Diary of a Startup
Invest in People Not Things (Part 2)
An Interview with Zane Zafrit of Conference Calls Unlimited
People make the difference. Blah, blah, blah….How many times have you heard that?
I recently had the pleasure of sitting down with Zane Safrit, PeerSight member and CEO of Conference Calls Unlimited to discuss how people really have made a difference in the growth and success of his company. Not the outcome of a “program” or canned motivational technique. It has been much more studied, proactive and intentional and I think we can all learn something from what Zane and his people have accomplished.
A bit of quick background first. Conference Calls Unlimited is unique in its industry. An industry dominated by low cost, narrow margins, low touch and limited customer flexibility; an industry that includes some very large players and much commoditization. Conference Calls Unlimited is unique in that they are not the low cost provider. They provide their customers maximum flexibility, assistance in customizing solutions, and new ways of using conferencing services to extend the reach of their businesses.
To their customers they are more than a mere expense item; more than a necessary evil and more than a cost of doing business. Conference Calls Unlimited has found a way to take a commodity and create top line value for their customers.
Now for the best part, Conference Calls Unlimited is growing, cash flow positive and profitable.
So what can we learn from Zane and Conference Calls Unlimited’s success? Does their experience teach us that if you treat your employees well, involve them and give them rich benefit packages, you too can expect the same results? Unfortunately no, it isn’t as easy as that. Not that those aren’t good things. Most likely doing those things will have some positive impact on your employees, but by themselves will not guarantee growth, profit and positive cash flow.
So how do you get there? What’s the starting point? While it may sound much too simple, the first step is to understand your competitive advantage. What do you provide your customer that isn’t easily copied? What is it you do better than your competitors? What factors drive it? What ensures its sustainability and for purposes of this article what role do employees play in achieving it.
Conference Calls Unlimited has not strayed from its original competitive advantage; providing prepaid flat rate services (conference calling, later expanded to include audio and video) and assisting customers in using these services to enhance the value they deliver. While Zane will be the first to tell you he does not know exactly what the future of Conference Calls Unlimited will look like he knows it will involve freedom for their customers to customize his products to meet critical business needs.
Armed with this information Conference Calls Unlimited has been able to define the characteristics of a successful employee, how they add value, and how they are motivated, lead and inspired….all critical elements to ensure that people make a difference in the success of a business.
Zane describes the characteristics of his staff this way, “People who in their DNA embrace a participatory, accountable, collaborative, self starting, autonomous workplace where change, communication and enthusiasm are required. Not exactly the formula for success in a traditional commoditized industry. When asked to explain how he avoids losing his market to a “better mousetrap”, Zane says, “ No mousetrap competes well with our level of service. Because of our people we compete successfully against free.”
But doesn’t that sort of put you in a box and limit your freedom to adapt and change your business? “On the contrary” Zane explains, his people provide the key to capitalize on future opportunities. “Customizing our product (and future products) is the key to our growth. That starts with the basics of answering the phone and listening. Our people are good listeners. They are creative and dedicated to finding the best solution. For us to compete and grow we have to do something different”.
Is it the skills or characteristics that make the difference? Zane explains that it is both, “ We thought we had an advantage working in a community (Fairfield Iowa) with people deep in sales, telecom and computer backgrounds. We were right and we were wrong. We did know good people but we didn’t originally understand how important the qualities of flexibility, openness, communication, and teamwork were to the profitable growth of our company. Outside the box sounds romantic but some people aren’t comfortable except in a clearly defined box.”
Is this heaven or just Iowa? This all sounds wonderful but aren’t there standards in the business? After all it is in a heavily commoditized industry so it has to have some standards and controls, doesn’t it? How do you take creative people, give them freedom, yet ensure the consistency and quality required of the product? “It is a mix of freedom and controls” Zane explains. “In some respects it has been tough for our company. I give everyone a clear description of how much autonomy and authority they have to make decisions. That extends as far as they need to make a decision with a customer or prospect on the phone. We don’t bring anyone into the company we can’t trust with this responsibility. Oddly enough many people are not equipped to take on this responsibility.”
Zane goes on to explain that of course there are policies, standards and routines, and everyone is expected to follow them, but unlike many organizations they do so mostly because they understand them and they helped create them. “ We actually measure and reward this behavior”, says Zane. “We measure it with every discussion and while we are patient with people in embracing this openness…eventually we insist”
Can this environment survive in a talent shortage? Zane says, “It is a question we are mulling over in great detail right now. It’s a core value to our company and its success. I could see us changing our financial principles for a short term goal more than I could the principles regarding our people. The wrong people could kill our brand. We may change a lot of things but the core principles of open communication, finding mature and flexible people who are motivated by playing a key role in the future of the company, who want to play with other adults, who want to be treated like an adult, who want to accomplish something and be recognized for it,…that part will never change”.
How would you describe your leadership style? What is its role in the success of your people? Zane describes his leadership style as “Getting out of the way. My job is to 1) organize procedures to ensure minimal interruptions, 2) provide the resources (equipment, direction, incentives, and mandates, including authority and autonomy) to inspire the best from the people, and 3) ensure smooth communication to and among everyone in the company.”
When asked if he ever “gets in the way”, Zane explains , “I get in the way when a policy needs to be established or changed. I get in the way when change has to come. I get in the way when our people are unable to do their jobs with present resources.” But even then as you might imagine he sees his role as creating change by causing the discussion to occur, by leading the discussion, making sure the issues are clear and leading to decisions.
So what can we learn from all this? What questions should you address to ensure people make a difference in the success of your business? It’s clear that people really do make a difference in the success of Conference Calls Unlimited. It’s also clear that the difference the employees make is not the outcome of a random leadership style or a set of measures and rewards. It’s actually the other way around. The leadership style, the rewards and incentives, etc. they have developed “fit” with the way the business delivers value to its customers.
So what questions should you ask yourself? What is your company’s real competitive advantage? How do you know? Would your employees agree? What role do employees play in ensuring it? What employee behaviors and characteristics “fit” with your business? What leadership style, hiring practices, and environment motivate and encourage these behaviors? How do you know? Something to consider….the profitable growth of your company probably depends on it.
One more thing….we always ask this question at the end of our interviews. If your son or daughter were to takeover for you tomorrow, what would you tell them? I think you’ll enjoy Zane’s response. It is not only humorous but also gives insight into his personality and why it fits so well with the culture he has created at Conference Calls Unlimited. Enjoy. Here is his response.
“Good luck. Make sure my payments are automatically deposited. I hate coming in from the beach.”
Steve
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Carnival of the Capitalists
Welcome to this week’s edition of the Carnival of the Capitalists.
PeerSight and Diary of a Startup are pleased to host this week’s Carnival of the Capitalists. Since so many of the posts fall into multiple categories, I’ve elected to list the posts alphabetically by blog name but from Z-A (That’s right, we’re changing it up). Pulling everything together has been a lot of copying and pasting but at the same time I really enjoyed reading all the posts, many from blogs I’ve been introduced to for the first time.
Without further ado, please enjoy:
Trust Matters - Charles H. Green argues that always exceeding expectations is a good way to destroy trust, because it shows you’re lying about what you can and will accomplish in his post - Trust Tip 38: Don’t Exceed Expectations The Small Business Buzz - In her post - Finding the Right Franchise for You - Michelle Cramer discusses the characteristics of a good franchisee and offers practical advice and resources for selecting the right one. The New Business World - A recent survey From Florida State University indicates that bad bosses are becoming more common, learn more in The New Business World’s post - Bad Bosses on the Rise! The Digerati Life - The Silicon Valley Blogger introduces the investment phenomenon called “the January Effect,” learn more in - All Hail To The January Effect TAM Money and Finance - Sean Hackbarth tips us off to - Amazon.com’s 30-Day Price Guarantee Sox First - Leon Gettler demonstrates that the generous rewards for chief executive officers reflects “market failure” and can’t be justified by arguing that the top job gets highly paid because it has more risks, according to a new report in - Soaring CEO pay shows “market failure” Sophistpundit - Adam compares 2 of Milton Friedman’s books and discusses Friedman’s idea that the choices made by private individuals yield results which are better for the whole than situations in which the government is the sole decision maker in his post - The Morality of Choice Software Project Management - In the post - Fresh Blood in the Team - Pawel Brodzinski shows us that If you want to benefit from new additions to your team you have to develop supportive atmosphere. SmartCoolRich - A summary of a Kiplinger.com article that offers a quick and practical - “Eight Keys to Financial Security” Slow Leadership - Carmine Coyote explains that it’s the simple, insignificant decisions that get in your way and prevent the change you want to make in your life in - Small Things Matter More Than You Think Scott On Money - Online business has received rave reviews this year for good reason. In - Online Shopping Shortcomings - Scott on Money reviews some of the areas were online shopping is falling short and offers some suggestions for improvement. Roth & Company Tax Update - Joe Kristan identifies 750 billion reasons why repealing the Alternative Minimum Tax isn’t as easy as some believe in - AMT Repeal - So Simple! Queercents - Paula at Queercents writes about the realities and perceptions around the issue of class and money in America in her post - What Class Are You? Passion, People and Principles - David Maister in - Passing It On - asks (and answers) the question, how does a personal services company/consulting company of small to medium size sustain its brand after its founders and key management retire? Overseas Property - A new rate of Spanish Capital Gains Tax came into force on January 1st 2007, learn more in - New rate of Spanish Capital Gains Tax One Man Band - Are you providing enough information to the visitors of your website? Is it simply and clearly presented? How do you know? A bad example is described in - Blank Form, Blank Stare Money, Matter, and More Musings - The Fish n’ Flush Aquarium or the lighter side of a business that is about to fail in - How To Flush $299 Down The Toilet Money Smart Life - This is the time of the year for annual pay increases. Every year they seem too small, Ben offers us one reason why in - The Problem with Annual Pay Increases Making Ripples: post-corporate adventures - David St Lawrence discusses that in the long run your achievement of career satisfaction will probably depend on how well you can control your working conditions. Learn more in his post - Is this your year to achieve some major goals? LWilliamLosapio.com -Bill Losapio offers a discussion of the Iran’s switch to the Euro and its economic effects in - Did You Feel the World Financial Foundation Shake? Lip-sticking - Yvonne DiVita offers more musings on innovation; what it is, what it should be, how to identify it… from an innovative viewpoint in - What does Innovation Look Like? LifeTraining Online - Just as you have a core personality type, you also have a core financial type. This type contributes to not only your current financial state but to many of the financial decisions you make in life. Learn more from Erich Jeackel in - What’s your Money Type? InsureBlog - When is insurance not insurance? InsureBlog’s Bob Vineyard reports on how some doctors are looking to make a few extra bucks, possibly at your expense in - Doctors Provide Health Insurance at a Lower Cost hopeisnotaplan.net - Introducing a new blog focusing on leadership of kinds. Check out Derek’s first post - On Leadership (Part I) HedgeFundDomain.net - The domain market, like the S&P500, finished the year very strong with several six figure deals in December. Read Jeff Burkey’s December wrap up in - Domain Trade Blotter-December ‘06 green | rising - Vihar Sheth reviews Paul Krugman’s ‘A Healthy New Year’ from the New York Times in the post - Our Responsibility to Every American Getting Green - In honor of the New Year Matthew Paulson is giving away a free copy of the Millionaire Mind. Learn more in the post - Getting Green Reader Appreciation Giveaway #1 Free the Drones - A post on a study suggesting that active investors often get poor returns because of overconfidence in their abilities. Check it out - Investing While Incompetent - And Blissfully Unaware Free Money Finance - Learn how a hobby quickly became a side business in - Turning a Hobby Into an Income: How I Did It Execupundit.com - Michael Wade at Execupundit.com notes some conflicting indicators of trouble in - Possible Signs of a Dysfunctional Organization Econbrowser - James Hamilton of Econbrowser tries to reconcile the conflicting signals about how much employment has been growing in his post - Employment still holding up (I think) Cap’n Arbyte’s Blog - Kyle Markley explains why the U.S. Mint’s new rule making it illegal to melt pennies and nickels will not succeed at keeping them in circulation. Find his post at - Reminding the Mint of Gresham’s Law Businesspundit - Rob offers his book review of “Lightning in a Bottle” - a process for creating new ideas. Check it out here - Book Review: Lightning In a Bottle - A System For Creating New Ideas Business & Technology Reinvention - In business, getting the right feedback can be empowering and the tipping point that delivers success. Learn how to ensure feedback adds value here - Is That What You Have to Say? Breaking the Shackles of the 9 to 5 - Michael Dawson examines the investment opportunities as a result of industrialization in Brazil, Russia, India, and China in - Investing in Brazil, Russia, India & China - 2006 Results, Plans for 2007 Blog Business World - Wayne Hurlbert delivers a great post on developing a Unique Selling Proposition for your business in - Business management: Stand out from the crowd
Thanks visiting and thanks everyone for submitting some fantastic posts!
Andrew
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Favorite Business Blogs of ‘06
We’re defiantly jumping on the bandwagon a bit here, but… in the spirit of several radio stations ‘best albums of ‘06′, we’ve compiled a list of our favorite blogs this year. If you’ve got some extra time on your hands (and I know you do, you’re at your inlaws) take a look. So, without further ado and in the order in which they appear on my RSS reader…
Kauffman eVenturing Entrepreneurs Viewpoint
The Intuitive Life Business Blog
Aggressive Small Business Marketing
Jeffery Cufaude, Idea Architects
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1st Step Guaranteed to Create Word-of-Mouth
Great article and Podcast on the 1st Step Guaranteed to Create Word-of-Mouth and the value of working with the right people from CCUCEO authored by Zane Zafrit (CEO of Conference Calls Unlimited).
Here’s his fist step…
“Step 1: Gather Remarkable People Together.
Sounds pretty straight forward, right.
Gather remarkable people together.
And honestly, who doesn’t want to work with remarkable people? We all look for companies to work at who have remarkable people to work with every day.
But if that’s the universal reality…then why don’t more companies hire remarkable people.”
To read the rest of the article click here
Andrew
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Tell Me Something I Don’t Know
“Listen to your customer. Change your product to meet the customers’ needs or change your market.” You’ve heard this, I’m sure.
Kathleen Dahlberg (Founder of numerous companies and currently the CEO and Founder of oVention, a technology firm ensuring hard returns on technology) says that “entrepreneurs spend too much time creating their product and not enough time selling it. They must change the product to meet the demands and needs of the customer. If the customer doesn’t like it, it doesn’t matter what you think of it. They won’t buy it.”
Great, what if the customer doesn’t know what s/he wants? How do you get the right balance of what they want and what makes sense from a profit perspective? How do you know what they will want in the future? ”This is tough stuff” says John Fox (President of Venture Marketing and author of The Marketing Playbook. Venture Marketing is a marketing consulting firm focusing on its client’s top line revenue)
Kent Nelson (CEO of HRH Illinois; formerly TJ Adams. HRH is the 8th largest insurance brokerage in the U.S.) recognized most of his competition (insurance brokerage) used the simple approach of shopping for expiration dates and quoting lower prices to find new business. That solved the customer’s cost issue, but only until the next broker came along with a lower price.
But the customer has many more issues than just cost. In response his commercial property and casualty business offered safety classes, introduced wellness classes, and provided blood screening to small businesses. The value added was obvious to the customer, and shopping price quickly evaporated. Customers no longer jumped to another insurance broker because HRH offered so much more. “Cross-selling” eliminated the price war, and everyone within HRH selling each of the services participated in the commission. Nelson’s customers didn’t know they wanted wellness classes and blood screens. But it has broadened their attitude toward their insurance broker and the value they offer.
Nelson has now expanded his brokerage service to include an HR outsourcing solution for small business (5 to 2500 employees). By introducing these different services, HRH has multiple “points of value” with prospects. It’s no longer just quoting premiums, but truly hassle free solutions in areas small businesses can’t afford to hire independently.
Ben Carnevale (Former President of Oxford International, a high growth Chicago based multinational corporation serving the OEM automotive industry) says, “Keep an open mind and recognize the opportunity provided by the relationship. By working hard to understand Chrysler and working closely in a ‘give and take’ relationship, we saw needs well ahead of our competition.” Oxford’s close communication with Chrysler allowed them to develop technology that solved problems. “We began combining elements that led to higher efficiency within Chrysler. We saw the need for automation and delivered the first automated plant of the 80s.” The result was a better, more competitive product for both Oxford and Chrysler.
But the customer doesn’t always know what they want? What then? John Fox tells the story of a major manufacturer of garage door openers who sold millions of remotes each year, but failed to see the automotive industry offering the remote as a standard item in newer cars. Now, they sell less than 100,000 remotes a year. The customer could not have told them this…..so how should they have known what the customer wanted?
Oxford’s thorough understanding of the automotive industry not only brought better efficiency to Chrysler, Chrysler saw them as a problem-solver. “Here is how we did it. We sent three people into the assembly line to study their process. What happened to our product when it went in? We noticed we could reduce cost on packaging, we could provide a lighter product, and better quality was the result. We were perceived as going beyond the scope of the vendor – just by listening.”
So what’s the so what of all this? How do you listen to the customer when they don’t know what they want? Your success is tied to the questions you are not asking as well as they ones you are. What does that mean? Instead of merely asking the customer what they want, become the customer for a day. Invest time in understanding them…and their businesses. Ask them how they do things? Why they do them? How much it costs to do them? What keeps them up at night? What are their priorities for the next 12 months? If they could change three things about their business what would they be?
Take specific ideas to them and ask, what if? What would be the benefit to them? See the world through their eyes. This isn’t easy, but it must be deliberate and become a formal part of operating your business. As John Fox says this is tough but very necessary stuff.
Something to consider.
Andrew
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Cash Power - The Financial Momentum To Move Your Business
“Momentum is the result of both speed and size.” A bullet has tremendous power due to its speed, notwithstanding its tiny mass. An avalanche has tremendous power due to its mass in spite of a slow beginning. Michael Gerber (best selling author of E-Myth Mastery) uses this analogy to describe the cash power within the organization. “The more cash you have at your disposal, and the faster it moves through your organization, the greater your financial momentum.”
We have all heard the stories about growth companies that fail because they outrun their cash. When you first hear about it, it seems kind of strange doesn’t it? After all, a rapidly growing company with new customers, increasing sales, revenue and profitability, what isn’t good about that? Management says “We’ve got the formula for success, let’s push it up another notch”.
Ben Carnevale (Former President of Oxford International Ltd.; a high growth Chicago based multinational corporation serving the OEM automotive industry) says “We learned a valuable lesson. We were expanding rapidly and focused on technology and satisfying the customer, but not paying attention to the financial guy. We out ran our cash”. Fortunately for Oxford they caught it in time. Lesson learned.
Oddly enough the attraction of this scenario is common for rapidly growing companies. We have all heard the stories, but how does it happen? How can you avoid “out running your cash” from happening to your business? Is the only answer to slow the growth? That seems counter intuitive.
Let’s set some context. Why does growth cause cash shortages? We all know the answer, growth is fueled by sales and marketing, and the fruits of those labors don’t pay off until some time later. But if it is so obvious, why do intelligent leaders of rapidly growing companies still end up as a statistic?
We believe it is a combination of factors that appear in several of our featured articles:
Companies are integrated pieces of a whole. They must be managed by looking at the “big picture”. Carnevale says “We did not watch the entire process”. Lack of formal basic cash management processes. In our feature article Navigating Growth we suggest that cash management processes are among the few formal pieces of structure that must be in place initially. Mike Slattery (President of Arthur P. O’Hara, a $5M Chicago based office distribution company) advises, “Early on, put a financial system in that provides key information”. Lack of adequate measurement. Lack of prediction. If you don’t measure it, you are not objective. The attraction of growth and lack of focus on cash management.
Most businesses, says Gerber, think only in terms of increasing revenues and decreasing expenses. Instead, consider the assets you have that can be sold to generate cash without hurting your business. Are there “pools” of cash lying dormant within your asset base?*
Gerber suggests six rules to maximize “cash power.”
1. Decrease assets
2. Increase liabilities or capital
3. Increase revenues
4. Decrease cash expenses
5. Improve productivity
6. Optimize timing
Even these actions speak of the business as an integrated whole. Each can have significant impact on the success of the business.
Get creative!
Graseby PLC, a $30 million laser optics company, owned a building (no debt) with a market value of $3.5 million. The second floor (vacant) was leased to a Fortune 500 defense contractor for $300,000 a year, Graseby then sold the building to an investor and leased their own space back at market rate. As a result they were able to capitalize the two income streams at the then favorable rate of 8%. The building sold for $4.5 million, and freed up $1 million in cash flow.
Don Urbancicz (CEO and Founder of Insurance Vianet and The Insurance Noodle, a rapidly growing $25M web enabled platform for the distribution of small commercial and property casualty insurance) addresses it this way. “In addition to securing a strong financial partner, most of our marketing success is driven by word of mouth referrals. Not only is it more effective, but significantly less costly too”.
John Fox (President of Venture Marketing and author of The Marketing Playbook. Venture Marketing is a marketing consulting firm focusing on its client’s top line revenue) says, “Don’t overlook financing by your customers.” Fox worked with a telecom company who wanted his technology, but could not purchase “new” technology. It had to be established. Fox needed $2.5 million to finance their project, but didn’t have the cash. He sold them a modem for $2.5 million with an agreement to receive the payments up front. He now had the cash, and delivered their project. The customer made it work. Had Fox not asked, the customer would never have thought of it.
So what questions should you always be asking your self? Am I watching the entire process? Are my cash management processes adequate without being too cumbersome? Am I realistic about how soon cash will start flowing from my marketing efforts? What are my cash requirements? Have I found the pools of cash in my business? What levers can I turn and what is their impact on the other pieces of my business?
We’ve all heard it. Cash is king!
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Is Measuring a Bureaucratic Waste of Time for Small Business?
Many business plans somehow imply that the future is predictable, but as any business owner knows, they do not. We all learned that from Steinbeck in Of Mice and Men. Michael Gerber (best selling author of E-Myth Mastery) exhorts us to begin, not with a plan, but with our vision.
The vision includes our strategies, tactics, and a direction to take our company. Our vision also includes our most valuable asset: passion. Vision leads to passion and passion leads to joy. Passion is what gets you out of bed each day to slay the dragon. A mediocre plan with passion is far better than a superior plan you don’t strongly support. But what is the key to executing your business plan, mediocre or otherwise? Kathleen Dahlberg and Ben Carnevale insist the answer is “measuring.”
Measuring quantifies the truth about your business. It allows you to know your business outside of your biases and emotions. “Your personal view will always be distorted when looking at this magnificent organization you have put together through brilliant, unparalleled genius”. Measuring allows you to base your decision-making on solid evidence versus misinformation. It pinpoints where things are going wrong, allowing you to anticipate problems before they materialize, before they cause you to lose customers.
But watch out. Don’t be measuring for measurement’s sake. Here are some good rules of thumb:
- Fewer is better. The process of identifying the really important measures usually results in a better understanding of your business. - Understand what makes your business work at every level. From top to bottom, (strategy to systems) and side to side, (financial, customer, operations and people). - Use measures to communicate and improve. - Include leading indicators. The business environment is constantly changing. Leading indicators are your early warning system. - Use measures that utilize readily available data, are simple to calculate and credible.
Ben Carnevale (Former President of Oxford International Ltd.; a high growth Chicago based multinational corporation serving the OEM automotive industry) agrees. “You have to measure the right things but measuring delivers a ton of data. You must be careful to make sure it is relevant and worth the effort….otherwise it can be overwhelming and a waste of time”
Carnevale also insists that measuring becomes a powerful improvement tool when you share the information with the people who do the work being measured. Make announcements of key measurements a positive experience. It is meant to connect all personnel with positive, continuous improvement.
Kathleen Dahlberg (Founder of numerous companies and currently the CEO and Founder of oVention, a technology firm ensuring hard returns on technology) stresses the need for leading indicators. “The business environment is always changing and leading indicators are the only way to make sure you know what’s coming. Most small business owners know them in their “gut” but don’t take the time to quantify them. If you don’t measure them they are not objective.”
OK, great. So what do we measure? Gerber suggests that we need to measure at three distinct levels in the business; (1) Key strategic indicators, (2) Key business indicators, and (3) Key system indicators.
Strategic indicators sense the health of your organization and provide the “big picture”, however, they can not be used in managing the day to day operation of the business and are not precise enough to detect or diagnose problems.
Key business indicators provide a picture of the integrated whole versus the piece parts of the business. They are multidimensional and all inclusive. Their creation and use force the discipline that ensures you manage your business as an integrated whole.
Carnevale explains that not watching the big picture has consequences. “As Oxford grew we expanded we focused on technology, and expanded too quickly. We were so determined to satisfy the customer we did not watch the rest of the processes. We weren’t paying enough attention to the financials and we outran our cash”.
Key systems indicators allow you to see the specifics of what is going wrong with each part of the business and fix it. Oxford Limited used key system indicators to measure results in all its production process. “It was the best way to isolate what caused problems by knowing exactly what is happening within any one system. The alternative is frustrating guess work.”
If you don’t measure it you can’t be objective about it.
Quantification (measuring) reveals problems and suggests solutions. It eliminates personal biases, decisions based on anecdotes, and personal observation. . . Quantification gives you control, objectivity, and a deep understanding of your business. [It] is the magnifying glass, the X-ray machine, the telescope, and the microscope that allows you to see into every corner of your business, and, at the same time, enables you to see the integrated whole of it. Quantification isn’t just numbers. It’s insight . . . understanding . . . [and] the path to a business that works.
- Michael Gerber, E-Myth Mastery, p 106.
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What Every Small Business Leader Must Know About Growth
One of my favorite articles from the PeerSight Resource Center…
You’ve heard it all before. Only 1 in 10 of all businesses ever achieves $10M in revenue, only 2,500 grow larger than $500M. Why is that? Is it something different for every business? Or are there common barriers to growth; rules of the road we can follow that can increase the likelihood of success and improve the potential of profitable growth
The good news is as businesses grow they move through a predictable series of changes. The bad news is that making the changes at each new level is not easy. Solid business growth requires intentional and sustained effort to achieve success.
What sort of changes are we talking about? In general the changes can be classified into two groups: (1) leadership changes and (2) structural and systems changes. Let’s take a look at both and explore the types of changes associated with each as well as some of the early warning signs that change is required.
Let’s first set some context and define the growth cycles. While the number and definition of the growth cycles has been debated by some pretty smart people we have decided to use the following for this discussion:
Start Up: This stage can be defined as the owner “does it all”. Focus on getting the product developed, tested, and sold to its initial customer(s).
Early growth: This stage is characterized by significant sales growth, capturing initial market share and operations that are often described as changing and sometimes chaotic.
Growth: This stage is defined by rapidly increasing market share and sales. The growth triggers a significant increase in employees and the need to form a real structure.
Take off: This stage is characterized by rapidly expanding market opportunities and an increasingly complex organization.
Leadership Changes
It has often been said that as leadership goes so goes the organization. That has never been truer than in navigating the growth cycles. In general successful growth can be directly tied to four elements: (1) leadership’s ability to adapt its role, (2) leadership responsibilities, (3) allocation of time, and (4) ability to delegate. Let’s take a look at the changes that occur at each stage. The following chart demonstrates leadership changes.
Take a look at the dramatic change required in the leader’s role and responsibilities. The change is not only necessary, but in many cases dramatically different from one stage to the next. The changes require the ability to trust, to let go, and the courage to change. Above all, it demands strong communication and leadership skills.
So how does anyone ever successfully make these transitions? We will address that thought, but first, consider your structure.
Structural and systems changes
In general, entrepreneurs dislike structure. They believe it slows them down. Oddly enough, in most cases, it accelerates growth by providing clear lines of responsibility, clearly defined roles, and the definition that standards bring to repeatable processes. In addition, it provides the focus required for people to move fast and apply creative energy to the organization’s rapidly changing needs. The following chart introduces the structural and systemic changes typically required at each stage of growth.
As you might expect, the number and complexity of processes increases as the organization grows. The greatest challenge here is to know “what to add when,” understand the degree of complexity, and exercise the courage and determination to make it happen…”the work” of leadership.
We believe that the following are critical to successfully move your business through the growth cycles:
A clearly defined and well articulated vision of the future. An understanding and acceptance of the need for change. The desire and conviction to make it happen. The ability to hire the “right’ people…people who share your values and vision. The courage and trust to let go and delegate. New leadership and communication skills. An understanding of when to change.
Signals of the need to change
While the following chart is general, it should help you understand when to change
So how do you make these changes? How do you know when? What or who helps you see it coming? How do you develop the conviction, courage and support to make them happen?
Don Urbancicz (CEO and Founder of Insurance Vianet and The Insurance Noodle, a rapidly growing $25M web enabled platform for the distribution of small commercial and property casualty insurance.) says “Gather your top 5 or 6 closest business associates and friends; ask them to be brutally honest and hold you to account.”
Mike Slattery (President of Arthur P.O’Hara, a $5M Chicago based office furniture distributor) agrees, “Learn from others. Go outside your business and find others who have grown to the next level. Seek accountability from your peers.”
John Fox (President of Venture Marketing and author of The Marketing Playbook. Venture Marketing is a marketing consulting firm focusing on its client’s top line revenue) recognizes the value of a good management team and the need for someone to hold him accountable. He says “There is no substitute for peer review…someone to hold you accountable.”
Does your organization need to move to the next level? Do you know what happens if you don’t? Do you have a vision for the future? Is it clear? Is it easily articulated? Do you understand what is involved? Do you know your leadership strengths and weaknesses? Do you have the courage to make the move? Do you have the desire to institute change, and a network of friends and peers to challenge you and hold you accountable?
The good news is that we know what makes a business “grow”….it’s predictable and repeatable. The tougher news is that the change required is challenging. As John Fox says “This is hard work”.
If you’d like a copy of these slides drop me a line at andrew dot macgill at peersightonline.com
Andrew
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Small Business Success Requires Investment in People, Not Things
From the PeerSight Resource Center…
If people are the most important asset, then why do small growth companies still forgo hiring key talent? Why do many businesses put up with the deadwood, especially in critical roles?
Ben Carnevale (Former President of Oxford International Ltd.; a high growth Chicago based multinational corporation serving the OEM automotive industry) says “build the team. They solve all the problems.” John Fox (President of Venture Marketing and author of The Marketing Playbook. Venture Marketing is a marketing consulting firm focusing on its client’s top line revenue) says “the biggest barrier to success is thin management not money”. Mike Slattery (President of Arthur P.O’Hara, a $5M Chicago based office furniture distributor) says “you can’t afford to keep the wrong people around too long”
But how do you hire the best when cash is tight and needed to fuel other growth investments? How do you find the right people? How do you motivate talent with limited resources?
We all know that owning a small business isn’t a “black or white” proposition. It is a balancing act of many variables all demanding your time and resources asking you to make choices.
Don Urbancisz is the CEO and Founder of Insurance Vianet and The Insurance Noodle. (The Insurance Noodle is a rapidly growing $25M proprietary web enabled platform for the distribution of small commercial and property casualty insurance). When asked how he attracts and motivates talent without breaking the bank, he says “salary alone will never do it.” His employees are “not driven by salary, but by opportunity and ownership. Insurance Noodle offers a good environment with the strategy that if employees feel good about what their doing, motivation will not be an issue.”
Don says “Find people who share your vision, your passion, and want to succeed. If they want “a job”, let them work somewhere else.” Don also recognizes the need to offer equity in the business. Within 6 months of employment new hires are vested. “They have an ownership attitude that intrinsically motivates them to perform.”
OK, but how do you find the “right” people?
Most small business leaders would agree that hiring the right people involves understanding your company’s culture and values….who fits and who doesn’t.
As Oxford International grew to 2,000 employees, team-building was essential to continue the entrepreneurial culture of the company. In hiring, Ben Carnevale sometimes avoided the brightest students because they didn’t fit with the team based culture. “An egoistic controller may not be the best fit for team-driven management. The team was more often right than wrong.”
So I understand my culture and values, who fits and who doesn’t, but how do I get access to the “best” talent.
Kathleen Dahlberg, (Founder of numerous companies and currently the CEO and Founder of oVention, a technology firm ensuring hard returns on technology) offers three simple keys to hiring: Find people with a good moral compass who are willing to learn, willing to work hard and have a passion for success.
John Fox adds a different dimension. He believes that everyone has talent. Some are just in the wrong slot – “round peg, square hole.” Poorly performing employees are many times the result of qualifying people poorly. To get good people, hire slowly, and put them in an environment that will help them succeed. Mike Slattery agrees; “hire slowly, fire fast”.
Urbanicsz hires only known quantities – people referred to him, or whom he knows professionally. He does not hire “off the street”. Referrals minimize hiring failures. He also goes to firms who are intimate with the industry, who can provide temps, who later become permanent.
So ask yourself these questions…the answers may surprise you and your business may depend on it. What key hires are you avoiding, why, what is the impact? Are you getting the right people? How do you know? Who are the right people? Are you getting the most out of your people? What motivates them? How do you know? What type of people are the best fit for your culture? Can you define your culture?
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We Kicked off a New Board This Week
We kicked off another new board this week. It is always both an exciting time and a tense time. Tense because it is the moment of truth to see whether or not our selection and placement process has worked. It is exciting because no matter how many times we do this I am always amazed at the energy and wisdom that occurs when the “right” group of entrepeneurs get together.
An energy that can not be created in any other forum. An energy that is contagious and is more than a sum of the individual entrepreneurs.
As I have said in earlier posts this does not happen by accident….we know what makes it work….but when it comes together it is exciting to watch. Anyway the group had a good kickoff and while time will tell as to the group’s success it looks like they are off to a good start.
Thats about all for now, but I wanted to share some of PeerSight’s good news with you. When all the theory we talk about becomes reality.
Thanks for listening
Steve
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