Wednesday, May 24, 2006

Managing Growth

Today, I had the good fortune of sitting in on a lecture by Verne Harnish on how to increase the value of fast-growth companies. Verne is the author of Mastering the Rockefeller Habits and CEO of Gazelles Inc. My host, a major Internet company, brought Verne in to provide senior and mid-level management a framework and set of best practices for managing growth and creating value. The subject matter is dear to my heart and a critical area of study for any start-up manager.

Verne's book is based on the management style of John D Rockefeller. Rockefeller's management style centered on three key areas: priorities (define the 1-5 most important organizational objectives), data (identify and manage to the key metrics and leading indicators), and rhythm (run a well-organized set of daily, weekly, monthly, and quarterly meetings that keep everyone aligned and accountable). The core premise is that success is the sum total of all decisions being made in an organization. Leaders/managers influence decisions, and hence success, and need a framework regarding how best to do so.

Verne laid out his 4-3-2-1 framework for how great managers can optimize decisions.

Managers have four decision levers:
  • people (happiness, turnover, applicants/job opening, quality applications/total applicants)
  • strategy (revenue/growth)
  • execution (profit/time)
  • cash
The four key decision areas are complemented by three key disciplines:
  • priorities
  • metrics/data
  • meeting rhythm
The three disciplines relate to two key drivers
  • reputation
  • productivity
Finally, each manager needs a life coach who will push, challenge, and hold them accountable as you grow as a leader. The key point is that if Tiger Woods, Roger Federer, and Michael Dell have life coaches, why do you think you don't need one? Good point.

Often start-ups feel that data-driven management is an oxymoron, that meetings are a waste of time, and that communication by email is the most effective way to get things done in a crazy, fast-paced world.

Verne's rebuttal to that world-view is that relentless repetition and routine frees the company to shine and grow confident that energy and effort are aligned with the end game. He advocates meeting and managing to a few key priorities, daily "talk time" where the team can spend 10-15 minutes reviewing pressing issues, daily data and indicators, and bottlenecks that require resolution creates incredible energy, collaboration, and productivity. He recounted multiple examples of companies that make a daily meeting an essential rhythm of corporate life and benefit in doing so.

As an investor and ex-CEO of a start-up, I relate very well to Verne's approach. Companies need to select a framework and language of dialogue that centers the team on common goals, common metrics, and creates a forum for cross-function collaboration, problem resolution, and productivity. While this is common sense, too often common sense is lost to inertia and productivity grinds to a halt as misalignment and misdirection sap energy, cash, and momentum. Whether Verne's framework or another, picking a methodology to detail priorities, metrics, and company alignment and communication can make implicitly intelligent ideas explicit mechanisms of management and key tenents of company culture.

With respect to growth, he argued that the faster the rhythm (group meetings and metric reviews), the faster you will grow. Seems counter-intuitive that meeting time accelerates productivity - but if a short, stand-up meeting eliminates bottlenecks, realigns priorities and strategy, and enhances cross-team synergy then it is somewhat obvious productivity will be enhanced. This is very similar to the role of the Scrum master in agile development.

His site provides templates for strategic plans, daily and weekly meetings, and other useful materail.

Finally, he left the group with two sets of looming questions.

The first set is what is the business question we need to answer? What is the key problem/question whose answer will free us to grow at 2x the competition, 2x the cashflow, 3-5x the profitability, and 10x the market cap? He also suggests picking a key personal question that will similarly accelerate personal growth and development.

The second question is to determine what to stop doing. What wastes time, is inefficient, gets in the way of true productivity - answer the question and get rid of it.

Thank you to my host and to Verne for a great day and lots of food for thought.

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