HOW TO VETT A BUSINESS OPPORTUNITY

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Like other high-income earners, physicians are often sought after sources of angel investment funds for start-up or growing businesses. I am often asked to review and analyze these business opportunities for physician clients.  In this article, I am summarizing the key considerations for evaluating potential investment business opportunities in startups or growth companies.

Vision, Values, and Strategy

Can the company’s management articulate a clear vision and strategy for the company? In other words, do they know what they stand for, and do they have a plan for where they are going?  Many companies suffer from a lack of focus.  Research supports that companies with a narrowly focused strategy will generally outperform the competition.  I am wary of any company that can’t clearly articulate their value proposition in the marketplace in 30 seconds or less.  I also look for whether management and employees are all in sync on the company’s vision and strategy.  Many companies overlook the creation of a value statement.  I prefer companies that know what they stand for.  Difficult times will face every organization.  Value statements that have real meaning and adoption provide anchors during turbulent times.

Execution

This is one of the hardest things to actually find out in due diligence, but probably the most important.  Here, I am trying to determine whether the management team can actually execute the company’s strategy.  Many people confuse effort and activity with execution.  Successful companies have high functioning teams that execute with purpose and passion to get things done.  I ask questions about how management creates accountability in the organization or look for examples of past execution to try and determine whether the management is execution-oriented.  Other clues to whether a management team can execute is the level of organization, timeliness, and if they are goal oriented.  I like to see clear written goals and action plans.

Products/Markets

People raising money for a company should have a clear command of the marketplace they are competing in and how their products and services stack up against the competition.  Is the company swimming in the “red ocean” of a very competitive market or the “blue ocean” of new and untapped markets?   If they are in a very competitive market, then can they clearly articulate why their product/service is differentiated from the competition?  In a new market, how are they pricing their products and gauging the overall market opportunity?  Many companies venture out and find that their market is actually much smaller than they thought. It is helpful if the company’s industry has solid data on size and growth.  High growth companies need large and growing markets to thrive.  I look closely at the price sensitivity of the products/services and the barrier to entry of other people to compete.   I also prefer recurring revenue companies versus companies that only have one-time sales.  Is the company a one trick pony or is there a pipeline of other products/services?

Management

No matter how good the products and services a company may offer, ultimately the success of a business depends on the quality of the people.   When you invest in a company, you are really investing in the management team.  Most companies in early funding stages lack a complete management team. I try to determine the strengths and weaknesses of the management group, and I want to understand how they will shore up the deficiencies in the short term and what their long-term plans are for fully staffing the management team.   Does the management group complement each other or is there too much overlap?  Are any of the founders part of the management that may soon have to be replaced?  Replacing a management team member can be a time consuming distraction for a company.  I prefer managers who have experienced both success and failure.  We all know we learn more from our mistakes than our successes.  I would prefer that a management team not learn their failure lessons with my investment.  Great managers are great leaders.   They are high performers and can attract top talent.  I have found that the best leaders are great coaches and know how to get the most from their employees.   You want to avoid know-it-all’s and micro-managers because they will ultimately prove to be poor leaders and will run off talented employees.

What is the Exit?

Most investors eventually want their money back out of the company in a reasonable amount of time.  A typical time horizon is 5-7 years.  What are the long terms plans of the company?  Are the founders creating a lifestyle business or a high growth company?   Typically, lifestyle companies will have slower growth but greater profitability.  High growth companies, often referred to as gazelles, usually focus on top line revenue growth.  These companies will typically lose money at first.  I look carefully at the “burn rate” of these type companies and want to understand when profitability will occur.  It is critically important that the owners and management all be in sync on the trajectory of the company and the goals for exit.

The Deal

Ultimately, the opportunity to own part of the company must be for the right price tag.  All pro-formas tend to look alike with slow growth in the early years and then the proverbial “hockey-stick”  high growth in the later years.  The investment and corresponding ownership should be reasonable based on very conservative financial projections. There are also a number of ways to creatively structure a deal to provide additional risk mitigation for investors.  In addition, the legal terms and conditions of the corporate documents you will be signing are a major factor to consider.  Structuring the financial deal and key terms and conditions will be explored in more detail in a future column.

While this is an abbreviated list of due diligence considerations when vetting investment opportunities, hopefully it will provide you a framework to begin to consider future investment deals.  For an easy checklist summarizing these points and others, feel free to email me, and I will send you a copy.   Good luck in your investment future!

WORK LIFE BALANCE IN YOUR ORGANIZATION

iStock_000058043210_Small-806x300Every organization wants “A” players on its team.  Further, a company’s ability to get maximum performance from the minimum amount of staff is always a great challenge.  In the war for talent in the 1990’s, many companies embraced a variety of work-life balance initiatives to recruit and keep top employees.  While foosball tables, gyms, and onsite daycares may not be in vogue anymore, employers are still facing a new generation of workers with different views and expectations about work and life balance.   The lines between work life and personal life are not as clear as they used to be. 

During these lean times, it would be easy for management to take the position “my employees should just be thankful they have a job.”   While that may be the reality, it is also shortsighted.  Decisions made now will impact the long-term performance of your company, especially as we companies continue to pull out of the previous recession.  Studies consistently show that most companies only tap a small percentage of the true potential of their employees.  For years, forward thinking organizations having been experimenting with how to harness the potential of their teams through work-life balance initiatives.  For those innovative organizations, this often results in being named to “Best Places to Work” lists.  Interestingly, studies have shown that public companies named to these type lists have outperformed the overall market.

One example of a Mississippi firm employing these type initiatives is Grantham Poole, a sixty five employee public accounting firm based in Jackson.   The norm for years in the world of accounting has been for employees to slave away long hours during the long spring tax season which usually runs from the beginning of January through April 15th.  Recognizing that this can have a detrimental impact on both employees and their families, the firm tried a bold initiative last year to limit everyone to 45 hour work weeks and only 4 pre-specified work Saturdays during tax season.   According to one of the founding partners, Jim Poole, “we wanted to pro-actively improve the quality of life for our employees which has resulted in a more balanced and happier workforce.”  Poole acknowledged that the shift has not been easy and has taken a lot of commitment from the firm to try and create workflow that is more evenly distributed throughout the year.  Poole further noted that “we have been pleased with the results and believe that it is helping us attract and keep talented workers.”

As more jobs are based on intellectual know-how and service standards, creating win-win partnerships with employees will be critical.  Many pioneering companies in the work-life arena found that even though they were putting in good programs it still was not creating the intended results.  The problem is that work-life balance programs are not “one size fits all.”  It really involves a dual commitment from employees and employers.  I believe that successful companies should be creative and innovative in their work-life structure and in return expect employees to contribute maximum effort to achieving the company goals.  On a practical note, a best practice that is evolving is to make training courses relevant to both life and work.  Research indicates that strategies for time management, planning, etc. that can be taught from a whole life perspective significantly increase adoption and execution in the workplace.

For employers, these type work-life changes may mean breaking with years of habit.  As Grantham Poole demonstrated in tackling the longstanding tradition of working brutal hours during tax season, positive change can be made with winning results.  As your company is looking for that competitive edge, perhaps it is time to honestly think about the output of your team and the opportunities to improve performance and attitude with some bold work-life initiatives.

Companies that do will be best poised for the continued challenges of 21st century employment.

GETTING THE EDGE

Did you get skip that workout you planned to do today or indulge a little extra at that meal last night?

Did you opt to put off that important customer feedback project that you had been planning to launch?

These are just a few of the many minor decisions we make everyday in our lives and business, and they usually don’t have immediate consequences.  If I choose to skip my exercise today, there probably is not a significant effect on my health.  If I skip the entire week, I am probably just fine. In fact, if I skip a whole month of exercise, there is probably not a consequence except that my pants may fit a little tighter. However, in time, the daily decision to not exercise will catch up with me.  It may be years down the road, but my decisions regarding my health habits will have a compounding effect on my life – either for better or worse.  My point is not to create guilt or motivate exercise fanatics, but to simply point out an important concept that relates directly to our success in business: we are the sum of decisions.

It has been said that if you want to understand where you are today, then you should examine your daily habits in the past.

If you want to understand your future, then you should examine what your daily habits are today.

These principles apply in our businesses as well as in our personal lives. We are always trying to get a leg up on our competition.  We read books, go to seminars, learn knew skills, work harder and faster – all to try and inch out our competition in an ultra-competitive global marketplace.   These are all important parts of building a successful business.  For entrepreneurs desiring to build successful companies, there is another key ingredient that is often overlooked – the “Slight Edge.”  Jeff Olson, in his book The Slight Edge, points out that the keys to your personal and business success are the things you do every single day, the things that don’t look dramatic or like they matter.  He argues that the little daily decisions not only make a difference – they make all the difference.  The Slight Edge is simply a commitment to making the right choices day in and day out in your life and business.  It is a philosophy that helps us understand that we make decisions knowing that the results are long term.  We know that in time, if we make the right choices, our lives and businesses will be better off.

Most of us have seen the chart that shows us that if we start investing a few dollars in our early twenties and stick with it, then we will retire with lots of money.  These charts, which are often used by financial planners, illustrate the powerful principle of compound interest. When you look at the chart, it appears that you are making great progress for a number of years, but over time, the true power of compounding becomes evident.  For entrepreneurs, the key is to begin making good daily choices with your time and priorities early. Don’t let everyday distractions deter you away from doing the rights things for your business.  I often see companies ignore basic corporate housekeeping and other similar non-revenue producing activities in order to deal with urgent, but usually unimportant, issues.  While there is no immediate consequence to your business for skipping over these often seemingly mundane details, they can have long term consequences.  Often, when a company gets ready to sell or raise money and the microscope is turned on their business through due diligence, the compounding effect of poor habits in these areas truly come to light.

Most “overnight” success stories are actually the result of years of hard work and effort.

We became spoiled in the dot-com era of companies starting up and then selling out for millions.  We need to be reminded that companies such as Starbucks, which has over 13,000+ stores in 39 countries, only had 165 stores after being in business 21 years.  The Slight Edge is no “get-rich-quick” scheme. It is an invaluable philosophy to apply in your business to develop positive daily habits which will help maximize its potential to become a fast growth venture.

OFFENSIVE STRATEGIES DURING DIFFICULT TIMES

Screen-Shot-2016-02-19-at-11.00.46-AMIt has been said, “necessity is the mother of all invention.”

Likewise, a recession and layoffs can prompt many people to consider the path of entrepreneurship.  A recent report by the Kauffman Foundation, a leading entrepreneurial think tank, validates this trend.  The report showed that approximately 530,000 businesses per month were created last year compared to approximately 519,000 per month in 2007.  Notably, the formation of high potential income new businesses was down compared to low and middle-income potential businesses which were up. This trend indicates that many of the new businesses were probably formed out of necessity.

There is a myth that entrepreneurship is only for those with a high tolerance for risk. 

The truth is that successful startups are founded by people from all ages and backgrounds with a passion to bring their goods and/or service to the market and who effectively manage risk in changing environments. 

Whether you are exploring a career shift to being an entrepreneur or your business is trying to consider how to weather this storm, I have listed below some of the ways savvy individuals and companies are capitalizing on the state of the current economy:

  1. Offer More for Less Most businesses are trying to stay competitive in a difficult economy utilizing less. Often with fewer people and less budget, managers are being challenged to squeeze increased productivity out of their limited resources. If your value proposition allows your target customer to do more with less, then you will always have a market.
  2. Find Your Treasure in Another Person’s Trash.  Many businesses are buying up fixtures and supplies at a fraction of the cost from companies that are downsizing or closing their doors.  Similarly, proactive entrepreneurs are buying up distressed real estate, businesses, bank loans, and even whole banks at incredible bargains.   These are people who don’t adopt a doom and gloom mentality but think clearly in times of difficulty and make sound long term investments.
  3. Go on the Offense When Your Competition is on the Defense.   As companies are pulling back their spending and hunkering down, customer service, marketing, and  product development often suffers.  This is a golden opportunity to go on the offense to grow your market-share. As big companies have frozen their R&D budgets, now is the time to bring your innovations to market.  Also, many companies are re-evaluating their supplier relationships to find cost savings. Again, this allows you to step in and offer “more for less”.    As one entrepreneur stated “the hungriest wolves hunt best.”   This is the time to be on the hunt, not playing defense.
  4. Go Fishing for Talent Whether you are looking for full time employees or part time contractors, now is the time to find talent at reasonable rates.   Big companies are not just laying off their poor performers, many are laying off some of their best and brightest people as whole divisions are being forced to close.  This is a great time to strengthen your organization by attracting top talent to join your team.    Don’t get caught up trying to make everyone a fulltime employee. Skillful entrepreneurs know the value in “renting” mind share from the best and brightest people.
  5. Show Me the Money Even though bank financing is still a scarcity, you may discover that finding investors is an available option for your business.  Since most real estate and stocks are not attractive alternatives right now, there is a tremendous amount of cash waiting to be deployed.  I am finding that the right deals are still being funded by those wanting to deploy cash in “real” businesses.

I don’t discount at all the pain and hardship that many people are enduring as a result of an economic meltdown.  However, I want to encourage those who seek to find opportunity out of difficult circumstances.  Those with a “glass half full” mindset may find that even career and business decisions driven out of necessity may turn out to be tremendous blessings in the long run if strategic thought and action is properly applied.

BUILDING A FAST GROWTH COMPANY

Recent research funded by the Kauffman Foundation tells us that over 440,000 Americans are starting businesses every month.

Most of these businesses are sole proprietorships or small firm ventures – the type of companies that make up the backbone of our economy.  However, some of these new businesses have the potential to experience rapid expansion and become breakout growth companies.  These types of fast growth companies, often called gazelles, certainly succeed against the odds. Verne Harnish, author of the book Mastering the Rockefeller Habits, notes that there are 23 million firms in the United States and that only about 4 percent ever get above $1 million in revenue.  Of those, only 10 percent ever make it to $10 million revenue (0.4 percent of the total).

These stats lead me to ask the question – what does it take to become a successful fast growth venture?

Uncovering the Principles of Success

I am fascinated with the art and science of how companies with dreams and desires to become fast growth ventures can successfully achieve their goals. For years, venture capital firms have struggled to locate the next big thing; however, we know that out of any portfolio there will likely be far more losers than winners. While that success rate may ultimately work out for the VC firms and their investors, those failures are not good outcomes for the dedicated men and women working in those businesses. Thankfully, recent research is starting to shed more light on how to increase the odds of success for fast growth enterprises. While there is no silver bullet, there are principles that can be applied to help businesses increase their chances of success.

Thinking “On” Your Business

In this article, I will focus on one of the core principles for turning businesses into gazelles – methodically sizing up your business. Management teams need to periodically and methodically stop and honestly size up their business. For most leaders, the path from startup to creating a stable business is a whirlwind of activity. I rarely see owners/management in this stage that routinely take stock of where they are in their business. Most business plans, if there ever were any, are usually collecting dust on shelves.  When you are in survival mode, it is understandable that taking time for seemingly theoretical concepts such as planning, analysis, and goal setting seem like a luxury. However, to help take the business to the next level, leaders need to begin the disciplined habit of critical analysis and planning.

Clarity

While the type of analysis will vary depending on the business and industry, the benefit of this principle is the same – management should come away with a clear vision of the company’s strengths, weaknesses, market position, and where opportunities for growth may be available. For the owner, this is often also a chance to reflect and make sure the business is meeting his or her personal goals for being an entrepreneur. The key is to come away from the process with clarity.  This clarity will help focus the efforts of the team to propel the company forward. Without this clarity, the sheer volume of decisions, challenges, and opportunities can be overwhelming.

Planning For Success

In the late 1990’s, I had a unique opportunity to participate in a venture backed dot.com in Silicon Valley. While the dot.com ultimately failed, like many others at that time, the experience was memorable and invaluable training for working with fast growth entrepreneurs.

I was fortunate to meet many successful entrepreneurs during this period and was struck by their focused vision and execution. Almost every one of these individuals had a disciplined practice of methodically evaluating their business. In addition to these anecdotal observations, this principle of planning is backed by leading research which tells us that it plays an integral role in helping businesses achieve their full potential.

HOW TO VETT YOUR NEXT BUSINESS IDEA

Entrepreneurs are people with big dreams and ambitious goals. They pour their time, energy, and resources into their business ventures in hopes of success. Unfortunately, the odds are stacked against most of them reaching their destination. Statistically, we know that most will fail within the first five years.  However, there are some people who defy the odds and somehow achieve success as serial entrepreneurs.   Are some people just born with the Midas touch?  What is it that people like Sir Richard Branson, founder of the Virgin Group, Ltd, have that gives them the ability to repeatedly strike gold in the cut-throat marketplace?

While there is no one magic bullet, there do appear to be some consistent themes.  One quality worth noting is the ability to critically vet business ideas to make sure the new venture has a fighting chance.  This takes rigorous analysis and the ability to honestly and objectively review the idea and the entrepreneur’s own ability to execute.

Clark Love, a native Mississippian, has achieved the goal that most entrepreneurs only dream about – he has successfully started a business, grown it, and sold out to a larger company. Love, a graduate of Ole Miss and Northwestern’s Kellogg School of Management, started Forest One, Inc. (later renamed Lanworth, Inc.) in 2000 at the age of 28.  Lanworth is an information technology company providing consulting services, applications development, and software to the forest products, environmental, and land management industries.  Love originally founded Lanworth with his college friend Dr. Henry Jones and grew the company to be a multi-million dollar enterprise with the main offices being in Jackson and Chicago.  In 2007, The Westervelt Company acquired Lanworth.

While Love achieved his goals for Lanworth, he has not remained idle.  His entrepreneurial drive has already rekindled as he in the process of launching several new ventures. Love’s analytical training as an engineer in college, his experience as a consultant with Accenture, and his “real world” experience with Lanworth and other startups has allowed him to develop a framework for analyzing new business opportunities.  His checklist for a new business venture includes the following requirements:

Have a Cause

The product or service offered by the business should move people.  Love added, “It doesn’t need to move everyone, just the segment of customers I plan to go after and the people I will hire.  You want a business people will put their hearts and soul into.”

Know Your First 3 Customer’s By Name

An entrepreneur should know by name the first 3 customers for the product or services the business will offer.   Many people have ideas about what will work in the marketplace yet they have never actually vetted the idea with a potential customer.  You need to know if anyone will actually buy your product or pay for your service.

Build a Recurring Revenue Model

A large majority of the revenue should be recurring so the business does not have to start from scratch each year.  Having a solid financial base of recurring revenue allows for more growth opportunities.

Be Passionate about Your Industry and Customers

Love noted, “Starting a company is incredibly hard, harder than most people realize.  Pay and economic reward are not enough – you really need to have a passion for the business and serve customers that you actually care about.”  This passion serves as the “pull through” that helps you get through the difficult times as an entrepreneur.

This checklist can serve as a useful tool in analyzing any new business opportunity.   I believe that serial entrepreneurs like Clark Love will play an integral part in Mississippi’s future in creating jobs and opportunities for Mississippians.  Hopefully, we can collectively make Mississippi, Tennessee, and the Mid-South attractive places for entrepreneurs to invest their passion and energy into creating world class businesses.

MARKETING YOUR BUSINESS

Marketing is a very common business concept, but one that I find is interpreted and applied very differently by business people. Marketing is often seen as a luxury, and not a necessity, so it is often first on the chopping block during budget cuts.  Hundreds, if not thousands, of marketing books are published each year trying to influence the way business leaders plan and execute their marketing strategies.  Over the years, Al Ries, Jack Trout, Robert Cialdini, and Seth Godin are a few of the authors and consultants that have risen above the pack to make a major impact on the way we think about marketing. For most entrepreneurs who don’t have a direct background in marketing, sorting through the various theories of marketing can be a difficult thing.  Part of the confusion lies in how we think about advertising, public relations, sales, and marketing.

I recently spoke with Bryan Carter, founder of thinkWEBSTORE.com, to get his thoughts on how entrepreneurs should approach their marketing strategies.  Carter has a very interesting background in design, technology, psychology, and business. His experiences include being a national consultant and speaker, authoring journal and industry articles, working for a large advertising agency, and developing award winning multimedia learning tools.  In 2007, he opened thinkWEBSTORE.com with a clear purpose in mind – to offer a “one stop shop” for businesses and their marketing needs. The services offered include marketing strategy, website design and hosting, search engine optimization and marketing, email marketing and advertising services for small and mid-sized businesses. Part of what makes Carter’s business model different is that he provides these services from a retail location versus a traditional office environment. Carter’s success is no accident. He knew his target market and designed a whole business around meeting the needs of that underserved market. Carter leveraged his experience and expertise in planning out the entire business concept in great detail and now has executed that plan diligently.

Many service professionals suffer from the “cobbler who has no shoes” problem, but Carter has certainly avoided that and done an excellent job of marketing his own business. Even though the economy tanked soon after it opened, thinkWEBSTORE.com is ahead of its goals, and Carter anticipates executing soon on his plans to expand the concept regionally and nationally.  According to Carter, “Marketing is how you put all the pieces together of advertising, PR, and sales.  It is your overall strategy which should be consistent and well thought out.”  Carter described advertising as the tool that gets people to your door and sales as a delivery mechanism.  Marketing, he emphasized, is where you “think through the details of your business including such things as pricing, positioning, and delivery ability.”  He also noted that while marketing is comprehensive, it does not have to be complicated.  Carter also believes that a company’s website, regardless of the type of business, is really the core that should be used as a guide for all other aspects of marketing.

Operating a service business, Carter noted that he emphasizes quality as they key.  In order to do that, he has a simple credo for his employees:  Be aware; Think things through, and Own it! He pointed out that when you are aware and think things through, owning the issue is usually not a problem.  I see many businesses where a lack or “ownership” is a major problem. Lack of ownership leads to no accountability which usually results in disastrous results both for both customers and the company. Ultimately, Carter’s passion and business is about helping entrepreneurs help themselves.  Many business owners come to thinkWEBSTORE.com with ideas and dreams, and Carter and his team help them accomplish them.

I am inspired by the detailed thought and planning that Carter puts into his business. For entrepreneurs and business people, I think we can all do better at being more diligent in thinking through the details of our business.  This type of planning is a fluid and ongoing process, and one which is important for the long term success of a venture.  For me, it involves a bit of a paradigm shift to try and clearly see a business through the eyes of the clients and prospective clients.  Truly great businesses see this view. They design not only their products and services, but the entire experience to maximize it for their clientele.  I am sure that we will continue to see the impact of Carter’s attention to this detail in the success of his business and his client’s businesses in the years to come.

ARE YOU CONTINUALLY IMPROVING YOUR BUSINESS?

Is your organization getting better all the time? 

Most business owners would like to think that their business is always improving; however, very few people are willing to actually do the heavy lifting to create an enterprise that is systematically improving on a regular basis. In the world of manufacturing, these concepts have been around for awhile.  American consultant Edward Deming was a pioneer in  quality improvement with Japanese industry post World War II. The Japanese term kaizen has become synonymous with continues improvement and this method was popularized by Masaaki Imai in “Kaizen: The Key to Japan’s Competitive Success.” In his book which was first published in 1986, Imai introduced the “LEAN” philosophy to the world and shared the secrets behind the success of Toyota and other Japanese companies.

The core principle of continuous improvement is the “self reflection” process.  This is essentially a feedback loop that requires a willingness to be brutally honest about your organization. The purpose of this process is the identification, reduction, and elimination of poor processes. Using a commonsense approach, minor improvements are continually made in small, incremental ways in the organization with a strong emphasis on the customer.

As a company successfully embraces continuous improvement then it moves from being a best practice to becoming part of the fabric of the organization. While these concepts may have originated in the manufacturing sector, they are rapidly being adopted by service businesses, particularly in health care and technology.  There is a tremendous opportunity to gain a competitive advantage by committing your company to a path of continuous improvement.

Mississippi entrepreneur Jill Beneke formed Pileum Corporation in 2002, and she has successfully built a management consulting firm by relentlessly focusing on improving her organization. Beneke worked for over twenty years in financial services, and she was Senior Vice President of the Capital Management Group for AmSouth prior to forming Pileum.  Her father was an entrepreneur as well as her husband, so it was a natural shift for Beneke to launch her own venture when the timing was right. Pileum acts as a trusted partner to companies in multiple industries to help with their information technology and their most important asset – their data management.  Because of this critical role the company plays for its customers, Beneke and her team have to stay ahead of the constant evolution of technology and meet the real time needs of their customers.

While Pileum may not use phrases like kaizen or LEAN to describe their internal process, they are very much committed to the path of continuous improvement.  The management team and staff continually ask the question “How can we do things better?” According to Beneke, “our management team gets together frequently, and we are open and honest about trying to improve.  This means that we can’t be afraid to be self-critical.”  Pileum also provides a significant amount of in-house training for its employees and pays for its employees’ external training and industry certifications.  Their goal as a company is to be getting better all of the time.  For Pileum, this commitment to continuous improvement has helped separate it in the marketplace and establish the company as a leading technology consulting business.  The company now has over 30 employees and services a large number of clients in the Mid-South.

If your company is not embracing the principles of continuous improvement then time is of the essence because your competition probably will be soon.  As a leader, you can demonstrate a commitment to continual improvement and set the direction of the organization.  In order to be successful, you also need buy-in of the members of your team and for them to embrace this kaizen mindset.  While dramatic changes may not occur overnight, your team will daily be embracing a way of thinking conducive for long term success.

 

THE GAMIFICATION OF WORK

Picture for a moment yourself on a sunny and cool fall afternoon getting ready to watch your favorite college football team playing their biggest rival.  The stands are packed, and the crowd is ready to cheer their team on victory.  However, right before the game begins the announcer comes over the loudspeaker and says that the teams won’t be keeping score and are just going to play for fun.  How would you feel?  Would you still be as interested?  Do you think the players would give it their all or simply go through the motions?  Have you ever watched a professional All-Star game – not exactly the highest level of intensity and effort.

It reminds me of when my kids were very young playing youth sports.  I remember coaching baseball and soccer, and I could not get my head around the fact that we were not keeping score.  I know, I know – five year olds don’t necessarily have to be competitive warriors out there, but still, it is just not very interesting if you don’t keep score.   You may be asking where I am going with this line of thought.  Good question!  In my 25+ years in the marketplace, I have found that most businesses operate just like my five year old soccer team – they don’t keep score!

Sure, ultimately, all businesses get down to the bottom line.  However, in most organizations employees go through their day as if they are in the Bill Murray classic, Groundhog Day.  It is easy to fall into a rut where you feel like you are on a treadmill with no end point.  There is a recent effort to try and “gamify” work to make it more meaningful.  While this gamification of work has become a growing trend, you don’t need high tech gadgetry to tap into the power of making work more interesting and meaningful.

Over 40 years ago, business consultant Charles Coonradt had an epiphany that led him to commit his life’s work to helping people make their work more like their recreation. He was watching a group of young men building a house that seemed to be slow and arduous work.  However, he noticed that on their lunch break these same young men engaged in heated competitions of 4 on 4 pickup basketball games.  For him, this was a paradox.  How could they put that much energy into their recreation but not their work?  He became fascinated with the phenomena that people will work harder and expend more energy in sports and other athletic pursuits than they will at their daily jobs.   Coonradt has several books out on this topic, but I want to highlight a few key ideas that may revolutionize how you think about your work.

KEEPING SCORE

In my teens and early twenties, I taught a great number of people how to play tennis.  I enjoyed the game and learned how to teach others at a young age.  As I would teach beginners the basics of how to hit the ball and keep a rally going, they all eventually wanted to play.  In order to do that they needed to learn how to keep score.  It was always interesting to watch how people pushed themselves harder and the competitive spirit would come out when we would keep score.  In organizations, we want to find simple and clear ways to keep score of what is important both as an organization and for the individual team members.  I have found over the years that some positions are easier to come up with the 2-3 areas to keep score. Scorekeeping should be objective and the individual employee should ideally know how to track and keep their score.  If you have not defined winning and losing for your team members then you are at risk of mediocrity.

ESTABLISHING GOALS

When a golfer goes out to play a round of golf, they usually have a score in mind they are trying to beat.  While I am a novice runner, I have come to understand a little of the lingo of competitive racers who talk about their PB (Personal Best).  When the coach gets the basketball team together to discuss the goals for the season they focus on specific goals.  For many programs, the goal is to make it into the “Big Dance” – the NCAA basketball championship tournament.  I have experimented with all kinds of goals for organizations and individuals.  I have found that the best are shorter term in nature.  I find that if they are too long term then people wait until the last minute to work on them like cramming for an exam. I like clear and specific goals that ideally can be accomplished in three to six months.

PROVIDE FEEDBACK

I went to a St. Louis Cardinals exhibition game recently against the hometown Memphis Redbirds.  As I looked at the new scoreboard in the stadium, I noted how much data was readily available: the score, balls, strikes, outs, and even the speed of the last pitch.  The players get real time feedback on how they are doing and can adjust their strategy.  Unfortunately, that is often not the case in business.  I have visited with many employees who never get any feedback or maybe only once a year in a perfunctory review.  How can people improve if they don’t get constructive feedback on their performance? As leaders, we should give helpful feedback early and often if we want our team members to develop.

KNOW THE RULES

Along with teaching my tennis students how to keep score, I also taught them the rules of the game.  Without rules, it would be chaos out on the court and constant controversy.  What if you started a game and then halfway through the rules changed midway?  How frustrating would that be?  Unfortunately, many workplaces feel that way.  The rules are not clear and may change in an instant.  Sure, there may be policies and guidelines in an employee handbook, but I am talking the day to day rules of operation.  What is expected?  What is off limits?  Too many handbooks are more driven by legal than practical considerations.  Employees want clarity and fairness.  As a leader, you have the opportunity to stomp out the ambiguity and create clear a set of rules that you expect everyone to follow.  I promise it will reduce the drama in your organization.

I hope these concepts give you some inspiration and ideas to “gamify” your organization.  We don’t have to watch the clock until 5:00 or wait until the weekend to enjoy a little competitive activity in our lives.  Our work can be just as invigorating and challenging if we put our minds to it.  Enjoy!

 

 

 

ORGANIZATIONAL HEALTH

Rich Roll is one of the fittest men on the planet. He has been interviewed by CNN and featured in numerous fitness magazines. Roll has been a top finisher in the Ultraman World Championships which is a three-day/320-mile double ironman distance triathlon. The event is invitation only for 35 select participants from around the world.  The first day is a 6.2 mile ocean swim followed by a 90-mile cross country cycling race.  The second day is a 170-mile cycling race, and the third day finishes up with a 52-mile double marathon. I am exhausted just thinking about that type of incredible endurance feat.  While he had been a competitive swimmer in college, this attorney and father of four had hung up his “Speedo’s” after college and was almost fifty pounds overweight by his 40th birthday.  Roll overhauled his diet and got back on track with his fitness program, and within two years, he was competing at an international level for endurance athletes.  What he has done through intentional planning and hard work is to achieve a level of optimum health that is allowing him to compete internationally well into his 40’s.

Similarly, organizations of different types and sizes can achieve a level of optimum health. This does not mean that we need organizations full of ultra-athletes.  Rather, we want organizations that operate in a healthy, complete, and consistent way. Best-selling author Patrick Lencioni emphatically stated in his book The Advantage, “The single greatest advantage any company can achieve is organizational health. Yet it is ignored by most leaders even though it is simple, free, and available to anyone who wants it.”  Most organizations fail to embrace organizational health, and the typical reasons include that it is too “touchy feely,” the concepts are too simple, or the tyranny of the urgent feeds our adrenaline addiction. Lencioni describes a healthy organization as one with minimum “politics” and confusion, employees with high morale and productivity, and low employee turnover.  Wouldn’t that be a great place to work?  As obvious and important as that is, we tend to spend all of our time and energy on the technical aspects of the organization (e.g. strategy, marketing, etc.) and very little time in making sure that we have a healthy company.  I have summarized below a few of the ways to help make the transformation from being a “couch potato” organization to one that has optimum organizational health.

Establish Trust

You don’t need to go to the ropes courses to build trust (although team building exercises can be helpful); instead, there are some simple things you can do to increase the trust in your organization.  One of the major symptoms of unhealthy organizations is that the management group does not feel free to share their opinions.  When managers are simply “yes men and women,” the organization is not benefitting from the collective wisdom of the group. Teams that always have complete consensus are potentially toxic because people are certainly withholding their true opinions.  The intelligence of the organization is hindered as employees all try to CYA (cover their assets) instead of contributing their best thoughts and ideas. The leader of the organization sets the tone here and should insist on candid discussion and promote vigorous debate. Remember healthy conflict is to be encouraged, not discouraged.  Team members need to understand the boundaries for conflict and be willing to commit to the path ultimately decided by the leader.   Another way to help strengthen the trust in the team is to utilize personality tests like DISC®, Myers Briggs Type Indicator® or The Birkman®.  These allow team members to better understand both themselves and their colleagues.  Many misunderstandings can be avoided once communication and personality styles are better understood.

Create Clarity

Healthy organizations have clarity and alignment around the main things and know how to “keep the main things the main thing.”  This is easier said than done and requires asking some simple but challenging questions. I recommend having the organization’s management team periodically independently respond to the following questions:  (1) What is our reason for being as an organization – why do we exist? (2) What are our true core values that guide our behavior? (3) What business are we in? (4) Where are we going as a company – what is our strategy for success? (5) What are the most important things that need to be done in the organization in the next 30-90 days?  (6) Who needs to do what to accomplish the most important things? (7) What are the key metrics for measuring the success of the organization?  Answering these questions independently will ensure that “group think” does not set in and that everyone does original thinking about the answers. The team can then gather and debate their answers and synergize their responses.  I am an advocate for having a concise 1-2 page summary of the results of this process which serves as the guide for the organization and an accountability tool for team meetings.  Answering these types of questions requires time and a change of perspective from “thinking in the business to thinking on the business.” In our world of constant emailing and texting, it is important to unplug and get away to periodically think on our organizations to create clarity.

Communicate, Communicate, Communicate!

Healthy organizations know how to communicate well. Their leaders repeatedly communicate key themes. They know that repetition counts and that they need to communicate with clarity what is really important.  I have found that whether coaching sports, raising kids, or leading in an organization, the key is to keep the messages simple and repeat them often.  Effective leaders use different mediums and tools to constantly reinforce messages.  Ambiguity and confusion are the hallmarks of dysfunctional organizations.  The anti-dote is communication!  Too often leaders fail to communicate enough because they are too busy or incorrectly believe that they are being too repetitive. Healthy organizations not only have effective top down communication that cascades through the organization, but they also have effective lateral and bottom up communication.  Smart organizations know that the information gathered by front line employees is invaluable and needs to circulate within the company.  Innovative companies will create regular opportunities to make sure upper management is spending time with front line employees to foster open communication.  Leaders can also promote good communication by being accessible and utilize techniques like “management by walking around.”  There is nothing worse for leaders than to get stuck behind their computer all day.  Focus and alignment occur when organizations have clarity on what matters most and communicate effectively throughout the organization.

Conclusion

While being an Ultra athlete is not in the cards for me, I do know that I can be a part of making sure that organizations I am part of achieve optimal health. There is no reason to settle for working in dysfunctional situations. By recognizing the important of being “healthy” in our business and utilizing some of the simple ways to become healthier, we are on our way to building healthy organizations!

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