By nature, the cannabis sector is highly dynamic and uncertain. Unlike other industries, it is difficult for many firms to craft and follow a formal, long term strategic plan. Yet, winning cannabis leaders do this all the time.
Canadian cannabis leaders have received a bad rap. Indeed, there is a lot to criticize: from making ill-fated strategic and financial decisions to growing bad product to creating dysfunctional organizational cultures.
We are three and a half years into legalization, and the fact of the matter is that most cannabis companies continue to struggle to turn a profit, let alone generate positive cash flow.
Yet, I can’t think of too many leadership roles that are more challenging than running a cannabis company (particularly a publicly listed one) or leading major functional groups, like finance and operations, within those companies.
The trials and tribulations of producing high quality product at scale, raising capital, right sizing the enterprise, and staying compliant is no doubt daunting. Nonetheless, there are many management success stories though most of which are outside the public purview.
I have been fortunate to have enjoyed a front row seat to the emergence of the Canadian and U.S. cannabis industries, not to mention been fortunate to have worked with investors, regulators, and hundreds of leaders and managers up and down cannabis organizations. I have uncovered what leadership styles and practices don’t work, and conversely, what is really effective.
Based on this experience, here are my top five traits and behaviours that winning cannabis leaders need to exhibit in order to achieve success:
1. Hire well:
The cliché that “it’s all about the team” rings truer in cannabis than most other industries. The sector relies on expertise from so many functions that a single leader — a la Steve Jobs or Elon Musk — is incapable of carrying the organization on his/her shoulders. As such, successful cannabis leaders tend to hire and empower top quartile, seasoned talent in vital areas like finance, operations, cultivation and sales. In their search, great leaders look beyond what’s on the CV, and focus on finding senior and middle managers with the right cultural fit and soft skills, such as agile thinking, collaborative inclinations, and professionalism.
2. Focus on building an effective culture:
Culture is loosely defined as the norms and practices in an organization. Much like a computer’s operating system, a culture will often determine how the company operates, attracts and motivates staff, and responds to adversity. Smart cannabis leaders understand the importance of getting culture right from the get-go. They prioritize and reinforce cultural health through setting the right management tone. Their practices include defining a motivating and shared corporate purpose, modeling the right behaviours, communicating extensively, and implementing the right performance measurement systems.
3. Adopt a learning/growth mindset:
It would not be an understatement to say that most LPs kicked off their business with little data and no strategic playbook (i.e., best practices). Successful leaders accepted the risks behind this uncertainty and proceeded with caution, humility and open-mindedness. They challenged conventional assumptions, such as that cannabis is similar to the alcohol industry, and furthermore, they adopted a “test, measure and improve” operational approach and avoided big and risky financial and operational bets. Finally, they recognized the importance of diversity and various thinking styles. This included seeking out gender and other minority group hires, as well as bringing in a mix of legacy, cannabis and related industry talent from industries like beverage alcohol, pharma, consumer packaged goods and tobacco.
4. Chart and stay a strategic course:
By nature, the cannabis sector is highly dynamic and uncertain. Unlike other industries, it is difficult for many firms to craft and follow a formal, long term strategic plan. Yet, winning cannabis leaders do this all the time. They define and follow a strategic “north star” (e.g., defined vision, mission and corporate positioning), which guides all decision making. Not to mention, ensures they avoid the pitfalls of their peers — poor capital allocation, operational complexity, and strategic confusion. Identifying your “north star” includes figuring out where you will compete, targeting which consumer segments and with what value proposition. Based on this, they establish their capabilities and find the capital they need to persevere. Finally, successful leaders decide how the company firm will measure its performance and then report it to a governing body, like a board of directors. Staying true to this mission takes courage and persistence but ultimately leads to a more focused, efficient and resilient company.
5. Manage stakeholder expectations:
If I could pinpoint one cannabis leadership mistake it might be the inability to set and manage the expectations of key stakeholders. Irrational exuberance during the run up to legalization (and soon afterward), coupled with unrealistic hopes around revenues and costs, quickly led to dashed expectations and anger when reality set in. The fact is that nothing in this industry proceeds at the expected pace or in a direct fashion. Managing expectations is not just about having a crack investor relations or good HR team. Rather, it is also about having a realistic view of the market and taking forecasts and promises with a grain of salt. Ultimately it is about not leading stakeholder hopes beyond what is truly visible and attainable. Not surprisingly, successful leaders are effective and timely communicators.
Clearly, no corporate leader is perfect — in and outside the cannabis market. Luck has (and will continue) to play a major role in a company’s success. However, it is now clear that an archetype cannabis leadership profile and suite of practices has emerged.
This profile should serve as a guide for corporate board of directors, as well as CEOs, to make better hiring choices, and to establish management norms and systems that enable them to succeed while fostering “built-to-last” organizations.
Mitchell Osak is the CEO of Quanta Consulting Inc. He has supported more than 210 cannabis clients around the world with their strategy, operations and capital market needs.