Execution is about turning your hard-earned revenue (top line income that remember comes from Strategy) into bottom line net profit. Companies that are strong on top line performance and yet struggle to make a reasonable or attractive bottom line profit typically have challenges with Execution – that is being both efficient and effective operationally. In this blog we will cover the principles and habits that John D. Rockefeller used to build an operationally excellent company and which Verne Harnish (Scaling Up and Mastering the Rockefeller Habits) has adapted for mid-market growth companies.
Execution is one of the Four Decisions every business must get right or risk leaving significant revenues, profits, and time on the table.
Execution is all about hitting and exceeding company targets like gross profit margin and profit goals. Think about the question in this picture: How many consecutive months have your company exceeded its revenue and profit goals? If you consistently meet or exceed your targets, you are outstanding at execution. If you are not consistently hitting your targets, what’s getting in the way? This blog and others to follow will help you identify and significantly improve in the areas that allow you to exceed your targets.
Execution starts with a plan, and columns 4-7 on the One Page Strategic Plan allow you to document this plan in a simple and easy-to-understand format. Note the sections identified on the One Page Strategic Plan pictured here that deal with Execution. These columns help us drill down on annual/quarterly/individual plans and set our quarterly themes, rewards, and celebrations. The key to a successful year/quarter is your execution plan and how you communicate the plan to the organization. With this blog we start developing your plans and show you how to communicate the plan effectively to the team. In the process, we’ll be using each of the 3 execution disciplines (priorities, data/metrics, and meeting rhythms) to achieve your goals.
The list of Execution Growth Tools includes: Rockefeller Habits Checklist, the three Execution Disciplines at Positioning Systems we call Strategic Discipline: Priorities, Metrics and Meeting Rhythms, Critical Number, Customer & Employee Feedback, NPS (eNPS), Annual Planning, Quarterly Planning, Themes, Individual Plan, Dashboards which include Success Criteria.
Positioning Systems is especially qualified to help in these areas of Execution. If you’ve completed Gallup’s Strength’s based leadership test you know there are four domains of Leadership: Execution, Influencing, Relationship Building and Strategic Thinking. Personally my strengths are spread over each of these four domains, however two of my strengths fall under Execution, Discipline and Deliberative. In addition coaching for ten years as a senior E-Myth Consultant established a deep root of systemic skills and appreciation for detail.
We’ve discussed the Rockefeller Habits Checklist many times before in this blog along with Strategic Discipline, and it’s execution disciplines of Priorities, Metrics and Meetings.
Please refer to Updated Discipline: New Rockefeller Habits Checklist and STRATEGIC DISCIPLINE Three Disciplines – Leadership Routines that Drive Growth for additional insights into the Rockefeller Habits Checklist and the three execution disciplines of Priorities, Metrics and Meeting Rhythms.
Rockefeller Habits Checklist: As noted in the blog mentioned above the Rockefeller Habits Checklist has been updated to make it more meaningful to your business, and especially for helping you score how your business is doing to determine what needs to change in order to achieve better bottom line profits and an improved profit margin. Alan Rudy is still one of the best examples of building a business by following the Rockefeller Habits Checklist. Check out Execution – Alan Rudy’s Success Story for more about the success Rudy’s had building three very successful mid-sized growth companies and a short 2 minute video on why the checklist is so important in his success.
There are still 10 disciplines that make up the Rockefeller Habits Checklist; however there are now four check boxes under each of these ten disciplines to help you specifically determine how well you’re doing. If you can check all four you’re probably doing pretty well and could mark yourself a 10 at this discipline. If you check ¾ you’re probably at a 7 or 8, 2 of the four and you’re mostly likely a 5 in that discipline. ¼ and you’re probably a 2 or 3. I’ve found this new format and number of check boxes provides for a better understanding of the principles and especially helps customers determine exactly how well they’re doing.
Frequently the first time you go through the Rockefeller Habits Checklist you score yourself a bit higher than you realize. Upon 3-6 months of working on the principles with a coach you suddenly discover that what you were doing that you felt reached the target is hopelessly inadequate in terms of being suitable to reaching your execution benchmarks. You need to step it up and become more focused and more aware of the details and systems required to truly make a difference in gross profit margin and net profit gains.
Do not underestimate the value of this checklist – it helps major functions of everyday business to run smoothly and efficiently. The value of the checklist is that it helps to remind you what you need to be doing on an ongoing basis. Just like a pilot of a plane, there are significant tasks that must be done regularly to ensure a safe flight. The pilot may have flown thousands of times, but still pulls a checklist out each time before takeoff. The discipline of using a checklist is what drives the best companies to succeed – it helps them to focus and attain operational excellence.
Have you and your leadership team scored your business on the Rockefeller Habits Checklist?
If so – how do we feel? Where are you aligned? Where aren’t you aligned? Spend a few minutes finding the one area that would give you the most impact if you focused on it in the next 90 days. Ask your leadership team to choose the one they think company should work on – see what you decide.
Another important point that Rudy notes in the video, don’t try to digest the checklist all at once, make quarter-by-quarter improvements. If you just do one thing, do the daily huddle. As we’ve seen with clients as they’ve applied the checklist over time, firefighting time goes way down and executives have more time to run the company and do what they do best. Great execution not only improves profits, it gives you time to plan/think.
Strategic Discipline: Three Execution Disciplines, Priorities, Metrics, and Meeting Rhythms: These 3 execution disciplines are critical to execution success. The key to a successful year and quarter is your execution plan and your communication plan. You need to identify the highest priority metrics and improvements and then meet regularly to keep the focus on the priorities and removing bottlenecks.
- Priorities: What are the “right” priorities? Priorities are focused on outcomes that make a difference in an organization; they matter! In the Four Decisions framework, priorities (whether annual or quarterly) should substantially align with the long-term objectives of the company, the BHAG and 3 to 5-year plan(s). Priorities also have a clear completion point (finish line) and are measurable with a Key Performance Indicator (KPI). Most, if not all, of you are familiar with the 80/20 rule: 80% of the results from a system or community statistically are driven by 20% of the contributors’ efforts. This is also known, more accurately, as the Pareto principle, named after the Italian economist Vilfredo Pareto. A key principle that the Pareto principle teaches us is to carefully choose what priorities to focus on and allocate the right resources to get the job done efficiently and effectively.
- Metrics: What are the key metrics (KPIs)? Metrics: the ability to gather the key numbers of the organization to make sure your performance is in line with your plans. Metrics help us answer the question ”How are we doing?” and great metrics help you predict “How will we be doing?” They help us look behind and look ahead. Data: How are you using customer/employee feedback to guide and inform your top priorities? Leading a business can be very much like driving a car at times. For example, what would happen if you covered your windshield with black paint and were asked to drive a route ONLY looking through the rear-view mirror? Would it be possible? What words would you use to describe this experience? How about the other way around? Driving a car without a rear-view mirror? The latter are called lagging indicators and the forward looking metrics are called leading indicators. You need both, yet most business concentrate way too much on the lagging. There are many kinds of metrics (profit/loss, balance sheet, departmental, people, process), but sometimes companies try to track so many numbers that the leaders can’t possibly read and digest them all. Using the priority discipline, we’ll help you to find the smaller number of metrics that make the biggest difference to your organization. In growth companies – and business – we call these leading and lagging indicators: Key Performance Indicators (KPIs) that help you determine where you will be in the near future (leading indicators) and where you have successfully been in the recent past (lagging indicators). The most successful growth companies measure and monitor both for successful development and execution of their quarterly and annual plans. The ratio of leading to lagging indicators in your business should be 2 leading to one lagging. Remember one of the key leadership functions is the ability to forecast.
- Meeting Rhythms: Once you know your targets, how are you communicating them to the team with clarity and speed and staying on top of them? The regular set of communication touch points you have as a team and company, to connect, synchronize and align. When we survey many of our clients prior to their first One-Page Planning Session and ask the question ‘What’s the #1 issue in your company right now?’ we can almost always bet that the majority of responses will have something to do with “communication.” It does not matter what size of organization we are surveying or what their industry is, it is almost a universal response. Improving communication, especially among those clients growing at a Gazelles pace of 20% or more per year, is at the top of the list every time. Starting with Daily Huddles, Weekly, Monthly, Quarterly and Annual Planning these are the critical meetings your business needs to be having consistently in order to execute at a high level.