Surgeon Atul Gawande has a great article in New Yorker about hiring a coach to help him become a better surgeon.

He doesn’t call it this, but what he’s describing is “Shadow Coaching”.  A shadow coach watches you (or shadows you) as you perform some activity and later gives you pointers and tips to improve your technique. This is the kind of coaching sports coaches do; also acting coaches, singing coaches, etc. Almost any kind of coach that improves performance works this way.

Why does Shadow Coaching work?

It’s useful because a coach has a different vantage point than you do (physically as well as emotionally) and can see things you cannot. A shadow coach also needs an understanding of the topic and the ability to teach things you would not have known. In Gawande’s case his coach was also a surgeon, and able to perform in the operating room. But this is not required in a coach. I doubt that 200-some pound, 50 year old Bela Karolyi (pictured above) could do any of the things he coached his 80 pound teen age girls to do in gymnastics competition, yet they won Olympic gold.

How can a Shadow coach help a CEO?

They can improve your performance in the following areas

• Running meetings
• Interpersonal communication (one-on-one meetings and calls)
• Public Speaking (with employees, the public and the press)
• Decision making (A coach won’t tell you what the best decision is – that’s what a consultant does, but they can help you improve the decision making process.)
• Time Management
• Reporting (helping you get the right reports and provide them to others)
• Interviewing

What to look for in a Shadow Coach

• Familiarity with your skill set. They must know as much or more than you about what you’re trying to accomplish. This can come from personal experience or other forms of learning. But beware of super stars who can do but not teach.
• Chemistry. They must be able to give advice, correction and encouragement in a way that you are able to receive.
• Ability to see patterns and consequences. You want a coach who can (for example) teach you how to eat better, not just cook you meals.

When NOT to hire a Shadow Coach

• If you aren’t willing to change your technique. This is particularly difficult in the areas how you relate to people but it’s correspondingly powerful.
• If you don’t know what to do next or how to prioritize. Then you need strategic coaching.
• If you don’t have the time to analyze, practice and improve some aspect of your performance
• If your shadow coach can’t see you in action frequently enough. “Enough” varies with your situation. Sometimes once is enough.

Strategic Coaching

This is the term I use for a less specific, but often more powerful type of support. A strategic coach is your confidante, your sounding board, your cheer leader and the one to kick you in the butt when needed. A strategic coach helps you achieve success (as you define it) in a broader sense than a shadow coach will. In fact one of the first things a strategic coach should do is help you put specific descriptions to your definition of success.

Why does Strategic Coaching work?

Strategic coaching also works because the coach has a different vantage point than you do, but in this case the important distinction is more emotional and intentional than physical. In fact it’s common for strategic coaching to work by phone with no face to face interaction at all. A coach can keep the big picture in mind and not get as distracted as you are in the day to day emergencies. Probably the single most useful thing a strategic coach can do is keep you focused on the important things and not allow you to get consumed by the merely urgent.

How can a Strategic coach help a CEO?

• Helping you define measurable goals
• Helping you keep your actions aligned with those goals
• Seeing inconsistencies in your thinking (let’s face it well all have some)
• Coming up with improvements in your ability. Ironically a coach (unlike a consultant) may not have good suggestions. But if their (lousy) suggestions help you come up with a better plan, they’ve made a significant contribution.
• Asking the right questions
• Pulling out the best parts of yourself

What to look for in a Strategic Coach

• One who is willing and able to help you see the hard truths
• One who is familiar enough with your situation to ask the right questions. This familiarity need not be as specific or detailed as that of a Shadow coach, but must be useful.
• Curiosity. Ironically if a strategic coach is not learning from you, if they know too much, they may try to force you into a mold that worked for previous clients doesn’t work for you
• Chemistry. They must be able to give advice, correction and encouragement in a way that you are able to receive.

When NOT to hire a Strategic Coach

• Insanity. I’m using the definition attributed to Einstein: Doing the same thing over and over yet expecting a different result. Do not hire a coach if you aren’t willing to change what you do and how you do it on a daily basis.
• When you need someone to solve a problem for you. Consultants do that. Some coaches are both. But a coach who is not a consultant will help you improve – not do work for you.
• Too busy. Ironically, this is often the pain that causes people to reach out to a coach. But if you aren’t willing to stop and work on ways to change then hiring a coach won’t help.

Consulting

In working with CEO’s there’s often a fine line between coaching and consulting so I thought it useful to give consulting a short mention here. My working distinction is this:

A consultant brings in  expertise that you didn’t have. A coach helps you maximize the expertise you already have.

Another way to say it is a coach is more focused on asking the right questions while a consultant provides answers. In my experience, CEOs of small to medium size companies want both. They want a coach to help them become better at what they know how to do, and at times they want a consultant to bring in some expertise that they have not yet developed.

Takeaway:

• Hire a shadow coach to help improve HOW you do something
• Hire a strategic coach to help improve WHAT you’re doing
• Hire a consultant to give you answers or ADVICE when you need it

And by “Nothing All Day”, I don’t mean you’re lazy or hanging out at the beach playing angry birds. What I mean is that the stuff you do all day is not, for the most part “CEO work”. It’s usually what is done in a large company by sales people, or production folks or HR or accounting.

There are 2 reasons for this.

CEO work is Important but not Urgent.

This is a trap. The more time you spend on important work, the less often emergencies pop up. If you don’t force yourself to block out time for the non-urgent then you’ll always be chasing your tail.

CEO work is not required full time.

This is true for all but the very largest companies. Think of CEO as a function not a job. Like cleaning your house. It’s a function that needs to be done, but you don’t need a full time janitorial staff. So there’s nothing wrong with you doing sales, solving production problems, or any of that others stuff. In fact there’s a lot that’s right with it.

What you shouldn’t do is neglect the CEO functions your company needs because they are not urgent.

CEO as Orchestra Conductor

Think of that metaphor. The conductor makes none of the music. A small band (4 or 5 people) doesn’t need a conductor. Everyone plays an instrument – but someone chooses what song to do next, and when to schedule rehearsal. You’re probably mid-way between the two. You are the conductor but you also play an instrument (or several).

Takeaways:

• Let everyone know when you speak as an instrument player or as conductor
• Schedule time to function as the conductor or the whole orchestra will get out of time.

One night at dinner she said to me, “The chicken stock makes the rice too salty”. I’ve been married long enough to know there was more to that statement than met the ears.

“Oh,” I said, “Did I buy the wrong kind of stock?” She nodded. “Should I have bought the low-sodium kind?” She nodded again. “But it didn’t say that on the list.” I said, more by way of explanation than self-defense.

Her response to me is the reason you should be interested in this post. She said “It never occurred to me that there was any other kind.” Never occurred to her. Never?

Of course she KNOWS there are other kinds of chicken stock. It’s just that this is the kind she’s used for so long that the others are not part of her conscious thinking anymore.

To be an effective shopping manager, she needs to think differently than she does as an effective shopper.

It’s the same reason we’re eating lots of mushrooms this week. She prints a list from the grocery chain website. The list said “ Mushrooms are on sale – 3 boxes for $5” and it didn’t say “We only need one box.” But I digress.

This is actually a pain in the ass for her. And I sympathize. She’s frustrated with having to spell all that stuff out. And frustrated when I call from the store asking about what I’m sure she considers stupid details. And she’s more frustrated because when she shops, she does make a list but also makes a lot of decisions and changes on the fly. These are triggered by what she sees on the shelf. And it ties into what she’s got coupons for and even changes her plans of what to cook. This is all very hard to translate into instructions for someone else to follow. Even someone as smart and motivated (did I say rich and good looking?) as I am.

The truth is, in our case it’s just not worth it for her to become a better shopping manager. We’ll muddle through and she should be driving again in a month or so. But in your case, if you want to free yourself from performing a function AND you want someone to do it as well (or better) than you, you have to become a better manager. Here are some tips:

1. Use details. Lots of details. A manager (or delegator) has to think differently than a doer. List the specifics of the outcome you really want – even the minutia that should be obvious. And consider the context of the decisions you’d make if you were doing the job. Then make those explicit. This is one reason it helps to write things down. It’s harder to be vague on paper.

2. Allow more time than you think it should take. You won’t be good at explaining everything right away and the other person will need some time to learn how you think. The more nuanced the job is, and the more experienced you are the more time it will take. Schedule some time for review and ongoing training. Schedule it before the deadlines are due so you have time to correct mistakes and omissions.

3. Use Verbs. Too often we give someone a list of To Do items that includes only nouns. When your list says “Conference Topics” it may not be obvious what you want them to do about Conference Topics. Do you want that person to suggest topics for the upcoming conference? Do you want them to interview others about what topic they’d like to see?  Are you giving this person the authority to decide on the topics or just to recommend? The answer lies in verbs.

Takeaways:

• As a manager you need to think differently than as a doer.
• Use details and verbs.
• Write it down.
• It takes time. If it’s not worth the time, don’t do it.

If that’s true, then you’re not doing it right. And, of course a lot of people aren’t doing it right – that’s what keeps my blog in business. I’ll tackle the meetings bit here and leave the manager problem for another post.

Collaboration, Communication

Most people don’t do their work in a vacuum. They need collaboration and communication (C&C) with others. Let’s say you have 5 people on a team who need to organize their work together. Let’s add a sixth person – the manager – who needs to know how the team is doing, if there’s anything she can do to help any of them (that’s her job after all) AND she needs to provide direction and connection with other teams in the organization.

That’s a lot of C&C.  If all those people reach out to one another willy-nilly whenever the impulse strikes that’s a lot of interruptions. No wonder Jason wants to get away from the office.

But there is another solution. Figure out which parts of all that C&C can be scheduled and organized. It won’t make the problem go away, but it will diminish it. Hopefully to the point where the down side of the interruption is out weighed by the benefits of C&C. So if you’ve got a scheduled and organized way to collaborate and communicate, what do you have but a meeting?!?!?

I agree that most meetings are a waste of time. But that’s because they aren’t done right. Appropriate meetings not only save time, but encourage all kinds of good things like synergy, morale, camaraderie, sharing of ideas – in short, team work. But the idea of abolishing meetings because of this problem is like abolishing food because people are obese. You just have to do it right.

Here’s a quick primer for Better Meetings

• Each Meeting  needs a purpose. And the kind of meeting has to fit the purpose.
• It has to include the right people – all of them but no one else.
• People have to come prepared.
• It should have a pattern – a rhythm. This will vary with the type of meeting and it’s purpose. A brainstorming meeting has a different pattern than a meeting where you hash out alternatives and reach a decision.
• It should be as short as possible – but no shorter.
• Someone must be in control.
• Each meeting should have an outcome – one that accomplishes the purpose of the meeting.
• Keep in mind that each meeting doesn’t happen in isolation. Maybe there are times that should be “meeting-free zones” and other times when meetings should be optional.

[Ricardo Semler goes so far as to make all meetings optional. His point is if you're planning the meeting it's your job to make it enticing enough that people want to come (and want to pay attention instead of playing with their iphones). This is pretty extreme and only works when all other aspects of the company culture are aligned with it. But it's an interesting approach. ]

If doing meetings this way sounds like a lot of work – well yeah. That’s why no bumper sticker says “I’d rather be running a meeting.” But (as Jason points out in the video) meetings are expensive. A one hour meeting with 10 people is really a ten hour meeting. And if you add up the salaries of all those people and account for the interruptions the meeting causes before they get back into the flow of their work – you’ll jump out of your skin. If you’re going to spend that much money / time / etc isn’t it worth it to do it right? That’s why you get paid the big bucks.

Takeaways

• Meetings are expensive
• If you’re going to have one – do it right
• If you do it can pay off it spades

UPDATE: Seth Godin and I are aligned in starting the new year with better meetings.

flickr.com/photos/ramdac/ Jason Gulledge

I almost called this post the ideal team for RUNNING your company. But that would be wrong. You can run it however you want. Some people want to be in charge of everything. Fine. Some want to just do stuff and not think about process or monitor any results except the bottom line. Fine. Some want to operate on a whim and change direction on impulse. Fine too. You can run a company any of those ways. Just don’t expect it to grow very large or very fast.

If you want a company to grow, you have to have a team that executes. Hence the term “executive.” By executive, I mean someone who can take an idea and run with it: make it happen. I don’t mean they run away with it. Executives need to be monitored and accountable but they don’t need hand holding. They take responsibility and initiative.

There are two reasons you need a team and they both relate to the fact that a growing company is constantly changing. There are new activities and new challenges all the time. (This same is true of a turn around situation so the team concept is applicable there as well even though the company may actually be shrinking not growing).

Reason # One is there are too many moving parts for a single person to do them all. If the same stuff is happening over and over again, maybe one executive can deal with it. But by definition, this won’t be true if you’re growing.

Reason # Two is because of the shower syndrome. You know those ideas you get in the shower? Or maybe as you’re falling asleep, or out walking the dog? I often get them when I’m in the car by myself – another reason not to text and drive.

Those are the result of your non-conscious mind working on a problem after your conscious mind has let it go. They aren’t always right but they can be very very powerful. The reason for a team is you only get these ideas about one thing at a time. If you’re focused on raising a new round of investment, you won’t be focused on opening a new market.

flickr.com/photos/rocketjim54/

You need a team so more people can get these kind of ideas in the shower. Not that I recommend group showers or anything.

So without further ado here’s your team:

NOTE: The ideal team size is not 7 even though I’ve listed 7 categories below. The best team size is either 3, 4, or 5. It makes sense to combine responsibilities based on your industry, company size and individual’s skill sets. But you do need a “buck stops here” person at the top of each of these categories.

Sales & Marketing. I know these are separate skill sets, but they both serve parts of the same process (turning a person into a lead, then a prospect then a customer). So you need a person at the top who can make this happen and do it in a way that supports the strategic goals of the company. At different times that means opening up new markets, shifting the sales mix toward, or away from certain product lines, more profitable sales at the expense of market share – or vice versa.

Operations. This person is charged with developing an organization to deliver what the sales people sell. They must focus on effectiveness, not just efficiency. They should be able to accurately project lead times, quality assessments and costs.

CFO Everything the company does affects cash. Someone needs to be focused on the cash aspects of every decision the company makes. Someone need the time and bandwidth to routinely hit up vendors for better prices, make sure sales are collected early and bills are paid at the optimal time.

This person need not be an accountant. But they need to understand accounting well enough to “speak the language” and relate accounting to management decisions. And she (or he) must understand the differences between short term spending and long term investment.

Legal Almost everything the company does has legal implications. This person should not be in-house council. They should probably not even be a lawyer (like the CFO need not be an accountant). But they have to “speak the language.” This person should know when something needs to be sent to the company’s counsel and when it doesn’t. They should be able to mark up legal documents and negotiate contracts to a point where you’re not paying lawyers to do things that a mere mortal can accomplish. This way the firm can get the most benefit from what it does spend on legal fees.

IT Here I’m talking of IT as a strategic function – not a support function. Increasingly, every company has some informational or knowledge component to what they sell or how they make and sell it. Someone needs to know how to tap into the latest technology to provide a competitive advantage in that aspect of the product or process. This is the person I’m talking about.

For some historical perspective, consider this. Before factories were run by electricity, they were powered by an external source – often water. No matter what they produced, they needed an intricate arrangements of wheels, belts, pulleys etc to get the power from the river or waterfall outside the building to the machines and devices inside. The ability to design and implement the power transmission often became a strategic advantage to the firm – despite that fact that what they sold did not contain water, belts, or pulleys. That is the aspect of IT that I’m referring to here. It is of course, more critical in some companies than in others, but worth considering in all companies.

New Products Every market is moving faster and faster. Just selling the same stuff year after year is a way to consign your company to the commodity market (at best and the graveyard at worst). Someone should be thinking 1,2 or 5 years out about and developing new products for existing customers as well as new markets. This job is very much in the Important but not Urgent category.

CEO The CEO is the keeper of the business model. It’s up to her (or him) to understand how the trends and cultural changes outside the company affect and are exploited by the systems and organizational structure on the inside.

This person is the captain of the ship, or more aptly, the conductor of the orchestra. Did you ever stop to think that the conductor makes none of the sound the audience hears? Their job is in two parts. One faces outside the company where they need to make key relationships and notice trends. One faces inside the company, where they develop the size and scope of the organization to profit from those trends and relationships.

So How Do You Get There From Here?

It takes a big cultural shift for many companies – especially ones that were founded by a single individual.

I’m a big fan of the bootstrap – that phase when you do it or make it rather then buy it, when you spend time rather than money, and pay in stock options rather than cash. But a company can only bootstrap so far. If you’re going to build a top notch team, you have to hire the best and pay them market rates. But just as importantly, you have to structure the organization so those expenditures are investments rather than costs.

Another big attitude shift is that of control. When one person’s at the top they are expected to know everything and all the decisions rest on their shoulders. A company like that can’t scale past a certain point. To grow you must be thrilled to give up control, and be happy to find people who are much better than you at certain tasks.

Another cultural shift is that as a company grows it becomes more dependent on process and less on just getting the job done. Not to say that process should be allowed to impede the results – that’s bureaucracy. But the wisdom and experience that people develop can’t be allowed to live in a few people’s heads. It has to spread throughout the organization so that best practices abound. That takes process.

THANKS

Many of the ideas here were inspired by a discussion I had with Mark Volchek about this topic. Mark is a co-founder and the CFO of Higher One. The company was founded in 2000 by students right out of college, was on the INC 500 in 2009 and went public in 2010.

What Do You Mean Organization?

That’s reaction some entrepreneurs have. They don’t need no stinkin’ organization. They just tell people what to do. Then they scream and curse when it doesn’t get done right. But whenever you have two or more people working toward a common goal, you have an actual organization, whether you like it or not.

The trick to developing a growing, thriving organization is to push as much responsibility as possible down the organization.

Yes, Down The Organization.

The more things that are handled as close as possible to where the work is done, the more people at the top have time and resources to do more strategic things. But this is hard to do.

Why? Because the people at the top often have more experience and ability. At least we say that’s the reason. Yes, they often are more competent. But the reason it’s hard to push that competence down the organization is that people who are good at what they do have what’s called “unconscious competence”. Remember when you learned to drive a car? Remember the focus it took? You were developing competence – consciously. At some point you got so good you could drive and talk and listen to the radio, AND think about something else. You became unconscious of the movements needed to maintain speed, steer, put on the blinker etc. That’s unconscious competence.

People Don’t “Get It” When They’re Not Unconscious

Probably the person down in your organization, the one who should be given some responsibility, is not unconsciously competent. And if you just told them to do something they wouldn’t do it right. They wouldn’t get what you wanted done. It may not be that they can’t do the job, just that they need training, mentoring, oversight (aka management) to be able to execute that responsibility as well as it needs to be done.  And that takes time and effort.

But more than time and effort it takes you being able to explain what you do well, and how you do it. That’s what trips most of us up. When we are so good that we are unconsciously competent, we can’t always explain to another person how it should be done. And so, we can’t figure out how to push some responsibility down to someone else. And we have to keep it ourselves. But that limits the growth of the company.

The Solution?

There are many: Checklists, Work Flows, Management Training, Mentoring, etc. “The Exercise of the Elves” is one of my favorites. They all take a skill set that is often quite different from the skill of actually doing the work. This is one reason many small companies stay small. They aren’t willing to invest in that skill. Big companies are. They hire people to do these things, or they bring in consultants [shameless plug] or both. Companies that aren’t willing to do this are forced to keep responsibility at the top and keep their organizations small.

But if you want to get out of the engine room and into the wheelhouse; if you want to take your company to new places; in short, if you want to function more like the CEO and less like the General Manager, it’s a skill you need to bring on board.

I just asked for a meeting with the CEO of a start-up I’ve invested in. The reason? I just got their half-year report and there’s no bad news! Andy, if you’re reading this, I’m talking about you.

Why is no bad news a problem?

Because we’re running a business here and there’s always bad news in a business. The only time there’s not bad news is when there is terrible news (the company just went out of business), or when there is amazingly, unbelievably,  terrific news (the company just got bought by Google, here’s your check for $100 million). The rest of the time there is bad news. And the CEO’s job is to find it and fix it. And do it quickly so you can find more bad news, fix that, then rinse and repeat till Google buys the company and we all get checks for $100 million.

If I get a report that doesn’t mention the bad news, then either the CEO hasn’t found the problems or the CEO isn’t telling me about them (and probably isn’t asking for the help he needs to fix them quickly enough).

Let me take that a step further.

The thing that gives me the most confidence in a business owner or CEO is how they handle bad news and problems. This doesn’t mean they shouldn’t be upbeat. There was some legitimate good news in the half year report I just read. There’s always good news too (or you’re out of business). But a good CEO is upfront about the problems, is looking for the root causes (not just the quick fixes) and is putting together a plan to deal with them.

Andy, if you’re reading this, two things.

1. Get back to work – you should be reading the blogs of your investors, your competition and your key customers – but enough already.
2. You’ve now got the agenda for our meeting.

And why that’s a good thing!

source: Richard Masoner on Flickr.com

Just like a bicycle built for one doesn’t usually grow into a bicycle built for two, there is not a linear continuum from small company to big company like there is from little kid to big adult. It doesn’t work that way.

Why? Because the business model has an external component: customers. And if you hadn’t noticed, they have a mind of their own. It’s been said, the things you can’t change include the weather and other people. The things you can change include yourself and the oil in your truck.

But the truth is, if your burrito sales max out at lunch time because there just aren’t enough people in driving distance who want your burritos, then making more of them faster, or adding more chairs or a bigger sign won’t conjure up any more sales. Now if the bottle neck is chairs, or how fast you can roll a burrito, then that’s an internal problem and you can fix it.

But if you’ve maxed out the external aspect of your business model, you just can’t grow it any bigger without changing the model. Opening another store to become a chain or selling online would change your model and allow for more growth. But without changing your model, the company won’t grow in size – but it can grow in profit.

Why is this a good thing?

The silver lining is that most really big business models REQUIRE size. They can’t survive at all when they’re tiny. They need life support (in the form of outside investment). And they need to grow really fast. Because of that, competition can often do a lot more harm to a company with a business model that requires growth.

As Ridgely Evers said “A Silicon Valley start-up is completely focused on getting big, and naturally risks failure to get there. A true small business, on the other hand, is focused on becoming profitable, feeding a family, and staying in business. That’s a fundamental psychographic and cultural difference.”

I’ve often said you need to do three things to have your company succeed.

1. Make something people want to buy.
2. Find those people and sell to them.
3. Build an organization that does the first two, over and over again at a cost below what your customers want to pay.

As I was thinking about Evers’ quote, it occurred to me that people who run small companies focus more on number one and two than they do on number three. While big companies put a lot of focus on number three.

The problem is not that small companies don’t grow into large ones – the problem is that if you ignore point number three, your company is not as successful as it could be regardless of its size.

The better you build your organization the more profitable and less frustrating it will become. Building an organization is the true job of a CEO.

It’s a statistical fact that people with bigger feet are better at spelling than people with smaller feet. Why? … They tend to be older!

Sorry for the bad joke, but ask yourself what’s the difference between big companies and small ones?

Did you answer things like: more customers, greater revenue, larger staff production capacity or sales force? Then you made the same mistake as the joke. Not understanding that size is the consequence not the cause.

What do we mean by “Scale”?

Scale has to be understood in context. If you’re a surgeon, or a personal trainer or a voice coach, then your business is a “practice”; and the maximum size you can get is going to be smaller than the maximum size for a company that makes computer hard drives. (It’s also true that the minimum size you can survive at is likely to be smaller as well.)

The same is true for a restaurant or a knitting shop.  You can only get so big before you’re serving all the customers who want what you sell and are within a reasonable distance from your shop. You’ve saturated the “addressable market” in business jargon.

Of course, a restaurant can open other locations and become a chain, and the knitting shop can start selling stuff on line. But think how different your day would be as the owner of a knitting shop compared to the owner of an online knitting shop. In the latter case you’d be analyzing your page views and conversion rates. You’d have a shipping department and your business would be open 24/7. You might even need to conduct business in multiple languages.

The difference is not one of size or quantity but a difference of kind or quality.  You’re not really in the same business at all. You are (to use jargon again) operating in a different business model.

And that brings us to the difference between a big company and a small one. A big company is one that understands it’s business model and exploits it for maximum size; and a small company doesn’t.

What is a Business Model?

Business Model

• Your goals, passion and financial targets. (Otherwise why on earth would you be running your own company if you didn’t have goals and passion for it?)
• Your customer’s desires. (They have to want what you sell more than they want their money or they won’t buy.)
• Your internal processes. (To make a profit, you have to make something  customers want, find those who want it, sell it to them, then build an organization that can do that repeatedly and less than the cost they’re willing to pay).

Two Kinds of Small Companies

Let me mention that there are two kinds of (small) companies that don’t understand or exploit their business models.

The first is what most companies are like. 50% of American workers work for small companies and most are like this. They actually have a business model, and they operate within that model. They just don’t consciously analyze the model so they don’t know how to incorporate it into their business decisions.

The Devil in the Details

To understand and exploit your business model, you have to know what really drives your customers to buy. Is it price? quality? features – and which ones? convenience? That’s why Ray Kroc (McDonald’s founder) used to say that they weren’t in the hamburger business they were in the real estate business. Their customers bought for convenience and consistency (not quality). So the key to their success was picking the right locations to give their customers the most convenient access to their consistent products.

You have to understand all your internal costs and how to maximize the impact of every dollar you spend. Do you know the cost of lead? The cost to convert each lead to a customer? Whether spending an extra 10K to improve production capacity will improve or hurt your bottom line and by how much?

Scalable companies know these things. And they’re always working to improve their execution of the model in which they operate.

Companies without a business Model
The second group of small companies is exemplified by the newest internet start-up. I’d name one but by the time you read this they’ll be supplanted by another.

But it’s true of any novel invention. Novocaine was invented to be a local anesthetic for military use – but found it’s market in dentistry. Early telephones were wired in pairs. You needed a separate line to the phone of each person you wanted to talk to because the business model was predicated on sending only urgent messages (faster than a telegraph). PayPal started selling cryptography on hand held devices. No one bought it. They tried several other business models before they found that people would pay to transfer cash electronically and that required security which they were good at.
These companies don’t have a business model or rather they haven’t found it yet. So what they should be doing is NOT growing. They should be learning. They should be learning what customers want, how much they’ll pay, how to find and sell to them, and how to do this in a way that makes money. Once they’ve figured that out, then they should grow.

She is a client.  Her company makes web sites and on-line products for a specialized industry. They’ve got a reputation for high end work, solid market penetration and about a dozen employees. She is the primary sales person and has the most common complaint I hear from business owners: “I can’t find good employees”

The meetings were going well. She was staying on track, learning what people were up against, and heading off complications before they became actual problems. The words were very positive, but her tone was not.
“So?” I asked.

“All these meetings. They’re keeping me from my real work.”

But she was wrong about that. What a small company has in common with a small child is despite their size, they still need all of the parts. So even small companies need three levels of management, someone to do collections, to analyse the numbers, and all that stuff big companies have whole departments for. But being small you don’t need them all full time. So people wear multiple hats. And when that happens, you tend to wear the hats you’re best at or enjoy the most. So my client loves sales and coming up with new product ideas.

Because she’s done a good job in those areas, the company needs more production capacity, and better coordination. So now she must consider management to be her “real job”. By focusing on this (not exclusively but predominantly) she’ll enable others to do more with fewer problems. That’s the real job of building a company. When problems decrease, and productivity improves, she’ll be able to wear this hat a little less and put on another a bit more.

One-on-one’s: Great management tool.
Have one with each of your direct reports.
Meet weekly at the same time for 30 minutes. Never reschedule. It’s that important – it is your real job.
Prepare. They should and you should too.
Don’t solve problems. Or train. Some of that may happen. But if you can’t fit it into 30 minutes along with the other stuff, then you need  a separate meeting for training or problem solving.
It’s a time for you to share certain things and learn certain other things. Generally the same kinds of things each week (maybe even in the same order depending on your style) which makes it easy for each of you to prepare.
What to share. Anything the other person must know to do their job better. That’s your role as manager: to help them do their job better. Maybe share what’s happening in other departments so they can interact better. Maybe it’s feedback of how they really made a difference. Share what they can expect from you and the rest of the company; both before the next one-on-one and longer term. You prepare by keeping a notebook around all week and jotting down stuff that you’ll need to share with each person.  Then spend a few minutes pulling it together before the one-on-one.
What you should learn. Status: what happened since last time and how that compares to what you expected. Why there’s a difference. What problems they are running into. Their opinions on things. Insights you don’t know about because you don’t live at their desk. Over time, you’ll get a sense of who they are as a person: what motivates them, what puts them off. You’ll get a feel for what they do well and where their limitations are. Make notes about this.
Written take-aways: What each of you will do before the next meeting based. This becomes the status for next week’s meeting. Notes you can use for their annual review. They should take away your impressions of how they’re doing so nothing (I repeat nothing) in their review is a surprise. If it is, you’re not doing it right, but that’s another column.

Trust (in both directions) is a non written take-away.

Beware: You’ll think you don’t have time. But it reduces time spent on interruptions and problem solving. And it’s your real job.

Takeaway:

• Do Them.

[tags]management, CEO skills, entrepreneur, small business owner [/tags]