Today’s podcast features Mike Paton from the EOS world. He’s the CEO of The Entrepreneur’s Operating System. This is a company that specializes in helping privately held lower middle market companies have everyone in the company get on the same page and moving in the same direction. It’s rare in today’s business climate that this type of congruency in a business happens.
EOS is a system that helps privately held business owners work in a manner that actually gets things done. For the next three weeks Mike will be with us to help us understand how EOS works. In today’s episode we’ll be covering some of the following items:
- What the six areas or components are of a business.
- Why vision is the place to start and why it’s so important.
- What the tools are that an owner would use in the EOS system.
- How simplicity is one of the keys to run a successful business.
- How this system is perfect for companies that do between two and fifty million dollars in sales.
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.
Today, you’re in for a big treat. In fact, you’re going to be in for three big treats because over the next three weeks we’re going to be speaking with Mike Paton who has spent a lifetime learning from entrepreneurs. He is the CEO of the Entrepreneurial Operating System which comes out with the book Traction by Gino Wickman. He is a product of an entrepreneurial household because he was in banking before helping run four small growing companies. Eight years ago, Paton met Gino Wickman and found himself immediately drawn into the simplicity and usefulness of his Entrepreneurial Operating System – and by the way, so am I. He quickly became a passionate advocate of the system and a leader of a vibrant and growing community of professional EOS implementers. So, instead of me talking about Mike, let’s bring him in and we’ll start the conversation.
Hey, Mike, how are you today? Glad to have you on our show.
Mike: Thank you, Josh. I’m great. I hope you’re doing well as well.
Josh: I am, thanks.
So, let’s start off and talk about what the EOS system is and why somebody might care about that.
Mike: EOS stands for entrepreneurial operating system. It’s just a simple way of operating a fast-moving, growth-oriented organization. People might care about it because the vast majority of entrepreneurs and their leadership teams aren’t getting everything they want from their businesses and we feel very strongly that EOS has a set of holistic concepts and practical tools that will help most entrepreneurs get what they want from their businesses.
Josh: There are six pieces to the EOS system and what are they?
Mike: Well, we believe that all businesses have six areas, or we call them key components, where when they’re strong in that component all the pieces tend to fall into place. And when there’s weakness in that component, things become a little more difficult, challenging – organizations and people get stuck et cetera. And those six key components are the vision component, the people component, the data component, the issues component, the process component and the traction component. I know we’re going to go into a little depth in each of those areas over the course of the next 20 minutes or so.
Josh: Yes we are. So, let’s start with vision. Why is vision so important?
Mike: Well, there’s never been an entrepreneurial company on the planet without any vision. In most organizations, there’s too much vision. Once there’s more than one person in a company, we find that even slight differences in people’s views about “Where we’re going? How we plan to get there? What’s most important this quarter? What we have got to save until the next quarter? What our core values are?” – key questions like that. Everybody in the organization needs to be 100% on the same page with “Where we’re going. Who we are at the core. How we plan to get to where we’re going.” And so that’s why the vision component is so important.
Josh: So, somebody is not on the same page with the vision of where company is going, what should the CEO or owner of the company do about that?
Mike: Engage in dialogue is the simple answer. Make sure that every member of your leadership team understands your vision. I’m a visionary entrepreneur myself and I’m guilty, at many points of my career, of believing that since the picture of where we’re going and how I plan to get there is crystal clear in my head – everybody else in my organization must know and must agree. And so, the very simple answer is get everybody in the room who’s a stakeholder, make your vision crystal clear, get your team to align around one vision, working together with that leadership team. And those who can’t align may not be a great fit for your company.
Josh: So would you recommend, if they don’t align, it’s probably best for them to leave the company?
Mike: Yes. In most cases, there’s some turnover on the leadership team of an entrepreneurial company that begins implementing EOS. A little more than 70% of the time, we find one or more significant changes are made but it doesn’t happen immediately and it’s not something to take lightly. You know, the first step is engaging everybody in a healthy dialogue that sometimes is filled with conflict. And by discussing and debating the vision, the core values, the core focus, we can go into more detail about the specific elements of our strategic planning tool. By having those discussions and debates, it’s not unusual at all for the visionary’s path to achieving his/her vision to be influenced by the rest of the leadership team. So often, the team working together does better work in terms of its ability to execute on the vision than just by having somebody pass that vision on down from high.
Josh: That makes a lot of sense. You just talked about something, you mentioned a word which is one of the things I really like about the EOS System and that’s the word tools. Could you talk about how having tools, in a general sense and then maybe more specifically about your system, why tools are so important as part of getting everybody on the same page, and going in the same direction, and doing the same stuff?
Mike: Yes. It’s absolutely central to what a company, running on EOS, needs and gets and that is simply this – the abstract concepts, the managements fads, the silver bullets, the great business thought leadership that’s out there in the world is only as good as the leadership team’s ability to implement and master those concepts. And without a set of simple, practical tools – a roadmap, a hammer, a screwdriver, a wrench – without those tools that help a leader and a leadership team transition from the way they’ve innately learned to run their own organization to the way they can work together with others to run the next generation of that organization is almost impossible. And so, when Gino Wickman, my co-author, my business partner and my mentor, created this system, it was that desire to give simple practical tools to the average entrepreneurs and the average managers and leaders and supervisors out there that really drove his thinking and is central to our work.
Josh: So you just mentioned something again which I think is just crucially important. It’s sort of anti-MBA principle which is simplicity. So what’s your experience with people bringing in tools that are too complicated versus your very simple tools which work really nicely?
Mike: I would say, right out of the gate, there are lots of very complicated systems and tools that work beautifully. It’s important that your listeners understand our target market and our audience for EOS and that is entrepreneurial leaders and their leadership teams. And so, when we’re talking about entrepreneurial companies, we’re talking about companies that have 10 to 250 employees, $2 million to $50 million in revenue. They’re not necessarily funded by venture capital firms or private equity firms. They’re funded out of somebody’s wallet. They’re often started in somebody’s basement or garage. You know, that’s our target market. And for those people, simple and clear and the shortest-distance-between-two-points-is-a-straight-line kind of things tend to work best and be adopted comfortably – not just by the smartest and most well-educated and most experienced people in the organization but in a rapidly growing company you need your whole team to get their arms around what you’re trying to do. And so, we find for that purpose, in that target market, that simple and practical is better.
Josh: Well, that’s great. You’re target market is our listener pool.
Mike: Perfect. That’s great.
Josh: So we’re in the same place then.
Let’s talk about process a bit because, again, this is one of those areas where often get way more complicated than they need to be. You know, one of the things I always tell people, “If you want to have a sustainable business, it has to be systematized.” And as soon as I say that word, people start cringing and going for the corners. How do you get past that?
Mike: The first thing is to make sure that leadership team understands that we’re not necessarily talking about a 500-page SOP manual with every step in every process in the organization documented and etched in stone and compliance systems put in place to catch when people mistakenly excuse themselves from a meeting to go to the restroom. We’re talking about what we call a 20/80 approach which is to say we’d rather document the major steps and the truly core processes of your business – those things that make you uniquely you. The things that get done every day and are vital to creating the kind of customer and employee experiences that make your organization unique and valuable. We focus on those core processes and we document only the major steps in each of those handful of core processes. And when we say 20/80, we say “If you can document the 20% of the major steps in the process and get 80% compliance that takes about 10% of the time that a 500-page SOP manual would take. That’s 100% of the steps and 100% of the processes to get 100% compliance, you just don’t get very much ROI on that extra work because those manuals are too hard for people to understand and to follow. And so, that’s the simple answer to your question. Our approach is this key thing at a high level, making sure the steps that can be systemized, that must be replicated over and over and over again get written down and made as simple as possible. And the nuance and the one-off and the ad hoc experiences – we leave that up to the entrepreneur or the senior leaders in the organization to figure out how to handle those things.
Josh: So, that makes tons of sense to me. And my experience is if I had a 50-page manual, no one’s going to look through the darn thing anyhow so I might as well not have it in the first place.
Mike: You’re exactly right. And, you know, the funny part is it’s impossible to even get your leadership team on the same page with what that 50-page document says because none of them have the time to even look at it and give you that approval that you need to go train all your people to follow it. And so, it just gets stuck somewhere in the process. And so, all of this work happens and nothing changes in the organization. We want to avoid that whenever possible.
Josh: Cool. So let’s move on to data. Again, this is one of those areas where people tend to look at data that is historical and not predictive and I think you guys have a different way of looking at data, don’t you?
Mike: Yes, a company that’s strong in the data component is running the business on facts and figures, on objective information rather than exclusively the subjective feelings, egos and emotions that so often drive decision-making in an entrepreneurial company. And in many entrepreneurial organizations – not all, the leaders and sometimes leadership team are already looking at lots of historical data, so income statements and balance sheets from the prior month or quarter, customer satisfaction surveys for example. And what we try and do in an entrepreneurial organization running on EOS is we try and help the leaders add to that rear-facing view, some leading indicators, some predictors of what the financial results or the satisfaction results might be next month or next quarter and to review that data on a weekly basis rather than monthly or quarterly, to help the leadership team make stronger, faster and better decisions in advance of results occurring that are too late to do anything about.
Josh: That makes tons of sense to me. So, are there any tricks or suggestions you would have to our listeners about what they might want to be doing with their data or what sort of predictive things they might want to look at?
Mike: It’s funny that you ask that because I’ve been around long enough to remember when the data problem for most organizations was there wasn’t any. In the early days, most entrepreneurs were running their business almost exclusively by gut. And today, the first trick I’ll give you is to quit burying yourself in data that doesn’t lead to clearer, better, faster decisions. Less is more. Find a handful of leading indicators that’ll give you at a high level, an absolute pulse on your business week-to-week, and then look at those numbers weekly. When they’re on track, move on. And when they’re off track, then dig in more deeply to the detailed data to find what the root cause might be of that number being off track and react to that rather than swimming in data that doesn’t really create any clear pictures for you.
Josh: Now, I also know that you recommend that you keep this data on a 13-week rolling basis, why would you do that?
Mike: We find that the ability to see patterns and trends in the data leads to more complete and faster decisions. That when you look at just one week of data as a snapshot or you look at too much data over too long a period of time you’re not getting the whole story fast enough. And so, our leadership teams, when they can see 13 weeks of data at a glance, number by number, down their scorecard, they’re able to see whether they’re on track or off track this week, how they’ve been trending the last few weeks, what the quarter’s story is telling them, and they just seem to get to the right answer a little bit faster.
Josh: So I think we have about enough time to go over one more of your areas. And I’d like to delve into issues because we’re going to do a couple more podcasts with you and we’ll be talking about people and your meeting pulse in other episodes. But I think this issues thing is a really important tool and you have some really cool tools around that, don’t you?
Mike: We do. And in fact, you know, one of the points I should make in this call, Josh, is that all six of these key components are interdependent. It’s almost impossible to strengthen, for example, the process component without strengthening the data component. And when you strengthen those two components, you create issues. And so, what your listeners, I hope, are taking away is – please work on strengthening all six of these key components because they work together to make your organization better.
So with that lead in, I’ll just say, for us, issues are problems, challenges, obstacles or roadblocks are sort of the things that are slowing you down, taking you off and holding you back but they also are new ideas, new opportunities, key strategic partnerships, cool things you want to go do and you can’t find the time or the energy to do them. And so, that’s an issue on an EOS company. And what we do with issues is we help compartmentalize them. We help make sure they’re stored in the right place.
And then when they are real priorities for the leadership team or some other team the organization, we teach a tool or a discipline called IDS which stands for Identify Discuss and Solve which really helps entrepreneurs and their leadership teams resolve issues for the long-term greater good rather than either mistakenly tackling symptoms and never really solving the root cause or what I was so good at in my entrepreneurial career – kind of wrapping duct tape and twine around everything and shoving it to the corner of my office hoping it would go away on its own.
Josh: You know, the screaming monkey syndrome.
Mike: Yes. Please don’t blow up before we make payroll next week, right?
Josh: Yeah. I’ve seen that more than once in my life.
Mike: That’s right.
Josh: You guys have written a bunch of books about what you do and you have consultants that help people implement this system. There’s actually one more thing I want to talk about before we end today because I think this is really key. Is the role of the visionary and the role of the implementer and the difference between the two, and the natural conflict that exists, can you first define what each is and then why is there this conflict that exists?
Mike: Yes. It’s visionary and integrator. And a good number of entrepreneurial companies are founded by a visionary entrepreneur – somebody with an idea, a passion, an enthusiasm for a client or a particular kind of work. And most successful entrepreneurial organizations are grown to a point by that visionary entrepreneur and then they get stuck. And when they get stuck, often, one of the root causes is that in order to lead an organization with 10, or 25, or 50, or 100 people in it, the tools and tricks one must use are different than the tools and tricks you need to grow a company from 0 to 10, or 20, or 25 people. And so, integrator is somebody who runs the day to day in a fast moving entrepreneurial organization with some number of people who need clarity and simplicity and accountability and occasionally require tough conversations. Those are visionaries and integrators. Generally, they couldn’t be more different.
And so, what we see in an entrepreneurial company where those two roles haven’t been clearly defined, separated and filled with people who are put on the planet to excel in those unique and distinct roles is two kinds of problems. The first is a visionary stuck in the integrator seat and those are companies where the visionary is frustrated and the leadership team is exhausted because the visionary keeps coming to meetings with 90 ideas and we haven’t even implemented one of the ideas from last week’s meeting and so on. And so, it can be chaotic in those organizations. Visionaries spend a lot of time in those companies doing stuff they don’t love.
And then the other kind of organizational problem created by the lack of a clear visionary and integrator is sometimes a company is started by two people, one of whom is a natural visionary and one of whom is a natural integrator. And because they don’t clarify and separate their roles, you get this dynamic of co‑running the company. And when two people are in charge of an organization without clarity around, who makes the final decision? Who’s job is what? Et cetera. Nobody’s really clear about who’s ultimately in charge. And in that situation, chaos and getting stuck ensue as well. And so, that’s what visionary integrator helps resolve.
Josh: Paton, we have just started to scratch surface and unfortunately we’re out of time, so if any of our listeners want more information or learn more, where would they go?
Mike: Well, I’d send them to our website eosworldwide.com. That’s where warehouse all of our intellectual property, our tools, links to the books – everything you can learn to help implement EOS in your business. That’s a great place to get started.
Josh: Cool. Thanks so much for your time, Paton, and we’ll be talking very soon.
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.