How could I not take up the challenge of finding the link between the 50 Shades juggernaut and my beloved Stage 2 small business clients!?!
Putting aside the more mundane topics of what Christian Grey’s DISC profile is, the importance of proper inventory processes, and the merits of NDAs, I’m struck by the similarity between Christian’s dominant role and how Shane Yount, owner of the Process-Based Leadership system, describes some companies:[Managing by position, proximity, or persuasion] creates dependency. Employees become dependent on their leaders to make the decisions, to solve the problems, to show them what to do and when to do it. Certainly managing by position, proximity and persuasion gets short-term results. But dependency is dysfunctional.
It may seem extreme to draw a parallel between 50 Shades’ dominant/submissive relationship and how many small business leaders operate, but there’s probably more truth to it than many owners would like to admit.
Recently I talked with a group of Stage 2 company CEOs, and one of their big a-ha moments was when they realized how dependent their organizations are on the leader’s opinion, intuition, and judgment.
If you realize that your leadership is out of balance, or if your employees start to refer to you as Mr/Ms Grey…what can you do?
The first step is creating a dialogue with your managers. You want a process to be guiding the company, not a person, and to do that, you need to start a process that involves your leaders in key decisions – and then you need to stay committed to it. And, if you’ve been doing a lot of the talking, start listening more. Don’t totally hand over the reins, but start to share them.
What should you talk about? To start, I like to focus on today – what is working, what isn’t working? Once you have things working OK, then you can start looking out farther on the horizon – to the next few months, and then to the next year, and then to the next 2-3 years.
Let’s be honest about something Christian Grey knows – it’s fun and exciting to be in charge, to be The One Who Makes the Calls. But it’s also not sustainable, and if you’re looking for your business to prosper for the long-run, you need to mature as a leader and expand how you relate to your business.
AI and machine learning have exploded onto the business scene in 2017. If you haven’t gotten an email asking you if you want to learn how IBM’s Watson can help your business, you will be soon. And we’re just getting started.
The bots are coming, and if you’re thinking your business is immune, I don’t think you’ll feel the same way by 2020.
What should you be doing in 2018 to prepare?
Many small companies are not going to have the budget needed to use AI. But if you’re in a small company, you should still learn about what it can do and how it can be used. By hearing how AI is being used in your sector, you can make your offerings better and your operations more efficient – even if you don’t spend a dollar on AI technology itself.
You should also figure out your company’s algorithms. AI works through algorithms – coded logic about how to interpret data. You may not have Big Data to work with, but you have algorithms operating in your company…like which customers are better to work with, what products help with what needs that a customer has, and which of your staff to assign to which types of projects.
Back in the old days, this was called Experience, or Tribal Knowledge. Now…we call it Algorithms.
Your algorithms will probably start simple – like which customers are better to work with. But that’s just the start. The real power comes when you think about branches that you can build to make the thinking more complex. For example, once you identify what services help with what needs, then you can identify if customers of one service are more likely to buy another service you offer. Where are the connections and patterns in your business?
Many of the small businesses I work with know these algorithms intuitively – they’re operating all the time in the heads of the staff who have been there more than 10 years. Often the first reaction I get when I bring up the idea of capturing the company’s algorithms is, “Oh, we don’t need to do that. We know that already…in our heads.”
Which is great…but right now, someone is working on coding into a computer the algorithms that are needed to run your type of business. It’s happening. Right now. Believe me.
And the need to document your algorithms will be much clearer – and more urgent – when your staff person is competing with a machine that costs less than a month of that person’s salary and doesn’t need health care. When that happens, you’re going to wish that you’d asked your staff to outline how they make the decisions that run your business. And that staff person is going to wish that they’d been thinking about how to build value on top of their knowledge, rather than clinging to the knowledge itself as the differentiator.
What do you do when knowledge and experience are no longer differentiators? What will the differentiators be? I have some guesses, that I’ll outline another time…
So, I don’t know how all of this will play out. I’m sure bots, at some point, will be able to do most of what we rely on workers to do now…and that there will be needs that bots can’t handle. But while we’re waiting for that to play out, you can use the thinking of AI designers to make your business better and be in better control of your destiny. And you can do that whether you can afford the actual AI technology or not.
Pretend that you’re designing your own bots, give them fun/interesting names (Watson! Alexa! Siri!), and have some interesting discussions with your Leadership Team about the algorithms driving your business.
As a small business coach, I’m always interested when the conversations I’m having in my client strategy meetings are echoed in news from the Fortune 500. And we had one such example last week – ESPN’s transition of their on-air talent from specialists to generalists.
Specifically, ESPN’s President John Skipper said, “Dynamic change demands an increased focus on versatility.”
Many of my clients are professional services firms – they are selling their people’s skills and thinking. Several weeks ago, in a quarterly strategy meeting with a 40-person services firm, the leaders asked me what I thought about a shift they were considering to organize themselves in specialized teams that could create deep expertise in certain areas. Here’s what I said:
- There is a lot of uncertainty in the market. That means that you don’t know what kind of work will come in, or when it will come in. (I am seeing this across my client base.)
- As a result, you have to have flexibility in who you assign to different jobs, because your talent assignments are probably not going to work the way you plan them.
- The only way you can have the flexibility you need to handle work in this uncertain environment is to actively develop cross-discipline agility – you have to make sure that people’s “downtime” is spent developing new skills.
In other words, you need to have a talent base that has a lot of flexibility in what and how it works – which is exactly why ESPN is making the shift they are, to multi-dimensional on-air talent.
Creating a flexible staff is no small task for small businesses. The large majority of small businesses under-develop their talent – that is to say, their talent development is mostly opportunistic and accidental assignments that happen to build new skills. That’s often OK – but it’s less likely to be OK these days, and companies who don’t get better at talent development are going to feel the pinch and pain of less-agile workers more and more, since the market will continue to be an uncertain place.
What’s needed to actively develop your people? How should they fill their downtime? Have your people…
- Explore new areas by looking through trade publications or surfing industry web sites
- Hold regular lunch-and-learns for your staff to educate each other
- Shadow each other doing work that’s new to them
- Sit in on internal or customer meetings that involve new areas for them
Are you developing the generalists your business needs – the ones with the skills and agility to navigate the uncertain environment we all face?
Small businesses are often dealing with situations in which performance has not met expectations. It’s not really a failure, per se, but there has to be a change. A restart.
It might be the European division, or the HR department, or the implementation of the new CRM. When the gap between where the initiative is supposed to be, and where it actually is, is big enough, a restart is needed.
(Hmmm, you say, how will I tell if my situation is “big enough” to merit a restart? The answer is different for every situation, but basically, it comes down to whether the business can handle the underperformance for however long into the future you want to look. A failing overseas office in one company might continue to bump along if the rest of the business can prop it up, while a similar office in another company is a crisis because it’s sucking too much cash that other parts of the business also need.)
When I’m faced with this situation in one of my clients, I work along 4 paths to do the restart:
– A credible though possibly uncertain understanding of our value, and an informed belief that people want what we offer, and a vision for why it makes strategic sense to “play that game” as opposed to focusing on something else
– A leader or leaders who can inject the energy needed to change things and break new ground
– The funding needed for the plan…and the mistakes we’ll make as we learn the flaws with the plan
– A story that refocuses the team from the failure and the pain, to the vision and the hope
As a leader, you know what these kinds of situations are like. Not clear. Not simple. Not easy. But if you have those 4 pieces, you’re well on your way to a successful restart, even if the results don’t come right away. And if you don’t have those 4 pieces…then that’s the first thing you need to work on!
My daughter is a huge Harry Potter fan, and she has been smitten by the frenzy of the release of Harry Potter & The Cursed Child. So last week I found myself watching Harry Potter 7 Part 2 with her. And in it, Hermione was recommending that she, Ron & Harry be more careful and plan out their return to Hogwarts, since that journey was likely to lead to a conflict with the forces of You-Know-Who.
Ron, feeling some urgency, dismissed Hermione’s request, saying:
“Hermione, when did any of our plans work? We plan, we get there, and then all hell breaks loose.”
Fortunately Harry, who is an intuitive strategist like most of the Second Stage owners I know, comes up with a short-term plan….”We’ll figure it out when we get there and we see what we’re working with.”
Let’s highlight some of the lessons about strategic planning that are contained in that little scene:
– Planning doesn’t work on its own, because things won’t happen the way you expected them to
– A good plan starts with an assessment of the current situation – assets, needs, opportunities
– There are times when good execution is more important than good planning – specifically, when a lot is uncertain, or you don’t have a lot of resources that you can put toward a plan (this is why planning is less important in start-ups bootstrap start-ups)
There are also some undercurrents to Ron’s statement – the stuff we can read “between the lines”:
– Planning helps get you ready for the battle, even if the plan doesn’t work
– People who fight the battle can use that experience to develop better plans – and do them faster
– When you’ve gone into enough similar experiences, you can rely on your intuition more than needing a plan – it’s likely that the situation will mostly look like something you’ve dealt with in the past, and the stuff that is new will be minor enough that it won’t overwhelm you
You Second Stage muggles have your own version of wands and spells – the experience you have that enables you to solve problems as if you were waving a wand, the insight and service you give your customers that can (truly) be like a spell, all the assets and resources you have built up to solve some of the world’s problems in a way that (if you step back from it) can seem magical to someone new to it. And all of those things will be made better, and more powerful, with the right amount of planning.
In the last week, I’ve had a couple of strategy meetings where the simple idea of going with the flow came up.
In the first, a decades-old company is finding that it’s not as easy as it used to be to get customers. They are facing the prospect of having to cannibalize their current customers to sell something that will have broader appeal – the plan being that the new sales will outweigh those lost from the cannibalization.
The go-with-the-flow idea? “Sell what they your market is buying.” After about 15 minutes talking to a salesperson, whose first reaction was to tell me all the reasons that customers aren’t buying the legacy product, he then said, “You know, there’s one big prospect on the East Coast who would be really interested in this new version we’re talking about.” And from there, we’re off…selling what the market is buying.
In the second meeting, we were debating which of several initiatives should get funding support. We were looking at 6 different programs, with varying degrees of success. Some were clearly “popping” and gaining traction; others were struggling though everyone thought they should have lots of potential.
The go-with-the-flow idea then? “Go in the direction of what works.” The path of least resistance was to double-down on the ones with traction. We didn’t abandon the others, but the question of where to put the discretionary budget we had available was answered pretty simply.
Sometimes business isn’t a struggle. Sometimes the market gives us the answer, and we just have to listen…and go with the flow.
There’s a cost to growth
Here’s a universal truth that doesn’t get enough airtime among business leaders – and that many leader teams, therefore, don’t fully appreciate:
Growth must be funded.
I started working with a company recently that developed a BHAG of doubling in size over the next 5 or so years. The first year went well – but last year was rough, and they’re now feeling pulled between the commitment they made to their BHAG, the desire they have to distribute profits at a level they’re accustomed to, and the need they have to correct some operational issues.
They have a newfound appreciation for the fact that the decision to grow often comes at the expense of the ability to harvest profits.
What does it mean that growth must be funded? Here are a few of the things that you’d need to invest in to grow – that you wouldn’t need (or wouldn’t need as much of) if you weren’t growing:
- Expanding your training and talent development efforts
- Developing new marketing programs
- Hiring more salespeople or programmers – and if they’re hard to find or need training, then you need to hire them before you have the revenue to support them
- Expanding into new facilities or adding equipment
There can be many more, but you get the idea.
On top of those tangible investments, you’d have two more hidden costs: the time that your team spends solving issues associated with the growth, and the inevitable inefficiencies you’ll have the first time you do things.
This isn’t to deny the wonderful benefits of growth, which include more people and customers to make your stuff better, more resources to solve problems and offer rewards, and more impact and influence on your markets and community.
But as you develop your BHAG, realize that you’ll also benefit from having a Big Heavy Accessible War Chest. And that’s why I often recommend that the first 2 years of a growth strategy focus on increasing your profitability and building your reserves. The path to your BHAG will be a lot more fun and manageable if you have the money to deal with the challenges you’ll face.
Crafting a dashboard that works
I’m going to be talking about dashboards on the Rising Leader webinar in March, and as I prep for that session, I’m reminded of why you should create a dashboard in the first place.
It may seem obvious on the surface, but a dashboard keeps visible and helps you track two things:
- What in your business will “move the needle” for success
- What you want to focus your attention on
Companies with fewer than about 25 people often don’t need a dashboard (which doesn’t mean they wouldn’t benefit from one). At that size, the team instinctively knows what’s important, and the leaders are close to the action.
Bigger than 25 people, though, and a dashboard is useful. Unfortunately, a dashboard is also harder at that size, for several reasons:
- There are simply more parts of the business – more things that the company is doing, many of which seem important. What is really important to put on the dashboard?
- There become several levels of “frames” that can be used to understand the business. There’s the tactical/trenches level (returning a customer’s email), the “strat-tactical” level (customer service), and the strategic level (the customer experience). Once you identify a part of your business that’s important, then you need to figure out if you measure it at the 100-, 1,000-, 10,000- level, or 50,000-foot level.
- There often is no immediate, easy source of data for issues that are important. For example, most people would agree that employee engagement is important to most companies – but how do you measure that? [Note: there are some pretty simple ways.]
So, crafting an effective dashboard takes thought.
Many companies have an annual budgeting process – they recognize that coming up with financial plans is complex enough that they should spend time figuring it out.
Well, you should also have an annual “dashboarding” process that figures out what’s important to your business and what you want to focus your attention on. Some things will always be important; others will come and go.
If you’re a middle manager or a high-potential employee, you can join the Rising Leader Program and hear more about dashboards this month in our webinar. Visit phimation.com/start to find out more.
You don’t need to hire every position with the same approach. Sure, some companies have the same hiring process for everyone, and it often involves spending 6 months on each hire and only hiring A+ people. In theory, that’s what you should do, but in practice, there are some hires that deserve more effort and some that deserve less.
How do you tell when to invest more or less? I’ll be talking about that on my webinar this month – the 3 different approaches to hiring, and when each one is appropriate.
For this column, I want to focus in on the highest-investment approach.
When does a hire deserve a heavy investment? The primary drivers are (a) the impact the position can have on the organization, and (b) the experience your company has with hiring that specific type of position. In other words, you should invest more heavily in your recruiting process when you’re hiring:
- Executive or key manager positions – because the impact of that position will be a multiple of the costs of even an elaborate hiring process
- New positions – because you don’t know what you’re looking for, and because you need to train your organization on what the new position will do
What does it mean to invest heavily in a hiring process? You should spend more time…
- Planning the position before even starting the recruiting process
- Choreographing the hiring process – who to include when
- Building a bigger candidate pool
- Interviewing candidates
- Confirming your final choice
It’s OK not to go all-out on every hire. What’s important for growing companies is having the wisdom to know when a more extensive recruiting process is needed, and having the discipline to invest the time needed when it is required.
If you do that, you’ll avoid the costs of a bad hire, which can be dramatic – around 2-3x the person’s compensation for a manager, and 5-10x the person’s compensation for an executive.
Leadership and the under-communication crisis
As the writer of this article, I’ve evaluated all of the possibilities I could focus on, and decided that we should give our attention to communication.
We all need to communicate more, and will be doing things in the coming months to do that.
Not enough for you? Keep reading to see what you should be doing to communicate as a leader.
When I was a debater in high school, my coach gave me the following formula for success:
Tell them what you’re going to tell them
Tell them what you told them
As a company leader, the same formula applies, with a change:
Tell them what you’re going to tell them
Tell them what you told them
This is the time of year when you’re setting your annual priorities, which will be followed in a few weeks by the need to communicate those priorities to your team. I was meeting with a COO last week, and after spending an hour talking about one of his 2016 company goals, I asked how he was going to communicate the goal to the organization.
“I’ll have the VPs tell their groups.” (Mind you, last year, some VPs told me that their colleagues would often communicate very different messages about the same topic.)
“Can you spend time on this in the company meeting?”
“No, we don’t have time. We need to keep those to ½ hour, and we have too many other things to cover. The VPs can cover it.”
Huh? Um, no they can’t – at least not by themselves. In addition to the VPs’ communication, all company staff need to hear a single version of the message directly from the highest leader. It ensures consistency of the message, and ensures that people know it’s important.
The closer a message is to something that people already know and already do, the less energy you need to spend on it. However, it would be unusual for a topic that rises to the level of an annual priority to be something that people already know and already do. So, it’s going to take energy to communicate.
And probably extra extra energy.
Here’s what most annual priorities should get:
- Monthly review by the CEO in a company-wide forum (ideally a meeting, but could be a newsletter)
- Monthly review by the VPs in their department or team meetings
- More frequent attention as needed by the relevant manager – such as the head of HR or Sales
“That’s a whole lot of communicating,” you may be thinking. But it’s actually still a small proportion of the overall communication that your employees are exposed to in all of the hours they’re at work. And we’re talking about a message that’s really important.
“People are going to be bombarded by too many messages,” you may be thinking. And if that’s true, then it highlights the need to reduce the number of priorities. The need to communicate is the need to communicate. If you’re not able to meet that need, then you have to focus your attention more.
Most business leaders are going to under-communicate their 2016 goals to their organizations, and that’s going to hurt their companies in an environment that requires as much efficiency and effectiveness as your team can muster. Are you going to make that mistake?