Mastering the Rockefeller Habits by Verne Harnish

Question 1

the fundamentals in creating a great business are the same for parenting great kids.

Answer 1

Mastering the Rockefeller Habits by Verne Harnish

Question 2

Anyone with children will recognize the fundamentals I’ve summarized as: 1. Have a handful of rules 2. Repeat yourself a lot 3. Act consistently with those rules (which is why you better have only a few rules).

Answer 2

Mastering the Rockefeller Habits by Verne Harnish

Question 3

three underlying habits I have observed are key to the successful management of a business are: Priorities - Data - Rhythm

Answer 3

Mastering the Rockefeller Habits by Verne Harnish

Question 4

Priorities—Does the organization have objective Top 5 priorities for the year and the quarter (the month if growing over 100% annually) and a clear Top 1 priority along with an appropriate Theme? Does everyone in the organization have their own handful of priorities that align with the company’s priorities?

Answer 4

Mastering the Rockefeller Habits by Verne Harnish

Question 5

Data—Does the organization have sufficient data on a daily and weekly basis to provide insight into how the organization is running and what the market is demanding? Does everyone in the organization have at least one key daily or weekly metric driving his or her performance?

Answer 5

Mastering the Rockefeller Habits by Verne Harnish

Question 6

Rhythm—Does the organization have an effective rhythm of daily, weekly, monthly, quarterly, and annual meetings to maintain alignment and drive accountability? Are the meetings well run and useful?

Answer 6

Mastering the Rockefeller Habits by Verne Harnish

Question 7

There is only one underlying strategy—what can be called the “x” factor—which must be discovered, defined, and acted upon to create significant value and ultimately significant valuations within a business: The “x” factor: identify the chokepoint in your business model and industry and then gain control of that chokepoint.

Answer 7

Mastering the Rockefeller Habits by Verne Harnish

Question 8

In planning, the “middle” is gone. You only have to define two points: where you plan to be 10 to 25 years from now and what you have to do in the next 90 days.

Answer 8

Mastering the Rockefeller Habits by Verne Harnish

Question 9

Keep everything stupidly simple.

Answer 9

Mastering the Rockefeller Habits by Verne Harnish

Question 10

The best data is firsthand data.

Answer 10

Mastering the Rockefeller Habits by Verne Harnish

Question 11

Defining a simple long-term vision 10–25 years out and deciding on a handful of priorities for the next quarter are the two most important decisions a business leader makes.

Answer 11

Mastering the Rockefeller Habits by Verne Harnish

Question 12

And it’s this yin and yang of having both a long-term “rarely changes” piece along side a short-term “changes a lot” dynamic piece that provides the delicate balance needed to drive superior performance.

Answer 12

Mastering the Rockefeller Habits by Verne Harnish

Question 13

You don’t have a real strategy if it doesn’t pass these two tests: that what you’re planning to do really matters to your existing and potential customers; and second, it differentiates you from your competition.

Answer 13

Mastering the Rockefeller Habits by Verne Harnish

Question 14

Priorities—there are a handful of rules, some of which don’t change much like the core values of the firm and the long-term Big Hairy Audacious Goal (BHAG) and others that change every quarter and every week, what I call the Top 5 and Top 1 of 5. It’s the balance of short term and long term.

Answer 14

Mastering the Rockefeller Habits by Verne Harnish

Question 15

Data—in order to know if you’re acting consistent to your priorities you need feedback in terms of real time data. There are key metrics within the business that you want to measure over an extended period of time, called Smart Numbers; and there are metrics that provide a short-term laser focus on an aspect of the business or someone’s job called a Critical Number. It’s the balance of short term and long term.

Answer 15

Mastering the Rockefeller Habits by Verne Harnish

Question 16

Rhythm—until your people are “mocking” you, you’ve not repeated your message enough. A well-organized set of daily, weekly, monthly, quarterly and annual meetings keep everyone aligned and accountable. And the agendas for each provide the necessary balance between the short term and long term.

Answer 16

Mastering the Rockefeller Habits by Verne Harnish

Question 17

There are three barriers to growth common among all growing firms: the need for the executive team to grow as leaders in their abilities to delegate and predict; the need for systems and structures to handle the complexity that comes with growth; and the need to navigate the increasingly tricky market dynamics that mark arrival in a larger marketplace.

Answer 17

Mastering the Rockefeller Habits by Verne Harnish

Question 18

of all firms in the United States, only 4 percent survive the transition from a small business to a growing firm.

Answer 18

Mastering the Rockefeller Habits by Verne Harnish

Question 19

4% “gazelles,” which are firms that grow at least 20% a year for four years in a row.

Answer 19

Mastering the Rockefeller Habits by Verne Harnish

Question 20

Delegating to Others Most entrepreneurs actually don’t like working with anyone, including their own employees! This is the major reason why 96% of all firms have fewer than ten employees, and a vast majority have fewer than three. Therefore, the decision to grow isn’t an easy one.

Answer 20

Mastering the Rockefeller Habits by Verne Harnish

Question 21

“One of the first real management concepts that stuck in my head,” Harrison says, “was that if you can’t afford the people to run the business for you, then all you have is a job, not a business.

Answer 21

Mastering the Rockefeller Habits by Verne Harnish

Question 22

Systems and Structures When the management structure is in place, systems are never far behind. There’s a reason why: both systems and structure are logical responses to complexity, which grows almost exponentially as the company expands.

Answer 22

Mastering the Rockefeller Habits by Verne Harnish

Question 23

“I deferred a lot of decisions to this team and listened to their ideas and accepted them, even when it didn’t feel right in my gut, because they were the ‘experienced’ ones. In reality, they were no more experienced then I was in an entrepreneurial company.”

Answer 23

Mastering the Rockefeller Habits by Verne Harnish

Question 24

Data Drives Prediction The ultimate goal of imposing structure and instituting systems is, of course, predictability. Unless a company has the ability to determine where it is today and project where it’s going to be this week, this month, this quarter, and this year, it’s not on a trajectory for growth. It might not even be on track for survival.

Answer 24

Mastering the Rockefeller Habits by Verne Harnish

Question 25

“The idea of always measuring and tracking a Critical Number gives you a firm foundation to know where you are—even if you don’t like the answer,”

Answer 25

Mastering the Rockefeller Habits by Verne Harnish

Question 26

Top 5 Priorities As you grow, you must keep the company focused. That’s especially hard once you reach the point—usually at about 30 employees—where you can’t personally interact with everyone each day. How do you keep everyone aligned and reading off the same page? Many gazelles find it useful to set priorities for each quarter—no more than five—and then to identify one goal that supersedes the others. This is known as a Top 5 and Top-1-of-5 priority list.

Answer 26

Mastering the Rockefeller Habits by Verne Harnish

Question 27

CEO John Carney keeps the Top 5 corporate priorities for the quarter and the company’s eight core values on 8.5x11 laminated sheets posted inches from his employees’ noses. Also on the sheet is a place for each employee to write his or her own Top 5 priorities for the quarter, aligning them with the company’s Top 5. These postings remind the workforce what’s important—like the priority this quarter to bring projects in on budget

Answer 27

Mastering the Rockefeller Habits by Verne Harnish

Question 28

Like many gazelles, Carney’s company drives quarterly priorities with a theme.

Answer 28

Mastering the Rockefeller Habits by Verne Harnish

Question 29

Each time the 40-member workforce hits a sales goal, there’s a theme-related celebration, with prizes and recognition.

Answer 29

Mastering the Rockefeller Habits by Verne Harnish

Question 30

While many companies tend to focus their themes on sales goals, it’s important to focus on other areas of the company as well. “We tend to pick a non-sales goal in our fourth quarter each year,”

Answer 30

Mastering the Rockefeller Habits by Verne Harnish

Question 31

Hokey as they may sound, quarterly themes are powerful goal motivators. They focus the entire workforce on that single, overriding quarterly target in a way that people can not only understand, but get excited about.

Answer 31

Mastering the Rockefeller Habits by Verne Harnish

Question 32

“It’s amazing what you can accomplish when you get a hundred people all working on just 1 priority, instead of 27.”

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Mastering the Rockefeller Habits by Verne Harnish

Question 33

Meeting Rhythm Themes create the focus and the fun, but what makes a quarterly goal achievable is a daily and weekly rhythm aimed at keeping everyone informed, aligned, and accountable. One of the most successful practices any would-be gazelle can implement is that of a daily huddle—no more than 15 minutes per group, in a room or on a daily conference call, just to celebrate progress toward goals or identify barriers blocking that progress.

Answer 33

Mastering the Rockefeller Habits by Verne Harnish

Question 34

These three Rockefeller Habits—priorities, data, and rhythm—are the key tools for handling the barriers that come with growth and keeping the company aligned.

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Mastering the Rockefeller Habits by Verne Harnish

Question 35

You stick to your Top 5 [goals] and your Top 1 of 5, you identify your roadblocks, report your numbers and then, bye.”

Answer 35

Mastering the Rockefeller Habits by Verne Harnish

Question 36

Today the company’s meetings typically run 10 minutes or less following a routine of just reporting the numbers, going around and highlighting bottlenecks or goal achievements, and being diligent about taking it off-line if a couple of people get involved in problem solving.

Answer 36

Mastering the Rockefeller Habits by Verne Harnish

Question 37

Market Dynamics The market can make you look smart or dumb, as we’ve all seen this past few years. Move with a trend and you win; try and buck a market movement and it can crush you.

Answer 37

Mastering the Rockefeller Habits by Verne Harnish

Question 38

With growth, market pressures increase and strategic decisions come with higher stakes. At $10 million and higher, CEOs often feel their attention is being pulled inside the business just when they most need to be focusing on what’s happening outside in the market.

Answer 38

Mastering the Rockefeller Habits by Verne Harnish

Question 39

Grow Thyself But tough times offer good CEOs the opportunity to look at themselves and their role with new eyes.

Answer 39

Mastering the Rockefeller Habits by Verne Harnish

Question 40

Barriers to Growth There are roughly 23 million firms in the US, of which only 4 percent get above $1 million in revenue. Of those firms, only about 1 out of 10, or 0.4 percent of all companies, ever make it to $10 million in revenue and only 17,000 companies surpass $50 million. Finishing out the list, the top 2,500 firms in the US are larger than $500 million and there are 500 firms in the world larger than $11 billion.

Answer 40

Mastering the Rockefeller Habits by Verne Harnish

Question 41

three barriers that prevent firms from moving along this path: lack of leadership, lack of systems and structures, and market dynamics.

Answer 41

Mastering the Rockefeller Habits by Verne Harnish

Question 42

Leadership As goes the leadership team goes the rest of the firm. Whatever strengths or weaknesses exist within the organization can be traced right back to the cohesion of the executive team and their levels of trust, competence, discipline, alignment, and respect. The two most important attributes of effective leaders are their abilities to predict and to delegate.

Answer 42

Mastering the Rockefeller Habits by Verne Harnish

Question 43

If we look at the second attribute of effective leadership, the ability to delegate, we can understand why most firms have fewer than ten employees. Getting others to do something as good as or better than yourself is one of the hardest aspects of leadership, but necessary if you’re going to grow the business. Thus most entrepreneurs prefer to operate alone or with a couple of people.

Answer 43

Mastering the Rockefeller Habits by Verne Harnish

Question 44

Successful delegation starts with choosing the right person. Keep in mind the rule that one great person can replace three good people. With the right people, delegation is a four-step process to pinpoint what they are to do, create a measurement system for monitoring progress, provide feedback, and then give out appropriately timed recognition and reward.

Answer 44

Mastering the Rockefeller Habits by Verne Harnish

Question 45

The key is to think in terms of three types of organizational charts. The first looks like what most of us know as the standard hierarchical organizational chart. I call it an accountability chart. The second type is actually a set of organizational charts that map work process or work flow. The third, the Almost Matrix, maps the relationships between organizational functions and the various business units that begin to form as the organization grows.

Answer 45

Mastering the Rockefeller Habits by Verne Harnish

Question 46

Accountability charts: A company will often become stuck or experience a lot of miscommunications and balls getting dropped when there isn’t clear accountability established within an organization.

Answer 46

Mastering the Rockefeller Habits by Verne Harnish

Question 47

There are two basic rules accompanying the creation of an accountability chart. First, there can be no “to be determined’s” on the chart. If you can conceive of a position, put someone’s name in it, even if his or her only accountability is to make sure the position is filled. Organizations often place the term “acting” in front of the title of someone filling a spot until it can be permanently filled. Second, there are always a few people in the organization who shouldn’t be leading other people, yet are considered senior in the organization. In this case, a few “off org chart” positions are advisable.

Answer 47

Mastering the Rockefeller Habits by Verne Harnish

Question 48

Work process charts: Because the accountability chart can’t capture all the interactions necessary to run a business without a mass of dotted lines running all over the chart, it’s better to keep the accountability chart clean and then establish four to nine work flow charts representing the critical processes that flow through the organization.

Answer 48

Mastering the Rockefeller Habits by Verne Harnish

Question 49

Almost Matrix: This chart shows the relationships between organizational functions and the business units that form as the organization grows.

Answer 49

Mastering the Rockefeller Habits by Verne Harnish

Question 50

Market Dynamics The market makes you look either smart or dumb. When it’s going your way, it covers up a lot of mistakes. When fortunes reverse, all your weaknesses seem to be exposed.

Answer 50

Mastering the Rockefeller Habits by Verne Harnish

Question 51

Between start-up and the first million or two in revenue, the key driver is revenue. The focus is on getting interest in the marketplace interested in you.

Answer 51

Mastering the Rockefeller Habits by Verne Harnish

Question 52

Between $1 million and $10 million, you add to your focus on revenue the cash concerns you had been putting off. Since the organization will typically grow more and faster during this stage than any other, cash will be rapidly consumed.

Answer 52

Mastering the Rockefeller Habits by Verne Harnish

Question 53

As the organization passes $10 million, internal and external pressures come to the forefront.

Answer 53

Mastering the Rockefeller Habits by Verne Harnish

Question 54

This brings us full circle to the number one function of a leader, the ability to predict. The fundamental journey of a growing business is to create a predictable engine for generating wealth as it creates products and services that satisfy customer needs and creates an environment that attracts top talent.

Answer 54

Mastering the Rockefeller Habits by Verne Harnish

Question 55

There are three basic decisions an executive team must make: 1. Do we have the Right People? 2. Are we doing the Right Things? 3. Are we doing those Things Right?

Answer 55

Mastering the Rockefeller Habits by Verne Harnish

Question 56

The research is definitive that training and development increases loyalty.

Answer 56

Mastering the Rockefeller Habits by Verne Harnish

Question 57

“Do I have the Right People?” And a quick way to discern the answer is to ask yourself if you would enthusiastically rehire each person on your team if given the opportunity. The second question to ask, especially regarding your executive team and other key employees, is whether you think they have the potential to be the best in their position three to five years from now.

Answer 57

Mastering the Rockefeller Habits by Verne Harnish

Question 58

Remember, “A” people tend to surround themselves with “A” people, so go only to your “A” network of friends.

Answer 58

Mastering the Rockefeller Habits by Verne Harnish

Question 59

The only type of interview that is effective is a behavior-based structured interview. Bradford Smart is the expert in this field. I highly recommend his latest book Topgrading. It’s very “how-to.”

Answer 59

Mastering the Rockefeller Habits by Verne Harnish

Question 60

the best way to select the Right Person is to have someone work with you for several weeks doing the work you’re expecting him or her to do.

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Mastering the Rockefeller Habits by Verne Harnish

Question 61

getting the right people in the right positions is the first and most important job of the CEO and executive team. Also important is getting the wrong people out as quickly as possible—though

Answer 61

Mastering the Rockefeller Habits by Verne Harnish

Question 62

If you then consider that a business is simply “people” doing “activities,” the model supports a familiar notion that you lead people and manage their activities—you don’t manage people.

Answer 62

Mastering the Rockefeller Habits by Verne Harnish

Question 63

It’s important to separate the person from their activities. While continuing to inspire people through your leadership skills, you must also be diligent about holding people accountable to results. In fact, you might have to love someone enough to let him or her go. (I tend to prefer the phrase “freeing up your future!”)

Answer 63

Mastering the Rockefeller Habits by Verne Harnish

Question 64

Customers can bankrupt you with their wants, wants, wants while a laser-focused competitor can come along and deliver on a more important need and steal your customers.

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Mastering the Rockefeller Habits by Verne Harnish

Question 65

Business is a constant process of balancing priorities,

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Mastering the Rockefeller Habits by Verne Harnish

Question 66

Rockefeller Habit # 1—Priorities A starting point to figuring out the number one priority for any particular quarter is to consider the six circles as potential priorities and choose the one on each side that needs the most attention at that moment.

Answer 66

Mastering the Rockefeller Habits by Verne Harnish

Question 67

Selecting a specific area is one of the tougher disciplines to maintain because the tendency is to try and work on all the areas simultaneously.

Answer 67

Mastering the Rockefeller Habits by Verne Harnish

Question 68

Rockefeller Habit #2—Data To monitor the progress of the business daily and weekly, and to accurately predict how the next few months are likely to turn out, you need metrics about all six areas of the business.

Answer 68

Mastering the Rockefeller Habits by Verne Harnish

Question 69

Rockefeller Habit #3—Rhythm In figuring out with whom you need to have various weekly meetings, the six circles provide guidance.

Answer 69

Mastering the Rockefeller Habits by Verne Harnish

Question 70

Around $10-million in revenue, the three fundamental functions represented by the three circles on the right begin to split. The Sell circle splits into separate sales and marketing functions, requiring different personalities to head up each.

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Mastering the Rockefeller Habits by Verne Harnish

Question 71

the Right People Doing the Right Things Right model encompasses the fundamental decisions leaders must make to successfully drive any business.

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Mastering the Rockefeller Habits by Verne Harnish

Question 72

MASTERING A ONE-PAGE STRATEGIC PLAN Keeping it simple keeps it clear!

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Mastering the Rockefeller Habits by Verne Harnish

Question 73

1. a framework that identifies and supports your corporate strategy, 2. a common language in which to express that strategy, and, 3. a well-developed habit of using this framework and language to continually evaluate your strategic progress.

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Mastering the Rockefeller Habits by Verne Harnish

Question 74

Most important, you’ve got to keep it simple.

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Mastering the Rockefeller Habits by Verne Harnish

Question 75

A vision is a dream with a plan. Without all seven levels of the Planning Pyramid delineated, your vision will be less than complete.

Answer 75

Mastering the Rockefeller Habits by Verne Harnish

Question 76

No organization or individual can focus on or accomplish more than five or six priorities in a given time period. The One-Page Strategic Plan forces you to select what I call your Top 5 and Top 1 of 5 priorities.

Answer 76

Mastering the Rockefeller Habits by Verne Harnish

Question 77

core values of the firm. These five to eight statements broadly define the shoulds and shouldn’ts that govern your company’s underlying decisions. Think of them as the Ten Commandments or your constitution, the foundation upon which the rest of the vision is built.

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Mastering the Rockefeller Habits by Verne Harnish

Question 78

Are you wondering if your firm might be too young or too small to have well-established core values? Such thinking is mistaken.

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Mastering the Rockefeller Habits by Verne Harnish

Question 79

Why is this company doing what it’s doing? What’s the higher purpose for why we’re in the business we’re in? Why do I have such passion for what we’re doing? The purpose gives the company heart.

Answer 79

Mastering the Rockefeller Habits by Verne Harnish

Question 80

Quarterly, you should take a look at your core values and your purpose statement. If your core values seem to be sagging, or your purpose isn’t being fully realized, the action list affords you the opportunity to detail the specific actions the firm needs to take to bring things into better alignment.

Answer 80

Mastering the Rockefeller Habits by Verne Harnish

Question 81

The BHAG is your Big Hairy Audacious Goal. As the name implies, it’s a 10- to 25-year, lofty goal, similar to Kennedy’s legendary goal to put a man on the moon. It’s the sort of goal that challenges the firm to greatness.

Answer 81

Mastering the Rockefeller Habits by Verne Harnish

Question 82

The Target level describes where you want the firm to be in 3 to 5 years. Besides listing certain quantifiable targets at the top of the column, a firm should define the Sandbox in which the company chooses to play, a place where it can be #1 or #2. The Sandbox defines the firm’s expected geographical reach, product or service offering, and expected market share within the chosen three-to five-year time frame. And yes, your Sandbox can and often does change.

Answer 82

Mastering the Rockefeller Habits by Verne Harnish

Question 83

Brand Promise Next, clearly articulate the key need you’re going to satisfy for your customers—your measurable Brand Promise (often called a value-added proposition or differentiator). It’s important that it be measurable,

Answer 83

Mastering the Rockefeller Habits by Verne Harnish

Question 84

Key Thrusts/Capabilities Now define five or six Key Thrusts/Capabilities necessary for you to dominate your defined Sandbox, fulfill your Brand Promise, and meet your quantifiable Targets. What are the five or six big things you need to do to reach your three- to five-year targets? Easier said than done, this part of the process challenges your team to define the handful of strategic moves that will put you on top.

Answer 84

Mastering the Rockefeller Habits by Verne Harnish

Question 85

what your company needs to achieve in the coming year to realize your longer-term targets.

Answer 85

Mastering the Rockefeller Habits by Verne Harnish

Question 86

list your five or six Key Initiatives for the year, similar in strategic importance to, and aligned with, the Key Thrusts/Capabilities.

Answer 86

Mastering the Rockefeller Habits by Verne Harnish

Question 87

Think of these initiatives as your corporate New Year’s resolutions, and plan to revise them each time you close the books on your fiscal year—or as the marketplace demands—while keeping an eye on the Targets column.

Answer 87

Mastering the Rockefeller Habits by Verne Harnish

Question 88

designation of one or two Critical Numbers—ideally, one from the balance sheet and one from the income statement. They should represent key weaknesses at the heart of your economic model or operations that, if addressed successfully, will have a significant and positive impact on the business.

Answer 88

Mastering the Rockefeller Habits by Verne Harnish

Question 89

Actions and Rocks Next come the quarterly action steps. This is the how stuff. Here’s where you break down your annual goals into the quarterly action steps that lead to achieving your yearly goals. Think of them as a series of five or six simultaneous 13-week missions that provide priorities to your entire organization as you drive to achieve the quarterly missions. I label these quarterly missions Rocks to align with Stephen Covey’s use of the term. Rocks are the priorities that need to stay out front, ahead of the fire fighting and pebble moving we do on a day-to-day basis.

Answer 89

Mastering the Rockefeller Habits by Verne Harnish

Question 90

Theme, Scoreboard Design, and Celebration/Reward Looking at your Rocks, Critical Numbers, and Goals for the year, establish a quarterly or annual Theme to bring additional focus to everyone’s activities. Decide where to post a scoreboard that will keep everyone apprised of your progress toward achieving the measurable target of the theme. Don’t forget the celebration either. You should state ahead of time what fun and exciting reward or event will occur when the measurable target is hit.

Answer 90

Mastering the Rockefeller Habits by Verne Harnish

Question 91

get out your corporate calendar and identify the dates of the next quarterly meeting. That’s when you’ll reconsider your theme and re-establish your action steps for a new quarter. Block in a full day for each of these quarterly sessions. Determining the appropriate action steps isn’t as easy as it may sound. For most companies, they’re the equivalent of running a mini-marathon. They take lots of preparation beforehand, and they burn up lots of time and managerial energy—that

Answer 91

Mastering the Rockefeller Habits by Verne Harnish

Question 92

Here’s where the action steps from the previous level get elaborated into a more detailed chronology. Looking across the entire organization, you need to determine when things will happen. What happens first?

Answer 92

Mastering the Rockefeller Habits by Verne Harnish

Question 93

remember: Nothing ever gets done in any organization until it shows up on somebody’s weekly To Do list—and I do mean weekly! Quit thinking in monthly increments and drive all measurements, deadlines, and deliverables down to weekly increments. It may be painful in the doing, but it needs to be done.

Answer 93

Mastering the Rockefeller Habits by Verne Harnish

Question 94

we cap our Planning Pyramid with some necessary accountability. This is the who level, where your company identifies specifically which person is accountable for which particular activity on your plan.

Answer 94

Mastering the Rockefeller Habits by Verne Harnish

Question 95

note that I didn’t say you should identify who’s “responsible,” because responsibility and accountability are two quite different things. Many people are likely responsible for meeting a certain goal or creating a product, but there should never be more than one person who is accountable.

Answer 95

Mastering the Rockefeller Habits by Verne Harnish

Question 96

if everyone’s accountable then no one’s accountable.

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Mastering the Rockefeller Habits by Verne Harnish

Question 97

One caution—resist the temptation to go back and revise or wordsmith your document. The point isn’t finding the exact words, or using them perfectly. It’s having something on a single sheet of paper that says it all for your company, no matter how imperfectly, and being able to use it daily to help your company reach its potential.

Answer 97

Mastering the Rockefeller Habits by Verne Harnish

Question 98

You must remember that this process is 1 percent vision and 99 percent alignment. The lion’s share of your effort must go not into meeting, talking, and wordsmithing, but toward getting your people aligned to do what needs to be done. Use your One-Page Strategic Plan daily, weekly, quarterly, and annually to “Do the right thing!”

Answer 98

Mastering the Rockefeller Habits by Verne Harnish

Question 99

Executive summary: Having a few rules, repeating yourself a lot, and acting in ways that are consistent with the rules—these are the three keys whether you’re providing your children with a good moral foundation or providing a company with a strong cultural foundation.

Answer 99

Mastering the Rockefeller Habits by Verne Harnish

Question 100

The key is not what core values an organization has but that it has core values at all.”

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Mastering the Rockefeller Habits by Verne Harnish

Question 101

At Gazelles, we have six: 1. Practice What We Preach 2. Ecstatic Customers 3. 1st Class for Less 4. Honor Intellectual Capitalists 5. Everyone an Entrepreneur 6. Never, Ever, Ever Give Up

Answer 101

Mastering the Rockefeller Habits by Verne Harnish

Question 102

Once you have your values, the other 99 percent of the effort goes into keeping these values alive with existing employees and inculcating (bringing into the culture) new employees and acquisitions as they join the firm. It’s the repeating of and living consistent with the firm’s values that’s the most difficult part of the process. A leader must go beyond merely posting the values on the wall and handing out plastic laminated cards. To keep things fresh, you have to get a little creative. You have to find lots of different ways to deliver the same information—over and over—so that it doesn’t get stale, yet is reinforced on a daily basis.

Answer 102

Mastering the Rockefeller Habits by Verne Harnish

Question 103

It’s critical for new employees to feel comfortable in your culture, and the best way to determine that is to ensure that they align with your core values. Start by using the language from your core values in recruitment ads and job descriptions. This will catch the attention of those people who resonate with those values. When it comes time to interview, design several of your questions and assessments to test the candidates’ alignment with your core values.

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Mastering the Rockefeller Habits by Verne Harnish

Question 104

With a little creativity, any performance measure can be made to link with a core value.

Answer 104

Mastering the Rockefeller Habits by Verne Harnish

Question 105

When you’re looking for recognition and reward categories, look no further than your core values.

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Mastering the Rockefeller Habits by Verne Harnish

Question 106

your core values are the most obvious source of quarterly or annual themes. Use your core values to bring attention to your corporate improvement efforts.

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Mastering the Rockefeller Habits by Verne Harnish

Question 107

I’ve found that managers and CEOs can repeat core values endlessly without it seeming ridiculous—so long as the core values they’re using are relevant and meaningful to their employees. When you make a decision, relate it to a core value. When you reprimand or praise, refer to a core value. When customer issues arise, by all means compare the situation to the ideal represented by the core values. The same goes for employee beefs and concerns—weigh

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Question 108

Have a Few Rules, Repeat Yourself, and Be Consistent

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Question 109

they want to know the rules aren’t a moving target or prone to selective enforcement. Your core values will do all of that for you,

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Question 110

The old saw is true: The organization with too many priorities has no priorities.

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Question 111

It’s then critical that everyone in the organization determine his or her own Top 5 priorities, aligning them with the company’s,

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Question 112

He started by having Schwab write down and prioritize his six most important tasks to complete in the next business day.

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Question 113

The lesson, of course, was the power of focus. The organization that understands—and acts upon—its Top 5 and Top 1 of 5 is the organization that progresses and prevails.

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Question 114

Establishing a Planning Context for Your Top 5 and Top 1 of 5

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Question 115

It’s often helpful to hold a monthly or quarterly meeting of all your employees to review the firm’s Top 5 and Top 1 of 5 priorities. Along with your core values, these priorities become the “handful of rules” that should drive decisions the next quarter.

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Question 116

establishing your Top 5 and Top 1 of 5, determine who’s going to be the point person on what, and when they’ll produce the deliverables. We’re talking accountabilities, sub-accountabilities, resource needs, deadlines, and sub-deadlines. It all goes in the Management Accountability Plan. Fill it out carefully and the result will be a week-by-week strategic plan over 13 weeks, detailing the steps that need to be taken and the milestones that must be reached to complete or make progress with this priority. Again, cascade this process down your organization, requiring everyone to produce a one page MAP for each of their major priorities.

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Question 117

If the process isn’t at least making you uncomfortable, you probably haven’t zeroed in on the right set of priorities, particularly your number one priority.

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Question 118

Recognizing Your Top 1 of 5: It’s the One that Hurts

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Question 119

toughest one of all: the need to replace yourself. We all know that the skills required to start a company aren’t the same ones required to run and expand a company.

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Question 120

The lesson is clear: If a competitor gets hold of a key relationship or patent or supply line, you’d better have a good counter-move or you’re in trouble.

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Question 121

For quite a while, he looked like a failure. But his willingness to retrench got him back to the break-even point, and it kept his company alive long enough to see his industry move forward again. Often CEOs aren’t willing to make the necessary cuts fast and deep enough. Instead, the death is slow and painful.

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Question 122

Pursuing your Top 1 of 5 goal is probably the most distasteful, frustrating, and perhaps discouraging thing you’ll ever confront. It’s not something you’ll take on lightly, and I’d advise you not to do it alone.

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Question 123

A company’s goals and priorities won’t be successful in driving the organization if they’re easily forgotten or ignored. Once you’ve established what’s important for your workforce to accomplish in the next quarter or year, you’ve got to do something to help your associates make the necessary emotional connection that generates commitment.

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Question 124

Great leaders have always understood the power of a theme.

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Question 125

To get people to storm the barricades on your behalf, you’ve got to give them a concept that connects not just with their heads but with their hearts.

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Question 126

the need for CEOs to “encourage the heart” when seeking organizational alignment.

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Question 127

Using Priorities and Critical Numbers to Drive Your Theme Good themes don’t pop out of thin air. The most powerful are those anchored in quantitative goals—be

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Question 128

One useful source of quarterly themes is your core values. Take one each quarter and use it to bring focus and improvement to a certain aspect of the business. It’s an excellent way to audit the organization’s culture and to reinforce the core values. And speaking of values, no matter what the theme for the quarter, it’s useful to review the organization’s core values at the quarterly meeting, relating each to the theme.

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Question 129

Tracking Progress and Keeping Score What makes a theme a mission rather than a mere event? Effective reinforcement does, and that can be achieved through publicly tracking progress and keeping score.

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Question 130

In all cases, the symbol or scoreboard for the theme was highly visible. This isn’t the time for 8.5” × 11” charts. Make them big, make them noticeable, make them memorable.

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Question 131

Nobody’s going to turn down a hard-won bonus or prize, but that’s just the frosting on the cake. The real reward is the sense of celebration that comes from reaching a goal and doing it together.

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Question 132

Dinner was provided to celebrate the achievement of a shared goal—and to mark the end of the quarterly campaign.

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Question 133

“The goal gets people focused on the right things, but it’s still just a game and it’s fun. You get the whole company pulling together.”

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Question 134

The trick in developing a successful quarterly theme isn’t just coming up with a good idea or presenting it well or tracking progress effectively or even celebrating success well. It’s encouraging the heart. Only when we do that extraordinarily well do we experience extraordinary success.

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Question 135

an important part of this feedback is objective daily and weekly measures that provide a sense of reality in terms of the future of the firm.

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Question 136

What makes people hate their jobs? What makes them non-productive, complaint-happy deadwood? The answer: recurring problems and hassles. I’m talking about the situations, problems, and mistakes that happen over and over again, never getting fixed.

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Question 137

you need to systematically gather data on what’s hassling your employees—and then do something about it.

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Question 138

if you solve just one percent of your problems or make a one percent improvement in your products and services each week, you’ll gain greater and greater yields from the solutions with each passing year. If, on the other hand, you aim for solving too many problems, you’ll have made a hassle out of your de-hassling system!

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Question 139

What should we start doing, what should we stop doing, and what should we continue doing?

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Question 140

The trick to getting your de-hassling system humming is to be responsive. If employees feel their feedback is dropping into a black hole, it’ll dry up. Initially, find some quick-hit solutions.

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Question 141

Again, don’t summarize the data, give it back to the team in raw form. The only exception is if the feedback includes personal attacks. These should be dealt with privately.

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Question 142

Closing the loop in this fashion is absolutely crucial. Let people know what issues are being addressed, and which ones have been resolved. If it’s something you can’t do anything about, say more than that—lots more.

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Question 143

Some companies will even keep an issues-aging report, tracking how long an issue has been outstanding, so it doesn’t fall through the cracks.

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Question 144

In the wrong hands, a de-hassling system can become an elaborate waste of time, or worse yet, a newfangled version of the old-fashioned corporate witch hunt.

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Question 145

The first three of my six guidelines have to do with getting your hassles under a microscope, checking them for relevancy and specificity, then making sure you’re addressing the root of the issue.

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Question 146

looking for the root of the problem. A key technique is asking “Why” several times.

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Question 147

many big problems trace back to simple solutions if you’ll just get Colombo-like and ask a lot of questions. And along the way, someone might ask why the system needs five copies in the first place!

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Question 148

The remaining three guidelines on my six-point list have to do with keeping your de-hassling system fair and humane: focus on the process (the “what”) and not the people (the “who”): involve all those affected; never backstab.

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Question 149

To avoid having the feedback degenerate into name-calling, focus on the what, not the who. When all the what’s keep leading to the same who, of course, you may need to free up that person’s future. And in that case, you still need to identify the “what” behind the failure of the “who” or you’re destined to make the same hiring mistake. But that’s rare. Most hassles are process hassles, not people hassles.

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Question 150

Finally, never backstab. We all have the right to face our accuser. Besides, we’re more likely to get to the root of the problem when all those affected are in the same room and thus less likely to attack the “who.”

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Question 151

de-hassling your organization doesn’t have to fall on the backs of the executive team. In fact, it’s better to form a mid-management team to handle the initial screening and problem solving. Who else is as close to the action? Not you.

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Question 152

These measures will also help everyone in the company answer the fundamental question, “Did I have a good week?”, which provides an objective indication of progress important to maintaining morale and enthusiasm.

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Question 153

Critical Numbers It’s best if the company has one or two Critical Numbers around which to align the company over the next quarter or year. A Critical Number represents a key short-term focus in the company that will have the most impact on the future of the firm.

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Question 154

“What is the single most important measurable thing we need to accomplish in the next 3-to-12 months?” And I want to emphasize that this focus should change regularly to improve different aspects of the organization.

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Question 155

Smart Numbers Next, the executive team should identify three Smart Numbers that give them insight into how the company is likely to do in the future. The ability to predict is a key leadership function. A Smart Number is typically a complex ratio made up of key indicators like the ratio of sales this week against the same week last year compared to the growth rate of the market.

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Question 156

This would tell you if you’re really gaining market share or not.

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Question 157

Once you’ve discovered three effective measures, you need to stick with them for a period of time so you can compare apples to apples.

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Question 158

Measures for Everyone Once the Smart Numbers and Critical Numbers are decided, every person or team should have one or two daily or weekly measures that align with these numbers.

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Question 159

every employee see how what they’re doing impacts the entire firm?

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Question 160

Make your measurements visible.

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Question 161

And I strongly suggest that every office employee has some kind of whiteboard in their cubicle or office on which to graph their own daily and weekly measures. These numbers have a much greater impact if people see them on a large graph. It is even better if they have to plot the numbers themselves. There’s something powerful in having to physically plot the points and connect the dots on the graph to bring the results alive and make them personal. It’s also useful to display last year’s results on the graph along with a projected or budgeted target line.

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Question 162

Once the habit of daily and weekly measuring is established, you want to start projecting ahead in addition to simply documenting the past. Jack Stack calls this Forward Forecasting. This involves making an educated guess about how the next few weeks or months are likely to turn out based on what you know now. Then, by comparing actual results against predicted results, you’ll begin to learn how to better predict outcomes and strengthen your knowledge about what drives results for yourself, your team, and the company.

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Question 163

Situation Room I recommend creating a situation room for the executive team. A situation room is where you display your core values and purpose, priorities for the quarter and year, and a map of the geographical territory you cover. Also display your Smart Numbers and Critical Numbers large and graphically. Make someone accountable for making sure the displays are up-to-date.

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Question 164

In summary, it is absolutely essential that you develop daily and weekly measurements for the company, and daily and weekly measurements for every individual or team that align with the company measures. These numbers focus everyone’s attention on driving performance, reinforcing priorities, and helping anticipate problems and opportunities. Make these measurements highly visible and graphical for everyone to see, and create a situation room for the executive team. Most importantly, just start measuring something and keep tracking different metrics until you find those that provide the most insight and useful feedback.

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Question 165

Relevancy—Does the issue really matter, is it of top importance, is there a customer affected by the hassle? Here you are looking for a pattern of recurring hassles. You can’t solve every hassle right away, so you want to look at those that are costing customers and employees the most time or money.

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Question 166

Be Specific—Look back over your hassle lists. Did you write in generalities or list specifics? Some people will list as a hassle communications problems, or interruptions, or having to answer the same questions over and over. However, you can’t begin to address these issues without knowing the who, what, when, where, how, and why of these hassles. Being specific also means being careful when using the words “always,” “never,” and “all the time.” In staff meetings, push people to give specifics.

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Question 167

Address the Root—Look at the cause of the issue and not just the symptoms. Let’s say you’ve identified a specific communications problem—in most cases, the standard response is “send out a memo.” Rarely does this get to the root of the problem—instead, it serves as a quick fix. One of the best ways to get to the root of the problem is using the “5 Whys” technique. Ask “why” several times until you get to the root cause.

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Question 168

Focus on the What, Not the Who— You don’t want to turn your search into a finger-pointing or blame game. Besides, 95 percent of the time, it’s a process problem, not a people problem. However, if all the what’s keep leading to the same who, maybe you’ve waited too long and the person has to be let go. But you should still ask “What did we do wrong that caused this person to fail?” Maybe your hiring or training process needs to be improved. If you don’t get to the root of the what, you’ll keep making the same who mistakes.

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Question 169

Involve All Those Affected—Rather than run around getting ten explanations from ten people, get them all in the same room to give a truer picture of the entire problem. Getting everyone in the room together also helps to minimize suboptimization—where fixing a problem in one part of the organization causes greater problems elsewhere.

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Question 170

Never Backstab—Never talk negatively about anyone if that person is not present. The only exception is if you need to seek the advice of someone before confronting the individual. In this case, you still need to bring the individual into the conversation as soon as possible. This guideline has its roots in such principles as the right to face your accuser and to be present when being judged. Besides, when you talk negatively about someone to another person, they have to then wonder if you are talking negatively about them behind their back. If you can be successful in implementing this rule, the level of trust and openness in your organization will improve immensely. And when the other person is present, everyone tends to follow the first five guidelines more closely.

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Question 171

At the heart of executive team performance is a rhythm of tightly run daily, weekly, monthly, quarterly, and annual huddles and meetings—all of which happen as scheduled, without fail, with specific agendas.

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Question 172

Each day, without fail, he’d sit down with his key people, have lunch, and talk.

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Question 173

the word company meant “to share bread.”

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Question 174

In the 19 years I’ve spent working with growing companies, the predictable winners are those who have established a rhythm and a routine of having meetings. The faster they’re growing, the more meetings they have.

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Question 175

I’m not talking about the kind of wide-open, poorly defined meetings many of us have endured. I’m talking about short, punchy meetings with a structure, time limits, and a specific agenda. This type of meeting doesn’t leave you feeling bogged down. On the contrary! This type of meeting routine actually sets you free.

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Question 176

For growing companies, when meetings are the rhythm and agendas are the rule, pros and unknowns can come together to create something new and marvelous. New people (and even newly acquired companies) get up to speed quickly when there’s an obvious structure they can align with.

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Question 177

More Meetings, Not Less Take a look at the meeting rhythm I’m advocating. Quarterly and annual meetings are givens in most companies. At the quarterly, you measure progress toward a year-end goal. At the annual, you consider that progress and set new goals for the following year. The key agenda for these quarterly and annual meetings is based around the One-Page Strategic Plan (described in Chapter 3). That’s all well and good. But I am absolutely adamant that you need to add daily, weekly, and monthly meetings as well. Why? Because the agendas of these more-frequent meetings drive the deliverables outlined in the less-frequent meetings. Each one builds upon the next.

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Question 178

didn’t just talk the talk of pulsing monthly; they walked it.

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Question 179

Daily Meeting—An Imperative Absolutely everybody in a growing company should be in some kind of five- to 15-minute huddle daily. I don’t mean they all have to be in the same meeting, just in some meeting. To me, this is non-negotiable.

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Question 180

Casual encounters fail to take advantage of the three most powerful tools a leader has in getting team performance: peer pressure, collective intelligence, and clear communication.

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Question 181

Without the discipline I’m describing, don’t kid yourself into thinking you’re getting this focused attention.

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Question 182

Timing To work well, the daily meeting must be set up right. I recommend that companies set the time a little irregularly—every day at 8:08 a.m., for example, or every day at 4:46 p.m. For whatever reason, people do a better job of being on time when the time’s not on the half or quarter-hour.

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Question 183

Make on-time attendance mandatory, with no excuses! I’ve been in intense meetings with clients. I’ve been in the midst of seeking funds from venture capitalists. It doesn’t matter; I tell them I need to take a break for my daily meeting. And it only gains me respect. Overall, start and end on time and don’t problem solve. This meeting is simply for problem identification. And if it starts to go longer than 15 minutes, people will drop the habit.

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Question 184

Setting Meet wherever you want, but I strongly suggest you avoid sitting comfortably. Stand up, or perch on stools. It’ll help keep the meeting short.

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Question 185

Who Attends The general rule is, the more the merrier—though you may wish to alter the approach a little if the group gets quite large or far-flung.

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Question 186

Who Runs the Meeting Pick someone who is naturally structured and disciplined, (and that might not be the CEO). Whoever it is, the main job is to keep things running on time. Use a countdown stopwatch to make sure you don’t let any part of the agenda run away with the meeting. The person running the meeting also has the important job of saying, “Take it offline.” Whenever two or more people get off on a tangent that doesn’t require everybody’s attention, instruct them to continue the conversation outside the boundaries of the meeting.

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Question 187

The Agenda The agenda should be the same structure every day, and it’s just three items long: what’s up, daily measures, and where are you stuck? In the first five minutes, each attendee spends a few seconds (up to 30) just telling what’s up. That alone is valuable, because it lets people immediately sense conflicts, crossed agendas, and missed opportunities. Next, the entire group takes a quick look at whatever daily measurement your company uses to track its progress.

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Question 188

Also, choose a short-term employee-based activity you want to focus on and track daily.

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Question 189

The third and most important agenda item is where people are stuck. You’re looking for bottlenecks, which ought to be your nemesis in business.

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Question 190

There are a couple of reasons why I consider this last part of the agenda crucial. First, there’s something powerful in simply verbalizing—for the whole group to hear—your fear, your struggle, your concern. It’s the first step to solving the problem, because until the mouth starts moving, the brain won’t engage. Second, the bottleneck discussion often reveals who’s not doing his or her job. Any time somebody goes two days without reporting a sticking point, you can bet there’s a bigger problem lurking. Busy, productive people who are doing anything of consequence get stuck pretty regularly. The only people who don’t get stuck are those who aren’t doing anything. So, scrutinize the exec who reports, “Everything is fine!”

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Question 191

the bottleneck conversation shouldn’t be allowed to drift into problem solving.

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Question 192

The Weekly Meeting Agenda The weekly meeting has a different purpose, and therefore, a different agenda. It’s intended to be a more issues-oriented and strategic gathering.

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Question 193

The Schedule Schedule the meeting for the same time, same place each week; 30 minutes for frontline employees and a full hour for execs.

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Question 194

Five Minutes: Good News Each weekly meeting starts with five minutes of good-news stories from everyone.

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Question 195

Ten Minutes: The Numbers Spend ten minutes on individual and company-wide measures of productivity. Every firm should have three key performance indicators that I call Smart Numbers.

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Question 196

Ten Minutes: Customer and Employee Feedback Spend the next ten minutes reviewing specific feedback from customers and employees.

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Question 197

30 Minutes: A Rock, or Single Issue The big mistake made at weekly meetings is covering everything every week. As a result, the team deals only with issues on a shallow level and never focuses its collective intelligence for a period of time on one issue. The key is focusing on a large priority for the month or quarter,

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Question 198

Closing Comments End your weekly meeting by asking each attendee to sum up with a word or phrase of reaction. It creates a formal closing for the meeting, it ensures that everyone’s had a chance to say something, and it gives you a window on what people are thinking and feeling. If you find there are lingering issues or conflicts, you can follow up.

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Question 199

It’s ideal if the weekly meeting is just before breakfast, lunch, or happy hour so the executives can have a more informal setting in which to discuss issues that surface during the structured part of the meeting. That informal time is often when real decisions are fleshed out.

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Question 200

The Monthly Meeting—Agenda Is Learning If the focus of the quarterly and annual meetings is setting strategy and the focus of the daily and weekly meetings is execution, the focus of the monthly is on learning—a chance for the executive team to “pass its DNA” down to the next level. This is a two-hour to four-hour meeting (we take four hours) for the extended management team to gather, to review the progress everyone is making on their priorities, to review the monthly P&L in detail, to discuss what’s working and not working from a process standpoint, and to make appropriate adjustments. It’s also a time to do an hour or two of specific training.

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Question 201

It’s your brand promise—the key factor that sets you apart from all competitors. Your brand promise is the starting point from which all other executive decisions are derived.

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Question 202

you’ll also see how successful companies evolve and change their brand promise over time.

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Question 203

Determining a brand promise is a fateful moment in the life of any company. Choose the right one—the one your customers respond to, the one you can track and execute day after day—and you win. It’s that simple. Choose the wrong one and you’ll probably flounder for years, never hitting your goals.

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Question 204

Your first point of reference when beginning the search for your measurable brand promise is your BHAG.

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Question 205

Why ten years? Because it’s so far out there, especially in New Economy terms, that nobody can question or debate your aims! This is key to rallying people behind your vision while providing a point of focus that will keep everything aligned.

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Question 206

all of the BHAGs I’ve mentioned are measurable. The BHAG serves as the foundational measure against which you determine your brand promise.

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Question 207

Define Your Sandbox Next, figure out your desired sphere of influence over the next three-to-five years.

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Question 208

Determine Customer Needs Based on the sandbox you’ve defined, ask yourself: what is your customers’ greatest need? I’m not asking about their wants—they’ll “want, want, want” you all the way to bankruptcy if you let them!

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Question 209

Once you’re clear on what that need really is, you’ll be that much closer to finding your measurable brand promise.

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Question 210

Bear in mind: your brand promise shouldn’t be easily accomplished. It ought to cause some stress in your organization.

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Question 211

one warning I can offer you as you home in on your own measurable brand promise, it’s to avoid getting caught up in marketing slogans.

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Mastering the Rockefeller Habits by Verne Harnish

Question 212

Control Your Bottleneck or Chokepoint At last I’ve arrived at what I like to call Rockefeller’s key strategy. Let me pose it to you in a question: Now that you’ve put a stake in the ground by determining your measurable brand promise, what are you going to do to lock it up, to hold that position? You’ve got to look for the bottlenecks or chokepoints—there’s always one or two—and figure out a strategy to either blow them up or neutralize their threat.

Answer 212

Mastering the Rockefeller Habits by Verne Harnish

Question 213

Everything Changes—Including Your Brand Promise

Answer 213

Mastering the Rockefeller Habits by Verne Harnish

Question 214

Just like Federal Express’s, your once-revolutionary brand promise will someday become table stakes, and probably sooner rather than later. Start working now on the next value-added improvement. If you don’t, somebody else will beat you to it.

Answer 214

Mastering the Rockefeller Habits by Verne Harnish

Question 215

Your measurable brand promise is crucial. It defines your company in the minds of the public. It gives your organization something huge and galvanizing to strive toward.

Answer 215

Mastering the Rockefeller Habits by Verne Harnish

Question 216

By considering your BHAG, defining your sandbox, determining customer needs, and controlling your bottleneck or chokepoint, you’ll have a measurable brand promise that will set you apart from your competition. That is, until your competition catches up and forces you to up the ante with a new and equally inspiring brand promise.

Answer 216

Mastering the Rockefeller Habits by Verne Harnish

Question 217

There is no magic involved in acquiring capital. It takes time, hard work, and an understanding of the dynamics of the process. The process consists of three basic phases: Preparation, Presentation, and Persistence.

Answer 217

Mastering the Rockefeller Habits by Verne Harnish

Question 218

the shortest distance between two points is clarity, and strategic planning brings about clarity.

Answer 218

Mastering the Rockefeller Habits by Verne Harnish

Question 219

A Knock Your Socks Off Loan Package Will: • Define your mission or niche in the marketplace • Present a vision of what the business can accomplish if it is successful • Demonstrate that you can track your money • Illustrate how well though out your strategies are and how you are prepared to deal with adversity if it arises • Outline specifically what you are going to do and how you will accomplish it • Identify the resources you will need and how you will access the capital to acquire them • Project where you will be in three to five years and what additional challenges you will face

Answer 219

Mastering the Rockefeller Habits by Verne Harnish

Question 220

It is important to take the attitude that an average package is not a package, it’s just average. While substance is critical, sizzle sells. Sizzle includes graphs, charts, research, and articles, as well as the professional look of the package itself.

Answer 220

Mastering the Rockefeller Habits by Verne Harnish

Question 221

A package should begin with a Table of Contents, which looks like this: Loan Package Table of Contents Executive Summary The Industry The Company Management and Ownership Financial Information/Projections Purpose of the Loan/Loan Request Exhibits

Answer 221

Mastering the Rockefeller Habits by Verne Harnish

Question 222

Executive Summary Section Your Executive Summary should create instant excitement and impact. It should spell out your company’s mission, clearly state the opportunities you see for your company and industry, and how those opportunities will result in increased earnings and profits. This section should never be more than two or three pages.

Answer 222

Mastering the Rockefeller Habits by Verne Harnish

Question 223

The Industry Section Never assume the banker knows anything about your industry. It is your job to convey the size, growth, and significance of your industry, as well as your specific niche in the marketplace. Your research should generate quotes from recognized authorities, such as business publications like Inc. magazine, The Wall Street Journal, and other business publications. Independent research will enhance your credibility.

Answer 223

Mastering the Rockefeller Habits by Verne Harnish

Question 224

The Company Section In this section, you should show your strengths, as well as your relative position within the marketplace. Below are typical components. History and Major Accomplishments: Banks are concerned about your track record. You want to show that you not only have the experience, but also have established yourself in the market. This is the section to boast about your progress. Divisions, Offices and Shop Locations: This will clarify the size and scope of your operation. Market Niche and Competitors: The more specific you can be about your market niche, the greater credibility you will demonstrate. You want to clearly show what differentiates you from the competition. It is equally important to identify your major competitors and their market advantages. This information demonstrates that you have done your homework and have a realistic perspective on the marketplace.

Answer 224

Mastering the Rockefeller Habits by Verne Harnish

Question 225

Marketing Plan: The best plans and ideas will not get off the ground if you don’t have a fine-tuned marketing plan to drive them.

Answer 225

Mastering the Rockefeller Habits by Verne Harnish

Question 226

A good marketing plan includes the methodology you will use to reach your target market. This might include: • Your data base • Information-gathering sources • Who will be doing the marketing • Specific types of marketing you will be doing • What the budget will be • What results you are anticipating • Why you will get the results you are anticipating • How you will measure the results • What you are currently doing and why it is working Your marketing plan could be a complete section itself. Clients: A client list can be impressive because of the diversity of your customer base, the quality and recognizability of the clients, or its sheer size.

Answer 226

Mastering the Rockefeller Habits by Verne Harnish

Question 227

Expansion Plans: If you are going to use the funds for growth, you should detail your expansion plans and demonstrate that they are both manageable and sound. Remember, while you may be excited about national or global expansion, it might make bankers nervous.

Answer 227

Mastering the Rockefeller Habits by Verne Harnish

Question 228

Company Values or Mission Statement: If you have a Mission Statement or Statement of Company Values, then place it at the beginning of the Company section. Highlighting the statement in italics or a different typeface will set it off nicely.

Answer 228

Mastering the Rockefeller Habits by Verne Harnish

Question 229

Profit Centers and Product Lines: By breaking out your profit centers and product lines one by one, you give the bank a clear understanding of how and where your company makes its money. Do not hesitate to include the gross profit of each profit center, as well as the percentage of business it generates.

Answer 229

Mastering the Rockefeller Habits by Verne Harnish

Question 230

Management and Ownership Section Both bankers and investors will look closely at the quality of personnel who run your company and who will successfully implement your plan. Begin this section with an organizational chart, and then do a brief biography of each of the key people. In the event that you will need to hire additional experts, indicate that need and describe the type of skills you will be looking for. Do not worry if a key person, including yourself, does not have academic credentials. What is important is to demonstrate the experience and skills they bring to the company.

Answer 230

Mastering the Rockefeller Habits by Verne Harnish

Question 231

You should also include a list of your Board of Directors and Advisory Board, as well as the professionals who advise your company, such as your accounting and law firms. If you are outsourcing key expertise, that should be included as well.

Answer 231

Mastering the Rockefeller Habits by Verne Harnish

Question 232

The Financial Information/Projections Section This will be the most difficult, time-consuming, and challenging aspect of the loan-package creation. Your financial projections should be for a three-year period and be presented through a Best, Probable, and Worst-Case scenario for each year. This should be done on a cash basis, line item by line item, and month by month. It should also include the assumptions that form the basis of these projections and the payback of the loan. This is the best way to show the bank that you really understand the movement and management of cash through your business as well as the strategic financial implications of your goals. Ideally, your historical financial P&Ls and current balance sheet will indicate top-line and bottom-line growth. If that is not the case, then part of your job is to explain why and indicate how you have corrected (or will correct) the situation. Although it is understandable that you may want to minimize profits or even show a loss on your tax returns, you will need to recast these numbers for the bank so they see the real income the business is generating—discretionary and other. Items like depreciation, the owner’s salary and compensation package, one-time expenses, and discretionary items such as charitable donations, can be added to a recast of the bottom line to add profits or change losses to profits. It will be very effective to chart the recast numbers on a bar graph to accentuate the positive. You will be be required to fill out a personal financial statement with your most recent tax return included.

Answer 232

Mastering the Rockefeller Habits by Verne Harnish

Question 233

Your Financial Section Should Include: • Three-year financial statements (P&Ls) • Tax returns and recast tax returns • Personal financial statement • Aging reports (accounts receivable and accounts payable) • Balance sheet • Cash-flow projections • Projected balance sheet • Contracts with clients for present and future work • Information about strategic relationships that will generate business • Any additional information that will help to make your case

Answer 233

Mastering the Rockefeller Habits by Verne Harnish

Question 234

The Purpose of the Loan/Loan Request Section In this section, spell out exactly what you want and reiterate what you will do with the funds. (You did put all this into the executive summary, didn’t you?) The section should be short, compelling, and to the point.

Answer 234

Mastering the Rockefeller Habits by Verne Harnish

Question 235

The Exhibits Section This section can include articles written about your company, letters of reference from clients, additional marketing material, citations, awards, pertinent articles about your industry, samples of your contracts from clients and strategic partners, and anything else that will add sizzle to your package.

Answer 235

Mastering the Rockefeller Habits by Verne Harnish

Question 236

If they say “No,” ask the banker for the name of a loan officer to call whose bank might be interested in your package. Most bankers know which banks can make loans that they cannot. Many business owners have found the right bank through this approach.

Answer 236

Mastering the Rockefeller Habits by Verne Harnish

Question 237

ask the banker to bring other decision-makers and to come to your place of business. If your business shows well, a loan officer will get a much better perspective of the dynamics of your company by seeing it in operation. Another reason to ask a banker to come to you is that it requires the banker to make an initial commitment in time, and you will have his or her undivided attention. Bankers love to get out of their offices, and many are required to make at least 20 cold calls per month. Visiting you helps them meet their quota.

Answer 237

Mastering the Rockefeller Habits by Verne Harnish

Question 238

I like a banker coming in to see another one going out. Bankers are competitive, and if they like the loan, they will work hard to capture your business. Tell each banker you are taking the time to find the right bank for a long-term relationship.

Answer 238

Mastering the Rockefeller Habits by Verne Harnish

Question 239

Find the Red Flags Before you make presentations to your target banks, or after you make your first couple of test presentations, you should identify any red flags that might work against you. A red flag is anything that could reflect negatively on your company,

Answer 239

Mastering the Rockefeller Habits by Verne Harnish

Question 240

John Wooden, the legendary Hall of Fame former coach of UCLA said, “Failing to plan is planning to fail.”

Answer 240

Mastering the Rockefeller Habits by Verne Harnish

Question 241

Another Hall of Fame coach, Vince Lombardi, once said, “Fatigue makes cowards of us all.” If you are willing to understand the process, stay the course, and pay the price, you will create the opportunity to realize your goals and control your destiny.

Answer 241

Mastering the Rockefeller Habits by Verne Harnish

Question 242

Keys to Success • The wisdom to know your strengths and how to highlight them. • The endurance and patience to go the distance. • An awareness of your limitations and how to play them down. • The ability to create the perception that you have the vision, competence, and commitment to execute your plan. • Demonstrate confidence to the lender. • Become a master of the system. Be so good at giving the lenders what they want that they are comfortable giving you what you need. • Be confident and shop until you drop. No one lender knows enough about your business to tell you it can’t work.

Answer 242

Mastering the Rockefeller Habits by Verne Harnish