A quick explanation of EM2.
EM2 is nothing more than the method that many successful entrepreneurs use to manage their people, and their business. It’s based on logic and experience. I as the author am a manager, and an entrepreneur. I’ve been managing people for fifteen years, and I’ve been a successful entrepreneur for more than ten. This book is not based on a study of thirty thousand managers, which then pulls information from all of them to arrive at a new theory of management that’s never been tested in the real world. This stuff works, and it works well.
The central theme of the book and the method is this; Identify your best people and keep them happy and productive. We refer to these people as HIHMs. Highly Intelligent, and/or Highly Motivated. We do this by rewarding them and giving them freedom and flexibility. If you accomplish nothing else make sure you take care of your top people.
The reason we do this is to increase the bottom line.
That is our ultimate goal.
Contrary to popular belief, we’re not here to build a team, make everyone feel good, or treat everyone the same. We’re here to make the owners and investors in this business a profit. The easiest way to do that is hire and retain the best people possible.
When we’ve stabilized and rewarded those at the top we make every effort to afford those in the middle the opportunity to join them.
With that accomplished we trim the fat at the bottom.
Step 1; Define the people
The first step is to define our people. We want to know who is at the top, who is in the middle, and who is bringing up the rear. Create a simple list with three sections. Your top performs, average workers, and those that need help or need to be shown the door. After creating the list put it aside for a week and then re-evaluate. This will help to remove any emotion from the decision.
We start with those at the top in productivity and efficiency.
The highly intelligent workers
o Mastery of the job
o Ability to learn quickly
o Finding new ways of doing things
o Leading through the thought process
o A Manager
o Technical support person
Next we identify our highly motivated employees
o Always works hard
o But not workaholics.
o Does the job right
o Count on them in a pinch
o Customer First
o Trying to get promoted on merit not seniority
o Customer service rep with excellent customer skills.
o Service provider to the end customer with great attitude (from plumber to consultant)
o Sales Person always meets or exceeds quota
o Field Technician customers love him.
Do we have any employees who are highly motivated and highly intelligent?
Our average worker
o Does the work expected
o Doesn't make many mistakes
o Shows up on time
o Doesn't work much overtime
o Has a solid understanding of the job and decent mastery of skills required to perform.
o Complains only occasionally
Finally we take a look at the bottom.
o Makes a lot of mistakes
o Misses work
o Shows up late
o Not much initiative
o Constant complaining
o Resource hog (always needs more people and money to get the job done)
o Doesn't get along with other employees
Step 2: Review your management processes
Conduct an honest and thorough review of what you’re doing and how well you’re doing it.
Measuring the success of the department
Before you can manage anything you have to be able to measure it. Do you really know how well you department is doing? Getting the job done and on time is only half the battle. You have to make a profit as well. Get a handle on your direct costs, and a solid picture of how much money your staff brings to the company. This isn’t always easy in big companies but hopefully you’ve got enough information to at least make a very solid estimate. An entrepreneur will only look at costs directly related to the specific department.
You may have an associated overhead cost tied to your group that you really don’t have any control over, or any benefit from. Disregard this cost, especially if you aren’t responsible for pricing your product or service. A quick example would be another unrelated department perhaps implementing a new computer network. That cost should be tied directly to that department and not spread throughout the company.
Review your hiring procedures
If your department is filled with underachievers it may not be related to your day-to-day management capabilities as much as it is to your ability to find good people. Hire people who are honest about their skills, have a clear goal in mind when joining the company, and aren’t afraid to tell you what they want. If you employ a peer review when hiring don’t make it the sole determining factor. Balance it equally with your own instincts.
Review your firing procedures
Do you pull the plug to quickly? Or are you like many other managers who keep someone around too long? Are there HIHMs in the group that should be fired? This can be the case if the person is disruptive to the point of decreasing everyone else’s productivity to the point of overrunning his own. If you have to fire a highly intelligent, highly motivated employee you must make sure you have given extraordinary effort to fixing the problem, and found a suitable replacement. Once the decision has been made it can take a year to actually make the move so that you can make sure company operations continue smoothly.
Scheduling your people
It’s not just making sure you have all of the projects covered. You also need to make sure you have the right person on the right job. It’s also a good idea to move people to different projects to try and get a burst of productivity and keep them interested in their work. Scheduling time (as opposed to people) is a great way to allow your staff more freedom and flexibility. The due date is important, not the time or manner in which your employees get there. To avoid Chaos set specific target dates for each phase of the project and then check in on the progress. If the target dates are being met you know you’ve found an employee who is quite capable of scheduling his own time.
Are you doing anything now to further motivate your employees? If the answer is no, don’t worry many managers, if not most, never really think about it. Chapter seven covers entrepreneurial motivation styles, and we’ll touch on it later in this chapter. For right now just make a quick note of what you do or don’t do to motivate your employees. Then take a minute and ask yourself, “Is it really working to build this department in the long run?”
You may be making the mistake of motivating only when you absolutely have to. If you’re behind schedule on a project you offer something to get everyone pumped up to get the project done on time. When that project is done, the reward has been paid and productivity drops back down to the previous level.
Are you working with your staff to determine their goals and objectives? Have you laid out any specific career paths for them? If so, are any of them attaining these objectives?
Do you know if your department is making progress? How do you know if the department is getting better, getting worse, or stagnant?
Is your staff paid at a fair value? Use tools like monster.com to find out if your salary structure is in line with similar positions in similar geographic areas. A high turnover problem may be related to pay out of line with what others are paying. You may be paying too much in a current economic condition and be able to replace higher paid, but lower productive people, with better people at a lower cost. This is another of those areas managers don’t want to acknowledge but it’s critically important to the ultimate success of your business. If your pay scale is low and you’re losing people, don’t bury your head in the sand and hope the problem goes away. It won’t.
Just as important, you can’t be afraid to hold down or eliminate altogether a pay increase for an average, or below average employee who can be replaced at significantly less money. I know these are not fun decisions to make but if you don’t you’re going to stabilize growth, and then begin to slide. There is no way around this. There is nothing at all morally or ethically objectionable with this. In fact, the biggest sin is to let the company become unprofitable and put everyone’s job in jeopardy just to save a few people who aren’t carrying their share of the load in proportion to what they receive.
Step 3; Develop and Test your new methods.
What is your plan for the department?
Do you have a specific plan with goals and how to reach them for your entire department? I’m not referring just to yearly objectives but how you react in certain situations, Is a structure already in place if you get busy with other responsibilities of the small business? Have you defined people on your staff that you can rely on for information, or go to workers if something needs to be done in a crunch? In step 3 we’re going to develop our Small Business management plan.
The fist thing we need to do is separate your employees into 3 groups using the information gathered in step 1.
o The highly intelligent highly motivated
o The average worker
o The bottom of the barrel.
If at all possible have someone from outside your team perform the same exercise on your staff. This may cause you to take a second look at someone you’ve placed in a particular position based more on emotion than logic.
Pick one highly effective person from the top of the group and do these things.
o Acknowledge the person as highly effective and let them know you value, and in fact need their input.
o Ask the person on the top of the list what motivates them. This is a point blank question and must be phrased as such. Fishing, or leading here is a big mistake.
o Ask them to write down a few ideas to make the group better. Not any formal approach, and aside from any company wide productivity plans or approaches.
1. What do we do with these ideas?
a. What ever motivates them most let’s address it. This may mean we’re giving out a raise or giving a little time off to someone who may have no vacation coming.
o Set them free. Not just flex time. If you’ve just hired someone who has had three jobs in the last 5 years consider boredom as one of the top reasons they’ve moved so often. Allow them to move from project to project in as short a period of time as possible.
Set boundaries with the playing field but within those your staff makes the decisions not you.
b. Examples of boundaries
o Time (get it done in this time frame)
o Who works on the project with them?
o Then try and remove or repair the situation that’s sapping the energy out of our top people
o The service industry often requires employees to directly work with the customer. Sometimes the match doesn’t work. With good people we usually use the catchall phrase “personality conflict”. This may or may not be the case. The important thing to remember is that not every one of your employees will fit with every one of your customers. Nothing will drive a person away from your business faster than placing them in a situation they hate. It’s not going to do any good for your customer either.
o We’ve obtained a lot of information now we need to put together a concrete plan. Executing the changes is even more important than figuring out what to do.
2. The HIHM has hopefully bought into this approach and is going to be a partner in developing our philosophy.
3. Those who are determined to be HIHMs are the future of the company. They protect your stock, and the company as a whole. Start developing leadership abilities in these people on day one. Without continuity execution of company strategy becomes much more difficult.
4. We need to meet with him for a few minutes at least every week so that he can measure our progress.
5. If he’s going off track or losing interest we may need to start evaluating HIHM number two.
6. What am I going to give? What am I going to get? How will I measure my success?
7. Environment changes
a. Windows, chairs, cubicles
b. People he/she works with
c. Hours of work ( 10 hours a day is 10 hours)
8. Tools to get the job done.
a. New computer
b. More staff?
Step 4;Take action
When you’ve defined your people according to their level of ability and motivation, reviewed your current processes, developed a plan for helping your staff advance their careers, and developed a simple operating plan for your department you’re ready to take specific steps to manage your people much more effectively, and increase your bottom line. At the end of this chapter are several ready to use forms to get you started quickly. A big part of taking action is measuring the results of those actions. When you make a change measure frequently at the start, then diminish to perhaps quarterly, and ultimately yearly if at all. An example of this is in your scheduling changes. When you allow your top people to schedule their own time you may want to track progress weekly for the first month or two. If all is going well you only need to review every month or so to make sure long-term projects are staying on track. If you’re satisfied after six months to a year that the employee is able to successfully schedule his own time, you don’t need to waste your valuable time checking on them.
Step 4; Manage the entire department
Throughout the process we’ve focused most of our energy on managing those at the top of the department. All that we’ve really done for the rest of the group is define them as average or below average. As an entrepreneur, my goal is to have an entire company filled with HIHMs. But I know that’s not realistic. I still have to manage the average worker, and the business itself. Projects must be managed, leaders developed, and the political rules inside your organization still have to be dealt with.
The Entrepreneur doesn’t completely disregard the rest of his workforce even though he’s giving special attention to a select few. When we begin to give special treatment to the top tier of the group what happens to everyone else? We’ve touched on this somewhat in previous chapters, but now we need to take a more in depth look of how we’re going to manage the exceptional people and how we’re going to deal with everyone else.
Managing the exceptional people inside the group.
o It’s OK to play favorites. We’ve made conscious decision to treat these top performers differently.
o How do you define an effective leader? Their willing to make decisions. Grant this power.
o Stick to your decisions and plans outlined in Step 3. Feelings will get hurt and egos bruised. That’s ok, we’re going to give everyone a fair chance to reap the same rewards.
How do you manage the rest of the team as they relate to the highly efficient members of the team?
o As word gets out that top people are receiving top treatment you need to let the middle of the road people know they’re very close to the top. Some are lacking the skills needed to get to the next level, and we’re going to help them attain those skills.
o We need to let the bottom of the pack know that they’re not pulling their weight. Be honest with them and tell them if things don’t improve a change will have to be made. Too many managers spend too much time on these people. Lay out your expectations, and tell them you want them met now. The only motivation necessary for these people is a kick in the pants, and the threat of losing their job. If that doesn’t work nothing else will so why waste your time? We can expend more energy on them when they at least get to the middle of the pack.
o How do we get the middle to the top? If you’re thinking motivation you’ve got the cart before the horse. You may not be dealing with a problem of motivation. Make sure the person has the skills to do the job and the proper direction. As you fine tune your management skills you’ll discover that you need to spend less time with the top people, because they have been given the freedom and flexibility to manage their own projects to a very large extent. You’ll spend less time managing the bottom of the barrel, because you’ve told them what to do and when you expect it. If they don’t start producing we just show them the door. That should free up time to focus on greatly increasing profit and productivity by upgrading a few of those average workers to HIHMs.
o Get your staff to help with marketing and sales. Without these two key elements it doesn’t matter how good our product or service is. No one will know about it. A really great manager gets his department moving in the direction of growth at all times. If it’s at all possible this should be an important piece of your overall management strategy.
o Take care of any red tape you can for all of your staff. It may be putting time sheets on the web so they’re easier to fill out, or putting in requests to human resources for them. But find a way to keep the bureaucracy to a minimum.
Step 5: Entrepreneurial Motivation
As a manager is it really your job to motivate? The straight answer is no. I see far too many companies that turn the job of manager into motivational carnival barker. We are supposed to be managing adults who have chosen their own careers. If they are even average employees they should have an internal sense of motivation just to do the job. Giving your top producing computer programmer or customer service rep a wooden nickel for $10 off of company merchandise is not motivation, it’s a carnival contest. And I think for many employees it’s more demeaning than it is motivating.
Real motivation is simply setting goals and establishing rewards when the goals are met.
There is of course negative motivation, which we’ve already dealt with for our employees at the bottom. You produce or we fire.
The motivation we’re concerned with starts at the top. We reward our very productive HIHMs based on one thing and one thing only. We give them what they want. You can’t really do that with a company wide motivational program, because everyone wants something a little different. In my experience most employees want either money or time. But there are some who want a fast track promotion, training outside their traditional skill set, or sundry other rewards for performing above and beyond the call of duty.
Motivating an employee effectively really only takes on thing. You have to listen.
What does the employee want? What do we need him to do? Is what we need him to do worth the reward?
Over the last couple of years I’ve seen a new trend emerging. While on the surface it looks great, there is one big hidden problem. I’m talking about turning everything into a reward. All of the employees make a relatively low salary. They are then given bonuses every month or so based on their performance. This is one area where I diverge from an entrepreneurial approach. I’ve only seen this take place at small companies. The problem with the approach is there is never a reward based on some level of security. If you have fifty great months and then get sick, or have a personal problem that is a distraction for a month or two you pay a heavy price. Even if the situation is not your fault, sales may be down for a few months for some reason, you effectively take a pay cut until things pick up. Because of this I’d be very careful with this type of approach. If your company is going through a short period where things are tough, you don’t want to make it worse by losing good people.
This is a quick outline more than a comprehensive approach. It’s not meant to be enough to turn your entire management career around, but it is a good start. You have to do the hard work, keep your mind focused, and ask questions from people who’ve been there and done it. If you want to boil it down even further I’ll do that as well.
The key to EM2 and very successful business is this.
o Take care of your best people first.
o Constantly strive to increase the productivity of those in the middle of the pack.
o Get rid of those at the bottom.
o Understand the numbers of your department.
o Help out with sales and marketing if at all possible
o Enjoy your life, you might get hit by a bus tomorrow.