Why You Should Run Your Business on EOS (Or Not)
Introduction:
This week, Shawn Busse, Paul Downs, and Laura Zander call on their own experiences to assess whether the EOS operating system—as explained in Gino Wickman’s book Traction—lives up to its promise of freeing owners from frustration, helping them put the right people in the right seats, and generating all of the scale they want. Laura hired an implementer to install EOS in her business years ago. Paul took more of a do-it-yourself approach, picking and choosing from the book’s suggestions. And Shawn while Shawn hasn’t tried EOS in his own business, he has seen how it works in lots of client businesses. As a result, all three have strong opinions about what types of owners and what types of businesses are likely to do best with EOS. Laura, for example, tells us: “I think it’s helpful for people like me 10 years ago, who just don’t know what they’re doing.”
— Loren Feldman
Guests:
Shawn Busse is Co-founder and CEO of Kinesis.
Paul Downs is CEO of Paul Downs Cabinetmakers.
Laura Zander is CEO of Jimmy Beans Wool.
Producer:
Jess Thoubboron is founder of Blank Word.
Full Episode Transcript:
Loren Feldman:
Welcome Shawn, Paul, and Laura. It’s great to have you here. I want to talk today about something that comes up a lot in my conversations with business owners but that we’ve never really addressed on the podcast, which is EOS, the Entrepreneurial Operating System. As you three all know, it is, in fact, an operating system for businesses. You can read about it in the book Traction by Gino Wickman. A lot of owners swear by it. For those who are not familiar, here’s what Wickman promises in the intro to his book:
“What if I told you that by reading this book and applying its core principles, you could eliminate all of your business-related frustrations? That you could have great employees at all levels who share your vision, communicate with each other, solve their own problems, and demonstrate accountability? That your organization could not only run seamlessly, but also have the potential to scale up as large as you see fit.”
That sounds pretty good! All three of you have some experience with EOS, and I’m eager to hear what it’s been like for you. Laura, I know you hired an implementer to help you get set up. Could you start by telling us: What drove you to give it a shot?
Laura Zander:
Desperation. [Laughter] Just flailing. It was, God, eight years ago, I think, because when I hired an implementer, I had read the book: really great, resonated a ton, and we had gone through a shift. We had a general manager who we had let go, and so I had this leadership team—I’ve got air quotes going on—we had a leadership team, and I just needed help to try to figure out: How do I make this work with this team?
So until seven years ago, we really had never hired anybody from the outside at an upper level. So everybody was promoted from within. Everybody started either working in the retail store or pull-packing, shipping orders, or in customer service. And then we’d give them more responsibility, and they’d work their way up into marketing or management. And I still don’t have the skills to train or coach a manager. And so I’ve got all these people in management positions who don’t really know what they’re doing, and I can’t really help them. And so we brought this guy in and thought, “Let’s give this a shot. Maybe if we have a system, that’ll solve all the issues,” which it did not.
Loren Feldman:
How’d it go?
Laura Zander:
You know, I learned a lot. I still have the books and all the binders and all the information, and we don’t use the system on a daily basis the way that we did in the very beginning. But the biggest lesson that I learned was that it doesn’t matter how good of a system you have if you don’t have the right people. And then if you have the right people, you don’t need a system, because the right people just kind of make it work, at least in my case. That’s what I learned.
I learned a ton of really good lessons, though, about—and they had some really good tools, in terms of, they have what they call the VTO, which is the Vision Traction Organizer. In other words: Here’s where we want to be. Let’s all sit down once a year and talk about where we want to be in three years, talk about what we need to do in the next year to get to where we want to be in three years. And then let’s break it down by quarter. So those kinds of tools we still use and were extremely, extremely helpful. Absolutely worth it. But again, the system is not a panacea. I mean, if you don’t have the right people, it doesn’t matter. It doesn’t matter how good your freaking system is.
Loren Feldman:
Do you remember what it cost to hire an implementer?
Laura Zander:
Yeah, a lot. I mean, it was like, a lot, a lot. Maybe we spent 30 or 40,000 bucks during the year.
Shawn Busse:
That sounds about right. They have a funny pricing model, where they’ll, like, charge per meeting. It’s like a $6,000 meeting, although that may have changed since you’ve done it. But yeah, that’s in line with what I’ve heard, too.
Laura Zander:
Yeah, I mean, I could go back and look at my books and see, but, I just remember it was the equivalent of hiring—at the time, anyway—a full-time person. So, I mean, it was a good experience. I’m glad we did it. We’ve learned a lot. As I say, it was cheaper than a Harvard Business class, and I probably learned just as much.
Loren Feldman:
Would you consider trying it again? Or, what are you thinking about, in terms of—
Laura Zander:
We now have the right people, and so that, again, was the lesson. I mean, we can systematize. We can have these weekly meetings, monthly meetings, all these check-ins, have everything written out and do all this stuff. But if you don’t have the right people in the right seats, it’s exhausting.
So now we have the right people in the right seats. And I’ll give credit, a lot of that is their terminology as well. I think it’s: Right people, right seats. You know, I learned a lot. I learned a lot about: Get it, want it, capacity. I learned a lot about trying to find the right people and realizing that, again, you just have to have people in there who are driven and who get it and who want it and who have the capacity to do the work that you need them to do. And then these tools are secondary—as opposed to, if we’re really struggling, bringing these tools in to solve the problems.
Paul Downs:
Well, I have a question. One of the premises of the book is that you have a process to identify the right people, and it’s kind of implied—and I can’t remember, I read it years ago—that getting the right people is just part of the thing. So did it help you to think about whether you had the right people? And did it initiate a process by which you replaced the wrong people with the right people?
Laura Zander:
Great question. I think, based on where I was in our business and just in my career, if you will, it did. But it took a very long time. I kept beating my head against the wall, thinking that maybe these are the right people. I’m trying to use this system, and I’m the wrong person.
So figuring out if somebody is the right person or not was hard, especially when you have people who are tenured employees. They know your business really, really well. I’m not a strong manager either. So it’s really hard for me to judge somebody else’s—or was, I’ve gotten better at it—management abilities. So the answer is: Yes, it did, but fuck, it took a long time. Like, years. It wasn’t the quick fix that I had been hoping for—not for 40,000 bucks.
Shawn Busse:
Well, or that the book promises, right? That intro paragraph was… I had forgotten about it. It’s just like, “Wow, if only running a business were that easy.”
Laura Zander:
Yes! Yeah!
Shawn Busse:
I’m kind of curious: So if I think about Shawn eight years ago, and you think about yourself eight years ago, I was a pretty different person, on a different level of understanding of what it takes to run a business. And I’m curious if you feel like you can give a fair assessment of the person who you partnered with to lead you through the process, and how skilled do you think that person was?
Laura Zander:
The guy who we had, I think, was actually really skilled. I think he was a go-getter. He was an entrepreneur. He got it. He asked really good questions. I mean, I’ve seen some other ones who, you know, it’s a little bit like a life coach who maybe just drank the Kool-Aid, but didn’t really have the skills, or couldn’t relate.
I mean, I’d call and I’m just like, “What the fuck? What the hell? Like, I’m trying. I’m doing this, I’m doing this, I’m doing this, and it’s still not working.” And he’s like, “You don’t have the right person. You don’t have the right person.” And that’s what I needed. I needed somebody to say, objectively, “It doesn’t matter if you use the system or not if you don’t have the right people.”
Shawn Busse:
How far into it did he tell you that kind of cold truth?
Laura Zander:
You know, it took a while, probably six or nine months. But I think part of that was because he needed to understand and get to know our business.
Shawn Busse:
Right, that makes a lot of sense. Yeah, it’s a tough thing to come in from the outside and know when you can tell an owner, “Hey, you got to get rid of this person.” Versus, you tell some owners that, and then they end up firing you, because it’s very hard as an outside consultant to know where the politics are.
Laura Zander:
Oh, interesting.
Shawn Busse:
I’ve seen that many times with prospects where it’s really clear that they have some problems. Usually on the leadership team is where I see it, because that’s who I’m interfacing with, and there are under-qualified folks on the leadership team. And it’s really difficult to be able to go in and say to the owner, “This person is holding you back, and you’ve got to get rid of them,” without building a lot of trust. And so that takes time.
Laura Zander:
Interesting. I mean, for me, it’s a little bit the opposite. I mean, I remember when I was working with Cliff, Loren, and he would say, “This person is not the right person.” I’m like, “Great, done.” I don’t have the self confidence or the experience or whatever it is to know if they really are the right person or not. I needed that outside person to say, “You’re not crazy. You’re beating your head against the wall for a reason. It’s because blah, blah, blah. But yeah, I mean, I can see that. I get that.
Loren Feldman:
Paul, if I’m not mistaken, you kind of DIY-ed a version of EOS. What got you interested in doing that?
Paul Downs:
Well, I had seen one of the members of my Vistage group be extremely successful with it. As a matter of fact, the guy who I think is the smartest one in the whole group—and that’s saying a lot—implemented it, pretty much by the book. And he just had a great business, which he recently sold for 25 million bucks. And it was a company that does valuations of small businesses for SBA lenders. And he grew it from, I don’t know, two or three people, all the way up to 20-some. But what always caught me were his margins. He was taking home 25 percent of the gross, which is astonishing.
Loren Feldman:
Do you think it was because of EOS he had that kind of margin?
Paul Downs:
This guy would succeed, probably no matter what. But what’s interesting is that he felt that it was helpful. And so if you see someone who’s really smart and has a lot of experience in running different businesses. His family is from India, and they emigrated to the United States in sort of the classic immigrant story. And apparently, in each generation, the older ones would get together and figure out which of the nieces and nephews and grandkids was going to be capable of running a business. And they got him started very early. I think he was running some Wingstop franchise or something at age 17. And then they bought him a couple of liquor stores, and he ran these things, and it taught him a lot. And then he started his own business. And at the end of all that experience and help, he’s like, “I need EOS.” And then he got it, and it worked out very well for him. So, you don’t ignore that when you see it happening.
Now, when I read the book, what I felt was that, first of all, I gave my people the little quiz they have at the beginning. And it’s like, I don’t know, 20 questions or whatever, and it gives you a score that’s supposed to, I believe, demonstrate what a screw-up you are. But it turns out that we were actually scoring in the you’re-doing-great range. So it’s like, okay… And I just didn’t feel all that compelled to then follow this book and do every single thing in it, because apparently I was already doing a lot of the stuff in it.
And the one thing that I’ve identified as a weakness then and still have as a weakness now, is laying out something like a five- or 10-year vision for the company. Because I’m not sure, particularly back then, exactly what it was going to be, and I’m still a little uncomfortable projecting that. I would rather have people focused on the nearer-term.
Because, honestly, 10 years from now, I better not be in this business. And I don’t think that’s a big motivator for your team. Honestly, like, “Hey, hey, I’m planning to cash out and go smoke cigars on the beach, and you people can stay here and keep working.” I don’t know why that would motivate anybody. So that’s the one thing that I’ve really left out of it. But read the book, I think it’s got a lot of valuable ideas in it. And we have, naturally, over the years, had a lot of turnover from the team that I had at the time I read the book. So, I’ve kind of incorporated those ideas of what a good employee looks like for a growing company when I try to hire.
Loren Feldman:
Is there anything in particular that you took from that experience that is still working for you?
Paul Downs:
Well, I think that having the right people is critical, and I have a pretty good idea of what kind of people I want to hire. And one of the things that they talk about in the book is that the people who are with you at the beginning are unlikely to be suited to a bigger company. And I think that that’s absolutely true. At the beginning, you don’t know how to hire. You just grab everybody who happens to be around, and often the kind of people who want to take a chance on a very small company have their reasons for it, and that may not be something that translates into a bigger company.
But I think that one of the weaknesses of the book is, like so much advice, it’s aiming at a type of company and a type of growth and a size of company that’s just way beyond where I’m ever going to get. Like, I’ve got 28 people right now. So going from 12 people to 28 is a pretty big change, but it’s not the same as going from 12 to 200. And when you try to write a book and sell as many copies as you can, it’s not like, “The EOS for going from 12 to 20 people.” They’re just trying to call it, “The EOS that fits all sizes.” And so some of that advice, I think, is harder to implement at certain places where a business may be, because it’s more generic. And it’s more talking about somewhat larger organizations.
Loren Feldman:
Shawn, have you ever thought about implementing EOS?
Shawn Busse:
Yeah, so I have had a lot of experiences with EOS, either through clients or friends. I’ve probably seen various versions of it done, I don’t know, maybe a dozen times or so. The other way I relate to it is, EOS, you might call it like a stepchild of the Rockefeller Habits book by Verne Harnish. So, I got exposed to that through the Entrepreneurs’ Organization when I was in their accelerator program, and I implemented a lot of what Verne had to say, the stuff around mission and purpose and values. We had done a lot of that already, but a lot of it got a lot more focused when we started working on that.
And I found having a system that we were operating on was a pretty effective way to help scale the company. But I guess, also, I think Paul’s touching on some of my experience, too, in that it is a bit of a one-size-fits-all. And what I’ve observed from those who’ve done it is it’s truly an operating system. It’s not a strategic system. It’s not a marketing system. It’s not a business model system. So if you’re going to it looking for those types of solutions, it’s not really a good fit for that. So if you have a business with a clearly defined customer, it’s scalable, the market wants what you’re selling—like Paul’s friend. It can be really good for that, because you’re really looking to amplify the thing that’s already working well.
Loren Feldman:
Shawn, could you define that? Explain what it does in terms of an operating system, the thing you say that it’s best at. What does it give a business?
Shawn Busse:
It’s giving you a rhythm and a way of working that is designed around repeatability, measurement, and growth. It’s really about amplifying the things that work, ideally more effectively. Now, I have a lot of complaints about how it goes about doing that. I think it’s pretty simplistic in a lot of ways. But generally, it’s about amplifying known things.
So if you know what you need to do, and you know what type of people are there to do it, it’s really oriented for that. And so businesses that are built like that—say, like manufacturing, where you’re making the same thing over and over and again—it can be a good system for that. Because then you can really start to identify where your strengths and weaknesses are within the system. Because it’s really designed to help you pinpoint where the problems are and to resolve those problems.
Loren Feldman:
Paul, did you find it helpful with that?
Paul Downs:
Uh, no, because I was already kind of doing it.
Shawn Busse:
Well, and actually, Paul’s not a manufacturer. People call Paul a manufacturer, and that’s not correct. Paul’s a value shop. Paul builds custom solutions for unique clients. And there are consistencies, like Paul has to sand the wood, and Paul has to take raw material and plane it down. But he’s not making the same thing over and over again.
Loren Feldman:
But he’s a custom manufacturer.
Paul Downs:
Well, no, the distinction that Shawn’s making is pretty good, because we’re very, very different from a factory. And actually, my buddy who had the SBA lending program was much more like a factory, because every valuation sort of came in from the same place. It came from a bank in the form of some packet of information. The same things needed to be done to it, and the output was always the same.
So, there were variations in what each company looked like, but they developed a method that could be executed by people with a certain amount of training, but they didn’t have to be geniuses. And that’s one of the reasons why the business was so successful and so profitable. They figured out how to do one thing over and over and over again, and they put all the customization not in the hands of the people doing the work, but in the hands of the customers. I had him evaluate my business because I wanted—reasons. Anyway… [Laughter]
Shawn Busse:
Reasons.
Paul Downs:
Yeah, and so I went through the process. And what it was is, I got a questionnaire, which is clearly the same questionnaire they gave everybody. Now, I had to do a bunch of work to answer it, but I was transforming my own information, experience, whatever, into their format, so that by the time their analysts got to producing the valuation, it was pretty much boilerplate.
Shawn Busse:
Yeah, I think that when you were describing your friend, Paul, I was like, “Oh, EOS is perfect for that type of business.” I knew a guy who ran one of those businesses. And anytime you have a business that’s really systems- and process-oriented, where the inputs and the outputs are really similar, that’s where a system like EOS can work pretty well for you. But if you think about the stuff Paul does, the customer is highly variable. The end product varies a lot. Sure, it sits on the floor in a room, but that’s about it, you know?
Paul Downs:
Sometimes.
Shawn Busse:
Right, maybe. And similar to my clients—every client I have is different; every solution they need is different—I think if anybody’s listening to this and they’re trying to decide, “Is EOS right for me?” I would say that the further you are on the spectrum towards consistent outputs, inputs, process, then it will probably help you improve some of those things and become more efficient and more profitable and more scalable. If you’re on the other end of the spectrum, I tend to believe that EOS is probably not the best answer for that.
You know, folks will argue with me on it, but I kind of put EOS in the same book as The E-Myth, as really oriented around: Process and systems will solve your life. And I think businesses are more complex than these books make them out to be. And so, that’s where I have a little bit of a hangup with them. I’ve had clients that have done it, and honestly, clients that have gone through EOS or have DIY-ed EOS. Those are my favorite ones, because the DIY guys, like Paul, they know what to pick out of it that’s helpful, and then they ditch the stuff that’s not.
Laura Zander:
I think it’s helpful, Shawn, for people like me 10 years ago, who just don’t know what the fuck they’re doing, just to have some sort of starting point. It’s like getting a really cool planner. It’s like going to school, and you get this binder with, “Here’s how you can do X, Y, and Z.” And you start with doing it all, and then after some time, you let go of the things that aren’t serving you and that just don’t make sense, because your business is too fluid, or it’s too custom, or whatever it is.
But, I mean, it was really helpful if you just don’t really even know where to start. And there were so many books out there like that. I mean, I remember searching, just like, “God, this thing is out of control. I don’t know how to handle this.” Which, I think the irony—and we haven’t talked about this yet—is that part of EOS is about the distinction between the visionary and the integrator, right? So you’ve got this visionary who usually starts the business. They’re the wacky one who’s thinking up all these crazy ideas and are optimistic and blah, blah, blah. And the visionary—me—is the one who is searching and trying to figure out: How do I wrangle this business that I’ve created and wrangle all these people and put something into place?
But the visionary is not the right person to put the system into place. The whole point is you need an integrator. You need somebody who is really good at systems and really good at being consistent and following through. And for somebody—I’m gonna throw Jay out there—like Jay, or somebody like me, we’re not good at that. I mean, EOS was really fun for two months. But now let me go find another book and another system, and I’m going to try that one out, and then I’m going to try something else out. [Laughter]
I think another thing that was very valuable was having that mirror and having these definitions of these two types of people, and understanding that: Hey, it’s not my role. It’s not my genetic code. It’s not my temperament. Like, I’m not an integrator. I’m not the person who’s going to manage the day-to-day and the details, and I’m not the one who is going to make sure that our meeting format is the same every week. Like, it sounds silly, but that’s a real struggle for me, because I get bored. I’m like, “We’re using the same freaking meeting format every week? Oh my God, why don’t we mix it up a little? Let’s move this one up and this one down.” And that’s not helpful.
Paul Downs:
Actually, I think, if you are starting a business, and you really haven’t had much help from outside, that distinction between the integrator and the visionary is one of the best things in the book. It’s so true that you need both of them. Now, after reading the book, what I thought was, “I can do both of those.” And I can. I think that what’s unusual about me is that I’m very good at integrating, like I’m very detail-oriented. I can do all that stuff. But I’m also capable of getting up there and giving a great speech and getting everybody rah-rah. It’s just an unusual skill-set. And okay, I’m bragging, but whatever. That’s what I can do. I’m tall too, and nothing’s going to change that. [Laughter] That’s what I can do.
And so I didn’t feel the need to really implement the book, because it kind of implies that you’re likely to be one or the other, which, in my experience, is true. Most leaders are one or the other. And if you’re missing the ability to do whatever you can’t—whichever one of those you’re not—it is very difficult to get a company to grow. So, that’s something that’s worth looking at. And Laura’s admitting she’s not an integrator. Great, now you know that. And so I think that’s worth looking at.
Laura Zander:
It’s funny, for us, what I didn’t realize—so my husband, Doug, and I have worked together. I mean, we met at work. We’ve always worked together. Even when we worked at different companies, we would do projects on the side. And we just make a really good team. And then we had a kid, and once we had the kid, then all of a sudden we couldn’t work 24 hours a day, seven days a week, the way that we did before. So we had to split up a little bit, and that’s when the shit hit the fan.
I didn’t realize it, but he was my integrator. He’s the adult in the room, is kind of what we say. He was my integrator, and so together, it worked really, really well. And all of a sudden, he’s kind of out of the picture some, or more so. And it took me years to find a replacement, to find a different Doug. And once I did, that was the missing piece. But it was nice to be able to put words to it, and to be like, “Oh, this is why,” you know? I mean, that’s even our relationship at home. You know, I’m the dreamer, and he’s the one who actually does the adulting.
Loren Feldman:
Laura, if I have my timeline right, it sounds like you went through this EOS process before you bought your manufacturing business. Am I right about that?
Laura Zander:
Correct. Yes, correct. We went through this in about 2016. It was 2016.
Loren Feldman:
Do you think it would have been more helpful if you had had the manufacturing business at the time? Do you think about trying to implement it there, now that you do have it?
Laura Zander:
No, I think, a little to Shawn’s point, the manufacturing business that we bought already had its own systems in place, in general. And the workforce is not an EOS workforce. This is really geared towards academic, college-educated—like my team down there would just laugh. And they’re like, “What a fucking waste of time.” You know, like, they hate meetings. They’re like, “Why are we spending all this time in meetings? We want to work. We want to get stuff done.” I mean, the helpful part is, the one-year strategy, or: Here’s what our goals are. Here’s what we’re pushing towards. Here’s what we think we want to be in three years. That stuff was helpful, but no. Not at all.
Shawn Busse:
Laura, I’m kind of curious, do you see yourself as a manufacturer? How do you think about yourself? Like, Paul clearly is, “I’m not a manufacturer.” I know I’m not. I’m just sort of curious how you see yourself. Do you see yourself as a creative company? Do you see yourself as a problem-solving company?
Laura Zander:
That’s a great question. Well, now, where we’re at with all of the companies that we have purchased, we are now a retail company. We’re an ecommerce company. We are a distribution company. And some of the products that we distribute—not all of them—we also manufacture.
Shawn Busse:
So, you’re like, vertically integrated. You’re more like an Apple.
Laura Zander:
Without most of the zeros, yeah. [Laughter]
Shawn Busse:
Part of the reason I asked this is that, if you think about a company like Apple, they have manufacturing, which really benefits from all of Tim Cook’s genius operations, and all that. But they’re an innovation company too, right? They’re constantly innovating, constantly innovating.
And this is where I think EOS is really not—it’s not its strength, has been my observation. If you’re a company that really prides itself on creativity and innovation… And I mean, you talk about educated employees, but I just sort of think of it as like: Do you have employees who really have a lot of agency and autonomy? And if so, I find that some of the ways that EOS talks about employees is a little simplistic.
Laura Zander:
Yep, there you go. That’s a great way to describe it.
Shawn Busse:
My team would go full revolt if I tried to do any of that stuff.
Laura Zander:
Yeah, it’s a little bureaucratic, you know? I mean, it’s very slow moving in some ways. It feels a little cumbersome. It feels like you’re handcuffed a little bit. But we’re also talking about if you were to implement this in 100 percent the way that they talk about it—and I doubt that was his goal. I mean, he’s probably, like, “Here’s all the things you could do. We recognize that if 50 percent of this stuff sticks and makes sense for your business, then you’re ahead of where you were.”
Paul Downs:
That’s true of most business books.
Laura Zander:
Yeah, exactly.
Paul Downs:
If you get one sentence out of it, you’re doing pretty well. The other thing about the book is that it was written in a pre-Covid time, so some of the techniques probably don’t translate as well to a remote workforce. And I know for a fact that a lot of them don’t translate to a blue collar workforce.
Loren Feldman:
Why is that, Paul?
Paul Downs:
Well, just like Laura said, a lot of blue collar workers do not particularly care to be confronted by some highfalutin theories about what work should mean to them. My theory, based on my workforce, which is still a pretty select group of workers from the blue collar pool, is that you should just be able to go home at the end of the day and forget about your work and enjoy yourself. And there’s sort of a you-need-to-be-this-kind-of-person vibe to the book that I think would be taken as an insult to a lot of people. Because they judge themselves by their ability to do work, not think about work.
Laura Zander:
One hundred percent. It’s a little elitist.
Paul Downs:
It’s a little elitist, which is not surprising, because it’s aimed at the boss. And let’s face it, most bosses are more educated, blah, blah, blah. But I just think that the basic idea of an operating system is valid, but you realize that you have to temper it for what you’re actually doing and who you are, and who you work with. And one other thing—which is kind of implied in the book, and I’ve heard stated more explicitly—is when they talk about having the right people, “If they’re not exactly as you wish them to be, just get rid of them.” That’s an attitude toward human beings that I find very offensive.
And I’ve heard Vistage speakers who took it to the logical extreme of, “If your people aren’t A-plus players, just fire them. To hell with them.” How many A-plus players are there, particularly wandering around trying to make conference tables? Zero. So, you have to make do with people as they are. And that often means being willing to accommodate a little more, in terms of individual personalities, variations, backgrounds, what have you, than these books would have you do. They think, “Okay, there’s always someone better out there. Let’s just go find them.”
And it’s similar, in a way, to watching my kids try to find dates on Tinder or Hinge or whatever the hell they use. They’re swiping, swiping, swiping. And then they meet the person, and it’s not that great. It’s like: That’s not how it works. You just have someone. I met my wife in college, and we just make it work. You have to be willing to ride the rough patches.
And that’s how you actually, I think, get the most out of a workforce, or you’re most likely to get the most out of the workforce. Because it’s most likely that you’re going to have a group of people who each has something great and something bad about them. So learning how to do that, as opposed to leaning on a system that just tells you to weed everybody out—I mean, if you were really honest with yourself, you’d probably be sitting at home, alone. Because nobody’s perfect. So, why would you do that? [Laughter]
Shawn Busse:
This is really one of my big, big problems with it, is it’s abdicating leadership for a checkbox, right? It’s saying, “Do they do this? Do they do this? If no, fire.” And I really believe great leadership is the ability to cultivate and grow people and develop them. And I’ve seen it. I’ve seen it in action.
And part of the reason I promoted somebody on my team to the president role is I watched her work. And I was like, “Jesus, she’s a really good leader.” She was able to do things with employees that I was never able to do. And a system would have told me to just fire those people. And it’s just watching that in action and understanding how constrained we are, in terms of available workforce—this is another piece. You know, it was written before the pandemic. It was also written before the Great Resignation and shortage of labor. And I think it’s really out of touch when it comes to that. So, I’m with Paul on that, 100 percent.
Loren Feldman:
So just to tie this up, if someone listening to this is wondering whether EOS might be right for them, is there one question or two questions you would suggest they ask themselves to determine if they should give this a shot?
Paul Downs:
Well, I’ll jump in. Like, if you’re starting from nothing, any system is helpful.
Laura Zander:
Exactly. Yup.
Shawn Busse:
Yeah, for sure.
Paul Downs:
If you’ve already been through five systems, don’t do it. Because when you go to explain this to your people, they’re just going to roll their eyes. Like, “Flavor of the month. Now we can ignore this, too.” But I think that there’s always value in filling in blank spots in your knowledge. And when I joined Vistage, after being in business for almost a quarter century, I had no knowledge about anything. I didn’t know anything. So any kind of theory is useful in that situation. And if you started a business, and you’re struggling, and you’ve never had management training, and blah, blah, blah, like, sure, read it. It can’t hurt you.
If nothing else, you’ll learn about the two things leadership needs to do. Leadership needs to be visionary, and leadership needs to understand how to actually execute. And if it can’t happen in one person, it has to happen in two people or more. But that’s a really valuable idea. And then the other thing is, confronting the idea that some of your people may not be suitable for whatever next phase you’re about to enter is also a valuable idea. And so those two things, I think, are worth it. And if you’ve got nothing, and you want something at the end of the day, it’s not a bad program.
Laura Zander:
Yeah, like you were saying with the people part of it, it gave me some acronyms that I could fall back on that are still embedded in my brain. You know the GWC: get it, want it, capacity. And so, as I’m thinking about: Is this person the right person? Are they in the right seat? Blah, blah, blah. I can just immediately say, “Okay, wait, do they get it? Intellectually, do they get it? Do they want it? Do they have the drive? And then, do they have the bandwidth and the capacity to take something on?”
And that really helps me. There are a lot of little tools like that that help me as I’m going through the process of figuring out: Are people in the right spot? Are they the right person, but they’re not in the right spot? Especially when you have a promote-from-within culture, you end up with a lot of people who are the right people who are in the wrong seat. You try them in this seat, and then you try them in that seat, and then you try them over there.
And so this has helped, I think, a little bit contrary to what Shawn was saying, in terms of: Just fire them. This has helped me actually not fire people as quickly, because I’m like, “Okay, wait a minute: Are they a culture fit? Do they want it? Then we just need to find the right spot for them. And what does that look like? And what does that process look like?”
Shawn Busse:
Yeah, I think what you both said are really good insights for somebody trying to evaluate this. And I think the simplest thing for me is to just ask yourself the question: What is the problem I’m trying to solve? And if the problem I’m trying to solve is one of scale and operational excellence, I think EOS can be a pretty good system for that. If the problem is strategy, if the problem is product-market fit, if the problem is marketing, if the problem is culture—I actually don’t think it has a great answer for culture. I know people will disagree with me on this one, but I think if there are any of those complex, almost intellectual challenges that there’s not a simple switch for, I think there are better answers out there. At least, that’s been my observation with clients that we work with.
Laura Zander:
Well, and I like the idea: It’s if you need structure. For me, part of what I was looking for was structure. So, if you’re in this spot where you’re the visionary, and perhaps you don’t have great structure and management skills, then this is a crutch that you can use until you get that integrator into place. And what has happened with us is that’s exactly what we did. I mean, because I don’t have those integration skills or the desire to do that, I needed to use this until I found somebody who had skills.
And that’s when we kind of let some of this EOS stuff go, as far as being strict about it. Because this integrator I brought in, she has her own way of doing things, so I’m not going to force this system on her just because that’s what I read about and because that’s what I like. No, I want her to be able to do her thing and do it her way. Shawn, like you had said, the person who you’ve got who’s just a rock star. It gave us a springboard. And if for some reason she leaves or takes off or whatever, then I probably will fall back on this a little bit more, because I need to.
Shawn Busse:
Or just hire another one. This is the thing, you know, the concept, the integrator idea—I’d actually named it something different a long time ago. I just called it the lieutenant: a really strong second who is operationally focused and who can execute like crazy. Paul’s spot on. It is probably 5 percent of entrepreneurs who are like Paul, where their brain is weird enough that it can do both. And it’s probably 95 percent who actually need a strong number two, and that’s a powerful combination. And it has been my experience that when you get that strong number two, you want to give them agency so that they can build their systems, as opposed to imposing a system onto them. But everybody has a different flavor, and some people love that stuff, and that’s cool, too.
Laura Zander:
Yeah, well, and it also depends on size. I mean, when we were smaller, I could be the number one and the number two. I mean, we couldn’t afford to have a second person. Or for me in our growth path, as I take on new businesses or take on new projects, I am the number one and the number two for a little while, as I dig into it, as I figure out what’s going on. Because then I can figure out who’s going to be the one to come over and help with stuff. But if you only have three people, I wouldn’t freaking bother.
Shawn Busse:
What do you all think, in terms of what’s the right size to where one could both afford it and realize the value of it?
Laura Zander:
That’s a great question.
Paul Downs:
I mean, it depends on a lot more than just size and people, size and revenues. I would say size and profitability. If you have enough money that you can swing 40 grand, go for it. And my buddy who implemented it, his company was the same size as mine, but he was making 10 times the profits. And Shawn, I know you’re saying I’m not a manufacturer, but I do have some aspects of manufacturing. Like, I’ve got to buy materials, do stuff like that. That costs a lot of money.
So he didn’t have any of that. All he had to do was run an office space and hire some interns and off and running. He was able to generate huge gross margins. And so it was worth it to him, because when he started off doing it, he was running himself ragged. He had the integrator, his buddy who had worked with him in multiple companies. And so he was able to get the company up and running and then really concentrate on growing the market and becoming a thought leader in the industry and start a bunch of other stuff. And so that worked out great for him, and we both started at the same revenue point, about $4 million. But I was never going to spend 40 grand on that, even though, when you think about it… $40,000, what’s that? A used Toyota.
Laura Zander:
It’s a lot!
Paul Downs:
No, but if you can’t see how spending some money would improve your life, sometimes you’ve just got to spend the money.
Laura Zander:
You do. But there are opportunity costs in some of the businesses that we’ve taken on. I have watched small businesses over-engineer and spend too much money on stuff that is negatively impacting their bottom line. And they’re not getting the value out of it. I mean, if you’re going to spend 40 grand, you’d better get something out of it. It better allow you to scale.
Shawn Busse:
I think 40 grand is a pretty cheap investment, even if all the 40 grand did was made sure your leadership team had functional meeting rhythms and was looking at the right KPIs. That’s worth way more than 40 grand.
Paul Downs:
Well, you can get that for $100 by buying five copies of the book and giving it to your people.
Shawn Busse:
Yeah, but you know, sometimes you do need that outside person. Some groups need that help, and I’ve seen this over and over again. I’ve seen businesses where they’re just spinning and spinning and spinning, and you can tell them what to do, but until there’s somebody in the room facilitating and pointing and holding people accountable, they struggle. And sometimes that’s what the tax is, because they’re not weird like you, Paul. I mean that in a good way.
Loren Feldman:
Let me ask a related question along those lines: What size do you think a business should be before the visionary entrepreneur decides to hire the Integrator as a number two?
Paul Downs:
I would say anything past about 15 employees, because that’s when it becomes a little too much for one person to handle and do anything else.
Loren Feldman:
Does that sound right, Shawn, Laura?
Shawn Busse:
I mean, I got lucky in that my lieutenant, she joined us as employee number five or six—
Loren Feldman:
But not as number two.
Shawn Busse:
No, no. Although, the title I gave her—and she hated it, and I don’t blame her—was “execution team leader.”
Laura Zander:
Wow.
Shawn Busse:
She says, “it sounds like I’m killing people.” [Laughter] And I’m like, “Well, I want you to kill the projects and make them happen.” So she was quote-unquote billable, right? She was not purely overhead, in terms of cost structure. And so I sort of split her time between doing client work and also implementing, moving systems forward within the company. And so, I think that was super advantageous. I mean, that’s when we were growing 30-40 percent a year, and we crossed the million-dollar threshold and then the $2-million threshold. Like, that combo was super powerful. And we DIYed, basically, Rockefeller Habits, which is, like I said, is a slightly different version of Traction. And so, we could not have afforded another $40,000 for an outside person. But hiring that person before 15, definitely. But you just have to have them do other things. It can’t just be 100 percent operations. The model doesn’t support it financially.
Loren Feldman:
All right, this was great. My thanks to Shawn Busse, Paul Downs and Laura Zander. Have a great week, everyone.
