4 Reasons Hopes and Dreams Can Be Bad

quote-Tracy-Chapman-peoples-real-hopes-and-dreams-can-be-70639Hopes and dreams are not what they are cracked up to be.

Yes, I believe in dreams (up to a point) but I prefer to describe the concept as thinking big with a specific, measurable, actionable, reasonable, time-based plan.  To me, there is no such thing as a dream home or dream vacation – there is only an earned home or an earned vacation.  You eventually wake up from dreams and get back to reality where you only have what you earned.

Not long ago two alarming conversations took place with people I deeply care about.  One involved a seasoned company founder hoping external macro factors would ultimately solve a revenue challenge.  The other involved an individual dreaming and yearning for a particular future while metaphorically running in place without a plan or even a plan to make a plan.  After listening, making innocuous comments and offering bits encouragement the discussion moved on.

Later I felt tremendous guilt.  On one hand, there was guilt for not opening up a deeper discussion that could provide usable perspectives to my friends.  On the other hand, there was a responsible, cowardly feeling because I avoided a deeper discussion only because I was not in the mood, or just too tired that day, to deal with potentially emotional responses.

Somewhere between being perpetually driven 24X7 “without a life ” -or- sitting around aimlessly hoping and dreaming while clutching a box of tissue lies a balanced response.  It does not take much energy to make a simple plan to address the problem, or at least start to do so with some reasoned effort.   After thinking, the dark side of dwelling hopes and dreams crystallized into 4 basic points:

  1. Dreams are often a morass of feelings and yearnings but these emotions too often betray us.
  2. Dreams usually have no action-plans and plans contain some level of accountability.
  3. Hope is not a method, it merely shifts responsibility somewhere else. (See also this book by General Gordon Sullivan)
  4. Hopes and dreams can mate which gives birth to the evil twins: excuses and self-victimization. (I was hoping that this would happen… I guess my dreams were not meant-to-be).

So, I am going back to finish both conversations without being a know-it-all or a screaming stepmother.  If I am to be true to these two relationships, then don’t I have a duty to deliver an encouraging, actionable response with care and compassion? Both conversations will include my encouragement to turn hopes and dreams into action-plans with clear objectives, no matter how small.  I will also give each person my commitment to hold them accountable and walk the path with them in whatever way they feel is most effective.  If I care, which I do, then I owe it to them.

3 Reasons Why CEOs Need an External Coach

Do you have a coach? If you know me, you know I am fully convinced that business executives need coaching – not just feedback loops and occasional mentorship.  Coaching is a realm unto itself.

LandryCEOs are wise to implement developmental feedback loops with C-Level direct reports, but deeper changes and the personal vulnerability that comes with it can only be obtained from a seasoned, effective coach outside their walls.  Beyond bringing a fresh perspective to business decisions and personal development along the way, there are 3 key reasons:

  1. Similar Experience:
    Engaging an external coach who has “walked the same path” and “has the same scars” provides a foundation of familiarity that quickly builds trust.  It’s also simply not possible to reflect on certain bad decisions with direct reports or the board.  The decisions themselves (such as a bad hire) and the cure (fire and rehire) require humility and checking ego and pride at the door to say, “I really blew it.” An experienced coach can receive such topics in private and also look the CEO in the eye and draw out those topics for effective discussion asking, “You need to come clean and admit to yourself that you really blew it.”
  2. Disrupting Your Team:
    An external coach is disinterested in raises, promotions or political positioning – all of which are realities that live in the hearts of those on your C-Level team.  There is obvious value in being transparent with your team, and many will welcome the news that the CEO has a coach.  Changes in the CEOs management behavior, participation in 360 interviews with the coach and observing optimized strategic decisions is positive evidence any team will welcome.  That said, the sensitive content and conversations contained within any coaching process would cause significant disruptions in those C-level relationships.
  3. Boards Can Be Fickle:
    While transparency and seeking counsel or even a little mentorship here and there from board members may work well, there is a chasm of difference when it comes to the level of vulnerability required in an effective coaching relationship.  Boards, especially investors,  are interested, rightfully and dutifully so, with enterprise value creation.  They have a duty to address ANY risks or impediments along the path to value creation.  A coaching relationship with a board member that brings deeper issues to the board’s attention can have some very obvious unintended consequences including loss of board confidence.

To state the obvious: This is a pithy summary that only begins to scratch the surface of an important topic and in no way is this an exhaustive examination.

So, do you have a coach?  If not, why not?

HEY! That’s My Pie!

PieChartIf your time was a pie chart, how much do you serve to others vs. keep for yourselves?  

Good question, eh?

The fact is that founders and CEOs are notorious for not only serving up too much of their pie to others but allowing others to steal their pie.

This is a question I address in engagements with founder CEOs.  Regardless of the company, sector or unique skills of the founder CEO, the stories are remarkably consistent:

“Once upon a time I had a vision for the company and dedicated myself to sector relationships / product / whatever (pick one) and this consumed something close to 70% (the typical answer) of my time. We raised money, hired key staff and drove forward.  Now, a couple years later as we cross $5M / $10M / $25M (read: real revenue) I found myself miserable – trapped IN my company vs. working ON my company.  I want and NEED to get back to driving value by staying in my zone like I was on day-1…  Please help liberate me from the other stuff!!”

After some questioning and prodding followed by honest introspection on the part of the founder CEO, the truth comes out: the CEO actually gave away his/her time or allowed it to be taken, it was NOT stolen.  Along the way, many issues are revealed:

  • Hired a Resume – into a key Sr. Mgmt position without examining true management capabilities.
  • Allowed Upward Delegation – particularly critical problems in product, operations or sales.
  • Feared Losing an Executive – and permitted performance issues instead of acting decisively.
  • Refused to Delegate – holding on to issues that took time away from value-driving efforts.
  • Micromanaged Delegated Issues – because the CEO had a previous aptitude in the area.
  • And on and on and on…

When we cross this bridge and put the truth on the table, creating a plan is remarkably straightforward.  This usually consists of a “before and after” org chart and list of 5 – 10 specific actions that the CEO will make in the next 30-60 days including hiring, firing, process modifications and personal behavior changes.

Executing that plan is anything but straightforward because humans are not robots and necessary discussions require brutal honesty and the conviction to make tough decisions and hold such discussions in the first place.  With a coach and accountability, however, the CEO can pull it off and get back to a pie chart where 51% of their time is dedicated to the areas where the CEO uniquely excels and adds enterprise value.  In the end, the organization and CEO are BOTH re-energized.

It’s not only unselfish to keep more of the the “time pie” to yourself, it forces your direct reports (read: well-paid Sr. Managers) to do their jobs and allows you to stay in whatever “your zone” is and drive the valuation of your company.

Is it time to stop serving it up and get back to driving value?

Repeating Processes Vs. Setting Goals

I was recently browsing through business publications and saw an article covering the concept of driving systems and processes vs. simply setting goals.

It reminded me of something I learned early in my career  that I shared with students and I dug up the quote:

“We cannot exactly replicate achieving a goal. We can absolutely replicate executing  our systems and processes and consistently improve them in the Japanese spirit of kaizen.  The evidence that this is working is the attainment of new performances that exceed old performances. Yes the goal was to exceed those old performances, but we will seldom get there by merely setting a goal and getting emotionally pumped up about it.  We get there because our systems and processes improve over time and we consistently expand the number of people who are experts at executing those systems and processes. If we achieve that, then achieving new performances takes care of itself, in fact we cannot help but exceed the old performances.”

My summation was by no means groundbreaking. It is been conceptually proclaimed by many people in many different ways over the years. But I was struck by the clarity with which I had summed it up.  Blessed to have good mentors around me, I listened carefully to those whose proof of performance over time strongly suggested I lend an ear to their words.

I wasn’t born with this knowledge, I am only passing it on.

Annual Operating Plan: Step 4 of 4

ObjectivesThe final step of drafting the Annual Operating Plan should be a straightforward and efficient task: The establishment of 10 – 15 key objectives in support of the Core Goals for the year (which, in turn support the 3-year strategic plan).

Objectives are essentially sub-goals (written in the S.M.A.R.T. format) that, if met, ensure a particular Core Goal is met.  In my experience, there are usually no more than 3 or 4 Objectives attached to each Core Goal.

Let’s review the sample Core Goals I presented in Step 3 (found here) and add some numbers:

  1. “$25M” Gross Revenue @ “50%” Gross Margin;
  2. “$6M” Operating Expenses;
  3.  “$3M” R&D spend expensed on the P&L and delivery of the Product Plan
  4. At least “$3M” EBITDA and “$2.5M” Positive Cash Flow optimized in the face of any challenges or windfalls.

A solid set of objectives might look like this:

Core Goal 1: $25M” Gross Revenue @ “50%” Gross Margin;

1A.  Sequentially increase topline revenue each quarter starting with at least $5.5M in Q1 and not less than that in any subsequent quarter.

1B.  Achieve full-year Gross Margin of at least 50% with not less than 47% Gross Margin in any month.

1C.  Increase Indirect share of revenue from 40% to 45% by year end through the addition of 3 channel partners generating not less than $1M each for  the year.

The above is a clear, concise set of objectives ready to be assigned as sub-goals to the Chief Revenue Officer or VP of Sales.  Measurement during weekly 1:1 meetings can then commence in a straightforward manner.

As you can see, this is not a difficult process.  It can be made difficult, however, if loose language or complex algebra is employed.  The more specific and more conforming to S.M.A.R.T. methodology the better off you will be.  It also staves-off or eliminates complicated discussions later as executives seek bonus payouts (and pitch their value and accomplishments).  Reflecting back on the Annual Operating Plan during 1:1s leaves no surprises when that same document becomes the measuring stick for bonuses, annual reviews and subjective performance grading.

If you have successfully navigated this step – the 4th and final milestone – then your document should be completed.   It should present your mission, vision, values and clearly articulate the story of your 3-year strategic plan followed by a detailed set of current year goals and the objectives that will ensure those goals are met.

You are ready to hand out the document and start measuring people weekly, monthly and quarterly according to the specific goals and objectives set forth in it.  Quarterly meetings of management become sessions to identify solutions to increase performance rather than argue about goals and objectives.  Any sane and rational individual cannot deny the goals and objectives set form in the plan.  Measurement is a simple numerical exercise led by the “evil folks in Finance” – just kidding.

In other words, “Now the fun starts!”

Annual Operating Plan: Step 3 of 4

PlanThe easiest part of the Annual Operating Plan  should be the clear selection and articulation of 3 – 5 core goals for the upcoming year.  It is particularly straightforward if the team has completed Step 1 (see this post) and Step 2 (see this post).

In Step 3, the CEO and management team must ask and answer the question, “What must we achieve next year as the first step in the rational yet challenging 3-year strategic plan?”

My experience suggests there should be 3 to 5 core goals that conform to the SMART test (Specific, Measurable, Achievable, Reasonable and Time-based) and also be:

  • Understandable – by ALL employees;
  • Inter-related – like building blocks;
  • Operationally Sound – NOT aspirational fluff that make executives feel good

For any company under $100M in revenue, a set of 5 goals that build on each other seems to work very well:

  1. “$X” Gross Revenue @ “X%” Gross Margin;
  2. “$X” Operating Expenses;
  3.  “$X” R&D spend and delivery of the Product Plan
  4. “$X” EBITDA and “$X” Positive Cash Flow optimized in the face of any challenges or windfalls in any of the above
  5. Completion of next year’s Annual Operating Plan by “date” (I suggest Nov 15th)

Do you see how effectively the 5 goals build on and depend on each other?  This ensures clarity that is easily communicated to every level of the organization.  And, best of all, no fluff!

Along the way, it should also be explained to every employee that:

  • Any position will be tied to #1 or #2 or #3 and everyone owns #4 in some way
  • The bonus program is paid for by #4, not the “bonus fairy” who somehow shows up regardless of performance
  • If you see something or think of something – make a recommendation.  We all win or we all lose (ie… bonus) together and there is no victory for one department, team or individual – the organization MUST win as a whole.

All said, if you have been successful with the foregoing, then Step 3 should be successfully completed.  This sets the stage for Step 4 – which is coming soon in the next post

P.S. Unsolicited Advice to Owners:

I’d like to add something for owners / founders / CEOs with large equity stakes.  This is merely my opinion but I have come to strongly believe in it:

(-) Employees by and large DO NOT CARE about the 3-year strategic plan or the vision to sell the company.  They don’t participate in such results the way owners and C-Level executives do and, thus, won’t care or live it from the heart (regardless of what they say to your face in order to curry favor).  This is a reality regardless of whether the employees believe in your vision or if the company was voted the “top place to work in Toledo.”

(+) What employees REALLY CARE ABOUT is recognition, career growth, job satisfaction, a company seen as benevolent in the community and… (wait for it)… the bonus they can earn this year.  Employees care deeply about that basket of tangibles and intangibles.  At the same time, if the employees are truly bought in to current year plan, and it is a rational step toward your 3-year goal and other visions, then you have as much alignment as you likely will ever see.

I get arguments about this perspective and no, it is certainly not an absolute, but I have seen very few exceptions to it.  There you have it – you can motivate your people TODAY (on their terms) to help you reach TOMORROW (on yours).