage of growth.

These choices seem harsh and unfair. We have the image of Donald Trump saying "You Are Fired!" Perhaps entertaining on TV, but most of us would see that approach as callous in real life. But keeping everyone in their current roles has huge implications.

Friendships with our colleagues grow when we work together over long hours to overcome the endless problems in any growth company. What could be more unfair than to say that those who were essential to the success of the team must move on now that the company has become successful?

A successful company is a community of people who identify the success of the company with their own personal success, care about each other and depend on the company for their livelihood. The customers of the company rely on its products and services for their well-being. The investors in the company have put their funds at risk believing in the company’s potential. The founders have put in countless hours away from their friends and families. Even though the founding team are "best friends," reluctance to making leadership changes can have a large and negative impact on the broader community that depends on the success of the company.

Here is another perspective. Does the VP of sales who is very effective dealing directly with clients really want to become VP of a Sales and Marketing organization where she will have little direct client contact? Does the CEO who likes the excitement of founding a new company with a great new product really want to spend much of his time dealing with investors, HR issues, financing and process improvements?

The successful leader may have to fire his best friend, but the leader does so because it is in the best interest of all the stake holders in the company including the key leaders whose roles may have to change.

What You Must Get Right to Grow to Scale

1. Start with where you want to go - a reality based plan with buy in from your board and leadership team.

2. What are the capabilities needed to execute on the plan including the skills, style and temperament of the key leaders? What are the gaps?

3. If you are the CEO or division leader, be honest with yourself. Are you the right person to lead the team through the next growth phase or should you have some other role?

4. Are you prepared to select the team and measure their contribution by reasonably objective performance criteria rather than by their commitment to you and the company?

5. Have you had a deep and honest conversation with your key leaders on what they want to be doing over the next 2 - 5 years - and how they will fit in?

6. Does your company and its leadership team have the culture and values needed for challenges required for the next 2 - 5 years? Culture is very hard to change. If cultural change is required, how will you make that happen?

Only a no-holds-barred dialogue - with yourself and your team - can set the foundation for growing your company to significant scale.

Rick Williams is a partner in the New England office of the Newport Board Group.

A version of this article was published previously in the Boston Business Journal.

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