Marty O’Neill’s latest book, The Power of an Internal Franchise shows you, the reader, how to lead, engage, inspire and empower the members of any organization to embrace that complete and total dedication to the success of their organization. Marty has laid out the argument with data and case studies, profiles and analysis. Then he has taken it a step further to offer tips and how-to’s to make that transition.
Marty O’Neill, is founder and CEO of Corsum Consulting, a firm focused on building enterprise value for mid market companies. Marty has been an operator and consultant in the technology services and software industries for 25 years. He has started technology based services companies, led two IT Services firms through successful acquisitions and ran a business unit for a Fortune 50 company.
Prior to this he was CEO of Canal Bridge Consulting, a management consulting firm. Marty was also the President and CEO of CTX Corporation, an IT Service company in the Federal Intel market. He founded and was COO and Director of Rapid Systems Solutions, an IT services company. Marty started his career as a consultant with Booz, Allen and Hamilton and later moved to Oracle in a sales role.
You can listen to our conversation at this link.
Marty, good morning.
Good morning, Zane.
Thanks for writing yet another great book and for taking the time to be here to talk about it today.
Well, it’s my pleasure.
This 3rd book is sort of a compilation or a continuation of I book I wrote early on called Act Like an Owner, which I wrote with a colleague Bob Blonchek...and the 2nd book we wrote as called Building Business Value.* So, this 3rd book sorta picks up many of the themes of the first two books and carries them to a new level.
We felt like the marketplace had changed a lot. A lot of change of the attitudes of trust and what the workforce wanted and how the CEOs thought about the dynamics of changing of the workforce. So, we thought it was time to write about leadership and the workplace now in light of all those changes.
On the back of my advanced copy of this current book it is written in bold type, at the top: Unlock the Entrepreneurial Spirit of Your Entire Workforce.
Judging by declining levels of employee engagement, the up to $300 billion per year lost in productivity according to Gallup organization and a decline of over 75% for return on assets among publicly traded companies since 1965 according to John Hagel and John Seeley Brown....most companies are either afraid or unable to do just that. Given the data that says they should...what is holding them back?
You know there’s a couple of ways to begin to look at that. We sorta took it from two angles. One is very logical. What CEOs felt. What could CEOs do to get the most out of their workplace. They answered with the following:
- They needed to develop the next generation of leaders.
- They needed to find ways to increase skills and knowledge of their workforce.
- They need to figure out how to align pay with their performance.
- They need to be better communicators and communicate the correct message.
- They need to create an engaged and empowered workforce.
So, they felt like if they could help the members of their organization be the best versions of themselves then they could be way ahead of the game and farther down the road to success.
Now, that’s one side. If you flip that and say,
“Oh, ok. That’s what the CEOs think. But what does the workforce think? “
And they said, and this is according to the book 12: The elements of a great managing, that when these attributes were present in a company then profitability went up. And so, these are a bit more touchy-feely:
- The employees needed to feel that they had the opportunity and the tools to do their best every day.
- They needed to believe that their fellow employees were committed to quality and success.
- They needed to feel that their opinions counted and that they could act on those opinions and it would effect the performance of the company.
- They needed to have a sense of connection between their work and the company’s mission.
There’s two sides of the coin, what the employees felt they needed to have and what the CEO’s believed they needed to do.
So, the trick is how do we align those things?
That’s really the message of the book:
Aligning what the CEOs believe they need to to create a productive workforce and what employees say does indeed make them more productive and the company more profitable.
So, that’s the premise of the book: aligning those two fields of thought.
On the other hand, there's some truth to the rumor that entrepreneurs are entrepreneurs because they can't take orders and can't work with anybody else. Some businesses might see that line and think
We'll that might sound good, but we don't want to do that.
Tell us what they're missing and why they should want to A. read your book and B. Unlock the Entrepreneurial Spirit of Your Entire Workforce.
That’s a great story. I was on the phone yesterday with a COO and he said to me:
“We need to get inside to see the CEO of the company.”
It’s a mid-sized market company, about a $50 million company. And he said:
“I’m a fraid if you open up with that entrepreneurial line, she’s going to shrink away from us.”
I shared the exercise with every public presentation I give. And what I do is break the room into two pieces. And I don’t tell each side what the question is that they are answering.
One side of the room is given the question:
“What are the attributes of your most favorite employee? “
And the other side of the room answers:
“What are the attributes of an entrepreneur?”
And we begin to write those attributes down on a big easel in the front of the room. And wouldn’t you know they are the exact same attributes with one exception. It’s always the exact same attributes with one exception.
People always value guys that get the job done, that have initiative and are accountable and that they have esprit de corps and they are focused on the customer.
These are all attributes that the best employees have and the best entrepreneurs have.
The only thing that we need to address from an attribute standpoint is risk. So, many people think that entrepreneurs are really risky people. And once we get through to the conversation that entrepreneurs are really people that can manage risk then we can continue on to the dialogue that indeed the entrepreneur attributes that we love so much are the exact same attributes we want in our workforce members.
The benefits, we can go through this whole discussion and they scream out to you, you want an engaged workforce. You gotta think about:
Wouldn’t you want a workforce:
- thinking about winning new business, new customers?
- that kept the best interests of the company in mind as they went about their daily work?
- where they were accountable for positive results.
- that never said “this isn’t my job.”
- that understood that business is about making money and that mkaing money is important.
- that understood that part of their job was to keep costs under control.
- who could draw this line of sight between what what they do every day and the financial performance of the company.
- who stayed with the organization because they felt it was the best place for them to be.
- who told stories in the community about what a great place it was.
These are the kind of attributes we laud in our entrepreneurial workforce. These are the same attributes we want to have in the workforce that we have in our companies.
That’s a great answer. With all the data out there that shows the higher, better, financial results for the company with an engaged workforce....then showing the attributes of an entrepreneur...it still astonishes me that there remains such a huge gap with employee engagement.
The list goes on and on. You’re correct.
Who did you write this for? Describe the reader you pictured as you wrote?
That’s a great question.
I have a real passion for equipping business leaders with tools. I fell that’s kinda my job. I’ve always been one to look for whatever tools I could find. And in running organizations, I always felt like frankly it was big sandbox and I would learn and find new ways to do things differently, change the workforce, delight my customers, finding the tools that work. I feel like my job is to find the tools to give entrepreneurs, executives, vision managers, owners, CEOs, additional tools to make their companies better, create more value and at the same time creating a workplace where people can stay engaged and say:
“This is where I want to be. These are the kinds of things I enjoy doing and I enjoy doing them for a higher purpose.”
So, that’s my job. My job is to create tools and offer them and teach people how to use them and then I hope they make an impact.
My perfect reader, my perfect person that I love talking to is the beleaguered manager that is interested in wanting to make a change in the organization, that says:
“I think if we could do a few things differently, that if we could change a little bit of how we do things, if we could engage folks a little bit, then we have the opportunity to set the world on fire.
So, that’s the folks I love talking to.
Excellent. Great answer.
Our friend, Erika Andersen coined a phrase and question in her book Being Strategic I use in nearly all of these interviews. That phrase is reasonable aspiration or hoped-for future. And the question she asks is:
What is our reasonable aspiration or hoped-for future?
What was your reasonable aspiration or hoped-for future with writing this book?
You know, I’ve done a lot of work with companies trying to create additional enterprise value. And sometimes they create enterprise value because they are considering an exit. The management team may be considering selling the company. That’s a fair enough goal for them.
But, I want people to think about in terms of an internal franchise, is the aspiration is that they will take what they do and consider this internal franchise as a model for a way to grow their company, as a way to be very specific and purposeful on defining exactly what they do so they can take that operating model, they can take that defined way of doing business and instantiating it or offering it to engaged or entrepreneurial employees.
It’s a way to further equip business leaders to grow their business.
It’s not, it’s a less risky version of making an acquisition or bringing on a brand new Sales VP who’s going to run your Southwest VP position. It’s a model where you take your greatest attributes with your company and shining them up.
I like the story that you may have heard of Dr. Russell Conwell who talks about acres of diamonds. And he started Temple University. And he went all over the world telling this story.
The African farmer who was looking for ways to make a million dollars. And he sold his farm and he went all around Africa looking for ways he could mine diamonds so he could become wealthy.
Well, the farmer that he sold his land to went down to the riverbed one day and he saw this shiny material and it turned out the farmer was sitting on one of the largest diamond fields in the history of the world.
The point of the story is that many of us are sitting on those acres of diamonds. We have to find those in our organization. We have to find them, shine them up, take their skills and abilities to market.
Again, it’s a way to grow your business without the risky version of acquisition; you can do that. But this is a way to do it organically.
That’s my reasonable aspiration is that people realize they are sitting on many times these acres of diamonds. And there’s a great way to grow your business by looking at what you have and shining it up and taking it up to market.
Your background should make this next question easy to answer. What are some of the metrics you will use to measure your progress towards that reasonable aspiration or hoped-for future.
Again, I spend a lot of time helping companies understand their current enterprise value and then what they ultimately want to get to. Many companies, especially in the privately-held mid-market don’t have a great feel for their value. They may say they are valued at $5 million, but they really don’t know.
And, so the way to measure this is quite simple. You go through an evaluation process. You say we’re valued at $1 million, $2 million, $10 million $500 million, and then you have objectives and goals to get there.
And once you take this internal franchise model you stamp out additional franchises in a step-wide fashion, then you can begin to see your enterprise value increase over time.
So, it’s a way to increase enterprise value and given my engineering background, it’s very easy way to measure and assess in this ever-continuing model of seeing how you can improve and increase your enterprise value by rolling out additional internal franchises.
Again, the title of your book is The Power of an Internal Franchise. What is an internal franchise?
I like to take people back to that traditional concept of internal franchises. We all have seen them. We know the McDonald’s and 7-11’s of the world.
The traditional franchise is made up of the franchisor, a franchisee and then this licensing agreement that says you as a franchisee are going to execute a set of business rules according to this franchise agreement.
Franchises are a great way to build business. Franchises get stamped out all of the world. It’s a great way for franchisee to start a business. You can scratch that entrepreneurial itch. You can take on more leadership, more responsibility. Maybe you can make a bit more money and have a better life.
The concept, the theory, behind it is if it can work for traditional entrepreneurs in a traditional franchise model why can’t it work internally to a company. So, that’s the concept. That’s the thought process behind an internal franchise.
An internal franchise is made up of an operating model. And that’s a franchisor. That’s the discrete, very clear, purposeful definition of the company. And the franchisee is this engaged entrepreneurial employee; someone that’s really excited about doing something. Then, the franchise agreement is not quite a legal agreement. But, it’s this cultural of ownership which exists in the organization. And it’s as binding as any legal document because it’s the norms and behaviors of your organization. It’s the culture which exists within your organization. And we call that a culture of ownership.
Think in terms of a traditional franchise. And then the 3 components of an internal franchise are an operating model, the engaged entrepreneurial employee, and this culture of ownership.
That defines the internal franchise.
Excellent. You know, whenever I have a great guest on that gives me great answers, I get lost in scribbling my notes and thinking about what they are saying. You caught me at a moment where I was thinking about the model and it’s so simple and clear.
That’s good you’re writing down. There may be a test at the end of the interview.
Thank you. Thank you for that. Is it multiple choice...?
Yeah, we’ll make it multiple choice. We’ll give you an out.
Some of these questions I am asking you have already answered. But I think their points are important enough to give a bit more attention.
What's the source of the power of an internal franchise?
That’s a fabulous question.
I really think that an internal franchise is this last untapped channel of distribution for your products or services. Let me say that again because that’s really critical.
“It’s the last untapped channel of distribution for your products or services.”
You’ve decided to take your product to market in a certain way. You’ve created channels of partnering in different ways to take your product to market. Or your service. You begin to have a service-delivery methodology or an approach about how to go to market and how to render your services.
But this is a new way for you to take what you have done and continue to stamp it out in that same fashion. It’s another untapped channel of distribution your company has.
And that’s the power behind it. The power behind it is that it’s a real force multiplier. It’s saying that if you’ve done something ok in your business life and in order for you to grow then you need to tap this whole thought process of how to grow and how to leverage what you’ve done in the past.
That’s the power behind it. The power is being clear and purposeful and declarative on exactly how your business runs; and there’s a lot that goes into that.
And then it’s finding the right people; that’s not trivial either.
Then it’s making sure your culture supports this.
Many times what we find is one of these 3 things aren’t clearly defined. That’s when you’ll have some challenges in the internal franchise.
But, once those three things are in place and clicking then the source of its power is in the idea that it’s a force multiplier.
You describe 5 Entrepreneurial Beliefs in your book. What are they?
Yeah, these are my favorite.
This is the test to see if what I call a culture of ownership exists in an organization. If you can walk through an organization then you can ask the people:
Belief in the Leader.
- Do they believe in the leader of the organization?
- Is their leader somebody with honesty and integrity, vision and competency.
- And people begin to trust these people.
Belief in the Purpose.
- So, what do you stand for?
- Why are you in business?
- What would it matter if you went out of business?
- Would anybody be effected?
- What is the purpose of your organization?
Belief in the Operating Model. I refer to that a little bit earlier.
- How does your business operate?
- What are the ways, the financial model and the operating parameters and the core processes?
- Are they all clearly defined in your operating model?
Belief in their Empowerment.
- Do the people have a belief in themselves and their ability to shape the organization?
- Do they have the authority and the autonomy and the ability to act in a way that is high initiative and high accountability?
Belief in the Reward System.
- Is there a belief in the reward system? Entrepreneurs sorta know that if they work hard and win business they have a chance for a reward.
I think of a reward in 2 different ways. One is the psychic income and one is the pocketbook income. You have to understand both.
- What gets people jazzed?
- Why do they show up everyday?
- And what’s the fairness around the pocketbook?
What are the measures to the behaviors that we’re looking for that we’re going to build long-term business value? That’s part of the reward component.
Those are the 5 beliefs. And if you can walk through an organization and do that check then you know the beginnings of a culture of ownership.
That’s the glue that’s going to hold all this together.
And, that starts with the 5 beliefs.
Beautiful. I’m going to ask an unfair question. But, that’s never stopped me before. Which one is the most important among these 5?
It’s kind of a first among equals.
But I may want to name Purpose. You sorta have to know what you’re ain business for, right. I always tell the story of the person walking down the street and there was a gentleman working and he asked him:
“What are you doing?”
And it was pretty obvious what he was doing.
“I’m laying brick. What do you think I’m doing?”
And was laying brick after brick. And he walked a little bit further down that same street and he asked the next guy he saw:
“What are you doing?”
And he said:
“I’m building a cathedral.”
So. It’s the purpose that the first person didn’t have that the second person had while doing the same thing.
Why you’re in business is critical. We run across businesses all the time that have a real passion for what they do. And you may run across businesses that are just existing. And there’s very difficult to find passion in organizations that just exist.
And you don’t have to be curing cancer. I was in a large machine-shop the other day here in Maryland. That’s a very passionate place because they all took their work so seriously. And they all co-opted the mission of their clients, whether it was making auto-parts or weapons systems; they all took that very seriously.
The most important thing is what they stand for. As Ronald Reagan said:
“If you don’t know what you stand for, you’ll fall for anything.”
That’s not dissimilar to this. You have to know your purpose.
That’s what entrepreneurs get intuitively. People that are beginning to feel like intra-preneurs or acting like owners developing this culture of ownership. And then they are going to act accordingly. They’re not going to do anything this is going to violate that.
Which is the one you see most evident in successful entrepreneurs?
The one that is most evident is the Leader. Almost everybody believes in this person.
If it’s an entrepreneur organization then there is some passion around this person.That’s a bit of a hero-mentality that can be a bit of a negative in organizations. The chances are the leader or the founder was able to do everything, being the chief cook and bottle-washer...being the person who could do everything...and that’s a hero-mentality.
What happens in a lot of organizations is they can’t scale because of that. They haven’t built up any infrastructure or built any process that they can teach how the company works to other people.
Folks almost always believe that the leader can do things. But when they can’t scale is when there’s no way for that hero-mentality to continue.
On the flip-side, what I see is absent most often are two things. One is the operating model being exclusively defined. It’s the business focus. It’s the key management indicators. It’s the operating parameters. That stuff is really well-defined. And, as a result of that, there’s no way to teach the next generation of leaders exactly how the company works.
That’s very very important. They don’t really quite know what to do next. It’s not clear. It’s in the minds of a few and since they haven’t done a good job of defining this operating model, how this business works, they have a very difficult time in growing a company on creating franchises because they haven’t taken the time to be specific on declaring their business model.
What’s an example of a company where you saw that happen? What are some ripple-effects that would let our readers know when they face that situation?
The fallout is when you find there’s no way to scale. If you sit inside a meeting and there’s an opportunity to do something and you realize the same two people are writing proposals all of the time and the same 2 or 3 people are the ones who are leading the engagement. And it’s the same people doing the same thing over and over.
What does Einstein tell us? That’s the definition of insanity: doing the same thing over and over and expecting different results.
So, when you find yourself not being able to build capacity and not being able to tap on new people and not being able to develop new leaders then it’s probably because you didn’t take the time to do two things.
One is clearly defining your business model.
Number two is explicitly saying these are the folks I have to groom to take on this business model and these are the folks I have to teach and I have to give them the management and leadership skills to pull this off.
"I have to teach them how this thing works. And I have to give them the leadership and management skills to implement."
So, when you’re in an organization you realize I’m doing the same thing I’m doing for the last 20 years or the people in my group are doing the same things. You’re unscaleable and you’re going to be caught in that trap until you do something different.
I loved what you wrote about competing on price. You wrote:
Competing on price never works. You have a choice: you can position your company, or you can compete. Competing means price wars, higher costs, more turnover, and dissatisfied customers.
So clear.
On the other hand, why do so many companies see that as the only way to compete and why are so many discount business models like GroupOn, etc, attracting so many investment dollars and clients. Don't their clients know that once you lower prices you can rarely raise them, except if you're an oil company selling gas to consumers.
Yeah. I think in terms of competing on price around the workplace, the culture and the staff.
Let me tell you a story. A number of years ago, in our business we gave a lot of autonomy and authority to our project leads. They could, they did a lot on setting prices.
But, when they were uninformed and uneducated on the important of keeping prices up the first thing they did in negotiation was discount price. That was the last thing we wanted them to do. And, that was the first thing they did with discounting price
So, one day our CFO walked into the office and said:
“Do you realize that we paid the clown at the summer picnic more than our average billing rate?”
This is a company filled with people with master’s degrees in technology; very bright people. Not to say that clowns aren’t worth their weight in gold, but we were paying the clown at the summer picnic more than our billing rate.
What we did is we find out that this is when empowerment runs astray. We gave them empowerment but we didn’t teach them how the business needed to run. They took that empowerment and the first thing they did was discount it.
So, what we did was, we had the CFO show up at the next all hands meeting with the financial numbers for the company. And he was dressed up like Bozo the Clown. From then on we had the “Never Go Below the Clown Rate” mantra. And after that our profits soared because our project leaders realized we were giving away a lot of margin.
It wasn’t their fault. We gave them the empowerment, but we didn’t give them the tools nor the ability nor the thought process of why making money was important to our thought process.
We were on the right track. We gave them the ability to do things. But we didn’t teach them how important it was to make certain decisions in the field.
So, you can’t have one without the other. So, when people go down that path of “let’s discount quickly,".... it’s really the last point of negotiation.
In this book I had a conversation with a graphics person. And in the very first conversation he wad with me, when we discussed his fee and his rate, he said:
“But I can discount that. I can cut back on that.”
And I thought:
“Jeez. We need to teach you that that is not the first thing you lead with in a negotiation.”
But, of course, I took him up on his offer.
But the point is that’s not the first thing people lead with because they don’t understand the business.
That’s a great story, a great way to illustrate it. When the CFO came into your office and told you that your billing rate was lower than what you paid to the clown at the company picnic, that must have got everybody’s attention.
Everybody’s attention!
I think what’s important for leadership to do is, especially in financial matters, and I’m a big advocate of teaching people, creating a line-of-sight between what they do everyday in the performance of the company and the financial performance of the company. So, that means folks have to understand how the company works.
In the book, I share a tool, and there’s lots of tools to do it, but treach peple how the company works. There’s one tool that I have used in the past that basically is a balance sheet and an income statement. It’s like you’re playing monopoly.
You basically run the company for a 3-month period, a quarter. And everybody that plays the game, this should be as many people as you can get to do it within your company, they understand how money comes into the company and what ends up on the bottom-line. Because, frankly, most people believe a lot more money ends up on the bottom-line than actually does.
So, you want them to make good business decisions in the field. And if they don’t have that knowledge they just cannot make those good decisions. And they need to be taught.
That’s one of the mnemonics we use later in the book. That’s the trust mnemonic. The first T in Trust is to Teach. Teach people your operating model. Teach as many people as you can your operating model. Because, if they are equipped with this knowledge they will make good decisions in the field.
Great. Thank you so much.
So, if they’re not going to compete on price then they’re going to have to position their company. What are three ways a brand can position itself? I know you talk a little bit about it in your book.
When I think of brand I probably think less of products than I do the workplace. That’s what I talk about in the book. You could imagine your workplace that had a brand that would attract and retain great people. You workplace had a brand that everybody wanted to come there.
Then you have a desirable entity. You have the place everybody wants to come work for in your region or market segment.
But you gotta have a few things to make sure that your brand is up to snuff.
The first is credibility. You have to be credible to your brand. You have to be customized to your market-segment. And there has to be some level of credibility. And the credibility comes from within the organization.
This is when a lot of companies go astray. A lot of companies say:
“Come in, Marty, and help us change our workplace so we can then begin telling people about it.”
That doesn’t work when there are website out there like Glassdoors and people log in there and say horrible things about their company. When those stories get on the marketplace then there’s very little credibility.
You have to align what you say with what you’re doing with the company. There’s a lot of great examples out there like SAAS and a company here in Maryland called Collaborative Spaces. They are a couple of examples of companies that really have credible workplace brands.
The second thing is customizing. You have to know what you are looking for. You have to know the kind of workplace yo are trying to create and it meets your market space. Google has to do different things than a medical supplier. It’s a different kind of crowd you’re trying to reach. You have to customize that to the market segment you’re in, the region that you’re in, the age group you’re trying to attract and retain.
So this one-size fits all, that some of us got caught up in during the dotcom years...that doesn’t really fit.
The last is this thought process of independence. It needs to be living on its own. The example I use is King Arthur Flour, which is one of the oldest companies, in fact they were around when George Washington was president of the United States.
One of the reasons they have been around forever and they have had such high-retention and they have reinvented themselves a number of times is because their culture can stand on its own. The company communicates about everything in the organization on a regular basis. The powers of the workplace, the workers, are asked to be partners in the company in creating the workplace.
These are the things to think about.
- Is it a brand?
- Is it a differentiator?
- Does it create loyalty?
- Is there an additional value that is created from your workplace?
Those are the three things:
- Credibility
- Customize
- Independence.
I love the part about attracting the right people. And I see so many brand experts, and I’m sure you do as well, that take the approach that you can, pretty much, shmear on a brand. The lipstick on the pig approach.
I love it that you flip that and say:
It’s your employees that make your brand.
There was a cool company I did some work with in the past. I really tout their positive brand.
One of the things they do is when you interview there, by the time you get home from your intervierw, you’ll receive a customized video from the CEO thanking you for coming there, naming who you saw and the topic and it will be attached to your email by the time you get home.
What does that do? It matches the truth of what the company talks about on its website and the experience they had during the interview process.
Now, this person may not get the job. But, they’re going to walk away thinking:
“That is the coolest company I have ever been associated with.”
It creates a loyalty; it creates a differentiator; it creates buzz in the marketplace.
But the truth has to be alive. The old joke is that:
"The truth will set you free from our religious backgrounds. "
And it’s true. The truth is going to allow you to live out this brand. Because when there is duplicity in the brand and it caves in quickly. That word gets around and it’s the worst thing you could have done.
I loved your unique approach to verifying your brand's claims. You suggested that brands prove their claims with prospective employees. That example you gave there was a first step in proving a company’s claims to a prospective employee. How would that work?
You think about a leadership team has to define their Truths. What are the 3-5 Truths that exist around a workplace brand? They may say:
“This is an empowered workplace.”
Well, how do you know? What does it mean? How do you prove that?
So, you have to take the things you are claiming about your workplace and you have to be able to prove that.
The worst meeting a leader can have is with an employee who has only been on the workforce for a couple of months and they tell you that:
“The demo was not the same as it turned out to be. You guys misled me in the recruiting process. "
That’s the worst thing that can happen. It’s the worst message you can get out there.
If you’re going to declare these truths, if you’re going to make certain declarations about the workforce, before you make that public and saying that on your website and any promotional pieces, make sure you can prove that. And have anecdotal evidence to prove that.
Another company that I did some work with that was really a fun exercise to do was they took a video out to their company picnic and asked their employees:
“Why did you come to work here?”
And that’s the truths they began to define. They didn’t come up with the truths from the CEO’s ivory tower. They came up with the truths from asking the workplace employees.
And then they began to make sure they could prove that over and over. That became the core of their culture.
Again, there has to be alignment between what you claim and what truth really exists.
And, that’s verification of the brand.
Again, that example just reinforces the message of your book:
you are turning employees into owners and letting them be the spokesperson for your brand. In their own words.
That’s much more cost-effective, much more powerful.
Yet, I still come back to the question:
Why are so few companies courageous enough to do that?
I think it’s a misalignment of priorities. If you and I think we’re going to succeed with others, then there’s an opportunity for everyone to succeed.
But, what I find with the companies that struggle with the leaders getting this and they might say:
" What can I do to to the workforce to make them change, to get them engaged? "
I find that the completely wrong question to ask. They shouldn’t be asking what they can do TO the workforce. They should ask:
" What can I do to change the environment to unleash this, the natural tendencies to get involved, to be curious, to be helpful, to want to achieve things. "
So when leaders begin to think about what they can do to manipulate things or what can I do to change YOU then that’s the wrong question. They should be asking:
What can I do to change the environment or create the workplace?
I use the analogy:
" It’s not the seeds, it’s the soil. "
I’m a big fan of the workforce. Occasionally, there’s a bad seed. Right?
But what I find is the workplace caustic or the soil has been tainted somehow.
Engaged employees means there is interest, of course. But, they have to have opportunities. Engagement occurs where there’s a connection between engagement and opportunity.
Sometimes, engagement means with folks means their behavior does have to change. But behavior only changes hen they’re pre-disposed to thinking that something positive might be able to happen.
If you’re thinking that “nothing positive is going to change around here”, then they’re not going to engage and they’re not going to change their behavior.
So, when the idea is possible and they begin to think that something is possible then they begin to change their attitude and then they begin to change their behavior. And THEN you can begin to measure things and start to reward things on changed behavior.
But they have to start with pre-disposition and that’s around emotions and beliefs and that’s around these softer things that there’s something that’s possible for them. And then they’ll change in their attitude and THEN they’ll change their behavior.
I think what so many leaders do is start with the wrong question:
“ What can I do to change the workforce? “
They should be considering:
“ What can I do to change the environment that is going to allow their change in attitude which will over time change their behavior.”
You listed 22 components a service company should have on its financial dashboard. Most of them seemed standard: EBITDA, Revenue, Overhead as percentage of sales, etc. But three caught my eye:
• Hires via referral
• Cost per hire
• Resumes in pipeline
Why are they important?
Well, you know, if you think of a services company that there’s really two major functions of a service company. And they have to be aligned.
- Talent acquisition and talent growth.
- Business acquisition or business growth.
Those two rocket-engines of growth have to be aligned. And on this one, the side we’re talking about here is the talent acquisition and talent growth.
How do you bring them in at a cost-effective manner?
And it gets back to that whole thing of creating a workplace brand. When you’re hiring via employee referrals then that’s telling you that you’re internal brand is credible. You’ve been able to claim it because your employees are out there acting as recruiters or owners.
When your cost per hire starts to go down, when you’re no longer paying recruiters to convince people to come there then, again, it’s the same sort of alignment.
Back to that statement that you want to create a line-of-sight between what people do every day and the performance of the company. One of the things even the most junior person in a company can do is refer people in to the company. That lowers the costs per hire. Chances are they will have referred somebody who’s worked with them and they trust them and know they’re going to do a good job. So, they’re able to, the actions they do every day is able to impact the financial performance of the company.
Then the resume’s in the pipeline...they just have to know, again the alignment of the acquisition of the business and the development of talent and the acquisition of talent, they have to be aligned.
Think in terms of sine waves. Right? One sine wave is the staff, adding staff to your company. the other sine wave is business development. In a perfect world, those two sine waves are aligned. Right?
The shift is one way or the other. You have opportunity costs where there are not enough people to do the work. Or you have too many people to do the work and you’re losing money.
So, a services company has to have that alignment. On the talent acquisition/development side these are three indicators that you should be able to share with everybody.
- How are we doing with referrals?
- How are we doing with keeping our costs per hire down?
- How many folks do have that want to come here? How many resumes in the pipeline?
Most companies consider employee candidates on the basis of fit.
Do their skills fit with the task they're hired for?
But, if I’m reading your book right, you're encouraging companies to consider candidates on the basis of do they have the skills to disrupt your business model. Tell us about that.
Yeah, that’s a crazy word isn’t it? Disrupt a business model?
The hiring process should change a little bit. You quickly need to qualify candidates. You need to move on to the assessment part, the education part.
Whole Foods does a great job of qualifying candidates. They have this model, it’s sorta like being voted off the island. If you’re going to work for Whole Foods and it’s in the meat department, then employees in the meat department can say:
“ You’re not cutting it after 30 days.”
And they can vote you out. So, they’re continuing to qualify after you’ve been on board for awhile.
Companies need to assess whether candidates can learn the operating model. Can they clearly learn it? Can they teach it to other people? That’s critical.
Three critical things:
- Can they learn the operating model?
- Can they execute it?
- Can they teach it?
There are three good starts. If you can get that then you can get some good folks.
But I like to challenge people to go even further. When they’re making this assessment:
“Are these people we’re bringing on board, that you have on board, can they challenge that operating model? Right?
Can they disrupt it?
And then can they improve it?”
I think challenging is great. But if you don’t improve it, uh, I want you to go back and try again.
So, they have to be able to learn, execute and teach it. That’s the good start.
Then the gravy on top is:
Can they challenge that operating model and then improve it?
During the hiring process you need to educate. That’s making sure there is expectation alignment. And that’s back to that point of making sure that truth that you’re making inside your company are indeed what you’re selling and indeed what you are buying when they come to work for your company.
Your leadership team may be a sharp bunch of folks. But, if you’re not adding to them and you’re not challenging them, then over time you will lose that innovative edge.
- And you’ll stop adapting to the market.
- And if you stop adapting to the market your product and services aren’t going to sell as well.
- And if you’re not going to sell as well you’re not going to make as much money.
- And if you’re not making as much money you’re going to lose market share, lose more earnings...stretch it out over time
- And you’re going to go out of business.
So, it’s key to finding people who are going to challenge your business model.
Why would that be appealing to a candidate? I have this feeling that some employee may find this opportunity to be intimidating. Over the years, they were never taught those skills or never had them or have lost them in these tight command-and-control structures.
Do employees have the skills to come in there and communicate, collaborate in a meaningful way to disrupt a business model?
Yeah. And the answer is I am going to go back to that environment answer. In other words, if the soil of the organization chops your hand off every time you bring up a point to improve and challenge, then of course no one will improve or challenge.
If the culture is such that that is embraced and people at the top are excited about it, they talk about it, they reward it, the stories in the organization exist around:
“Remember how we improved that because the junior person on staff came up with that?”
When your company has that anecdotal evidence then it works great.
If the culture is such that, again, the CEO may say:
“You’re empowered”.
But the first time you make a mistake they chop your arms off then no one is going to make that mistake.
We talk about vulnerable leadership. That’s making sure leadership is vulnerable to making mistakes and it’s ok. You should be able to share those mistakes.
And, in the book we talk about the myths that exist. One of the myths is that you can’t make mistakes. But you should be able to share this information, make mistakes, and then use these mistakes as teaching moments.
Your point is the staff may have been beaten down where they worked in the past. And that’s true. You bring those folks in slowly and if they can adapt to this new workplace then great.
There’s a fellow by the name of Bob Augerbright that was one of the early-adoptors of the open-book management system by Jack Stack and the whole Springfield New Manufacturing movement. Bob ran a company here in Baltimore called Chesapeake Packaging. They made cardboard boxes.
The story that Bob used to always tell is they had a contract with McCormick Spice. And they did so well, such great work and they had such a great workplace that the CEO of McCormick Spice came over for a tour.
And the guy who gave him the tour was not my friend Bub Augerbright was one of the fellows working Press #4, one of the long-haired tattoo guys. Turns out he knew evertying about the company. He knew how they made money; he knew where the waste went; he knew why it was important for the delivery guys to be on time; he knew why the lights should be turned off; he knew why the air conditioning should be turned down at a certain time. He knew everything about how the company made money.
That’s because Bob had built a culture of teaching people how things worked. That same person was going to struggle where they were put in an environment where it was a command-and-control structure.
“ Just do your job. Just do what you’re told. “
Bob had a line I liked. He said:
“I want to spoil our employees. I want to make it so they will never want to go work anywhere else.”
Again, it’s not the seeds; it’s the soil. Our job is to change the environment to make that soil conducive for the seeds to grow and flourish.
Time has slipped by so fast and I’ve enjoyed so much talking with you. We've talked a lot about your great book, The Power of an Internal Franchise. I hope all the listeners go out and get a copy. I see it being written from your work with your consulting firm. Tell us about Corsum Consulting. What do you do? How do you bring value to your clients?
Corsum’s really built on the premise that as a consulting firm we really help companies create enterprise value. We do that through a number of different ways, through 3 main ways.
We do that through the definition of their strategic intent. And that’s really the work I’ve done with value drivers and it’s really a strategic planning process and what drives value in your organization.
And then we have a section of our business built around operational efficiencies. We understand that operational efficiencies are necessary but not sufficient over time to build value; it’s important. And that’s sorta where we talk about building workforce ownership.
And the last part of the puzzle is talent development, developing this next generation of leaders. And you can see that fits very nicely with the cultural development side and with the operational efficiency side.
You're a leader. Leaders are readers. Jim Rohn says that. I just quote him. What are you reading these days?
I’m in the middle of, I’m on a bit of, a kick here with some of my faith work. I’m reading a book on how Christian tradition shaped our popular culture.
Leave us with one last thought on the power of an internal franchise?
I think back to those first points we made. CEO’s thought they needed to do a few things:
- Develop the next generation of leaders
- Develop knowledge and skills
- Align pay with performance
- Communicate the right message
- Empower this workforce.
And then we talked about what employees want. Employees felt like if they felt:
- they had the opportunity to do their very best every day.
- their fellow employees were committed
- their opinions mattered and they could act upon them
- they had a sense of connection
If these two things were aligned, what the CEO thought and what the employees felt, then you had an opportunity.
The internal franchise is a way to align CEO goals and the desires of the workforce. The internal franchise is the answer and the last untapped channel of distribution for companies’ products and services.
Where can we find you on the web?
And you’re on Twitter at MFOneill
I encourage people to go read your blog; you write a great blog and newsletter. I encourage everyone to read your blog and sign up for your newsletter.
Marty, I appreciate your time. I encourage everybody to go get your book, read it, do it. Have a great vacation.
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