If you think it is common to build a scalable business, you may find the following statistics, from Verne Harnish’s book, Mastering the Rockefeller Habits, startling. Of the roughly 23 million firms in the US, only 4 percent get above $1M in annual revenues. Of those firms, only 1 in 10, or .4% of all companies, ever make it to $10 million, and only 17,000 firms exceed $50 million. Finally, only 500 firms exceed $11 billion in annual revenues.
Harnish goes on to assert that there are three barriers that prevent scalability in firms: Leadership, lack of systems and structures, and market dynamics. Under the category of leadership he has this to say. “To make more than just a lot of noise in your business, you’ve got to have rhythm. And the faster you want to grow, the faster you have to pulse. At the heart of executive team performance is a rhythm of tightly run daily, weekly, monthly, quarterly, and annual meetings—all of which happen as scheduled, without fail, with specific agendas.”
If all those meetings sound less than entrepreneurial, he follows the metaphor of the freedom expressed in Jazz. “At first glance, all you see is the improvisation. But if you study Jazz or talk about it with somebody who really knows the idiom, you soon realize that there is a rock-solid rhythm and a set of rules underlying all that passionate free-styling. To come together and create something amazing, all players must understand jazz’s basic structure and agree to work within it. They have to know the key and the time signature. They have to establish how many bars are theirs for a solo (usually eight), and they need to know who to take the hand-off from….For growing companies, when meetings are the rhythm and agendas are the rule, pros and unknowns can come together to create something new and marvelous.”
Harnish is not talking about the endless, often pointless, meetings many of us have endured in the past. If order to ensure rhythm these meetings need to be on time, agenda driven, and full of purpose. I sit on the advisory board of one of the start-up ventures at the Baiada Center. Each Friday evening, without fail, the advisory board receives an email from one of the founders of CityRyde, detailing the accomplishments from the week, and how each accomplishment links to a strategic objective for the company. It has become so predictable that I find myself checking my Blackberry each Friday evening at about the same time for this update. This weekly ritual has gone a long way toward helping the team develop a rhythm for the company. I have seen first hand how that rhythm has helped CityRyde build and maintain momentum, even in the most uncertain and ambiguous times.
In the book, The Rhythm of Business: The Key to Building a Successful Business, David Rottenberg and Jeffery C. Shuman have this to say:
“Whether in art, song, dance, literature, sports, love or recreation, all human activity follows a rhythm. And not surprisingly, this rhythm also runs through business, rhythm is basic to how business functions. Most simply, the rhythm of business is attempting to develop a product or service that fulfills a group of customers’ wants and needs, testing the product or service in the marketplace, learning from that test, and then refining the product or service to more accurately fulfill your customers’ wants and needs.”
Rottenberg and Shuman explain six basic requirements to developing the rhythm of business:
- You need, at least, some natural skills.
- You need to work hard and practice.
- You need a basic understanding of the mechanics of the business you are in.
- You need to gather information about your business.
- You need to constantly think about your business.
- You need to love the business with a passion.
The American Heritage Dictionary defines rhythm as, “The regular patterned flow, the ebb and rise, of sounds and movement in speech, music, writing, dance and other physical activities, and in natural phenomena.”
In the August-September, 1994 issue of Earth Star, Layne Redmond wrote an article entitled, When The Drummers Were Women. In that article Redmond claims, “Rhythm is undeniably the structuring basis of life on this planet…The sun’s rays create the primary rhythms of rest and activity, of growth and decay, of life and death…Realizing that healthy living things are not only internally rhythmic but are also synchronized with their environment, the earliest communities of humans based their survival on keeping track of these rhythms.”
Larry Bird attributed his success in basketball to, always knowing where the ball was going to be, and Wayne Gretzky attributed his success in hockey to skating to where the puck is going to be. Doesn’t that sound like rhythm?
The Rhythm of High Performance Teams
High performance teams thrive on collaboration. Rhythm becomes essential where high levels of collaboration are needed. I recently had the opportunity to witness the Chester County Youth Orchestra give a performance, which provided an excellent example of collaboration. Although the orchestra was comprised mostly of K-12 students, the audience was treated to some very sophisticated pieces, typically reserved for more mature orchestras.
During a particularly challenging piece I was struck by the importance rhythm played in their ability to collaborate. What I experienced was musicians knowing exactly when to come in and out of the piece. One section would finish runs of other musicians, with the Bassist playing the first five notes of the run, finished by the Cellist playing the last five notes. These musicians were demonstrating seamless hand-off. If you were to close your eyes, it would sound like one instrument. It reminded me of the competitive advantage that comes when business partners and participants in the value chain create a rhythm that allows for the seamless handoff of business activities, so that it looks to the customer that they are getting one stop shopping.
The Rhythm of Purpose
In an article entitled The Passion and the Rhythm of Business, Melody Campbell describes the importance of having a clearly defined and easily communicated purpose for your business.
“This is where the “rhythm” of business comes in. You must have a formula, a plan, that when applied to your business with the discipline of an athlete in training – organized, finely tuned, and flawlessly executed every day of your business life – will reward you with steady growth. I’m talking about the mechanics of how you bring your customers in; how you service them when they’ve done business with you once; how you keep them so loyal they’d rather `fight than switch.’”
Campbell goes on to articulate the need for clearly identified tasks that become your daily money making activities that keep you from getting off point with busy work.
“For example, you might have on your list the following:
- Contact 5 new prospects each day
- Call 5 previous customers each day
- Create 1 new alliance relationship
- Follow up on 2 current alliance relationships
- Add 5 new link swaps to website today.
With a list like this – if you’re just not up to doing business as usual you can give yourself the day off if you do the list. It’s remarkable what transformation you will go through if you create a list like this. Your business will grow daily and you will pull yourself out of ‘the glooms’ more often then you might realize just by going through the motions. Remember, when the passion of your small business seems gone, look to your purpose, and put the rhythm of your plan to work for you. When the success is steady it will create the passion again.”
The Rhythm in Music
When listening to a basketball being dribbled, I am reminded that rhythm can be found just about anywhere. As an integral part of nature, rhythm is found in raindrops falling, waves crashing, a horse’s gallop, a beating heart, or a person’s gait. It is no wonder that rhythm is what makes music move and flow. Music is made up of sounds and silence that form a pattern of sound. Rhythm in music is dependent on the fact that humans recognize a beat occurring at a regular interval. Rhythm in music is more than just a beat, however; it is the way that sounds with differing lengths and accents can combine to produce patterns in time, which contain a beat. These sounds do not have to be particularly musical; striking almost anything can make rhythms, as long as there can be difference in accent. Differences in accent can mean different sounds or just different amplitudes.
It is common to speak of a particular rhythm, referring to a pattern of note lengths, which occurs in a piece of music, and it is important to understand that the rhythm is defined by the pattern. While the tempo could vary from performance to performance, the rhythm remains the same.
The Rhythm of Building a Scalable Business
Much like in music, in order to build a scalable venture you must maintain a rhythm that, when consistently applied, allows employees to stay on track. This requires the consistent rhythm that comes from planning, directing, control and culture. These four concepts provide the antidote for two of the three barriers described by Harnish: leadership and lack of systems and structures.
Many businesses start through the efforts of a single individual. When this occurs, the individual looks much like the solo singer/songwriter. If the entrepreneur is skilled, he or she may have the necessary ingredients for a successful offering. As a solo artist, tempo, pace and rhythm are at the discretion of the entrepreneur, providing them a great deal of freedom and flexibility. Although rhythm is required, it need not be too structured or predictable.
Much like the solo artist, solo entrepreneurs are typically faced with limits to their ability to grow. While a solo musician may offer great appeal to a particular fan base—I never tire from James Taylor’s One Man Band, or Joe Pass’ Virtuoso—his or her breadth of appeal may be limited. In the case of James Taylor, some fans may want to hear his songs played with different instrumentation. Although Joe Pass is arguably one of the greatest jazz guitarist of all times, some folks might like to hear the lyrics associated with the Jazz standards he plays so expertly. Likewise, when a business tries to scale, it often needs to build a team, find suppliers, partners and other affiliates, in order to meet market needs. Once the business moves beyond the sole proprietorship everything changes, which requires rhythm.
In a recent panel discussion, I spoke with Thom Elicker, visiting professor at Elizabethtown College, on the subject of rhythm.
Loschiavo: What does it mean for an organization to have rhythm, and when and why is it important?
Elicker: Organizations having rhythm means many things:
First, it means setting a beat everyone follows – having a structure, not rigid and inflexible, but one everyone knows and understands. Like a budget – how we’re going get there. In other words, planning.
Second, it means predictability – being consistent, not changing the beat mid-tune. Having consistent quality products and services for customers, reliable pricing, consistent delivery patterns, and treating employees fairly. For example, not changing the rules for how employees earn a bonus in the middle of the year. In other words, directing.
Third, it means everyone is in sync following the beat – everybody understands the corporate goals and objectives. For example, having clearly defined hiring practices, having clearly defined accounting controls. In other words, control. By the way, this is much easier to do when a company is small. It gets more difficult as you add people.
Which brings me to culture. Every company has a unique beat. It is a certain way they do business. Some are more laid back. Some are more rigid. The beat may actually change over time, as a company goes from being a start up to a publicly traded company, but it is the beat that helps to define the culture of the company. People identify the beat with the company and sometimes if the change in beat occurs too quickly, the company may lose its rhythm, temporarily. For example, when some of the Big 4 accounting firms merged in the 1990s, cultures were disrupted and had to be re-defined. The same is true in music. Remember the Bee Gees? They started as a British Invasion type band, disappeared for a while, and then re-appeared as the stars of the Disco Era.
Loschiavo: How does an organization stay in rhythm?
- By having the mission statement regularly re-enforced – leaders walking the talk, corporate retreats, webcasts, newsletters, etc.
- By focusing on what made them successful in the first place – by surveying customer and employees to be sure they are still on track.
- By establishing some specific measures of success and monitoring against them.
Loschiavo: What’s a potential cause of a company getting out of rhythm?
Elicker: Growth and more specifically, diversity.
Loschiavo: So is it good for a company to get off beat temporarily and redefine its rhythm?
Elicker: Yes! This frequently happens during periods of growth and adding people with different backgrounds – in other words, making the organization more diverse. There are several advantages to being a more diverse organization:
- Increased adaptability – can supply a greater variety of solutions to problems in service, sourcing and resource allocation. There is no one best answer to a question.
- Broader service range – being better able to provide services to customers on a global basis. Be in a better position to understand the demographics of customers they serve –increasing market opportunity.
- Increase in productivity – different cultures may bring different skills sets – bring insights previous managers may have overlooked.
In fact, a study conducted by the Society for Human Resource Management found that diversity has led to improvements in employee morale, retention and recruitment. But it is not without its challenges – Organizations need to learn how to manage differently.
- Communication could be a problem – culture and language barriers
- Resistance to change, caused by prejudice of some employees – could lead to turnover, harassment and other legal issues
- Costs – legal and revamping offices to accommodate people with disabilities
But, all in all, increased diversity in an organization – “changing the beat” – is typically very advantageous.
With a solid rhythm that comes from effective planning, directing and controlling, and with a well-defined culture, an organization can not only overcome differences in style, but can learn to leverage it to me more successful.
According to Bob Wilson, Vice President of Sales for Disc Makers, “In music you have to keep the beat. That’s called rhythm. In management it’s the same, it has to be consistently applied or you lose the beat or the rhythm that you’ve established. Employees will tend to go off and do their own thing without the consistent rhythm or consistent application of management; coaching, reviewing, monitoring, mentoring, and listening.”
“Every song has structure; key, time signature, tempo, melody or lyrics,” says Wilson. “In management you have to build structure; expected hours, objectives, productivity goals, policies and the like.”
Taking the music metaphor further, Wilson speaks to the musical arrangement, “Each player in an ensemble needs to know their role and any parameters surrounding them. The larger the ensemble, the tighter the arrangement needs to be. The same applies in organizations. Each employee must know the parameters within which they are permitted to act. What is their authority, when do they escalate an issue to management, how do they interact with other functions?”
According to Bruce Kaminsky, founder and president of KYDD Products, rhythm provides gravity for a musical number. “Although a piece may have a great deal of diversity in tempo, style or voice, rhythm is what allows the piece to remain cohesive. The same holds true for business.”
Even the most independent-minded entrepreneurs recognize the need for rhythm. While few would argue that Steve Jobs is anything short of a brilliant entrepreneur, he is often criticized for “not playing well with others”, and “marching to the beat of his own drummer.” In a 60 Minutes interview on April 13, 2008, Jobs had this to said, “My model for business is The Beatles: They were four guys that kept each other’s negative tendencies in check; they balanced each other. And the total was greater than the sum of the parts. And that’s how I see business. Great things in business are not done by one person, they are done by a team of people.”
If great things is business are done by a team of people, that team must have rhythm. Rhythm comes from the culture you develop in the organization and by a purposeful attention to planning, directing and control.
If you would like to see a podcast of a unique panel discussion on this subject please visit https://www.lebow.drexel.edu/Centers/Baiada/Calendar/podcast.php?vid=6748b514c68469fcc9726c82613ec88f.
©Mark P. Loschiavo