One of the precepts of the EOS program is, “The answer is in the room.” It’s a phrase that’s used to emphasize the importance of discussion in addressing important issues, and I am a full supporter of that idea.
The problem is, the phrase itself is not quite right.
WELL…SOME KIND OF ANSWER IS IN THE ROOM
A more accurate phrase would be, “An answer is in the room.”
And it’s the job of the CEO to know whether it’s the answer or an answer that is in the room – whether your team has the right stuff to understand and evaluate the issue and the options for solving it…or not. Because if they don’t, but they think they do, then you are wading into dangerous territory.
It’s not that dangerous if the issue is minor. But if it’s a major strategic decision…having the wrong answer is a big problem.
EVALUATING THE QUALITY OF YOUR TEAM’S ANSWER
So, how do you gauge whether you are getting an answer (a poor or bad decision) or the answer (a good decision)? Here are some questions you can ask:
- Have we seen this situation before? Or something similar? Or has someone on our team?
- Can we come up with a list of risks that would make our banker (or some other knowledgeable skeptic) proud for how pessimistic the list makes us appear?
- Can we come up with 3 strong options for handling the situation?
- Is there more than one person who is worried that the answer may not be in the room?
A CAUTIONARY TALE
Let me talk more about that last one. The biggest business mistake that I have witnessed was when a client decided that the answer was not in the room for them. They hired me to write a plan for a new initiative, discussed and agreed to the plan as a team…and then 2 weeks later the CEO came up with an alternative “short cut” approach.
That short cut ended up costing the company between $2MM and $10MM, depending on how much you count the indirect impact that decision had. At the time the leadership team was discussing the short cut, there were 3 members of the team who said, “We just paid for a plan, and we all said we liked the plan – why are we not following the plan? Why do we think we have a better answer than the plan now?” (Which is another way of saying, “The answer is not in the room.”)
HOW THEY GOT IT WRONG
Why did most of the team change their minds? Because the CEO had a long history of running and building the business, and the majority of the leadership team said, “If you think this is the right thing to do, we trust you.” What they missed was that the CEO had not pursued a strategy like this before – it was a new area for him, and it was more complicated than anything he’d worked on before.
The team needed to listen to the skeptics more – and there’s a lesson there for you, dear CEO, if you find yourself in a similar situation.
YOU BE THE JUDGE
If you’re a CEO listening to your team debate a topic, you have another role you need to play – you need to raise yourself above the discussion, and look down on it, and critique whether the sophistication of the discussion matches the complexity of the issue and the quantity of the resources you’re going to commit to the answer.
What do I mean by prioritizing your priorities? Why is it important? Why is it hard?
It’s fairly easy for any business to come up with a dozen ideas for improvement – and most businesses wouldn’t stop there, generating dozens of possibilities. The challenge for any leadership team is to pick the right priorities to focus extra attention on among all those many options.
It’s easy to say, “You should have 3 big rocks that you focus on.” It’s muuuuch harder to say, “These are the 3 rocks that will give you the best outcome.” Why is it harder? Because there are many variables to consider in coming up with the answer. I’ll highlight 2 as examples:
- What’s the balance between financial outcomes and intangible outcomes? You could work your staff hard for two years, get your financial results up, and then sell your business for great personal gain. But many small companies have more connection to their employees, and so are willing to support work-life balance at the expense of financial performance. In that case, you can’t just decide on priorities based on financial ROI.
- What if short-term success and long-term gain are not aligned? Often they aren’t! Short-term, it almost never makes sense to upgrade your systems. But if you never upgrade systems, that will eventually undermine your results. How do you balance those competing interests? How do you decide whether long-term payoff is the right thing to aim for now?
So this is a hard task. Why not just avoid it?
Because focus is a key part of success. Spread yourself too thin, and you won’t have the energy to see your initiatives through to success. As we all know, juggling 6 balls is far harder than juggling 3 balls.
Although there are tools that can help you prioritize your priorities, this is not something that is driven by tools. A SWOT or Gap analysis will not solve this problem. A 1-page sheet that puts long-term vision, annual goals, and quarterly objectives…will not solve this problem.
The center of this solution is wisdom and judgment. It takes experience, insight, creativity, foresight, and thoughtfulness to prioritize your priorities. Whereas operating a business is more akin to an industrial “assembly line” process, guiding a business is a craft that has as much art as science. That’s why venture capital looks foremost at people when considering an investment.
One of the great things about working with Stage 2 companies is that there is usually a strong team operating the business, and any gaps they have in operations can usually be filled with a toolkit from EOS or e-Myth or Rockefeller Rules. Whether they are a strong team leading the business depends a lot on their ability to prioritize their priorities and pick the right things to choose on.
I’ll be posting a self-assessment soon for you to gauge how your team is at leading your business. So…well…this is just the placeholder until I get that! But if you’re reading this and are interested, send me an email – or give me a call and I’ll share what I have in draft form.
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.
I have 2 clients who are focused on “accountability” this year, and it’s proving a hard row to hoe for both of them. Why?
Well, first of all, accountability is a somewhat scary term. If someone is saying we need it, then that must mean that we are not being accountable, and that sounds like someone’s not happy with people’s performance.
Worse, if there’s not a way to gauge performance, the people are likely to take a need for accountability as a judgment on their dedication. They’ll confuse accountability with work ethic.
It’s unfortunate that accountability gets this reaction. In Stage 2 companies, accountability is more about making things that used to be managed intuitively into things that are managed objectively. It does make a judgment about how people are working, but not in the way they think – accountability focuses on working on the right things, not the level of effort.
In fact, most of the time I work on accountability, people have a clearer sense of direction and less stress in their jobs.
I can spend lots of time talking about how to make your organization more accountable, but for now, let me finish by answering the question, “How do you overcome the initial resistance to accountability?”
I recommend 3 steps. First, before you bring up accountability, praise the team’s work ethic (assuming it deserves praise…if it doesn’t, that’s a deeper problem…), so that they know that you know they are dedicated. Second, give them an example of people spending more time in an area than they should. (Serving the bottom 20% of your customer base is a fairly typical area.) Finally, ask the team, “Do you have a way of quickly seeing whether the other people on the Leadership Team are succeeding?” If you don’t, then you’re probably spending more time than you should simply understanding how you’re doing, instead of diving into the issues that will make your business better.
One of the pleasures of working with Second Stage small businesses – the largest part of the economy – is that I can mostly ignore Wall Street. It’s not the people – I’m sure there are good people and bad people working there. It’s just that for the small business economy, money is the benefit of good work, not the reason for it.
But today is different.
Greg Smith, a leader at Goldman Sachs, has pulled back the curtain on Goldman Sachs culture in an Op-Ed article in the New York Times. Not surprisingly, he portrays a culture focused on making money, sometimes to an extreme.
Although small businesses mostly ignore Wall Street, there’s actually some value for us in what Mr. Smith has to say – because he highlights 2 key ideas about culture.
First, company culture comes from leadership. For a small business, this means that leaders have to be aware that their little behaviors get magnified and projected in the organization. There are many benefits of being a small business leader, but one of the burdens is that you may need to crimp your style for the good of the company.
Second, culture must be evaluated in the context of strategy. Strategy provides the direction, but culture provides the energy. So, before you work on “solving” culture problems, you first have to make sure your strategy is right. It sounds like Goldman Sachs has done a good job of aligning its culture with its strategy – with enough clarity that talented and motivated people who aren’t a fit are self-selecting out. Although there may be long-term problems with the strategy, you have to give the Goldman Sachs leadership credit for being focused.
You’ve probably made a difference in 5 or 10 small business’ cultures by your article today, so thank you Mr. Smith and Goldman Sachs for the lesson.
My “Situation Assessment: Today’s Economy” post looked at some positive forces and trends at play in today’s economic landscape. In this post, I want to step back and take a longer view, and include some learning I’ve had about economic change over the last 150 years.