By Verne Harnish “Growth Guy”

In the same (simple) way that lemon juice prevents a quartered apple from turning brown, high dose vitamin C prevents harmful oxidation from sapping the life out of today’s busy executive – and now we understand the mechanism

Year after year I’ve watched CEOs come off high stress periods in their businesses and develop chronic illnesses, some severe including cancer and heart disease.  I wanted to understand why and how to prevent this.

Similarly, I wanted to understand why I and many of my entrepreneurial friends would come down with the flu around the holidays – almost as if our bodies knew we couldn’t get sick during the busy times, but had permission to “let down” when we had some time to rest.

And this search for answers became very personal when I suffered a chronic illness while building my first venture twenty-five years ago.  It was a dear friend and mentor that introduced me to the Center for Human Functioning in Wichita, KS – funded by one of the wealthiest families in the U.S. at the time – the Garvey family – and led by the late Dr. Hugh Riordan.

It was Dr. Riordan who picked up the torch from Dr. Linus Pauling, the two-time Nobel Prize winner who discovered that high dose vitamin C, along with certain nutritional protocols geared to a person’s unique body chemistry, cured most chronic diseases, even cancer.

Stagnant Water

The analogy I like to use is that of stagnant water – without “flow” a body of water will become toxic.  The same for the flow of electrons within our bodies.

As we face a daily bombardment of environmental toxins (airplane flights are the worse), degraded food, viruses, bacteria, and stress, the same oxidation process that turns apples brown and rusts metal is happening within our own cells.  Where the oxidation does the most damage is dictated by our genetic code which points to our most vulnerable point (the lungs for me).

It’s at this weak spot that an infection develops (“…itis” means infection i.e. arthritis, tendinitis, laryngitis, etc).  What we know medically is that at the infection site, the flow of electrons – the energy force — is essentially blocked.  This leads to a stagnant situation which becomes further toxic leading to chronic conditions.

The trick is getting the electrons to start flowing.  This is where Vitamin C plays a crucial role.  If you look at the chemical make-up of vitamin C, it mimics the structure of sugar (which is why cancer cells readily absorb vitamin C, making it nature’s perfect chemo) with an extra oxygen molecule hanging off the side.  It’s this extra oxygen molecule that holds the key to health.

Hydrogen Peroxide

I remember my mother liberally using hydrogen peroxide to clean the various cuts I sustained as a child.  Chemically structured like water, except with an extra oxygen molecule, it’s a fairly unstable compound which is why it’s stored in a dark brown bottle.  Once liberated from the bottle and poured on a cut, the extra oxygen molecule is released (thus the fizz) along with a flow of electrons.

It’s these electrons that kill the infection, almost like laser surgery, and helps restore the flow of electrons that were absorbed by the oxidation process.  And it’s this same hydrogen peroxide process that occurs internally when vitamin C faces an infection or cancerous cell.  The challenge is getting a high enough plasma level of vitamin C, especially since we’re one of only two mammals unable to manufacture C internally, to knock out these infections.

Collagen and Adrenaline

Vitamin C is crucial to the production of adrenaline. It’s why after pumping so much adrenaline during stressful and busy times, you’ll have drained most of your vitamin C reserves and become ill.

Vitamin C is also key to the production of collagen, the tough, glue-like protein that makes up 30% of your body’s protein.  Wrinkles are just one indication of the lack of sufficient vitamin C, which tends to deplete over time as stress, toxins, and pumping adrenaline sucks up your reserves.

Another indication of insufficient vitamin C is bleeding gums, due to the weakening of arterial walls (thinnest at the gum level).  It’s why the body produces cholesterol – a way to patch up weakened arterial walls, trading off long term complications in order to prevent the rupture of a blood vessel due to the lack of Vitamin C and other nutrients.

Intravenous Vitamin C

Again, the challenge is getting enough Vitamin C given the toxic environments in which we live and work.  Most doctors will tell you that it’s fruitless to take mega-doses since you’ll just pee it out – and to some extent they are right.

However, what Sebastian J. Padayatty, MD and his former chief, Mark A. Levine, MD (Harvard Medical School) discovered in 2004 is that blood plasma levels of Vitamin C, 60 times greater than expected, can be achieved when administered intravenously — levels toxic to cancers and infections, yet helpful to healthy cells.

This is what the Mayo Clinic missed when they attempted to replicate the success of Dr. Pauling’s use of Vitamin C.  Decades later the mistake was found.

As such, three to four times a year, to fight the “rust”, I receive 50,000 mg (50 grams) of Vitamin C intravenously along with glutathione which revitalizes the liver.  I use the protocol created by Dr. Riordan that is being used by cancer researchers and found a local doctor willing to support this protocol, which he now shares with scores of patients and executives throughout the DC region.

I also have most of my family members and several colleagues within my company following the same protocol – and it is so safe my wife continued the protocol through pregnancy (they are now discovering how important Vitamin C is to the development of the fetal brain along with folic acid). 

In addition, I take 8 grams of C orally each day — 800 times the Recommended Daily Allowance.  I’ve come to learn this is the right amount for me (different for each person).  I’ve learned from research why you have to increase your dosages slowly, why you need this much, how enzymes are produced by the body to aid absorption, and how this impacts you if you skip a day.

There’s an excellent book entitled “Vitamin C, Infectious Diseases, and Toxins” by Thomas E. Levy, MD, JD.  It summarizes over 1200 medical and scientific journal articles on Vitamin C spanning the past century.

While waiting for the rest of the traditional medical community to catch up, I’ve followed the advice of Dr. Frederick Klenner, one of the early pioneers in the use of high dose vitamin C, who administered IV Vitamin C whenever a patient first entered the hospital:

“Vitamin C should be given to the patient while the doctors ponder the diagnosis.”

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At its core, Capitalism is about voluntary association and collaboration, which is one of the reasons Capitalism works, why it won the battle with Socialism in the 20th Century, and why it continues to persist and flourish. But the abuses of the early 21st century (e.g. Tyco, Worlcom, Enron), the recent financial “meltdown,” and ongoing issues including the social costs of externalities, the extreme and widening gap between executive and worker compensation, among others, have undermined trust in business and confidence in Capitalism. For several decades, companies emerging out of the culture of the 60s have been cultivating a new genre of Capitalism.

This is a Capitalism that recognizes the power of purpose and the principle of interdependence. It is a Capitalism the sees leaders as stewards and facilitators. And it is a Capitalism that embraces the cocreative, generative nature of business, and is directed towards fulfilling the potential of business and the marketplace to be a powerful force for positive change.

This is a Conscious Capitalism, embodied by Conscious Capitalists. Many of these companies, their founders and leaders – such as Kip Tindell and the Container Store, John Mackey and Whole Foods Market, Chip Conley and Joie de Vivre Hotels, Sally Jewel and REI, to name a few – are purposefully coming together to share their experiences with each other, to support each other to address pressing issues they face with their companies, and to catalyze a broader Conscious Capitalism Movement, to spread the CC meme to other businesses, to the investment community, to consumers, employees, and other stakeholders.

John Mackey co-founded Conscious Capitalism, Inc. to provide a home for the Conscious Capitalism Movement and to create community and content to deepen and broaden the Movement.

to learn more visit http://consciouscapitalism.com/

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By Verne Harnish “Growth Guy”

Customers experience your company’s processes, not its functions.  Yet executives spend most of their time focused on making sure the functions of the firm i.e. sales, operations, finance, HR, IT, etc. are properly led, staffed, and driven by appropriate key performance indicators (KPIs).

For the sake of customers and the sanity of your team, it’s important to turn your company on its side and focus on those processes that flow across your various functions.  This is a critical activity in building a sustainable and profitable growth firm – and building a firm that isn’t driving everyone increasingly insane as the company gets bigger.

It’s poorly designed and executed processes that suck up large amounts of money, time, and energy – and ultimately lead to a frustrating employee and customer experience.

What Are Your 4 to 9 Processes?

There are normally four to nine of these horizontal processes that cut across your various functions, processes like “how do we bring on a new customer” which can involve sales, operations, IT, and even finance.

And like with functions, they must be properly led, staffed, and driven by appropriate KPIs – and they must be designed with the end customer in mind.

So the first step is to gather your executive team in a room and name these processes.  While several of the processes are similar across many companies (“how do we bill and collect from customers”) there are some that are specific to your firm.

For instance, GrupoIntercom, the internet incubator I’m working with in Barcelona, has a special process for attracting and selecting entrepreneurs to join the incubator.  They also have a specific process for helping an internet entrepreneur go from concept to monetizing their internet portal. We identified eight key processes that drive this incubator.  What are yours?

Process Accountability

The next step is assigning accountability for each process to a specific leader.  And because a process cuts across several functions/departments there might be some perceived turf battles.  However, assigning someone accountability for a process doesn’t mean they are the new boss of everyone that touches the process nor do they necessarily have increased decision making authority.

Their job is to monitor the process (time, cost, accuracy), let the team know if there are any issues, and lead a regular meeting to fix or improve the particular process.  As such, its best if the person with process accountability has some cross-functional experience.

So, who are your key process owners?  It’s as critical of a decision as who heads up each function in the business.

Process Mapping

This leads to the third step – mapping the process.  Gather together someone from every function that touches a specific process, including a few customers that are impacted by the process (if possible).  Using colored Post-It Notes to represent each function (sales is green, accounting is blue, etc), map out the steps and decision points as the process presently flows.  Then step back and begin streamlining the processes, eliminating wasteful steps and removing obstacles.

For instance, think about how a certain piece of paper (physical or electronic) moves from a website to an email in-box to an order fulfillment desk in the warehouse, including emailed confirmations and order tracking systems for the customer.  You’ll be surprised at the number of steps and people required for a simple process.

Along the way, set specific KPIs at critical steps and decision points so the process can be continuously monitored.  In the case of Grupo Intercom’s process for helping entrepreneurs monetize their portals, specific KPIs are tracked that let the executive team know if progress is being made.

I’m a particular fan of the Lean approach to process mapping and improvement.  It focuses on reducing the overall process time, which leads to less steps, reduced costs and improved outcomes.  Contact the Lean Enterprise Institute in Cambridge, MA for books, resources, and support at www.lean.org.

How-To Manual

The beauty of identifying and documenting the processes in your business is that it provides you an excellent “how to” manual.  I have a friend whose father is getting ready to retire from the family business.  By identifying and mapping the various processes, they were able to both extract useful information that was locked in the mind of their father and the other employees while taking advantage of his expertise in changing the processes.  And the process improvements will further enhance the value of the company should they need to sell it.

Last, it’s useful to revisit and examine one process every 90 days as part of your quarterly planning process.  Like hallway closets and garages, these processes get junked up and need to be re-cleaned periodically.  With four to nine processes, each will get examined every twelve to twenty-four months, which is sufficient to keep your company running insanity-free.

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10 Tips to Bottom Line Up Management
By Rich Russakoff and Mary Goodman

Bottom Line Up management is common sense but not often common practice. For Stage 1 Entrepreneurs, many of these tips will be new and compelling. For the more seasoned Entrepreneurs, we hope they will provide the impetus to remain connected and to check that their systems are current, effective, and complied with. We’ve selected these tips through the filter of WIN – What’s Important Now!

1.    CEO: think of it as an acronym for Cash, Equity, & Operations. It’s the CEO’s job to make sure the company has enough cash to meet its obligations, build equity, and maximize profits through operational efficiency and excellence.

2.    Scrutinize your large &/or past due receivables. Are there any accounts deceivable? Even if the economy has little or no impact on your business, some of your customers may not be as lucky. We doubt that Circuit City or Mervyns were completely current with their vendors and suppliers when they closed their doors.

3.    Create Profit focus through Margin Focus. Just as sales are the leading indicator of revenue, gross margins are the leading indicator of profitability. You get the behavior you exhibit, expect, tolerate, and reward.

4.    Identify profit drivers, not just revenue drivers. Incorporate the profit drivers into bonus and commission structures.

5.    If looking for bank loans, consider smaller, community business banks. They may be more aggressive and accommodating. They’re under less regulatory scrutiny right now and therefore may have fewer constraints.

6.    To reduce debt, follow these three steps: 1) Get cash flow positive. 2) Don’t add to debt – keep current on payables. 3) Prioritize by balance size. Pay as much as possible to the smallest balance, when that’s paid off, roll that payment amount into the next smallest balance, then roll both those payment amounts into the next, etc.

7.    Waste erodes profit. Know the impact that it has on your bottom line. If you have a 10% profit margin, for every $1000 in wasted expenses, you have to generate $10,000 in additional sales just to break even. And if you are operating on a 5% profit margin you need $20,000.

8.    Set targets and ranges by P&L expense line. We like to display them similarly to the way blood work is displayed from the lab. It’s bolded and highlighted if it’s outside of range. This creates a smoke alarm. Sometimes, there are reasons for it. Other times, it’s a red flag that needs investigation and/or intervention.

9.    Go deeper with your customers. Identify your niche and dig as deep as you can. This is imperative to survive and thrive in a retracting economy. Just like trees in a storm, those that grow wide and shallow will be uprooted while those with deep roots will continue to stand.

10.    Connect to the customer. Talk to them, and not just to sell, service, or solve a problem. Use specific and disciplined dialogue: What can we do to make it easier for you to business with us? What can we do to create a better buying experience for you? What other problems do you have? It stands to reason that if you’re trying to create solutions you should talk to the people with the problem.

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“…keeping you great”  By Verne Harnish

HEADLINES: Must Watch Documentary — Thomas Friedman, the acclaimed NY Times columnist and author, featured Steve Mariotti and NFTE (Network for Teaching Entrepreneurship) in his Sunday column entitled “More (Steve) Jobs, Jobs, Jobs, Jobs.” He also mentions a recent documentary called “Ten9Eight” that should be watched by every student in the world (I showed it to my children) — it’s how a dozen students made it through NFTE’s national business plan contest — very well done! Take 3 minutes and watch the trailer then order the film, show it to your children, and donate a copy to your school (www.ten9eight.com) — the world needs more jobs and only entrepreneurs can get the job done.
(http://www.nytimes.com/2010/01/24/opinion/24friedman.html?pagewanted=print)

Reducing Insanity — a critical step in building a sustainable and profitable growth firm, that isn’t driving everyone increasingly insane as the company gets bigger, is to focus on processes. Everyone thinks in terms of functions — sales, operations, finance, HR, IT, etc — however, once a company gets over a handful of people, most of what a company does flows across these functions i.e. how do we bring on a new customer? Sales has a roll, finance might have a roll, operations has a roll, IT has a roll, etc.

What Are Your 4 to 9 Processes? There are normally four to nine of these “horizontal” processes which you must name, map, and assign someone accountability just like you would a function i.e. Jan is accountable for how we bring on a new customer; Sebastian is accountable for how we develop and deplore new courses; etc. These processes represent the “how to” manual of the company once you have the steps identified and documented.

Process Accountability — because a process cuts across several functions/departments, there might be some perceived turf battles. Assigning someone accountability for a process doesn’t mean they are the new boss of everyone nor have increased decision making. Their job is to monitor the process (time, cost, accuracy), let the team know if there’s any issues, and lead a regular meeting to fix or improve a particular process. And using Lean techniques to map and improve a process, the focus is to reduce the time of a process which also decreases the cost and improves repeatability. So, who are the key process owners? It’s as an important decision as who heads up each function.

Spanish Incubator Processes — while several of the processes are similar across many companies (though “how” you do a particular process is really the key to differentiation), there are some that are special to your firm. GrupoIntercom, the internet incubator I’m working with in Barcelona, has a process for attracting and selecting companies to become involved with the incubator. They also have a unique process for getting a company from concept to monetizing their internet portal with specific metrics to monitor progress.

Process for Living Longer — in an earlier insight I mentioned the book The Blue Zones: Lessons for Living Longer from the People Who’ve Lived the Longest (http://www.amazon.com/Blue-Zones-Lessons-Living-Longest/dp/1426204000/ref=sr_1_1?ie=UTF8&s=books&qid=1264690732&sr=8-1). Here’s a short summary of the finders along with a 15 minute presentation by the author Dan Buettner at a TEDx conference. The last minute covers the nine strategies if you want to skip ahead. My mid-life crisis friends running marathons, please take note!
(http://www.cnn.com/2010/OPINION/01/26/buettner.long.life/index.html?hpt=C2)

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By Verne Harnish “Growth Guy”

One of India’s wealthiest business leaders, Anil Ambani, invests $325 million in Steven Spielberg’s movie studio DreamWorks – something unimaginable just five years ago.  In turn, Warren Buffett invests $230 million for a 10% stake in Chinese electric car manufacturer BYD, the same investor who shunned technology investments earlier this decade.  It’s obvious the top entrepreneurs and investors understand that India and China are the future of our global economy.  Do you?

With over 1 billion people moving into the middle class, effectively increasing the global market for products and services by 50% over the next decade, can your firm afford to ignore the single largest market opportunity in the history of business?   It’s time you consider “going east” as part of your 2010 strategic plan.  And it’s as critical for small to mid-size firms to make the move as it is for top investors and large corporations.

Made It In China

Two entrepreneurs helping others make the leap are Graham Jeal and Simon Cann, authors of a new book series entitled Made It In….  Graham, a British-born entrepreneur who has been building companies in China since 2001, is the former president of the Entrepreneurs’ Organization (EO) chapter in China.  Cann, a prolific writer, has been a management consultant to companies spanning the music, entertainment, and broadcast industries.

I met Graham and Simon on my last trip to China and was impressed by their enthusiasm and initiative to encourage others to leave the comfort zone of their own markets and venture out into some of the leading business hotspots around the globe.

In their first book, Made It In China, they feature specific lessons learned from nine entrepreneurs including Graham, who have built manufacturing plants, launched internet businesses, started hotels and restaurants, and created large sales organizations within China.  One of the entrepreneurs was even the first foreign participant on China’s equivalent of “The Apprentice.”  In all cases, these entrepreneurs left their home countries and built businesses in a culture different from the own – and their stories are both inspirational and instructive.

Other countries in the series include Vietnam, Russia, and Kazakhstan with more in the works.  I encourage you to go to their website www.MadeItIn.com to learn more.

Coming with Quality

Another must read book for growth firms wanting to dominate their industry is Hermann Simon’s Hidden Champions of the 21^st Century. I was speaking with Hermann Simon upon his recent return from China.  He brought news that Chinese firms are focused on building competing quality products that will challenge even Germany’s lead in many export areas – and that they are building factories in Germany and the U.S. and other parts of the world.  They want to get “in our backyards” before we get in theirs!  And with over $2 trillion in surplus cash vs. a projected U.S. 2010 $14 trillion deficit, they have the financial muscle to do it.

No longer will the “Made in China” label mean low cost or low quality.  Their entrepreneurs are hungry to learn from the best and bring their business models, products, and services to other countries.

India is aiming for the same upgrade to their brand.  Seen primarily as a cheap supplier of back office functions, they are building global brands and bringing their products, like the $2500 Nano car, to the developed world.   And with one of the youngest populations in the world, India is well poised to incubate entrepreneurs that will be hungry to get into other markets.  Again, it will be crucial for established businesses to plan their India strategy for next year and beyond.

Wholly Owned Subsidiaries

Hermann Simon notes, based on his research of the world’s top mid-market companies, that they almost always set-up wholly owned subsidiaries vs. licensing or joint venture relationships.  It’s been critical for these firms to control their brands and have their own people “on the ground” in other countries.  And they tended to expand into one or two different countries each year, with many now having operations in over 50 countries.

When these “hidden champions” are asked which countries they’re focused on for the next decade, it is India and China.  And while it might be too late for manufacturers outside these countries to make inroads as quickly, the customer service models and cultures of the west will not be easy to imitate by the eastern entrepreneurs.  This is the distinct advantage, plus a long history of good management practices, that entrepreneurs in the west have as they pursue these eastern markets.

Read the two books mentioned above and make 2010 the year you focus on the east.

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“…keeping you great”

HEADLINES: (Growth Summit Highlights Day 1, 2 minute interviews)

Best News from Jim Collins — THE question that got the attention of a lot of entrepreneurs and their teams in the room last week was when Jim was asked whether founders were able to actually build a company beyond start-up i.e. would they be able to go from telling time to being clock-builders. And the answer is yes!! In the great companies it was NOT the case that the entrepreneur had to be replaced with professional management. Whew! This was reinforced with Hermann Simon’s research that the tenure of the founder/CEO in Hidden Champions was over 20 years.

Jim Collins’ Top Ten Books — Jim spoke for over 3.5 hours, so difficult to summarize everything, however, here’s a link to a short 2 minute interview I conducted asking him about the specific disciplines necessary to build a great company. There is also a lengthier interview available as well — both in the right hand column at www.gazelles.tv. And below are listed Jim Collins top ten recommended books and top ten courses.

Aubrey Daniels takes on Dan Pink — Aubrey carefully corrected Pink’s assertion that traditional rewards can’t drive creative thinking — here’s the link to a short 2 minute interview where I asked Aubrey to elaborate on his Dan Pink comments (www.gazelles.tv — in the right hand column). More to Aubrey’s point, most reward/compensation schemes are useless in driving performance since they are not reinforcing to the performer, whether it’s highly creative problem solving work or routine process activities. What does work all the time are PICs — Positive, Immediate, and Certain reinforcers. The best example? A scoreboard!! That’s why the BHAG video scoreboard, posted where everyone can see it at Australia-based Red Balloon, is such a powerful tool. Go to right hand column of www.gazelles.tv and look for the “BHAG — Red Balloon” video to see their BHAG scoreboard.

Theme/Celebration for 2009/2010 — and to add a little spice to the Growth Summit, we featured Gazelles customer Wide Open Baja (Christian Hammarskjold, CEO) and one of their $100k high-performance off-road vehicles. If you’re looking for a reward for your team for doing a great job, a place to host your strategic planning session, or a customer appreciation event, it’s one of the best I’ve found. Check out their executive excursions and Horsepower Ranch at www.wideopenbaja.com NOTE: Gazelles isn’t receiving any compensation for this — we’re just enthusiastic supporters since we know how hard it is to come up with fun executive activities and rewards.

Do you need expert assistance constructing a winning plan for 2010? — At the Summit, Jim Collins talked about how the best companies are actively taking advantage of the current market conditions to come out as big winners. Are you playing to win in 2010 or not to lose? Take the time now to block out two days to work with your team to develop a solid plan for 2010. If you need help with your Annual Planning, Gazelles can help you. Contact Cindy Praeger at Gazelles (cindy@gazelles.com or 704-996-0399). If you sign up before December 31, we will help you jumpstart your plan with 1 free month of Rhythm Execution Coaching and Software.

Feedback from Benetton India — and India Tour Dec 1 — 3 — I’ll be leading one day workshops in Mumbai Dec 2 and Bangalore Dec 3. I’ll also be leading another private session for Benetton India — this note from Sanjeev Mohanty, CEO of Benetton India post our first session earlier this year. “During our session we had set up a challenging target of 65% growth for the 3rd quarter. I am happy to share that we have achieved this target! We had launched a very creative campaign across the organization and charged up and motivated everyone with the same and it was a great experience. This is an amazing achievement as most of our competitors are either no growth or even worse, de-growth in business. The most amazing part of the story was that more than the sales guys the supply chain, design, manufacturing and HR guys were chasing the numbers on an hourly basis.” The Rockefeller Habits tools are effective across various cultures.

Jim Collins Top Ten Lists:

Ten Books Jim Collins Recommends

1. Churchill, The Second World War
2. Caro, Master of the Senate
3. Goodwin, Team of Rivals
4. Bernstein, Against the Gods: The Remarkable Story of Risk
5. Lewis, Moneyball
6. Homer, The Iliad
7. Drucker, The Effective Executive
8. Gardner, Self-Renewal
9. Lewis, Assault on Lake Casitas
10. Manchester, Goodbye Darkness

Jim Collins Top 10 Great Courses from the Teaching Company

1. How to Listen to and Understand Great Music by Robert Greenberg.
2. Great American Presidents
3. Argumentation — The Study of Effective Reasoning
4. What are the Chances? Probability Made Clear
5. Economic History of the United States, 1900 – 2000
6. Art Across the Ages
7. Dante’s Divine Comedy
8. Emperors of Rome
9. The History of Ancient Egypt
10. History of Modern Russia + From Yao to Mao — 5000 years of Chinese History

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By Verne Harnish “Growth Guy”

“Jemma is a great barrier to protect the team from my overzealousness and enthusiasm,” notes Naomi Simson, founder and CEO of Sydney-based RedBalloon.  “She balances all my ‘brilliant’ ideas with a focus on making them process driven.

The single most important decision most entrepreneurs and CEOs make is who is going to be their right #2; who will play the insider role so the CEO can stay focused on market-facing activities; who will make stuff happen after the CEO tosses a new idea over the transom; and who will act as the shock absorber between the crazed entrepreneur and the rest of the team.

Sadly, it’s a decision most CEOs blow.  And once burnt by the wrong #2, CEOs are reluctant to ever try again, dooming them to long hours and frustrating activities for which someone else is better suited.  It also exacts a huge negative financial impact on the business since the CEO ends up handling day-to-day operations instead of focusing on marketing and innovation.

Someone You Know

For almost three decades I’ve watched CEOs make right and wrong decisions when it comes to hiring the right #2.  Howard Schultz, CEO of Starbucks, is yet to get it right.  Michael Dell was forced to take back control of Dell after the failure of his #2.  In turn, Bill Gates seems to have made the right decision in Steve Ballmer.  And I’ve witnessed countless small to mid-sized company CEOs live and die by choice they’ve made for the #2 position.

I became most acutely interested in the topic when it was time for me to hire my #2.  So I began to look for patterns in success and failure.  Surprisingly, only one variable emerged as critical – whether the CEO had worked with the #2 for quite some time before putting them in the position.

Steve Ballmer was a poker-playing friend of Bill Gates going back to their Harvard days — success.  In contrast, Schultz plucked his #2 out of Wal-Mart — failure.  But isn’t Google’s situation a large exception?  Eric Schmidt was first made Chairman of the Board for six months before he was given the official #2 position as CEO for the co-founders.  And given Google’s growth rate, six months is like six years for everyone else, giving the co-founders a chance to test-drive Schmidt before inviting him into the triumvirate.

Started as a Subcontractor

The #2’s that work out the best tend to be family members, employees that move up through the ranks, former customers/suppliers, or long-time friends and colleagues from a previous career.

In Richard Koury’s case, his successful #2 started as a subcontractor for his $17 million Chino, California-based geotechnical engineering firm.  With only a high school education, he excelled in his first assignment back in 1998, “rising to the top and running the job for us within the first few months,” notes Koury.

So talented was this subcontractor that he was hired away to manage a $120 million construction job for another firm and was nominated for a major construction management award.  Koury knew this guy, Dave,  was special and remained a friend and mentor over the next few years.

Four years ago, Koury felt his firm was ready for the right #2 and he knew Dave was the right guy.  So one Saturday morning he took him to breakfast and asked him point blank “Dave, are you being treated well and are you happy?”  Noting that many things that make one happy can’t be put on a spreadsheet, Koury suggested to Dave that he join his firm.  He’s been there ever since.

“He’s transformed the place,” exclaims Koury.  “I’m overly driven and he puts the appropriate reins on me.  And there isn’t one move he’s made that hasn’t helped move the business forward.”

Equally important, Dave has allowed Koury to focus on the growth of the business and the hiring of more great people.  “He’s taken over what I didn’t enjoy, wasn’t good at, and where he had better ways to do things,” concludes Koury.

Early Hire

It was a similar story for Simson at RedBalloon.  Jemma joined the company when it was only 18 months old, recruited as a product assistant managing content on the website.  Over the next six and a half years, she was promoted many times, first to product manager, then marketing manager, national marketing manager, and finally as general manager for the last 2 years.

“She has the strengths I don’t have,” explains Simson. “She is analytical, detailed, calm, and patient.”  At the same time, Jemma shares Simson’s focus on marketing, Simson herself being a former marketing manager for Apple.  Often the strength of the founder can become the weakness of the organization if the founder doesn’t find someone to support them, given all the other demands that come with growing a business.

The List

These are just a few of over fifty examples I’ve researched. And in 90% of the cases, the success rate is much greater if it’s someone you’ve worked with for quite some time.  Questions about compensation, ownership sharing, and transitioning, though critical, are moot issues (and costly!) if you don’t get the right person in the first place.

Therefore, if you think it’s time to find the right #2, start by making a list of all the quality people you’ve worked with the past several years:  customers, distributors, former employees that have gone on to bigger things, suppliers, family members, childhood friends, etc.  Somewhere on that list is a person that will likely succeed much better than a relative stranger and give you the support and freedom you need build a better company.

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By Verne Harnish

“…keeping you great”

HEADLINES:

Hiring the Right #2 — “Jemma is a great barrier to protect the team from my overzealousness and enthusiasm,” notes Naomi Simson, founder and CEO of Sydney-based RedBalloon, on her #2. “She balances all my ‘brilliant’ ideas with a focus on making them process driven.” Take five minutes and read ((http://www.gazelles.com/new_articles/Hiring_the%20Right2.pdf)) how she and other CEOs found their right #2s, one of the most important hiring decisions an entrepreneur will ever make, in my latest “Growth Guy” syndicated column.

Hiring the Right #3, #4, etc. — Gazelles is hiring; we’re excited many of our clients are hiring; and it’s still a great time to acquire critical talent. But it’s no time for amateur hour when it comes to recruiting and interviewing. The ONLY selection and hiring technique found to give a 90% success rate is the Topgrading methology. The rest of the methods: testing, behavior-based interviewing, or “passing the breath test” have between a 30% and 60% success rate — too costly! Join us for the #1 selection process if you’re going to hire at least one person in 2010:

“19 Appointments with the Right People” — and this note from Mark Dover of Canadian-based warehouse supply firm Doverco “I wanted to share the success we have enjoyed as a result of the Webinar we participated in several months ago given by Chet Holmes (http://www.gazelles.com/ggs_chet.html). Following the model of his ‘Best Buyer’ program, we conceived of a program of 10 monthly letters directed at 165 ‘Best Buyer’ prospects. Each letter contained industry intelligence (teaching is the highest form of selling as related to us by our Gazelles coach Les Rubenovitch) and our related capabilities. And every other letter had a small, low cost, attention grabbing gift related to the theme of the missive. We are at letter #6 and have already been able to secure 19 appointments with the right people! We have reached our objective and we’re only 60% through the project. Thanks to Les, Chet and Gazelles for making us smarter. BTW, the (Dr. Robert) Cialdini Webinar (http://www.gazelles.com/ggs_cialdini.html) on ‘Influence’ was awesome.”

Keeping the Right People Smart — commit to 90 minutes of first class executive education each month using our monthly online seminars — LIVE or archived; alone or with your team (perfect for the monthly management meeting). Jeff Jarvis (http://www.gazelles.com/ggs_jeff.html), author of What Would Google Do? is our February 18 online seminar; and Chip Heath (http://www.gazelles.com/ggs_chip.html), author of Made to Stick and Switch is our March 25 online seminar. These are the #1 business thought leaders of our time that would cost you $25k plus in speaker fees and travel expenses — now delivered right to your desktop for a fraction of the cost.

Vision Board Update — the children loved the experience of putting vision boards together this past weekend and I especially enjoyed sitting with my 6 year old daughter who surprised me with her desire to be a high board diver, something my wife always wanted to do but had never shared with any of us. We used Google image and lots of magazines to find the appropriate images for the boards — and appreciated the guidance given by John Assaraf’s The Complete Vision Board Kit (http://www.amazon.com/Complete-Vision-Board-Kit-Visualization/dp/1582701911/ref=sr_1_2?ie=UTF8&s=books&qid=1263315748&sr=8-2)

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By: Seth Godin

If you walk into a company-owned cell phone store to sign up for a contract, what are you worth?

Given the huge gross margins at AT&T and Verizon and the standard two-year contract, I think it’s easy to figure on more than $2000 in lifetime value.

If you ran a business where a customer represented an additional $2,000 in profit, how would you staff? How long would you make someone wait? If staff costs $25 an hour, how long would that extra person take to pay off?

Few businesses understand (really understand) just how much a customer is worth. Add to this the additional profit you get from a delighted customer spreading the word–it can easily double or triple the lifetime value.

So, a chiropractor might see a new patient being worth $2,500, easily. And yet… how much is she spending on courting, catering to and seducing that new customer? My guess is that $50 feels like a lot to the doc. Instead of comparing what you invest to the benefit you receive from the first bill, the first visit, the first transaction, it’s important to not only recognize but embrace the true lifetime value of one more customer.

Write it down. Post it on the wall. What would happen if you spent 100% of that amount on each of your next ten new customers? That’s more money than you have to spend right now, I know that, but what would happen? Imagine how fast you would grow, how quickly the word would spread.

Here’s how you’ll know when you’ve really embraced this–a good customer at your podiatry practice (or supermarket or tax firm) walks out the door in a huff and you turn to your partner and say, “There goes $74,000.”

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