The CEO Project Podcast

At The CEO Project we work with CEOs of a variety of sizes on their most difficult issues, but today we are focused on one that everyone is concerned about - building a predictable growth engine into your business. The first thing to think about is a grid that was developed by Bain Consulting. Customers are on one axis and products on the other new, new, and old for each one. Existing product, existing customer, which is the cheapest and most reliable way of delivering revenue into your business. New customer, existing product, which has more risk because we don't know the client and it does take time. There's some analysis that says the cost of acquiring a customer and selling them something versus the cost of selling something to an existing client is four times higher. New product, existing client, which has relatively lower risk, but it does take a while because they have to go through some sort of acceptance and sign up and maybe change from an existing supplier. And then the hard one, and the one that a lot of us focus on, maybe inappropriately, is new product, new market or new customer. This is the hardest, takes the most money, and takes the most time. And in terms of thinking about a predictable revenue growth engine, it is not particularly useful. Why are existing customers the key to our growth engine? The first element of growth is retention. And specifically recurring revenue. We want to see as much recurring revenue as possible in your business model or at a minimum strong repeat revenue of clients that you count on to come back to you every year. Retention of clients is the cheapest way to keep revenue. When you think about losing a client, every time you do that, you've created a hole that you have to then go fill before you get to grow. And so spending money on retention is of very high value and a very high rate of return on investment. 4 Components of Retention There are four components of retention that indicate why people leave you in the relationship. And this is whether it's recurring revenue or non-recurring revenue, just generically they choose not to do business with you anymore. Do you have a competitive offer? A realistic assessment of the landscape of what's out there and what the options are. You need to have a product that is competitive in the market first. Now you have some advantages on that. It doesn't have to be exactly the same. You could almost be a little bit behind if it is an existing client, but when we get to new clients, you will have to have some level of advantage. Have you built trust? And the way we build trust with clients, it's really simple. We do what we say we're going to do. If you're an organization where if we say something, we do it and we consistently meet our obligations, you'll build trust in clients and therefore desire to continue the relationship kind of alongside that is how they feel about the relationship. Do they match your culture? When you engage, they engage and that means the receptionists, the customer service people, the engineers, the salespeople name it, they engage with the people in a way that they would want to be treated. And then the final one is switching costs. Are there designed friction points to make it difficult to move from one supplier to another? The biggest single one that we can identify as a mutual investment in the relationship is if they've spent time to make their systems adapt well to your product. Investment in the relationship increases the switching costs. To learn more about building long-term relationships with your customers to create your growth engine, and how to use Linkedin to warm up your leads through your digital marketing efforts.

In this Episode… Jim Schlecker and Sam Watson, discuss the complexity of the multinational business and managing multiple presidents. Sam shares his story. Sam's headquarters is here in the US but is spread around about 40 different countries. They have meaningful, 50 plus headcount in probably 10 or so countries around the world. Their geographic spread both in terms of customers as well as manufacturing and employees and quite vast. In terms of the nature of the products that they are selling - they are all sort of marine water oriented. One of the things Jim has talked about previously in terms of the goodness of a business is recurring revenue. Customers repeat a lot with them either through the course of the year or over like a five-year period. A race boat is a consumable product. If you look at their customer base, it's quite solid and approximately 80% of them are repeat buyers. Their mass-building business is more focused on the top end of the market, the big soup yachts and the race boats in particular. And they tend to be kind of repeat owners in the background. They might have different boats and sometimes cross between different parts of the business, but they are big capital projects. In general, pretty good predictability about what they are going to get next year. Customers repeat on whatever cycle, depending on the product. Sam is a leader leading leaders. They have their own P & L inside each of these businesses. He is in constant contact with them throughout the week. There are issues boiling up around the business that Sam gets in touch with them to solve. And that always gives him a touch point to just check in on how things are going. Sam focuses on tracking to the budget and the sales KPIs. Jim and Same also discuss budgeting, 5-year planning, strategy, and the importance of running a high-functioning organization virtually. To learn more about success in multi-unit businesses, download this week's episode of The Lazy CEO Podcast. Resources mentioned in this episode: Samual Watson on LinkedIn North Technology Group on LinkedIn Jim Schleckser on LinkedIn The CEO Project Great Ceos Are Lazy: How Exceptional Ceos Do More in Less Time by Jim Schleckser Thank you to our Guest Sam Watson, North Technology Group, CEO Sam is a leader with multinational experience and a track record leading large teams across multiple geographies and time zones at the most senior level. Sam is an expert at managing the challenges of global communication and demonstrated ability to drive change & develop buy-in to a global business direction. Sam has extensive experience in M&A, Integration, Strategy Development & Planning, Product Development, and Talent Acquisition and Retention.

We all know the math that the cost to retain a client is 20% of the cost to acquire a client. From a sales and marketing point of view, if you can retain the clients that you bring on board, you're way ahead of the game because you don't want to have to go out and spend literally five times as much money to go acquire new ones. It is one thing to get them, but you need to keep them. Keeping them is what's interesting for a good recurring revenue business. This Podcast will talk through the elements that were identified in a scholarly piece of research. This study validated, with large statistical studies, real data about businesses and the success or not success they've had based on a couple of factors. There are really three things you need to pay attention to if you want to retain clients. One is the tangible elements of your product and your relationship. The second is the intangible elements around the relationship. And the third is customer expectations. Tangible elements of your product and relationship Within tangible factors, there are really three tangible factors you need to focus on when you're thinking about trying to retain clients. Barriers to exit. So once somebody's in a relationship with you, are there barriers that prevent them from exiting that relationship? And obviously the higher the barriers to exit are, the better you're going to retain them. Limited external alternatives are an absolute barrier. To the extent you can make your product unique enough that there really is not a comparable offer in the market, you're going to improve your retention. The next one is the utilization of the system. This is a little more applicable to software, but if they've got a high degree of utilization, and high rate of retention. Gartner discovered through market research that people that didn't use the product, didn't renew their subscriptions. What Gartner did is they intervened about six months before the renewal date and they began training people on utilization, driving them to get value out of the subscription. And what they found is if they could get them to use the product, they increased their retention rates. Investment in your system and investment in the relationship increases the rate at which they are retained. If they spent the time, effort, and money to link all the APIs and pull the database information, etc. A competitive offer. It needs to be on par or superior to the alternatives available in the market, at the price. What are their features? What is their functionality? What are the price points? And how do I compare to that? This is exactly what your competitors are doing. They are looking at the options, they're comparing it to yours and they're saying, how does this all stack up? Relationship factors. Do I trust you? Are we cooperative? The idea is that you're going to try to generate a sense of moral obligation in the client because you are giving first. You are giving to try to build the emotional obligation. Adaptability, cooperation, delivering high-quality service, etc. Intangible elements around your relationship An active relationship with the management, sitting down with them and talking to them on a regular basis. Communication builds trust. It allows you to demonstrate openness, and competency which builds trust. Managing custom expectations There are two elements to consider, one is customer selection and the other is expectation management. Customer selection means you shouldn't sell to marginal clients. Once in a while, we are all in a competitive scenario, we're trying to sell somebody, and we know it's a little marginal. Like the product isn't the perfect fit. Our price isn't just right for them. We get the client anyway. Odds are you've acquired a client that's not going to be retained because they're not profiled perfectly for your offer. The price isn't right. The product isn't right. One of the things to do early in the process is to set expectations for performance. Let's get clear about what the product does and what it doesn't. Let's get talk about, talk about our restock cycles. Let's talk about product availability. We're at 99.5. It won't be better than that. In some cases, you may want to embody that in a service-level agreement.

Today we are speaking with a renowned thinker about engagement and management and strategy and how you bring your whole team along on the journey in an engaging way. What is Reassessment? People are reassessing where they want to be, what they want to do, who they want to do it for, and who they want to do it with. People want to work, but they don't want to work where they feel they have to put up with things that inhibit or constrain what they have to offer. – 66% of people do not feel valued in what they do If you're doing something every day and you don't feel valued, you're probably looking for something else. And what is behind the sense of feeling valued? It had not a thing to do with engagement. It doesn't have anything to do with pulse scores. It has to do with do you believe that your people, stepping into co-thinking your business with you, will create a better outcome than you telling them what to think? When your team uncovers a better way forward, then there's a certain sense of value and nobility and dignity that comes. That's a big deal, this whole sense of value and value driven by leaders thinking that we're creating creatives, not just creating implementers. - Over 50% of the senior people interviewed believe they're contributing less than 50% of their capability to their organization. That suggests there's a whole lot more we have to offer that we're just not able to get out there. The successful leader in this great reassessment is asking, what other capabilities are you not contributing? What can we do to get those to come forth, get those to be released, unlock them, etc? The final piece on that whole conversation is, that I don't know anybody under 30 that will work for an organization that doesn't have a strong purpose or a cause and has a new expectation for what the experience at work is going to look like. What that means is that I am no longer going to be willing to compromise my experience at work and just invest in my personal experience. So, my expectations are the same things I have in my personal life for the fulfillment, and for achievement. And if I'm not getting that, I'm going to find a place where I get what I can get because I want to live my life fully across the board. Listen to this podcast for more about reassessment in today's workplace: - If we want to create an extraordinary experience for our people, or experience for our guests and clients, then we must encourage variability. - Believe in people that they want to win, and they don't wake up every day saying, I can't wait to be average again today. But they rarely get a chance to get in the game to that full degree. And so to the extent, we can get them in the game, and their experience is one that is as personal as their best home life experiences, there's tremendous financial, benefit in that. - Values are the guidelines for which you make the decisions about the stuff that there are no rules. - The great reassessment leaders going to have to change how they behave in terms of how they handle the truth and some things they probably need to stop doing. How are leaders going to need to change in this reassessment environment? - Do we have a common mental model that ensures we all see things the same way? Are you drawing out the attitudes, opinions, and beliefs of different people and merging them into a common picture that means the same thing to all of us? - Determine what to say no to. Thanks to our Guest Jim Hauden is an expert on leadership alignment, strategy execution, employee engagement, business transformation, change management, and accelerated learning. He has spoken at TEDx BGSU, Tampa TEDx, and Conference Board events, and has given keynote speeches for many organizations throughout the world. He contributes regularly to business publications, including Inc. and Switch & Shift, where he was ranked on the Top 75 List of Human Business Champions. He lives in Sylvania, OH, with his wife, Michelle. They have three children, Brad, Brooke, and Blake, and five grandchildren. When he's not traveling the globe visiting clients, he enjoys relaxing with his family at their lake cottage, golfing, fishing, sailing, photography, and attending Jimmy Buffett concerts.

Box out, and make room for the strategic moves needed to stay profitable in an inflationary environment. Today we're going to talk about dealing with unpredictable markets and specifically inflationary markets. Specifically, we are going to talk about two options, do nothing, or do something, and then what can you do. If you do nothing about this environment, you are assuming it's transitory, it's going to pass, no big deal. But both material costs as well as labor costs going up. And if you're not doing anything, your prices are remaining the same and you just are going to get caught in the squeeze, the margin is going to shrink, and profit is going to shrink. This is obviously a long-term problem for survivability. If inflation carries on at this rate or increases to the rates, we saw in the early eighties where it was double-digit inflation for extended periods of time. No model, no matter how good your model is, can withstand that without making moves. So there really is no choice but to make moves on both the cost side and the price side. Wages are going up on an ongoing basis. You must be increasing prices. Your cost increases are coming from both labor and materials, so whether labor-dominated or material dominated as a business costs are going up. A 10% price increase can double your organizational profit. Now, in this case, you're probably going to end up spending part of that increase on increased labor costs. It, you know, if you just match inflation for your employees, you're at seven. So your labor costs are going up 7% and you're not actually giving them any real money increase with a 7% raise. It's the same as they used to make. Your material costs are likely to go up by similar numbers, seven, eight, maybe more. There's some, there's sort of two effects going there. There's the underlying cost structure and then there's the scarcity problem that's occurring. You're going to see price increases probably between labor and materials of 7-8% because their labor's going up 7%. And it's a chain. So, if you're not thinking about seven, eight, or 10% price increases you're going to go backward. In other words, your costs are going to go up by more than your prices are going up and you're going to squeeze your margins. In an inflationary environment where everything's going up, a price increase doesn't change your position on the supply-demand curve, it's the same. The whole market shifted 7%, you moved up 7%, and there's no conversation about losing customers. Listen to the podcast for more on running your business in an inflationary market. The elasticity of your pricing. You need to increase prices, but how much is acceptable without risking your customers? How do you analyze the competitive environments? How do you analyze your supplier market? Do you have an economic alternative for your clients? Is this a re-designed product of a new marketing effort of an existing product How capital intense is your business?

Jim Schleckser, The CEO Project, and Kim Conklin, KC Consulting, debate the merits of compensation and incentive plans. Listen to this Podcast for entertaining bantering between Jim and Kim as they navigate this extremely important and relevant topic – fair compensation. What does Fair Compensation mean? It means when employees look internally, other people that do more or less the job I do are paid more or less what I'm paid. And when I look outside, people that do more or less what I do make more or less what I make. 90 something percent of the population feel they are paid fairly for their effort, for their skills, experience, background, knowledge, etc. Where that sometimes runs into trouble - people that are fully coin operated, meaning they are all about maximizing their personal income and they will pound you. It doesn't matter where they are relative to anybody else, they will just pound you on compensation always. The other place that I've seen problems in this is when they have what I would call poor referent groups. These mercenaries are going to change jobs every year or two, maximizing their income. One of the things that people do is go on salary.com and just plug in a job title and assume that their title matches the exact same job and then they wonder why it's 30 grand less. When you are looking at compensation, you need to look at the actual responsibilities of the person and the actual responsibilities of whatever job you're comparing it to. Sometimes a VP isn't a VP and a director isn't a director. Here are some important tips for any organization. For details, listen to the podcast. You need to have a job banding framework with market data for job families within that band. You need to be careful about what you incentivize. For sales, you need to figure out the right mix of base pay vs incentive pay. For sales, you start earning your bonus or your incentive, whatever, whether it's commission or it's a management deal at 80% - a pretty healthy percentage of last year's number. And you earn it as we go from 80 to a hundred. For executives, the target to open the pool of money is the EBITDA. Typically it's your EBITDA budget and everybody has a different view on this. Some companies start paying it at 75% of target. I've never seen anyone go below 75. But yeah, typically, but it's not over prior year, it's at that 80, 85% of budget. Compensation and employee value must be aligned. Equity adjustments are important to ensure competitive wages. Critical benefits – 401K match, flexibility to work from home, mental health benefits, financial counseling, maternity and paternity leave

Today Jim Schleckser talks on a topic that we see a lot when we're dealing with CEOs – accountability. What is accountability? The word is literally the definition of what accountability is, which is an obligation or willingness to accept responsibility or account for one's actions. In other words, transparently accept and explain what I've been doing and the outcome I got. When somebody says, I see a problem, I own a problem, I'm going to solve a problem, that's accountability, particularly when they do it transparently and share it with their team and their boss, that's accountability. On the negative side of non-accountable is, I wait and see. I finger point, it wasn't me, it was somebody else. I deny it. We see that all the time. Not my job. All of that is a lack of accountability, particularly as you grow the organization as an entrepreneur, we run into leaders that tell you I am trying to get the best out of my team and I struggled to hold them accountable to achieve the results. When you're trying to hold people accountable, the first thing you have to have is an identifiable outcome. In other words, this is your obligation. Whether you're managing one person or managing an organization, you need to be clear about where you're going. So what does it look like? When are we going to get there? How are we going to know we achieved it? The classic model for accountability is smart goals. So it's specific. We're going to achieve 12 million in revenue. It's measurable, we're going to measure it by the P & L. We'll know if we got there or not – it is achievable. That's the A in smart, right? Achievable - we did $10 million last year. We've been growing a million or 2 million a year. 12 is well within the capability of this organization. Revenue is one of the more relevant things in a business environment, but it might be generating a number of leads and that's relevant because it drives sales. In this episode, Jim shares the critical elements of accountability and how to achieve accountability in your organization. Specific, measurable goals that can be evaluated Achievable objectives with specific timeframes and outcomes Follow-up tips to successfully hold people accountable 4 elements that define accountability - goals, expectations, awareness of what it means, social pressure Tactical elements of accountability – holding yourself accountable first, providing clarity and resources, removing roadblocks, providing feedback, rewarding appropriately

We have talked before about the criticality of management, as we talk about business model processes and leadership or talent, everybody's happy to spend on their executive team and get these A players. Everybody's happy to go hire people that are sort of billable, and customer-facing, but once you cross about a hundred people, the distance between those two spreads enough that you must have people in the middle. And as entrepreneurs, it is not an appealing place for us to spend time, effort, and money. And yet, it can put a nail in your tire and really screw you up. So this episode is focused on what it does it do to your company if you don't, and what are the implications? And then we will get into how to make it better. When organizations grow and that need arises, generally they'll do a few things. One is they'll ignore it and they'll just overburden the executive team. What we most commonly see is a spoke and hub where all decisions run back and forth between the CEO or the leaders directly involved in decision-making in one way or another. Or we see a flat organization, maybe some supervisors, the CEO's direct reports. With either one of those models, you start to see a lot of constraints. You start to see a lot of slow down, burnout and overwhelm. So, what organizations often do is they'll hire externally because they begin noticing that there's a need and you lose institutional knowledge or you promote somebody too soon or they haven't been fully developed, now you're having to backfill the best person in that department who now doesn't know how to lead effectively, and the whole thing becomes problematic. The best way to avoid this issue is to know your organization. Who is ready to move in the next 12 months, or in the next 3 to 5 years? So the real question is, how do you get someone ready? There are two ways to develop your talent – providing them with Professional Development. The first is technical expertise through certifications, conferences, and job training. The second is leadership development. There are a number of ways to go about providing leadership development. Nothing beats one on one interactions. CEOs should skip levels and spend time with people two levels below. Experience what someone is good or bad at yourself. Start giving them small bite-size challenges. This episode of the Lazy CEO Podcast will answer these questions and more. What do you do when you promote somebody and six months in you realize you made a mistake? 4 ingredients to effective accountability – Clarity, Responsibility, Deadline, and Reward Tools for assessing middle managers – Nine Box, 70-20-10

Neen James helps people think about how they focus their time, and how they maximize the impact, for not only themselves but also their organization. And she does a lot of very interesting coaching around systems thinking and communication techniques to improve executive effectiveness. Neen shares insights about paying attention, and how to focus your attention on the things that are your strengths and allow your team to focus on the rest. Neen discusses the importance of remembering that No is a complete sentence. As CEOs, we must have shortcuts. We must have language that is understood by our team. So, an elegant way to say no is that sounds like a great project to be involved in. I'm at capacity right now, I'm going to direct you to this person. So you are acknowledging the request or the person or whatever the ask is. Because that's how we make them feel important. That's how we make them feel like we're giving them attention. But we also must be, have the courage to say, that's not a use of our time right Now, what I never want any CEO to say is, I don't have time. And here's why. When you say to someone, I don't have time, what you're actually saying is, I don't have time for you. And that's how we make them feel less valuable. And that's not our job because we're creating a culture where we want to develop the talent. Neen leaves us with this challenge - have a 15-minute strategic appointment with yourself every day and identify your top three priorities that'll help move the business forward today. For more advice and insight, I hope you will enjoy this Episode of The Lazy CEO Podcast.

This episode focuses on the secret to being a great and lazy CEO - knowing what to work on, only working on that, and getting rid of everything else. When I spread my effort across the whole organization, or we call it peanut buttering, your time across the business, it's not particularly useful because you haven't applied force in a significant way to one or two problems to really bust through them and get a great answer. You sort of neutralize all your effort by spreading it so thin. You can think of this simply like a garden hose. So, you go out in your water, in your garden, and everybody knows what happens when you pull on the hose, you get a kink in the hose, and the kink in the hose stops the water from flowing. And if you think about the purpose of a hose, it's to flow water, right? That's the only real job it's got. So, it can't do its job because there's a kink in the hose. So your job as the waterer is to go find the kink and open it up, and then you get your flow rate back. Now, the same thing's true in your business. That's a system. It's a simple one. It's a hose, but your business is a system too. But it's almost certain they're never going to open the kink and the hose if they just sort of work on the entire hose. A great CEO who's lazy, and doesn't want to spend that much time working, says, I'm going to do this smart, I'm going to follow the hose, find the kink, and then I will get the performance I'm after. In other words, very specific and dedicated types of work to change the performance of the system. And that's what good CEOs do. And if you think about how a business grows, we've all seen these like scalloped curbs where it grows a while and then it gets flat, and then it grows a while, and then it gets flat. That little flat spot is the kink coming into play. And until you resolve the kink, you don't get to grow again. When you see companies grow, then flatten out, grow, flatten out, that is because they're not being proactive and fixing the point of constraint from the kink before it comes into play. So how do you do this? In my book, Great CEOs Are Lazy, I talk about this idea of five hats, and these are the five hats that you should be thinking about wearing as a CEO when you're focused on the point of constraint. The first two hats are "find the kink" hats and the other three hats are "fix the kink" hats. The hats are player, learner, architect, coach, and engineer. For details about each of the 5 hats, I hope you will enjoy this Episode of The Lazy CEO Podcast.