Verne Harnish: Growth Formulas

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As the clock chimed midnight and the old year gave way to the new, you probably resolved: “I will grow my business in 2002.”

February 01, 2002

 

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As the clock chimed midnight and the old year gave way to the new, you probably resolved: “I will grow my business in 2002.” Now, more than a month into the new year, you’re facing the harsh reality of your resolution, and only one question looms: How?

Verne Harnish is the man with the answer. The founder and CEO of Gazelles Inc. is the growth guru for some of the best-known companies in the country. His recipe for successfully growing a business is brilliant in its simplicity. Forget the multipage strategic plan. On a single sheet, says Harnish, the owner of a growing business must be able to answer just two questions:

  1. In a single measure (revenue, number of closings, active communities, revenue per employee, etc.), where do I want the business to be 10 years from now?
  2. What is the most important thing the company must accomplish during the next 90 days?

“If an owner can’t answer the first question, it will be impossible to make the 100-plus other decisions that are required day to day,” Harnish says. “Secondly, don’t over-plan; do what is most urgent. Because of the pace of change today, the world will be different in 90 days. Stay true to the long vision, but lead in the now.” Cascade this same 90-day planning approach to every department in the company so that every individual focuses on “today’s brutal reality, not what’s to come.”

The characteristic uniting companies that have cracked the formula for growth — both in value and in wealth — is discipline. In his latest book, Mastering the Rockefeller Habits, Harnish draws parallels between the recent dot-com craze and the early days of the first oil boom. “Both were a make-it-fast, lose-it-fast economy,” he says. “Such a wildcat economy is usually replaced by an economic phase marked by skillful, disciplined leaders who instill the same sense of discipline and purpose in the organization.”

This disciplined culture poised for growth is manifest in three ways. First, the leaders adhere to a few priorities. It is easy in any business to have a long list of must-do’s, but it is difficult to figure out the one or two things that must be done in all of 2002 to propel an organization forward. “It takes genius to be simple,” says Harnish. “Anybody can make business complex.”

This laser focus on a few issues can also be the competitive advantage that propels growth in the marketplace. John D. Rockefeller, though he was in the oil business, dedicated himself and his operations to only one aspect of it — driving down the transportation costs associated with the raw material. “This is where he put most of his effort and nearly all of his focus,” Harnish says, “and it is where he gained an advantage and how his company emerged as the market leader.”

 

 

“It takes genius to be simple. Anybody can make business complex.”

Second, a disciplined company focused on growth must be data-driven in all its decision-making. Daily and weekly flash reports built around the key measures in your company are critical. In addition, it is vital that the owner/CEO/president see developments in the market. “Get out on the site to check the accuracy of your data,” says Harnish. “Talk to customers, employees, subcontractors. There are tons of technologies that can deliver data to you, but none are as reliable as getting information with your own eyes and ears.”

While adhering to a few priorities and being data-driven in all decision-making are important, No. 3 is critical: creating an effective meeting rhythm throughout the organization. “If growth is your goal and you can only do one thing to make it happen, this must be it,” says Harnish. When a growing company gets beyond 10 employees, the big issue — the bottleneck — becomes communication. The information exchange and sharing of market knowledge that happened by chance and by necessity must be planned for as an organization grows. To ensure that this continues, Harnish proposes the following meeting schedule:

 

 

 

 

  •   Daily huddles: Assemble the entire team for 10 to 20 minutes faithfully each day. With modern communication tools, there is no reason not to meet and no better use of the time.

    “This type of daily meeting prevents a lot of minor train wrecks before they become major,” Harnish explains. “Every day with my team we hear the same thing: ‘Oh, you’re doing that’ or ‘Glad I know about this.’ Daily communication lets everybody on the team be more proactive.”

    Daily meetings also ramp up the speed of the company. “There is a direct correlation: The faster you pulse, the faster you move, the faster you grow,” Harnish says. “Pulsing faster means resolving issues more quickly and getting through the bottlenecks faster.”

     

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  •   Executive huddles: If the right group of executives can huddle weekly, monthly and quarterly, the impact of their collective intelligence on the business, short and long term, will be substantial.

    “Face time matters,” explains Harnish. “Too often today we leave voice mails and trade e-mails and think these can replace the communication that happens around a table. The terrible truth is they can’t.”

    In reviewing the rise of the Rockefeller oil empire, Harnish details John D. Rockefeller’s daily luncheon meetings. “At first it was with his four partners and later with his nine directors. The business grew because he had that quality time together with his key business advisers to figure things.”

    Establishing this effective meeting rhythm is the most important activity, Harnish says, because the frequency of the encounters forces data-driven decision-making that propels a company forward. “Regular, effective communication is the catalyst for everything.”

    During this disciplined phase the entrepreneurial vision grows into a business of value — provided the entrepreneur lets it happen. Too often, says Harnish, the founder tries to manage the business while managing that one area in which he or she excels — design, marketing, construction management, etc. Problem is, managing activities that don’t come so easily, be they finance, estimating, etc., often eats into the time that should be dedicated to the one that does.

    “Building a team of seasoned managers must happen if growth is the goal,” says Harnish. “One person simply can’t do it all, and if he or she persists in trying to, forget about growing.

    “Manage the growth of your business the way you build a home — with a clear picture of the finished product, the best experts you can find to do the work and regular meetings to keep the project on track.”

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