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

by Verne Harnish

QuEST uses a triple scorecard approach to satisfaction — measuring satisfaction among customers, employees, and the company itself. The first two, customer (c-stat) and employee (e-stat) satisfaction, are benchmarked against industry standards. The third one, QuEST Satisfaction (q-stat), is used to evaluate whether or not to accept projects. “We don’t take projects until they meet QuEST Satisfaction. It has to be a client that we can make more efficient and profitable, and it has to fit with our strategy,” says Prabhu.

Conversations With Customers

The 4Q refers to the four questions that we suggest leaders ask customers in person (not on a survey): 1. How are you doing? 2. What’s going on in your industry/neighborhood? 3. What do you hear about our competitors? 4. How are we doing?

The first question will give you an understanding of their current situation: What are their pain points? What are their priorities for the coming year?

The second question offers insight into industry trends in general. What are the newest changes or technologies? Who is buying whom in the industry? And if you are talking with consumers, what are they and their neighbors thinking/feeling/talking about?

The third query is probably most important, because it can help you cut through your own biases.

Look at these efforts as an investment in customer retention. At rapidly growing companies, the team is often so busy chasing new opportunities that the existing clients feel ignored. If companies were able to hold on to the customers they now lose from neglect, it would fuel at least half of their growth.

At the “good” companies, the executive team spent zero time discussing what it was hearing from customers at its weekly meeting. The only time a customer’s name came up was if there was a crisis. (Think about your own weekly meeting!) In

contrast, the “great” companies — which, like Enterprise Rent-A-Car, were growing considerably faster — spent roughly 20% of their leadership team’s meeting discussing feedback from customers.

Much of their data also emerges from enticing customers to make comments and leave ratings for innumerable products and services online. We’re in an era in which people don’t trust large institutions. Instead, they turn to “the crowd” to help them figure out which doctor or vacation spot to visit.

Fred Reichheld popularized it in his book, The Ultimate Question: Driving Good Profits and True Growth, and today’s revised and expanded version, The

Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World

Rockefeller Habit #9: KPIs for Everyone

This habit is linked directly to column 7 of the One-Page Strategic Plan, discussed in the “Strategy” section. It is important to have a clear plan for the company for the next quarter. In turn, each team and person needs individual quarterly goals that align with the plan. This creates “line of sight,” as discussed in the “People” section, so every employee feels connected to the vision and direction of the company.

A Bloomberg Businessweek article titled “The Happiest Man in Detroit,” by Keith Naughton, highlights former Ford Motor CEO Alan Mulally and his weekly 2½-hour Business Plan Reviews with the 15 top Ford executives. In this meeting, Mulally’s direct reports were required to “post more than 300 charts, each of them color-coded red, yellow, or green to indicate problems, caution, or progress.” There was no hiding from data with Mulally at the helm. As he said: “You can’t manage a secret. When you do this every week, you can’t hide.” Clearly, the charts were telling the truth, and through this rigorous discipline, Mulally and the leadership team drove changes that without a doubt drove profits.

And like the company, all employees or teams need to set a handful of priorities (known as rocks) that will help them achieve their Critical Number (i.e., each individual/team should have three to five rocks that align with those of the company).

For more details, search for “Marshall Goldsmith peer coach” on the Web, and you’ll find a free document that further details the process. We also have the link on scalingup.com.

Rockefeller Habit #10: Scoreboards Everywhere

At a minimum, have your metrics, goals, and plans up big and visible in a place where you host the various weekly meetings

The monthly meeting is a KEY routine for developing middle managers into mini-CEOs so they are capable of running the business (execution), freeing up senior leaders to focus on strategy. We’ll also look at the #1 roadblock to effective meetings: generalities

Yet playing jazz isn’t easy. Great jazz bands just make it look that way. The same goes for great companies. Exceptional firms produce something beautiful, and the rest just make a bunch of noise.

Managing Up: How to Forge an Effective Relationship With Those Above You, by Rosanne Badowski.

Competing on Internet Time: Lessons From Netscape and Its Battle With Microsoft by Michael A. Cusumano and David B. Yoffie.

Three Powerful Advantages to Meeting Regularly The two main arguments we hear for not meeting regularly, especially for the daily huddle: 1. We don’t have the time. 2. We see each other all day anyway.

Casual encounters fail to take advantage of the three most powerful tools a leader has in getting team performance: 1. Peer pressure 2. Collective intelligence

3. Clear communication

By holding one-on-one conversations with their team members in lieu of a weekly meeting, leaders lose these advantages. Unless these individual sessions are for coaching, there can be a lot of private negotiating going on (“You know what I’m up against. …”...

Meeting as a group, in contrast, takes the heat off the leader and creates peer pressure that increa...

Rockefeller Habit #3: Meeting Rhythm

This rhythm of meetings is designed to support cascading communication around the priorities and metrics-driving strategy. Specifically:

1. The daily huddle. A 5- to 15-minute meeting to discuss tactical issues and provide updates. This will help you avoid minor train

wrecks and to take quick advantage of unforeseen opportunities. Normally, a daily huddle saves everyone an hour or so of needless email updates and ad hoc interruptions. Issues that em...

The weekly meeting. A 60- to 90-minute discussion to review progress on the quarterly priorities and tap the collective brainpower of the team in addressing one or two main topics. This meeting also provides a time to discuss the market intelligence gathered that week from customers, employees, and competitors. Repeated patterns of discussion determine the one or two main issues for the monthly meeting. 3. The monthly management meeting. A half- to full-day meeting, in which all senior, middle, and frontline managers come together to learn and collaboratively address one or two big issues requiring several hours of effort. It’s also designed to transfer DNA (knowledge, values, approach) from upper to middle management. 4. The quarterly and annual planning meetings. At this one- to three-day offsite mee...

The quarterly breaks these longer-term priorities into bite-sized priorities that the company can digest. • The monthly addresses the bigger issues or opportunities that surface around the strategic direction. • The weekly keeps the priorities top-of-mind and drives discussions around input from customers, employees, and competitors, which feeds back into the quarterly and annual planning processes. • The daily huddle tracks progress and brings out sticking points that are blocking execution of the strategic direction

Timing — Set the start of the daily huddle at an odd time, like 8:08 or 16:16. People are more likely to be on time than if you schedule the meeting on the quarter-hour or half-hour. And start the meeting on time, whether everyone is present or not. You don’t have a lot of time to waste, and it’s important to set that tone from the beginning. It’s also important to end on time, not letting the meeting run longer than 15 minutes, or people will drop the habit. We suggest setting a timer for the first few weeks of meetings and ending on time even if the agenda isn’t complete. Team members will learn to get to the point and move on to the next item. Plan 1 minute per person, meaning that an eight-person team should expect an eight-minute daily huddle. Time of day? Doesn’t matter. Choose whatever time best fits the rhythm of the business.

Setting — Meet wherever you want, but stand up or perch on stools. It’ll help keep the meeting short. Gathering in the leader’s office makes it more convenient for him or her. If some people will dial in regularly, put everyone on a conference call. There’s nothing worse than having a few people huddled around a speaker phone every day. We also recommend against using videoconferencing, which adds one more level of technology complexity. The exceptions are fixed-based operations that communicate every day. RS Software uses teleconferencing to

host its daily standup meeting across 12½ time zones between its offices in Kolkata ...

Who Attends — The general rule is to have more people in fewer meetings, rather than fewer people in more meetings. That’s true even if only 10 to 15 participants do most of the sharing. At Microsoft, daily meetings can host up to 60 developers, though only 20 gather in a conference room and the rest attend via the videoconferencing tool NetMeeting when working on a new software release. The Ritz-Carlton gathers about 80 people at headquarters for a 10-minute Daily Line-Up to receive updates from Boston to Bali. Meanwhile, all 35,000 Ritz-Carlton employees participate in some kind of Daily Line-Up at their local hotels. (A great deal has been written about their Line-Ups. It is worth searching for informatio...

Who Runs the Meeting — Pick someone who is naturally structured and disciplined (that might not be the CEO) to keep meetings running on time. The leader should use a countdown stopwatch to make sure that no part of the agenda runs away with the meeting. The person running the meeting also has the important job of saying, “Please take it offline” whenever people get off on a tangent that doesn’t require everybody’s attention.

The Agenda — The agenda should be the same every day, and it’s just three items long, with five minutes maximum per item: 1. What’s up (in the next 24 hours)? 2. What are the daily metrics? (All companies should have some.) 3. Where are you stuck?

Don’t pile too much into the daily huddle, or it’s going to extend past the 15-minute limit and people will start

to resent the meeting.

Expanding upon the agenda: What’s up: In the first five minutes, each attendee spends a few seconds (up to 30) sharing very specifically what’s up in the next 24 hours (between today’s huddle and tomorrow’s). The idea is to let people detect conflicts, crossed agendas, and missed opportunities immediately. These updates should relate to key activities, meetings, decisions, etc., and should NOT be a recitation of someone’s daily calendar in 15-minute increments! Team members at Monday’s huddle don’t need to hear about the sales meeting that happens every Tuesday morning unless there’s something unusual or critical coming up.

Daily metrics: The next five minutes are spent verbalizing the

daily metrics that the company monitors: website hits, open positions, proposals submitted, daily sales, cash, workplace accidents, number of consultants deployed, etc. Remember, you’re looking for patterns and trends. Since it generally takes six data points to constitute a trend, it’s going to take months to see patterns if you look at metrics only every 30 days. If you meet once a day, you’ll have a jump on the competition and on your own challenges. We know you may be getting this data in written form. Verbalizing it makes it more visceral for the person sharing, while, in turn, hearing it makes it easier for the team to absorb. The more senses are engaged, the better your team’s ability to pick up trends and patterns. Stucks: This is the most important agenda item. You want members of the team to bring up constraints and concerns that could prevent them from having a great next 24 hours (i.e., What’s the rock in their shoe? What’s keeping them awake at night or worrying them? Are they stuck because of another team member?) The brutal facts need to be shared, and the leader needs to see the patterns of “stucks” to understand what underlying issues must be addressed.

The Weekly Meeting If the daily huddles are functioning well, they will lead to immediate action on scores of issues that would otherwise clog up the weekly meeting. You don’t want to spend the weekly meeting poring over updates. Everyone should be well-informed via the daily huddles. You also don’t want to address the dozens of issues that have accumulated over the week. The idea of the weekly meeting is to keep everyone laser-focused on the #1 priority — and the big rocks supporting that mission. You want to tap the collective intelligence of the team for 30 to 60 minutes on one or two important topics. This affords the group an opportunity to resolve 50 to 100 important things in a year.

HINT: Does your organization spread out its functional meetings throughout the week, thinking that it’s best not to take up too much of any one day? If so, let us suggest that you do just the opposite. Pick one morning or afternoon, and host ALL of your functional and project meetings back-to-back. This allows everyone to get in a meeting mindset and flow, and frees senior management to spend the rest of the week out in the marketplace. We picked up this idea from Rick Kay and his team at OTG Software.

In fact, Kay had a rule: Do not email big files (or links to websites, as in “When you have time, please look over these updates to the software interface”). Instead, the company gave team members time in the meetings to pull up a website or read through a contract, as Jeff Bezos allows at Amazon’s weekly meetings. This gave people time to review and respond in a dynamic,

synchronous fashion, with Kay pushing for decisions rather than defaulting to a follow-on meeting. And at the end of each functional meeting, Kay’s assistant would summarize the “Who, What, When,” so the entire company was clear on the functional priorities for the week.

The Schedule — Schedule the meeting for the same time, same place each week. Set aside 30 minutes for frontline employees, 60 to 90 minutes for middle and executive teams. Since the Gazelles team is spread across 12½ time zones, from Hyderabad to Portland, Oregon, our several hours of meetings on Mondays are held via conference call. It works.