Thursday, June 9, 2011

Education and Title ≠ Wisdom

Executive Summary:
A frequent tale is the founder of a rising business who retires and installs a well-educated business executive from a successful corporation to take over as CEO, then the business declines or fails.  It seems that there is more to operating a business than education and corporate credentials.  One must have genuine experience solving the problems that businesses face.

The Rest of the Story:
This week I read an on-line article in Product Design and Development magazine, by Meaghan Ziemba titled, “Smart People Suck.”  In the article Ms. Ziemba describes the failure of a successful business after it was taken over by “higher-education types.”

Coincidentally, her story is very similar to a series of conversations I had about a year ago with a retired business owner who was reluctantly returning to work because the corporate executive he made CEO had ruined his business and he needed to save it.  Both he and his son, a vice president in the business, said the same thing about the CEO they installed, “He tried to do things he read in books and they just didn’t work.”

Small towns and big cities across the United States are homes for countless successful businesses founded by entrepreneurs.  Many of the founders of these businesses were not business experts, just people with vision and gumption.  And they built very successful businesses in spite of a lack of formal business education.

On the flip side, it’s not uncommon to hear about highly educated business experts ruining successful businesses.  I found myself meditating this week as to why.  Why are uneducated starters better at running a business than some highly educated business professionals?  (Not to say this is a rule – just a repeated phenomenon)

I keep coming back to the same conclusion.  There is much more to running a successful business than understanding economics and measures of business success.

I don’t hold any graduate degrees in business or business administration, so I speak without true perspective, but from what I have researched about the content of MBA degrees, they seem to be highly focused on teaching measures of business success, legal requirements of business models, some basic marketing strategies, how to garner financing, working with unions, and other similar matters. 

None of the education programs I’ve researched teach what to do when a major production system is down, or how to deal with a customer that has issue with your product, or how to teach your entire business new methods of process improvement.  Frankly, many corporate executives don’t know how to do these things either.

Often, corporate executives, particularly energetic and ambitious ones, have “fast tracked” their way up the ladder and into the executive roles.  They spent less than 5 years as individual contributors in some function then went right into management where they spent probably 1-3 years in each role, ambitiously jumping from role to role in order to connect all the right dots to qualify for the next promotion.

In many cases, the next opportunity came from jumping companies to move from say marketing manager to program director.  So over the course of twenty years, the executive never really spent any significant time in any particular trade or function, or even industry.

Don’t get me wrong, our executives are most often very bright people with genuine business acumen.  They know a great deal about what equates to strong or weak business, about diversifying portfolios, how to satisfy the board of directors, and how to put a business up for sale.  But there’s more to running a business. 

These executives never designed a product and put it into production.  They never had to work side-by-side with customers to develop specialized solutions or develop a partnership with that customer.  They never stayed up for four days straight trying to get a broken production line back up and running.  They never nursed an old product or production system back into the black with wave after wave of process improvements.

It’s one thing to know that your business is weak or strong, or to know that a more diversified portfolio might stabilize revenues.  It’s entirely another matter to know how to lead your business through a crisis or know how to innovate new solutions to diversify that portfolio.

Also, with only 1-3 years in a role, one gets a good feel for what that role does and gains some good perspective, but one doesn’t develop the experience that makes one really good in that role.  I’ve seen many times some very intelligent and educated people attempt to install the theories they learned with poor results. 

I saw process improvement agents install text-book Lean production cells only to have the production numbers worsen because the text-book solution wasn’t the right fit for the situation.  I’ve worked with experts in production process improvement to improve office processes and realized they had no experience in doing so. 

We aren’t stupid, but we do what we know the best we can.  We learn from our mistakes.  How many business-operating mistakes has a fast-track executive made?  How many crises has that executive lead a business through?  One of the strengths of large diversified corporations is a distinct vacuity of crisis.

Entrepreneurs, on the other hand, learned how to make the business work the hard way, by making mistakes.  The business leader that grew up with the business knows every product and production line, knows every customer, every supplier, and has single-handedly survived and lead the business through every crisis, including the ones that leader is responsible for creating.  The “grass roots” business man often doesn’t have the education to guide business decisions, but he knows how the business runs and what keeps it running.

Obviously, the perfect business leader possesses both the business education and acumen to prevent or avoid poor business decisions, as well as the experience within the business to know how it truly functions.  Such are uncommon businessmen.

I suppose the point, and therefore the advice of my thought process is that education and diverse business perspective are great, but they do not equate to the wisdom that comes with experience.  We cannot expect an ambitious corporate executive to understand our family-owned business like those who built it.

If you are looking for a business leader to take over your start-up or your family business, look beyond education and a long string of job titles.  Look for someone with some genuine down-and-dirty experience and hard-knocks bumps and bruises. 

If you are that well educated leader, recognize that your people who learned in the trenches may not know as much about business models as you, but they know more about one particular business than you.  You will succeed more my listening than by speaking.  Set a vision, but let your veterans of the business show you how to make it work.

Stay wise, friends.

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