What Got You Here Won't Necessarily Get You There

If you've done something the same way for a while, and gotten good results, it's easy to think you can keep plugging away and making progress. This works fine if you're in "Sustain" mode, but likely not if you're in "Growth" mode.

This newsletter is about leadership and business, but I'll first try to make this point with an aspect of life we can all relate to...health & fitness. I'll use myself as an example. I eat healthy (most of the time...well outside of the occasional cheat meals, my love of pizza, and sometimes indulging in ice cream before bed) and exercise 5+ days a week whether it's running or lifting weights. If I went to see a doctor and/or had some lab tests run, it would indicate I'm in pretty good physical shape compared to most of the population.

I can keep up the same healthy habits and definitely sustain, but let's say I wanted to compete an International Federation of Body Building and Fitness (IFBB) competition. If you haven't met me in person, just trust me that without some major changes, it wouldn't go very well. I'd need to completely overhaul my diet, my exercise regimen, not to mention some heavy supplementation. And even then, I might not have a prayer of competing just due to genetics and body type. Suffice to say, what got me here wouldn't get me there, and I'd probably end up like this guy during the training.

The same applies to growing and scaling a business. We are about to acquire our 3rd business two weeks from now, and all were profitable, successful, and growing before we ever got involved. That said, there's sometimes a sense that we just need to do more of the same to keep profitably growing. I mean on the surface, it makes sense. If I've done something one way, and gotten good results, let's just keep going right?

I've tried to explain that if each business grows another 2 or 3x, and we are rolling everything into a platform company, things are necessarily going to have to look, feel, and operate differently than they do today. This is a hard message to convey and requires repeating and sharing from multiple angles. Below are just of few of those areas we see in our businesses, perhaps you can see parallels in yours as well.

Key Performance Indicators (KPIs) - Neither of the first 2 businesses we acquired used any sort of KPIs. In their defense, they didn't really need to, as the owners and key management had their fingers on the pulse of most everything going on in the business. Through this level of involvement, they could either identify issues on a job-by-job basis, or use their gut feel and intuition (based on many years of experience) to tell when something was off the mark.

To operate at scale though, we need KPIs to allow us to set a target, track progress, and quickly see through a metric if we're on or off track. A simple example is a service manager reviewing every single startup after it's completed, whether that be onsite in-person, or virtually through information captured in our software system. This might be feasible at 10 startups a week, but near impossible at 50 or 100 a week. A corresponding KPI could target 80% of startups completed in 2 hours or less. If we fall below the 80%, we dive into the instances where we exceed 2 hours and identify the reasons why and how to resolve. That's far less time consuming than reviewing every single startup in detail, but requires establishing the KPI, how to access the data, a reporting cadence, who's going to take action on it, etc.

Shared Services - Another example is any sort of reliance on shared services. For those who aren't familiar, in this context shared services is the idea of a group of people or resources that are shared across multiple companies. Examples might be Human Resources (HR), Accounting, Information Technology (IT), Marketing, Fleet, Safety, etc. In a small business, you can't afford to have a specialist in every one of these areas...the overhead would be too high. What happens instead is that over time, folks on your team with other primary jobs, absorb aspects of each of these into what they do.

In order to scale, we need folks in our portfolio companies to feel comfortable turning over the reins on some of these tasks to someone in shared services, so they can focus on what they do best and drive the business forward. Not to mention the shared services team should be experts in their given function, and you likely aren't. A recent example is we hired an HR Manager and she is taking over many aspects of recruiting. These include posting/marketing the jobs, reviewing resumes, phone screening candidates, setting up interviews with the hiring manager, preparing offer letters, and pre-onboarding tasks like background checks/drug screening. This is going well but when you've done it yourself for a long time, you can see how trusting someone else to manage it can be difficult. Even more challenging is taking that extra time you should now have due to relying on shared services, and redirecting it towards something productive like customer satisfaction, employee development, or driving sales.

Organizational Structure and Management Empowerment - This is a tough one because bureaucracy gets a bad rep, rightly so, in big corporations and even the government. You'll hear often there are too many Chiefs, not enough Indians. That being said, having a clearly defined organizational structure with clear roles/responsibilities, and managers empowered to make decisions, does serve an important purpose in a large and growing organization.

What we've seen is that most important decisions (and even some non-important ones) bubble up to the owner. Once again, this works fine up to a certain size, but then starts to break down. There are designated "managers", but often their decision-making authority and responsibilities are poorly defined.

Another dynamic I've noticed is lack of clarity on who direct reports to who. One argument is..."Who cares? It shouldn't matter who works for who, we're all part of the same team working towards the same goal." While that argument makes sense on the surface, it becomes unsustainable at a certain size. A direct manager should be responsible for hiring, firing, providing coaching and direction, defining KPIs for those on their team, among other responsibilities. To have true accountability, everyone should be clear on what their responsibilities are, and who their manager is. This is something we're working on at Southeastern Home Services.

Importance Culture and Defined Values - There are a variety of other aspects I could write about. Processes, meetings, and communication cadences are all topics that fall under the "what got you here won't get you there" umbrella. But I'm going to close with some thoughts on a topic that may feel fluffy, but it so critical to a growing business.

I just read the book A CEO Only Does Three Things: Finding Your Focus in the C-Suite. One of the three things it says a CEO does is sets the culture. Part of culture is having a clearly defined set of values, and having a team that not only believes in those values, but acts them out every day. Culture can feel somewhat soft. Unlike KPIs, processes, and financial performance, it's hard to pin down and quantify. Despite that, I think it's perhaps the most critical thing to get right in a growing company.

The reason is because the larger your organization gets, the less involved you'll personally be in everything that's happening. You need to develop trust that even if the members of your team don't handle a situation exactly like you would have, they are looking through it from a similar lens, anchored in similar values and priorities. In order to do that you need to be intentional about setting the culture of your organization.

There are many aspects of building the right culture, and that could probably be an article of its own. It starts with leading by example. It also requires defining your team's core values and sharing those broadly and repeatedly. You then have to hold your team accountable to acting in correspondence with those values. The values feed into your interview process and who you hire. I saved culture & values for last, but it's probably the most important item on this list. When you start to get it right, everything picks up momentum, like a snowball, and you can be confident your team is rowing together in the right direction, whether you can see it all happening firsthand or not.

I could keep going but those are a few examples from my recent experiences where we'll have to do some things differently in order to achieve our future goals. I'd love to hear from any readers if you have other examples within your business.

Here are some of the favorite things I've stumbled across the past several weeks:

·        Article - The Broker Who Saved America by Josh Brown – This was an entertaining read on the 4th of July. It’s fascinating to think of all the people behind the scenes who help make remarkable things happen

·        Movie - Top Gun: Maverick – I had high expectations going to see this movie after seeing the phenomenal reviews and everyone I heard from saying it was great. Well it didn’t disappoint. Maverick seemed to have something for everyone, highly recommend

·        Twitter Thread - Lessons From 5 Weeks Away by Peter Lohmann – Peter is a business owner I had the pleasure of meeting in Columbus, OH. He totally unplugged from his business for 5 weeks and I thought his reflections were super insightful, whether you choose to unplug for an extended period of time or not

·        Short Video - Kara Lawson to Duke Women's Basketball Team – I love this idea of life is going to get harder, “so make yourself a person who handles hard well”

·        Article - Lifestyles by Morgan Housel – Entertaining stories with an important message about seeing external vs. internal satisfaction

·        Quote – The road to hell is not paved with good intentions. It is paved with lack of intention. Dr. Gabor Maté