9 Sure-Fire Ways to Give Yourself the Finger and Wreck Your Business

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You might be giving yourself the finger and not even know it. Don’t look back and realize all you needed was to get the other four in line with the one in the middle.

In 2000 we were building a fast-growing fulfillment and logistics business. I was a minority partner and had expressed my concern that we should get some backing. The majority partner felt no need to do it, even though we had an angel investor who wanted a very reasonable piece of the action.

We had some pretty nice names on our customer list, Sun Microsystems, TAP Pharmaceuticals, Johns Manville, Seagate, and a host of other not-so-large companies. After I landed a huge contract with Microsoft my partner came into my office and said, “See, aren’t you glad we didn’t take on an investor?” I replied, “No, in fact, if we don’t get one soon, we could go out of business.” The angel investor brought back an even sweeter deal my partner refused to take.

The business had grown by 420% in three years, yet even with a great profit and loss statement, we had to sell the business within nine months of landing the Microsoft contract. It was a bitter lesson. Even in a great business with wonderful growth, when one part of the business is out of balance with others, it can sink you.

Giving Ourselves The Finger

For us, it was cash flow. We had great profit on paper, but it was stretched out all over the business, and we learned the faster you grow, the less cash you will have in your bank account. It’s the most common killer of businesses.

But there are plenty of ways to spike your business, most of which will sneak up on you by looking like a plus, when they are really a minus. It’s all about balance.

Contrary to common belief, most businesses don’t go under for lack of customers. In fact, it’s almost always the opposite. The number one reason businesses fail is because they grow too fast, or more specifically, some element of the business outpaces the others. Unbalanced growth will put you out of business faster than anything else.

Krispy Kreme has been selling donuts since 1934. In 2000 the company went public and grew 840% in just three years. The stock peaked around $50 per share and then in 2003, started a free fall because the market was over-saturated with Krispy Kreme donuts. In 2009 the stock was at $1.09. The company’s production had outstripped the market demand.

Imbalance Has No Bias

I’ve seen this “unbalanced growth” issue with companies of every size. It respects no boundaries. A real estate agent can get in trouble with too much marketing and not enough cash flow. An Internet store can get in trouble with too many customers and too few suppliers. The entire airline industry is despised because of its focus on profit and a complete abandonment of customer service. This has resulted in huge growth for Southwest Airlines, which balances profits and customer service.

Ways to Give Yourself The Finger

Here’s just a partial list of things that, if not in balance with each other, can put you out of business:

Cash flow – never too much; feel free to be out of balance and be flush!

Staff – very costly to have too many OR not enough–balance!

Production – too much is expensive; too little hurts quality and/or growth

Customers – too many will cause all kinds of bad decision-making

Suppliers – production can be halted by a simple missing part

Cash flow – the #1 way to be out of balance

Facility Space – don’t bite off more than you need (or less)

Products – most often, too many can kill you; rarely, the issue is not enough

Leadership – stop micro-managing, allow & require others to decide things

Culture – “Culture eats strategy for lunch.”–Peter Drucker

Management – gut the management layers; rely on self-management

Cash flow – yes it’s on here three times; it’s that important

Cashflow Finger - the good one

Are You Paying Enough Attention?

What is your imbalance? We’re always fighting one–it’s never not an issue. No matter where you are in the business cycle, you have too much of something, and not enough of something else. And it’s not always easy to see. Take leadership as an example. Too much micro-management and not enough distributed decision-making causes good people to leave, leaving behind unmotivated “responders” who do only what they are told. It could take a year or more to wake up to that.

Grow, Baby, Grow!

Fast growth by itself is never a problem. You can grow incredibly fast as long as you make sure all aspects of your business are growing in balance with each other. But remember, lack of cash flow will put you out of business faster than any other type of imbalance.

By the way, all of this applies to your personal life, too. Read The Power of Full Engagement.

Watch Your Shop

Only the paranoid survive. Don’t give yourself the finger. Stay vigilant, stay balanced, and you can grow as fast as you want. Keep growing!

Article as seen on Inc.com

Pivotal Labs Finds Success With Self-Managed Teams

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Pivotal Labs doesn’t talk about not having managers or use the term “self-management”. They just do things this way because it works so much better.

For Pivotal Labs, the only reason to have a process is to get a result. Productivity is the mantra, and it’s all based on three simple, core values: “Do what works,” “Do the right thing,” and “Be kind.” But wait, where are the managers? Oh, that’s right, there are none.

Addition, Not Subtraction

Pivotal Labs never tried to reduce or get rid of managers or create “self-managed teams.” Instead, CEO Rob Mee, who co-founded Pivotal in 1989, based his culture on extreme programming, and designed the most efficient project team structure for getting things done fast and well. It’s focused on “balanced teams,” and managers were never part of the mix. And it worked.

Today, Pivotal has over 2,000 staff members in nearly 20 locations around the globe. Clients like Twitter, Mercedes, GE, Philips, Humana, and Southwest Airlines lead a Who’s-Who list of companies that have benefited from Pivotal’s commitment to results over process. And their technologies and tools touch billions of users every day.

Pairs, Teams, and Generalists

Pivotal Labs structures their workplace very simply, with teams of people working on projects together. Pairs of programmers switch out almost daily to work with other people and on other projects. Cross-functional pairs can also be comprised of user experience (UX) and user interface (UI) designers, product managers, and engineers. Rejecting the specialized assembly line method, there is an emphasis on everyone learning how to do everything. Mee says, “At Pivotal, every developer works on every level of the system, from HTML and JavaScript to Ruby and down to the database. The argument that specialists will be better at a particular layer of the system if they’re allowed to focus on it doesn’t really hold water.”

Shaping Cultures, Not Just Building Apps

The company’s success speaks loudly to that belief, and others have taken notice. Pivotal has been credited for shaping the cultures of some of Silicon Valley’s most influential and valuable companies. This is a result of their own belief that building better software is as much about creating a better culture as it is about creating new products. So companies regularly reach out to Pivotal not just to build an app but also to get help with rebuilding their own software development cultures.

Productivity Drives the Absence of Managers

Pivotal Vice President Drew McManus says, “Few software companies truly operate as self-managed workplaces. Putting agile development principles into practice is harder than it looks. It’s not about Ping-Pong tables in the break room, but about productivity. Rather than providing Ping-Pong or other games as a ‘perk,’ they are used as strategic breaks from staring at computers by employing other motor skills. People are happiest when they are being productive, and productivity drives everything we do here.” Which is why they don’t have managers.

The idea isn’t new. In the late 1950s, Bill Gore created his company, W. L. Gore and Associates, to produce Gore-Tex fabrics and other great products. Today, Gore’s revenue is north of $3 billion annually, and it has over 10,000 staff members. Gore called it the “Lattice Organization”-if you need something from someone, go get it. Pivotal Labs didn’t study Gore, or any of the thousands of other companies running without managers. They focused on getting the best result as fast as possible, and simply arrived at the same conclusion: most corporate layers slow things down without adding value.

Empathy-Based Teamwork

But Pivotal isn’t a rugged individualist culture, either. They don’t hire programming “unicorns,” working in the middle of the night propped up by caffeine, headphones, and Doritos. If you can’t program in pairs and work as part of a team, Pivotal won’t hire you. Again, Rob Mee addresses this myth. He says the most important thing they hire for is “empathy.” “Collaboration is the most important thing we do, and it doesn’t matter how smart you are if you can’t relate to how other people think.”

Janice Fraser, director of innovation practice, says a group of people built the concept of balanced teams together in 2010. “For the best outcome, ownership should be with the team, not with one person,” she notes. As a result of the work environment they’ve built, McManus says, “Pivotal’s best sales tool is the tour, because they see people working without managers. Large corporations say, ‘I want this. Come show us how to do this.'” They’re not just writing software, they’re helping change organizational structures from traditional top-down hierarchy to teams without managers.

Conversations, Not Communications

Every company struggles with communications, but Pivotal approaches it differently. Fraser says, “Our organization is built to create conversations, not just communications. Word of mouth is the best way to communicate. So we give people lots of landing spaces and encourage interaction.” To put feet to creating conversations, Pivotal provides free breakfast every morning and everyone takes lunch at exactly the same time. They also work from “stories,” not architecture, which also facilitates conversations. “Our office sounds like an bustling caf,” says McManus. “Face to face conversations are encouraged. Pivotal Tracker also triggers conversation. Live interaction saves us a lot of time. It happens ad hoc, so we have very few meetings.”

Part of building a culture of conversation is ongoing “AMA” (ask me anything) sessions with leadership. And sideways communication is facilitated by software they developed called Feedback, short tweet-like shout-outs with timely responses. All of it is designed to eliminate latency between identifying an action item and completing it.

Trust Is Everything

Fraser sums up Pivotal’s unique culture, “Think about who else will be affected and get them involved. We all strive to act like grownups. Balanced teams works on the principle that the right decision is made by the right person who has the right information at the right time. It’s all about trust.”

That’s real leadership. And all without managers.

Article as seen on Inc.com

At Nearsoft, No Managers and Complete Freedom Create Responsibility, Not Anarchy

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Leaders at Nearsoft believe that when you give people complete freedom, it makes them even more responsible, not less. It’s counter-logical, but actually very intuitive.

Superman Need Not Apply
Nearsoft in San Jose, CA is a fast-growing software development company with nearly 200 developers in the U.S. and Mexico. Roberto Martinez and Matt Perez, the co-founders, aren’t the kind of heroic activists who get featured on the front of business magazines by force of will, command and control, or by building an emotionally charged personality cult. They’ve figured out none of that is a good idea for building a great company in the emerging work world of the Participation Age.

Managerless Responsibility
Nearsoft promotes self-management and runs their company without any managers. Everyone decides for themselves what needs to be done. Roberto says, “Lack of control is the illusion people have. But when you give people true freedom to make decisions, become leaders, or solve problems, it makes them more responsible, not less. This is a very powerful statement. Everyone at Nearsoft is completely free to take care of the important things.”

Nearsoft is an early adopter to the idea that the last 150 years of top-down management was a bad idea when it worked and an even worse idea in a technology-driven world where participation and sharing attract the best people.

In 2006, Nearsoft built their company around two simple but profound assumptions: everyone is an adult and should be treated that way, and everyone wants to be responsible, not just a very few who are “in charge” of others. Julio Gonzalez, head of operations says, “At Nearsoft, leaders encourage everyone to ask questions, not permission. Trust in their desire to be responsible adults is key to our success.”

Managerless, And More Organized
Nearsoft has done a great job of grasping that the profound things are almost always simple. Nothing is complicated in the way they have built their company. But that lack of complexity is many times mistaken for lack of organization. Matt Perez emphasizes the point, “We have a governance structure. That fact that our company is very flat and democratic actually means we are MORE structured than the traditional management model. We have very clear processes for everything we do.”

Ownership By Decision-Making
Clear roles and well-defined processes are consistent with self-managed companies in every industry. The difference is that instead of having roles, responsibilities, and processes foisted on them by top-down command and control structures, the staff themselves determine who will do what and how it will get done. Development of roles and processes by those who will have to carry them out, guarantees ownership of the result. Traditionally managed companies only hope for such “engagement”.

Julio adds, “We even have people get together and form leadership teams to discuss any topic they want, and make decisions. Our entire profit-sharing structure was changed from the bottom up because people took initiative to meet and decide how to make it better. We simply facilitated the process.”

Values Actually Mean Something
Nearsoft runs on five core values: leadership, commitment, teamwork, long-term relationships, and being smart and getting things done. And they have two corresponding principles: transparency and honesty. These are not filler for annual reports, but values that everyone at Nearsoft believes in. Most companies have similar lists, but Nearsoft makes all their decisions based on whether they are aligned with these five values. Very few companies like Nearsoft truly function on an everyday basis from a list of values.

When There is No Manager, Few People Leave
Consistent with all self-managed companies, Nearsoft has extremely low employee turnover. Matt says, “One guy left to be a manager at a traditional company and was miserable. He’s back, because here, even though he isn’t a manager (no one is), he has responsibility and authority. There he was just a spokesperson for upper management. Another woman came back because her employer made her get permission to pick up her mom from an appointment. Here everyone is an adult and doesn’t need permission to take care of their families.”

Work From Anywhere
Part of being an adult is deciding where to work. Sometimes working at home is best and other times coming in to the office to collaborate is more effective. Nobody manages that, the teams decide for themselves according to Nearsoft’s working from home manifesto. Nearsoft adds to that trust in adult behavior by giving everyone the option to work from anywhere in the world for up to a month, twice a year.

Employee engagement is an ongoing buzzword problem with most companies. Nearsoft advances the idea of self-management as a key to solving that problem. And thousands of companies like them, in every industry, are moving quickly in this direction.

Give People Their Brains Back
Nearsoft’s story is a powerful lesson for all companies. If you want to grow quickly, increase profits, reduce unproductive middle management layers, and keep your best and brightest people, you might want to give them their brains back and require that everyone become a self-managed adult at work.

Article as seen on Inc.com