Built to Sell by John Warrillow | with guest Martin Harper

15:01Martin Harper:interestingly around personal development of individuals or professional development of individuals within the context of the team what i found when trying to support people to progress their careers is that it's very easy for people in appraisals to submit what i would call emotional testimony which is effectively stress and upset being the basis for promotion and for increased wage, responsibility, bonus, whatever. So moving it back to an objective skill set of achievement of KPIs that are in line with the role is the lesson that comes off the back of perhaps pushing individuals that are louder in saying that they want to be part of a bigger system.

15:41Martin Harper:They are more proactive in doing stuff that might not necessarily lead to the right outcomes at the end of it. And I think that's probably the lesson learned that even with the bit I said at the beginning around ensuring it's the right person, the right role, mistakes can still be made. And there's certainly been people put into positions that weren't the best fit in the long term for the team as a whole and for the output of the company.

16:02Business Book Club Host:I know you to be a very systems oriented person. What do you use to evaluate whether someone's ready for a senior leadership position?

16:11Martin Harper:They would have to have progressed through a set of KPIs from effectively junior, mid into senior. That would be how we do it. And the responsibilities they've taken around the work that they do is where we'd see that they are able to move to a level where they're managing people below that. And I think it's the interpretation of a task. So the literal reading of a task and doing as instructed verbatim is a team member that fits into the team normally, but ensuring that what is written is the intention of what the client wanted and reconfirming afterwards and ensuring it's delivered all the way through is someone that's closer to understanding that it's the entire output of the product that is more important than the task itself in the bigger picture.

16:56Business Book Club Host:Let's move it to what the impact is. So say you've been able to hire a leadership team, you've got 20 employees and maybe three in a leadership team. What impact does that have on you as a founder?

17:08Martin Harper:In a positive or a negative way? I meant in a positive way, but I'd love to hear the negatives. It's not negative as such, it's more a surprise, which is that suddenly you've got a set of people that are qualified and are pushing ideas that are perhaps differing from what you intended. And obviously, you put these people in position in order to make these types of decisions for you. I think the expectation is that they will be in line with what you'd envisaged in the first place, rather than their own good ideas that are challenging things in the right way to deliver the correct outcome. My view and the way that I have done, things like that over time has changed.

17:46Martin Harper:So if I'm asking someone to do something initially, I will say, this is what we're going to do. This is exactly how I do it. And at the end of it, I effectively say, you can absolutely use your own method. Mine is available and I can tell you again what it is, but effectively the outcome is the immovable part, but the method is something that you're absolutely free to do. And I think that sort of framed it as negative initially, but the unexpected part is that if you are allowing these people to make decisions, You also now need to allow them to be free on the method chosen as long as the outcome is agreed.

18:17Martin Harper:And of course, that's effectively the definition of whether it be an OK or a KPI, which is that the written word and the intention of those written words is what the outcome is as opposed to the method of it. Unless, of course, the method itself is an immovable part in the context of the outcome of the task.

18:34Business Book Club Host:On the flip side, were there any benefits that came out of that? Like what were you able to do that you weren't before?

18:39Martin Harper:A long list of benefits. immediately you're freed up from doing the specific day-to-day tasks that obviously dominate a lot of time we obviously spoke about transitioning from a service to a product because ultimately the most effective way of commercial success is productizing something rather than selling time for money but on the base of it in offloading those tasks to other individuals you're freed up to think more commercially more visionary around exactly what the direction of the company is and other ways in which you can either support the team, grow it, or be successful with what the targets are.

19:12Business Book Club Host:In the book, they talk about incentives. When you've got a leadership team, the type of incentives that he likes are these long-term incentives that try and align his needs as a founder that may sell it someday with the needs of the senior leadership team. So he tries to make them long-term and he doesn't like giving equity, but he likes giving financial rewards for kind of long-term, you know, if you're still here in five years, you get bonus kind of rewards. And then just to back up this kind of incentives thing, I read Charlie Munger's books as much as I can. And one of the things that he says is, I'm in the top 1 % of everyone who understands the power of incentives.

19:43Business Book Club Host:But every year that goes by, I'm surprised by how much incentives matter. I wonder, how have you set up your incentive structure? Have you kind of taken advice from the book at all? How does it look?

19:54Martin Harper:The most straightforward and direct answer is, yes, absolutely. I understand the benefits and have implemented incentives. However, there's far more context to that, which is that I have a very large desire to understand how people function and why they do what they do. Part of what we've done in the last couple of years, I think this is probably many years, perhaps even up to five years, is run motivational maps on our team, which allows us to understand what motivates them as individuals and also how fulfilled they are within those motivators. So part of what I do in appraisals is I ask people to be very clear on what their motivators are.

20:27Martin Harper:And I give them literal examples in advance to make sure that they're as direct as possible to explain to me exactly what motivates them as individuals. And I say to them, look, if it's about money, if it's straightforward about money as a motivator, because it's around building a stable life and money is required to do that in this case, then put that. If it's around ensuring that you feel that your job title and your responsibilities represent the importance of what you do, put that. But make sure that we're able to understand in conversation exactly what is the motivator that is key to you to feel that you're rewarded for the effort you put in.

21:02Martin Harper:Money is always a part of it anyway, even if it's of less importance to people. So a structure around exactly what the role band is for financial reward. But within the appraisal processes to map out whether it be bonus, promotion, or salary increase is a key part of it to make sure that those expectations can be aligned financially and job role-wise, but there's a wider piece around exactly what those motivators are and how people feel that they have been fulfilled. Where did you get that? Is that a framework that you've picked up from somewhere? The motivational map framework, there's individual maps around seven or eight different things that you're scored on from what is the biggest motivator conceptually, where instead of it being a one to 10 answer, it's more about roughly, do you prefer money or do you prefer power?

21:50Martin Harper:Do you prefer power or do you prefer freedom? And from that effectively is scoring you on what your motivators are. After that, you're then asked to rate whether or not you're fulfilled. But it's a framework that allows us as individuals to understand it. Also, you can put them together in a team and it shows you potential conflicts that can occur within team members, which is that things are important to someone and not important to another. And if you've got someone that is super high and super low on something at opposite ends of the scale, it's likely they will be in some sort of conflict over an issue if there's a responsibility or a task that comes up that's in direct conflict of that.

22:26Martin Harper:And it actually helped us understand within our team that client services, so client facing, speaking to them all the time, they were motivated by being an expert, so enabled to impart knowledge to clients to solve their problems. And the development team were more leaning as a whole into searching for meaning. So lots of why questions. And I said to them what that could mean in a practical situation is that a client services member is very keen to get an answer to a client who's in need of a solution and the development team are asking why for a long period of time or why they might want that.

23:00Martin Harper:So it could lead to a delay and two frustrated team members where one is seeking meaning for why exactly they're trying to do that to help them is in they're truly trying to understand and someone else is simply trying to move forward with speed to get the fulfillment of I'm trying to help this person. And of course, in both roles, the correct solution was what it might mean in some situations is that we just need a solution really quickly to send over. But actually, on the other side of that, we should consider what is the true purpose of what's trying to be achieved. Because there was maybe a lack of understanding technically on exactly what the client was after from the client services person, a requirement to say, are they really wanting that change done?

23:40Martin Harper:What is the outcome they're expecting in doing this? And of course, allowing both of those situations to play out in acute emergency situation, just getting the job done helps everybody. And in a longer time where you've got more space to think about it, working out exactly what those strategic objectives are is far more beneficial.

23:58Business Book Club Host:One more quick question on this is how often do you test this? Is this like an annual thing? Because I imagine people's motivations kind of change over time, depending on where they are in their career or in their life?

24:07Martin Harper:The answer is not as much as we probably should. But fortunately, we have a good external person who's pushing us to make sure that we re-evaluate roughly on an annual basis to make sure that we understand what they want. We've added new PIP members of the team, so we need to understand how they fit into the team structure and where there might be alignment or conflict within smaller teams such as development. It's likely they're closer from what we've seen historically. But as a wider team, as I said, that type of unresolved conflict could potentially arise.

24:35Business Book Club Host:What is your third lesson?

24:37Martin Harper:Overall saleable mindset. It feeds directly from the previous lesson around building a team below you, which is that the expectation should be that at any moment someone could come in and buy the company. If they're doing that, then there needs to be an understanding of what the roles are of the teams, that they understand what they are doing without direction from you. So it is documented. It is understood procedurally what exactly is supposed to happen, what the vision is of the company in general, how they're providing services. It doesn't mean that as a founder or owner, you can't contribute largely to that, but the understanding needs to be that anyone coming in is either filling those roles with suitably qualified people or they're fulfilling those roles themselves.

25:19Martin Harper:And you don't want too many of those roles going too far down into the team, or you're going to have a huge problem in saleability.

25:27Business Book Club Host:Do you think that this helps you both for being a saleable company and for being a company that just operates in a more efficient, better way? Or is it more weighted to prepping for the sale?

25:42Martin Harper:My view is that they're the same thing in that running an autonomous team and also being ready for sale. The question is, am I sticking around? Am I going? That's effectively what the saleability topic is, which is, am I preparing to run out of the door at the earliest moment? No, absolutely not. what I'm doing is setting up a situation where both are equally possible, which is that I can come in and operate at the entrepreneurial vision type level of what's going on and where are we taking things. Someone else who's that experience could equally come in and do that. But it means that I can do it in the seat or someone else can come and do it in the seat.

26:17Martin Harper:But the team and the function of the business is still successful independently of that. But of course, to some level it does require it it's just who it is and if there is set up universally to work where they understand the key reports that should come to them whether it be a p &l or an operational output these things can be generic across different types of businesses and you'd expect that that type of universal swap out should be possible and that's why if you set up tasks or you're responsible for tasks that go too deeply into the team then there is a technical function that you're doing that is potentially non-replaceable by someone else swapping out.

26:54Business Book Club Host:Take me inside Quickfire. What are the functions that just need to be fulfilled? How do you think about different members of the SLT responsible for those different functions running to the level that you want them to be?

27:07Martin Harper:So the way we split it out within reason is members of the team or members of the management group that are from client services, from development, operational, resource, sales, marketing. These are types of people that we think that the functions are effectively taking the client all the way from the beginning of the journey to the end. So the initial touch point of the client is understood. It is brought all the way through into an operational structure that is made for the client services team to develop through exactly what do you want, strategically work out what the plan is with someone that's strategy on top of that, and work all the way through into a development standard that is run by a head of development that is looking for consistency in the type of coding structure that we do, all the way back through client services to output.

27:55Martin Harper:And then of course, the quality and alignment of expectation of outcome is managed by a combination of making the process the method of quality output. And that's done by a structure that's put in place operationally and combined with a development and client services team to put out there.

28:10Business Book Club Host:Do you think this is just infinitely scalable? At what point can you start thinking about this mindset about having an always saleable business what size do you need to be and is there any kind of transition points where you think that it might be difficult you know when you start getting to like 100 staff or something like that there's probably a lower limit of people a smaller

28:30Martin Harper:company that has restrictions on simple requirement of time and people within the business that have to fulfill roles that are non-disconnectable from them so i think you have to have a minimum size of team that has a level of structure in where someone comes in. And I think that's where the expectation of what they're doing would change. So if someone's coming in that's more technically experienced in the particular area of the business, then yes, they could buy a smaller business, but there'll be a point where the individuals need to be disconnected from effectively the C-suite, from the CEO, the COO, CRO, CMO, where that structure is financially possible from the revenue of the business to support a team below that operate the specifics of the product in question.

29:15Business Book Club Host:Martin, I've really enjoyed this chat. It's been awesome. I'm just going to try and wrap up by taking a minute to pull together all the biggest takeaways from today. Takeaway number one, you have to specialize to be able to scale. So Martin, you talked about the transition from being a general hosting and marketing company into specifically a Shopify e-commerce agency. It sounds counterintuitive to reduce your total addressable market, but as the book argues, you can't scale if you're a jack of all trades. If you do everything, you're actually selling your personal time and your creativity and this just doesn't scale.

29:49Business Book Club Host:You're basically being a freelancer with help. So why is niching a great way to scale? Well, it helps you hire specialists so your product quality goes up. This improves your customer LTV as happy customers keep coming back. It also gives you a bit of a moat. It enables your sales team to become great at selling because they know exactly who they need to be speaking to and everything about the exact product that they can offer them. So let's think about some of the biggest brands in the world like Amazon. They got really good at selling books. Facebook was just for Harvard students. Then these brands, they niched, they did that really well and then they scaled.

30:28Business Book Club Host:So here's an action to take this week. Look at your revenue streams. Which service requires the most customization? and the most personal brainpower, that's likely the thing that's holding you back. So start productizing, turn your service into a standard offering, where the customer pays for a predictable outcome, not your personal hours. Takeaway number two, beware the emotional testimony trap. I thought this was a brilliant insight, Martin. When you're building your management team, it's so easy to promote people just because they work hard or they're loyal, and they've been there for a while.

31:00Business Book Club Host:But promoting based on effort rather than outcome is a recipe for a weak management layer. But practically how do you do this? So first thing to do is audit your org chart. Have a look, are your leaders there because they are the best at their function or are they there because they've been with you the longest? You need to hire people who are better than you at their specific role. If you're the smartest person in every room in your company, your company literally can't grow beyond you. And lastly, takeaway number three, align incentives with autonomy. We talked about motivational maps and how different people are driven by different things.

31:37Business Book Club Host:Some want money, some want freedom, some want mastery. If you want to take a step back, you need a team that thinks like owners, but you can't just expect them to care as much as you do. You have to build that into the structure. But how do you do that? In a nutshell, stop micromanaging the method. Martin's point here is to be rigid on the outcome but really flexible on the method, giving your team the destination and a lot of clarity around the destination but letting them actually drive the car. That's the only way to eventually get to step out of the vehicle entirely. If you want to go deeper I highly recommend picking up a copy of Built to Sell.

32:13Business Book Club Host:It's a pretty quick read and it might just change your life. I've dropped a link to buy it in the show description and you'll be supporting the show if you do. But before we go, Martin, if someone wants to get in touch, if they want to move to Shopify and they're thinking that you might be able to help, how would they get involved?

32:29Martin Harper:We actually operate a series of events that are community-focused called Engage With E-commerce. We've operated them historically and we also are doing a number of events this year that are mostly London-based. There is some international ones that we're talking about, mostly London-based, that are events where brands come and get information about exactly how best to operate in the e-commerce space, how best to operate in Shopify. We like to make sure that people understand exactly what's going on and how they can best utilize it for success themselves. We're on LinkedIn. We chat about them all the time between myself and the other team of Quickfire.

33:02Martin Harper:Our website always talks about it. So yeah, we try and promote it as much as possible to make it visible.

33:07Business Book Club Host:Thank you so much, Martin. If you got some value from this episode, please hit the follow button on your podcast player right now. it really helps me grow the show and bring on more great guests like Martin. Thanks for listening to Business Book Club, the community of founders learning to lead better one chapter at a time. See you on the next one. Just a quick one before you go, if you want to get in touch to suggest a guest that I need to speak to, give me some feedback, sponsor the show, or for any other reason, there's a link in the episode description.