By: Gino Wickman
Simply put, this is THE book that business consultants, executive coaches, and entrepreneurs use to improve and run their businesses. I have read dozens and dozens of business operation books. Everyone has their own spin on this topic BUT you have to pick 1 way to run your business. You can’t keep switching how you will operate and expect to keep employees much less do what you do well. This book has shown up as a common thread throughout my network as the best operating system for entrepreneurs.
The Entrepreneurial Operating System
The Entrepreneurial Operating System (EOS) identifies Six Key Components of any organization.
- Vision: Successful business owners not only have compelling visions for their organizations, but also know how to communicate those visions to the people around them. The more clearly everyone can see your vision, the likelier you are to achieve it.
- People: Successful leaders surround themselves with great people. The right people in the right seats. Simplify how you hire, fire, review, reward, and recognize people in your organization. They must get it, want it, and have the capacity to do it.
- Data: The best leaders rely on a handful of metrics to help manage their businesses. A Scorecard is a weekly report containing five to 15 high-level numbers for the organization. Everyone will have a clear, meaningful, and manageable number that he or she is accountable for on a regular basis.
- Issues: Issues are the obstacles that must be faced to execute your vision. The good news is that, in the history of business, there has only ever been a handful of different kinds of issues. The same ones come up over and over again.
- Process: Your processes are your Way of doing business. Successful organizations see their Way clearly and constantly refine it. Clear and refined processes result in simplicity, scalability, efficiency, and profitability.
- Traction: Successful business leaders execute well, and they know how to bring focus, accountability, and discipline to their organization.
Component 1: Vision
Entrepreneurs must get their vision out of their heads and down onto paper. From there, they must share it with their organization so that everyone can see where the company is going and determine if they want to go there with you.
What is vision? It’s clearly defining who and what your organization is, where it’s going and how it’s going to get there. Answer the 8 questions below.
Question 1. What are your core values?
What are core values? They are a small set of vital and timeless guiding principles for your company. A good rule of thumb is to limit them to somewhere between three and seven. As always, less is more. These core values define your culture and who you truly are as people.
Question 2. What is your Core Focus?
Your job as a leadership team is to establish your organization’s core focus and not to let anything distract you from that. The core focus is the mission and vision statement for your organization.
Question 3. What Is Your 10-Year Target?
Where do you want your organization to be a decade from now? Our number 1 goal.
Question 4. What is your Marketing Strategy?
Marketing strategy is made up of four elements, which are contained in the fourth section of the V/TO:
- Your Target Market/”The List”: Who are our ideal customers?
- Your Three Uniques: What are the 3 unique things only our company has?
- Your Proven Process: What is our proven process (3-7 steps) to tell our customers about?
- Your Guarantee: What problem are we committed to solving for our customers?
Question 5. What Is Your Three-Year Picture?
Have everyone on the leadership team write down bullet points of what the organization will look like three years from now. Factors to consider include things such as number and quality of people, added resources, office environment and size, operational efficiencies, systemization, technology needs, product mix, and client mix.
Question 6. What is Your One-Year Plan?
Schedule two hours with your leadership team.
As with the 3-year picture, again, decide on the numbers. What is your annual revenue goal? What is your profit goal? What is the measurable? This number should be consistent with the 3-year picture measurable.
With the 3-year picture in mind, discuss, debate, and decide on the three to seven most important priorities that must be completed this year in order for you to be on track for your 3-year picture. These become your goals. They need to be specific, measurable, and attainable.
Component 2: People
Right People: The right people are the ones who share your company’s core values.
Core Values + People Analyzer = Right People
The right seat means that each of your employees is operating within his or her area of greatest skill and passion inside your organization and that the roles and responsibilities expected of each employee fit with his or her Unique Ability.
The People Analyzer
|Name||Be Humbly Confident||Grow or Die||Help First||Do the right thing||Do what you say||Get it||Want it||Capacity|
The People Analyzer is designed to clarify whether you have the right person in place or not.
- Step 1: After determining your core values as a leadership team, analyze the leadership team. Follow the 3 strike rule.
- Step 2: Have your leadership analyze everyone in the organization in one on one sessions.
- Step 3: Use the people analyzer in quarterly reviews with all team members. Let them analyze you too.
- Step 4: When struggling with a personnel problem, run the person through the people analyzer.
Right Seats: This means all of your people are operating in their Unique Abilities and those abilities are clearly in line with their roles and responsibilities.
Three Major Functions
Sales/Marketing: Generate business.
Operations: Provides the service or manufactures the product, and takes care of the customer.
Finance/Admin: Manage the money flowing in and out as well as the infrastructure.
Integrators: CEO, president, general manager, king, or queen. It doesn’t matter what you call it, but the bottom line is that the integrator is the person who has the Unique Ability to run the organization, manage day-to-day issues that arise, and integrate the three major functions.
Visionaries: The visionary typically has 10 new ideas a week. Nine of them might not be so great, but one usually is, and it’s that one idea each week that keeps the organization growing. For this reason, visionaries are invaluable. They’re typically very creative. They’re great solvers of big ugly problems (not the little practical ones), and fantastic with important clients, vendors, suppliers, and banking relationships. The culture of the organization is very important to them, because they usually operate more on emotion and therefore have a better barometer of how people are feeling.
More on emotion
|Lead, Manage, Accountability|
Remove obstacles & barriers
More on logic
Your Leadership Team: The visionary, the integrator, and the people heading up the major functions.
GWC: GWC stands for get it, want it, and capacity to do it.
- Get It: Simply means that they truly understand their role, the culture, the systems, the pace, and how the job comes together.
- Want It: Means they genuinely like the job. They understand the role, and they want to do it based on fair compensation and the responsibility.
- Capacity to Do It: Means having the time as well as the mental, physical, and emotional capacity to do a job well.
Component 3: Data
Anything that is measured and watched is improved.
A profit and loss statement is a lagging indicator. Its data comes after the fact, and you can’t change the past. With a Scorecard, however, you can change the future.
- Step 1: Spend an hour with your leadership team and decide and list all of the categories that you’d need to track on a weekly basis. These categories should include items such as weekly revenue, cash balances, weekly sales activity, customer satisfaction/problems, accounts receivable and payable, and client project or production status, to name a few.
- Step 2: List who is accountable.
- Step 3: Decide and fill in what the expected goal is for the week in each category.
- Step 4: Put next week’s date in the first date column.
- Step 5: Decide who is accountable for collecting the numbers and fill in the Scorecard every week for the leadership to review. Decide how that person will receive the numbers from each member.
- Step 6: Use it! You must review your Scorecard every week to ensure that you’re on track for your vision.
Three Scorecard Rules of Thumb
- Rule 1: The numbers in the Scorecard should be weekly activity based numbers. New revenue/sales. If you only monitor revenue as it comes in, you’ll react to downsides too late. Measure the number of leads generated, the number of contacts, the number of appointments scheduled, the number of appointments attended, the number of proposals, and/or the number of closes.
- Rule 2: The Scorecard is a proactive tool. But you still need to look at monthly financial statements and monitor the budget monthly.
- Rule 3: When managing a Scorecard, many clients find value in red-flagging categories that are off track.
What gets measured gets done.
Everyone has a single meaningful, manageable number to guide them in their work. This number will enable leaders to create clarity and accountability throughout their team.
- 1. Numbers cut through murky subjective communication between manager and direct reports.
- 2. Numbers create accountability. Everyone knows what the expectation is. (i.e. keep AR below $50,000).
- 3. Accountable people appreciate numbers.
- 4. Numbers create clarity and commitment. When an employee is clear on his or her number and agrees that he or she can achieve it, you have commitment.
- 5. Numbers create competition. Create competition by making a target number known to all teams.
- 6. Numbers produce results.
- 7. Numbers create teamwork. When a team composed of the right people in the right seats agree to a number to hit, they ask themselves “how can we hit it,” creating camaraderie and peer pressure.
- 8. You solve problems faster. When an activity-based number is off track, you can attack it and solve the problem proactively, unlike with an end-result based number that shows up after it’s too late to change it.
Component 4: Issues
There should be three types of Issues Lists in your organization:
1. The Issues List in your Vision/Traction Organizer (V/TO). These issues are tackled in future quarterly meetings. Stored somewhere so that you don’t lose sight of them.
2. The weekly leadership team Issues List. These issues will be resolved in your weekly leadership team meetings. More strategic in nature. (i.e. rocks off track, a bad number on the scorecard, etc.)
3. The Departmental Issues List. Relevant departmental issues for the week. Tackled during the weekly department meetings.
The Issues Solving Track:
Decide on the top 3 Issues to be solved. Then decide on the most important one.
Step 1: Identify
Clearly identify the real issue or the root cause.
Step 2: Discuss
Once the issue is clearly identified, suggest a solution. This prompts a fuller discussion. You get everything on the table in an open environment where nothing is sacred.
Upon the completion of the discussion step, all of your options, data, ideas, solutions, and concerns regarding the issue at hand will be out in the open.
Step 3: Solve
The solve step is a conclusion or solution that usually becomes an action item for someone to do. When the action item is completed, the issue goes away forever.
Component 5: Process
A typical organization operates through a handful of core processes. How these processes work together is its unique system.
To systemize your organization through your core processes, you must take two major steps.
Step 1: Documenting Your Core Processes
Identify Your Core Processes.
Document Each Of The Core Processes:
When documenting the processes, you should follow the 20/80 rule. The means document the 20 percent that produces 80 percent of the results. In other words, document at a very high level.
The other reason you must document and simplify your processes is that your business has to become self-sustaining. It has to be able to run without you. You have to get your key processes out of your head and onto paper.
Step 2: Followed By All
When everyone follows their process, it’s much easier for managers to manage, troubleshoot, identify and solve issues, and therefore grow the business. Your business now becomes more scalable, which means that you can add more customers, transactions, revenue, and employees while reducing complexity.
In order to implement this crucial step, your leadership team must be convinced that everyone should follow one system.
“Do as I say, not as I do” is not effective management. I say this because most of the time this step fails because the owner or owners are not willing to follow the process.
Component 6: Traction
At this moment, your vision is crystal clear, you have the right people in the right seats, you’re managing data, you’re solving your issues, and you’ve defined your Way of doing business and everyone is following it.
The ability to create accountability and discipline, and then execute, is the area of greatest weakness in most organizations. To do this well you need to set specific, measurable priorities and then meet/follow up on the progress.
You have a vision. Now establish the three to seven most important priorities for the company for the next 90 days to move towards the vision. Those priorities are called Rocks.
You cannot focus on everything at once. Set priorities and focus.
Establishing Your Rocks:
- Step 1: Determine the 10 to 20 things that you’d like to close out.
- Step 2: Discuss, debate, and determine the most important priorities from step 1 to focus on the next 90 days. Cut them down to 3 to 7.
- Step 3: Set the date that the Rocks are due. A Rock is specific, measurable, and attainable.
- Step 4: Assign who owns each Rock. Each Rock must be owned by one and only one person on the leadership team. The owner is the person who drives the Rock to completion during the quarter by putting together a timeline, calling meetings, and pushing people.
- Step 5: The members of the leadership team each set their own Rocks. No more than 3 to 7.
- Step 6: Create what is called the Rock Sheet. This Rock Sheet is brought into your weekly meetings to review your Rocks. No new priorities can be added.
- Step 7: Share the company Rocks with the entire organization.
- Step 8: Have each department set their Rocks as a team.
- Who: The leadership team
- Where: The office conference room
- Duration: 90 minutes
- Frequency: Every week
- Segue (5 minutes): Each person should share three things: (1) best business and personal news in the last 90 days, (2) what is working and not working in the organization, and (3) expectations for the day.
- Scorecard (5 minutes)
- Rock review (5 minutes)
- Customer/employee headlines (5 minutes)
- To-Do List (5 minutes)
- IDS (60 minutes)
- Conclude (5 minutes)
- Who: The Leadership Team
- Where: Off-site
- Duration: 8 hours
- Frequency: Every 90 days
- Review Previous Quarter
- Review the V/TO
- Establish Next Quarter’s Rocks
- Tackle Key Issues
- Next Steps: Next steps, who is doing what, and whether there are any messages to communicate to the organization based on the decisions made in the meeting.
- Who: The leadership team
- Where: Off-site
- Duration: Two days
- Frequency: Every year
- Review Previous Year
- Team Health Building
- SWOT/Issues List (What are the businesses strengths, weaknesses, opportunities, and threats?)
- V/TO (through one-year plan)
Getting Started: Action Plan
- 1: Vision
- Fill out the V/TO:
- What are your core values?
- What is your core focus?
- What is your 10-Year Target?
- What is your Marketing Strategy?
- What is your 3-Year Target?
- What is your 1-Year Plan?
- Fill out the V/TO:
- 2: People
- Run every member of your team through the People Analyzer.
- 3: Data
- Create a Scorecard: 5-15 high-level weekly numbers that are activity based.
- Give everyone Measurables: Everyone has a number and knows what success in their role looks like.
- 4: Issues
- Create an Issues list.
- Decide on the Top 3.
- Identify (Root Cause), Discuss (Lay out data, ideas, solutions), Solve (Create action item and execute).
- 5: Process
- Identify Your Core Processes.
- Document each of the core processes at a very high level
- Ensure these processes are followed by all, especially owners.
- 6: Traction
- Establish 3-7 Rocks (90 Day Targets) to move closer to your vision.
- Schedule weekly meetings to review Rocks.