You’ve heard plenty about growth and fixed mindsets in business, but have you heard about a poverty mindset? A poverty mindset often plagues businesses that aren’t able to get out of the startup phase– you know, that company that’s been around for ten plus years but still seems to be bootstrapping their operations?
And while a fixed mindset is also a cautionary tale, a poverty mindset is like cancer to any business. A fixed mindset may stifle growth, but a poverty mindset erodes the company from the inside out. It tanks morale, causes high turnover, poor decision making, and weak asset management.
In this piece, we’ll talk about common signs of a poverty mindset in business applications, so you can catch signs early and correct course.
What is a Poverty Mindset?
A poverty mindset describes making decisions from a place of inherent lack and limitations. Common manifestations include feeling unable to take risks, that any success is fleeting and unlikely to repeat, and that you feel jealous or threatened by other successful people (even while chasing success yourself). And while a poverty mindset is most often talked about in the self-help realm, its effect on businesses is undeniable.
Let’s explore real-life consequences for an entrepreneur or CEO struggling to manage a poverty mindset.
- Difficulty Managing Risk
Business growth has a lot to do with properly managing risk. Of course, you need to take risks to invest in your business idea, but not all opportunities are worth chasing.
There are several ways that a poverty mindset can interfere with risk and decision-making:
- Leaders may be hyper-focused on being the “good idea person,” so they may stick with a failing plan to maintain the appearance of control.
- Leaders may not take the necessary risks for fear that failure will reflect poorly on their leadership.
- Leaders may consider employees as risks and attempt to micromanage. This leads to burnout, high employee turnover, and poor work quality.
On the other hand, successful leaders have a laser focus on success. As a result, they can separate their ego and fear of failure from their decision-making tools. This allows them to fail without crumbling.
Steve Jobs is an excellent example of a business leader with a laser focus on success. Jobs’ career was marked by plenty of market failures, like the LISA computer. However, his failures did not stop him from continuing to innovate and take further calculated risks.
Apple cinched its place in the technology sphere with the invention of the iPhone and subsequent upgrades. However, the iPhone only came into play after Jobs’ had been fired from Apple, spent years working at NeXT Enterprise and leveraging a partnership with Pixar, and then returned. His legacy would not have been possible without the significant failures partnered with years of learning and adapting from those failures.
- Reluctant to Receive and Implement Mentorship
Did you know that 25-40% of Fortune 500 CEOs have business coaches or mentors? Mentorship provides critical, scarce, and high-demand resources to businesses. These include networking opportunities, solidifying a company culture, and perspectives that might save you a costly mistake or two.
Unfortunately, a business owner or manager stuck in a poverty mindset will often resent successful people (at least subconsciously). They see themselves as “other” and struggle with jealousy. They commonly have a victim mentality about why they were not given their peers’ resources, contacts, or charming personalities.
This state of mind easily translates to anti-growth for two main reasons:
- First, it is difficult to respect someone you resent.
- Second, it is impossible to actively become like someone you resent.
Therefore a poverty mentality fosters the perfect storm to ignore successful methods, often resulting in continued failure, reinforcing the sense of victimhood.
- Treat Employees as Replaceable
Business experts agree that human capital is the real game changer– more important than correctly positioning products and services or an excellent sales method. One of the top indicators of a healthy business is not revenue but employee turnover rates. Great employers keep their employees outside of pay and perks.
Companies with high turnover are likely to suffer from a poverty mindset. It is one of the top ways to self-sabotage. Common indicators include:
- Reminding employees that they are all replaceable
- Hiring externally rather than promoting from within
- Leaning on titles to differentiate status
- Not ask for or receive employee feedback
- Failing to appreciate work well done
- Failing to provide sufficient resources or training
Essentially, these business owners feel the need to tightly control their environment. As mentioned, they often see their employees as a risk, particularly those with ambition, natural ability, or specialized education. Instead of accepting and leveraging those traits for the good of the company, the business owner would rather smother and lose the employee than admit they do not have every skill the company needs.
- Inflexible to Change
Many business owners present the face that they are open to change. In fact, some may even brag that they are always looking for good ideas and are always asking. However, those same people are the ones who often dismiss ideas without examination and plow on their own course.
The biggest problem with inflexibility is that the market does nothing but change. An assumption that you’ll retain practices or methods because they’ve lasted this long can blind leaders to warning signs, even data-backed evidence.
Let’s look at a simple example. Many law firms are managed by senior partners from the Baby Boomer generation. While they’ve adapted computers for their work, many have been reluctant to move from on-premise software to cloud-based software. While there were plausible arguments about unnecessary changes and losing money by terminating service early with on-premise providers, the COVID pandemic hit these firms hard.
Other, more agile firms that had embraced cloud-based solutions already were able to shift to work-from-home quickly and without a significant change in business. It’s critical to develop a growth mindset focused on forward thinking and flexibility.
- Frequently Short on Capital and Resources
Finally, company management coming from a poverty mindset always seems to be short on resources. Let’s break down two common ways this symptom shows up.
The first scenario acknowledges that some successful businesses also struggle to have enough capital. The difference comes down to the way the owner talks and feels about their lacking funds.
Those with a growth mindset believe that the resources they need are available to them and will work diligently and efficiently to find those solutions. Those with a poverty mindset seem to accept they do not have enough. They spend much of their time talking about the need for more, even planning to get more, but rarely spend the time fundraising or networking.
The second scenario is linked with poor management skills. This includes an inability to monitor and act on needed risks, leverage talent, and evolve with the changing market. When you are too afraid to stretch, need an iron grip on control, and cannot depart from your original course, you will inevitably be short on resources and capital.
Ready to Make a Change?
If you see any of these scenarios at play in your business or want to proactively avoid them, we’re here to help. Think of us as a third-party partner that’s committed to supporting you from start to finish. That includes “diagnosis,” implementing changes, and sticking around to see your business recover. And we’ll still be there in a year or two to help you adapt to new needs and growth!
Contact us today for a consultation!
- Moving from a Poverty Mentality to an Abundance Mentality
- How Employees Make or Break Business Success (And How You Can Lead the Way)
- Why Successful Entrepreneurs Need To Be Calculated Risk Takers
- Five Reasons Why Every Business Owner Needs A Mentor, No Matter How Successful They Are
- The Fortune 500’s Secret Weapon – Executive Coaching