Intuition and Loyalty, Start Stop Keep, 4Q Conversations, Bad Acronyms & Power of LER
9th August 2020 Evolution Partners Newsletter
“You don’t become successful and then become disciplined, you become disciplined and then you become successful” – Greg McKeown
Hope you’re Thriving!
A busy, enjoyable week for me with a 2-day strategic planning workshop as well as a lunch with former EO presidents. In my local EO chapter about ten years ago I helped establish an annual lunch where the new incoming president presents the state of the nation for the chapter as well as their plans for the coming year to the past presidents. It’s a wonderful ritual that all attendees gain value from and provides the president with a sense of support (‘call me anytime – I’ve been through all this’) as well as custodianship, providing a sense of responsibility to the incoming president for the effort that has come before them.
It’s hard to grow leaders in any situation, and we need to surround growing leaders with a system to cultivate them, to help them thrive and confidently grow into their position. And that’s the intent of the EO Presidents lunch, to help embed the culture and values in each new president. It reminds me of a chat I had with a US-based entrepreneur several years ago whose company was growing exceptionally fast, opening a new office in a new country each quarter, and that CEO said once you get the strategy right, and growth is going well, bringing on the right people becomes the real issue. This CEO knew that the biggest barrier to growth they faced was getting the right people who would align with their values and be productive in their roles – to be effective – in order to maintain their growth successfully.
And I’ve seen that through a few different lenses this week.
Firstly where a recently hired senior executive didn’t align with the Core Values and left the business because their beliefs were so very different than the CEO and the culture of the business’ beliefs. Only once the executive was working in the rhythm of the business did these issues surface – because the CEO didn’t spend enough time hiring to the values and as well hire someone who could meet their expectations. All of which could have been identified with a more robust hiring process. To be fair the onboarding process they used shone a light on the individual’s issues, and that the person would not be able to fit the culture and the leader’s expectations, but there’s no substitute for a robust hiring and onboarding process.
The second was a fast-growing company who, like the US-based CEO above has a very strong culture and realises how hard it will be to hire enough leaders in key positions. The challenge here is growing the current leaders fast enough to be able to delegate their issues and to grow (cultivate) leaders from within the ranks below them who can assume more responsibility.
Broadly as leaders, we need to take more time hiring, and less time firing.
If both of the two examples above apply to the first part of that (hiring), let’s think about the second, firing.
What is your intuition telling you about a situation?
I’m a big fan of the concept that most decisions are made by the subconscious, and the conscious is simply a reactive beast that feeds information to the subconscious. For example, need to make a big decision? Sleep on it.
Imagine then that your subconscious manifests itself as intuition to protect you during the day to day, but there is very little connection between conscious and intuition.
Next, think about the yin/yang symbol, two parts of the whole.
And as you look at the image below, and consider the importance and competitive nature of these two elements in the context of firing, consider that they are both important parts of your being, but you need to stop letting your loyalty trap you into situations that your intuition is trying to pull you out of.
Ask what is loyalty telling me? What is intuition telling me?
Let your conscious, the reactive beast, add the appropriate weight to each of these elements.
What is the 1% of the 1% of the 1%?
It’s the top 1% of the S&P 500.
It’s easy to look at the total market cap of the S&P 500 and note that on December 31, 2019, it was valued at $26.72T (Trillion), and around the same at $27.05T on July 31, 2020 (having dropped by around 22% during March and recovered), but how have the valuations within that market changed?
If you ever wondered how 2020 has impacted the top 1% of the top 1% the graph below is pretty insightful. It shows that since the beginning of the year the 5 largest stocks on the S&P 500 have grown in market cap around the same amount as the other 495 stocks have decreased in market cap.
It’s easy to look at something and not know the real story. It’s OK, in fact much better, to say you don’t know, and retain an open mind in most circumstances.
Think about two numbers.
1. How fast do you ride a bike?
2. How fast do you think the fastest person has ridden a bike?
Now perhaps you thought that you ride a bike at 30km/h (19mph), and perhaps you thought that the fastest a person has ridden a bike was 100 km/h (62mph).
It turns out the average cycling speed is 15.5km/h (9.6mph) and the fastest a person has ridden a pushbike is 270km/h (168mph) so estimating what we think, and betting on that could be out by an order of magnitude. Our estimate, especially about our competitors, or the market, or what customers think could be very different, and so within the strategic planning process, even for smaller teams, we need processes that will build the leadership teams first-hand knowledge and understanding of the things that could impact the business.
This week I came across an interesting image which was from a Reddit thread, but I don’t know the origin. It provides a unique insight into the perspective on different elements for different classes that I thought you might enjoy.
Finally this week a topic I’m passionate about, acronyms.
Bad acronyms ruin the potential for effective communication. They are the tool of a lazy mind, and work against the stated objective – to communicate clearly and effectively.
From my book Made to Thrive “Our brains didn’t evolve over tens of thousands of years to connect with spreadsheets or graphs, or even data retention in the form of acronyms. It was how a situation or person made you feel. It was a story about an event that happened.
That’s why I’m very reluctant to have teams I work with build Core Values that are an acronym spelling out something in the hope team members will remember it, like R.E.C.I.P.E or D.R.I.V.E. The stories of genuine, lived behaviours within an organisation matter the most and will help people understand and remember the values that matter.“
And Elon Musk feels the same, as he outlined in his SpaceX email entitled “Acronyms Seriously Suck”
“There is a creeping tendency to use made-up acronyms at SpaceX. Excessive use of made-up acronyms is a significant impediment to communication and keeping communication good as we grow is incredibly important. Individually, a few acronyms here and there may not seem so bad, but if a thousand people are making these up, over time the result will be a huge glossary that we have to issue to new employees. No one can actually remember all these acronyms and people don’t want to seem dumb in a meeting, so they just sit there in ignorance. This is particularly tough on new employees.
That needs to stop immediately or I will take drastic action—I have given enough warnings over the years. Unless an acronym is approved by me, it should not enter the SpaceX glossary. If there is an existing acronym that cannot reasonably be justified, it should be eliminated, as I have requested in the past.”
This interesting article which discusses the Elon Musk interview above outlines some valuable tips for using acronyms, including this one I love “The key test for an acronym is to ask whether it helps or hurts communication.”
This week on The Growth Whisperers podcast
On episode 17 of The Growth Whisperers, Kevin Lawrence and I talk about the following.
Emirates and Barbados
Kevin and Brad talk about how Emirates and the country Barbados are de-risking people from spending money during COVID-19 and how this concept might apply to your business.
How can you de-risk the transaction so the company feels the burden or the onus to deliver, versus the customer feeling they are taking the risk – and use that to grow sales. Brad and Kevin provide examples of companies who are successfully using this concept.
Listen to The Growth Whisperers
From the vault
The Power of LER
In my previous post 4 reasons this is the most important KPI you are not measuring I explained how Labor Efficiency Ratio (LER) is the most important number to small and medium businesses for the following reasons;
- Different employees have different productivity rates
- Labour is the most expensive component of your Profit & Loss
- LER directly correlates to Net Profit
- LER is a leading indicator
As a quick overview, LER is calculated by dividing Gross Profit (Revenue minus Cost of Goods Sold) by labour cost. For example, if we had a Gross Profit of $4M and a wage cost of $1M we would have an LER of $4.00. This means that for every $1 we pay our staff the business receives a $4 return on that investment.
Read the full article here
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