Clockwork: Design Your Business to Run Itself

by Mike Michalowicz

we haven’t told them wha...

Scott’s fix to this problem is to have his employees interview him (with a recorder at their side so they don’t miss a single detail). This is a way to get freedom from the tasks. You can capture what you do for highly replicable tasks, but some things are more nebulous. Having someone interview you brings out the details. People can’t read what is in your mind, but they can get it on paper. They can proactively ask you the questions that they have or believe they will have. They can ask all the questions necessary to take your vision and make it into something doable. And by asking these questions, they alleviate that second 10 percent where they are coming back to you with questions after the fac...

My company is running on its own, and I devote my time to just knowing the market. I know my customers so well that I can move a million times faster than my competition. Not working in my business has given me the freedom to make moves so fast that my competition is blurry eyed.”

The natural tendency of people is to defer decisions. We do it at work and at home. Ever catch yourself saying “yes, dear” to your significant other’s request? It’s easier than arguing, right? It’s easier for your employees to do the same.

you are meeting resistance from employees you’ve empowered to make decisions, whatever you do, don’t make their decisions for them! You must let them do the research, determine the course of action, and then commit to it. After all, we are trying to get you out of the business, and you can’t do that if you keep making the decisions.

Your employees may resist this by coming to you for assistance in decision making, but you should always push the decision making back to the employee. If they ask for direction, respond with “What do you think we should do?” If their plight of avoiding a decision continues with the popular “I don’t know, that’s why I am coming to you” answer, respond with: “We hired you because you are smart and driven. We hired you to find answers. Please come back to me with your best answe...

Even as they offer up ideas that you disagree with, bite your lip and support it. Then, after the decisions and actions have been carried out, for anything with significant outcomes—either positive or negative—do a debrief...

they will do differently the next time. Always do the debrief after they make and execute on a decision. The only time to intervene is if you see them making a decision that will have extreme and dire consequences. If you spot severe danger, make your colleague...

In a must-see interview, billionaire Sara Blakely,* the founder of Spanx, explained the foundational belief that spawned her success: failure should be embraced. Blakely explained, “My dad growing up encouraged me and my brother to fail . . . It’s really allowed me to be much freer in trying things and spreading my wings in life.” The only way to make progress is by moving through challenges, mistakes, and errors, and learning on the way. This requires making your own decisions. Ultimately, as Blakely explained, the only true failure is idleness, where you don’t make any decisions. Stop training your employees to be idle by deciding for them. Have them move your business forward by empowering them to make decisions.

How do you empower someone to make decisions? Brace yourself—you must reward mistakes. When something doesn’t go right and you punish the person (lecture, point out what went wrong, chop their pay, anything), you instill fear of making the wrong decision, and therefore it is safest for them to just come back to you for decisions (keeping

you in the Deciding phase). But if you say, “Hey, the outcome was not what we expected, but I am proud of you for making a decision to move us forward. I want you to keep at it and move us forward. Tell me, what can I do to serve you?,” you will not only start to see your business run like cl...

Capture a system now. Yes, you have hundreds of systems you will ultimately capture, but you won’t capture any of them if you don’t get started. Take the first step now—something small and easy, and something that you can take off your plate permanently. Capture that first system and see how it works for

you. And then have the person to whom you assign the system make the next version of the recording.

Store your first captured system in a directory that is accessible by your entire team. Set up a simple directory with folders labeled ATTRACT (marketing), CONVERT (sales), DELIVER (operations), COLLECT (accounting). Then, make the necessary sub-directory below the appropriate ACDC folder for the new system you captured. As you and your team move along with capturing systems, store them in the new folder structure you cre...

“I didn’t start off with a good team,” Nicole told me. “There was a ninety-day run when I cried every day because my team was so bad. But what I realized was, it was me, not them. I had to reset and restart, and make sure I was hiring people based on their zone of genius, which complemented

my zone of genius.” (That’s a lot of geniuses!) Nicole works just five days a month and she’s more successful than ever. She doesn’t do any QBR work, which for the firm is spot-on legal work. She focuses on managing the business flow. Do you see how replacing yourself—especially in terms of the work you do that does not feed your soul—can only help your business to grow?

From the moment you make your first hire, part-time or full-time, or bring on your first virtual assistant or contractor, your company has multiple gears and you need them to mesh harmoniously. If you build a balanced company from the get-go, you will have a stronger foundation and it will be easier and smoother building from that point. Maste...

First, let’s address your mind-set about doing the work yourself. Let me ask you a question. Would you rather make fifty dollars an hour or five dollars an hour? Of course you want that fifty bucks. What if I asked you if you would rather make fifty dollars an hour doing all the work yourself, or five dollars an hour doing no work at all?

This is where the Survival Trap reveals itself. Fifty dollars

an hour is still better on an hourly return than five dollars an hour, but how much you ultimately earn is determined exclusively by your effort and your ability to sustain. The five dollars an hour (after expense...

The great irony is that you should not hire people based upon the skills on their résumé. The only thing you can give people is skills, and you want to give people the skills to do the work the way you do it. “Skill” jobs can be a trap. When you hire someone who has the skills already, it means they are walking in with the baggage of their past work. They will apply the skills you need, their way, which is rarely the way you want or need the job done. This means there will be, best case, confusion and inconsistency, and, worst case, the need to redo work.

You want to hire people with a great get-it-done attitude, high energy, and high intelligence, people who are a strong cultural fit and who have a desire to do the work you need done. All these are intangibles that can’t be taught. Either they have it or they don’t. So seek out people who have the intangibles you need, then give them the only thing that you really can: the skills.

Remember, people don’t pick jobs based on just pay and vacation. And if that is the only consideration those people are making, you don’t want those people, anyway. Yes, people want pay to live their lifestyle and vacation and to do other things, but good employees are also looking for something deeper. Fun, learning, impact, culture, and more. When looking for new team members, seek diversity. The biggest mistake we make is hiring people whom we like. If we like them, it is usually because they are like us. We need people with different skills and points of view. Hire diversity. Don’t hire people you like; hire people you respect.

For example, near the end of the ad, require that an applicant respond with “I’m pumped for this job” in the email subject line of their response. You will find that the vast, vast majority of applicants won’t do this, which means they did not read the ad and are not truly interested in the job, or they are spamming, or they aren’t able to follow instructions (a critical ability). On Clockwork.life, I share one of the best job ads I posted; you are welcome to copy, tweak, and paste it to attract your own part-time or full-time rock stars.

So move slowly with hires. Build the trust gradually. When you delegate, as Scott Oldford says, start with handing off the task, then the decision making, then responsibility for the result, and, finally, responsibility for the larger outcome to the company.

In the past, Cyndi was on the front lines of all communication with their clients. Now, a few short months after balancing her team, all she had to do was send one thank-you email to a very pleased client. That is Clockwork, my friend! Boom! Now let’s do this for your business.

For a business to stay afloat and grow, it must be actively Doing things that its clients value. The Designing work is about creating the best way to do things your clients value, and have your company do those things on automatic.

As I shared previously, the optimal percentages of work balance for companies is 80/2/8/10. Eighty percent is Doing: getting tasks done that directly or ultimately serve the customer and bring value to them. Two percent is Deciding for others: making necessary approvals, helping employees with decision making in unusual circumstances. Eight percent is Delegating the management of resources. To reiterate, Delegating is NOT making decisions for others; it means assigning ownership to others and providing the necessary leadership to bring about a larger outcome. Ten percent is Designing strategy. This is about making the other three levels—Doing, Deciding, and Delegating—more and more effective.

When you have multiple employees, you want to balance the team to bring the average to 80/2/8/10. For example, your individual time may be 60 percent Doing, 4 percent Deciding, 16 percent Delegating, and 20 percent Designing. Assuming you have one other employee who works the same amount as you do, they will need to be 100 percent Doing in order to bring the aggregate of Doing for your company to 80 percent, as their 100 percent and your 60 percent averages out to 80 percent. Similarly, Deciding would now be 2 percent for the company (the average of you both), 8 percent for Delegating, and 10 percent for Designing.

With all the sticky notes of Primary Jobs on the table in front of him, Roberto goes through the deductive process until he is left with the “one for the wallet.” It is clear what makes all the difference to the company, so Roberto declares his QBR is connecting with guests. He is such a good storyteller that people get excited about their adventure before the trip begins, stay excited while they are there, and talk excitedly about their trip after they get home. Next, Roberto starts the QBR protection, which means

Because Roberto does not go back to running the big trip that took up so much of his time, he has time to think about his QBR. One night, while talking with his new in-house booker, Mariette, she says,

“Our company QBR is storytelling. You serve the QBR. Running an entire trip is not the QBR, but your story times are. Why don’t we have you drop in on a trip near the beginning, and then again on the final night? Instead of running a trip for two weeks, you can serve the guests on the trip for a day or two. And, since almost all of our tours pass through Paris, our home base, many of these story times will have you out of the office for just four or five hours.”

Roberto likes the idea but is skeptical. He knows storytelling is the QBR, but he struggles to believe that showing up only at the beginning and end of a trip will have a big impact. Roberto is right. That small tweak to the ...

Traditional teachings tell us to first determine whom we are serving and to modify our offering to meet their need. The popular term today is “pivot,” but that term will change. It used to be “inflection point.” Before that it was “paradigm shift.” And before that it was “Soooo, what the hell should we do now?” The point is, you need to sell what the customer wants, otherwise you won’t have anything to sell. On the surface, this theory seems to make sense, but it ignores the most important element of a successful business . . . you.

I have seen wonderful businesses pivot into disdain and failure. The owners keep shifting their offering to match what the customer wants until the customer starts buying. But in the process, they neglect to consider what they, the owner themselves, want. They ignore what their heart calls out to do. And they ignore that crucial final yellow sticky note: that thing that fuels their business. They ignore their QBR. And while the business may be winning customers, it is losing the heart of the owner and the soul of the business. I have seen many businesses pivot into something that the owner loathes. Sure, it may make money, but at what cost?

Dreading going to work is no way to experience life. This is why it is absolutely critical for you to first determine what you want. What you intend to be known for. What your soul sings out to do. That is why we must first discover your QBR, serve and protect it, and balance your team around it before we find the community that wants it. Don’t pivot to the customers’...

First, evaluate your existing customer list. Sort them by revenue from most to least. This is important because the people who spend most on your product or service, particularly if they repeat purchases, are demonstrating through their behavior that they value you the most. Don’t trust people’s words; trust their wallets. In other words, people can say how much they love you until they are blue in the face, but it is the action of spending money with you, or not spending money with you, that points to their true feelings.

The first lesson is to judge the viability of a market based on its congregation points. If it has many of them, and the community is active in multiple, that is proof that they are sharing with one another through established channels. Channels that you can access. Channels that you can market through. Channels where you can easily get a reputation for excellence. If you can’t identify any congregation points, or if the points you do locate are few, scattered, and unestablished, you are in for a long slog. It is hard to be discovered when the community can’t even find itself. The second lesson is to go narrow and build toward

After I wrote and published my first book, I discovered my authentic whom: mom entrepreneurs who were entering or reentering the workforce after their children reached an age that gave them enough freedom to run their own business part-time. Many people suggested my niche was small business owners, but I knew it was all about mom entrepreneurs as I was building my business. Did other people read my book? Absolutely. And I love them for it. (Shout-out to the dudes slogging their way through entrepreneur-land. I see ya, my brothas.) But had I focused on the broader community of small business owners right out of the gate, I wouldn’t have been noticed. I lived the lesson Brian Smith taught us: If you want big success, you need to first focus on a small community, and then empower that community to carry you to bigger markets.

I continued. “Of course! The QBR is self-determined. Just like your business, just like my business, just like any business, the industry doesn’t determine the QBR. The leader of the business determines what the QBR is. The leader picks what the business will make its stance on. Therefore, the lumberyards you worked with can choose. In fact, they need to choose.” I was on a roll now. “One lumberyard may bank its success on the speed of the operation. They want to make lumber, fast. And in that case, the QBR is what makes the operation move the fastest. Just like a beehive’s QBR is to hatch new bees from eggs. And that is why the Queen Bee is revered, since she makes the eggs.”

“Bingo!” said Adrienne. “If the lumberyard declares speed of production as the QBR, they then look on what part of the business operation most influences the speed of production and which people are serving that role. And, so you know, that is what most lumberyards choose as their

“You got it, Mike. And don’t forget that is just one choice of QBRs. A lumberyard may determine that they will be world famous for their quality of wood. Speed becomes secondary to selection in this case. So the QBR is now identifying the best wood raw materials. The crane operator is still a relevant employee, of course, but they are not serving the QBR. The lumber quality control manager is. They are serving the QBR.”

Adrienne explained that lumberyards aren’t unique, in that every business determines its QBR. And the QBR always sits within one of four quadrants: leads, sales, deliverables, or cash flow. I prefer to think of these aspects of business in terms of things we do, and so I modified them a bit, though the meaning is the same: Attract, Convert, Deliver, Collect (ACDC). (Recall that I first mentioned ACDC in chapter five.)

First, you must generate interest in your offering (Attract leads). Then, for the people interested, you must convince them to buy from you (Convert leads to sales). Once they are a customer, you must Deliver on your promise. At some point during the process, you must take money from them for the work you do (Collect).

A metric is usually a number. It can also be a binary (yes/no or on/off), or it can be something else. But a metric is always measurable and comparable. A metric sets the expectations, and when the actual events that the metric is measuring are higher or lower than expected, it indicates that an investigation of the situation is appropriate, and a resolution may be required.

In Profit First, I explain that you need five foundational bank accounts: INCOME, PROFIT, OWNER’S COMPENSATION, TAX, and OPERATING EXPENSES. Then you start allocating funds based on preestablished percentages (which serve as metrics, too) for each of the five accounts.

For example, with Profit First, you set an expected income metric on a biweekly (or weekly) basis. Even a seasonal business can do this, too. Then you compare where you are on that income versus where you expected to be. Something is off? You investigate. You don’t have to read cash flow statements or other reports to see if your business is in need of cash or profit is down.

He simply set his income target and the percentage of operating expenses (including the purchase of equipment) that he could spend. With a constant percentage of operating expenses, if income slipped, the operating expense automatically received a smaller portion. He only spent money

that was pre-allocated to expenses.

When you turn multiple dials that affect a common outcome at the same time, you cloud the solution. First one change could fix it and another could counteract it, so even though you had fixed it you undid the fix and don’t even know. Other times you change multiple dials and it does fix the problem, but you don’t know which one was the fix.