Meaning
Inherent delay within a company’s systems and processes that prevents a new leader from seeing the immediate results of their actions. Structural latency is caused by long sales cycles, multi-year projects, and existing contracts that the successor did not sign. It remains a factor until the new leader has been in the seat longer than the average duration of the company’s longest operational cycle.
Systemic Delay
Delay in the feedback loop can be frustrating for a new executive who wants to show quick wins. They may change a policy today, but the financial result might not appear for a year. This makes it hard to tell if the new strategy is working.
It also gives the founder an excuse to stay involved.
Decision Tracking
Tracking the results of choices made by the successor requires patience. The board must understand that the current numbers are often the result of the founder’s previous choices. A fair evaluation of the new leader must take this lag into account.
This prevents the successor from being blamed for the founder’s mistakes.
Operational Lag
Lag in the organization is part of the architecture of the business. Some industries have more latency than others. In manufacturing, a change in the supply chain takes months to filter through.
In software, it might only take weeks.
