Circle vs Spiral, Paying on time, Edelman Trust Barometer, 9 ways Teams Fail as they Scale & 7 Cashflow Leavers
14th March 2021 Evolution Partners Newsletter
“A ship is safe in a harbor, but that is not what ships are built for.” – John Shedd
Hope you’re Thriving!
I do like autumn.
In summer it gets so very hot here in Perth and at the moment, the beginning of autumn it’s like the arm wrestle between summer and winter begins again in earnest, following months of heat where summer has been winning, the first cool days begin. It’s not that I particularly like any one season the most, I most definitely wouldn’t want to live where there is only one season, it’s that I like the way after 3 months there is a change to a new season. 3 months feels about right.
The Circle versus The Spiral
Over the millions of years that humans have evolved, every year there has been a change of seasons every 90 days due to the angle of the Earth’s axis, the distance to the Sun and the time it takes the Earth to rotate around the Sun. Our bodies are deeply encoded to anticipate, sense and respond to change every 3 months as the seasons change. When scientists have studied the impact of isolation on people working in Antarctica after 3 months they noted significant declines in coping strategies such as active problem solving, palliative reactions, avoidance, and comforting cognitions as if they enter a state of psychological hibernation as a stress-coping mechanism.
And in the work I do, facilitating quarterly strategic planning meetings, I’ve heard many people say over the years that toward the end of the quarter they felt like they needed to get back offsite and reset.
Some people might look at strategic planning and think why do you go offsite and spend a day or two talking about the business in a meeting? You’ve been doing it for years, going around and around doing the same thing.
They look at the process like this.
Yet if you look at the same circles with a different perspective you can see what is really happening there.
Every quarter, every year we are spiralling upwards.
It’s the same situation with a different perspective.
Every time we meet, we are better than the last time, we are building on all the foundations previously laid. We are learning new and deeper insights into the things we have worked on before. The business plan we build through each day is better than the last one, and the one before that. And the businesses profit and value are doing exactly the same thing. Spiralling upward.
That’s why I’m not a teacher. I’m not a trainer.
That’s why I don’t do one-off workshops or even one-off meetings. I’m only interested in building these spirals for every team I work with because that creates real, enduring success.
And every meeting I have, be it a full day or an hour is primarily for the purpose of building these spirals.
The Amazing Power of Paying People on Time
My payment terms for clients are ten days.
I send a client an invoice on the first of the month, and they pay it on or before the tenth of the same month.
This is written into my quote and our contract and we agree that I will deliver on my end of the agreement, and they will deliver on their end of the agreement.
This is what a contract is.
Yet some people believe that because they are the client and because they are paying, that their part of our contract doesn’t apply to them.
I have one client who pays in 8 days average, and another who pays in 52 days average.
Every month one of these two breaches the terms of our agreement. They might not know it, but I certainly know it.
They have two obligations on their side of the contract. Firstly, pay an amount and secondly by the tenth of the month, and I have two thousand things to do to scale the spiral mentioned above with their team (well a lot anyway).
I didn’t agree to be paid on a 52-day average because if I did, I would have put it into our agreement. I’m not going to say if I do anything different between the one who meets their obligation, and the one who doesn’t.
Let me be clear though, I am not writing this to complain about my clients. I write this to make a point.
I’m very aware of who pays me on time and who doesn’t. And you probably are from your end also.
And you may treat the people who pay you on time or pay you early, actually delivering what you have both agreed to, differently from those who pay you later.
I remember twenty years ago when I worked in contracting where the payment terms were 30 days after the end of the month, there was one client who would pay exactly on time. Every single month on the first day of the month his bill would be paid.
Then other clients would pay whenever they paid. Some had averages of 45 days some closer to 65 days.
Yet in contracting many of these clients of ours were competitors with one another. So when we were pricing work we would evaluate the people we were going to send the quote to and we would consider three things.
We would consider how difficult the client would be to work with.
We would consider how much we were going to charge the client if we won the job. Our quoted amount.
And finally, we would consider when will we get paid. What are the average payment terms for this client?
So, we would be treating clients differently based on their payment terms. We knew that we wanted only three things from the client, we wanted to be paid the quoted amount, we wanted to be paid by a certain date and finally, we wanted them to be competent in the project management side of the job so that we could be efficient.
The client who paid us every single month at 30 days knew the amazing power of paying people on time. He knew exactly just how much leverage he had over his subcontractors if he always paid them on time. He knew that he would get better pricing at the quote stage which was the single thing that mattered to him the most, by doing the right thing on the things that mattered to us.
And as happened there, actually paying someone on time, often becomes a hidden differentiator. If you treat suppliers like a bank or treat when they get paid with contempt, you’re potentially losing an opportunity that they will help you when you really need help in another area.
Are you paying your suppliers on time? Are you paying your suppliers within the terms that they have stipulated in their contract with you? If you aren’t paying them on time the question is what are they doing differently because you aren’t paying them on time compared to if you were paying them on time? And the second question is what benefit you could gain if you actually consistently paid them on time, as you have agreed to, every single time. Perhaps you think you’re getting free credit by not paying your suppliers on time, but on the other hand, maybe it’s more expensive when multiplied than you think.
Anything Multiplied by Zero will Equal Zero
You can go to a restaurant where the best food is served in the best atmosphere with the most amazing wine but if you go to the bathroom and there’s sewage spilling out everywhere the whole experience was a zero and you will never go back again. Consistency matters and if you have a great project for suppliers to work on and you manage it well, but you don’t pay them the entire experience isn’t acceptable because you’re not meeting their terms and they won’t come back again. It’s ignorant to think that you can get away with something that you don’t care about or that you ignore that matters to another party be it an employee, client or supplier.
When you introduce something into a situation, be it payment terms, or bathrooms or almost anything else, if you’re delivering a zero, when multiplied the entire experience will be a zero. 100 times 100 times 0 equals zero. Even if it’s not a zero and it’s only low, then that will multiply out and probably bring the trust within the relationship down.
Edelman Trust Barometer 2021
One of my favourite annual reports came out a few weeks ago the Edelman Trust Barometer 2021. Each year I find great interest in looking at how trust in different institutions has changed over the previous years. The Edelman Trust Barometer provides great insights into the societal impact on trust through employers, institutions and CEOs as well as Government and other areas of society.
Some of the interesting insights include
- 76% trust their employer (78% in Australia, 72% in USA)
- 53% trust their Government
- 63% trust their employer CEO
- 61% trust information from their employer (more than Government, media, major corporations, advertising or social media)
- 50% of those who are employed are more likely now than a year ago to voice their objections to management or engage in workplace protest (wow!)
- Australia’s composite trust index recorded the largest gain globally (+12 points) of the 28 countries surveyed, driven by the science-based Government and business response to COVID
- Business is the only institution that is seen as both competent and ethical
This week on The Growth Whisperers podcast
This week Brad and Kevin discuss the top 9 ways that people fail when scaling their business, and what you should do to avoid the pitfalls of scaling your business.
How teams fail when Scaling Up their business
Listen to The Growth Whisperers
From the vault
The 7 easy levers to improve cash flow
What’s more important, profit or cash? If you’re a growing business, it’s absolutely cash. This is why Amazon has continued to thrive at near break-even or frequent losses. It’s Amazon’s business model that generates significant cash – more than $ 3 billion in 2013 – that fuels its rapid growth.
You can get by with decent people, decent strategy, and decent execution, but not a day without cash. And cash becomes even more critical as the business scales up since “growth sucks cash.” The key is innovating your business model to internally generate sufficient profit and cash flow so you don’t have to turn to banks (or sharks!) to fuel your growth.
Patrick Lencioni event
In partnership with The Growth Faculty, Evolution Partners is delighted to offer you $100 discount to see Patrick Lencioni in a live virtual event this April: Patrick Lencioni: 4 Pillars of High-Performance Cultures.
New York Times best-selling author of The 5 Dysfunctions of a Team (plus 11 others), Patrick Lencioni is the global pioneer of the organisational health movement.
McKinsey research shows a healthy organisation delivers roughly 3x the returns to stakeholders than less healthy companies. And, companies that institute initiatives to improve health see tangible performance increases in as little as six months.
Named “one of the most in demand speakers in America” by the Wall Street Journal, Patrick Lencioni will deliver a fast-paced, highly practical event teaching business leaders and their teams how to create a healthy organisation and high-performing culture that takes advantage of the talent within their teams.
YOU WILL LEARN:
Practical and highly entertaining, over 2.5 hours you’ll learn:
• The 4 Disciplines Model of organisational health
• The 5 Essential Behaviours required to build a cohesive and high performing team
• The Ideal Team Player framework for identifying, hiring and developing ideal team players
• The 6 Types of Geniuses – Identify your areas of working genius that allow you to thrive at and enjoy work
• PLUS, interactive Q&A with Patrick
You will leave with immediately actionable frameworks and tools that have transformed thousands of businesses globally.
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