Today’s episode is our 3rd in the series with Mike Paton from the Entrepreneurial Operating System. This is the management system that came out of the book Traction by Gino Wickman.
One of or in some cases the most important thing you can have in your company is having the right person in the right seat. (Thank you Jim Collins) If you don’t have the right people there’s a good chance you’ll spend way too much time managing people you shouldn’t have in your company in the first place.
One of my favorite things about EOS is the way the recommend you recruit, manage and supervise people in your company. In today’s episode Paton will take us through the steps you need to follow to have great people in your company.
Here are some things you’ll learn:
- Why people are so important in the success of your company.
- Where learning the terminology that Jim Collins recommends makes sense in all companies, no matter what size they are.
- How to merge your company’s core values with hiring the right person.
- Learn why all of your management team needs to be on the same page and then how they can take that information all of the way through your company.
- You’ll get a really good definition for what right person/right seat means.
Narrator: Welcome to The Sustainable Business Radio Show podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. In The Sustainable Business, we focus on what it’s going to take for you to take your successful business and make it economically and personally successful.
Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning and thinking about what it takes to make a successful business sustainable.
Josh: Hey, this is Josh Patrick and you’re at The Sustainable Business podcast. Thanks a lot for joining us today.
Today’s guest is Mike Paton and he’s here for the third week in a row, talking about the entrepreneurial operating system which is a system developed by Gino Wickman and it comes from the book Traction. I can tell you that I’ve been incredibly attracted to this system. And the reason I’m attracted to it is because it’s simple and it works.
Paton has spent his lifetime learning from entrepreneurs. He’s an entrepreneur himself. Presently, he is the CEO of the EOS system. He and Gino have written a book together which he’ll talk about a little bit later on.
Today, we’re going to be talking about the people component of EOS. I can tell you that without having the right person in the right seat, which is a Jim Collins statement, it’s going to be almost impossible for you to develop a great business. So, instead of me talking about this, why don’t we bring Paton in and let him talk about it himself.
Hey, Paton, how are you today? I’m glad to have you with us.
Paton: Glad to be with you, Josh. Thanks.
Josh: This is the third of our series that we’re doing with you. The reason were doing this is because there is so much rich material in the EOS system. So, just quickly, can we just have a review of what EOS is and then we’re going to get into today’s topic which is the people component?
Paton: You bet. Let’s just start by saying EOS is a simple set of practical tools that help entrepreneurs get more or what they want from their businesses. It’s a way of operating an entrepreneurial company.
Josh: Cool. Let’s talk about people because—I don’t know about you but many of my biggest problems in my business have been around having the right person in the company doing the right things. And you actually have good terminology around that. So, what is your terminology around people?
Paton: Well, when we’re talking about helping a leadership team strengthen the people component of their business, we actually credit Jim Collins with these terms. We talk about right people in the right seats. You have to have both. And right people are people who fit your company’s culture, who consistently exhibit the organization’s core values. That is an idea completely separate from right seats which is somebody who’s really good at their job consistently and independently effective in the role they play on your organization. And so, if you have every person in the organization who’s the right person, consistently exhibiting your core values and everybody who’s in the right seat, independently capable as they execute in their job, you are 100% strong in the people component.
Josh: My bet is that the traits for right people would be the same for every single person in your company.
Paton: Yes, you cannot have departmental or people-dependent right people but I would like to share a couple of insights with your leaders here. So, if you don’t mind, I’m just going to teach what we walk our clients through to help them determine what the core values are for their organization. Does that make sense?
Josh: I would love to have you do that because frankly it’s one of those things I preach from on high.
Paton: Beautiful. So, what we do—and core values, for those of your listeners who are unfamiliar with this concept, I’m pretty sure it’ll be next to none these days, they’re just a simple set of enduring, guiding, characteristics that define the company’s culture. In an EOS company, we believe three to seven core values is right.
And what we do with the leadership team is we get the leadership team in a room and we first ask them to identify three superstars in their business. Three people that if you could clone those folks, you’d conquer the world. And once we get all those names up on the board, five–person leadership team who are likely to have somewhere between eight and eleven names on the list. Once we get their names up there, we ask the leadership team to write down the characteristics or attributes of those people that made them put the person’s name on the list. What is it about these folks that you love so much that you want to surround yourselves with? And we might end up with somewhere between 50 and 60 potential core values on the list. And through a process we use a lot in the EOS called “Keep, kill, combine”, we get the leadership team to agree that these three to seven characteristics are really the common thread, the thing that all of us agree, makes somebody a perfect fit for our unique culture. And those are our core values and they become standards by which we evaluate everyone in the organization and with which we all have to feel comfortable holding people accountable.
Josh: What about the owner’s individual core values, do they have a role in figuring out what the company core values are?
Paton: Yeah, they’re almost always in the room for this exercise and they have significant influence over the team’s decisions here. In many cases, whether the core values have been clearly articulated or not, it’s very unusual in an entrepreneurial company, for somebody whose core values don’t at least partially match the owner’s preferences to still be around to participate in this session. So, generally, we’re in a room full of people who share a lot of these characteristics and attributes. And when that’s not the case, we smoke it out immediately when we’re coming up with the core values because we can’t assign a bunch of core values to our organization if we’re not willing to be held accountable to those standards ourselves.
Josh: So, am I correct in assuming that the owner or owners have veto power over these core values that start popping out?
Paton: I think veto power is too strong a word, Josh, but a lot of influence. I’ve done close to 1000 sessions over the last eight and half years as an EOS implementer with 100 leadership teams and I can’t ever remember an owner having to veto a core value or stomp his/her feet and make a big stink. Usually, it’s collaborative and there’s comfortable alignment around the table.
Every once in awhile, there are some outbursts. I once had a visionary founder of an organization say, “What do you mean, we can’t have core values that are aspirational? Does that mean our core values are lazy, entitled and frustrating as hell?” You know, that’s sometimes the way it feels but usually you can dial that back in and get everybody to understand how this process works. And it really is a very logical approach to driving something that most entrepreneurs – whether they’re founders or not, are incredibly emotional about because when people don’t fit your organization, it’s irritating and it’s very, very difficult to do anything about it without the words and the framework for having the tough conversations and making the tough decisions that somebody doesn’t fit your culture and exiting them from the organization. And that’s what our approach to core values is really designed to facilitate.
Josh: You know, you just brought something up which I want to ask you about. I’m not sure if you guys get into this or not but I think it’s an interesting question. I’ve had, more than once, business owners try to convince me that aspirational values are actually core values in their company and I think it’s a really dangerous sort of road to go wandering down, allowing this to happen. Have you ever had that sort of experience?
Paton: Yes. It does come up. We ask our leadership teams to read a great Harvard Business Review article written by Patrick Lencione called Make Your Values Mean Something.
Josh: I love that article.
Paton: And that article, in advance of the core values work we do in the session room, really sets the leadership team to understand what the dangers associated with aspirational core values are. That said, Josh, I’m a facilitator when I’m working with my clients and if the leadership team feels strongly about keeping an aspirational core value, and they’re willing to do the tough work that results from doing that, that’s happened before and it’s worked out okay. It’s just really tough work and the team needs to enter that project with their eyes wide open.
Josh: Let’s make a switch. We’ve talked about right people. Let’s talk about right seats for a while. What does that mean?
Paton: Right seats is – imagine a world in which every time you look around your office, or your factory, or your shop, or whatever it is you’re working in, every person you see is independently doing great work. That’s what right seats is. And so, for us, the first question we need to answer with the leadership team, when we’re talking about right seats is, we need to make sure we properly structure the organization that the way we organize the little human balls of energy in our company is the right structure – the simplest and best structure to get us from where we are today to where we are 6 to 12 months from now. And so, that’s our first step when we’re working with our leadership team is– and this is a joke when I say this, we figuratively fire everybody and we start from scratch saying, “If none of us were available to work in the company tomorrow and we were just the owners or the Board of Directors, how would we organize the human balls of energy to get the most amount of output from the least amount of personnel?” And we build an accountability chart to answer that question.
Josh: So can you go into the accountability chart for a bit because I think this is really important for folks who are looking at how their business is structure and who is doing what?
Paton: You bet. And we call it an accountability chart. A lot of organizations have org charts. I would just refer to an accountability chart as an org chart on steroids. It’s designed to clearly articulate, preferably on one sheet of paper, what everybody’s accountability is in the organization – crystal clear on who reports to whom and what I’m accountable for everyday as the desired outcome.
And when that happens, it eliminates so many of the root cause issues in a fast‑moving entrepreneurial company. If you think about a baseball analogy, there are far fewer incidents where the two in-fielders and the one outfield are crashing into each other because they’re not sure whose fly ball it is. Or vice‑versa, they assume the other person’s going to get it and the ball drops to the turf. That’s what we’re trying to do with the accountability chart.
Josh: One of the things which I’ve always found interesting which is true and you guys talk about this a lot. If you have people issues, you don’t have enough time for anything else.
Paton: Yeah. So, when I’m doing a workshop or a talk for an audience full of entrepreneurs, I ask the audience often to assess their companies from 0 to 100% strong in each of the six key components. And then, at the end, when we’re doing some “roll up our sleeves” work, I’ll ask the audience which component they want to start with.
I’ve been in the room, Josh, where the average to the people component was 85%, and the average score of the other five components was maybe 45%. And still, everybody wants to start with the people component because that’s where we’re all frustrated. And so, even if you got one right person or one right seat issue in your company, that’s what’s keeping you up at night, so that is completely normal if that’s the way your listeners feel.
Josh: So, if you really roll this thing out in your company and you do it properly, I’m wondering if you stay away from this syndrome which happened with me all the time when I had 90 people in my food service company. I had one or two people in our company that were just a real pain in the neck and it might take me three months, six months to get around to actually, effectively deal with them which meant having them go away. In the meantime, nobody has said a word to me.
Josh: And when I finally pulled the trigger and asked them to leave, everybody comes up and says, “What took you so long?”
Josh: Does this system help with that issue?
Paton: Absolutely. Actually, after we’ve developed the core values and we built the accountability chart, we put the core values and a term called GWC which is “gets it, wants it, and capacity to do it” which is an acronym that really means “somebody’s in the right seat.” They can independently and consistently execute well in the role. We put those criteria on a tool we call the people analyzer and we ask the leadership team, and the mid-level managers, and the supervisors to evaluate one another and their direct reports on a regular basis, and to engage in two-way dialogue with all of their direct reports on a quarterly basis about whether or not they are consistently exhibiting the core values, and whether or not they’re consistently GWC-ing the five roles in their seat on the accountability chart.
What we’re trying to do a very specifically there is take that thing you’re laying in wake at bed at night, trying to figure out what to do with – all by yourself, nobody to talk to about it. And we’re trying to bring that into the open air and give every leader and manager in your company a framework for having those awkward, difficult conversations regularly, healthfully and with a focus on the greater good of the organization. And 80% of the time, Josh, when you have a conversation with a direct report early and often about not fitting the culture and not being good independently at the job, they’re able to self-correct. If you wait for nine months, they’re clueless. They’ve galvanized their behaviors and you’re so frustrated by them that there’s very little chance that person is going to be able to self-correct and get themselves above the bar. And so, that’s really the nuts and bolts of our approach to managing people, it’s right there.
Josh: So, I’m going to guess that using the people analyzer allows you to get rid of the hated performance appraisals.
Paton: Well, most of my clients are doing an annual performance appraisal and some semi-annual that are written but they’re using the people analyzer framework as the underpinnings of that appraisal. There are really three things that an EOS company expects from all of its employees and that’s what’s appraised on a regular basis. The first thing is you’ve got to consistently exhibit our core values or fit our culture. The second thing is you’ve got to be consistently good at your job or GWC your seat. And the third thing is you’ve got to complete one or more rocks every quarter that move the company or your team or yourself forward in some material way. What we ask is that our clients, using whatever framework they feel comfortable with, have four conversation a year – about every 90 days with their direct reports so that whatever written appraisal they do, it doesn’t come as a surprise to the employee and that you’re working together with them to get what you want out of one another.
Josh: Then you’re being pro-spective instead of retrospective—
Josh: Which is also a good thing.
There’s another thing which I want to just talk about shortly which is the “wants it.” I’m sure this has happened to you. It’s happened to me more often than not where people will give me lip service. They tell me, “I really want to do this. I really want to do this. I really want to do this.” Then I watch what they actually do and they don’t do anything towards it. So, would it be fair for us to say that the “wants it” component of GWC, they have to actually exhibit the behavior and not just talk about it?
Paton: Yes. And I’m going to broaden what you’re suggesting, in a minute, but I’ll address you with some specific thing. When a leader or a manager in an entrepreneurial company running on EOS sits down with his/her direct reports to have a positive or constructive feedback conversation, we ask them to bring three data points particularly around every negative piece of feedback or constructive piece of feedback. So my much challenge to you, in that situation, would be to – when you say “It doesn’t feel like you want, to this employee, just give him three things you see them do that makes you come to that conclusion. You’re allowed to feel that way. You’re allowed to point to three things they do that make you feel that way. Even when the employee thinks you’re drawing an inappropriate conclusion to the extent you can clarify for them what kinds of behaviors they should stop exhibiting or what kind of behaviors they could start exhibiting to change your perception, you’re working together to solve the issue. If you just say “It doesn’t feel like you want it” and you walk away all pissed off, that’s not helpful, constructive feedback. And so, that’s the way we coach our people to give feedback around the core values and G, and W, and C – three data points to really drive home the point. That’s the way to get there.
Josh: And you also recommend people do that when they’re thinking about describing the uniqueness around their business as well, don’t you?
Paton: Yes. Moving into the vision component, when you’re describing your organization as different and better than the competition, we coach our people to come up with three unique, sort of three differentiators that together make you better than anyone you compete against.
Josh: I’ve got to tell you, I’ve been working with people for a zillion years and using your people analyzer and right person, right seat when you’re starting to look for people, also is a very powerful way to hire the right person instead of the wrong person by your gut feeling which is a horrible way to hire somebody.
Paton: Yeah. I appreciate you saying that. And that’s where that “structure first, people second” thing’s got to come in. Really figure out what your organization needs first, then find the best candidate – the one who fits your culture, absolutely non‑negotiable, and is going to be real good at the specific job you need done. Hire that person. A lot of entrepreneurs are so busy that they don’t take the time to follow those steps and they hire the most convenient person rather than the right person in the right seat for a position that’s critical in the business.
Well, Paton, we’re out of time again. I would love to have you tell folks how they can get more information and maybe even find an EOS coach if they want one.
Paton: There are tons of resources available out there for your listeners that want to learn more. And the homebase for all of that stuff – the books, the videos, the tools that you can download for no charge are all at eosworldwide.com. And you’ll also be able to find a professional EOS implementor like Gino, like me, like our 128 colleagues around world that might be able to help you and your leadership team get what you want from your businesses.
Josh: Thanks so much for your time. I’ll tell you, this is our third episode that we’ve done together. If you guys haven’t listened to the first two, go back and do so. You’re going to be leaving some real gems on the table if you don’t.
So, Paton, thanks so much and I appreciate your time.
Paton: My pleasure. Thank you very much, Josh.
Narrator: You’ve been listening to The Sustainable Business podcast where we ask the question, “What would it take for your business to still be around 100 years from now?” If you like what you’ve heard and want more information, please contact Josh Patrick at 802‑846‑1264 ext 2, or visit us on our website at www.askjoshpatrick.com, or you can send Josh an e-mail at firstname.lastname@example.org.
Thanks for listening. We hope to see you at The Sustainable Business in the near future.