Be Fast – Not Reckless

For most businesses, speed is a competitive advantage. For many leaders however, the desire for speed also comes with a willingness, or craving, take big risks. But leading an organization to be fast should not mean being reckless. By breaking large decisions into small, rapid, iterative steps, speed can be attained while also reducing risk and maintaining flexibility.

Unfortunately, for leaders who believe in making unnecessarily high-risk decisions, who can’t detach from the adrenaline rush of pushing boundaries, or who let their egos blind them to the risks, making overly bold moves can be not only intoxicating, but also dangerous.

Such was the case at a manufacturing company I worked with that found itself having to conduct a major turnaround due to failures that had come from a belief that speed required making high-risk decisions. The company had raised significant capital and had a sizeable cash reserve. It was privately owned, was servicing a meaningful debt balance, had fully drawn down its line of credit, and was led by a CEO with an aggressive growth mindset.

With the comfort of stable sales and a strong balance sheet, the CEO had launched a bold new initiative for growth that would require spending a significant portion of the cash reserves. He was determined to move fast and believed that getting all the equipment purchased as quickly as possible was the key to speed.

The VP of Operations was supportive, but she was concerned that the plan to purchase all the equipment simultaneously was too large a step. The huge commitment tied up significant financial resources, but more importantly, it limited future flexibility if things changed as the project unfolded.

She voiced her concerns and said the approach could even be a "bet the company" decision if anything went wrong. “We don’t need all the equipment on day one.”, she had said. “We can purchase the equipment incrementally so we can learn and adjust. It may look slower, but we’ll actually get to the end point at about the same speed.”

The CEO was undeterred. He dismissed the concerns and accused VP of being negative. "Susan, we have to have the courage to take risks to grow. This is fast - we aren’t going to be slow like other companies. It's the right move. I can always raise more capital in the future if we need it, but we have to be fast. " He signed the contract for all the equipment.

Unfortunately, true to the VP’s intuition, things didn’t go as planned. Deliveries ran behind schedule, and when the equipment was finally on site, installation took longer than projected. All the while, much of the facility sat idle while rent and other costs began to kick in. By the time the equipment started to come online, it was too late - market conditions had shifted dramatically, sales of the company’s core products had declined, and demand for products that would be produced by the new equipment dried up.

Because it had not implemented an incremental strategy that would have maintained cash and flexibility, the company found itself in an extreme liquidity crunch with few good options. The big decision to purchase everything at once had drained cash which impacted vendor payments and created delays in receiving essential supplies. As a result, production was negatively impacted, and delivery commitments were missed. Unhappy vendors and customers contributed to poor financial performance which necessitated rapid cost reductions and layoffs that further impacted morale and productivity.

Eventually, to survive, the company sought new investment capital, but it came at a cost – capital markets had shifted and access to new capital became more difficult. Ultimately, to bring in the needed financial resources, the equity holders had to accept significant dilution, and the original vision of the company was compromised. The overly aggressive move had backfired; the company was left in a precarious position that destroyed morale, relationships, reputations, and value.

In hindsight, the decision to pursue the new growth initiative had not been the problem. Nor had the goal of moving fast. The problem had been trying to move fast by making large high-risk decisions. Had the CEO listened to his team and executed the project in smaller, fast, iterative steps, the project could have moved fast while maintaining flexibility. The CEO’s ego had led him to make decisions that were not only aggressive, but also reckless.

Unfortunately, the story of this manufacturing company serves as a cautionary tale. Speed is a competitive advantage, but leaders must maintain balance. Leadership isn't just about having the courage to accept risk; it's about having the perspective and thoughtfulness to mitigate risk while still accomplishing the mission. Incremental decisions provide a way of attaining speed while maintaining operational flexibility and strategic agility. Being aggressive is about taking action, not about taking unnecessary risk.