Psychological Barriers and Solutions for Consulting Leaders

Key Takeaways

Internal Issues Over External Factors: 85% of senior executives blame internal issues for failures, often rooted in leaders’ mindsets.

Common Psychological Barriers:

• Overconfidence and Neglect: Transitioning from consultant to CEO can lead to neglect of essential tasks and overconfidence.
• Bureaucracy: Excessive reporting and administration after scaling beyond 35+ employees stifles growth.
• Intellectual Focus Over Practicality: Prioritizing intellectual pursuits over business needs hampers success.
• Hero Dependence: Reliance on standout individuals rather than systems hinders scalability.
• Risk Aversion: Excessive caution limits growth and expansion opportunities.

Solutions:

• Professional Coaching and Feedback: Engage a coach and implement 360-degree feedback to gain valuable perspectives and understand decision impacts.
• Balanced Partnerships and Diverse Boards: Partner with a co-founder and cultivate board diversity to enhance decision-making and innovation.
• Robust Systems and Calculated Risk-Taking: Develop efficient systems for sustainable growth and encourage calculated risk-taking to drive progress.

Research by Bain & Co. reveals that 85% of senior executives from companies that failed to meet growth expectations attributed their failure to internal issues such as organizational complexity rather than external factors like market conditions.

I’d actually go further than this an suggest that much of that ‘internal’ figure actually occurs in the heads of the firm’s leaders. Here, I reflect on a rare, but important, discussion – how founders often self-sabotage their ambitions, and what can be done about it.

5 Founder Mindset Barriers to Growth

All of us, including founders of consulting firms, often have psychological barriers which prevent us from achieving our goals. Personally, I hate administration and have little attention to detail. I’m also too dependent on people saying ‘well done’ to me (and have scant will power when it comes to pastries….).

Here I outline the five most common psychological obstacles I’ve seen among leaders of professional service firms and provide some ideas on how to recognize and overcome these barriers to promote enduring growth.

The Expert Consultant Barrier

Many who excel as consultants in large organizations believe they will naturally succeed as CEOs of their own companies. This belief sometimes leads to overconfidence in their own abilities or a reluctance to perform tasks they’re not skilled at, such as developing internal systems.

I frequently hear from partners or founders convinced their firm is ready to sell because it’s profitable, only to find it’s merely a group of effective salespeople and service providers with little intrinsic company value. When such firms are considered for purchase, they’re often valued much lower and viewed as buying a team rather than a business, typically with an earn-out period of up to five years.

The Administrative Barrier

This barrier emerges when a firm grows to a certain size (often around 35+ employees) and the initial entrepreneurial and aggressive sales focus shifts to a more administrative approach. The firm’s vision gets buried under excessive reporting and checking boxes.

While systems and processes are vital for a growing company, mimicking the bureaucracy of much larger firms can lead to inefficiencies—known as ‘death by a thousand cuts’—where meetings proliferate and documents accumulate. Excessive bureaucracy not only increases costs but can also divert focus from growth, potentially leading to a decline in revenue.

The Intellectual Barrier

As illustrated in Malcolm Gladwell’s “Outliers,” genius is often context-dependent and may not translate well to entrepreneurship. I’ve encountered brilliant individuals in large consulting and IT firms focused more on academic recognition than on the firm’s profitability.

Such individuals may prioritize complex, abstract problems over practical business needs. While intelligence is valuable, those who see themselves as exceptionally bright may neglect the essential, more mundane tasks that drive a company’s success.

The Hero Complex Barrier

This occurs in environments that idolize certain employees who seem to achieve the impossible, often at great personal sacrifice. While these stories can be inspiring, they create a dependency on standout individuals rather than on robust systems and processes. Such reliance can be detrimental, especially as the company grows beyond the capacity of these ‘heroes’ to single-handedly manage.

The Safety Barrier

A final psychological barrier is an excessive aversion to risk, which can stifle early-stage growth in consultancy firms. Consulting is typically a cash-rich industry with low capital expenses and a stable growth rate, making the business risk relatively low.

Yet, some founders, often due to personal backgrounds, shy away from necessary risks like hiring more staff or expanding service offerings. This can severely limit both growth and potential exit opportunities.

Overcoming the Barriers

Here are several effective strategies that founders can employ to identify and overcome these limitations, fostering a healthier, more productive organizational culture.

1. Engage a Professional Coach: A coach can offer valuable external perspectives and insights that challenge a founder’s existing mindsets and behaviours. This guidance is crucial for personal growth and for navigating complex business challenges.
2. Implement 360 Degree Feedback: Regular, comprehensive feedback from employees at all levels can help a founder gain a clearer understanding of the organizational impact of their decisions, including any unintentional fostering of bureaucracy or over-reliance on specific individuals.
3. Partner with a Co-Founder: Having a co-founder can complement a founder’s skills and perspectives, especially in areas they are less familiar with. This partnership can mitigate the risk of overconfidence and help balance decision-making processes.
4. Cultivate Board Diversity: A diverse board can provide a range of perspectives that enrich decision-making and prevent echo chambers. Different backgrounds and expertise on the board can help challenge the status quo and encourage innovative thinking.
5. Develop Robust Systems and Processes: Building and maintaining efficient systems ensures that the business can operate smoothly without over-reliance on any single individual. Systems should promote accountability and ease of operation, supporting sustainable growth.
6. Encourage Calculated Risk-Taking: If you are in a decent niche but are not growing as fast as the competition, it may be because you are too conservative in your (lack of) risk taking. Have a dedicated session with your board and SLT on the risk/reward of different investments.