By Verne Harnish “Growth Guy”

No company better exemplifies the power of a strong corporate culture than Zappos, the online shoe and clothing retailer acquired by Amazon last November for $1.2 billion.  Just over a decade old, its corporate culture is the critical glue that helps this rapidly growing company deliver on its promise of providing exceptional customer service – and delivering happiness!

To witness this culture firsthand, I organized a private tour of Zappos corporate headquarters in Henderson, NV for 120 CEOs and executives of growth companies.  We also invited their well known CEO, Tony Hsieh, to share his personal insights into corporate culture with a broader audience of growth company executives the following day.

FAILED CULTURE

Hsieh’s obsession with corporate culture dates back to his first company, LinkExchange, which he sold to Microsoft for $265 million when he was 24 years old.  He decided to sell the company the morning he found himself hitting the snooze button on his alarm clock multiple times, dreading the thought of having to go into work.  And he wondered how many other employees felt the same way.

He vowed if he launched another company he would focus on maintaining a strong corporate culture rather than one that haphazardly drifted and shifted as new employees were added to the firm.

CULTURE DRIFT

This cultural drift begins around 70 employees – when the senior executives no longer know everyone’s name in the company.  This drift accelerates when the company moves to a second floor in a building or opens a second location.  The physical separation makes it that much harder to keep the corporate culture tight and aligned.

The key to maintaining a cohesive culture is discovering a set of core values that accurately reflect the nuances of the organization’s personality.  Hsieh led this discovery exercise during Zappos’ fifth year in business.  This is about the right timing.  Like a child, the corporate culture or personality isn’t fully revealed until the company is five years old, being shaped through early experiences and the collective values of the people involved.

DISCOVERY PROCESS

I’ve seen firms spend tens of thousands of dollars and months going through a laborious process that often generates a generic list of core values.  And this generic list often fails to represent the uniqueness and power of the existing culture.  Alternatively, there is a way to get at your core values that’s fun and amazingly fast.  It’s an approach outlined in Jim Collins’s and Jerry Porras’s article “Building Your Company’s Vision.”  You can download the article from www.hbr.com for $6 or Collins has some

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There is a difference between a house and a home.

A house is a structure, nothing more, nothing less.  To build a house requires a technical knowledge, materials and some money. There are well built houses and there are some weak ones too.  A house serves as a place to keep our stuff and protect us from the elements. But a home is different.

You can live in a house that doesn’t feel like home. To be a home, it needs to feel like a place you belong.  A place you feel at peace. Comfortable. A home reflects your personality, so it stands to reason that people like you will also like being in your home.  And even if you don’t own the house, the home is yours.

The same is true for a company, but sadly we don’t have two words to make the comparison.

A company is like a house. It’s a structure. Nothing more, nothing less. It requires technical knowledge, materials and some money to build.  There are well built companies and some weak ones too. A company serves as a place for us to work so we can earn a living, pay our bills and protect our families. But some companies are different. Some companies also feel like a home.  Some companies are more than a place to work, the people who work there feel like they belong.  They feel at peace.  Comfortable. These companies reflect the personalities of the people who work there, so it stands to reason that people who like it there are all alike.  And even if you don’t own the company, it still feels like yours.

The company that is like a house, focuses on the structure. Strategy and tactics are a way to increase sales, and money is the pursuit.  The company that feels like a home, focuses on the culture – the very thing that makes a house into a home. Strategy and tactics are a way to share that culture, that belief, with people outside the company too, and money is the result.

The funny thing is, with all these contractors out there building all these fancy houses with all the latest modern conveniences, it is the homes that are more profitable, more innovative, have the most loyal customers and employees. If there is a storm, people rally to fix the home where others abandon the house. Our houses have value, but we value our homes.

It’s a shame we don’t have a word for companies that are built like homes.  If we did, we’d probably have more of them.

http://sinekpartners.typepad.com/refocus/2010/02/house-vs-home.html

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Today I spoke with a friend that told me he just see an entrepreneur we met 5 years ago. This entrepreneur was beginning a company to custom-made dress shirts for the wealthy executives.

So the business idea was to send nice looking girls to visit wealthy individuals to their offices and sell them custom-made dress shirts, and send the shirts to be made with tailors in Hong Kong. When he told me what he was doing, I said, well cool idea and fun to hire by commission all this beautiful girls to send to my friends offices… and also I hate to shop and it would be great to have my shirts sent to my office. But on the other side, I thought, what unsexy business with little scalability and low income potential.

5 years later… very different story… today he is closing his second round of financing by a prestigious group of VC´s, has over $10 million in sales and he is on his way to create the Amway for the rich executives!!!! Wow what a different story!!!! Imagine the potential of sales of having an Amway for the rich? Amway today has sales over $8 billion dollars!!!! An sells to the base of the pyramid an mid class.

This confirms my thesis that ANY idea with a good and passionate entrepreneur perusing it can grow significantly and bring great wealth to him and the ones that trust him at the beginning. So the first thing I like to see when analyzing an investment opportunity is who is the entrepreneur behind the opportunity… I believe if you have the right entrepreneur executing and running the company, you have at least 50% chances of success in your investment.

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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”

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 Wikipedia Chris Anderson (born 1961) is editor-in-chief of Wired, which has won a National Magazine Award under his tenure. He wrote an article in the magazine entitled The Long Tail , which he expanded upon in the book The Long Tail: Why the Future of Business Is Selling Less of More (2006). He currently lives in Berkeley, California, with his wife and five young children. He is the chairman of a new startup, BookTour.com

Chirs Anderson en Traweln 2009 (By Mariano Amartino) from DamianVoltes.com on Vimeo.

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The yellow dots are aircraft.

It is a 24 hour observation of all of the large aircraft flights in the
world, condensed down to about 2 minutes. You can tell it was summer
time in the north by the sun’s footprint over the planet. You could see
that it didn’t quite set in the extreme north and it didn’t quite rise in
the extreme south.

Notice that as evening approaches, the traffic is predominantly from the US
to Europe and when daylight comes, the traffic switches and it
is predominantly from Europe to the US.

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By Seth Godin

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