An ego in balance is a vital tool. An ego ruled by emotion is a disaster waiting to happen.
Ego is a powerful and important tool to support success in the challenging world of entrepreneurship. Ego is the source of energy that tells you, you can accomplish anything.
It is what drives an owner to work 80 hours per week, climb over impossible barriers and accomplish amazing feats.
It is the sum of competitive energies that professional athletes harness to accomplish amazing athletic success. It is what battle-hardened warriors utilize to win at war.
Ego is, of course, a vital aspect of a businessman or woman’s persona, needed to win against huge odds and propel one to accomplish what others consider impossible.
Ego is also, however, where emotion lives; and an ego out of control, ruled by emotional decisions, is a dangerous place from which to run a business because it is where business decisions run amock.
Simply stated, decisions made from emotion or ego out of control, are likely to be bad decisions and result in mistakes of judgment. In fact, a good judgement/decision requires no emotion but is best implemented out of pure logic.
An ego in balance is a vital tool. An ego ruled by emotion is a disaster.
Let’s look at some typical challenges business owners experience and see where you stand in your business decision making process.
Let’s start with pricing.
Are you evaluating your fixed and variable overhead, and your cost of goods or services and then adding a required % for profit to arrive at your price? Rarely. But you need to be.
For example: When Starbucks first began populating the
planet, their coffee price was deemed outrageously high. But they did their accounting and then priced it accordingly, creating a presence that enticed the consumer into purchasing a very expensive cup of coffee despite the availability of cheaper alternatives.
They did not do what more emotional business owners might have done, which is look at the competition, say Dunkin Donuts, and price competitively to their standards; that is, a lot cheaper.
Starbucks did not allow ego or emotion to control its pricing decisions. They applied basic business logic; disregarding the competition, not caring how the market interpreted such a pricing strategy, while knowing they had an excellent business model priced appropriately and carrying it through to success.
This overruled any emotional decision which would have ultimately been controlled by what others were doing, while undermining the growth of a successful model.
Too many small business owners look to their competition and price as the competition is pricing because they fear rejection by the market; thus, they lose the opportunity to do business profitably and risk losing money accordingly.
Another example, is when revenue goes down for whatever reasons. Rather then let employees go, a business owner emotionally decides to hold payroll where it is and not reduce it appropriately because they care about their employees- which is of course a good thing; but not when it is to the detriment of the business.
This owner will emotionally run a payroll which eventually puts them out of business. All because they were emotionally unprepared to reduce the employee base.
They simply could not fire some employees despite the fact the business had no gainful use for them -and despite the fact that carrying this extra weight ends up destroying the company.
The owner could not handle the emotional pain of letting Ethel go, despite her job being unaffordable, threatening the entire company while Ethel busies herself doing ineffective work.
Small business owners love their inventory and typically build up large amounts of goods, with a turn of less than once per year. This practice wraps up huge amounts of capital in inventory that cannot be sold in a reasonable amount if time.
Small business owners love inventory because it makes them feel secure. They believe they will not miss an order if they have massive amounts of inventory in every size and color; thus a fortune of capital sits idle, wrapped up in inventory they cannot sell.
This is a hugely emotional decision because it gives the owner a false sense of security, while being massively inefficient.
Accounts receivable collections is a trap for the emotional owner, who continues to ship goods to a client who is in arrears and not paying on older invoices.
The client is being shipped to again and again simply building debt to the company, which eventually goes unpaid; and at some point, the customer will go elsewhere for future business, so the owner suffers a double loss.
Despite the obvious pitfalls, small business owners do this every day, because they are afraid of losing a customer, which is an emotional decision, more than a rational one.
They will hold on to the belief that the AR report, which demonstrates large numbers, is a form of wealth and a measurement of his/her success; even though a significant percentage will never be paid and actually represents an expensive loss. This is an area where emotional bias can be truly disasterous.
Payables are a treasure trove of emotional decisions. Not paying the crucial payables required for basic survival, and paying the squeaky wheel payable who begs the loudest, is a misuse of your valuable capital which should otherwise be supporting your survival.
Small business owners are controlled by emotion not logic in the payables arena more often than they realize. It’s a common blind-spot: Wanting to be liked, and not wanting to disappoint the person begging for payment leads to perilous decisions that do not serve the needs of the business.
Not firing an employee who is unable or unwilling to deliver the work required is another key area where owners are often ruled by emotion.
The owner does not want to absorb the emotional pain of firing someone, knowing how it will negatively affect that person’s life; and not wanting to be the bad guy, the owner allows the employee to remain.
Not firing when it’s the logical decision is a practice that will ultimately undermine the team, the flat organization, and the bottom line.
Downsizing a business means adjusting the business model to accommodate current influences. Changing product lines or changing distributors are good business decisions that can be upended if made emotionally. The problem is, they most frequently are. This is another ‘emotional blind-spot’ to be keenly aware of.
Perhaps the most frequent emotionally driven, ego-based reactions of the entrepreneur are expressed in the need to micro-manage, and in the failure to delegate with authority and responsibility.
The typical small business owner/operator believes he/she knows it all and must make every decision. This entrepreneur requires any subordinate decision to be checked by him/herself before implementation.
This owner finds themself working 80 hours per week because their ego prevents them from delegating some of their authority to subordinate managers/employees.
The ‘boss’ believes only he/she has the ability, responsibility, experience and expertise, and therefor must make every decision.
Obviously, this severely limits growth and stifles originality along with the many valuable contributions others could make. It is a perfect demonstration of ego out of control and a major reason many small businesses are either unable to expand or fail trying.
The lesson is obvious and simple: There is no room for emotional or ego driven decisions in the business world. That does not mean there is no room for emotion or ego in the business world.
What it does mean, is that emotion and ego, which are the well-spring of our passions, motivations and human connections, must be reigned in by logic and business fundamentals.
When ego and emotion control your business decisions, it is bound to result in the wrong decision and cause catastrophe.
So I ask, is your brain controlling your business through logical decision making or are your ego and emotions ruling the day?
When emotion is getting in the way of what’s best for your business, the answer is simple: Start by simply being aware that emotion and ego may be a blind-spot driving your decisions.
With this basic awareness, you can stay mindful and on-track – so your brain can do what it does best, and run your business.