Six Key Components of a Well-Run Business

Editor’s note: This is a guest post from Gino Wickman. Gino is the author of the award-winning book Traction; Get a Grip on your Business.

Gino is an entrepreneur with skill and his passion is helping business owners and leaders get what they want out of their business. What I like about Gino’s approach is that he turns business into a system of core components to help you get a handle on your business.

Without further ado, here’s Gino …

The Entrepreneurial Operating System

Through his Entrepreneurial Operating System (EOS), Gino helps businesses succeed and achieve greatness. EOS is is essentially a way to make business success more systematic and repeatable, and it’s based on his real-world experience (Gino has been an entrepreneur since the age of 21.) Without further ado, here’s Gino …

Having personally delivered over 1,200 full-day sessions working hands-on and intimately with over 110 entrepreneurial leadership teams to help them build great companies, I find one fact undeniable: When an organization strengthens its key components, everything falls into place.

At EOS Worldwide, our team of EOS Implementers and I spend our days helping people build very well-run businesses by strengthening Six Key Components. So what are the Six Key Components, and how do you strengthen them?

One Holistic, All-Encompassing System

Before we take them one at a time, the first step is to start seeing your organization differently. Assuming you have the right product or service that has value in the world (no buggy-whip businesses, please), you must organize all of the many moving parts of your business into one holistic, all-encompassing system that consistently delivers that product or service with excellence. To help you do that, I suggest that you see your business as being made up of Six Key Components. As you focus on strengthening these Six Key Components, your business will become complete, everything will start to work harmoniously, and all your obstacles, problems, and frustrations will greatly diminish. As a result, you’ll gain tremendous traction.

The 6 Key Components of a Well-Run Business

Drawing from my Entrepreneurial Operating System (EOS), any organization has Six Key Components:

Vision
People
Data
Issues
Process
Traction

#1 – Vision

Now, more than ever, an organization’s vision needs to be simple, clear, and concise. If you can’t clearly articulate and communicate your vision in a page or two, it’s too complex.

The real power is in keeping it short and sweet while getting everyone on the same page. The Vision Component is strong when everyone in your organization is 100 percent on the same page with where the organization is going and how it’s going to get there. To strengthen your Vision Component, get your vision out of your head and onto paper by having your leadership team meet to answer these eight questions:

What are your core values?
What is your core focus?
What is your 10-year target?
What is your marketing strategy?
What is your three-year picture?
What is your one-year plan?
What are your quarterly Rocks?
What are your Issues?

Don’t move on to the next question until you have absolute buy-in, agreement, and commitment to each question’s answer. With your leadership team now completely on the same page, share your vision with the rest of your organization to get everyone moving together in the same direction and sharing that vision. By default, this means that anyone who doesn’t want to be part of it must go. Harsh, but true. By fully strengthening this first component, you’ve gone to the root of most of your symptomatic issues.

#2 – People

People are both a company’s greatest asset and potentially its greatest liability. Getting past emotion, personal histories, individual egos, and subjective opinion and getting “great” people in place to do the work that needs to be done is a vital step. The impact of even one individual who’s a poor fit can be profound, and I’ve worked with clients whose entire operations were revitalized and reinvigorated by a single personnel shift.

Strengthening the People Component means that you’re structured properly, with only the seats necessary to deliver your product or service consistently with excellence. Always focus on and solve structure first, then people second. With the right structure in place, you can now get to what defines “great” people in your organization. It’s two simple truths: First, every person possesses your core values, and second, they’re sitting in the right seats and you’re convinced that they Get it, Want it, and have the Capacity to do the job (GWC). You must hire, fire, review, reward, and recognize your people consistently around these truths. If you’ll stay true and consistent to these two truths, someday soon, you’ll look up and realize you have great people at every level and your culture will thrive.

#3 – Data

Strengthening the Data Component enables you to objectively manage your business through a small set of activity-based numbers that are leading indicators of future results, giving you an accurate pulse on the business and the ability to predict future results. To make the Data Component stronger, pick five numbers right now that you should be looking at on a weekly basis to assure that everything is on track in your business. If you can‘t come up with five, here are a handful to get you thinking: number of sales contacts, number of sales appointments, number of quotes, closed business, customer satisfaction, gross margin, and A/R balance. Set a weekly goal and assign someone to manage and be accountable for each number, and then start tracking them weekly. When a number is off track, the accountable party must take appropriate action to get that number back on track. Keep 13 weeks at a glance; this will give you the ability to see patterns and trends. Continue to refine this Scorecard as you move forward; it takes about one to three months until it evolves into something you love.

#4 – Issues

Strengthening the Issues Component helps you to compartmentalize all issues in your organization and solve them effectively in order of priority at all levels. Unresolved issues drain your energy and are barriers to moving forward. To strengthen the Issues Component, list all issues as they arise. Help everyone understand that calling out issues is good, healthy, and right. Get them on paper. When you meet with your team weekly, rank the issues in order of priority, starting with the top three, and then follow the Issues Solving Track to resolve them in order of priority. Step 1: Identify the underlying root cause of the issue. Step 2: Discuss the best possible ways to resolve the issue. Step 3: Solve the issue by selecting the best action steps to take to make the issue go away forever. This will stop issues from lingering for days, weeks, months, and sometimes years.

#5 – Process

Strengthening the Process Component aids you in creating a scalable, consistent, and easier-to-manage organization that’s ultimately more profitable. To strengthen your Process Component, take a big step back and think about what your business model is and what its core processes are (e.g., HR, marketing, sales, operations, accounting, customer retention). Document each of the core processes at a high level without too much detail, focusing on the major, essential steps within each process, and then manage everyone to follow them. Identifying the core processes that make up your business model, documenting them in a simplified fashion, and then getting them followed by every single person enables you to systemize the predictable so you can humanize the exceptional.

#6 – Traction

If you make no other investment of time and energy in your company, commit to locking your leadership team in a room every 90 days for a full day and spend that day hashing things out, getting back on the same page, solving issues, and deciding what the three to seven biggest priorities are for the coming quarter. You’ll see huge returns on the time invested. A large percentage of problems and nagging issues get solved simply by devoting the time necessary. With that discipline in action, take it a step further and, within those 90-day periods, plan to meet for 90 minutes every week, spending at least half of that meeting time productively working to resolve issues (following the Issues Solving Track above). Businesses who commit to this “90-day world” gain huge results and actually save time, reduce errors, miscommunication and unresolved problems. It also stops them from trying to take on everything. It’s the operational equivalent of periodically recalibrating your instruments and synchronizing your watches.

Build Your Solid, Well-Oiled Machine, One Component at a Time

If you work to strengthen these Six Key Components, all of the obstacles and frustrations you have been facing can be greatly reduced. If you’re feeling a bit overwhelmed right now, simply pick one key component to focus on and strengthen it and then move to the next. Before you know it, you’ll build a solid, well-oiled machine and have a stronger business than you ever thought possible.

Clarity is the Key

Ultimately, the bottom line is clarity. Business owners, entrepreneurs, and leaders who adopt this holistic approach—as all of our clients do—train themselves to stop treating symptoms and start getting to the root causes of problems.

I wrote Traction as a complete how-to manual for helping a company strengthen its Six Key Components, and our supporting website offers many free downloadable tools for easy access and use. You can download any of the above mentioned tools and disciplines at www.eosworldwide.com.

Enjoy the journey.

You can follow Gino on the EOS blog and you can learn more about the Entrepreneurial Operating System (EOS) using the following resources:

EOS Worldwide (website)
Traction (book)
Decide! (free eBook)