A Mindset All Progressive Leaders Share

One of my favorite exercises is to examine, dissect, and diagnose why organizations are succeeding, or, why they aren't.

It's fun to look back at my time as CEO of Baker Tilly and reflect on what led to our success and now, as an advisor, I get to enter many organizations and assess what opportunities exist to unlock new growth potential.

When I say succeeding, I mean thriving and making meaningful progress toward becoming (and staying) a relevant and sustainable organization.

That's what all companies should aspire to be.

Whether you've been receiving this newsletter since the beginning or this is your first one, my intention each week is to share the themes, trends, and learnings with you to challenge you to think differently—to BREAK THE MOLD™.

Today, I want to share another mindset I've recently observed, which is limiting companies from creating differentiated results and empowering their growth.

I call it "upside vs cost" thinking.

Companies that are transforming their business and executing strategy (at the same time) share a common mindset around making new investments. Plus, I'll share a critical question you can use to clarify the upside associated with any decision.

Let's dive into what "upside vs cost" means and more importantly, how you can apply it to unlock new transformation and growth potential within your organization.

The Decision Dilemma

Look, one of the most challenging parts of leading a company (or practice, or department, or team) is the many decisions that need to be made.

Of those many decisions, one of the most difficult is whether or not to invest financial and intellectual capital into things that may enable strategy and support future growth.

I'm referring to decisions like:

• Hiring additional people

• Licensing software or technology

• Acquiring other firms or practices

• Expanding into new geographies

So often, these can be sticking points for leaders. And for good reason—they are meaningful decisions, after all. The reason they often become sticking points is that the costs related to this decision are often quite clear and overwhelming.

"I know this software license costs $2500 / head."
"I know hiring for this position costs $150k / year."
"I know acquiring this firm costs $10m."

Those are real costs. Real $$$.

As we've discussed in previous newsletters, not all $ are the same, though.

When we get sticker shock and are solely focused on the cost associated with opportunities, it often causes inaction.

Through inaction, we're limiting ourselves and we may be unintentionally stunting our ability to transform and grow.

Cost vs Upside

There's another side to every decision, of course.

The opposite of the cost is the potential upside.

What do you stand to gain if you capitalize on this investment?

Now, if you're thinking you've heard this idea of thinking about upside before, I'm sure you have. I have a slight spin on it, though, that I believe will take this exercise one step further for you.

The thing is, the upside is often less clear than the cost.

A software license might cost $2,500 / head, but what about the upside?

How do we know what the upside is and maybe more importantly, how do we know how plausible it is to actualize that upside?

Here's where we can employ a "What will it take?" exercise.

When trying to map out the route to actualizing the upside of an investment, start by asking: "What will it take to maximize this investment and make it worth our while?"

Map it out. Define it. Write it down. Make it clear.

As simple as it may sound, it's a critical step I find many leaders overlook when analyzing investment decisions.

Let's say that same $2,500 per head software license could enable our partners to increase their sales by 10%—netting a couple of million dollars in additional revenue to the organization.

And, because we mapped out what it will take to maximize the investment, we know that would require each partner to:

• Enter all sales activity into a CRM tool

• Invest 1-2 hours per week inside this software identifying new opportunities

• Sending one additional project proposal per week based on the information presented

Now, the upside part of the "cost vs upside" equation is much clearer and we can make a more informed decision.

Even if we had to license it for 200 people at an annual cost of $500,000 (not an insignificant cost), the upside to the organization would still be greater.

As a CEO, this is how I look at making decisions about investing financial and intellectual capital. Investing in things that enable strategy execution and better position us to be relevant and sustainable into the future are smart investments.

Another Hidden Cost

There's often one more hidden cost that may not be as apparent as the actual costs associated with a particular investment:

The cost of staying the same.

You may not decide to invest in licensing the software that supports your sales efforts, but what if your competition does?

I don't suggest watching your competition's every move, but I am suggesting that decisions about investments aren't made in a vacuum.

You and your organization exist in a constantly evolving marketplace. So when you decide not to make an investment while your competition does, you may appear to maintaining status quo when, in fact, you are slowly starting to fall behind.

There's a hidden cost to complacency and a cost to being content with maintaining the status quo.

Applying Cost vs Upside

This week, I encourage you to apply this lens of "cost vs upside" analysis to a decision requiring an investment of some kind.

Ask your team: "What will it take to maximize this investment and make it worth our while?"

Your goal is to gain clarity on the potential upside and what it will take to get there so you can now weigh that clearly against the costs.

Ultimately, we can't know exactly how any decision is going to turn out. Whether we decide to make the investment or not, it comes with some risk.

Evaluate the level of risk you are willing to take and don't forget, there's risk to staying the same too.

Assisting CEOs and their leadership teams with decisions like where to invest financial and intellectual capital is an example of one of the many ways I support organizations as a strategic advisor.

If you'd like to discuss how I might support you and your company in a similar way, you can book a 30-minute call on my calendar using this link.

With intention,
Alan D Whitman