The stalker has finally emerged from the bushes. Process. Everything that we covered so far rides on the back of process. Everything.

I hear you saying, “Now he tells me?”

Yeah, now. If I had overtly introduced process in chapter 1, there would be readers galore already billing themselves out at $2,500 a day as “Leadership Process” gurus. They’d gobble up the process and ignore the rest. Process is not leadership, but effective leadership depends on process.

Raw emotion isn’t enough.

Is this Frank Pacetta speaking?

It’s me. All the sincerity, trust, communications, family atmosphere, fun, high performance, people-ology, recruiting, and training aren’t worth a damn without process. Process forms the wheels of people-ology and leadership. If you have a process phobia—and I believe more business people do than don’t—hang in for this chapter! Process will not blunt your entrepreneurial edge.

The good news is it’s simple to have an awesome process.

There’s no bad news—except when there’s a half-cocked process. Then the news is grim.

When I met Jaci Clark, the University of Dayton’s women’s basketball coach, I was startled by how many responsibilities she was juggling in a seemingly effortless way. “Doesn’t it get to be overwhelming?” I asked. (I could tell it wasn’t, but the dumbest questions get the best answers.) She said, “Not if you break it down.”

Not if you break it down. Hello, red notebook.

That’s what a process does. It breaks down a complex agglomeration of demands into manageable pieces. I have to have a process like that. I’m not smart enough to handle anything that has a high degree of intermittent synchronicity in a multimodular format. I can drive, talk, and tune the radio at the same time, and that’s about it.

Therefore my process is simple and it works. There are four components:

• expectation
• execution
• inspection
• evaluation

You can clutter it up with subcategories, but why bother? Expectation, execution, inspection, and evaluation can also be expressed by basic questions:

• Where do we want to go?
• How do we get there?
• How do we know it’s working?
• Are we where we want to be?

Great Expectations

This is the place where we get a chance to “dream big dreams.” Or little ones. But there has to be a destination, both short-term—today, tonight, this week, next month, and so on—and long-term.

Don’t turn into Carl Sagan on me and burn up billions and billions of brain cells planning a trip through the cosmos. There is entirely too much strategic thinking being done by people who should keep their feet on the ground worrying about the tactical considerations—like paying the rent and having enough left over to buy a nice U.S. Savings Bond or a promising Internet startup venture. Keep it simple until you get the hang of it. Where do we want to go? Try

Bill Locander of the University of South Florida’s business school says that leaders take us on a journey. I like that metaphor. If we’re going on a journey with a destination of “What a great place to work” in mind, how do we get there? The first decision involves the means of transportation. I vote we go in our own vehicle—let’s travel in “The Business.” Like most vehicles, it runs on fuel. Profits fuel The Business.

So now the question becomes, where and how do we get the profits we need to make the journey? This is a hard one, so think about it.

Right. The Business sells a (product or service) that generates a profit that fuels The Business.

I’m being excruciatingly simple-minded here because unless we embrace the radical notion that only by doing what we do as a primary business purpose, doing it well, doing it better, and doing it consistently over and over again in a manner that delivers high value to a customer is there any hope of getting to destination What a Great Place to Work.

Break it down. Everybody gets a piece of the profit generator. Do you design it? Do you manufacture it? Do you ship it? Do you market it? Do you sell it? Take your piece and break it down even further. What do you do to manufacture it? What do you do to ship it? What do you do to market it? What do you do to sell it?

Once you’ve broken it down to this point, the next thing is—stop. It takes too long to get to infinity and that’s where we’re headed unless we know enough to refrain from continually subdividing our basic profit generating unit.

In sales, that unit is customer contact. But, you might say, it’s different for every business, isn’t it? If you make Girl Scout cookies, it’s…customer contact.

Well, what do you know? Customer contact is such a basic component of success because it provides an opportunity to accomplish four goals or steps:

1. To make a personal touch or connection.
2. Establish a relationship.
3. Make a good first impression.
4. And allow the relationship to grow.

My friend Doad parlays customer contact into a lucrative men’s clothing business. I wouldn’t let anyone else sell me a suit! He has the four steps down pat. When I first met him I explained that I hated going shopping and trying on clothes. No problem. He took all the measurements he needed, made several suits, and brought them to my home—on a Sunday. Into the closet they went, and I didn’t try them on until I was ready to wear them. Every one was a perfect fit. Once I asked Doad for a specific style and fabric, wore the suit once, and decided I didn’t like it, even though it was precisely what I’d requested. He took the suit back and never charged me. He is a charming, interesting guy, and a genius at making customer contact work. One of his secrets is he exudes pride and enthusiasm. The man loves being a tailor! Doad’s passionate. He cares more about how I look than I do. When Doad makes contact with the customer, it’s almost guaranteed that he’ll sell a suit or sports jacket.

As for bullet point four—allow the relationship to grow—Doad is now not only making suits for me, he is giving me golf lessons for a hefty hourly fee. And my game is improving. Kind of.

Sure, there are other basic elements that link to and go beyond customer contact. Intel, for instance, has to make a superior computer chip if customer contact is going to yield a profit. But without sufficient customer contact the chip will not yield a profit on its own. Likewise, Doad has to be a skilled tailor (and golf instructor) to stay in business; that’s a key link. You can decide which link comes first in the chain. Just decide. But in both cases superior people, with their commitment, enthusiasm, and expertise, provide the linkage that makes for the superior product and superior customer contact.

The next step it to find out how many chips or cookies or customer contacts are occurring currently. That’s your preexpectation baseline. It’s not going to enough to take you to the destination—What a Great Place to Work—because it barely meets the payroll, debt payments, and the cost of golden parachutes for your senior management.

The key tactical expectation becomes, what does it cost in basic profit generating units to get where we want to go? From that figure, subtract the current number of profit generating units. The difference is the “do-now” cost that will get you to the big dream.

Expectations must be specific, otherwise there is no basis for execution. I’m very reluctant to walk you through a detailed expectation-setting exercise because you will immediately revert to the old “Great idea, but we don’t do it that way in our business.” I hear it most from people who then add that their company or industry “is a lousy place to work.”

So let’s stay general. By estimating the cost of your primary expectation and translating it down to the required number of extra basic profit-generating units, you’ll get a useful figure. When I first went to Danka, I determined that we needed a minimum of one more sales call a day from every rep. That’s what I expected. It was the extra basic profit-generating unit that could get us to where we wanted to go as a company. Add that up. For two thousand sales reps that was ten thousand extra customer contacts a week, or over a half million a year.

How did I come up with that figure? I SWAGed it. SWAG is an informal military acronym for Scientific Wild-Ass Guess. I was out to jump-start lagging performance. That wasn’t going to happen with, “When you get around to it, please do a couple of extra calls.” I laid down a specific expectation and then insisted on execution.

The Executioner’s Song

No, wise guy, “I did it my way” is not the executioner’s song. It’s more like “Row, row, row your boat.” Execution is another word for action. Execution is the second most neglected part of the business process. The most neglected is inspection, and we’ll get to that in a few more pages. When it comes to execution some of the most hard-headed people start conducting themselves like the absent-minded professor. They forget to write it down.

Here’s where the personal performance contract comes into play. Expectation goes in one column (target), execution (actual) in another. The contract below can be adopted for use organizationwide, for operational units, and for each individual, and should be broken out on an annual, quarterly, and monthly basis.

The contract is basically a fill-in-the-blanks operation. Under Business Results denote what is expected, like revenue, total sales, sales broken down by product, and the like. Under Activities specify what actions are expected to occur: customer contact, face-to-face appointments, demonstrations, customer retention calls, cleaning the cookie cutter, and so on.

The format is usable at all levels. If there are ten regions, and everything else is equal (which it usually isn’t), the regional manager’s contract would be derived by dividing the national numbers by ten. Similarly, the districts would each get an appropriate slice, which would be parceled out to the individuals therein.

You probably know this already, but just in case I want to warn against breaking down a national performance contract into equal slices. There needs to be sophisticated statistical and tactical analysis conducted to set the numbers for each operational unit.

If it is divided in equal pieces, a number may be unrealistically high for one unit and ridiculously low for another. You have to outlook the business, but that’s the subject of a whole other book. Also, this is easier to apply if the individual team members have basically the same work situation and business opportunities. Even then, however, the manager and the individual have to work closely together to write a contract that is both realistic and challenging. One size does not fit all.

If I’m a district team leader, I have a contract with my boss that budgets the whole team at 810 customer contacts a month, for example (substitute your own business activity). I can divide that number by ten and assign it to each member of the team. And you thought I just got through warning against equal slices? I did, but I was talking nationally. It’s a big, diverse country. Frontline teams need to be playing on the same field by the same rules. Unequal quotas within the same team lead to tension and resentment. Everyone should be pulling a fair share of the basic load. If they are properly motivated and rewarded, high performers will easily hit the plan’s number and keep going. As for the team’s overall targets, it’s a judgment call, but in this case I would build in a 10 or 15 percent cushion to cover unforeseen problems. Better to shoot too high than too low.

The contract allows you to see expectation and execution at a glance.

The Expector General Meets the Inspector General

Expectation, execution, inspection, and evaluation happen when four questions—you’ve seen them already, but they bear repeating—are asked over and over again:

• Where do we want to go?
• How do we get there?
• How do we know it’s working?
• Are we where we want to be?

Step back from a business orientation. When my daughter learned to ride a bike, we could have used the same formula.

• 1. Where do we want to go?
  Alle learns to ride a bike this summer.
• 2. How do we get there?
  Dad spends an hour each Saturday and Sunday coaching Alle and running alongside as she tries to develop balance.
• 3. How do we know it’s working? Dad sees improvement each time out.
• 4. Are we where we want to be?
  The summer is half over and Dad is doing more watching than running.

Actually, Dad was on the golf course and Mom was watching and running. The truth squad would pull me over if I didn’t make that clear right now. But this process makes dreams come true whatever they are. You have to have a means of systematic execution, inspection, and evaluation.

The performance contract that I showed you earlier combined both execution and inspection. By noting the actual number of business activities performed, the leader-manager is inspecting. By doing monthly reviews of the contract—yes, monthly—you engage in a regular inspection process. You just filled in the blanks, including a rating (which I’ll explain in a moment) and comments. The individual should be prepared to verify the activity by bringing along notes or a planner in which he or she has recorded the details of the activity. Make this part of the drill for everyone, and that way its not interpreted as distrust.

In the past, when I’ve bumped up an activity rate, I’ve asked all my people to turn in their planners each week to show me that the activity is booked. Ronald Reagan said it about dealing with the Russians—trust but verify. This is also the time to go beneath the numbers to ask specific questions about how things are going:

• When do you foresee closure?
• Can we speed thing up?
• What are the possibilities for additional business?
• Why haven’t you demonstrated the new product?
• This number is at the low end of the range, can you bring it up?

Obviously, with my sales background, I believe in the importance of customer contact. The point is to take what drives your business and break it into a process that sets specific expectations, requires execution, and can be easily inspected and evaluated. If I’m wrong about customer contact, for instance, and business results start fading even though the customer contacts are high, I can then switch my emphasis or take the wheels off customer contact to see what’s wrong. Perhaps it’s a training problem or a product problem. If there’s no process, however, I’ll never know what works and what doesn’t.

Many companies have huge process manuals that are never opened and never executed.

Take your truth serum. Am I talking about you?

This is precisely where we can put new technology to work. Information gathering is a piece of cake with PCs these days. If it wiggles, hit it. Get a number. In your red notebook, write down five important business results and five activities that are key to the results. Now you’re ready to run the numbers. Don’t run from them.

The Value in Evaluation

Quantification is also necessary for effective evaluation. I use a three-level process: 1) green, 2) yellow, and 3) red. Here’s the way it works.

Green is the highest level. It requires the expected business result or activity to exceed 100 percent of the expectation target. My goal as leader is to have everyone on my team with a green rating in every category. The yellow level is defined as performance that falls in the range of 70 percent below the target to just meeting 100 percent of the target. Yes, hitting the target merits only a yellow. Red kicks in at under 70 percent of expectations. I back this up with what I call “progressive discipline,” which also uses a three-level escalator.

A level one, your yellow performers—hopefully, there will be some elements of green in the review—need counseling and coaching on their deficiencies. Document the unsatisfactory performance in writing and pair it with an action plan that describes specifically how the employee and the manager will address the problem. Lay out the responsibilities and expectations for both sides. This needn’t be anything more than a memo.

But repeat after me: I will put it in writing.

The red performers will need more extensive coaching and a more detailed action plan, given their performance. If they are deficient in more than a couple of important categories, or the percentages are extremely low, take them immediately to the next step in the paragraph that follows.

If there’s been little or no progress after a month, the individual should be given a formal letter of concern modeled on the one I’m about to introduce. Reds who received a letter of concern the previous month and failed to make progress should be warned they may face termination if specific goals are not met within thirty days. Do it in writing after alerting human resources and your boss. The reds who did not receive formal letters before, but who have failed to show improvement have to be given a letter at this point.

Large Mouth, Sharp Teeth

It’s heavy, isn’t it? But a leader has the responsibility to enforce discipline. It comes with the job. Take it from a reformed underachiever, you’re not doing a favor to anyone whose performance is poor by avoiding the issue. There have been times when I’ve been thanked by employees for starting the corrective action process. Until that point they had been in a panic about what to do. Accountability closes the process loop. Everyone, top to bottom, must be held accountable. Not a few of the people all of the time, not many of the people some of the time—all of the people all of the time.

Progressive discipline backed up by the letter of concern comes as a shock only when it is infrequently used. If you bring it to bear early and often—but only when it’s warranted—it becomes more of an administrative tool and helping hand rather than an invitation to a beheading. Most people will move quickly to get the troubles behind them. The whole idea is not to allow problems to fester until the individual’s career is in jeopardy or the team’s performance collapses.

A corrective action letter like the one I’m including should go out only after three conditions are met:

1. The manager has gathered all information about the individual’s performance;
2. The manager has reviewed this information with his or her boss;
3. The manager has cleared the wording of the letter with the boss and alerted human resources.

Here’s the context and situation for the sample letter: John is a sales rep with a good territory but he is below plan through the first two months of the year. His activities are low (measured by the contract) and this was discussed one-on-one with his manager at the end of January, the first time the problem had occurred. Don’t let the example’s sales orientation persuade you to say, “This won’t work for my business.” It will work. John can be an engineer or a truck driver. He has a contract with his boss, after the first month his performance falls short of the mark; the manager spots the problem and discusses it with John; they agree that February needs to be better; a month later the review shows that the improvement has not taken place. The corrective action letter follows.

Don’t leave out the next to last paragraph—the one that commits the manager to support the employee’s efforts to improve. If a leader doesn’t actively work to help a member of the team succeed, he or she is helping them to fail. If the day comes when an employee must be terminated you have to know in your own heart that you did everything within your power to assist them. Everything.

Putting it in writing means you are deadly serious.

Low Maintenance, High Yield

This process will not work if it is allowed to become an off-again, on-again thing. It seems complicated on paper, but once it’s up and running, there’s very little maintenance or hassle involved. Many managers fear that if they use corrective action, they’ll cause conflict and hard feelings. Once it becomes part of the culture, however, it takes the onus off the leader. You’re not being vindictive or mean—you are being responsible. This is a tool for achieving excellence. Don’t be afraid to use it.

Businesses, families, schools, government agencies, and relationships are chock full of opportunities for miscommunications, misinterpretations, and memory lapses. The best process is one that takes this fact of life into account. The performance contract, combined with progressive discipline, accomplishes five key goals:

1. Establishes set activities and performance requirements for each individual on a yearly basis (but reviewed monthly);
2. Avoids side-stepping conflict because a manager may be reluctant to tackle these issues face-to-face;
3. Gives individuals clear direction and avoids surprises;
4. Brings in the next level of a management and HR into the loop;
5. Improves performance when done correctly.

The other requirement is that it must chain up as well as down. If I’m not being held accountable for holding (or not holding) my people accountable, the system is worthless. The people czar’s job is to make sure the process has integrity and is being followed. For starters, he or she should have the assignment to inspect and evaluate the contract between each member of the board of directors and the corporation’s share holders.

Yeah, I’m serious. The board then inspects and evaluates the CEO’s contract, and down the process cascades until the place is awash in success.

X-ray the Business

Process is really very simple. A process is the way we live or the way we do business, whether we know it or not. As a business consultant, one of the things I offer my clients is an X ray of their business to get a detailed picture of the way they operate.

I’m not interested in what their process manual says they do, the only relevant information concerns what they actually do.

Answering the following questions will bring your business process into focus—for better or worse.

No matter the size of the organization, the product, or service, the answers to these questions define a process of doing business. It’s all here. For each bullet, there are several more layers of questions to be asked. Go to it! By examining the operation in such detail you can spot strengths and weaknesses. Question marks and lack of specifics should be red flags. And please, “We don’t do business that way,” isn’t acceptable. That’s a cop out. The way you’re doing business—what you, your customers, employees, and shareholders complain about—is the problem.

This is the kind of X ray Wall Street and individual investors should be doing as they conduct due diligence. I’ve attended my share of dog and pony shows for financial analysts; it’s been disconcerting to see how easy it is for top management to brandish a few big numbers and projections to convince otherwise intelligent men and women to take huge leaps of faith. As far as I’m concerned a CEO who couldn’t answer each one of the X-ray questions wouldn’t get a dime of my money.

The direct link between data and revenue hit me during a meeting I attended in Boston at Fidelity, the number one mutual fund operation in the world. Before a packed audience of analysts and their support teams, the executive vice president evoked a Star Wars theme by putting up a slide that said simply: R²/D². The message was, “square the revenue, square the data.”

Brilliant. The two go in tandem. The revenue will never be squared without the additional data. And, besides, as Yogi Berra allegedly said, “If you don’t know where you’re going, you’ll be lost when you get there.”

Process delivers R² and D². A tight, consistent, in-depth process doesn’t have to be a forms festival or an example of “analysis paralysis”—the disdainful words of one of my former bosses who ended up with paralysis that crippled his company because he scoffed at the need for analysis. Don’t hide behind, “Too much paperwork. It takes too much time.” It’s not the case if you’ve got the right people and the right leaders. Processability equals attainability and sustainability.