“The curious paradox is that when I accept myself just as I am, then I can change.”
― Carl R. Rogers
“In the beginner’s mind there are many possibilities, but in the expert’s mind there are few.”
- Shurnyū Suzuki
Scenario: Leonard is 73-years-old and has had at least one significant health scare. While Leonard has family, no one wishes to take over the business he spent his entire adult life building. Despite receiving several excellent offers including the most recent all cash offer of $28M, Leonard has repeatedly pulled out of the deals at the last minute. In this case, just one hour before meeting the buyer, Leonard cancelled and left his investment banker wondering what happened.
After assessing Leonard we discovered that:
• Life beyond his business is a scary proposition. His relationships with employees hold more meaning for him than relationships with his family.
•Life beyond his business is a scary proposition. His relationships with employees hold more meaning for him than his relationship with his family.
•Previous potential buyers have been able to use Leonard’s psychology against him to lower the enterprise valuation.
•It is almost impossible for him to sell because he is afraid of leaving money on the table.
Leonard fell victim to the paradox of success a long time ago and both his family and business continue to pay the price.
Sadly, Leonard is not alone….we’ve met a lot of Leonards.
What is the paradox of success?
It is a psychological phenomenon that arises when a successful entrepreneur’s self-efficacy increases leading to increased self-reliance that creates blind spots and limitations to greater success. In addition, their self-identity begins to fuse with their role identity making it impossible to separate who they are from their role as owner.
How does it happen?
With each new level of success, a growth curve is conquered that reinforces an owner’s belief that they were successful yesterday, they are successful today, and they will be successful tomorrow because of who they are and how they operate.
Owners soon forget failures and hold on to successes. From a psychological perspective this leads to resilience that is essential for continued success. If owners focused on failures they wouldn’t get out of bed or have what it takes to drive through the next challenge and lead the people who depend on them.
Research has demonstrated that as an entrepreneur’s self-efficacy rises their risk-taking propensity rises and they increasingly rely on their own abilities eschewing the wisdom of external voices such as advisors or their own management team. This highlights some distinguishing features that differentiate successful entrepreneurs from managers. One of the most pronounced differences results from how their skills are developed.
Managers who climb through corporate ranks face tests that mold, shape, and grow their leadership as they are challenged and tested by peers, subordinates, and superiors. This process forces managers to reflect, adopt new paradigms, and change in order to meet the expectations of the organization. Successful entrepreneurs also face tests of leadership, but the experience is quite different from that of managers.
Instead of having to rise through corporate ranks, owners must drive through growth curves. This seemingly innocuous difference actually has a profound psychological impact. Absent organizational checks and balances faced by managers, owners will build organizations that accommodate their own psychological needs. The process is akin to building a “psychological castle” that allows them to satiate certain needs and lean into five entrepreneurial characteristics (need for goal achievement, tolerance for ambiguity, risk taking propensity, innovativeness, and need for control) that give owners the resilience necessary to persevere and achieve new levels of success.
While there are tangible benefits for the owner, their psychological comfort comes at a price. The paradox of success is that the owner’s psychological castle keeps them from having to explore certain cognitive and emotional dimensions of their personality and leadership. Where managers must adapt, change, and conform to organizational demands, owners create organizational environments that change, adapt, and conform to their own needs and demands.
It is not until owners and their firms reach seemingly impassible challenges, obstacles, and barriers that they begin to experience their historical success getting in the way of future success. Simply put, the problem they face is in the mirror. An owner’s own psychology prevents them from seeing how what worked in the past no longer gets the desired results or how to fix the problem. As is the case with Leonard, the paradox of success is one of the most significant forces that can lead to self-sabotaging an owner’s best interests, goals, and desires. For many owners this means unnecessarily limiting the success of their business. The phenomenon is also a significant contributor to the high rate (≥ 70%) of mid-market business owners that fail to exit their businesses on their own terms and live a satisfying life of significance beyond their role as owner.
Mid-Market owners that guard against being overtaken by the paradox of success realize at least 5 important benefits:
1. They are able to identify and take advantage of business opportunities that can lead to improved bottom line performance.
2. As personal blind spots are revealed and limitations are overcome owners experience aspects of themselves differently leading to improved personal performance.
3. Firms that have been plateaued or even started to decline are revitalized leading to better valuations and more successful transitions.
4. Owners who reach this new level of insight have the capacity to build and engage strong management teams, systems, and processes all designed to grow the value of the business.
5. Perhaps one of the greatest benefits is that these owners begin to separate their self-identity from their role identity and that ultimately gives them more control over their business and their future.
Realizing these benefits starts by increasing self-awareness, busting out the walls of their psychological castles, and gaining greater control in their business. The following steps offer owners the opportunity to gain essential insights for achieving their goals:
1. Take Orange Kiwi’s assessment.
• 12-minute online transition readiness assessment will give you an instant score so that you understand where you are starting from
2. Journal: Take five minutes at the end of every day and answer the following questions:
• Who or what energized me today?
• Who or what drained me today?
• Who or what am I looking forward to tomorrow?
• Who or what am I avoiding?
Identify Patterns: Every 30 days look back over the journal entries. When you identify patterns ask yourself the following:
• If I could change one thing about the patterns I see it would be:
• The inherent benefit of that change for my firm would be:
• The inherent benefit of that change for myself would be:
• What will I stop doing in the next 30-days?
• What will I start doing?
• Who do I need to help me?
• Who will hold me accountable?
• How will I know I’m making progress?
At the end of every quarter review journal entries and reflect on the identified patterns. And ask yourself the following:
• Given the opportunity would I rehire every member of my management team? If the answer is “no” who is falling short and what will I do about it when?
• Do I have the right external advisors on my team? If the answer is “no” what skills are missing and/or who is falling short? How and when will I address this issue?
• What changes to staff, skills, strategy, structure, systems, culture, and/or style are required to achieve my goals in the next quarter?
3. Get outside help:
• Engage a skilled executive coach
• Join a fit-for-purpose peer group for owners only that is skilled at focusing on these challenges.
• Talk with owners who have been through the experience.
• Build a team of skilled experts who understand both the business and psychological challenges.
What does the future hold for 73-year-old Leonard? He is seven months into a 36-month transition plan that involves increasing his self-awareness and building value into his business so that he is able to transition on his own terms. Right now his goal is not to exit, but to prepare the business so that it can thrive without him. Each step he takes gives him more control over his future and brings him closer to building a life beyond the business. In the meantime, he is enjoying his business again and being rewarded by improving both his top and bottom-line profitability.
The aspect Leonard is most grateful for is that the personal changes have resulted in one of his children being willing to engage in the transition process and join the business. The two are building a better personal relationship as they build the business together. His son has said, “it is not easy, but it is worth it to see my dad finish well.”