Traction Read online

  2. The Scorecard is much more of a proactive tool, helping you to anticipate problems before they actually happen. However, you still need to look at either monthly or quarterly financial statements and monitor a budget on a monthly or quarterly basis.

  3. When managing a Scorecard, many clients find value in red-flagging categories that are off track. Red-flagging occurs when one of your numbers does not hit or exceed the goal for the week. Shade that number so it stands out in the Scorecard, usually using the color red. This can be programmed in an electronic spreadsheet or done manually. This creates better focus and awareness on that number, which creates more urgency in the weekly meeting.

  Your Scorecard will evolve over the next several months. Assuming you’ve taken a good first cut, your categories should be about 85 percent right. That is close enough at this point. As your Scorecard is brought to life in the succeeding chapters, it will evolve to 100 percent. On average, three months have to pass until it evolves into a tool you love.

  The Scorecard should cause an organizational shift. Your leadership team will become more proactive at solving problems because you’ll have hard data that not only points out current problems but also predicts future ones. By solving them, you’re assuring them that you’re on track with your vision. In order to solve a problem, you must know the source of the number in the Scorecard; therefore you can go directly to the root cause and create better accountability and clarity with your people. That leads to the second part of the Data Component.

  MEASURABLES

  What gets measured gets done. Complete mastery of your Data Component is achieved when you boil the organization’s numbers down to the point where everyone has a single meaningful, manageable number to guide them in their work. This number will enable leaders to create clarity and accountability throughout their team. With a completed Scorecard, you can track high-level numbers down to a single person as the source.

  EVERYONE HAS A NUMBER

  The founder and chairman of a large Michigan mortgage company and a leading online mortgage lender once gave a talk at our Entrepreneurs’ Organization Chapter. This was 16 years ago, when I was running my first company and he had 75 employees. He’s a fanatic about measuring everything; at one point he told us that “everyone has a number.” He went on to explain how every employee in his organization has a number, even his receptionist. Hers was two, as in, “two rings good, three rings bad.”

  His speech was a wake-up call for me. Back at my office, I came up with and implemented a number for everyone. I have since taught this discipline to every client, and it has produced tremendous results.

  Dale Carnegie’s book How to Win Friends & Influence People contains an example illustrating the power that numbers can generate among your people: Charles Schwab ran Bethlehem Steel Company in the early 1900s, and he had a mill manager whose people weren’t producing their work quota. One day Schwab asked him, “How is it that a manager as capable as you can’t make this mill turn out what it should?” The mill manager didn’t have an answer. He had tried everything. This conversation took place at the end of the day, just before the night shift came on. Schwab asked the manager for a piece of chalk and asked the nearest man how many heats (i.e., batches of refined steel) his shift had made that day. The man said six. Without another word, Schwab chalked a big figure six on the floor and walked away.

  When the night shift came in, they saw the six and asked what it meant. The day people explained that Charles Schwab, the big boss, has asked how many heats they’d made, and chalked the number down on the floor. The next morning, Schwab walked through the mill again, and he found the night shift had rubbed out the six and replaced it with a big seven. When the day shift reported to work that morning, they too saw the seven chalked on the floor, and decided that they would show the night shift a thing or two. The crew pitched in with enthusiasm, and when they quit that night, they left behind them an enormous 10. It wasn’t soon before this mill, which had been lagging way behind in production, was turning out more work than any other plant.

  That shows the power of giving everyone a number. In fact, there are eight distinct advantages to everyone having a number.

  1. Numbers cut through murky subjective communication between manager and direct reports. As an example, where the old response between sales manager and salesperson regarding last week’s sales activity was a vague “Great! Things are picking up,” the new number-based answer is crystal clear: “I got three.” If three is good for that company, then last week was great. If they needed to get 10, there is an issue to solve. Better to solve it now than two months from now when it shows up as poor revenue in the P&L. Numbers aren’t just for the person. They become a communication tool between manager and direct report, creating the basis of comparison, unemotional dialogue, and, ultimately, results.

  2. Numbers create accountability. When you set a number, everyone knows what the expectation is. Accountability begins with clear expectations, and nothing is clearer than a number. For example, if in the accounting department the people’s expectations are “collections,” that is unclear. However, if they are supposed to keep accounts receivable days below 40, balance below $100,000, or aged receivable less than $50,000, that is a clear expectation. The people know exactly what their target is.

  3. Accountable people appreciate numbers. Wrong people in the wrong seats usually resist measurables. Right people in the right seats love clarity. Knowing the numbers they need to hit, they enjoy being part of a culture where all are held accountable. It creates an esprit de corps with everyone pitching in to make the company a success because right people want to win.

  4. Numbers create clarity and commitment. When an employee is clear on his or her number and agrees that he or she can achieve it, you have commitment. There is no gray area. A great example is the number Nordstrom uses with its salespeople: sales per hour. The number shows up on their paychecks and perks are tied to it. Nordstrom salespeople know exactly what their sales expectations are all the way down to an hourly basis.

  5. Numbers create competition. Charles Schwab was able to create competition by making a target number known to all teams. Sure, they might experience some discomfort and a little stress, but there is nothing wrong with a little pressure.

  6. Numbers produce results. Similar to the way Rudolph Giuliani helped turn a city around, you can create terrific results. If the customer service department’s expectation is zero unresolved customer issues, by hitting this number, you will achieve the ultimate result of customer retention and satisfaction. Or if your customer service people are accountable for ancillary sales, and they know $1,000 in daily ancillary sales will reach the total ancillary sales goal, you’ll typically hit it, or at least do better than if you don’t provide this number. What gets watched improves.

  7. Numbers create teamwork. When a team composed of the the right people in the right seats agree to a number to hit, they ask themselves “how can we hit it,” creating camaraderie and peer pressure. When a team of technicians are challenged to perform their service in four hours or less collectively, they will all pull together to figure out ways to achieve that number. The ones that aren’t pulling their weight and hitting the number will be called out by the other team members that are.

  8. You solve problems faster. When an activity-based number is off track, you can attack it and solve the problem proactively, unlike with an end-result based number that shows up after it’s too late to change it. In addition, the use of hard data cuts through all of the subjective and emotional opinions that create murkiness and lengthen the amount of time it takes to make the right decision.

  Todd Sachse of Sachse Construction immediately saw the value of everyone having a number but struggled to persuade his leadership team to embrace the concept and understand the value as well. They assumed a backlash from the employees. He asked me to present the above advantages to them, and Todd’s people have now come to embrace the idea of numbers. His superintend
ents achieve 15-day turnaround times on punch lists. His accounting people keep accounts receivable under 30 days. Even his receptionist opens and hands out mail in less than four hours. He attributes everyone having a number as one of the key reasons that his organization grew 50 percent the following year.

  If you’re still stuck, a great place to find numbers for your people is your completed Accountability Chart. Look at each of the five roles for each function. One, two, or three of those five roles can be measured by a number. For example, let’s say a project manager’s five major roles are as follows:

  • complete projects on time

  • achieve margin goal on each job

  • client satisfaction

  • weekly reporting in on time

  • achieve quality standards

  Of these five, you can measure on-time, margin, client satisfaction, and possibly quality standards.

  With the tabulation of data, your organization accomplishes the third essential component of gaining traction. With the vision clear, people in place, and data being managed through a Scorecard, you’re creating a transparent organization where there is nowhere to hide.

  Your company is open and honest. Any obstacles that stand in the way of achieving your vision will be apparent. Your job is to now remove these barriers and solve the issues holding you back.

  CHAPTER 6

  THE

  ISSUES COMPONENT

  DECIDE!

  The fourth essential component of gaining traction is having the discipline to face and solve your organization’s issues as they arise. When the vision is clear, the people are in place, and you’re managing data, you will inevitably find out what’s holding you back. Successful companies solve their issues. They don’t let them linger for weeks, months, and years at a time. Problems are like mushrooms: When it’s dark and rainy, they multiply. Under bright light, they diminish. In an organization where there is nowhere to hide, the problems are easily illuminated. EOS will create that strong light.

  It’s human nature to put off making a hard decision. If given the option, most people would prefer not to address an issue and hope that it goes away on its own. This reluctance to act can be a drag on growth and is extremely frustrating to watch. As Napoleon Bonaparte said, “Nothing is more difficult and therefore more precious than to be able to decide.”

  Your ability to succeed is in direct proportion to your ability to solve your problems. The better you are at solving problems, the more successful you become. This is not a new discovery. In the classic book Think & Grow Rich, Napoleon Hill cited a study that analyzed 25,000 people who had experienced failure. Lack of decision, or procrastination, was one of their major causes of failure. In contrast, analysis of several hundred millionaires revealed that every one of them had the habit of reaching decisions promptly and changing them slowly.

  Most leadership teams spend their time discussing the heck out of everything but rarely solving anything. What is draining your energy is not having a lot of work to do; rather, it’s having unresolved issues. You’re about to learn a process that helps leadership teams quickly dig to the root of an issue, discuss solutions, and then decide—therefore keeping them moving forward and giving them energy by pulling up the anchors holding them back. The one statement that summarizes this chapter best is a maxim my dad taught me long ago: “It is less important what you decide than it is that you decide.” More is lost by indecision than by wrong decisions.

  When most new clients solve their major issues in the early stages of the process, they typically say, “That one has been around for years,” or, “We’ve been trying to solve that issue forever.” Each unresolved issue is an incomplete project weighing down your organization and holding you back. You only have so much capacity, and these unresolved issues take up time and energy. Ultimately, you or your organization will implode under the burden. By solving these issues, you’ll free up capacity, creating more time and energy.

  In this Issues Component chapter, you’ll learn the next two EOS tools to wield against obstacles holding your company back. The first is a discipline of creating an Issues List. The second is the Issues Solving Track. Once you set them up, you’ll knock those obstacles down.

  THE ISSUES LIST

  It’s normal to have issues. The sooner you can admit that you have them and not view that as negative thinking or some kind of a weakness, the faster you will move forward. The good news is that there are only a handful of issues in the history of business. The same ones crop up over and over again. What changes is your ability to solve them. The key is to create an environment that smokes them out.

  A vital first step is creating a workplace where people feel comfortable calling out the issues that stand in the way of your vision. To do this, your leadership team must be comfortable with this type of environment. My only expectation with every EOS client is that they be open and honest with each other. To the degree that your leadership becomes open and honest, you will end up with an open and honest organization. As goes the leadership team, so goes the company. If the leadership team is open and honest, issues will flow freely.

  No one has ever died from being open about issues. You have nothing to lose and everything to gain. Start with your leadership team meetings, and this behavior will trickle down throughout the entire organization. The result is an environment in which everyone feels comfortable being open and honest about everything.

  If, on the other hand, the leadership team is not healthy, the organization never will be. In The Five Dysfunctions of a Team, Patrick Lencioni makes the point that a high level of trust is the foundation of what makes teams healthy and functional. In Managing by Values, authors Ken Blanchard and Michael O’Connor write that “communication happens naturally when you make the work environment safe.” Trust creates an open culture in which everyone feels comfortable talking about issues as they arise.

  You cannot achieve this openness if people in the organization fear losing their jobs or some other terrible ramification. Therefore, trust starts with you. You set the tone by openly admitting mistakes and issues and then working together to solve them. Everyone must know that it’s okay to raise issues as long as they are corrected.

  The Issues List is meaningless if no one ever puts anything useful on it. The way to get meaningful issues on the list is to create open and honest teams. When your Accountability Chart is complete, your organization will be made up by a handful of teams. Each must be healthy, starting with your leadership team. As each team becomes healthier, you will notice issues flowing more freely and the trust level increasing.

  With an open and honest organization, the Issues List becomes a tool that creates a discipline to keep all of your issues out in the open and organized in one place. There should be three types of Issues Lists in your organization:

  1. The Issues List in your Vision/Traction Organizer (V/TO). These are all company issues that can be shelved beyond 90 days. These issues are tackled in future quarterly meetings. The issues that are not a big enough priority for this week or this quarter must be stored somewhere so that you don’t lose sight of them. The V/TO Issues List is the place for that. This list will include issues as diverse as new product ideas, key employee issues, technology needs, office relocation, capital needs, and the need for HR policies. They’ll go there if this is not the quarter to solve them because you have bigger fish to fry.

  2. The weekly leadership team Issues List. The time frame on these items is much shorter. These are all of the relevant issues for this week and quarter that must be tackled at the highest level. These issues will be resolved in your weekly leadership team meetings. You should not be solving departmental issues. These will typically be more strategic in nature. If it can be solved at a departmental level, push it down. Leadership issues include things as diverse as company Rocks being off track, a bad number in the Scorecard, key employee issues, major client difficulties, and process- and system-related problems.

  3. The de
partmental Issues List. These issues are on a more local level. These include all the relevant departmental issues for the week that must be tackled during the weekly departmental meetings. The sales team might have hitting call numbers, presentations, closing business, marketing, and presentation materials on their list, while the operations team might have fulfilling orders, purchasing, customer complaints, and low production numbers on theirs.

  A client shared a great idea that he used when he was having a hard time getting the people in his department to be open and honest in the identification and resolution of issues. For his next meeting, he made it mandatory that everyone bring two issues. If someone did not have two, he or she could not attend the meeting. He said it was the best meeting his team had ever had. With the floodgates opened, they are healthier than ever.

  With an open and honest culture and the three Issues Lists clear, issues will start flowing freely. You can now compartmentalize each issue onto the appropriate list. Each issue that arises in your organization has a place, which means you have to start working on solving them. The most effective way to do that is by following the Issues Solving Track.

  THE ISSUES SOLVING TRACK

  When addressing issues, leadership teams spend most of their time discussing the heck out of everything, rarely identifying anything, and hardly ever solving something. It’s truly an epidemic within the business world.