Transcript
Speaker: Hello, welcome to another episode of Scale Up Confessions, the show where we talk about what it's really like to lead and manage a growing small or medium-sized business where things get messy.
Speaker: My name's Rob, I'm a certified EOS implementer and transformation director. That means I help businesses and leadership teams get what they want from their businesses, either by coaching teams to do the hard right things themselves, or sometimes being parachuted in for a period of time to help teams make the changes that they need to make.
Speaker: and to get more aligned around a vision, executing more efficiently against that vision and just basically building team health so that people have the conversations they need to have and do the hard right things to get the business back on track.
Speaker: Sounds easy. In practice, we all find it a struggle. I found it a struggle for most of my career, which is why we do these confessions.
Speaker: We had a small hiatus from scale up confessions and I built up ah a number of emails that came into me with confessions that it now fills time, particularly with the market in the UK economy where I'm based hardening to um to dig into some these confessions and start putting some some content back out into ah my community to hopefully be be helpful because for every one email that I get, I'm pretty sure there'll be 50 or so people that are dealing with the same thing. That is the nature of running a small or medium sized business.
Speaker: In some ways it all tastes like chicken, which is why I'm so keen on EOS, the Entrepreneurial Operating System. So as always, forgive me if a lot of my answers hark back to EOS. It was transformational for me and therefore it's the toolkit that I constantly go back to. There are of course other ways to run um and transform small medium sized businesses. This is my just my favorite approach.
Speaker: So listener be warned if you've heard a few episodes before and any of this feels familiar. If it feels familiar, that's good. You might be starting to get it Okay, so this confession, um the confession i'm going to read this week is from Martin.
Speaker: Hi, Rob. I'm Martin, and I own a commercial fire protection business employing around 70 people. We install and maintain alarm, sprinkler and suppression systems for warehouses, offices and industrial sites.
Speaker: If you looked at the business from the outside, you'd probably think things were going really well. Turnover has increased for four years running, we've recruited more engineers and we've got a healthy order book. The problem is it doesn't feel like we're making any more money.
Speaker: We're busier than we've ever been, but some jobs look profitable when we win them, seem to make very little by the time they're finished. There are site changes, extra visits, materials we hadn't allowed for, and the occasional customer request that nobody wanted to push back on.
Speaker: Our sales director points to the amount of work we're winning. Our finance director keeps telling me our margins are heading in the wrong direction. A few weeks ago, I asked the team to show me which customers and types of work actually make us the most money.
Speaker: I'm still waiting for a clear answer. We've always priced work using experience and judgment, and that worked when we were smaller. I'm starting to wonder whether our growth is actually hiding problems rather than solving them.
Speaker: Where would you start? Thanks, Martin. Okay, cheers, Martin. So um pretty common problem, one that I've experienced and one a lot of the teams that I see experienced as well, particularly at the moment where costs seem to be going up everywhere, ah particularly in the UK.
Speaker: Okay, so I would basically take a three-step approach. for The first thing I would do is back to basics. So in my world, that just means reassert the fundamentals of EOS.
Speaker: So that means go back to the six components. So vision, people, data, issues, process, traction, and check that you're relatively strong in all six components. So vision.
Speaker: Of your 70 people, Are most of them clear on what your behavioural and cultural expectations are, why the business exists, where it's going in the long term, where you need it to be in the medium term, the picture in your head, what you're committed to doing in the next year, and then the priorities for quarters as they go.
Speaker: um Starting at the company level priorities and then hopefully by each department getting them working in that 90 day world. And then also being open about the issues that are affecting the business at large, but that you're not going to get into yet. Those are the eight parts of the VTO in EOS, the vision, the two page business plan, the vision traction organiser. Ask yourself, how strong are we around vision? If nobody knows what we're doing, where we're going, then ah you're going to find it hard to lead them in the direction you want to go. If you want to be focused more on making money, does your vision actually say that?
Speaker: Second component, people, having the right people in the right seats. Wrong people means people that don't honor those values we talked about in vision. In the wrong seats means that they don't get, want, or have the capacity to do the job that you need them to do. If you're carrying a bunch of people where they're not very good at their job or they don't like each other or you don't like them, that's going to be hard. It might have been fine in good times, but as the market gets tighter and tighter, you'll find that having people issues um is going to eventually prevent present potentially insurmountable problems. Okay, so we talked about vision and people.
Speaker: ah Then we've got data. So does everybody in your organization, to all 70 of those people, understand what you want from them? So of course you've got the accountability chart. That's that diagram that illustrates who's accountable for what in your business in EOS. Hopefully you've got that if you're listening to my podcast.
Speaker: um Then the question becomes, do each of those people know what you need from them on a week to week basis in terms of activities? So what are the leading indicators of them doing a good job for you?
Speaker: Ideally, everybody should have a measurable and they should be able to articulate what you're expecting from them in numbers. Every team should have a scorecard. And when we talk about traction, we'll talk about how we get them thinking in numbers and holding themselves and each other accountable week to week.
Speaker: issues component all the way through the business and 70 people that means you've got people that don't report directly to you I assume um does each team in the business have a ah the confidence and the habit of listing issues when they arise and periodically ideally weekly and quarterly if you're following the EOS rhythm do they face those issues have open and honest discussions about them and solve them once and for all for the greater good.
Speaker: If they don't, then various problems that are coming up operationally that are then impacting profit are not getting resolved. So you really need to look at how effectively are you and each team in your business led by your various managers identifying and solving issues.
Speaker: Fifth component is the process component. So does everybody in your business know the right and best way to perform all of your core processes? That's not just sales and pricing,
Speaker: It's also delivery, um also billing, all sorts of parts of the business that will impact your P&L and l and your cash flow. ah To what extent have you articulated crisply what the expected processes are?
Speaker: It sounds like from your letter that a lot of things have been done on hunch and feel and experience. So you might be a bit loose in the process component. Of course, if you're not in control as to how people are doing things, it makes it much harder to get the expected outcomes you're looking for, including profit outcomes.
Speaker: And then finally, the traction component is that's that's the rhythm, the operating rhythm of the organization. So um is every team in the business, starting with your leadership team, having a high quality weekly meeting that's keeping people on track for their strategic priorities, their 90 day rocks, their week to week responsibilities, their scorecard measurables?
Speaker: And are the leaders making themselves available to solve their own and each other's issues, that IDSing, that issue solving piece on a weekly basis? If that's not happening all the way through the organization, then it's going to be very difficult for managers to be leading their teams effectively, managing their teams effectively to deliver the expected outcomes.
Speaker: And similarly, if you're not doing those kind of overarching quarterly objectives, then that makes it very hard to make strategic transformation like sharpening up on profit focus and cash flow focus, like it sounds like you want to do at the moment.
Speaker: Okay, so that's a back to basics piece. That's your fundamentals. That's your EOS fundamentals. If you're not operating the business fundamentally well, then it's not that surprising you're not getting the financial outcomes that you're looking for. So I would start there.
Speaker: Assuming that you are running the business relatively well, let's say we're aiming for 80% or stronger across each of those six components. The next thing that I would do is I would go to the toolbox tab at the back of your EOS folder, assuming that you've done an EOS journey with an implementer.
Speaker: If you haven't, then you can get the tool on the EOS website or email me and I'll send you a ah copy. And look for the tool, the eight cash flow drivers. um The eight cashflow drivers is a tool that when you're working with an implementer, they'll teach your leadership team first so that each member of the leadership team can then teach it to their teams.
Speaker: Basically what it does is it's a facilitated exercise. It will take you about an hour and it allows you with each team to get them to get on a rounder whiteboard and list all of the things that might drive positive financial outcomes for the organization. So what are the things that are causing us to to waste money? What are the things that are causing us to get paid slowly?
Speaker: um Are we paying our invoices too quickly? um If we're collecting slowly and paying fast, then we're going to have cash flow problems. you know, what are we doing around pricing and so on? Right. So it's a facilitated exercise to and and finance people always think this is really rudimentary and kind of dumb.
Speaker: And then you do it with them and they love it because they realize the value of it is it helps them teach others to do and know things that previously has only been trapped in the head of the finance person. Because you mentioned that you've got a finance leader.
Speaker: So don't don't be turned off if they say to you this eight cash flow drivers thing is too simple and too dumb. It's not for their benefits, for the team's benefit. So you get everybody up on a whiteboard, you list out all the things that could make a financial impact.
Speaker: Then what you do is you keep, kill, and combine those things until you get down to just a handful of drivers of your intended financial outcomes, classically eight. And then what you're able to do, if you've if you've sorted out your fundamentals and you've got all the right tools in place, some of those tools I referenced a moment ago,
Speaker: then you can tie those initiatives that have now been identified by the relevant team. And remember, every team can do this to their scorecard or to their rocks or to their specific seat in the accountability chart.
Speaker: And then through your traction component, you can ensure that those numbers, those initiatives are tracked and and managed so that you actually get the movement that you're looking for. Okay, so that's tip number one. So first, back to basics, run a good company.
Speaker: Tip two, dig into the EOS toolbox and do the eight cash flow drivers with each team so that they start to think more about driving your financial your financials more effectively.
Speaker: And then the third one is the one that I like. It's just a little bit of sort of icing on the cake. Read the the great game of business would be my recommendation and think about open book management. So a lot of teams, even teams that are healthy in the vision component in EOS, shy away from being honest about their financial aspirations.
Speaker: Again, finding good times, but when times are harder, you find the owners actually start to, um, kind of start to feel a bit persecuted by their own company because, you know, whilst they haven't admitted it to anyone, it's not a charity in most cases. And they do in fact need to or want to earn a certain amount of money from from their risk capital, from their investment of time and money and all the other things that they've put into the business.
Speaker: um But it's quite hard to pivot from not talking about financial expectations in good times to suddenly acting like your coin operated as an owner without alienating the team. So the great game of business is a methodology for becoming more transparent about the numbers, how the business works, and you effectively think of yourself as a teacher, a finance teacher, not accounting, but business finance.
Speaker: And you basically, it gives you a methodology to teach your organization how the company makes money. And then what it it encourages you to do is to create a um variable variable pay. So performance incentives. Now, the critical thing about the great game of business is it's determined that you will not create um a sense of entitlement and false expectations that's actually going to put jobs at risk at risk in the future.
Speaker: And so it asks you as an owner to think about what your owner hurdle is. How much money does the organization need to meet to reinvest and or to pay out to investors before you're satisfied?
Speaker: After that, that's the hurdle. After that, then it encourages you to think about how much of the surplus beyond your hurdle would you be happy to share with your team? And it's got some recommended methodologies as to how you might allocate between team members and how you might phase out pay payouts over the course of a year, quarter by quarter.
Speaker: It's really good. And so that would be the third piece, I would say. Explore the great game of business as a way of giving your people a stake in the outcome of driving the transformation that you're looking for.
Speaker: um the The numbers don't always need to be life changing. You know, like high single digit percentage of salary is is a whole month extra pay. It's like getting like there being 13 months in the year, you know, so it's more it can be more financially motivated than you might think.
Speaker: But beyond the hard numbers, a decent percentage of the employees will often actually really enjoy learning about business and learning that not every pound that comes in as revenue ends up in your fat pockets as an owner.
Speaker: You'll often find that when you don't talk to teams about how much money you're making or not making, they assume you're making a lot more than you are. So the thing you're trying to protect them against, you're not protecting them against anyway. They're going to be just as cynical as they would have been if you were more transparent. so But the author of The Great Game of Business makes a better case for that than I do in the book.
Speaker: so Three tips, get back to basics, recommit to EOS if you're on the EOS journey. Two, dig into the EOS toolbox and explore the eight cashflow drivers if you haven't done so already or reteach it if you have, but you've forgotten it.
Speaker: And then finally, explore the gate game of great game of business to make your team more excited about and knowledgeable about the drivers of financial impact and to give them stake in the outcome when they clear your reasonable expectations so that everybody wins.
Speaker: So I hope that helps, Martin. um Looking forward to some more confessions over the coming weeks and months. If you're listening and something's troubling you, feel free to write on a named or an anonymous basis and we'd love to help you.
Speaker: My details are in the in the show notes. As always, feel free to drop me an email with any questions, or if you want tools or resources, I'd be very happy to email them to you. All right, best of luck, guys.
