Traction: Get a Grip on Your Business

By:

GINO WICKMAN

Rating:

Personal Thoughts

All entrepreneurs and business leaders face similar frustrations: personnel conflict, profit woes, and inadequate growth. Decisions never seem to get made, or once made, fail to be properly implemented. But there is a solution. It's not complicated or theoretical.

Summary Notes

How would you rate the accountability throughout your organization on a scale of 1 to 10? Most new clients that start The EOS Process rate their accountability somewhere around 4. Gaining traction requires two disciplines. First, everyone in the organization should have Rocks, which are clear 90-day priorities designed to keep them focused on what is most important. The second discipline requires implementing what is called a Meeting Pulse at all levels in the organization, which will keep everyone focused, aligned, and in communication.
1. You must build and maintain a true leadership team.
2. Hitting the ceiling is inevitable.
3. You can only run your business on one operating system.
4. You must be open-minded, growth-oriented, and vulnerable.
The next leap of faith you have to take is this: As goes the leadership team, so goes the company. Your leadership team must present a united front to the rest of your organization. In a nuclear family, when the child doesn’t like the answer from Mom, he or she might go to Dad. In your company, there can be only one answer, and your leadership team needs to parent everyone to greatness.
In fact, most companies need to start with a focus on internal growth before they can even think about external growth. The paradox is that they will actually grow faster externally in the long run if they are focused internally from the outset.
On its official website, the U.S. Small Business Administration purports that “roughly 50 percent of small businesses fail within the first five years.” In a study published by the Monthly Labor Review in 2005, economist Amy E. Knaup states that 56 percent of businesses die within the first four years. And in his book The E-Myth and The E-Myth Revisited, author Michael Gerber paints an even scarier picture, saying that 80 percent of businesses fail in their first five years and 80 percent of those remaining will fail somewhere between years six through ten.
“Simplify, simplify.” Henry David Thoreau
“One ‘simplify’ would have sufficed.” Ralph Waldo Emerson
As leaders, you’ll need to stop working in the business 100 percent of the time, and as Michael Gerber, author of The E-Myth and The E-Myth Revisited, puts it, work on the business every so often instead. This discipline will get you to where you want to go faster.
Hard experience taught me the value of this belief. After one particularly unsuccessful engagement, I reflected back on why The EOS Process did not work. It came down to a simple truth: The members of the leadership team weren’t growth-oriented, either internally or externally, nor were they willing to be vulnerable or open-minded. We accomplished very little because it was a constant battle to make decisions and discuss difficult issues.
In summary, the four fundamental beliefs are as follows:
1. You must build and maintain a true leadership team.
2. Hitting the ceiling is inevitable.
3. You can only run your business on one operating system.
4. You must be open-minded, growth-oriented, and vulnerable.
In The Five Dysfunctions of a Team, Patrick Lencioni credits a friend who built an organization from a start-up to a billion dollars in revenue with the following observation: “If you could get all the people in an organization rowing in the same direction, you could dominate any industry, in any market, against any competition, at any time.”
The first tool in EOS is the Vision/Traction Organizer (V/TO). Not only is the V/TO designed to get your vision out of your head and onto paper, it will help you answer these eight questions. It’s meant to help you create a clear picture of where the company is going and how it will get there. Most importantly, it does so simply, by boiling your vision down to only two pages. An example of a V/TO appears on the next page and an electronic version of the V/TO can be downloaded free at www.eosworldwide.com/vto
The quarterly state-of-the-company has proven to be the most effective discipline for helping people share, understand, and buy into the company vision. In its purest form, the meeting has a three-part agenda.
1. Where you’ve been
2. Where you are
3. Where you are going
Each quarter, you and your leadership team fill each of those agenda items with three of the most relevant data points, and you’ll deliver a clear, concise, and powerful message that keeps your people in the know. Its effectiveness stems from delivering it every quarter and being consistent.
As a good leader, you must remain consistent in your message. The first time they hear it, they’ll roll their eyes and say, “Here we go again.” (Remember, you created this culture through past inconsistencies.) The second time, they’ll still roll their eyes a little. But by the fourth and fifth time of hearing it, they’ll realize this is for real. By the seventh time, they’ll be on board. You’ll have to adjust your outlook from “I’ve told them three times—this is so frustrating!” to “I’ve told them three times—only four more to go!” Be patient, and remember that this is a journey.
RIGHT PERSON, WRONG SEAT, In this case, you have the right person (i.e., one who shares your core values), but he or she is truly not operating in his or her Unique Ability®. This person has been promoted to a seat that is too big, has outgrown a seat that is too small or has been put in a position that does not utilize his or her Unique Ability®. Generally, this person is where he or she is because he or she has been around a long time, you like him or her, and he or she is a great addition to the team. Until now, you probably believed you were helping this person by promoting him or her to his or her existing seat. In actuality, you were hindering his or her growth and the growth of the company. Your job in this situation is to move this person out of that seat and into a seat that is right for this person, one where he or she will be successful. Assuming that there is such a seat—and most of the time, there is—the problem is solved once you move this person. Unfortunately, sometimes there is no seat available. In this case, you have to make a very difficult choice. You have to make decisions for the greater good of the business, and you don’t have the luxury of keeping people around simply because you like them. If this is the case, you must let them go. This will be one of the toughest issues you will have to face. Once the change is made, the company is always better off, and usually, the person is happier in the long run.
THE THREE-STRIKE RULE What do you do if someone is below the bar? Before you make any drastic decisions, I highly recommend that you first communicate the People Analyzer results to the person and give that person the chance to better his or her performance. He or she will improve almost all of the time. The question is, will he or she improve enough to move above the bar? Most people will, some won’t, but you should give them a chance to perform according to the new structure. The three-strike rule works as follows:
Strike One: Discuss the issues and your expectations with the person, and give him or her 30 days to correct the problem.
Strike Two: If you don’t see improvement, discuss his or her performance again and give him or her another 30 days.
Strike Three: If you still don’t see improvement, he or she is not going to change and must go. When the termination finally happens, all of those who are the right people will thank you for it and wonder what took you so long.
To make the point, let’s consider three scenarios:
• You have a strong sales and marketing function, a ]weak operations function, and a strong financial function. What’s the net effect? In that scenario, you’re doing a great job selling and bringing in new customers, but you’re losing them right out the back because operations is not delivering what you promised and customers aren’t happy.
• You have a strong sales and marketing function, a strong operations function, and a weak financial function. What’s the net effect? Again, you’ll bring in a lot of customers and take good care of them, but money is coming in the front door and going right out the back due to a lack of financial controls: $10 million in and $10 million out, or worse, $10 million in and $10.2 million out. This may strike a nerve because many companies fall into a situation where there is no monitoring of spending, nor is individual customer profitability assessed.
• You have a weak sales and marketing function, a strong operations function, and a strong financial function. What’s the net effect? A bunch of talented people in operations and finance are waiting around for something to happen, and nothing is
In a small to mid-size company, the visionary is typically the owner, co-owner, or founder. In a partnership, most of the time, one partner is the visionary and the other is the integrator. It’s a dynamic that has elevated them to where they are. The visionary typically has 10 new ideas a week. Nine of them might not be so great, but one usually is, and it’s that one idea each week that keeps the organization growing. For this reason, visionaries are invaluable. They’re typically very creative. They’re great solvers of big ugly problems (not the little practical ones), and fantastic with important clients, vendors, suppliers, and banking relationships. The culture of the organization is very important to them, because they usually operate more on emotion and therefore have a better barometer of how people are feeling. If you’re one, know thyself and be free.
For a deeper dive into the visionary/integrator dynamic, read Rocket Fuel: The One Essential Combination That Will Get You More of What You Want from Your Business. Written with my co-author, Mark C. Winters, it is a complete how-to manual for finding, developing and maximizing your visionary/integrator relationship.
Envision all of your direct reports’ responsibilities, problems, and issues as monkeys. When your direct report walks into your office with a problem, he or she is trying to leave his or her monkey with you. At the end of the day, after multiple people have walked into your office with their problems and left them with you, you end up with 20 monkeys jumping around your office. If someone walks in with a monkey, he or she needs to walk out with it. If he or she can’t or won’t, you’ve hired the wrong person.
Keep two important points in mind:
1. Be careful what you wish for because you’ll get it. If you want to grow, you have to understand that not everyone is going to be able to keep up and remain in the same seat forever.
2. Keeping people around just because you like them is destructive. You’re doing a disservice to the company, to everyone in it, and to the person. People must add value. I realize this may sound cold, but to the degree, people are in the right seats, everyone is happier, especially them.
THE THREE QUESTIONS TO ASK When a client completes its Accountability Chart, we ask three questions to confirm that it is at 100 percent. Please ask these three questions with your leadership team:
1. Is this the right structure to get us to the next level?
2. Are all of the right people in the right seats?
3. Does everyone have enough time to do the job well?
STEP 1 Spend an hour with your leadership team. Imagine you’re on a desert island somewhere. None of you can talk to anyone, access e-mail, or talk on the phone. All you have is a piece of paper with a handful of numbers on it. These numbers must allow you to have an absolute pulse on your business. What are all of the numbers that must be on that piece of paper? Decide and list all of the categories that you’d need to track on a weekly basis to have that pulse. These categories should include items such as weekly revenue, cash balances, weekly sales activity, customer satisfaction/problems, accounts receivable and payable, and client project or production status, to name a few.
STEP 2 In the left-hand column, list who is accountable for each of the numbers. Only one person is ultimately accountable for each, and it’s usually the person heading up that major function. This is the person who must deliver that weekly number to the organization, not the person who simply enters the number. For example, the head of sales and marketing is accountable for hitting the sales-activity numbers, not the finance person who fills out the Scorecard each week.
STEP 3 Decide and fill in what the expected goal is for the week in each category. Now that your V/TO and vision are clear, the goal numbers in your Scorecard should be tied directly to your one-year plan.
STEP 4 Put next week’s date in the first date column in preparation for filling in your Scorecard next week.
STEP 5 Decide who is accountable for collecting the numbers and fill in the Scorecard every week for the leadership to review. Decide how that person will receive the numbers from each member.
STEP 6 Use it! You must review your Scorecard every week to ensure that you’re on track for your vision. The real magic of using a Scorecard is not limited to managing it on a weekly basis. You will soon see 13 weeks (three months) at a glance, which enables you to see patterns and trends. From there the numbers roll, meaning that the first week will drop off the Scorecard as the 14th week is added. Make sure you keep the numbers that drop off for future reference and historical data.