My brother is a great guy…and a great investment banker whose boutique firm uses the Haviland & Co brand that our family’s china business made famous. We talked recently about business problems that show up because of misalignment between people.
First, some background… He and I do similar work – he focuses on the owner’s exit, and works with the leadership team to make the business better to support that, while I focus on working with the leadership team to make the business better, and as a result position the company for the owner’s exit. We both talk about business value and ROI – but what I call mission and vision and strategy…he calls “the investment thesis.”
His experience is that when people come into conflict, it’s because they have different perceptions of what’s valuable. As a guy who has brokered $700MM in deals, it’s not surprising to me that he’s got a special skill at recognizing different values, and helping people to common ground.
As he describes it, when a small orange cube shows up, one person could focus on its small-ness, another could focus on its orange-ness, and another could focus on its cube-ness. The way to get through misalignment, then, is to identify how each person defines value, get them to appreciate the different perspectives, and come up with a common understanding of the facts, their meaning, and what to do about them.
Most of the time, when in this kind of situation, we’re able to talk about the facts, and the person focused on the small-ness listens to the others and expands their view of the facts to include the orange-ness and cube-ness. When everyone does that, it takes work to create alignment, but it’s not particularly hard to come up with a common understanding of the facts, their meaning, and what to do about them.
When “hard” misalignment happens – let’s call it dysalignment, to give it a dysfunction flavor – that dialogue doesn’t work. Instead, there are blockages and blindspots that prevent people from seeing the whole picture.
As a business leader, the question is, when does dysalignment happen? And why? If we can understand that, then we can recognize when we’re in those positions, and take extra steps to create alignment.
While talking with my bro, here’s what I came up with for when dysalignment happens…
At the core of values. Not all of our values are equal. Some we’re more flexible on, some are hard-core. When a deep-set value of mine comes up against a deep-set value of yours, those values will create blockages to us being able to see the same set of facts and to being open-minded to see the other perspective.
At the edge of the investment thesis. In all areas of life, we invest our time and resources with an assumption about what we’ll get for that investment. Sometimes our investment thesis is clear and certain; other times, it’s unclear and uncertain. If we start to get worried that our investment thesis is wrong – that we’ve made an investment and it’s not going to generate the results we expected – that is a time of high stress and uncertainty. And that makes it hard for us to see other perspectives.
At the bottom of performance. If something is not performing well, that creates stress…and calls into question whether we can trust the other people that we’re working with. Why are we not performing? What’s the cause? Who’s to blame? There is a lot of uncertainty and interpretation that goes into answering those questions, and because it’s so subjective and so stressful, we can be blind to seeing other perspectives.
At the height of uncertainty. The edge of the investment thesis and the bottom of performance both involve a lot of uncertainty…and that uncertainty can show up at other times of change – with similar dynamics. When we’re not sure what the “rules” are for how things are working around us, and we’re not certain what/who we can trust, we’re more likely to stick to our views and less likely to be open to alternatives.
My brother is right – when misalignment shows up, it’s time to talk about how people perceive value.
If that conversation doesn’t work, though, then you’re likely facing dysalignment, and the blockages and blind spots that come with it. At the heart of dysalignment is the following question: how do you deal with change, uncertainty, and the “boundaries” of performance (failure and success). When we’re in The Comfort Zone, alignment takes work but is very achievable with the right people facilitating the right discussions. If people are struggling with dysalignment, my preferred approach is to change the conversation to a “meta discussion” about being outside The Comfort Zone, and hearing how people handle being there.
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, then 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.
We have a free self-assessment to use to understand the strength and weaknesses of the ‘Operating System’ that you use to manage your business. If you’d like to assess the current state of your Operating System, click here to download.
Are you in growth mode, or survival mode?
I have some clients who are growing, some who are hanging on – and some who are transitioning from one to the other. Although most businesses would like to be in growth mode, the point isn’t to say that one is right and the other is wrong – it’s to understand that different situations call for different approaches. And that can be an issue when transitioning from one situation to the other.
HOW GROWTH MODE AND SURVIVAL MODE DIFFER
I did a chart recently for a client of the differences that their company would see as it switched from survival mode to growth mode. There were 15 different areas that would see changes!
In survival mode, your “strategic horizon” (the timing you take into account when making decisions) is the next quarter. In growth mode, that horizon stretches out to 3 years.
And a lot of areas can be “good enough” in survival mode – but need to be tightened up when growing. Those areas include accountability, processes, and hiring. And the inverse is true, too – things that need to be tightly managed in growth mode should be loosened up in survival mode. (Why would you want less accountability or process? Because that takes time, and in survival mode, that time can be better spent talking with customers.)
THE IMPORTANCE OF FRAMING
When you’re having strategic discussions, one of the most important steps is to pick the right “frame” for the discussion. A more tangible way of saying that is, you have to know the right question to ask. This is something that you can do intuitively most of the time. But when companies are going through change, picking the right frame is much harder. And picking the wrong frame can be very costly.
Here’s a simple example. I can create a very different conversation, and a very different outcome, if I ask the question, “What should we do more of next year?” rather than, “What do we need to do differently next year?” The first question is appropriate for a company continuing in the same mode it was in the prior year – baked into the question is the idea that we already know the right “model” of how we do things, we just need to pick areas to emphasize. The second question is appropriate for a company in transition – and in that case, doing more of something you’re already doing may actually hurt you more than help you.
(And, yes, it often makes sense to ask both of those questions in your annual planning.)
As a leader of strategic discussions, you need to be aware of what frame you’re using for each discussion, and you need to build your toolkit of frames, so that you can bring the right one to bear in whatever situation you find yourself in.
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.
I got to spend a couple hours talking about hiring last week with Miche Rayment, who runs The Hire Effect and wrote a book by the same name. Since we’ve both worked with growing companies to define hiring processes and hire key positions, we shared some stories and developed some tools to help people decide how they should approach hiring.
I had the most fun when we were brainstorming what to call the “hiring strategy” of the many companies that, well, don’t have a hiring strategy. It went something like this…
“They just decide they’re going to hire someone, and start looking, and then find somebody and hire them.”
“It’s like they just go pull someone in.”
“It’s like a vacuum. They flip a switch, and then wave around a tube that’s sucking in whatever gets near it.”
“That’s it – it’s the Suck Strategy of hiring!”
“How do you hire? We suck! Hahahaha.”
That was the most fun part of the conversation. The most interesting to me was when we talked about how much time a company should spend on a hire.
Let’s be honest – most companies don’t have the flexibility or discipline to go through a highly rigorous process with every hire. (Some hiring guides espouse taking months with each candidate! That is just unrealistic for most companies.) On the other hand, some roles and situations demand a lot of structure and steps in the hiring process.
So, what are the factors that a small company leader should look at to decide how much time to spend on a hire? There are just a few I look at:
- Importance of the role: bigger impact of the role = more time hiring
- Newness of the role: uncertainty of what the role is and what kind of person to hire for it = more time hiring
- Availability of talent: hard to replace a bad hire = more time hiring
- Pace of growth: faster growth = more growth issues coming up faster = more need to hire the right person = more time hiring
- Degree of competition: more competition = higher need to perform = more need to hire a strong performer = more time hiring
There are many situations when a company can just Suck to find an acceptable employee. But if any of the factors I list above apply to you or a position you have available, you should spend the “extra” time in your hiring process to find the right/best person. In those situations, the consequences of hiring are significant.
I recently gave a webinar for the SPARK.grow program on high-potential employees – how companies can identify, foster, and be attractive to high-potential employees, and how high-potentials can identify, develop, and be attractive to high-potential roles. (The recording of the webinar is here.)
I described a “High-Potential Talent Stack.” That stack has 6 levels – the bottom 3 are the factors that enable someone to perform at any job, and the top 3 levels are the factors that enable someone to perform as a leader. I want to describe each level…
Performance – this is how well the person gets work done
Results Focus – this is the ability to not just put in the effort, but to figure out a way to go around roadblocks and keep at a task until you get the result that is needed
Learning – high-potentials are always expanding their toolkit of skills, and learning about the work they do
Investment Thinking – this is the ability to think in terms of Return on Investment
Maturity – high-potentials handle themselves well, in different situations and with different people
Leadership – this is the combination of skills that are needed to get a team to perform at a level and in a direction that they wouldn’t get to on their own
This stack is a powerful tool. It shows what a company can look for when hiring new staff, and what they can train and develop to improve their high-potentials – and shows high-potentials what skills to develop for further growth.
Each level of the stack has 3 more specific components. The target is to score a total of 12 or higher when each of those components is rated on a 1-5 scale. Scores of 4-4-4, 5-4-3, or 5-5-2 would all qualify; scores of 5-3-3, 4-4-3, 5-5-1 would not qualify. It’s a high hurdle – but the people that meet that standard are often the “10x-ers” – the ones who have 10x the impact on your business than your typical employee.
Almost universally, small businesses underinvest in their high potentials. There’s too much potential ROI for you to do that.
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.
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?
Making Better Goals with a Strong Annual Planning Process
Although it seems like just yesterday that the days were hot and we were at the local swimming hole, this is the time to start thinking about annual planning. Some of my clients have small, simple businesses and handle their planning in an afternoon. Others are larger and more complex, and we spend 4 days over the course of 3 months.
No matter the extent of the process, they all have the same underlying process:
– Assess the environment and identify areas that have potential to improve the performance of the business
– Select the areas that have the best potential impact, and create initiatives to address those areas
– Define and justify the investments needed for the initiatives
– Develop action plans
– Launch the initiatives with managers and staff
There’s a rich set of best practices and tools for each of those steps. For example, many people like to use the SWOT framework to assess their situation. But I’ve found that reviewing hits and misses often provides better insight into areas of improvement.
On my Monthly Strategy Slice webinar, we’ll be looking at a small slice of the annual planning process – how to make sure you have a strong set of initiatives to focus on. On the webinar, we’ll talk about tools to evaluate your initiatives along 4 dimensions:
– Are you focusing externally (e.g., developing new markets), internally (e.g., reorganizing), or a combination of both?
– Are you focusing on initiatives with short-term payoff (e.g., a marketing campaign to existing customers), medium-term payoff (e.g., hiring an important new position), or long-term payoff (e.g., launching a new product)?
– Do you have a mix of initiatives that will have a big (transformative) payoff and smaller (incremental) payoffs?
– Do you have a mix of initiatives that have different investment profiles – some requiring relatively little investment, and others needing heavy investment?
We’ll talk about how to evaluate annual priorities, and how to apply the evaluation tools to your business on my webinar – please join us if you want to see these in action.