Hopefully, Your Firm Doesn’t Claim a Family Culture

Hopefully, Your Firm Doesn’t Claim a Family Culture

I am a strong believer that company culture is critical in its success. It defines who you are, who you attract, and how you behave. As Jim Collins says, the most important thing is “Who is on the Bus.” However, when talking to many clients and business owners, I often hear that they have a “Family” culture within their organization. I am always perplexed by this answer, but it has become a red flag in my book about the possibility of the organization’s performance.

What Does Family Culture Mean?

Drilling down, it would appear that it means that the organization is nurturing like a family. Mentally they envision a Norman Rockwell painting of everyone happy and getting along. However, most family gatherings are not like that. Rather it starts that way and then someone says something that leads to the usual conflicts arising. I know families where they always invite guests to ensure everyone remains on good behavior.

When I hear family, the first thing I think of is “dysfunctional.” Now everyone is pointing out that only my family is dysfunctional; however, we all have thought our spouses/partners’ families were dysfunctional when we met them because they didn’t behave like ours. But it is not just behavior; there is true dysfunction. As a friend reminded me of at my wedding, at every wedding, there is the equivalent of the “Drunk Uncle.” Let’s consider some of the cast of characters that can appear.

  • The matriach/patriach. They rule. All allegiance is to them. They were paramount in the family’s success, so their “rules” are lived to even when no one can remember how or why the rule came into being. I have seen families lose fortunes following such directives because the world had changed, but all that remained was the rule and not the intent.
  • Favored child. There is always one. They often perform way below par and everyone else, but the parents continue to make excuses for them and support them. They are the ones who believe they are owed everything under their “favored” child status.
  • Second Class Child. The one that was ignored as all the attention got lavished on the favored child. They often work harder, produce more, and die for the family’s success; only they are never taken seriously. Often they become bitter and seek the destruction of all.
  • Drunk Uncle. We all know him/her. Embarrasses everyone, totally inappropriate, starts fights, resented by all, yet tolerated because they are family. However, everyone hopes they will not make the next event.
  • Bitter Sibling. Was overlooked in the succession plan, so bitter forever. Points out how the others received everything on a plate, but they received nothing. They ignore the fact that they have lived off the families’ wealth for the entire lives.
  • The Outcast. Unable to fit in went on their own. Has done well, but resented because they had the strength to walk away and is enjoying life.

If we have a “Family” Culture, then we probably have some of these in the organization.

What is the Problem?

Employees leave organizations because they lose respect for their supervisors.  Why? Their supervisor tolerates “B and C” performers. “A” players want to be surrounded by other “A” players. In a high-performing company, if you don’t meet expectations, you are fired. There is no job security other than through performance.

However, we never fire relatives; we can’t. You are always my father, mother, son, daughter, etc. Thus, claiming a family culture, by definition, requires that you will tolerate poor performance. Knowing that there are “B” players on the team who are never going to leave because of the “family” culture will just driveway more “A” players. This is a negative reinforcement cycle that leads you into a future of mediocre performance as an organization.

My father gave shares in his company to his parents and siblings. When my aunt married someone who didn’t reflect my father’s values, she demanded that my father give him a job in the company as she was a shareholder and it was a “family” business. My father fired all his family members and reminded them that he had them sign undated sale agreements back to him when he gave them their shares. He dated them all and became the sole owner. From then on, he would only hire those that could perform.

So What to Do?

If one looks at successful family businesses, I see that they don’t claim a family culture. They emphasize those family values that they care about. They can say that their values are “nurturing and developing” e.g. they are a “pool” company. Or they can say that they train and develop their people to go on to better things, e.g. a “stream” company. In my father’s case, one of his values was caring. When one of his accounting staff’s husband was diagnosed with terminal cancer he sent her home on full pay until the husband had died. He made sure that the bonuses and gifts he gave made it to the employees’ families. When my father died, over three hundred Africans came from the townships in South Africa to pay their respects at his funeral.

Further, I have noticed that high performing family businesses often have rules, like those below, when a family member wants to join the family business they must:

  • Have worked elsewhere before joining.
  • Apply for an open position
  • Have the requisite experience and qualifications,
  • Be interviewed and selected by non-family members.
  • Report to non-family members and stepping over the chain of command to family members higher up can be a termination event.
  • Realize they will be fired for nonperformance. If they are, they are still in the “family,” just not in the company.

So if you want a culture of performance, don’t say you have a family culture. Focus on what part of the “family” culture you want to emphasize and say that.

Copyright (c) 2021, Marc A Borrelli

 

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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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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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Do You REALLY Know Your Business Model?

Do You REALLY Know Your Business Model?

Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.

Do You REALLY Know Your Business Model?

Do You REALLY Know Your Business Model?

Clarity is a repeated theme of mine and The Disruption!, whether in regards strategy or how you make money. Listening to Josh Kaufman discuss his “Five Parts of Every Business” and the need to define your business model while presenting this information clearly magnified the point.

 

What Are The “5 Parts of Every Business”?

Kaufman says in every business model there are “5 Parts of Every Business,” each of which flows into the next:

  1. Value Creation: A venture that doesn’t create value for others is a hobby.
  2. Marketing: A venture that doesn’t attract attention is a flop.
  3. Sales: A venture that doesn’t sell the value it creates is a non-profit.
  4. Value Delivery: A venture that doesn’t deliver what it promises is a scam.
  5. Finance: A venture that doesn’t bring in enough money to keep operating will inevitably close.

 

Value Creation

Kaufman defines Value Creation as “Discovering what people need or want, then creating it.”

Most customers don’t know what they need or want. As has been pointed out many times, people wanted a faster horse, not an automobile. However, whatever they want, in reality, they are just seeking a solution to a problem. Therefore, the critical issue is determining “What problem you are trying to solve?” Or, as Clayton Christensen said, “What is the job the customer is hiring you or your product to do?”

Defining this is often hard, as many companies don’t know what job their clients are seeking them or their products to provide. I have discussed this before. However, as the adage says, “people aren’t buying drills, they are buying holes.” This is a vital part of your business model.

So, working with your team to determine “the job to be done” and your “Core Customer” is well worth the effort because you can better describe what you do, and all your employees will better know what you do and how what they do impacts it.

 

Marketing

Kaufman’s definition is “Marketing is defined as attracting attention and building demand for what you have created.”

In today’s digital world, with Google, Facebook, Linked In, and Instagram, marketing separating yourself from the masses is hard, especially if people don’t understand the product and service. Therefore, by focusing on the job to be done or the problem you are solving, it easier to stand out among the crowd.

Also, as you identify what the “job to be done” is, you can better identify your Core Customer. Remember a Core Customer is:

  • An actual person with needs and wants. If you sell B2B your core customer is still a person because you have to convince a person to buy.
  • Who buys for the optimal profit.
  • Who pays on time, is loyal, and refers others.
  • Has a unique online identity and behavior; and
  • A customer who exists amongst your clients today.

Build Direct started as a company supplying contractors. However, it soon realized that while contractors were a key customer component, they were not the company’s Core Customer; instead, Build Direct’s core customers were young female DIYers interested in the products and education. Build Direct focused its marketing according to that recognition and started providing much educational content for young female DIYers. This specific marketing drove much better brand recognition and engagement.

Also, South Shore Furniture in Canada identified their core customer as “Sarah.” Sarah is so vital that there is a mannequin of Sarah in all meeting rooms, so no one forgets whom they are seeking to serve.

Besides, marketing to the correct demographic is easier and more fruitful if you know your Core Customer. Without this information, the marketing section of your business model is just hope, not a strategy!

 

Sales

Kaufman defines sales as “Turning prospective customers into paying customers.”

However, as Jeffrey Gitomer, put it “People don’t like to be sold, but they love to buy.” So the key is how do you move prospects into customers? Businesses have to earn their prospects’ trust and help them understand why it is worth paying for the offer. Another way of looking at this is, “What is your brand promise?”

Companies need to know what their brand promise is. For example, Starbucks is “Love your beverage or let us know and we will always make it right.” Some organizations may have supporting brand promises to prove more definition of the brand promise. Your brand promise must be measurable, because as Peter Drucker said, “What gets measured gets managed.” So if it is measurable and measured, the organization can ensure that it meets its brand promise, which provides more assurance to the prospect. Finally, with a clearly defined brand promise that is measurable, the organization ends up saying “No” more than “Yes” to opportunities and ideas since they will damage the brand promise.

Since no one wants to be taken advantage of, Sales is about educating the prospect to identify what is essential to convince them you can deliver on your promise. A clearly stated brand promise that is measured and quantified increases the ability to persuade the prospect to purchase from you. It amazes me how many business models don’t have a brand promise.

 

Value Delivery

Here Kaufman defines Value Delivery as “Giving your customers what you’ve promised and ensured that they’re satisfied.” With this, I have no issues. Anyone who doesn’t deliver what they promised is effectively a “scam artist.”

To ensure you that make the customer satisfied, you have to exceed the customers’ expectations. A popular way to determine customer satisfaction is through Net Promoter Score scores which we see more and more (if you are looking for help with NPS surveys of your customers, contact me). You want more promoters and detractors. However, the NPS score tells you what the customer thinks after experiencing the service or product. Companies need to develop systems that ensure the service or product is exceeding expectations.

A great example is the Ritz Carlton’s policy whereby any Ritz-Carlton employees can spend up to $2,000 per incident, not per year, to rescue a guest experience. This policy ensures that the customer is getting a great experience because it empowers employees to fix problems and provides the customers’ concerns are solved quickly. As David Marquet says, “Move the decision making to where the information is.” That is what Ritz is doing, and it is empowering employees and making customers happy.

Companies that have outsourced many functions to cut costs, so any customer has difficulty reaching the people they need or have to spend five minutes going through a phone tree to contact some is already failing at this.

Ensure your business model tracks customer satisfaction and you have ways to ensure that customers are happy.

 

Finance

Kaufman defines finance as “Bringing in enough money to keep going and make your effort worthwhile.”

As I have pointed out, this is key, and many people don’t realize the situation because of flawed analysis and lousy modeling. However, the key for any organization must be a well-defined “Profit/X.”

Many organizations don’t have a well-defined Profit/X, but there is a lack of discipline that ensures good financial performance without it. Profit/X is some unit of scale, and profit can be gross profit, net profit, EBTIDA, or EBIT. Examples that I have seen are:

  • profit per airplane
  • profit per job
  • profit per customer
  • gross margin per delivery
  • profit per employee

There is no correct Profit/X, just the one that works with your business. One organization that did deliveries chose Gross Margin/Delivery, which focused on reducing the cost of delivery to maximize profit. Once Profit/X is selected, the entire organization must seek to meet or exceed it; thus, everyone needs to understand it and how they drive it. With that focus and discipline, the organization is more likely to meet its financial goals and objectives.

 

Summary

In summary, the organization needs to be able to define its business model by the following:

  • Define the problem its products or services solve or, more precisely, what job they do.
  • Who their Core Customer is so they can market to them effectively?
  • What is their brand promise, and how is it measured?
  • That their customers are satisfied, returning and recommending.
  • That they have identified their Profit/X so that they are profitable.

Doing this work is an excellent exercise for any leadership team to help bring clarity to your organization. If you need assistance doing it, contact me. Good luck, and may your business grow.

 

 

Copyright (c) 2021, Marc A. Borrelli

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In discussions with many clients this week, the common theme that I heard was exhaustion and depression. As I have said before, thanks to COVID, we are all tired. However, our personal situations amplify the stress that we all suffer from because of COVID. In some cases, it may be a spouse losing a job, homeschooling multiple children while trying to do your work, or worries about elderly parents.

Regardless, the stress is coming at us from all sides. I recommended that my clients spend time talking to their direct reports, employees, clients, and suppliers and asking how they are doing. Not just asking, but actively listening to hear what is going on in their lives. Things like this make a difference.

Besides, a repetitive theme is “Clarity,” e.g., what is your strategy in a single sentence. However, regardless of our intentions, the corporate playbooks come out periodically, messing everything up. I have recently heard companies ignoring such advice and reverting to keeping all information secret and locked up.

Now I am not talking about profits or trade secrets, but rather things like strategy, brand promise, employee development, and bonus calculations. This lack of clarity causes confusion and more stress. However, it is also giving rise to another issue, the loss of “A” employees.

My recent blog on the coming talent crunch pointed out a shortage of “A” players. As see from my clients and others, as we are starting to emerge from COVID, demand is increasing. Many are scrambling to fill positions to meet that demand. As a result, for “A” players, the call is out that you are needed, and the market will reward you!

If your organization is focused on obscurity over clarity, whether intentionally or not, your “A” players are vulnerable. It reminds me of my many years in M&A when a selling owner or CEO would concoct stories to cover the buyers’ due diligence. In every case, the “A” players would realize what was going on. In the best cases, they would be in the CEO’s office that same day asking, “Are we being sold?” However, in the worst cases, they would start the discussions around the proverbial water cooler. Nature abhors a vacuum, and it never ceases to amaze me the stories that people can come up with when they don’t know what is happening. Regardless, the net effect of uncertainty with the future leads all your “A” players to get their resumes out and start looking. Only the “C” players stay because they have no options.

Regardless of how your business is doing right now, you need your “A” players to survive and thrive. If you are left with your “C” players, you might as well start looking for a buyer or considering some other form of exit.

So, consider your “A” players. They need to know the strategy, brand promise, and core purpose of the organization, their career development and options, and their expected compensation and how it is calculated. Why?

Strategy

If they don’t know the strategy, they cannot execute it. As David Marquet put it in, Turn the Ship Around, “Push the decision making to where the information is.” The information is at the front lines, not in the board room. The more your employees know about the strategy and the clearer it is, they can make the correct decisions as market conditions change. And market conditions are changing rapidly at the moment.

Core Values and Brand Promise

COVID has brought home how precarious life is. So, people during this time of lockdowns and death are questioning the meaning in their lives. They are now looking at the organizations that employ them and asking if their values align. A recent Harvard Business Review article put it that Core Values are no longer a nice thing to have but a core part of the strategy. So, if you cannot articulate your core values and brand promise clearly to your employees, they will determine it on their own, and it may be very different from what you proclaim. Self-determined values are based on the behaviors they see rather than what is claimed. In that case, you may lose those employees who would support the values and brand promise you aspire to rather than what you live.

Career Development

As mentioned above, COVID has brought home fragility. Many are questioning if they want to do “X” for the rest of the career. Thus, a vital part of any employee review at this time is understanding what they seek for their future. It may no longer be promotion and leadership, but more time with family or new experiences in other divisions or markets. Understanding your employees’ desires and working with them to realize their desires while meeting the organization’s needs is more likely to retain them than ignoring them.

Their compensation and its calculation

Your “A” employees are getting calls from headhunters and recruiters because there is a talent crunch. If not, they soon will be. While the vast majority of employees don’t leave because of compensation, as a result of COVID, many bonuses or pay raises were deferred, changed, or ignored. Many organizations face cash flow issues and are in no position to provide employee bonuses or raises but explaining that is key. Others thrived during COVID, and many of their employees have stepped up well above expectations.

In some cases, those employees don’t understand how their financial rewards correlate to their efforts and believe they were short-changed. Those employees are more likely to take a headhunters’ call. Therefore, explaining the situation, explaining the policies, pay, and bonuses are calculations will help dramatically.

With greater clarity, you will more likely realize your strategy and keep your “A” players, enabling you to thrive. Obfuscation will only lead to tears.

 

Copyright (c) 2021, Marc A. Borrelli

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As I have mentioned before, we are all tied of Zoom, and the meetings seem never-ending. However, with COVID, I hear from many people that they are tired of Zoom meetings and actual meetings. As someone recently said, “We are having more meetings now than ever, and everyone is tired of meetings.”

It easy to suffer meeting fatigue, especially at times like this. So how do you reduce meeting fatigue? I think there are several ways.

 

Do you need a meeting?

It is too easy to have meetings today, especially with Zoom and our lack of social interaction. However, just because it is easy doesn’t mean that it has to happen. Undoubtedly everyone has seen those mugs and memes – “I survived another meeting that could have been an email.” So before calling a meeting, determine several things:

  • What is the purpose of the meeting?
  • What is the expected outcome of the meeting?
  • How needs to attend?
  • How long should it be?

If you cannot easily articulate the first two, then you don’t need a meeting. If you can, “Who needs to attend?” should be easy to determine. Keep it limited to only those who need to attend because making it large and wasting people’s time will reinforce “death by meeting.”

Finally, as Leonard Bernstein put it so well, “To achieve great things, two things are needed: a plan and not quite enough time.” Keep the meeting short, which keeps pressure on everyone to get its purpose accomplished within the time because no one needs another session.

 

A Meeting Agenda

Having determined that a meeting is necessary, put together a meeting agenda with time allocation. As Bernstein’s quote above states, you need “a PLAN.” Your agenda is the PLAN. So, lay out all the parts you want to cover in the meeting, the estimated time for each item, and the takeaways. Not the specific outcomes, but that there will be an agreed date, action item, responsibility.

Once you prepare the schedule, share it with the invitees, so they understand the expectations and determine if they need to attend. For example, an agenda could look like the following.

Item Outcome Time
1 Introductions & Purpose 5 minutes
2 Update on project status – Just each step’s status
  • On Schedule
  • Of Concern
  • Behind Schedule
5 – 10 minutes
3 Review of those items “Of Concern” and “Behind Schedule.” Action Items, To-Do List 45 minutes
4 Review of meeting outcome and schedule of next meeting if needed Confirmation of Who, What, and When 5 minutes

The above agenda provides expectations of the meeting’s purpose, the expected outcomes, and how long the session will last. Without results, the meeting becomes a discussion with no solutions. I remember leaving a board meeting once where I was only an adviser, saying I would never attend another because, to paraphrase Samuel Beckett, “Nothing happens. Nobody commits; nobody is held accountable. It’s awful.”

 

Meeting Rhythms

Now just because we are suffering meeting fatigue doesn’t mean we don’t need meetings. For meetings to have value, they need a rhythm that is a continuous circle of meetings. Each session has a specific purpose, outcome, and time allocation. As Verne Harnish put it, “Goals without routines are wishes; routines without goals are aimless.” If you follow Rockefeller Habits, the 7 Attributes of Agile Leadership™, which I use, or EOS™, meeting rhythms will not be new.

However, whatever meeting rhythm you have, the key is to ensure the relevant data, financial, KPIs, etc. is circulated to all members prior to the meeting. Spending a large portion of the meeting receiving the data through PowerPoint presentations has a number of effects:

  1. It is just a huge waste of time. We can all read faster than we speak.
  2. Attendees tend to check out and so miss key pieces of information that may be presented.
  3. Giving people time to review and process the information will lead to better discussions.
  4. It increases “Death by PowerPoint,” and an aversion to meetings.

The ideal Meeting Rhythms for a company are below.

Daily Huddle

The Daily Huddle is a daily alignment meeting that lasts 10 or 15 minutes—done standing. All employees attend, and anyone not present should call in. If this seems complicated, remember General Stanley McChrystal, while in Iraq as Commander of JSOC from 2003 to 2008, did a daily huddle involving 50 people. However, he soon realized that the huddles needed to change to adjust to battlefield conditions, so they were expanded to include 7,500 people and run for 90 minutes.

The purpose is to synchronize activities across the organization and provide a daily forum for activity updates and scheduling. Each team member should contribute. However, it is paramount for the leader (CEO) to make sure it is too valuable to miss.

Sample Agenda:
  • Headlines: Good news (personal and business). The aim is to make the attendees relaxed and build camaraderie.
  • News: Any news from the previous day relevant to the entire team. Align on the Number One Priority for today
  • KPIs: Review yesterday’s numbers and each persons’ progress regarding their stated Critical Numbers and Key Performance Indicators (KPIs).
  • Issues: Any issues employees have encountered preventing them from moving forward on the Number One Priority for the day.
  • Rocks: The most crucial task each team member is committed to accomplishing that day. The statement starts with: “Today I will commit to accomplishing…”

Weekly Meeting

The Weekly Meeting ensures the weekly execution of Quarterly Rocks’ sub priorities. This meeting should be 60 to 90 minutes.

Participants should prepare to discuss results, KPIs, accomplishments, Rock updates, and their respective Priorities for the upcoming week. The meeting is not to solve significant strategic issues but to resolve most minor matters relevant to the monthly or quarterly plan and problems from the Daily Huddle.

Maintain focused discipline on the time frame and make every minute count. Reward and recognize good performance

Sample Agenda
  • News: Wins both personal and business
  • CEO Update: On the prior week or week ahead. Making the meeting “a not to be missed!”
  • KPIs: Did the team have a good week or a bad week? How is the team performing on Critical Numbers? How is overall performance?
  • Department-level Quarterly Rocks Review: Is the team on track or off-track for the quarterly goals? What Priorities are going well? What Priorities require fixing? Completed and open assignments?
  • Customer/Employee headlines: What are customers saying? What are employees saying?
  • IDS: Identity, Discuss, and Solve important tactical or implementation level issues. Use collective intelligence. Action Items and the “To Do” List. Who What When (WWW)
  • Close: One Phrase by each attendee summing up the meeting.

Monthly Meeting

The monthly meeting is the foundation of strategic execution. The discussion should start with a strategic training topic as part of the management team’s continual education. Frontline, middle and senior manager should attend, and the organization should use it as an opportunity to transfer leadership DNA.

This meeting is a place to discuss significant issues, which will have a long-term impact on the business. As these issues require more time for participants to brainstorm, debate, present ideas, and actively engage with each other to achieve the optimal long-term solution, the meeting should only be one or two topics identified in advance.

This meeting undertakes a review of the prior month’s financial results and the Rock’s execution status, so it should occur as soon as the monthly financials are available.

Sample Agenda
  • News. Good personal news.
  • Monthly strategic training topic(s)
  • Wins and Misses. Successes and Misses from the prior and current month relating to the achievement of monthly and quarterly business goals.
  • Review of Financial Statements: Monthly focus on Income Statement, Cash Position, and Working Capital.
  • KPIs: Executive report out on Critical Numbers, Metrics, Lead Measures and KPI’s.
  • Quarterly Rocks Review: On track? What is going well? What needs fixing? Where do you need help? Are there processes and inter-departmental flows that need improving?
  • Customer/Employee headlines
  • IDS
  • Close

The Quarterly Meeting

The Quarterly meeting is a time for leadership to assess a variety of strategic issues. The update and execution of The One Page Strategic Plan drive the agenda. Other topics for discussion and resolution are the team’s interpersonal performance, specific elements of the company’s strategy, top-tier and bottom-tier employees, morale, client success and satisfaction, competitive threats, and industry trends. Focus on the four key areas: People, Strategy, Execution, and Cash.

This meeting focuses on executing the subsequent 13-week “Sprint” toward the next waypoint on your company’s 3HAG. The duration of the session is typically half to a full day, depending on company need. It should occur as soon as the quarterly financial results are available.

Sample Agenda
  • Team Exercise or Icebreaker
  • Prior 13 Week Sprint Assessment: Revise incomplete priorities. Review the attainments for the quarter against critical criteria.
  • Financial Performance: CFO Report
  • Next 13 Week Sprint Plan: Review of 1 Year Goals, 1 or 2 Critical Numbers-Upcoming Year & Quarter, Key Company Rocks, Key Metrics/Lead Indicators
  • One Phrase Close

The Annual Strategic Planning Retreat

The annual strategic planning retreat is somewhat similar to the quarterly meeting; however, it is more strategic in scope. Assess the prior annual plan, current realities tested, and formulate a new long-range strategic plan. The yearly retreat focuses on the core ideologies, the BHAG, the development of 3–5-year strategic thrusts that will meaningfully differentiate the company.

The meeting’s duration is typically a whole day to two days, depending on company need, and is held offsite.

There is no need for the plan here as that can be a separate topic; however, in the end, communication of the outcomes to all employees need to be determined. The meeting rhythms should be set annually at the retreat, with the times and dates of all the meetings planned and circulated to everyone that will attend.

1-2-1s

All managers should have weekly 1-2-1s with their direct reports. These meetings should be an hour and the discussion focused on:

  • How is the employee doing?
  • Issues they are facing?
  • Issues that the manager sees?
  • KPIs and objectives for the quarter and year.

It is best if the agenda is agreed upon beforehand to prepare both the manager and direct report. If both know the topics for discussion, the outcome will be more fruitful, and if not, neither may have the requisite information at hand, making the discussion meaningless. Also, this weekly 1-2-1s are providing continuous feedback to the direct report and allowing for incremental improvements. Thus, at the time of the quarterly, or annual, review, there are no surprises, and no one has to recall what has happened over the last year.

If all those meetings seem overwhelming, I think on reflection it should reduce the number of overall meetings make the remaining ones more effective. Hopefully, with this guide your meetings can be more fruitful and engaging, resulting in better outcomes for the organization, the employees, and the managers.

 

(c) Copyright 2021, Marc A. Borrelli

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COVID = Caught Inside

COVID = Caught Inside

As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.

Why is there not MORE common sense

Why is there not MORE common sense

“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.

Do You Understand Your Costs to Ensure Profitability?

Do You Understand Your Costs to Ensure Profitability?

You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.

Sunk Costs Are Just That, Sunk!

Sunk Costs Are Just That, Sunk!

If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.

Do You REALLY Know Your Business Model?

Do You REALLY Know Your Business Model?

Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.