The Ivory Tower of Business
What are the most expensive words in business?
Not so long ago I was sitting in the rather spacious office of a prominent business leader, discussing business. The office, the location and the finishes were all the peak of business. Simply put these people looked and talked like success.
Leaning forward as if to tell me the great secret of the universe, he shared a strategy with me. “We lose money on each sale, but we’ll make it up in volume …” As soon as those words left his lips, I vividly remember experiencing the joys of an awkward silence. He was clearly watching and gauging my reaction.
How are business leaders seduced by failing strategies?
So there I sat, sweating through that awkward silence. Was he trying to make a joke? Trying to prove a point? Making an assumption I didn’t see? Or, did he truly believe he could generate a profit from selling lots of something that otherwise loses money?
I was confused for two reasons. First off, how did he stumble upon this strategy? Simple mathematics did not support it in the slightest. Adding negative numbers will always lead to a negative number. A negative number times a positive number will lead to a negative number. It doesn’t take a mathematical genius to deduce that if each sale loses money, having more of such sales is only going to speed up the loss of money. Furthermore, who told him this strategy was a good idea?
(I would like to take a second to stress that there is a concrete difference between the idea of startup money and losing money. It is one thing to require an initial outlay of cash to get a business started with the understanding that said outlay will be paid back as the business grows. It is an entirely different idea to find yourself stuck in a situation where you are stuck in a strategy that requires some kind of miracle to become sustainable.)
As the seconds stretched on to minutes, I began to realize he wasn’t joking in the slightest. He naturally assumed that as he started selling a lot of this something, that somehow his company would figure out how to do it better and would somehow figure out how to reduce costs and eventually start making money on his proposed sales.
Are you in an Ivory Tower?
Culture eats strategy for breakfast
I’ve often read that the most expensive words in business are: “But we’ve always done it this way.”
I would even go a step further and include the rather famous idea that “Culture eats strategy for breakfast”.
Simply put, said executive existed in an ivory tower. His people are paid well and no one is eager to rock the boat. In other words, the company has developed a culture of “yes” around him to such an extent that his employees are afraid or simply uncomfortable “being the negative person” to anything new. Surrounding yourself with “yes men” can be the worst thing for growing your business. In such a culture, communication breaks down between the business managers and key employees.
As a business owner, this should scare you. A lot. Such an individual and such a culture fosters stagnation within a company. The legal profession is not immune either. I have business owners consult me about legal issues, only to ignore my advice either because my advice doesn’t fit neatly into their perception.
Avoiding the Ivory Tower
Does your business have a culture problem?
Do you you find yourself dismissing or not following the advice of your CPA, banker, financial advisor, business lawyer and/or trusted leaders in your small business? If so, you’ve fallen into the trap. So how can you avoid the ivory tower?
- Be Involved in Your Business. If you are in a big corner office, its time to get out. Get actively involved on every level of your business. Encourage all the employees to freely voice their concerns to you.
- Ditch Confirmation Bias. Do not only seek out opinions that confirm to your suspicions and viewpoints. However if you are actively avoiding facts to get there, you could get in trouble. Switch things up by seeking out opposing opinions, new data, and different viewpoints. You do not need to listen to them per se, but having more facts will help you as a manager to make better informed decisions.
- Examine Your Culture. What culture does your business foster? Are employees happy to come to work? Is there transparency or a rumor mill? Are people comfortable suggesting change? Remember your own employees are there everyday; they can be a fantastic resource for figuring out what to improve in an office.
I eventually parted ways with said executive and his ivory tower. But the lesson has stayed with me. As an attorney running a small firm, it’s easy to fall into the trap of the ivory tower myself. It’s so alluring to think that business conforms to all that I wish to be good and correct in the world. However, when I stop listening to my key employees, trusted advisors and the professionals I use for my business, then I’ve fallen into the trap.
Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later.