Oct 212014

Dr. Earl R. Smith II

I was recently working with the senior team of a mid-sized government contractor. They had built the company nicely to just over thirty-million dollars in annual revenue. The customer base was tight and well focused. They had good client intimacy and acceptable pipeline velocity. An initiative to move into a new agency seemed to be going well. From the outside, the company looked fine.

Internally, the landscape looked quite different. Management was having an increasingly difficult time controlling operations and keeping costs under control. A proposal had been muffed – submitted without adequate red-teaming – and the result was a loss that they had counted as a win. Two key team members decided to move to another company. A review of their books showed a significant financial control problem. What was all growth and sunshine on the outside was stormy and gray on the inside.

Intervention: I was asked to ‘take a look around’ by one of the major stakeholders. They had just finished a review meeting and were concerned by what they heard and saw. The ’golden team’ that had done so well in the past was starting to look, at least occasionally, like the Keystone Cops.

I began my diligence phase with a two-track approach – talking to members of the team as well as clients of the company. I wanted to quickly figure out what was going on and decided that both perspectives would help me get there faster. What I found resonated with other experiences with other companies. The common atmosphere was one of disquietude. An uneasy feeling had settled in with both management and client.

Growing Pains: The company’s growth had been fairly rapid. Sure, they hadn’t set any ‘land speed records’ but growth had occurred in the kind of spurts that characterize government contracting. They would chase business until they caught it and then try to come to terms with having it. As the CEO told me one evening over drinks, “finding and capturing is nothing compared to having to domesticate. But one thing I can tell you, chasing is a lot more fun.” Based on years of experience, I knew exactly what he was talking about. It is much like politicians who realize that fundraising is a lot more fun than governing. Once they reach that realization, they are finished and useless to their constituents. Management teams can, similarly, become enamored with the process of chasing and winning new business – the thrill of the hunt and the satisfaction that comes from a new conquest. But any addiction has its cost.

The company’s growth – its rising skill in chasing and winning new business – had shifted the corporate culture. Like people who prefer to think of movie stars as their friends and avoid having real-life friends, management had turned away from the reality of sustainable growth to the illusion of explosive growth. The people who were focused on actually doing the business of the company had become a kind of underclass. The ‘hunters’ felt that they were the most important people on the team. They began paying more attention to how many awards they were getting or how many times their names appeared in the news. I had seen too many companies destroyed after ending up on some service provider’s fast 50 list.

The change was also having an effect on the company’s client base. Key decision makes were increasingly worried about what they saw as inattention to their concerns and needs. Three brought up the ‘h’ word. “These guys are so full of themselves that there is no room for us clients. Hubris does not make for good client relationships. I’m getting ready to search for an alternative.”

Diagnosis: It would have been easy to return to my friend and report what I had found. After all, a major stakeholder should be made aware of managements descent into self-adulation. But that was not my remit – I was asked to diagnose the problem and propose solutions. The second phase of my work focused on extended interviews with key members of the management team. What I found was so critical to the future of the company that all parties had to step back and absorb the shock.

But more of that in the next chapter. Stay tuned.


© Dr. Earl R. Smith II



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