As the owner of a 32-year-old consulting firm with 10 very talented professionals, there are certain roles that I’ve gravitated to and others that someone on my team is better suited to provide. The role that clients expect of me is to help them look downfield and position their business strategically within the competitive environment. That is the first way in which the 5 topics above are all directly related: each of these topics are the highest order of strategic issues that an owner has to address. Over the next few newsletters, I am going to address each. I’ll tie them together in this article, then dive deeper into the topics and their interconnection.
First, let’s set the stage. Decision Associates’ client base is 65% privately held companies; there are no publicly traded or private equity owned companies. Most are very high performing, sitting near the top among their peers. The other 35% is in the nonprofit sector. Interestingly, most of these are very similar to our privately held clients: most offer a fee based service to the community, are led by a strong executive and have a substantial staff and budget. For whatever reason, most of those that we work with are high performers. So, we’ve developed a deep expertise in supporting and guiding high performance entities. We are also pretty successful at helping entities that are not yet high performers but have the drive to do so.
It starts with the CEO’s role. If the CEO isn’t “working on the business,” then no one is. Working on the business starts with having a Strategic Plan: what we stand for (Values), where we are headed (Vision), where we fit in the market (Market and Competitive Positioning), our current state (Strengths, Weaknesses, Opportunities, Threats), how we are going to get there (Strategies), and what results we expect (Objectives). The Plan can take a lot of forms, but the best are formal, structured processes involving the management team.
After the CEO Role and Strategy, the next connection has to do with the Economy. There isn’t one Economy anymore; there are many micro-economies. While it’s true that there is a national economy, it is on the third ring of impact. The first ring is the micro-economy of your industry. Example: if you are in a business directly and deeply related to oil, gas and mining, you are in a depression, regardless of what is going on in the national economy. If you are in air transport or automotive, you are in a boom. Both contribute to the national economy, but what you are experiencing as a business or nonprofit is driven by your industry micro-economy. The second ring is your geographical micro-economy. This has many factors and I can’t address them all in this intro. But, the concentration of industries and the health of those industries, combined with the economic attractiveness of your region form a geographical micro-economy. Northwestern PA, Northeastern OH and Western NY, are likely slipping into a recession right now because of the concentration of gas, oil, mining related businesses and the ongoing migration of new plant construction to the South (e.g., automotive assembly plants and their suppliers).
The connection is this. As the leader of the “on the business” activity, it is the role of the CEO to ensure that the Strategic Plan recognizes and addresses the micro-economies that will impact your business or nonprofit. This includes understanding how those micro-economies may be out of step with the general economy and how you will be affected. Not to mention, understanding the micro-economies that impact your largest customers, who may be in different micro-economies than you are.
Succession? How is that connected? The obvious answer is that the current CEO has an obligation to plan for someone to step into their role as the leader. In a privately held business it may be your children or an employee group. In a nonprofit, it is someone in your organization. If you don’t have this in motion, if you are not mentoring someone, then you are leaving it to chance: the probability that someone can be hired and instantaneously have a grasp of the right strategy and economic interpretation needed to take the company forward.
Which brings us to M&A. Sometimes, the answer is to sell or buy or merge. This is true even in the Nonprofit world. The reasons vary. It can be driven by the lack of a successor; or by the need to have improved market diversification, or, by industry consolidation, in which smaller entities will not have the scale to survive. Again, it starts with a CEO who has the downfield vision to know the right strategy for the survival of the entity in the economy in which it exists.
So, yes, this is the stuff that I get to work on. I love it and I love working with not only the CEO’s, but their executives and managers as they grapple with these issues. I’m proud of the fact that the best CEO’s in the best companies and nonprofits entrust Decision Associates with these issues. In the next few newsletters, I will take each of these topics deeper and better explain the connections between them.
If you have questions or would like more information about our M&A business, call Don at 814.528.9403 or email DonMoore@DecisionAssociates.net.