The Organization Has to Become Profitable

WHY I wrote Outbound Air

Organizations moving to the next level, have solved the problems of the past, but solving those problems created the new problems of the future.

In the stage of infancy, everyone did a little bit of everything, but market demand required more volume, so headcount increased. With more headcount doing a little bit of everything, chaos increased and worked against the higher volume. It was great to have all hands on-deck, but the chaos wreaked havoc on efficiency. Sure, the product was delivered to the market, customers were satisfied, but in the wake, were body bags and organizational friction. These were the hallmarks of the Go-Go stage.

In the stage of infancy, efficiency was not an issue, because the point was “proof of concept.” Make the product or service, and (please) find a customer to buy. The sale did not have to be a profitable sale because the expense was pushed to a line of credit. But, at some point, the bank actually wants the line of credit paid off (primarily, so they can take it away, but that’s another story for another day).

At some point, the organization has to become profitable, it has to become efficient.

The Entrepreneur Becomes Prey to the Charlatan

WHY I wrote Outbound Air

As organizations struggle with (normal) growing pains, I watch entrepreneurs grasp at futile straws to make the pain go away. Often the solutions they seek aggravate the condition. Most often, the effort is to find a quick answer to a complex circumstance.

The entrepreneur becomes prey to the charlatan. There is a multi-billion dollar industry dedicated to fleecing CEOs looking for a quick fix. Outbound Air is a warning. The helpful stranger is not necessarily your friend.

Most issues that organizations face are structural. The symptoms look like breakdowns in communication or personality conflicts. They are NOT. Most challenges that organizations face are structural.

Structure is the defined accountability and authority embedded in the working relationships of the organization. Most companies do not define those accountabilities and that is where the trouble begins.

“Oh, we must have a communication problem.”

No, you don’t have a communication problem, you have an accountability and authority problem.

“Oh, we must have personality conflict.”

No, you have an accountability and authority conflict.

This is the beginning of WHY I wrote Outbound Air.

What Comes After Go-Go?

WHY I wrote Outbound Air

I watch organizations struggle. It is normal, uncomfortable, but normal. This organizational discomfort causes the founder to look for answers, in all the wrong places.

Go-Go is the most fun stage for any business. There is energy and enthusiasm. With a sustained momentum of sales, there arises a new feeling, invincibility. The entrepreneur says, “We faced the odds against us and we didn’t die. Our customers love us. We have a superb business model. Flawless execution of a brilliant business plan. We could take our business model and conquer any industry.”

This organization bounces inside its geography, opportunistic in its behavior. Its organizational challenge is focus. It cannot figure out if they are in the real estate business or the shoe business, because they believe they could make a fortune in both.

The momentum of sales has turned the negative cash flow of infancy into revenue streams of Go-Go. With a credit facility for expenses, this organization is on top of the world. The customer is happy and promises to buy more. But a subtle inspection in the wake of this organization produces body bags and friction. It is a wonder there is not more collateral damage. Efficiency is elusive. Profit is fleeting (in spite of the appearance of cash).

All of this is normal, but the entrepreneur is stumped, wondering why the organization does not run more smoothly and why it staggers in inefficiency. There are many who would provide answers, but most would be wrong.

This is the beginning of WHY I wrote Outbound Air. Tomorrow, the next stage.

Maybe It Should Have Stayed a Hobby

Why I Wrote Outbound Air –

Before I tell you why, here is what I see. An organization bands together to accomplish something noble. In the beginning, everyone is organized around that noble idea. It is all about that noble product or service. Find a customer to buy it. Simple. So simple that most startups go out of business in the first five years.

Yet some survive. Those that did not die, make enough sales to prove market potential. I said market potential, not market success. In fact, those initial sales did not have to be profitable sales, because this startup put all its expenses on a line of credit or a credit card, whatever it took to emerge from this infant stage.

This noble product or service, this entrepreneurial idea was in some cases a hobby. In some cases, it should have stayed a hobby. But, the entrepreneur cannot help this feeling, this cause, to bring this idea to market. All odds are stacked, yet if enough early adopters buy enough product or service, create enough market demand, the organization just might survive to the next level.

If there is enough market demand to outstrip the organization’s capacity to produce (it is all about production), then the organization has the potential to grow. To grow requires change. To produce more volume requires more resources, more people. Headcount increases along with chaos. Ichak Adizes calls this Go-Go.

In the beginning, everyone did a little bit of everything, that was all that was required. With more headcount, that strategy, everyone doing everything, creates organizational noise and friction. To reduce the noise, individual roles are created with defined accountability and authority. This transition signals the first emergence of structure.

This is the beginning of WHY I wrote Outbound Air. Tomorrow I will write about what comes after Go-Go.

Outlast the Panic

From Outbound Air

“So, what did you think?” Jim asked.

Kevin DuPont stared into the corner of the room, not making eye contact with Jim. “I am not sure. That was a pretty awkward meeting. Before it started, I agreed with you. I mean, all we did was change the name of the meeting. But I can put two and two together. I didn’t like the reaction of the team.”

“What did you expect?” Jim asked.

“I don’t know. What did you expect?” Kevin replied.

“Exactly what we got. Panic. Except for Javier. He was the only calm head in the room. Of course, you cut the meeting short.”

“Well, yes. Couldn’t you feel the tension? Tough enough that morale is bad, now we have, what did you say, panic?”

Jim chuckled. “You young guys just don’t have the patience. Didn’t you know that all you had to do was outlast the panic?”

And If the Advice is Wrong?

From Outbound Air

“So, what happened?” Jim wanted to know.

“It doesn’t matter what happened,” Mary said. “What matters is that it was my decision and my decision alone. I was accountable for the decision and the consequences of the decision. The technical crew did their best to keep the aircraft in pristine working order. Flight operations did their best to keep the customers on schedule.

“If I decided to fly the plane and something happened, the technical crew would not be accountable. If I canceled the flight and the repair turned out to be a non-event, flight operations would not be accountable. This decision was my decision.”

“What if the technical advice you get from your team is wrong?” Jim pressed.

“I am still accountable. As the manager, I have to evaluate the risk. If the risk is high, even if I trust my team to do their best, sometimes I have to double-check the data or bring in a second opinion on the analysis. I am still accountable.”

The Manager Lives and Dies by the Decision

From Outbound Air

“I have an issue where I could use your help,” Jim explained to the group. “And I think your understanding will have impact all the way to the top of this organization.

“As a manager, you each have a team,” he continued. “And you defined a manager as that person held accountable for the output of the team. So, if there is a decision to be made, related to the objective for that team, who is accountable for the consequences of that decision? Is it the manager, or the team?”

“Are you kidding me?” Johnny replied. “It’s the manager. If it turns out to be a wrong decision, we don’t fire the whole team, the manager is accountable.”

“Then, whose decision is it to make?” Jim floated the question, the same question that frustrated Kevin DuPont. “Whose decision is it?”

“It’s the manager’s decision,” Johnny responded. “The manager is accountable, the manager lives and dies by the decision.”

“But what if the manager doesn’t have all the facts to make an informed decision,” Jim protested, “and needs the team to participate. Needs the team to gather the facts, analyze the facts. Then, whose decision is it?”

Doesn’t This Look Like a Hierarchy?

From Outbound Air

“You know, this is beginning to look like a hierarchy,” Johnny said. “Do you remember Preston Pratney? If there is one thing he railed about, it’s that hierarchy is bad. It goes against all the tenants of Tribal Leadership. Having layers inside the company makes it too bureaucratic, too much red tape. If there is a decision to be made, why should someone have to check with their manager?”

Mary stepped in. “You’re talking about Preston Pratney? The problem with Preston is that he read too many books on leadership. He never understood the purpose of hierarchy. He got it confused with command and control. Hierarchy is necessary, to create this value stream for decision making and problem solving.”

It Doesn’t Matter What Department

From Outbound Air

“It doesn’t matter what department,” Frank added. “The level of work is that same whether it’s clerical, baggage handling or customer service work. They have different skills but the time span of their tasks is in the same range.”

“Wait, you are telling me that a baggage handler is the same level of work as customer service?” Catherine challenged.

“Within the range,” Johnny replied. “We talked all night about this one. At first blush, you might think that a baggage handler isn’t very high up on the food chain. But think about the discretionary judgment that team has to use. They have problems to solve and decisions to make as they maneuver portable conveyors in and around multi-million dollar aircraft. What happens if they misjudge and push a machine one inch into the skin of an airplane? Or if they fail to fasten a baggage door? Or if they are careless about the way cargo and equipment is secured inside the belly? Remember ValuJet?”

The somber reference to the 1996 airline disaster that killed 110 aboard fell over the group.

Who Appointed You to Make That Decision?

From Outbound Air

“It’s not their role to make a decision like that?” Javier replied.

“Says who?” Catherine baited.

An awkward twenty seconds ticked by on the clock. “Says me,” Javier finally relented. “That is not a decision that my shift supervisors are capable of making.”

“And, who appointed you to make that decision?” Catherine continued to press.

“You did,” Javier replied without hesitation. “My shift supervisors are perfectly capable of handling the day to day uncertainty of running an airline, but the problem of an unprofitable route likely has nothing to do with operations. It could be a marketing problem, a pricing problem. It could be a new competitor. It could be a spike in fuel costs. It could be the discovery of a new oil field in North Dakota, or government throttling of fracking activity. All of those issues could impact passenger load factors and are beyond the level of work of my shift supervisors.”