The Greatest Own Goal or the Greatest Collapse

The Greatest Own Goal or the Greatest Collapse

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Last week saw the birth and collapse of the European Super League (ESL). Living in Atlanta, to me, the defeat was on a par of the Falcon’s 2017 Superbowl and Greg Norman’s 1986 Masters. On Sunday evening, there was the announcement of the formation of the ESL, comprising 12 “founding clubs” from England, Spain, and Italy. Three other unnamed clubs were soon to join, along with another five teams that would qualify annually for the 20-team competition. Within 48 hours, it was dead!

The announcement of the ESL was accompanied by a promise to “deliver excitement and drama never seen before in football,” and did they deliver!

Why was the ESL formed?

Why? Simply, MONEY. The fifteen founding clubs were guaranteed a place every year with no messy football stuff like qualifying and relegation! The teams would capture a larger share of the revenues with less risk. Expectations were that broadcasting rights might generate €4bn a year, nearly double the €2.4bn brought in by the Champions League in the 2018-19 season. 

As Martin Baumann put it, “We can sell just about anything to the Europeans. Why not our hyper capitalistic cartel-based pro sports system?” That sentiment seems very popular on this side of the Atlantic. Many other commentators pointed out that the owners sought profits before tradition, financial opportunities before culture, and self-interest before communal identity. The ESL was the logical outcome of the increasing commercialization of football and powerful few’s desire for monopolistic control. To enable the ESL, J.P. Morgan underwrote its formation with a $4 billion line of credit. 

While I like capitalism, I find it interesting the claim that this is capitalism. So saying ignores a couple of the mainstays of capitalism – no monopolies or cartels and creative destruction. The owners were not imposing an American capitalistic system on football; they sought to create an American-style cartel to reduce risk and transfer more money to themselves. This has just been done with F1 under the ownership of Liberty Media, turning the ten existing teams from car manufacturers into holders of very valuable franchise charters. Of course, technology development will slow, and the product quality fall. But we can’t let that get in the way of making money.

American sports competitions, especially the major leagues, are all effective money-producing cartels. Professional sports leagues in the United States are monopoly-like structures that ensure that the riches are spread evenly among a self-selected group. The teams stay in the league no matter how they perform. So much for the American ideal of meritocracy! 

The only economic competition they face is from rival leagues; that is why the U.S. system is a century-old marketplace of rival sports leagues. The combination of less risk and less competition for talent produces higher profits for owners. According to a ranking last year by Forbes magazine, forty-three of the world’s 50 most valuable sports teams are American – aren’t cartels wonderful! Such a structure has several results:

  • “Brand value” is not necessarily tied to on-field success. The “worst teams” in one season get the best players through draft picks the following year. 
  • It provides an inferior product, as I have discussed before. Guaranteed a place in the league means there is no need to invest in the team and deliver a good product for the fans. Recognition that the product is inferior is reflected in U.S. sports capturing a smaller share of the global viewing audience each year. 
  • It delivers more money to the billionaire owners, who theoretically have invested in the clubs. In every American sport, an inferior on-field product isn’t a reason for billionaire owners to make less money, e.g., Tampa Bay Buccanneers. The Bucs, I believe, have the worst record of any team in the NFL, even though they have two Super Bowl titles – 278-429-1. With such a record, they would have probably been relegated in European sports and no chance at any championship.

For those unfamiliar with relegation, unlike American teams, European sides play in open leagues, where the three poorest performers get demoted to a lower tier, with stingier broadcasting and sponsorship deals. The three top performers in the lower leagues get promoted to a high league reaping greater rewards. Club owners thus gamble on making it to the top, investing generously at the expense of profits.

The European model is genuinely a capitalistic one where owners take risks and invest for a potential reward. Creative destruction is evident: between 1992 and 2014, there were 45 insolvencies in the top three tiers of English football, 40 in France and 30 in Germany. 

So why did the ESL collapse? 

I believe it was because of hubris. Through hubris, the founders ignored the sport’s business model and Ben Horowitz’s sage advice, “Take care of the People, the Products, and the Profits— IN THAT ORDER.” 

Hubris

Hubris is a terrible thing and causes many failures in life and business. Only hubris can cause a few rich people to come up with an idea that generates such visceral and universal hatred, or put another way, “Never underestimate the incompetence of people.” The hubris of the American owners that they could easily impose the U.S. system on European clubs showed that they “were willfully ignorant of an alien culture.“

Value Creation

Value creation is about “the job to be done” for the customer. The league claimed it would be an exhibition of elite football. However, with no qualification, the teams would not have had to try very hard and thus reduce the value of the “job to be done.” However, even more concerning was that the league’s criteria were not based on being the best in Europe but merely the richest. Once a world power, Arsenal is barely one of the best in England and just a bougie to Newcastle United. Arsenal currently sits ninth in the Premier League table, out of reach of Champions League qualification, and likely to miss out on the less lucrative Europa League as well. Choosing the clubs by the wealth of the owners killed any pretense at value creation.

Marketing

The key to marketing is delivering on your brand promise. The brand promise in European sports is the promise of the club’s success. The basic unit is the club in European sports, which tends to be much older and more locally rooted than any franchise and far more fervently followed. Many clubs are over a century old and ripple with local associations and mythologies. For those who want a greater understanding, I would suggest watching Sunderland Til I Die.

Not only is the club the basic unit, but there is a “holy trinity” in a football club, the fans, the players, and the manager. The owners are there to invest and collect profits. Unlike in the U.S., when a team wins a championship, the owners are never seen lifting the trophy, only the players and the managers.

Sales

The key to sales is to know your core customer, the FANS. The fans were not amused, to put it bluntly. Unlike peripatetic American sports fans, English football clubs’ fans are even more zealous and less forgiving. The Glazers, Stan Kroenke, and John Henry were pretty much despised by the fans of Manchester United, Arsenal, and Liverpool, respectively, before the ESL. If they were unaware of this, the fans that welcomed the Glazers to Manchester chanting “Die, Glazers, die!” should have been a hint. The ESL announcement only made things worse. Liverpool fans were burning effigies of John Henry outside Anfield. A banner outside Old Trafford read, “Created by the poor, stolen by the rich.” A YouGov poll found that 79% of British football fans opposed the Super League, 68% of them “strongly.”

There have been massive protests by Chelsea, Liverpool, Arsenal, and United fans at Stamford Bridge, Anfield, The Emirates, the Carrington training ground, and Old Trafford within the past 5 days. All the fans have been complaining about the money taken out of clubs rather than investing in them. Opposition was fiercer still among fans of clubs outside the ESL, some of whom burned Liverpool shirts. However, American billionaires excel at ignoring public outrage. Kroenke and the Glazer family might’ve waited out the protests until kingdom come. However, the rest of the founders abandoning the ESL gave them no choice.

Value Delivery

The key to value delivery is keeping the customer satisfied which in European sports is RIVALRY. The rivalry between teams is local, not leagues as in the U.S. Liverpool’s main rival is neither of the Manchester teams but Everton, a mile from Anfield. The ESL would have removed these rivalries. Further, ESL was not designed with these in mind, but for millions of foreign fans, in Asia and America who care less about such details. In European football, this was heresy. But overall, the ESL would have stopped the key rivalries that make European football what it is and thus reduced value delivery.

The Outcome

There were apologies all around. John Henry issued a groveling apology to Liverpool’s fans: “I’m sorry, and I alone am responsible.” This is something I don’t any U.S. fan has heard from an owner. Also, JP Morgan has apologized, which shows how much it has realized that its role might damage its chances of getting business in Europe. However, apologies are the least of the owners’ issues as hubris takes its toll. The speedy collapse presents an opportunity for the wider community [members of the Premier League] to drive a harder bargain during the auction of a new round of Premier League broadcasting rights. The result is that the ESL founders may receive a small cut this year.

However, the real threat is regulation. Boris Johnson, Britain’s populist prime minister, read the tea leaves and thus vowed to “do everything I can to give this ludicrous plan a straight red [card].” Oliver Dowden, Britain’s sports minister, wants to examine everything to stop the new league, from competition law to governance reform. His words, “Owners should remember that they are only temporary custodians of their clubs; they forget fans at their peril,” should be a stark warning. Also, the British government launched a wide-ranging review into how football is run this run. There is pressure for British clubs to adopt the German community-ownership model with fans owning 51 percent. While some point out that fan ownership did not dissuade Barcelona and Real Madrid from joining, the Spanish and Italian leagues’ financial health is more impoverished than England’s.

Who says football is boring?

 

Copyright (c) 2021 Marc A. Borrelli

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Every business owner I have ever known, has sought to sell their business at the top of the market. I think this is part of the movement where many are in a constant quest to outdo others. While conceptually I understand this desire, these owners should heed the voices of some sages.

Daniel Kahneman’, “The average investor’s return is significantly lower than the market indices due primarily to market timing.” 

Warren Buffett, “Trying to time the market is a fool’s game.”

Baron Rothschild, “You can have the top 20% and the bottom 20%; I will take the 80% in the middle.”

 

What it takes to Sell at the Top of the Market

If you are determined to sell at the top and are ready to step aside at any time, the only concern is timing. However, if you have other timing considerations, e.g., retire when my business is worth $X, step aside when I am 65, then things are far more complicated.

For the market to be at the top when you reach some predetermine criteria, you need to ensure that the entire economy collaborates with you. To do this, I expect you would need to have the ear of: 

  • the President, 
  • the majority of Congress, 
  • the Chair of the Federal Reserve, the Secretary of the Treasury,  
  • the President of the European Central Bank, 
  • the German Chancellor, 
  • the President of France, 
  • the President of Russia, 
  • the President of the People’s Republic of China, 
  • the heads of the People’s Bank of China, and
  • the leaders of all the leading investment banks and hedge funds worldwide, to name a few. 

Not only would you need their ear, but you would have to persuade them that collaborating with you is in their best interests as well. Furthermore, many of these people would want something in return for a favor, and most of the people I have spoken with would be able to afford the price Vladimir Putin would expect. Finally, I have found any scheme where only one person knows of it but requires many people to ensure its success is bound to fail.

As a result, I would say that trying to sell at the top is a fool’s errand and one that should be abandoned.

 

A Contrarian View

Some have argued that selling at the bottom of the market makes more sense. The rationale is that the business owner will reinvest those assets into other assets whenever they sell their company. Thus if you want to ensure continued wealth accumulation, one should do it at the bottom of the market rather than the top.

To examine this theory, I did a simple analysis. I reviewed four dates and the market conditions. I looked at the Russell 2000 Price Earnings Ratio for those dates and indexed them with the 2000 Price Earnings Ration as the base = 100. Assuming that enterprise value (EV) to EBITDA ratios followed the Russell 2000’s PER, the EV/EBITDA ratio in 2000 was 5x, and the company had an EBITDA of $1 million in each year before the sale, the results are as follows:

Date Market Conditions Russell 2000 PER (Indexed) EV / EBITDA Multiple Proceeds ($k)
12/31/2000 After the Top of the market 100.0 5.0 $5,000
12/31/2005 Near the top of the market 58.6 2.9      $2,929
12/31/2010 Emerging from a recession 52.6 2.6 $2,631
12/31/2015 Middle of a bull market 74.7 3.7 $3,734

I then made a few more simple assumptions:

  • Transaction costs to be 30% comprising intermediary and legal fees of 10% and taxes of 20%.
  • The proceeds are invested in two funds, VFIAX – Vanguard 500 Index Fund Admiral Shares and VBMFX – Vanguard Total Bond Market Index Fund Investor Shares as proxies for a general stock and bond market investment.
  • The allocation is 70% into VFIAX and 30% into VBMFX.
  • Any funds withdrawn and any distributions are ignored as they would be the same for both funds.

Below is a chart of the S&P 500 from December 31, 2000, to December 31, 2020 to show the market’s performance over the period.

Source: Yahoo Finance

Following the investments as described above after five, ten and fifteen years the returns were:

Date Initial Value ($k) After 5 yrs ($k) Return (%) After 10 yrs ($k) Return (%) After 15 years ($k) Return (%)
12/31/2000 5,000 4,822 -3.6 4,930 -1.4 7,027 40.5
12/31/2005 2,929 2,993 2.2 4,292 46.5 5,414 84.8
12/31/2010 2,631 3,790 44.0 4,786 81.9    
12/31/2015 3,734 4,643 24.3        

 

So as it can be seen, while selling at the top, provided the greatest wealth after fifteen years, interesting the difference over 10 years was less than 3% between selling at the top and selling just after the bottom. The other points are somewhere in between. Therefore, selling at the top is not the conclusive answer we expected.

 

So what to do?

What I have always advised clients is to build a business that is attractive to buyers and can be sold. The key is to create your own redundancy, so that you can sell it, stay in a non-executive capacity and effectively “coupon clip,” or pass it on to your children or employees. You have many options and if someone comes along and offers you “silly” money, take it. But don’t worry about the “Top of the Market.”

If you want to know if your business is sellable, complete this questionnaire, and if you want help building a sellable business, contact me.

Copyright (c) 2021, Marc A. Borrelli

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Passion. Your employees are passionate about the “X” and excited about increasing it.
Empowerment. Your employees are empowered to make decisions to ensure the baseline Profi/X is met.
Drive. It drives behavior to generate profit and growth.
Discipline. It provides the financial discipline to ensure that the organization remains profitable as it grows.

Thus is it is your Economic Engine that will enable profitable growth.

Many people look for a quick answer in determining Profit/X, but there is no quick answer. It is an iterative process that will get there, but no something you necessarily come up with on the first try.

Profit can be:

  • Gross Profit,
  • Operating Profit,
  • Net Profit,
  • Gross Margin,
  • Operating Margin, or
  • Net Margin,

to name a few.

“X” is very variable and can be:

  • “Product/Service,”
  • Customer,
  • Invoice,
  • lb,
  • pallet,
  • truckload, or
  • plane.

For a better understanding of Profit/X, my video below may help explain it better.

Profit/X

It is well worth your time to develop your Profit/X and get your employees to understand it and embrace it. The discipline it provides combined with the drive and empowerment it delivers makes a very strong economic engine and ensures continued profitability through your growth.

 

Copyright (c) 2021 Marc A. Borrelli

 

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Reflecting on the current employment environment as we emerge from COVID makes me think of “Being Caught Inside When a Big Set Comes Through.” Why?

For those who don’t understand the analogy, it is something that surfers experience when paddling out when a large set of waves appears. The first wave appears in front of you, and it is a monster. So you put your head down and paddle like crazy to get over it before it crashes on you. You paddle up the face of the beast, hoping to get over the top before it breaks and drags back down “over the falls.” You make it, and you look up to see the next monster, larger than the last, bearing down on you. Tired, you have to paddle harder to make it over that one before you end up in the “impact zone.”

2020 was the first wave that appeared. We all put our collective heads down and paddled hard. We made it over. However, talking to many in early 2021, I don’t think we realized how much effort that had taken. Everyone was tired, many a little depressed. But as we looked up, the next wave was there blocking the entire horizon. That wave is the increase in business activity.

Some of my clients are experiencing more business in Q1 than they did in H1 last year. So we need to paddle hard to make it over this one. However, with everyone tired and depressed from the last one, it is getting harder. Everyone is looking for employees right now, but you are asking more of your employees when they are already working flat out and dealing with the stress until you hire.

The Current Situation

As a result, many are thinking about moving. A new survey reported by Fast Company found that 52% of U.S. workers are considering a job change this year, and 44% have plans in place to move. What is interesting when breaking down the data is that:

  • 59% of those whose annual household income is between $50,000 and $75,000 (the middle-income bracket) were thinking about moving.
  • 76% of those under 30 either looking or open to new opportunities.
  • 48% of six-figure salaried workers were planning their change, and 66% of them are feeling more confident about their decision to change jobs than they did six months ago. 
  • 21% of those surveyed felt there were “better opportunities available to [them] at other companies.”

What I have also seen recently is not only that people are considering leaving, but who. The “Who” here are those centers of influence within the organization. To understand that, look at your “shadow org chart,” which shows employees who have disproportionate levels of impact relative to their hierarchical position. To develop one, ask your employees these three questions:

  1. Who energizes you at work? (list four or more people)
  2. Who do you go to for help and advice? (list four or more people)
  3. Who do you go to when a decision needs to be made? (list four or more people)

If key influencer leaves, then many others may decide that the time to move on has come. One executive told me this week that his concern was that if two of their top influencers left, that would be the beginning of the end.

A recent HBR article suggested asking both the departing employee and the rest of your team questions, listening attentively, and acknowledging their concerns. Focus on goals and reassure your team that they’re still important and achievable, and provide them with educational opportunities to show that you care about their long-term effectiveness.

Regardless, those looking or considering a change are looking for:

  • A stable organization and where they are sure they’re growing and changing within that organization. 
  • More pay. Pay is the main factor that entices employees to look for a new role.
  • Work-life balance is also an essential requirement. 68% of employed workers and 43% of women said that remote work and work-from-home options are “very important,” versus 33% of men. 18% want to have more flexible hours in a new job.
  • Finally, the overall work environment is an essential factor.

However, employees say that the most critical factor that keeps them with their employer is engaging work.

Furthermore, a recent study from Ceridian reports that the cost of onboarding a new employee can range from $2,000 to $4,000, and talent expects a rise of 29% to change roles. I have mentioned before that everyone I know is looking for people. So if a 30% increase is required to change, and 50%+ are looking to move, expect salary and wage costs to increase.

The Challenges

So given the above, the critical challenges for organizations today that want to get over that second wave are:

  • Recruiting.
  • Onboarding.
  • Engagement.
  • Growth path.

Recruiting

I have written before about recruiting and ways to make it better and more of a system. However, I think some of the critical factors to consider right now are:

  • Stand out above the crowd. How do you attract the best talent and not just one of the many looking for a new opportunity? To achieve this, you need to produce job ads that create interest in your organization and the opportunity to attract everyone, not only those considering moving. 
  • Using your employees, customers, and suppliers to help find new talent. These people all know you. They know your culture and values. So they are the best people to refer people to you if you are looking. However, first, you have to tell them what you need. If you have a great job ad, share it with them. Encourage your employees to refer people.
  • Employee testimonials on your website. Again I have mentioned this before, but it still amazes me how few companies have employee testimonials on their website. The first thing a prospect will do is go to your website to find out about your organization. Having no employee testimonials is not a good way to entice them. Worse is only having stock photos of employees other than the leadership team.
  • Ensure your reputation is good. Check Glassdoor and other sites to see what has been said about you. While you cannot always change the negative posts, understand them and be willing to address them in an interview.
  • Interviewing. With many people looking to move and the cost of replacing large, make sure that you are getting the right person. A term I prefer is “auditioning.” As many have said, the key is culture and values. Concerning ability, ensure they can do the job. Given how busy everyone is, it might be harder to defend hiring someone capable but requires training. However, getting the wrong person just because they have the skills is a more expensive proposition in the long run.

Onboarding

Onboarding is more critical than ever, and it is more challenging than ever with COVID. However, now you have to ensure that your new members can absorb your culture and values and know your strategy and expectations.

I have discussed onboarding with many CEOs and find that all are struggling to do it effectively. A few thoughts are:

  • Ensure they know your culture and values, and strategy first. With this knowledge, they can make better decisions that benefit the organization.
  • Ensure they understand what is expected of them and have regular check-ins for the first year to ensure that both of you are on the same track.
  • Understand their objectives and needs. These are both professional and personal, but you can build a plan together to help realize them if you know them. That is not to say the company has to give them more but enabling them to see that they have a path to what they seek will show interest on the organization’s part. Right now, several companies are offering an extra day off a month or large bonuses. Figure out what you can offer to make your employees feel appreciated and not cause trouble in your organization.
  • Make sure they feel welcome. Remember, a majority of people regret the move after the first day! Make sure your new employees don’t. 

Engagement

Keeping all employees engaged is key to keeping them, those that you have and those that you are hiring. That means they need to know:

  • The current situation. Your employees need to know where you are today. Now is time for the truth because they do know, just not necessarily from the leadership team. Telling them everything is okay when they see chaos around them means that the leadership team is out of touch with reality, and now is the time to move on.  
  • Where is the company going? Make sure they know the company’s BHAG and 3HAG. Knowing where you are going provides more energy for the task, and right now, we need everyone to paddle.
  • What is their role? Make sure they know their role in the organization. First, make sure they can answer the following:
  1. What do we do, and where am I in the process? 
  2. How do we make money, and what do I do that helps that? 
  3. How will we succeed?
  4. What is most important right now that my team has to do? 
  5. Who must do what? Accountability and reporting roles and 
  6. How can they help? Seek input from them regularly on how to improve processes and actions to perform better. It is incredible how often employees know a better way, but no one ever asks. However, please don’t ignore their feedback because they will never give it again. If you don’t want to use it, explain why.

Growth Plan

As part of the onboarding, understand what they want in their life. If they wish to grow to a new role in the next X years, help them develop a plan. If they are contented at their current position but want to move flexibility, work on that. Understanding their wants and needs shows interest by the company, and that builds attraction. If they feel you care about them, they will care about you. 

Given all that is happening, this is not the time for the Mushroom Theory of Management!

Finally, given that many people are thinking of leaving, if you can afford it, maybe this is the time to prune some of that deadwood.

Good luck paddling out, and I hope you make it through the set.

 

Copyright (c) 2021 Marc A. Borrelli

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I often hear a variant of this in meetings with business leaders, when discussing their employees or the actions of their direct reports: “Why don’t they use common sense?” As Abraham Lincoln supposedly noted, “God must have loved the common man because he made so many of them,” then, surely, most of the decisions involve common sense.

We all think that all it takes is common sense; however, we all decide based on the information we have and the guides we use to make those decisions. Thus, for people to make better decisions, we need to ensure that they:

  • Are solving the right problem.
  • Have all the available information.
  • Know the “Intent.”

 

Solving the Right Problem

The first person to state a problem rarely has the best insight into the issue. However, once a problem is defined, our problem-solving and “get it done” nature kicks in, and we dive straight in. We don’t stop to ask, “Are we solving the right problem?” As a result, many decisions made solve the stated problem, but not the right one.

To prevent solving the wrong problem, make sure of the following:

  • You defined the problem and not someone else.
  • You are close to the problem.
  • You are thinking about the problem from many levels and angles.

 

Have all the Available Information

Having all the available information is challenging; however, I look to two military people to guide me. First, David Marquet, whose great advice is, “Move the decision-making to the information.” This ties in with being close to the problem above. So, move the decisions to the front lines, where people with all the available information about the situation are. The second person is John Boyd and his OODA loops, which I have written about before. OODA means Observe, Orient, Decide, Act. I would say that having all the available information is a combination of Observe and Orient.

 

Observe

Here the purpose is to observe the situation to get the most accurate and comprehensive picture possible. Information alone is not sufficient; we need to take the data and put it into context. The real skill here is identifying what is “noise” and thus irrelevant for the current decision. Ensuring you can put all the information in the correct context requires asking questions to build a comprehensive picture.

At a simplistic level, this reminds me of two stories.

A little girl asked her mom where she came from. The mother responded with the full explanation of the birds and the bees. The little girl looked a little confused, so the mother asked why? “Well,” said the little girl, “Jill next door says she is from New York.”

A car stops next to someone walking down the street, and the driver asks for directions to the nearest interstate. The pedestrian responds with directions, and the driver goes off. However, the pedestrian should have asked, “Where do you want to go?” The interstate may not be the best solution or the quickest for where the driver wanted to go.

In both cases, questions upfront result in a better answer as they help understand the issue. However, we are programmed to answer, not to question!

 

Orient

Orientation is seeing the world as it is and removing the influences of cognitive biases and shortcuts. If you properly orient yourself, you can overcome disadvantages from less information or fewer resources. However, there are four barriers to the ability to orient effectively.

  1. Cultural traditions. Much of what we consider universal behavior is culturally prescribed.
  2. Genetic heritage. We all have certain constraints.
  3. Ability to analyze and synthesize. We fall back on old habits if we are faced with new types of thinking.
  4. The influx of new information. If the environment keeps changing, it is hard to determine what is going on.

To overcome these barriers, Boyd recommended “deductive destruction,” a process of understanding our biases and assumptions and developing mental models to replace them.

As Boyd put it, “Orientation isn’t a state you’re in; it’s a process. You are always orienting.”

 

Know the “Intent.”

You will notice that I didn’t say know the “Rules”, as I feel rules are too limiting. They tend to prescribe an exact situation, and if the situation changes, then a new rule is needed. Also, rules are easy to get around. Knowing the intent is a broader guide but makes it easier to understand.

A great example was GM when Mary Barra changed the corporate dress code. GM’s dress code was ten pages long, trying to cover everything. As a result, it was complex, and I doubt anyone read it. However, Mary Barra decided to change it to “Dress appropriately.” Before the change, someone would have to go through ten pages of rules to determine if an outfit met the code; now, they have to decide whether it meets the intent. Now Dress Appropriately on its own may have caused a few issues, but in discussions among teams to explain the purpose, it didn’t take long for everyone to understand what was required.

So, when I ask CEOs and business leaders, do they have organizational clarity, they respond, “Yes.” But when I ask the following:

  • What is your BHAG?
  • What is your passion?
  • What are your core values/expected behaviors?
  • Why do you exist?
  • What is your Strategy in a sentence?
  • What is your Brand Promise?
  • Who is your Core Customer?
  • How do you make money in a sentence?

Often, they cannot answer all these questions and think that many are trivial. Yet these are the “Intents” that provide organizational clarity. If you know the answers to all these questions, you know whether an action will support the organization or not.

However, the answers to the questions are the “Intent” that helps your team know what is expected of them. If everyone knows the same answer to all these questions, then it is more likely that they will make a decision that falls within the “Intent” and meets your definition of common sense.

Returning to David Marquet, he emphasized that for people to make good decisions:

  • They need to have control, e.g., make the decision so they take ownership of the problem. If you retain the power and don’t give it, your team members will never make the decisions you want.
  • They need to be competent. Do you have the “right people in the right seats?” If you do, then they should be able to make the decisions. If not, then it is not their issue, but yours. You have the wrong people running things.
  • Organizational Clarity. Or stated as “Is it the right thing to do?” If your people know the above guides’ answers, they will know if the action supports the organization’s purpose and goals.

So next time you feel your team is not making “common sense” decisions, ask yourself:

  • Are they solving the right problem?
  • Do they have all the available information?
  • Do they know the “Intent,” and is there organizational clarity?

I think you will find that something in the above is missing.

However, a warning! This course is not easy; you are giving up control, and to make it work, you have to allow them to make different decisions. If you keep snatching power back, it will fail. 

Once you decide to go down this path, ensure that the “Intents” are answered, and everyone knows the answer. Good luck.

 

Copyright (c) 2021, Marc A. Borrelli

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