Traction Page 11

  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.

  Tyler Smith of Niche Retail is a textbook example of someone who has been able to constantly delegate and elevate as his organization has grown and continuously broken through new ceilings. When Tyler and his partner, Brad Sorock, started their Internet retail company (with Tyler as integrator and Brad as visionary), Tyler handled all sales, operations, and finance, while Brad was in the lab researching and finding the next product idea and strategy. Tyler would get a ping on his cell phone indicating he had received an order, and he would go down to his basement and print the order, package it, and ship it out. He would then process the payment, order from his supplier, and pay the bills. This went on for the first year.

  As the business grew, he reached full capacity. He couldn’t do all of his former jobs anymore. His first delegation and elevation was to his wife, Stacey, who helped him pack boxes. Soon, they reached capacity again. He hired someone to help him ship orders, and he let go of that function completely. He then moved to a 2,000-square-foot warehouse that could handle all of the inventory, which created the need for an operations manager. He then hired a bookkeeper and let go of that function. The growth continued.

  Niche moved to a 10,000-square-foot warehouse. That created the need for a CFO and then a COO, as well as a head of site stores and marketing. Further growth required an 80,000-square-foot warehouse, and the story continues to this day. Tyler masterfully delegated and elevated each time he reached capacity, avoiding burnout. In addition, each member of the leadership team continues to delegate and elevate as the organization continues to grow. Here is Niche Retail’s evolving Accountability Chart:

  EVOLUTION

  As your organization grows, your Accountability Chart will constantly evolve and change, as you can see in the example on the preceding pages featuring Niche Retail. This is a dynamic tool. Think back to what your structure looked like when you were half your size. Now imagine what it would look like at double the size. What are the differences? The point is that the Accountability Chart is an ever-evolving tool if you’re growing. At a growth rate of 20 percent, you will make a change to the Accountability Chart about every 90 days.

  SCALABILITY

  When you build out your Accountability Chart, you will notice that certain functions require multiple people doing the same job (e.g., salespeople, customer service representatives, accounting clerks). The Accountability Chart becomes scalable. Where multiple people have the same job, you simply put the number of people in that function rather than adding multiple new boxes.

  For example, if you look at Niche Retail’s Year 5 Accountability Chart under the call center manager, you’ll see the customer service representative (CSR) function with eight people in it.

  YOUR EXISTING ORGANIZATIONAL CHART

  You may be wondering what to do with your existing organizational chart. Your newly created Accountability Chart should replace it and become the tool you use to illustrate the organizational structure. It clearly shows the reporting structure and the roles and responsibilities of each function. Keep it simple. The next step is to share it with everyone in your company. They’ll appreciate knowing where they fit and what they are accountable for.

  From there, assuming they have your core values and GWC, let go of the vine and let them execute. You will experience the incredible results that come from harnessing all of their combined talents.

  TERMINATIONS

  A word of caution: Now that you’ve created clarity, you’ll clearly see the people that do not fit in the organization. Yet you shouldn’t run out and fire them all. That would make you vulnerable as an organization and leave some gaping holes.

  Take a methodical approach to personnel changes, making sure that everyone on the leadership team is on the same page and then moving forward step by step. This doesn’t give you an out. It just means that you can’t put the company in a vulnerable position. You still have to make the change.

  Once, my parents went out of town at a time when my two teenage brothers and I still lived at home. Upon their return, my dad realized we hadn’t watered my mom’s plant and it was quickly dying. We decided that overwatering it would do the trick, and of course it didn’t. Upon noticing the problem, my mom simply grabbed a pair of scissors and pruned a few dying limbs. The plant came back to life a short time later.

  You must do a little pruning from time to time for the organization to flourish. Merely hoping that poorly fitting people will make it, sending them to a seminar, or giving them a pep talk is like overwatering the plant. It isn’t going to solve the problem. Once you do the necessary pruning, your organization will be revitalized.

  36 HOURS OF PAIN

  If people must go, and you’re procrastinating because the prospect of firing them seems painful, hopefully this will give you some motivation. During the evolution of Niche Retail illustrated on the previous pages, Tyler Smith kept someone around for a year too long because he was having a really hard time making the decision to let the person go. What made it equally tough was this person had been with them through the early years. The company outgrew him, though. He was aware of this, and over time, his attitude had soured. The leadership team finally pulled out the People Analyzer and the results showed there was simply no other option. The person was no longer right for the organization. As a result, after much anguish and soul-searching Tyler finally made the tough decision to let him go. A couple of days later, Tyler called me and shared a term that is now an EOS staple: 36 hours of pain.

  The hours leading up to and including the termination were painful, but after that point, he realized it was one of the best decisions he had made for the greater good of the company. He couldn’t understand why he hadn’t done it sooner. The work environment was so much better and less tense for everyone. He was relieved.

  Other employees thanked him for making the tough decision. He experienced all that pain for a year, when in hindsight he could have experienced only 36 hours of pain, probably for both parties. Incidentally, the terminated gentleman is now doing well and pursuing his passion. The decision was best for all.

  If the People Analyzer shows you that someone is the wrong person for your organization, make the decision. And yes, there will be some pain, but only for about 36 hours.

  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?

  A “yes” on all three confirms that you’re at 100 percent in this essential component.

  We now know what great leaders mean when they attribute their success to surrounding themselves with good people. It’s putting the right people (core values) in the right seats (GWC and Unique Ability®).

  With your vision clear and shared by all, and with the
right people in the right seats, the next step is measuring your progress and having an absolute pulse on your business. That requires the use of data.

  CHAPTER 5

  THE

  DATA COMPONENT

  SAFETY IN NUMBERS

  Picture a small plane flying over the Atlantic Ocean. Halfway across, the captain announces, “I’ve got bad news and I’ve got good news. The bad news is that the gauges aren’t working. We are hopelessly lost, I have no idea how fast we’re flying or in what direction, and I don’t know how much fuel we have left. The good news is that we’re making great time!”

  Does that sound at all familiar? That’s how most entrepreneurs run their organizations. They’re flying blind with no data to let them gauge where they are, where they are going, or if they are heading in the right direction. But they always remain optimistic.

  Doubts can eat away at you. If you’re a typical business owner, you often wake up at 2:00 a.m. with an uneasy feeling. You feel you can’t accurately measure the pulse of your business. To take that pulse, you walk around the office the next day and talk to five different people. In the process, you waste a lot of your time and other people’s, and after all that talking, what you have are subjective opinions, not hard data. Only factual information can provide the basis for productive discussion and decision-making.

  This chapter is designed to help you formulate and manage your data to let you take the pulse of your business consistently and accurately so that you can then take effective action. You will no longer be managing assumptions, subjective opinions, emotions, and egos.

  You will gain the power of being able to manage your business through a chosen handful of numbers. These numbers will allow you to monitor your business on a weekly basis, quickly showing which activities are on track or off track. Once you have tracked those numbers for a while, you will achieve the valuable ability to see patterns and trends to predict the future.

  For the Data Component, you will be introduced to a time-tested tool that will allow you to quantify your company’s results. It’s called a Scorecard, and once you learn to use it, you’ll be able to accurately read the pulse of your business. With hard data in hand, you’ll sleep better at night. Ultimately, you will have the ability to let go of the vine and be better connected than ever. In addition, you will reach the point where everyone in your organization has a number, a meaningful, manageable measurable. This will give them clear direction and increase productivity.

  SCORECARD

  According to an old business maxim, anything that is measured and watched is improved. The concept of managing through a Scorecard has been around for a long time. The idea has been expressed through many different terms. It’s been called a dashboard, flash report, scoreboard metrics, measurables, key performance indicators, smart numbers, and so on. Whatever you call it, it’s a handful of numbers that can tell you at a glance how your business is doing.

  The unfortunate reality is that most organizations don’t have a Scorecard. They lack activity-based numbers to review on a regular basis. They might rely on a P&L (profit and loss statement) to tell them the score, but by then it’s too late to make corrections. A profit and loss statement is a trailing indicator. Its data comes after the fact, and you can’t change the past. With a Scorecard, however, you can change the future.

  Let’s look at someone who managed the most seemingly unmanageable beast of all using a Scorecard. In his book, Leadership, Rudolph Giuliani says in a chapter aptly titled “Everyone’s Accountable, All of the Time” that one of the first things he did when he took over as mayor of New York City was to introduce CompStat. CompStat is a multilevel management tool that allows officers of the New York Police Department (NYPD) to report specific crime numbers on a daily or weekly basis.

  Giuliani says it enabled local precinct commanders to see patterns and trends, and then to react and deploy officers where necessary. In the past, the NYPD had merely tracked the number of arrests and the response times to 911 calls, but these are trailing indicators. By the time these numbers were received, quarterly or even annually, the pattern of crime would have changed. CompStat tracked crime activity on a daily and weekly basis, which Giuliani says allowed the NYPD to take the pulse of crime activity and thus gain the ability to prevent crime rather than just report it.

  In eight years, murder figures went down by almost 70 percent and overall crime went down by about 65 percent. In 1996, CompStat won the Innovations in Government Award from the Kennedy School of Government at Harvard University. Now many cities are using the same type of tool. After the success of CompStat, Giuliani went on to unveil a citywide Scorecard called CapStat, which allows a detailed performance evaluation of 20 city agencies.

  My business mentor, Sam Cupp, showed me how he used his Scorecard to take the pulse of his companies, which totaled over $300 million in sales. In his teachings, he forced me to do the same with my business.

  In my first business, I was able to manage the entire company using 14 numbers. How many numbers you need to track depends on the type of business you have. Every company’s Scorecard is different. With over 400 EOS clients, there are over 400 different Scorecards. Your Scorecard will be unique to you and your organization. The following exercise will show you a step-by-step process for creating a Scorecard that fits your unique business.

  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.

  As a rule of thumb, you should end up with five to 15 numbers—hopefully closer to five. There is such a thing as too much information, so keep it simple. Once you’ve identified all the categories, you then plug them into your Scorecard template. On the previous page is a sample template in a spreadsheet format. As you can see, you list the categories under the Category heading:

  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.

  THREE SCORECARD RULES OF THUMB

  1. The numbers in the Scorecard should be weekly activity-based numbers, not the type of high-l
evel numbers you see in a profit and loss statement (P&L). Remember, this Scorecard is not a P&L. It’s based on numbers showing activity and telling you whether you’re on track for a strong P&L. In other words, your Scorecard predicts your P&L. What are activity-based numbers? To help clarify, let’s look at a couple of examples.

  One category would be new revenue/sales. If you only monitor revenue as it comes in, you’ll react to downslides too late. Look at your sales process and follow the steps as far back as you can. Typically you’ll find that each step can be measured with a number. Take them in order, starting with the first step. Measure the number of the leads generated, the number of contacts, the number of appointments scheduled, the number of appointments attended, the number of proposals, and/or the number of closes. You decide how far back you want to measure because you can chase the process all the way back to the first step.

  Say, for instance, you choose number of new leads generated and track that number in the Scorecard. By knowing the number of leads you have, you can see how many of the leads turn into contacts, how many contacts turn into appointments, and so on. By understanding these formulas and these ratios, you’ll be able to predict the number of closes two, three, and sometimes four months down the road. This ultimately gives you the ability to predict and tells you how many leads you need to develop today.

  Another example of activity-based numbers is client satisfaction. If you merely track customer complaints or lost customers, that’s too late as well. Instead, go to the first step in the process—finding out what factors drive both happy and unhappy customers. For instance, you might do a proactive numerical survey, such as asking three questions that require a number-based answer every time you close the business or deliver the product. As a result, you’ll create leading indicators that allow you to track how you’re doing. For instance, if, on average, you receive an 8.5 rating out of 10 in a certain area of your delivery and suddenly see an average rating of 7 for a series of three weeks, you know that a problem is brewing somewhere. You then have the opportunity to solve it before you potentially lose the customer.