/Lex Sisney

About Lex Sisney

Lex Sisney is an expert at creating breakthroughs in individuals and organizations. He's grown from co-founder and CEO of the world's largest affiliate marketing company to follow his passion as CEO Coach to the world's next generation of expansion-stage companies.

Does Your Business Need an Anti-Chaos Officer?

Does your business need an anti-chaos officer? And what in the heck is an anti-chaos officer anyway? I’m referring to a senior leadership role that is dedicated to reducing the internal friction, noise, and chaos that naturally emerges across and between functions and whose mission is to enable the entire business to execute faster and smarter as a whole.

This role goes by many different names and interpretations and is usually splintered across multiple organizational functions. As a consequence, even though it can deliver tremendous value and leverage, it is still widely misunderstood. Additionally, the need for it is unrecognized in most businesses today. I am dedicating this article to clear up these misconceptions and to help you design and implement this very impactful position in your business. You’ll be very glad that you did. Let’s get to it.

What is this Anti-Chaos Officer Role Exactly?

Half the battle of understanding this role is defining it. Seriously. It is usually fragmented across the organization and comes in many different flavors and job titles. In my organizational structure work, I usually call this the Business Alignment Office. But this term hasn’t really helped me to make this position easier to communicate and teach. I recently heard a recruiter tell one of my clients, “Oh, it’s like an Anti-Chaos Officer!” and I laughed at the clever angle, which is what inspired me to write this article. Sometimes this role gets conflated with a Program Management Office or even a Project Management Office but it is more than these. Obviously, a role like a Chief Operating Officer or an equivalent has elements of bringing order, stability and throughput to the organization, but that isn’t the role I’m describing either.

So what is it? This is an organizational linchpin role that drives the coordination, management, and execution of all major cross-functional processes, projects, and initiatives. Its purpose is to identify, plan, coordinate, and communicate those high-impact, cross-functional problems and initiatives that improve metrics and decision-making, accelerate throughput, improve quality, and enable scalability of the entire organization. Its #1 mandate is to seek out cross-functional entropy and — by working together with other impacted functions — bring forth shared insights, speed, quality, and performance. Then find the next cross-functional opportunity and repeat.

When I was the CEO of Commission Junction, I blindly stumbled into this role and quickly realized the positive impact it can have. At the time, I was fortunate to have on staff a very smart and talented individual named Wade Crang. Wade had an MBA and an advanced math degree and had worked for several years has a consultant at a Big 5 consulting firm. I remember hiring him even though we didn’t really have a well-defined role for him to perform at the time. We just liked him and could tell he was smart and highly motivated.

Wade had a natural affinity for data and a deep curiosity to seek out and discover where the organization could save time and money and do things better. He didn’t focus on one area but looked across at the entire business for the low-hanging fruit to pick. He had one direct report underneath him, a business analyst, and that was the extent of his department. I basically left them alone to their own interests and initiatives and didn’t expect too much positive impact. I was quickly proven wrong. Within just a few weeks, we began to see friction and problems areas that had persisted in the gaps in between functions (e.g., between sales and operations, for example) start to go away and more momentum and free cash flow fall to the bottom line.

Three things stick out to me about Wade’s role and his approach. One, he always started with the data first and made sure that there was an accurate baseline established as to what was happening in the business before he did anything. Two, he never forced himself into another department. He always presented the data to the impacted departments and offered his help. But if they wanted his help, he had to be invited in. Three, he always shared the results and the learnings from these cross-functional initiatives, good and bad. Example: “Our average time to onboard over the past 6 months was 72 hours. We (myself, the sales leader and customer success leader) had a hypothesis that we could get it to 50 hours by changing these steps in the customer onboarding process. As of now, we’re at 48 hours, resulting in $400K in new monthly MRR this year.”

That’s the spirit of this role. Find the friction points and delivery model gaps that exist in between other functions and then take a data and business process optimization mindset to reduce entropy and increase throughput, quality, and bottom-line results. Then repeat in a cycle of continuous improvement.

In my organizational structure and design work, I have seen that the success and impact of such a business alignment role can make, time and again. But honestly, too few of my clients prioritize this role to the extent they should. I think part of the problem is my inability to give it a clean title. After all, it’s easy to go to the recruiting market to look for a qualified Chief Operating Officer or a head of Program Management. There’s tremendous shared consciousness on what these more commonly understood roles do and look like. It’s not nearly as easy to define a head of a Business Alignment Office or an Anti-Chaos Officer (to quote that recruiter who was also struggling to give it a sexy title). Nevertheless, this role I’m describing is just as critical and can create tremendous return on the investment.

What this Role is Not

Sometimes the best way to understand what something is, is to define what it is not. In this case, this role is NOT accountable for product management, operations, fulfillment, customer success, or other major organizational functions. Instead, it is accountable for the design and optimization of “the work that supports the work,” especially the workflows that cut across different functions like Sales, Product Management, Manufacturing, Engineering, Fulfillment, and so on. In other words, it does not manage Product, Operations, or Fulfillment teams, projects, or engagements directly but works with other functions to optimize how you execute as an entire organization.

Look at the image of the gears above and note the gaps that exist between them. If each gear represents a different organizational function like Sales, Operations, and Fulfillment, then this role is accountable to sniff out and close the gaps between gears. It is such a critical role because chaos or entropy naturally emerges in the dark areas that exist between different functions, and if left unaddressed, it will only increase over time. This role is accountable to find those problem areas, bring them into the light, and to help the impacted functions to resolve them together. This will move the organization forward so that each turn of the gears gets better and faster.

For example, let’s say that there’s a breakdown in the time between when the organization invoices customers and when it collects. Who is accountable for this breakdown? If you were to ask Sales, they would tell you it’s the Accounts Receivable department, which isn’t generating the correct invoices in a timely manner. But if you were to ask Accounts Receivable, they will tell you the problem lies within the Sales team, which isn’t following the defined setup and invoicing process.

As you know from experience, the correct answer probably lies somewhere in the middle, right? The Sales team needs to follow the accounts receivable process but that process can probably be highly simplified and optimized. The Accounts Receivable department needs to be accountable for the receivables balance but also needs help from Sales to influence collections from key accounts. If you were to attempt to solve this problem without a third leg of the stool that can understand the data, look at the problem from a holistic view, and catalyze Sales and Accounts Receivable to design a new and better process together for both sides, the problem will likely remain and chaos will reign.

Therefore, the purpose of this role is to seek out those problem areas or breakdowns that exist in between functions, bring them to light, galvanize a response, then measure progress and share the results. Put another way, if one of the reasons of having an organizational structure is to create unarguable accountability for different business functions (and it is), then this role acts as a scanner and sweeper to ensure that problems and opportunities aren’t lost in the gaps between functions.

The Approach of a Successful Chief Chaos Officer

You may be asking, if this anti-chaos role isn’t actually accountable for functions like Product, Operations, Fulfillment, etc., then how can it possibly bring down the chaos that exists within and between these and other functions?

The answer is all in the approach! Just like Wade, the leader of this role must rely on data and influence vs. authority and control. It can’t force its way in to solve others’ problems. It can’t take on the accountabilities of other functions. It has to demonstrate its value by leading with data, working across, modeling and sharing success, and offering to help.

In addition to hiring or promoting the right skills and style of the individual to lead it, the best way to launch this role into the organization is to have the leader create a digital war/data room. They’ll spend the first 3 to 6 weeks interviewing other functions on their frustrations and opportunities for improvement, specifically in cross-functional breakdown areas.

This is important! While this role may have the expertise to help Manufacturing with its manufacturing process, it is much better to help streamline the process in between and across Manufacturing and the rest of the organization — for example, between Manufacturing and Engineering or between Manufacturing and Finance or Sales, or wherever the breakdowns are occurring. If it dives deep into the Manufacturing process itself, then it’s going to spend the next several quarter/years, optimizing manufacturing only. But what if the Manufacturing function is sucking eggs and actually needs tremendous help? Then it probably needs a new head of Manufacturing and/or the support of dedicated manufacturing specialists. In other words, Manufacturing needs to own its own internal manufacturing process, just as all other functions need to own their own internal processes and metrics.

There are three guidelines that I always teach a new head of Business Alignment:

#1: Never take on a project that doesn’t have baseline data. You must be able to measure both pre- and post- implementation, or simply don’t do it! If your business is in a data quagmire and can’t easily get or extract data, then you might assign a dedicated business analyst with coding skills who can work around the obstacles until you have a full-fledged data warehouse and analytics. Don’t be alarmed about giving a few engineering or analytics resources to the Business Alignment Office. It will never have a large team. Just a small cadre of smart people who are data-, business-, and process-savvy and who are dedicated to helping other functions close the gaps. The resources you invest here will more than pay for themselves. If not, then there’s either no room for continuous improvement (impossible), the growth strategy isn’t putting enough pressure on the system to evolve, or you’re doing it wrong.

#2: When getting started, always look for quick wins. Meaning, don’t take on 3 or 5 projects at once and allow yourself to get bogged down in a quagmire. Instead, choose 1 short-range project and knock that out of the park. Then share the results with the entire organization and give lots of credit to those functions and people who were involved. That will start to build shared consciousness across the rest of the organization on what this new role does and the impact that this office can bring. Basically, don’t try to herd cats. Open a can of tuna and watch the cats come running. You can consider taking on longer term initiatives only after you have established the purpose and impact of this office.

#3: Always be fully transparent. Publish what potential projects are at the top of the queue. Actively share results and learnings, both good and bad. Make it the problem of the other business leaders to get your attention and change the priority in the queue because of the business ROI potential. If they make a strong business case, then their project gets priority, but that means other projects have to drop in priority. Meaning, I want you to have a mindset of full transparency and execution. Drive results. Share the results. Then repeat. Don’t become a bottleneck that is trying to digest and process a host of different projects. Also, don’t take on doing the work that is the accountability of another function. Focus on improving the throughput and quality in between functions.

Where to Place this Function in the Organizational Structure

I recommend you place the anti-chaos or Business Alignment function as a peer to the other major functions in the structure and as a direct report to the CEO. Why? Because this role is relying on influence and data to work across the organization. If you bury it as a project manager within Operations, for example, then it is going to be operations-centric and won’t be seen as a catalyst to other functions. In such a structure, it can even be seen as a stool pigeon that is just there to implement the will and needs of Operations, not to understand and help other functions like Sales, Customer Success, Finance, Marketing, etc. By keeping it a peer, you keep the interdependency.

Even if you are running a more consolidated structure with a span-breaker like President & COO in place, you still need to activate this Business Alignment role in the structure. It just can’t be buried under Operations or another major function if it is going to work across the organization and make the impact it is capable of.

If you’re already familiar with the Organizational Physics approach to Product Management, then one way to conceptualize this role is as a complementary twin to the Product Management Office in the structure. Basically, Product Management is the role accountable for translating, prioritizing, and coordinating new short-range product development and releases. Just as Product Management is to product, the Business Alignment Office is to the rest of the business.

Put another way, every organization needs at least two legitimate linchpin roles if it is going to thrive over time: one on the product side (Product Management Office) and one on the business side (Business Alignment Office). Basically, they are two sides of the same coin. Both roles can have a similar style, approach, and mindset to work across the organization and set priorities, but they require very different skills, career experience, and knowledge. In the chart below, note the importance that I’m placing on cross-functional coordination in the Business Alignment Office:

Why OKR Management is Placed Here

You may be asking why I’ve placed Objectives and Key Results (OKRs) Management under this function. The reason is that OKRs have a very high level of cross-functional interdependency and they are about moving the business forward and creating up-lift (versus business as usual). Therefore, the management or support of OKRs fits very nicely into this role—not to mention that the leader of this function needs to understand all aspects of the business from a cross-functional or holistic view.

This does not mean that this role is accountable for the execution of other departments’ OKRs or for approving their OKRs. Approving OKRs is always the accountability of the CEO or business unit head. The Business Alignment Office role is there to support the CEO or business unit head in the planning, tracking and retrospectives of the OKRs.

This is not a Project Management Office

One trap this role can fall into is to become a centralized project management office that is tracking, reporting and troubleshooting on a host of different projects across the organization. While your business may need a centralized project management team, don’t allow this function to get swamped under general project management tasks. This is NOT an administrative role. Instead, set it free to find those high-leverage, cross-functional improvement opportunities that reduce entropy and make the work better, smoother, and easier for everyone involved.

What is the Best PSIU Style for this Role?

I usually code the desired PSIU style for this role as a Stabilizer and Unifier or a pSiU which means that it excels at bringing order out of chaos and working well across the organization.

However, you will find more candidates, and may even feel better yourself, by having a higher Producing force in this role. The Producing force is that high-energy force that focuses on the short-run tasks and busts through obstacles to deliver results. It certainly seems like there is a need for a higher Producing force in this role, so why don’t I code it that way, as a Producer-Stabilizer-Unifier style?

The reason why is that a strong Producer style in this role will tend to create fast results but at the cost of stepping on a lot of toes and creating internal resistance to its presence. Basically, you want a healthy Producing force in this role, but not so high that it can’t work across the rest of the organization well or that it dives in to fix others’ problems for them. You need this role to galvanize awareness and initiative so that other functions can participate in solving their own challenges. You don’t want this role to become a one-man superhero who jumps in to save the day and then gets burned out from the effort and political fallout.

What is the Actual Job Description?

Great question. I’ve created one for you. Feel free to copy and modify it.

Where to Find Qualified Candidates

Qualified candidates are actually easy to source. Look for really high IQ with enough EQ to work well across the organization. MBAs with experience in Big 5 Consulting, data analytics and process improvement can often be ideal. As I mentioned, look for a Stabilizer-Unifier style and with enough Producing force to get after it, but not so much that it creates more organizational entropy.

As I mentioned, the real challenge that I and the CEOs that I coach have with this role is what to call it. And especially what to call it in the recruiting market. I hope it is obvious that I used the term “Anti-Chaos Officer” to grab your attention and that hopefully I’ve inspired you to start to think about the impact this role can make and where and why you need it. But I don’t think you can go to the recruitment market looking to fill for an “Anti-Chaos Officer.” Maybe I’m wrong.

So what do you think I should call it? I’m definitely open. I have called it the Business Enablement office at times but now I’m leaning towards Business Alignment Office. Program Management Office (PMO) is too bureaucratic and doesn’t quite capture it. Business Operations is too operationally oriented. Business Integrator is a loaded term but maybe it works. Seriously, I would love to find the perfect title! :-/

How to Measure the Success of this Role

If the leader of this function has approached things in the right way by leading with data and establishing a baseline, measuring performance, being transparent, and working across, then it’s drop-dead easy to measure the performance of this role. The numbers and ROI will be right there for every project. If they haven’t, then it isn’t easy to measure success at all. Just another reason to reinforce approaching it in the right way.

One thing to keep in mind is that this is indeed a full-time role. Its job is never done. You don’t launch this role to complete one or two key cross-functional projects and then end it. There is always room for continuous improvement. There is always chaos to manage. If you want something to improve in your organization, have the right role accountable for it and keep striving to get better with each iteration.


Despite not having a perfect title for this role yet, I hope that I’ve communicated the essence of it and the sustained value it can bring to your business when approached in the right way. While the value will show up on the top line and bottom line, if done correctly, it will also show up in how the entire organization learns and evolves.

If you don’t have this role in the organization, or you have it buried too deeply under other functions, elevate it! Give it a charter and watch what happens. It’s only after having it in the organization for a month or so that the light bulb will finally turn on. When you hear yourself saying, “Ohhh, now I get it. This is what that guy Lex from Organizational Physics was talking about! I wish I had done it 3 years ago,” just know that I’ve heard that before!

Finally, two books besides Organizational Physics that I assign to all CEOs and new leaders to understand this role are Black Box Thinking by Mathew Syed and the High Velocity Edge by Stephen J. Spear. Black Box Thinking reinforces the need and mindset of measuring everything and using the data to solve problems, not casting blame. The High Velocity Edge is great primer on the mindset for continuous improvement, showing that we learn best when we get to experiencing the problem ourselves and then self-discover the solution. These are both essential skills for building a learning organization that gets better over time.

By |2020-12-06T20:45:40-08:00December 6th, 2020|Articles|Comments Off on Does Your Business Need an Anti-Chaos Officer?

Delegation Strategies: When NOT to Delegate

We’ve all been encouraged to delegate more. We’ve also all had the experience of delegating in the past only to have things turn into a total fricking disaster. Most management writing is on how to delegate better. I want to explain when, why, and how you should NOT delegate at all and how to better educate your team about why you’ve made those delegation decisions.

What inspired this article is a CEO friend of mine who recently completed a 360 degree performance review between herself and her leadership team. Can you take a guess at what most of the ‘things to improve’ feedback was? You got it. “Needs to do a better job of delegating.” “Tries to do too much herself.” “Gets too involved in the details sometimes.” I see the same scenario often with my clients.

Some of the feedback my friend received was valid. But some of it was not because, in this instance, she doesn’t fully trust in the abilities of the subordinates who were giving the feedback. She’s not wrong. How can you delegate a mission-critical project to someone whose capabilities you don’t fully trust?

There’s a mental model I like called the Conviction-Consequence matrix that helps to clarify to yourself and to others what projects you’re delegating and which ones you’re not and why. I picked up the outline for this model in the book Super Thinking, where the authors originally attribute the model to venture capitalist Keith Rabois. I’ve put my own spin on it:

Do It Yourself are those projects or situations that you have high conviction over and that also have very high consequences, positive and negative, to you and the organization.

I just love the use of the term conviction here. Think about the things in your life that you have high conviction over. Notice that you tend to be very capable in these areas already. You likely also have some significant experience dealing with similar situations to this one in the past. Ideally, you also have deep understanding of the first principles that guide the outcomes in this area.

However, there are also times as an entrepreneur when you can’t actually explain why you have such high conviction. You just know that you know, even if you’re not sure exactly why you know. True conviction can sometimes be a purely innate sense but it is still one that is hard to argue with.

Delegate to An Expert refers to those projects or situations where you have low conviction yourself but there are definitely high consequences for you and the organization. These are the projects or situations that you delegate to an expert, either to an internal staff member or to an external resource whom you trust.

The operative word here is trust. Building trust takes time. So if this is expert relationship is a new one to you, then you’ll need to spend more cycles getting to know him or her, learning from them, and verifying their approach and results. Once trust is built, you can delegate here with higher confidence and less of a time burden on you.

Delegate to Develop Others are those projects and situations where you have high conviction over what the end result should look like but it’s of low(er) consequence. This is a great area to use to train and develop your high-potential staff members. If they make a mistake, it’s manageable, and you’ll both learn and grow from it. But you’ll often be pleasantly surprised at their results too, which further builds trust between you and encourages you to give them high(er) consequence projects in the future.

Always Delegate are those low-conviction and low-consequence projects and situations. Get these off of your plate – and fast. Build complementary teams and support systems around you so these things get taken care of in ways that are timely and accurate, but require little time and energy expenditure from you.

Next Step: Map Your Projects

Using the Conviction-Consequence matrix as a guide, the next step is to reflect on how you’ve spent the last few weeks or months and place those projects or situations into the quadrant they should be in, then compare them to how you’ve actually been managing or delegating them. Look for discrepancies.

Are you spending your finite time and energy on directly leading projects that you don’t have high conviction over? If so, I would wager a large sum of money that you’re stressed out and agitated because you feel like the blind leading the blind.

I also imagine that you have had a hard time finding a suitable expert to take on this project, either because you lack the resources or you don’t fully trust the person who should be in charge, and so you’ve stepped in to fill the void.

My advice? Shift resources to finding and placing the expert, again either internal or external, that you can trust. There’s a reason that Jim Collins coined the term “first who, then what.” If you don’t have the right people on the bus to drive a project, you probably shouldn’t be doing that project right now.

Are you missing opportunities to delegate low(er)-consequence projects in order to develop your staff? Developing others takes time but if you don’t let go of some things, you’ll end up drowning in all things. What projects do you have high conviction over that you can and should delegate and to whom?

For instance, my friend who inspired this article is in the middle of raising Series B. Obviously a high-conviction and high-consequence project. However, she’s been spending an inordinate amount of time getting the investor deck right. She realized that her business analyst is actually the perfect person to delegate this project to. Of course she’ll validate the work and can make any adjustments but more importantly, she can use it as a development opportunity.

Have you been ignoring some high-conviction and high-consequence projects? If so, this is a double negative whammy. These are the projects that you’re best at doing and should be doing but you’re not, likely because you’re too busy and consumed managing people and a litany of other projects. Fix this and fast. Not only are you not doing what’s best for the organization, you’re likely irritable and stressed out too because you’re not playing to your personal strengths and interests. It’s a downward spiral.

Do you have any low-consequence and low-conviction projects sucking your time? I think all of us are clear that we’re supposed to be outsourcing/delegating these kinds of projects and activities but it’s still easy to get sucked in here. Be vigilant in not allowing low-value and high-cost projects into your life. Don’t trade activity for effectiveness. In order to drive meaningful things forward, you have to have the capacity and focus to actually do it. Everything is a trade off.

Mental Models Are Best When Shared

Mental models are best when shared, so one thing I recommend is to actually teach your team this matrix and lay out where the current projects and situations should be in each quadrant. You’ll notice that some projects seem to get stuck in the middle between quadrants. That’s a great leading indicator that something needs to change.

Do you trust the leader to whom you should delegate? If not, make it known how they can build trust with you and vice versa. What are the expectations, key results, and key performance indicators to tell you this project is on track? Align there or make a change in the leader. Don’t get stuck in the middle.

Do you lack the resources to delegate to? If so, do less. Let things go until you have the resource you feel you can quickly get to high trust with. If you’re under pressure from elsewhere in the organization to legitimately do too much, then shift your focus to making this known and coming up with a solution.

Finally, use this matrix to ask your team for perspective on where they think you can do a better job of letting go and delegating. Find out where they are inspired and talented enough to step in and fill the gaps. And what are the expectations you have on them if they do take a particular project on? Well begun is half done.

Every leader has to go through a progression from leading by doing to leading through others. Use the Conviction-Consequence matrix to identify gaps in where you should be delegating or not and to create shared consciousness on your team about where the problems and opportunities lie. If the team can understand the rationale for why delegation decisions are made, this will reduce internal noise and friction around who is doing what.

I hope this concept was helpful in delivering some new perspectives for you and your team on when to delegate, when not to, and why.

By |2020-03-02T13:20:25-08:00March 2nd, 2020|Articles|Comments Off on Delegation Strategies: When NOT to Delegate

Great Brands Have Only One Message

Casper the online mattress company – sorry, eh, I meant to say “the sleep transformation company” – recently announced its IPO. From the S-1:

As the wellness equation increasingly evolves to include sleep, the business of sleep is growing and evolving into what we call the Sleep Economy. We are helping to accelerate this transformation. Our mission is to awaken the potential of a well-rested world, and we want Casper to become the top-of-mind brand for best-in-class products and experiences that improve how we sleep…

We believe great brands win over the long-term and have the ability to change the culture around them. We have endeavored to build a brand that is genuine, trustworthy, and approachable, as well as fun and playful. Through our investment in a sophisticated and integrated marketing strategy, we engage consumers across the entire consumer journey, from our iconic public transit advertising campaigns, to our “Napmobiles” and experiential retail store concepts, to our category-leading social media presence. We see the Casper brand as an immeasurably valuable asset that we are utilizing to help capture a large share of the Sleep Economy.

When you read this, does it make you want to go online and buy one of their mattresses? Me neither.

Does it make you roll your eyes a bit? Yep, me too.

But does it do what the message is targeted to achieve – to speak to the financial community and gather interest and excitement for the upcoming IPO? I don’t think it does.

In fact, I think this message creates more harm than good because the brand is speaking with two voices. One to its consumers through its “brand focus” and one to its investors through its “investor focus.”

Great brands don’t do this. Great brands speak to the core customer’s perspective with one voice and one message to all stakeholders.

So what should Casper say to the investment community instead? I don’t claim to be a communications expert but it’s some variation of what really matters to the core customer: “Casper helps people have a great night sleep.” Period.

Why is this the core message? Because the core customer defines the polestar for all other company stakeholders, activities, and initiatives. If the head of the company muddles this message and focus, then they muddle everything else too.

“But wait a minute,” you might be asking, “what about meeting investor needs? Prospective IPO investors will certainly want more color on the company’s customer acquisition costs or gross margin or strategy, so shouldn’t they also have a message tailored to the investment community?” Nope. From the top of the company down, it should actually have the same message when speaking to the investment community as they do to all stakeholders, internal and external: “Our focus is on helping people to have a great night’s sleep. Everything we do is about understanding our customers’ needs. We strive to provide our customers with the best sleep possible at great price. That’s what we do.”

Notice that in my example I actually didn’t answer the questions from the financial community. That’s exactly right! The most important thing for brand engagement as well as organizational culture, alignment, and execution is that the leadership of the organization consistently reinforces the organization’s purpose from the core customer’s perspective.

All communications, internal and external, must speak to the purpose of the brand and as if everyone was a potential consumer of Casper mattresses. Financial investors can review the company’s financial statements. Those who really care can tell if the company has healthy acquisition costs and operating margins. But the core message shouldn’t deviate. In this case, probably on the advice of the investor relations committee, Casper made a mistake by attempting to appeal to the investment community by focusing on the company’s data acquisition strategy as a competitive differentiator:

“We believe we have more data on consumer sleep behavior than any other competitor, and we use it to enhance all areas of our business. We gather data from a variety of sources including webpage visits, retail store analytics technology, retail points of sale, delivery partners, retail partners, media partners, social media, consumer reviews, inbound consumer interactions, returns, and a variety of third-party data sources. Our in-house teams of data scientists and analysts leverage this data for insights to enhance various areas of our business including new product development, current product improvements, casper.com user experience optimizations, pricing, and delivery improvements.”

Information is free-flowing. Investors read it but also consumers and employees. Multiple messages go to all audiences. Now if you’re a potential consumer of mattresses or even “sleep transformation services,” does giving up a bunch of your data to a CPG brand fill you with warm fuzzies? Didn’t think so. Or, if you were an employee reading this does this focus fill you with pride and tap your latent creativity for the company? Just the opposite. If Casper was smarter, they would drop the split personality and speak with one voice to all stakeholders through the lens of the consumer.

Do you know who does this really well? Jeff Bezos and Amazon. Bezos is always on message about being customer-centric, about finding new opportunities to listen to customers and to delight them. Go read any Amazon quarterly report or press release. It’s almost ALWAYS written towards the end consumer. There is nothing in the messaging that orients away from the purpose of delighting the customer or sending mixed messages.

Does Amazon’s lack of sharing internal strategies or metrics piss off some investors? You bet. Does Amazon have a lot of detractors? Yes, it does. Does it matter? It does not. What matters is that from the top down, Amazon is always speaking to all stakeholders through the lens of only one message and customer: the consumer.

For example, here are some random quotes from Bezos speaking to Prime (Amazon’s amazing economic flywheel), Innovation, and Strategy. Notice how everything is focused on the end consumer:

On Prime: “We want Prime to be such a good value, you’d be irresponsible not to be a member.”

On Innovation: “Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.”

On Strategy: “There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.

“Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great.”

The point I’m trying to make is that as a leader, first and foremost, the message starts with you and you need to know for whom it is that your organization exists and that answer should drive all of your messaging. Knowing for whom you exist is even more important than articulating why you exist. A high-performing organization cannot serve multiple masters. If it attempts to have multiple messages to different stakeholders then it will lose credibility to all of them. Be consistent. Be on purpose. Speak with one message to your most important core customer and all other stakeholders will get in line.

Let me give you another example of the negative repercussions that occur when a brand has multiple voices to multiple audiences. This one is so egregious that I actually remember the quote from several years ago. It comes from the CEO of once hot consumer brand SodaStream:

“We created a razor and a razor-blade business model. The razor is obviously the soda maker (lower margin) and we have three blades (higher-margin): the CO2 refills, the flavor syrups, and the bottles. So it’s not a one-time sale — the blades are our future revenue stream. We acquire users, build our installed base, and we cultivate those users for life… The kitchen countertop is the most expensive real estate in the world.”

To be fair, SodaStream sold to Pepsi Co for $3.2B at the height of its popularity so you might view that as a success no matter what. But SodaStream has dropped considerably from its sales apex and I think one reason is that many consumers like me found the time between refills to be short and frequent instead of long and of value. In fact, every time I personally went to buy a refill as a consumer I would remember this CEO’s quote about the world’s most expensive real estate on my countertop and the value of selling razor blades. It wasn’t long until I felt resentful and cheated by SodaStream and it soon went below the countertop and unused.

In summary, we live in a world of free-flowing information. All stakeholders, consumers, employees, and investors are exposed to all messages. As a leader, one of your most important jobs is to set the tone. Be consistent. Be on purpose. Always speak to the purpose of the brand through the eyes of the core customer who is your most important and valued audience. If you do that, then all other stakeholders will eventually understand what’s most important to your business and can either opt out or opt in for the ride.

By |2020-01-15T14:39:03-08:00January 15th, 2020|Articles|Comments Off on Great Brands Have Only One Message

Who Owns the Customer?

When I’m building a new organizational structure with a leadership team, someone usually makes this observation: “In this new structure, who actually owns the customer?” Before responding, I first try to get a shared definition so I’ll ask them to clarify: “Great question. What do you mean specifically by ‘own the customer’?”

They tend to hem and haw before replying something like, “You know, own the customer… a single point in the organization that knows everything about the customer, that is accountable for the overall customer experience, makes product decisions, and that champions the customers needs.” They might then share with me that in their old structure, this role was held by the VP of Product or Marketing or Customer Success. “In this new structure,” they’ll add, “it’s unclear who owns the customer.”

OK, now we’re getting somewhere. Here’s the answer:

In a well-designed organization, no single role should “own” the customer. Instead, the entire structure must be designed to acquire and serve the right customers now and over time. Every role in the structure has a part to play in accomplishing that mission.

Put another way, there are some key steps in the customer journey: from acquisition to on-boarding, to engagement, to support, to the design and maintenance of the products and services customers use, and so on. Each of these distinct steps in the customer journey actually requires a different mindset, skill set, and focus. If the structure were designed so that one role is accountable for all aspects of the customer journey, some very predictable problems will emerge because the organization is attempting to consolidate too many conflicting and competing needs under one role.

What kinds of problems? They exist on a spectrum in relation to the competing demands of short-range vs. long-range, efficiency vs. effectiveness, and autonomy vs. control. You can read more about these competing demands in Top 10 Signs Its Time To Change Your Org Structure. How those problems show up in your particular business will depend a lot on the skills, style and interests of the individual leader as well as the lifecycle stage of your business.

For example, if the leader who is supposed to “own” the customer is more sales-oriented, then you can expect to see a lot more focus on customer acquisitions and a lot less on customer engagement and retention. If the leader is more process- and quality-oriented, you should expect to see a lot of great product plans but very little throughput. In other words, some segments of the cycle will thrive and others will suffer.

Or, if your business is growing rapidly in the early Nail It stage, for example, you will see a lot of firefighting by the team to meet customer needs, with no one really sure who is in charge of each step, and no solid foundation to actually sell and serve customers sustainably. This will result in underperformance across the board.

In any case, the solution to solving these challenges is to actually map out an ideal customer journey and then clarify what roles or functions are accountable for each step. Then it becomes a question of implementing cross-functional processes, teamwork, and metrics to delight the customer at each stage of their journey with different roles focused and accountable for each distinct step.

Let me give you an analogy. If your organization was a professional soccer team instead of a business, who should “own” the victory? The answer is that the entire team is responsible for the wins and losses. But clearly, different roles are accountable for different things. The forwards are accountable for scoring goals. The midfielders for controlling the transition game. The coaches for ensuring that the right players are well-prepared and on the field, and so on.

The head coach of a soccer team is ultimately accountable for success or failure of the team. Just like the CEO, the “buck stops here.” However, the head coach’s job is to delegate accountability for key results on and off the field. Accountability can and should be delegated but responsibility cannot be. In other words, the entire team is responsible for success, with key roles each accountable for their part. Another way to think about this is that if there is one role that owns the customer journey, it’s actually the CEO. The CEO delegates key steps in that journey to other roles.

The same is true for your business. Let me show you what I mean. First, see if you can map out the ideal Customer Journey for your business today from start to end (not what is happening but what should be happening). You can think of the Customer Journey as a cycle or a process that repeats itself. As a leader, your job is to design your Customer Journey so that, like a flywheel, each iteration is done faster and better for your customers.

Mapping the Customer Journey

Below is a simple Customer Journey map for a B2C product company that sells through retail channels. Your goal is to design something similar to this. Draw the key steps that customers should go through and that answer the question, “How should we best identify, engage, sell, retain, support, and develop new and existing customers?”

The Customer Journey or Customer Cycle shows how we best identify, engage, sell, retain, support, and develop new and existing customers.

Next, see if you can map the functions or roles that should be accountable for each step in your Customer Journey, just as the roles on the soccer field have different accountabilities. If you notice that you’re consolidating too many steps under one function or role, see if you can push deeper into the organization to the role that is actually accountable for implementing or performing that step in the process. You want one role accountable – not two – for each step.

As an example, here is the same Customer Journey as before, now mapped with the roles that are accountable for each step:

Customer Journey mapped with key accountabilities at each step.

To be clear, I am not showing reporting structure in this map of accountabilities. For example, Fulfillment may actually report to Operations or Product Marketing may actually report to Brand Marketing in the structure. However, I am calling out which role is accountable for getting the work done “on the field.”

It might be tempting to do this exercise and say “OK, yes, this is the ideal Customer Journey and yes, these are the roles accountable for each step and now I’m going to just have Sales or Marketing or Product or whatever oversee the entire journey.” This would be a serious mistake that would actually violate the laws of structure. It’s akin to asking your goalie to report to your lead forward, which would backfire on the soccer field, right? Well, if your business is set up in a similar way, it will backfire there too.

Do You Feel Nervous?

If you’re feeling nervous about NOT having one role accountable for the entire Customer Journey, then I haven’t done a very good job of explaining myself. Let me put it this way. Would you feel nervous if you were actually a soccer coach and your lead forward on the soccer team wasn’t also playing goal keeper simultaneously? Of course not. On the contrary, you would feel very nervous if that were actually the case. Instead, you should feel nervous about not having strong leaders and performers executing each key step in the process.

Rather than thinking about “owning” the customer, think instead about designing an entire organization that excels in delighting its customers at every step of the way.

The same concepts are true for your Product Development Cycle and for your Employee Cycle. These and other mission-critical process cycles in your business require their own accountabilities, teamwork, and cross-coordination. They don’t require one “owner” and in fact, you’ll find yourself suffering if you have them consolidated in that way.

But Wait – We Need One Person in Charge Around Here!

This takes me to the hidden objection behind the questions, “Who owns the customer?” or “Who owns product decisions?” or “Who is accountable for recruiting?” that I often come across when designing a new organizational structure. It’s the erroneous belief that “I have to be in charge of it in order to get the work done.” This is a fallacy. Instead, what most often happens when a role in the organization believes they need to “own it” in order to make it work is that they end up managing a bunch of entropy that they’re not well-suited to manage.

For instance, I was recently working at a company with a head of Product and Marketing (these are two distinct functions, by the way, and they should never be co-joined). He was very reluctant to give up product management decisions in order to spend more time on marketing and brand development activities (areas he was much better suited for and where the company really needed a boost). His ego believed that he needed to “own the entire customer journey” in order to ensure that the product was on target and customers were satisfied.

What do you think was actually happening? He was spread thin, operating outside of his true strengths, and fire-fighting in a bunch of different areas of the business. As a result, nothing was working well. His belief was, “I need more resources!” In reality, he was trying to be accountable for too many things on the field at one time. This is a recipe for failure. He was trying to play offense and defense at the same time and he was exhausted. The entire team was suffering, especially in new product launches, which he never seemed to find the time to lead.

Everyone – the entire team – is responsible for wins and losses. But different roles in the organization should be accountable for discrete steps in the Customer Journey. The same is true for how you develop and maintain your products (Product Journey). Ditto for how you attract, retain, and develop your employees (Employee Journey). All roles must have clear accountabilities but also work together to deliver excellent results in a changing world.

So back to the question that started this article, “Who owns the customer?”  The answer is: No single role owns all aspects of the Customer Journey. The entire structure must be designed to support a world-class customer experience at every step, now and over time.

By |2020-06-17T07:43:47-07:00December 5th, 2019|Articles|Comments Off on Who Owns the Customer?

Communicating for Better, Faster Change Management

As a manager, have you found yourself asking an employee or team to do something differently and, despite your best attempts at getting through to them, their old behaviors remain? Does this not make you want to pull your hair out in frustration and consider a new career in bocce ball?

If you’ve answered even a half yes, you’re obviously not alone.

Often things go like this. You communicate to an employee or a team that something needs to change. You make sure to look for signs of shared understanding and commitment back from them: “Does what I’m saying make sense to you?” or “Can you repeat what I said back to me so I know that I was clear?” In that moment, they seem to get it. But when you follow up a few weeks later, you’re dismayed to find out that their old behaviors remain are stuck in place.

This scenario is as frustrating as it is common. The good news is there are approaches that can help you get the results you want with much less effort. I’m going to share a great one here that I learned recently from a wise mentor and coach.

The next time you find yourself in a similar situation, you can try this approach instead. Begin first by communicating what they need to STOP doing, then communicate what they need to START doing, and then paint a picture to define in unarguable terms what the IDEAL would look like.

If you can follow this sequence of STOP-START-IDEAL, your chances of initiating change and seeing new and positive behaviors is much greater. Why? Because each of us has finite energy in time. If you don’t first call out what existing behaviors or mindsets need to STOP, that person won’t likely have the energy and capacity to START something new. Finally, if you don’t create a shared consciousness about what the IDEAL or goal actually looks like, you may even lead the person in the wrong direction.

Let me illustrate the key differences between they typical approach to coaching and the STOP-START-IDEAL approach to coaching. We’ll start with an example from sports and then apply that understanding to a corporate setting.

The Blind Side

Ben Jones is a hypothetical left tackle for the Jumbotron Jets. He has all of the physical tools and potential to be a great player but he isn’t performing at a high level. Despite the team’s best efforts at ensuring his success, he just doesn’t seem to get it.

It’s not from a lack of effort on Ben’s part either. Ben has clearly been working hard to get better. But at this point in his development, everyone — including Ben – is frustrated with his ongoing poor performance. It’s a real drag on the organization.

I’d like you to imagine that two of Ben’s coaches are on the line guiding him to practice his run blocking. Let’s listen in to the two approaches:

Coach 1: “Ok Ben, I want you to keep your body low and drive powerfully off the line, ready? Hut hut.”

“Damn it Ben, that’s not quick enough. You’re too far back in your stance. Do it again!!”

Coach 2: “OK Ben, I need you to first STOP shifting your weight back in your stance. Instead, I need you to START shifting your weight forward in your stance. Look, here is a picture of an IDEAL stance that I need you to model. Notice how far forward it is? Good, any questions? OK, ready, hut hut.”

“Nice Ben, you nailed it. That’s exactly right. Good job.”

What was the difference between these two coaches and their impact on Ben? The first coach told Ben what he wanted but it didn’t work because Ben’s existing behaviors and mindset were in the way. In order to be more successful, Ben first has to recognize and let go of what is taking up space in his behaviors and mindset. It’s not enough that others can see what Ben has to stop doing. It only matters that Ben gets it!

The second coach began by telling Ben what he needs to STOP doing. Only then could Ben fully understand what he needed to  START doing. This coach also made sure that Ben could see and start to embody the IDEAL in his mind’s eye. It would be no surprise if Ben’s performance immediately started to improve.

Begin with STOP!

The second coach who followed the STOP-START-IDEAL model has a valuable insight and lesson for every manager struggling to coach up their staff. It’s the recognition that each of us has finite energy and capacity at any moment in time. If we don’t first identify and clear out what needs to stop happening, there’s no room or capacity in the employee to start a new, ideal mindset and behaviors. It’s true in athletics and it’s true in business.

Here’s an example from business. Let’s imagine you have an employee, Sam, who is the VP of New Business Development. Sam is charged with establishing new channel partnerships. He keeps closing mid-tier partnerships but he hasn’t yet closed one tier-one partnership, which is what the organization really needs him to do. You keep communicating, “Sam, it’s good that you’re closing these mid-tier partnerships but I want you to focus on tier-one partnerships too.”

What’s going to happen? Despite Sam putting some initial renewed efforts into closing tier-one partnerships, the inertia of mid-tier partnerships will continue because that is where Sam got initial traction and is comfortable operating. “Besides,” Sam tells himself, “at least it is something.” Inertia in life and business is a real thing.

Instead, you first need to make it clear to Sam what you need him to STOP doing. If he stops doing this, then that opens up space for that. If you don’t call out what he needs to stop doing first, the status quo will continue.

Now, you may be thinking: I can’t afford to have Sam stop doing mid-tier partnerships altogether because we need both. Well, that may indicate that you actually have a structural flaw if you are asking one person, Sam, to focus on both types of partnerships. Or it may mean that you need to stop spending outbound marketing efforts targeting mid-tier. Or it may mean that you have misaligned incentives for Sam. In any case, it won’t get fixed in Sam’s mind unless you communicate first that he needs to stop doing “X” in order to make space to start doing “Y,” and what an ideal “Y” actually looks like.

Followed by START, then the IDEAL

If you can clearly communicate what the employee needs to stop doing first, then it’s actually pretty easy to communicate what you need them to start doing, especially if you can show or model the ideal. Notice that this works for both actions and behaviors.

“Sam, I need you to stop calling mid-tier partners. I need you to start calling tier-one partners. An ideal tier-one partner is ACME which does $100M+ in sales, has 50+ distribution reps, and is the leading channel on the east coast. I need you to find 1 partner like ACME in each region within the next three months. Any questions?”

“Cindy, I need you to stop thinking like a department manager whose main goal is to build up and manage a team. I need you to start thinking like a subject matter expert instead. We already have an ideal model for this — think of Laura in the Business Alignment Office. Laura has just one staff member but she is a company resource to many people who seek her expertise.”

I’m not asking you to be formulaic with these examples, just to first call out what needs to STOP before you can communicate what needs to START happening, and then anchoring it in with an IDEAL model – in that sequence.

Who Should Define the Ideal?

In a normal scenario, you can rely on your staff to help define what an ideal looks like. In some cases, however, when you’ve been trying to communicate and you’re not getting results, it’s critical that you define the ideal. Why? Because if your employee really understood the ideal model, it’s likely that they would be doing it already. You have to define it for them and then make sure that they understand it clearly.

Needs, Not Wants

Notice in the examples that I’m using the language of needs and not wants. That’s deliberate. If the employee in question assumes that this is just the whim of you the manager and not a true need of the organization, it’s less likely that they will get it and actually change. It needs to be clear that this is a need, not a whim or desire. If these needs aren’t met, this employee is no longer going to be in this company or in this role. Got it?

What if They Still Don’t Change?

If you’ve tried this approach to change management and you’re still not getting results, then you need to either let the employee go or find a new role for them in the organization that is better suited to their skills, style, and interests.

In some cases, you’ll need to look deeper for any underlying structural flaws in your organization. If your employee or team is fighting an uphill battle in the structure, they won’t have the autonomy or resources to actually make the change you’re asking for.


The STOP-START-IDEAL communication model is based on the recognition that each of us has finite energy at any given moment in time. Before we can embrace a new behavior, especially a new behavior that’s a stretch to develop, we have to first cease doing what we’ve been doing, in mindset or behaviors, that is no longer effective.

If we can first get clear on what old behaviors or mindsets need to stop, and actually stop them, by law that frees up energy and capacity to develop new mindsets and behaviors. If we don’t first stop the old behaviors, the inertia of the status quo will continue.

First begin with STOP, then define the new behaviors to START, and then make sure to define what the IDEAL actually looks like. Do those steps in that sequence for better communications and more effective, faster change management.


I always learn a lot from the people and coaches I work with. Here I want to give a shout out to a wise and talented conscious communications coach, Veda Mallory Ball of TeamWise. Veda is the person who taught me the STOP-START-IDEAL model and reminded me to align with my own first principles of Organizational Physics: first stop the leaks or energy drains that are stealing capacity. Thank you Veda for another great life lesson. To my readers, if your organization needs practical, heartfelt communication and management training, reach out to Veda. He’s a true sage.

By |2019-09-22T10:43:53-07:00September 18th, 2019|Articles|Comments Off on Communicating for Better, Faster Change Management

The Top 10 Signs It’s Time To Change Your Organizational Structure

Lex conducting an Organizational Structure & Design Workshop in Capetown, South Africa. Photo Credit: Gregor Röhrig

Changing your organizational structure sucks.

There. I said it.

Helping companies change their structure is the work I do every day. If I didn’t know what I know now, I’d wonder, “Why would anyone want to do it?”

Changing your company’s structure can be a massive initiative. If you don’t do it correctly, it’s a recipe for disruption and disaster. People’s careers are on the line. Job titles can change. Existing reporting lines can get disrupted. One leader’s turf can expand and another’s shrink. The political fallout can be a huge cost in itself.

Even worse, if the new structure is done wrong, you’ll have the classic case of the cure killing the patient. You can set your company back even further in its development.

The corollary is also true. Structure done right can be the breakthrough you’ve been looking for. It’s like activating the booster stage of a rocket. It’s the catalyst to the next level of performance. I know because I’ve seen it happen over and over. It’s the reason why I do the work I do. It’s also one of the most misunderstood aspects of organizational design.

Let me explain all this by starting with a recent example at Microsoft.

In the early 2000s, a few years after taking over as CEO from co-founder Bill Gates, Steve Ballmer decided to double down on the existing divisional structure at Microsoft. A divisional structure typically has strong divisional heads but poor or limited cross-functional coordination across the divisions. Ballmer’s approach led to this infamous visual about working at Microsoft in the 2000s (I’m not sure who the source is but I still find it funny):

If your business has the wrong structure for its business model, strategy, or lifecycle stage, it’s not going to scale up. It’s going to trip up.

What was the problem with this approach? It was the wrong structure for a changed reality. The existing divisional structure worked well for Microsoft in the 80s and 90s during the desktop/data-center era. But the structure itself also made Microsoft incapable of adjusting to a radically changing, Internet-first era. Ballmer tried to rectify this problem by changing strategies several times but he never changed structures until 2013 (and then only haphazardly or half-heartedly). It was too little, too late. Under his tenure, Microsoft lost half of its enterprise value. Not a good score.

Within a short time after taking over from Ballmer as CEO in 2014, Satya Nadella not only changed the strategy at Microsoft to be truly cloud-first/mobile-first; he also made it priority to change and refine the organizational structure in order to best execute on that strategy. Under his leadership Microsoft has more than tripled in value.

Structure can kill or structure can strengthen your entire organization. But as a CEO, how do you know when it’s OK to let the current structure stand and when it’s time to change it?

I’m going to share with you the 10 tell-tale signs that you likely have a structural issue harming your business. The more symptoms you can check off on this list, the more urgency you should feel about designing the right new structure for your business.

1. The strategy has changed. The structure has not.

The bigger the change in strategy, the greater the need for change in the organizational structure to support it. Why? Because inertia in business is a real thing. It’s not enough to announce a change in strategy. You also have to re-align the power centers of the organization to actually execute on the new strategy. Otherwise, the inertia of the status quo will continue to send the organization on its existing trajectory.

What do you think would have happened to Microsoft when Nadella took over if he attempted to execute on the new mobile-first/cloud-first strategy within the old divisional structure? You know what would have happened! Despite his message to investors and employees about shifting strategic priorities, Microsoft would have continued to pump out windows-first desktop and mobile applications tied to Windows-only hardware. A new strategy requires a new structure.

2. You have strong individual departments and weak cross-functional coordination.

If you’re mostly pleased with the performance of your individual departments but those departments are acting more like isolated silos than high-performing cross-functional teams, this is often a structural issue. A good rule of thumb is that if you want something to change or improve in your company, you’ll need a function or role accountable for it. This includes the accountability for cross-functional coordination.

There’s a catch here. There’s a common misconception that in order to have high coordination there also needs to be high consolidation. For example, let’s say that Sales and Product aren’t working well together, causing a lot of internal friction and finger-pointing. A common mistake is to consolidate Sales and Product under one leader like a President: “Ha! That will teach ’em to get along.”

Can it work? Sure. It can work. But it’s very risky. It puts a very high dependency on one individual leader. It could very easily tip so that Sales starts to shape Product too much toward meeting short-range quotas and thus the company misses out on the next round of long-range innovation. The company can quickly become sales-dominated vs. product- and innovation-oriented.

In reality, we do want conflict between Sales and Product. You just want that conflict to be constructive towards the sustained performance of the company over time. It’s usually a mistake to consolidate functions together when those functions each serve a different purpose. It’s especially so when it’s simply an attempt to improve cross-coordination. A better and more scalable approach is to energize a function in the structure to become a peer to Sales and Product as well as other major functions — one that is accountable for cross-functional prioritization and coordination, such as the one I describe in Rethinking Product Management: How to Get From Start Up to Scale Up.

3. The new business unit is failing to get traction.

Every entrepreneur really starts to understand the importance of structure when they attempt, but fail, to launch and grow a second business unit or secondary market. One obvious reason this happens is that the main business unit (the mothership) requires perpetual resources in time, people, and money and the new business unit (the child) isn’t getting the dedicated resources it needs to achieve product-market fit and its own escape velocity. The new unit then starts to feel like a stillbirth.

An equally bad result can happen when the new unit actually does have the resources it needs to execute but is trapped within the existing processes, procedures, and systems of the mothership. The key is to structure the organization so that the new unit can succeed by giving it just the right amount of coordination and resources from the mothership for your business model and strategy. This could be a little coordination or it could be a lot. The bottom line is that the right structure will allow you to effectively manage different lifecycle stage business units appropriately at the same time.

4. The CEO is a bottleneck.

If you’re the CEO, you’ve tried to delegate. You’ve attempted to make great hires. Yet too many things are still coming back on your plate. You’re working too long, seeing too little of your family, and your health is shot. Every CEO and entrepreneur has been there.

The secret to freeing yourself from those tasks and meetings that drain your energy and time is also structural. The right structure creates role clarity and the ability to delegate into that structure with visibility and control. If you delegate the wrong things, you run the risk of causing the business systemic harm. If you delegate the right things and you don’t have visibility into performance, you’re not managing. You’re just wishing.

Many CEOs attempt to solve this riddle by hiring a Mr. or Mrs. Inside so they can be Mr. or Mrs. Outside. Again, this can work. But it’s highly risky and backfires much of the time. It’s why I recommend that you do NOT have a President and COO overseeing all internal operations.

Instead, a better answer is structural. The right structure (with the processes and metrics that bring the structure alive) allows you to stop being a bottleneck. It lets you focus on the right areas of the organization and delegate with the right level of visibility and control. This is a fine balance. If you don’t get it right, it’s unclear who is accountable for what, or if you’ve mixed too many conflicting accountabilities into one role, so things continually fall back onto your desk. Which takes me to the next, related symptom…

5. There’s a lack of role clarity.

The purpose of structure is to closely align accountability with authority. Fundamentally this means that the person or role accountable for the implementation of a decision should also have authority over the decision itself. Why? Well, have you ever been accountable for something you had no control over? That’s the very definition of soul-sucking stress, resentment, and burnout, isn’t it? Your staff feels the same way.

If you’re in a situation where you’re trying to push accountability down into the organization, but multiple people from across different departments seem to believe they each have authority over the decision or its implementation, then you have a structural issue. It will often show up in a pattern where a decision gets made, or seems to finally get made, but the implementation stalls out. It can also show up in a washing machine cycle of constant debate about the decision, with a lot of opinions expressed but no one taking the lead and actually making the call.

In both cases, the secret to creating role clarity starts with your structure. A good structure is how you begin to truly push authority as deeply as possible into the organization so that those who are responsible for the implementation have authority over the decision itself. Without the right structure, authority and accountability are going to be very hard to figure out and align. If you’re interested in learning some core principles to push authority and initiative deeper into your organizational structure, I recommend you read Scale on Principles Not On Policies: Or, How to Implement Amazon’s Type 1 and Type 2 Decision Making.

6. Multiple senior-level hires haven’t worked out.

If you’ve attempted to make several senior-level hires that haven’t worked out, this too can be a structural issue. One mis-hire is common. Two can be written off as bad luck. If you’re at 3 or more senior-level mis-hires, then you need to look at your structure. As Deming sad perfectly, “A bad system will defeat a good person every time.”

By |2019-05-03T17:26:03-07:00February 26th, 2019|Articles|Comments Off on The Top 10 Signs It’s Time To Change Your Organizational Structure

Scale on Principles, Not on Policies: How to Manage Type-1 vs Type-2 Decisions

If I were to ask you — “How are you instilling a culture of speed, accountability, and teamwork as your organization scales up?” — how would you respond?

This is a critical question. On the one hand, you want to keep what works well from your early start-up culture — fast decision making, risk-taking, camaraderie, and innovation. On the other, you have to manage the growing complexity — more people, new product lines, multiple business units, increasing regulatory requirements, and more. How can you achieve both?

Most entrepreneurs and CEOs struggle with this. They know that as their business scales up, they must evolve how the business operates, makes decisions, and cascades its culture. They also rightly fear that more policies, centralization, and procedures could cause the company to bog down and lose its entrepreneurial edge. The status quo is no longer tenable. You need a cure but the cure shouldn’t also kill the patient. What to do?

If we were to ask Jeff Bezos the same question — How do you instill a culture of speed, accountability, and teamwork at Amazon?” — he’d say something like this:

“Amazon’s management philosophy is to be customer obsessed, treat every day as if it were Day 1, manage the two major types of decisions (Type 1 and Type 2) differently, reinforce that it’s better to disagree and commit than get stuck in information paralysis, and elevate true misalignment issues quickly.”

What Bezos has figured out, and what he’s consistently trying to communicate and reinforce, is that to be effective at scale means to build on principles, not on policies. Policies, procedures, and rules may be necessary to some extent (especially if you are in a highly regulated industry) but they do not create high performance. As you know, they often prevent high performance.

Principles, on the other hand, are designed to be few in number but strong in impact. Meaning, a principle points you in the right direction but calls on the common sense and creativity of the individuals executing it. Also, if a principle is violated, this must carry big consequences. It has to, or it has no weight; it’s just a platitude.

If you’re like me and you tend to resonate with the principles-over-policies approach to scaling a business, but you’ve also been wondering how to bring this home for your leadership team and staff, I want to share with you a one-page document I use with success in my coaching practice. This one-pager presents three operating agreements that bring some of the most important Amazon-like management principles to life in a cohesive way.

The 3 Agreements: Operating Agreements for Decision Making

The 3 Agreements are a set of core, organization-wide operating agreements that define the different types of decisions, including how to make and execute them.These three core operating agreements don’t replace your existing strategic plan, core values, key metrics, objectives and key results (OKRs), or other elements that you may already have in place to create organizational alignment. They complement them.

Below is the basic version of the 3 Agreements. After you’ve read them, you’ll see my answers to the top ten questions I hear when helping to deploy them in many dozens of next-generation companies. For your reference, you can download the complete one-page version of the 3 Agreements here.


The goal of these operating agreements is to create a high-performing culture of accountability and fast execution. Accountability is created by accepting ownership for the roles we play. Fast execution is created by seeking out perspective from those who will be impacted downstream before we make decisions and by supporting one another towards our collective vision.

Agreement #1: The Leadership Team is the cross-functional decision-making body
This agreement is for major, Type 1 decisions. The goal is to funnel all major, cross-functional decisions into the weekly Leadership Team meeting. A “big” decision is not a decision until it is brought to the Leadership Team as a proposal in writing and is accepted by the implementer. Anyone in the company, not just Leadership Team members, can be invited into a Leadership Team meeting to make a proposal. This process leads to better strategic decisions, faster implementation, and less time spent in meetings overall.

Agreement #2: Everyone seeks perspective and accepts accountability for their role(s)
This agreement is for everyday operating and Type 2 decisions. The goal is to create an organization-wide culture where, before making a decision, we gather data and seek out perspective both upstream and downstream, as appropriate. Seeking out perspective is not the same as seeking permission. This practice leads to better decision making and faster execution of everyday operations.

Agreement #3: We commit to listen, understand, provide perspective, decide, and act
The goal is frank and honest discussion of the facts before a decision is made, followed by total commitment to implementing the solution after the decision is made. Therefore, if you are being asked for advice or perspective, you need to ask questions until you are clear about the proposal and provide honest feedback to the proposal up front. Put another way, it’s OK to question a decision up front but it’s not OK to fight it or ignore it during implementation. When you’re presented with a proposal, remember that your spirit of helpfulness and cooperation towards others brings about more helpfulness and cooperation later towards you. If you are presented with a proposal that you fully understand but still don’t agree with, a perfectly acceptable response is “I disagree and commit!,” meaning that the implementer can count on you for your aid and support.

Adopting these agreements means that any individual who makes a habit of violating them shall be dismissed. That is, it’s OK to make an honest mistake and learn from it. It’s also necessary to put out fires when there’s a fire. It’s also OK to occasionally have to ask for forgiveness rather than permission. However, it’s unacceptable to not abide by these agreements as your general way of operating.

Below are the most common questions and objections I receive when a Leadership Team is considering adopting these agreements as their core operating agreements. You may be asking yourself the same questions…

By |2020-12-18T14:57:41-08:00January 27th, 2018|Articles|Comments Off on Scale on Principles, Not on Policies: How to Manage Type-1 vs Type-2 Decisions

Four Criteria for Making Great Hires and Promotions

I’m writing this short article for any manager who is looking to make a new hire or is considering someone for a promotion. There are four criteria you should be basing every new hire or promotion opportunity on. Time and time again, I have seen the wisdom of this approach. Think of these criteria like a checklist. When considering a new hire or promotion, work through your checklist in this order of priority:

#1 Values

Values are a person’s deep-seated beliefs that motivate their behaviors. The question you’re seeking to answer when assessing a candidate’s core values is if their personal values are in alignment with the organization’s core values. There are tests you can give to candidates to help ascertain their values but in my opinion, the only way you can really get a sense for someone’s soul is to spend time together. Why have they made the key decisions in their life? Who are they at their core? It’s why we date before we get married. The more senior and critical the hire or promotion is to the organization, the more time you need to spend dating.

#2 Style

Style is how the candidate thinks, behaves, and approaches challenges and opportunities. Each of us has a style or a unique way of managing the world. Some styles are exceptional at being tactical, detailed-oriented, and executing a process. Other styles are better at being strategic, conceptual, and results-oriented. Don’t ask a fish to climb a tree. You can learn more about styles and their relative strengths and weaknesses by playing around with the World’s Fastest Personality Test. Or, you can compare the style of a candidate with the needs of an open role by test-driving the PSIU Talent Management Suite.

#3 Skills

Skills are the technical capabilities the candidate brings to the table. For instance, if you’re hiring for a sales role, the skills question you’re seeking to answer is, “Does this candidate have high sales skills or the natural ability to develop those skills?” My preferred method to assess for skills is to have the candidate audition for the role. It’s not enough that they tell you; they need to show you. This is why athletes do try-outs, aspiring chefs cook up a meal for the owners, and actors audition for parts. It’s a skill test. In the example of the sales hire, I would run a mock sales call and see how the candidate performs.

Note that many skills can actually be trained and developed rather quickly but style and values are much more ingrained. In practice—especially when up against project deadline and resource pressures—most of us tend to sacrifice values and style fit to find someone who has past experience (a proxy for skills). I’m just as guilty of this as anyone. But every time I’ve hired like this out of expediency, it came back to bite me in the ass. It ended up costing more in time, energy, money, and lost opportunities than if I had never made the bad hire in the first place. Always try to prioritize first for values, then style, and then skills.

#4 Comp

When thinking about comp, you should consider the total compensation that the candidate demands. The kicker here is that, if the first three criteria are a match, then you also don’t have to pay above market rate to recruit this candidate or secure this promotion. Often, the right candidate will come on board for the new role for less than market. Why? When it’s the right candidate, they will be attracted to the whole picture. If you know basketball, you might think of Kevin Durant, who took substantially less comp from the Golden State Warriors than he could have gotten elsewhere. The reason why is that everything about the role—including the culture, style, and skills—were a great match for both sides. There are many forms of compensation. Your job is to paint a full picture of the total comp for the candidate.

Putting It All Together

I’ve written about these four criteria in-depth in my book How to Think About Hiring: Play Smarter to Win the Talent Game.

In the book, I take these same four criteria and combine them to create a picture of a “draftboard” to show how each candidate stacks up against your target or ideal profile. This makes your process very simple. Basically, your goal is to work through your checklist to determine where a potential draft pick fits on your board compared to the other candidates. If you’d like to learn more about the draftboard, just click here. Otherwise, I hope you find these four criteria—Values, Style, Skill, and Comp—helpful in making your own, smarter hiring and promotion decisions.

Continue to Lex’s blog ==>>

By |2020-01-06T08:25:07-08:00January 13th, 2018|Articles|Comments Off on Four Criteria for Making Great Hires and Promotions

It’s Not a Problem to Solve. It’s a Polarity to Manage.

I saw this image circulating around social media last week and I had to roll my eyes:

It’s not because I don’t believe in the values of “new management” thinking. Quite the contrary. It’s that making the shift from “old management” thinking to “new management” thinking is not a problem to solve. It’s a polarity to manage.

A problem is something to be dealt with or overcome. A polarity, on the other hand, is something to be managed on a continuum. Basically, anytime you are dealing with things that seem at odds with each other or paradoxical, you’re dealing with a polarity and not a problem.

Take the first line in the viral image above as an example. Are employees your biggest risk or your biggest asset? The answer is both! Hire the wrong employee or lose control of your HR compliance function and it won’t be too long before you’re served a very expensive and frivolous lawsuit. On the other hand, if you treat your employees like they’re not your greatest asset — like they can’t be trusted to use their common sense or act in the best interest of the company — then you’re going to engender a lot of resentment and apathy.

This meme, which is generating thousands of likes and shares, portrays New Management Thinking as the solution to the problem of Old Management Thinking. It’s actually not the solution. There is no problem to solve – just a polarity to manage.

Don’t treat polarities as problems to be solved or pay the price. Why? Because when a team treats a polarity to manage as a problem to snuff out — chanting all the while “Down with hierarchy!” “Down with meetings!” “Out with the old and in with the new!” — one polarity will be emphasized too much and the organization will experience even bigger problems.

A team like this wastes an inordinate amount of time and energy on the wrong things, leading to a lot of activity and little effectiveness. Their misguided efforts also make it harder for the good and necessary aspects of the opposite polarity to exist within the organization. The end result is an organization that is less resilient and adaptable to change.

As a leader, being able to discern the difference between a problem and a polarity will help you to build a culture that makes the right decisions about the right things. This is true even if, from an uneducated eye, those efforts can sometimes appear to be in support of “old” ways of thinking. But they are not old ways of thinking! You are just boosting up an aspect of a polarity that is needed in your organization at this period in time. Later on, you may boost up “new” ways of thinking, depending again on what’s really needed. Let’s see how to do that…

Polarity Mangement

There’s a book I like that does a good job of recognizing the difference between a polarity and a problem and how to leverage the best aspects of both sides of a polarity. The book is appropriately titled Polarity Management, by Barry Johnson.

In a picture, polarity management works like this. Draw a 2X2 matrix and put the poles or the extremes of the two polarities on the horizontal axis as Pole A and Pole B. Write “Positives” at the top of the vertical axis and “Negatives” at the bottom. Then identify in the top quadrants the positives of each pole and in the bottom note the negatives that come from an overemphasis of either pole. Finally, draw some butterfly wings that meet in the center of the quadrants with arrows in the left wing going counter-clockwise and arrows in the right wing going clockwise, to show the flow between polarities.

Going back to the meme that started this article, a polarity map of “old management thinking” vs. “new management thinking” would look something like this:

What does this map tell you? As a leader, your goal is to manage the polarity. This means leveraging the best of old management thinking and new management thinking while avoiding the extremes of both. If you find that the organization has emphasized one polarity too far, then you know you need to bring it back the other way by driving the organization towards the top of the other polarity.

In this example, if you found that your organization was too chaotic, free-wheeling, or producing too many errors (the negatives of new management thinking), then you know you need to add a bit more clarity, accountability, leadership, and performance management to bring it back the other way (the positives of old management thinking).

On the other hand, if you noticed that your organization was too bureaucratic, political, or stagnant (the negatives of old management thinking), then you’d need to break some glass and shift the organization’s polarity up the other side to have more transparency, autonomy, and trust (the positives of new management thinking).

The goal of polarity management is to be astute enough as a leader to get the positive sides (above the red horizontal line) of both polarities while avoiding the negative sides (below the red line) of each one. Put another way, you’re seeking to balance the organization so that it’s on the top half of the red horizontal line and doesn’t fall off into an abyss on either side.

OK, that makes a lot of sense in theory. However, sometimes it can be challenging to break a situation down into just two polarities. Life and work are messy and complicated. What is the polarity you are really dealing with? It can be hard to tell.

The good news is that if you like the principles behind Polarity Management but seek an easier “map” that tells you what you are really dealing with, you will find my Organizational Physics model very useful. The model can make recognizing and managing polarities in your organization much easier. Here’s what you need to know…

Organizational Physics and Polarity Management

When I set out to create Organizational Physics, one of my primary goals was to identify the underlying patterns that drive all organizational behavior and show how to improve performance. You can think of Organizational Physics as an ultimate meta-framework. It explains all other management theories (at least the good ones) and puts the different camps in their respective context. So naturally, Organizational Physics is rich with polarities.

Some of the main polarities within Organizational Physics include the dynamic tension between the need to be well integrated with the surrounding environment while managing things falling apart (Universal Success Formula). There’s also the polarity between organizational development and stability (Lifecycle Strategy). And there’s the polarity between making good decisions and implementing them fast (The Physics of Fast Execution).

However, one of the best parts of Organizational Physics is that once you understand the framework, it makes managing your organization much easier and even allows you to anticipate what happens next in its development. In this regard, understanding the Four Forces of Management – Producing, Stabilizing, Innovating, and Unifying — within Organizational Physics is not only useful, it’s the ultimate polarity management framework.

The principle behind the four forces of management – Producing, Stabilizing, Innovating, and Unifying — is that every complex adaptive system, from an individual to the world’s largest company, must at a minimum do four basic things. It must shape its environment and respond to change and it must manage its entire system, including the parts or tasks that make it up. In a picture, this means that at a fundamental level every system is managing these two basic sets of polarities between shape/respond and whole/parts:

  • The Producing Force is what gives an organization its drive to produce results for clients.
  • The Stabilizing Force is what brings order and repeatability to the organization.
  • The Innovating Force is what gives an organization its drive to find creative solutions and new ways of doing things.
  • The Unifying Force is what brings cohesion and unity to the organization.

The picture below shows how each force or polarity has a different time horizon, approach, pace, and orientation. If this image doesn’t make much sense to you yet, you can learn more about each force and what it does in Part II of Organizational Physics or play around with the World’s Fastest Personality test and see how these forces show up in individual personality styles.

*** Please note that this image above has NOTHING to do with the four quadrant approach from the book Polarity Management. That is, that book shows how to break a polarity down into two dimensions. I’m going to show that most polarities can be understood across four dimensions total. This means that there is no horizontal red line above which you are trying to manage. Put another way, I am NOT saying that the Stabilizing and Producing forces are the positives and the Unifying and Innovating are the negatives. Quite the contrary, what this new vision means is that you are seeking to get the best of all polarities for the lifecycle stage of your system.***

Because, at any given point in time, every system must manage these polarities with finite energy, when one pole is really strong, another will be weak. In other words, the system will exhibit some tell-tale, predictable behaviors. Here’s how you can use that knowledge to your advantage…

Polarity Management Made Simpler

Once you understand that every organization is managing these four polarities — Producing, Stabilizing, Innovating, and Unifying — it’s much easier to place any set of polarities in their proper context and have a deeper sense of what to do next to improve organizational performance. Put another way, once you understand this framework, you have four dimensions to engage in polarity management vs. just two. Here’s what your new map looks like:

What this map shows is that a healthy, high-performing organization will have the right mix of forces for its lifecycle stage, as shown in the dark and light green circles. But push one polarity too far or at the wrong time to the red ring of the target and your organization will start to exhibit some negative, counterproductive behaviors. It’s a lot like driving a car. You’re trying to keep the engine humming by having the right mix of fuel and performance without taking one polarity too far (into the red) or you’ll burn out the engine.

What’s cool and useful about the above map is that you can use it to scan your organization and get a quick sense if one or more forces are too far out of whack. Then based on this awareness you can give the system more of the missing force, which will bring the organization back more towards the center of the target. Most situations you’ll come across in both work and life will fit somewhere on the above map!

For instance, if you were to notice that part of your organization can’t see the forest for the trees or is close to burnout from the constant short-range time pressure, you will see that the Producing force is out of balance in the upper right quadrant.

What should you do? Well, it would depend, of course, but using this map you would know you need to back off the Producing force and focus your efforts in one of the other areas first. You could add some more Stabilizing force to the system (through a better process or tools that reduce the workload); you could boost up the Innovating force (clarifying the strategy and big picture with the team); or you could focus on increasing the Unifying force (connecting and processing together as a team to reflect, renew, and recommit). Or some combination of these.

Going back to the first scenario that started this article, let’s say that an employee says to you, “We need more New Management thinking vs. Old Management thinking.” With this new map you can quickly ascertain that they are likely saying that the organization needs to develop its Unifying and Innovating forces (the bottom half of the map) over its Stabilizing and Producing Forces (the top half of the map). But you also know by now that this is not a problem to solve – it’s a polarity to manage without taking things too far in one direction.

Or, if your board member argues that the company needs to improve its sales process because it’s not scalable, you know that they are oriented towards the Stabilizing quadrant. While you might boost up the Stabilizing force with more focus on process and systems, you wouldn’t let it go too far out of whack so that the process takes over and the sales team loses its Producing force because it’s trapped in a bureaucracy.

One more example — your spouse tells you that you are working too much. What does this mean? He or she wants you to Unify more with the family. Is this a problem to solve? Nope. You get it. It’s a polarity to manage! So because your marriage and family are important to you, this coming weekend you’ll back off of your Producing force, put down your phone, and invest some quality time Unifying with the family. Everything is a trade-off and the basic idea is to not let one force get too out of balance for too long or you’ll suffer the (predictable) consequences. Instead, strive to manage the polarities and avoid the extremes.

One thing to keep in mind as you navigate the polarity map above is that if one force or pole is too far out of balance, you don’t add more energy and effort to improving that pole! Instead, you give energy and effort to its complementary pole. For instance, if your culture had turned toxic and there was a lot of infighting (an imbalance in the Unifying force), you would NOT take the team into a feel-good kumbaya team-building session. This is just adding more fuel to an over-hot Unifying force.

Instead, you would look to boost up one of the other three complementary forces depending on the needs of the organization. To boost up the Stabilizing force, you might bring more process or regimen to how the team interacts. To boost the Producing force, you might identify a big market challenge to get the team to focus more on external client needs and creating new client wins instead of internal politics. Alternatively, you might work with the team to align around a new vision and strategy — something that transcends petty politics — which would boost up the Innovating force.

In summary, if your company starts to treat a polarity as a problem to snuff out, it’s going to have a host of even bigger problems. Instead, try to recognize the general Producing, Stabilizing, Innovating, or Unifying quadrants that the organization’s current behavior is coming from. If it’s getting too far out of balance in one area, back off that area while boosting up another force. This will help to bring the organization back towards balance. Extremes will happen naturally, so your job as a leader is managing them to leverage the best that healthy polarities have to offer.

By |2017-06-28T01:08:16-07:00May 17th, 2017|Articles|Comments Off on It’s Not a Problem to Solve. It’s a Polarity to Manage.

If You Give a Man a Hat, Take Away His Incentives

Balancing multiple competing accountabilities is hard to do.

Balancing multiple competing accountabilities is hard to do.

… Take away his incentives…wait…whaaaaaat did I just say? Let me explain.

One of the key concepts of Organizational Physics is that growing your business from the Nail It to the Scale It stage usually requires a change in organizational structure.

Changing structures, roles, accountabilities, and reporting relationships is a big undertaking. It’s a pre-requisite to scaling up but it can be hard to get it right. It also takes time and energy to integrate the new design.

When a growth company doesn’t yet have the resources to hire out its full team for the new structure, it’s a common practice to assign multiple roles or “hats” to existing leaders.

The idea is this. Until the company can afford to find and hire a dedicated replacement, a few leadership team members are assigned accountability to execute across multiple functions at the same time. Once a replacement can be made, the hat is taken off and given to the new dedicated replacement.

Some common examples of hat wearing that I see in companies in the Nail It stage include:

  • The head of Sales wears the hat of head of Marketing. Once a head of Marketing is hired, the head of Sales can return to focusing 100% on sales.
  • The CEO wears the hat of head of Strategic Alliances. When the business warrants a dedicated Strategic Alliance role, the company makes that hire.
  • The head of Admin wears the hat of head of Recruiting and People Development. When the company has the resources, it creates two distinct roles: one for liability prevention and one for recruiting and cultural development.
  • The head of Software Engineering wears the hat of head of IT/Tech Ops. Once the company has the resources to hire a dedicated head of IT/Tech Ops, the head of Software Engineering can go back to focusing fully on driving external software development.

There are other examples. Obviously, hat wearing isn’t ideal. In all of these instances the organization is violating a principle of structure. This is because they’re combining effectiveness roles with efficiency ones, long-range roles with short-range ones, or roles that need more decentralized autonomy with those that need more centralized control.

In other words, while hat wearing can be useful and necessary, you should always view it as a temporary measure. It sacrifices some focus and energy in the people wearing the hats (and the company as a whole) in exchange for short-term cash flow savings and buying time to find the right new hire or promotion. Basically, only deploy hats when cash or time is too tight.

That said, if you are deploying multiple hats, you should keep in mind a simple concept that will increase organizational effectiveness during a time of transition. It will also help your hat wearers to be successful in their multiple accountabilities. This concept applies only to those in jobs that have performance-based incentives.

The concept is this: Convert any performance-based incentives for those wearing multiple hats to base compensation, including any incentive compensation they would have likely earned if they had performed just their major role.

Here’s an example. Let’s say that you are the CEO of a fast-growing company with $15M in revenue and Joe is your head of Sales who runs the entire sales team. You have enough cash flow to make some smart business investments but not enough to hire or invest willy-nilly.

The rapid business growth is putting a strain on the culture and hiring. To compensate, you decide to create a new role called head of Culture and People Development with accountabilities for cultural events, recruiting and on-boarding, and cross-functional staff development.

You can’t justify hiring a full-time person for this position right now so instead, you ask Joe to continue to lead the Sales function and take on the newly formed Culture and People Development function. You justify this decision because it’s intended to be for one year only and Joe is your best cultural leader. Joe’s base salary as head of Sales is $150K. He earned $100K in sales commissions last year and is projected to earn the same this year.

Since Joe is now temporarily wearing two hats, what I’m proposing is that you should temporarily convert his existing sales commission plan and pay him base compensation of $250K (what he would earn if he hit his full sales targets this year), for as long as he’s wearing both hats.

Does the idea of taking away your head of Sales incentive plan make you feel queazy? It should. But if you are committed to driving your business to its scalable potential – and if Joe really is your best choice to wear the hat for Culture and People Development – then that’s exactly what you should do.

Why? Because if you give Joe both roles but keep the old incentive plan in place, despite his best early intentions to do well at both, he will likely do worse. The role with the explicit incentives (in this case, Sales) will always dominate his energy and attention, even if it causes harm to the development of the business. At the same time, even though he’ll give Sales most of his efforts due to the incentives, he’ll likely do worse at both roles because of the increased demands placed on him.

However, if you were to pay him a healthy flat wage and trust his intrinsic motivation to lead and oversee both roles – Sales and Culture and People Development, then he has a chance to do well at both roles in the interim. You’ll notice that without incentives, he’ll start to act less like a hammer and more like a lever. He’ll do better at developing the bench in both departments. He’ll see the big picture and make decisions that are best for the business in the short and long run.

Why is this the case? Wearing multiple hats — leading multiple, competing priorities — is hard to do. Short-range priorities like Sales will naturally overpower longer-range needs like Culture. Sales requires a hunter style; Culture a harvester one. Navigating these inherent conflicts puts a tremendous burden on the leader and on the company.

If the organization is going to achieve escape velocity, then Joe needs to be able to reconcile these conflicts, adapt his own style, develop the next generation of leaders, and execute well on both roles at the same time. Performance incentives don’t help in a scenario like this. They hinder.

For instance, if you were a professional soccer coach and your best athlete was a striker, you’d be hard-pressed to ask him to play defense too. You might justify it, however, if you were getting a lot of goals scored against you and you didn’t have other capable players. Now imagine that you ask the striker to make that change but also keep his existing goal bonus in place. How much defense are you going to get? Not much, and it will probably be erratic. But if you were to take away his goal-scoring bonus and just pay him as if he hit his quota anyway, then you’d get a more balanced player and true team leader.

Assigning hats in business is the same. Over time, it’s hard on the player and it’s hard on the team. You need to rely on the intrinsic motivations of the people wearing the hats and create an environment where they can do what’s right for the business’ sustained performance. Performance incentives hinder this by causing the leader to sacrifice one function for the other because the one with the explicit incentives will always win out.

Frequently Asked Questions (FAQ):

This concept of rolling performance incentives into healthy base compensation for hat wearers is simple but it usually raises some questions. Below are answers to some of the most common questions to help you think this through:

1. Why have any performance incentives at all?
Good question. There’s lots of evidence that — especially for creative, team-based collaborations — performance incentives cause more harm than good. Your business and culture may not need or have any performance incentives. If that’s the case, there are no incentives to take away or convert. Without incentives in one area, it’s much easier to move people in and out of hats.

2. Don’t I actually have to pay the hat wearer more to run multiple accountabilities?
No. I would argue that if you ask someone to wear a temporary hat and they reply with “pay me more money,” you’re not asking the right person. You’re dealing with box #3 Mercenaries/Specialists and they should be left alone to focus on their singular task.

3. Shouldn’t I create new performance incentives for all of the multiple hats instead?
No. You’re creating more complexity that’s harder to manage and harder to change when it’s time to take the hat off. Keep it simple. If you are committed to performance incentives, then keep them at the macro-level, like profit sharing or stock options, but don’t try to micro-manage incentive-based performance.

4. It seems really stupid to ask the head of Sales to also take on Culture and People Development. Do you recommend this?
No, I don’t recommend this. I was just sharing an example (one I have seen before). Again, hat wearing is not ideal but you have to play the cards in your hand.

5. Why have role accountabilities and hats at all? Why not just create a self-managed organization where people can shift in and out of roles across departments at their own volition/discretion?
Good luck with that. Every high-performing organization has defined roles on a team. Those roles may be self-defined but they are defined. The principle is the same. If you want fluidity of roles and accountabilities, individual performance incentives will only harm.

6. It seems really hard to get someone who’s wearing a hat to actually take it off. How is this done?
It can indeed be hard to get someone to take off a hat, especially if it feels like a loss of status. It isn’t. You can mitigate any resistance by helping the person being asked to take off a hat to see the bigger picture and what is best for the next stage of business growth. At the same time, try to get them to acknowledge what they are exceptional at and enjoy doing. By taking off the hat, you are freeing them up to have more time and energy to do what they are most exceptional at and creates the most value for the business – i.e., their main role.

7. It is too risky to take away all performance-based incentives. What are other options?
If the thought of taking away performance incentives from a particular role or individual feels too risky to you, I would trust that and not make the change. Either don’t invest in the new role at this stage or find someone else to wear the hat – someone who gives you confidence that the can execute without extra incentives.

By |2016-06-10T20:44:03-07:00June 10th, 2016|Articles|Comments Off on If You Give a Man a Hat, Take Away His Incentives

Rethinking Product Management: How to Get from Start-up to Scale-up

I earn my living as a scaling coach to expansion-stage companies. One of the advantages of my position is that I get a deep, inside look into different industries and businesses. While no two situations are exactly alike, I have seen a consistent yet under-reported issue out there that keeps 9 out of 10 companies from getting out of start-up mode to the next level.

What is it? It’s a breakdown in Product Management.

Assuming that you already have a sound strategy and execution framework in place, if you can get your Product Management function right, you’ll solve a lot of problems inherent in scaling your business. You will also have a much easier time increasing revenue growth, execution speed, agility, and profits. If you don’t get Product Management right, scaling to your potential will be much harder or even impossible.

Before proceeding, I need to call out that the problems and solutions described in this article are only applicable to a company in the late Nail It to early Scale It lifecycle stage of business development:

The Organizational Physics Strategy Map. You'll likely need to redesign Product Management in order to make the leap from Nail It to Scale It.

The Organizational Physics Strategy Map. To scale successfully, you’ll need to rethink and redesign Product Management between the late Nail It and early Scale It stages of business development.

In the early start-up stages of a business, Product Management doesn’t need to be a well-defined function. It’s just something that is organically “managed” by a product-savvy entrepreneur. At this stage, there’s a drive to find product-market fit and not much else matters.

But once product-market fit is established and the company is ready to scale up by adding new product lines, customer types, or markets between the late Nail It and early Scale It stages, that’s when Product Management should be rethought and redesigned. This article will help you do just that.

Is There a Breakdown in Your Product Management Function?

It’s pretty easy to spot a breakdown in the Product Management function in your business. Assuming that your business has already aligned around a clear growth strategy and execution framework, some symptoms of a Product Management breakdown will show up when there is one or more of these conditions:

  • Poor coordination between sales, engineering, manufacturing, and marketing
  • Haphazard quality in new product releases
  • A struggle to translate customer needs into a delightful customer experience
  • Growing revenues but little or no profits
  • Finger-pointing and blame between departments
  • Perpetually late product development
  • A strong technical product but poor product marketing or vice vera
  • A lack of organizational clarity on the short- to mid-range product roadmap
  • A visionary entrepreneur who is stuck managing product details

Now, you’re probably thinking that I’m attributing a lot of internal corporate issues to a breakdown in just one function. And I am. That’s because at its core, Product Management is a translation, prioritization, and coordination function. And when it breaks down, this has a big impact across the entire organization. Let’s see why…

Product Management: It’s Not What You Think

The term “Product Management” can mean many different things to different people. For example, does your own definition include product marketing? Product development? Product pricing and positioning? Feature prioritization? Product strategy? Brand management? Resource allocation? More?

If you’re trying to improve something, you must first start with a clear definition of what it is you’re working on. There are actually five primary product management-related functions that every business performs but are distinct functions that should be treated as such. These five functions are Product Strategy/Vision, Product Design, Product Development, Product Marketing, and Product Management. While the titles may be different in your own business, the core functions will be familiar to you.

Terms and Definitions: Throughout this article, I use a shorthand code called “PSIU” to refer to the four forces and styles present in any organization: Producing, Stabilizing, Innovating and Unifying. You can learn more about PSIU here and take the World’s Fastest Personality Test to get a basic sense of it before proceeding.

Product Strategy/Vision (psIu)

Elon Musk would make the dictionary definition of the Product Strategy/Visionary role.

Elon Musk would make the dictionary definition of the Product Strategy or Product Visionary role.

Product Strategy/Vision is the function that finds the breakthrough product opportunities in the marketplace: “Hmmm, what potentials exist out there that we can bring together in new and innovative ways and that allows us to fulfill on our purpose?” The Product Strategy leader asks this question all the time and has the answers (sometimes the right answers, sometimes the wrong ones, but opinionated answers nonetheless).

A head of Product Strategy is usually either really enthusiastic or really frustrated. Why? Because they live in the future with a vision for how the world should be. When their vision is tracking well and showing visible, measurable results, they are really excited, fun to be around, and charismatic. But when things aren’t tracking to their expectations, others’ don’t “get it” like they do, or they’re not in a position to effect the change they want to see, then they can come across as extremely frustrated or irritable.

The style of a head of Product Strategy is very Innovative or future-oriented and focused on possibility (psIu). “What if we tried this?” Or, “Why not do it this way instead?” A classic example of a Product Strategy/Visionary style is Elon Musk. Notice how Musk continually underestimates the true delivery time frame for all of his ventures – SpaceX, Tesla, SolarCity, etc.? That’s because the high Innovator style tends to live in the future and sees things for how they could/should be and naturally underestimates the nitty-gritty details.

In your own business, Product Strategy probably isn’t its own distinct title. Instead it’s a “hat” worn by the visionary entrepreneur, CEO, or CTO. There’s no wrong answer. It should go to the person most suited to holding, articulating and selling the vision and strategy. As you go through this next section, I’d like you to keep in mind the different skills and style needed to be a great Product Strategist/Visionary compared to the skills and style required for the other aspects of managing products.

Product Design (pSIu)

Jack Dorsey, CEO of both Twitter and Square, made his mark as a Product Designer.

Product Design is the function that can translate the Product Strategy/Vision into an amazing customer experience. Product Design will often speak in the language of “user experience.” They’re usually asking themselves and others, “What is the purpose of this product? What is the feeling we want to create? What is the optimal design for the best user experience?” Technically, they are well-versed in key elements of the user interface and how the product can or should interact with back-end technical systems and processes.

The style of a head of Product Design is usually a mix of Innovator and Stabilizer or pSIU. This means that they excel at seeing and articulating the product vision or strategy and how it should actually show up in end-user hands. They’ll use language like “elegant, beautifully, functional, appropriate,” and also have an intense level of attention to detail when it comes to the product experience.

An example of a Product Design style is Jack Dorsey, who is co-founder and now CEO of both Twitter and Square. The media tends to define Jack as the “next Steve Jobs.” But what I want you to notice is that Dorsey’s style is more in the detail and design of the user experience rather than the classic Product Visionary style of an Elon Musk or Steve Jobs. You can see this very clearly in Apple’s history. Apple would not have been Apple without a Jonny Ives — who is a Product Designer style — to complement the Product Vision of Steve Jobs.

Depending on your business type, Product Design likely has a title of Designer (Software) or Prototype Design (Manufacturing). The titles will be different but the function the same — to translate Product Strategy into an elegantly functional user experience. The better the Product Designer holds the Product Vision, understands the back-end technology or manufacturing process, and tunes her empathy to what the end-user desires, the better she will perform in that role.

Product Development — PsIu

Mark Zuckerberg

Mark Zuckerberg is a classic example of a Product Development type. Note that even as CEO of Facebook, he still maintains his product development focus.

Product Development is the function that transforms product designs into actual working products or, in the case of a manufacturing company, actual working prototypes for manufacturing to produce at scale. The Product Developer is constantly thinking about how to translate the concept and requirements of a product design into something that actually works and getting it produced or launched — fast!

The PSIU code for a Product Development function is a high drive to Produce or get stuff out the door and a high drive to Innovate or to be creative and disrupt the status quo. Mark Zuckerberg, CEO of Facebook, is one example of a Product Development entrepreneur. Notice that he holds the product vision (Innovator) and also gets his hands dirty writing code and getting products shipped (Producer) or a PsIu style that is common to many product savvy entrepreneurs. Even after Facebook became a $1B+ business, Zuckerberg still preferred to spend most of his time head down coding on the product while others took care of the business and coordination stuff.

Depending on the type of business you’re in, Product Development may be called Software Engineering (Software), Prototype Engineering (Manufacturing). Whatever it’s called, it is valued for its ability and capacity to produce high-quality and innovative products quickly.

Product Marketing — PSIu

peggy caption

The fictional Peggy Olson from AMC TV’s Mad Men is a classic example of a Product Marketer.

Product Marketing is the function that defines how the product “shows up” in the marketplace. A great Product Marketer is adept at using their intuition and data to artfully answer questions like, “What makes this product unique? Who is the core customer? What are those customers’ conscious and unconscious unmet needs? What is the pricing model? Through whom should we distribute? What campaigns will be effective?” And then driving forward the execution of the campaigns that bring that brand to life.

In PSIU code, the Product Marketing function needs a high drive to Produce results or get the volume of day-to-day work accomplished; a high drive to Stabilize or ensure that the brand is accurately presented to the world; and a high drive to Innovate or be creative (PSIu). One popular example of a classic Product Marketer is Peggy Olson from AMC’s hit TV show Mad Men. When watching the show, pay attention to the fact that Peggy works long and hard (Producing) into the night responding to client projects. She is also able to analyze and intuit the larger product strategy for breakthrough positioning (Innovating) and manage the details of the pitch with attention to detail, stability, and support (Stabilizing) to her boss Don Draper, who is a classic Creative Director type or a big Innovator.

In your own business, the Product Marketing function might be called just Marketing or Brand Management – even as it helps to manage a wide range of functions such as product positioning, pricing, promotion, competitive analysis, PR and creative, and drives marketing execution and more.

Product Management — pSiU

caption here

Sundar Pichai is a classic Product Manager type who was recently promoted to CEO of all of Google.

And this brings us to Product Management, the focus of this article. At its core, Product Management is a translation, prioritization, and coordination function. Meaning, its role is to translate “upstream” product requirements from a variety of sources including clients, sales, strategy, marketing, and R&D. It prioritizes those requirements to best meet short-range client and business needs. And it coordinates “downstream” releases so that current customers, prospects, and staff are aware of (and ideally excited by), trained on, and engaged with the evolving features and products.

This includes prioritizing Product Development and Design resources by product, coordinating with Product Marketing activities, and ensuring that the short- to mid-range product development roadmap ties into the overall Product Strategy and is clearly communicated. An outstanding Product Management function keeps the customer needs forefront in their decisions while coordinating and allocating resources to delight those customers and achieving business objectives.

In PSIU code, the Product Management function needs a high drive to Stabilize and a high drive to Unify, or pSiU for short. For instance, a classic Product Management style who is now in the public limelight is Sundar Pichai who was recently promoted to be the CEO of all of Google when it made the recent shift to its new Alphabet structure. By most accounts, Sundar is highly respected for his ability to translate the emerging products vision, manage the gap between technical product details and user experience, and coordinate across other Google functions (Stabilizer) and also to empathize and communicate with a wide range of different and often competing interests within Google to keep things moving forward (Unifier).

Aside: Note that Sundar has a very different style compared to the more famous Google co-founders, Larry Page and Sergey Brin, who both have a high Producing and Innovating style or PsIu common to entrepreneurial founders. Sundar’s pSiU style complemented Sergey and Larry’s PsIu style very well as he was able to help translate the strategy and competing product priorities into compelling Google products while navigating the political minefields and different personalities within Google. It will be interesting to see how he fares in the Google CEO role. I think he’ll do well at managing and improving on the core products Google already has while the big “moon-shot” innovations are hoped to emerge and be commercialized from elsewhere in the Alphabet portfolio. But that’s a subject for a different article.

In your own business, the Product Management function may not yet exist at all, or it may be called something different. If yours is a service or contract business, then perhaps it’s called Project Management or Program Management. Regardless of the title, the purpose of this role is to translate requirements, set short-run priorities, and coordinate releases.

In the rest of this article I’ll show why the Product Managmement function may be missing or has been set up incorrectly in a business that is attempting to scale and how to do it right. It is a very critical, high-leverage function that, when executed correctly, greatly facilitates the leap past start-up into scale-up and beyond.

Now, you may quibble with how I’ve defined and described the many facets of Product Strategy, Product Design, Product Development, Product Marketing, and Product Management, and the examples of styles found in each. It’s not an exact science and you’ll find variations in different companies and situations, along with changes in style as people evolve. But no matter how you slice it, we should all be able to agree that there’s a lot happening under the label “Product Management” that should be conceptualized as distinct and separate functions.

Put another way, if you’re waiting for some mythical combination of Elon Musk, Jack Dorsey, Mark Zuckerberg, Peggy Olson, and Sundar Pichai to materialize in your company as a single product visionary/designer/developer/marketer/manager, put the crack pipe down and come back to reality. These are different functions that must be thought of and managed differently.

So yes, you want to improve your company’s ability to define, prioritize, build, release, and promote its products – but how do you know where the breakdowns are really happening and how do you catalyze a breakthrough? Now that we have our definitions, we can start to understand what to do…

The 5 Things Every Business Can Do for Product Management Breakthroughs

product-management-5-factorsThere are five basic product management tactics that every business can implement to help it scale up more easily and profitably. These five tactics are applicable to most industries and scale up situations. I’ve helped to deploy them and seen them create significant breakthroughs in revenue growth, profits, and execution speed in multiple different industries, including high tech, clean energy, healthcare, finance, services, and manufacturing.

  1. Make the Product Management Role a separate function in the organizational structure
  2. Delegate profit & loss accountability to it
  3. Decentralize it so that it’s close to the customer
  4. Place the right style of leaders to manage it
  5. Equip it with sound processes, metrics, and tools

You’ll notice that all five of these tactics relate just to the Product Management function and not to Product Strategy, Design, Development, or Marketing. Why?

In most businesses struggling to scale, there’s not usually a big gap in Product Strategy, Design, Development, or Marketing. Put another way, it’s pretty easy and aligned for the current head of Marketing to manage or hire for Product Marketing; for the head of Engineering to manage or hire more Product Development or Design resources; and for the founding entrepreneur or head of the company to manage overall Product Strategy.

It’s true that sometimes early-stage start-up employees aren’t capable of scaling to the next level but, more often, it’s because they’re overwhelmed, taking on too much of the Product Management role in addition to their other roles (like when the head of Product Development or Product Marketing is also the head of Product Management). When these leaders can focus on what they’re best at, they have the time, energy, focus, and skills to thrive at the next level.

However, there usually is a breakdown in how the Product Management role is managed in a company between the Nail It and Scale It stages. Typically, the Product Management role is not treated as its own major function; it does not have P&L accountability; it is too centralized; it doesn’t have the right style or dedicated leadership; or it lacks sound processes, metrics, and tools.

And if it should turn out that your current head of Product Strategy, Design, Development, or Marketing still can’t cut it after relinquishing Product Management duties, well, congratulations. These roles are much easier to fill once you have set up these other five elements and have clarity on the real accountabilities of their respective roles. So the early focus should be on improving the Product Management function as it has been defined. Now let’s dive deeper and see how to do that.

Breakthrough #1: Make the Product Management Role a Separate Function in the Organizational Structure

Breakthrough #1 is to treat the Product Management role as its own major and separate function in the organizational structure. For instance, here’s a picture of a structure for a manufacturing company. I’ve designed it using the 5 Laws of Structure but intentionally left out the Product Management role to make a point. Note that the major business functions are in grey and each has a blue section with basic Key Performance Indicators (KPIs) to help explain its accountabilities.

The wrong approach to scaling your business. If the Product Management role is not its own major function, a business will struggle to make the leap from start up to scale up.

The wrong approach to scaling your business. If the Product Management role is not its own major function, a business will struggle to make the leap from start up to scale up.

While Product Design and Development (under Prototype Engineering), Product Marketing (under Marketing), and Product Strategy (under Strategy) are in their correct relative locations in this structure, the Product Management role is missing. What do you anticipate the problems would be in a company structured like this? As the company attempts to scale, there will likely be…

  • A real struggle to translate new prototypes into manufacturing efficiently
  • Increasing conflict between Manufacturing and Prototype Engineering departments, with each side claiming that the other “just doesn’t get it”
  • Poor communication and coordination with Product Marketing, which feels increasingly left out of the picture and unsure of what’s coming out of Manufacturing and when
  • Lack of confidence across the culture that the product will do what it’s supposed to do
  • A frustrated Product Strategy function because it feels that the long-range product needs aren’t being taken into consideration in product development, which is perpetually under the gun to meet short-range needs

Have you seen some of these problems before? I bet you have. When most companies run into them, they attempt to solve them by calling out for “more product management.” However, they make the mistake of assigning product management within an existing function, usually Product Development, Product Marketing, or Product Strategy. But none of these locations in the structure are ideal and, in fact, can cause a lot of harm when attempting to scale up.

The Mistake of Co-joining Product Management with Product Development or Design

managing_and_doingFor example, what do you think happens in a business when the Product Management role and Product Development or Design roles are co-joined as the same function? That’s right, there’s a breakdown on one side or the other. If you have a technically strong head of Product Development or Design who also oversees the Product Management function, then you’ll likely have a fairly strong technical product that ends up being miscommunicated and that few are trained on. You will also have poor communication and coordination with marketing, sales, and operations on releases. Product Development seems confident in its own product and projections but everyone else isn’t.

On the other hand, if you have a strong Product Manager who is also head of Product Development or Design, then you’ll likely have a really thorough product plan that is well-communicated but perpetually late on shipments. I.e, there is a lot of product planning being done but a lack of actual live, high-quality, working products shipped to customers on time. It should be clear that Product Development and Design roles and the Product Management role are different functions that require different accountabilities, skills, and leadership styles.

The Mistake of Co-joining Product Management with Product Marketing or Strategy

run_with_the_wolvesIf you co-join Product Marketing or Product Strategy with the Product Management role then the long-range functions of Product Marketing and Strategy won’t be as effective because they’ll be under constant short-range pressure to manage the current product pipeline efficiently. Product Marketing and Strategy must maintain that long-range focus to be effective while the Product Management role must have a short-range focus and deliver results efficiently. Don’t mix them.

Critically, if the Product Management role is buried under an existing function, it also won’t be able to coordinate cross-functionally very well because it’s not truly its own independent role in the structure. Let’s say that the Product Management role was buried under Marketing. If so, how do you think Sales Operations, Customer Service, and Manufacturing would view the Product Management role? That’s right, as a biased (if not useless) marketing function not pertinent to the operational demands of today. It would be given lip-service or ignored. Everyone would be frustrated with this arrangement, especially the Product Manager who wouldn’t seem to be executing on their charter.

Example of Product Management as a Separate Function in the Organizational Structure
Again, you can get away with burying the Product Management role in another function when the business is in start-up mode with fewer problems. But as you make the leap to scale-up mode and add more product lines, customer types, or markets, the Product Management role must become its own major function in the organizational structure like this:

When scaling up, the Product Management role should become its own major function in the organizational structure.

When scaling up, the Product Management role should become its own major function in the organizational structure.

With this approach, the Product Management role (called the ‘PM Office’ in the image above) now has its own dedicated home in the organizational structure so that it can perform its function and fulfill its accountabilities. It translates upstream requirements from clients, sales, marketing, and strategy into clear, short-range priorities. It helps to communicate and guide the transition from prototype to manufacturing. It coordinates between sales, prototype engineering, manufacturing, and marketing so that downstream product releases are well-prepared and communicated, adopted, and impactful. And critically, Product Development, Design, Marketing, and Strategy are freed up to focus on what they do best.

Breakthrough #2: Delegate Profit & Loss Accountability to It

delegationIt’s not enough to just make the Product Management role a dedicated major function in the business. It should also have accountability for quarterly and annual Profit and Loss (P&L) targets for all the products and/or business units it manages. Notice in the structure above that the Product Management role is black in color? The term “in the black” means to be profitable and it is the Product Management role that should manage short-range profitability.

Why? One of the biggest challenges of leading a company into scale-up and beyond is freeing the founder/CEO from trying to do or manage too many things herself. What worked in a start up can become a bottleneck to growth and no longer work at scale. As a company gets into scale mode, the founder and CEO (as well as other members of the leadership team) need to start taking off the multiple hats they’ve been wearing so they can focus on fulfilling the individual roles they are best suited for.

It’s a common scenario. Imagine a fast-growing start up where the visionary founder plays the role of head of company and also wears that hats of head of Marketing, head of Product Strategy, head of Product Management, and head of Team and Culture. Obviously, this isn’t going to scale up and this founder will quickly find themselves overwhelmed, unable to delegate effectively, and a bottleneck to growth.

When there’s budget and availability, this founder must find talented replacements for each of these hats so they can focus on being the head of Company and wear just one or two additional hats (such as the head of Product Strategy or the head of Team and Culture). That’s plenty to take on at scale.

But if quarterly P&L accountability is not delegated to the Product Management role, then the founder will never fully take off the old hats. Instead, they’ll be continually sucked into making product prioritization decisions that are really in the realm and accountability of the Product Management role who needs the authority to do his job.

Accountability Should Be Matched with Authority

Product_Management_PM_without_authorityFew things are more ineffective and dispiriting than having accountability for something without the authority to see it through. And the Product Management role has a lot to see through. For instance, can you get a sense for how much conflict the Product Management role must continually manage? It’s a lot. Sales has its needs. Operations has its needs. So do Strategy, Marketing, Customer Service, Finance, and others. How is all of this conflict supposed to be managed without the authority to set short-range priorities?

By delegating P&L to the Product Management role, you are putting real teeth into its authority and allowing it to fulfill its purpose. It’s much more realistic for this role to make prioritization decisions based on the constraints of quarterly profit targets (whatever they may be), rather than just the strong opinion of Sales, Marketing, or Operations.

Again, the Product Management role is essential but it isn’t easy. If the team can sniff out that this position really doesn’t have the authority to make prioritization decisions, the Product Management role will be bypassed and the ensuing conflicts will end up right back at the feet of the founder/CEO. This is NOT how you get to scale.

And if you’re thinking of delegating P&L decisions to the head of Finance instead, you’re preventing the Product Management from being responsive to customer needs and fulfilling on their charter. The head of Finance needs to support the Product Management role with clear budgets, analysis, and advice but the actual authority to make decisions within those budgets needs to reside with the Product Management.

How Does the Product Management Office Manage P&L In Practice?

PM_Profit_and_Loss_ManagementSo how does the Product Management Office actually manage P&L in practice? Basically, in the budget process, the head of Company and head of Finance collaborate with the head of Sales to set annual and quarterly revenue targets and with the other functional heads to set expense budgets.

The head of Company and head of Finance then also collaborate with the head of the Product Managementfunction to set profit margin targets, the pricing matrix, and discount percentages allowed for each product. The target profit margin could be anything, even 0% as in “We’re not interested in profits right now; just step on the gas and drive revenue.”

By listening to and collaborating with all the other major business functions, Product Management decides on the resource allocations to be put toward the various products and features. For instance, in a software company, Product Management would decide what percentage of development resources to put on different products or features in a given quarter. Note that Product Management is NOT dictating which individual developers to put on different tasks. That’s the role of Product Development. Rather, Product Management is deciding what percentage of total product development resources to invest this period – as in 30% to Product A, 20% to Product B, and 50% to Refactoring, etc.

As mentioned, having accountability for P&L also allows Product Management to be effective in their role. When conflicts arise (and they will), then the quarterly P&L target is the ultimate arbitrator. For example, let’s say that Sales really wants a feature in the next release but it would mean bumping out some other critical features in the roadmap in order to deliver it. Product Management can look at all the trade-offs and say, “Listen, this isn’t personal. Here is our profit target for this quarter and next. Based on what I’m hearing from Sales, Operations, Marketing, Strategy, and Customer Service, these are the features I’m going with and why…”

Will fierce conflicts in prioritization still arise? You bet they will. And will Product Management be able to resolve all of them without help and influence from the head of Company or head of Division? Probably not. But the spirit here is really critical. If Product Management can’t resolve prioritization conflicts with their peers, then that key decision will need to roll up to the next level in the organization. But at the same time, the goal of the head of Company/Division is to push accountability for short-range prioritization decisions down to Product Management.

In a scenario where the Product Management can’t resolve prioritization conflicts by himself or herself and the decision does end up rolling to the CEO, then a good CEO won’t just step in and decide. Instead, they’ll respond with, “Hey Sales and Product Management, if you can’t work this out together, then I will make the call – but I warn you up front, neither one of you is going to like my decision. Penelope, as head of Product Management, you have your profit targets. Sam, as head of Sales, you have your revenue targets. I’m sure you guys can find the common ground and figure out what’s best for the overall business without me having to decide. The choice is yours…”

Breakthrough #3: Decentralize It So That It’s Close to the Customer

Is your Product Management function too centralized?

Is your Product Management function too centralized?

In a company that already has a well-defined Product Management role, a complaint you may be hearing around the water cooler is that the Product Management Office just doesn’t get it; that they’re too far removed to understand everyone’s needs and too heavy-handed with their decisions. If that’s the case, this is likely occurring because the Product Management role is too centralized — there’s too much riding on one person or centralized team and they can’t process through the volume of work or they are too far removed from the unique needs of a customer segment to make sound decisions.

For instance, let’s say that you are a US-based manufacturing business and have manufacturing sites in Chicago, Tokyo, and Frankfurt. Well, if you were to centralize the Product Management function in Chicago, then you can imagine the discord, complaints, and manufacturing breakdowns happening in Tokyo and Frankfurt, can’t you? Each site has its own sales team, manufacturing team, expertise, language, and culture. The solution is to decentralize the Product Management role out to each site.

If so, then decentralize the Product Management function into teams that are close to the customers/regions they serve.

If so, then decentralize the Product Management function into teams that are close to the customers/regions they serve.

Put another way, to decentralize means that if you have multiple products, factories, or semi-autonomous sites, then a Product Management function should be assigned to each of them. That is, you’re not trying to create a bottleneck where every decision must flow to one central person or team to make Product Management decisions. Instead, you’re pushing accountability down into the organization so that those closest to the customer can conduct their own product management.

Using the above example of a manufacturing company with three sites, you’d work to develop a separate Product Management Office at each site. And each site may have multiple product managers, depending on the company size and complexity of its products and services.

Decentralizing product management has several benefits:

  1. You’re forming semi-autonomous teams that have revenue and profit accountability.
  2. The product decisions are closest to the customers they serve.
  3. There are no centralized bottlenecks.

When you hear this suggestion, you may be thinking that having separate Product Management offices and/or product managers seems to require a lot of new hires or a lot of overhead. Actually, no. An approach like this is a “costless structure,” meaning that you don’t have to make any new hires to make a decentralized product management structure work. If there’s not enough scale or budget to warrant a dedicated Product Management at each site, then you would simply have someone wear a part-time Product Management hat until you can afford to hire or until you need it as a dedicated position (i.e., the difference between a start-up and a scale-up).

Breakthrough #4: Place the Right Style of Leaders to Manage It

The style, vision and values, and capabilities of the people who play a Product Management role in your organization also have a lot to do with its overall success. Many struggling growth organizations make the mistake of attempting to fill their Product Management roles with a high Producer or a high Innovator style. And if you didn’t fully appreciate the true purpose of the Product Management role, then it’s easy to understand why these decisions get made.

When a High Producer is a Product Management

gotta-nail.gifThe mistake of choosing a high Producer style to be the Product Management usually happens because founder/CEO is frustrated by the lack of production happening in the product development domain and erroneously believes they can solve it by putting a high Producing force in the Product Management role. “We need a kick-ass go-getter who will drive the teams to get things done and won’t take no for an answer. Find me a Marine!”

Clearly, every organization needs a really strong Producing force. It needs it in Sales. It needs it in Product Development. It needs it in Manufacturing and other key areas of the business. But asking the Product Management role to provide that high Producing force is like asking the guy who quickly changes tires in a NASCAR pit crew to take that same approach and manage the entire racing operation. One needs to produce lighting fast on incremental tasks and the other needs to think, orchestrate, prioritize, and coordinate across an entire team, race, and season.

It’s not only the rest of the organization that will feel frustrated by a high Producer style in the Product Management role; the Product Management himself will also feel great frustration. Why? Because their daily work will feel like pushing a string. A high Producer style has a lot of energy and drive to step in and get things done but, in this new role, they can’t step in and actually get things done themselves. They need to listen, ask smart questions, empathize, coordinate, think things through, understand the details, communicate, influence, etc. All of these activities are a huge energy drain to a big Producer style but can be an energy gain to a Stabilizer/Unifier style.

When a High Innovator is a Product Management

PM_as_mad_scientistAnother common misstep occurs when the company believes that its products aren’t creative or innovative enough and so it looks for a high Innovator style to play the Product Management role thinking that that will lead to more creative ideas. While it might create some new energy and excitement in the short run, it will come at a huge cost of poor coordination, communication, and prioritization and will slow down overall execution speed soon after.

Yes, you do need innovative products. But there are already probably a ton of new breakthrough product ideas residing across your organization, including from within Sales, Marketing, Customer Service, Strategy, and R&D. Ideas that keep getting suggested but don’t get implemented. It’s not a lack of creative ideas that is holding back your product. It’s a lack of assessing those innovative ideas, prioritizing them, resourcing them, and launching them.

There is another big drawback to having a highly innovative Product Management in a founder-led company. A talented and visionary founder is worth his or her weight in gold. They simply have an intuitive knack for understanding where the market is going, where the opportunities lie, what customers truly desire, and how to delight them. Frankly, there is no product development process that can come close to duplicating this innate sense.

But when two strong Innovating styles are forced together, this usually turns into a pissing contest over who really owns the vision. Meaning that, if there’s a high Innovating force in the Product Management role and a high Innovating force in the founder/CEO role, then the conflict over who owns the vision and sets the priorities will get severe. Soon, Product Management will be forced out or the fonder/CEO will quit in frustration.

You want Product Management to have enough Innovating force to get and appreciate breakthrough ideas coming from elsewhere in the organization. He or she especially needs to be able to translate the innovative ideas coming from the founder/CEO but also needs the strength and credibility to remain neutral and push back on their dumb ideas. They should be able to steward the product vision but not have a need to control the product vision.

The Desired Attributes of a Great Product Management

There are other capabilities and attributes to look for in a strong head of Product Management besides the natural ability to Stabilize and Unify. Some of the qualities I’ve seen that work best include:

  • They are in the #1 Team Leader quadrant, meaning they not only have the skills and pSiU style; they also share the desired vision and values and aren’t mercenary.
  • They have a deep technical understanding of the product. This allows them to be credible with Engineering, Marketing, Sales, Strategy, and R&D. They understand the details but without getting lost in the details.
  • They command and grant mutual trust and mutual respect. A successful Product Manager doesn’t have to say a lot to get a lot done. They emanate a sense of respect for themselves and they give and receive respect with others.
  • They don’t make things personal. There’s no politics, innuendo, or personal toxicity following them around like the cloud from Linus’ blanket.
  • They keep the mission forefront in their decisions. They make decisions based on what’s right for the company, not what’s seen as best for an individual or department.
  • They add energy to the group. They make the work fun, stay positive, and are generally additive to a group or situation. They reduce entropy; they don’t create more entropy.

In short, I want you to recognize that the Product Management role isn’t a junior role. It’s a key senior role on your leadership team. So put resources and investment into finding and filling it with the right leader, with the right structure and accountabilities, and then support it with the right processes, metrics, and tools.

Breakthrough #5: Equip It With Sound Processes, Metrics, and Tools

PM_with_wrong_tools_for_jobThere’s a booming industry of software-as-a-service (SAAS) companies that would like you to believe that if you just subscribe to their leading communication/groupware/collaboration/execution platform then your business will somehow be magically transformed. Good luck with that.

Purchasing or deploying a new tool or platform without first making the Product Management role a core and distinct organizational function, assigning quarterly and annual P&L accountability to it, and staffing it with the right people, would be the equivalent of applying a fresh coat of paint to a badly designed house. Sure, it might look fresh for a month or two but the house is still falling apart and it’s still hard to live in it.

Instead, put most of your energy and attention into rethinking and redesigning the Product Management function (as well as your overall strategy and execution framework) and then you can help to equip the Product Management with the right processes and tools to be effective. More specifically, strive to keep the processes and tools simple. You don’t scale through complexity; you scale through simplicity.

Regarding process, the Product Management function’s major process to manage is to define and communicate the short-range product roadmap/prioritization. The best practice I’ve seen here is for the Product Management to host an open product roadmap meeting once or twice a month. This means that whoever wants to influence the product roadmap can show up to that meeting and make their case. If someone doesn’t want to influence the product roadmap, then they don’t need to show up to that meeting. And if they miss that meeting, then they shouldn’t be allowed to jump in and sway those short-range prioritization decisions on the next release cycle.

The benefit of this approach is that it allows for frequent enough influence into product prioritization decisions but also enough autonomy for the Product Development team to produce actual products/features. Product prioritization decisions shouldn’t be left to the daily or weekly whim. They need some stability and focus. It also allows Product Management to have some sanity because they’re not being whipped this way and that way every day trying to accommodate an ever-changing array of feature requests.

This suggested timing is just a guideline. If you are in a setting that requires more frequent adjustments to priorities, then you may have to have that prioritization meeting every week. If not, have it every quarter. Use your best judgement.

Product Management must also make communicating the short-range product roadmap cycle a regular priority. This can be done however makes the most sense for your company, including via meeting, email, groupware, or even a dedicated product roadmap tool like ProductPlan provides (shout out to my fellow local Santa Barbarian Jim Semick!)

For metrics, also keep it simple. You don’t have to invest in a million-dollar ERP system just to figure out the exact profit margin to-the-penny of your various products. Start where you are. Guesstimates are good enough to begin. The spirit is for accountability on prioritization decisions to reside with the Product Management role and for it to have enough teeth behind its decisions to follow through and execute quickly.

As the business develops, Product Management can gain additional leverage and insight by tracking key performance indicators (KPIs) like:

  • Profit margin by product
  • Development time and cost by product (i.e. resource allocation)
  • Customer satisfaction by product
  • Sales by product

The bottom line when it comes to processes, metrics, and tools is that a strong Product Management function will likely already know what processes and tools they want to deploy and what metrics they need to track. If they try to go overboard, encourage him or her to keep it simple. Focus on having a regular and open product prioritization meeting as well as the regular communication of the short-range product roadmap and to pay attention to the metrics that really matter. That’s it.

One more thing: I would encourage Product Marketing to maintain its own product release calendar so that it can coordinate and execute on training, PR, education, campaigns, and all other aspects of product marketing. And that Product Development maintains its own development or sprint calendar too. Like an air traffic controller, the Product Management role needs to make sure the planes are doing what they’re supposed to be doing and that traffic is well coordinated, but they don’t actually fly the planes.

Also make sure to keep the product prioritization meetings SEPARATE from your regular cross-functional leadership team meetings. The product prioritization meetings are about working in the business. The cross-functional leadership team meetings are about working on the business. If you co-join these into one meeting, then you’ll spend almost all of your time deciding product prioritization and you won’t have the time energy, and focus to work on developing the rest of the business. Keep them separate.

Now that we’ve defined the terms of product management, talked through the basic scaling tactics, and answered the most pressing questions, let me share a case study with you that should help to bring it all together. This case study is based on one of my coaching client companies and I’ve changed the names to protect any proprietary information.

Case Study

Three years ago, Acme Co. was struggling to break through from Nail It to Scale It. This eight-year-old company had about $6M in annual sales but its growth had been stagnant for the past several years and it was losing money. Its main product offering was providing benefits administration services to large employers. If you can picture 10,000 employees at Honda logging into a web portal to track and update their benefits, then you have an idea of their basic business model. Acme had invested heavily in its technology platform so that it could provide personalized information and benefits education to thousands of employees at scale.

The CEO of Acme, Max Payne, is a very smart, driven visionary. He didn’t set out to be in the large employer benefits administration business but found himself there because, after several early pivots, that’s where the market demand was, albeit with increasing competition and deteriorating margins.

For the past several years, Max was anticipating that the adoption of the Health Care Affordability Act by the US Government would unleash huge market demand from large employers and insurers to track quality of care (He was right). His vision was to transform Acme into a Quality of Care and Benefits provider – one with higher margins and faster growth potential, and a lot more exciting to manage than a low-growth, low-margin, pure benefits administrator. The challenge was that the company seemed to keep tripping over its own two feet during execution.

From his own assessment at the time, Acme seemed to be struggling most with:

  • A compelling and exciting vision but poor execution
  • Difficulty in managing the competing needs between the existing benefits business and the new quality of care initiative
  • Too many dropped balls between signing on and onboarding new clients
  • Inefficient manual processes that never seemed to get fixed
  • Everyone not on the same page in understanding priorities and resource allocation
  • Product development taking too long on the next-generation portal
  • Max spent too much time managing internally vs. being external, meeting with new clients and partners to sell the vision, win early accounts, and build momentum for the new model, which he was very well suited to do
  • A lack of capital, time, and energy to do everything at once.

At the time, Acme had an organizational structure that functioned something like this:

  • Product Management didn’t really exist. It was “sort of managed” by the head of Software Engineering, head of Marketing, scrum master, and Max. A common problem was that new features for the next-generation portal would get built but were usually a surprise to everyone outside of product development and weren’t communicated well to clients or to support staff.
  • Product Marketing was weak. It was managed by the head of sales who also oversaw marketing. The company knew this wasn’t ideal but didn’t have the budget yet to have a full-time head of marketing.
  • Product Strategy was very strong. Max had and maintained a very clear vision of what the product could do and was very skilled at communicating that vision to the entire ecosystem.
  • Product Design and Development was heroic. What do I mean by heroic? They were perpetually understaffed but had a small, committed, and talented software engineering team who kept building really great technical products.
  • Other major functions like Sales, Customer Support, Channel Management, Tech Ops, Finance, Accounting, and Admin did exist and were being managed well, but with the usual challenges of a growing business.

Our solution (after putting in place a sound strategy and execution framework using the Strategic Execution Coaching Program) was to break out Product Management as its own major function as a Product Management Office that would manage both external products and internal projects like this:

New approach Product Management in Structure - Rethinking Product Management (1)

After adopting this new structure at first, the company didn’t have a dedicated leader to head up its newly formed Product Management Office. Instead, a temporary hat was worn by the head of Tech Ops who did his best to manage the Product Management Office in the short run while the head of Software Engineering owned Product Development and Design, the head of Sales continued to wear the hat of head of Marketing and oversaw Product Marketing, and Max continued to wear the hat of Product Strategy, which he continues to wear to this day.

Over the next three to four months the company hired a dedicated person to be the full-time Product Manager as well as a dedicated head of Marketing. Note how much easier it is to hire into a clear structure with well-defined roles. Even if your business doesn’t have a budget to make new hires, you should still create the right structure and assign temporary hats to current staff and then hire into those roles as you can afford to do so.

In this new structure, the accountabilities of the Product Management Office were to translate requirements from sales, strategy, marketing, and operations; prioritize the short to mid-range Product Development roadmap and resource allocation; and coordinate with Product Marketing on new product and new feature releases so that both internal staff and external customers and prospects are aware, educated, and trained to get the most of those features and benefits.

So what were the results of this new structure? Breaking the Product Management Office out as its own major function in the business has some profound benefits. In this case:

  • The company has grown from $6M to $30M in sales in just two years (i.e. their timing was right thanks to Max’s high Innovating style and it is actually executing on its strategy thanks to the new Product Management role).
  • Its net operating margin has improved from approximately 12% to over 50%.
  • Max spends significantly less time managing the business and almost no time managing the product pipeline (other than contributing his desired priorities from Product Strategy).
  • The business is an emerging leader in the new exciting growth field.
  • The company just completed a new financing round at a significantly higher valuation.
  • Intra-departmental communication and coordination has improved tremendously.
  • The distinct accountabilities between Product Management, Strategy, Design, Development and Marketing are clear and managed by different leaders who are each a strong fit for their roles.

Now, just as I was attributing a lot of internal corporate breakdowns to one role — Product Management — I’m also now attributing a lot of internal breakthroughs, including increasing sales, improving product margins, better communication and coordination to that same role. Is this all really due to breaking out the Product Management Office as its own major function? Yes and no.

Yes, because Product Management was conspicuous by its absence. That is, if the organization is in scale-up mode and it is a complicated task to manage multiple product lines, customers, markets, or conflicting priorities, then the absence of Product Management will cause the business to bog down in its execution.

No, because Product Management does not operate in isolation. Every successful business must also have the basic foundation in place to scale. This includes a strong cultural system, a clear strategy, good cross-functional decision-making processes, great communication, a sound organizational structure, talented people who fit the culture, and effective targets and KPIs. In this case, Max did a great job of making sure that all the foundational pieces were alive within Acme and then by adding Product Management as its own major function into the mix, it could really scale up quickly.


Having coached over 50 multimillion-dollar companies from the Nail It to the Scale It stage, I’ve seen firsthand how Product Management can make or break your efforts to scale. In this critical stage transition, redesigning Product Management is essential.

Product Management is a distinct function from Product Strategy, Product Design, Product Development, and Product Marketing. If your business is making the leap from start-up to scale-up, then in order to be successful, you should make the Product Management role its own major function, delegate P&L accountability to it, staff it with the right leaders and team, and equip it with sound processes, metrics, and tools. Avoid Product Management bottlenecks by decentralizing the PM function to the teams closest to the customer. Finally, having a strong Product Management function does not mean you can skip the other elements of running a sound business – culture, strategy, structure, process, people, etc. The Product Management role is a catalyst that helps to bring all of those other aspects together for quick execution but it can’t itself overcome a misaligned structure or environment.

I hope you find this article helpful and that it gives you some things to think about as you work to create breakthroughs in your own organization.

By |2021-02-08T09:18:19-08:00October 15th, 2015|Articles|Comments Off on Rethinking Product Management: How to Get from Start-up to Scale-up

How to Hire Like the NFL’s Best Teams

NFLShield The NFL is the most popular professional sports league in the United States. In fact, it’s bigger than the next three largest professional sports leagues combined. But when it comes to the field of talent management, what makes the NFL such an interesting case study for businesses of all types and sizes is not its popularity but its parity.

Each season, all 32 NFL teams begin with the same basic chance to be competitive. All teams have a roughly equal amount of money to spend and the same numbers of players to a roster, and the worst teams from last season get higher draft picks and an easier schedule this season. If a team gets “harmed” during free agency, the league will assign it compensatory draft picks to help it stay even.

Parity in the NFL has worked. On any given Sunday, one team can beat another. However, a few teams — despite parity — have been able to win consistently over time. In fact, over the past 13 NFL seasons from 1999 to 2012, just 6 teams out of 32 have achieved a 60% or better winning percentage: the Patriots, Colts, Steelers, Packers, Ravens, and Eagles, with only one team achieving a 70% winning percentage: the Patriots.

Clearly, if everything else is held nearly equal, then these winning teams have cultivated an edge in how they go about managing their business and developing their front office and on-field staff. Is there something you can learn from these consistent winners? And if there is something you can take away, can you actually apply it in growing your own business — a business that probably has just a fraction of the money and assessment resources that an NFL team can throw at the hiring problem? And can you teach it to your own team?

These are smart questions to ask. Even if you don’t follow the NFL or understand the rules of the game, anyone can appreciate the dedication it takes to thrive over time in a highly competitive setting. True, the NFL has its problems and its detractors. It’s violent beyond belief. It’s hypocritical when it comes to player safety. Its locker rooms and rosters are filled with some great men and some giant a@*!#$. That said, the NFL absolutely provides some critical insights for how to think about and approach the hiring process for every business, not just a professional sports team.

While you may not have considered the similarities between your business and an NFL team before, there are many. First, you too are faced with intense competition for great talent. Second, you can’t just throw money at the problem. You have finite time, energy, and resources to make great hires and avoid bad ones. Third, when an athlete is drafted and signed to a professional contract, they’re effectively being hired to do a job just as you hire an employee or independent contractor to do a job. So while your “draft picks” don’t get interviewed on ESPN, the fundamentals of getting the right talent at the right price are the same. Fourth, and most important, you’re not just looking to hire individual talent; you’re looking to build a winning team.

How Should You Solve the Hiring Puzzle?

Seattle Seahawks coach Pete Carroll and GM John Schneider  working together in the Seahawks "war room." Source Q13fox.com.

Seattle Seahawks coach Pete Carroll and GM John Schneider working to solve the hiring puzzle in the Seahawks “war room.” Source Q13fox.com.

Just as the NFL pours millions of dollars into how it assesses and hires potential draft picks, businesses of all types and sizes do the same when it comes to hiring. In fact, according to a recent IDC report, businesses actually spend over $85B each year trying to make the hiring process more efficient and effective. They invest in recruiting services, comparative profiling, psychometric tests, research, training, and other ways to try to get an edge in hiring and make it a little less painful.

Despite these massive investments, hiring is still a messy, expensive, convoluted process. For instance, in a recent Career Builder Survey of over 6,000 hiring managers from the world’s ten largest economies, more than half report making a bad hire that caused significant harm to revenues, productivity, client relations, or morale costing more than $50,000 per bad hire.

If you’ve been in the business world for more than a year, then you don’t need these stats to tell you how painful it is to make a bad hire and how challenging it is to get the hiring process right. If you can solve the hiring puzzle, then you can transform your business. If you can’t, and you make a string of bad hires, then you’re soon going to be out of business.

So what can you learn from the NFL winningest teams that hasn’t yet been captured by one of these tools, services, or recruiting firms? Why do businesses pour so many resources into it and still come up short? And can the hiring process ever be truly improved or will it always be an expensive crapshoot?

If you were to ask today’s HR experts on how to improve the hiring process, they’ll tell you that answer lies in having more technology and more data. For instance, there’s a fast-growing startup where I live in Santa Barbara, California, that helps companies scan a candidate’s Facebook page so they can know what that person is really like at home and avoid hiring some whacko. It’s all perfectly legal and EEOC compliant.

There’s yet another company nearby that will do a personality profile on your top performers and then compare them to new job applicants. Supposedly, this approach will weed out the riff raff to help find candidates who mirror the thought patterns and behavior of your existing “A Players.” It’s too bad that this company’s clients haven’t yet understood that high performers actually work best in teams when they are surrounded by complementary, not similar styles of colleagues.

Or perhaps you’ll hear that poor hiring is actually a supply side problem that occurs from a lack of adequately trained candidates coming out of colleges, universities, and trade schools. The solution therefore lies in how we prepare young people to enter the workforce and older people to transition their skills. If you believe this, then I know a few politicians who’d love to speak with you. Bring your checkbook.

The fact is that technology and training can play a part in improving the hiring process. But most NFL teams have near-equal technical capabilities and near-equal training regimes. Sure, every few seasons one team might develop an innovative technical or training edge, but that edge is quickly wiped out when other teams copy it. (The NFL is notorious as a copy-cat league. If something seems to be working, teams will quickly adopt it for their own use).

And if you were to ask the common fan why some teams perform consistently better than the rest, they’d tell you it’s because those teams have a great coach and a great quarterback. “Why have the Patriots won 70%? Easy. They have Belichick and Brady. ‘Nough said.”

Is that true? There’s some truth to it. Would the 2013 Broncos be who they are without Peyton Manning? Nope. Special players like Manning are hard to find and if you get one, you can build a dynasty around them while they last.

But it’s just as true that stars are developed, not born. We’re all shaped by the systems we inhabit and the NFL is rife with stars who were once rejects on their former teams but were fortunate enough to sign on with another team where their style, values, and talents were a better match – and that’s how they became stars (see Wes Welker or James Harrison).

It’s also true that great players get hurt (just like when a top performer at your company quits unexpectedly or no longer performs like they used to) and when this happens, the teams that don’t consistently win at a high level tend to implode. Those that do win consistently, however, tend to keep on winning, even without those former stars. New players enter the scene but the victories keep piling up.

Finally, two objections I often hear from executives when I tell them that the NFL can teach them about hiring is this: “That’s not applicable to us,” one struggling startup founder told me recently. “The NFL can try out players before hiring them. I wish we could do that. If we could try out staff members before hiring them, we’d do a better job too.” I’ve also heard, “The NFL has tons of standardized data to work with and a common hiring pool to compare players through the draft. If we had that level of standardized data, we’d be world-class at hiring too.”

It’s irksome to me that I hear these objections because executives like these just aren’t getting it. Yes, the NFL can try players out and then decide to keep them or cut them. So what? Your business can do the same. In fact, you should always try to structure your new hire arrangements so that you can date before getting married. It’s called a trial period and it’s easy to do and perfectly appropriate.

And yes, the NFL has lots of standardized data to work with. Team management knows the height, weight, 40-yard dash time, Wonderlic score (an “intelligence” test), and playing history of every prospective and future player.

While most of corporate America and Silicon Valley startups are driving hard to get more and more standardized and relevant information through big data, social gaming, and assessments on potential recruits, again, so what? The consistently winning teams use the same data set and have the same opportunities in the draft (or to recruit outside the draft using free agency) as every other team. Yet they consistently outperform their peers. How?

What the Best NFL Teams Do Differently

Parity in the NFL. Every team beat the team to the clockwise direction. Yet some teams consistently outperform. Why? Source: Business Insider.

Parity in the NFL. Every team beat the team to the clockwise direction. Yet some teams consistently outperform. Why? Source: Business Insider.

Clearly, there’s something beyond technology, data, training, individual talent, and luck that the winningest NFL teams do differently than the rest over time. So what is it?

The answer is both simple and profound: Consistently great teams don’t scout and hire for talent. They scout and hire for talent that is a supreme fit for their system. They always think about building a team with a strong collective identity at a fair price instead of just collecting individual talent at any price.

In addition, great teams tend to develop through the draft rather than relying heavily on expensive free agents. They also have a system for recognizing when to unload an existing player to another team and they manage their payroll (their biggest expense) in such a way so that the organization is healthy in the short and long run.

You too need to hire and develop top-notch managers and players. You too are under intense pressure and competition. And unlike the Yankees or Manchester United, you can’t just throw money at the problem. You’ve got to play “moneyball” instead and find the right mix of skills for your system and at a good value to market rates. You need to build a team, not a collection of mercenaries.

Put another way, the hiring process can be improved in your business by modeling what the NFL’s best teams do – but this doesn’t come from new technology, more training, or getting lucky. It starts with rethinking how you think about the hiring process itself. Unless you and your team have the right paradigm to think about hiring in the first place, then no matter what tools, resources, and processes you deploy, your hiring process is still going to be flawed. Until you think differently, you can’t act differently.

Belichick’s Epiphany

New England Patriots head coach and defacto GM Bill Belichick with quarterback Tom Brady.

New England Patriots head coach and defacto GM Bill Belichick with quarterback Tom Brady.

Today, you may know Bill Belichick as the head coach and de facto GM of the New England Patriots and one of the most successful coaches of all time. But 25 years ago, he got his first head coaching start with the lowly Cleveland Browns.

According to the book War Room: The Legacy of Bill Belichick and the Art of Building the Perfect Team, when Belichick took the helm at Cleveland, he was already crystal clear on the type of team he wanted to build — a big, strong, fast team that was capable of playing in any weather, in loud and hostile Rust Belt stadiums, and was smart enough to adjust their schemes each week to take away the biggest strengths of their opponents.

But during his first days on the job he quickly noticed that the Browns’ pro and college scouts, coaches, and administrative staff were not thinking about the hiring process in a smart and unified way. Because they weren’t thinking about it in the right way, they weren’t going about it in the right way, and they certainly wouldn’t be able to create a sustained competitive edge until they changed their thinking:

“[The Browns staff] were not speaking the same language when it came to personnel. There was one grading scale for evaluating the pros and an entirely different one for analyzing collegians. Even worse, in his opinion, there was no organizational identity. After all the scouting, who were the Browns trying to be?

It seemed to him that there wasn’t a good systematic answer to the question, so that became one of his missions: Build one player-evaluation system, for pro and college players alike, that always provided an instant snapshot of who a player was and whether he was capable of helping the Cleveland Browns. When the system was perfected, the coach imagined, everyone in the organization would be able to glance at a couple of numbers and letters on a scouting report and know exactly what type of player was being discussed.”

Belichick was never able to complete such a system for the Browns. A few years after taking the job in Cleveland, the team was moved to Baltimore and Belichick was fired. But the vision was set and years later, when Belichick became the head coach of the New England Patriots, he was able to put such a talent evaluation system in place and, with a few notable exceptions (no Aaron Hernandez jokes here, please), the results have been outstanding.

What Belichick recognized when he started with the Cleveland Browns is that hiring and development of both front office and on-field staff was critical to the organization’s success, but the organization lacked the framework to transform it into a competitive edge to wield against the competition.

It took Belichick years to refine his talent evaluation system. Once he got it going and cascaded it throughout the Patriot scouting teams and front office, however, it transformed a haphazard process into one that is much more accurate, scalable, and powerful.

I’m not saying the Patriots and other top performing teams have been perfect in their drafting and team development (they haven’t) but that the way they think about hiring and the approach they use gives them a slight edge over the other teams. And in a highly competitive setting, a slight edge makes a significant difference.

To drive this point home, I’d like you to reflect for a moment about how exactly you think about the hiring process in your business today. Are you searching for a particular personality? A salary range? Past experience? Education or credentials? A personal referral? Commitment to a vision? Job skills? Upside potential? Cultural fit? Avoiding a future liability? All of the above? And if you are clear on the above, how do you go about determining it? What tradeoffs are you willing to accept and why? Finally, how do you — and your team — actually know it when you see it in a way that everyone can agree on?

Chances are that you don’t have a unified answer to these questions nor a systematic way to find answers. And if you should happen to have an answer personally, does the rest of your company’s hiring team know the answer too? Probably not. In order to create a unified and systematic approach to hiring, one that guides you and your team to find the right candidates and avoid the wrong ones, you need a framework to follow.

The New Hire Draft Board: The Ultimate Talent Management Framework

Every season the NFL has a draft for new players. There’s a lot of organizational focus and media attention on the draft. It gets NFL fans in a tizzy of excitement too. “Who will our team draft this year?” “Will they botch it up again?” “Is there hope for the Browns finally?”

Before and during the draft, each team creates its own version of a draft board. The draft board helps team management to think about where they believe the relative value of a prospective player is compared to the “market demand” and the team’s needs.

If you’ve ever heard an NFL GM tell the media, “we worked our draft board perfectly this year,” what he’s really saying is that he believes the team got the players it wanted for the price they wanted to pay.

Even though your organization doesn’t hire employees all at once during a certain time of year like the draft or recruit employees in a hierarchy of rounds, but rather by pressing organizational need, you still need your own version of a “draft board” that allows you to think clearly and accurately about who to hire and why (and who not to hire and why) and where the value of a particular candidate lies.

If you had such a system, then you could place any prospective new hire on the draft board and see if they’re a fit or not, what the trade offs are for each candidate, and how candidates compare to existing staff and even glean insights into how to best recruit, manage, and develop them. In a word, the draft board brings clarity.

The right draft board will not only apply to prospective new hires but also to existing staff. That is, if you were to place an existing staff member on the draft board, it would tell you if they need a raise, if they’re suitable for a new position or are ready to be promoted into a leadership position, or if it’s time to let them go and find someone new.

Below is just such a draft board. It’s based on the team leadership framework created by legendary San Francisco 49ers football coach and GM Bill Walsh who was the architect of the 49ers football dynasty in the 1980s. There’s a richness of detail here, but for now just scan it quickly to get a sense for what a blank new hire draft board looks like:

The New Hire Draft Board. The ultimate framework for making smart hiring decisions.

The New Hire Draft Board. The simple framework for making smart hiring decisions.

Like most great things in life, this draft board is both simple and powerful. It groups all of an organization’s current staff and/or potential job candidates into one of four quadrants:

  • The Team Leaders in quadrant 1 demonstrate high skills and fit for this position or role, they have shared vision and values, and they demand fair compensation (defined as at or below market rates for your industry and corporate lifecycle stage) for this position. That is, they could get more money elsewhere but they choose to take less because they intrinsically value being part of the team and opportunity in a role that is well suited to their strengths and interests.
    Team Leaders define “the way” of your organization much like Peyton Manning or Tom Brady are team leaders who define the way of their respective teams. “Hey rookie, see how Peyton Manning studies film every morning at 6am? That’s the kind of player we want around here. Prepare like he does and you’ll do just fine.”

    Think of your Team Leaders as stars, starters, or captains. You want to reward and retain them for as long as possible. Give them ownership opportunities, career paths, autonomy, and support them as role models for the rest of the company.

  • The Team Players in quadrant 2 don’t have the same technical skills, fit, or experience as a Team Leader but they share the same desired vision and values and don’t cost an arm and a leg relative to market price.
    Team Players are valuable to your success and you definitely want them around. It’s very hard to find people who share the same vision and values and embody “the way” of your organization. If they have the raw talent, it’s much easier to develop their technical capabilities over time to become Team Leaders or if not, to remain as valuable role players. It may also be that, as they develop their capabilities and acumen, a role in the organization opens up that is a very strong fit for their style.

    Think of your Team Players as your role players or bench. You need to coach them to develop their technical proficiency and groom them into the right role while still celebrating them as key contributors to the team’s success.

  • The Specialists in quadrant 3 have high technical skills and are a strong style fit for the job, but they don’t share the same vision and values and/or may be very expensive compared to market rates.
    Specialists are viewed as highly capable experts that don’t fit into the desired organizational culture. While specialists can get the job done, great organizations rely on them sparingly and never place them in core leadership positions because the specialist doesn’t share the desired vision and values. Much like having a primadonna wide receiver like “Ocho Cinco” in an NFL locker room can shift the focus from the collective “we” of the team to the “me” of the individual ego, a specialist in a leadership position who doesn’t embody the desired vision and values can quickly turn a once winning organizational culture into one that is toxic and self-defeating.

    Think of Specialists like mercenaries or free agents who get paid well to perform a specific function well. If you do choose to use them to fill in some talent gaps, keep them on the periphery of the organizational core and pay them cash on the barrelhead for a job well done.

    The biggest mistake you can make when hiring a specialist is to delude yourself into thinking that you can mold them into a Team Leader with the proper incentives and motivation. Don’t do it! They are who they are, and no amount of incentives is going to change that fact unless they themselves want to change.

    Even with a strong individual commitment to change, personal character development can take a long time and can easily be tripped up. Therefore, if you do hire a Specialist, avoid putting them in a leadership position but allow them to express their high level of skills and acumen outside of the organizational leadership core.

  • The Waivers in quadrant 4 do not have the skills and fit and do not buy into the desired vision and values. Or, they simply demand way too much compensation beyond market rates for a company of your size and industry.
    Waivers are who you’re trying to avoid hiring in the first place. The easiest time to make a waiver is before they even get hired! So if in the interviewing process you notice the signals of a quadrant 4, it’s straightforward: DO NOT HIRE.

    The next hardest waiver to make is an employee who sneaked through the hiring process and turned out to be a poor fit that now sucks everyone’s time and energy. They don’t perform at a high level and they don’t embody the desired cultural traits. So why do you have them around? Now that you’ve recognized the mistake, fix it. Fire ‘em or trade ‘em to the competition. Fast.

    By far, the hardest waivers to make are those former Team Leaders and Team Players who just no longer have the high level of technical skills or fit within the evolving organization, or who are just demanding too much compensation relative to market rates for a company of your size and industry.

    While it’s hard to say goodbye to these once valued team members, it’s even harder to be burdened with excessive overhead and a diminishing skill set. (Just ask the Raiders who have been mired in trying to work themselves out of expensive and underperforming contracts for the past five years).

That’s the four main quadrants of the draft board: #1 Team Leaders, #2 Team Players, #3 Specialists, and #4 Waivers. You should notice immediately that this framework provides a strong foundation for how to think about who’s on your team now and who you want on your team in the future. It tells you that:

  • You need a strong core of #1 Team Leaders who are extremely talented at what they do, are a great fit for your system, share the desired vision and values, and will work at a fair price relative to market rates.
  • You need a deep bench of #2 Team Players who aren’t yet as talented as the starters (or there’s not the same level of job fit) but buy into the desired organizational culture at also do so at fair market price.
  • For the most part, you want to avoid using #3 Specialists who, if placed in a leadership position, can quickly turn the organizational culture toxic or tip the payroll balance by demanding exorbitant fees to be part of the core team.
  • You must avoid hiring and retaining #4 Waivers who don’t have the skills, aren’t a fit, don’t buy into the vision and values, or make it too expensive in time, energy, and/or money to keep them around.

As you can see, the draft board framework provides a very strong foundation for how to think about the type of players you want on your team. It’s pretty straightforward to master the basic concept and it’s simple for everyone involved in the hiring process to understand.

The PSIU Code: A Common Language for Hiring Success

The draft board framework also sets the stage to create a powerful common language within your company. A common language, or code, promotes rapid communication and instant understanding. Having such a code is incredibly important to not only the hiring process but also to overall communication and organizational performance.

The winningest teams in the NFL understand this. Each one uses their own proprietary written code or shorthand to define players’ skills and fit within their system. The Patriots, for instance, use an intricate upper- and lower-case letter and numbered grading system that compares a potential draft pick or free agent against existing players on the Patriot’s roster.

Patriot scouts are required to rank a player using this internal code to describe not only physical characteristics, but also how those players play the game and fit within the Patriots’ system. (Is this player aggressive? Smart? Instinctual? Observant? Tough? Passionate? Studious? etc.).

Using a code to identify and communicate the kind of player the team needs for any particular position is brilliant. Because once you know the language, this allows a near-instantaneous understanding of an existing player or potential draft picks. It also forces the entire organization to get on the same page when it comes to knowing what an ideal player represents – e.g., What does a starting Patriot linebacker look like and how should they go about their job? The code tells it.

Your business needs a similar code – and the draft board framework provides it. The code needs to be able to answer this question: “What are the desired characteristics for this role and is there a match with this employee or job candidate?” The code must be simple, fast to use, and easily understandable by everyone involved in the hiring process.

Here is an example of the start of an active draft board with a simple code. This draft board is for a new Head of Operations role for an expansion-stage healthcare technology company. It includes the new shorthand code that you will soon master.

The target represents the ideal candidate for a given position.

The target represents the ideal candidate for a given position. An effective recruiting and interviewing process will allow you to quickly and accurately place candidates in their correct locations on the draft board. The best candidate will be the one closest to the target.

Learning a new language takes a bit of practice but already you should have an initial grasp of the type of candidate this company wants just by glancing at the draft board target. What can we tell?

The company is seeking a #1 Team Leader who demonstrates high job skills and high style fit for the role, who shares the desired vision and values, and who demands fair compensation compared to market. In addition, we can tell that the right candidate is a Producer/Stabilizer style (PSiu) in their approach — meaning that he or she will thrive when working to accomplish the daily/weekly work and to bring order or efficiency out of chaos.

PSIU stands for the Producing, Stabilizing, Innovating, and Unifying forces (think “PS. I love U” to remember them) and is a form of management shorthand that tells you what kind of style, strengths, and approach you require from any given position. As I explain in my book Organizational Physics: The Science of Growing a Business, these four forces show up in individual management styles as a result of how we learn to drive and respond to change and to focus on the parts or the whole of the system we’re in.

“OK,” I can almost hear you saying. Seems simple enough. But how do I determine where each candidate is on the draft board?” Well, that’s the purpose of your recruitment and interviewing process! That is, a good recruitment and interview process will quickly and cost-effectively identify where a candidate is on the draft board. A poor recruitment and interview process won’t provide that level of insight or it will take too long and cost too much to find the answers.

Before you start diving into how you’ll build a new recruiting and interviewing process to support the draft board framework, I’d like you to pause and reflect for a moment. Remember earlier when I asked you how exactly you think about the hiring process in your business today?

”Are you searching for a particular personality? A salary range? Past experience? Education or credentials? A personal referral? Commitment to a vision? Job skills? Upside potential? Cultural fit? Avoiding a future liability? All of the above? And if you are clear on the above, how do you go about determining it? What tradeoffs are you willing to accept and why? Finally, how do you — and your team — actually know it when you see it in a way that everyone can agree on?”

Well, guess what? Now that you are starting to get an initial feel for the draft board framework, can you see that you’re already well on your way to answering those questions now and forever? No matter how you slice it, from now on when you think about the hiring process, you’ll know what to think about:

Are you in search of a “#1 Team Leader” and will you only accept a “#1 Team Leader” because this is a critical leadership position and you must have captain who walks the talk and demonstrates a high level of skill and fit?

Or will you accept a “#3 Specialist” for this position because it is outside the company core and you just need a high level of technical skill and role fit to get the job done?

Perhaps you are in the market for a “#2 Team Player” but you’ll expand the scope to a “#1 Team Leader” if you stumble across the right candidate? Or is this purely a “#2 Team Player” hire because that’s all that’s really required for this role?

And what is the style of candidate who will naturally thrive in this role based on the job requirements and the complementary skills and gaps in the team? Do you need a high Producer/Innovator who thrives at winning and coming up with creative solutions to complex problems? Or would it be a Stabilizer/Unifier style who brings order out of chaos while keeping the team and clients on the same page? Or a different style altogether?

There are still a lot of details to answer and those answers will come soon enough. But what’s really important (and valuable) is having a framework to ask the right questions in the first place! And that’s exactly what the draft board framework gives you: A new way to think about hiring, along with the right questions to ask.

Now that you have a snapshot of the draft board framework, the next step is to understand how to put it into action. Once you know the how, then you can tackle the when to hire and who to hire. But right now, don’t rush past small victories. Take a moment to savor them. You now have a seriously powerful framework for how to think about the hiring process.

This post is an excerpt from How to Think About Hiring: Play Smarter to Win the Talent Game.

By |2017-02-25T20:38:43-08:00December 6th, 2013|Articles|Comments Off on How to Hire Like the NFL’s Best Teams

Africa Rising: An Amazing Story of Sustainable Business Doing Social Good

The image of a dark Africa is going to change radically in the coming years.

The image of a dark Africa is going to change radically in the coming years.

If you’re a person who likes to hear about momentous progress happening in the world, then you’re going to like the story that about I’m to share. However, if you’re an entrepreneur who appreciates ingenious solutions to complicated problems, then you’re going to absolutely love it.

It’s the story of one of the most innovative business models I’ve seen in some time. It’s also a story of confluence – an almost magical combination of technology, market timing, and business strategy that leads to greater social good.

The centerpiece of the story is M-KOPA, a fast-growing startup based in Nairobi, Kenya. M-KOPA has a compelling vision: to bring solar panel lighting and electricity to the African continent. M-KOPA doesn’t build solar panels. It provides consumer financing for them. And even though it went into service just a year and a half ago, it already has over 35,000 customers and is growing rapidly.

M-KOPA has created an ingenious solution to bring solar panel financing to Africa.

M-KOPA has created an ingenious solution to bring solar panel financing to Africa.

You probably know already that much of sub-Saharan Africa still uses kerosene-based lighting. Kerosene is not only antiquated, it’s also dangerous and unhealthy. If Kenya alone switched from kerosene to solar electricity, it would not only provide superior lighting and energy, according to Luminanet.org, it would also save the average Kenyan household $105 USD per year, eliminate 2.3 million tons of carbon dioxide from the atmosphere (equivalent to about 500,000 mid-sized cars), and save millions of children and families from exposure to toxic fumes (62% of all child poisonings in Kenya come from kerosene).

But wait a minute… haven’t you heard this story before? Haven’t you heard the big dreams and opportunities that Africa presents for both energy and economic transformation? And haven’t most of those dreams been shattered like a wooden boat thrown against the rocks of Cape Hope?

I know. I get it. I can almost hear you saying, “Wait a minute, what makes M-KOPA different from the dozens of other companies that have traveled this route before? Why are they growing so quickly? Are they some kind of pyramid scheme? And how can they provide financing to consumers who don’t have a credit score, a credit card, or collateral to take out a loan? Sounds like a fine African fairy tale.”

This is where confluence comes in. In 2007, Kenya adopted a mobile phone payments system called M-Pesa. M-Pesa has grown astoundingly quickly since the moment it was launched and, according to Wikipedia, by 2011 it had more than 17 million subscribers. Today, M-PESA is effectively at or near universal market penetration. Put another way, while we in the US suffer from shitty cell reception (“Can you hear me now?”) and legacy bank transfer systems, almost everyone in Kenya has a mobile phone with constant reception and the ability to do instant cash transfers!

On the back of this universal payment network M-KOPA, was conceived: a company designed from the ground up to do mobile phone payment transfers for solar financing. Without M-Pesa, M-KOPA could never exist. So one of the things that’s different this time around in Africa is timing. And as my granddad used to say, timing is everything.

“But wait a minute,” you’re probably thinking, “just because someone can pay for financing via mobile phone doesn’t mean they actually will pay. How does M-KOPA check for credit scores? Deal with non-payments and defaults? Collateralize their loans? What, do they have a fleet of bicycle-based repo men? Doesn’t sound very efficient to me…” The answer is No, No, and No. And this is what makes the M-KOPA business model so ingenious and scalable.

Here’s how it works: M-KOPA charges an up-front deposit of about $30 USD. This fee is high enough so that consumers value their investment but low enough that most Kenyan households can save up for a few months to afford it.

M-KOPA then finances the balance of the panels to their customers at a very affordable fee of $.50 (USD) per day. The program is designed to pay off the panels in one year, after which the customer owns the system outright.

That’s pretty basic. Now here’s the secret sauce: M-KOPA installs a secured SIM card on the solar panels themselves. In the event that a consumer doesn’t pay the 50-cent per day fee, then voila’, those solar panels get shut off through the mobile network! Once a customer shores up their balance, the panels are turned back on via the mobile network. No need for credit scores, credit checks, a fleet of repo men, or bank references (which don’t exist).

Isn’t that brilliant? M-KOPA’s loan repayment rates are astoundingly high. Once consumers shift from kerosene to solar electricity and lighting, they definitely don’t want to go back. Not only is it a sustainable business model, it’s the kind of approach that will allow Africa to quickly adopt clean, green, energy and all the benefits that entails.

As Chad Larson, co-founder and finance director of M-KOPA and an Oxford graduate put it to me, “Our loan repayment rates at M-KOPA are on par with those of loans to the highest credit score borrowers in the West. But what is more meaningful is that there’s huge demand for this kind of power in Africa, and it’s now possible for us to meet that need in a sustainable way.”

I love this story. I admire the combination of clean energy and social good combined with a sustainable business model. I tip my hat to the team at M-KOPA and wish everyone involved a brighter future.

If you’re interested in the new emergence of Africa, here are some interesting TED Talks I’ve seen recently that describe Africa at a tipping point towards a more prosperous future:

By |2013-11-03T23:30:40-08:00November 3rd, 2013|Articles|Comments Off on Africa Rising: An Amazing Story of Sustainable Business Doing Social Good

How NOT to Interview

Office_Space_Bill_Lumbergh_Gary_Cole When I was 26, I had a job interview that I’ll never forget. It was for an entry-level sales position with a fast-growing telecom company in Minneapolis, Minnesota.

At the time, I had just shut down my first startup, had burned through all my savings, and was in desperate need of a job.

A friend of mine told me about the firm one night over beers: “Hey Lex, I know that you just shut down your startup. Sorry it didn’t work out, man. But hey, if you need a job to pay the bills, they’re hiring where I work. It’s not the best job in the world but the money can be good if you work hard at it.”

The notion of hard work and good money sounded like a pretty good opportunity. I needed something I could throw myself into until I found my footing again. So I called the company the next day, told them I was referred by one of their existing reps, and set an appointment for an interview.

To prepare for the interview, I practiced my spiel about why I’d be a good fit for their organization, polished up my resume, put on a suit, and went in with a mix of hope, anxiety, and chutzpah.

600full I arrived at their offices and approached the receptionist’s desk. The receptionist, middle-aged and blurry-eyed, looked me up and down skeptically and, with a hint of exasperation at having to deal with me, said, “May I help you?”

“Ah yes, I’m here for an interview for a sales position. My name is Lex Sisney.”

She glanced down at her calendar and shook here head: “There’s no interview today. You first need to take the written test.” She reached into her file drawer and handed me a 50-question fill-in-the-oval-and-make-damn-sure-you-stay-in-the-circle-scantron-test. “If you pass the written test, then you’ll be invited back in for an actual interview.”

I thought to myself, “Really? Why didn’t they tell me this on the phone? I’ve got to take some psycho-babble test before even speaking with somebody? And is this the kind of place I want to work for? WTF. Oh well, I guess I do need the money so I better just play along.”

So out loud I said, “OK, let’s take the test.”

“See the clock over there on the wall?” she said. “You have 30 minutes to complete the test. Have a seat under the clock and the time will begin. Do you have a #2 pencil?”

“Ahh, no, I’ll need a pencil please, do you have one?” She rolled her eyes and reluctantly handed one over like it was her last meal. I took the pencil, turned on my heel and walked back to my assigned seat under the clock.

The test asked me questions about what I’d do in hypothetical situations like the following:

“You see a co-worker take a company coffee mug from the storage closet and put it in his briefcase. You should:
A) report the theft to HR.
B) ask him what he’s doing.
C) take a mug for yourself.
D) tell him to put the mug back.”

I snickered under my breath but played along anyway. I finished quickly and turned it in with 15 minutes to spare.

The receptionist scanned it over with a raised eyebrow to make sure I stayed within the circles and didn’t miss any questions. “OK,” she said, “someone will call you if there’s a possible fit,” and I left. (Note: psychometric tests like this one have transitioned from #2 pencil to the web but they can still be just as asinine.)

About a week later the company called me in for the actual interview. And I was told that this time, I’d actually get the chance to speak with the hiring manager.

I arrived early and re-greeted the receptionist. She seemed in a somewhat better mood this time: “Have a seat Mr. Sisney and Mr. Johson will see you when he’s ready.”

After waiting for 20 minutes past the scheduled time (is this a doctor’s office?), a new voice spoke from the receptionist area. “Mr. Sisney? I’m Lidia, Mr. Johnson’s assistant. He’s ready to see you now.”

TOM SMYKOWSKI Lidia led me back through the cubicles and telemarketers to a large windowed office. There at a small, round conference table sat “the Man.” As I was ushered into the office, he didn’t actually look up or greet me but sat leafing through some papers, extended a limp-fish handshake, pointed to a chair across the table and sternly said, “Have a seat.”

After what seemed like five minutes of just sitting there waiting, he finally looked up from his reading, made eye contact, and with pursed lips told me, “I’m concerned about your ability to conform.”

“Excuse me?” I asked trying to mentally process what he just said. He placed one of the pages he was reading on the table and with two fingers slowly twisted it towards me so I could read it.

“You see this chart? This fourth column is conformance. Your scores in these other three areas are very high but you have the lowest conformance score of anyone I’ve ever seen.”

I said, “Hey, that’s pretty cool. Can I have a copy of that?”

“No,” he frowned. “But tell me why should I believe that you can conform to our way of doing things here?”

I tried to dance and weave and sell him on the idea that non-conformity really meant “creativity” but I didn’t think he really bought it. The interview lasted about 10 minutes total and I left thinking it was all a big waste of time.

Surprisingly, they called me a few weeks later and offered me the job.

“No, thanks,” I said. “It seems like you’re looking for drones for your empire. That’s not really me.”

Conformity vs Community

pesticides1 I share this story because the push towards conformity is relentless. If you’re not careful, it will insidiously work its way into your culture and eat it away from the inside.

Just think about this interview I had. It’s clear that this company was suffering from high turnover in the sales team so they tried to fix the problem by weeding out risky candidates (like me) using a psychometric profile test early in the hiring process.

In effect they were saying, “Turnover is costing us a lot of money. We must control for it by only hiring reps who can conform to our process.”

Did it work for them? No! They still had high turnover in their sales team; those they did attract were of the lowest common denominator; and their entire recruiting process became a bureaucratic numbers game.

It’s no coincidence that this company went public a few years after my interview and went bankrupt a few years after that. Why? The market no longer demanded their products and they couldn’t adapt because they had conformed to the past.

Wise leaders build their businesses on a different principle. Rather than allowing for conformity, they design for community.

  • Conformity gives the illusion of control but, in the end, its focus on “monocultures” makes the system brittle, stagnant, and tired.
  • Community takes more time and courage to build but its focus on diversity ultimately makes things alive, vibrant, and adaptive over time.

The tricky thing to manage when designing for community is that community requires some conformity!

How to Design Your Culture for Community, Not Conformity

foodforest1 Imagine a community where no one speaks the same language or shares the same ideals, where there’s not a clear structure or decision-making process, and where the systems don’t interoperate (all of these things require some level of conformity). What do you get? Anarchy. Inefficiency. Exhaustion. Failure.

So how do you balance that? Or, how and where do you require some conformity but keep its relentless advance in check so that individual diversity can flourish, adapt, and up-level the entire system over time?

The answer is that every situation is unique but the underlying patterns remain the same. The secret to spotting those patterns and managing them more astutely is to understand the four forces of Organizational Physics: Producing, Stabilizing, Innovating, Unifying (PSIU). If you’re new to the concept of the four forces and how they show up in every system, read Part II in my book Organizational Physics – The Science of Growing a Business.

Take a look at the PSIU matrix below because it reveals the secret to balancing community vs. conformity:

The behavior of every complex adaptive system can be understood through a drive to shape and respond to the environment.

The behavior of every complex adaptive system can be understood through a drive to shape and respond to the environment.

On the left side are the Stabilizing and Unifying forces. The Stabilizing force creates Conformity. It makes things efficient, repeatable, and scalable. The Unifying force allows for Community. It makes things harmonious, congruent, and working well together as a complete whole.

On the right side are the Producing and Innovating forces. The Producing force is about getting things done and producing results for clients. The Innovating force is about adapting to changing conditions.

In order to be successful over time, the left side (Stabilizing and Unifying) of your organization must always be harnessed to support the right side (Producing and Innovating). I say “harnessed” because, like horses run amok, if left to their own devices, the Stabilizing and Unifying forces will creep, control, and condemn the rest of the system to failure.

For instance, if the Stabilizing force is out of whack, there will be too much bureaucracy, rules, standards, and efficiency in the system. The organization shows up like a shit factory. It produces the wrong thing very efficiently.

But the Unifying force can get out of whack too. If it is out of balance, the culture becomes all-consumed by politics, infighting, and the “drama in here” versus the “needs out there.” In this case, the organization shows up like a bad soap opera or a community at war with itself.

To repeat: the secret to designing a business that leverages diversity to become strong and vibrant over time is this: the left side must support the right side! If the Stabilizing and Unifying forces are NOT supporting the Producing and Innovating forces, then they are cancerous and must be ripped out/changed/healed/improved. That’s your job as a manager.

Why must the left side always be in support of the right side of the matrix? Because the purpose of the business is to produce results for its clients, now and over time. If you’re focused on meeting the changing needs of the external market, then everything else is open for reinvention.

  • Is a process slowing us down in our ability to meet customer needs? Replace it.
  • Is our culture too focused on what’s going on in here? Get out of the office and go meet with customers.
  • Are we too staid in how we’ve always done things and the market is changing rapidly? Better get busy on blowing things up.
  • Is our recruiting process bringing in the right candidates to meet client needs now and over time? No? Better go change that process.
  • Etc., etc…

So as a leader, how do you know what to do and when to create community and not fall prey to simple-minded conformance? You need to create a framework for success. Equipping you with such a framework is outside of the scope of this article because it would require a book

But a short answer is this:

  1. You need to define and defend the Vision and Values of the community. And yes, Vision and Values must be defended, just like the Constitution of the United States must be defended. If you don’t defend it, you’ll soon lose it.
  2. You must put in place a sound structure of accountability and have key metrics in place to track performance.
  3. You must enforce a sound team-based decision making process that allows for diversity of perspectives in the decision and ensures rapid implementation post-decision.
  4. You must create space for others who buy into the desired vision and values to have a place in the organization where they can express their individual talents in service to something larger than themselves (i.e., the clients).

Once you have these elements in place, that’s enough “conformance” to create a vibrant community. Your task as a manager is to now help keep the community focused on what’s happening out there in the world: being in service and producing results for clients and adapting to changing conditions over time. That’s sacred. Everything else in the community is open for reinvention.

By |2020-01-06T08:36:56-08:00September 29th, 2013|Articles|Comments Off on How NOT to Interview

Walk Across the Valley

Have you ever wanted something only to rue the day you actually got it?

Recently, I had a simple but profound lesson that really taught me the value of “be careful what you wish for.” I’m really lucky to live in a beautiful place. Take a look. Here’s the view from our deck:

Before you make a decision, walk across the valley and see what the view's really like from that new angle.

Before you make a decision, walk across the valley and see what the view’s really like from that new angle.

It’s an awesome view right? Well, when my family and I first moved here, I certainly noticed that it was a beautiful view. Almost immediately, though, my internal monkey mind started telling a story that that the view from across the valley must be even grander.

“Wow,” I thought, “the view from here is pretty spectacular but the view from that beautiful house across the valley must really be great!” I even felt inferior in some sense, as if we had ended up on the “wrong” side of the valley. The truly good stuff was clearly over there.

Well, I’m an idiot. One day my wife and I took a hike across the way. When we got to the other side and looked back, what do you think we saw? A really mediocre view compared to our side of the valley. The mountain ranges and textures that made our own view so spectacular were missing on the other side. Duh!

I realized in that moment that I had spent much of my life assuming things were always better on the other side. From afar, they looked more beautiful or interesting or desirable “over there.” I often focused blindly on simply getting “there” even if “here” was actually better.

I know I’m not alone in this error. Many highly driven people make the mistake of focusing on getting something new, even if it doesn’t make any sense to do so.

For instance, I have a friend who built up a successful company over the past decade. He worked hard, lived a nice lifestyle, and seemed to authentically enjoy the industry, clients, and his employees. Basically, he had a really good thing going and he knew it.

But my friend’s vision had always been to sell his company. The story he told himself was that if he’d work hard to build up his business, then one day he could find a strategic acquirer, sell it, and do something new. He didn’t give too much thought to what he would do after the sale. He was exclusively focused on making the exit happen. He told himself that he’d figure out what to do once he had the time, money, and freedom to really think about it.

You can probably guess what happened. He actually did sell the company, but it turned out to be a disaster. He signed a three-year workout clause with the acquiring company. They made promises to keep the existing staff and give his business complete autonomy within their portfolio. That lasted for about 60 days before the new owner decided to change strategic directions. They made a call to shut down his business (now theirs), fire the staff, and sell off the assets.

Today, my friend has a little bit of money in the bank but he’s miserable. He’s cut off from the work he enjoyed, the team he built and thrived with, and the clients he used to serve. More than that, he’s really, really pissed off at how things went down. He feels cheated by the acquirer and blames himself for wrecking a really good thing.

I can contrast this story with another friend of mine who’s also successful entrepreneur. This friend had made his fortune in the commodities business and moved to Santa Barbara to “retire” at 40. He quickly got bored and decided that he wanted to get into the restaurant business. A dream that he always wanted to pursue.

But this friend did something really, really smart. He found a restaurant for sale that seemed like it might be a great purchase. But he didn’t go to the owner and make an offer. Instead, he dressed down and went to the owner and got a job as a busboy! I asked my friend why, being independently wealthy and with a world of options at his fingertips, he would waste his time being a busboy?

My friend responded, “Because I want to try on the restaurant business before I commit to it.” He worked at the restaurant for about a month. He learned the ins and outs of that business by doing the work, getting a firsthand account of the operation, and befriending the owner to get more inside information.

Ultimately, he decided that the restaurant business wasn’t his game. The margins were too thin and the hours too long. But isn’t that perfect? He only risked his ego and some time to suss out what his new reality would be like after the potential decision was made. The value he got of NOT buying a restaurant is priceless. Otherwise, he would have gotten stuck owning an asset he didn’t really want to own. His kind of methodical thinking and willingness to “try on” the future before making a commitment is certainly one of the reasons this friend is so successful.

I’ve tried to take this lesson to heart by slowing down my own decision-making process long enough to really investigate (or even intuit) what life would be like after I make a certain decision. In essence, I try to walk across the valley and see what life over there is really like before wishing I had it any different. How about you? Are you wishing you had it different when what you’ve got right now is perfect? How can you tell if you’re too focused on just getting it done versus making the right decision?

By |2013-08-11T21:22:46-07:00August 11th, 2013|Articles|Comments Off on Walk Across the Valley