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

by Verne Harnish

As Google’s people analytics team discovered, one-on-one coaching is the #1 factor linked to great management.

Leadership and the One Minute Manager: Increasing Effectiveness Through Situational Leadership,

Use these conversations to review individual KPIs, Priorities, and Critical Numbers from column 7 of the OPSP at each meeting. Recognize good performance, analyze underperformance, and discuss activities needed to get back on track. Ask questions to put the focus on the process, rather than lamenting results. Also give feedback on adherence to Core Values and, if necessary, develop strategies to correct behavior. Don’t hold back. Timely feedback is the most effective. It is easier to digest and prevents the formation of bad habits.

And above all, make your coaching situational throughout the process. Again, read Blanchard’s book on Situational Leadership. We also recommend Beverly Kaye and Julie Winkle Giulioni’s book Help Them Grow or Watch Them Go: Career Conversations Employees Want. It is a great resource with many practical tips and hands-on guidelines on how to structure your one-on-one conversations. Add Brian Souza’s book The Weekly Coaching Conversation to help get your managers into the mindset required for great coaching. And last, read Chapters 5 and 6 in Marcus Buckingham and Curt Coffman’s First, Break All the Rules: What the World’s Greatest Managers Do Differently to learn more about strengths-based management and coaching.

Help Them Grow or Watch Them Go: Career Conversations Employees Want.

The Weekly Coaching Conversation

First, Break All the Rules: What the World’s Greatest Managers Do Differently

“Great coaches consistently get the most out of their people, because they consistently put the most into their people,”

“When all is said and done and we’ve completed this journey we call life, what will matter most is not what we have achieved — but rather who we have become.”

With this in mind, we finish this chapter with a plea: People are not resources that you consume. So rethink the name of the department that takes care of them. Call it Talent Development, Human Relations, People Support, or whatever fits your culture — anything but Human Resources.

People are not resources that you consume. So rethink the name of the department that takes care of them. Call it Talent Development, Human Relations, People Support, or whatever ...

KEY QUESTION: Can you state your firm’s strategy simply — and is it driving sustainable growth in revenue and gross margins?

Successful athletes know the power of having a strong core, no matter what the sport. Growth firms require a similar core to maintain a strong culture. This chapter will discuss the practical role of Core Values, Purpose, and Competencies when scaling up a business. It will explain how to articulate the Core so it’s more than just a list posted on the wall. We will outline eight ways to use your Core to drive the people (HR) systems in the company, using the case study of Appletree Answers.

Successful athletes need a strong core — or midsection — to provide overall stability, power, and control. The same is true for growth firms. Without a strong core, the organization risks instability from cultural challenges, loss of focus, disengagement, and lack of heart as it scales up. It will experience the proverbial wheels flying off as the business speeds down the highway. And just as a strong center is based on having stronger lower-back muscles, oblique muscles, and abdominal muscles, there are three equivalent muscles at the center of the organization: Values, Purpose, and Competencies.

And just as a strong center is based on having stronger lower-back muscles, oblique muscles, and abdominal muscles, there are three equivalent muscles at the center of the organization: Values, Purpose, and Competencies.

Core Values are the rules and boundaries that define the company’s culture and personality, and provide a final “Should/Shouldn’t” test for all the behaviors and decisions by everyone in the firm. It’s especially important that top managers lead by example, making sure their behaviors and decisions align with the Values.

When Values fully permeate the company, the leadership team can avoid being sucked into many of the day-to-day operational issues. The rule becomes, “If you think you need to ask me permission for something, just consult the Core Values!” This gives management the confidence to delegate important tasks. They can trust that employees will know the right things to do when faced with a decision or an ethical dilemma.

Discerning the Core Values is a DISCOVERY process, not the creation of a wish list of nice-to-haves.

“Discerning the Core Values is a discovery process.”

To give you the flavor of the Core Values of a growth company, here are Gazelles’: • Practice what we preach • Nothing less than ecstatic customers • First class for less • Honor intellectual capitalists • Everyone an entrepreneur • Never, ever, ever give up

“Building Your Company’s Vision,” by James C. Collins and Jerry I. Porras.

If the Core Values are the soul of the organization, the core Purpose (some call it “mission”) gives it heart. The Purpose answers the ageless question “Why?” Why does what we do matter, and what difference are we making in the world? Why would our customers or the world miss us if we weren’t around?

“A powerful Purpose tends to revolve around a single word or idea.”

We find that a powerful Purpose tends to revolve around a single word or idea: • 3M: Innovation • Disney: Happiness • Wal-Mart: Robin Hood Even Starbucks’ heritage was built on the idea of being an escape — a third place — between work and home.

This central word or idea is then expanded into a phrase or two, but is most easily remembered and acted upon when it has a single word or idea at its core. To discern this Purpose, gather a team together and start with the question, “What do we do?” (You might answer: “We’re a school.” “We sell overpriced coffee.” “We host a CRM system.”) Then ask “Why?” several times (a technique known as the five whys). Why does this matter, or what difference can we make? Keep asking until you get to your version of “Save the world,” and then back up one step.

At Gazelles, we are an executive education and coaching company. Why does this matter? In the end, it’s all about freedom. It’s freeing leadership teams from the day-to-day so they can get out and grow the firm. It’s about helping entrepreneurs, who launched a business for the freedom and independence it promised, to deal with the new constraints of their own creation. And ultimately, we see ourselves as freedom fighters. “A country with gazelles excels” is our motto. There cannot be a truly free society without growth firms underpinning a healthy economy and generating jobs. You don’t have to buy into this, but this is why we wake up and keep plugging away.

A Core Competency has three attributes, according to Prahalad and Hamel: 1. It is not easy for competitors to imitate. 2. It can be reused widely for many products and markets. 3. It must contribute to the benefits the end customer experiences and the value of the product or service to customers.

“Don’t define Core Competencies too narrowly.”

It’s equally important for a company to understand what it is inherently incapable of doing, or its core weaknesses. 3M has never been effective at selling direct to consumers, so it has developed a core strength of working effectively with distribution partners. In turn, it has divested itself of certain product lines that the market has forced into direct channels.

As we’ll discuss later in the “Strategy” section, your organization’s Core Competencies provide boundaries for determining what product and service offerings you should pursue. They are also foundational in helping you determine how to differentiate the company in the marketplace. Once you articulate your Values, Purpose, and Competencies, put them to work in creating an engaged and focused team.

“What CEOs don’t realize is the access you have that other people don’t, and how you can create opportunities for people you never would have thought of,” says Ratliff.

Integrity matters • Think like a customer • Spirited fun • Be quick, but don’t hurry (borrowed from legendary basketball coach John Wooden) • Employees are critical • Small details are huge • Take care of each other

It is worth noting that Appletree renamed its HR Department the Employee Experience Department. “The #1 goal of HR was to create better employee experiences, and we wanted them to focus on that,” says Ratliff.

Each winner received a T-shirt imprinted with the corresponding Core Value.

“Every time you praise or reprimand someone, tie it back to a Core Value or Purpose.”

EXECUTIVE SUMMARY: Without a powerful, industry-dominating strategy, you’ll spend the next several years generating very little traction in the marketplace. To address this challenge, we’ve integrated several of the best-known strategic concepts into one comprehensive framework — called The 7 Strata of Strategy — for scaling up your business. It provides an agenda for the strategic thinking team to create and maintain a competition-crushing, differentiated approach to a specific market. There are recommended resources to bolster your team’s understanding of each stratum. It’s hard work, which is why we suggest you assign this effort to a handful of leaders.

When you nail your strategy, top-line revenue growth and fat margins come almost effortlessly.

“More companies die from indigestion than starvation.”

We strongly suggest dividing up the workload and having each executive team member read one of the recommended books or articles and then brief the rest of the executives. Strategy is what a senior team should be spending the bulk of its time on, anyway — not fighting fires on a day-to-day basis, which is best left to the middle managers.

NOTE: If this work were easy, every company would have a killer strategy. The process can be very uncomfortable for CEOs, who might feel they should already have all the answers. After all, it’s the CEO’s primary job to set and drive the strategy of the business. At the same time, it’s a very messy and creative process requiring lots of learning and talk time with a myriad number of customers, advisors, and team members. This can be particularly difficult for engineering types who want to follow a sequential process to finding the right answers. It just doesn’t happen that way.

The first step in completing the 7 Strata and working through the 4Ps or 4Es of marketing is designating a strategic thinking team. Select no more than three to five people to meet for an hour or so each week to discuss each of the Strata and other issues of strategic importance.

Select no more than three to five people to meet for an hour or so each week to discuss each of the Strata and other issues of strategic importance. It’s not sufficient to schedule strategic thinking time once every quarter or year. It’s all about iterations: making a few decisions, testing them, and coming back to the table the following week for discussion.

The council doesn’t accomplish its work in isolation. The council members are expected to spend time each week talking with customers and employees and checking out competitors, extracting insights and ideas to fuel their strategic thinking.

In the end, strategic decisions need to be made, and it’s the job of the CEO to make them. Yet it’s advisable to recruit several pairs of eyes (and to have frequent contact with the market) to help you navigate.

Lords of Strategy: The Secret Intellectual History of the New Corporate World

Here are the 7 Strata: 1. Words You Own (Mindshare) 2. Sandbox and Brand Promises 3. Brand Promise Guarantee (Catalytic Mechanism) 4. One-PHRASE Strategy (Key to Making Money) 5. Differentiating Activities (3 to 5 Hows) 6. X-Factor (10x – 100x Underlying Advantage) 7. Profit per X (Economic Engine) and BHAG® (10- to 25-year goal)

NOTE: Most strategy frameworks include some kind of competitive analysis. As you work through the 7 Strata, it’s illuminating for the team to discuss how the competition might fill in each level — and to do the same for firms you highly respect outside your industry. This will give you additional insight into the market, the competition, and ways to differentiate your strategy

Most strategy frameworks include some kind of competitive analysis. As you work through the 7 Strata, it’s illuminating for the team to discuss how the competition might fill in each level — and to do the same for firms you highly respect outside your industry. This will give you additional insi...

Words You Own (Mindshare) KEY RESOURCE: Search Engine (G...

It’s a fun and useful exercise to think of well-known brands (and your competition) and discern the words they own. In the end, that’s what branding is all about: owning a small piece of the mind-space within a company’s targeted market, whether that’s in a local neighborhood, an industry segment, or the world. If you want to hurt a competitor, steal its word, as Google did with Yahoo, becoming the “search” engine of choice.