First Measure: Profit

The exact amount of the profit goal is an executive decision and based on the financial needs and aspirations of ownership. Suffice it to say, it is a very rare organization that is not expected to turn a profit. So, for the purposes of this explanation, let's just use “profit” as a synonym for the money that ownership requires the organization to generate on the bottom line of a profit and loss statement. Achieving that figure is one of the success scoreboard measures. Interestingly, achieving the target or even exceeding it can be a double‐edged sword for a business. Too often, profit is weighted disproportionately heavily relative to the other components of success. There are many unhealthy organizations with exceptional profit performance. This tendency can be devastating to the organization as they often overlook the following critical measures because of an abundance of profit. Doing so can result in significant damage as markets evolve.

Second Measure: Efficiency

From 2003 to 2007, a significant amount of my business revenues was generated through clients who were both directly and indirectly impacted by the mortgage boon. I worked with mortgage bankers, mortgage insurers, home builders, professional associations for lending, banking and building industries, home remodelers, luxury appliance manufacturers, and designers. I spoke at many realtor associations to packed crowds populated by relatively new real estate professionals who had tripled their incomes in a couple of years by transitioning into this vocation. Everywhere I went, money was plentiful, and profitability was at record levels. There was only one problem. These incredible profits were concealing a toxic and terminal organizational threat: inefficiency. It was the business equivalent of “fat and happy.” More accurately, many organizations and individuals had become fat and sloppy.

I remember being struck by how many leaders – respected, long‐term professionals in the field – would come up to me after a presentation and share with me how worried they were about the sustainability of this market situation. They seemed keenly aware that the environment was changing and that when the “chickens came home to roost” the entire industry would suffer significantly. Yet few made changes in their operation. I remember only a handful of clients who made wholesale adjustments in their business strategy in anticipation of more turbulent times. Most others were content to ride the hot hand. I was appreciative of the siren calls of those professionals as it inspired me to pivot toward the pharmaceutical and insurance industries, but not without sustaining my own wounds.

When the mortgage boon abruptly ended in 2008, many of the same organizations and individuals who had experienced the apparent phenomenal success the preceding several years were now thrust into a precipitous decline in profitability. In fact, many became unprofitable, and more than a few companies and people were driven from the industry entirely. That's because in their rush to make more and more money, they failed to create the efficient processes and infrastructure necessary to protect against market fluctuations. When the market suddenly declined, they didn't just see their profits shrink; they saw them disappear. My own small firm took a hit. While we were able to survive, I can still remember those hard lessons. They showed very clearly how operational inefficiency can be deadly.

The success scoreboard must contain measures of both profitability and efficiency. Efficiency will not wholly protect an organization from severe market fluctuations, but it does allow companies to remain profitable during the natural ebbs and flows. Efficiency also shows discipline, in that companies that maintain diligence and stay committed to operational best practices even as they achieve profitability goals are well positioned to endure whatever the market environment may throw at them.

Of course, not all market developments can be foreseen. The best insurance against unforeseen threats to organizational success is efficiency. While market is a leading driver for profits, leadership is a leading driver for efficiency. Unfortunately, too many leaders allow the market to drive both.

Third Measure: Stakeholder Satisfaction and Retention

The third measure on the success scoreboard is more complicated – stakeholder satisfaction and retention. Stakeholder satisfaction is a behavioral metric. Since organizations are simply a collective of people unified around a common business strategy providing services to other people (individually, business to consumer, or collectively, business to business), one can anticipate that the behavior of the people involved is of critical importance to the company. The success scoreboard must measure the relative satisfaction of three sets of people with three distinct perspectives: owners, customers, and employees. Further, one must be mindful that a fundamental tenet of human behavior is that behavior breeds behavior (more on that in a later chapter). This means that any dissatisfaction within one of these three populations will inevitably lead to dissatisfaction in another.

It is this last sentence that is so important. Keeping owners happy is a pretty obvious metric for organizational success. I can honestly tell you that in my 30‐plus years of working inside companies and outside as a consultant/speaker, I have never discovered an organization that survives ownership dissatisfaction. Heck, many organizations don't survive satisfied owners! Owners are also the most likely of this triarchy to voice dissatisfaction assertively for the purposes of changing the operation. In that regard, their feedback is the most accessible of the three, and while I have known more than a few irrational owners, it is still the easiest feedback to define.

Over the last 40 years or so, the rise of customer centricity has created a broadly accepted view that customer satisfaction is critical to organizational success. Virtually every industry in a capitalistic economic structure faces competitive forces for their products and services. As a result, customers who are not happy with their current service provider can pursue other options. Even those companies who enter markets as the sole service provider will have only a short advantage before competitors show up. The Walla Walla Valley wine industry is a great example. It essentially began when Leonetti Cellars, founded in 1977, produced a wine that would be named the best Cabernet Sauvignon in the nation by Wine & Spirits magazine. At the time, much of the world responded with, “Who is Leonetti Cellars, and where is Walla Walla, Washington?” Today, over 150 wineries exist in this market. Success generates competition. Thus, satisfying your customer is a no‐brainer. However, customer satisfaction does not assure customer retention.

Makeup of a Core Ideology

Core ideologies are a combination of vision, mission, and strategy. Vision is the desired future state for the organization. It is a clearly articulated description of what the organization will look like when they have achieved their goals. Once achieved, the organization can aspire to a new, enhanced vision or strive to maintain what they believe is a model for excellence. Visions may or may not be shared with customers, but they are vitally important in determining the organization's direction and monitoring the ongoing alignment between the market environment and the success scoreboard.

Some visions are detailed, addressing exactly what the desired future state will look like. Others are more conceptual and aspirational, serving as a continuous point of comparison to keep the organization tethered to a core ideology. For example, my company – the Leadership Difference, Inc. – has a vision: “To positively affect the life of every person with whom we come in contact.” This statement guides all our activities and provides the basis for comparison to ensure our mission and strategy are consistent with our vision.

Mission is the vehicle that will take us to that state. Think of mission as your “special sauce.” It is the one thing you believe you can do better than your competitors. A mission is what you base your brand on, and how you will promote your company. Think about how some of the iconic auto insurance companies promote their mission with brand slogans. “You're in good hands with Allstate” articulates their belief that policyholders will be well taken care of when they have a claim. “Like a good neighbor, State Farm is there” indicates that the policyholder can rely on them to be there when they need help. “We know a thing or two because we've seen a thing or two” (Farmers Insurance) indicates that this organization has the experience and expertise to handle anything that the policyholder may experience. My mission is “To provide thought‐provoking perspectives on work and life shared through humor.” Consequently, our brand slogan is “Laugh and learn!” My core ideology then states that we will have a positive impact on you by providing laughter and education.

Strategy is the route we plan to take when applying our mission to achieve our vision. If vision is “Who are we?” and mission is “Why are we?” then strategy is “How are we?” It is arguably the most challenging element of core ideology in that it requires the examination of pathways to propel the organization from the current state to the desired future state. There are a lot of moving parts within an organization and it is very easy to get bogged down in the details. Having facilitated many strategic planning retreats, I can attest to the dangers of wasting entire days – even weeks – on discussions about very specific operational elements when examining ways to improve the organization. In the next chapter we will explore “vertical alignment.” Many of the issues that distract from a good strategic planning session are components of vertical alignment (initiatives and action items), not horizontal alignment (strategy).

These strategies are mostly broad, like the concept of customer centricity. Customer centricity is a strategy that elevates the client's perspective into every decision made by the organization. Slightly different than “the customer is always right” – which sounds more like a brand slogan emerging from a mission – customer centricity challenges the organization to evaluate the impact of all decisions on the client's experience. As such, it demands that the customer is always top of mind. That sounds like an obvious strategy, but most companies are not customer centric. In fact, most of the companies that claim to be customer centric are not. One of my clients, Stu Needleman – a C‐suite‐level executive in the pharmaceutical industry who is an evangelist for a customer centric strategy – often starts a meeting by asking, “Who here is in sales?” Anyone who doesn't raise their hand gets a lecture on customer centricity.

For customer centricity to be a strategy, each member of the organization must manifest the client's perspective when making decisions, providing services, or selling. That is how a strategy works. At the Leadership Difference, Inc., we use a variation of a customer centricity strategy called a consultative approach. We spend time understanding the client's needs, identify the most important ones, and recommend services that target those needs – even if the client has expressed an interest in alternative services. A consultative approach elevates the organization's expertise to the same level as the client's needs. That is a strategy.

Perhaps it goes without saying, but a successful core ideology is one that resonates with the market environment and produces the desired results as identified in the success scoreboard. That is horizontal alignment. The beautiful part of this is that it is not one size fits all. Within any market, many core ideologies can exist. The key is to have a vision, mission, and strategy that will excite the environment.

Comparing Two Wineries' Core Ideologies

Back to Walla Walla's wine industry. For a new winery to succeed, they must offer more than being simply another option for the consumer. An eye‐catching label or creative name is not a strategy. They must identify and articulate the mission they will deliver on to achieve their vision of success. How does an organization know if they have a core ideology? They stick out. They can tell their story in a couple of sentences. Core ideology is to an organization what an elevator pitch is to a salesperson.

Consider Cayuse Winery. Cayuse is a legend in Walla Walla and the envy of savvy, serious wine collectors around the world. If you are only a casual wine drinker, chances are you have never heard of Cayuse. Even if you are a full‐fledged wine enthusiast, it is quite likely you have never consumed a Cayuse wine and probably never will. Why? Because they are impossible to get. That seems like a very odd core ideology for a for‐profit winery, but that is exactly what makes Cayuse special. Cayuse Winery began as a contrarian venture, so the fact that they continue their success using an unconventional core ideology is not a surprise.

Cayuse was founded in 1997 when Christophe Baron purchased some land notable for the large stones that littered it. While the locals viewed the stones as an unappealing and challenging barrier to work with (breaking equipment and adding unnecessary expenses to vineyard management), Christophe saw a terroir (aspect of land and soil composition) that matched the famed Southern Rhone wine appellation in France called Châteauneuf‐du‐Pape. Nothing in the Washington wine region could compare with the prestige of Châteauneuf‐du‐Pape – at least, not until Christophe planted Cayuse.

His vision was to produce a wine to rival those from France. He produced mainly Syrahs, Syrahs that did not taste like the other Washington Syrahs. Like the vineyard from which they come, they are earthy, minerally, and big. If you could make wine out of a rock, it would taste like Cayuse. That is a compliment; wine is made better when it comes from vines that struggle. They beg for food, elevating any meal in which that wine is included, and can bottle‐age for decades. That is the vision of Cayuse: to create an iconic Old World Syrah in Washington. Christophe's mission is to craft food‐friendly wines of incredible depth, individuality, and character – all from fruit grown entirely using biodynamic farming methods. The wine press fell in love and wine connoisseurs came in droves. Demand grew. And grew.

Most companies, when faced with growing demand, increase supply. That's generally a no‐brainer strategy. But not Cayuse. They embraced a strategy of exclusivity. Here's the actual language on their website under the “Contact Us” tab: “Thank you for your interest in Cayuse Vineyards. Due to the demands in the vineyards and wine studio, we regret that we are not able to offer tours or tastings. Please don't hesitate to contact us with other requests. Thanks.” I mean, if I can't taste the wine, what “other requests” would I have at a winery – am I right?

They sell all their wine to restaurants, distributors, and Cayuse club members. There is a long waiting list to be added to the club. They have a wine tasting room in downtown Walla Walla that is open one day each year. On that day, Cayuse club members can come and pick up their allotted wines. It is so popular that the entire town of Walla Walla and the 150 other wineries celebrate that day with Cayuse Weekend. There are special events at other wineries, restaurants, hotels, and retail shops. Imagine a company whose products are in such a demand that their competitors celebrate the moment they make them available to their customers. I giggle at the thought of Microsoft celebrating the new iPhone release, or Chevrolet throwing a party to recognize the arrival of the new Ford Mustang. That is an amazing strategy to complete a well‐honed core ideology. It's essentially, “We are amazing, and you can't have it.” Brilliant.

A few miles away from the exclusive Cayuse estate (not open to the public, of course) is Sleight of Hand Cellars. Sleight of Hand's core ideology is very different than that of Cayuse. While Cayuse makes it nearly impossible to get their wine –a strategy that has become a significant part of their core ideology – Sleight of Hand's expressed mission is “serious wines without serious attitudes.”

Founded ten years after Cayuse by Trey Busch and Jerry and Sandy Solomon, there is a rock and roll vibe in their Walla Walla tasting room. Visitors can select the vinyl record they want to provide the soundtrack for their tasting experience. As they have increased in popularity, they have increased their production and opened an additional tasting room in Seattle. Their club shipments include free downloads of songs from the famous record label Sub Pop. “Great wine, great music and lots of fun – that's our recipe for the Sleight of Hand lifestyle,” is the stated core ideology, with the “lots of fun” representing their strategy.

While the core ideologies couldn't be more different, both Cayuse and Sleight of Hand benefit by having a clear, articulated core ideology. It is no surprise that they are two of the most successful wineries in Walla Walla – distinguishing themselves from the crowded field of competitors by horizontally aligning the market environment with a core ideology that generates the success scoreboard. They are also evidence that there are many paths to success, as long as you are horizontally aligned.

Spend Some Time Evaluating the Leadership Team's Culture

The goal here is to move the participating executives responsible for the core ideology from individual contributor to team member as early as possible. One of the challenges I have noticed in doing leadership development for organizations is that the individual leaders are often more comfortable with their functional responsibilities than their role as an organization leader. They often have nearly complete autonomy within their department, which frequently means they lead with an autocratic or directive style. Within the organization working with their fellow functional leaders (peers) on companywide strategies, they must arrive at consensus or at least be inclusive in decision‐making efforts. Doing a team building exercise early on can shift their perspective from function to group and begin the process of identifying the leadership team's culture.

I utilize the content from my book The Power of Understanding People, which includes a self‐assessment to identify which of twelve Hollywood movie characters you most communicate like. It is a fun way to better appreciate the diverse ways with which each member of the leadership team communicates and can provide insight into the team's preferences, strengths, and vulnerabilities.

For example, if all or nearly all the executives share the same interactive style, this indicates a strong preference (culture) for a certain way of thinking and communicating. This “lean” will generate obvious strengths and vulnerabilities. It also often makes consensus easier to achieve but risks significant blind spots when crafting the strategy due to their singular perspective. Conversely, teams that have diverse styles may struggle to reach agreements on strategic decisions but arrive at much more comprehensive and thoughtful ones when they do. Of course, they may also self‐destruct in the process. Both compositions have strengths and weaknesses, and knowing these predispositions before beginning strategic planning can be very useful to the process.

As a participant in the corporate world, I was also impressed by the effectiveness of experiential exercises in creating a foundation of cohesiveness and unity. My favorite version of this approach was the ropes course, which introduces the team to a series of challenges that are both mental and physical in nature. Ropes courses can be designed to accommodate the level of physicality appropriate for the team. I have found that some people experience a true epiphany when confronted with a physical challenge that serves as a metaphor for a professional situation. When my clients get stuck, I often drag out three tennis balls and a stopwatch and introduce them to the “ball industry.” I won't give it away here because you may be a participant someday. Suffice it to say, watching a dozen executives flinging tennis balls around a room for an hour can create some creative energy and unification of perspective. There are several other ways to make the leadership team more cohesive and learn about their behaviors as a unit. Escape rooms, charitable activities, scavenger hunts, cooking classes, and so on can all be constructed as team building events.

There are some foundational behaviors that are necessary for a leadership team to manifest to successfully arrive at a core ideology. These sound a lot like those corporate values that are promoted on almost every company website under “About Us.” As you'll discover in a future chapter, I am a bit skeptical of those corporate values. However, a few are important to team function. I think of them more as the foundation of a high‐performing leadership culture. Here are the ones that I find to be most valuable:

Spend Time Thinking About the Market Environment

I find it very useful for the group to discuss three things:

• What does the market expect from an organization in our industry?
• What do our competitors do well?
• Are there products/services that do not currently exist that would meet the needs of the marketplace or create a new desire?

These three questions will generate discussion related to the market environment. It can be quite telling about the current state of the organization if the group struggles to answer these. In a perfect world, the leadership team should be able to answer at least the first two easily and thoroughly. If they cannot, or if there is a difference of opinion, there is a clear lack of market intelligence that needs to be addressed. Assembling a successful core ideology will require that leadership knows what the market expects, who is currently delivering that, and if there exist some gaps not being served by the market.

Spend Time Honestly Evaluating Your Current State

This is the part of the process that I call “Naked and Afraid.” If an organization is going to develop a clear strategy as part of their core ideology, they must begin from an honest current state. To do otherwise would be like getting directions to a destination on Google Maps from a location that you are not currently at. The directions may be accurate, but they are not useful.

I still find the good, old‐fashioned SWOT analysis to be the best tool for generating the organization's current state. For those not familiar with this iconic resource, it challenges participants to list the Strengths, Weaknesses, Opportunities, and Threats that currently exist within the organization. This activity can be long and arduous, but the more comprehensive the SWOT analysis, the more accurate the organizational current state becomes. It is completely okay – encouraged, really – for the leadership team to be critical of the current state of the organization. That's healthy and a hallmark of peak performance.

Recently, I was facilitating a strategic planning session with a local chapter of a chamber of commerce. The organization was struggling with financial solvency and had been brainstorming avenues for increasing revenues and membership. In my research on the organization, I couldn't identify a clearly articulated core ideology. As we began the session, I remarked that some of the struggles facing the organization likely trace back to the lack of a well‐defined core ideology. Initially, we agreed that one of the focus areas of the strategic plan would be to create a mission statement.

As the initial meeting ended (we had scheduled three two‐hour meetings to create the strategic plan), we started to discuss subcommittee assignments for the next meeting. It was agreed that we would do a SWOT analysis of the chamber's current state. It was then that a board member brought up a brilliant idea, one so perfect that I remember being pissed that I didn't think of it.

“Why don't we have our members do the SWOT analysis?”

You could have heard a pin drop. It is a bit scary to ask your customers to define your current state. However, I think you can make a compelling argument that they know better than you. You can tell the market who you are; but if they view you otherwise, I would suggest that you are wrong and they are right. Who better to tell us our strengths, weaknesses, opportunities, and threats than the people who were experiencing our services? As for me, after a career of promoting, training, and facilitating customer advisory boards, I just shook my head at the genius of the suggestion.

It does take some guts to invite your customers to perform a SWOT analysis on your organization – but you can't ask for a better way of getting some truly meaningful data on your current state. You don't need to facilitate a meeting with them to accomplish the SWOT analysis, either. By creating a simple survey, you can obtain ample evidence of your strengths, weaknesses, opportunities, and threats. For the chamber, it looked like this:

• What do you believe we do well as an organization?
• What do we currently do that you believe we could do better?
• What are we not doing that you believe would be beneficial if we did?
• What changes in your situation/direction could result in you not renewing your membership?

The answer to these questions will populate your SWOT analysis, respectively. You can wordsmith the questions to reflect the nature of your organization. Use Table 2.1 to get started.

Determine the Desired Future State

Here, we let our freak flags fly. What do we need to be as an organization? I have found two approaches to be effective: one is aspirational and the other reflective. The aspirational approach posits that we should be unencumbered by what we are today and imagine a future state that exists in a perfect world. This is a lot of fun because it allows participants to completely reimagine the organization. But obviously, a complete rebuild of the organization can be time consuming and impractical, so this approach doesn't always make sense.

However, what if the group answered that third question – “Are there products/services that do not currently exist that would meet the needs of the marketplace or create a new desire?” – with some exciting possibilities? If so, one can certainly imagine engaging in an aspirational future state that addresses this new product/service that does not exist in the market environment.

The reflective approach turns the SWOT analysis around to create a TOWS analysis. A TOWS analysis is a lesser‐known resource that plays the components of the SWOT analysis off each other. Executing a TOWS analysis means discussing the following:

• How do our strengths position us to take advantage of our opportunities?
• How can our strengths protect us from threats?
• How do we minimize the effect of our weaknesses so we don't miss our opportunities?
• How do we eliminate or hide our weaknesses to avoid being damaged by threats?

While maybe not as much fun as the aspirational approach, the TOWS analysis will not only provide a substantive desired future state, but will also jumpstart the strategic plan.

Both approaches have their own strengths and weaknesses. The aspirational approach is long on vision and mission but can be short on strategy and completely bereft of initiatives and action items. There can be more than a few “we don't know what we don't know” moments. It is said that learning is a process of going from “I don't know what I don't know” to “I know what I don't know” to “I know what I know” to, finally, “I don't know what I know.” Good strategic planning requires knowledge, so you must at least know what you don't know. To be completely clueless is not the basis for the development of a meaningful core ideology.

The reflective approach is long on strategy and mission, but short on vision. Most of the work is spent on knowing your current state and developing strategies to improve it. The desired future state is generally just a better version of the current state. But radical change isn't always – or often – necessary to coax peak performance out of an otherwise healthy organization. In his book Good to Great, author Jim Collins called this the flywheel effect where peak performance is the result of many little things (turns) that result in a breakthrough (the moment the flywheel releases its energy).

The aspirational approach often produces a bigger, broader, and more creative desired future state, putting even more pressure on developing strategy. The reflective approach will produce a more pragmatic vision but can be self‐limiting. So – which should you use?

Construct the Core Ideology

Armed with a unified leadership team, knowledge of the market environment, an identified organizational current state, and a desired organizational future state, you are now ready to construct your core ideology: vision, mission, and strategy. The vision is arguably the easiest since you have already identified a desired future state. It often only requires some wordsmithing to convert the language of the exercises to a single coherent image of the future.

Mission can be trickier. Many times, the mission does not change during a leadership retreat. Often, the group decides that the “why” we exist hasn't really changed. Other times, the mission does change, or it may be identified for the very first time, as was the case with that roofing company in Detroit. A good mission statement should be just that – a statement. Two sentences are acceptable, one sentence is better, a paragraph is too much. Simple is better, meaningfulness essential. A well‐constructed mission statement becomes the basis for every business decision in a peak performance culture. Here are some mission statements/brand slogans from a few of my clients:

Doing Well and Doing Good

Piramal Inc.

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Building Homes to Live Your Dreams

William Lyon Homes

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To provide businesses the opportunity to control their insurance costs through the creation and oversight of member‐owned group captive insurance companies

Captive Resources

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A String of Pearls

Ste Michelle Wine Estates

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Simple and Rewarding Home Loan Experience

PrimeLending

Finally, the strategic plan is developed. This is the most time‐consuming and detailed part of the core ideology and will likely require additional work beyond the retreat. However, the leadership team must identify and agree upon high‐level priorities for initiatives. You can worry about action plans, individual tasks, responsibilities, timelines, and metrics later. However, you must achieve consensus on the priorities of focus that will move the organization from current state to desired future state.

By process end, you will have been successful if you achieve:

• A more unified executive leadership team
• A better understanding of the market environment
• A clear identification of the organization's current state
• A clear identification of the organization's desired future state
• The construction of a core ideology (vision, mission, strategy) for achieving that future state

• Horizontal alignment requires that an organization has a clear mechanism for ongoing evaluation of the market environment.
• It is essential that a “success scoreboard” has been constructed. This scoreboard should include expectations for fiscal achievement, operational efficiency, and stakeholder (ownership, customers and employees) satisfaction/retention.
• A core ideology defines the organizational vision, mission, and strategy and connects the market environment with the success scoreboard.
• A core ideology answers these questions: Who are we? Why would a customer choose us over our competitors? How do we deliver that?
• The formulation of a core ideology is the result of knowing your organization's current state, desired future state, and the strategy for achieving the latter from the former.