The 5 Systems That Will Make Your Business Run Itself | Ep. 346

What if I told you that building a billion dollar company from zero has nothing to do with working hard or anything to do with building better systems? I went from working at subway to being the CEO of a $500 million portfolio and I have learned that there is a reason that 99% of people say stuck and it is not lack of effort. Today I want to show you the five systems that I've used to building business that runs itself so that you can level up your life and work like the top 1%. The first one is culture as a system. Okay, whether you have a company or you're just starting one or you're a leader in one, this is something that you want to understand, which is that culture is going to start with you. When you're a kid and you go over to somebody's house and you go over to one friend's house and like it's like no elbows on the table, always take out the trash. If you're here, you got to take your shoes off and it's like if you don't do those things, they're like you don't get invited back. And if you're your other friend where it's like you go over, it's like you could wear your shoes through the house, they don't give a shit where you sit and eat, there's food on the ground, that's a culture. Now culture is a system that governs people when you are not in the room. Early in my career at Jamal, we had hit like 50 million revenue. I remember I was literally on a walk the day that I found out that we hit 50 million. I was like holy shit, this is crazy. At the same time, I'm like dude, I can operate or just quit. I lost my three best salespeople. I had these giant clients who had left and they like made a huge storm on the way out and like start a Facebook hate group it was awful. At the same time, these two things are happening. I remember thinking how is it possible to be winning so much on paper and feeling like so sh*tty about everything else that's going on? And that is when I learned that growth actually does not fix broken systems or broken culture. It actually multiplies all of those things. And so what I realized is like we had these values in the company and I explained them a lot like I told people of them. I had them everywhere. I said them all the time but I did not enforce them. Culture is not what you say. It's what you tolerate. It's what you enforce. So if you tolerate lateness, that's your culture. If you tolerate low standards, that's your culture. If you tolerate people who are rude to other people, that's your culture. So for a lot of you, what happens is that you keep people on your team who don't abide by the culture because they are good performers. Congratulations. Now your whole team thinks that behavior matters less than output. So if you keep high performers who have low culture or if you keep low performers who also have low culture, you lose respect from the great people on the team, the A players who have abided by your culture and now you have nobody that's good. So how do you actually do this? How do you make them culture into a system? The first thing is that it's okay. We have values. We're honest integrity. All these things. Well, what the f*ck does that actually mean in terms of observable behaviors? What can I see with my eyes? How do I know that somebody's honest? What do they do? What do they say? And so when people say, oh, we value integrity, well, what the f*ck does integrity actually look like? We need to know how to observe it. If we can observe it, we can enforce it. You have to be able to observe what you want to enforce. You need to break these things down into observable behavior. Let's give you an example. We have competitive greatness. It means that when the games on the line, they decide to stay until after dinner or maybe even later to get the job done because the game's on the line. They don't say, hey, you know what? I'm going to go home for dinner. They say I'm going to f*cking finish this because I need to finish it. That's competitive greatness in my opinion. Now is that for everybody? No. And I make people well aware of that before they come to work here. So you can second that we want to do. Build rituals that reinforce those behaviors. Okay. So this can look like daily recognition, weekly shoutouts, monthly awards, recognitions literally free. And there's a quote by Mary Kay that supports this very beautifully. The only thing that people want more than money and sex is recognition. And I truly believe that. Something that we do all the time is like, I will come back to my phone after this actually. And there's a slack channel that says shoutouts. It's just people shouting people out for following the values. That's it. It's just all day people are doing that. It's reinforcing the behaviors we want. That's the first thing. Now the second thing is to enforce the behaviors we don't want, which I use what I call enforcement matrix for this. It's essentially evaluating the people on your team because the biggest way to enforce behaviors is by showing people by who you hire and who you fire. That is like the biggest thing you can do to reinforce a culture is like who they see go out the door and who they see come in. That's who you tell people like what is most important to this company is the people in it. And who you decide to bring in who you decide to kick out. That's going to tell people everything. Use enforcement matrix. I use this matrix like this. And on this end of the axiom, you have skill and on here you have will. I use will as I say culture fit. Like how much do they embody the values? How much skill do they have to do the job? People have high skill and high will or values fit. I would say those are stars. I want to keep reinforcing and publicly recognizing those people. Promote them, shout them out, put them in front of people, give them more opportunity. People that have neither of those things, you want to kick out. If somebody has low values and low skill, why are they in your company? I don't know because you're lazy and don't want to get them out or you're passive aggressive. You got to get them out though. Like that's terrible signaling to these people. These people hate being in a company with these people. They'll leave if you don't get these ones out. Here you have people who have high values fit but low skill. That's good. That's not bad thing. Coach those people, in fact use the stars to coach the develop the people that need developing. Now we can't have an entire team of them but we can have a good ratio between these two. And on this end, if you have low values but high skill, those are the people that usually you're going to have to get out to. Now you want to coach them. Hey, you're not adhering to the culture. This is a risk. But a lot of those people, it's harder to coach culture than skill. And so usually you have to end up coaching these people out of the business as well. Now these systems make your culture real. And culture is what allows your business to run without you because culture is what people do when you're not in the room. System two is removing the founder bottleneck. Your business isn't stuck because of your team, your market, your strategy is probably stuck because of you. There are so many things in our life where we become the bottleneck and we don't even know because it's almost like a fish doesn't know it's in water because it's just there. It's just how it is. And I remember the first time that I realized I was the bottleneck is when I was running my first company gym watch and it was 2019. There were so many things coming my way decisions and I realized that I didn't even have enough mental capacity during the day to make those decisions. I remember I came back home one night and I was at an event had to go run my quarterly the next day and I came home to like 17 O'Sana tasks and they were all asking me to make decisions. And what I realized is like I am now the bottleneck. People are waiting on me to make decisions. They cannot move forward until I do something and they were like this. The bottleneck is often at the top, not the bottom. So a lot of people when they see problems in their company they go to the bottom. They're like what's going on over here. Usually problems are upstream. So most of the time it's you and this is like the hardest thing to see but your company is really a mere of you. Every business is packed at the founders personal capacity. I see across every portfolio company is now a talent problem or industry problem is truly a founder problem. For example, I have this founder. He was a super fried guy but he was stuck at 10 million for almost like four years and he kept asking me what do I need to change? I need to change a team, the strategy, the structure. One day I just couldn't take any more because I was like this four years ago I was a little nicer than I am now now. I'll just get straight to the chase but I was like no you need to change. You are still operating like you have a five million dollar business and I remember he looked at me and he was like okay so who do I need to become? And that is the question that most founders never ask. They are so busy trying to scale the business trying to fix the business trying to fix the people fix, fix, fix, fix. They don't look at the hardest thing which is to look at themselves. They don't ask the question that actually matters which is who do I need to be to grow a million dollar, 10 million dollar, 30 million dollar, 50 million dollar, 100 million dollar, billion dollar company. This is the pattern. You hit a million because you learn how to sell. You hit three million because you can delegate a little bit. You hit 10 million because you learn how to actually hire people can do stuff. And then usually around 10 million things if they aren't growing start to become way more a leadership issue rather than a product or market issue because you don't learn how to lead people and how to be a great leader. And so these traits that made you very successful early on. They are the exact same traits that hold you back later or they become useless. And so at some point those things work against you. Like very common. Moving fast. It actually becomes too chaotic and people don't want to work for you because they're like, dude, we have a giant company. Like I have to retrain the team, redo the systems, get a new CRM, like we can't just pivot tomorrow. And at some point other things like having all the answers, it actually prevents your team from thinking and feeling competent. So in the beginning when you hire people that aren't super smart and you tell them what to do, they're like, okay, thank you. I didn't know what to do. When you hire smart people and you tell them what to do, it's like, what the I thought you hired me for me to be smart and use my brain. There are so many times when this happens. I remember specifically when I brought on my first executive assistant and I was like, listen, I don't always know what to tell you what to do, but I'm going to do my best job with your boss because I'd never had an executive assistant before. And I remember it got to some point where I could see that she was becoming more capable and able to do more. And I kept still doing certain things that I had done for myself in the past because I'd never had an executive assistant before. How do I supposed to know? And I remember one day where you know emails came through and answered the emails and made these decisions and I remember she messaged me, she said, why do you answer your email? And I said, because I did. And then she was like, why are you doing my job? And I was like, oh, so I started to realize, wow, I need to do things differently. Like I need to be able to let go. And I think in the beginning, it's all about gaining control. And as you grow, it's all about letting go, which is just like complete opposite of the kind of person that you become. If you want to build a business that runs itself, you have to start with the question, where am I the bottom link? And then you have to build yourself into the person that has the traits, has self-control skills and points, a competitive greatness to make that leadership sustainable and scalable. That is the hardest part. The business cannot outgrow you. If you can fix yourself, everything else is going to start working. It sounds really hard, but if you think about it, observable skills. What are the observables that you need to acquire to become the person that can do this thing? Watch other people who are at the level you need to be at. How do they act? Success leaves clues. A lot of them act in different ways. You don't see a ton of very frenetic billionaires. Why? Because at that level, that kind of activity that actually works against you, not for you. The third system is the people fly well. And this is why, at some point, you need to learn this because you realize you can't do everything. This is a mistake that a lot of founders make. They think, oh my god, I'm so overwhelming to hire somebody. And so for like 60 days after you've hired somebody who have this very euphoric, very fake relief. But then this person you've hired starts asking you questions. They start slacking. They start asking you more questions. Then they start duplicating your work. And then they don't know who owns what. And then you don't know who owns what. You don't know what's clear and what they do versus other person. And they need to realize that they don't actually make decisions value. And then six months later, you have more people, but you have the same capacity. And you have them grown. You're like, why did I f***ing hire these people? Because I thought if I hired 10 more people I've grown by 10 more. And it's like, no, you hired a person into a system that either sucked or didn't exist. A lot of times what happens that people point to the person that like I've got the wrong people. Most of the time is that you didn't build the right system. So you need three elements in order to scale. Okay, you need functions. This is what work actually needs to happen to make the business work. This is like you would literally list out all the activities that occur in your business. Like some businesses have manufacturing, they have sourcing, some just have like technology and they have hiring and they have customer delivery. What are all the functions that need to happen to make your business work? Second is you need people. Who are the right people to create the outcomes and the functions? It's an important question to ask. What people can make these functions work? What people can run these functions? And then you need operations. How does information flow between all the functions and people? If any of these three pieces is weak, then you end up filling in the gap and holding it all together. So you have to ask yourself, is it a functions issue, a people issue or an operations issue? They are different issues. Most people point to person and they say it's the person. But oftentimes the person is the symptom and they are the last piece in the puzzle. So again, what I told you earlier, you gotta go upstream. Upstream, there's operations, there's functions, there's did you select the right people for those functions? I asked you yourself these questions before you point to the person and say they stop. Next piece is that people look at the people and most people hire in people and they want them at a level five accountability, which is essentially like they want them to come in to a complete ownership, act independently, make decisions and I would say that 99.999.999.000% percent founders don't actually hire those people but they say they want them. They hire people at a level two who need to be told what to do because most founders don't want to pay part level five because if I told you how much they cost, you'd be like, I don't even make that much. I'd be like, I know, that's why you used to wait until you were serving the company. But what happens is they hire level two's, they don't train them to be a level even three or four of the level on five and then they say stuck doing 10 or 20% of that person's job indefinitely. And so your job, you become a bucket of all the 10 and 20% of other people and you just do all that. You're essentially like the junk drawer. That's what you are. You're the junk drawer for your business. You do a little bit of everything and nobody exactly knows what's going on there. We can fix this when I call the accountability dial. So the accountability dial is essentially you hire somebody who's at a level one which means they really just need to be told what to do. They can't even get started without being told what to do. There's hiring people at a level two where it's like level two accountability is like they can do some tasks but they can't make decisions or follow things through without input. Level three is you hire people and they can do tasks and come and get feedback from you before they finish it. Level four is like they can do tasks and make decisions and then they get feedback from you after. Level five is where they can do tasks, make decisions and don't even need to loop you in. And so what happens a lot of times when you bring someone to level two but you really want a level four and then you just want them to change. Instead we want to train somebody up. So I'll tell you what I do. If I hire somebody who's at a level two, how do I move them up the dial? Easiest thing in the world is you have to prompt practice. So I can explain to an employee all day. This is how you make this decision. This is how you do it. Unless I give them the opportunity to practice, they will never learn. People don't learn by hearing an explanation. They learn by trying. So you have to prompt attempts. You have to prompt them to try. And so for example, I had an executive assistant and I remember I used what I called the Q&A framework with her which was every time you have a question for me, what I would like you to do is bring to me the answer that you think I will give you. And I will tell you if it's right or wrong. And so we did that for a while and this was because I wanted her to make more financial decisions. I didn't want her to ask me where to spend money or not spend money, especially if I was only requesting that she go do something with my money. And after I would say about two weeks of her doing it, she was able to make decisions that me as the CEO of the company was only able to make at that point. Because she'd used the Q&A framework with me, which what was that framework doing? He was teaching her to get the answer herself and then ask me for feedback before she went to the final. And then finally, I just said, you've gone it right about 10 times without me. Go do it yourself now. Like it is that easy. This helps because you can stop being the command and control CEO and you can start being the architect and you let this flywheel kick in where people are able to not just do things on your behalf but decide things and move things forward. Better systems produce better people, better people produce better outcomes, better outcomes attract better talent. And that is the cycle for compounding a business. Which brings me to system four, the talent engine. Companies that scale the fastest, they don't hire the most people, they hire the right people. This means that your talent system has to be as good or probably better than your customer acquisition system. If you think about it, it's like a lot of founders, they spend like 40 hours a week on marketing sales, brain, customer customer customer. And they spend like zero hours a week selling talent, getting good talent, improving the team, figuring out how to get more A players. But the bigger the business you want, the more you actually have to reverse that ratio. So I remember at gym launch, we were growing 30% month of a month and we were also losing people just as fast as we were growing. So I'd optimize like every single piece that customer's funnel, like I knew every email, every meme that got texted to a customer, every single point in the funnel. But my talent funnel was literally just like, I'm just gonna post this on Indeed and Craigslist and pray to God that I get somebody good. That was what I did. And what I learned through this is a few things. One, A player talent is not scrolling on Indeed and Craigslist. This was 10 years ago, don't judge me. They are being recruited. They are probably choosing between me and five other companies. They probably aren't even on the market. So they can choose where they want to go. So for example, if my job description that I post on Indeed, which they probably won't even click on, you know, reads like every other job post, marketing manager needing to manage marketing things. Like I have already lost. The companies that scale the fastest do not hire the most people. They hire the right people and they keep them. And they're able to do that by building out a true talent funnel. What I mean by that is you have to start seeing your talent funnel the same way as your customer funnel. So it's like you have leads that convert into calls that convert into customers that then you onboard. Okay, here you have people who apply, who then you book interviews with, who then you interview, who then become an employee that you then onboard. It's the same on both sides. The issue is that you haven't dialed in the talent acquisition funnel, the same way you have the customer acquisition funnel. So the goal is to have the same level of detail, precision and thought behind both. Don't just use a chat, UPT generic job description posting, but like seriously throw that out. It's yucky and everybody else is doing it right now. Your job description is like the sales page. Your interview is like the sales call. Your onboarding is fulfillment. And your retention system is like your LTV. If you see those things the same way and you build out this system just as robustly as you build up this system, which by the way, it's the same skill then you can really build a business that runs without you. Which brings me to system five, the final system, which is the operating system. Okay, most businesses don't fail because they've bad people or even bad ideas. They fail because they have this little gap. Even when you get all the right people and you have all the right structure, your business can still collapse under its own weight if you do not have an operating system. And here's the thing, the team mirrors you. So if you lack cadence, they lack cadence. If you change priorities midweek, they do the same. If you cancel one or one, they treat accountability as optional. I remember when I was running my business, I had like 13 people on the team and I was talking to them all day and I was like, man, I feel like we're like really not on the same page with things like things are all over the place and all stuff. I remember my message to the team, I said, hey, what do you guys think about having like a once a week meeting? We just talked about like where everything's at. I remember like the first message I got was thank God. I'd never been so excited for a meeting. And I was like, oh fuck. And that was when I realized I was like, oh, I don't have a system that keeps my business running smoothly. And so this piece, this system's actually pretty simple. If you think about an operating system, it really comes down to a couple of things. First one is expectations. You have to define outcomes, not just tasks. So what's the outcome of this department? What's the outcome of this person? What's the outcome of this job? Every job description I have has what I call result section, which is like essentially the expectations. What are you expected to deliver by having this job? Every department that I have has metrics that they're supposed to report on as an expectation. I expect you to deliver on these measurements. Now the second piece that goes with this is accountability. You have to measure the expectations that you've set. So if I set an expectation for somebody, I expect us to do these things. We have to measure it. Easiest way to get this in place in a business is to have dashboards. It's also the hardest thing you get in place. If you can't have dashboards, you've got Google Sheets. And that will do for now. Third piece goes into communication. This means how do we talk about all the things and reinforce the accountability? This is usually by weekly 101s. This is by giving feedback about the expectations if they have or have not been met. So it's like in all your 101s, these are my expectations. This is what a 10 out of 10 looks like. Are you out of six out of 10, a seven out of 10, et cetera? And the entire point of 101 is essentially to guide somebody to a 10 out of 10. You just want to be thinking, how do I get them to a 10 out of 10? What feedback do I have to give? That's how you get people to meet expectations. And now the fourth piece of this is cadence. How do you do this in a predictable way? Is it weekly, is it monthly, is it quarterly, what does it look like? That is how you get a system to continue repeating itself. And then you can continue recognizing and reinforcing what you want, repeat it. If you want people to do more of something, reward them for it. If you want them to do less of something, ignore them for it. Literally, that is how it works. Now once these things are consistent, something really amazing happens. People actually can stop waiting for you. And they can stop waiting for you to solve everything, for you to answer all their questions, for you to make every decision. And you'll actually see people start leading. And your business is no longer going to need your specific energy to operate every day. In fact, it is going to run off of systems, not off of personality. This is what it feels like exactly. I can tell you. It's like you have just rolled this boulder up a hill with your own bare hands. And finally, you have hit the tipping point and it starts to roll on some. And I will tell you, it is like such a glorious moment when this happens out of as a founder because you realize, finally, I am not the bottleneck. It does not all rely on me. It can roll without me pushing it. This is the best moment that you can get to because you realize, oh my God, now I can go focus on finding another boulder, which is amazing. And also not everyone finds another boulder, but I like to find another boulder, which is how you continue growing the business. It is like the most relieving thing that you can have ever occurring your business. And it's really fucking cool. great because it means that your business doesn't need you to operate. The biggest takeaway that I want you guys to walk away with is that systems are not just for when your company is getting pick and scaling. They are prerequisites in order to scale. Otherwise, you're just going to scale broken shit. It's going to feel worse than now. If you have a small company and you think, oh, if I get big, it'll go away. No, you're just going to make the problems bigger. Now, if you want more tactile advice on how to become the leader that can scale a business into running itself, you can go ahead and grab the link in my description here to my new newsletter. I call Layla's Letters. These are my uninfiltured memos. I send them to my team as we grow acquisition.com to a billion dollar company. So don't forget to hit subscribe on my channel and I appreciate you guys for watching. See you on the next one and hopefully on the newsletter.