Scaling Up: How a Few Companies Make It...and Why the Rest Don't (Rockefeller Habits 2.0)

by Verne Harnish

So how do you figure out an X-Factor? Start by asking: What is the one thing I hate most about my industry? What is driving me nuts? What is the choke point constraining the company?

One clue to the source of the X-Factor is going back to your last 10 trade association meetings and gathering the titles of the various breakout sessions.

Jim Collins’ Hedgehog Concept in Good to Great: Why Some Companies Make the Leap... And Others Don’t

The Profit per X metric represents the underlying economic engine of the business and provides the leaders with a single KPI they can track maniacally to monitor the progress of the business

Your BHAG® should be measured in the same units as the X.

The BHAG® must also align with the Purpose of the company,

nail down what you can and keep moving. Set up your strategic thinking team, have each member read (and master) one of the referenced books or articles, and start testing your theories and honing your strategy to perfection.

The bigger your company, and the faster it’s growing, the harder it is to keep everyone on the same page.

These strategic components and priorities provide a quick snapshot of the company’s vision.

We encourage team members to post this Vision Summary in their cubicles, their offices, or the cabs of their sanitation trucks as visual reminders of the organization’s strategic plan and their part in making it a reality.

a vision is a dream with a plan:

To flesh out the vision, you need to answer seven basic questions: who, what, when, where, how, why, and the often challenging question, “But should we or shouldn’t we?”

“Get it down; then get it right”

The balance of the plan, as you move right, becomes more dynamic, stimulating progress to meet the trends, opportunities, and challenges of the marketplace.

the OPSP process provides the organization with: 1. A framework that details your corporate vision. 2. A common language with which to express that vision. 3. A well-developed routine for keeping the vision current.

Column 1 (Should/Shouldn’t): Lists a handful of rules defining the boundaries for decision-making — the Shoulds or Shouldn’ts represented by the Core Values.

Column 2 (Why): Expresses the impact the company wants to make in the world

Purpose (often referred to as “mission”): the aspirational North Star or Southern Cross providing direction to the business

BHAG® (Big Hairy Audacious Goal): the measurable piece of the Purpose that the business can achieve in the next 10 to 25 years

Column 3 (Where): Defines Where the company is headed in the next three to five years.

Column 4 (What): Describes What results need to be achieved in the next 12 months.

Column 5 (How): Details How the company plans to achieve its vision, focused on a measurable “next step” 90-day #1 Priority (Critical Number) and a handful of “Rocks.”

Column 6 (Finish Lines and Fun): Describes the theme, celebration, and rewards associated with the #1 Priority for the quarter or year.

Column 7 (Who): Delineates Who is accountable for various aspects of the OPSP, detailing the KPIs, Rocks, and Critical Numbers for each employee or team. Last, the When question is represented by each column’s time frame.

To eliminate confusion over whether the month or day is listed first in the date, we suggest trying the global standard used by Cisco: the two-digit designation of the day, followed by the three-letter designation of the month, and then the four-digit designation of the year

alignment starts with getting agreement on the organization’s name, your name, and the format of the date.

These three to eight phrases broadly define the shoulds and shouldn’ts that govern your company’s underlying decisions and describe the personality of the organization.

If the first column represents the soul of the organization (or organism), then column 2 presents its heart. Column 2 answers some very basic Why questions: Why is this company doing what it’s doing? What’s its higher purpose? Why should I have passion for what we’re doing?

Profit per X is a single KPI that represents the company’s primary economic engine

The BHAG® represents the quantifiable 10- to 25-year target that aligns with the Purpose and Profit per X.

As we move to column 3, the plan becomes more detailed, listing specific financial targets and priorities over the next three to five years.

Since everything between the BHAG® and the next 90 days is a WAG (wild-ankle guess), the three- to five-year financial targets might as well be aspirational and aggressive.

a short description of the core customers (Who and Where) and What it is you plan to sell them.

if you’re going to get to your next camp, What are the #1 Priority and Key Initiatives for the company year — sometimes referred to as OKRs (Objectives and Key Results)?

THE Critical Number for the year: “the main thing that will be the main thing.”

you’ll pick a Critical Number that will address either an opportunity or a challenge on the People/Balance Sheet side of the business (e.g., reduce employee turnover, improve customer service scores, or dramatically reduce a credit line with the bank) or the Process/Profit & Loss side (e.g., improve gross margins, reduce production cycle time, or increase sales close ratios).

“What are a handful of Key Initiatives we must complete this year to achieve our financial outcomes and hit our Critical Number?”

The quarterly Critical Number represents a key step in achieving the annual Critical Number.

Last, choose a handful of Rocks* — priorities that must be accomplished to achieve the quarterly financial outcomes and Critical Number.

To see an excellent demonstration of Covey’s rock analogy, go to YouTube and search “Big Rocks in First” and watch the six-minute video with your team.

Measurable Target: The quarterly Critical Number

Theme Name: Brainstorm a fun and relevant title for the Quarterly Theme.

Celebration: The Quarterly Theme gives you a reason to host an event to either celebrate the accomplishment of a big goal or commiserate.

Once the vision has been set, sit down with each individual or team in the company to establish what they can do over the next quarter to help the organization succeed. This creates “line of sight,” through which everyone is able to see how his or her daily actions link to the company’s goals.

Your KPIs: Every employee or team should have an ongoing KPI or two that enables them to quantifiably answer the question, “Did we have a productive day or week?” 2. Your Quarterly Priorities: In addition to an individual’s ongoing work, what are a few priorities for the quarter that will raise his/her performance or drive a special project that aligns with the employ-ee’s Critical Number and the #1 Priority of the company? 3. Critical Number: What is the single most important quantifiable quarterly achievement for that person or team that will help the company achieve its vision? One of the keys to keeping people engaged is making a connection between their day-to-day efforts and the goals and vision of the company.

Employees: Happiness and engagement scores

Customers: Kept Promise Indicators and Net Promoter System scores

Shareholders: Cash and company valuation

Make/Buy: Speed of processes (Lean), costs, and qua...

Sell: Close ratios, sales cycle, and r...