What would you pay for a tool that could transmit the wisdom of your smartest people out to everyone in your whole organization? One that is able to reduce errors in the most complex activity and achieve consistent results time after time? I’m sure you’d pay a lot, but this tool costs very little and requires almost no training to use.
By now you’re beginning to suspect the tool does not exist or this is some kind of joke. But this tool has accomplished the following things:
In 1935, a new generation of long-range bomber was all but certain to be adopted by the US Army until, in it’s competition flight, the Army’s chief of flight testing crashed it killing himself and another of the five crew members. There was no mechanical failure – the problem was pilot error due to the complexity of the new machine.
The bomber was scrapped in favor of a simpler plane which had much less range and capacity. But a few of the more complex planes were purchased for testing and this tool was adopted. Using this tool, pilots went on to fly this plane a total of 1.8 million miles without a single accident. The Army eventually ordered close to thirteen thousand of these bombers and because of its increased capacity gained a serious air advantage in World War II. The planes were known as the B-17 and nick named The Flying Fortress.
In more recent times, the tool has been applied to the complexity of hospital intensive care units where over half the ICU’s in the country (USA) rely on a super-specialist to oversee the intricacies of care which involve on average 178 separate, individual actions for each patient every day. In Michigan, starting in 2004 this tool was used where many hospitals are short on staff and funds. It saved over 1,500 lives and an estimated 175 million dollars in a year and a half.
What is this tool? A check list. That’s right. A check list. A simple check list. In this great New Yorker article, Atul Gawande points out that check lists have two benefits. I’ll quote him here and provide my emphasis.
First, they helped with memory recall, especially with mundane matters that are easily overlooked in patients undergoing more drastic events. (When you’re worrying about what treatment to give a woman who won’t stop seizing, it’s hard to remember to make sure that the head of her bed is in the right position.) A second effect was to make explicit the minimum, expected steps in complex processes. Pronovost was surprised to discover how often even experienced personnel failed to grasp the importance of certain precautions. In a survey of I.C.U. staff taken before introducing the ventilator checklists, he found that half hadn’t realized that there was evidence strongly supporting giving ventilated patients antacid medication. Checklists established a higher standard of baseline performance.
If something so simple can achieve such fantastic results why are they not used more often?
I’ll bet the answer lies in your response when you read what the tool is. Didn’t you think “Well that can’t apply to my business. Most of what I do can’t be reduced to something as one-dimensional as a check list – it’s too complex/unique/has special circumstances?” Didn’t you think that?
So did doctors and test pilots. The truth is most company founders don’t go to work thinking their main job is to develop check lists. No. We think our job is to get real stuff done. Solve problems. Sell product. Collect money. We don’t have time to develop check lists.
But that’s only our job if we don’t want to build a very large company. If we want to scale what we do then we should spend half our time developing check lists, the other half making sure people follow them (read the article for some great insight on that) and the third half handling the stuff that truly is special. It’s my experience that the “third half” is actually less than 15% of what goes on. The rest can be documented and replicated with something as simple as a check list. Or, actually, many check lists.
The problem with this approach is that it doesn’t feel so good. We don’t feel like heroes walking around with a clipboard ticking off boxes. We feel much better thinking that what we do is special and unique. We like to be heroes.
But you know what? A friend of mine’s house burned down recently. The picture above is of their house. Here’s the video.
Luckily he was awake at 2AM getting ready for a trip so he heard the smoke alarm go off. He rushed upstairs and got his kids and wife out of the house. With literally seconds to spare. One of their three pets died, another escaped in good shape, and the third was resuscitated by the fire fighters with oxygen and is doing fine. The house was destroyed. All their possessions including video tapes of the kids and all his wife’s art work were ruined. The family was checked out at the hospital, but didn’t need to stay. He described it like being sunburned and having smoke in the lungs like a few cigars. Sunburned skin from being so close to a fire in your house! That’s how near they came to disaster. Instead they only lost all their possessions and a pet.
Somewhere between the smoke detector, him rushing upstairs through smoky rooms, and the fire fighters I’m sure there’s a hero or two or three. I’m just as sure they wish they never needed one.
Sometimes our desire to feel like the hero gets in the way of building a company. Because the majority of what we need to accomplish is not heroic. But making sure the right things happen day after day every time anyone in your company does their job or helps a customer; to do that consistently with great results we need a cheap little tool, not a hero.
Takeaways:
Change the batteries in your smoke detectors.
Don’t be a hero
Build some checklists
[tags]Checklist, CEO Skills, Entrepreneur, Build a company, small business [/tags]
Joel Spolsky recounts his move from a Microsoft to (eventually) Juno Online Services in New York.
Eventually, though, I started to discover that the management philosophy at Juno was old fashioned. The assumption there was that managers exist to tell people what to do. This is quite upside-down from the way management worked in typical west-coast high tech companies. What I was used to from the west coast was an attitude that management is just an annoying, mundane chore someone has to do so that the smart people can get their work done. Think of an academic department at a university, where being the chairperson of the department is actually something of a burden that nobody really wants to do; they’d much rather be doing research. That’s the Silicon Valley style of management. Managers exist to get furniture out of the way so the real talent can do brilliant work.
Guess what. Microsoft is still around and you probably never heard of Juno.
Takeaways:
[tags]small business, manager, management, CEO, entrepreneur [/tags]
There are examples to show incentives are good: they improve some behaviors and are a way to give people what they want in exchange for effort you want. There are also examples of why incentives are bad: they promote individuality at the expense of teamwork, they morph motivation to extrinsic rewards when motivation could (should?) be intrinsic, people always find ways to game the system.
Context is the Key
It’s like saying is fat bad? Too much is, so is too little. And it depends what kind, what else you eat etc.
Incentives are good for some things, bad for others. On top of that some people respond to them differently from others. Management is part science and part art. The smaller your group of people (less than a dozen) the more exceptions there are to the “science” and the more important is the art of knowing each person and what works for them and how to give people what they want/need without making others feel things are unfair.
Takeaway:
If you’re in the USA – have a happy Thanksgiving Day this Thursday. If you’re not in the USA be thankful. (Double entendre intended.)
[tags] management, CEO skills, small business, entrepreneur [/tags]
…is acknowledging what they are worst at. They think they’re good (or good enough) at everything.
But consider that every company needs to get results in four areas. This means the company needs skills such as:
Even a company that’s not growing and changing very much needs most of those skills. How likely is it they all reside in one person?
Why would anyone even want to be good at all of that? And how could a rational person believe he or she is? OK never mind that last question, we’re talking about entrepreneurs, not rational people.
Of course, when you start a company you have to do everything. With no money you don’t have the option of hiring and you don’t have the option of letting stuff go un-done so you do it all. The problem is that you don’t look to see what you’re really good at and off load the other stuff as soon as you can. It’s like a really good wide receiver starting a football team and staying as quarterback as long as possible.
“Has anyone given you the law of the offices? No? It is this: nobody does anything if he can get anybody else to do it. … As soon as you can, get some one whom you can rely on, train him in the work, sit down, cock up your heels and think out some way for the Standard Oil to make some money.â€
Takeaway:
[tags]CEO, Marketing, entrepreneur, small business[/tags]
I’m sure you’ve heard that when you ASSUME it makes an ASS out of U and ME. Here’s a way to make assumptions that work.
Investors all know that business plans are fiction, or rather fairy tales (fiction sometimes has an unhappy ending business plans never do.) And many successful companies thrive without business plans. Even those who promote business plans as a management tool usually say it’s the planning not the plan that’s of value. So what’s better?
A business Model
As I’ve long said, a model is better than a plan. The key difference is that a plan is based on time – what you’ll do in this month, that quarter, the next year. Hint: the vast majority of business plans have a huge sales jump in year three. Why year three? it’s so far in the future that it doesn’t have to be based on reality, yet it gives you the numbers you need to make your return look good. A model, on the other hand, has all the parts of the business based on each other (and ultimately sales) not based on time. So as reality happens differently than you’d like, you can adjust. Quickly.
How to Assume
This article gives a good example of the kind of assumptions that underly a business model. The two key points are Dollars per … and Levels of demand.
Dollars per …
You only spend money in a business because you want to gain something. Usually it’s to gain capacity. Every single one of your costs should have an assumption tied to it that links dollars to some non-financial thing. And no cheating. You can’t assume rent by saying dollars per square feet. That’s the same thing. You need to say dollars per employee (if you’re renting office space) dollars per SKU (if you’re renting retail space) or dollars per widget produced (if you’re renting manufacturing space).
You must tie each dollar you spend to something else – it makes you think long and hard about why you’re spending it. In some cases you need to break down a single line item on your P&L into multiple assumptions. Take the example of rent I gave above. Suppose you rent a building that you use as an office, a warehouse, and a manufacturing space. Your P&L probably just says RENT. But to build a good model, your assumptions have to state why you need so much of each type of space. That way the parts of your model are tied together. If you double your business, you won’t just double your rent because the ratio of office to warehouse to manufacturing won’t stay the same. Likewise if your business falters and you have to downsize.
So having an assumption of Dollars per for each reason you spend money gives you a model you can use.
Levels of Demand
Hidden in this paragraph of the article I linked to is a gem. (emphasis mine)
Admit that revenues are a mystery. If you don’t have any revenues yet, you can’t say what they’ll be. The point of a model is to prove you can make money if people buy your product, not to insist that they will. By developing different scenarios based on different levels of demand, you can later calibrate hiring and spending according to which scenario fits reality best.
This was written for a start-up but it applies to any business that is growing (or shrinking) or attempting a new initiative. Since you don’t know how the customers will react, or how fast, you need to develop scenarios based on different levels of demand. This is possible to do if you’ve made your assumptions with dollars per. Because what you’re buying with those dollars is capacity – the capacity to support a certain level of sales. (And by support I mean everything in the whole company life cycle – market, sell, produce, deliver, invoice, collect etc. Everything.)
So pick three levels of demand and work your model of what your costs need to be to fully support each level. That way as your initiative goes forward, you know what you should be spending.
If you’re a start-up one of those levels needs to be break-even: the level sales need to be so pay for all the support in a self-sustaining manner.
Takeaways:
[tags] business model, small business, entrepreneur, start-up business plan[/tags]
The key to growing your company is to prevent problems rather than solve them. There are two parts to this: Attitude and Skill.
Attitude – you must not like being the hero
Heroes solve problems. Usually at the last moment in dramatic fashion with a fanfare and a flourish of cape – just before they dash off to a secret place where they can transform into their secret identity. If this turns you on, it will be hard to stop solving problems. You won’t get the same kind of attention or validation. Because when problems are prevented, nobody knows. How many colds didn’t you get last year? How many times did your roof not leak, or the bridge you were driving on not collapse? But all of these things took some not inconsequential degree of effort – the first by your immune system, the second by your builder and the third by a whole slew of people: some who paid taxes, others who allocated them to public works instead of flashier projects, and still others who built and maintained the bridge.
If, in your heart of hearts, a smooth running transportation system is not more satisfying than charging on the scene in a cruiser with lights flashing to set up a detour and save folks from driving over a rotted out bridge, then the best you can hope for is a company that stays small enough that the problems don’t kill it, and you can still be the hero.
Skill – root cause analysis
The skill in problem prevention is to find and cure the root cause of the problem, not the most obvious symptom. Cash flow is a prime example. It’s common wisdom that the reason most companies die because they run out of cash. Well that’s like saying in the 1700′s the two main causes of death were consumption and heart failure. They figured if you didn’t die of consumption, then it’s a sure bet that your heart had stopped. Obviously medical science was in its infancy.
The knee-jerk reaction to cash flow problems (in start-ups anyway) is to raise more cash. This almost always prolongs the agony rather than cures it. If cash is tight because sales are too low the solutions are a whole lot different than if cash is tight because costs are too high, or collections are not efficient. More cash is rarely the ultimate solution to any of these.
Common Sense & Quick Fixes don’t usually work
Two quotes from http://www.isixsigma.com/library/content/c050516a.asp are enlightening. The emphasis is mine.
“Research has repeatedly proven that unwanted situations within organizations are about 95 percent related to process problems and only 5 percent related to personnel problems. Yet, most organizations spend far more time looking for culprits than causes and because of this misdirected effort, seldom really gain the benefit they could gain from understanding the foundation of the unwanted situation,” according to Gene Bellinger, who writes on the web site Systems-Thinking.org
Alexander Dunn, director of Assetivity Properties Ltd., in a paper posted on the Maintenance World web site, quotes a study which showed, “…that, when trying to prevent unacceptable events from happening again, 10 percent of participants immediately sought to place blame, 26 percent immediately expressed an opinion of the causes and offered an opinion without investigating the problem, and only 20 percent of participants examined the problem in sufficient detail to be able to identify an effective solution.” From these statistics, its clear that effective problem-solving is far from common sense.
The 5 Why’s
One technique used to find the root cause is to ask why five times. Suppose your car won’t start because the battery is dead. Calling a tow truck to provide a jump start is solving the problem. But asking why five times might result in prevention.
You can see from the example that the key is asking the right questions. You might also note that five is not a magic number – the point is to keep asking why till you find a root cause and five is often enough for that. According to wikipedia, this technique was developed by Sakichi Toyoda.
Takeaways:
[tags] CEO Skills, Problem solving, Small business, entrepreneur [/tags]
We all know about working smarter not harder. But Seth Godin has an interesting insight that we often confuse working longer with working harder (or smarter).
Here are a couple of choice quotes (but you should really read the whole thing – especially on Labor Day).
None of the people who are racking up amazing success stories and creating cool stuff are doing it just by working more hours than you are. And I hate to say it, but they’re not smarter than you either. They’re succeeding by doing hard work.
Hard work is about risk. It begins when you deal with the things that you’d rather not deal with: fear of failure, fear of standing out, fear of rejection. Hard work is about training yourself to leap over this barrier, tunnel under that barrier, drive through the other barrier. And, after you’ve done that, to do it again the next day.
Entrepreneurs, especially need to hear that working long is attractive because it helps you avoid the hard stuff while feeling like you’re doing what you should. And the hard stuff that really pays off doesn’t have to take long.
Takeaways:
UPDATE: I have a client who loves to work 17 hour days (except for weekends when she only works eight). She also wants to grow her company and sell it for 20 million dollars. She doesn’t realize why her long hours will make it harder for her company to be worth that much. Here’s why.
Anyone in a position to pay $20MM for her company, won’t be in a position to step into her job and work those hours. If they have to figure out how many people it will take to replace her, how those people will fit into the organization and how it will affect the bottom line, then the company will be a lot less valuable to them than if she’s already A) figured it out and B) implemented it for enough time to work out the kinks.
Let’s say her company is worth $5 Million today. She can wait till it’s worth 15 before she does those things, OR she can do them now. The sooner she does them, the more pervasive the systems and culture of scalability will be within the company when it is time to sell. That will make it worth more sooner.
The most value she can add is to replace herself so completely that when she does sell, neither the customers, the staff, or the suppliers notice any hiccup at all.
[tags] entrepreneur, hard work, productivity, small business, CEO Skills [/tags]
Lots of things. Mostly they put too much emphasis on the outcome and not enough on the process. I’m not a big fan. Yes, I know you need them if you’re going to ask for money. And yes planning is a good idea. But planning is a verb not a noun. You should engage in planning on a regular basis. And you should compare your thoughts when planning to what actually happens. Then you should learn how to plan better.
It will be helpful to have some documents to do this. But a typical business plan is not usually the right document. The right ones capture what you thought would happen, and more importantly, why you thought it would happen that way. Then they make it easy to compare what did happen and why to what you were thinking at the time.
Here’s an example. In the marketing section, most business plans cover who the market is, how fast it’s growing etc. They often get this information from generic research reports that talk about market segments. But market segments are irrelevant to a small company (and all start-ups begin as small companies). Then the business plan makes some guess at what percentage of that market they can capture. The guess seems to be based on what number will look like they can make a lot of money, while not make investors think they are smoking crack.
But this evades the more important questions about your market: how you’re going to find them, educate them about your product and ultimately sell to them. And how much time this will all take, and how much it will cost?
Here are some better things to document about your market:
Rank your market in order of the cheapest / easiest to sell to. For each group estimate the following:
Never forget that a customer is a person. It’s not a company, a family, a household, or a demographic. It’s the person (or people) in that organization who actually decides to pay the money. Say you want to open a family restaurant. Yes, you need to know how many families live within a certain distance from your place. But don’t stop there. The time and cost of marketing a meal to a kid (think Chuck E. Cheese or McDonald’s happy meal) is different from marketing a meal to an overworked Mom or to a grandparent. Who is going to decide to spend money at your place and what will it cost to get them to do so?
Document your thoughts on that. Then you can regularly compare what your actual sales are, and what it actually costs to make a sale to what you were thinking. If you’ve been open a month you have enough data to start the process. The actuals won’t match up (trust me on this) but the point is to get better at projecting so that by month 6 you’re doing a better job and by month 18 you’re doing a good enough job to know if you should stay in business, close the doors or raise more funds. And if you do need to raise funds, that kind of detail will convince investors yours is a business not just a product.
Takeaway:
[tags] small business, entrepreneur, business plan, planning , CEO Skills [/tags]
This from Jessica Hagy who does all kinds of funny, insightful stuff on index cards.
But the bigger point is, many people think (no, it’s beneath thinking, they just KNOW) that to run (never mind start) a company you have to work a gazillion hours, and it has to take over your life. I don’t believe that.
I do believe there are times when that’s necessary – but they are temporary. And I do believe a business takes over your life in the sense that it’s a constant presence – like being married or being a parent. But if it doesn’t allow you time to live from the get-go something is wrong.
Here are the usual things that are wrong.
The last two are problems that aren’t psychological so I’ll elaborate on them below.
Problem #4 – Let’s say you’re the owner and chief cook and bottle washer (literally) of a small diner type restaurant. One of that kind that are affectionately referred to as a “greasy spoon”. You probably can’t hire someone to do your job without losing money. Your business is not the right size. But there are other restaurants where the owner doesn’t cook. What size, or how profitable does yours have to be for that to work? It may not be possible in your current space, or with only one store or whatever. But those are all choices. You can decide to grow it / shrink it / serve a more profitable menu or not. Or you can stay the way you are.
Problem #5 – Let’s say you’ve upgraded the menu, added a few tables, changed the hours, whatever and it’s now profitable enough to pay someone to cook and let you have a bit more time off. But you can’t find anyone who can do it like you do. This is a very common problem with super-stars. It’s common in sports that great players make worse managers or coaches than more mediocre players. People who do things really well, are often not conscious of how they do them. So they can’t train others. But maybe someone else can help you do that.
My friend Nick, runs a deli. It took him a long time to realize that every time he walked by a refrigerated case, he stuck his hand into it just to make sure it was cool. That way if a compressor went bad, he knew before all the food was ruined. His employees didn’t do that automatically – why would they? But when he realized it, he didn’t make them stick their hands in the cases. He instituted a policy where twice a day it was someone’s job to take and record a temperature reading for each case. That took him out of the loop and actually gave a better indication of the health of the equipment than he had before. It’s lots of little things like that, that make you replaceable.
Takeaway:
“Has anyone given you the law of the offices? No? It is this: nobody does anything if he can get anybody else to do it. … As soon as you can, get some one whom you can rely on, train him in the work, sit down, cock up your heels and think out some way for the Standard Oil to make some money.â€
- John D. Rockefeller
Rockefeller often came home for lunch, took frequent naps, spent summers away from the office and retired in his 50′s. Oh, and he was the wealthiest man in the world at the time (an maybe ever).
[tags] small business, entrepreneur, work life balance, CEO Skills [/tags]
Leadership has been getting all the spotlight in recent years, but management is really where the action is if you want results. Management is the hard work of developing (as well as sustaining) an environment that supports people to be successful in a common goal. The common goal, of course is the success of your company.
Joel Spolsky said it well:
You can go into any coffee shop in the country and order a short soy caramel latte extra-hot, and you’ll find that you have to keep repeating your order again and again: once to the coffee maker, again to the coffee maker when they forgot what you said, and finally to the cashier so they can figure out what to charge you. That’s the result of nobody telling the workers a better way. Nobody figures it out, except Starbucks, where the standard training involves a complete system of naming, writing things on cups, and calling out orders which insures that customers only have to specify their drink orders once. The system, invented by Starbucks HQ, works great, but workers at the other chains never, ever come up with it on their own… As a manager it’s your job to figure out a system. That’s Why You Get The Big Bucks. [emphasis mine]
One reason the two are often confused is due to style. Management has become associated with an authoritarian style aka “Command and Control” Leadership has become associated with an more “empowering” style.
Sigurd Rinde makes this mistake in his post about leading children as training for MBAs.
When dealing with knowledge workers in our more flexible economy it’s usually more useful to use a more inclusive, empowering style whether you are leading or managing (not always but usually). It’s absurd to think you can create an environment that supports people without their input. But just leading people will not develop a scalable organization.
Takeaways:
[tags] Managing, Leading, Management, CEO Skills, Entrepreneur [/tags]
photo courtesy of GeekPhilosopher
This from Paul Orfalea
[founder of Kinkos which got acquired by FedEx
and now has 1,200 stores in 10 countries]
You must be flexible and astute and focus on the big picture. Busyness is not your friend. Startup entrepreneurs too often try to run away from their anxiety by being busy. But you have to leave time open on your schedule for hard thinking rather than hard working. Make sure you get plenty of sleep take vacations and don’t get mired in the details either at the store or at your headquarters. You don’t have to be at your desk in order to analyze cash-flow projections or revenue-by-category data, both of which I love to pore over by the way. Can’t get enough of it. You, as an owner have to be smart about managing your relationship with time. My definition of owning a business is to make money while you’re sleeping. If you can’t make money while you are sleeping, then your business owns you – you don’t own it.
Takeaways:
[tags] start-up, entrepreneur, CEO skils, running a business [/tags]
One of the services that makes this blog worth every dollar you pay for it, is the time I take to scour the web and find the gems for you. Two posts in blogs I love come together today under the heading :Why didn’t I think of that?
Seth Godin says make sure your system works before you make it bigger. DUH! My refinements are: Make sure you can sell before you spend more on marketing and advertising. And make sure you can sell at a profit (including the cost of sales) before you do more of it. No sense paying people to take your stuff.
Guy Kawasaki posts an interview with Jeffrey Pfeffer author of “What Were They Thinking?: Unconventional Wisdom About Management.” 16 questions and answers – You could spend 6 months on each one and your company would see vast improvement. Here are a couple of my favorites:
Question: What can companies do to get smarter?
Answer: Companies learn just like people learn—by trying new things and seeing what happens. That requires, first, a tolerance for failure, since by definition, learning means doing things you aren’t very good at.
Second, it requires structured self-reflection—after-action or after-event reviews so that instead of having one year of experience repeated 20 times, people and companies actually accumulate learning over time.Question: What is the proper role for a CEO?
Answer: To develop others and their talents and to create an environment in which people can do their best and want to. It is not to make all the decisions or, like some kind of “sun king,†absorb all the light and the attention.In fact, sometimes, as the Grammy-award winning Orpheus Chamber orchestra shows, the best leadership is less leadership. No seed can grow if it is dug up and examined every week, and for people to innovate and get things done, sometimes they need some time and space and resources.
Takeaways:
[tags]small business, management, CEO Skills, entrepreneur [/tags]
Everyone knows that to grow a business you have to delegate. But it’s hard. Here’s why. Most of what you do (and want to delegate) is knowledge work. Peter Drucker coined the term Knowledge Worker to mean someone who works in information or who develops knowledge in the work place. This makes it distinct from physical work.
Physical work is easy to quantify qualify and thus easy to delegate. If I delegate the task of painting a room to you, your only question would be “what color”? It will be obvious when you started, how far along you are by the end of the day and if you did a good job or not. Without me having to spell out the details.
If you ask me to negotiate a contract with one of our suppliers, or develop a marketing plan, or research the competition, none of those things are obvious. What level of detail is required? When am I finished? How do we determine when I’m missing something critical and when I’m missing something that doesn’t matter? What constitutes a good job?
So here’s what usually happens.
Scenario 1. You give me the task of negotiating the contract. I spend so much time getting your input on this, that, and the other thing, that between the two of us we spend twice as much time as we should. Next time you just do it yourself.
Scenario 2. You give me the task of negotiating the contract. You’re too busy to give me any input, or I want to show you how good a job I can do so I figure it out all by myself. If I luck out, and do it to your liking, you think I’m wonderful and lament that you can’t find other employees like me. You give me all the contracts to negotiate and I can’t ever move up in the firm because you can’t replace me.
Scenario 2a. Perhaps I don’t do it to your liking. Perhaps I negotiate a really bad contract and you spend more time fixing it or solving the problems the bad deal has caused. Next time you just do it yourself.
Scenario 3. You give me the task of negotiating the contract. But you check in with me so often and ask about every little detail that I can’t get any work done. You are frustrated by lack of progress. Between the two of us we spend three times as much time as we should. Next time you just do it yourself.
Is it any wonder that Entrepreneurs find employees the most frustrating part of running their companies? (Customers are in second place.)
What’s the underlying cause of this problem?
The real cause is communication. With the task “Paint the room” that simple sentence communicates very clearly what is to be done. The phrase “Negotiate the contract” is not nearly as clear. So the delegator (that’s you) has to figure out what exactly you want done. Supreme Court Justice Potter Stewart defined hard core pornography by saying in a judicial opinion “I know it when I see it” While that may have been good enough for the Supreme Court, it’ doesn’t cut it when you try to delegate knowledge work.
Here’s a solution. Assume you are delegating some task to me. You have to commit it to paper (OK electrons – but you have to write it down). Writing makes your thought much clearer or at least makes it obvious when they’re imprecise or contradictory. You can write it down – or you can explain yourself and ask me to write down what I thought you said. Yes it will take more time to assign a task that way. But you’ll save so much more time in the execution it will be worth it. If it’s not worth that little bit of extra time, then the task it probably not worth doing at all.
Write it down in the following format.
[Note: the process doesn't have to be autocratic. We can discuss any of these points, you can defer to my opinion or insist on your or we can meet half way. The point is the delegation is not complete until these points are well defined.]
The first two questions will almost always cause you to refine what you’re really delegating. The third question will make you clarify what you mean by success. It will make it easier for me to know if I’m doing the right thing without your constant involvement. The forth question will free me up to work at my own pace and still meet your deadlines. But you must play fair and not follow up before you said you would. That’s micro-management.
If I’m unfamiliar with a task, or you’re unfamiliar with my ability to do that task, I recommend a 10-50-90 follow up schedule. That means schedule the first follow up when you expect 10% of the job to be finished. For a task you expect to be finished in a day, the first follow up would be in an hour. If the task is expected to take a week, follow up in half a day. The purpose of this first follow up is to see if I understood the assignment (or if you communicated it clearly). If 10% of the job is not done by then, you’ve caught the trouble in plenty of time.
Schedule the 2nd follow up when you expect 50% of the job to be done. The purpose of this follow up is to see if the pace of the job is appropriate. Sometimes people take too long because they are working to too deep a level of detail, or perhaps they didn’t give it a high enough priority. A check at this point will alert you to any problems of speed.
The third follow up – at 90% completion is to catch any last minute snafus while there is still a bit of time left to help.
Takeaways:
[tags] small business, management, CEO skills, delegation, how to delegate [/tags]
It’s well known that the pessimist says the glass is half empty – so his surprises are all positive ones. The optimist says the glass is half full and somehow keeps that attitude despite her negative surprises.
What does the CEO say?
The CEO says “Hey, don’t we have twice as much glass as we need around here?” And I phrased that as a question on purpose.
Maybe you need that extra glass. If your company is growing you have to have a bit more capacity to grow into, otherwise you hit a wall. But, if you have too much extra capacity, your costs get too high and your profit goes to hell.
The CEO’s job is to question the answers – not to answer the questions. Is it really half full – or is it more like a third and everyone just rounds up hopefully? Is there really twice as much extra capacity or are some vital activities getting put off or not measured? How much extra capacity is really needed? In what areas? What is your trend line in the recent past – and how accurate is it in predicting the future? Are there things about the past that won’t repeat?
The answers, off course come from the customers. But they don’t answer in words, they answer with their wallets. And you can’t wait till then to plan. So you’ve got to approximate your answers yet remain flexible. No wonder you get paid the big bucks.
Takeaways:
Thanks to Jerry Guirlinger of Mobile Shop Company – talking to him today inspired this post.
[tags] small business, CEO skills, entrepreneur, ambiguity [/tags]
Everyone knows reward is proportionate to risk.
When everyone knows something, it’s usually wrong. And there’s usually a bit of truth in it. Maybe the wrong bit comes from the fact that for everyone to know something it usually has to be dumbed down a lot. But I dirgess.
The fallacy in believing that reward is proportionate to risk is that you’ll believe the more risky something is, the more reward there should be. Not true. Another way to say it is that every reward is associated with some degree of risk. But not every risk has any reward associated with it at all.
The truth is entrepreneurs don’t like risk. Sure they tolerate it, but they like to minimize it. They often see ways to do this that others don’t so they appear to take more risks than they actually do.
The biggest risk in running a company is that customers won’t do what you want them to (buy your stuff at a high enough price point) and they won’t do it fast enough (before you run out of money). Your exposure to that risk is compounded if you don’t track what they do and how quickly they do it. And if you make up reasons for their actions or see patterns that don’t jibe with reality.
Takeaways:
[tags]small business, entrepreneur, business model, risk reward, CEO [/tags]
The society which scorns excellence in plumbing because plumbing is a humble activity and tolerates shoddiness in philosophy because it is an exalted activity will have neither good plumbing nor good philosophy. Neither it’s pipes nor its theories will hold water.
John W. Garner, Forbes “Thought” page Aug 1, 1977 from The Official Rules by Paul Dickson
It occurs to me that this applies in business if you substitute leadership, vision and other high level ideas for philosophy and you replace plumbing with management, training and oversight.
It’s amazing to me that amount of high falutin’ clap trap folks will espouse (not to mention pay consultants for) in the first category, without considering if the ideas actually work. Then they’ll go to all kinds of effort to convince themselves they don’t need to be consistent and specific in the later category.
The truth is, it’s more fun and feels great to philosophize about your vision and the like; while it can be tedious and time consuming to actually discover what’s important to measure and hold people accountable (especially yourself).
If you want to play football, a game plan is nice. But accomplishments happen on the field, in the huddle and executing plays. You’ll do better with good execution and good huddles and no game plan than the other way round. Better if you have people who can do both well.
[tags] management, leadership, vision, business, CEO, entrepreneur [/tags]
Among the many tasks of a CEO probably the hardest and most beneficial is to obliterate SHEEPWALKING. The term comes from this post by Seth Godin who defines it as what happens when you hire “people who have been raised to be obedient and [give] them a brain dead job and enough fear to keep them in line”
The opposite is: ‘At first, it seems crazy. There’s too much overhead, too many cats to herd, too little predictability and way too much noise. Then, over and over, we see something happen. When you hire amazing people and give them freedom, they do amazing stuff. ” – also quoted from Seth’s article.
Here’s why it’s so hard. Running a company you’ve got way to many things to do. You’re looking for things to control. You don’t do it consciously but creating a culture of sheepwalking is a comfortable way to run a company and think you are in control. In fact, you really are in control. And that’s the problem. The things you can control in a company don’t guarantee success. At best they only prevent catastrophic failure. At worst they cause the failure albeit slowly so you don’t realize what’s happening.
Why? As I’ve said before, business is like sex where success depends on the interaction between you and the other person. The control you think you have in your company is all about you – not about the other person and it limits the kinds of interactions and responses your company will have. Plus it limits the types (and number) of people you’ll be attractive to.
This may have worked in the old days when the markets didn’t change very much, and the types of interactions were limited. But that’s not true anymore.
Takeaways:
[tags]Small Business, Entrepreneur, Management, How to be CEO[/tags]
You wouldn’t ever spend a penny of your company’s money without expecting some benefit. You spend advertising to get sales, you spend on inventory to have something to sell. You spend on sales people because they put money in your pocket.
A business model is a tool to help you figure out when to spend how much, what results you should be getting when, and to know in advance when you’ll have to raise more money from investors.
How, you ask, can you predict all those things with enough accuracy to bother? Well, you can’t. Certainly not at first. But the fact that you can’t predict the future doesn’t mean you shouldn’t develop a tool that helps you understand it – especially as the future becomes the present. That tool is the business model. Probably the most important thing you’ll do as CEO is develop, refine and then USE the business model when decisions are being made in the company.
What is a Business Model? It’s an understanding of how these three things intersect:
1. What the customers want to buy (and why).
2. How the company will make and sell those things.
3. How the company will make money from doing so.
As you can imagine, there is a bit of guesswork involved. We call them assumptions. And it’s important to write them down and test them against reality, then revise them as you learn more. Pretty soon they’ll actually be dependable.
The other thing you’ll need assumptions about (at least at first) is the capacity of parts of your business. Production capacity is pretty easy to come by – how many widgets can a machine make in a day. But Sales capacity (how much can you sell before you need to hire an additional sales person) and administrative support are things you’ll have to guess and refine.
The parts of your model that you can get exactly are your costs.
Many people don’t build a model because so much of it involves guesses (I mean assumptions) so they don’t think it’s valuable. They are wrong.
I build mine based on cash flow. On the dollars page I put all the sources of cash in on top of the reasons to spend cash out. I group the cash in by product line and the cash out by reasons to spend: COGS, Cost of Sales & Marketing, Overhead, Paying back lenders & investors and PROFIT. Profit can be money taken out of the company or money kept in and used for growth.
On the assumptions page, I make all kinds of assumptions about how long it will take for customers to buy, what the average sale size will be, how interest rates will affect my business, how long it will take to raise more money etc. Make sure the numbers on the dollars page accurately reflect these.
I make a third page for capacity. This is a specialized form of assumptions that relates how much it costs to accomplish or produce a certain number of results. Things like how many people can each administrative assistant support, to how big can you grow before you have to rent larger facilities.
When you first start this, the number of details can seem overwhelming. Don’t worry. Start at the highest level and add details as you need them.
Takeaways:
[tags]Business Model, Small Business, Entrepreneur, Management, How to be CEO,CEO Skills[/tags]
I came across this in a letter by Jim Womack, author of Lean Thinking and, to hear him tell it, one of the developers of the Toyota Way. The graphics are mine – which is why I’m not a graphic designer.
All value created in any organization is the end result of a lengthy sequence of steps – a value stream.
These steps must be conducted properly in the proper sequence at the proper time.
The flow of value toward the customer is horizontal, across the organization.
All organizations … are organized vertically by department … because this is the best way to create and store knowledge and the most practical way to channel careers.
He goes on to say that managers are judged by metrics that apply within their departments. But no one is actually responsible for the horizontal flow of value [toward the customer]. This is the problem big companies face.
So why are small companies better than big ones?
Because you have your hand in everything. YOU (the owner/founder/entrepreneur) are responsible for the horizontal flow of value.
So why are small companies worse than big ones?
Because you have your hand in everything. When the company grows to the point where some organization by department is useful, the owner/founder/entrepreneur is better at building the product than building the company. So emergencies, inefficiencies, and other stuff happens which takes you away from managing the value flow. So you end up with the worst of both worlds. No departmental support and a poorly managed value flow.
Takeaway:
[tags]Lean Thinking, Small Business, Entrepreneur, Management, CEO Skills[/tags]
I agree with Peter Drucker that this one is overrated when running a company. Skill in management is much more important. Nevertheless, leadership can be a useful skill, and it’s much simpler than you’d believe by reading or listening to the folks who make a living teaching courses in it.
Leadership is the ability to get folks to follow you to a place they wouldn’t go on their own. That’s it. It happens to people with all manner of personalities – from the charismatic to those as boring as wallpaper paste. There is evidence to suggest that less charismatic leaders actually produce better results for their companies over the long term.
Leadership skill involves two things: Vision and Communication.
Vision means you can see where you want the company to be. Someplace different from where it is right now. If you can’t see something different, stop now. You’ve arrived and don’t need to lead anyone anywhere. If you can see something different, describe it.
Communication means telling people where you see the company headed. Tell them how they play a part in taking it there. In the simplest and most concrete terms you can find. This won’t happen automatically. They won’t just “get it” and the right words that are simple and concrete won’t just “come to you.” Spend some time (perhaps with a language coach like Isabel Parlett) describing your vision properly. Then tell your vision to everyone you work with over and over and over and over again. And again. When you start to get bored hearing it tell them again.
Takeaway:
[tags]Leadership, Small Business, Entrepreneur, Management, How to be CEO,CEO Skills[/tags]
Subscribe to this site's RSS feed.