Climbing the Right Mountain

Climb Right Mountain

Like many leaders I can be described as driven, relentless, aggressive, determined, focused, and other common traits of “type A” personalities.  Have you ever considered how these traits may be causing you to be less productive? As an executive coach, I have found many well-intention “Type A” people are actually causing themselves and their organizations to be less productive.  Often, we self-deceive ourselves into believing that we are productive most of the time and downplay the impact when we are not.  The justification is our success track record. We see this success a result of making quick decisions, moving fast, pursuing excellence, and using our drive to move things forward. While these traits are valuable, when overextended it works against us.

Could you unconsciously cause yourself and others to climb the wrong mountains? You are doing it far more often than you realize. Many leaders enjoy and love to solve problems.  When they see them, they want to solve them.  The more problems solved the more accomplished one may feel.  However, what if the problems you solved are the wrong ones? Or worse, they are really speed bumps taking you away from the climbing the right mountains.

I COULD HAVE STOPPED AND DID NOT BECAUSE OF A RELENTLESS PURSUIT TO RIGHT A WRONG.

I was inspired to write this article after a recent experience where I ruined a Saturday. This all happened because I felt compelled to fix a wrong. On the surface, it seemed like the right thing to do. However, my relentless pursuit to right a wrong led to an odyssey that I could have stopped at any time and did not.

I had purchased some headphones (an Apple product) from Verizon. They were shipped to me because a lack of inventory.  When they arrived one of the headphones had a button that was stuck. While they worked well-enough, it bothered me that one of the earpieces was damaged. I could not use the button to accept calls, pause and start music, and so on.  I felt entitled to have a product that worked properly and was perturbed that $200+ headphones did not work as they should.

Long story short, I spent 5 hours in-store and on the phone trying to get Apple to repair or replace the headphones.  After all of this effort, they agreed to repair them. In the end, they were returned to me still broken and with out the earpieces that accompanied them.  Yes, the situation was now worse. I submit!

The real issue was me! Once I had momentum to fix my perceived situation, there was no stopping me.  After all, I take pride in making things happen. If I was not so focused and determined I should have aborted? Yes, I received damaged goods.  But they worked fine…just not perfect.  And, in my defense, if you told me in advance, I could get them fixed but it would take 5 hours of my time, I would never have left well enough alone. $200 is not a big deal for me and I could have easily tossed them without a sweat. After all, I have tons of headphones sitting in a drawer because I disliked them for one reason or another. The real issue was me. In the end my time was more valuable then righting this wrong.

IT IS FAIR TO ASSUME THAT THE AVERAGE PERSON WASTES AT LEAST 20% OF THEIR TIME EVERY WEEK CLIMBING THE WRONG MOUNTAINS OR TAKING THE WRONG PATHS.

You are probably asking yourself, what does this have to do with you as a leader and how does this affect your organization.  The fact is, all day long we have people doing the equivalent. They spend time on $200 headphones when there are much better uses of their time.  Worse, when they start down the path of solving a very important issue and don’t pull back when it is obvious they are headed down the wrong path. It is fair to assume that the average person wastes at least 20% of their time every week climbing the wrong mountains or taking the wrong paths. We need a process to see when we need to consider aborting.  Most “Type A” people miss these moments and take others with them.

USE THE SYMPTOMS TO FIND THE MOUNTAIN!

In Your Business is A Leaky Bucket, I opened with a story about a client who was nine months away from the end of an earn-out period from the sale of their company. They had a lot of money at stake and were not sure how they were going to maximize their return.

They brought me in to help figure-out how to close the gap.  After meeting with their executive team, there were a few factors that were apparent:

 – The existing team seemed overworked.

 – It appeared that had to fill too many open positions and did not believe they could fill them in time to take advantage of the earn-out period.

 – They were afraid if they pushed people any harder more people will quit required them to fill more positions.

 – Most importantly, their sales team was spending far too much time working on administrative issues rather than selling.

So which issue do you address: recruiting, retention, workload, or sales team productivity? Most leaders would say we have to address all of them.  They would push everyone to work on the symptoms.  The symptoms would have been the wrong focus.

We found the mountain, that when solved, would make the other mountains go away.  The mountain was “waste.” They had 175 employees, most of which were the right people in the right seats.  When I asked, “was it possible that, on average, everyone wasted 10 percent of their time doing things that did not help them add customers, serve existing customers, or improve the profitability of the organization?”  I got a hearty laugh from everyone in the room.  Everyone believed they spent over 20% of their time in unproductive meetings, developing unnecessary reports, creating redundant procedures, and so on.  In the end, it was agreed that a 10% organization-wide waste goal was conservative. To put this into perspective that represent approximately forty-five thousand hours of work.  The equivalent of 21 people.

Without going into a lot of detail we climbed the forty-five-thousand-hour mountain. They engaged every employee in the company to help identify the waste. They challenged everyone to double the amount of time salespeople spent selling without adding any employees.

It was a big success! The employees submitted far more than 45,000 hours worth of suggestions, many of which were addressed in 60 days.  The result:

 – Record growth rate – sales people far more productive

 – Record net profit margins – Driven by higher growth and eliminating the need for headcount.

 – Record employee engagement scores – Aligning and enrolling all employees to eliminate workload lead to employee engagement scores that have never been replicated.

 – Everyone was working similar hours and felt less burnout.

TAKE A GOOD LOOK… ARE YOU AND YOUR ORGANIZATION CLIMBING THE RIGHT MOUNTAIN?

Can you be guilty of chasing too many issues rather than fixing the one big one?  One way to know is to look at the list of company priorities.  If there are more than 3 it is likely that you are not focusing and failing to properly prioritize.  Look at the usual symptoms: 

 – Difficulty filling positions

 – Higher turnover

 – Failure to grow faster than the market

 – Net profit margins are not in the top 10% for your industry peer group.

 – Time is controlling you

 

Howard M. Shore, Founder and CEO of Activate Group Inc., is a bestselling author and serial entrepreneur specializing in liberating leadership teams from the barriers holding them back personally and professionally. Howard has helped create over $1 Billion of value and authored two best-selling books, The Leader Launchpad and Your Business is a Leaky Bucket.

Your Philosophy Around Talent Makes A Difference

Your Philosophy Around Talent

Your Philosophy Around Talent Makes A Difference… Having a company full of “A Players” does not guarantee success, but it significantly raises your prospects.

As a Business Coach, I have worked with many organizations and see the differences between the companies that produce short-term success, long-term success, and those that flounder. There is a vast difference in how the long-term winners build their organizations and their results versus everyone else. The factors that cause these results are known, often discussed, and rarely emulated. Your philosophy around talent matters!

Identify any company you consider great, and you will find that the greatness was 20 years in the making. You have probably heard revenue is vanity, profit is sanity, and cash is king. If you are producing high levels of success in all three measures, you should be proud. Not many companies can boast such performance. And still, you may not be built to last. What worked in the past may not work for the future. 

Most businesses will never be innovative, transformational, or trailblazers. However, all can have extraordinary growth in revenue and profits. An example most of us know is Southwest. They don’t have the most revenue (10th), largest fleet size (5th), or passengers flown (3rd). However, they broke the mold when measuring cumulative profit over 30 years. And, they copied and better executed another companies business model. 

As a business coach, I help companies build great companies and develop the best leadership practices to stay great. I help address organizational habits that cause growth ceilings. Or worse, your habits could lead to a decline or even failure. I see my job as a blind spot remover. One of the keys to your success is your leadership philosophy around talent.

First Who Then What

You can’t discuss enduring success without addressing the elephant in the room. Your business will only be as good as the people that operate in it. Jim Collins nailed it in “Good to Great, “first who then what!”

Many companies have a few great people, but few can boast the best talent throughout the organization. Most leaders will tell you that they are great at selecting people, but the data proves otherwise. Most companies don’t have the measures to know and only use their income statements as their measuring stick. The stark truth is that at least 30% of your employees are not performing and hiding in plain sight.

As I wrote in Your Business is a Leaky Bucket, even great leadership cannot overcome the limited abilities of “B” or “C” talent. Often, leaders can only go as far as those they lead. Think about it from a coaching perspective. You could have a world-class coach, but if you have a team of players with mediocre athletic ability, you’ll only get so far. The coach can draw up all the plays he wants, but the team has to execute them on the playing field. Players have to make split-second decisions and make the plays as the game unfolds. The players determine whether you win or lose. Business is no different.

Great leadership puts a person in a position to excel and succeed, but that person still has to do all the heavy lifting. It has been said that a great leader is like a gardener who plants seeds, makes sure that the soil has the right nutrients, and then nurtures the soil. The gardener cannot grow his crops, and he can only provide the right conditions for growth and plants the right seeds. 

Trust me when I say it is imperative to have A-rated talent to obtain optimal results. Then it takes leadership to keep them at that level. Now, don’t think of this as a process of rating people. Instead, it is about establishing the standards for every employee. Only after specifying measurable objectives can you hold your team accountable. Incomplete hiring and accountability practices, not putting people in the right seats where they can excel, failure to hold people accountable to key outcomes, and weakness in your culture represent poor leadership.

One of the biggest profit leaks in your company may be related to your philosophy regarding personnel. The highest cost in most companies is payroll; therefore, your biggest asset or investment is people. How seriously are you and your company taking this investment, and how disciplined are you in demanding that it produces an adequate standard of performance?

I have enjoyed coaching excellent teams and have experienced the pain of excessive numbers of wrong team members. It is no surprise that when the leadership team is weak, so is everyone else. An “A Player” will not survive a “B” leader or tolerate being surrounded by “B” coworkers. Birds of a feather flock together. We have looked at the success rate of our engagements, and Clients that put heavy investment in filling their organizations with “A Players” far outperformed the rest. Worse, companies with “B” leaders, particularly CEO, moved sideways at best. We would use the same process, same coaches, and double the effort to help the “B” team. We always fail to make sustainable progress with a “B” team.

What Are “A” Players?

 “A” players are employees who consistently meet productivity requirements (performance standards) and consistently live your company’s core values. Your productivity requirements should be set at a high bar and be readily achievable. Do not place the bar so high that it takes a unicorn to fill your position. Regardless of the role, strong performers can produce at two to three times the output of their peers. Many organizations, however, label the wrong people as their “A” players. You may be favoring people you can identify with more personally, that you have less conflict with, who have organizational tenure, who have the most institutional or industry knowledge, or that you consider loyal to you. They are not necessarily “A” players. If you are like many leaders, you may be giving more weight to only a few attributes or qualities you find important. Unfortunately, those may or may not be critical to the position’s real mission, purpose, or success.

I had a client who had an issue with his controller and was leaning toward dismissal. This was a sales culture, and the CEO favored outgoing and communicative people. He felt the controller did not fit his culture. The controller was reclusive and preferred to work in a quiet place to concentrate. Also, this controller was not afraid to tell the CEO when the company was wasting money, even if it was the CEO doing so. The controller was very focused on precision and getting things right. She often voiced concerns when other leaders exaggerated their points or made decisions with no supporting data.

The CEO failed to realize the issues he had with the controller were not related to her skills and talents. Instead, they were related to her behavioral style, which differed from the CEO. The controller’s behavioral style helped balance the leadership team and was essential to her being a suitable controller. Being the decisive and outgoing communicator that the CEO preferred was not a necessary quality for being a competent controller. The controller lived all of the core values of the business entirely. Moreover, everything produced by the department was helpful and accurate. Furthermore, she treated the company as if its assets were her own, protecting the owners.

So what causes someone to be categorized as a “B” or “C” player? A “B” player consistently lives all of your organization’s core values but is not meeting 100 percent of their position’s productivity requirements. A “B/C” player performs at the required levels but does not consistently demonstrate one or more core values. “C” players are failing to meet the performance and values standards. In all cases, anyone who is not classified as “A” should only be kept on your team if management believes they can become “A” players with proper training and coaching within an acceptable period. If not, the best thing you can do is replace them speedily.

Three Types of A-Players

Earlier in my career, I took over a new role and fired our top producing salesman. The owners thought I was nuts. We had about 20 salespeople and his book represented 20% of our revenue. What the owners were not seeing was how he affected everyone else. I spent approximately 5 hours a week dealing with issues presented because of this person, including a sexual harassment claim, which turned out to be a repeat offense. I stuck to my decision and fired him. In the end, our company, which had been declining in sales the three years previous to my being hired. After firing this toxic employee, revenue started growing immediately. Within 30 days of firing him, our largest client (representing 10% of revenue) called the President and said it was about time. They had been diverting business to our competition because they found him toxic. They immediately began ordering more from us.

There are three types of “A Players:”

A1 – They are great in their current position. We would hire ten more just like them. These people are not promotable, love what they do, and are passionate about their work.

A2 – Is someone you believe can be promoted 1 level. They have done very well in their current role and have the skills, desire, and ability to take on higher responsibilities. They can help produce more people just like them by sharing their knowledge and experience and representing your core values daily.

A3 – Is someone you believe can be promoted to two levels or more. They have traits, capabilities, and the desire to lead others.

One last comment about “A Players.” Too often, leaders create arbitrary performance standards. I have found this to be a large problem. The standards are set, and no one consistently hits them. When people miss them after giving 100%, they can be labeled as “not performing.” This leads to lower performance and eventually termination. I recommend you use much rigor in developing reasonably high-performance standards. Failure to do so costs you a lot more than you realize.

Eight Questions to Ask When Someone Does Not Perform at an “A” Level:

(1) Have you adequately communicated expectations?

(2) Has this person been an “A” player in the past? If so, what has changed?

(3) Does the person have the skills and knowledge necessary to perform his or her job at a high level?

(4) What training is required to get this person to peak performance?

(5) Has the organization created unnecessary barriers to this person becoming successful?

(6) Do you believe this person will achieve productivity within a reasonable amount of time?

(7) Does this person believe in your core values, and is he or she willing to live them?

(8) Which processes, if fixed, would lead to better success in the future?

Answering these questions will help you diagnose the issue(s). Sometimes team members are well past the rebound zone. That is, you simply cannot resurrect their performance. Other times, with a little redirection and emphasis on coaching, mentoring, or training, an underperforming person can bounce back. Either way, you have to determine the exact problem and then take great strides to address it.

Why is the “B” and “C” Performance Issue Not Being Addressed?

The primary reason employees are permitted to underperform is a lack of clarity in leadership. Leaders are often too busy doing their jobs to focus enough time and energy on what they want from their team. And when they have a good idea of precisely what they desire, often they do not adequately communicate it. Even then, performance is usually not being measured to allow a person to be held accountable.

Most sharp business owners do measure the performance of their businesses on at least a monthly basis. Still, they fail to relate that measurement to individual employee performance properly. By not requiring a specific level of performance, monitoring that performance, and holding employees accountable, you allow your employees to establish their performance requirements. Common sense tells me your employees will set lower work standards for themselves than you would.

You may be wondering how “B” and “C” performances can cost a company millions and go unnoticed and unaddressed. The primary reason: There is no financial statement line item to quantify the cost of the lost clients, lost productivity, mistakes, and lost opportunities attributable to these nonperforming players. This begs the question: Why would you ever even consider keeping a “B” or “C” player?

 When Do You Keep “B” or “C” Players?

Keep a “B” or “C” player when you confidently believe they will become an “A” player within a reasonable amount of time. If you cannot define how and when that will occur, stop fooling yourself and cut the cord. With that said, you may have to keep a person on board until hiring their replacement. At times, prematurely forcing a vacancy will be too disruptive. Be careful. I find that keeping the wrong person is costing you far more than you ever imagined.

Leaders have many excuses for not replacing their “B” or “C” players. All of the reasons boil down to either leadership laziness or just plain poor leadership. Let’s again clarify the definition of the “A” player. They are not extraordinary. They are people who meet the requirements of their positions and fit your culture. Anything less, and you are overpaying for a position.

Every company leader I have met who had a cash flow problem or was unsatisfied with their growth or profits also had a people problem. Growth problems attributable to bad strategy are the result of people problems. Companies that choose the right people (including advisors, consultants, and coaches) are less likely to have strategy problems. Think about it. The employees of any business are like the cogs that keep a machine running. Doesn’t it make sense that the machine won’t operate at optimum performance when you have broken, incorrect, or rusty pieces inside of it?

It is rare to find a company that already had the processes in place to allow them to demonstrate that at least 75 percent of its employees were “A” players. In fact, most had 40 percent or even less. Many initially believed they had 75 percent or more, but that was a wish and a prayer, as they were not tracking any performance indicators to prove their people were performing.

Research shows that replacing even one “B” or “C” player with an “A” player has a significant impact on a business. Some companies misunderstand what could happen if they commit to doing what it takes to achieve A-player performance in every position in their company. They create walls or personal obstacles, some of which sound like this:

 – There are not enough “A” players out there.

 – It will take much longer to hire people.

 – It is too complicated.

 – It takes too much workforce.

 – It can’t happen in our industry.

 – I have to fire everyone who is a “B” and” C” player.

 – “A” players must be paid more than “B” and “C” players.

The truth is that these are all myths and limiting beliefs, allowing leadership to continue to justify poor hiring practices and maintain the status quo.

The Container Store provides one of the best examples of building an organization with “A” players. I was fortunate to hear Kip Tindell, founder of The Container Store, share his formula for making a great organization. He built his company from a small start-up to one of the most respected businesses around. By enforcing an “A” player mantra, his company grew 20 percent a year to well over $1B in revenue. His formula has five crucial keys to success:

(1) Pay – They paid 50 percent to 100 percent above the industry average. Tindell knew one great person could do the work of two to three ordinary people. “A” players pay for their “extra” salary threefold, so overall labor costs are lower than the competition. His people are incredibly proud to be part of the company.

(2) Recruiting and Retention – To win, he knew he must only hire great people. “A” players only like to work with other “A” players. They do not want to be surrounded by mediocrity. They would choose to be in his company to be on a great team. They wanted more of the best and brightest out of school. This means his recruiting process had to be phenomenal to find and select the right people and never settle. This resulted in less than 10 percent turnover in an industry that typically experiences over 100 percent turnover.

(3) Training and Onboarding. Tindell provides eighty-four hours of formal training in the first year compared to the industry average, which is eight hours.

(4) Real transparency and communication. Your leaders and managers can thrive with clear communication and transparency. If they don’t feel sufficiently informed, they feel left out, and their performance will suffer.

(5) Culture is everything. Free the employees to choose the means to the ends, but tell them the foundational principles to use in making those decisions. All employees will give you 25 percent of their efforts, considered the bare minimum amount of productivity required to keep your job. To get the other 75 percent, they have to love their manager and culture.

In each of these steps, you’ll quickly come to a singular conclusion: Great leaders invest enormous time and energy into their team. They create a culture that invites in “A” players and demands an A-level performance.

 Actions to Take

What steps can you take to build a high-performance organization? Just like any machine that takes proper maintenance and attention to run smoothly. Lack of timely care to problems leads to more costly repairs. So likely, we can all agree it is much more efficient and cost-effective to ward off those repairs. People already spend enormous amounts of time interviewing candidates. They need to learn the right techniques and processes to determine whether the people they interview are the right choices for the positions. The real challenge is instilling an organization-wide commitment to high-performance standards, and practice makes perfect.

There is no one-size-fits-all sort of remedy. Different companies require different solutions. Remember that you’re dealing with real people and problems, so do not remove the compassion from the equation. Classifying someone as “C” or “B” in their current role does not mean they cannot become an “A” player in another position or possibly in their existing position, with just a little more training.

It has been said, “That which gets measured gets done!”When measurement tools are in place, leaders are shocked by how many employees fit the categories of “B” and “C” players. This performance gap costs companies millions in profit leaks. However, you can take several steps to resurrect and improve your organizational productivity.

 Six Steps to A-Player Status:

(1) For each position in your company, identify two to three key performance indicators that the person in the position has direct control over and would prove they are performing well in their job. Establish a high but realistic standard for each indicator.

(2) Communicate these indicators and the standards to the person in the position and measure actual performance versus the rules you’ve set.

(3) Establish a process for continually reinforcing your core values with all of your employees.

(4) Every quarter, review how consistently each member of your team lives your core values and meets the performance expectations of their role

(5) Put employees who are not living your core values or meeting performance expectations on definite performance plans to direct them toward achieving the desired performance.

(6) Take immediate action to help employees who are not meeting their requirements. Those who cannot meet your standards should be replaced.

 

Howard M. Shore, Founder and CEO of Activate Group Inc., is a bestselling author and serial entrepreneur specializing in liberating leadership teams from the barriers holding them back personally and professionally. During his 35+ year career, Howard has helped create over $1 Billion of value and authored two best-selling books, The Leader Launchpad and Your Business is a Leaky Bucket. Howard cut his teeth as the owner of several successful companies and executive for Fortune 500 companies like Ryder Systems, AutoNation, and KPMG. Howard has become a sought-after business mentor, executive coach, and keynote speaker. His clients work in family-owned, multi-national, public, and private companies ranging from $1 million to over $1 billion in annual revenue. With a 30-year track record of success, he guarantees any organization using his methods and systems will become more profitable, stable, and scalable.

Leaders Get Out of Your Own Way

Get Out of Your Own Way

The CEO of a manufacturing company recently approached a business coach because he was frustrated by his organization’s performance. He knew it was underperforming, failing to achieve his objectives, had never had positive cash flow since he took the helm, yet he could not put his finger on why all this was happening. He thought that implementing a good leadership operating system would make all his problems go away. Little did he know that poor leadership was the cause and everything else was effect… Leaders Get Out of Your Own Way!

Without boring you with too many details, the coach facilitated a three-day retreat with the executive team, and it was clear why this company was having trouble. While this company did need a leadership operating system that could help guide them to make better and faster decisions, create winning strategies, limit focus on a few key priorities, align everyone, and hold people accountable, this company faced a bigger problem. The main issue was the dysfunction amongst the leadership team itself. Worse, the CEO could not see that his behavior was the center of it. He loved to argue every point, even when it did not matter, hated to lose more than he loved to win, belittled his leaders at every turn, and had to put his stamp on everything.

After several working sessions with the coach, the team came clean and told the CEO how they felt. Rather than taking this as an opportunity to grow and shift, the CEO’s ego took hold. He told everyone in the room that he did not believe he needed to change, and if they could not stand the heat they should find another place to work! As his coach tried to work with him to see how his people had become “yes” people, the opposite of what he told them he wanted, he became even more adamant that maybe they were just the wrong people. We call someone like this un-coachable. While the coach could help implement the leadership operating system, the effectiveness of the system was severely compromised by the inadequacy of the CEO, leaving an enormous amount of profit and growth potential on the table.

Are you concerned about how to get more out of your team? Have you wondered why one team functions better than another? Have you noticed that your team members are not contributing much in your meetings, but you know they have valuable ideas? Or worse, are you now questioning their capacity to grow.

I share this story right from the start because much of our success as coaches depends on how coachable our clients are. The tools and processes are only as good as the people we work with. Most companies have a lot more growth and profit potential staring them right in the face. Having a great team is right around the corner, but they can’t see it. Less stress, more control over the business, less drama, and happy customers can be more simply attained. The secret can be found in their “Leaky Bucket.” I discuss this in detail in Your Business Is a Leaky Bucket: Learn How to Avoid Losing Millions in Revenue and Profit Annually

The Leaky Bucket concept is very important. The leaks covered in the book will not be found in your financial statements. Yes, they impact the results, but not in ways that are easily measured. I used the Leaky Bucket as a metaphor to help you visualize cash pouring out of a bucket through lots of various sized holes. You can also imagine water flowing over the top because the bucket has not grown fast enough.

I mention my book because this whitepaper, goes deeper into the issues related to profit leak number 1, “poor leadership.” When you make allowances for poor leadership, you are deciding that a substandard leader has more to offer than everyone else put together, which is a fool’s bet. Your ineffective leader causes everyone else to perform at lower levels. You lose access to a lot of great ideas, and people are less apt to willingly give extra effort.

In this whitepaper, I want to address three issues that I have found that have the biggest effect on our ability to maximize success with a client. All three factors can be addressed through training and coaching as long as the “student” is a willing participant.

  • Ego Traps – It is obvious to most people that having too big an ego is not an appealing trait, and nothing good comes from it. Therefore, it is amazing how many leaders are unconsciously walking around daily suffering from an ego problem and inflicting harm to their careers, their team, and their organization.
  • Strength in Dealing with People – A lot more attention needs to be given to soft skills in the college setting. Too many people are walking around the workplace with little idea on how to properly work in teams, how to communicate effectively with others, and just practice simple people etiquette.
  • Learning How to Say “No” – I am sure you will agree that people are too conditioned to say “yes.” Learning how and when to say “no” is crucial to the success of your organization.

Ego Traps

After 35 years in the workforce, I am convinced that the number one hindrance to peak performance is ego. While you would no doubt agree with me, and are probably saying to yourself “duh”, ego problems are the least dealt-with issue and are the most severe the higher up we go in organizations. This is significant because leaders have more of an impact on their organizations than their subordinates. When you have a senior leader with an overinflated ego, business life is a train wreck!

If you have not read it yet, The Ideal Team Player, by Patrick Lencioni, must be at the top of every leader’s must-read list. In this book, Patrick recounts a story about leaders that discover the three virtues that are necessary to avoid having assholes working for them. Sorry for the language, but that was the story line. While it seems obvious in hindsight, he was right to identify that you are not an ideal team player if you do not possess humility, hunger, or common sense about how to interpersonally deal with people. I am going to deal with the last item later in this whitepaper. In his book, they describe people who lack humility and interpersonal skills as “bulldozers.” Imagine what this does to employee engagement, turnover, productivity, and so on. There is no way your organization could operate near its peak performance. Worse, it would be hard for you to recruit top talent or talent in general. Who wants to work for a “bulldozer?”

Are You Even Aware That Your Ego is Causing a Problem?

You may find this difficult to believe but many people do not recognize when their egos are clouding their judgment, swaying decision making, causing favoritism, inciting organizational strife, stifling teamwork, and causing high turnover rates. They refuse to consider the ideas of others, and in many cases, do nothing because they are afraid to be wrong. Ego is a blinder and a form of self-sabotage. It stops them from processing information and seeing the world as it is. In some cases, they are more concerned about themselves and blinded by the beauty of their names in lights that they fail to realize that it is not all about them, that others contributed to the results, that others are not there to serve the leader’s greatness, and that their job as the leader is to bring out the best of others.

 “Success comes from knowing that you did your best to become the best that you are capable of becoming.”John Wooden

Do you easily compliment or praise teammates without hesitation? Do you easily admit mistakes? Do you easily take lower-level work for the good of the team? How easily do you defer credit to the team for accomplishments? Do you easily acknowledge and seek help for your weaknesses? Do you offer and accept apologies graciously? If your colleagues do not indicate that for each of these questions you “usually” act in that manner, you have an ego problem.

There are Two Types of Ego Issues

There are two primary ways in which Ego manifests itself. The first is when someone thinks too highly of themselves. This person spends a lot of their time making sure everyone knows how great they are, making sure they get their time on stage. You get to hear their incredible opinions, taking all the credit for success, posting their picture every two minutes on Facebook and Instagram to show you everywhere they are, who they’re with, and their latest recognition. We will refer to this as false pride. The second type, is fear or self-doubt, which is when you think less of yourself than you should and are consumed with your own shortcomings. In many cases, these people can be more damaging than the false pride folks as they can significantly erode their effectiveness or the effectiveness of their departments.

One of the hardest challenges for leaders is to remain grounded in the face of their success. When everyone defers to you, it must be tempting to start believing your own press releases. It must be easy to think: I am smarter, more charismatic, and more powerful than everyone else. As

leaders reach a point where they believe their opinion matters more than yours, they stop listening. And that means they stop learning.  Leaders dominated by false pride are often called controllers. Even when they don’t know what they are doing, they have a high need for power and control.

As an Executive Coach, I’ve encountered many controllers who really believe their people cannot possibly decide without them. They act as bottlenecks to their organizations because everything has to flow through them. They honestly believe they are right every time; every change they make to a document was crucial to its success; they are the best at selecting new employees; and they are expert at every function in the company. This is, of course, buffoonery, but they cannot see it. They can see everyone else’s mistakes but their own. The organization ends its days cleaning up their leader’s messes, doing double and triple the work, and keeping their ideas to themselves because there is no way around it.

At the other end of the spectrum are the fear-driven managers, often characterized as do-nothing bosses. They are described as never around, always avoiding conflict, and not very helpful. They often leave their team members alone, even when these individuals are insecure and need help.

Do-nothing bosses don’t believe in themselves or trust their own judgment. They value others’ thoughts more than their own, especially thoughts from those to whom they report. Thus, they rarely speak out and support their own team members.

Solutions to the Ego Barrier

The great thing about the “ego” trap is that it is a coachable issue. Now keep in mind, one is only coachable if they desire being coached and want to change. If not, you can stop reading because the person you’re dealing with is not going to change.

In The Ideal Team Player, Lencioni suggests we make the three virtues mandatory in our organizations. If someone is not willing to be coached and does not address their humility problem, I would remove them from the organization. In the long run, such people will cost you far more than they can possibly be worth. They cause everyone else to be less effective, and no one person is worth more than the many. If you happen to be a subordinate of this person, and there is no chance they will be replaced (because they are the owner or CEO), then my recommendation is to leave. You will never receive the appreciation you deserve. They will always cause unnecessary drama for you and other teammates, and there will be more pleasurable places to work. Life is too short, and you deserve better!

Now if you want to address the ego barrier here are some practical suggestions for developing your humility:

  • If you suffer fear or self-doubt, it is important identify the cause of your insecurity. I would work backwards in time to discover when it started and how it manifested. Whatever the cause, it is often helpful to share your issue(s) with teammates and manager and ask them for help to overcome it/them. While this seems counterintuitive, it is often liberating when you share with others. You will often receive a lot of empathy and support, and it makes it easier for others to coach you through it when they realize you are aware of your issues and want help.
  • Practice giving credit to others. Giving credit to others helps break your habit of taking credit for everything. A great exercise every leader should practice is to find a least one genuine compliment you can give to at least one employee daily. Keep track and see how many times you give praise versus criticism daily. It is instructive. Leaders that lack humility really struggle with this one at first. I can remember one client with more than 60 employees that refused to do this exercise after their culture survey came back indicating that employees felt they rarely if ever received praise from any managers in the company. In this person’s mind, it was the equivalent of giving everyone a trophy for showing up to work. The CEO felt that it was not appropriate to compliment someone for doing their job. You will not be surprised to know that this organization receives very low employee engagement scores every year and has a serious problem recruiting new employees.
  • Be vulnerable. People cannot relate to superheroes. Recognize and acknowledge your weaker points. On a piece of paper, identify the skills you are weak at. Identify the behaviors that get in your way. Next, I want you to draw 4 squares on a piece of paper. In Square 1, list the activities in the company that you love to do and are great at. In Square 2, list the activities you do that you are great at but don’t like to do. In Square 3, make a list of the activities that you are involved in that you are not good at but like to do. In Square 4, list the activities you are involved in that you are not good at and don’t like to do. If you do not have a fair number of items in 2, 3 and 4, you were not brutally honest. Now sit down with your team and share with the team what you have learned. Show your humility and immediately delegate everything in boxes 3 and 4 to others because there are people who can do those items 5 to 10 times faster and better than you. Stop meddling. Ask your teammates if they agree with you in terms of your strengths in boxes 1 and 2, and be willing to hear them out. Anything that you should have put in boxes 3 and 4, delegate to others. Then figure out what from Square 2 you can give to someone else.
  • Seek mentorship. Find three people you trust to serve as mentors. Choose mentors you can trust to tell you the truth even when it hurts. Make a commitment to listen to their opinions with an open mind.

Strength in Dealing with People

The second most crucial issue I see holding back organizations is how leaders treat their people. In Lencioni’s The Ideal Team Player, the essential virtue of “smart”, which he describes as a person’s common sense about people and their ability to be interpersonally appropriate and aware in individual and group situations. I agree with Patrick that this is an essential component in teamwork and being a leader. However, there is another dimension I want to address, namely the leader’s biases toward how they view subordinates and colleagues in general.

Let’s first address the leader’s common sense about people. Much has been written about emotional intelligence, but not enough has been done to apply it. Let’s face how most leaders have been selected in your organization and others. The people that are the hardest workers, with the most industry knowledge, highest technical acumen, people you may feel comfortable with and have been with the company the longest are usually given the most attention. Soft skill qualities are usually identified as important but, let’s face it, are usually considered secondary.

After all, how often have you seen people in companies that are horrible communicators, cause tons of drama, directly cause the most turnover, and survive year after year because they deliver results or are coveted for the reasons I described above. They are considered irreplaceable because of their customer relationships, contacts, institutional knowledge, etc. In the end, they are horrible with people and are severely holding your company back because you have decided that this one person is more valuable than the many they are infecting.

Worse, once you have tolerated one person treating other people badly, you are telling others that being a jackass is okay. You are indicating to all your employees that treating people with dignity, respect, and character does not affect results. You are indicating that we should not care about the feelings of others. Just focus on results because that is all we care about. If you deliver results, you are untouchable.

The Key Is Assertive Communication

You probably wondering where I was heading with the above. I am sure if I audited your company, I would find at least one leader that has poor emotional intelligence, and you are tolerating it. As an executive and business coach, I witness this issue daily in every organization. What I find frustrating is that leaders allow the dysfunction to continue. I have found that improving your decision making, leadership team chemistry, and organizational effectiveness

can be achieved simply by helping that leader understand how to use the right communication style. An assertive communication style rarely has the issues I described above.

“It’s the little details that are vital. Little things make big things happen.”John Wooden

The degree of assertiveness you use in dealing with people provokes fairly predictable reactions by others, which in turn help determine how effective you are as a leader. Assertive communication is characterized by honesty. It enforces rules, requires results, and is a direct approach that shows concern for yourself and others. It communicates the message that “you are both okay.”

This communication style could be construed as treating all the individuals involved as equal, each deserving of respect, and no more entitled than another to have things done their way. You feel connected to others when you are speaking to them, and you are trying to help them take control of their lives. You address issues and problems as they arise and create environments where others can grow and mature.

The reason assertive communication is so effective is that it combines the positive dimensions of both aggressive and passive communicators. The assertive communicator is goal-oriented and direct, and at the same time is a good listener, considerate, and thoughtful. Thus, the assertive leader bridges the most positive aspects of the two other styles of behavior while at the same time avoiding the negative aspects of those two styles. The assertive style is both a good human relations style and a good team-building style for any organization. The assertive leader is viewed as someone who is strong, energetic, and is both able and willing to fight for resources needed by the department. Further, the assertive leader does not appear to play favorites, since he or she does not bend rules or fail to enforce rules in an effort to be liked by others. This leadership style is most admired by team members and employees.

Leadership Biases

As I mentioned above, there are some biases that I believe leaders have that severely hamper their interactions with people. While there are many I could discuss, there are two biases that cause some significant lost opportunities in organizations.

God Complex

I have met too many leaders, particularly founders, who believe everyone in their company exists to serve them. While it is true they started the business, and at one point you could say they were the business, at some point the organization must grow up and operate as a business, not a bunch of serfs working for their master. Everyone in a successful business, including the founder, exists to provide products and services to customers.

Each person in the organization has a role in the process of providing products and services. As a team, we help each other to do a better job than our competition so that we can operate more profitably, and thus enable everyone to earn their fair compensation and the business to expand and create more jobs. The leader’s job is to make the subordinate’s job easier so that all are in a better position to serve our customers well. Not the other way around!

I have witnessed servant leaders on average get two to three times the productivity of those that have the god complex. Their employees give extra effort, work efficiently, and spend extra time looking after the customer. Ironically, they spend more time looking after their leaders than subordinates of leaders with a god complex. I believe the reason is that the latter secretly resent their boss and do the minimums to stay out of trouble.

Leaders with this complex cause everyone else to be inefficient. Employees spend their days readjusting their schedules from best serving customer to best serving the leader, resulting in severe organizational inefficiency. Such leaders misuse resources and do not even recognize it because they are so selfish.

Others Will Not Figure Things Out Without Me

In a world where most jobs require people to use their brains, and each situation is a little different, most roles are filled with knowledgeable workers. Ironically, many leaders do not treat them as such. In Multipliers: How the Best Leaders Make Everyone Smarter, Liz Wiseman identified the difference between leaders who access and revitalize the intelligence in the people around them (Multipliers) and those whose view of intelligence is based on elitism and scarcity (Diminishers). The Diminishers believe that intelligent people are a rare breed and that they are one of those few smart people. They then conclude that other people will never figure things out without them.

Here is the rub! We are all Multipliers and Diminishers. The questions are how often are we multipliers and with whom? Leaders that have huge ego problems are most often Diminishers. I know of one CEO that terrorizes the leadership team and other employees daily with emails micromanaging their every activity. This CEO’s team loses tremendous daily productivity in order to respond to those emails, provide reports to show what is being asked for, and attend update meetings so the boss can show them what to do.

Diminishers have other traits that cause them to get far less productivity than their people are capable of. The “tyrant” creates a tense environment that suppresses people’s thinking and capability. We have all been around that leader who loves to debate everything, hates to lose, and loves to win. It takes too much energy to get our own points across, so we just don’t even try.

Another Diminisher is the “know-it-all” that gives directives that showcase how much they know. Then there is the “decision-maker” who makes centralized, abrupt decisions that confuse the organization.

“You are not a failure until you start blaming others for your mistakes.”John Wooden

The Multiplier has a completely different way of handling people. Where Diminishers cause people to underperform, Multipliers can get the very best out of people and some believe exceed expectations. They are considered “liberators” as they create an intense environment that requires people to tap into their best thinking and work. They are considered “challengers” as they define an opportunity that causes people to stretch rather than the directive that limits the outcome. The Multiplier wants to make sound decisions, so they encourage vigorous debate on important decisions, usually staying quiet during the debate. After all, they know their own opinion. They really value the opinions of their team. They are “investors” as they invest in people to take ownership of results and are invested in their success!

Learning How to Say No!

In my book, Your Business is A Leaky Bucket, profit leak number 12 is dedicated to “being allergic to saying “no”. Rarely do I meet someone that tells me that they have mastered the use of time! If you are one of those people, you primarily work only those things that will contribute the biggest impact to your organization and role, and you are good at deferring, delegating, or discarding the rest. As a leader, you are communicating well, and you are emphasizing messages you really want your team to hear. Most importantly, you are clear on the right type of opportunities you expect your team to aggressively pursue and those you want them to defer, delegate, or discard. To a very large degree, your success depends on it.

Do You Use Your Time or Does Your Time Use You?

You cannot manage time itself, but you can manage how you choose to use your time. We are under more time pressure than ever, and those little gadgets like cell phones may make our lives much harder than easier.

Time is the great equalizer. Everyone gets the same amount of time: 24 hours in each day. You cannot buy more time, and no one can give you more of it. Thus, the most important question you can ask daily is: “How can I and my team use time more wisely?”

One of the essential keys to maximizing success as an individual or an organization is to effectively determine where your time should go now and into the future. Where you used time in the past only serves as a guide, a learning mechanism for your decisions as to where time should be used in the future. One person in your group losing focus on congruent goals can impact everyone’s time and even create a huge barrier to success.

Too often people search in the wrong places when trying to understand why they are not achieving their goals. They think there is something wrong with the time management program they’re using, so they buy a new one. The real problem is not what program or process they currently use. Rather, it is what habits of thoughts and attitudes they use to decide how they will use their time.

To do that, you must pick and choose which opportunities and tasks to undertake. Time and priority management is a skill few people master, but every person needs. One of the greatest mistakes many leaders make is to say “yes” too often. In many cases, time management is more about what you decide not to do, rather than what you do. Does your leadership team fail to say “no” often enough? Or does it choose to chase fires rather than identify and address the real issues staring them in the face? While there is no exact percentage, you should be passing on at least 25 percent of the opportunities and responsibilities that come your way. Otherwise, you will find yourself spending far too much time on tasks you never should have agreed to take on in the first place.

Belief systems lead to actions that cause results, which then impact your time management. If you or your people behave in counterproductive ways, try to identify what the belief systems are that cause that behavior. For example, let’s say you decide you should exercise three days a week to improve your health. Your primary belief system, however, is that exercise is boring and painful. What do you think the chances are you’ll implement that “decision” to exercise three days a week?

Commonly, I hear CEOs complain that they spend little or no time on their strategic priorities. Instead, they spend their days putting out fires and dealing with their employee issues. They are usually insistent this is just part of business as usual. However, a closer examination teaches us that some people like to put out fires. They enjoy the immediate gratification of handling the daily emergencies, want to be the ones with all the answers, and have trouble saying “no” to others. These habits directly impact their ability to manage their time effectively.

“Don’t measure yourself by what you have accomplished, but by what you should have accomplished with your ability.”John Wooden

Our society is notorious for seeking immediate gratification. The benefit of better health is a long-term goal. In the short term, however, a person is apt to avoid the pain of sore muscles and the loss of self-esteem that goes along with confirming one’s own bad physical shape by not going to the gym. In other words, they feel better about not going to the gym than they do about going. This is immediate gratification, even though the decision is a bad one for long-term goals.

To change behavior, you must identify the immediate gratification you get from your bad behavior and the thought patterns that cause you to continue to practice it. Once identified, you must find something more motivating to replace them. For example, many people would exercise if their doctor told them, “If you do not start to regularly exercise tomorrow, you’ll have only six months to live. If you do exercise regularly, you will live another twenty-five years.” That is quite a carrot to dangle.

An additional aspect of using time is that most people do not have a good sense of where their time goes. At least once every six months, executives should track their time to see where they really spend it. Once you have a solid understanding of how you spend your time, you can redirect time you control and use it more productively by delegating activities to others.

Are You Chasing Revenue Everywhere?

A key area where leaders have the hardest time saying “no” is when it comes to revenue.  This is critical. Not only is this a critical strategic conversation, it is also an issue that can destroy a significant amount of your organizational resources; both time and money. Not all revenue is good revenue. In addition, the more market segments target, geographies you try to conquer, product and services you offer, and distribution channels required, the more resources required. It is important to be prudent in how you go about building your revenue. It is very important to know when and how to say “no”!

Your strategy will help you consider the best type of revenue to target. The predictability and consistency of your revenue growth rate are important measures of the health of your business. A key to driving your growth is targeting the right market segment, not aiming to be all things to all segments. You might love pie, but you’d likely not be feeling too well if you ate the entire pie at one sitting. The same is true regarding the health of your business. You must pick the right slice and exercise moderation. Targeting every source of revenue can leave you spread thin, the proverbial jack-of-all-trades and master of none. Profit leaks result from not focusing your efforts on the most valuable and sensible avenues for revenue.

What does this have to do with saying “no?” Positioning your company in a growth industry, market segment, or sector is crucial to the continued success of your company. To have future growth, regardless of how you are doing in this quarter or year, there must be a target market that your products/services are focused on and that is regularly growing. When businesses mistakenly chase revenue anywhere it leads them, they wind up with less of it. Great companies quickly learn that by segmenting the marketplace, they can perfect their business model around owning their segment or slice of the pie.

Without Saying “No”, Everything Is Equally Important

You set your employees up for failure by saying yes to everything. When everything is important, nothing is truly important! Perfection does not exist. Simple math dictates that the more things you randomly throw on someone’s plate, the less time they have to spend on each thing. Overloads cause leaks in company buckets.

A domino effect occurs when leaders cannot say “no” to anything. Let’s take the people ramifications. The more complicated your service model, the more talented your service staff has to be. They have to be smarter than the average employee in the marketplace while also maintaining specialized skills to handle your customers. That said, when you overload them with responsibilities, you’ll find they cannot reach all your original projected goals.

“Being average means, you are as close to the bottom as you are to the top.”John Wooden

The number one job of a leader is to make their employees’ jobs easier! I recently had breakfast with a CEO I am coaching, and he had mentioned that the COO seemed overloaded. He had wondered if he had hired the wrong person. As we talked, it became clear that they had never established clear priorities together. In other words, everything was important! When I started asking him questions about what he believed the top priorities where for this person in the current quarter, he paused. It was obvious that he was unsure. A great example of setting a good clear priority was an advertising agency that had too much complexity in its client intake process. It took two weeks and six different people to onboard a new client! After proper focus and attention, that was reduced to one hour and one person. That could not have happened had they not focused on a clear priority and de-emphasized other things to get that done.

You Can Reduce Complexity by Saying “No.”

A great example of a company that benefited from saying “no” is Southwest Airlines. They say “no” often. If you want reserved seating, you do not fly Southwest, because their boarding process does not allow for it. Southwest Airlines, unlike most of the competition, does not charge for bags. All of their planes are 737s. This simplifies their fleet, reduces the time it takes to train mechanics, and drastically improves inventory management. In addition, they do not provide onboard amenities. Also, you will notice they fly to just 101 destinations. They choose airports with lower gate fees. Additionally, you can only book flights on their website. The culmination of these “no” decisions is that they have remained one of the most profitable airlines in the industry. As of this writing, they are second only to Delta Airlines in market capitalization with approximately half the number of employees.

Saying “No” Will Simplify Your Life

Typically, leaders push back on the concept of saying “no”. To that end, make it a priority NOT to schedule any meetings or calls in the first three hours of each day. Use that time to work on one key task to move the rocks (your main priorities) out of your way. If you finish in less time, use the leftover time to go after the gravel, sand, and water tasks in that order, the lesser priorities that also fill your daily bucket. This ensures you are working on at least five key motivators each week. You have been trained since you entered the workforce to please your customers and your bosses. They make you feel as if you always have to go the extra mile and exceed expectations! The problem with this mentality is that by trying to please everyone, you end up pleasing no one. You set yourself and others up for failure. You might think it takes courage to say “no”. In reality, it takes brains to say “no”. And the better practice is to prioritize your time commitments and always put thoughtful productivity at the forefront of your mind.

In Conclusion

Strong leadership is essential to maximizing the success of your organization. Failing to address a poor leader in your organization is the equivalence of leaking money out of your bucket. I encourage you to coach each leader in your organization to check their egos at the door. We all falter. When you notice colleagues faltering, reach out in a positive manner to help them see it so that you can all grow as leaders. Don’t assume that just because someone has poor people skills that it must stay that way. Recognize that they have never been taught or required to be any different. Take responsibility to help them see a new way of interacting with the team. Work hard as a leadership team to say “no” more often. Help everyone see what is most important and get better at letting the rest wait. In the end you will find an organization that will grow more profitability with a lot less drama.

Howard Shore is a business growth expert who works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm, please visit his website at www.activategroupinc.com or contact Howard Shore at (305) 722-7216.

Use Metrics to Propel Business

business metrics

Several years back, I was the Business Coach for a mid-sized company in the healthcare industry.  When I first started working with the leadership team, the company grew rapidly and was on the path to insolvency. In nine short months, we were not only able to accelerate their growth but turn them into a highly profitable company with plenty of cash in the bank. The company did so well that it sold for a high multiple only 18 months after our initial meeting.  The secret to the turnaround was found in how we used metrics to propel the business. The turnaround happened so quickly and easily that one of the senior leaders insisted that I had played with numbers.  He could not comprehend how we so quickly turned the company around. I want to share with you how you can use the same steps to ignite the growth and profitability of your company.

In Your Business is a Leaky Bucket, I identified how small improvements could lead to huge improvements in the bottom line. I identified 15 ways (I refer to as leaks) to improve your financial results in the book. I provided an example whereby improving revenue, cost of sales, and overhead each by 1%, a client could improve profit by 42%.  That client made three seemingly small moves that increased their bottom line from 3% to 20% of revenue in one year. Proving that small moves good lead to big results.

HOW WELL DO YOU UNDERSTAND YOUR FINANCIAL STATEMENTS?

One of the keys to achieving higher results is understanding your financial statements better. Most accountants produce financial statements and fail to help you determine how to propel your business forward. This is a big weakness among the leadership team. And you don’t have to be a Certified Public Accountant to learn how to understand them in a highly impactful way for your organization.

One fact that does not get talked about often is that those financial statements, while important, are missing some of the most critical information for you to build a better business. Your financial statements are not wrong. They are just limited because they only capture financial transactions. They don’t capture the metrics needed to help understand the cost of the organizational missteps. In most organizations, the costs of these missteps usually can triple your net profit.

Generally accepted accounting principles don’t help you measure the business leaks happening in plain sight. For example, there is no financial statement line item measuring the costs of keeping poor performers, deals that you lost because of inept salespeople, margin lost because of poor pricing, and so on. It would be best if you used the metrics to propel your business.

BUSINESS METRICS DEFINED

Before I take you through the thought process that will help propel your business, I want to clarify some terminology. There are several terms used in business that represent different types of metrics. Metrics include goals, targets, critical numbers, and key performance indicators. Business metrics allow you to determine how well each employee and the company perform. Metrics help measure whether you are on track to achieve annual and quarterly priorities. There are many metrics (profit/loss, balance sheet, departmental, people, process). It takes discipline and skill to find the smaller number of metrics that make the most significant difference to your organization.”

While we recognize all metrics as important, the “critical number” designation means this metric is the main priority for the company. We must not have more than two. We need two for balance—if we are too focused on performance indicators, we may damage our relationships, and vice-versa. This metric(s) should help you focus on the biggest obstacle(s) to achieving your goals.

What is a key performance indicator (“KPI”)?  KPIs are either leading or lagging metrics identifying activity, inactivity, and effects of accumulated decisions.

  • Lagging indicators are metrics that portray the performance of the past.  Examples of lagging indicators include revenue, gross margin, net profit, cash in the bank, and turnover.
  • Leading indicators are those metrics that help us forecast and predict future results. Leading indicators are those measures that focus on today’s actions that impact the lagging indicators.  For example, all businesses have revenue goals.  The starting point to generate revenue is interacting with a potential customer. Leading indicators for revenue include the number of qualified leads, number of appointments, dollars in the pipeline, etc.

Many metrics can be leading or lagging indicators.  For example, I had a Business Coaching Client that recently missed their revenue goals for the last two months.  When evaluating why the goals were missed, they concluded that they failed to use their marketing budget fully or misallocated what was spent. While the marketing costs were a lagging indicator on their financial statements, how and how much was spent on marketing led to insufficient leads and fewer sales. 

Business goals describe what a company expects to accomplish over a specific period. Goals might pertain to the company as a whole, departments, employees, customers, or any other business area. Goals are metrics and key performance indicators. Targets are the long-range metrics we aim to achieve. Targets are a little more difficult to forecast than 90-day and 1-year goals and metrics.

Goals and targets are the terminology used in business planning and priority setting. While you could use these terms interchangeably, I consider goals well-developed metrics that we feel confident in achieving. You should not call something a goal unless you are committed to achieving it.  Not reaching a goal is a failure in performance.  On the other hand, targets are typically lofty goals with much lower certainty, and we have not determined how to achieve them.  Targets are helpful because they stretch us to develop new strategies and tactics to improve our business model.  Falling short on targets is not necessarily a failure.

There are three primary ways we use metrics to propel a business:

  • Goal Setting
  • Perspective
  • Momentum

IS YOUR GOALSETTING PROCESS BROKEN?

My first objective with many business coaching clients is to shift them from arbitrary to well-thought-out goals.  An arbitrary goal has little basis. Just because you grew 30 percent last year does not mean you will continue to grow at that rate. 

Learning how to develop goals does not require a Ph.D. in quantum physics.  It requires the leadership team to identify key metrics, the assumptions that need to be considered and establish metrics expectations. 

A key sign that you will likely miss your goal, or achieve it for the wrong reason, is when there is little debate.  I often find the goals could be set much higher, but the leadership team is too focused on how they have been doing things rather than how things could be done. The secret is in debating the assumptions and asking questions like what must happen and be true to achieve the goal.

Let’s use my client that failed to achieve their goals for two months. To develop their revenue goal, they need to make assumptions about the following metrics:

  • # sales people
  • Dollars spent in marketing
  • # leads generated
  • # of leads converted to appointments
  • $ of appointment converted to clients
  • Average $ earned on each client

Each of the metrics has a range of potential outcomes. For example, how many of the salespeople will meet their quota?  How many will leave or be fired?  How many do we have to hire and by when?  Can we hire that many people at one time? And so on?  How can we influence each of these assumptions? Where do we like confidence? How can we mitigate risk?

I agree that this seems like a lot of hard work, but it is necessary. All of the issues will be faced during the year.  You will have a higher success rate if you plan to improve the right steps in the process rather than wing it and hope that you will make the right moves.  Hope is not a strategy. Through discussing these assumptions, you will find the key success factors that need to be addressed in your business plan.  You will have established the foundation to propel your business by prioritizing and addressing success factors.

IT IS NOT THE BUSINESS METRIC…IT IS WHAT YOU CAN LEARN FROM IT

Consider evaluating the effectiveness of you are using metrics to propel your business.  I often find that leaders are using metrics but from the wrong perspective. If you are one of our business coaching clients, you evaluate metrics when creating your budgets and forecasts. The metrics used to create them are based on what you have learned from daily, weekly, and monthly reviews of leading and lagging metrics.  It is not only possible but probable that you are going through these rituals and missing the majority of the value of the process.  When done properly, you drive continuous improvement, debunk flawed assumptions, and increase momentum in your business. This all happens through continuous improvement, not a once-a-year budgeting process. By debating and discussing your metrics, you can make more of the right moves to improve your results faster.

It starts with budgets and forecasts.  A common mistake is not to include the entire leadership in their development.  Your financial function can lead the process and construct the financial model, but the functional leaders own the inputs.  We want a leader to own and know their numbers.  When taken seriously, developing functional contributions to your forecasts causes the leader to consider improving their metrics in the coming periods.  And, you want the leaders developing their targets considering and company-wide view.  You need to bust siloed thinking. Doing this helps leaders understand how they and their functions contribute to the overall numbers. When done well, the forecasting process leads to continuous improvement.

You must use a widget-based approach to budgeting and forecasting.  A widget is a primary input that drives your business model. The widgets are leading indicators to success, such as # of Leads, # of Clients, # Jobs, and so on. Why widgets? The lagging results, such as sales, are important, but you cannot manage sales. A key to optimal success is driving the inputs that cause sales. A widget-based forecasting approach allows the leadership team, not just the CFO, to own the forecast. Using widgets as inputs, you can improve forecasting accuracy and easier forecast cash.

Depending on the nature of your business, many widgets should be developed and tracked weekly.  You might be thinking, what is in it for you? We have found that prioritization and focus get much stronger. One of our software-as-a-service business coaching clients focused all their energy on building better software.  While this was important, looking at metrics from a holistic standpoint, the leadership team recognized that their marketing and sales functions were performing poorly.  This was perplexing because they had built one of the best platforms in their industry segment. Using the key marketing and sales metrics, we focused on why the metrics were below expectations.  This led to a deep discussion that you can learn more about by reading my blog post Trying to Sell and Apple to Someone Looking for Chocolate.  That discussion led to substantial changes to their go-to-market strategy, and I am proud to say that momentum changed almost immediately.

IS YOUR BUSINESS GAINING MOMENTUM?

One of my all-time favorite books is Good to Great by Jim Collins.  In that book, Jim discusses the Flywheel effect. The following is an excerpt that can be found on his website.

No matter how dramatic the result, good-to-great transformations never happen in one fell swoop. There is no single defining action, grand program, killer innovation, solitary lucky break, and miracle moment in building a great company. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough and beyond.

Picture a huge, heavy flywheel—a massive metal disk mounted horizontally on an axle, about 30 feet in diameter, 2 feet thick, and weighing about 5,000 pounds. Imagine that your task is to get the flywheel rotating on the axle as fast and long as possible. Pushing with great effort, you get the flywheel to inch forward, moving almost imperceptibly at first. You keep pushing and, after two or three hours of persistent effort, you get the flywheel to complete one entire turn. You keep pushing, and the flywheel begins to move a bit faster, and with continued great effort, you move it around a second rotation. You keep pushing in a consistent direction. Three turns … four … five … six … the flywheel builds up speed … seven … eight … you keep pushing … nine … ten … it builds momentum … eleven … twelve … moving faster with each turn … twenty … thirty … fifty … a hundred.

Then, at some point—breakthrough! The momentum of the thing kicks in in your favor, hurling the flywheel forward, turn after turn … whoosh! … its heavyweight working for you. You’re pushing no harder than during the first rotation, but the flywheel goes faster and faster. Each flywheel turn builds upon work done earlier, compounding your investment of effort—a thousand times faster, then ten thousand, then a hundred thousand. The huge heavy disk flies forward with almost unstoppable momentum.

Now suppose someone came along and asked, “What was the one big push that caused this thing to go so fast?” You wouldn’t be able to answer; it’s just a nonsensical question. Was it the first push? The second? The fifth? The hundredth? No! All of them were added together in an overall accumulation of effort applied in a consistent direction. Some pushes may have been bigger than others, but any single heave—no matter how large—reflects a small fraction of the entire cumulative effect upon the flywheel. Here’s what’s important. We’ve allowed the way transitions look from the outside to drive our perception of what they must feel like to those going through them on the inside. From the outside, they look like dramatic, almost revolutionary breakthroughs. But from the inside, they feel completely different, more like an organic development process.

As a business coach, I have witnessed companies that can show you excellence in their processes but have little to no momentum.  I recommend you develop your flywheel and measure momentum.  Using metrics in conjunction will help the leadership better understand creating momentum. There is a direct correlation between developing and analyzing metrics and the flywheel effect.  When constructing your metrics and priorities, you need to consider how this will help momentum in your flywheel faster.

CONCLUSION

When leveraged properly, metrics lead to propelling your business forward. Metric development and review is a critical skill that all leaders must master. It takes practice, practice, and more practice like any other essential skill. You can only get better at forecasting and using metrics with commitment, discipline, and continuous improvement. And the Finance department is not solely accountable for forecasting. Instead, it is a process that requires input from everyone. All leaders need to help develop the metric targets related to their departments. It is also helpful to run the standards by the employees that must deliver on them. The feedback is where the gold lies.

The review and discussion process as results are occurring is crucial to having a predictable business gaining momentum. By critically reviewing actual versus planned results, you help everyone see where the critical leaks are in the budget. Not only do you need to identify the leaks, but you must also address them.  You must identify the few big leaks that are slowing momentum. Once identified, discover the problem that is causing the metric.  Be relentless in truly addressing the issue by ensuring that you have company initiatives that will remove the bottleneck.

With practice, I believe every leadership team can produce highly predictable results. Each time you evolve a new forecast, you will learn new ways to improve performance and strengthen accountability in your organization.

Howard Shore is a business growth expert who works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm, please visit his website at www.activategroupinc.com or contact Howard Shore at (305) 722-7216.

Avoid Horrible Meetings

A client asked me to observe his weekly leadership team meeting and it was one of the worst meetings I had attended in a long time. Every leader in the room should have been upset because they essentially wasted 90 minutes. More concerning was the fact that leadership rated it a great meeting.

Might you and your leaders unconsciously fall into the same traps as my client? After all, the agenda and process for the meeting is common practice and is prescribed by EOS (Entrepreneurial Operating System) Implementers all around the world. The problem was not the process or EOS, it was the way it was being implemented. Let’s dissect what happened and then discuss what should happen in every weekly meeting.

Form Over Substance

The overriding problem was form over substance. The team followed a proven process and yielded the wrong outcomes. The meeting involved a standard agenda, covered the topics, engaged everyone, started on time, and finished on time. From a theoretical standpoint it appeared to be a well-run meeting. And my client rated it so!

Here are the primary reasons I would rate the meeting horrible:
1. Clarity of Purpose
2. Undervaluing time
3. Little (if any) conflict
4. Lack of accountability
5. Failed to address serious problems

Clarity of Purpose

Are your meetings more focused on purpose or process? Purpose focuses on intended outcomes and process focuses agendas, start and end time, checking the boxes, and having the meeting in the first place. The problem with process is that you can follow it flawlessly and not accomplish your purpose. The challenge with standard operating procedures is the presumption that conditions don’t change. When it comes to leadership meetings, we are always operating in turbulent conditions, so we need to have flexible standard operating procedures that adjust the process to accomplish our purpose.

The purpose of the weekly leadership meeting is to:
• Share key information across the team
• Break silos
• Keep focus on the top priorities
• Hold people accountable when they are off track
• Solve big issue(s) together

Agendas are typically designed to identify the key information that needs to be shared. Personal update, business update, customer feedback, employee feedback, priority status, to-do status, metrics update, and key company and department challenges. After providing this information the team identifies topics, prioritize, and discuss key topics, and agree on solutions. This is precisely what my client did. So, you are probably thinking, this sounds like they should have had a great meeting. What’s the problem?

Information was shared and after 45 minutes none of the key issues in the company were raised. Yes, they identified issues, but it was all small issues. This company had major issues and none of them were brought to the table. When issues were addressed, half the room would check out when it was not their issue. Leaders had opinions and observations that should be raised, and they did not. Worse, most of the issues discussed was a quick conversation between two people that should have happened and could have been resolved before the meeting. These people are all in the same building, are steps away from each other and clearly have not been talking.

Had this meeting addressed its purpose, the leadership team would have spent a lot of time discussing their number 1 issue, people. Certain vacant positions were causing the company to miss opportunities. Keeping the wrong people was costing them money. And, there was no confidence in how this would be resolved. Every leader has a hand in this obstacle and failure to address was costing this company over $1 Million in profit. This discussion should happen every week until results prove that the plan is in place that is showing the progress necessary to capture the $1 Million.

Key Observation: Focus on making major improvement to your business every week. Leadership meetings should limit the small stuff.

Undervaluing Time

If your week is like most leaders, time is always an issue. Time is finite and if we don’t use it wisely the company and performance suffers. When we have meetings, we are investing time just like we would money. When you allow for a bad meeting, one that fails to speed up taking advantage of big opportunities and eliminating your bottlenecks, it is costing you dearly. In the case of the people issue (identified above), it is costing the company $20K in profit each week.

Have you ever wondered why time is being squandered? I have given this significant thought and find two reasons to be the main culprit. First, we tend to avoid the elephants in the room. The elephants are the big problems. To resolve them is difficult, it can take considerable thought, requires conflict, and takes significant steps and time to address. As a result, we go after the small stuff. Second, it feels good to check items off the task list. As problem solvers by nature, we feel good when we solve a volume of problems. However, most of the problems would go away or be different if you addressed the elephants.

In the client example, it was considered important to finish and end on time. Because this occurred, the meeting was rated well. Based on the content and discussion, this meeting should have been completed in 60, not 90 minutes. Most weekly meetings, when focused, can be completed in 30 minutes. In my client’s case, the extra time was caused by taking 45 minutes for ideation and updates. Not only did they spend time focusing on minor issues, but they also spent too much doing it. I plan 60-minute meetings with a 30-minute buffer. While I expect to get done in 60 minutes, there are times when the issue is big and important. It is crucial that you finished discussing and prescribing a solution before leaving the meeting. Failure to do so adds a week delay in addressing important issues. In addition, it causes more time to solve the same problem because you lose momentum in the discussion.

Key Observation – Get better at increasing the value from holding meetings and have the discipline to get done in shorter periods of time. Reward the team with unscheduled time when this happens, and they will go back and get more ROI from their time. A key measure of a successful meeting is identifying and measuring the value of the decisions and actions from the meeting.

Break Silos and Encourage Conflict

I have participated in thousands of meetings. The difference between great and ordinary leadership team meetings is how leaders engage in meetings. In great meetings, everyone in the room is playing to win and there are no sacred cows. Everyone demands excellence, want to contribute value, and cannot stand for bulls#@t. If you get through a meeting and there is little conflict, your meeting suffered one of the following:

1. You are discussing insignificant items.
2. There is a lack of trust

Healthy conflict needs to be mandatory. If you are discussing a difficult issue, there should be varying opinions as to the definition of the issue, multiple ways to solve the problem, and rarely consensus on actions to take. It takes vigorous debate, challenging each other’s assumptions, questions about sources of information, and so on. While I am certain there are moments where this happens in your meetings, how often? What percentage of your meeting involves conflict?

In my experience, a lack of conflict occurs because of the highest-ranking person in the room. For conflict to happen, this person must be more curious, and listening rather than talking too much. After all, they already know their opinion. The job is to access everyone else’s brains. It is important to understand everyone’s perspective on a subject. Even when it is not in their area of expertise. Some of the best ideas and perspectives come from those people that seem the least qualified to contribute. In every meeting everyone should expect to share and contribute ideas. They should truly be part of the decisions. Our job in meetings is to co-create.

We also need to be vigilant about three types of circumstances:

1. Politics
2. Low Contributors
3. Negative Influencers

You can identify politics when people are not speaking their mind. Their body language, tone and past discussions on a subject indicate whether they are speaking up. When people are saying what others want to hear or staying quiet because they are avoiding going against the grain, this is politics.

Key Observation: By making people speak up you help them grow as leaders. You get more and better ideas and break siloed thinking. We want to not only hear everyone, but we also want to understand why they have come to their conclusions.

Lack of Accountability

We must hold the team accountable for achieving company and department priorities and goals. While this is obvious, it is not happening in most organizations and execution suffers. While my client presented the status of priorities and goals, it was a farce, and no one spoke up but me.

First, when leaders presented their metrics, almost everyone one of them was red. Red should be an indicator of poor performance. In an accountable organization when this goes on for too long someone should be fired. When I saw how many metrics were red, I asked “how long they had been red.” The team answered “forever.” Essentially their targets were not real expectations and did not represent reasonable expectations. Targets for the week, month, and quarter for every metrics must represent present conditions. Failure to adjust them accordingly leads to an environment where it becomes impossible to be accountable.

Secondly, this team recently set new priorities and had concluded that the old priorities were too shallow and would not drive needed results. Instead of updating their scorecards they reported on old priorities. Worse, since there were no clear milestones and due date for action steps it was impossible to know whether leaders were on track to complete their priorities. Thus, the priority status update was bogus.

Key Observation: When metrics and priorities are not properly developed it is impossible to hold someone accountable until it is too late.

In conclusion, by having meetings that achieve their purpose, you will be able to grow your organization faster and with less effort. You must properly use time when you hold weekly leadership team meetings. Time is best used solving “big” rather than small issues. Your company would be better off solving one big issue rather than lots of small ones. The big issues relate to quarterly priorities and show up when metrics are below meeting a reasonably high standard. You know that you have hit gold, when you are having constructive conflict and rigorous debate. 

If you need further help, then head over to our business coaching page for more information.

Making Lofty Goals Realistic

Many organizations set goals that are not realistic and are in the habit of not meeting their objectives. Others achieve some of their goals by accident, and some could achieve a lot more. The first questions is, “Are your goals mandatory, or are they something you set out to try?” If they are mandatory, then I suggest you make sure that you are planning for success instead of failure. Many organizations set their goals without considering the obvious reasons they may not be achievable. By addressing these reasons up front, an organization can dramatically increase the likelihood of success or know that they must adjust them to something more realistic.

Here is a common list of possible circumstances that cause organizations not to achieve their goals:

  • Has consideration been given to the capacity of the target market (growing-shrinking) and what a realistic share of the market can be?
  • If revenue levels were achieved, considering seasonality effects, what is the ability of the organization to deliver the products and services at the optimum level while keeping its brand promises?
  • Can the company finance growth; should it grow faster than its ability to self-fund?
  • What advertising or marketing support will be needed to support the goals, and are there finances in place to support it?
  • How will competition respond to your strategic moves, and are your marketing and sales forces well prepared to properly differentiate the company?
  • What is the performance track record of the people that need to deliver, and will your new goals require a significant increase in performance?
  • Are there enough sales and sales support people based on: the amount of time to make the appropriate amount of sales calls; the number of meetings it will take to close a deal; how many proposals one has to write; the time it takes to process a deal, given the normal sales cycle, based on the average close ratio, the average size of deals closed, and travel time?
  • Will you need to introduce new products, by when, and how much of your sales volume depends on it?

Lofty goals require a regular regimen of adjusting your resources (time, people and money). As an organization answers the above questions, inevitably they should be considering upgrading some people, increasing some resources, moving some around, refocusing time, etc. Significant goals, those that require growth rates and increases in profit margins that are large improvements over prior years, need refinement on a monthly and quarterly basis. As we are trying things, we will make mistakes and/or see more opportunities for growth. The great leaders are the ones that are making these adjustments.

Howard Shore is a business growth expert that works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm please contact Howard Shore at [phone link=”true”] or shoreh@activategroupinc.com.

Conflict Avoidance Hurts Teamwork

A great way to tell whether you have a strong team is by the amount of regular, healthy conflicts that occur in meetings when decisions are being made and if decisions are really being made at all. It is often said that if everyone agrees than someone is not needed. This may be true but the real issue may be that the team dynamics in the organization has been broken. This breakage may be causing key people that can be contributing to stop contributing.

There are many leadership missteps that may be killing and destroying teamwork and cause conflict avoidance. Here are a few examples of when a leader can destroy the team.

  • Stopped being curious and really does not listen to people when issues are raised in meetings.
  • Intimidating or threatening so subordinates have fear of reprisal so they do not want to speak up.
  • History of judging people in the room (and voicing those judgments) when opinions differ from theirs or are not strong and thus people do not want to be vulnerable.
  • Appears to only be self interested.
  • Tendency to interrupt other team members before their idea may be completed.
  • Makes personal attacks when they are not getting their way.

According to Pat Lencioni’s book Five Dysfunction of Team, “fear of conflict” is one of the five dysfunctions that are critical to teamwork.  The leader has to make sure that this behavior is not tolerated, and that topics focus on the issues that need to be resolved. If everyone is not weighing in and openly debating and disagreeing on important ideas at your meetings, look for passive-aggressive behavior behind the scenes or back-channel attacks. What organizations find is that healthy conflict saves them a lot of time and leads to better decisions. The role of the leader is to practice restraint and to allow for conflict and resolution to occur naturally.

Howard Shore is a business growth expert that works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm please contact Howard Shore at [phone link=”true”] or shoreh@activategroupinc.com.

Think Before You Communicate

So often verbal communications do not work out the way people want. They cause a completely different outcome from their intended purpose. The challenge is not just the words one uses. It is the tone and body language of the delivery. Research tells us that words make up only 7% of the communication we receive. Body language accounts for 55%, and tone 38%. Meanwhile, people spend the majority of their time thinking about the words they want to use. I would suggest that not enough thought is given to timing and method of delivery.

The more prominent a person’s role in an organization and community, the more important it is for them to be a master communicator. Their prominence results in their communications touching and impacting larger audiences of people. For example, let’s look at Dan Gilbert, owner of the Cleveland Cavaliers. His comments after LeBron James announced his decision to go to the Miami Heat will have a profound impact on his organization and his community. In case you missed it, he denounced the player who won MVP in the league for the last 2 seasons and carried his team to the playoffs for the last few seasons, making statements publicly that included the following:

  • Heartless and callous
  • Shocking disloyal
  • Shameful display of selfishness
  • Cowardly betrayal

Mr. Gilbert then went on “to personally guarantee that the Cleveland Cavaliers will win an NBA championship before the self-titled former “King” wins one. You can take it to the bank.”

The consequences of these remarks served little purpose other than to embarrass Dan Gilbert and his organization and to hurt his community. It put the team in a position where LeBron might never consider returning to play in his home town, Cleveland, regardless of what trades they made. Gilbert violated the rule of “never burning bridges.” Had the Miami Heat or Alonzo Mourning done something so foolish back when he had health issues, Alonzo might not have returned to play a critical role in helping the Heat win the NBA title. There are many cases where players have returned to a former team later in their careers and played crucial roles.

In addition, the people in the city also should have thought before they burned their LeBron jerseys. All of these people acted in a shockingly disloyal and selfish manner toward a player who brought them incredible baskeball for the last 6 years and donated a lot of time and money in their community. Many stars continue to support their home towns after leaving for another team. Now these shortsighted people are alienating him. What are the chances that he will want to continue to give back to this community? What purpose is their communication serving?

The lesson here is that one must think before communicating. I would bet that many communications would never happen because they serve no useful purpose. They are often just an outlet for some to free their anger; as above. In the process they hurt themselves and others. There are only two proper purposes for communication: 1) to transfer information, and 2) to encourage others to behave or act a certain way. You know you achieve that goal when the information has been transferred properly or the other people are behaving or acting the way you desired. If this is not the case, you failed in your communications. If your purpose with communication is to hurt someone or to cause anger, it usually acts as a boomerang.

Howard Shore is a business growth expert that works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm please contact Howard Shore at [phone link=”true”] or shoreh@activategroupinc.com.

Is Your Decision Based on Knowledge or Belief

In today’s IntelligenceReport on Parade.com they have a quiz to test people on whether you know what Democrats and Republicans stand for http://www.parade.com/news/intelligence-report/quiz/hey-big-spenders.html. They used some the data in the book Presimetrics, by Mike Kimel and journalist Michael E. Kanell where politicians’ claims with the decisions they made from 1952 to 2008 are compared. In the survey you find a few interesting facts, such as:

  • Reagan actually increased the number of Americans working for the federal government while it actually decreased under Carter, Clinton and George W. Bush.
  • The USA’s GDP (the value of goods produced by a nation’s economy has tripled since 1950. So the theory that everything is made overseas should always be a concern but can’t be valid.
  • The national debt grows faster when control of Congress is mixed rather than when one political party has full control, refuting claims that the debt would grow faster if Congress is controlled by the Democrats.

While I have not verified these supposedly validated facts, there is a critical point here. Whenever you are making a decision, one of the key elements is the validity of the information you use to make it. For example, I believe the information in the article I referenced is fact. But I have not verified it, it’s only a belief. I am assuming that Parade understood and interpreted what they were reading correctly, and that Mike Kimal and Michael Kanell did their research well and properly analyzed the data. The point is that “knowledge” is absolute and is either correct or not. There are varying degrees of “belief”, and “belief” can still be wrong or right. I would need to do some more work to validate my belief, which would then create “knowledge”.

Too often we hear or read something and automatically assume it is knowledge based on fact. Our belief is based on the integrity we attribute to the writer or the speaker. However, in today’s world of gathering information through our information sources, which now include Twitter, Facebook and blogs, and the speed at which information is collected, disseminated and decisions are made, there seems to be less emphasis on verifying the facts and validating the information.

In the past, many people have made important decisions based on what turned out to be invalid information. We are now at risk for this to happen more often and rapidly. Before making decisions, it is important to determine the criticality of the decision (its impact on well-being, financial stability, etc.) and what information is mission-critical to that decision. The larger and more critical the decision, the more information you need to gather and greater the importance one should place on verifying that the information is “knowledge” instead of “belief”.

Howard Shore is a business growth expert that works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm please contact Howard Shore at [phone link=”true”] or shoreh@activategroupinc.com.

Do you truly add value?

When times were good and money was flowing fast it was easy to generate business without a high level of differentiation or an incredibly strong value proposition.  But now that the economic times have gotten tougher and every business and personal consumer is carefully considering how to spend their dwindling resources, unless  you can clearly show that your business adds real value to the customer… you’re going to have a really hard time finding any customers!

Let me give you a very quick example.  About four years ago my wife and I had a good friend of ours build a custom home for us.  When it was time to choose the lighting for the new house we went to a local “lighting gallery” to sit down with the owner and pick out all of the various lighting fixtures and fans we would be putting throughout our new home.  We spent about two hours going over catalogs with him, as he suggested specific fixtures that would go nicely in our craftsman-style home and match the rest of our decor.  We had made it clear that our budget for purchasing all of the lighting fixtures and fans was between $9,000 and $11,000. Twelve days after we met with him we received an estimate for $21,000!  We quickly realized three important things:

1.  Obviously “budget” did not mean a darn thing to this vendor.  Actually, we ran into this time and time again when building our home, we would tell people exactly what we wanted to spend and then they would come back with a price that was often 60% to 120% higher than what we had stipulated.  When we would comment to them that this was far out of our budget, the common refrain was, “well, then just add some more money in your budget.”  Folks, the days of being able to give your customer that sort of response… are gone.  Even back then I felt this was an awfully arrogant thing to say, today it would be downright stupid.

2.  If you’re going to send me a proposal that is twice what I asked for, it shouldn’t take twelve days to get around to offending me.  At the very least I would expect extremely fast and courteous service if I was being asked to spend double the amount of money I had intended to.  Slow service and outrageous prices… not exactly a winning business formula.

3.  When we got the estimate, and picked our eyeballs back up off the floor, one of my first thoughts was, “Why did he let us pick out the fixtures that were so far out of the price range we wanted to spend?”  I felt that as our “lighting consultant” it would have been his job to help steer us toward the fixtures that were within our budget.  However, when my wife decided to Google a few of the products we had picked (using the exact SKU numbers off of the estimate) we discovered that everything on the list had been marked up by 80 to 150%.  The next day we took a trip down to local Home Depot where we looked at the exact same fan we had picked out at the lighting gallery, which had it priced at $480 on our estimate, and was now sitting in front of us at Home Depot for $245.  We promptly went home and ordered everything off the Internet.  Total bill for all the lighting fixtures (the exact same ones we had chosen out of the catalog at the lighting gallery) was $7,300… which included shipping and tax!

The reason I dragged you through this entire story was to make this point: even though my friends at the lighting gallery had been in business for 22 years, in the new Internet-enabled “watch-every-penny-economy” it only took them about three years to go out of business.  That’s right, I drove past their building the other day and there’s a “for sale” sign out front.

They did not go out of business because they sold a bad product, their lights, fans and fixtures were all of the highest quality.  What drove them out of business was the fact that their old way of doing business is obsolete.  They added no value to the equation.  I could go online and find every single thing I wanted, at half the price or less and have it all delivered to me with absolutely no hassle.  Their building, their displays, their catalogs and even their consultation certainly did not add up to enough value to make me want to spend twice what I could get everything for from the comfort of my home.

Unfortunately, I am seeing the same scenario played out in company after company.  For years they have motored along picking all the low hanging fruit, delivering good (but not truly fantastic) products and services and enjoying high profit margins for basically low-value offerings.  Now that the economy has made selling even the best products and services challenging, these companies are having an incredibly hard time demonstrating the real value-add they bring to the equation that justifies their high profit margins.  The old equation used to be “high-quality… fast… or cheap… pick any two you want.”  Today customers demand the best quality, delivered immediately, at the lowest possible price, with superior customer service throughout the entire buying and owning process! If you cannot clearly differentiate yourself on all of these aspects… combined, you’ll find it very tough to convince customers to buy from you, or at least to buy from you without totally beating you up on price.

So here are my questions for this blog: How do you truly add real value to your customers?  What is everything that is unique and different about the way you add value that would make your customers be willing to pay a premium price to do business with you and feel absolutely great about the transaction?

Two things to keep in mind as you try to answer these questions:

a) Remember, value is from the customer’s point of view, not what you think.  As Mark Twain once said, “The only critic whose opinion counts is the customer.”

b) If you cannot answer these questions in a clear, honest and very compelling way… you have some serious work to do.

I hope you found this post of value. I look forward to your feedback and questions.

John Spence is an accomplished businessman and a leading authority on strategic thinking, advanced leadership development, and many other building blocks for successful businesses. He ranks highly among the most sought-after executive educators and has conducted workshops for numerous Fortune 500 companies.