The secret business weapon

What's up, everyone? This is Alex, the host of Founders Journal. As you may know, I built Morning Brew from my senior year of college until we sold the business in 2020. And now I'm building a variety of businesses in different spaces and different stages. I'm basically averaging 1 to 2 new businesses per year. And because of that, I have had the opportunity to test a ton of different products and services, ultimately landing on a core software stack that serves as my business operating system whenever I start a new company. I have my go-to banking service. I have my go-to formation service. I have my go-to domain hosting service. But probably the most important of them all is my HR service, Gusto. If you're a longtime Founders Journal listener, you know how much I think about people in the context of business. A business is nothing without its people, which means a platform that helps me manage and take care of my people is invaluable. And that means I've tried every HR platform under the sun, always with the same exact goals in mind. First, I want a product that's intuitive and delightful to use. As a non-HR person, I find the intricacies of payroll, benefits, taxes, compliance, and expenses to be painful. So I just want something that makes my life easier. Second, I want it to be affordable. I'm a bootstrapper at heart. I started Morning Brew with $0 and I started StoryArc with $0 as well, which means I don't have infinite dollars to drop on SaaS products. And third, I want a platform that acts as my one-stop shop for all things people. I want it to handle payroll, benefits, hiring, onboarding, and taxes, all while integrating with all of the other tools in my business stack, whether it be QuickBooks, Slack, or Google Workspace. Well, Gusto hit the trifecta, which is why I am a customer and use it for every single one of my businesses. Yes, this is a paid sponsorship by the amazing team at Gusto, but I would sing their praises even if I wasn't being paid to do so. So if you're looking for a platform that takes the pain out of payroll, benefits, and HR, I highly recommend you check out Gusto. And if you sign up at gusto.com/alex, you will get your first 3 months free. Now on to the episode. What's up, everyone? Welcome back to another episode of Founders Journal. I'm Alex Lieberman, co-founder and executive chairman of Morning Brew.

Today we are talking about EOS, an operating system for running and scaling your business successfully.

Since 2019, we have used EOS at Morning Brew to scale our business from 15 people and $3 million in revenue to 300 people and $75 million in revenue. Now, EOS is just one of several startup operating systems to pick from. There are OKRs, desired future state, scaling up, and others. More important than what system you choose is that you choose one that resonates with you and that you can consistently commit to for a long time. EOS has been that for us. So today I'm going to break down the system for you with the help of a world-class guest so that you can decide if EOS is right for you and your business. My guest today is Michael Gurley, an entrepreneur and content creator creator who has a holding company of 12 businesses that do $100 million in annual revenue. His businesses span from a fireworks retailer to a paid community for business owners. Michael is an EOS expert, having read Traction, which is the Bible of EOS, dozens of times, and he has applied EOS to all of his portfolio companies. By the end of this episode, you will understand how EOS works. You will have tools to apply it to your business, and you will understand if it is a framework that you want to understand more deeply.

Let's hop into it. Michael Girdley, long time no talk. Welcome back to the pod.

It's a miracle we're wearing the same clothes as last time.

It's wild. It's wild. And no coordination whatsoever on making that happen. We're talking about a topic that I'm really passionate about, as are you, I know. And it's incredibly important and valuable. For entrepreneurs at any stage. I'll just give the quick preamble that in 2019, my co-founder Austin and I were talking a ton, like on a daily basis, around this notion that we felt like we were being reactive to our business at Morning Brew. Like everything we were spending our time on was to put out a fire or fix a problem that would just keep the machine running tomorrow. And we were having daily conversations about How do we get out of this? How do we move to a world in which we're proactive, where we're thinking and spending time on things that are a month, 3 months, 6 months in the future for the business? And one day, one of our investors for Morning Brew, who actually was the creator of the Snuggie, he told Austin, he was like, you have to read this book. And the book was Traction by Gino Wickman. Austin read it in a day. I remember he Slack messaged me and he was like, you have to read this today. Read the book, and we've run our business off of EOS since 2019, scaling the business from let's call it like 20 employees up to 300 employees. And so my question for you is: I know you're really passionate about EOS. I want to start by understanding why is it that you've kind of taken this this love to EOS when there are a lot of other frameworks out there like scaling up OKRs? What do you love so much about it?

Yeah, I think that EOS and, well, basically every one of these entrepreneurial operating systems or business operating systems, they all kind of have the same ideas. And so it's different flavors of the same thing. It's kind of like picking a CRM, which CRM do you want to pick? And okay, HubSpot has its thing and Salesforce has its thing and other people have their thing. So I think there's a level of choosing there. And I tell people actually, if you're going to be trying to run your business better, 70% of it is just picking one of the frameworks and using them. Personally, you compare it to scaling up, EOS, OKRs and other stuff. I don't like OKRs, so we can talk about that later. But I think EOS tends to be the one that is the 80/20 rule of the stuff that you really need to do business planning, strategy, vision, meetings, problem solving, and all that stuff really well. And it's probably the one that's the most easy to self-implement and get up to speed and start using immediately, which I really like. And there's a trade-off there. There's stuff that Scaling Up, for example, does that is bigger and badder than what's in EOS. But a lot of times when you're under 50 people, that stuff doesn't really matter much. So that's why I spend a lot of time talking about EOS.

Love it. So can you give a little masterclass on EOS? So assuming that a listener knows nothing about EOS, but they're thinking about implementing an operating system within their business, what do they need to know about EOS to start Implementing it.

Yeah. So there's, one of the phrases I like is to say that like 80% of all business tastes like chicken. And kind of the idea is, is like every business has to do these same common things, right? You have to like, you have to have like a strategy, you have to have a vision, you have to define your core values. You have to understand how you're gonna compete in the market. You have to set goals, you have to have team meetings, you have to deploy your people in the right way. Like notice I haven't talked about anything that is industry specific. I could have been talking about a law firm or I could have been talking about a coffee shop or like a media company. Like, I just described all those things. But the way most of us historically have approached those things is by just YOLOing our way into it. None of us ever got a CEO course in college. The books that you buy that teach you how to be a CEO or teach you about business are delightfully theoretical and a bunch of feel-good crap and not very tactical. And so, you know, what, what has happened in the past 20 years or so is a number of folks have gone in and studied and said, what is the best practice for each one of these things? Like, what's the best practice for defining a vision for my company? What is the best practice for setting goals? What is the best practice for us running our team meetings and how we're gonna solve problems? And put all of that into an encapsulated framework, these business operating systems that you could just take that off the shelf and just run it. And you can worry about the stuff that's really important for your business and not worry about figuring out how to do vision and strategy and all that kind of stuff. So that's the case, that's the story behind. And I think the case for using one of these operating systems is Like it'll just like it allows you to work on the stuff you should be working on, which is like delighting your customers and not like figuring out how to run a team meeting.

Love it. So let's let's go a little bit deeper into the actual tactics or specifics of EOS. Like if I'm a listener, I'm wondering like okay, I'm bought into this idea that eighty percent of businesses taste like chicken, that there's these repeatable processes for setting vision, having meetings, goal setting. Et cetera. What does that actually look like with EOS? Like if I was to crack open a book or a one-pager that lays out all of kind of like the recipe or the ingredients and like the step-by-step of implementing EOS, what would I be reading?

Well, so first, full disclaimer, like I make no money from this. We did a previous episode on Effectuation. I've also figured out not how to get paid by that as well. So like, this is all like public service. I just want you to be, you know, as a business operator to do better. And really EOS, if you look at it, they have a pie chart that describes it. There's 6 parts to it. There's a planning part, and I'll just list them all real fast and I'll come back to each one.

Cool.

There's a planning part, there's meetings, there's a process part where you define what all your processes are. There's numbers where you take and define what your KPIs are going to be. There's an organizational chart part where you determine who's accountable for what. And then there's a meeting pulse where you're like deciding, like where you're having like a regular cadence of meetings. And so in practice, what it really looks like is starting with the first thing, which is like the vision part and the strategy is part of the process is it forces you to sit down and put together what's basically a one-page business plan. And this is a pretty common idea where you force yourself as a company to define exactly where you're gonna be 10 years from now to the best of your knowledge, where you're gonna be 3 years from now, where you're gonna be 1 year from now, and where you're gonna be this quarter. and tie all of that together in a straight line path, and then put that all in terms of those goals and your strategy on the front and back of a one-page piece of paper. And you're like, wait, we can tell our whole strategy for our entire company for the next decade on the front and back of a single piece of paper? And I will tell you, absolutely you can. And it's one of those things where it's like, you and I see it all the time, Alex, where it's like, okay, I could have written a blog post about this, but now I'm really challenged to have to spend 3 times as much time to figure out how to write it in one sentence in a tweet. And it's the same exact thing. But the beauty of when you encapsulate your entire strategy from vision, culture, goals, how you're gonna compete in the market, what your guarantee is to your customers, who your target market is, when you define all that very concisely is it creates this document that is just a beautiful document where everyone suddenly aligns around that because they can just read it in 30 seconds and understand everything about your business. So that's the vision aspect. I will pause there 'cause I'm gonna run out of breath. But there's 5 other ones where you do that as well.

Okay.

Do similar stuff.

We'll go through the other parts of the chart. But out of curiosity, do you, do you have this for all of your businesses? Like we spoke last episode about ScalePath. Do you have this one-pager for ScalePath?

Yes.

And, and would you be open to sharing like what some of those statements are like in ScalePath? Like what is your vision? Or like almost like just give an example or two of what, what, when you've actually implemented this, how does it actually read in practice?

Yeah. So for example, the vision is we want to create a really big business. Our goal is to have it be a $100 million a year business or bigger at some point in the future. So that's basically the vision for 10 years from now. It's very well encapsulated. It's like, okay, our goal, and we're all aligned around this, is to be a really hugely impactful business in the future. We've defined who our target market is. So there's a very concise sentence that basically says we're targeting businesses between $500,000 and $5 million a year in revenue who both both the CEOs and the business want to scale themselves and the company. And they're located anywhere that can function well in the Western time zones. In terms of competitive advantage, we've defined those things as well. And it's like I just kind of whip this stuff out, but it's actually like the way you get there is you go away with your team and you go to an offsite and you sit around for 2 days going through a structured process to argue about each one of those sentences. for like 2 hours and then come down with a very concise thing of what you want. So we did the same thing for the core values, like what our mission is, like our why are we here instead of working on anything else. All of those are things that you, you know, after meeting with your team and forcing yourself to have those really hard discussions, you come out with a lot of clarity about purpose, focus, and the answer to each one of those questions that every business needs to know.

Love it. Before we move on to the, the next part of the pie chart, I just want to talk quickly about rocks, which are 90-day goals. Obviously, you talk about drawing the straight line from 10-year vision all the way down to the most micro, which is what actually matters over the next 90 days for your business. Are there any like kind of best principles or rules that either EOS defines or that you follow for setting effective 90-day goals in terms of is there an owner of these goals? Are they done at the company level or are they done at the individual person level, what makes a goal a good goal? Elaborate on what a good 90-day rock looks like.

Yeah, so EOS has rules for everything, and I follow like 95% of 'em sometimes. So I'm very entrepreneurial. Sometimes it's just like, okay, well, we're not gonna do that. But I believe in the way they do, I believe in the way they do their goals. And so the EOS rule is every goal that's written, which they call rocks for no good reason whatsoever other than to make you feel like you're part of a cult. But the, They they have an acronym to describe them that they're smart goals. They're specific, measurable, achievable, relevant, and time-bound. So you know if you look at goals, it's like okay we will create a marketing program that will generate a thousand leads by the end of the year. Okay does it pass specific, measurable, achievable, relevant, and time-bound? Absolutely. In the end, that's the way EOS defines how you should build these goals. They have other rules around goals as well. I think you hinted about it, Alex, which is great. A lot of companies will just say like here's our goal, and then like nobody. is actually responsible for it, or 2 people are responsible for it, which when you assign a goal to multiple people, then that means nobody's responsible for it.

Yep.

So they will say one person has to take ownership of this particular goal and go for it that way. So I think those are most of the goals. The other thing that they do, which is super powerful, is there's a forced level of prioritization inside of EOS, which is if you look at what truly pushes businesses forward, it's like 3 or 4 things you achieve each year, maybe 5 or 6 at most.

Yeah.

And so there's a specific rule that for each year, your top-level goals can only be up to 7 goals. You have to have a minimum of 3 and up to 7. And you would say, wow, like our company has to do a lot more than that. And it's like, yeah, you're definitely gonna keep doing other stuff. Like you also need to keep breathing. Like that's not an excuse just 'cause it's not a goal. But like it forces you to focus on making sure those really important things get done above all. And then there's other stuff that happens and you track those things as well. But the company focus and the thing everybody's aligned around are These top-level company goals, and there could be three to seven of those for you know for an individual year.

Love it. Let's keep it rolling with other parts of the pie chart. Where do you want to hit next?

I think accountability chart would be a good place to go. Or let's go to meetings. Let's go to meetings. So okay. You know, so the the pulse of every company, either for good or bad, is meetings that are good or bad, right? And like the thing I love about the way EOS does things is it takes all of those shitty meetings that you have, and I don't know if this. a cursing podcast, but we just made it one.

Yeah, it's a cursing podcast.

And it turns them into what I consider high-quality meetings, right? And so we've all been to those meetings where one person is talking about an issue over here, people aren't potentially talking about the issue at all. You have all these things that are all over the place in terms of what's going on with a particular meeting. So EOS has this defined cadence of meetings, everything from your weekly team meetings that happen to your quarterly offsites, to your annual offsites. And there's a cadence that's very fixed in terms of how you have to approach those when you run your business. And inside of that is a very powerful framework called IDS, which is a 3-stage framework that everybody uses to solve problems. So it solves your problems where a lot of times you get 20 minutes into a discussion and you realize Jim was talking about a different issue than you were. And it's like, oh, well, let's be more structural about how we approach problems as a team and solve them and actually push the ball forward. And this IDS process is super powerful to do that.

And if I remember correctly, IDS is issue, discuss, solution.

Exactly. Yeah, you identify, discuss it, and then you solve it. So identify, is everybody talking about the same issue or what is the core issue? And so an example of that is one time we looked up in one of my businesses and we were not getting shipments out on time and it's like, oh, okay, well, Well, why is that? Well, that's because Jim didn't show up to work last week. Well, okay, well, what's going on with Jim, the warehouse manager? Well, it turns out the real issue is Jim is the wrong person to have in that role. So you identified really quickly what the root of that cause is, and then we discussed that and then we solved it, which was let's work on finding the right role for Jim over time.

Love that. I feel like that's a perfect segue into accountability, which I think you were going to talk about before. What does that look like within the EOS framework?

Yeah, so most companies end up having an org chart, which is like, you're the CFO and you're this and you're that. And like, that's fine. That's like who reports to who and you need to know those things. But EOS takes it a bit further and EOS does this thing called an accountability chart. And the idea is it's a map where every major area of responsibility inside of your company is mapped back to an owner. And that means it's a bit different than an org chart because your grouping of responsibilities, like as a founder, for example, if you're just starting, you are the CFO, the CEO.

Yep.

Head of sales, all that kind of stuff. Well, you're in all those buckets, but as people's jobs come in and they, the responsibility starts to get divvied up, you can see where, you know, those, those things get filled up by other names and those boxes there are there. But ultimately, like what it does is it creates a very powerful situation as you think about your organization where there is an accountable person who is responsible for every function of that organization. And everybody knows what it is because there's this map called an accountability chart. And it ends up being much more powerful than having like a classical organization chart.

And if I can't remember off the top of my head, but isn't there a way to basically evaluate if someone is the right person for the right seat? Isn't it like has it, wants it? There's like basically 3 things to determine if someone's in the right seat.

Yeah. So it's a framework exactly as you're talking about to evaluate fit. It's called GWC or GCW. I'll start backwards. C stands for can do it. Like, can they do the job? So that's pretty straightforward. Like, do you have the skills, the ability, like physical ability, mental ability, all that kind of stuff? Want it. Like, do they want to do the job? Like, is this something they're passionate about? Like, put me in accounting, I will not want to do the job. Sounds terrible. And then gets it is like the other stuff. Like, it's like the cultural fit. Like, do they understand the broader context of why they're doing what they're doing? And so those 3 things together, you want to have everyone in your organization to have 100% GWC. And sometimes you'll see people that can't do it, but they want it and they get like the culture and they're a great fit and everybody loves 'em, but they're in the wrong seat, right? Or they're potentially on the wrong bus with you. So those are things where like you can use that framework to go through and evaluate your whole team and see like, okay, do we have the right people on the bus and, and are they in the right seat?

Love it. What else haven't we hit in the pie chart? Metrics?

There's a lot more detail to it. It's like a 250-page book. It's $12. Go buy it.

And the book is called The Perfect Contract.

As you can tell, I've used it a lot because I could give a 30-minute lecture on it. There is a whole KPI section. So most businesses are delightfully missing numbers about how their business is performing. And you want KPIs because it predicts your future. Your financial statements are really good at describing your past. So there's a whole framework that they have you use to build weekly, monthly, quarterly KPIs to predict the performance of your business. There is a level of definition of defining processes. Most businesses are, all of the memorialization of processes is in somebody's brain, and if that person leaves, you're screwed. Great businesses have defined processes that are repeatable and get used over and over again. And so they have a section on that that you implement as well. And if it sounds like a lot, it's because this really is a lot. It takes people years.

But the nice part But the nice part of it being a lot is I feel like there's so many things in a business where you as a founder, an operator, CEO, it's important for you to like think really critically and like kind of draw things up from scratch. But I think the beauty of this is it's a lot because it's basically codifying kind of abstractable principles and ways of building a business that, again, like you said, work across industries. And And it's done so in a way where, of course, like you said, you don't have to implement 100% of an operating system for it to work for you. Maybe actually the optimal situation is 90% or 75%. But the beauty of this is a lot of it you don't have to think about, where it does basically give you an instruction manual for if you follow this, it will stack the deck in your favor for running a well-operating business and machine.

Million percent. Well said. We should— you should be— you should describe this.

No, I've probably read the book like 3 times. It feels like you've read it 30 times. I have 2 more questions before we go. The first is, you said earlier in the conversation you don't like OKRs, and I'm just curious, what is it about OKRs that you don't like?

I wrote a whole thread about OKRs. So 2 things I didn't really like about OKRs. They tend to have a lack of clarity in my opinion where it's like, why do we need objectives, key results, and all this stuff? I would rather just say the goal. The other thing I really dislike about OKRs, and this is my biggest concern with it, is it's very much a system that tries to be bottom-up and very kumbaya. And great organizations don't work that way.

Yeah.

Great organizations set a vision and head in a direction and everybody aligns to make that happen. And yeah, there's some people that take OKRs and then do them better than that. But every time, like, I read John Doerr's book about it and I was like, this is freaking chaos. This is terrible. Why are teams telling people upwards what their goals are gonna be? It's like, no, no, your job as a team is to support the mission of the company and go that way. So anyway, my 2 major complaints are it's unnecessarily complex. And then secondarily, I think the best way for organizations to work is top-down alignment.

Yep.

Just do that. And I mean, if you look at it, proof in the pudding, who are the big success stories you know from OKR? John Doerr's book totally talks about Google. Well, Google just happens to have the greatest money printer behind the iPhone in the history of civilization. You could give them crayons and Play-Doh and they're going to turn out to be a beautiful business because they just print money no matter what they do. Like when I read the book, I was like, where are the rest of the successful companies using this? And it was telling when John Doerr didn't share, like they don't run their bit, they don't run their venture fund on OKRs. Yeah. Like if OKRs are so good, why isn't Kleiner Perkins running OKRs? Like, so, so—

And I think that, I think that's also a very astute observation, which is like, whatever causation correlation, like just because a great business uses OKRs It's important to think about, is the system the thing that's driving the success of the business, or is it the product, or is it some other variable? Which is spot on. Last question for you. For someone who's listening to the podcast right now and say they're in the position that myself and my co-founder Austin were in in 2019, where we were looking for a system to implement, implement, we hadn't implemented one yet. We, we come across EOS because they've listened to this podcast and they're like, what do I do now? What should they do? How do they actually start implementing this?

You have a couple options. One, if you have a lot of money, you can hire consultants to help you. Most businesses tend to self-implement and do the second option, which is read the book and then just start doing the exercises and learning the process very well until they get to about 25, 30 employees. And then at that point, the business is big enough and has enough revenue where it makes sense to hire some of the consultants that will help people with it and take that off their plate. But when you're just starting out, like go read the book, start doing it, sit down with your co-founder, try to fill out the VTO, which is a one-page strategic plan. Like start using the IDS process to solve problems, start running your team meetings that way. And that's the best option to do it. Like read the book and then just start following it. And it's, what I love about EOS is it's one of a small percentage of business books that are like super highly tactical, right? And like there's so few business books that are that way. And like it's just a recipe, it's a cookbook that you get off the shelf and I think it's $12 or $15 right now. Amazon, just buy the book and read it and see if it speaks to you. And if you don't feel like it speaks to you perfectly, go read the Scaling Up book or go read John Doerr's book and see if you disagree with me, whatever, and go check some of these out.

Totally.

I think the most important thing if anybody's listening is just pick a framework and use it, and it'll be 80% of the battle or 60% of the battle or whatever it is. Most of it's just picking one, even if it's a wrong framework, because it will save you tons of time, conflict, And pain if you're talking in circles with other people and heading in all kinds of different directions.

I'll link to the book in the show notes in case you're already sold on EOS and want to start implementing it in your company. Michael Girdley, thank you so much for joining Founders Journal and excited to have you on again in the future. That is it for today's Founders Journal. As always, thank you so much for listening to the pod and I will catch you next episode. And if you have any questions, you want to say what's up, or you want to recommend a future episode or topic I should talk about, shoot me an email to alex@storyarb.com. That is alex@storyarb.com.

Thanks for listening. Catch you next time.