The 5 Lessons I Learned Building High-growth Companies (And the Huge Mistakes to Avoid)

Growth for growth's sake isn't sustainable. Like many entrepreneurs, I learned some lessons the hard way.

We have a saying in the SEAL Teams: Don’t run to your death.

After leaving the Navy SEAL teams and attending graduate school, I started my first company. Ten years later I am on my third company – all of which have double revenue each year throughout their lifecycle.

This reality isn’t necessarily due to any extreme level of intellect or entrepreneurial genius by any means. But it has required a bit of vision and risk-taking coupled with hard work, discipline and resiliency.

By identifying some white space and leveraging passion and purpose, any entrepreneur can achieve the same trajectory – and more.

Here are five important lessons I have learned on both literal and figurative battlefields – and the costly mistakes to be avoided.

1 – When setting lofty goals, have a clear vision.

The first major career decision I made was in 2000 when I decided to leave my corporate finance career and join the Navy. The goal was lofty to say the least – become a U.S. Navy SEAL and serve my country in the most elite and feared special operations unit in the world. Knowing the attrition rate of the training pipeline is extremely high, I knew fulfilling this dream would be a challenge. Basically, SEAL training has about the same failure rate as start-ups. Most do not succeed.

When setting lofty goals, I have found it beneficial to define a clear and concise vision and then work backward to define the mindset, behaviors, actions and key performance indicators that will take you there. Beyond that it’s about prioritization and execution.

When starting my first company, we raised about $1 million in a series A round and therefore had a significant focus on growth and building shareholder value. We doubled revenue each year for many years. But I did not use the same focused aggression and discipline I applied to preparing for and navigating the rigors of SEAL training.

Yes, rapid execution was part of the strategy as was an aggressive approach to sales and marketing. But some of the foundational pieces that were missing left us exposed when the economy collapsed in 2008. We didn’t have the team aligned and emotionally connected to our vision and mission narrative. Because beyond growth – and more growth – we hadn’t defined any of that.

Growth for growth’s sake isn’t a “vision” nor is it sustainable. A clearly defined vision and mission are imperative.

2 – Prioritize values and culture.

As entrepreneurs, we often make the mistake of de-prioritizing values and culture until more measurable metrics are defined and “sustainable” growth is achieved. But the reality is that growth cannot sustain without these critical foundational elements. I learned this the hard way in my first two companies.

Once the economic indicators started showing that the mild downtown would in fact be the collapse of the world economy, we started planning for entrepreneurial diversification. We borrowed $100,000 from the first business to start the second business – which initially was going to be a simple alternative revenue stream. Soon after, we did another series A round raising about $1.75 million. That business also double revenue each year and experienced the growing pains to boot. It wasn’t until we implemented the first 360 degree review and feedback mechanism that we realized that nobody had a clue as to where we were headed, how we would get there, or how any of that was supported by our organizational culture and values. Why?

Because none of that had been clearly defined or articulated to the team. We had a sales-solves-everything culture. But that’s about it. We quickly pumped the breaks on growth in order to define who we were so we wouldn’t get slowed down by the inevitable growth barriers all companies experience. Culture and values play a big role.

Similarly, it wasn’t until 2005 that we create the Navy SEAL Ethos – our mission, vision, values, purpose and culture statement all wrapped into one beautiful creed. We had been fighting at the speed of war for four years and in a constant state of transformation. But we hadn’t really defined who we were as an organization – something kind of important for maintaining “elite” status.

In the 2017 Global Deloitte Human Capital Trends report, executives and senior leaders from all over the world that were surveyed cited the areas of culture, retention and engagement as urgent – areas that needed immediate attention. And today’s work force cares deeply about the vision, values, culture, work environment and purpose behind the organizations they seek to join. And they should.

Don’t leave these things to come about haphazardly – they must be by design and align with vision and strategy.

3 – Don’t assume engagement and empowerment exist.   

According to recent global Gallop research, employee engagement can be broken down as such:

·         Engaged: 15%

·         Disengaged: 67%

·         Actively Disengaged: 18%

A fundamental reason engagement is more important than ever? Because leading through change and navigating organizational transformation and growth requires the engagement and participation of as many people as possible in the organization. Something all companies face now more than ever. But when only 15% are going above and beyond and emotionally connected to the mission and vision, you will have problems.

The level of engagement in today’s workforce is due to many reasons, one of them being that it is simply not a managerial priority. I know because I have made this mistake in the past. More Gallop research shows that employee disengagement costs the United States upwards of $550 billion a year in lost productivity!

So you can see why engagement is both a problem but also an opportunity for leaders who learn how to master the art and science of culture management and employee engagement. And when they do, they realize the measurable financial returns that result from it.

4 – Learn to measure and improve trust and accountability.

Like culture, values and vision, the principles of trust and accountability aren’t nice to have social variables or soft-side management strategies. They drive the financial health of any organization.

Human Capital Institute performed a study called Building Trust 2013: Workforce Trends Driving High-performance. A key data point that resulted was that employees working in what they defined as high-performance companies (continually driving positive financial returns) believe their leaders, managers and peers to be highly trustworthy. And the two areas that trust and accountability effect the most in any organization are productivity and engagement.

Since we have already established that engagement is an issue, one could conclude that in many companies, trust isn’t valued or at least not properly managed and measured. Like engagement, don’t assume you have a trusting and accountable workforce just because you are growing. That will only last so long.

5 – Build a data-driven mindset into the culture.

When we entered these conflicts after 9/11, the United States military was essentially a very hierarchical, siloed, slow-moving twentieth century organization. And we quickly realized that to move at the speed these wars required (and to defeat a very decentralized enemy), we had to rethink our systems, structures, communication processes and even our culture. Data and intelligence, despite a seemingly open-ended budget and plethora of agencies, was simply not flowing fast enough. It was getting trapped in our many silos.

We also made the same mistake in my second company because we were doubling revenue each year while maintaining a healthy EBITDA. Or so we thought. We were drinking so much of our own Kool-Aid, we weren’t looking at what the data was showing us. Nor did we have the tools or mechanisms in place to collect the right data for making informed strategic decisions.

When we finally did put the right tools and people in place, the data we discovered wasn’t good. Top line revenue wasn’t the problem. But profitability at the company, client and project level was nowhere near what we had thought. Nor were productivity and utilization.

By working diligently to transform our culture to be more data-driven, we were able to make better decisions internally and externally in our approach to products and service offerings.

Just because a company is growing doesn’t mean there won’t be many obstacles ahead. By building a strong foundation, a clear vision, culture and values that support the vision and strategy and using data to drive the mission plan, you will be better equipped to bounce back from adversity, adapt and grow sustainably.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

 

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