traction is a blueprint for business success for first-time entrepreneurs and those who've hit a ceiling in their business where hard work and determination are no longer enough for the business to survive and grow business owner and consultant Gina Wickman explains how to structure your business using his entrepreneurial operating system to remove typical frustrations so your business runs seamlessly and grows at a faster rate than you thought possible the system is based on practical experience not Theory numerous tools and templates lead business owners step by step through processes to create a structure and focus that strengthen and re-energize their organizations most entrepreneurs experience one or more of the following frustrations lack of control you aren't controlling your business it's controlling you you're putting in ever longer hours yet barely keeping up with what's happening in your company and Market people you're frustrated with your partners employees vendors and customers people don't seem to hear what you say or follow through with action no one's on the same page a growth ceiling your business has hit a ceiling that you can't seem to push through you're stuck your business is spinning its Wheels the strategies and advice you've applied haven't given you the traction to get going again part of the problem is you've become so wrapped up in your business you've forgotten that it's separate from you to reach the next level you need to build it into a self-sustaining entity powered by an effective system rather than just your determination the entrepreneurial operating system or EOS trademark builds or strengthens six key business components the author discovered while turning around his family's company he now teaches the system as an author and consultant clients using the system average 18 percent annual revenue growth chapter 1 the entrepreneurial operating system most entrepreneurs get caught up in worrying about countless details however every organization or system has a number of key components and when they're set up correctly your business functions smoothly without your constant oversight the six key elements of any business or organization Are One Vision you need a compelling vision for your business that you communicate clearly so everyone can focus their energy on it and help you achieve it this book explains how to define your vision which capsizes who you are as an organization where you're going and how you'll get there you develop a vision by identifying your sweet spot the area where you Excel defining a marketing strategy and setting one dash three dash and 10-year goals two people you need to have the right people in the right positions people who are wrong for your company or are in the wrong positions hurt your business a tool introduced in chapter 4 helps you identify the right people those who share your core values another tool helps you put people in the right jobs by assessing whether they get want and are capable of the job you also need the right organizational structure the accountability chart helps you create a structure defining and clarifying your business functions roles and responsibilities three data by creating a scorecard or weekly report on a few key numbers you can regularly check the vital signs of your business quickly see and solve problems and predict the future without waiting for financial statements you can also give each person a metric or number she's accountable for issues you need to systematically identify and address issues before they undermine your business to do this maintain and regularly review an issues list when you take the time to solve a problem you'll save up to 10 times that amount of time dealing with the problem or its consequences later 5. process your processes are the way you do business you need to identify address and document each of your core processes and continually improve them many entrepreneurs don't fully appreciate the value of having the right processes however sound processes create efficiency and make your business scalable and more profitable six traction traction the ability to execute or make the company's Vision a reality requires two things one 90-day priorities for everyone and two regular focused productive meetings at every level these six components make up the entrepreneurial Operating System model in any given area most businesses are less than 50 percent effective achieving 80 percent Effectiveness in every area will create a smoothly functioning effective operation the Myriad details that used to consume you will take care of themselves chapter 2 letting go of control most businesses fail to reach the next level of growth because owners are afraid to let go of Total Control trust their leadership team and delegate to them but for their business to grow they need to take that leap of faith the key is getting an EOS trademark in place so your business functions without your micromanagement the first step is to change your thinking stop treating your company as an extension of yourself and let it evolve into its own entity for your company to evolve you must one build a strong leadership team two expect to hit ceilings three choose a single operating system to run your business four be open-minded and humble one build a strong leadership team every entrepreneur must decide whether to operate the business as a dictator or with a strong leadership team a business run by Fiat can't grow Beyond a certain size nor Outlast its leader it stalls when the number of decisions and problems becomes too much for one person to handle the best approach for the health of the business is to run it with a strong leadership team your senior leaders should have clear responsibilities authority to make decisions in their areas and accountability for their decisions once you choose the right people and establish the expectations and communication processes you need to let them take control they'll be better at running their departments than you would be at trying to do everything at the same time the team needs to speak with one voice to the rest of the organization two expect to hit ceilings businesses usually grow in stages they reach a ceiling and push through to the next stage you must keep making adjustments in order to grow this is the only option the alternative is to stagnate and die growth can be external in Revenue profits physical size or internal and organizational capability usually you need internal development first to drive external growth many organizations fail to survive their first growing pains when they hit a ceiling about half of small businesses fail in the first five years Michael Gerber author of The e-myth Revisited put the number at 80 percent further he wrote that 80 percent of those that do last five years fail in the next five however you can push through to the next level of growth when you and your executive team adopt five approaches simplify delegate predict systematize and structure simplify your team must be able to simplify the business to enhance efficiency and focus by streamlining the system processes communication and the vision the EOS process is designed for Simplicity the theme throughout this book is that less is more delegate reaching the next level of performance for your business also depends on your ability as the leader to delegate delegating operational details allows you to take a strategic view of where the company needs to go which is the best use of your time and talents by contrast you hold back the company's growth when you stay mired in the details think of it this way when you grow personally by taking that leap of faith and relinquishing control your company grows at a minimum you need to delegate tasks like handling customer complaints approving most invoices and opening the mail you'll set an example for your senior leaders who also need to delegate predict a company's leaders must be able to accurately predict where the business will be in both the long and short term long-term prediction publicly held companies predict earnings for every quarter if they hit their projections their stock value goes up if they miss it falls however if small companies fail to meet their projections they go out of business so leaders need a strong sense of where a company is going and how it will get there a long-term prediction is for 90 days or longer this kind of prediction isn't about guessing but determining what you will do in the future based on what you know today the way to make long-term predictions is to start 10 years out and work backward to three years one year and finally to the next three months leaders need to take the long or strategic View while your crew Battles Through the Jungle you need to climb a tree see where you're headed and provide Direction in the e-myth Revisited Gerber argues that business owners must stop working so much in the business and spend more time working on it when you do you'll reach your goal faster short-term prediction the short-term focus is on what you do daily and weekly you need to have a handle on the immediate issues and be able to troubleshoot because avoiding or solving them will affect the company's performance in the long term as you and your team get better at predicting you'll foresee problems and preempt them systematize in the early stages of leading a business you're often reactive resolving every complaint and issue on the Fly but at some point instead of numerous individual responses you need to systematize the way you handle recurring things businesses need only a half dozen or so core processes in order to function you need to identify them and integrate them into an operating system by simplifying and documenting these processes you increase efficiency and reduce errors with well-defined processes you can delegate responsibility for each one while you take the Long View structure you need to create a structure for your company that clearly defines functions roles and responsibilities often small businesses are Loosely structured and built around the ego or personality of the leader this kind of company may get stuck because it can't grow without changing its structure however a structure with defined roles and accountability encourages and enables expansion three pick one operating system the third requirement for your company to evolve is to choose a single operating system your operating system is like a computer's operating system that organizes activities and data in a way that enables everyone to be more productive it's a consistent approach to planning setting priorities determining your vision meeting and communicating if you have more than one system people will work at Cross purposes for your company to succeed you need an operating system that keeps everyone on the same page 4. be open-minded finally for your business to evolve you and your leadership team must be open to new ideas and willing to admit what you don't know and ask for help you as the leader must know your strengths and weaknesses and let those with greater skill in specific areas take charge you also must be vulnerable or humble enough to see and address your organization's weaknesses when you're ready to let go of Total Control you can build a stronger organization that continues to succeed at higher and higher levels chapter 3 defining a vision the first component of the EOS trademark is your vision most entrepreneurs have a vision for their company which they assume everyone else can see as well as they can but many times others in the organization don't see it and when people are confused they go in different directions and Visions can't be realized to get traction the ability to execute or make the company's Vision a reality you need to clearly Define and communicate your vision to create a vision determine the following one your defining values to your company's main focus three your 10-year goal for your marketing strategy five your three-year goal six your one-year goal seven your quarterly priorities eight your issues if you prefer you can download the vision traction organizer V2 tool free to fill in your answers one your defining values creating a vision starts with defining three to seven core values that serve as guiding principles for your company they Define your culture and who you are when your core values are clear and compelling you'll attract people who share them and discourage those who don't from sticking around you build a culture around your core values by letting them guide you when you hire Fire review and reward people and built to last Jim Collins and Jerry porus write that successful companies Define their core values early in their development and build a culture around them in contrast most businesses lack clarity about where they're going which hinders their growth how to determine your core values here are four steps to determine your company's core values step one think of three people in your company who stand out as star performers Step 2 list the characteristics these people embody what do they do or what values do they exemplify for example working hard serving customers and acting with Integrity or imagination step 3 your core values are among the characteristics you listed combine similar values and narrow the list step 4 decide which three to seven values Define your company examples are service results or Cutting Edge knowledge think about them for a month or so then finalize them communicate them to your employees in a compelling way write a speech that backs up each value with stories and examples of people in your company applying the value present the speech at a company-wide meeting also explain the values and examples when you interview job candidates and ask them about ways they have applied those values in their previous work you'll make better hires if you determine whether candidates share your values before you evaluate their skills when your core values are part of the common language in your organization they'll become a way of life two your company's main focus the second step in defining your vision is determining your company's main focus when talking about their main focus businesses use different terms for it including Mission Core Business and sweet spot your core focus is the job your company excels at it should get your time and resources it's the responsibility of your leadership team to establish your company's core focus and make sure nothing distracts from it when you clarify your focus you may discover that you need to streamline the business eliminating unrelated product lines positions or even divisions that don't fit while this is painful it strengthens the company in the long run how to determine your focus to determine your core Focus you need to know two things your company's reason for being and its niche here are some ways to think about these components one why does your company exist what's its purpose or Mission the answer doesn't have to be unique to your business when you answer the niche question you'll be looking for what's unique or differentiates your business from others to Define your purpose or Mission strive for and answer that is no more than seven words is simple is bold resonates emotionally involves everyone in the company doesn't involve money is broader than a goal an example of a purpose or Mission would be to improve the quality of life in our town two what's your niche What specifically do you do that fulfills remission the answer should be simple and useful in making decisions about how to spend time and resources examples of niches include popcorn and solving complex real estate problems here are some examples of both Mission and Niche which together Define a company's core Focus a Paving Company being the best Quality Asphalt Paving a construction firm exceeding expectations completing every aspect of a project a laser printer company building a great company with great people and results simplifying companies printing environments as you concentrate your company's efforts on its core Focus you'll see increased success and profits as a result of building on what you do best it's like playing golf a golf club has a sweet spot bat if lined up with the ball sends the ball farther and straighter improving your score your company's core focus is its sweet spot if you stick with it your business will get the best results three your 10-year goal companies need long-term goals so they know where they're heading and whether they're on or off course in built to last Collins and porus write that successful companies stand out in setting big bold long-term goals which the authors refer to as bags big hairy audacious goals when you have a big attention-grabbing goal you start doing things differently in the present to get there to make such a mental leap focus on ends rather than means think of your long-term Target as the end like an athlete making a long jump focus on where you will land when you Orient your thinking this way Solutions come to you that wouldn't otherwise examples of big bold goals include 10 million dollars in Revenue with 15 percent net income 5 billion gallons moved and 25 percent of target market how to set a 10-year Target identifying a 10-year Target may take some time discuss with your leadership team where you want to take your company the goal should be specific measurable and clear start by asking what the company's Revenue goal could be in 10 years once people start talking firm up a Target that everyone agrees on the right target is one that generates energy throughout the company when your company is three years from achieving your 10-year goal make it your three-year goal and set another 10-year Target four your marketing strategy one reason you need clarity about your core focus is so you can then Focus your marketing strategy effectively a focused strategy will increase your business and be the basis for promotional material messages plans and advertising if you lack Focus as a company you'll waste time and money on diffuse marketing messages printing or consultant services that have little impact for instance if you try to do everything your customers want it will be hard to keep up you'll get frustrated and the business will be less profitable a scattered approach may have worked in your company's early stages but to reach the next level of growth you need Focus an effective marketing strategy has four parts one your target market and Prospect list two your differentiators three your process for your guarantee your target market identifying your target market means defining your ideal customer your employees need a clear understanding of who you should be doing business with and how brainstorm with your leadership team on the following Geographic characteristics demographic characteristics behavioral characteristics as an example of a target market a laser printing company targets I.T directors and companies with 25 or more Laser Printers in Michigan and Ohio next based on how you define your customer create a list of prospects for your sales staff to pursue in the process you may discover you have some existing customers who aren't part of your target market if they're not profitable enough you'll need to shift your attention to better customers by focusing on your best prospects list those bringing more profit with fewer hassles you'll turn sales around how to create a prospect list creating your list will involve examining current Prospect lists getting referrals from clients examining trade Publications and asking your sales people for recommendations your list should include contact information for each name the next question is how to reach them most companies find that using referrals is the best method or you could use cold calls direct mail or a variety of other options appropriate to your business implementing a targeted approach will create a Snowball Effect where your sales effort is self-perpetuating generating new business will take less effort your differentiators as part of your marketing strategy identify three qualities or differentiators that make your company stand out to your Target customer many businesses offer too many products or services in an effort to please everyone as a result they don't stand out at anything your sales staff should be able to tell customers what you do better than anyone else and to look elsewhere if they want something different for example Southwest Airlines three differentiators under co-founder and CEO herb Kelleher were the lowest fares on schedule flights and having fun this didn't satisfy those who wanted additional services but Kelleher famously stuck to the company's core Focus telling dissatisfied passengers in effect so long stick to your differentiators and don't apologize for them how to choose your differentiator start by listing everything that makes your company product or service and people unique include your sales and marketing team in this exercise ask some of your key customers the same question narrow the list to the three qualities that are most important to you and your customers none of your competitors should provide all three of these services or attributes the way you do for example a property management firm focused on these differentiators we offer personalized customer service and sales we invest in our people and we have an owner's perspective your proven process in most companies salespeople try to win over new customers by showing them a lot of numbers visuals and charts which makes the salesperson sound the same as every other sales rep a more effective sales pitch focuses specifically on what your company does and how you have a distinct way of delivering your product or service every time that produces a consistent result it's why your company is successful Define your proven process in up to seven steps present it visually on a single sheet of paper and give it a name such as the X company difference presenting your process this way stands out and increases customer confidence in your ability to deliver you can introduce it like this here's how we deliver great results for our customers we have a proven process called how to create your proven process Step 1 map out up to seven steps for delivering your service and give each step a name for example a financial services company listed the following process steps Discovery solution presentation 1 competitive bidding solution presentation 2 solution implementation review and service Step 2 add up to five bullet points to each step for salespeople to use as talking points in the previous example the first step listed the following sub points about us about you defining your objectives step 3 give your delivery process a name like that the X company difference or our proven process step 4 have a graphic designer illustrate your process and have it professionally printed your guarantee offering a guarantee as part of your marketing strategy is a way for you to differentiate Yourself by calling attention to a service or quality shortcoming of your competitors for example Federal Express emphasized its reliability in speed compared to others by guaranteeing overnight delivery when it absolutely positively has to be there overnight similarly Domino's Pizza guaranteed fast delivery 30 minutes or it's free to come up with a guarantee for your company think about what your customers count on you for you don't absolutely need a guarantee but you'll be more successful if you offer one you're already missing business because of some area where you don't have the full confidence of potential customers if you can get that confidence you'll increase your sales besides increasing sales having a guarantee puts everyone in your company on notice that they need to deliver it also forces you and your leadership team to ensure the company has the necessary capability both of these strengthen your company how to choose a guarantee it may take time to come up with the right guarantee for your company start by identifying your Target customers biggest concerns and frustrations then develop several guarantees that will bring you more business by addressing these concerns get feedback on your proposed guarantees from customers choose the most effective one that you can deliver call it a pledge commitment or promise if you don't like the word guarantee 5. your three-year goal now that you know your values Focus 10-year goal and marketing strategy to get there the next step in defining your vision is to create a mid-range or three-year Target having a picture for how things will look in three years has two benefits your employees know where the company is going and can help make your vision a reality it makes the one-year planning process easier because with an eye on the three-year goal you can determine what you need to do in the next year to stay on track in writing your three-year goal focus on measurables and bullet points not details on the end point rather than the potential hurdles how to set a three-year goal pick a date preferably the end of a calendar year determine what your annual revenue will be three years from now your senior leaders need to be on board with the number set a profit number choose a key measurable for example an oil company that supplies fuel to gas stations decided its measurable would be gallons delivered a Soup company decided to increase from 38 to 94 stores in three years use bullet points to describe how the company will look leaders should Define their roles in that time frame so everyone is aligned when the leadership team understands and agrees on all major points share the three-year plan with employees six your one-year plan creating a one-year plan is the sixth step in defining your vision the one-year plan what has to happen this year creates the traction for achieving your vision pick up to seven objectives for the year when you have more than that none stand out your efforts are scattered and you accomplish little but when you focus on a few key things you accomplish more how to create a one-year plan set your future date set it within the calendar year regardless of where you are in the year for instance if you're currently in July set your future date as December 31st after that you can create a full one-year plan as with the three-year picture set a revenue goal profit goal and immeasurable consistent with your three-year measurable choose up to seven priorities that should be completed this year to be on track to meet your three-year goal they should be specific measurable and doable budget for your one-year plan to ensure you have both the resources and a reasonable profit goal seven your 90-day priorities once you have a one-year plan determine your priorities for the next 90 days like the one-year plan your 90-day or quarterly plan creates traction or keeps your company moving forward in many organizations department heads have competing priorities having your leadership team determine priorities for each quarter gets everyone United the right 90-day priorities put you on track for your one-year plan which positions you to meet your three-year and ten-year targets your issues the last step in establishing a vision for your company is creating an issues list once you know your destination you need to know what stands in the way you'll always have issues being clear on what they are is key to solving them with your leadership team discuss and list any obstacles and concerns you're likely to encounter in pursuing your vision always maintain and continually update an issues list as part of operating your business chapter 6 will address solving issues share your vision with the completion of your vision you have a basis for building and implementing the rest of the entrepreneurial operating system next share your vision with employees so everyone is working toward the same goal communicate your vision with three company events one a kickoff meeting at which you present your vision using your core values speech and answering questions two a quarterly company status meeting at which you share progress review the vision and share the priorities for the next quarter three a quarterly leadership meeting to set both company priorities and priorities for each department to support the overall vision the meetings will give employees clear Direction which will enable them to make better decisions and enable you to delegate and elevate employees typically need to hear the vision seven times before it sinks in so it's critical that you as the leader deliver a consistent message repeatedly expect to keep repeating your vision as opposed to expecting employees to get it by the second or third time the next chapters deal with making your company's Vision a reality chapter 4 managing people effectively the second component of the EOS trademark is people there are two steps to managing people in your business One hiring the right people and two putting people in the right positions the tools and practices introduced in this chapter help you do both the right people for your company the ones who will fit and thrive in your culture are people who share your key values the people analyzer tool is a report card for grading people on your values to see if they're a good fit the right position is the one in which the job duties match the employee's distinctive skills and talents and she's able to apply her abilities to the greatest effect the person in the right place creates value for the company and receives value from having the opportunity to hone a talent three common Personnel problems are one right person wrong position the employee shares the company's core values but isn't in a position that matches her particular talents she may have been promoted to a position that's not a good match outgrown her current position or was put into the wrong position to begin with often the person is allowed to continue in an unsuitable position because she's been around a long time but as long as she's in the wrong position she can't grow and will hinder the company's growth if the right seat isn't available for her you may have no choice but to let her go two wrong person right position and employees skills and talents may be a good match for the job but if he doesn't share your values he'll hurt the company in the long run he'll likely undermine the company by making negative comments and spreading dissension when a person is wrong for the company he needs to go three wrong person wrong position sometimes a position evolves as company needs change but the person holding it doesn't or can't change this person also needs to go the right people the people analyzer is a report card tool for assessing how well current and potential employees match your company's values download the tool here or create your own version it helps clarify Personnel decisions and makes them less subjective the people analyzer toy using the downloaded form or a spreadsheet list the people you're assessing in the left column and list your core values across the top rate those on the list for how they align with your core values give them a plus if they demonstrate the value most of the time a plus minus if they sometimes demonstrate the value a minus if they rarely demonstrate the value the company's senior leaders need to decide the minimum acceptable standard managers should apply in hiring and holding employees accountable for instance if a company has five core values the overall bar could be three pluses two middle ratings and no minuses people who are at or above the standard would be right for your company how to implement the people analyzer tool step one have your leadership team analyze each other's alignment with the company's core values there are two benefits it's a test of your values if everyone on the team is weak in a particular value it may be one you should exclude from your core values you'll learn whether any of your senior leaders are below standard if so give them a chance to improve using the three strike rule step two as a leadership team assess the rest of the employees and have each person's manager share the assessment with him step 3 as the company leader use the assessment tool in your quarterly performance reviews with senior leaders and let them grade you too step 4 if you have a Personnel problem use the tool to assess the person if they're not meeting the standard for the right fit use the three strike process give employees three strikes if a current employee is falling short share your assessment and give him a chance to improve use the three strikes rule strike one point out the problem and your expectations and give him 30 days to improve strike two if the person isn't improving enough be clear with him about that and give him another 30 days to meet expectations strike three if the person still doesn't meet expectations terminate him other employees who are meeting company standards will appreciate your holding everyone accountable usually when you're clear about the company's core values people who aren't right for the company will realize it and leave voluntarily because they can't go on unnoticed the accountability chart before you can put people in positions you need a structure the accountability chart is an organization chart that defines the functions and roles in your business a business typically has three major functions or departments which are equally important and interdependent sales and marketing to generate business operations which produces the product or provides the service finance and administration which handles the money all three functions need to be strong or the company will struggle for instance it will fail if it has a strong sales effort but the operations Department can't reliably deliver the product for the accountability chart visualize the three functions as three boxes lined up horizontally only one person should be in charge of each function and accountable for its performance if you have more than one name in a box on your organization chart your lines of accountability aren't clear and this is likely hindering your company's ability to grow some functions may be subdivided for instance sales and marketing or finance and administration may be split but remember to keep things simple the integrator and Visionary roles to coordinate the three major departments and manage the tension that will develop among department heads a company needs an integrator usually a general manager CEO or president who runs the overall business in addition to the integrator many organizations have another key role that a visionary the Visionary is usually the company's owner co-owner or founder when there are co-founders or Partners one is often the Visionary and the other the integrator they're opposites in many ways the integrator manages the business nuts and bolts profit and loss overall business objectives and day-to-day operations the integrator is a good manager who solves problems and holds people accountable she tends to be practical and logical in contrast the Visionary is a creative person whose new ideas keep the company growing he solves big problems and is good at building outside relationships with banks vendors and key clients the Visionary is attuned to the company culture and morale the Visionary and integrator have unique talents and complement each other when working within a structure that defines their roles and responsibilities if a company has a Visionary leader but lacks an integrator the leader May struggle to gain traction and feel frustrated at having to get involved in day-to-day operations defining roles the accountability chart identifies the key roles within each major business function or Department for example the Visionary functions roles might be research and development problem solving key relationships selling and culture everyone on the chart who has direct reports is responsible for three things leading managing and holding people accountable which can be designated on the chart by the acronym LMA to fill out your accountability chart depict the major functions or departments as well as the sub functions that report to them list the key roles of each function once you've created the best structure for your company put the right people in the right positions your accountability chart should look like a typical organization chart but with bullet points indicating roles in total it defines functions roles and the reporting structure your structure creates accountability Meanwhile your culture should be open and honest encouraging communication across all organizational lines so there are no silos the leadership team the Visionary integrator and people heading the major functions or departments comprise your leadership team the next four chapters explain how the teen should meet prioritize resolve issues and execute the company's vision the right positions once you've created the right structure with lines of accountability your ultimate goal is for people to be in positions where they're functioning at their highest level when considering someone for a position use the gwc tool ask yourself whether they won get it two want it and three are capable of doing it no one can perform at their highest level without meeting all three criteria in fact when you have a performance problem when someone isn't meeting their job responsibilities it's usually because they don't meet one of the criteria as a result you can't delegate responsibility to them because you can't trust them to do the job you have to do part of it yourself and you're both frustrated here's what the criteria mean one G get it when someone gets or understands a job they fully grasp the role and responsibilities including the systems deadlines and the way the job relates to other positions and the company's mission 2 W want it to do well in a job the person also must have a strong desire and motivation to do it as well as truly enjoy it he doesn't need to be pushed or cajoled by a manager to do what's required three C are capable of doing it being capable means having the intellectual physical and emotional capacity to do the job a position may require more than 40 hours a week which not everyone will want to commit to or it requires certain experience knowledge or interpersonal skills in applying the gwc test you may find that one or more members of your leadership team are in the wrong position and you'll need to make leadership changes to achieve your vision here are some additional Personnel considerations one person two jobs one person can sometimes do more than one job this is fine as long as they have the time and capability in startups the owner founder starts out filling nearly every seat but as the company grows the jobs grow and you need additional people delegate as your company grows you and your leadership team will have to delegate so you can perform at your highest level working on building your company for the future rather than focusing on daily Nuts and Bolts if you're working at 120 percent of capacity you need to delegate the extra 20 so you can devote your full ability to being the leader if you don't delegate you're underperforming as a leader and holding your company back spect your accountability chart to evolve the accountability chart is a tool to structure and track your company's growth it will continue to evolve if your company is growing at twenty percent a year you'll probably need to change your organization chart every quarter terminations as you develop your accountability chart you'll discover people who aren't a good fit for your company don't immediately start firing people proceed step by step to avoid creating a lot of vacancies at one time and endangering the company however don't ignore problems hoping they'll resolve themselves or sending people to training that isn't going to help is like over watering a plant when what it needs is pruning also don't be tempted to procrastinate to avoid the discomfort of a termination it will only be painful for about 36 hours the time leading up to and including the termination things will improve significantly afterward employees who were picking up the slack or suffering because of someone's poor performance will be grateful that you acted to avoid 36 hours of pain some managers and their teams end up suffering much longer chapter 5 the data component the third component of the EOS trademark is data many entrepreneurs are like pilots flying blind with no data to help them determine where they are or where they're heading they may talk to a few people and gather subjective opinions about the health of the company but opinions and instincts aren't enough to make good decisions instead a handful of key numbers comprising a weekly scorecard will let you check the vital signs of your business weekly spot problems and Trends and make course Corrections before problems become crises the scorecard will enable you to let go of control while remaining connected the scorecard the scorecard immediately tells you how your business is doing most companies rely instead on a pandell statement but by the time you get it problems have already occurred with the scorecard you can see where you are and if necessary change where you're headed for example as mayor of New York City Rudy Giuliani used a type of scorecard to more quickly address and even prevent crime the tool called comstat allowed police to report crime numbers immediately so Precinct commanders could spot Trends and deploy more officers to problem areas here are the steps for creating a scorecard for your business step one brainstorm with your leadership team about what numbers tell you the most about how your business is doing on a weekly basis for instance Revenue sales activity customer complaints accounts receivable and production output you should end up with about a dozen numbers create a template or spreadsheet with the categories listed in the far left column followed by a goal column and columns for entering numbers below dates running across the top it should be designed so you can see 13 weeks of numbers at once step two with each category also list who is accountable for the number only one person usually the department head should be accountable for each this person provides their weekly number to whoever is in charge of updating the spreadsheet step three decide on a weekly goal for each category and fill it in the goals should align with your one-year plan step four determine who will update the spreadsheet each week for senior leaders to review at a regular meeting determine how the person will get the numbers from each leadership team member step 5 review the scorecard with your leadership team every week to monitor how the business is doing and take any steps necessary to stay on track to reach your goals three caveats one the scorecard numbers should be activity based and traceable to an originating step for example new revenue and sales are activity-based numbers but if you track them only as they come in you can't react to sales slumps in time to make a difference instead trace the sales process backward to find more actionable numbers by tracking the number of New Leads received each week you can see how many leads typically translate into sales and therefore predict how many leads you need to develop today to hit a sales Target in the future two while the scorecard can help you to spot potential problems you still need to look at monthly and quarterly financial and budget statements to get a full picture of the company's finances three when a number doesn't hit or exceed the goal for a week Mark that number in red in the scorecard so it stands out and creates a sense of urgency at your weekly meeting your scorecard will evolve it will take about three months to get at the point where it's fully useful give everyone a number after creating a scorecard the next step in using data effectively is to give every employee a single meaningful number they're responsible for meeting when everyone has a number to meet you can track high level numbers down to an individual the benefits of making everyone accountable for a number include one numbers are concrete and objective when a manager asks an employee how sales went last week she gets a number instead of a vague comment like things seem to be picking up two numbers create accountability when you set a number an employee is clear on what's expected for example keeping the number of accounts receivable under 40 is a specific expectation while being responsible for collections is General three numbers boost production you can create competition by presenting a target number to your teams for example in one of Charles Schwab's steel making plants Cruz competed daily to produce the most batches of refined Steel each crew leaving for the day chalked their number on the floor and the next shift tried to Beat It overall production increased four numbers lead to results for instance if you set a goal of zero unresolved customer issues by achieving this goal you'll Boost customer retention a positive result five numbers create teamwork when a team has a number to hit they work together to make it happen even calling out team members who aren't doing their part to help you find numbers for every employee review your accountability chart many of the listed roles can be assigned a number for instance the following project manager roles are measurable complete projects on time achieve the margin goal on each job meet quarterly standards chapter 6 resolving issues the fourth component of the EOS trademark is issues many leadership teams talk endlessly about problems without solving them but unresolved issues or problems drain your company's energy the entrepreneurial operating system provides tools to help your leadership team uncover problems drill down to the cause discuss Solutions and take action the tools for tackling issues are an issues list and an issue solving track the issues list the issues list is a tool for getting issues on the table and in one place where they can be dealt with organizations should keep three types of issues lists one a quarterly meeting issues list this is where you list non-urgent company issues that can be addressed in future quarterly leadership meetings they're not immediate priorities for this week or this quarter but you need to note them so they won't be forgotten examples include new product ideas HR issues and capital needs two a weekly meeting issues list these issues are tackled at weekly leadership meetings their strategic non-departmental issues that need to be addressed this week or this quarter at the leadership level examples are priorities being off track a missed scorecard goal client issues and process related issues three a departmental issues list this list contains immediate departmental issues that must be handled at a weekly departmental meeting for instance sales department issues might include not hitting call numbers planning sales presentations and closing sales operations Department issues might include production numbers and customer complaints with an open problem-solving culture and these three issue lists issues will surface regularly once you've identified and listed them the tool for resolving them is the issue solving track the issues solving track the issues solving track has three simple steps one Identify two discuss three solve first look at your list and pick the top three issues to be solved when you work through issues in order of priority some issues will disappear because they were really symptoms of a key issue you addressed discuss each of your top three issues using the three-step process one I identify First drill down to the real issue or source of trouble probing for the underlying issue can be uncomfortable because problems usually involve people but it's important to be honest for the good of the company this step may take longer than the other steps you may spend most of your time identifying the problem and need only a few minutes to discuss and solve it there are generally three kinds of issues a problem to be solved information to be communicated to the team and agreed on an idea someone wants feedback on the person raising an issue should indicate the response needed for example she might say I just want to make sure everyone understands and agrees with the new maintenance contract this speeds up the process 2 D discuss the discussion step is where everyone gets a chance to weigh in many teams flounder on this step because they didn't identify the real issue first they talk a lot without solving anything however once the team has identified the issue there may be little need for discussion because the solution is clear in that case don't be afraid to suggest a solution this will either save time or it will prompt valuable discussion as people jump in to make additional points before it's too late avoiding tangents discussions often drag on too long because they keep going off on tangents one way to deter tangents is for team members to call out tangent alert when the discussion starts going off track if a tangent raises a real issue however add it to the list and refocus on the topic at hand three s solving this step you determine a solution or conclusion with an action for someone to take add the action item to a to-do list and when it's carried out you're done with the issue you should decide issues in ways that move you closer to achieving your vision thus you can't start solving issues until you've established your vision or you won't make the right decisions it would be like driving a car without knowing where you're going you won't have a rationale for deciding where to make turns tips for solving issues one when team members disagree on a solution the integrator should make a decision and the team should get behind it when views are split the majority is often wrong also as Author Jim Collins pointed out in a Fortune magazine article the most important decisions usually aren't unanimous two get first-hand information when an issue involves multiple people you need to hear from all of them get everyone together to talk about it at the same time three act in the company's best interests not out of self-interest or for political reasons keep your eye on the company's goals when making decisions four you have three options for handling every problem put up with it end it or change it putting up with it should be a last resort you want to end it instead five face your fears and act the issue you're most afraid of is the one you need to tackle first solution statement at the conclusion of the three steps a team member needs to verbally summarize what's been decided and the next steps for example Nicole will meet with John and discuss the warehouse issue she'll offer him a transfer to another position and if he doesn't take it we'll terminate him addressing Personnel issues when two people don't get along have a third party facilitate a Solutions meeting with them at the meeting have each person share what he believes are the other's three biggest strengths and weaknesses identify the issues and solve them list the steps to be taken for implementing the solution meet again in a month to ensure the steps were taken if this process doesn't resolve the problem you may have to let one of the individuals go or move him to another position chapter 7 documenting processes the fifth component of the EOS trademark is process your company has a few key processes that keep it running together they constitute your unique way of doing business many entrepreneurs neglect this component and allow their way of doing business to develop haphazardly people do their jobs in whatever way they see fit this creates inconsistencies and inefficiencies as well as never-ending headaches for you as the owner in contrast honing your processes so they run without constant oversight frees you to focus on building your business rather than being mired in its details also when you have a defined way of doing business you make your company more scalable and valuable in the event you decide to grow or sell it there are three steps to systematize your business one identify your key processes two document each process three ensure that everyone follows the processes one identify key processes your leadership team needs to identify the processes for carrying out every major activity of your business list the processes on a single sheet of paper and agree on what you will call each one so there won't be confusion over what anyone is talking about most businesses have processes to handle the following human relations marketing sales operations this breaks down into sub-processes for instance warehouse distribution customer service and production Counting customer service and retention 2 document each process the person accountable for each process should document it don't list every detail just the most important steps with a few bullet points for procedures under each follow the 80 20 rule document the 20 of the process that produces 80 percent of the results here's an example of documenting an HR process the HR process Step 1 Sergio create job description oh determine search method oh conduct search Step 2 interviewing step 3 hiring step 4 orientation step 5 performance reviews step 6 termination step 7 ongoing benefits management the documentation for each process should be up to 10 pages your goal is to keep your processes simple as you document steps you may find redundant or unnecessary steps that you can eliminate for some processes a checklist May suffice while codifying your processes you may find areas where new software can increase efficiency but do your research so you get the right technology and don't waste your money on bells and whistles you don't need three ensure everyone follows the processes compile all of your documentation into a manual whether printed or digital each process should be a chapter the title should be the way train employees in the processes you need them to use as the company's leader make clear your expectation that everyone including your leadership team will follow the processes also show how the new system coordinates everything to make individual jobs easier and the company more successful it may help to create a visual of your way that illustrates how all of the processes work together the benefits of having documented processes include when everyone follows the same processes it's easier for managers to identify and solve problems many problems stem from a process breakdown for example a customer isn't billed because a service rep didn't forward the order to the finance department you can track the problem to the step that failed and fix it it positions you to grow the business with effective processes you can easily scale up or increase customers revenue and employees chapter 8 getting traction with five key business components in place you're ready to create organizational traction and move forward getting traction means executing or making your vision a reality to create traction set 90-day priorities and establish a meeting structure one priorities short-term priorities move you in the direction of your vision the company leadership team and employees all should have three to seven quarterly priorities aligned with your vision when you focus everyone in the same direction you collectively gain traction this book refers to priorities as rocks based on an analogy in Stephen covey's book first things first involving a cylinder in rocks gravel sand and water the cylinder represents the amount of time in your work day the rocks are your priorities gravel represents day-to-day responsibilities sand represents interruptions and water is everything else that comes up during your day if you put gravel sand and water into the cylinder first the Rocks won't fit that is when you spend your time on day-to-day details interruptions and trivia there won't be time to address priorities but when you put the Rocks into the cylinder first followed by gravel sand and water everything fits the point is that you need to work on priorities first and everything else will fall into place establishing priorities leaders should meet quarterly to review your vision and set priorities for the company and leadership team for the next 90 days here are the steps to follow step one after reviewing the vision list things that must be accomplished in the next 90 days to move toward your vision Step 2 narrow the list to three to seven priorities step 3 set the due date for meeting each priority Define each priority so that its specific measurable and doable for example a priority might be close three major sales step 4 assign an owner from the leadership team to each priority this person will be accountable for achieving it by creating a timeline assigning tasks and ensuring people complete them step 5 after the company priorities are set each leadership team member should set their own priorities including the company priority they own some items on the brainstorming list that were dropped in Step 2 could become individual priorities step 6 put the companies and Leadership team's priorities on a spreadsheet or one page document and review it each week at the leadership team meeting step 7 share these priorities with the entire company at the quarterly company status meeting step 8 have each department establish up to three priorities further each employee in the department should choose up to three individual priorities tips for establishing priorities make sure you take enough time to set the right priorities those that move you towards your vision rather than sidetracking you it takes two quarters to get the priority setting process working effectively start with just the company and Leadership setting priorities for the first two quarters then have the rest of the company do it make sure you're fully committed to the process don't announce priorities to employees and then forget them or you'll lose credibility two meetings it's a myth that meetings are a waste of time meetings are where you practice accountability and get traction but they need to be productive by following a structured meeting schedule with purposeful agendas you'll find that everyone will get more done and continuously Advance the company's vision you should have two types of leadership meetings quarterly and weekly the quarterly meeting when you have annual three-year and 10-year goals it's human nature for people to start wandering off track in about 90 days to counter this you need to focus on interim goals every 90 days where you'll lose sight of your vision your quarterly leadership meeting should be a full day off-site event with the following agenda opening each team member should share the following good news from the last 90 days what's working not working and expectations for the day review the previous quarter review the financials then review the company and leadership team priorities to confirm which ones were achieved you won't complete 100 percent every quarter strive for 80 percent or better if you missed hitting a priority you can advance it to the next quarter reassign it or if it's close to completion just put it on a to-do list and finish it review The Vision to ensure everyone has Clarity so you can set the right 90-day goals as part of this update the issues list set the next quarter's priorities follow the steps for setting priorities described earlier in this chapter list what must be done in the quarter and narrow the list to three to seven items tackle key issues determine your top three issues and go through the IDS process for each of the top three then begin moving down the list solving as many issues as you can in the time available save the rest for your weekly leadership meeting next steps clarify who is doing what and whether there's anything to communicate to the employees for instance any decisions made to solve problems conclude each team member should share feedback on the meeting whether their expectations were met their reading of the meeting from 1 to 10. repeat this meeting every quarter don't skip any quarters your quarterly meetings will become increasingly productive at the end of the year add a second day to your quarterly meeting for annual planning following this agenda annual planning agenda day one opening team members should share the company's three greatest accomplishments the individual's greatest personal accomplishments and expectations for the meeting review the previous year review the financials the previous year's goals and the last quarter's priorities team building exercise the one thing have the team give each member feedback on her greatest strength and weakness then have each team member choose one thing to do differently SWAT issues list discuss the company swats from the discussion create an issues list challenge the vision take a critical look at your core values core Focus marketing strategy and 10-year Target make sure everyone is still on board with it create a new three-year plan then your one-year plan for next year annual planning agenda day two establish your priorities for the next quarter tackle issues determine the next steps conclude the weekly meeting once you've set your quarterly priorities you and your leadership team need to meet weekly to stay focused address issues and communicate the weekly meeting is like a drumbeat that keeps your leadership team marching forward in step in terms of productivity this meeting should be a 10 most people rate their meetings as a four or five on a scale of one to ten a level 10 meeting will keep your scorecard numbers and priorities or rocks on track and give you an opportunity to troubleshoot and solve problems the following agenda will ensure a productive meeting the weekly meeting agenda opening spend five minutes sharing good news scorecard review the numbers compared to goals any misses should be moved to the issue solving part of the agenda review priorities review the companies and team members priorities to see which are on track when a priority is off track move it to the IDS agenda item customer and employee news cite positives and move issues to the IDS agenda item to-do list review to Do's from last week's meeting these are action items that pop up throughout the week for example a commitment to ship an item immediately indicate whether items have been done not done no item should be on the to-do list for more than two weeks the vast majority should drop off each week the list creates traction and accountability IDs identify discuss and solve the issues on your issues list there should be a few holdovers from last week plus others added during the week or a total of 10 to 15 issues go through them in order of priority once an issue has been solved an action usually should be added to the to-do list next week confirm it was carried out conclude recap your to-do list and the assigned actions determine whether anything from the meeting needs to be communicated to employees have everyone rate the meeting on a scale of one to ten tips have the weekly meeting at the same day and time each week follow the same agenda and start and end on time assign someone to run the meeting and someone to maintain the agenda once the leadership team has the process down apply the same format to weekly meetings in each department chapter 9 implementing the EOS trademarked the combination of vision people data issues process and traction the entrepreneurial operating system positions your company to achieve your vision this book presented one component at a time in order to make the EOS trademark model easy to understand and learn but that isn't the most effective way to implement it in a business based on the author's experience with hundreds of companies the following sequence is recommended implementation sequence Implement these seven tools with your leadership team first in order before sharing them with other managers and employees one accountability chart create your accountability chart first because it goes to the root of most issues determine the right structure then put the right people in the right positions with this tool in place the other tools are more effective two priorities once you know who is accountable for what you'll set better priorities three meeting schedule implement the weekly meeting first this requires you to choose what's most important every week and start solving the key problems using the IDS tool to gain immediate traction start your quarterly and annual meetings based on where you are in your calendar year four scorecard this takes one to three months to develop and further creates accountability ownership and results 5. vision statement the first four tools above create a foundation on which to build your vision rather than Pie in the Sky after you've established accountability and traction creating a vision is easier and the result will be more meaningful anyway most organizations have a fair idea of where they're going already six core processes after the foundational tools are fully implemented the next step is to document and train people in your core processes using the three steps seven everyone has a number this is last because without the main Tools in place it's less effective due to lack of accountability and strong management however with the foundation in place adding a number for everyone increases results once you and your leadership team have mastered the tools roll them out to the rest of the company one level at a time start with the middle managers who report to the leadership team and present these tools the vision statement accountability chart priorities or rocks the structured meeting schedule the scorecard if you have multiple locations site managers need to be fully on board with the foundational tools before sharing them with the next tier at that location roll out tips be patient it will take time for the system to click with a majority of employees once you start to gain traction at some point you'll hit the ceiling again stick with the tools and five leadership abilities hone them and press on decide how big your company should get rather than aiming for growth for growth's sake meet once a month to ensure partners are still on the same page with where the company is going do an organization checkup twice a year to see where you are in implementing the EOS trademark the goal is to continually make progress when you find gaps between where you are and want to go add them to your issues list for solving some may become quarterly priorities thanks for listening if you enjoyed this please like And subscribe to the Literary Digest for more videos like this one and don't forget to leave a comment below and let us know what you found most helpful until next time keep striving for success