9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.
03/19/2015 By Jim McHugh
Note: This was originally published in the March 2015 issue of Private Company Director Magazine. Reprinted with permission of the editors.
“You’ve become one of them.” That’s what a fellow Director (“MoneyGuy”) said to me after one of XYZ Company’s regular board meetings. MoneyGuy was from XYZ’s lead investor group and the majority shareholder. The ’them’ MoneyGuy was speaking about was XYZ’s management team. From his tone, I knew MoneyGuy wasn’t giving me a compliment; I was being admonished because I ‘sided with management’ about a particular matter that was pivotal to the future of the company.
What had I done wrong? To find the answer, you’ll need to read the following fifteen “rules” on how to work with owners.
These rules apply to different ownership structures of private companies. In general, the shareholders in private companies are either families, private equity/venture capital groups, management/founders, or a combination of these. The rules are indifferent to the stage of the company (early stage, mature, in decline, whatever). Hopefully you will see why these distinctions don’t alter how I work with owners.
Here are my fifteen rules:
1. Remember your role as a fiduciary. MoneyGuy knew I had a fiduciary responsibility to the corporation, not just to him and his private equity firm. They put me on the Board to be ‘an outside, independent voice.’ Somehow that slipped his mind! This brings me to Rule #2…
2. Don’t be a rubber stamp. You can get rubber stamps at Staples. MoneyGuy or any other majority shareholder should realize that you are not on the Board just to be another automatic vote for them. Another Director friend told me: “There is a fine line to walk as an independent director when those sitting around the table own the company and you are effectively their invited guest.” If management knows you are truly independent and not there to throw them under the bus, this will help build trust with all.Read More
02/18/2015 By Jim McHugh
A CEO friend recently told me that he asked three people to leave his company over the last few months. After they were terminated, there was a marked improvement in the overall morale and attitude of the other employees.
I had met these people in the past. Of the three, two were rats and one was a snake. Rats and snakes can wreak havoc with your culture and your strategy.
Introducing The Creatures…
Corporate rats are different from corporate snakes; however, both can be found in all levels of any organization, from significant investors to the rank and file employees.
Rats are Enablers.Read More
10/14/2014 By Jim McHugh
This is a picture of my 55+ year-old wooden oars after I opened up our boat this past spring. They looked pretty beat up: chipped and peeled paint…cracks in the wood…and they were graying at the edges.
Were they past their useful life? Would I need to replace them with a brand new pair?
Before trashing them, consider this –> these oars have a rich history that you could never imagine by catching a glimpse of them lying on a dock or in the bottom of a boat.
These oars have done their job quietly and well in rowboats, dinghies, motorboats and sailboats. The type of boat didn’t matter to my oars.
They were always there when I really needed them.
Doesn’t that sum up a good mentor, senior advisor, or board member? Versatile and at the ready when you need their capabilities.Read More
02/20/2014 By Jim McHugh
I Don’t Know (wait…he’s on third). Major League Baseball’s Spring Training kicks into high gear this week. Red Sox position players reported on February 18th and today (Feb. 20th) is the team’s first full squad workout. The players know their positions. Some players are versatile and can rotate around the lineup; however, once they are […]Read More
Filed Under: Leadership, Leadership & Governance, Management, People & Culture, Slow Lane Tagged With: business, CEO, communication, Family Owned Company, functional analysis, human resources, leadership, management consulting, manufacturing, manufacturing company, organizational behavior, organizational chart, people issues, performance improvement plan, private company, role clarification, roles and responsibilities, turnover, who's on first
01/30/2014 By Jim McHugh
Imagine the scene: the CEO and a collection of company shareholders, directors and senior management team members have piled into their corporate Covered Prairie Wagon. The wagon is lumbering down the winding, bumpy, rutted path called the Shareholder Value Road.
Or…instead of a crowded, hot Prairie Wagon (did the Pioneers hang those ‘Little Trees’ air fresheners…), maybe it’s just you bouncing along in your own personal buckboard.
No matter what you’re driving, at some point on the journey all corporate wagons come to a major crossroad – a Strategic Crossroad. Generally, more than one Strategic Crossroad is encountered on the long Shareholder Value Road. You can hit them:
- early in the adventure
- at a mature midpoint
- and/or near the end of the trail
Whatever the natural stopping point, critical choices have to be made – you (and your traveling companions) have to pick a direction and move on. Chances are you will have to ‘make camp’ for a bit while the directional choices are identified, evaluated, debated, argued, rejected and decided. In some extended encampments, the travellers may need a lot of provisions!
There could be many signs in front of you…Read More
09/18/2013 By Jim McHugh
I’ve been contacted a number of times this year by business partners who are bickering with each other and/or struggling over the condition of their business.
It seems like there have been more of these calls than in the past…maybe my blogging is the little nudge that pushed the business owners to either phone or email me.
Do you and your business partners get along?
- Yes? That’s great! You are in good shape. If you want to maintain that success, I suggest avoiding the potholes by reading this post.
- No? Did you get along when you started out, but not anymore? What’s changed?
There are 7 reasons (7 Partner Potholes) why conflict creeps into ‘partner’ type businesses and causes successful companies to fray or even break up after many fruitful years of existence. Conflict among business partners can become burdensome, intrusive, even crippling to the day-to-day operations of a company. Over the course of my business career, I have seen and/or worked with companies that have had ALL of the 7 Partner Potholes.
How can these situations be fixed or avoided? Are there some partner conflicts that can’t be fixed?Read More
Filed Under: Leadership & Governance, People & Culture Tagged With: business conflict, greed, leadership style, partner conflict, roles and responsibilities, stage of career, strategic disagreement, tangled web
08/22/2013 By Jim McHugh
A significant reason for writing this blog is to hopefully prevent companies from developing any of the 9Stucks conditions talked about. When I see or read something worth sharing, I will share it here and on social media.
Author Morten Hansen is interviewed in the very brief HBR Facebook clip featured below. He teamed up with Good to Great author and leadership expert Jim Collins to write Great by Choice. If you haven’t read the book, the 5-minute clip is a good introduction to their research findings on sustainable leadership.
What can leaders do to succeed when having good or bad ‘luck’?
They need to have what the authors term “Productive Paranoia”. The discussion also addresses an approach to innovation – creating the future via ‘empirical trials’. Good stuff. ‘Good to great’ actually. Enjoy.Read More
08/13/2013 By Jim McHugh
Is your company stuck in the past…is your industry slowly (or quickly) changing? Have your customers’ needs moved away from your old product/service offerings? These changes can build up, and then erupt. Companies become Stuck in Another World if: They don’t recognize or react to evolving industry forces and trends They have lost their core strengths and competitive advantages […]Read More
Filed Under: Another World, Business Model, Industry Forces, Trends, Uniqueness, Markets, Customers, Go-To-Market Tactics Tagged With: business model, business processes, customer needs, customer satisfaction, industry changes, living in the past
07/18/2013 By Jim McHugh
In New England, nothing shouts “Summer!” more than the first report that sharks have been spotted off Cape Cod beaches. Great White sharks. Six more were spotted this week cruising close to the shore in Chatham, MA.
When the island of Martha’s Vineyard was used as the setting for the 1975 movie Jaws, the movie rolled out a tide of beach fears that have never quite receded. Scenes from Jaws have caused adults and children to avoid swimming in the ocean, or panic and run from the water when seeing a harmless sunfish off the beach, or learn the pounding technique for scaring a shark away.
Are your competitors sharks? When new competitors are 100 yards off your company shore, or seemingly right next to your plant (boat) do you immediately think you ‘…need a bigger boat?’
My experience has shown that management reacts in one of three ways when confronted with intense, encroaching competition:Read More
06/20/2013 By Jim McHugh
I know you’ve run across Sacred Cows (“SCs”)…we all have in our business careers or personal life.
Dictionary.com defines a Sacred Cow to be: “an individual, organization, institution, etc., considered to be exempt from criticism or questioning”.
This is the final post in my five-part series that explains how 5 particularly disabling conditions can negatively impact the value of a family-owned company. I saved this particular subject for last. I find that the presence of ‘bad’ Sacred Cows is the most emotional and highly personal of all of the previously discussed performance inhibitors found in this series.
Good SCs, like a popular brand or an established, competitive business practice, are legacies that should not be messed with. However, ‘bad’ SCs:
- are difficult to change
- are hard to eradicate
- can’t be spoken about
- can have a profound, severe impact on operations Read More
Filed Under: Business Model, Industry Forces, Trends, Uniqueness, Leadership & Governance, Markets, Customers, Go-To-Market Tactics, People & Culture, Strategy & Planning, Systems, Processes, Fixed Assets Tagged With: Family Business, Family Companies, family conflict, Family Owned Business, Family Owned Company, performance improvement plans, sacred cows, unqualified family members
06/05/2013 By Jim McHugh
I recently returned from my college reunion… swept back in time to the days when living in my college bubble was a secure yet liberating environment. Those were happy personal times – times of discovery, growth, socialization, and empowerment.
Based on my experience working with ‘stuck’ companies, executives caught in a company bubble might not be having as much fun. Operating in a company bubble suggests you are isolated, cut off from outside perspectives. Is your company operating in a bubble?
This is Part 4 in my multi-part series that explains how 5 particularly disabling conditions can exacerbate family business underperformance.
If there is a weak independent board of directors/advisors, or one doesn’t exist, then governance and decision-making at the top of a family owned company is concentrated and insulated. Due to the historical, generational ownership structure, there is a tendency that a family business could be prone to operate in its own unique bubble.
I’ve seen first hand where the lack of solid governance makes a difference. Similar to the other issues covered in this ‘Pesky Plights’ series, the absence of good external, independent governance could have negative implications on company execution.Read More
Filed Under: Industry Forces, Trends, Uniqueness, Leadership & Governance, Strategy & Planning Tagged With: Board Of Directors, Family Business, family owned businesses, governance, succession planning
05/21/2013 By Jim McHugh
I ran outdoor track both in college and high school. Since I was a fast runner (back in the day) I always ran one of the legs of the 4×100 and 4×200 relay teams. Our relay teams practiced daily on perfecting the handoff – passing the baton. We had the relay leg transitions down pat. Unfortunately family-owned businesses may not plan for a leadership transition and may bungle, delay or simply avoid the handoff to the next generation of family leaders or to non-family executives.
This is the mid-point in my multi-part series that explains how 5 particularly disabling conditions unique to a family business can exacerbate business underperformance.
This post is about companies with non-existent succession/transition plans. When owners can’t or won’t let go, four of the 9Stucks (Ditch, Moment, Slow Lane, and Another World) get really amped up and push the stuck company into a deeper hole.
Family company leaders often stay in their roles too long. But staying too long is not the problem; being in a zone of leadership indecision creates troublesome ripples throughout the entire company.
FamilyCo was one of my stuck manufacturing clients. I was hired by the company/family to do a ‘fresh eyes’ assessment of their business. The company wasn’t in trouble but it had hit a wall and was stagnating. It didn’t take me long to figure out there were issues with the senior team, the company’s competitive position and a number of important operational functions.
The children told me: “Dad was the driving force to get the company to where it is today, but now we think he has blinders on; he doesn’t acknowledge all the changes in the industry, the shifting customer demands or the need to upgrade our facilities, systems and equipment. He is living in the past. You (me) need to talk to him about letting us run the company.”Read More
Filed Under: Another World, Ditch, Governance, Leadership, Moment, Slow Lane Tagged With: Bill, Board Of Directors, Business Part, business transition, CEO, entrepreneur, Family Business, Family Companies, Family Leader, Family Owned Business, Family Owned Company, Leadership Transition, ownership, private company boards, succession planning, Transition Plan
04/23/2013 By Jim McHugh
Innovate and grow or maintain the status quo?
The process of making this basic strategic choice can be an exciting journey forward, or a source of conflict in a family-owned company.
Why? What causes a family company to be frozen in its tracks over this fundamental question? And what can be done to thaw the ice, or better yet, prevent the business from becoming Stuck in the Moment?
You may be thinking…’Conflict among the shareholders of a private company over strategic direction is common and good.’ You’re right! Debate over the best go-forward strategies and tactics can be healthy and productive. In companies that are not family owned, the conflict tends to resolve itself in a timely and orderly way. This is especially true in companies with outside institutional investors who don’t tolerate indecision for extended periods of time.
In some family-owned companies, the strategic discord festers and lingers. A ‘strategic fog’ permeates the boardroom, family gatherings and the company’s hallways and cubicles. Critical decisions are delayed and significant opportunities ignored. The disagreement can go dormant but then suddenly explode. This can be debilitating to the business and to the shareholders.
What has always intrigued me is not the presence of a rift over the strategic direction of a family business. My question is why the conflict becomes so pervasive and common.Read More
Filed Under: Governance, Leadership, Management, Moment, Strategy Tagged With: Board Of Directors, Family Business, Family Companies, family conflict, Family Legacy, family owned, family owned businesses, Family Owned Company, private company boards, strategic choices, strategic decision making
03/27/2013 By Jim McHugh
Family-owned companies are plentiful in number and unique in character. Like any other type of company, these businesses are not immune to being infiltrated by the 9Stucks. In fact, a family business is fertile breeding ground for a unique 9Stucks mix that is often configured with a twist and a flair for the dramatic.
I’ve regularly experienced 5 missteps of leadership that can exacerbate the 9Stucks:
- Family needs vs. business needs: They are strikingly out of balance.
- Strategic direction is stymied: Conflict over growth vs. maintaining the status quo freezes the business in its tracks.
- Transition/succession plan is non-existent: The owners can’t or won’t let go.
- Governance and decision-making at the top is concentrated and insulated: There is a weak independent board of directors/advisors, or one doesn’t exist.
- Sacred cows graze in the company’s organizational pasture: Top leadership spots are based on birthright or longterm ‘family favorite’ status rather than skills. These sacred cows crowd out talented non-family leaders.
One blog post can’t do justice to these 5 ‘pesky plights’ so I’m creating a 5-part series.Read More
Filed Under: Governance, Leadership, Maze, Rough Tagged With: Board Of Directors, excessive cash, Family Business, family company leadership, family owned, Family Owned Business, family owned businesses, Family Owned Company, sacred cows, The Family Business
01/24/2013 By Jim McHugh
9Stucks is a business diagnostic tool that identifies nine distinct yet interrelated business challenges that cause a company to underperform and restrict innovation. The 9Stucks are patterns…recurring conditions I’ve seen and experienced fixing stuck businesses for the last 20+ years. These 9Stucks are real, not theoretical.
One reader of the 9Stucks blog said to me: “I may be stating the obvious, but when I think about your 9Stucks, I think about PEOPLE. Don’t the people in a company have a big impact on creating, causing or maintaining all of the stucks?”
Hmm, good catch…
People are the driving force behind the 9Stucks.
They are the actors and actresses who have leading and supporting roles in an organization’s stuck performance, a performance that can carry the same degree of drama as any stage play.
Introducing the Stuck Cast.Read More
01/09/2013 By Jim McHugh
Exit Planning is a trendy topic, especially for owners of stuck companies who often develop the itch to sell their business when raw emotions push aside rational thought.
Exit Planning means helping prepare the company and shareholders for an ‘exit event’ (aka Sale).
The idea of “It’s time to sell the business” becomes more top of the mind when the owner(s) of a stuck company grow weary of dealing with their own personal collection of stucks. Here are some points of frustration…
- the owners fighting with each other (Stuck in a Ditch)
- the fun is gone for the CEO (Stuck in a Ditch)
- overbearing customers (Stuck in a Rut)
- disgruntled employees (Stuck in the Slow Lane)
- a rapidly changing industry (Stuck in Another World)
- declining margins (Stuck in a Maze)
- ubiquitous competition (Stuck in Traffic)
Since I have been asked about Exit Planning/Selling a business frequently in the last couple of months, I thought I would share an email I wrote to the CEO of a stuck company who was contemplating selling. Here goes:Read More
Filed Under: Competition, Financial Condition, Industry Forces, Trends, Uniqueness, Leadership & Governance, Markets, Customers, Go-To-Market Tactics, People & Culture, Strategy & Planning, Systems, Processes, Fixed Assets Tagged With: business exit strategy, exit planning, selling company
12/21/2012 By Jim McHugh
Scrooge and Marley PLC was stuck.
I don’t identify my clients by name, but given the widespread publicity and overall notoriety of this particular company, I felt it would be beneficial to reveal the real ‘story behind the story’. This is a case study about how Scrooge and Marley PLC became unstuck.
Jacob Marley died while he was still employed at the company. There was no key man life insurance; they were too cheap to buy a policy. After Marley’s death, Scrooge became the sole shareholder and he decided to run Scrooge and Marley as he saw fit.
Little did Scrooge know that Jacob decided to maintain a Board observer role.Read More
11/08/2012 By Jim McHugh
Is your company’s value ebbing or declining?
Do you know ALL the reasons why your company is underperforming, or can you only pull apart some of the reasons?
Figuring out why shareholder value is deteriorating can be easy if the issues are really obvious. It can be hard and confusing if the overall situation is a quagmire.
The 9Stucks collection identifies the most common causes of why a company isn’t meeting shareholder expectations. For those of you who have looked at the 9Stucks, each standalone Stuck is straightforward and uncomplicated. Most of the significant, contributing issues that cause a company to be stuck are not hard to uncover if you know where to look.
However, the 9Stucks are usually not limited to just one or two. A stuck company always has A COLLECTION of the 9Stucks. The breadth of the collection determines the overall organizational ‘stickyness’.Read More
Filed Under: Ditch, Fog, Leadership, Management, Maze, Moment, Rough, Rut, Slow Lane Tagged With: business model, cash flow, CEO, declining gross margins, family owned businesses, low morale, manufacturing company, stuck stew
10/13/2012 By Jim McHugh
“The only players who survive in the pros are the ones able to manage all their responsibilities.” – Tom Brady, Quarterback of the New England Patriots
Football, rugby, or any other sport organized around a finely-tuned playbook, requires players to understand roles and execute plays in both familiar or unplanned situations. Each player has defined roles and responsibilities based on his skills; that player is fully aware of his role, the roles of others and has studied the plays. A solid playbook enables a cohesive team to maintain control of the ball and win.
Does your company’s playbook have:
- unclear roles and responsibilities (Stuck in the Slow Lane)
- players with missing skills (Stuck in the Slow Lane)
- undefined or unfollowed business processes (Stuck in the Rough)
This all too common, weak people/process combination creates lots of broken plays. Basic things like roles, skills, processes really should be a given in any organization.
But if that’s what’s ‘supposed to be’, then why have I regularly seen many corporate fumbles, pigpiles, tangled situations and outright conflict over ‘who does what and how’?Read More
09/27/2012 By Jim McHugh
BuildingCo was constantly in a cash crunch.
The company manufactured a line of building products, had one production facility that supplied 12 regional warehouse/distribution centers and was founded by two entrepreneurs. BuildingCo was well positioned in a steadily growing (at the time) geographical region of the US. To help fund the company’s growth, management used a combination of outside capital from 2 private equity groups, mezzanine and senior debt.
However, as the velocity of growth accelerated, the company regularly bumped up against their line of credit availability.
They were running on cash fumes.Read More
09/10/2012 By Jim McHugh
This final episode explains emotional venting related to internal confusion over the company’s OPERATIONS. When I stick my head under the hood of a company and listen, I often hear lots of clanking, banging and rustling from the CEO, Board, and investors about:
- the overall business model
- cash (or the lack thereof)
- the capital structure (translation – too much debt, not enough equity)
- costs: fixed and variable
- business processes, weak systems, old equipment
- the basic forces of producing and executing
Recap of Episodes 1 &2: Episode 1 pointed out the emotional ebbs and flows associated with LEADERSHIP in a stuck company. Their voices express what they live everyday.
Episode 2 gazed outward at the emotional toll inflicted on the business by a host of ever changing dynamics broadly called EXTERNAL FORCES. What’s happening to us?! Can a company be a victim? Maybe so, but maybe not…
08/23/2012 By Jim McHugh
“Serving up family time, one smile at a time.”
- Tag line from the Hostess Brands website
Today I’m announcing that …
Hostess Brands Joins the Top 20 Stuck List
The creator of Twinkies becomes the latest iconic corporate brand to ‘get listed’. Here is my Top 20 Stuck List ranking so far:
- Hewlett Packard – Call the Handyman: These Garage Doors are Broken
- Yahoo – What Marissa Mayer Should Do To Unstick Yahoo
- Hostess Brands
- TBA (Hint: baseball team from Boston)
- Numbers 5-20…More to Come (any suggestions?)
Hostess filed Chapter 11 (again) this year. Do you Wonder (sorry, bad pun) what happened to drive them back into court a second time? How is it possible that a well known, ubiquitous US corporation that sells millions and millions of sweet, spongy, crumbly, powdery, chocolate and squishy things each year can’t pay its bills?
Find out why Hostess is Stuck and my Top 10 recommendations to fix the company once and for all.Read More