Tips to make your business... Organic?

Organic is a buzzword these days. Everything from paper products, produce, beer, and textiles can be labeled organic. But what does organic really mean? Organic refers to the “methods that produce or involve production without the use of synthetic fertilizers, pesticides, or other artificial agents.” Why does this matter? Because organic products are thought to be healthier than conventional products. So, should you make your business organic?

Yes! By adopting organic standards, you can increase the health of your business. How does this happen? By avoiding artificial growth agents, pesticides, and synthetic fertilizers. This post contains three tips businesses can follow to make the leap to organic: promote from within, fund your own growth, and adopt a family business mindset.

HIRING AND PROMOTING ORGANICALLY

The first step toward an organic business is avoiding the harmful turnover practices that erode your business’ culture. You do this  by developing a hiring and orientation process and by promoting leaders and middle managers from within. Aside from limiting turnover, there are two other benefits of developing a hiring process and promoting from within:

• Culturally, standardized hiring and promotion processes help acquire and retain individuals who reinforce your mission, vision, and values.

• Operationally, promoting from within increases leadership’s understanding of the nuances of processes and procedures and retains institutional knowledge. Leaders with field knowledge can make a better decision more quickly. When leaders don’t have this understanding, a disconnect can occur between what actually works in the field and what leadership thinks SHOULD work in the field.

One of the best examples of promoting from within is demonstrated by Publix Supermarkets. At Publix, one of the common refrains you hear from managers is, “I started as a bagger x number of years ago.” It is a badge of honor they wear, but it’s also a great recruiting tool used to get young professionals to own the vision and values and make Publix a career. Without exception, every associate receives a job in an entry-level position. Even experienced ex-managers from other grocery chains are required to work in each customer service position before being promoted up the ladder. It’s no wonder why Publix is one of the largest grocery chains in the US and consistently ranked on Fortune’s 100 Best Companies to Work For list.

NON-ARTIFICIAL FINANCING

It’s impossible to have the conversation about growing organically without also discussing ways that companies can fund growth. Increasing net margins, bank lending, mergers, loans from friends or family, SBA loans, etc., all serve the purpose of securing funding for the next stage of your business. But which method is best? How do you know what strategy is best for your business? There are  are certain strategies that are less “artificial” for funding growth than others.

Increase Net Margins

The all natural, non-GMO, method to funding growth is hitting 10-15% net margins. This concept popularized by Greg Crabtree’s in his book Simple Numbers Big Profits,  is the idea that 10% net margin is the minimum necessary to have capital leftover to invest back in the business. Unfortunately, there is no magic wand one can wave over a business to make it comfortably profitable. There needs to be a plan. Simple steps to increase your bottom line include:

• Cutting down on unnecessary expenses. Yes, your customers and operating partners might really enjoy sports, but do you really need season tickets?

• Setting up a salary cap. A salary cap is Crabtree’s idea of working backward to determine the max you should be spending on O/H labor in order to achieve 10%-15% net pre-tax margins

• Increase prices. There are many reasons to raise prices: keeping up with inflation, higher cost, increasing your perceived value, and most important, positioning yourself in the competitive market. Additionally, all else remaining constant, raising prices results in a direct increase to the bottom line. When is the last time you raised your prices?

Line of Credit.

Another source for financing growth is a line of credit (LOC). The benefit of a line of credit is its low impact on a company's operating fitness and its low cost. Cost can remain low on a LOC because unlike a long-term loan, interest is calculated only on the amount utilized. However, anytime a business uses the money it didn’t generate - its artificial. Therefore, it’s important to be wise when tapping into a LOC. We don’t recommend utilizing a LOC to fund payroll or other overhead expenses. Possible uses for a line of credit are:

• Accounts payable associated with cost of goods sold. A line of credit can be used to increase  raw material or inventory purchases that will be converted into sellable goods that will generate cash.

• Increased accounts receivable. Revenue growth usually results in larger accounts receivable, and funds from a LOC can help bridge the gap until those new customers start paying their invoices.

• Revenue generating payroll positions. Hiring new salespeople entails a period of training and draws until they get up to speed. A LOC can enable you to onboard these positions, but you must be diligent to make sure they stay on track and begin generating a return on that investment.

INSTITUTIONAL KNOWLEDGE.

Lastly, leveraging institutional knowledge  is a great way to move toward organic growth. Family businesses seem to have inherent qualities that qualify them for the “organic business” label and many times it is their institutional knowledge that sets them apart. They utilize the wisdom of prior generations, current generations rely on the tried and true methods and processes developed by their predecessors , and the future generations are groomed under a well accepted set of company values. When these things happen, wisdom capital grows.

This is the wealth of information that accrues in any business over time. As generations endure up and down seasons, they’ve learned what works and what doesn’t. This creates a distinct advantage for future operations because problem-solving and decision making can be done efficiently. But this doesn’t just result in operational efficiencies. Culturally, wisdom capital results in vision and values affecting how things get done as much as (or potentially more than) standard operating procedures.

An example of this can be seen in Goodall Guitars. Since 1972, James Goodall has been building guitars with one goal, “Acoustic Excellence.” During his process, which you can watch here, Goodall explains how over time he’s manufactured tools to build and piece together components to avoid using excessive internal bracing which dampens the “tonal quality” of his concert grade instruments. It is here, in the refinement of a component that cannot even be seen, that we understand the attention to detail required by a standard of “Acoustic Excellence.” And in true family business fashion this wisdom capital is being passed down to his son.

An important caveat is that in a growing business this institutional knowledge must be captured. Information must be stored in playbooks, recorded in processes, and taught to the “next generation” before it can become culture influencing wisdom capital

Going organic doesn’t happen overnight. But with disciplined and focused use, strategies like these can help your business achieve growth without the nasty side effects of more artificial options.

Responsible Service Part 2

In part one we talked about the importance of personal responsibility in driving customer satisfaction. This week is about building a culture of personal responsibility, and how that culture creates opportunities for highly personal relationships.

THE IMPORTANCE OF CULTURE

Culture is the average of every individual’s values in your organization. This means that if the majority of individuals in your company desire to make a name for themselves, the culture will reflect that “dog eat dog” mentality. Likewise, if your employees value unity, conflict resolution is a skill many of them use on a daily basis. No matter what, culture exists. And though cultures vary, two broad types of culture separate every organization: transactional or relational.

TRANSACTIONAL BUSINESS

Like a vending machine each input variable results in a specific output. With a vending machine, humans put in money, we punch in our request, and the machine distributes the item. When the transaction goes smoothly we feel satisfied. When the machine doesn’t deliver, we can call the 1-800 number but what we really do is bang on the machine to get our snack to break loose or concede the battle and pay again.

RELATIONAL BUSINESS

Here, inputs and outputs still exist, but the delivery process gives us a sense of connection. The best example of this in our world is the relational vending machine, Amazon. Inputs and outputs still exist; however, Amazon also offers recommendations or “frequently purchased together” suggestions that create a shopping experience more tailored to our needs and wants. They also send updates including shipment and delivery notifications. When the transaction goes smoothly, items arrive in a couple of days. When Amazon doesn’t deliver, a short phone call, email or live chat result in a quick refund.

I’m not saying transactional businesses are inherently bad, it’s just that businesses with relational cultures have higher levels of trust and commitment from their customers. And building a relational culture and a culture of personal responsibility go hand in hand. In fact, there is one question that can help us do both at the same time.

THE QUESTION: HOW ARE YOU DOING?

It’s a question we hear every day. Unfortunately, we use it so much we’ve become numb to its meaning. Yes, we can use it to show concern for someone we care about it, but most of the time it’ is just a responsive greeting. We use it when talking with complete strangers without any expectation of an honest response. Yet, despite its commonality, if we are intentional and genuine, this question prevents us from remaining passive. By asking it, we assume the burden of hearing and replying to the answer.

And leaders must be the first to ask, “How are you doing?” and listen. For when leadership asks and is intentional about listening, they model care and responsibility for their team. Over time, this will encourage other team members to ask the question and assume the burden to listen and act. In so doing trust, commitment, and regard for others will be reciprocated beyond the four walls of your business.

How do you get started? What does asking this question look like in different business activities? To help answer these questions, here are three ideas you can use today.

ASK TEAM MEMBERS IN THE DAILY HUDDLE

This is a discipline we recommend to all of our clients so that the team begins each day on the same page. The focus of these 5-10 minute meetings is for leaders to support their employees by asking three questions.

• What is on your list for today?

• Did you get yesterday’s list done?

• How are you doing? Are you stuck?

The beauty of the huddle is that there isn’t enough time to get into operational weeds, and the focus is on hearing and responding to the needs of your employees.

ASK CUSTOMERS WHEN WE TALK TO THEM

You should directly ask your customers the question with phone scripts or surveys. You may think it’s a no-brainer, but your receptionist should ask this question to every customer. Not only does it provide valuable intel about the customer, but if the receptionist passes that info along to the next department who speaks with the customer, it immediately becomes an opportunity to communicate that your company listens and cares.

ASK OUR PROCESSES WHEN WE MAKE CHANGES

Weekly operations meetings are a time to address issues and troubleshoot. In these meetings someone in the room should always play “customer advocate” when discussing changes. The assigned individual’s role is to get everyone in the room to ask, “Is the customer going to be better off after this change?” In this indirect way we are trying to ask our customer “How are you doing?” after a change is made. The answer should always be better, and it is the advocates job to articulate exactly how the customer will be better off after the change.

Cultures don’t change overnight and creating a culture of personal responsibility will take time. By asking “How are you doing?” and intentionally listening to the response you will start to see individuals not only accept, but assume personal responsibility in the business. Always start from the inside out. Your team needs to know that you feel a responsibility toward them before they can ever pass that along to customers and the business at large.

Submitting to Your Org Chart

It is easy for business owners to fall into the trap of thinking they need to be the one in charge. In a recent planning session a large ownership group had to decide which roles various shareholders would fill. With seven owners this $5 million business did not have enough C suites for everyone to have a corner office. More important, they were keenly aware that their long-term strategic plan required current employees to move into leadership roles as soon as possible.

As we discussed various operational responsibilities one owner in particular stepped up to the plate and volunteered that the business needed him in a regional manager position more than it needed him in the VP slot. This meant he would be reporting to a non-owner who worked for him. But it also meant that the non-owner would have the position and the mandate she needed for the long-term plan to be successful.

As logical as this sounds it doesn't happen very often. Great leadership doesn't mean having all the answers and it doesn't mean calling all the shots. In small businesses owners are responsible for establishing direction and long-term vision, but it is okay, and many times even preferable, for these owners to hand over key responsibilities to others better suited to the task. Since most small businesses cannot afford purely passive owners this means shareholders still need to fill an operational role that requires them to be accountable to employees who work for them.

We often talk about servant leadership, and this is a prime example. Submitting to the org chart means putting yourself in a position to serve the organization. In setting aside his ego to do it this owner demonstrated humility and leadership at its best.

Responsible Service

The role of customer satisfaction in business is undisputed. Businesses exist because they satisfy a customers wants and needs by delivering products and services for a profit. Without satisfied customers, businesses fail. Yet, despite its importance, predicting customer satisfaction is surprisingly hard to do. There has got to be a better, less dynamic, variable that accounts for satisfaction and that is standard across businesses.

That universal variable is personal responsibility. Customer satisfaction will be higher in an organization where employees have a greater sense of personal responsibility for the customer’s satisfaction. So how would we measure this variable? How does it differ from fault? How can a business leverage this variable?

To answer these questions, I’m separating the topics into two blog posts. Here I’ll talk about personal responsibility and the distinction between fault and responsibility. In my next post, I’ll share the question that each individual in your organization should be asking to build a culture of responsibility and how this transforms any company to be more relational.

Personal responsibility

The variable that you should use as an indicator of customer satisfaction is personal responsibility. Measuring personal responsibility is an inexact science at best, but if we get creative there is a way we can gauge to what extent individuals within the company view their efforts as being responsible for customer satisfaction.

Imagine a company survey that asked employees to fill out a pie chart assigning customer satisfaction responsibility to each department. In this company there are four departments: sales, service, operations and administration. If each department viewed their efforts as equally responsible for customer satisfaction each would draw a perfectly weighted pie divided into four neat pieces. In other words, each department when asked independent of the others, decided that they were only 25% responsible for the customer’s satisfaction.

But imagine a company where the sales department weighed themselves as 60% responsible with the other departments sharing the remaining 40%. Service weighed their portion at 75%. Operations similarly put their responsibility as 65% of the pie. Administration viewed their role as 85% responsible for customer satisfaction. For purposes of our “Personal Responsibility Metric” we don’t care how each department rated the others. We only care how each department weighed itself. In this company the totals don’t add up to 100%. They add up to 285%.

It is safe to say the the company where individuals view their roles as more responsible for customer satisfaction will enjoy higher satisfaction ratings among actual customers.

By contrast, a business where each department thinks customer satisfaction is someone else’s responsibility cannot expect to find many satisfied customers in real life.

Fault vs Responsibility

It’s important to note we aren’t measuring fault. Fault by nature is error-centric, where responsibility is solution-centric. There’s a saying, “If someone leaves a baby on your doorstep, it isn’t your fault, but it is your responsibility.” This perfectly highlights the contrast between two terms that are often used interchangeably.

Don’t measure customer satisfaction on the basis of fault or an employee’s ability to do their job; this doesn’t work. I’ve experienced skilled employees who’ve done their jobs well but left me feeling unsatisfied as a customer. One of our clients experienced the cost of a dissatisfied customer when a $50,000 contract was cancelled. In the meeting to determine what went wrong, we heard mostly fault-finding. Everyone was looking for an individual or process to blame for the customer cancellation. But there was no silver bullet. In the end there was just a string of instances where everyone viewed customer satisfaction as someone else’s responsibility.

The organization where fault finding is the norm — though it is important to identify errors — is ultimately trying to avoid disappointing customers over thinking of proactive ways to satisfy them.

The Role of Culture

How then does a company leverage personal responsibility to improve overall customer satisfaction? Through the culture. Without a culture of personal responsibility, most businesses will default to fault finding in a crisis. This is reactive and toxic to a healthy team. In my next blog post, I’ll give you a very tangible question that everyone in your company should be asking to build a culture of personal responsibility. And I’ll show you how this transforms even the most transactional encounters with customers into opportunities for highly personal relationships with your company. 

VIDEO: Discover New Things in Your Financial Numbers

What if I could show you a way to instantly recognize trends in your business, trends spanning anywhere from years to months to days? If you are like most business owners, this newfound ability would forever change the way you manage the financial reporting coming out of your company. It will reduce the time it takes to understand major financial and operational indicators and allow you to communicate that information to key managers and employees without having to explain the first debit or credit.

The tool I cover in this video is one introduced to me by Greg Crabtree in his excellent book, Simple Numbers, Big Profits. It is called rolling 12 or trailing 12 analysis.

When presenting financial data to your team a picture is worth a thousand words or more. We rely heavily on charts and graphs with our clients due to their ability to present massive amounts of information quickly and succinctly. If we imagine a typical line graph of revenue what we are accustomed to seeing is each month’s revenue represented by a single data point on the map. While useful it does not allow us to account for the seasonality of a business when reviewing the current month’s numbers.

This type of chart also fails to lend any insight into the annual numbers or current run rate of the business. Without doing a lot of manual math there is no way to understand whether we are ahead or behind where we were last year.

Rolling 12-month analysis changes this by using each data point on the map to represent 12-months of trailing data. For example, the data point for 6/30/18 would include all revenues from 7/1/17 to 6/30/18. The preceding data point at 5/31/18 would include all revenues from 6/1/17 to 5/31/18. This accomplishes several things.

First, we are able to organize revenues (or any other metric) across years, even decades. This allows us to obtain a more comprehensive picture of where businesses are in relation to where they have been in the past. More than once we have worked with clients to identify historical periods of high growth using this technique. Then we’ve gone on to deconstruct the causes for past growth and replicate those conditions in future periods. Similar lessons can be learned by identifying past periods of decline or stagnation.

Second, we can immediately compare the most recent period to the same period in the prior year. To understand this, consider the previous two data sets we used as an example. When we move from the 5/31/18 data point to the 6/30/18 data point all we have done is replace last June’s data with this June’s data. So, if the line goes up and to the right, we know that this June was better than last June. If the values are included on the chart simple subtraction tells us how much better the most recent period was than the year prior.

Third, we can intuitively examine the existing trend and develop a forecast into the future. It is not difficult to do some back of the envelope regression analysis to draw a line of closest fit for recent periods and extend it out into the future. You can see people do this within seconds of grasping the 12-month trailing concept on the chart in front of them. 

Fourth, by plotting multiple series on the same graph we can identify correlations that may be causal or predictive. This is especially true where the correlation may lag for several periods. For instance, it is easy for anyone to identify and link together an increase in advertising spending with an increase 30-90 days later in revenues.

Finally, using 12-month trailing data to review income statement metrics against monthly balance sheet accounts allows the interdependence of those values to be understood. We see this when increases in 12-month trailing sales drives an increase in accounts receivable.

If you use QuickBooks this video shows how you can quickly generate 12-month trailing spreadsheets for use with charts in excel. It takes a little work, but the insights and understanding you will be able to communicate are well worth the effort.

Before You HIRE Your Next Customer, Ask These Three Questions

A few weeks ago I had lunch with the owner of a creative agency. We talked about the difficulties of work related to managing customer expectations. He shared the story of a customer who came to him wanting a complete re-brand for a community district. The project required designing unique street signs, facilities signs, park benches, trash cans, etc. All to create a distinct atmosphere for the district.

This was a huge opportunity for his company; the district received a ton of foot traffic and the community recognition alone would have been sure to bring new business to the firm. There was only one catch, the customer wanted the plan complete and ready for implementation in just two weeks. 

I love this story because I think it represents a dilemma that business owners face more often than they admit — the question of "Should I, or shouldn’t I?" Often times the knee-jerk reaction is to accept the opportunity and then struggle to meet the customer’s expectations. This is haphazard. There is a better process that incorporates strategy when deciding to work for customers and their expectations. That process involves three questions.

Question 1: Do we have the resources to execute?

This question is the logical starting point. It requires that you clarify the constraints that are rooted in the customer’s expectations. Resource constraints come in many forms. Time, personnel, materials, cash, and technology are the minimum constraints that should be considered before you decide whether or not you can serve the customer. Ask clarifying questions like:

• Do we have the personnel to deliver/perform our product/service?

• Will we have to hire to get the job done?

• Can we deliver on time?

• Will we have to move current deadlines to make the customer happy?

• Do we have the materials, inventory, or technology required to deliver?

Depending on your answer, it may be wise to consider declining the work. Even if the new agreement will provide all the cash you need to go out and buy resources you should consider that you are reacting to the situation, and that the firm that will be delivering the finished product is not the firm you have now. Being able to become the firm that can deliver is not the same as being the firm that can deliver. Which leads to our next question.

Question 2: Are we changing who we are to serve this customer?

Deciding if you can satisfy a customer depends on more than the availability of resources. This is because a company’s identity is not simply its products and services, but also why and how it delivers those products and services. Said another way, a company’s identity is in the values and culture that shape every interaction within the organization. The last thing you want to do to meet a customer’s expectation is undermine the current culture. 

This is why making the decision based upon the availability of resources alone, although prudent, is incomplete. For example, say you’re short the personnel capacity to do the work, but the customer provides and advance that pays for workers. How quickly are you going to be able to recruit and hire? Do you plan on retaining them? If you don’t plan to retain them, how likely is it that they will adopt your culture and values?

Cutting corners to satisfy a customer’s expectations could harm current customer relationships, establish new, undesirable norms, and worse, erode your company’s culture and identity. Depending on your answer to this question, it may be wise to consider referring the customer elsewhere. But if you are still thinking about saying yes there's one more question.

Question 3: Do we really want to do the work?

This question is probably the toughest, because it requires that you temper your own expectations. It requires honest reflection on your own motivation. Yes, you have the resources and you are staying true to your values, but is this job likely to get you out of bed? Are you doing it for the next dollar? There are plenty of other ways to make money.  Is the association with this customer one you will be proud of? Do they stand for the things you stand for? Is this work, all things considered, that we are going to stand behind and be proud of? Only after this last question are you ready to make the call. But rest assured you’ve carefully considered whether or not the next steps are worth taking and you are managing customer expectations strategically.

So, what did the business owner I had lunch with do? He gracefully declined. He explained it wasn’t a lack of resources, or that it was contrary to the DNA of his company. It was that he couldn’t answer the last question with a confident, yes. His desire was to lead the project, but the expectation from the customer was too idealistic. He knew that he couldn’t stand proudly behind his work under a demand that it had to be done in two-weeks. So he said "no" without any regrets.

Set Better Goals Using the Paradox

Can you believe we are already in July? It seems hard to believe half the year is in the rear view mirror. 

Since your second quarter is over let me ask: how are you doing? Did you hit your quarterly goals or are you still catching up from the first quarter? Have you even thought about your goals for Q3? Are you on track for your year? If you’re like most of us, my guess is that you’ve still got some work to do.

How do I know this? Because countless studies and opinion pieces have been written on goal setting and goal attainment theory. In Measure What Matters, John Doerr, covers Edwin Locke's theory about “specific, hard goals."  Back in 1968 Locke asserted that hard goals were more effective than easier ones. Since then we've developed acronyms for SMART goals and HARD goals, and SMARTER goals. While the acronyms abound multitudes of people, everywhere, every day, still struggle with setting goals and/or executing against them to attain their vision. What you need is a framework to set better goals.

The framework I like for setting better goals is unique because I think it accounts for the two things that are key to all goals: difficulty and simplicity. I call the framework the Goal Setting Paradox. It’s the idea that better goals must be difficult and simple. 

Goals Must be Difficult

Difficulty can be subjective. What is difficult for one team may prove easy for another. There are three ways we can define difficulty to be less subjective.

Difficult goals take more than a year to accomplish.

This means goals are mid-term achievements whose purpose is to propel your business toward the future. Difficult goals may have priorities or tasks that can be accomplished in less than a year, like checkpoints in route to the finish line, but the end result should engage your team for around a year. Difficult goals, proven by extensive study, result in high rates of engagement and execution.

Difficult goals engage more than one department/team

The implication here is that difficult goals utilize the strengths of multiple teams in your business. A perfect illustration for this is Amazon’s original series “GRAND PRIX Driver.” The series follows McLaren’s Formula One racing team as they attempt to regain their competitive standing in the sport of F1. The first season documents the inner workings of McLaren and extraordinary number of teams that must be engaged to build a Formula One car worthy of competing.

Difficult goals require learning and personal growth.

Setting difficult goals will require movement from a context of safety and normal, toward discomfort and challenge. The status quo is not engaging enough for your team to pursue. They won't engage, won't give their best, and definitely won't grow as individuals during the process. When gold is tested to determine its level of purity it is subjected to intense heat that either burns off the impurities or allows them to be skimmed off the molten metal. It's not a pleasant process. Difficult goals have the same effect on team members, but the end result is a more refined, more capable, more valuable product. the fire is hot and acts as a force on the gold.

Goals Must Also be Simple.

It is important to understand that difficulty does not presume complexity. There is a real danger in goal setting of making things more complex than they need to be. But there is also a danger in creating simplistic goals that fail to reach a meaningful level of difficulty. That is why goals must be simple but not simplistic. There are two qualities that illustrate the value of simple goals

Simple goals are well defined and explicit

This involves not only defining what the goal is but also the exact result we should be able to expect when the goal is achieved. Those charged with achieving any goal are going to naturally wonder "why?" Being able to paint a clear picture of what goal achievement looks like and what difference it will make enables the leader to answer that question from the beginning.

When we first get involved with a business we perform a Strategic Assessment that will list dozens of recommendations for improvement (i.e. what we are asking them to do). But we also list why we think the business should adopt our recommendation (and possibly turn it into a goal).  Giving our clients a clear picture of what accomplishment looks like can help them decide if the why and the what are worth their time, effort and resources. 

Simple goals put first things first.

Teams need to step back and ask if the goals they've set are address the most important priorities in the long term success of the business. That isn't to say that long term goals always trump short term goals. On the contrary, it makes little sense to set goals for long term product development when cash flow isn't capable of funding current operations, much less long term strategy. On the flip side businesses that constantly set goals around urgent priorities never develop a competitive advantage because they never consider anything other than the fire that needs to be put out now.

In spite of how you may feel now it is possible to finish the quarter with excitement and a sense of positive inertia. It may just be a process of setting better goals, goals that embrace the Paradox of being difficult and simple at the same time.

VIDEO: Take the Time to Explain Why (How to not fire people)

Do you ever get frustrated that your people just aren’t performing? No matter how many times you explain, no matter what kind of training resources you supply, no matter what threats you make…they just don’t follow through. My tendency in these situations, especially when listening to clients talk about the same struggles over and over again, is to ask “should this person even be on the bus?”

The "bus" is Jim Collins analogy for describing the team. He talks about whether people belong on the bus or not, but also whether people are in the right seats on the bus. As I said, my tendency is to question whether we should keep them on the bus.

But a recent book has caused me to both recognize this tendency and to think better of it. In Extreme Ownership Jocko Willink and Leif Babin  talk about the importance of explaining “why” to your team. In the life and death situations encountered by Willink and Babin (both are former Navy Seals) leaders can't afford NOT to explain why. It is critical that everyone understand the instructions AND the leader’s intent. That way, when things go wrong (and they will) individual team members can adjust and still accomplish the leader’s intent.

In two recent situations with clients we asked if anyone had sat down with the employees who were struggling to explain why we were asking them to do things in a certain way. No one had every explained why. At least they couldn't remember doing it.

I think this happens a lot because the leadership team has been struggling with “WHY?” from the very beginning. When we work with the team to develop strategy we are constantly asking "why?" When we judge competing ideas to determine which one is the best we force them to answer a whole series of "why?" questions. So the leadership team understands the why behind everything they are asking the team to do. They've been eating, sleeping and breathing why.

And that is also why they take it for granted when communicating change to their team. They may mention the why in passing, but they focus most of their training, instruction and motivation on the how of new process and procedure. No one outside of the leadership team ever gets to see the week’s or month’s of struggling with why. And had they seen it they might have a better appreciation for how the current change came into being.

Ultimately as leaders we need to own the fact that if people aren’t doing what we have asked them to do it is our fault. Asking someone to get off the bus is almost always the culmination of multiple leadership failures. Owning our responsibility as leaders means taking the time to explain why and giving those we lead some insight into our decision making process.

That comes with risk. Team members my disagree with our why or they may challenge our changes as the best way to get there. But that is GOOD. We don’t want a bunch of robots following our every instruction with zero push back. We think we do at times, but in the long run we know we don’t. So welcome the conversations, welcome the challenge, welcome the debate and slow down enough to explain why. You might find that a lot of the struggles with performance are less difficult to overcome than you first thought.

VIDEO: The Weekly Check-In

Weekly check-ins are one of the main tools we use with clients to make sure that the strategic plans we build with the team actually get executed by the team.

That planning process starts with identifying the vision that leadership wants to pursue, and then identifying the one or two strategies that the team can work on over the next 2-3 years that will move us closer to the realization of that vision. Strategic planning is a lot fun, but it doesn’t actually make anything happen. For that we need to focus on execution.

In our work with clients execution happens on a weekly basis. We may only be there every 30 days, that is our normal rhythm with clients, but the plan has to be worked on every week for it to make a difference. So when we meet with clients one of the things we do is finish up with commitments from each team member to move the strategy forward. These are typically things that the team has identified as necessary action steps during the course of our meeting. And someone on the leadership team has volunteered to make sure that action step gets done.

We can think about this process in three steps.

1. The team recognizes something that needs to get done to move the strategy forward.
2. Someone on the team volunteers to take responsibility for that action item.
3. At some point after the meeting (and hopefully before the next meeting) the person responsible actually completes the task.

After hundreds if not thousands of meetings I can tell you that the number one place teams get derailed, stuck, off course and frustrated is between steps 2 and 3. We will often come back 30 days later and find that nothing has been done on the commitments for most team members.

What are we asking of these team members? Not as much as you might think. Even in the most ambitious strategic plans we need a commitment of just 2-3 hours per week from each leader to move the plan forward. But if they are not diligently spending those 2-3 hours on their commitments things grind to a halt.

It is understandable. Everyone we work with has more on their plate than they can get done. They shoulder tons of responsibility and every day surfaces new challenges, fires to put out, demands from customers, needs from employees, and plenty of tempting distractions.

There is one thing that can keep teams on track, that their commitments remain top of mind and that the whirlwind of daily responsibilities doesn’t drown out the hugely important job of working on the business strategy.

The Weekly Check-in is simply a once a week reminder of each person’s commitments. In our check-ins with clients we list the commitments of each person in an email and ask three questions:

• Did you get your stuff done?
• Is there anything else you need to add to your list related to the strategic plan?
• Have any issues surfaced that we need to put on the agenda for our next meeting?

That’s it. And it is incredibly effective. The most important thing about the weekly check-in is that it happens every week no matter what and that it doesn’t shy away from holding anyone accountable.

If you don’t have a weekly check-in process I encourage you to try it. You might find that progress starts happening at a much faster pace than you ever anticipated.

The Pure Genius Tax Planning Strategy

We are smack dab in the middle of tax season with only a couple of weeks left before the individual filing deadline. That means S corporation business owners all over the country are wringing their hands, hoping for a great March and April to pay their tax bill. This annual ritual of scrounging for cash to pay last year’s taxes is a huge distraction for businesses. And it leads to all kinds of shenanigans.

Most tax planning advice given to small business owners is based on spending money.

“Buy new equipment before year-end.”

“Prepay next year’s insurance policy.”

“Buy the heavy duty truck for your new ‘business vehicle’ so we can write it all off in year one.”

I’ve heard (and at times have said) it all. Don’t get me wrong, if you are going to spend money, do it tax efficiently. But why spend money in the first place to lower your taxes? Let’s look at the numbers and see how absurd the spending strategy really is.

If you decide to spend an extra $10,000 at year end to ramp up your deductions it might save you $2,500 in taxes. So net-net you are $7,500 OUT of pocket. Decide is the operative word. I am describing a situation where you can spend the money and use the purchase in your business OR you can choose not to spend the money and it won't kill you or have a negative impact on the business.

If you decided NOT to spend that money, your profits would be $10,000 higher and your tax bill would be $2,500 higher. So after paying your taxes you would be left with $7,500 IN your pocket.

You see how that works right? When you're 'smart' and employ the spending ’strategy’ you give up $7,500, but when you act like a fool and pay more taxes you KEEP $7,500. 

Why is it that we lose our minds when it comes to taxes? Are small business owners so loath to render unto Caesar that they’d rather spend 100% than keep 75%? I don’t think so. I think first, they are getting bad advice. And I think second, they are reacting emotionally to the very frustrating experience of having to come up with cash to pay a tax bill. So when someone says “Do this and your taxes will be lower” they just do it without thinking about the bigger picture.

Here’s the truth. Most of the truly strategic tax saving strategies require CASH. And the best way to accumulate cash is to not spend it. So we need a better strategy, one that provides the cash to pay taxes, avoids spending, and allows us to stockpile cash for use in future tax saving strategies. It might sound sexy, but it is dead simple. And those who follow it enjoy...

• Enough money on hand to result in stress free cash flow management

• The opportunity to self fund everything from life insurance to asset purchases

• The resources to take advantage of long term strategies down the road

Let's break this strategy down to four simple steps.

Step 1

Setup a separate savings account to hold nothing but money you will use to pay taxes.

Step 2

Every month close your financial statements (quickly) and multiply your YEAR-TO-DATE net income before taxes by an approximate tax rate based on your tax bracket. Your CPA can help you come up with this. A good place to start is 25%-30%.

Step 3

Compare the result of step 2 to your tax savings account balance. If step 2 is more than your balance put that much money INTO your tax savings account. If it’s less pull money OUT OF your tax savings account and redeposit it into your operating account.

If you make estimated quarterly payments just subtract the payments already made from the result in step 2 before you compare it to your tax savings account balance.

(NI) x (25%) - (E) - (B) = transfer amount

Where...

• NI = Net income

• 25% is your estimated tax rate. This may be higher or lower based on your situation

• E = estimated payments already made

• B = balance in tax savings account

• Transfer amount = amount to move into (out of) tax savings account

Step 4

When tax time comes around your final tax bill can be paid out of your savings account. If you use a conservative percentage (usually somewhere between 25%-30%) you will almost always have extra left in your account after you pay the tax bill. This can be distributed as an extra dividend for you to spend as you like or you can roll it back into the business. If the balance in your tax savings account is not enough to cover the tax bill the remainder is usually not very large and paying it causes none of the disruption to your business or hand wringing that you experienced with your previous tax bills.

If you want to see a simple example of this strategy take a look at the following spreadsheet.

If your business is larger or smaller just add or subtract zeros as appropriate. You should get the picture.

At the end of the year there is $10,750 available to pay the final tax bill. If the final return winds up being less whatever is left over can go to the owner. Also notice that in the two worst months when the business was losing money the owner was able to take money out of the tax savings account and deposit it back into the operating business where it could do some good.

Without this plan the business owner would need almost $11,000 on top of the quarterly payments at tax time. And that’s IF the quarterlies were being made. If he followed the norm and just took the 4% underpayment penalty “loan” from IRS by not making any estimated payments he would be stuck with a $40,000 tax bill. But most likely he would have spent that $40,000 back in December on a new truck to “save taxes”. And, YES, it would have lowered his tax bill down to about $30,000. But where is THAT money going to come from? 

I’ll tell you where it’s going to come from. Next year’s profits. But to pay that $30,000 to IRS the business has to make $40,000 in profits ($40,000 less 25% tax leaves $30,000). In a growing business this snowball continues to get larger year after year. There were a lot of businesses that let that snowball grow unchecked between 2000 and 2009. It never caused a problem because their January, February and March numbers were always solid and higher than last year’s. They cannibalized current year profits to pay last year’s taxes after spending down their tax bill the previous December. And then what happened?

Whether it’s a recession, a competitor who opens up across the street or just grandma’s common sense voice ringing in your head, eventually that unpaid tax bill is going to create some serious headaches. Not only are you running on borrowed time you are just spending more than you should. Remember our example earlier. If you make $10,000 of profit in a month and spend all of it on a blockbuster family vacation not only are you failing to put away the $2500 you will eventually owe Uncle Sam, you are blowing $7500 that you could use down the road to help fund one of those fancy long term tax saving strategies you can never afford because your CPA tells you “I’m sorry, you don’t have enough cash to do that.”

Pay this year’s taxes out of this year’s profits and you will never again dread that terrible, horrible, no good, very bad day called April 15th. 

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How I Found 25 Hours a Week to Think

There is a famous quote ascribed to Henry Ford.

"Thinking is the hardest work there is, which is the probable reason so few engage in it."

I was curious so I went looking for the source. The quote is from an article Ford wrote for the April 1928 issue of The Forum. I would encourage you to read it. Apart from his thoughts on "thinking" it is worth the read to see how closely the issues and debates of his day match our own. You can view page images of the original periodical here. But back to the quote.

Thinking is indeed hard work. In the article Ford draws a distinction between thinking, wondering, just having ideas and intelligence.

Intelligence comprehends the outlines of a thing. Thinking breaks it into its elements, analyzes it, and puts it together again.

The problem, as in Ford's day, is that our overcommitted schedules and multitasking habits drive out any time to just think. Last week I was listening to an interview with Sara Blakely, founder of Spanx. She lamented the loss of time to just think because one of her favorite places to be alone and think is in the car. But now her office is only 15 minutes from home. Single, childless adults cannot relate to this, but a kid free car is near and dear to every parent's heart. I can sympathize with Blakely's desire for a longer drive to work. She solved her problem with a fake commute. Every morning she drives around Atlanta for an hour on her way to work and another hour on her way home.

Blakely's story reminded me of my college years. I inherited my grandfather's Dodge Ram 50 pickup truck, and I would drive it from Central Florida to Chattanooga, Tennessee for school. It had an old AM radio that was virtually useless on the interstate. So for eight hour stretches of time I would sit behind the wheel and just think. I can remember getting ready for a trip and deciding what I would think about, what project I would work on, what problem I would try to solve for the next eight hours.

That was back in the early 90's. In that same scenario today, without a radio, I would just put on my headphones and start listening to whichever audiobook or podcast currently had my attention. I would literally consume information for eight hours straight with very little time spent digesting it or working out its application for my life.

I'm not saying that podcasts and audiobooks are bad. I listen to a lot of them, and I get great information. But I admit that my application of their ideas and concepts is pretty shallow. Without the time to seriously think, break apart the ideas and put them back together again my application is mostly just tips, tricks, and hacks that require a minimum amount of effort.

So I started to experiment. I decided to find as much thinking time as I could. I would stop consuming so much information and just try to process more. After about 10 days I calculated that I have at least 25 hours a week just to think. Here's how I did it.

Drive time

Like Blakely, drive time is by far the biggest chunk of discretionary time I get during the week. On most days I am traveling to and from one or more clients for meetings. I average about 350 miles a week. At an average speed of 35 miles an hour that's about 10 hours of drive time. On some days it's more and on some days it's less but 10 hours is about right. My normal routine during drive time is to just listen to podcasts or audiobooks. Instead I can reclaim this time and get uninterrupted quiet time to just think.

Chores

The second biggest chunk comes when I'm just doing things around the house. Washing dishes, mopping floors, doing some kind of outside project on the weekends… It all adds up. Normally I'd have headphones in listening to another podcast. This accounts for about 7 hours every week.

Walking the Dog

I spend about 3 hours every week walking the dog. Instead of listening to podcasts or music that time has been converted to thinking time.

Shower and Shave

I spend about 3 hours a week showering and shaving. Again, my custom is to multitask by listening to podcasts during this time. Simply turning off the phone gives me 15 minutes every morning and 15 minutes every evening to just think.

Solo Lunches

Two or three times a week I eat lunch alone. Rather than listening to podcasts, watching videos, or reading a book that time can be converted to thinking time. That's another 2 hours I can spend just thinking.

There are plenty of other times I could squeeze, but I like my podcasts and audio books. They give me food for thought, and also help me unwind. Thinking is work, and I'm not always up for it. Incidentally, replacing TV time is not on the list. I just don't watch enough TV to find much more than an hour a week to reclaim.

Tip #1: Deconstruct a Problem

So you've found your own 25 hours. What do you do with them? As Henry Ford said, just letting your mind wander is not the same as thinking. It is best to have an object for your thought, something you can meditate on and roll around, deconstruct and put back together. For me problems work best. Here's a sample.

• A client is struggling to make progress on a major project. How can we get them unstuck and get some momentum?

• Our outreach to clients is lacking. How do we engage with them more often and provide things they can use?

• I'm not keeping pace with my word per day count for my writing goal. What are some different ways I can approach this in my schedule or workflows?

• A company I work with is struggling to hire good people. How can we assimilate all we've ever done on hiring so our clients can use it effectively?

• We've pulled out the same report three times in a row with this client. How can we portray it in the dashboard so the people who need it don't have to ask for it anymore?

• One of my kids struggles to remember school assignments and bits of minutia that have to be signed, turned in, etc. How do you develop a task management system for a 9, 10, 11, 12 year old that is fun to use and not too cumbersome?

If you want to get serious about upping your thinking game keep a list of problems you want to work on. Don't be a slave to the last problem that crossed your mind. Disciplining yourself to spend time thinking is a valuable skill. It's best applied to the problems that are most important to solve.

Tip #2: Meditate

Your thinking time doesn't have to be all problem solving. You can also gain valuable insights by taking a thought, a concept, a quote or a piece of scripture and just meditating on it. You don't have to sit cross legged and chant mantras to meditate. Meditation is first and foremost contemplation and reflection.

You may not be sitting on a pillow, listening to serene music and overlooking a sunset, BUT the act of discovering some truth or application simply by thinking is a very calming and relaxing experience. I can be backed up in traffic, but if I'm meditating on one of the Proverbs, digesting the pieces word by word...I don't care that we're crawling along at 5 MPH.

Keep a list of cards handy that have inspiring verses or quotes or deep thoughts on them. I keep mine in the car since that is where I have the most time. This practice has the ability to change the course of your day and put you in a frame of mind to accomplish much more than you would otherwise.

A huge part of our role in business is to THINK. But you have to make the time first. Take a look at your days and weeks and I'll bet you can find a few extra hours to up your thinking game.

Let me know how you plan to do it.

Your Vision Statement Needs a NUMBER!

Last week I talked about the difference between mission, vision and values. Of the three, we always start with vision. And we do so for purely practical purposes. If a business doesn’t know what it wants to accomplish it is impossible to be intentional about achieving it.

But vision statements can be tricky things to write. Everyone seems to have a different opinion about what they should cover or how inspiring their prose should be. Most vision statements of Fortune 500 companies are of little practical use. I’m particularly fond of this example from the Swedish company Ericsson:

“Our vision is a Networked Society: one where connectivity brings people together.”

What does this mean? I am certain it means something, but without talking to the people who were in the room when it was written it's hard to know exactly what this vision will look like when it is realized. The biggest problem with this vision statement, as with most, is that it is missing NUMBERS. That's right, numbers are the secret ingredient to a good, practical vision statement.

But we are getting ahead of ourselves. First, we need to know what constitutes a good vision statement. There are a few simple rules.

1. A good vision statement helps you communicate what you are trying to accomplish. This means that it paints a clear picture with a minimal amount of effort.

2. A good vision statement is aspirational. It describes a situation that is not yet. It gives people working alongside you something to work TOWARD.

3. A good vision statement comes from leadership. It is not developed in committee. When I help develop a vision statement I do it with the business owners. They are the ones that must provide leadership. Vision is the primary communication tool of good leaders.

What we want to address today is point #1. If we cannot paint a clear picture people will shrug their shoulders and lump us in with all the other corporate blowhards and ivory tower know-it-alls. Clarity is king. And for this reason we need NUMBERS.

Think about how quickly numbers provide context. This context is what allows you to fully understand the situation. Consider the following statements.

• "She makes a LOT of money!"

• "He's pretty fast."

• "I'm going to take a little time off from work."

These statements might be accurate, but then again, it depends on your point of view. Vision statements shouldn't depend on a point of view. Let's get more precise by using some numbers, and see if these statements provide more clarity.

• "She makes $250,000 a year."

• "He runs a 4:10 mile."

• "We are spending 2 months sailing the Caribbean."

Numbers are powerful. They quantify situations and remove ambiguity.

When we use terms like "a lot", "leading", "major", "best", "most innovative" we fail to really communicate anything meaningful. We may know what we mean, but others have no clue what we are trying to communicate. The truth is ambiguous vision statements aren't even understood by the leaders who come up with them. And that is shameful.

Being lazy with thoughts and language is most damaging to the leaders who wake up every day uninspired and without any directional compass to drive their big ideas. Getting clear with your language by using numbers is the most effective way to communicate your true North.

So how do you do it? I give my clients some homework. I tell them to start by writing out a couple of paragraphs, even a page or two, describing what they want their company to look like. Just tell me a story. Everybody has a different approach. Some imagine a future where they've just sold their company for a boat load of cash and they describe what they've sold, how they built it, what the toast sounds like as they sit on the beach enjoying a celebratory glass of champagne. Others will fast-forward 5, 10, or 30 years into the future and talk about what they have been able to accomplish in the community, how their children are involved, what their personal life looks like and how it has been enriched by the business. This is not difficult work, but it requires some time and effort.

With this homework in hand the business owner and I meet the next day to begin an offsite retreat. I start to poke and prod their story. I kick over rocks and try to get to the heart of what's important to them. Those stories contain a lot of information about their values and even their mission, but I'm after vision. And as we get close I start to ask about numbers. "What does that look like? How many people are involved? How big? How many customers? How much revenue? What percentage of the market? Regional or national? Employees or contractors? More than one location? How much volume?" The questions continue until we strike gold.

After two hours of this one of our clients said, "I want us to be a household name in the state of Florida in our industry." We were getting close.

I asked, "How many transactions do you need to do a month to get that kind of recognition?"

Immediately she said, "10,000 per month."

"How many do we do now?," I asked.

"About 2,000."

BOOM! Now we have context. Now we have a clear picture of what we are trying to accomplish. Two hours later we met with the leadership team and said, "Our vision is to become a household name in the state of Florida by doing 10,000 transactions per month." Everyone in that room knew exactly where we were going, and they were PUMPED!

Other clients have expressed their vision as:

"Become a top 100 company in our industry"

"Employee, lead and serve 1,200 employees"

"Create $100 million in savings for our clients every year"

"Open 5 locations in the 5 largest metropolitan centers in the Southeast"

These small business vision statements may not have the panache of Google's "To organize all the world's information." They may never be quoted in Harvard Business Review like Ikea's "To create a better everyday life for the many people."

But these vision statements from smaller companies, all doing between $1 million and $25 million in revenue, accomplish something more important. The employees, vendors, customers, and founders of these businesses aren't left asking "what does that mean?" And for a tool that is supposed to help you communicate, clarity is pretty important.

Vision statements with numbers not only provide more clarity, that clarity allows them to be more inspiring. If you don't have numbers in your vision it's time to stop being lazy with your thoughts and words. The people who work alongside you deserve to know what you are about. They deserve good leadership. With a clear vision great leadership becomes possible.

How's your vision statement? Is it clear to you? Is it clear to everyone else? If not let me know and I'll be glad to give you some tips.

What's the difference between Mission, Vision and Values?

This post was last edited November, 2, 2020

I was in a meeting the other day and the guy next to me, who runs a very successful company, said "you know, I've just never taken the time to do the mission statement. I know I should, but I don't quite know what to do."

Mission, vision and values are great tools for communicating what you are about and helping other people understand what you are trying to accomplish. Any business that struggles with communication should start here. It will make a big difference in how you talk with employees, customers, contractors and everyone else you do business with.

But first you need to understand the difference between all of these terms. There's a popular formula in the self help world that goes like this.

BE x DO = HAVE

When most people talk about success they talk about the HAVE. It's about having a bigger bank account, or having a successful business, or having a nicer house, or having a more successful relationship.

The problem is this. The HAVE is a product of BEing (what kind of person you are) and DOing (the disciplines and habits and ways you spend your time). If you are a kind, generous person who prioritizes time with those you love and makes an effort to do things to help them you are virtually guaranteed to have more fulfilling relationships. If you are others-focused and disciplined about finding and delivering the services that your customers value you are virtually guaranteed to thrive in business.

This same formula helps us differentiate between mission, vision and values. It goes like this:

VALUES x MISSION = VISION

Your vision is what you want to accomplish. It is aspirational. Axiom's VISION is to have 1,000 consultants caring for and serving businesses across the United States.

Our MISSION is to grow our client's businesses by teaching the art and science of growth through strategic planning, stewardship and leadership.

Our VALUES are Care (love those we serve), Truth (speak the truth even when difficult) and Diligence (bring the right amount of effort to the task).

Each of these areas is different. Our values are about the kind of company we want to BE. Our mission is about the things we DO every day with customers. And our vision describes what we would like to HAVE accomplished at some point in the future.

There's one more element.

WHY does any of this stuff matter to us?

Simon Sinek wrote a great book called "Start with Why" and this gets to the heart of the matter. What you DO will rarely inspire people, but WHY you do it is a different story. When you share your WHY you are sharing your heart of hearts. You are telling people what gets you out of bed every morning and what keeps you up late at night. Your WHY is hugely important when you communicate what you are about.

At Axiom we believe that there is no greater vehicle to change the world than small business. It has a power to transform and influence that is greater than any non-profit, church, social institution or government entity. Small business done well is world changing, and we live to help small business owners make an impact. That's our WHY.

If you've never thought seriously about your mission, vision, values and why I would encourage you to take an afternoon sabbatical and start working on it. It will rarely be a once and done exercise. You will come back to it, polish it, rewrite it, tweak it. Over time it will stabilize and become part of the fiber of your company. And it will be the most powerful communication tool you have.

No Shared Todo Lists

In today's video I share some of my thoughts on todo lists and why I think shared lists are a bad idea. I want to cover that topic here and address what is sure to be an often raise objection to my point of view.

Shared todo lists are a bad idea because as a rule they allow those delegating tasks to abdicate two primary responsibilities of management.

1. The responsibility to confirm the recipient's understanding of the task being assigned and
2. The responsibility to hold the recipient accountable

No matter what our intentions we often make assumptions about how other people are going to use (or should use) a shared workflow system. Because if they WOULD use it the way we want them to it would alleviate a lot of stress and menial work on our part. But they don't use it the way we want them to. They use it the way that suites them best, which in many cases means they don't use it at all.

Keeping track of the stuff you need to do in life is about as personal as it gets. So when you dictate to someone else that they have to use YOUR system you should expect some push back. Your system suites your tendencies and habits. One person may prefer pencil and paper while another is only happy with a cross platform app that keeps everything in the cloud. In the end it's not important that everyone use the same system to track their responsibilities. It's most important that everybody has their own system, so long as it adheres to the three cardinal rules of task management.

RULE 1 - Always keep a list
I love the Tom Sachs Studio film 10 Bullets. Bullet #7 is "Always keep a list." It's not just about writing things down so you don't forget them. It's not just about clearing headspace so you can concentrate on the task at hand. It's about being intentional with the stuff you allow onto your plate. It's about curating your world so you and I both know what is important to you. A person without a list is a person I can't trust.

It doesn't matter whether the list is on paper, in an app, on a spreadsheet...the most important thing is that the list is always available. For reasons I describe here I am currently keeping my list on paper. That may change, but my list will always be something I can carry with me pretty much wherever I go.

RULE 2 - Track what people owe you
David Allen popularized this in his Getting Things Done book, but I learned to do it long before that. Allen calls it the @waiting list. It's just an entry on your list that tells you what someone has promised to deliver back to you. If you assign a project or delegate a task it goes on your list with some indication that you are waiting on someone to get it back to you. I note these items with a big "W" and include the date that the commitment was made.

Now, every time I review my list I am reminded that someone owes me something. It could be a document that a client has promised to send me. It could be a date for an upcoming meeting someone wants to schedule. It could be a book I loaned out. It doesn't matter. If someone owes me something it goes on my list.

This is perhaps the single biggest credibility hack available to managers and professionals. If you don't track what people owe you you cannot consistently hold them accountable. But if you do, they will remember it and they will perform at a higher level when working with you.

RULE 3 - Always confirm receipt
This goes to the heart of shared todo lists. If you can't confirm that someone has received your instructions you cannot confirm that they understand what they are supposed to do. Don't take it for granted that just because you assigned someones initials or sent them an email, or left a voicemail or sent a text that they have received AND accepted responsibility for getting the thing done. Always confirm receipt.

I'm sure to get some criticism from businesses that use ticketing systems or dispatching systems. All hell would break loose if they ditched their platform and I get that. But what I am talking about are not workflow systems, they are management systems. Ticketing and dispatch systems are no different than assembly lines. They are the means by which knowledge workers and technicians do the rote and routine things defined in their job descriptions.

I am talking about how professionals manage the shared responsibilities on their team. And in my opinion handing that off to a piece of software or a database pretty much guarantees that thigns will fall between the cracks and people will get frustrated.

Three Ways to Get Better at Accountability

I had been working with this client for over six months. Our relationship was solid. Appointments were upbeat and fun. By the end of a morning together we always accomplished a lot and went our separate ways feeling energized. 

But as I sat at the conference table this morning all was not well. Over the preceeding 13 weeks several major projects had failed to get done. I looked at the project plan in front of me, the same one the client had designed during our last session. The tasks were not difficult. The pace was not that rigorous. 

Why hadn't they gotten any of this done? And then it hit me. This was my fault.

I realized that morning that I understood exactly how this client worked. I put myself in his shoes. With all the demands on his time, our strategic project list was getting lost. The important things were taking a back seat to the urgent things. He knew these things were important, and he felt terrible about the lack of progress. As he was beating himself up I interrupted, and I apologized.

I apologized for failing him as a coach and as a client. We both knew he needed accountability to be effective. But accountability is like medicine. You need the right kind, in the right dose at the right time for it to be effective. That is where I had failed. I was providing the wrong type of accountability, in the wrong dose, at the wrong time. 

My story is played out every day by managers trying to provide the accountability and oversite their team needs to be successful. And just like me their efforts don't result in the right things getting done. They are focused on accountability for it's own sake rather than accountability for the sake of their team's effectiveness. Here are a few suggestions for better accountability.

##Type
Do your team members need accountability for deadlines, accountability for daily time management, accountability for adherance to company values....the list could go on. As a manager your role is to support your team. What kind of support do they need in the area of accountability? Most people take for granted that accountability is about staying on top of people so they meet deadlines. But a completely different type of accountability is helpful when it comes to staying on task and managing time.

One of my clients had a key employee responsible for scheduling most of the firm's production as well as handling incoming phone and email requests from customers. His ability to stay engaged and focused had a huge impact on everyone else in the company. But telling him to stay focused did little. Making him log his time did even less. Keeping meticulous notes of customer interactions worked for a little while, but not forever. 

We did two things to help this employee be accountable for his time, focus and engagement. First, we made him take more breaks. With extra time to recharge the batteries and take a breather he was much more energetic on the phone and much more conscientious when scheduling production.

Second, we asked him to have a cup of coffee with the owner at 4:45 every day with the sole purpose of answering the question "was it a good day today?" This changed the focus of our accountabilty from "did you get your stuff done?" to "how do feel about what you got done?"  He admitted that those 4:45 conversations were top of mind about 1:00. He said, "I would start thinking to myself 'it's not a good day yet, I need to make some more progress before 4:45 gets here."

##Dose
An example of providing accountability in the wrong dose is freaking out. I saw this happen in a client's business when the office manager ripped someone a new one for parking in the wrong spot. Granted, there were good reasons for designated employee parking, but the punishment didn't fit the crime in this case.

Middle managers or new managers seem to do this more than others. At first I chalked it up to the power trip that comes with authority. But over time I have come to believe that it's more out of fear than anything else. 

Managers feel like they should be doing something, and in the absence of a good mentor or decent training they just call people out for failing to perform. They want to do their jobs well. The problem is no one has ever taught them what good accountability looks like.

Of course the opposite is also true. One of my confict averse clients struggled to hold production managers accountable for turning in time sheets and pay requests on time. He would call the offenders into his office and listen as they explained why they missed the deadline. By the time the meeting was over everyone was all smiles with promises to do better next time. 

One day the payroll manager quit and the owner asked me to perform the exit interview. It turns out she had been looking for a job for months. All those late time sheets and pay requests had been making pay days miserable for her. Time after time she saw the owner let guys off the hook, and she decided enough was enough.

##Timing
By far the most frequent place business owners and managers go wrong is timing. Accountability is only effective if it is present in a way that motivates behavior. And this is exactly where I had missed the boat with my client. Providing accountability during our meeting, at a time when he was unable to do anything about it, was pointless. It would have been much better for me to followup with him a week before our meeting. He would have been motivated and he would have had time to get something done prior to our meeting.

Timing is also the easiest part of accountability to get right, IF you think about it ahead of time. Tackling the timing side of accountability is best done as soon as someone accepts responsibility for the task or project. Just ask, "when is the best time to check back with you on this?" Immediately the appointment goes in my calendar with an appointment invitation emailed to the other person. 

##Call to action
Think of an area where holding someone accountable hasn't been working and change up your approach by doing one of the following:

1. Change the type of accountability. If you are just asking "have you got this done?" change it up and ask "what kind of support do you need to get this done?"
2. Change the dose. This probably means getting more confrontational for most people. Commit to have a "come to Jesus" meeting with someone who has been let off the hook too often.
3. The next time someone commits to something immediately ask, "when is the best time to check in with you on this?" and put it on your calendar.

Don't Outthink a Fool

It was the middle of the day, and I was on another marathon conference call. These had become routine with this client. Two, three, four times a week, sometimes several times a day I was in the middle of strategizing and crisis management sessions. We were pitted against an adversary that would clearly do or say anything to tear us down. It was incredibly stressful.

During those sessions we examined every possibility, every move and counter move. We tried to anticipate what might be said or done next knowing the only thing we could count on was continued bad faith. As the weeks dragged into months I learned a valuable lesson. 

Our assumptions about what the other side might do would have been orders of magnitude more effective than what they actually did. We always gave them too much credit. We always figured them smarter than they wound up being. And we always imagined their timing would be much better than it turned out.

It is probably true that you should not **underestimate** your opponent. But that doesn't happen as often as the more problematic tendency to **overestimate** the other side. The trick is to strike the balance.

Thankfully this is rarely a necessity in the world of small business. The political game we were playing is much different from the common sense, market driven world most small business owners enjoy every day. But sometimes you find yourself at odds with a disgruntled former employee or customer beyond the reach of reason. In those times you need to remember a few things.  

First, great leaders are obsessive about preparation. But if you are struggling with someone who is irational, desperate or unpredictable you are probably not dealing with a good leader.  Even if you are their highest priority they are probably not spending near as much time on the issue, problem, or personal attack as you are.  We tend to assume that people acting like fools will act with inexhuastible lucidity when it comes to preparing how to act the fool. They won't. But you will waste valuable time and energy preparing for eventualities that never happen. 

Second, inertia is very powerful, and wasted time is a sure way to kill it. The desire to be certain or the desire to include others means a lot of wasted time. If you are leading a small business there is a good chance you are fairly decent at gathering facts and making decisions. Just because someone has taken a cheap shot or two doesn't mean you should slow down and seek levels of certaintly or take precautions your are not accustomed to. An ounce of reflection is healthy.  A pound is often pointless. Act! and control the pace of whatever game the other side happens to be playing. 

Last, discern the difference between a foolish attack and someone with a legitimate grievance. We ought to seek reconciliation with those we have wronged, whether or not we meant the slight.  Usually the only road block to reconciliation is an ego that won't get out of the way.  Wise business owners will recognize legitimate criticism, check the ego and make things right. Wise business owners will also recognize foolish attacks and not overthink the response, lest they be drawn into an argument only a fool can win.

ROWE is for Sissies

When I was growing up there were few things worse than being called a sissy. Guys who complained about hard track workout were labeled sissies. Buddies who hesitated on the edge of the high dive were prodded over the edge with jeers of “don’t be a sissy.” Today I tell clients to stop being sissies when I can see they are just avoiding the hard work.

ROWE (results only work environment) is a management philosophy that says it doesn’t matter how the work gets done, only that it gets done. Let me be clear. I’m a big fan of ROWE. A few years ago I was able to spend a day in a room with Jody Thompson. I learned a ton. As a part of that experience I turned my own small business into a ROWE, and it was very good for us.

But sissies like ROWE too, and you know I have an issue with sissies. Here’s the problem. A lot of business owners jump on the ROWE bandwagon and then spend all kinds of energy trying to decide what "RESULTS" matter.

If Andy Rooney were commenting on ROWE he might say “Real men do OBM.”

What’s OBM? It’s open book management, a management philosophy championed by Jack Stack in his book The Great Game of Business. OBM is great because it cuts through all the shenanigans and hoops that sissie ROWE adopters talk about and gets right to the heart of the matter.

OBM says this: * Results matter * Everybody gets to see the results * Everybody gets to be held accountable for the results

Oh, and there’s one more part: * Results are measured by what happens in the books

Wait! What?! Are you starting to understand the sissie’s problem? I’m going to tell you exactly why I think most ROWE adopters who stop short of OBM are sissies.

First, results are actual things, not decisions. Too many times the sissies want to subjectively tell people what the results are. You hear things like “profits were up but not enough given what’s around the corner so we can’t pay bonuses.” In OBM nobody gets to make a decision about what the results were. They happened or they didn’t.

Second, there are no secrets in OBM. Communication takes on a whole new level of transparency. Sissies can’t pretend they don't have the time or the luxury to explain all the facts. Employees don’t need ALL the facts. They just need the ones that matter. OBM shows the facts that matter in all their gory detail. That’s scary territory for sissies who hide poor performance with half truths and subjective evaluations about "what really happened."

Third, sissies don’t like to be held accountable to a standard that allows no wiggle room, no re-definition, and no excuses. This is the biggest reason I call them sissies. In every organization, ROWE or not, OBM or not, it is the person at the top who is ultimately responsible for the performance of the business. OBM allows everyone in the company to share in holding the person at the top responsible, and that is terrifying for insecure sissies. OBM is ROWE on a two way street.

Don’t be a sissy. If you do ROWE, go all the way. Make OBM your ROWE gold standard. Everyone will thank you for not wasting months or years of their time squabbling over the meaning of “Results” in a Results Only Work Environment.

How to tell if an employee's performance is your fault

When managers complain about an employee's performance there are usually two possibilities. Either the employee is letting the manager down or the manager is letting the employee down. Everyone identifies with employees being the problem. Our tendency is to chalk up poor performance to incompetency or laziness. But knowledge workers need the right tools for the job just like everyone else.

Business processes are the toolset of the knowledge worker. Those processes are designed, maintained and certified by managers. So when an employee is not performing ask if it might be the manager failing the employee that's the problem. Managers fail by not providing tools sufficient to do the job or do it the right way.

If you have lingering questions about whether your employees are really the problem or whether you might be to blame ask a few questions.

1.  Do we even have a process? 

This seems obvious, but in smaller, fast growing companies it is not uncommon for whole parts of the company to be run by one person. Joan has been doing shipping for five years so Joan knows everything there is to know about shipping. The problem is no one else knows and if Joan starts falling behind we assume she just can't keep up with the work load. But if there has never been a process for shipping Joan might be getting bogged down because the people upstream of her are never submitting orders for shipment the same way twice. What is missing is a standard that allows Joan to become more efficient at scale rather than less.

Experienced team members need processes just as much as inexperienced ones. When you start to correctly identify processes as tools you start to see how foolish it is to assume someone can substitute experience for the right wrench.

2. Did anyone ever agree to use the tool?

Bean counters and pencil necks are notorious for designing processes in the ivory tower that never survive their first encounter with the real world. Processes designed by a party of one are destined to fail. Building a good process is a collaborative effort. It isn't hard but it can be time consuming.

Buy-in is critical. No matter what steps you go through to build your process the very last step should include going around the room and asking every single person who must use the tool "Is there anything, based on what you know right now, that would keep you from using this tool to do your job? Speak now or forever hold your peace."

3. Has responsibility been abdicated or delegated?

It is common for managers to create a process, launch it with fanfare and never look back. They have abdicated responsibility to a process rather than delegate responsibility to a person.

Good processes start out as flawed processes. What makes a good process is refinement and refinement only happens during the course of holding people accountable to the process. How does this work in real life?

One month after launching a new shipping process, Joan's manager, Amy, pulls ten invoices and compares the documentation to the standards outlined in the new process. Four of the invoices don't match the process. Amy calls Joan in for an explanation and finds out the process breaks down on the 29th, 30th and 31st of the month from a rush of last minute shipping to meet sales numbers. Amy and Joan work out a solution that allows the most time consuming part of the process to be batched and entered later during the busiest times of the month.

The analogy of processes as tools for the knowledge worker is not a trivial one. If your employees are struggling it might be their work ethic or it might be their competency. Or, it might be that their boss is neglecting a responsibility to provide the right tools for the job.

You are too busy missing your goals

There was a time when I turned my nose up at personal trainers and fitness coaches. After all, I was a standout athlete in high school. I went to college on a [very small] athletic scholarship. I had discipline and fortitude and know how in spades. Why in the world would I spend money on a personal trainer?  But after turning forty I started to understand something. Discipline and know how don't count for much when weeks turn into months and months turn into years and your goals aren't any closer.

An athlete will almost always lift more when the coach is watching. The frequency of workouts will go up when we know the trainer is waiting for us at 6 am. And business owners are more likely to spend valuable time on important yet non-urgent projects when a good consultant isn't afraid to mix it up and hold someone's feet to the fire.  Accountability is an ingredient we all need for better performance. But that's nothing new.  The question I would like to answer is why we don't reach out for it more often? We know we need it, but we don't do anything to get it.

I think the biggest reason we don't get the help we need is that we are too busy missing our goals.  Nearly every business owner I have ever encountered is aspirational.  Most wake up with dreams they want to accomplish. And 16 hours later when they lay their head on the pillow most realize that they have just finished another day on the hampster wheel. Business owners are all motivated to do more, but they get busy and the busyiness crowds out the time, the energy and the focus they need to stop and do the important stuff. 

Another big reason is that for the most part business owners are optimistic and fail to realize the ugliness of their situation. There is one harrowing truth that will usually get even the most optimistic small business owner's attention. The past is the most accurate predictor of the future. In other words, the fact that you have failed to meet your goals is a very, very good indication that you will never meet them. 

The only way out of this predicament is to hire someone who will regularly trump everything else on your calendar and force you to spend time working on the business rather than in it. But no consultant, coach or advisor has a magic wand. You are the one in the business every day and you are the leader. You alone will be able to execute and affect the changes needed in your business. That means showing up every day to the hard work and homework assignments you and your coach have agreed to, but more is required. 

You must also schedule regular times where you do nothing related to your normal business workdays. You will need every ounce of creativity and insight to accomplish your goals. The only way to get there is to go off by yourself and do the hard work of self reflection, rejuvenation and creation.  If you think it takes discipline to work a 20 hour day, try blocking out twelve workdays a year where you don't go to work with anyone but yourself. Very few people want their dreams bad enough to say "no" to all the people, tasks and distractions that will compete for those twelve days. But those are the days insight shows up. Those are the days creativity has enough time on the clock to actually produce something. And those are the days that remind you why you are doing all of this in the first place. Without that recharge you are likely to wake up one day and find yourself five years down the road with nothing to show for it.

Five Reasons Second Generation Owners Struggle

Working for my dad was, how shall I put this... challenging. And as "challenging" as it was for me I can imagine it was even more difficult for him. I was a bull headed 23 year old with definite ideas about how he should run his business.  Nearly twenty years later my dad has grown six feet taller and immeasurably wiser.  We no longer work together, but I recognize some of our struggles in the clients I work with today. Given my past working relationship with dad family businesses have a special place in my heart. And I see them struggle in ways unique to family businesses. Unless they deal with these issues the jobs of both family and non-family members are at risk.

Mom and dad play it safe
When it comes to business entrepreneurs leap over tall buildings with a single bound and conquer uncomfortable situations without blinking an eye. But that courage and resolve often evaporates when it is time to have a tough conversation with a family member. There is a big difference between sitting down with your largest customer to talk about the realities of a price increase and sitting down with junior to talk about deficiencies in his management style. Parents are often reluctant to have the tough conversations and risk relational stability with their family member employees.

The best managers thrive in situations where they are both empowered and held accountable.  Yet, second generation employees are the least likely to be held accountable. Most successful business people can tell you a story from their past when a boss or customer set them straight. It is these experiences that resulted in personal and professional growth. Parents need to stop playing it safe and risk a little discomfort for the sake of their child's growth.

Safety nets make poor teachers
Talk to company founders and you will hear stories about bootstrapping and sales heroics that are inspiring and terrifying at the same time. There are plenty of things that we don't think we can do. But placed in a situation with no other choice we learn that we can do a lot more than we think we can. The problem second generation owners face is that there are few impossible situations that must be overcome. The financial resources of a successful business discourage rather than encourage risk. Company founders live in an environment saturated by risk while the second generation is insulated in an environment protected from risk. As a result they have few experiences where the only option was success or catastrophic failure. They are uncomfortable and no one wants to live through them more than once, but these are the stories that give us the confidence to do more than we ever thought possible.

No one remembers how to grow
The first generation grew the company from nothing to "successful" then transitioned  to "stable." It sounds silly to imagine a company founder bragging, "you know, junior has done a great job keeping the status quo." But that is what mom and dad often expect.  The status quo is a lot harder to maintain for a second generation than growth. What they need is a mandate to change the business, to grow it, to reinvent it. The second generation has to learn how to grow the business again and that also means they must diplomatically usher the company's founders, employees and customers into a new era of change. 

Siblings
Businesses are not cash and they don't divide nearly as easily. A business cannot succeed going from one owner/operator to one operatior answerable to three equal but passive shareholders. It is very common for one child to be involved in the business while the siblings are passive hiers. This is a recipe for disaster. And the trouble doesn't wait until after the funeral to start.  Ask yourself how hard you would work to grow the company knowing that in ten or twenty years you will be taking flack from every sibling wondering how much the next dividend check will be. Parents need to settle the succession issue before they hand over control to a child. There are no easy ways to handle this sensitive issue, but they become exponentially harder the longer they are put off. I have talked with over a dozen business owners who inherited their parent's business along with their siblings. The problems didn't stop and the company didn't start to flourish until they had successfully bought out the siblings who weren't working in the company. 

Entitlement
This is the one everyone points to but I have listed it last for a reason. Yes, some children come into the business with an entitlement attitude. I know I did. I could say things to my dad, even borderline disrespectful things, and I knew I wasn't going to get fired. But I think those days were less frequent than I remember them.  In the case of my clients I think that is definitely the case. Most children recognize the opportunity they have been afforded, and they work their butts off. 

Entitlement is more often the false pretense other employees use to criticize the shortcomings of the parent or the child. I have witnessed perceived entitlement in the face of kids working 60 hour weeks, giving up bonuses and pitching in to help whenever asked. And it usually happens in cases where for good reasons or not the child has leapfrogged the normal progression of advancement within the company. They may have started in the mail room but when a key management spot went vacant they jumped a few spots and cut a year or two off the original plans for promotion.

These are not all of the issues that families must overcome to work together successfully. But they do seem to be inevitable for most familes. Making them part of the conversation within the family and within the company is the first step to making sure they don't stand in the way of future growth and success for everyone.