Episode 255: Organizational Physics with Lex Sisney

So the big question is this: how do small business owners like us grow our leadership, develop our teams, and scale our business in a way that allows us to get our products and services out to the world yet still remain profitable? That is the question, and this podcast will give you the answers. I'm Bradley Hamner, and this is the Club Capital Leadership Podcast. Hey, before we get into today's episode, did you know that Club Capital is the largest accounting advisory firm for insurance agency owners in the country, providing monthly accounting, CFO services, and tax preparation. Check them out at club.capital.

Welcome to another episode of the Club Capital Leadership Podcast. My name is Bradley Hammond, your host. On today's podcast, we have Lex Sisney. He is the Organizational Physics founder and head coach. He's a business scaling expert and a wizard at organizational structure and design. He works with CEOs and leadership teams of expansion stage companies who are committed to growing their business without compromising their values. The word scaling gets thrown around a lot and sometimes maybe too loosely. I think you're going to get a lot out of this episode. I really love talking about things like organizational structure, organizational infrastructure to be able to build a company to design for scale. And Lex works with, you know, big companies, typically companies doing, you know, $15, $20 million to $30 million. And we talk about it on the episode where, you know, there are things that a company there is doing that maybe a company doing $300 million shouldn't be what the things a company at $30 million are doing. But there are always threads that you can pull. Specifically, listen to some of the comments that we discuss around or values in particular.

All right.

I think you're going to get a lot of this episode. Without further ado, here's my podcast with Lex Sisney. Lex Sisney, welcome to the Club Capital Leadership Podcast.

Thank you. Glad to be here.

Well, as I said to you before we hit record, I really truly am excited about this. I get excited about a lot of podcast guests, but your topic today is something that I personally really geek out on. And so, We're going to keep this to our normal length, but I think you and I could have chat for 3 hours if we had enough time. But I want you to get to your glass of wine in Italy this evening. But before we do get into any of those things, for people that are not familiar with your work, can you kind of take us back? We always start with background and origin story.

Sure. So the origin for my work today goes back to my my early 30s, and I was an entrepreneur, and I started and was the default CEO for one of the country's fastest growing technology companies at the time. And my approach to leadership then was, hey, if I focus on culture and hiring great people, everything will kind of take care of itself, right? That was true until a certain ceiling of complexity. Okay. And then I really found the limitations of my current, you know, my current mental models that I was bringing to bear. And I really struggled under hypergrowth. And what just— so for those who maybe not have experienced it, one of the benefits of a really fast-growing situation is you get real-time feedback about what works and what doesn't. So just imagine me, you know, early 30s, I'm taking up an idea from here and an idea from here, and I'm trying all this stuff and I'm deploying it, and it's just a disaster. You know, the business is still growing, but inside it's just chaos, right? And, uh, I, I suffered enough where I finally broke down and asked for help. And I found a scaling coach, a brilliant guy named Sunil Duvvadi, who's from the Adizes Institute. And Adizes is kind of world-renowned in understanding life cycle theory. They had helped transform companies like Porsche, Bank of America, Marriott Hotels in the '80s when they were kind of going through turbulent growth years. And he really fundamentally taught me to think differently. Like, and what I was doing wrong is I was applying the right tactics at the wrong stage. I was like, I was, uh, seeing my— let's imagine I had a 3-year-old child and I was trying to parent them like they were 13. You know, I skipped a bunch of steps and that's what I was doing unconsciously because they just didn't have the model. Yeah. So with a new way of thinking, what I saw was I, I saw things differently, therefore I acted differently, and so did my team. And that company went on to be the, the world's largest of its type. That experience of struggling, new model, thinking differently, acting differently, seeing new results was really inspiring to me. And I went off on a quest to try to find new methods, models that, you know, that would be universally true, independent of time, location, culture. And that gave birth to Organizational Physics ultimately, which is a way— it's kind of a systems thinking approach or a methodology to build your business, lead your team, have more success and satisfaction. And it kind of all ties into First principles.

Yeah, in essence. All right, so I've got just in that, I have so many questions that I want to dive into. Here's the very first one that I wanted to start our conversation with. What are the levels? And, and I think in business we use revenue as a way to be able to keep score. We realize that top-line revenue is not everything. I understand that there's a lot of different ways to be able to measure measure success, but revenue at least is a benchmark to be able to say, what are the, what are the levels that you say, okay, look, there's this first zero to X, and then there's X to X, and then there's this, this. Because I think that what you mentioned there has been so true for me, my, myself, to say, wait a minute, I was trying to take what someone was doing at $5 million and apply that to where my business was at $500,000, and it wasn't working. Okay, and let alone $50 million, right?

Right. Uh, yeah, so just let's just reinforce that you, you, you gotta manage things to their life cycle stage. You know, just like I said, don't parent a 3-year-old like they're 13, or vice versa, right? So really important you recognize the stage. And as you're, as you're saying, like, revenue growth can be an indicator, but it's, it's really not that valuable. I mean, I'll answer your question and speak to it in generalities, and it's changing thanks to inflation. Okay, but if you kind of said startup is $0 to $15 million in annual recurring revenue, you know, uh, early stage scale-up, it's kind of in maybe in the $15 to $150 range, and true scale-up probably north of $150 million. And those, you know, for some companies, those are just, you know, business units, right? Business lines. But you just, you'll notice that complexity increases. Your old approaches no longer seem to work. They've reached the limits of complexity. And so you gotta step back, look at the situation with fresh eyes, and try to come up with those new approaches that achieve, you know, what's called the simplicity on the other side of complexity. Mm-hmm. That's kind of what I do in my work. I specialize in the $30 mil to $300 mil range of companies, and they have a leadership team, and they're still typically very— they want to be innovative. They have been innovative, but they're finding this— it's not easy like it used to be. And we don't— we want— we know we need to change, but we don't want to sacrifice our entrepreneurial DNA or our core values. So what do we do? How do we do it?

All right, so that leads me into my next question of ceiling of complexity. You kind of mentioned that. So regardless of the business size, here's my, here's my question. Do you build the foundational, the foundations? Do you build the infrastructure of the company to then a certain point? And let's just use an example. Let's say, let's say $10 million, right? It's a true startup and it's up to $10 million. And then you say, okay, you know, for us to go from $10 to $30 million, what we need to do, the foundation's got to change, the structure's got to change. Okay.

Yep.

Or, and then you get to $10 and you hit that sticking point and then you have to kind of redo it and then go to $30. Okay. Or do you say ultimately we are wanting to be able to scale Pat to 9 figures to get to $100. So therefore we're going to build the infrastructure, the foundation to, to be able to get there now. Like, do you see that balance? Like which one comes first? It's a little bit of chicken and the egg.

A little.

It is. And it's— let me say that as a general rule of thumb, no, you should not try to build the infrastructure at a sub-$10 million company. Don't try to design your way into a $100 million business. You actually don't want that in the startup mode. You want a tremendous amount of flexibility. You want to design around people. It's a tremendous amount of grit, gut, gumption, luck. Marc Andreessen said it really well. There's like two stages to every company. There are pre-product market fit problems and then post-product market fit problems. And where most of your listeners are in the insurance industry, right? It's kind of a a market that's certainly doing some innovation, but the model is kind of known, right? So just imagine though, you're not in that industry and it's a lot of unknowns. You don't want a heavy infrastructure, of course, because it'll prevent you from adapting quickly to get product market fit. And so what, again, just manage to the stage, like parent your 3-year-old like they're 3. And then parent them appropriately at that stage. And then you got to change your parenting style. Don't cheat, don't, don't pre, pre, uh, pre-attempt to, or attempt to, uh, change your parenting style too early, right? It's not like, so just line it up.

Yeah, yeah, it makes sense. Okay, as an organization grows in revenue, but specifically in management layers meaning obviously people. And so maybe when a company hits their first 10, they've got— they start to think about their first level of management because the founder entrepreneur can't have everybody having direct reports. And then you just scale that up to 100,000, 200,000 people. I would think and have seen myself, but certainly not at the level that you have, Lex, the difficulty of cascading communication specifically around vision.

Yeah.

How do you do, how do you do that?

Well, yeah, the secret here is to the— I believe that the CEO cannot delegate strategic communications, which includes vision, includes values, includes who we are, why we exist, even, you know, What, what's the state of the world out there and what are we doing about it? You can't delegate it. You can't delegate it to your culture and talent team. You can't delegate it to your head of marketing. You gotta own it. And the CEOs that I've seen are, are best at that. They have developed a habit of weekly consistent strategic comms from them to the whole ecosystem.

Hmm.

Employees, customers, partners. And it tends to follow a little bit of a— I don't want to say it's formulaic, but they're hitting the highlights, you know. Okay, what's, what's the good news? How are we, how are we tracking towards our goals? What's, what's an anecdote or a story, you know, from the field? And what, what needs to happen is you got to think about it like you can't rely on your middle management layer to communicate. Some will be really good communicators Okay. But a large percentage won't be, or they won't be on message. Okay. So as a leader of the company, you gotta think about how do I communicate and bypass all those layers? How do I communicate directly? Yeah. So it could be writing, it could be email. I'm sorry, it could be email, could be video. I'm having client, a lot of CEO clients embrace video as their weekly kind of conduit for communication. Really, really important and unrecognized. How valuable and important it is for the CEO to embrace that. You know, and a lot of CEOs at first who I coach to do this will be like, is anyone gonna watch? Does anybody freaking care? How do I know it's working? Well, just pilot it, you know, get a baseline, measure, ask for feedback. But that regular ritual of communication, strategic comms from the head down, you know, by the way, if the head is clear and committed, the body tends to follow. And if the head is absent, you know, the body tends to follow. So like, you got to own that, I believe, as a leader. I don't, I don't know how you got it.

Yeah, so basically, if you rely to go down to your C-suite and then they pass it down to their managers, and then you go to the man, it's going to get diluted. It just gets diluted, as opposed to the CEO being able to communicate it across the board to everyone. That way, it's— they, they know the message is getting— is getting the way that they want it delivered. Okay, so that's good. That makes sense.

Track how many opens. Yeah, do, do quit, you know, follow up. Yeah, just think about all the communication tools we have right at our fingertips, right? Like, there's— yeah, yeah.

So one thing though that is impossible at that scale is then accountability. And so then that comes down to, okay, well, the CEOs clearly can't hold everybody accountable. And so, you know, an accountability gets thrown around quite a bit. But how do you do that at scale? Because there's this idea, and I've heard some other people talk about this, is like, as the organization is kind of growing, what ends up happening is it almost kind of slows to a halt even though it's growing because things, details around accountability and expectations begin to kind of get watered down.

Yeah, yeah. So, uh, if you think about it like this, uh, in my, in my work I teach a concept, all right, it's called manage the mass or gather the mass, and it's just this recognition that every system, every individual has resistance to change or inertia. So a company tends to do what it's been doing unless there's something happens to it, right, some force of change is applied. Yep. And as a leader, you gotta design your subsystems to get your business to do what you want it to do, you know, do the right thing even without your direct involvement. Hmm. Okay. So there's 4 basic levers you have to work with and, and incentive— incentives isn't one of them. Okay. Incentives seems obvious, but if you only are relying on incentives, you're gonna get yourself into a lot of problems because there'll be perverse incentives where people do the right thing to get the incentive, but it's not the right thing for the business. Uh, they'll feel like they, they don't have any autonomy and authority over what they need to do, so what's the point, right? Your incentive program can be helpful, but it's not really the lever. It's a subset of the lever. The real levers are culture.

Go ahead. And I just— I don't want to interrupt, but I just want to double tap on that and say that it tends to be the very first place that we go to is like, yeah, how do we, how do we just throw money at the problem, right? The very first place. And you're saying like, that's It's not even one of the levers to go to at all.

No. In fact, if you take these other approaches I'm going to lay out, then you can add a very simple, transparent, easy-to-manage incentive program that helps you, doesn't hinder you. If you don't do the things I'm going to say and you deploy an incentive program, it's going to end up, you know, you're going to want to pull your hair out because it's not creating the results and it's actually a lot of money to manage it. Okay. All right, so the levers you do have are your culture, which is, you know, shared vision and values, and that has to be designed and reinforced from the head down. And the culture, you know, don't underestimate like a really powerful, really reinforced culture does to bring forward accountability and transparency and trust and teamwork. Like, don't— that's there. Okay, sure. Another one is who you hire, right? Okay, so now those two things sound very obvious. In fact, I could go ask a thousand business people, what's the secret to business success? And they'll go, well, you got to have a good strategy, you got to have a great culture, you got to have great people. Next.

Yeah, 100%.

Yeah, right. Okay, but underneath the surface, there's a couple levers that are underutilized that with awareness you can lever, and they actually create the most leverage for change. All right, one is structure. Structure is not the org chart. Structure is the design of the business. And then process, and process isn't a, a, a legacy bureaucratic stifling thing. Like, the process is what brings the organization alive, right? It's how we gather data, make decisions, and get stuff done. You can kind of think at a level deeper and say, okay, well, if this is the strategy, what's the structure I need to drive it forward independently of people? Okay, and there's some— there's some, I'll call them rules or laws there that you don't want to— you don't want to design the wrong structure for the strategy or you're not going to succeed.

That's good.

Talk about this if you want to go there. And then how I energize accountability in a company is through, uh, you know, the CEO and a leadership team with very vividly clear roles in the structure, with very few conflicting accountabilities. Well, the easiest thing in the world is to give somebody conflicting accountabilities and they say, I can't do this, what you want me to do, 'cause I gotta do this over here. Just try to strip away the competing accountabilities. Get them showing up, you know, in the leadership team model representing those role, that role that they play. And then have a process that allows the CEO to push authority deep, right? Delegate deeply, but still have visibility and control over the big strategic things. Oh yeah, you can do all those things. Culture, you know, strong culture, get the right people in the right roles in the structure and energize it with the right process where we're accountable to each other. And there's just a tremendous amount of transparency, right? In, in the companies I coach, I'm actually striving for like nowhere to hide. Like transparency is essential to teamwork, performance, and accountability. Be no different than being a sports team, right?

Yep.

You know, get the right players on the field in the right roles. If you're short a player on a key position, you're not gonna win. You gotta get the— you gotta feel the team energizing with the right culture, the right process to give and receive the ball. And you can do those basic things. You have a chance to really you know, win and win not only one season but over time. If you, if you're missing any of those elements, you can preach accountability, you can try to do performance tracking, you can throw a bunch of incentives on top, it's going to backfire.

Is that basically— an example would be where you have a leadership team that does not have clear lines drawn between who owns what, and then when, when a new initiative project, uh, does not take off the way that they wanted it to, then everybody starts saying, well, it was him, or it was her, and it was him, and it was like me, you, you, me, like that type of thing. To where, you know, then that it's like, it wasn't my responsibility, because nobody was clearly owning that task or that project or had clear responsibility over that. That was basically what you see.

That can be one manifestation of it. And it's really important that on a, on a mission-critical project or initiative that you have one owner. I call it the big implementer. In other terms, you might have heard is like a single-threaded owner. And that means that they're accountable, right? We're supporting this individual on this to drive this initiative forward, you know, and they have a dedicated a pod or a team, small, that's like on this charter, you know? And what happens is you can kind of get caught in the middle where you got a bigger company and you're pursuing a bunch of stuff, probably too many things. Mm-hmm. And the core team's dedicated on the core business and they don't have any time or capacity to do the new thing, but yet still you're allocating them in that split direction. And then you're frustrated that the core business is stagnating and the new business unit or product line isn't taking off. and you should put the mirror up and go, oh, okay, I've split. I'm asking my striker to play defense. They're running around all over the place. Of course it's not working.

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What strikes me about you and your work, Lex, is, you know, when you look at your books Design to Scale and How to Structure the Business for Exponential Growth, um, I tend to personally lean on the harder skills of business, if we want to categorize them there, as opposed to maybe the softer skills. But at the same time, you do a really nice job of being able to also acknowledge the softer side of the business, such as culture and core values and the people aspect of it and hiring the right people and that sort of thing. And so it's almost like fitting the softer skill aspect of business inside, and you really have to have both. In order to be able to scale. It's not just, just go hire the right people and everything takes care of it. It takes care of everything else. Like my own journey, I would get so frustrated when you go to a conference and they trot people up there who have been able to scale and they say basically what you said earlier, you know, uh, have some systems and processes and hire a good team. And you're like, well, no crap. I mean, I've heard this 72 times. So just your thoughts about blending those two things together.

Well, they, they both must exist, you know, and in the work that I teach, I have a, like, a little model called PSI-U, which kind of gives a language to these different orientations and skills and pace and time horizon. And, and you need the right mix and the right, in the right places in the organization, really.

What is, one thing on around vision and values, people can read a business book that talks about core values, and it can be one of those examples where it can be dismissed. I just want you to just touch on the importance of actually establishing and having the cadence of communicating core values in an organization.

Yeah, so those are, um, really hard things to implement and keep alive, right? Most organizations, we end up with a statement of values and it's on the wall, but it's not really living and breathing. And it's so easy to go sideways because Mary in accounting, well, she's clearly never living by the values and she's been here for 6 years and she just makes me want to pull my hair out, right? So everybody has a different orientation on that. If you look at the great long-lasting cultures, they've built in mechanisms at all levels of the organization to define, reinforce the values and have consequences around them. And it breaks— basically break— if you study like You know, take the US military and take the Catholic Church. Okay, now these are big hierarchical organizations. Like, I don't want you to take the example for that, but just that, like, they have very distinct cultures, right? Very distinct. But they actually approach cultural building in the same way, and that's that they have a set of core values, right? And around those core values, they have rituals. They have stories and they have consequences. And so as a leader, you need to think about that. Like, here's my core values. I gotta bring these alive somehow. Therefore, I need rituals, which is how we live and breathe and interact those values in real time. Stories, because humans lead, lead, live and learn through stories, right? And so you gotta cascade values through storytelling. And one example would be, uh, you know, sharing an anecdote of what Frank and manufacturing did to save the day, to express our value of tenacity, you know. Oh, okay, that's, that's what we're looking for, right? Rituals would be, hey Frank, here's the, you know, night out on the town. Or, uh, you know, rituals could be how we greet each other, how we start our meetings, how we end our meetings, things like that, right? And then consequences are You know, if somebody's not living in, in to the values, they gotta go. And also those who live to the values and are really talented, they, we wanna uplevel and celebrate and reinforce. So if those, any of those elements are missing, you're not gonna have a vibrant culture. Now notice though, most of the modern approach to building culture is around entitlements. Hmm. Ping pong and free meals and spa days and work from home. And you know, just notice though that Every entitlement begets more entitlement. Hmm. Doesn't lead to higher performance. Might make you feel good, like you're doing these nice things, but it doesn't create performance. It just creates a sense of entitlement. And so you gotta like step back from what might be popular and like really think about, okay, the purpose of this business is this. I need a culture system to empower that, right? To make that happen. And it's gotta have those elements I mentioned. Core values, rituals, stories, consequences.

You know, one thing, um, well, the rituals, stories, and consequences inside of the core values, that is one thing that I'm actually going to go back into, um, uh, what we call it Core 4, uh, having 4 core values. And, um, and we gave like a little paragraph speech about kind of what it is, almost a defining of what the core value is as an example. And I've got a little video video that does a deeper dive. But one thing that I have not done, and that is a great example, is to tell a story around the core value. And I'm thinking about immediately this afternoon maybe shooting a, shooting a video for each one of those to actually tell a story, because I have stories around each one of them, as opposed to just defining the core values. So that's really, really good.

Yeah, stories are really, really powerful. And share stories of people expressing your desired core values in action, right?

Yes, yes.

Both stories, because the negative stories will, will, uh, transfer immediately, right? And I'll go all around the office, virtual or in person, like, oh, so-and-so did this, right? Like, if the people cannot design it against it, cultures will naturally deteriorate under their own, under their own, uh, inertia, under their own weight.

Yeah, we could go on about that because what you choose as your core value is going to dictate so much about how the organization operates. I mean, if you go off speed is king as a core value, well then, you're probably going to make some mistakes along the way. But so what? Because that's our core value is speed. But then if it's like you're all about doing things first-class experience, it's kind of like, well, you know what? Mistakes, forward-facing mistakes are not nearly as accepted as those things. So I think that's incredibly important. I want to ask you around metrics. We haven't talked about measuring numbers, et cetera. So I'm going to switch back over to kind of the hard skill things. What do you see as— this goes back to your comment earlier about doing the right things at the right time. Okay, so when it comes to metrics and numbers and tracking, what are the things that a company that's on the early stage would be needing to have? I mean, clearly they're going to have numbers and data as opposed to a company that's on the upper end.

So this is actually interesting question because What, what a small company should be tracking and what a large company should be tracking are fundamentally the same, right? So this might— this is actually one thing that would transcend or go across different lifecycle stages. And the reason why is that most of the metrics your company should be tracking are in— should be input metrics, right? Inputs are those things that we can— we have some control over. They're leading indicators. They tell us what the downstream effects are going to be. What can happen though, in a company gets larger as they start focusing on the output metrics like revenue or nobody does this anymore. I mean, we do it unconsciously, stock price, right? Or number of customers. Notice those are all output metrics. Yeah, you're too late. That's too downstream. You're going to track them anyway. Yeah, like, you know, for financial reporting and otherwise, but like put the emphasis on tracking your input metrics. So on the, on the leadership team dashboard metrics that, that I deploy in my coaching practice, there's like 4 categories and we're trying to get mostly to inputs, you know, uh, sit on the, on the sales side. Are, are, are we doing the right thing to build our brand and attract customers? On the operational efficiency side, it's like our customers happy and engaged. On the finance side, are we operating profitably? And then on the innovation side, are we doing the right things to drive forward new innovations? And on the people side, it's like, how's our team and our culture? How is that looking? And there are input metrics you can track on all those. And that's what I'm trying to communicate here is just put your bias extremely on the inputs. Not on the outputs. And that would— I would hold that that's a good approach at any stage.

Okay. All right. Well, then that leads me to, to kind of the next thing, which is your thoughts on— I, I'm just going to call it this because I think it's a, a catch-all that people would, um, relate to, and that is a proper goal setting framework. I personally don't tend to use— I'm not expressing this to others, but I tend to not use the word goals too often because it becomes, for me personally, a little too synonymous with wishes. Okay, but goal setting framework— what have you seen that actually works, as opposed to, well, that's nice in a book, but that crap doesn't work?

Yeah, I think it's really important that a company has a clear set of priorities. Rocks, I call them strategic imperatives. These are, you know, 3, maybe 5 initiatives that are going to take us like sustained effort, focus, 3 to 5 year time horizon.

Hmm.

As I was talking about life cycles earlier, right? These are things that are gonna take us from our current lifecycle stage into the next stage. Okay.

Yep.

That to me is a minimum, right? These are our top 3 priorities or top 3 imperatives. Okay. Now you can do interesting things from there, right? I can tie those strategic imperatives into like a 3-year highly achievable goal. It's called a 3HAG, right? That's a popular term now, a 3HAG. You've heard the term a BHAG, which would be a big hairy audacious goal. That's more on a 10-year timeframe. But just notice what's tangible for me are those strategic imperatives that are pointing towards a 3 to 5-year time horizon. That's long enough where we got to stretch and think and we have time to execute. But short enough where it's not some distant dream where like a BHAG might seem like a distant dream.

Yeah.

Then if you, if you have the desire, you can as a leader and you want more granular tracking, then you can start to break those 3 to 5 imperatives down into annual goals. Okay, so each imperative has 3 to 5 annual goals. By the way, I mentioned that big implementer or those single-threaded owner, there needs to be one, one owner for each imperative.

That makes sense.

Yeah.

Well, and then that imperative owner has a team that's leading the annual goals, right? And then you can go down further, you can get into quarterly objectives and key results. You know, it depends how far down you want to cascade. But for me, like, the things come alive at the imperative level, those 3 to 5 imperatives that take 3 to 5 years to complete.

Yeah, that, that, that resonates with me. I think personally I can get behind a 10-year, 20, 30-type, uh, uh, vision of like me personally, kind of where I want, want to be.

Yeah.

And then you kind of go back into the, the business. But from a business perspective, 3 years, you know, what, 3-year vision, uh, I, I like 3HAG. I have not heard that before. That was, that's really good. Uh, that seemed, that 3 to 5 year period of time seems to be, I mean, uh, a period of time to where you can get meaningful things done in that period of time, but not mess around.

Yeah, that's right. And, uh, shout out, uh, to the book The Metronome Effect, which is where I first heard the, the term 3HAG. And, uh, I apologize, I can't think of the name of the author. I have to just say that I read on Kindle and there's never the— the author's name is no longer on top of the book. I just never— like, thank you for the book. I'm sorry I'm not remembering the author's name.

Yeah, well, your, your, your book is on my Kindle, so her website though is, is, uh, Three Hag Way.

Three Hag Way.

Okay, okay, okay.

Awesome.

That's great. Um, I enjoy, I enjoy reading about those. Uh, Cameron Herald's, uh, book, who's been on the podcast, Vivid Vision, has been helpful around, uh, creating a 3-year vision for me. Um, as, as well. Yeah. Um, okay. What are, um, structurally, what, what is something, Lex, that you think is really imperative that we haven't touched on? We've touched on a lot of different things. Um, certainly team and vision and core values, etc., metrics, numbers, uh, scoreboards, etc. Let's think of something we haven't.

Okay, so let's go back to that concept of not allowing for conflicting accountabilities. You can, right? But if you're in a small business with no budget and resources, you're gonna have to, right, have conflicting accountabilities. But you should have a goal to work towards fewer, few conflicting accountabilities in your leadership team over time. And, uh, what I mean is that, uh, you don't want to let a leader that needs to be focused on short-range results to control or overpower long-range development. Hmm. You know, so you'll just notice in your own life, like, you're— like, let's say you're under pressure at work, you know, and you have no time to think. And so what do you do? Well, you, you know, maybe you drink more alcohol, you give up on your fitness routine, you're not as present. Just notice in our life that short, you know, short-range pressure tends to overpower long-range needs and development. And so you say to yourself, well, I just got to get over the hump here at work and then I can take a break and think and reflect and plan for the future.

Yeah.

So if you can, if you collapse those accountabilities, if you give like your head of sales accountability for brand marketing, what's gonna happen?

Hmm.

Your brand marketing function's gonna look a lot like a garage sale, a fire sale. You know?

Yeah.

Oh, right. So be mindful. That's a conflicting accountability. Another conflicting accountability is you, you don't wanna allow efficiency-oriented functions. Efficiency means make things repeatable, scalable, high quality, right? You don't wanna allow efficiency functions to control or overpower effectiveness ones. Effectiveness is to try new stuff, break glass, make mistakes, be innovative. Yeah. Imagine if you put your, uh, R&D— no one would ever do this, but just to illustrate, imagine you put your new product innovation function in ops, in operations.

Hmm.

You just intuitively, our gut goes, oh, that'll never work, right? That's because efficiency overpowers effectiveness. Don't allow it. That's a conflicting accountability. If give them the right space and the structure, Another conflicting accountability can show up. But, you know, I need to say this: the only reason to have a structure at all, by the way, is not to control or consolidate. It's to push authority. It's to delegate. It's to decentralize. You know, if it was only the leader, if you're a one-man band, you don't need a structure. You're the one-man band. You do everything. Okay, but as you scale and you hire people, you have a structure so you can push authority deep. You can't delegate everything. But what will happen in a lot of companies is there's a control side, right? Compliance, control, accounting, quality, right? They can encroach very easily where you need more autonomy or decentralize it. You need more initiative, risk-taking.

Yeah.

So you got to be mindful not to collapse conflicting accountabilities where centralized control can overpower decentralized autonomy, or you'll end up with a shell of a company, right? You won't have the company you, you were, you were dreaming of building because it's just become a shell because it's all compliance and bureaucracy and, and things like that. So those are some conflicting accountabilities to be aware of.

That's really good. That as you were talking, I was thinking to myself one, a couple questions I had not got around to asking, but I want to, I want to ask a couple things around founders, the CEOs, the early stage founders and CEOs. So I'll tell you, talked about stories earlier. I'll give you a 30-second story. So a friend of mine was in biotech space, and they, they scaled the company. He's really smart. I mean, he goes, you know, he got his MBA. He was the CFO of the company, you know, 33% equity holder, I think. They scaled it to about $100 million. And he told me over a beer one day, he said, you know, I knew how to manage the financials from $10 million to $100 million, and that's about when I tapped out. And it was around there that they ended up selling to private equity. And they still have, you know, they've got a second bite of the apple, etc. But they brought in obviously someone who knew how to take that from $100 million to a billion or whatever, you know, a lot more.

Yeah.

And, um, I guess the reason I tell that story is because I want to ask you a question, is how often do you see, man, this, this founder got the company from 0 to 10 million, and then they were able to develop the skills, the mindset, the tools, etc., themselves. They, they leveled themselves up to be able to get it to 30, but boy, they're tapping out. They're tapping out not just in terms of they're tired but the skill set that's required to go from 30 to 300, okay, you kind of notice it's just not there. How do you work through that? What are the things that you see, Lex?

Yeah, so in my work, what I— like, I got fired early in my CEO thing. I got fired up to chairman, okay? And I was really devastated by that. Like, I really didn't like it. They took my kid away from me, you know, and I was pissed, right? And, uh, I think one of the reasons I got fired up is I, I didn't know what I didn't know. And, uh, if I had more— a little bit— if I was a little bit earlier on deploying like a CEO coach you know, to like help me think ahead, you know. Like, I, I was, I was in a place in my company where my company was leading me, I wasn't leading it, you know. Uh, and so what I, what I like to do in my work, what I, what I try to do is, uh, equip the CEO with the tools, lens, model to like be themselves, you know, do what they're really good at and scale this thing as far as they want to take it. Now I've had a couple, you know, like a couple recent situations where the CEO took it, you know, one— well, think of one recent example is she's just stepping into a chairman role now. You know, she took it from 11 to 35, 40, and she's got a full-time job podcasting, so she's gonna just focus on podcasting, and we promoted someone from within to be the CEO. The CEO. That makes, you know, really good natural sense to me. So like, what I found is if a leader can like own strategic communications, own culture, own strategy, uh, own hiring and firing the leadership team, and deploy a smart structure and a smart, you know, transparent leadership team model, most CEOs would be surprised how far they can take it. But if they're not willing and able to do that set of things, they know those undelegatable— they just made up a new word, uh, they shouldn't be CEO, right? They should get into another role. That's my view.

Yeah. So it really is about their own desire to want to be able to acquire the new skills to go to the next level, like the— to go to the next life cycle. And they may say You know what, I'm good, I'm good. Do you think it's almost like a high school coach saying, you know what, I want to, I want to go to college, I want to coach in college, but I don't necessarily need to be in the SEC, or I don't necessarily need to be an NFL coach, as an example?

You know, yeah, it's hard to find the right metaphor here, but, but I would say that if we have drive, most of us humans are capable of acquiring new skills, you know, and especially if we're mature and we're developing as humans, like where we have good listening skills and curiosity and ability to learn, right? Mm-hmm. Really master how to learn. Mm-hmm. What can go really far, but if those things are missing, like you said, like if the desire isn't there, the ability to really listen and learn isn't there, the just innate curiosity and, and humility to learn or, or get help isn't there. Like it's gonna be hard.

Yeah.

Well, Lex, this has been great. I've got 4 pages of notes. Uh, where can people, if they want to connect with you, learn more about your work, uh, where would you, point them to. I have really enjoyed, um, your books, and so, uh, point people where they should go if they want to connect with you.

Uh, yeah, everything that I, uh, talk about is on my website, organizationalphysics.com, and there's lots of, uh, tools there, content, assessments. Have at it.

So what's the evening look like in Sardinia?

Well, you're not allowed to eat dinner in Italy before 8 PM. Okay, we'll have a little bit of time then. Yeah, we'll have an aperitivo and then we'll have a little dinner.

Awesome, Lex, appreciate you coming on.

Right, thanks, Bradley. Talk to you later.

Okay everyone, so there were a few things that I picked up on that episode with Lex that really I think are going to be impactful for me. Number one is when he talked about with core values having consequences, rituals, and stories. I got to think through the consequences aspect of core values, but definitely having rituals around the core values and then stories. Number 2, I thought whenever we— he was talking around metrics and measuring numbers, the focus being around input metrics. I know for me, I love to discuss output metrics a lot more. So results, outcomes, etc., as opposed to really challenging ourselves to put on the scoreboard input metrics. I thought then also the 3HAG was another way. So I'm going to check out the metronome effect and 3HAG way. I think it's going to be good. So those were some of my takeaways. Love to hear what some of your takeaways were for you. What'd you love? What'd you learn? What are you going to do? Big shout out to our podcast sponsors, Club Capital, Coach P, and Autopilot Recruiting. You know the importance of developing your team. Well, what if you could do it on a consistent basis twice a week with Coach P directly and his team? Go to coachpconsulting.com. It's also important that you allow yourself to consider outsourcing one of the most important functions of the business, and that is recruiting consistently. If you go to autopilotrecruiting.com and let Alex and the team know they heard about them on the Club Capital Leadership Podcast, they are absolutely A-players in and of themselves and what they do. They work with thousands of agents at this point, helping them to be able to recruit on a consistent basis and feed you with high-quality vetted people so then you can make the decision of whether or not they should come on your team. Go to autopilotrecruiting.com. And certainly last but not least, our partners at— and certainly last but not least, our partners at Club Capital who make this podcast possible. Go to club.capital, book a no-obligation demo and see how using your financials, getting them on a regular basis, and how the Club Capital team can help you with a mindset, skillset, and toolset so you can make better decisions in your business.

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