Does operational excellence matter to you?
If so, then I’d like to introduce you to a powerful new tool called the Organizational Physics Entropy Survey. The Entropy Survey allows you to survey a cross-functional team to discover a company’s most important internal improvement points and create an action plan to fix them. Then you can track the team’s progress at driving and sustaining operational excellence over time.
For over a decade, I have relied on this same tool as a linchpin in my strategic alignment and organizational design consulting practice. I have used it with several hundred companies. I know it can be transformative for two reasons:
- Many clients who completed my initial program continue to use this same survey every year, as part of their own strategic planning and alignment process.
- The survey allows the team to track its progress at reducing entropy over time. This way we can actually measure it working!
It’s a powerful tool and is like nothing else out there. I’m just now making the Entropy Survey available to other coaches and CEOs who would also value the improved ability to:
- Gather and align diverse perspectives
- Solve problems at the root cause
- Improve organizational velocity and scalability
- Measure improvements over time
- Create a successful, resilient, and agile organization
“The Entropy Survey is a revolutionary change. Not simply an incremental move, but a massive transformative change over the traditional SWOT Analysis.”
– Paul Cronin, Managing Director, Cornerstone3 Inc.
If you’re potentially interested in a powerful approach to organizational development like the one I’m describing, then I’d like to invite you to register for free, kick the tires, and see how it works. If you give it a sincere try, then you’ll quickly understand why it can make such a positive impact in growing a business.
I had the privilege of being on the Fort Podcast with Chris Powers last week. Chris is an excellent interviewer and we covered a lot of ground including scaling-up, organizational design, and where a leader can create the most leverage to get and sustain business momentum. Listen on:
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 […]
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 […]
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 […]
Photo by Mike from Pexels
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 […]
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.
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, […]
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.
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:
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.
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.
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 […]
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 […]
Should you run a top-down or a bottom-up organizational design?
Choosing “top-down” means giving the roles at the top of your organization significantly more control over key decisions than those lower in the hierarchy. Choosing “bottom-up” means having little to no centralized control so that those doing the work are free to organize, make decisions, and perform as they best see fit. Both camps have their own justifications.
The extremists in the top-down camp believe that an autocratic, hierarchical style of command-and-control decision-making is necessary for an organization to be successful and fulfill its purpose. In this case, strategies or plans are first conceived at the top of the organization and then cascaded down into the organization for implementation. When decisions from the bottom need to get made, they must first go to a qualified manager for approval. Deep down, the proponents of a top-down structure believe that if there isn’t an appropriate level of centralized control, the inmates will soon be running the jail and chaos will reign.
The extremists in the top down camp believe that without a high level of centralized control the whole enterprise will quickly fall apart.
The extremists in the bottom-up camp believe just the opposite — that most forms of hierarchy are unnecessary and inefficient (if not outright evil). Their view is that a top-down hierarchy separates authority from those actually doing the work. Therefore, at its best, a top-down approach leads to cultures of disempowerment, resentment, and bureaucracy. At worst, it gives birth to autocratic tyrants who wield unchecked power, enriching themselves and their families at others’ expense.
The extremists in the bottom-up camp believe that most forms of hierarchy lead to tyranny.
So who’s right?
Well, if you were to gauge the current zeitgeist in business and popular culture, you’d get a strong sense that the bottom-up camp is right camp to be in. Best-selling books and viral articles get published regularly that bemoan the old paradigm of top-down command and control as “so-last-century” while promoting an emerging new paradigm of self-managed, egalitarian organizations without bosses, titles, or anyone telling you what to do. Ahhhh. So refreshing.
But is it true? Let’s see…
Reinventing Organizations from the Bottom Up? Not Quite.
In a recent New York Times interview, Tobi Lutke, CEO of Shopify, used the term “trust battery” to refer to something that we’re all familiar with but we may not always articulate well: monitoring the current level of trust between people.
As you undoubtedly know, there are few things that can hinder success in an organization as much as a lack of trust. Using the metaphor of trust battery is a clever way to think about and communicate the importance of trust in your organizational culture and using it can make some hard conversations easier too.
Here’s how the trust battery works…
Every time your work with someone, the trust battery between you is either charged or discharged. When the trust battery between you is high, then the work gets done smoothly and quickly. When the trust battery is low, everything deteriorates.
When you start working with someone new, like a new hire, then the trust battery between you is charged at about 50 percent. You’re not really sure what to expect but you also give the benefit of the doubt and try to keep an open mind. Over time, if your interactions are positive, the trust battery fills up. If not, it drains.
Depending on its level of reserves, the trust battery can drain slowly or quickly. If you’ve worked with someone for a long time, have many positive shared experiences and a high degree of trust, then even if this person starts acting differently, the trust battery will drain more slowly. “Hmmmmm, Sam doesn’t seem like himself lately. He’s always been on time and now he’s late. I wonder what’s going on with him? I better check in and see if he needs anything.”
On the other hand, if it’s a relationship with low trust reserves already — like a new hire who clearly doesn’t cut it or a long-term relationship with a history of negative behaviors — then that battery drains very quickly. “Damn that Sam. He’s never delivered and he never will. He says one thing and does another. Why hasn’t he been fired yet?”
The trust battery works between groups too. For example, in your own organization, have you examined the trust level between sales and marketing? How about between customer service and engineering? Or between the CEO and the rest of the company? If you sense that the trust battery is running low between groups, I can almost guarantee that your company it not executing to potential – and it would be wise to take corrective action.
To be sure, we all have an intuitive sense for this already – it’s just how humans work. But calling it out makes it easier for everyone in your culture to understand and model. It also makes having difficult conversations easier […]
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 […]
“We believe that the future standard for all executive teams will include a head of Customer Success who’s on the same level as the head of Sales, Marketing, and Demand Generation.” – Aaron Ross
If you run a software-as-a-service (SAAS) business, you might already know about the core concepts behind Aaron Ross and Margaret Tyler’s book Predictable Revenue. Aaron Ross learned his craft as the head of customer acquisition for Salesforce.com and this book seems to have become the hot new bible for scaling up the revenue side of a SAAS business.
The main theme of Predictable Revenue is that the single most important thing a SAAS business can do to scale revenues is to segment its Sales roles into distinct focus areas and also to create a new role in the organizational structure called “Customer Success” that is dedicated to making existing customers successful and driving renewals.
Lately, I’ve been getting asked frequently in my consulting practice about how to structure the Customer Success role. My sense is that there is some confusion out there about the distinction between Account Management and Customer Success. In this article, I’m going to show you how to use the principles of Organizational Physics to actually structure the Customer Success role so that your own SAAS business has the greatest probability of realizing its potential.
Role Segmentation: Always a Good Idea
Predictable Revenue argues that the major role of Sales is actually four roles that need to be segmented in the organizational structure:
- “Inbound Lead Qualification” to qualify new leads coming into the business;
- “Outbound Prospecting” to create and qualify new sales opportunities and then pass them to Sales or Account Executives to close;
- “Account Executives or Sales” that close deals and carry a quota;
- “Account Management/Customer Success” which is a role dedicated to making existing customers successful and driving renewals.
Does it make sense to segment these different sales roles? Absolutely. In fact, you should define and segment all of the major roles and most of the minor roles in your entire business — not just sales.
Segmenting by roles greatly supports scaling your business. It helps to create role clarity and accountability. It allows the right style of people to focus on the most important things for their roles. It significantly improves the hiring process. And with the right management process, it can significantly increase execution speed.
Predictable Revenue encourages the segmentation of sales roles earlier than one might think and I totally concur — but again, for all roles. Technically I would start to think through your organizational design and role segmentations in the mid- to late Nail It stage of business development. Heck, it doesn’t even cost anything to segment by roles if you don’t have the budget […]