I’m hoping that you took the time to figure out your core values and then put clarifying statements around all of them. That was your assignment from my last post and the first in this series. After that, I hope you also took some time to develop a short mission for your company that can be answered with a yes or a no.
This week we’re going to deal with the topic of operational irrelevance or what I call passive ownership. This is where you get out of the day-to-day operations of your business.
I think is the most critical step of creating a sustainable business. If you’re involved in the day-to-day, there is no way your business can become sustainable. It’s also what I think is the hardest step.
Let’s start with a story.
We’re going back to 1976 when I bought a tiny vending branch from my father that was two hours away from our primary operation. There were only a part-time person and me. This was easy for me to manage. I just had to tell her what to do, and that was the end of the delegation.
During my first year in Plattsburgh, I had a chance to buy our largest competitor and overnight my operation went from 1.5 people to 25. That’s when the trouble started. I had no idea how to delegate, and in fact, I didn’t delegate, I just yelled at people to do what I wanted.
As you can imagine, this didn’t work out very well. All decisions ran through me, and although we got things done, it always took a lot of effort.
Then two years later, we had a chance to be a vending operation in Burlington, VT. Things went from terrible to impossible. There was no way I could tell people what to do when I couldn’t see them.
I had only one choice, and I didn’t even know what that option was. I needed to become operationally irrelevant and manage through others. This was the hardest lesson I ever learned in business, and the mistakes I made along the way came close to putting me out of business.
The things I learned.
My first lesson was that I no longer could just tell people what to do and have them do it. I needed a system that I could use not only to delegate but make sure what was assigned got done.
Early in my career, I learned the mantra of expect, inspect, accept from a critical early mentor. I learned that setting an expectation was one thing and not a very important one. The more critical and today I would say crucial step was to inspect to make sure it got done.
At first, this was done with me actually seeing it with my own eyes. As our company grew, that eventually stopped working. I needed to develop metrics where I could look at our results without me inspecting in person.
The thing I kept missing and it wasn’t metrics
We’ll get back to metrics a little later. But it’s this step that is the key to becoming operationally irrelevant……
This step has two parts. You need to build a culture of mistakes which is step one. Step two is you need to learn how to trust those you assign tasks, responsibilities, and outcomes to.
Now, I know what you’re thinking. You’re assuming that mistakes are not OK and you don’t want them part of your business. The sad thing about that is whether you like it or not, errors will be part of your life. You have a choice…..you can either accept mistakes and learn from them or pretend they don’t exist and have them destroy your company.
An exercise you need to do.
Here’s an exercise for you. Write down the last five mistakes you made. Next to each error write down whether these mistakes were severe enough to put you out of business. My bet is your answer is no. Next, I want you to write down what you learned by making a mistake. Finally, I want you to write down how you’re going to systematize your solution, so the mistake has a low probability of happening again.
This is how I want you to handle miscues. Most people don’t make mistakes on purpose. They usually happen because there isn’t a system in place to make sure the mistake doesn’t happen. That’s what great companies like Disney do. They look at all the mistakes that are made, develop a system to keep them from happening again and then train to the system. It’s why you get an experience at Disney that is always outstanding and predictable.
Let’s get back to trust.
In the book, The Trusted Advisor there is a formula I use every day. It’s called the trust formula, and it looks like this:
Reliability + Intimacy + Competence/Self-Interest = how much trust there is in a relationship.
If you’re not hiring people who are competent, you won’t trust them. If you don’t care about the people you hire as people, they won’t believe in you. If the people in your company aren’t reliable, no one will trust them. And, if everything is all about you, you’ll have no trust.
Paying attention to this formula will help you learn how to delegate effectively. It’s what I use whenever I think trust is falling between myself and others and the answer always lays in this easy to remember and use formula.
Let’s get back to metrics
When you make yourself operationally irrelevant, you are forced to work through others. As your company grows past twenty-five employees, you have to start learning how to manage, managers and not just people who work directly for you.
This is where having metrics that tell you what is happening and is going to happen in the company becomes essential. You need to learn to go past your P&L and develop weekly, monthly and quarterly numbers that tell you not only what is happening in your company, but what is likely to occur in the future.
Your next challenge is to put together a dashboard. Your dashboard should not just be numbers you get from your financial statements. Your financial statements only tell you what has happened in the past. You want to know what’s happening now and is likely to occur in the future. Your financial statements show the results of your becoming operationally irrelevant, it doesn’t help you manage and lead to where things are going.
If you don’t have the skill to figure out what these numbers are, you might want to hire some part-time outside help like a rent a CFO to help you figure out what you need to measure.
To become operationally irrelevant and become a passive owner here are the steps you need to take:
1. You need to learn to tolerate and learn from mistakes.
2. You need to take the learning from the mistakes and make corrections to your systems.
3. Learning how to trust and using the trust formula becomes a must if you want to get out of the way and let people do their job.
4. You might find the numbers in your company that tells you what’s happening today and will likely tell you what’s going to happen tomorrow.
5. If your dashboard shows you things are deteriorating, you must have your team, not you take actions to reverse the problems you’re seeing.
6. You must inspect to make sure that the changes that you’ve asked for are happening.
7. Finally, make sure you accept the changes and improvement and let the people who work with you know how much you appreciate their hard work.
If you do these seven things, you’ll have moved a long way towards creating a business where you become a passive owner and get to be operationally irrelevant in the day-to-day operations of your business. It’s also the most critical step to take when creating an economically and personally sustainable business.
When you become operationally irrelevant, you’ll find that you have more fun in your business and you start making more money. You have also learned the skills that will allow you to scale your business and grow past twenty-five employees.
Why don’t you let me know what you think about becoming operationally irrelevant in the comments below?