Innovation is an ever-present buzzword in today’s economy, so you would be forgiven for thinking that if a company is hyper-profitable and scaling, it has to be because they are doing something new. As a Scaling Up Coach, I won’t deny that innovation is important. But what if I told you the things these elite companies are doing to scale are actually quite old school?
John D. Rockefeller was arguably the most successful and wealthiest American in history, and his century-old management principles are still the key to growing profitable companies today. Verne Harnish embraces these principles in his groundbreaking, bestselling books, including the seminal Scaling Up: Mastering the Rockefeller Habits 2.0. Harnish breaks Rockefeller’s principles into 10 key habits that have helped thousands of companies scale, sometimes into the billions. Adopting the Rockefeller Habits not only reduces stress and saves time for you and your team, but it also dramatically improves cash flow and the quality of your company culture. It makes making money fun and rewarding.
The 10 habits outlined in the Rockefeller Habits Checklist™ form a simple, rational, easy-to-implement framework for nailing the execution of your company’s strategies. Here’s a brief overview of each of them and why they work.
Habit No. 1: The Executive Team Is Healthy and Aligned
Rockefeller’s ability to create internal harmony within his company was one of his greatest talents. High-performing companies are also highly collaborative, and by implementing some simple practices your team can learn to debate critical issues without resentment and division.
This is the most important habit of the ten and should be the first one you implement in your organization. At the heart of any effective team is trust, which in a business context means nurturing a shared understanding and a shared commitment to achieving results.
So what does a healthy, aligned team look like? There are four goals to aim for here:
- Understand and respect each other’s styles
- Meet regularly for strategic thinking and renewal
- Participate in ongoing executive education (an outside coach can facilitate this)
- Have a rapport that is constructive, inclusive, and fun.
I find when working with executives on implementing this habit, it’s helpful to follow the Scaling Up recommendation of using Patrick Lencioni’s The Five Dysfunctions of a Team to root out the issues that might block alignment for your team: Absence of Trust, Fear of Conflict, Lack of Commitment, Avoidance of Accountability, and Inattention to Results.
Habit No. 2: Everyone Is Aligned with the #1 Thing That Needs to Be Accomplished This Quarter to Move the Company Forward
Everyone in your organization should be working toward what in the Scaling Up methodology we call the Critical Number. The Critical Number is every bit as crucial as it sounds, and you identify it as part of the Scaling Up One Page Strategic Plan (OPSP). Think of your Critical Number as your lead domino from which all the other dominoes in your business cascade. If you can achieve this one thing—often a key bottleneck or X-factor in your business—it will enable you to accomplish everything else. Develop 3–5 Priorities (Rocks) that support this Critical Number and then develop a quarterly theme that brings these priorities to life in a fun and meaningful way with a celebration and reward identified after your 13-week sprint. When companies start looking at their businesses this way and rally their teams consistently around their Critical Number, they develop a different type of organizational strategic thinking that helps them outpace the competition.
Habit No. 3: Communication Rhythm Is Established and Information Moves through the Organization Quickly
Communication is any organization’s greatest challenge, and it is incredible how easy it is to solve by setting a smooth meeting rhythm. Rockefeller understood the power of routine-based, well-run meetings: they drive focus, alignment, and timely problem-solving.
Here is the meeting structure that elite companies use to crush their goals:
- The Daily Huddle. A 5–15-minute, all-hands, stand-up meeting at the same time every morning to discuss daily priorities, exchange updates, and discuss tactical issues.
- The Weekly Meeting. A 60–90-minute discussion to review progress and accountabilities and to brainstorm one or two main issues. You can also use this time to review market intel from customers, employees, and competitors.
- The Monthly Management Meeting. A full- or half-day meeting where all senior, middle, and frontline managers report on their accountabilities and where formal executive education is undertaken as a team to foster strategic thinking skills and cohesiveness. It is also a good time to communicate strategic priorities and execution to middle management and the front lines.
- The Quarterly and Annual Planning Meetings. This should be an offsite, 1–2-day meeting where leaders update the OPSP and Scaling Up Growth Tools. It’s an all-generals-in-the-room strategy session to establish the next quarterly or annual theme. Afterward, the leadership team communicates the results to all employees in a 45-minute meeting.
Habit No. 4: Every Facet of the Organization Has a Person Assigned with Accountability for Ensuring Goals Are Met
There are four key ways elite companies ensure complete accountability for their goals so they can execute flawlessly. The first is that they embrace a Scaling Up Growth Tool called the Functional Accountability Chart, or FACe. The FACe of the company captures each person’s function in the organization and the one or two KPIs that person must achieve. This ensures that you have the right people, doing the right things, right. Each box on the FACe must have one name and only one name in it. If there is more than one, you don’t have true accountability! If the box is empty, you have no accountability.
The second way is to assign a person to each line of the three financial statements: income statement/P&L, balance sheet, and statement of cash flows. By doing this, companies can start to see their achievement of revenue targets and reduction of extraneous expenses improve very quickly.
The third way is to define the critical processes that drive your business in the Process Accountability Chart, or PACe. The PACe of the company lists the 4–9 critical processes that uniquely drive your business and determines how each process will be measured to ensure it is running smoothly. Also included are the leaders accountable for each process and its measurable KPIs.
The last way elite companies achieve accountability in ensuring goals are met is to make sure that each 3–5-year Key Thrust/Capability has a corresponding expert either in-house or on their advisory boards to ensure movement is made towards achieving these mid-range capabilities.
Habit No. 5: Ongoing Employee Input Is Collected to Identify Obstacles and Opportunities
Rockefeller was known for letting others speak first in meetings to invite other points of view, and he tended to preface his statements as opinions rather than directives to encourage friendly debate. Elite companies embrace the power of employee input in this very way and embed it in their culture. All executives and managers should have a start/stop/keep conversation with at least one employee every week and share those insights in the weekly executive team meeting. This ensures that every week, the team is hearing about the obstacles and opportunities employees see from the frontlines up. A mid-management team should be responsible for closing the loop on these obstacles and opportunities so that employees can see that their suggestions are bearing fruit.
Habit No. 6: Reporting and Analysis of Customer Feedback Data Is as Frequent and Accurate as Financial Data
High-growth companies are almost universally great at making the most of their customer feedback. Just as with Habit #5’s employee input, customer feedback should be collected weekly and shared at the weekly executive team meeting. Again, a mid-management team should be assigned the duty of making sure all the loops surrounding customer feedback are closed.
All executives and middle managers should aim to have a 4 Questions (4Q) conversation with at least one end-user customer each week, ideally face-to-face or by phone. The 4Q questions you are seeking input on are:
- How are you doing?
- What’s going on in your industry (or region or neighborhood)?
- What are you hearing about our competitors?
- How are we doing?
This straightforward approach cuts through the clutter to yield actionable results. Some of my elite clients actually dis-invite executives from the weekly meeting if they have not come prepared by having a 4Q conversation with a customer that week. This has proven to be an excellent practice to ensure the company is functioning with a healthy dose of direct market intel rather than opinions and BS!
Habit No. 7: Core Values and Purpose Are “Alive” in the Organization
Elite companies have Core Values that are more than a mission statement. They are a small set of rules and boundaries that define what is truly and dearly important to them. They are the operating system for the whole organization, defining its culture and desired behaviors.
The complement to your Core Values is your Core Purpose. This is your North Star—the why behind what you do; how your company makes a difference. It is best defined in just a word or a few words (think of 3M: To solve unsolved problems innovatively, or Disney: Happiness).
Here are two rules of thumb about creating your business’s Core Values and Core Purpose:
- Core Values and Core Purpose are discovered in your business, they are not created. If you meet for a day, stick them on a poster in the lobby and forget them…you’re doing it wrong!
- Everyone in the organization needs to bring the Core Values and Purpose alive every day through their work. All executives and middle managers should refer back to these when they give recognition or reprimands, and no one should be hired to join the team who does not align with them. Each quarter, actions should be identified and implemented to strengthen your Core Values and Purpose.
Habit No. 8: Employees Can Articulate the Key Components of the Company’s Strategy Accurately
One of the huge advantages of using the One Page Strategic Plan is that it is one page! The reasoning behind this is that highly distilled information can be easily communicated and acted upon as a group. The information on the plan forms patterns that drive strategic thinking and action. It literally gets everyone on the same page!
Employees at elite companies can speak knowledgeably and concisely about four things:
- Your Big Hairy Audacious Goal (BHAG®). Coined by Jim Collins and Jerry Porras, your BHAG is your organization’s 10–25-year stretch goal. Everyone needs to be aware of it and what you are doing as a team to reach it.
- Your core customers. Who are your “juicy” core? (Yes, add the word juicy! Elite companies pass on average customers.) Build descriptive personas of 25 words or less around your juicy core customers to bring them to life in a way that everyone can remember and articulate. Focus on why they buy from you, not demographics.
- Your 3 Brand Promises and KPIs. You should develop a lead brand promise and two supporting promises. For example, the Scaling Up company BuildDirect.com has the lead promise “Best Price” and the supporting promises “Best Customer Service” and “Product Expertise.”
Your Brand Story. I’m not talking about a sales pitch here. What everyone employee needs to be able to do is to articulate what makes your company special in the eyes of your customer.
Habit No. 9: All Employees Can Answer Quantitatively Whether They Had a Good Day or Week
This habit really separates the elite from the also-rans. In an organization where everyone is accountable with goals that align with your Critical Number, quantitative answers to this question are easy to come by. Each person should have their own personal Critical Number that aligns with the organization’s and should be able to report on one or two KPIs weekly. The key here is that everyone takes ownership for their function in meeting the company’s goals.
Each individual or team should also have 3–5 clearly defined quarterly priorities, or “Rocks” that align with those of the company. Upholding this kind of system is made much more effective if all executives and middle managers have a coach or peer coach who holds them accountable to changes in behavior. As Google CEO Eric Schmidt points out in his book Trillion Dollar Coach, coaching is “the best way to mold effective people into effective teams.”
Habit No. 10: The Company’s Plans and Performance Are Visible to Everyone
Elite companies not only have their Core Values and Core Purpose pervading their entire organizations, but they also have scoreboards everywhere, displaying the current progress on KPIs and Critical Numbers. It’s extremely useful to have a physical or virtual “situation room” established for weekly meetings with uncomplicated, drilled-down data that everyone can rally around. Departments can do the same for their own teams.
One tool that can make a huge difference in making plans and performance visible throughout your organization is a digital strategic execution platform like Scaling Up Scoreboard or Metronome. These give your executive team complete visibility into all your strategic priorities and track their execution—literally at your fingertips. Goals achieved are ticked off in real time and missed goals are immediately red-flagged—which sounds intense, but remember, having nowhere to hide is a good thing in a high-growth company. A more accountable organization is more profitable and easier to run. It’s also the kind of place where the best people want to work.
Implement the 10 Habits Now So Your Company Can Start Scaling Up
The Rockefeller Habits are simple yet powerful principles that can launch any company into high-growth mode. While you might not be able to implement all ten in your organization overnight, you can start with one or two and build them out over 24–36 months. As John D.Rockefeller knew and as Verne Harnish has said, “routine sets you free.” Every day, tens of thousands of companies implement these habits to build teams that enjoy working together and getting results. And of course—making more money.
This has been a distillation of the 10 Rockefeller Habits and how you can use them to create change in your organization. If you want to check them out in even greater detail, feel free to read more. If you are ready to be coached through implementing the 10 Habits and other Scaling Up methodologies in your business, schedule a conversation with me today.