Episode 274: Is Process the Missing Key to Unlock Growth? A Chat with EOS Leader, Mike Paton

Welcome to Skucast, the podcast for entrepreneurs in the promotional products industry. Skucast shines a light on our industry's best work, features maverick personalities, and discusses what's really involved in running a modern promotional products business. Skucast is the official podcast of Common Skew. Mike Payton has spent a lifetime learning from entrepreneurs. He's an author, speaker, EOS implementer, and host of the EOS Leader Podcast. Over the past 15 years, he's conducted more than 1,500 sessions for the leadership teams of more than 150 companies. He's co-authored 2 books, succeeded Gino Wickman and spent 5 years as EOS Worldwide's visionary, And now he spends all his time helping entrepreneurs run better businesses and live better lives by mastering the simple concepts and practical tools he'll share with us today. What is EOS? Well, Mike gets into that today, but know this, you don't have to be an EOS company to get a ton out of Mike's advice. We talk about the one word creative entrepreneurs do not like, and that's process. We talk about how process is not the enemy of creativity, how it's impossible to scale without process. Mike shares his 20/80 rule, not the 80/20 rule, but the 20/80 rule, and the difference between a core process and a proven process. One is about internal processes, the other is about the customer journey. And then finally, how to actually implement processes, starting with processes like a sales playbook, without draining your company and your energy. This was recorded a few months ago, so you'll hear Mike give us some great post-COVID advice that's still holds true today. Hi friends, I'm Bobby LeHew, Chief Content Officer at Commenscue. Today's episode is brought to you courtesy of Commenscue. We are the work-from-anywhere platform that powers your connected workflow, enabling you to process more orders and dramatically grow your sales. What I love about having Mike on the cast today is that at Commenscue, we've created a seamless experience to handle the complexity of any of your projects, and yet it feels invisible. I think that's what a really good process does once you've implemented it. Feels like it's running in the background so you can focus on the fun, energetic, forward momentum tasks that help you grow. How seamless? In 2022, there were over 676,000 projects created in over 4,000 shops. Put fun back in your work again. Learn more at commonscue.com. Now on to my chat with Mike. Oh, a little bonus. At the 20-minute mark, I play a clip from Russell and Jocelyn Byrd from The Promo Addict. It's a clip from Sku Camp Brooklyn, and they talk about how they implemented a process for their meetings that really transformed how they move the business forward. Here's Mike. Mike, it's so great to have you here.

Thanks, Bobby. It's great to be here.

I mentioned to you that there is something going on in our industry where agencies or distributors in our business reach a certain size and they start to adopt, they start looking for internal strategies to help create structure around their business, around their leadership and how they're going forward. And it seems that a certain percentage, or maybe even a large percentage, are adopting EOS. Can you explain, before we get into the whole idea of process, what is EOS? Why is it important for a small business growing as they scale from like $10 to $20 to $30 to $50 million or more?

You bet. First of all, that's music to my ears and I'm sure Gino Wickman's ears. So thank you for sharing that with us. But EOS is just a high-level, simple way of operating a rapidly growing, rapidly changing business. And so you're in a field where a lot of your clients and listeners are rapidly growing and it's a rapidly changing field. And so that doesn't really surprise me at all. At a high level, EOS is just a set of simple concepts and practical tools, been around for 1,000 years, going to be around for thousands more, but the way they're woven together really appeals to a busy entrepreneurial owner and/or leadership team. And so that's why the adoption rate is so high.

Is my assumption correct in that people gravitate toward EOS because they need a systemized— like, we provide a systemized way of operating their business in terms of the platform, and we bring a lot of synergy to, to what was before a very complicated and frustrating process? And it almost feels like this is an invisible part of what we do on the platform side where it's, where you're providing structure for their growth as they move forward as a leadership team. Am I right, Chase? Yeah.

Yeah. So EOS stands for Entrepreneurial Operating System, which a lot of early stage entrepreneurs might call an oxymoron. Wait a minute. I'm making stuff up as I go along here, which is certainly the way it always felt for me. But basically it's a way of bringing a little structure, discipline, and accountability to a rapidly growing business without creating a corporate bureaucracy full of red tape and rigid rules and unhappy people and so on and so forth. And so how do we keep our entrepreneurial spirit alive and execute more consistently is a, is a big part of implementing EOS.

One part of EOS, a big part of it, is just process. And can you— I don't want to oversimplify this, but, or maybe I do. Process is— I always say that process is like when you get up to go to work, you have a process. Right? The way you shower, the way you get ready for work, the way you get ready for your day, there's a process that you adopt without even really being cognizant of it. Is that— am I on the right track with this?

You've got it. A process is a series of steps that when repeated get consistently great results.

Okay.

And that process—

okay, great. So we don't like cause people to turn off from listening right now. Entrepreneurs typically don't like this word, right?

Yeah. So we're talking about process because that's the latest book in the Traction library. My co-author, Lisa Gonzalez and I really enjoyed writing it. But process is one of the 6 key components that a business running on EOS is working to strengthen: vision, people, data, issues, process, and traction. And the motivation for me to write this book was that after 13, 14 years of being a professional EOS implementer and helping companies implement this system, I would say my clients were weakest in the process component by an alarming margin.

Wow.

And it caused me to evaluate evaluate my own level of passion and enthusiasm for the topic and my abilities as a teacher of that topic. And as a result, I recognized that I could get better at teaching it and I could do a better job of getting entrepreneurial leaders excited about the topic because most entrepreneurs look at process and think they have to make a choice between an entrepreneurial company and a process-driven company. And quite frankly, I don't believe that's right.

They feel like they're giving up on spontaneity and creativity and that kind of energy for formality and structure and rigidness that has none of those aspects. Is that my right?

That is. It is not in a lot of— part of the problem, Bobby, is in a lot of larger corporations or government agencies, the overly rigid approach to process is so common and so visible to customers or taxpayers or whatever that it creates a perception in the mind of an entrepreneur about what process has to be that is frankly only one of two approaches. And what we tried to teach in the book Process is the entrepreneurial approach or 20/80 approach to strengthening your process component. It doesn't need to work like the Bureau of Motor Vehicles where at 11:15, I'm going to lunch whether there's a line full of people out the door or not. That's what the process says. That's what we're trying to prevent.

And is it safe to say that without process— and I want to touch on your 20/80 because I really want you to unpack that first— without process, it's really impossible to scale?

Yeah. Every company, as it grows, reaches a point where one person making all the important decisions, driving all the important actions, answering all the questions from the new people in the organization is no longer an efficient or effective way to run a business. And so you've got to start delegating and elevating to grow and scale a business. And when you do that, it's scary because you just learn naturally how to do all of these things. And every successful entrepreneur will tell you, I just learned by my own failures. Like everything I screwed up, I just quit doing that. And everything that worked, I did that over and over again. And so the question is, how do you get your brand new employees as you're growing to 10 or 50 or 100 people, how do you get them to know what you've learned their first month on the job. And that's what process is in an entrepreneurial company.

Yeah, it seems like too, post-pandemic or through the pandemic, we— like, at least I know in our industry, we adopted the apprenticeship model as the number one model to train people in the business. Even if you didn't do it on purpose, you did it accidentally, where you were apprenticeship, you're literally sitting by each other, this is what I do.

That's right.

It almost seems like process is more important than ever in the world of hybrid work culture because now you need something more than just being physically in the office all the time where you have those sort of run-ins.

Yeah. And I would say, I actually think Zoom and video conferencing makes apprenticeship a little easier in some situations because you can have somebody observing a Zoom meeting you're doing with a prospect and not be visible. And so they're seeing the whole thing. So I would, but In a world in which lots and lots of people are never coming to the office, what you lose is the spontaneous connection. The, hey, you got— you're sitting in the lunchroom with somebody, an experienced person, and you're brand new in your job. You don't get those spontaneous opportunities to say, hey, something happened with a client last week that I didn't really understand, and how would you have handled this situation? That's where I think things have really changed post-COVID.

Dynamic and energetic entrepreneurs typically push back against process because it's exhausting, it takes too much time, it's not their nature, and like I said earlier, it constricts— they think it constricts their creativity and destroys freedom. But you have a really important principle that I love called the 20/80 principle. It's the first time I've ever read it reversed like that. Can you explain what the 20/80 principle is?

Yeah, it is the Pareto principle, but we just say it a little bit differently. When we're documenting and simplifying a handful of processes with an entrepreneurial leadership team, what we ask them to do is 20% of the work to get 80% of the results. And that's compared to the corporate bureaucracy approach, the 750-page SOP manual approach, where the people who own and run those companies feel like they've got to document 100% of the steps in 100% of the processes to get 100% compliance. No entrepreneur on the planet wants to run a business that way. And so what we say back is, how about we focus on the handful of core processes and only the major steps in those processes? So we're doing 20% of the work and creating 80% of the positive outcomes. That makes sense.

It does. Do you see entrepreneurs, particularly those that are in a selling-forward business like ours, do you see them adopting couple of big rocks in terms of taking, deciding what it is they're going to focus on for process. I tend to see people starting to develop first their sales playbook or HR or some— are there 2 or 3? If you were talking, you train a lot of entrepreneurs, where do you suggest they start?

Yeah, I'll start by giving the menu. So every client is a little bit different, Bobby, but, but you're right, I would say people and revenue creation are the 2 most common pain points or areas of focus for a leadership team, especially with all the labor pool issues we've been dealing with for the last couple of years. That supply chain management has been a very frequent focus too, because all the supply chain disruptions. But most of the time my clients are prioritizing which of their core processes to focus on first. It's where they think they can make the most impact. So, you nailed it. It's how do we Recognize we have a need for people, go out in the market and find the right folks, onboard them properly, train them up, and make sure they stay happy and engaged their whole careers. That's the people process or the HR process. And then either how do we go out and generate qualified leads, or how do we go out and turn those leads into longtime mutually benefiting customers or business partners of ours? Those are the two that get prioritize first in most organizations.

You have a process which I loved. Even those unfamiliar with EOS can really grasp some of these fundamentals that you preach. Can you unpack the process process?

Yeah, please. And I are still laughing about that because we were really trying to come up with a clever name and this is what we ended up with. So the book is called Process with an exclamation point for a reason. There's a little sarcasm in that because not a lot of Entrepreneurs are excited about process. And so, what we wanted to do is demonstrate in the way we wrote the book what we were teaching people to do about process in their own organization. And so, we just created a visual workflow of the 3 major chunks of work that need to be done in order for a company to strengthen its process component. The first chunk of work is commitment, or commit is what the first step is. And that's getting the owner and the leadership team 100% in alignment that we need to prioritize this. And quite frankly, that's 80% of the battle in most entrepreneurial companies. The second set of steps is about documenting and simplifying the core processes, getting the leadership team to agree. We've got somewhere between 5 and 15 truly essential processes in this business. We agree they should be done this way at a high level. Think 1 to 3 page checklists rather than 25 page SOPs. At a high level, they should be done this way. That's step 2, document and simplify. And then step 3 is the FBA checklist, and FBA stands for followed by all. How do we turn this great work we've done into an actual driver of consistent execution in our business rather than a process manual that gathers dust on a credenza somewhere?

Yeah, I have a dumb question. When, if I were an entrepreneur, let's say I have a team of 10 to 20 people, 20 to 30 people, and we finally realize that we need to start documenting or developing a process for our sales playbook. How do you encourage folks to even start? I know it sounds like a dumb question, but it's, I don't even know where to start. I have all this information in my head. How do they begin?

Yeah. So the first thing I would do is I would own it at the leadership level of the organization rather than the temptation we all have as entrepreneurs to say, okay, I'm going to document, simplify my sales process. I'm going to go ask my best seller to write down everything she does from start to finish to win a new piece of business. And then that's going to be my sales process. And if you read the book Process, you'll see some funny outcomes of that, or maybe not so funny outcomes of that. So, number one, you got to make a commitment as a leadership team that this is a priority right now. And I'm warning your listeners, There will be some resistance to that idea because most of us feel too busy or not inspired or like it's going to take too much time or it's going to drain all my energy or creativity, blah, blah, blah. So, you're going to encounter a lot of resistance. So, start there and then follow the process process. As simple as it is, go observe the way things are working right now in your business and resist the temptation to fix things right away because that creates confusion and complexity. And write down the way things are working now. Then when you've got it all written down, then you can start looking at it with a critical eye. Where could we make it a little more efficient? Where could we eliminate bottlenecks or drop batons or whatever you want to call it, make it better? Could we automate anything? So you're simplifying it and then get the leadership team to agree, this is the way we ought to do it every time. If we can't, Part of the thing in an entrepreneurial company is you got to acknowledge that you're here to serve your customers or clients, and you're not always able to follow every step in your process exactly as the way it works. And so, don't make it rigid. But when we can, we should try and do it this way every time because we're going to get better results. That's where I'd start the journey.

Realistically, if I were to take that same team and say, okay, you know what, we're going to start with our playbook, our sales playbook. Is there a timeframe?

Is there an average?

Are you seeing an average timeframe for folks when you should say, I think you should be able to knock this out in 90 days? Or—

Yeah, usually in an EOS company, each member of the leadership team walks away with company and individual rocks for the quarter. So it's just 90-day business priorities. And so usually drafting a sales playbook or sales process is a rock for the head of sales. And the head of sales is able to at least put a draft together for the leadership team to review and approve at the next quarterly meeting. Once it's approved, then the rock is implement it by conducting training and implementing measurement around whether or not the process is being followed and getting the desired results. And that's a rock the second quarter. So, after 2 quarters, most of the time, a leadership team is able to document simplify, and begin working to get a core process followed by all.

Okay. What's the difference between a core process and a proven process?

Yeah, a proven process for companies running on EOS is like this EOS process behind me. It's a proven way of taking care of your customer from the minute they start thinking about doing business with you to the time they're longtime satisfied business partners of yours. For your listeners who are marketing agencies, and I know a lot of them are in that space, it's a customer journey. It illustrates what your customer experiences, not the work you do behind the scenes in order to create that experience for your customer. So, core processes are internal back-of-house processes. Proven process is what the customer experiences, the customer journey. For what it's worth.

Okay. One more question around the nomenclature of rocks. I know in the SaaS business we use OKRs, and if I understand rocks right, does it come from the old analogy of you have a cup full of priorities and you're going to put your biggest rocks in first and then everything else can come in? Is that where it comes from?

Yeah. Stephen Covey's glass cylinder exercise, where we have a tendency as leaders to prioritize the urgent rather than the important. And our job as great leaders is prioritizing the important and allowing the urgent to settle into the distance between the big important rocks.

Okay. Can you describe the EOS tool called Getting What You Want? How does that really help us refine our core process?

I always start by saying, don't try this at home because it may not work with your partner. Getting What You Want is just a visual device of beginning with the end in mind when you're trying to do one of three things. Document and simplify a process, identify leading indicators or activities-based numbers that you might put on a scorecard to predict future results, or break a long-term project up into a series of initial steps so that you can map out your entire journey to complete that project over time. And so, the trick is you begin at the end. What's the result you want? About how long do you think that's going to take? And then, you just work back from there only including the essential steps in the process that allows you to get the desired result consistently. And that enables you to eliminate all the one-off ad hoc complexities that most people when they're doing process work can't help themselves from doing. It's the salesperson who says, No, Bobby, it's really complicated. Sometimes our clients are tall and sometimes they're short and we need to use a completely different process.

And it's just not true.

It's a series of consistent steps.

I see. It's like reverse engineering the most important parts as opposed to saying— Yeah, I see. I see. We have a few leaders in our industry speak at a recent conference. We hold an entrepreneurial boot camp every fall called SKU Camp. And at our recent leadership conference, Russell Byrd and Jocelyn Byrd talked about their Level 10 meeting. I loved this idea. And I maybe had read it before, but I don't recall. Would that be a great example of a process?

Yeah, as a matter of fact, almost everything in EOS is a process. And in fact, within the Level 10 meeting agenda, which is a process of running an efficient and productive business meeting so that you focus 60 minutes of a 90-minute meeting on what leadership teams should do when they meet, which is prioritize and resolve issues. It's a process for making sure every one of your meetings is a high-quality, efficient, productive meeting. And the last step in the process is magic. There's not a lot of magic in EOS, but this is magic. Very simply, we just ask business leaders at the end of every meeting they hold each week, to rate the quality of the meeting 1 to 10, with 10 being best. And then when they don't say 10, we ask them to give a reason so that instead of complaining about one another's behavior in the meeting offline with one person who was there, they're working together as a team to master the art and science of running efficient, productive meetings. It's really simple, but man, that step is really key.

I love that idea. It just sounds on the surface, it sounds, I don't think we need that, the quicksand that meetings can be. We all know that you've been in a meeting where you just, everyone's been in. And so it's a really great process. I'm going to play a clip from Russell and Jocelyn here.

Please do. That's awesome.

So yeah, we run a Level 10 meeting once a week. Typically it's on Wednesdays. It lasts for an hour. It comes from the EO group or Scaling Up, which John mentioned earlier. He's nodding over there. And so our 1-hour meeting, it's just our managers. So it's myself, Jocelyn, and our operations manager, Chris. And it lasts 1 hour and it's super critical. Like, we have to do it every week.

And Jocelyn, you want to talk about, like, we follow a very strict format that we post in advance in Slack before the actual meeting.

So just for the management team, just for the management.

Yeah. So we have our own management channel in Slack. So we always start off the meeting with good news. It has to start with good news. That way everybody's on the same page. Then we go into our scorecard. So Russ brings that to the meeting showing what our goal was for the month and what we're at right now. So he's doing that for all the businesses, how many presentations, sales orders, invoices we've done for the month. And then we move into our 90-day scorecard. So we do a quarterly meeting that we set our 90-day rocks. And based on that, we do our progress report essentially every week.

Okay.

Explain rocks real quick.

So rocks are the, the things that we want to accomplish in each quarter. We pick 4 or 5 big things that we want to accomplish in a quarter to push us more towards our annual goal. And then you break that up weekly as well.

So you have the weekly meeting and, and do you decide beforehand which topics, if there are new topics or new business agendas and you're gonna throw that in the Slack channel, how does that work?

Yeah, so we do talk about that. It's a minimum 1 hour before the meeting. We have to make sure that we put our notes in there so that there's no surprises.

Nobody weaponizes the new, the new Exactly.

Exactly. Because the other point, the other part of our meeting, we do our customer and employee headlines and then we end with issues. So if we bring up an issue at the meeting that's not, that nobody was prepared for, that's when bigger issues happen because we don't wanna surprise somebody or blindside somebody with an issue. So we always wanna prep them in advance.

Let's talk a little bit about today's entrepreneurial challenges and the environment that we're in today. We're, we're obviously experiencing an uncertain economy. We could say a volatile fluctuation in workforce. Some are experiencing unprecedented growth, others are struggling. It's a really odd time that we're in. Are you seeing unique challenges now for business leaders and entrepreneurs as you're coaching and leading, maybe especially in the area of process, that might be different post-pandemic?

Yeah, I think in the pandemic, Bobby, the inability to count on labor showing up every day and supply chain fulfillment happening in a consistently predictable manner created a lot of disruption and a lot of unkept promises made to people inside the business and outside the business partners, vendors, et cetera. And so, it created this sort of excuse-making mechanism where delivering on what was promised wasn't a necessity. That's, I think, the biggest thing COVID created.

Yeah.

How many times did you hear, we're understaffed because of COVID or we, we can't get raw materials because of COVID So we promised we were going to ship your thing in March, and now we're only going to ship it in August. And then you're saying my event is in April, so your thing isn't, isn't going to help me in August. So I want to cancel my order. You can't do that. We're not going to give you a refund. And so I think it lowered everybody's expectation about what they we're getting from one another from a business-to-business or business-to-consumer standpoint. And I'm beginning to see that return to a period of normalcy. And so my advice to your listeners here is business is all about making and keeping promises. So are relationships and everything else in life. And so as quickly as you can, with all of the challenges that you've had to overcome these last 3 years, you and your leadership team need to figure out how get back to consistently making and keeping promises. And yes, hurdles are going to continue to present themselves to you. We are not healed from COVID I don't believe that's the case, but the excuses are wearing thin. And it's our job as leaders. And this is what entrepreneurship is. When COVID first hit, we had an EOS conference that I keynoted from my session room right here. And the theme was entrepreneurship and crisis management are the same damn thing. Okay. Where danger and opportunity meet, that's where entrepreneurs thrive. And COVID created danger and opportunity. And so let's go take advantage of this opportunity to demonstrate we can keep our commitments better than the competition. Those are the companies that are going to thrive. Post-pandemic.

Mike, you have no idea what sensitive topic you just hit on for our supply chain. I'm sure it's everywhere, but in ours, I can only speak to ours. And so thank you for mentioning that. Do you think— and I don't want to be harsh— but do you think there is a residue of that excuse-making or holding on to those reasons as opposed to pushing past them? Do you think on the worst side that it's a residue left over that we have to get beyond?

Yeah, I mean, it's— I It's pushing past limitations to achieve something you weren't sure is possible is what entrepreneurship is, right? And so, humans are naturally really good at that and like those types of challenges, or they avoid it like the plague. So, the residue is just because everybody else was making apologies and getting away with it and raising prices beyond what maybe was appropriate and getting away with it doesn't mean you can do that forever. And so get rid of the residue yourself and you're going to kick ass and take names in this space because I think humans are going to go back to expecting quality service, somebody who's appreciating my business, stuff showing up on time, reasonable prices. If you can get back to that faster than your competition, you're gonna win. You're gonna win.

Really great advice, Mike. I know you, you consume a lot of smart, intelligent materials in your work, as your coaching teams. What book, podcast, or article or other have you read or consumed lately that really impacts the way you think?

This is gonna let your listeners know what a short attention span I have, but I'm actually going to share a YouTube video. Oh yeah, that I freaking love, and I've been playing it for all my clients. I can't get through a whole book. Come on, Bobby, I'm a visionary. So I write books, I don't read books. And that's not true. I read a lot of books, but right now I'm really passionate about this. There's a woman named Kara Lawson who's the head women's basketball coach at Duke University, and she's got a YouTube video that's viral times 10 called "Do Hard Better." And if you haven't seen it, you need to watch it, especially coming out of COVID It is a reminder that If we're waiting around for things to get easier, we're going to get eaten for lunch. So do hard, better. Kara Lawson, I appreciate you, Kara. Keep doing what you do for the young people that you're influencing.

That's awesome. Thank you so much, Mike. We'll share that link in the show notes. Thank you, my friend, for joining us. I really enjoyed this conversation with you.

As did I, Bobby. I really appreciated being here.

Thanks so much for tuning in to this episode of SkewCast. Be sure to keep up with our latest content by subscribing to SkewCast on iTunes or to our blog at community.commskew.com. Until next time, friends, thanks so much for listening.