Over-estimating competence a set-up for failure
The Kiwi feel-good factor, or our tendency to self-inflate our competence, is one of the reasons so many SMBs fail every year, says a prominent Kiwi business venturist.
The Kiwi feel-good factor, or our tendency to self-inflate our competence, is terrible for business and one of the reasons so many small and medium businesses fail every year, a prominent New Zealand business venturist believes.
“We avoid giving negative feedback when it is warranted. Telling people ‘you can do anything’ is a set-up for failure,” says Chris Chandler (pictured), co-founder and director strategic relationships at OneHQ.
“We see it in business planning all the time. Businesses leaders over-estimate their targets and their competence and underestimate the sheer effort it takes to get the results. Consequently, most people fail to hit their targets, and it can be very demoralising.
“I blame it on a culture that teaches everybody you’re good, your worthy, you’re wonderful, you can do this. I accept the good and worthy bit, but unfortunately wonderful is a very high bar, and most people can’t do everything that needs to be done – at least not on their own.”
Chandler believes that ignorance and pride are at the root of the problem. “People don’t know how good or bad they are because we’re not honest with each other anymore. We’d rather be agreeable than risk hurting somebody’s pride. It’s not just me saying this; there’s empirical research that backs it up.
“Richard Branson is tremendously successful, but even he admits it’s because he’s hired talented teams of people to get things done.”
Chandler said SMB owners – even the teams within a business – could do worse than some crystal ball gazing, followed by setting targets for themselves that are achievable rather than what they dream of achieving.
“I see it all the time. Bold statements and stretch targets that fall by the wayside because they’re unrealistic. SME leaders work all day in the business and then go home to do accounts and admin. With that kind of routine, growth is almost impossible.
“The flipside is the business scales too fast. It hires a bunch of staff and then finds that profitability is lower than when there were just one or two people in the business.”
Having a business plan that is not honest is worse than not having a business plan at all.
“Create a business plan you can execute on. Work with a third party who will hold you to account. It could be your accountant, a business coach or mentor. The critical factor is that they give you honest feedback and that you are realistic enough to accept their advice and act on it.
“There is also no point having a business plan you cannot execute on because you’re working sixty to eighty-hour weeks. That’s just a case of over-estimating your abilities once again. It is critical that you free yourself up time to carry out the plan – execution, not talent, time or money, is the difference between success and failure.”
Chandler offers the following advice to business owners who want to break out of the rut and build an actual business:
1. Don’t have more than one or two goals at a time
Decide on the one or two things you know will move the dial on your business. “If you can execute on one or two things that will make a difference in your business, no matter how small, you will find it does wonders for your business and your motivation. It is all about incremental change.”
2. Be short term focussed
Chandler says a business plan should not be for more than a year ahead, with perhaps a big hairy audacious goal that goes three years out. “The business plan needs to be reset annually. Write your business plan, execute on that plan, create milestones you can measure and report back to your accountability partners, whether that’s a board, coach, accountant or mentor.”
3. Make it about your priorities
Chandler said that a business plan is like a roadmap to deliver on those goals and milestones the leadership considers most important. “What is the priority for you in the business at the moment? It can be anything from improving staff efficiencies to introducing a new product or optimising your internal costs for a better bottom line. Make sure you identify your most important priorities and act on those.”
The danger of over-estimating your competence, by setting unrealistic goals is that failure will damage your confidence as well as the confidence other people like your partners, staff and bank manager have in you.
“Keep it small. Make it incremental, and you’ll not only keep your credibility, but you’ll also find that you’re happier and more profitable,” Chandler says.
For more information: https://www.OneHQ.nz/