Are you paranoid enoughMany people have a vision of a company leader as a decisive, strong-willed titan of industry that drives the business forward and inspires the troops when he or she isn’t appearing on magazine covers.

But there is a surprising quality that many successful company leaders possess – paranoia. We are not talking about paranoia in a clinical sense. No leader can be successful if he or she is scared, unable to make decisions, and worried about what employees are saying about him or her. However, the concept of “constructive paranoia” or “productive paranoia” is very healthy in business. By understanding that things can – and almost certainly will – go wrong, these leaders are able to prepare for various crises, and thereby enable their company to survive tough times.

We first heard the phrase “constructive paranoia” from Andy Grove, the former CEO of Intel. He wrote a book called Only The Paranoid Survive built around this mantra:

  • Success breeds complacency.
  • Complacency breeds failure.
  • Only the paranoid survive.

And in his book Great By Choice, Jim Collins talks about the need for company leaders to have “productive paranoia.” Collins wrote that successful executives are always preparing for the storm that you cannot predict. For instance, Collins wrote that companies helmed by these so-called paranoid leaders held as much as 10 times as much in cash reserves as other comparable companies.

As a leader in your company, it is important for you to embrace productive paranoia, and then create a plan to address potential problems. It is wise to sit down and ask yourself or your senior team a series of what if questions: What if our biggest client leaves? What if our best salesperson takes another job? What if the economy tanks and clients begin to view our product or service as a luxury? Considering these negative scenarios will not be an enjoyable session, but it is the responsible way to run your business.

Practicing productive paranoia does not mean you should suddenly adopt a gloom-and-doom personality; it is important to be optimistic as the head of the company. However, you must tamp down over-optimism across your organization. The hubris of success can lead you to walk right into risk and leave the business vulnerable.

Remember – only the paranoid survive.

Contact us at (215) 441.4600 if you have questions or would like to discuss how this topic may impact your business.