THE BUSINESS ODYSSEY – Intentions

“Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives – choice, not chance, determines your destiny.”
― Aristotle

Intentions establish the foundation guiding choice and action.  In a previous issue of The Business Odyssey I described the Fundamental Purpose of Business.  In that issue I mentioned, but did not discuss, the idea of intentions unique to each business.  This issue will focus on describing business intentions and its significance.

Business is about an idea, a concept that is converted to something of value to others.  Businesses use some expression of Institutional Intention to justify the business’s existence in the form of achievable outcome(s). This issue of The Business Odyssey will describe two different but interrelated forms of intention. The first, Institutional Intentions[1], expresses the business’s expectation of outcomes and dependent actions. Private Intentions, synonymous with self-interest, often exert insidious influence on business performance.

Intentions are easily overlooked or treated with nothing more than superficial acknowledgement.  The disregard for intentions probably occurs more often because executives, board members, or investors lack a careful understanding of what intentions are and how intentions exert influence on business performance.  Consequently, careful consideration of intentions commonly begins and ends with a company’s Mission Statement.

In my experience, business dysfunction is often rooted in ambiguous or conflicting intentions. For this reason I am using this issue of The Business Odyssey to stress intentions (in particular the distinction between Institutional and Private Intentions) as a critical attribute of business maturity.

Institutional Intentions

Business organizations commonly rely on a Mission Statement as a convenient surrogate, rather than devote the rigor necessary to acquire a more perceptive insight into Institutional Intentions.  In principle, the Mission Statement provides clarity and guidance to formulate goals, objectives, decision making and strategic direction.  Mission Statements on occasion are good, many are bad; most however are ornamental.   In practice, Mission Statements usually suffer from three shortcomings: 1) fail to comply with the requirements of the fundamental business purpose; 2) ambiguous, confused or muddled intentions; and 3) fail to mitigate conflicts arising from private intentions.

Countless words have been devoted to defining the essence of a ‘good’ Mission Statement.  I am going to side-step the trap of opining on what makes a good Mission Statement, suggesting instead a simple test that can (and should) be applied to determine if a business is articulating a viable and useful Institutional Intention.  Ultimately, the expression of Institutional Intention (in the form of a Mission Statement) needs to satisfy:  1) clear and understandable outcomes; and 2) actions and choices necessary to achieve the expected outcomes.  Judging the quality or appropriateness of a Mission Statement is obviously subjective. Nevertheless, it needs to be clear, unambiguous and memorable.  And the business’s actions and choices need to be consistent with its words.

The importance of a clearly stated Institutional Intention is easiest to appreciate by thinking about the audience.   Employees make countless choices (or decisions) every day to carry out individual responsibilities.  Each choice is guided by self-interest, values (personal and institutional) and the Institutional Intention.  Investors and others use the Institutional Intention as the basis for understanding the business, and shape their expectation of the choices and future performance of the business.  Customers consult a business’s Institutional Intentions to differentiate one supplier over another.

This does not mean a well-crafted Mission Statement is a satisfactory expression of Institutional Intentions.  The ultimate test is the coherence between what the company says and what it does.  The effectiveness of the explicit statement of Institutional Intentions (Mission Statement) stems less from the artfulness of its wording and more from its fidelity to actions and choices.  It is this fidelity of the Institutional Intentions to the business’s actions and choices that requires a deeper understanding of the interplay between Institutional Intentions and Private Intentions.

“In this world . . .
It’s Heaven when:The French are chefs, The British are police, The Germans are engineers, The Swiss are bankers And the Italians are lovers.
It’s Hell when:
The English are chefs, The Germans are police, The French are engineers, The Swiss are lovers And the Italians are bankers.”
Hidekaz Himaruya, Hetalia: Axis Powers, Vol. 2

 

Private Intentions

There is no denying or avoiding that individuals have self-interest.  Self-interest, in and of itself, does not necessarily corrupt or compromise a business’s Institutional Intentions.  When undetected or ignored, however, self-interest can and does have a caustic effect on businesses.  Oftentimes, recognizing and embracing self-interest, or as I call it Private Intentions, can contribute to the most desirable outcomes.  Private Intentions that remain hidden often become a caustic force conflicting with implicit Institutional Intentions relied upon by stakeholders, leading to disappointment and conflict.

Sometimes Private Intentions are obvious, such as an individual’s expectations or desires for compensation, title, job security or responsibilities.   Pretending that individuals don’t have self-interests is foolhardy.  It is also naïve to think individuals will subordinate their self-interest to some institution’s “higher good” without just cause or motivation.  A recent example exemplifies the destruction created by a CEO’s self and egocentric interest when allowed to predominate over the interests of the business and its stakeholders.

Intentions at Work

Supreme Construction Services[2] (“SCS”) provided specialized equipment used predominately by commercial builders.  Builders rented the equipment with SCS responsible for delivering, assembling, disassembling and removing.  The CEO, two institutional private equity investors and a lender combined to purchase the company in a leveraged buyout a few years earlier.

SCS understood the customer satisfaction it provided and had an effective business operation.  Additionally, the CEO consistently articulated clearly the importance of earning capital providers a return on the capital furnished to the company.  The Institutional Intention was clear and satisfied the requirements of the fundamental business purpose.  Additionally, the CEO and his institutional private equity investors had a shared and well understood agreement to focus on improving financial performance from the company’s history of modest performance.  On the surface this all seems pretty reasonable.

The CEO, conveniently holding 51% of the ownership, harbored personal intentions and went to extreme lengths to keep them hidden.  The CEO reserved for himself the exclusive and unilateral right to make decisions.  His rigid insistence on hierarchy and deference to his title produced an autocratic culture where obedience was valued over results.  Any dissenting or challenging opinion was an act of insubordination and considered a treasonous violation of the right he held by virtue of his rank as CEO.  His Private Intention (obviously not expressed explicitly) was to rule over a kingdom where he was supreme ruler.

As a practical matter, perpetuating the CEO’s egocentric self-image infected his ability to make the necessary choices to advance business performance. Sadly and unsurprisingly, the bankruptcy filing that followed resulted in a liquidation of the business. The investors and the lender ended up losing nearly everything they invested.

This example is extreme, but an extreme that occurs frequently.  There are other forms of Private Intentions that are valuable to describe that are less catastrophic.

Other Forms of Private Intentions

Founders have Private Intentions when they start a business.  A few examples of these intentions include:  creating a legacy, supporting a lifestyle, producing wealth, retaining control or proving an idea. None of these Private Intentions are inherently right or wrong.  Trouble stems not from the Private Intention but rather from the consequences when Institutional and Private Intentions conflict.  For example, a founder seeking to support a personal lifestyle or retain personal control will eventually encounter conflict with an outside provider of capital who expects investment rewards commensurate with aggressive growth.  The choices or decisions made by a founder motivated by lifestyle or control will not likely harmonize with the Institutional Intentions.  Similarly, the senior executive recruited, based on a founder’s promises of aggressive growth, will be disappointed when the founder is unwilling to relinquish control or authority.

Private Intentions, while legitimate, will influence business priorities.  This influence establishes the “what” and the “how” of the business’s actions.  When intention is inconsistent with other principles, performance will disappoint and failure is likely to follow.

Business performance depends on individuals working collectively and in unison to achieve a common outcome.  Assuring these collective actions requires clear intention and purpose, free of ambiguity and hidden agendas.  Transparent and coherent intentions produce good choices and effective actions.

[1] In the course of this article it may seem that I use “Institutional Intention” and “Mission Statement” interchangeably.  While Institutional Intention and Mission Statement may seem synonymous, they are not.  The Mission Statement is a written expression of the institutional intention.  A Mission Statement may or may not adequately reflect the institutional intentions of the business.

[2]  Out of respect to current and former clients, I fictionalize certain aspects of the business and business name.  Any changes are for the purpose of protecting identity and are not meant to compromise or misrepresent the illustrative value the example.

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Andy Harvey

Businesses struggle and fail to perform because they don't grow up. Mature businesses, like mature, well adjusted, functioning adults, have the skills, the tools and the intelligence to perform routine activities, make decisions and cope with uncertainty. Andy Harvey is an experienced management consultant helping middle-market companies mature, overcome crisis and succeed. He has advised companies on growth strategies, corporate finance, business infrastructure, turnarounds, restructuring and crisis management. His thirty-years of consulting and operating experience has included industries such as: manufacturing, aerospace, defense, technology, energy, environmental services, financial services, scrap metal, transportation, distribution, medical devices, interior design and others. He specializes in working with growing, under-performing and distressed companies applying expertise in corporate finance, crisis management, competitive strategy and operating performance. Mr. Harvey has held positions as CEO, COO and CFO as well as CRO (Chief Restructuring Officer). He has navigated companies through Bankruptcy, fraud (alleged or injured), distress, acquisitions, succession and other changes. aharvey@ctmoffitt.com

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