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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, […]

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 […]

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 […]

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 […]

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 […]

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 […]
  

“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 […]
  

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. 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 […]

Photo credit: AudienceView.

It’s a classic tale. Your company’s driven, visionary founder manages to lead your start up to takeoff and hit rapid growth mode. But then something happens, and everything starts to bog down. Those former start up struggles and early wins turn into a whole new set of challenges: running the business at scale.

At about this time in an organization’s lifecycle, conversations in the board room and around the water cooler start to focus on the founder. See if you’ve said or heard any of these before:

• Our founder has great energy and ideas (along with some really dumb ideas) but we still can’t seem to get our act together.
• It’s no secret our founder isn’t an Operations person.
• We need to either replace our founder or support her with someone experienced who can run day-to-day operations and keep the trains on time.
• What we need is a President/COO. Then the founder/CEO can be Mr. Outside and the President/COO can be Mr. Inside.

Does any of that sound familiar? I bet it does. On the surface, having a President/COO can make a lot of sense. Every organization needs stability, structure, and experience if it is going to scale up. The approach is certainly popular. “President and COO” titles are so common—throw a stapler in the air at your local office park and you’re bound to hit one on the head.

But hiring a President/COO to solve the “founder” problem typically brings just a new set of problems, setbacks, and even disasters. In many cases I’ve seen, the new President/COO was a sure bet on paper but failed to replicate past successes in a new environment.

In another common scenario, you’ll find that soon after joining, the new President/COO will […]

“What’s the difference between an organizational structure and an organizational chart? Do you need one or the other—or both—to manage your business?” I get asked different versions of this question a lot. The distinctions are subtle but important. Knowing the answers—and approaching your organizational design the right way—is mission-critical to scaling your business.

The short answer is this. In most cases, if you’re entering a new stage for your business—scaling beyond start-up mode or embarking on a new growth strategy—you’ll need a new organizational design. And when it comes to organizational design, you really only need two things:

1. A well-designed organizational structure
2. A “role-centric” human resource management system (HRMS) that mirrors the structure

That’s it. You do not need a classic org chart—that constantly-changing and almost instantly-out-of-date diagram that shows names, job titles, and lines of reporting responsibilities. The org chart tends to quickly become obsolete and leads to a counterproductive focus on who’s where in the organizational pecking order…

You don’t need this. Photo credit Pathfinder.

Trying to maintain a classic org chart—or, heaven-forbid, to redesign your business based on one—causes much more harm than good. So drop the classic org chart and instead embrace the principles of effective organizational structure combined with a role-centric HRMS. Here’s what you need to know…

Are You Attempting to Redesign Your Business from an Org Chart?

It should be intuitive that, in order to manage and scale your business, you need a sound organizational design. As I’ve written in “The 5 Classic Mistakes in Organizational Structure: Or, How to Design Your Organization the Right Way,” everything has a design to it. If your business design sucks, then your execution will too.

Changing an organizational […]

Sales vs. Marketing. Who’s the Ape? Does your head of sales think your head of marketing is an imbecile — that they just don’t “get it” and aren’t doing the right things to drive qualified leads for the sales team? Or perhaps your head of marketing looks down his nose at those “apes” in the sales department who constantly demand more results but don’t understand the strategic aspects of real marketing, not to mention the time and money it costs. Sheeezh.

You may not be surprised to hear that this tension between sales and marketing is common. The truth is that, by nature, their functions will always be in tension or conflict. One is short-range-focused, with a drive to close qualified leads NOW. The other should be long-range oriented, developing the brand and product offering to meet evolving customer needs in the future – not just this quarter’s targets. That conflict is never going to go away. And the point I’m going to make in this article is that it can be harnessed.

There is an easy way to address the conflict between sales and marketing and make it constructive for both growing sales and building the brand. It does, however, take awareness and discipline to do it well. The solution is to refocus and get alignment between sales and marketing on the most important question every business must answer: Who is your primary customer? You might think this is obvious, yet a surprising number of B2B marketing companies overlook this step. Or don’t do it adequately.

Who is Your Buyer Persona?

A “buyer persona” is a semi-fictional representation of your ideal customer — the real buyers who influence or make decisions about the […]

Hint: It’s a system. 

Key Takeaways:

• You don’t build a great culture through intention alone. You build it through a culture system.
• You can’t dictate culture. But you can design for it. A strong culture system is designed around four key elements: Values, Rituals, Stories, and Consequences.
• To build a better organizational culture, use the culture system framework to focus your energies on improving the weakest element, then improve the next and so on.

When Intention Isn’t Enough

It’s 9am on Monday morning at ACME Widget Corp. The management team is gathered in the 1st floor conference room waiting for CEO Jack Ryan to arrive. A rumor is buzzing around that Jack has spent the past weekend at Culture Summit 2.0, some sort of “interactive experience” where business leaders learn from culture gurus how to build a thriving organization.

A few minutes after 9, Jack, calm and present as always, enters the conference room and gives his hellos. As he is taking his seat, Sally in Marketing says, “Jack, there’s a rumor going around that you attended a corporate culture workshop this weekend? How was it? We’re all curious to know…”

Jack doesn’t answer right away and instead takes time to visually connect and smile at everyone around the table. Finally he speaks. “This was one of the most transformative weekends of my life. It really reinforced for me the importance of values-based leadership and I’ve got a lot of new ideas to try. But the main thing is this: going forward my #1 commitment is to ensure that we truly become a values-based organization. That’s what I’m most committed to and excited about as a result of this weekend.”

Now imagine you’re in that circle and you hear Jack say this. How do you […]

Sometimes the best way to understand what NOT to do in an interview is to go through a bad one yourself. I’ve definitely had this experience. It occurred when I was interviewing for an entry-level sales position with a fast-growing telecom company in Minneapolis, Minnesota. At the time, I was 26 years old, 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 you just shut down your startup. Sorry it didn’t work out, man. If you need a job to pay the bills, they’re always 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, 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.

I arrived at their offices and approached the front 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 […]

Being business partners is a lot like being married. When the relationship is thriving, it’s awesome. But when it isn’t, it really sucks. In fact, few things can destroy organizational momentum like two co-founders in a bad relationship. I have a friend in a successful business partnership who puts it like this, “I have two wives. One at home and one at work. I’ve got to invest time and energy to make sure that both stay happy, otherwise, it all goes to s#*&t!”

Not all partner conflict is bad. You actually want constructive conflict in your partnership. Constructive conflict means that you and your partner share the same vision and values; there’s give-and-take; you fiercely debate potential decisions but without attacking each other’s character; there’s a sense of mutual trust and respect; and your individual strengths and styles complement each other. You are both better because of the other.

Destructive conflict, on the other hand, is like a toxic marriage. It eats away at the system from the inside and doesn’t work for anybody. Just as divorcing adults impacts their kids, two co-founders in a toxic relationship impact everyone else in the organization.

If you’re navigating a bad business partnership, or you just want to make sure that your current great partnership remains so, then it can be eye-opening to understand that any destructive partnership conflict falls into just three types. Once you know what type of conflict you’re dealing with, then you can know how to address it.

As you read about each category of destructive conflict below, see if you can recognize where your partnership is experiencing the most strain today. That will tell you where to focus your energy and attention to help the partnership be […]

My friend and client Russell Benaroya, CEO at Everymove.com spoke this weekend at the second annual Dent the Future conference in Sun Valley.

Russell’s topic was “Entrepreneurs Need Coaches” and I thought he had some great insights that every entrepreneur can benefit from. If you click the link you can read his full commentary on the right hand side of the slides. I’ve also captured some of my favorite highlights from his talk below.

Created with Haiku Deck, the free presentation app

“We are all capable of being champions, in making the impact we want to make. Why not us? Practice! Practice! Practice! But how do you “practice” being an entrepreneur. The plane is in the air. For me, I need ground control, someone that can see the big picture when I’m just focused on the next waypoint. For me, it’s been about surrounding myself with the best coaches I can find.

The only lens that we see of the performers is the result of their practice. The problem is that there is not much of an opportunity to see that lens into ourselves and have it reflected back so that we can learn, grow, and make smarter decisions.

The road of entrepreneurship is just lonely. I did not fully appreciate that I was going to lose so many friends, that I would test my marriage and that I would question my sanity. What saved me? The acknowledgement that I am not alone, that what I am dealing with is a well worn path, that the path is the greatest gift, both the ups and downs. How I stayed on the road? By building a […]