80% of businesses fail within their first 3 years, and many businesses have no or minimal profit even though they remain open. The main reason why so many businesses fail or don’t do well is that they lack good systems and metrics. In this month’s podcast, Linda Ratner shared the 6 key components of successful businesses.
Linda is the founder of Ratner Consulting. She has built, sold, and continues to operate successful businesses across several industries. She has developed rare practical insights into operating systems, creating and managing key performance indicators and creating work environments that foster the success of any venture.
The system that Linda propounds is the EOS System, developed by Gino Wickman and outlined in his book, Traction. EOS stands for Entrepreneurial Operating System, and it consists of the following 6 key components:
- Processes and
The Vision component is represented by the Vision/Traction Organizer (or V/TO), which is a 2-page simplified business plan consisting of core values, core focus, 10-year target, marketing strategy, 3-year picture, 1-year plan, “Rocks” or 90 day plan, and issues list. This is created with the leadership team and shared with every employee on a quarterly basis.
The People component consists of having the right people in the right seats. The right people are ones who share the core values of the organization, and they are in the right seats if they have the ability to do the job they are in, are good at it and enjoy it. The tool to determine this is the accountability chart.
Running an organization based on data helps ensure that the organization is on track to meet its 1 year, 3 year and 10-year plans. The tool to enable this is the scorecard, which identifies who is responsible for what and when. This is reviewed weekly, so if something is not working, adjustments can be made. Everyone in the organization should have at least some number they need to meet so everyone is part of the solution.
At each weekly meeting, time is scheduled on the agenda to discuss any issues, so they get addressed promptly. The first step is to identify the issues, then prioritize them to determine which ones need to be addressed right away, and then the team discusses and solves them. For this to work, the culture of the organization has to support people in raising issues. Those issues that don’t get addressed are maintained on the V/TO so they don’t get lost.
The Processes component consists of doing the right things the best way possible, consistently. This is accomplished by documenting the most important processes, which are usually HR, Sales & Marketing, Operations, Accounting and Customer Satisfaction. Then these need to be monitored to ensure that everyone is implementing them properly.
The last component, Traction, consists of creating discipline and accountability throughout the organization. The main tool for this component is the weekly meetings known as L10’s (Level 10), with the review and reporting of the Rocks, Scorecard, People Headlines, and any To Do’s at the top level and at each level of the organization. Eventually, this meeting cadence is migrated to everyone in the organization so that all employees are part of a Level 10 meeting. Everyone in the organization must attend unless they are sick or on vacation. These meetings are scheduled on the same day and at the same time each week. They create a lot of discipline and accountability within the organization.
No matter what business you are in, implementing the EOS system will improve your business’ profitability. Typically, it takes about 2 years for companies to become masterful at implementing the EOS system, but fortunately it doesn’t take 2 years to see results.
For more information and to obtain a complimentary consultation from Linda, email her at LRatner@RatnerConsulting.com.