I’ve read a business book every two weeks for nearly 25 years, and spent my entire adult life running businesses. I’ve read hundreds of research papers on business theory and attended six business schools in four countries.
Of all the things I’ve learned about running a business, the one that’s had the most profound impact on my life as a CEO is the concept of organisational health, which I was first introduced to by American business writer Patrick Lencioni in his book, The Advantage, where he argues that “being smart is only part of running a successful organisation”. The other half of the equation – the one that is largely neglected – is about being healthy.
Organisations spend an inordinate amount of time on being smart, when the real competitive advantage is in being healthy. The difference is that while smart organisations excel at things like strategy, marketing, finance and technology, healthy organisations excel at alignment, morale, engagement, productivity and talent retention.
It’s relatively easy to be smart – to employ the latest financial management tools; the most efficient marketing techniques; the most effective HR processes. That sort of information is largely free now, and it’s all there for the taking if you want to go out and find it. It’s almost a given that a successful organisation will be smart.
But to be healthy? To build a team that works collectively and cohesively, in an environment of trust, to achieve what no single individual can achieve on their own? To have people within your organisation who look out for one another, and want to do the right thing by you as a business owner?
Well, that’s not so easy, and it’s not knowledge that can simply be acquired. You have to work at it, and you have to commit to it, but it’s well worth the effort.
I’m proud to say that in the five years since I founded PieLAB, our staff turnover has been zero. Not one single person has left.
Before PieLAB, I ran a property management business. That’s an industry that’s notorious for its high turnover rates – the average person stays in a property management role for about nine months in Queensland. In my company, which was the largest property management business in Queensland, the average tenure was nearly three years, and seven years for members of the senior executive team.
I’d love to say that was because of my sparkling wit and magnetic personality, but in reality, it’s because since reading Patrick Lencioni’s book, The Advantage, I’ve always placed a strong focus on organisational health, which starts with building a cohesive leadership team. And while there’s no one way to do it right, here are five things that I’ve found are crucial to fostering success.
Establish a clear purpose
Why does your business exist? Of course, on some base level, the answer is ‘to make money’ – but how is that going to inspire your staff? I believe it’s absolutely crucial for your employees to know your business’ core purpose, and how that purpose translates into everything your organisation does.
According to McKinsey & Company, businesses with a clearly defined identity deliver returns to shareholders that are 60 to 200 per cent higher than businesses without one – and that’s because the people within the business understand what they’re trying to achieve.
At PieLAB, our core purpose is ‘to develop people and help them build great businesses’. Because we’re clear about that purpose, it helps attract people who like learning and growing, and how like helping other people to grow and learn and grow. Not only do they get a sense of fulfillment out of their work, but this helps us and the businesses we work with to become more successful, because as they develop their skills and abilities, they become better at performing their roles.
If you want to attract and retain talented people, you can’t just give them work to do – you have to give them a purpose.
Live your values
As well as a core purpose, it’s important to have a set of core values that genuinely reflect your organisational beliefs. These values shouldn’t just be words on a piece of paper that you occasionally pay lip service to, or include in your marketing and promotional materials – they have to be reflected in the actions of everyone in the organisation. Most importantly when recruiting new team members, you need to first recruit for a value fit, and secondly focus on skills and experience.
At PieLAB, we have four core values:
- Be inquisitive,
- Have a ‘get up and go’ (GUAG) mentality,
- Remain generous, and
- Be humble.
These values are important to us because they reflect the identity of our team. Your company’s values might be very different to ours, and that’s okay – what matters is that the members of your team align around your values. At the end of the day, it’s the alignment your values create within your organisation that really has, well, value.
We list our core values on the job ads we post, which is something you rarely see, but has always held us in good stead. People will often say to us in interviews, ‘I wasn’t going to apply for the role, but then I saw your core values, and they really resonated with me’.
We’ll then go through the values in the interview. ‘Tell us about a time you demonstrated humility. How is your ‘get up and go’ mentality reflected in your work?’ And so on. Of course, people can make stuff up – but you do get a sense of who people are and how they align with your values through their answers, and if you don’t ask, then you’re definitely not going to know.
The key to all of this is that every quarter, we evaluate the members of our team on how they’ve lived our values, and assign them a positive, negative or in-between rating. If someone has a negative rating on any of those values, we’ll have a straightforward and to-the-point conversation with them about why that is.
Virtually every organisation has values, but most don’t do anything about it if their people aren’t living them. In my view, if you can’t align yourself with the core values of an organisation, then you shouldn’t be there.
Set clear objectives and priorities
Everybody in your organisation should know what their objectives are, how they’re prioritised, and what metrics they’ll be measured against.
PieLAB invests in and acquires great businesses, then grows amazing leaders to run them. Each of those businesses, as well as PieLAB itself, works to a model called The Entrepreneurial Operating System. It’s an operating rhythm that helps a leadership team and CEO set clear goals and objectives, and hold each other accountable so they are achieved.
For any of those companies, at any time, we can pull up their core purpose, their core values, their go-to-market strategy, and their goals– for the quarter, for the next 12 months, for the next three years, and for the next decade.
Each of the leaders within those businesses can see their to-do list, and their scorecard, to help them achieve and be accountable for those outcomes. Every time the leadership team meet, which is every week, they have a structured process to see what has been done, and what needs to be done. It’s a clear vision for the future.
There’s a concept called Pearson’s Law which states, when performance is measured, performance improves, but when performance is measured and reported back, the rate of improvement accelerates.
Encourage open and honest communication
A healthy organisation requires people to be vulnerable. It requires people to be able to say, ‘I don’t know the answer to this’, or ‘I made a mistake when I made that decision’, or ‘I don’t know what to do in this situation… who has some ideas about what we should do?’
There are a lot of people in leadership roles who think their job is to have all the answers and make all the decisions. It isn’t. If you work that way, not only will you not get the best out of your people, but you’ll lose good people, because good people like to have input.
To have a culture of success, you need to create an environment where people can say what they think and tell you their ideas without fear of retribution. If people feel like they’re being heard, then they feel like they’re making a contribution. And people like making a contribution! They don’t want to just turn up, do a job, go home and make no impact – and if they do, then you probably don’t want that person on your team.
Straightforward and honest communication, between people at all levels of an organisation, fosters a sense of mutual respect and trust, and is an essential foundation for success.
Lead by example
This is Leadership 101 stuff, but you’d be surprised how often it doesn’t happen. ‘Do as I say, not as I do’ is an attitude that seems to be rife amongst leaders of unsuccessful organisations.
At PieLAB, our policy is that everyone turns up on time for our weekly leadership meetings – and I mean everyone, and I mean on time. To that end, we have a system. If you turn up even one second late, then you chip $50 into the jar for the social club. No exceptions – not for me, not for anyone. And you know what? People turn up for the weekly leadership meetings on time, every time, without exception.
In my last business, we had a similar policy, but the fine for our senior leaders was actually double the fine for everybody else. If a manager came late, that might be a $50 fine for them – but if it was someone from the executive team, it’d be a $100 fine.
The point is that if you’re a leader, you’re not more ‘important’ than everybody else. You don’t get to be late. You don’t get to make one set of rules for yourself and another set of rules for everybody else. In fact, if you’re a leader, it’s more important that you’re on time, or whatever the case may be, in order to set the tone for the rest of the organisation.
In short, an organisation is healthiest when its people are aligned and unified in the service of a common goal, with a clear strategy, behind a leader they can trust and respect.
Now, if you’ll excuse me, I’ve got a weekly leadership meeting I simply can’t afford to miss…
Chris Rolls is a serial entrepreneur, investor and self-professed business geek. Chris has built and exited four businesses in four different industries. Three of these businesses (Rental Express, First Class Accounts and Scody Performance Wear) have become some of the largest of their type in Australia. Chris is the Founder and Managing Partner of PieLAB, which invests in and acquires businesses. PieLAB helps founders and CEOs:
1.Retire and sell their business to a trusted partner while still retaining an interest allowing their legacy to live on while also providing them with better cash flow than they would otherwise get by selling outright and investing the proceeds, or
2. Assists founders and CEOs to take their business to the next level with additional capital and a panel of expert CEOs from PieLAB’s CEO Council to provide advice and mentoring.