Scaling Up Book_compressed.pdf

Additional Praise for Scaling Up “There is no one in the business of the business world like Verne Harnish. “Unlike all too many authors and gurus who are obsessed by statistics, followers of the latest trends, and seekers of celebrity, Verne is firmly centered on the success and well-being of bus...

Additional Praise for Scaling Up “There is no one in the business of the business world like Verne Harnish. “Unlike all too many authors and gurus who are obsessed by statistics, followers of the latest trends, and seekers of celebrity, Verne is firmly centered on the success and well-being of business leaders, who respect, trust, and benefit from the thinking, assistance, and advocacy of this passionate protagonist of our global business community. “Verne is genuinely devoted to the business challenges and ambitions of his vast population of loyalists. A day doesn’t pass without his instant response to requests for help. He has an uncanny ability to connect businesses with reliable resources who can make invaluable contributions to their success. “Now, Verne has published a new book filled with timely insights about the benefits and problems associated with scalability. For everyone who is curious about barriers to growth; concerned about what’s around the corner; or suffering from unrelenting 3 a.m. nightmares about their businesses’ sustainability and that urgent need for an aggressive new growth strategy, this is a ‘got-to-read-right- now’ book from today’s compulsive storyteller of business content, Verne Harnish.” — Robert H. Bloom, strategist and author of The Inside Advantage and The New Experts “Scaling up is every entrepreneur’s dream — and nightmare. Hypergrowth is terrifying, and it’s most often success that kills great companies. This book goes way beyond advice, offering specific habits, processes, and outlines to ensure that growth is the beginning, not the end, of success. Nobody understands the day-to-day reality of hypergrowth like Verne Harnish, and his book is full of the tough love you’d want from an outstanding mentor: fully aware of the challenges but determined to overcome, not duck, them. With great structured thinking and not a word wasted, highly appreciative of the value of time, and immune to sentiment, this book will help anyone determined and smart enough to follow its advice.” — Margaret Heffernan, serial entrepreneur and author of Willful Blindness, Women on Top, and A Bigger Prize “Delivers the practical lessons that most B-schools don’t. If you want to grow your business faster, buy Scaling Up, turn to Chapter 14, and read ‘The Power of One.’ Not next week. Not tomorrow. Now.” — John Mullins, professor of entrepreneurship at London Business School, and author of The Customer-Funded Business, The New Business Road Test, and (with Randy Komisar) Getting to Plan B “Scaling Up is a blueprint for building a growth company. With this book, Verne has pulled back the curtain on how the fastest-growing companies in the world fuel their growth. Scaling Up gives you an insider’s view into the inner workings of the most successful companies on earth. A must-read for an ambitious entrepreneur.” — John Warrillow, founder of The Sellability Score and author of The Automatic Customer: Creating a Subscription Business in Any Industry and Built to Sell: Creating a Business That Can Thrive Without You “I didn’t think it possible to discuss Strategy and Cash in the same book — or People and Execution in the same book, for that matter — but Scaling Up deals with all four topics in a compelling way. Verne Harnish and team have found juicy examples and simple rules that will help any growing business avoid costly mistakes. A great read for entrepreneurs and anyone trying to be a personal engine for growth in any organization.” — Richard A. Moran, CEO of Accretive Solutions and author of Navigating Tweets, Feats, and Deletes  SCALING UP How a Few Companies Make It...and Why the Rest Don’t Verne Harnish and the team at Gazelles  SCALING UP: How a Few Companies Make It…and Why the Rest Don’t Copyright © 2014 by Gazelles LLC. All rights reserved. No part of this book may be used, reproduced, or stored in a retrieval system, or transmitted in any form or by any means — electronic, mechanical, photocopying, recording, or otherwise — without the express written permission of the publisher. Published by Gazelles, Inc. www.gazelles.com First Edition 978-0-98601955-5  THE DEDICATION A city with scaleups, moves up; a country with gazelles excels. To the leaders who scaleup companies — and their families and teams that support them. You are the engines of our economies and the source of our freedom.  THE ACKNOWLEDGEMENTS Thank You! First, we want to thank the thousands of CEOs and executives who have utilized our open-source tools and provided input on how to improve them and their application to scaling up organizations. Your contribution to the community of “gazelles” is greatly appreciated. Business Leaders Several of these leaders and their companies are highlighted throughout the book. Thank you for openly sharing your stories and lessons learned so that we might all benefit, specifically: Rob Banks, Jeff Booth, Gene Browne, Dwight Cooper, Fred Crosetto, John DeHart, Gunjan Doshi, Barrett Ersek, Mark Fullerton, Ben Godsey, Sam Goodner, Vishal Gupta, Roger Hardy, Jack Harrington, Alan Higgins, Nelson Jacobson, Mike Jagger, Kees de Jong, Rick Kay, Clate Mask, Henry McGovern, Lois Melbourne, Sanjeev Mohanty, Simon Morrison, Scott Nash, James Perly, David Rich, Stephen Roche, Alan Rudy, Ken Sim, Naomi Simson, Carey Smith, Jerry South, Adam Sproule, John Stepleton, Scott Tannas, and Graham Weston. Two entrepreneurs went way beyond the call of duty to review the galley copy and provide extensive, critical, and detailed feedback, which resulted in significant changes to the style, approach, format, and design of the book: Kevin Daum, serial entrepreneur, author, and brilliant columnist for Inc. Magazine; and Jimmy Calano, founder of CareerTrack, who gave Verne his start as an author and was one of the early investors in Gazelles. Everything you like about Scaling Up, credit them. Everything you don’t, it’s likely because we ignored their advice! Thought Leaders We’ve always believed it takes a “village of gurus” to help a company scale up, and it’s no different for Gazelles and the content in this book. We would like to especially thank Jim Collins, the late W. Edwards Deming, Pat Lencioni, Tom Peters, Hermann Simon, and Jack Stack. Their pioneering contributions to the world of business have helped millions and shaped many of the ideas you find in this book. In addition, we would like to thank Greg Alexander, David Allen, John Assaraf, Laurie Bassi, Josh Bernoff, Bob Bloom, Travis Bradberry, Greg Brenneman, Mark Burton, Jim Cecil, Ram Charan, Robert Cialdini, Chip Conley, the late Stephen Covey, Stephen M.R. Covey, Aubrey Daniels, Peter Diamandis, Mohamed Fathelbab, Frances Frei, Seth Godin, Marshall Goldsmith, Mark Goulston, Vijay Govindarajan, Adam Grant, Brian Halligan, Brad Hams, Darren Hardy, Chip Heath, Margaret Heffernan, Sally Hogshead, Luke Hohmann, Tony Hsieh, Mark Johnson, Rick Kash, Eric Keiles, Dave Kerpen, Todd Klein, Jim Kouzes, Mike Lieberman, Giovanni Livera, Jim Loehr, David Marquet, Ron McMillan, James McQuivey, Ari Meisel, Youngme Moon, Geoffrey Moore, Richard Moran, Anne Morriss, John Mullins, Alexander Osterwalder, Bob Parsons, Daniel Pink, Joe Pulizzi, Fred Reichheld, Rich Russakoff, Tom Sant, David Meerman Scott, Robin Sharma, Brian Souza, Jim Stengel, Jeff Thull, Bill Treasurer, Lynne Twist, John Warrillow, Pat Williams, and Liz Wiseman — all of whom have contributed to our various Growth Summits around the world and our continuing online course offerings. Marketing and Coaching Partners Critical to spreading the use of our tools around the world are our marketing partners: Patrick Cheo, Southeast Asia; Gautam Ganglani, Middle East; Daniel Marcos, Latin America; Pieter van Osch, Netherlands; Christo Popov, Eastern Europe; Raghu Potini, India; and Eric Schmidt, China. We also want to thank our growing association of coaching partners around the globe, led by Keith Cupp, and his team at Gazelles International, including Jean Carpenter, Maureen Chan-Hefflin, Cindy Kraft, Mary Rarick, and Debbie Trimble. Many of our Gazelles International Certified Coaches (and those completing their certification) read through an advance copy of this book and provided detailed feedback. These partners include Betsy Allen, John Anderson, David Baney, Kenyon Blunt, Andy Buyting, Elizabeth Crook, Rick Crossland, Doug Diamond, Will Ditzler, Glen Dobbie, Michael Duke, Hayley Erner, Ken Estridge, Robert Fish, Jerry Fons, Brad Giles, Mike Goldman, Lluis Gras, Jeremy Han, Lynn Hartrick, Nicolas Hauff (and his son Christopher), Jon Iveson, Hazel Jackson, Christopher Kenny, Avtar Hari Singh Khalsa, Cheryl Beth Kuchler, Matt Kuttler, Neale Lewis, Michael Mirau, Jeff Moore, Bahaa Moukadam, Paul O’Kelly, Craig Overmyer, Jeff Redmon, Ted Sarvata, Terry Schaefer, Nicholas Scott, Howard Shore, Rob Simons, Shannon Susko, and Monte Wyatt. Key Collaborators There were a handful of key collaborators without whom this book would not have become a reality: Patrick Thean, who worked closely with Verne to create the original version of the Growth Tools; Kevin Lawrence, who provided significant help in updating the tools and served as an early sounding board in shaping the “Execution” content; and Greg Crabtree and Alan Miltz (and his team), who contributed much of the “Cash” content, which was sorely missing in the first draft. A special thank-you to Sebastian Ross, peer coach and dear friend, who contributed extensively to the “People” content and met weekly to review and provide important feedback for the entire book. The Council and Team Gazelles’ “council” provided important support, encouragement, and feedback throughout the process of creating the book. This team includes the CEOs of the various Gazelles companies: Keith Cupp, Gazelles International; Daniel Marcos, Gazelles Growth Institute; Steve Sansom, Gazelles Growth Capital; John Ratliff, GazellesPro; Kaihan Krippendorff, Gazelles Strategy; Sebastian Ross, Gazelles People; Jeff Freemyer, Gazelles 360; and Andy Bailey, Align for Gazelles. We would like to especially thank the team at Gazelles HQ, including Joanne Costello, Missy Giltner, Kathleen McKune, and Donna Whitwell. Missy provided overall project management for the book, keeping us on deadline and driving all the extensive details (printing, distribution, warehousing) of getting a book self-published. And thank you to our outsourced technology team, led by Raghu Potini — with direct support from Amruth Mekala, Dayanand Chilveri, Purity Correia, and Praveen Salitra, who created and continually update the scalingup.com and gazelles.com websites and distribute the “weekly insights.” No book gets completed without a direct team of writers, editors, and designers. Thank you to writing partner and editor Elaine Pofeldt, who helped extensively with this book and supports the Fortune magazine and Growth Guy syndicated columns; Wendy Zuckerman, who provided extensive copyediting for this book (any mistakes were because we ignored her advice!); Hank Gilman, former editor and champion at Fortune, who helped with the book title; and Jun-Hi Lutterjohann, who designed the book cover, Growth Tools, and graphics, and typeset the entire book. Family and Friends Thank you to Stephen and Shelly Watkins, Derek and Rachel Benham, Craig and Linda Husted, and Rajeev and Arpita Agarwal for their support (and homes) in providing hideouts for completing the book. And a special thank-you to Catalan friend and partner Cesar Martinell. Last, thank you to Verne’s wife, Julie, and four children, Cameron, Cole, Jade, and Quinn, for their support and patience through the writing of this book. And to his mom, Jan, on whose 80th birthday this book was published. THE TABLE OF CONTENTS THE INTRODUCTION Tools for Scaling Up 1 THE OVERVIEW People, Strategy, Execution, Cash 2 THE BARRIERS Leadership, Infrastructure, and Marketing SCALING UP PEOPLE Introduction 3 THE LEADERS The FACe and PACe of the Company 4 THE TEAM Attracting and Hiring 5 THE MANAGERS (COACHES) Keeping and Growing (Educating) the Team SCALING UP STRATEGY Introduction 6 THE CORE Values, Purpose, and Competencies 7 THE 7 STRATA OF STRATEGY The Framework for Dominating Your Industry 8 THE ONE-PAGE STRATEGIC PLAN The Tool for Strategic Planning SCALING UP EXECUTION Introduction 9 THE PRIORITY Focus, Finish Lines, and Fun 10 THE DATA Powering Prediction 11 THE MEETING RHYTHM The Heartbeat of the Organization SCALING UP CASH Introduction 12 THE CASH Accelerating Cash Flow 13 THE ACCOUNTING Driving Profitability 14 THE POWER OF ONE 7 Key Financial Levers NEXT STEPS 5 Things to Do Now KEY RESOURCES INDEX THE INTRODUCTION Tools for Scaling Up If you want to teach people a new way of thinking, don’t bother trying to teach them. Instead, give them a tool, the use of which will lead to new ways of thinking. — R. Buckminster Fuller Designer, inventor, futurist Infusionsoft, an Arizona-based provider of customer relationship management software, secured $54 million in growth capital from Goldman Sachs in 2013 and used the money to improve its product, invest in better services, and expand its customer base. Infusionsoft grew 53% the year before, with a $50 million run rate, and has plans to grow to $200 million and 100,000 small business customers by the end of 2016. Its #1 priority for 2013 was to increase its score from the Net Promoter System. Infusionsoft is a “gazelle.” “One of my team members took a picture of me while I was signing the deal [with Goldman Sachs],” Clate Mask, CEO of Infusionsoft, told Verne. “At the time, we were at our monthly off-site meeting, working on our 2013 and midrange plans. We were frequently referring to Mastering the Rockefeller Habits that day, and it happens to be in the picture. The Rockefeller Habits and its tools are discussed on a weekly basis among our leadership team. Your work has made a big impact on our company.” It’s been 12 years since Mastering the Rockefeller Habits was first released. Scaling Up (Mastering the Rockefeller Habits 2.0) is the first major revision. Having spent over 30 years helping more than 40,000 business leaders like Mask scale up their ventures, we’ve learned that CEOs and executives of growth firms want ideas and tools they can implement immediately to improve some aspect of their business — and want to enjoy the ride along the way! … So How Is This Book Different From Mastering the Rockefeller Habits? If you’ve not read Mastering the Rockefeller Habits, you can skip that book. If you have read it, here’s what’s new: 1. Scaling Up is organized around the 4 Decisions a leader must address: People, Strategy, Execution, and Cash. This structure provides you with a more comprehensive look into the issues you face in growing a business (75% of it is new material). 2. Our One-Page Strategic Plan has been updated extensively and is supported by a more robust strategic-thinking tool called the 7 Strata of Strategy. This tool will help you craft an industry-dominating strategy. 3. There are six new one-page tools, including a simplified Vision Summary document that will make it easier to communicate the vision of your organization to employees and others. 4. We moved the practical examples, gleaned from more than 50 interviews with CEOs using our tools, from the appendix (no one reads an appendix!) and placed them throughout the main chapters. 5. We share our take on why certain techniques — like the daily huddle — falter. This will save you time (and frustration) in implementing the Rockefeller Habits. What hasn’t changed is the style. Just as we were writing this introduction, Verne received a note from entrepreneur Ray Lambert, who exclaimed: “You have written a book exactly like I like to read. You get TO THE DAD GUM POINT! I love it.” Mastering the Rockefeller Habits has helped tens of thousands of leaders of growing firms. We hope you find Scaling Up to be an even more practical resource. Most Important Routine/Habit Leaders are readers. When Larry Page, CEO of Google was asked how he learned to run a company, he responded “I read a lot.” For instance, he read three books on how to name things. Bill Gates, for decades, maintained his famous “Think Week”, devouring a record 112 books/articles/whitepapers during one session. Mark Cuban, the outspoken owner of the Dallas Mavericks, reads 3 hours per day. His goal is to find just one idea he can use to give him and the over 150 companies in which he’s invested an edge in the marketplace. Mark Zuckerberg’s personal development priority in 2015 was reading a book every two weeks, exceeding by two the number of books (24/year) Topgrading author Brad Smart found separated A-player executives from B and C players. And Charlie Munger, reflecting in 2015 on the 50-year record of investing by his partner Warren Buffett, credited “his (Warren’s) first priority would be reservation of much time for quiet reading and thinking, particularly that which might advance his determined learning, no matter how old he became.” All these great biz leaders know one thing — nothing interesting can come out of your brain that you don’t put in first. Having a natural curiosity and thirst for learning separates the good from the great in our experience. Happy reading! 1 THE OVERVIEW People, Strategy, Execution, Cash EXECUTIVE SUMMARY: A 20-minute overview providing busy executives with a summary of the practical tools and techniques for scaling up a business. Aligned around 4 Decisions every business leader must make — People, Strategy, Execution, and Cash — they also represent the four main sections of this book where more specific how-to information, along with mini-case studies and examples, are detailed. WARNING: This overview contains a lot of lists to keep it concise — you’ll be drinking from a fire hose! But it will prep you for the rest of the book where the ideas will be served up in more bite-sized pieces. You might also want to read the last, three-page-long chapter titled “Next Steps.” Start up, Scale up, Sc@%w up … … or Stall out (fail to scale)! This sequence describes the life cycle of most businesses as they move up the S- shaped curve of growth. The key to scaling this curve: 1. Attracting and keeping the right People; 2. Creating a truly differentiated Strategy; 3. Driving flawless Execution; and 4. Having plenty of Cash to weather the storms. Millions of people start new ventures, and of those that survive, 96% remain “mice.” It’s only a few — the “gazelles” or scaleups — that scale beyond $10 million, $100 million, or $1 billion in revenue, the path that Clate Mask’s Infusionsoft (mentioned in “The Introduction”) is on. This book gives you the tools to scale up 10x. Eventually, many growing firms — gazelles — get sold, some to “elephants” (and a rare few grow up to become elephants themselves), often crushing the innovative culture of what was a thriving, growing company. Completing the cycle, many of these big companies turn bad — often downright evil — and later become extinct or irrelevant at best. (Read Nassim Nicholas Taleb’s breakthrough book Antifragile: Things That Gain From Disorder for ways to inoculate your family, company, and country from this tragic ending.) Because of the sheer number of startups and small businesses, there is a huge market for the myriad number of books supporting these entrepreneurs — the two best being Michael E. Gerber’s The E-Myth Revisited and Eric Ries’ The Lean Startup. The large number of entrepreneurs also forms a significant enough voting bloc to garner attention from politicians. In turn, the sheer size of the Fortune 500 companies provides a huge feeding trough for the thousands of business gurus and the 11,000 new business books they release each year. These large firms employ expensive lobbyists to do their bidding with governments, receiving all kinds of special favors. Largely ignored, by gurus and governments, are the older, high-impact growth firms. Though they generate almost all of the innovation and job growth in economies, there are not enough of them to garner the favorable attention of politicians or book publishers. Verne and his team are focused on helping cities and countries create scaleup eco-systems to support the already robust startup eco-systems that exist. Gazelles: High-Impact Firms In a study for the US Small Business Administration titled “High-Impact Firms: Gazelles Revisited” (http://tiny.cc/high-impact-gazelles), the authors note: “High-impact firms are relatively old, rare and contribute to the majority of overall economic growth. On average, they are 25 years old, they represent between 2 and 3 percent of all firms, and they account for almost all of the private sector employment and revenue growth in the economy.” To underpin this “older” idea, we looked at the trajectory of two well-known gazelles: Apple and Starbucks. Apple, which started in 1976, had only 9,600 employees when it released the iPod in 2001, its 25th anniversary. The rest is history. All the phenomenal growth of Apple in revenue and employment (80,000 in 2013) occurred after this historic milestone, resulting in the largest-market-cap company in the world at the time of this book’s publication. Starbucks followed an almost identical growth path, launching in 1971 and taking the first 20 years to perfect its business model and reach 100 locations. By its 25th anniversary, it was at 1,000 stores and ventured outside the US for the first time. Since then, it has rocketed to more than 18,000 stores in 62 countries and more than 150,000 employees. To paraphrase Steve Jobs, “I’m always amazed how overnight successes take a helluva long time.” If you’ve been in business less than 25 years, you still have time to make it big; if it has been more than 25 years, and you’ve not scaled up, it’s never too late!  Scaling Up “How do we scale up the business?” is a question we’ve heard from countless leaders over the years, prompting the name and focus of this book. “How to survive the process” with your sanity and relationships intact is the second question. Dumbest in the Room Senior leaders know they have succeeded in building an organization that can scale — and is fun to run — when they are the dumbest people in the room! In turn, if they have all the answers (or act like they do), it guarantees organizational silence, exacerbates blindness (the CEO is always the last to know anyway), and means the senior team ends up carrying the entire load of the company on their backs. The best leaders have the right questions, but turn to their employees, customers, advisors, and the crowd to mine the answers. Every business is more valuable to the degree that it does not depend on its top leader. For more on these topics, read Margaret Heffernan’s book Willful Blindness: Why We Ignore the Obvious at Our Peril and Liz Wiseman’s Multipliers: How the Best Leaders Make Everyone Smarter. To scale up a business from a handful of employees to something significant (i.e., build a company that has a chance to both put a “dent in the universe” and dominate its industry), our tools and techniques focus on three deliverables: Reduce by 80% the time it takes the top team to manage the business (operational activities) Refocus the senior team on market-facing activities Realign everyone else (onto the same page) to drive execution and results And when our tools are successfully implemented, organizations attain these four outcomes: At least double the rate of cash flow Triple the industry average profitability Increase the valuation of the firm relative to competitors  Help the stakeholders — employees, customers, and shareholders — enjoy the climb Yet there are three barriers to scaling up, which we’ll discuss in the next chapter: Leadership: the inability to staff/grow enough leaders throughout the organization who have the capabilities to delegate and predict Scalable infrastructure: the lack of systems and structures (physical and organizational) to handle the complexities in communication and decisions that come with growth Marketing: the failure to scaleup an effective marketing function capable of attracting new customers, talent, advisors, and other key relationships to the business Thus, to overcome these barriers your team must master, using our tools, four fundamentals: In leading People, take a page from parenting: Establish a handful of rules, repeat yourself a lot, and act consistently with those rules. This is the role and power of Core Values. If discovered and used effectively, these values guide all the relationship decisions and systems in the company. In setting Strategy, follow the definition from the great business strategist Gary Hamel. You don’t have a real strategy if it doesn’t pass two tests: First, what you’re planning to do really matters to enough customers; and second, it differentiates you from your competition. In driving Execution, implement three key habits: Set a handful of Priorities (the fewer the better); gather quantitative and qualitative Data daily and review weekly to guide decisions; and establish an effective daily, weekly, monthly, quarterly, and annual meeting Rhythm to keep everyone in the loop. Those who pulse faster, grow faster. In managing Cash, don’t run out of it! This means paying as much attention to how every decision affects cash flow as you would to revenue and profitability. With these fundamentals in mind, you’re ready to start climbing. Climbing Everest Scaling up a business is like climbing a mountain. To use a simple analogy, many people dream of summiting Mount Everest (or its equivalent in their life). Those who do it create a plan. Prepared with a set of inviolable rules and a passion for the journey, they head toward the summit. Along the way, they aim for a series of camps: intermediate waypoints normally marking significant changes in terrain. Then it’s a matter of focusing on the next day and, more important, the first and subsequent steps, making adjustments along the way as the mountain conditions dictate. Those who have made such personal journeys report that it’s ultimately about staying acutely aware as you push to take just one more calculated step. It’s the same for an organization. Guided by a set of Core Values and a purpose, it chooses a Big Hairy Audacious Goal (BHAG®)* to achieve in the next 10 to 25 years. To break up the journey, the leadership team sets a series of three-to five-year targets divided up into annual goals. These are further broken down into specific actionable steps the business takes over the next few weeks or months, adjusting tactics as the market conditions dictate. *BHAG is a registered trademark of Jim Collins and Jerry Porras. In the end, it’s about keeping everyone focused on the summit (BHAG®) and then deciding the appropriate next step (quarterly Priority) while respecting the rules that keep you from being swept off the mountain (Values) — keeping in mind Bill Gates’ note that “most people overestimate what they can do in one year and underestimate what they can do in ten years.” Everything in between this quarter and the next 10 to 25 years is a WAG: a wild- ankle guess! There are no straight lines in nature or business. As a winding river must follow the contours of the landscape on its way to the ocean, a business must navigate the undulations of the marketplace on the way to its Everest. The key is keeping your eye on the prize and adjusting course accordingly. And along the journey, there is a set of habits — routines — that will make the climb easier. “Routine sets you free” is a key driving principle behind our methodologies and tools. You may set a goal to lose weight, but unless you change some daily and weekly routines, it will never be accomplished. Goals without routines are wishes; routines without goals are aimless. The most successful business leaders have a clear vision and the disciplines (routines) to make it a reality. “Routine sets you free.” Wasted Debate Nothing is more maddening than hearing teams debate whether a certain idea is applicable in a business-to-business or business-to-consumer engagement. In the end, we’re all in the same business: people to people. None of us sell to companies; we deal with the people (consumers) inside these companies, who have the same motivations, challenges, and emotions as any other person. The other needless delineation is between product and service companies. In the long run, most product companies add on services to increase profitability and most service companies productize their offerings to make them easier to sell. We recommend that you avoid these debates, and consider most of the examples in this book applicable to any organization in any industry.  4D Framework McKinsey has its 7-S Framework for large companies; we have our 4D Framework for growth firms. This framework evolved from the fundamentals, barriers, and goals described earlier and was based on this quote attributed to Albert Einstein: “Everything should be made as simple as possible, but not simpler.” Scaling a business is a complex endeavor and requires robust — yet simple enough — tools and techniques to get the job done. The framework includes these elements (see diagram on Page 8): 1. Driver: Leaders drive implementation of the Rockefeller Habits with their teams. Execution is much easier if they and their teams engage in coaching, embrace learning, and encourage the use of new technologies to accelerate implementation of our tools. 2. Demands: Leaders have to balance two often competing demands on the  business — People and Process. This requires simultaneously maintaining a great reputation with the employees, customers, and shareholders (the People side of the business); and improving the productivity of how the firm makes/buys, sells, and tracks these transactions (the Process side of the business). 3. Disciplines: To effectively execute, there are three fundamental disciplines (routines): Set Priorities; gather quantitative and qualitative Data; and establish an effective meeting Rhythm. It’s in these meetings, debating the data (the brutal facts!), where the priorities emerge. 4. Decisions: Ultimately, all of the above require some decisions. To scale the business requires getting four key decision sets — People, Strategy, Execution, and Cash — absolutely right, and there are right and wrong answers. Shortchange any one element and you’re not maximizing your opportunity. WARNING: Since Mastering the Rockefeller Habits was written, many bits and pieces of our 4D Framework and tools have been copied by others. In the process, several have over-simplified our work to the point that it might still be helpful — setting a few priorities and key performance indicators (KPIs) is better than nothing — but there is huge potential left on the table in terms of revenue and profit. “Simple, not simpler” is our aim, as Einstein warned. In turn, we know that it takes a “village of gurus” to help a company and that no one person has all the answers. Therefore, we’ll be referencing many important books and ideas that fill in important gaps around leadership, sales, marketing, hiring, etc. Right Questions Our last guiding principle in designing the 4D Framework: We have the answers, all the answers; it’s the question we do not know. Most of the teams we work with are wicked smart. With enough perseverance and grit they’ll find answers. Our concern is they might be working on the wrong question. Much of our work is helping leadership teams formulate the right questions. Once they get the questions right, the answers tend to appear. “We have the answers, all the answers; it’s the question we do not know.” Each of the 4 Decisions — People, Strategy, Execution, and Cash — is anchored by an overarching Key Question. And the accompanying Growth Tools (our label for the collection of one-page worksheets summarized next) are designed to focus teams on specific questions driving growth and performance for each of the 4 Decisions areas of the business. So, to start implementing the 4D Framework, the first question is, “Which of the 4 Decisions — People, Strategy, Execution, and Cash — needs the most attention next?” Start there! We have a complimentary individual 4 Decisions Assessment available at scalingup.com to help you determine your starting point. Our methodology and tools are like crossword or Sudoku puzzles. Start where you can and work your way through. There is no specific sequence. However, we do have five initial “next steps” outlined in the last chapter. The following overview of each decision will further help you choose where to start in scaling up the business. People KEY QUESTION: Are the stakeholders (employees, customers, shareholders) happy and engaged in the business; and would you “rehire” all of them? Do you have the “right people doing the right things right” inside the organization? “Right people doing the right things right.” Then you need to evaluate all the key relationships surrounding the business. Would you keep all your existing customers? Are you happy with your investors/bank? Are your vendors supporting you properly? Are your advisors — accountants, lawyers, consultants, and coaches — the best for the size of the organization and future plans? The toughest decisions to make are when the company has outgrown some of these relationships and you need to make changes. It starts with your own relationship goals and priorities, then being clear who are the leaders accountable for the main functions and processes that drive the business. The tools (three-quarter-size copies are included in the introduction to the “People” section): One-Page Personal Plan (OPPP): Our personal and professional lives are intertwined — and best if aligned. This tool looks at four key decisions — Relationships, Achievements, Rituals, and Wealth — which mirror the four key decisions for the business: People, Strategy, Execution, and Cash. Having a strong and fulfilled personal life provides an important foundation for sustaining your efforts in the business. Function Accountability Chart (FACe): Jim Collins, author of Good to Great: Why Some Companies Make the Leap... And Others Don’t, emphasizes the importance of getting the right butts in the right seats at the top of the organization. After all, the bottleneck is always at the top of the bottle! The FACe tool provides a list of seats (functions) that all organizations must fill. “The bottleneck is always at the top of the bottle!” You want to delegate these functions to people who fit your culture and pass two tests: 1. They don’t need to be managed. 2. They regularly wow the team with their insights and output. Next designate one or two key performance indicators (KPIs) for each function, defining objectively what activities each senior leader needs to be focused on day-to-day. Last, decide on a handful of results/outcomes accountable to each function (i.e., who is accountable for revenue, gross margin, profit, cash, etc.). These outcomes normally represent line items on the financial statements. When completed, this one-page accountability tool helps you diagnose where you have people and performance gaps on the leadership team. Process Accountability Chart (PACe): Most work flows horizontally across the various functions. Functions are not isolated cells. When these functions aren’t working well together, the firm can stall. This chart provides a place to delineate the four to nine processes that drive the business (i.e., the processes for developing and launching a new product; for attracting, hiring, and onboarding new employees; for billing and collecting, etc.). Next, designate who is accountable for each process, which can be tricky since these processes cut across various functions and there might be some ego/control issues between the functional heads. Last, decide on two or three KPIs that track the health of the process — the most important being the length of time, from start to finish, for a specific process. We’ll discuss how a variety of organizations are utilizing the principles of Lean, a management practice invented by Toyota, to streamline and speed up their processes. “The Team” and “The Managers” chapters: There’s a continual war for talent. We’ll share guerilla marketing techniques for attracting a large number of qualified candidates and review the Topgrading methodology for interviewing and selection. In retaining employees and keeping them engaged, we’ll cover the five activities of great (vs. good) managers (we prefer the term “coaches” — more on this later): Help people play to their strengths. Don’t demotivate; dehassle. Set clear expectations and give employees a clear line of sight. Give recognition and show appreciation. Hire fewer people, but pay them more (frontline employees, not top leaders!). Strategy KEY QUESTION: Can you state your firm’s strategy simply — and is it driving sustainable growth in revenue and gross margins? It’s time to break apart a 50-year-old business term — strategic planning — and think about it in terms of two distinct activities: strategic thinking and execution planning. Each requires two very different teams and processes. Strategic thinking requires a handful of senior leaders meeting weekly (it’s not sufficient to do strategy work once a quarter or once a year) in what Jim Collins calls “the council.” It’s a meeting separate from the standard executive team meeting. Rather than getting mired in operational issues, the strategic thinking team is focused on discussing a few big strategic issues including those outlined in the SWT and 7 Strata tools summarized below. Execution planning, in turn, requires a much larger team engaged in implementing the broader strategy. Setting specific annual and quarterly priorities, outcomes, and KPIs is best if middle management and frontline employees are involved. They are closer to the day-to-day operational issues of the company, and their participation in setting the plan creates better buy-in. Add in both disciplined action and active learning activities and you have a simple Think, Plan, Act, Learn cycle of strategic planning. The tools (three-quarter-size copies are included in the introduction to the “Strategy” section): Vision Summary: For companies just getting started implementing the Rockefeller Habits as well as firms with 50 employees or fewer, the Vision Summary provides a simplified One-Page Strategic Plan (OPSP) framework. And for larger firms taking advantage of the more detailed aspects of the OPSP, the Vision Summary provides a one-page format to communicate key aspects of the company’s vision to employees, customers, investors, and the broader community. SWT: We’ve augmented the standard SWOT (strengths, weaknesses, opportunities, and threats) process with a tool called the SWT (strengths, weaknesses, and trends). Whereas the SWOT process drives leaders to look inward at both their company and industry challenges, the SWT focuses on exploring broader external trends beyond their own industry or geography. It’s a powerful tool to spot opportunities before the competition and prevent “inside/industry myopia.” The 7 Strata of Strategy: This tool represents the seven components (stratum) of a robust, yet simply stated, strategy. It’s designed to provide the kind of differentiation and barriers that allow you to dominate your niche in the marketplace. The seven components: 1. What word(s) do you own in the minds of your targeted customers (e.g., Google owns “search”)? 2. Who are your core customers, what three Brand Promises are you making them (e.g., Southwest Airlines promises Low Fares, Lots of Flights, Lots of Fun), and how do you know you’re keeping these promises (Kept Promise Indicators, a play on KPIs)? 3. What is your Brand Promise Guarantee (e.g., Oracle has been advertising the chance to win $10 million if its Exadata servers don’t outperform the competition by a factor of five)? 4. What is your One-PHRASE Strategy that likely upsets customers (Apple’s “closed system”) but is key to making a ton of money and blocking your competition? 5. What are the three to five Activities that fit Harvard strategist Michael Porter’s definition of the essence of differentiation (e.g., IKEA’s furniture needs assembly)?  6. What is your X-Factor — a 10 times to 100 times underlying advantage over the competition — that completely wipes out any and all rivals? 7. What are your Profit per X (economic driver) and BHAG® for the company? These come straight from Jim Collins. One-Page Strategic Plan (OPSP): If you want everyone on the same page, then you need this page first. The OPSP is our best-known and most widely used tool. It’s designed to drive alignment, accountability, and focus. “If you want everyone on the same page, then you need this page first.” The body of the plan consists of seven columns organized around seven basic questions you need to answer if you want to accomplish anything: Who, What, When, Where, How, Why, plus Should/Shouldn’t. We’ve aligned these with standard strategic planning language like Core Values, Purpose, Annual Priorities, etc. — but anchor the plan in these simpler questions. The first three columns of the OPSP represent the strategic thinking part of the plan supported by the work done on the 7 Strata; the last four columns represent the execution planning part of the plan. The OPSP has space along the bottom to summarize your SWT and along the top to list the key metrics monitoring your reputation (People) and productivity (Process). Execution KEY QUESTION: Are all processes running without drama and driving industry-leading profitability? You know you have execution issues if three things exist: 1. There is needless drama in the organization (e.g., something shipped out late; the invoice was wrong; someone missed a meeting; etc.). 2. Everyone seems to be working more hours, spinning his wheels, or spending too much time fixing things that should have been done right the first time. 3. Most important, the company is generating less than three times industry average profitability. “Is the company generating three times industry average profitability?” WARNING: Companies can get by with sloppy execution if they have a killer strategy or highly dedicated people willing to work 18-hour days, eight days per week to cover up all the slop. Just recognize you’re wasting a lot of profitability and time (i.e., you’ll burn both cash and people in the process!) The tools (three-quarter-size copies are included in the introduction to the “Execution” section): Who, What, When (WWW): Improve the impact of your weekly meetings by taking a few minutes at the end and summarizing Who said they are going to do What, When. This isn’t about micromanagement; this is about excellent management and being clear in both communication and accountability. The key is setting a “when” that is no longer than the time between weekly (or monthly) meetings. And if you have a more substantial initiative, the key is breaking it into pieces (eat the elephant one bite at a time) that can be accomplished within a few weeks. Rockefeller Habits Checklist™: There are 10 fundamental habits that support the successful execution of your strategy — habits that haven’t changed for 100 years since John D. Rockefeller implemented them, becoming the wealthiest person ever and building what has morphed into one of the largest companies today: ExxonMobil. These habits dramatically increase profitability and reduce the time it takes to manage the business. And like the checklists that are critical to the airline industry in making sure planes stay in the air, consider these 10 habits as a “preflight” checklist for keeping your company growing and ensuring that it doesn’t stall out. WARNING: You’ll drive everyone in the organization crazy if you implement all of these habits at one time. The key is focusing on one or two each quarter, giving everyone roughly 24 to 36 months to install these simple, yet powerful, routines. Then it’s a process of continually refreshing them as the company scales up. The habits (“Routines that set you free!”): 1. The executive team is healthy and aligned. Here we pull a page from Patrick M. Lencioni’s The Five Dysfunctions of a Team: A Leadership Fable, a book we recommend that all leaders peruse (it’s a quick read). In essence, your executive team needs to have a level of trust that permits true debate and constructive conflict to occur. What prevents this in large companies is politics; what blocks it in growth firms is friendship. Members of the team must embrace its diversity (the more the better) and be willing to challenge each other in making decisions and exposing the brutal facts. 2. Everyone is aligned with the #1 thing that needs to be accomplished this quarter to move the company forward. As mentioned earlier, scaling a firm is about taking one significant step at a time and then checking data and adjusting accordingly. It is about setting a quarterly goal, providing the company with a badly needed finish line every 90 days, vs. just running and running and running. It also affords everyone an opportunity to celebrate or commiserate — and have some fun along the way. This is the power of setting a Quarterly Theme, which we’ll discuss in depth later. 3. Communication rhythm is established and information moves through the organization accurately and quickly. The #1 challenge when two or more people are working together is communication (anyone married?). The key is an effective daily, weekly, monthly, quarterly, and annual Meeting Rhythm, which, when executed properly, actually saves everyone a tremendous amount of time. It’s counterintuitive, we know. Specific agendas for each meeting will be detailed in the “Execution” section. 4. Every facet of the organization has a person assigned with accountability for ensuring goals are met. If communication is the #1 challenge, then nailing down accountabilities as the company scales is #2. This needs to be clear both vertically (across functions) and horizontally (across processes)  throughout the organization. And it really gets messy when the organization moves to discrete business units. 5. Ongoing employee input is collected to identify obstacles and opportunities. A key component of the weekly qualitative data you need to guide the business must come from your employees, especially your sales channels and your frontline employees. They are closer to the action. We recommend that each senior leader formally talk to one employee each week and ask, “What should the company Start/Stop/Keep doing?” Pay particular attention to the “stops.” These are the roadblocks you need to eliminate from the company to keep people motivated. 6. Reporting and analysis of customer feedback data is as frequent and accurate as financial data. The second key component of the weekly qualitative data that you need to guide the business must come from customers. We suggest that each senior leader formally ask customers questions that are more about gathering market intel, especially about competitors, than discerning whether they like your particular product or service. 7. Core Values and Purpose are “alive” in the organization. These are the handful of rules (Core Values) that you’ll use to guide all the HR systems in the company: hiring, feedback, rewards and recognition, handbook, etc. And the Purpose (a better word than “mission”) provides the critical “why” behind everything you do (i.e., what difference is your company making in the world?). 8. Employees can articulate the following key components of the company’s strategy accurately. You want all employees to align their actions with the strategy of the company. To do this, they need to know and understand the company’s 10-to 25-year goal (BHAG®); who the core customers are; the three Brand Promises everyone needs to keep; and what the company does — and be able to explain it when asked (the elevator pitch). 9. All employees can answer quantitatively whether they had a good day or week (Column 7 of the OPSP). Is each employee or team clear on their priorities and KPIs for the week? And do they know how they did that week? People love to know the score; thus the attraction of video games, sports, fundraisers, competitions, etc. 10. The company’s plans and performance are visible to everyone. We’re not big on sports analogies, but we strongly suggest stealing one idea from that  industry: having huge scoreboards visible to everyone. We’ll share examples and photos of growth firms that do. Cash KEY QUESTION: Do you have consistent sources of cash, ideally generated internally, to fuel the growth of your business? Growth sucks cash. This is the first law of entrepreneurial gravity. And nothing ages a CEO and his or her team faster than being short of cash. In fact, Jim Collins and Morten T. Hansen, in their best-selling book Great by Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All, found that successful companies held three to 10 times more cash assets than average for their industries, and they did so from the time they started. (We highly recommend that you read this book, Collins’ first that directly addresses growth firms.) “Growth sucks cash — the first law of entrepreneurial gravity.” Yet many growth company leaders pay more attention to revenue and profit than they do to cash when it comes to structuring deals with suppliers, customers, employees (think bonus plans), or investors/banks. And when they receive their monthly financial statements, the cash flow statement is either nonexistent or ignored. The quickest action you can take is to have your CFO give you a modified cash flow statement every day detailing the cash that came in during the last 24 hours, the cash that flowed out, and some idea of how cash is looking over the next 30 to 90 days. This will keep cash top-of-mind and give you a great feel for how cash is flowing through the business. It’s also critical to know your Cash Conversion Cycle (CCC). It’s a technical term for how long it takes, after you spend a dollar/euro/yen on rent, utilities, payroll, inventory, marketing, etc., for it to make its way through your business model and back into your pocket. So that you can see how to calculate this, we recommend that you read a classic Harvard Business Review article titled “How Fast Can Your Company Afford to Grow?” by Neil C. Churchill and John W. Mullins. The tools (three-quarter-size copies are included in the introduction to the “Cash” section): The Power of One: The 7 main financial levers available to managers to improve cash and returns in the business are: 1. Price: You can increase the price of your goods and services. 2. Volume: You can sell more units at the same price. 3. Cost of goods sold/direct costs: You can reduce the price you pay for your raw materials and direct labor. 4. Operating expenses: You can reduce your operating costs. 5. Accounts receivable: You can collect from your debtors faster. 6. Inventory/WIP (work in progress): You can reduce the amount of stock you have on hand. 7. Accounts payable: You can slow down the payment of creditors. The tool calculates the benefit to cash if a 1% or one-day change is made to each of these levers. Cash Acceleration Strategies (CASh) — Break down the CCC into four components, and brainstorm one of three ways to increase the cash flow in the business. We’ve had many clients double their operating cash flow immediately after working through this tool. It’s also a great exercise to do with middle managers, to strengthen their understanding of how cash flows through the organization and to illustrate how everyone can make a positive contribution to improving the CCC. The goal is to reverse the first law of entrepreneurial gravity and develop a viable business model in which the faster you grow, the more cash you generate — through larger deposits, faster collections, shorter sales and delivery cycles, etc. Then you’ve built a company that can self-fund its own growth.  Final Recommendations Downloadable documents of the various tools, in multiple languages, are available at scalingup.com at no charge. Feel free to modify them and to suggest changes. They remain an open-source set of tools, and they are constantly being improved by the community of growth company executives using them. Weekly Insights: Sign Up! If you like the style and substance of the book, you can receive a very concise weekly email of best practices for managing a growing firm: ideas we pick up each week from executives like you. Simply send an email to [email protected] and put “weekly insights” in the subject line. And please include a first and last name and your title, and tell us where your company is based. We’ll add you to our expanding list of more than 60,000 leaders of growing companies. Technology and Coaching Support We’ve created several cloud-based tools to make implementation of the Rockefeller Habits 2.0 much easier and faster. The first is an online version of Verne’s 2.5-day Scaling Up course providing a convenient way to educate your team and create a common language around our tools and techniques. Visit www.growthinstitute.com. We’ve also created Alignwithgazelles.com, an online and mobile-based app that hosts our one-page tools and helps you track all your cascading KPIs and Priorities in one easy location. Visit www.alignwithgazelles.com for more information and to start your trial today. We also have certified coaching partners around the globe that can support you locally in implementing the Rockefeller Habits 2.0. No one has ever achieved peak performance without a coach. Visit www.gicoaches.com to locate a coach near you. Relax With the Process None of this is complicated (except strategy): It just requires some discipline and perseverance. Treat our tools as you would Sudoku or crossword puzzles. Fill in what you know as you go. Again, it’s not necessary to work through the tools in any kind of sequence. Start where it makes the most sense for your organization. “Get it down; then get it right” is one of our mottos. The key is lots of iterations: reviewing and updating our Growth Tools every quarter. Routine will set you free. “Get it down; then get it right.” The rest of this book provides the practical how-to details behind our recommended processes and tools. Enjoy, and best of luck as you scale your business — and let us know how we can help. 2 THE BARRIERS Leadership, Infrastructure, and Marketing EXECUTIVE SUMMARY: There are predictable evolutions and revolutions as an organization grows. These are dictated by the increasing complexity that comes with adding employees, customers, product lines, locations, etc. Handling a company’s growth successfully requires three things: an increasing number of capable leaders; a scalable infrastructure; and an effective marketing function. If these factors are missing, you will face barriers to growth. Scaling up successfully requires leaders who possess aptitudes for prediction, delegation, and repetition. I’m tired of sailing my little boat Far inside of the harbor bar; I want to be out where the big ships float — Out on the deep where the Great Ones are! … And should my frail craft prove too slight For storms that sweep those wide seas o’er, Better go down in the stirring fight Than drowse to death by the sheltered shore! — Daisy Rinehart Back in 1999, Alan Rudy was a disillusioned CEO. “Wasn’t I supposed to be making more money and having more fun, the bigger the company got?” wondered the founder of Express-Med, a mail-order medical supplies firm based in Ohio. “I was angry all of the time,” remembers Rudy. “I had a long weekend planned to go skiing with my father and two brothers for the first time in 10 years, yet I bagged out at the last minute because the business needed me to hold things together.” To make matters worse, on March 30 of that year, Rudy’s CFO showed him financials that estimated a first-quarter profit of $300,000, yet two days later, his CFO said that they had actually lost $350,000. “For several hours, I thought it was an elaborate April Fools’ joke,” he chuckles today. “I kept trying to be a good sport about it, yet it turned out to be true.” Turmoil among his staffers capped it off. Associates had fistfights in the parking lot, and one employee slashed the tires of another because of something said at work. The endless firefighting meant Rudy was putting in 80-hour workweeks. Needless to say, “stress was a little high,” says Rudy. Yet within two years, Rudy had reversed the trends, addressing the barriers we’ll outline in this chapter. Utilizing the tools and techniques you’ll learn in this book, he scaled up his 7-year-old firm into a $65 million industry leader. More important, he says, “It was fun again, and we were making money.” Rudy went on to sell the company for $40 million, completing his own entrepreneurial life cycle: start, scale, sell. Drawing on the lessons he learned in scaling up Express-Med, Rudy launched an investment firm to unlock the growth and profitability of additional companies. Incubating multiple firms amplified the importance of getting the right people into leadership positions. Because Rudy is a driven leader who “can take over a huddle and tell everyone what to do,” he had to make himself “push accountability down,” so everyone at each company had a stake in helping the business to excel. Besides mastering these leadership and delegation challenges, Rudy learned a crucial lesson from the marketplace: You have to get your strategy right. This is what he calls finding the “ping” in the business. (Imagine the sound of flicking a plastic cup, representing a weak strategy, vs. flicking a fine crystal goblet, indicative of a clear one.) Great execution won’t get you anywhere if your strategy is wrong. Understanding this has paid off handsomely for Rudy at several of his investments, including Perceptionist. Perceptionist’s “Ping” Perceptionist started out as a call center, answering the phones for companies in 60 to 70 different industries. To uncover the Ohio-based firm’s growth potential, Rudy spent three months on the road visiting customers. (CEO Lou Gerstner had the senior managers at IBM do something similar in an initiative code-named “Operation Bear Hug.”) One of Perceptionist’s clients began grousing about paying monthly rates equivalent to about $1 per minute to have calls answered, especially for misdials. Moreover, the customer waxed indignant about the problems of playing phone tag with clients who just wanted to make an appointment. In his frustration, the customer exclaimed to Rudy, “Forget the buck per minute; I’d pay you $25 to take over my calendar and book appointments!” A light bulb went on. Rudy sold off accounts that needed only answering services (including ours at Gazelles!) and shifted the company’s direction to booking appointments for its clients. While everyone else in the industry was focused on achieving a certain profit per minute, Rudy focused on attaining a targeted profit per booked appointment. This turned around a situation in which Perceptionist had been struggling to compete with overseas rivals with rates equivalent to 50 cents a minute. Focusing on this new metric and a handful of targeted industries — core customers — that needed appointments booked (plumbing, HVAC, and maid service firms) helped the company bring in revenue averaging $5 a minute. This was more than four times the industry average. In addition, complexity decreased. “Training costs went way down, since our new reps went from needing to learn the language of 60 different industries to [mastering] just a few,” says Rudy. “In the past, we often could not take on a new customer because we did not have trained personnel,” a huge People problem in scaling the business. Rudy eventually sold his stake in the company back to the original owner, and he says it is now doing well. Meanwhile, he tripled the value of his investment in the firm. Grow Where You’re Planted Rudy has achieved some of his greatest successes with firms when following the old adage, “Grow where you’re planted.” In other words, stick to the businesses and markets you know best. For Rudy, this approach shortens the learning curve of entering a new industry, allowing him to better leverage the contacts and knowledge he already has to address the People, Strategy, Execution, and Cash aspects of each new business. (For more on this key point from the founders of Pizza Hut, Boston Chicken, Celestial Seasonings, and California Closets, read this Fortune article by Verne: http://tiny.cc/worth-repeating.) In Rudy’s case, growing where he was planted meant focusing on the medical supplies and pharmaceutical industries. In 2003, when he bought a minority stake in MemberHealth, a pharmacy benefits management company that helps seniors get discounts on prescription drugs, it was bringing in $7 million in revenue. Rudy helped the 18-person team implement the Rockefeller Habits, coaching MemberHealth’s founder Chuck Hallberg. At Rudy’s suggestion, the company dived into the first habit, holding a daily huddle at 7:30 a.m. to keep everyone focused on execution. Eventually, Rudy took on the role of chairman, while Hallberg remained CEO. The company rocketed to $1.2 billion in revenue by 2006, when the duo sold it to Universal American Financial, a Nasdaq-traded company, for $630 million. It is now a division of CVS — a really big ship. And Rudy is at it again. In March 2013, he formed Sleep Health Supplies, which took over a failing firm. He’s CEO and majority shareholder of the business, now known as Good Night Medical. Using disciplines like the daily huddle to stay focused on key metrics, his team has achieved double the orders per year and has kept patients for twice as long as most competitors. Building strong, recurring relationships with customers has enabled Rudy to negotiate a cost of goods from manufacturers that is about 30% lower than his rivals’. All told, he estimates that the value of the firm’s customers gives Good Night Medical about a 10x competitive advantage over other players in the field. As a serial entrepreneur and investor, Rudy has experienced firsthand the importance of getting the right People in place and learning how to delegate; the power of a focused Strategy to reduce complexity and drive industry-leading performance; and the importance of bringing disciplined Execution to all these ventures through habits like the daily huddle. (He’s a big fan, if you haven’t already guessed.) And he’s both invested and made significant Cash — while continuing to learn what is required to make the ride enjoyable along the way. The Growth Paradox — an Anchor, or Wind at Your Back Like Rudy, who continues to go out beyond the harbor bar, you will find that leading a growth company is one of the more exhilarating things you can do in the world. And eventually sailing among the “big ships” can be an incredibly fulfilling and rewarding opportunity. Jack Harrington’s Big Boat Experience Raytheon acquired Virtual Technology Corporation (VTC) in 2006, and within 30 days, Jack Harrington, VTC’s co-founder and CEO, was asked to run a $750 million, 2,000-person Raytheon division specializing in command, control, communications, computers, and intelligence (or C4I, in defense industry terms). Admittedly, this was a daunting move for the growth-oriented CEO, who was used to running the much smaller $30 million company. “I immediately called Verne and said, ‘Holy cow, Batman, I’ve got a $750 million business,’” he recalls. “He told me that I had all the skills and talent I needed and that I could do it. And in my heart, I wanted to see if I could take what I learned in growing a fast, entrepreneurial company and apply it to a larger business. I immediately brought in the Rockefeller Habits, starting with the morning huddles, and then quarterly strategic planning meetings using the One-Page Strategic Plan. It was really incredible to increase our alignment, strategic thinking, and debate.” Harrington was next asked to lead an even larger organization, ThalesRaytheonSystems, a joint venture equally owned by Raytheon Company and France-based Thales S.A. He notes that the same habits and meeting rhythms were responsible for creating a more collaborative culture across the French and American operations. Plus, the organization became much more aligned around the strategic vision of the company. What was once a divide-and-conquer approach to managing the business changed dramatically. “Everyone is building trust and relationships,” he says. “It’s tremendous, because you’re not just getting together to discuss operations. You’re discussing strategy and debating the market, and that really brings out incredible insight and power.” Yet for many business leaders, scaling the business is a nightmare. Does every employee you hire, every customer you acquire, and every expansion you drive actually make you tired? Are you working longer hours, although you’d thought there should be some economies of scale as the business grew? Does it feel like everyone is just piling onto an increasingly heavier anchor that you alone are dragging through the sand? This isn’t what you signed up for. It’s supposed to get easier as you scale, so what happened? You’re experiencing the growth paradox: the belief that as you scale the company — and increase your dream team, prospects, and resources — things should get easier, but they don’t. Things actually get harder and more complicated. Yet Harrington’s experience in scaling VTC to $30 million and leading a growing 2,000-person division at Raytheon demonstrates that the techniques you’re learning in this book do scale — and that they are as applicable to some of the largest companies around the globe as they are to growth firms. So why do only a fraction of companies actually scale up, while others fail to scale? How do you counter the growth paradox? What did Harrington have to master at VTC that was transferable to his Raytheon experience? In short, he had to conquer complexity (and so do you!). Complexity Think back to when your company was just the founder and an assistant with a plan on the back of a napkin. This startup situation represents two channels of communication (degrees of complexity), and anyone in a relationship knows that is hard enough. Add a third person (or customer or location or product), and the degree of complexity triples from two to six. Add a fourth, and it quadruples to 24. Expanding from three to four people grows the team only 33%, yet complexity may increase 400%. And the complexity just keeps growing exponentially. It’s why many business owners often long for the day when the company was just them and an assistant selling a single service. This complexity generates three fundamental barriers to scaling up a venture: Leadership: the inability to staff/grow enough leaders throughout the organization who have the capabilities to delegate and predict Scalable infrastructure: the lack of systems and structures (physical and organizational) to handle the complexities in communication and decisions that come with growth Marketing: the failure to scaleup an effective marketing function to both attract new relationships (customers, talent, etc.) to the business and address the increased competitive pressures (and eroded margins) as you scale When you remove these barriers, then that anchor you’ve been dragging turns into wind at your back. You can get your boat sailing ever faster. You can better navigate through the “Valleys of Death” — those points in the company’s growth where you’re bigger, but not quite big enough to have the next level of talent and systems needed to scale the venture. These are points where the business needs to leap from one whitecap to the next or risk falling into an abyss (see figure). There are roughly 28 million firms in the US, of which only 4% ever reach more than $1 million in revenue. Of those firms, only about one out of 10, or 0.4% of all companies, ever make it to $10 million in revenue, and only 17,000 companies surpass $50 million. Finishing out the list, the top 2,500 firms in the US are larger than $500 million, and the top 500 public and private firms exceed $5 billion. Data indicate that there are similar ratios in other countries. What defines the hills and valleys is related more to the number of employees than to revenue, since this is what drives the complexity equation mentioned above. If you figure roughly $100,000 revenue/employee for small firms and $250,000 revenue/employee for larger firms (yes, larger firms are more efficient on average); and you figure that one can lead seven to 10 others, you get some natural clusters: One to three employees (the majority of home-based businesses) Eight to 12 employees (a very efficient company with a leader and a bunch of helpers) 40 to 70 employees (a senior team of five to seven people, leading teams of seven to 10 — in a company where you still know everyone’s name)  350 to 500 employees (seven leaders, with seven middle managers each, running teams of seven to 10 — actually a very efficient company) 2,500 to 3,500 employees (more multiples of seven to 10) Any company with an employee count between these natural clusters is likely feeling a bit stuck. Everything seems to take longer to complete. Problems you thought you had solved earlier start creeping up again. And you’re feeling this “big, but not big enough” syndrome — even in making minor decisions like what size photocopy machine you need next. As an organization follows this growth path, it goes through a predictable series of evolutions and revolutions. For more on these natural cycles, read professor Larry E. Greiner’s classic Harvard Business Review article titled “Evolution and Revolution as Organizations Grow,” from July-August 1972 (updated in May 1998). Scott Tannas and His Valleys of Death In 2011, Western Financial Group (WFG) — an Alberta-based financial services company with more than 2,000 employees — was acquired by Quebec-based Desjardins Group in a $440 million transaction. In the 15 years between WFG’s IPO in 1996 and its return to being privately owned, the company’s stock price rose 1,038%. Founder and Vice Chairman Scott Tannas remains committed to growing the company, and regularly shares with other entrepreneurs his insights on how to handle growth. “Verne talks about the Valleys of Death in how companies grow, and for those of us who have grown a big business, it’s true,” he says. Drawing from his own experience scaling WFG during 20 years as CEO, Tannas shares that when a company grows from two to 10 employees, it arrives at a “Valley of Death” because processes have to change. You’ll need to hire an assistant manager. “You can’t run the business all by yourself, so you need to change the way you run it, and some guys can’t get over it,” says Tannas. After 25 employees, you face another set of challenges. For example, you need to hire someone to control money. At around 100 employees, “you need internal communications processes because you can’t have a single staff meeting anymore,” Tannas says. Company politics also come into play. “You have employees who think they know more than others,” he notes. “All these different challenges come at different stages of  growth that require you to change things. If you don’t, then you will either fall backward or you’re doomed to stay a company of that size.” Hoping to tap into some of his business experience to grow the economy of his own country, Tannas became a senator in the Parliament of Canada in 2013. The three barriers to leadership, infrastructure, and marketing that can prevent firms from dealing with complexity are obstacles that Rudy, Harrington, and Tannas negotiated when growing their companies. Let’s examine each barrier in more detail. Leadership: Prediction, Delegation, and Repetition As goes the leadership team, so goes the rest of the company. Whatever challenges exist within the organization can be traced to the cohesion of the executive team and its capabilities in prediction, delegation, and repetition. Prediction Leaders don’t have to be years ahead, just minutes ahead of the market, the competition, and those they lead. The key is frequent interaction with customers, competitors, and employees. This is much easier when the company is small and the leadership team (or lonely entrepreneur) is personally handling all the sales, programming the software, and delivering the company’s products and services directly. This becomes increasingly more difficult as the business scales up. Senior leaders become further isolated from customers and frontline employees, losing their gut feel for the business and the marketplace. This is why Rudy spent three months on the road visiting Perceptionist’s customers, discovering a new business model that tripled the value of his investment. In “The Data” chapter, we’ll delineate specific routines, along with tips on harnessing the power of big data, to help leaders improve their ability to “see around corners” in the marketplace. Ultimately, our tools and techniques will free the senior team so they can spend 80% of the week engaged in market- facing activities. Delegation Letting go and trusting others to do things well is one of the more challenging aspects of being a leader of a growing organization. Most entrepreneurs prefer to operate alone. This is why most companies have just a handful of employees. We often exclaim (tongue in cheek) that many business owners would love their companies even more if they didn’t have to deal with employees or customers! It’s the idea — the dream — of their business that they love the most. To get to 10 employees, founders must delegate activities in which they are weak. To get to 50 employees, they have to delegate functions in which they are strong! In many cases, the strength of the top leader becomes the weakness of the organization. For example, if the founder is the CEO and the main sales driver, either everyone ignores the big picture or revenue stalls. The leader needs to delegate one of these two functions if the company is to continue to scale up. From 50 employees on up, the senior leaders must develop additional leaders throughout the organization who share the same values, passion, and knowledge of the business. This way they have enough talent to whom they can delegate the myriad number of activities and transactions necessary to grow the business. Most MBA programs don’t offer a single course or even a lecture on how to delegate, yet it is one of the most important skills a leader must develop. And many leaders confuse delegation with abdication. Abdication is blindly handing over a task to someone with no formal feedback mechanism. This is OK if it is not mission-critical, but all systems need a feedback loop, or they eventually drift out of control. Successful delegation requires four components, assuming you have delegated a job to the right person or team: 1. Pinpoint what the person or team needs to accomplish (Priorities — One- Page Strategic Plan). 2. Create a measurement system for monitoring progress (Data — qualitative and quantitative key performance indicators). 3. Provide feedback to the team or person (Meeting Rhythm).  4. Give appropriately timed recognition and reward (because we’re dealing with people, not machines). The Rockefeller Habits provide the methodologies for leaders to delegate properly. NOTE: Beehives have only one leader. So why do companies need more? Some firms are experimenting with “bossless” organizations. In these companies, essentially everyone is a leader, able to act on his or her own. This requires a tremendous amount of training and development so all employees share the same DNA (values, purpose, knowledge, etc.) as the CEO. These “agile scaleups” (our preferred term) must also have technology-driven systems in place to handle several of the delegation activities listed earlier. Our favorite book on the topic is Steven Johnson’s Emergence: The Connected Lives of Ants, Brains, Cities, and Software. The Rockefeller Habits, when fully implemented (and automated through technology), facilitate the decentralization of organizations, providing pheromone-like communication and feedback trails similar to those that guide the activities of ants and other communities without bosses. WARNING: Since computing technology has yet to reach the capability of “HAL” in 2001: A Space Odyssey (though it’s getting closer), organizations that attempt the bossless experiment find they still need quasi-team leaders they call “champions” or some other related term. In reality, we still need these middle- management layers, for now. Repetition The leader’s final job is “to keep the main thing the main thing” — to keep the organization on message and everyone heading in the same direction. L. David Marquet, author of Turn the Ship Around!: A True Story of Turning Followers into Leaders, led the US Navy’s worst nuclear sub to first place in a year (without throwing anyone off the sub!). He had a picture hanging on the back of his stateroom door showing a man repeatedly asking his dog to sit, until the dog sits and the man exclaims, “Good dog!” This was a continual reminder to pick a message and then repeat it a lot until the organization responded. Repetition encompasses consistency. Finish what you start. Mean what you say. And don’t say one thing and do something else. Consistency is an important aspect of repetition. We’ll reinforce the power of repetition throughout the book. Specifically, we will look at: 1. Core Values: the handful of rules defining the culture, which are reinforced through your People (HR) systems on a daily basis 2. Core Purpose: the top leader’s regular stump speech to keep everyone’s heart engaged in the business 3. Big Hairy Audacious Goal (BHAG®): the 10-to 25-year goal that provides constant context for all of the decisions made throughout the organization 4. Priorities/Themes: a handful of three-to five-year, one-year, and quarterly priorities, which require repeated review on a daily and weekly basis to keep them top-of-mind A key function of leadership is delivering frequent messaging and metrics to reinforce these key attributes of the company and culture. Scalable Infrastructure As an organization grows, it becomes more complex. It’s a force of nature. The lowly amoeba can do everything it needs with one cell. (The home-based business is similar.) However, as the number of cells increases, the organism begins to develop subsystems — for feeding, elimination, circulation, procreation, etc. In order to survive, each cell must be located close enough to a nutritional source and have sufficient surface area to absorb energy and eliminate waste. That’s why a cell can get only so big. The same is true for companies, only these subsystems (cells) represent the various functions, locations, and business units within the organization (organism). As these subsystems grow, they must continue to segment, or they become too big and insular and thus experience the problems we see with large bureaucracies. Just as living cells need to be near nutrients, companies need to be close to customers (in terms of locations, product groups, and customer segments). This drives how companies structure their organizations and establish accountabilities. To keep things flowing, an organization needs a scalable infrastructure (similar to the blood supply and the nervous system). When you go from two employees to 10, you need better phone systems and more structured space. When your company reaches 50 employees, you still need space and phones, and you suddenly also require an accounting system that shows more precisely which projects, customers, or products are actually making money. Between 50 and 350 employees, your information-technology systems need to be upgraded and integrated. And above that, you must revamp them again, as the organization attempts to tie all systems into one comprehensive database. Otherwise, a simple change of address by a customer can unleash a series of expensive mistakes. NOTE: Don’t decide the physical location of employees and teams haphazardly. Certain functions are best co-located together, which we’ll discuss in the “People” section of the book. Even determining the location of restrooms, break rooms, and meeting rooms is important, especially when a company grows to occupy a second floor or more in a building. Serious communication issues surface when employees on different floors no longer bump into each other. The goal is to increase the cross-interaction (accidental collisions) of various individuals and functions. Marketing The #1 functional barrier to scaling up is the lack of an effecting marketing department, separate from sales (accounting is the second — discussed in the Cash Section). Marketing is critical to both attracting new relationships (customers, talent, advisors, investors, etc.) to the business and addressing the increased competitive pressures (and eroded margins) as you scale. To prevent margin erosion, marketing’s role (with lots customer input) is to determine the right what we should be selling to the best who’s; and how best we should sell at the right price. And because marketing strategy equals strategy, the head of the organization is usually intimately involved in these decisions. It’s Regis McKenna, author of the classic Relationship Marketing: Successful Strategies for The Age of the Customer, who taught Steve Jobs, Andy Grove, and most of the Silicon Valley tech stars how to market in the 80’s. It was McKenna and his firm that also guided Verne as he built his early global entrepreneurship organizations. McKenna’s focus was twofold. First, the key to effective marketing is setting aside one hour per week to focus on marketing i.e. establish a marketing meeting (do you have one?). Second, to make a list of the top 25 (or 250 if you are a bigger firm) influencers — relationships — you need to get behind the venture to scale it up. Then spend time each week figuring out how to network your way to these people. With a compelling vision (elevator pitch), then convince these influencers to help. The more influential the names you put on the piece of paper, the more potential you have to scale the business bigger and faster. Being young and dumb, as a student at Wichita State University (go Shockers!), Verne boldly included President Ronald Reagan, Steve Jobs, Michael Dell, and the owners of Venture and Inc. magazines on his list of 25. What’s crazy, in just 36 months of working the list, one hour per week, the Association of Collegiate Entrepreneurs (ACE) became a global “overnight” success, hosting a major event in Los Angeles for over 1100 entrepreneurs including Jobs and Dell with full page ads for the organization donated by Venture and Inc. magazines — and a congratulatory telegram from President Reagan. So the first step is to stop and make your list! The other major agenda item for the weekly marketing meeting is Dr. Philip Kotler’s 4Ps of marketing — Product, Price, Place, and Promotion. Of the four, pricing tends to get the least attention yet is one of the most important decisions you’ll make. Whereas we’ll spend hours working on the cost side of the business; the pricing side is lucky to get an educated guess. To up your skills in this area we strongly recommend reading pricing guru Hermann Simon’s book Confessions of a Pricing Man: How Pricing Affects Everything. His firm Simon- Kucher & Partners is the leading pricing consultancy in the world — you might consider engaging them. We also encourage you to search for Olgivy’s 4Es of Marketing. One of the largest ad agencies in the world, they have updated the 4Ps of marketing and have provided a complimentary online presentation and whitepaper on the 4Es — Experience, Exchange, Everyplace, and Evangelism. Spend time each week working on how to execute better the 4Es of the business. Last, we encourage you to read Adele Revella’s book Buyer Personas: How to Gain Insight into your Customer’s Expectations, Align your Marketing Strategies, and Win More Business. Ultimately, marketing’s job is to identify and attract the best (right) customers to the venture and arm the sales team (or those driving your online marketing activities) with a definitive list of prospects and plenty of information to help them make the sale. If not, sales teams (distributors) will chase any low hanging fruit they can find which is the quickest way to defocus the business and crush your margins. Market Dynamics More broadly, the marketplace makes you look either smart or dumb. When it’s going your way, it covers up a lot of mistakes. When fortunes reverse, all your weaknesses seem to be exposed. Bill Gross, founder of IdeaLab which has launched over 100 companies, looked at the key factors to the success of growing firms — including people (team), strategy (business model and idea), and cash (funding). What he determined is that market timing trumped them all. Too early or too late with your great idea and you miss the wave. There’s an additional cruel and counterintuitive market dynamic when you’re growing a business. As the firm scales from $1 million to $10 million in revenue, the senior team tends to be focused externally on amassing new business. Yet this is precisely the time when a little more internal focus, to establish healthy organizational habits and a scalable infrastructure, would pay off in the long term. As the business scales past $10 million, organizational complexities tend to draw the attention of the senior team inward (leading to firefighting). This is precisely when the team needs to be focused more externally on the marketplace (by talking to customers, as Rudy does), given the increased competitive pressures that come with size. There is also an important sequence of focus when it comes to your financial metrics. Between startup and the first million or two in revenue, the key driver is revenue (sell like hell). The focus is on proving that a market exists for your services. As for cash, which many business owners might think is the first focus, the entrepreneur has to rely mainly on family and friends (or fools!). It’s between $1 million and $10 million that the team needs to focus on cash. Growth sucks cash, and since this is the first time the company will make a tenfold jump in size, the demands for cash will soar. In addition, at this stage of organizational development, the company is still trying to figure out its unique position in the marketplace, and these experiments (or mistakes) can be costly. This is when the cash model of the business needs to be worked out (e.g., “How is the business model going to generate sufficient cash for the company to keep growing?”). Will the business model generate its own cash internally; have sufficient lines of credit to sustain growth; and attract investors with deep- enough pockets to support it? As the organization passes $10 million in revenue, new internal and external pressures come to the forefront. Externally, your organization is on more radar screens, alerting competitors to your threats. Customers are beginning to demand lower prices as they do more business with your company. At the same time, internal complexities increase, which cause costs to rise faster than revenue. All of this begins to squeeze an organization’s gross margin. As gross margin slips a few points, the organization is starved of the extra money it needs in order to invest in infrastructure, like accounting systems and training. This creates a snowball effect of further expensive mistakes as the company passes the $25 million mark. To prevent the erosion in your margins, it’s critical that you maintain a clear value proposition in the market. At the same time, the company must continually streamline and automate internal processes to reduce costs. Organizations successful at doing both will see their gross margins increase during this stage of growth, giving them the extra cash they need to fund infrastructure, training, marketing, R&D, etc. By the time it reaches $50 million in revenue, an organization should have enough experience and a strong-enough position in the market to predict profitability accurately. It’s not that profit hasn’t been important all along as the organization grows. It’s just more critical, at this stage, that organizations generate predictable profit, since profit swings of a few percentage points either way represent millions of dollars. Which brings us full circle to the main function of a business leader: to build a predictable revenue and profit engine in an unpredictable marketplace and world. The “20-Mile March” lesson from Jim Collins and Morten T. Hansen’s book Great by Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All highlights how companies with steady growth year in and year out dramatically outperform firms that experience wild swings in revenue and profits. The spoils of victory go to those who maintain a steady pace, day in and day out, in all kinds of weather and storms. And it’s this predictability, driven by effective processes, that is ultimately the key to crafting an organization that attracts and keeps top talent; creates products and services that satisfy customer needs; and generates significant wealth. In summary, growing a business is a dynamic process as the leadership team navigates the evolutions and revolutions of growth. And like the growth stages of a child, they are predictable and unavoidable. To deal with these challenges, the company must grow the capabilities of the leadership team throughout the organization; install scalable infrastructure to manage the increasing complexities that come with growth; and stay on top of the market dynamics that affect the business. To do this, there are 4 Decisions that leaders must address: People, Strategy, Execution, and Cash. These are the same four that Rudy and his team continue to face as they scale up their latest venture. The rest of the book is organized around these 4 Decisions, providing you with tools, techniques, and best practices for making the critical judgment calls that drive growth.  SCALING UP PEOPLE THE PEOPLE INTRODUCTION KEY QUESTION: Are all stakeholders (employees, customers, shareholders) happy and engaged in the business; and would you “rehire” all of them? Business leaders need great people both inside the company and out — investors, suppliers, customers, partners, advisors — as well as a great support network at home. All of these people are critical to the business. So how do you know you need to make changes on the people side of the business, and in your life, as you scale up the venture? Two questions: 1. Are you happy? We’re not talking about some kind of monklike peace, even in misery. This is a more straightforward question. Do you enjoy coming to work? Or are you experiencing irreconcilable issues with business partners? Is there a specific executive not getting the job done? Is there a team member who disrupts everyone else? Is there a customer with too big a piece of your revenue? Is there a supplier not delivering? Is an investor or the bank making your life difficult? Are you having issues with a family member or friend? 2. Would you enthusiastically rehire everyone, knowing what you know today? This goes hand-in-hand with the questions above (except for family!) and includes not only employees but existing customers, suppliers, and other stakeholders in the business. It’s a painful question that requires one to face the brutal facts and make changes. It’s especially tough when the company has simply outgrown some earlier relationships. If you fail to address these relationship issues head on, they will continue to drain your emotional energy, leaving little left to expend on the Strategy, Execution, and Cash aspects of the business. That’s why we address People first in our 4 Decisions model. ACTION: Is there a relationship that is draining you emotionally? If you need to deal with a contentious situation, we suggest you read Crucial Conversations: Tools for Talking When Stakes Are High, by Kerry Patterson, et al. Section Overview The first chapter, The Leaders, details three one-page People tools to help you think through your personal relationship goals; specific accountabilities for the company’s functions and business units; and the various process accountabilities in your organization. Working through these will help you recognize and prioritize the People challenges in your business and your life. The second chapter, The Team, shares techniques for attracting and hiring talent. We’ll emphasize the need for a strong marketing function to help recruit people, and the use of the Topgrading methodology for interviewing and selecting the A Players you need to grow the business. The third chapter, The Managers (Coaches), outlines five management practices that will keep everyone engaged, productive, and happy; and ideas for continuously educating your people so the company doesn’t outgrow them. Nothing is tougher and more time-consuming than having to replace people who haven’t kept up with the growth of the business. Three one-page People tools will be covered in this section: 1. One-Page Personal Plan (OPPP): provides a framework for people to plan their personal life 2. Function Accountability Chart (FACe): clarifies the people who are accountable for scaling the business 3. Process Accountability Chart (PACe): lists the processes, and people accountable, that keep the business running smoothly NOTE: The “e” in the FACe and PACe acronyms represents the energy and entrepreneurial spirit that leaders must possess in order to scale up a business. A special thank-you to Sebastian Ross, German tech entrepreneur and Gazelles International Certified Coach partner in Barcelona, for co-authoring this “People” section and serving as an ongoing collaborator on the book. Everybody, Somebody, Anybody, And Nobody This is a little story about four people named Everybody, Somebody, Anybody, and Nobody. There was an important job to be done and Everybody was sure that Somebody would do it. Anybody could have done it, but Nobody did it. Somebody got angry about that because it was Everybody’s job. Everybody thought that Anybody could do it, but Nobody realized that Everybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have done. Unknown author of condensed version of Charles Osgood’s – A Poem About Responsibility. 3 THE LEADERS The FACe and PACe of the Company EXECUTIVE SUMMARY: “The bottleneck is always at the top of the bottle,” notes management guru Peter Drucker. Challenges within the company normally point to issues with, or among, the leaders. To address them, this chapter will focus on the leadership team. We will share three tools that help leaders get clear on their personal goals; define senior leadership accountabilities, key performance indicators (KPIs), and outcomes; and delineate the four to nine processes that drive the company. We include a short primer on organizational theory to help you think through how to properly divide the company into functions, product/service lines, and divisions. HINT: Keep everyone as close to his or her respective customers as possible! Co-founders Stephen Roche and Simon Morrison realized that if they wanted to keep Shine Lawyers growing, they needed to bring up the next generation of leaders to drive the day-to-day so Roche and Morrison could focus on expansion. In addition to promoting Jodie Willey and Lisa Flynn into senior legal management roles, t