Stan Leopard's Notebook

Improve Performance by Using Rules Skillfully

We live and work within rules or laws that specify:

• What is required
• What is allowed
• What is prohibited

Rules are a fundamental element in determining the spaces of possibilities for our thinking and actions. The more skill and expertise we develop for noticing, observing, assessing, designing action, preparing to act and acting with various categories and sources of rules, the more power, or capacity for effective action, we have for fulfilling our personal and business ambitions.

You have to learn the rules of the game. And then you have to play better than anyone else. Albert Einstein

For this post I distinguish and work with 3 categories of rules in business and life:

• Those from Reality's Operations, e.g. the human body allows the great majority of human beings to learn and compete only through our early 60s.
• Laws, Rules or Regulations made by those with political authority, e.g. the rate of taxation on certain income levels or transactions; more fundamentally what types of transactions are consistent with the rules
• Rules we specify, e.g. what we require of others to have and retain our help, how our organization will be governed

Personal honesty and giving up an addiction to denial are two of the seven prerequisites for superior marketplace performance. This means we must learn reality's operations in order to quit the actions inconsistent with the laws of reality, and to increase our competence for performing effectively and powerfully the actions that allow us to succeed. I have written previously about personal practices. For example, I know that our performance is constrained and limited by our biology and by the state of our bodies. Therefore, to perform our best, we must invest a portion of our capacity to maintain and/or increase our fitness, knowledge and capabilities for thinking and acting. We are in denial when we think we can compete effectively without daily and weekly practices for sufficient exercise, effective nutrition, rest and competitive learning.

The rules from political action are complex and constantly changing. For whatever our particular industry and offer, and for our roles as CEOs and business owners, there are many rules to learn about and be aware of the drift. Only when we know these rules can we make new interpretations of how we can best use them to perform and compete. When a competitor is not following the rules, we might make a complaint to the appropriate authorities. Only when we fully understand the rules can we design new actions to change how the results of their application to us. An example here is how we take money from our enterprises. Depending on current tax laws, we may find a more powerful design of the combination of compensation (salary and bonuses), dividends, interest or distributions (taxed as investment earnings in some cases). One way to know tax rules is with a superior CPA in our network.

It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood. James Madison

Lastly are the rules we specify. I say this is an underutilized area for many ambitious business professionals. Notice where you have power to declare rules. Sources and locations of this power or authority include:

• Your role: CEOs have the power to declare how the enterprise will be organized and how it will function
• Your offers of help: when you have highly-valuable offers of help, you have the power to specify what's allowed, prohibited and required to access your help, to retain your help and to increase the help you give
• Financial Capital: when you are making investments you have power to specify what is satisfactory in exchange for your capital investment
• Your network: to make the help of your network available to another you have increasing authority the more valuable the help

Leadership and learning are indispensible to one another. John F. Kennedy

An exercise:

• List all of the interactions, engagements or roles you currently have
• Next list what rules you have specified; in what form do they exist? Are they being held?
• What consequences can you produce for those who follow your rules?  For those who decline to follow or ignore your rules?
• Speculate about what's missing, flawed, incomplete or weak in your use of your authority and in specifying rules
• What new thinking and action is produced?
• What new commitments will you make?

We are in a new economic and political environment, as well as a global marketplace of tough and increasing global competition. The possibilities for you and your network to take care of your concerns, and fulfill your ultimate personal and business ambitions, will be produced, maintained and increase by your actions. It is not possible for governments to take care of citizens to a standard most of us would consider satisfactory. Effective thinking, committed action, continued competitive learning and strong networks are the dominant strategies for success in the world in which we find ourselves.

As always, I invite your questions and comments as you work with my guidance. Although I work to produce and function in a strong discursive network, as opposed to a social network, I regularly tweet links to statistics and writings of others I find valuable. To receive these follow me on Twitter.

Relevant Prior Posts

Be Prudent–Continued Danger Ahead

Need to Dramatically Shift Results? Transform your Culture

Image Credit Flickr User/Otzberg

Do You Pay Yourself at Market?

If you own all or most of your company, it's easy to think, "What's the big deal? At the end of the day whatever the business produces is mine."

You are both an executive and investor in your enterprise. Compensating yourself at a rate other than market–pay based on the role you hold, the skills you have and the marketplace you're in–sets up several breakdowns, both for you and for the business. 

Design the Enterprise as an Investor

How you think about your compensation affects how you think about the compensation of others. Reflect on your actions to reveal your philosophy. Given that compensation has a significant impact on the organization, know and be consistent with a philosophy and practices for designing compensation. My philosophy: pay base salaries slightly above market median and provide strong rewards for performance above standard, at both the individual and team levels; share company successes broadly in some manner. When we win, we win together. Establish and build a culture that provides satisfaction beyond the financial domain.

When you aren't rigorous in making assessments of the market value of your expertise for your present situation, it's unlikely you will be rigorous in making these assessments of others. Overpaying is a negative for investors, as excess returns to management come at the cost of returns to investors. Excess compensation produces a culture of entitlement and resentment. Underpaying also produces resentment, at least from top performers, and increases the likelihood of a culture of incompetence, dissatisfaction and higher turnover. In a competitive marketplace we compete for employees just as we compete for customers. A driver of Apple's success is their commitment to positioning "A" players only for to key roles and teams.

An Approach to Designing Management Compensation

• Constitute your philosophy for compensation. You can get help from other CEOs, your board, and your network of professional help. Do not hire compensation consultants–the incentives are misaligned.
• Develop a standard practice to determine the base salary range for each role in your market and for the size of your company. Possible resources include your CPA, industry and geographic compensation surveys, and professional investors in your space. This practice is then performed periodically to keep your knowledge of compensation aligned with market changes.
• Rigorously specify what results are specific to each role. What are the outcomes that each individual or team produces? Specify the standards for acceptable performance. Reward performance exceeding satisfaction. A starting place is the individual/team gets 10% to 20% of the results produced beyond standard. 
• If you have a board or investor as a customer for your performance, establish your own compensation to be base plus performance bonus as well. If you are your own customer, have only a base salary for yourself, closer to the top of the range.
• Constitute a minimum profit standard for the enterprise. Share profits achieved above this standard. 10% of excess profits is a starting point.
• Design all performance rewards and profit sharing to have a 3 year time horizon. Rewarding annually provides incentives to "game" the system.
• Adjust base salaries up or down as the market changes. Success with this practice requires it be part of your culture and you make your team aware of the philosophy when they join and ongoingly. The fact is no single company can stand against the marketplace. To be effective, strategic and competitive we must always be responding to market forces, adjusting our design as these forces change.

Different companies have fundamentally different cultures. In some situations everyone employed may be a real team member (this is often the case in very small enterprises and professional service firms. In others, there are builders and mercenaries. I prefer (where possible) to work to have an enterprise where everyone is committed to our competing successfully to fulfill our mission. However, I have learned to be rigorous in making these interpretations. If you have mercenaries or laborers, design their compensation appropriate to their roles.

If you pick the right people, give them the opportunity to spread their wings and put compensation as a carrier behind it, you almost don't have to manage them.  Jack Welch

There's more to culture than compensation, and we must always do our best to have compensation fit our environment and mission. One of the 10 fundamentals of economics is that people respond to incentives. Though fraught with a myriad of negative consequences when badly designed, compensation is a very powerful incentive. 

Other Resources

How Much Should you Pay Yourself? Entrepreneur April 18. 2012

 Relevant Prior Posts

A Firm's Culture is an Essential Element for Success

Good Thinking is Real Work

This is a Time to be "On the Numbers"

Image credit: iStockphoto/tattywelshie

Producing Sustainable Competitive Advantage

How can our enterprises produce, maintain and increase competitive advantage(s)?

Does the business have something people need or want now and in the future (demand), that no one else has (competitive advantage) or can copy, take away or get now and in the future (sustainable), and can these advantages be translated into business value?              Warren Buffet

Utilizing today's ubiquitous technology for learning, communication, coordination and production, valued offers that can be copied will be. A recent HBR post When You Can't Innovate, Copy by Ndubuisi Ekekwe begins...

Nothing breeds copycats like a successful business venture. When a new business idea is incubated and executed successfully, cloners naturally emerge and imitate. To mitigate risks associated with eroding market opportunities due to copycats, investors always look for companies with strong competitive resilience or those that are operating with a high barrier to entry. In traditional investing philosophy, the most innovative firms are potentially the most profitable.

The dominant strategy for producing sustainable competitive advantages in medium private enterprises relies on intentions and practices to….

• Verify or constitute a highly valuable core offer
• Target a market (with sufficient demand to achieve your personal ambitions and the company's mission if you are successful) in which you intend to become a market leader
• Produce a culture that continuously learns, and thereby cooperates, coordinates, innovates and produces with increasing skill and effectiveness
• Produce a steady stream of new specific offers to continually provide competitive marginal utility to your customers

I assume our innovations will be copied. We work to counter with a culture and practices for continuous innovation, continuous competitive learning, and for best knowing our customers concerns and situations so that we can work with them in ways that produce and maintain superior trustworthiness. We think about how to extend the period of competitive advantage. Those who copy are always late and unlikely to be as connected to customer concerns and situations as those who innovate. We target a set of customers who can value the help we provide (it's up to us to produce the interpretations which lead to valuing).

 

I recommend making and regularly verifying/refining your interpretations of your market.

• What are the criteria and standards for who's in your target market?
• Who are current customers for your offers?
• Who are possible customers for your offers?
• What are their concerns now? Are these different for different segments of your market?
• What situations dominate their reality?
• What new situations are they working to produce?
• What key breakdowns are they coping with now? What breakdowns do you anticipate they will face in the future?
• What offers compete with yours? These can include offers that similar or very different–what alternatives exist for the resources you customers will spend or invest to accept your offers?

Our philosophy of competition is to provide help to our customers that is scarce and valuable. While we pay attention to competition for many strategic purposes, we do not focus on "beating the competition". The best competition expands a specific market.

 

Recommended prior posts:

Attend to the Details

Need to dramatically shift results? Transform you culture

Where does the Customer fit into culture?

Increase your Power with Skillful Requests

This week I found myself thinking about the consequences produced by how skillfully or unskillfully requests are made. I received a vague request from a colleague, leaving me unclear what would be helpful and valuable. I had both a willingness and an intention to help, yet I was unsure what accepting his request would mean, whether I could afford to accept, what counter-proposal might be higher value for him with satisfactory costs to me, etc. While we handled the particular matter with a couple of emails, I was left thinking how much power we gain, lose or miss depending on our expertise and awareness in designing, crafting, making and being a good customer for our requests. And I think we are often blind to the depth of consequences in this domain.

What is a Request?

Today's post will be most valuable with a background in the Action Workflow Loop and conversations for action–distinctions and practices I have learned and deepened in my studies with both with Fernando Flores and Toby Hecht. If this knowledge is new to you, I strongly recommend study and practice from a competent teacher/institution. While being skillful with requests sounds easy, I continue to deepen and refine after more than 3 decades.

A request is just a request, right? Not really. My children make continuous requests, and those requests are not for mutual power. Working with an ambition to build economic and social wealth calls for a sufficient depth of knowledge with requests to build power for ourselves, our organizations, our networks and the performers for our requests. A request is a commitment to be satisfied, and provide compensation to the performer as appropriate, when our conditions of satisfaction are fulfilled. Conditions of satisfaction always includes time or "by when". 

To accomplish anything extraordinary, we must engage in effective, strategic and competitive exchanges of help with others who have power. Those exchanges are originated in, negotiated through and skillfully managed with superior language and practices. My comments are about these interactions for power–capacity for superior thinking and action–with the key people in our configuration.

Some consequences of missing or unskillful requests:

• CEOs doing many/most new actions and projects themselves, leaving them without time required for reflection, strategic thinking and building networks
• Losing power with members of one's network by making requests that are all cost to them, or have insufficient reciprocal value
• Incurring high costs or failing to accomplish something important because the request was incomplete, flawed or weak, or the performer was unable to fulfill and/or unable to decline
• Moving slowly in bringing strategies and projects into effective action by not knowing what request(s) to make of whom
• Designing requests such that when they are fulfilled as we asked, the outcomes are insufficient for our ambitions and intentions
• Producing identities that are insufficient to our personal ambitions

Being Ineffective with Requests

I speculate that the fundamental source of our weakness with requests comes from our "lone ranger" culture. Even those of us who "know" that we must have help to accomplish meaningful outcomes can easily forget that the way we secure that help is with skillful requests and offers. The more powerful the person from whom help would be valuable, the more skillful we must be to be effective.

Some sources of ineffectiveness include...

• Not making requests
• Making requests with missing or unclear conditions of satisfaction
• Not negotiating a real commitment to time for completion
• Not producing an effective negotiation, an example of which is having no space for declines or counter-offers
• Making requests the performer can't fulfill
• Acting as if we (the requestor) is no longer responsible for the outcome once we have a promise from the performer (completion of the conditions of satisfaction is a mutual commitment of performer and customer)
• Failing to manage the action through to completion, e.g. not letting the performer know in a timely manner when things change that affect the loop, not withdrawing a request when it's outcome is no longer valuable or necessary
• Failing to keep the commitment progressing to completion, e.g. make interim assessments of status, dialogue with the performer, offer help when required

Being Effective with Requests

My fundamental advice is to take making requests seriously. Give sufficient time and attention to designing, crafting, making and being an effective customer for your requests.

Things I consider for strategic requests...

• What are my concerns and intentions to be served by this request? 
• What are the performer's concerns and ambitions, and how will fulfilling the request be valuable to them?
• Where do our concerns overlap, i.e. what are our shared concerns?
• Is the performer trustworthy for this request? 
• Is the performer's situation coherent with commiting to fulfill this request?
• What compensation will I provide? This may be tangible or intangible, explicit or implicit, and can include obligation held for the future. For people we employ, the compensation is usually not just their salary–powerful requests enable them to gain knowledge, identity, accomplishments, etc.
• Writing to produce clear, rigorous and complete thinking before launching.
• Having effective existence systems to keep requests present for me and to manage them intentionally through to completion.

As I come to the end of this post, I see expanded richness in the domain of requests. In our business, we speak often about our offers, practices, narratives and strategies, and much less about our requests. I see new possibilities (after 3 decades plus of working with conversations for action) for continuing to increase the effectiveness and power of my requests. Let me know what new thinking and action you produce from this post.

On Being an Effective CEO

In practicing my "art" of building robust private companies I've held the role of CEO several times. In addition, I have coached, advised and mentored a few dozen other CEOs. Upon reflecting on my experiences, past and recent, it seems to me that the commitments and skill required of a CEO are unclear. I speculate that confusion arises from the fact that CEOs are often also founders, significant owners and/or operating managers. I see the CEO role as distinct from these responsibilities, which I may write on in a future post if there's interest.

What must the CEO accomplish to be successful?

In my view, the CEO is the promisor (a distinction of the Action Workflow Loop from Dr. Fernando Flores) to other stakeholders for the enterprise fulfilling its mission, and producing economic and social wealth. The role of the board of directors, if there is one, is to be the customer for the CEO's performance in fulfilling this role. By the way, I recommend always having a capable board even if you own 100% of the enterprise. We all perform better when we have a skillful customer for collaboration and production.

The CEO constitutes or establishes the social organization that is the enterprise, specifying such things as:

• What values the business will use as criteria for its actions; what ethics the company culture will hold
• What's allowed, what's prohibited and what's required from each participant's role in the company, particularly executives and managers
• The core offer of the firm; the fundamental help all of our products and services are created to provide
• The strategies for fulfilling the mission and for producing, maintaining and increasing enterprise value
• The organizational design–how we will arrange the personnel and resources of the enterprise to be effective, strategic and competitive in making and fulfilling our core offer
• The executive/management team's roles (set of commitments), team ethics and practices
• The culture, including practices for learning and developing as measured by increased effectiveness and value to customers and other stakeholders
• The capital strategies and structures to take care of the forms of capital utilized (we distinguish 6 key forms of capital–human capital, financial capital, operating capital, capital equipment, capital inventories and social capital)
• The compensation philosophy; incentives are immensely powerful and communicate the real values of an organization

How do you work best with your team?

I encourage an open exchange of interpretations and hold that the speaker has an obligation to provide supporting facts or assertions upon request. I establish regular practices with my team, usually including weekly writing, a weekly team meeting and individual "tunes" to fit the current situations we're engaged with. When it's time declare new action, (a strategy, a project, etc.) either consensus appears or I declare the action we will take (for domains affecting the entire enterprise). I lead and develop my team to be committed to letting go of their views and opinions once we have a declaration of action. One of the ethics I insist on is that each of us perform to the best of our ability in our individual and team commitments. When everyone works to their best, we will quickly see what works, what doesn't work and what's missing. We can be always learning, refining and improving our thinking and actions.

What's most unique about the role of CEO?

I see building companies as a blend of utility and artistry, with the CEO as the "artist". The CEO does not have peers in the organization–they have help, just as Leonardo da Vinci had numerous apprentices and helpers in producing his art. Other executives, managers, directors and team members all have peers with whom than can collaborate (and sometimes commiserate). The CEO must have these relationships externally, and the design of this network can be one of the greatest challenges in being an effective CEO. I have seen more difficulties for CEOs seeking comradeship and approval than from those being too strong a leader. All of the other stakeholders rely on the CEO to make the interpretations, judgments and declarations to produce the new situations to keep the company growing and progressing. They rely on the CEO to anticipate and notice breakdowns, and to respond skillfully.

In my experience, the most effective CEOs are excellent listeners and keen observers–of both the internal and external environment. They have different styles, some being warmer than others. They constitute the enterprise rigorously, then continuously learn, respond and refine to keep the business returning to its mission and objectives. They are ok with making the tough calls. Often the strongest CEOs I've known readily take full responsibility for the breakdowns, failures and shortfalls that occur in the company's growth and learning, while fully acknowledging the contributions of others in the wins and successes.

My thinking in this post are for the CEO of a private enterprise who has a meaningful stake in the ultimate enterprise value. There are many different situations that shape the design of governance and the specification of the roles of the board and executives.

My previous post on advisors and mentors is relavant for thinking about becoming a more effective CEO.

Image: Flickr User/h.koppdelaney

Book: Seth Godin's Survival is Not Enough

One of the things Jeff and I say to our colleagues and followers is "The rules have changed." We see that to perform effectively, strategically and competitively in today's highly competitive and rapidly changing global marketplace we must be continuously learning strategic knowledge to better design and execute offers, practices and strategies that provide the best value we're capable of to our customers, employees, colleagues and networks.

I recently read Seth Godin's Survival is Not Enough: Zooming, Evolution and the Future of Your Company. Seth's writing, in his blog posts and books I've read, often provokes my thinking about refining enterprise design for increased effectiveness in our fast-changing world. We have prepared a book review that's a more complete description. If you are intrigued, I recommend you buy the book and read it. It offers fundamental thinking that's as sound today as when it was published in 2001.

In our reading and dialogue on Survival we focused on culture and capital assets as the two key domains in which to learn and increase our capabilities for acting with our enterprises.

Work to build a culture that's nimble, that's prepared to deal with the unexpected, that tolerates failure. Design projects and plans so that failures that do occur happen at non-catestrophic levels of investment. Increase the organizational learning that occurs between individuals in the same roles, such as your sales people, and between different functional units of the company, such as engineering and sales.

In not one of the presentations [for VC investment] has the entrepreneur walked in and said: "We've got really smart people, an excellent attitude and an organization that's designed to evolve and change.  We're not sure what the future brings, but we are sure that we've got the fast feedback loops and bias to evolve that we'll need to stay ahead of the competition."

Practice fast feedback and refinement. Continuously test, measure and implement. Launch new offers, practices and strategies with velocity and with just enough design, crafting and preparation. Don't work to have perfection in the plan, but rather start executing as soon as you're sufficiently prepared to not break trust. Design and refine more frequently to increase and sustain competitive advantages.

So what separated Sam Walton from the thousands of other people who opened little hardware stores in overlooked towns all over the country? One principle. Sam was obsessed with testing, measuring and implementing. He organized to evolve. Every day (sometimes every hour) Sam would try something new. He'd gather every bit of data he could about the test and then test something else. By testing and measuring, Sam discovered a pricing strategy that still works. By testing and measuring, Sam discovered a store location strategy that still works. Walmart now has a database with more than a billion [this was 2001] items of information in it. They've used it, for example, to discover that people who buy bananas frequently buy milk. By putting a display of high-profit bananas near the milk, they dramatically increased banana sales (and profit). For twenty years, Sam Walton tested and measured (then implemented) every principle he could. He built open systems that let his suppliers do the same thing. More than 98 percent of the items in a Walmart never see the inside of a Walmart warehouse. They go straight from the manufacturer to the store.

We see that our criteria and standards for making new capital expenditures must be nimble. There are many new offers in the marketplace for elements of design, for production, etc. We're becoming aware of resources we can utilize at far lower costs that internal investments.

Do we still need factories? Of course we do. How else are we going to make all this stuff. My point is that while the world still needs factories, that doesn't mean you have to own them. Owning a factory will probably become a profitable niche business, a way to make a nice living. But fast-moving, high-growth, zooming companies don't need to own them. Because factories are no longer local, because the ultimate provider is no longer the manufacturer, the model that was factory-centric is dead. Being factory-centric doesn't increase your profits, it decreases them. Being factory-centric doesn't decrease your time to market, it increases it.

Let me know what new actions you take. We accumulate new capacities to think and act in action, not by merely reading.

 Image: Flickr User/emmma peel

3 Phases of Projects: Learning, Preparing and Executing

My partner was recently frustrated with his progress to fulfill a project he's holding. In our dialogue, I asked was he learning, preparing or executing. On reflection, he saw he was preparing and that his frustration came from assessing the project as if he were executing. This led us to dialogue about project phases, with us settling for now distinguishing 3 key phases.

A project is a committed, one-time course of action to acquire a new capacity to act (for the individual, team or organization), to invent a new practice which can become a standard practice, or to perform a complex action once. The project may be to take care of a one-time threat, obligation or opportunity.

Action in our discourse of business is anything done with the intention to take care of a concern, so we're "acting" on a project whether we're preparing, learning or executing. We work to have our actions be effective–produce the intended outcomes; strategic–producing, improving or completing a strategy, making possible new strategies; and competitive–enable fulfilling our intentions in a competitive situation. As best we can, we hold a commitment, a a declaration of personal responsibility for results, to perform effectively, strategically and competitively in our professional endeavors. Being committed does not mean we will accomplish what we desire, and it does significantly improve our probabilities for success. Outcomes in the future can never be guaranteed. Because of this, skillful action is most possible when we hold our values and intentions, with clarity on our purposes and objectives, in every moment as best we are able.

The purpose of the learning phase is to be satisfied we have available the required knowledge, expertise, tools, resources, network of help and project team to succeed. Projects are costly, and we work to undertake and continue only those projects we assess can produce a satisfactory return on the costs. We see projects as investments and we invest with the intention to produce satisfactory returns. This phase is also where we make interpretations of the environment in which the project will exist, e.g. other projects, strategies or commitments.

Possible actions for Learning:

• Write your narrative describing the project and its purpose; say why the project is meaningful, relevant and valuable to the enterprise
• Specify what facts or assertions we need to know to prepare and execute, such as what projects, strategic objectives and situations our design and execution must take into account
• Specify the knowledge, tools, practices, etc. we will be able to use in fulfilling our project
• Specify the budget for the project; we think of costs as time, money, energy and lost opportunities
• List the people from whom we may request help; speculate about what roles or contribution each could provide
• Accumulate knowledge we require and don't have available; this may require delaying the start of the project until we accumulate knowledge ourselves or ensuring we have a team member with the required expertise

The purpose of preparing is to design and craft the plan for the project to be as complete, strategic and effective as we are able at this time. We say a plan is a conversation, meaning it is evolving and refining as we act, learn and encounter new situations. At the end of preparation we have a written plan accessible to all team members that will change as we fulfill (our project template).

Preparing (done with the team if this is a team project):

• Refine your project narrative based on your learning
• Gather and organize the information you need to design the project
• Make requests for help from others and gain the commitments you can; form your team
• Specify who will hold the key roles of the project and align the team; we use the roles of holder, specifier, designer and fulfiller for projects
• Design the specific actions to be taken by each member of the project team and the outcome to be produced by the action; organize these in an effective sequence to produce the action plan for the project. We think of who, what, when, where, how and why in crafting the plan.
• Specify the practices for the team, e.g. how often will you meet, what and how will you communicate, etc.
• Assess the costs now that the project is designed and crafted; affirm you can produce a satisfactory return

The purpose of executing is to fulfill the project's purpose by producing the desired outcomes, including a satisfactory return on costs. In our projects we pay attention to accumulating knowledge with projects, and do our best to avoid being task-oriented. We are or become task oriented when our focus becomes getting done without commitment to fulfilling a larger tactical, strategic or ultimate commitment.

Executing:

• Work to stay mindful and aware during execution; refine and evolve the plan based on new knowledge, situations or concerns
• Pay attention to the pull to become task oriented, also known as "head down, butt up"
• Stay mindful of the array of concerns, strategies and projects you are holding or acting in, and that all action is to accomplish our ultimate ambition, which includes living coherently with our values and intentions
• Continuously refine and adjust action to be effective, strategic and competitive
• Be willing to abandon the project if you assess it is no longer high-return; the ability to quit (projects, people, etc.) is an important strategy skill
• Use the plan and keep it current; we work to have our plan have every relevant action of the project in sequence; we mark actions complete and keep them on the plan
• Acknowledge the contributions of others; cultivate gratitude for the help you receive
• Celebrate the accomplishment of the project; speak the value of what was produced to your team, network of help and the organization

As designers and builders of private enterprises, which must perform successfully in the most competitive global marketplace that has ever existed, we see that continuously improving our capabilities in the practice of projects is strategic and valuable. I welcome your questions about using projects more effectively, strategically and competitively.

Image: Flickr User/vancouverfilmschool

Where does the Customer fit into Culture?

This week's hubbub over the New York Times Op-Ed piece Why I Am Leaving Goldman Sachs by Greg Smith prompted me to write again on culture. We hold that sound strategy and a culture that can execute with precision are two fundamentals we work on recurrently in order to build successful private enterprises.

I don't know anything personally about the culture of Goldman Sachs. I do know that a firm with a culture that fails to recognize and take care of the concern of its constituents has a strategic weakness that can be exploited by competitors. While I can't claim it's causal, from the publication of Smith's piece Goldman Sachs fell 1.29%. Comparatively JP Morgan Chase, a firm that's a representative competitor, rose 2.72%. That's a difference of 4% or over $2.5 billion dollars of shareholder value.

As founders, leaders and designers of small and medium private enterprises, we have a lot of authority with which to produce a culture that is coherent with our personal values and ambitions. There's no right and wrong in the constitution and design of culture. The primary concern is creating and sustaining an organization that can be effective, strategic and competitive in order to produce economic and social wealth for the key stakeholders.

Who's In?

My teacher and friend Toby Hecht distinguishes a business as:

A social organization–relationships, roles and identities, and their costs and risks–of coordinated actors all working with the shared ultimate purpose of helping the organization succeed or survive, increase its freedom to act and its value in the marketplace.

I've written in previous posts (see the category Culture) on thinking and practices to establish, build, maintain and grow your culture. Today I'm focused on clarity about who are our key stakeholders. If Smith's interpretations of Goldman's culture are valid, their customers aren't key stakeholders. Rather they exist to be exploited in ways that can be harmful to their concerns. Much of the marketplace is organized around separating customers from their money, and I support a free market with regulation only sufficient to avoid fraud and other forms of theft of customers.

As customers it's our responsibility to be prudent in our role in an exchange. As businesses, it's also our responsibility to be prudent, making sure the exchange works for our concerns and those of others we say matter. For a sustainable enterprise–one increasing in value over time–the transactions must be satisfactorily beneficial to the business and the clientele. For a sustainable culture, the "relationships, roles and identities, and their costs and risks" (and returns) must be satisfactory to members of the team.

To reflect the question of "Who's In?" I offer some principles:

• Design the enterprise to take care of concerns of customers, employees, colleagues, investors and other key stakeholders
• Produce offers that provide marginal utilities to customers that are scarce relative to demand, and which can't be easily copied or blocked by competitors
• Focus on gaining good customers, not "beating" the competition; be willing to "fire" bad customers
• Lead, in action, the speaking of the organization to be only what's true, useful and timely; if you take this one on I imagine you will be amazed, as I was, the amount of conversation that's purposeless and reducing rather than building the relationships I aspire to have
• Embrace (rather than resist) failures when they occur; have practices to learn from failures; start over quickly holding intentions and objectives
• Practice forgiveness; this does not mean not speaking authentically and accepting the consequences of action–it means not dwelling on the past but moving on
• Accept that not everyone, maybe not even most people, will want to be members of the culture you declare; let them go
• Design, hold and continuously refine practices for learning new fundamental, strategic and tactical knowledge throughout the organization
• Design compensation and other incentives to be fully coherent with the culture you're committed to having

Assessing the firm's culture, seeing what's working, what's not working and what's missing, and designing new practices and actions is a recurrent commitment of the CEO and the company's leadership and management. 

A closing quote...

The highest possible stage in moral culture is when we recognize that we ought to control our thoughts. Charles Darwin

 

Follow Up:  John Tammy of Forbes takes an opposing view to Smith in Greg Smith's Gratuitously Opportunistic Departure from Goldman Sachs published late Sunday, March 18th.

 

Image: Flickr User/stevendepolo

Attend to the Details

Learning and designing to pay attention to every detail, the practice we call precision consciousness, is an element of establishing and building competitive advantages in our enterprises. The language of business strategy speaks about sustainable competitive advantage, this means producing high return on costs (time, energy, money and lost opportunity) for customers in ways that can't be easily copied or blocked by competitors. In today's highly competitive, rapidly shifting global marketplace I see that sustainable competitive advantages are established and built with...

• a growing body of practices for continuous productivity and quality improvement
• practices for rapidly prototyping and assessing new offers, in order to discard the weak and develop the strong
• a well-designed practice to move forward with new offers selected for high marginal utilities for customers with rigor and velocity
• robust yet flexible business strategies
• a culture of communication, commitment and collaboration
• an openness to learning, to giving up prior interpretations and strategies in the face of new facts from the fast-changing marketplace
• embracing change as the norm in business, not the exception

Producing economic and social wealth by building a successful enterprise is highly challenging work, and work that is never finished. Resting on past success is the beginning of losing competitive advantage. The initial success we produce by moving from an insight of marginal utility that's highly valuable to customers, to the designing, crafting, bringing to market, producing and delivering the offer satisfactorily, is merely the beginning of producing, maintaining and increasing the value of our enterprise. If we relax in our past accomplishments and fail to constitute and refine practices for continuous learning and innovation, we are quickly eclipsed by competitors.

I continue to be passionate and in wonder about all there is to learn and the challenge of competing effectively; and simultaneously daunted by the relentlessness of global competition. Over my 3 plus decades in business, I've seen the pace of change accelerated again and again, and I anticipate this will continue for the relevant future.

Attend to Details, Get the Facts

Whether in the initial constitution of the enterprise or the continuous innovation required to remain competitive, effective thinking and design require facts and the use of those facts with precision consciousness. Quickly gather the relevant facts, then use them to continuously improve productivity, culture, strategy and the design of new offers.

What are the facts? Again and again and again–what are the facts? Shun wishful thinking, ignore divine revelation, forget "what the starts foretell", avoid opinion, care not what the neighbors think, never mind the unguessable "verdict of history"—what are the facts, and to how many decimal places? You pilot always into an unknown future; facts are your single clue. Get the facts! Robert A. Heinlein

We use facts (assertions) for the thinking and designing to manage the enterprise. We use details to assess our strategies, measure our improvements (or lack thereof), notice anomalies that trigger the design of new offers. Change is the constant of modern business. We continuously design, execute, measure, assess, refine and redesign our offers, practices, narratives and strategies. Without relevant and sufficient data, our thinking risks being weak and non-competitive.

We recommend building a culture for change, a culture in which it's ok to fail, ok to speak negative assessments, and one in which continuous learning is embraced. I do not mean a "throw it against the wall and see if it sticks" culture. I mean a culture where we continuously inquire into how we can improve, what can we adopt and adapt, which strategies are becoming uncompetitive, etc.

To begin, determine what metrics will enable management to assess performance of each individual, team and function of the enterprise. We aspire to establish and maintain high velocity in assessing outcomes. These include practices that are daily, weekly, monthly, quarterly, semi-annually, annually and longer. The time horizon fits the domain. However, we strive to make actionable assessments in the shortest reliable time horizon.

Our purpose in making assessments is to improve performance for standard practices and to assess the value of new offers, practices and projects. To do this successfully requires a culture that actively looks for what's flawed, missing, incomplete and weak in order to improve. Building and maintaining this culture is counter to popular the American culture of "we're the best". Cultivate humility, respect and curiosity. The faster you can improve and generate new, valuable offers and practices, the greater the competitive advantages you can accumulate.

Some additional thoughts for practicing precision consciousness:

• Push your organization to continually increase velocity in knowing details and making assessments; develop and refine fast feedback loops in every area of the enterprise
• Design to always have capacity for trying new ideas, e.g. Google gives every engineer a few hours a week to devote to ideas of their choice, including the freedom to work alone or form a team of their choosing.
• Have metrics for every member of the organization and use these to improve performance; avoid a culture where mistakes are not tolerated (the goal is to not make the same mistake again, to use failures to learn)
• Organize HR around recruiting competent performers who fit the culture; avoid the annual review in favor of fast feedback performance improvement
• Have practices to produce a learning organization; remaining static in one's knowledge leads to an early death in today's competitive environment
• Hold people accountable for their promises and for acting with the company's values
• Be willing to release (fire) those who cannot or will not embrace a culture of communication, collaboration and commitment; free them to find an organization where they fit and free your organization to become stronger and stronger
• Require metrics for meetings and all standing commitments; stop those that are not producing satisfactory returns
• Get periodic assessments from competent observers from outside your culture, e.g. your CPA firm, investors, advisors, teachers, etc.
• Look for and open to well-grounded negative assessments, i.e. assessments of what is flawed, missing, incomplete and weak

Some people aren't used to an environment where excellence is expected.  Steve Jobs

What will you start, stop or modify as a result of reading this post?

The twin pillars for producing, maintaining and increasing enterprise value are strategy and culture. Take action today to improve your strategy and/or culture. The only actions available in the present are to start something, stop something or modify something. An enterprise is an evolving entity, and all practices that slow its evolution increases the risk of failing to survive. Start more powerful practices, modify existing practices to improve performance and quickly stop practices and projects that are not producing satisfactory results.

A question for organizing action when there are many possibilities: "Where is the highest leverage"?

Look for where you get the best return on investment. I work to execute as much new thinking and action as we can, organizing actions from highest return to lowest return. Success if not about being perfect, success is about doing our best and continually increasing our knowledge and capabilities.

Help from Others

• Survival is Not Enough by Seth Godin. Seth makes many distinctions and offers ideas for numerous practices for producing what he calls zooming. A foundation for zooming is paying attention to the details, getting the facts, and continuously refining your interpretations of what details are meaningful, relevant and valuable.
• To Create Something Exceptional, do Sweat the Small Stuff, a blog post by Aaron Levie, founder and CEO of Box.net.

Imag: iStock Photo: SpiffyJ

Run More Effective Meetings–Guest Post by Jeff Hanhausen

A meeting is an event where minutes are taken and hours wasted. James T. Kirk

Have you noticed the rules have changed? What rules you might ask. The answer is all of them. Competing successfully in today's global marketplace is no longer business as usual. Imagine playing chess when the rules have changed, and you don't know the new ones but your opponent does! Before starting you would be soundly defeated.

The rules have changed for accounting, strategy, competition, pricing, marketing, selling and on and on. There is radical change everywhere we look.

What does this mean for meetings? As I pondered this question, I came across Read This Before our Next Meeting by Al Pittampalli. What he calls The Modern Meeting both perturbed and intrigued.

I’ve often listened to complaints about meetings. “Another meeting – uggh, I have real work to do", “That meeting just dragged on and on, I didn’t think it would ever end” and “Does anybody know why we're meeting?”  I'm sure you have your own version of negative meeting comments. Perhaps how we think about meetings, their purposes and structure, is out of sync with current reality. The rules have changed for meetings, and that means you must change your structure for meetings.

I separate meetings to produce and coordinate action from meetings having a purpose of creation/speculation. These are two very different conversations. Effective meeting design maintains clarity between conversations for action and conversations for speculation, usually not including both in the same event.

Speculative meetings are essential for the continuous innovation required to compete successfully. In a meeting for speculation, let the ideas flow and don’t judge them, simply allow them to be spoken and captured. Encourage and support new thinking by not allowing criticism or evaluation of the new ideas as they're being offered (this is far more challenging than it sounds).  The metric for conversations of speculation is the breadth and quantity of ideas . I recommend you number the ideas and target a number, e.g. go for 10, listing each. It’s fun! Specify a start time and a finish time, and use a timer—really. Ideas usually start coming faster as time runs out. There is something about us, human beings, and deadlines that provokes action. Encourage people to be active during the meeting, walking around to think or moving their chairs. Keep focused on the purpose for the brainstorming, writing everything down so participants can reflect later. Oh and did I mention—have fun!

What about all those other meetings? Other than speculation, we meet to review an existing plan in order to continue action–to correct flaws, incomplete or missing items that impede the production of satisfactory outcomes. Begin this meeting with a declaration of purpose. After making assessments and refinements, we coordinate action. Ensure everyone knows who is doing what, why, when, where and how. Assign responsibility to individuals and the plan is now ready for action.

Let’s look at the rules for this meeting.

1. The leader of the meeting prepares and distributes the agenda and background materials required before the meeting.
2. The agenda states the problem, the alternatives and the decision.  It is not simply making bullet points but requires thought and choices.
3. All participants come to the meeting prepared.  Prepared means they have read the materials and gotten answers to any clarifying questions before arriving.
4. Participants have met 1-1 for complex issues prior to the meeting to add depth.
5. Start and finish the meeting on time–always.
6. Limit the number of attendees to only people critical to the outcome (I suggest no more than 10, and closer to 5).
7. The leader choreographs the moods appropriate to the meeting.
8. Our meeting is about speed, not prudence.
9. Keep meetings brief and moving with velocity.
10. Have people who aren't required for the entire conversations leave when they are complete.
11. Have a recorder who captures all commitments made; review commitments before adjourning.
12. Adjourn the meeting and schedule the next meeting, if required.

In our company we had many meetings that were fast and productive. To accomplish this required a background of trust in our culture so that people understood they did not have to attend or stay to the end of every meeting. Of course we faced challenges changing our common sense, but over time people came to see the increased productivity and competitiveness we were able to produce.

As an attendee, ask yourself:

• Will you be able to function if you read about the meeting after it's over?
• If you're given the decision we’re discussing in advance, can you give me your opinion in advance?
• Do you add value by sitting in the meeting without participating?
• Are you attending symbolically, or simply as a way to demonstrate your power?

OK, you're ready to go.  The first step is to separate speculative meetings from action meetings. Communicate with everyone about what you are doing. Your goal is increased velocity, not prudence.

Image: Flickr user/Iain Farrell