The 5 Obsessions of An Elite Organization with Michael Erath, Founder at Next Level Growth
In this episode of Exploring Growth, host Lee Murray talks with Michael Erath, Founder and CEO of Next Level Growth. They highlights the importance of emotional connection, purpose, and optimized systems in building elite organizations. The conversation covers key insights on great people, clear expectations, and proactive financial management.
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Liam - https://www.linkedin.com/in/liam
Michael - https://www.linkedin.com/in/michaelerath1/
Michael Erath
00:00:00
I think the definition of a lead is going to be different for each organization and for each founder. you know, elite for some people is to be the biggest in their industry. Some it's to be the most profitable, summits to, you know, have the highest enterprise value or be valued at the greatest multiple. For others, it's a self-managing organization that allows them significant freedom to do things they want to do. And this their business becomes an investment for them. So the definition is different, but it's really about being so committed to what that looks like to you that you will, in fact, obsess about the things necessary to get there and not just profess that that's what you want to be, but actually put it into practice.
Lee Murray
00:00:47
I'm sure many of you listening have heard of Traction or EOS. And today's guest, Michael Erath, is a former former EOS implementer, now founder CEO of Next Level Growth. And we're going to dig into a new framework that he's created for taking your business to the next level.
Lee Murray
00:01:04
And we'll be walking through parts of his book that is about to publish the five obsessions of Elite organizations. So, Michael, welcome to the show.
Michael Erath
00:01:13
Thank you. Appreciate it. Liam, I'm delighted to be here.
Lee Murray
00:01:15
Yeah. So oh, my guess I was asked to give context to the ideas you're going to give us. Give us a little bit of your background and what led you to next level growth?
Michael Erath
00:01:23
Sure. So, kind of really abbreviated backstory I grew up in a family manufacturing business back on the East Coast. We manufactured hardwood veneer for the furniture, kitchen, cabinet door and panel industries. And there's a whole backstory on kind of my development and journey through that. But in essence, in 2015, I exited my manufacturing businesses and started working with EOS. I had implemented EOS self, implemented it in our business, but in doing so I had customised a lot of it and made it really more tailored to my organization, my style and our culture versus really doing the pure approach to iOS.
Michael Erath
00:02:09
And I found a lot of value in being flexible within a framework. So when I started working as an iOS implementer, I had a really successful several years doing that, but I was constantly frustrated by the prescriptive nature of that kind of one size fits all system. And what I found was of the multitude of business operating systems that are out there. That's typically the approach they take. And when you do that, it puts primacy on the system, not the user, and requires the user to bend and morph in ways that may not be ideal for them in order to fit the system. And so that was constantly a frustration. It felt like it was not really true to the entrepreneurial spirit. And so what I when I left iOS, what I worked on creating is more of a principled approach, which is based on a framework around five specific principles, which we refer to as the five obsessions of elite organizations, and the tools and concepts that we work with our clients to adopt in advancing each of those obsessions is very systems agnostic.
Michael Erath
00:03:19
there's so much in the public domain that that we're able to to help guide our clients to and help them understand and learn how to use that. It allows us to really provide the right tools at the right times based on what specific user's needs are, and do it in a way that custom tailors the ultimate business operating system. They get so that it's a fit for them, and the system is being made to fit the user, not the other way around. And so what we've really tried to focus on is always putting primacy on the user and their outcomes, and doing that through a flexible framework around these obsessions.
Lee Murray
00:03:53
Yeah, it's really interesting because I'm sure there's a lot of organizations that have used EOS and maybe fallen away from it. for this reason, and, and I think that, you know, as, as time goes on, there's a time in kind of era for certain things, not saying that us is past, but I think it doesn't necessarily fit every organization and how they're, they're, they're built.
Lee Murray
00:04:17
So I think it's interesting how you're, you're taking a completely different approach and making more about the user, and principles versus trying to fit, sometimes, you know, round peg in a square hole.
Michael Erath
00:04:28
Sure. And I think, you know, I think it's a very good starting place for, for a lot of smaller organizations that just really need to get things together. But if you're familiar with iOS, it typically has an 18 to 24 month run until you would more or less graduate from your facilitator or coach. at which point you're kind of on your own. And I like to view growing a business like climbing a mountain. And I feel like it's a bit of a disservice to think that I'm going to take my company and my leadership team. We're going to go climb Mount Everest, but the Sherpa is only going to get me to the first or second base camp, and then they're going to go help somebody else, and it's on me to get to the summit. Yeah. so as we've built this out, one of the other things that has become very unique to next level growth is that we currently have eight partners in business guides working with companies across the country.
Michael Erath
00:05:23
And one of the things that became very important to me was the standard to become a partner and guide. So we only allow people to become partners and guides who have been an owner, CEO or president of an organization with at least 10 million in revenue and at least 50 employees back. Back when I was in Ypo. That was the old Ypo qualifications. Gotcha. But what we find is people who have had ownership or full Accountability at organizations of at least that size have encountered most of the same issues that even much larger organizations were will encounter. And that's allowed us to spend. I've actually my my very first client ten years ago that I started working with is still a client today because we're able to evolve and grow and flex with them. and that's that's the ultimate joy for us is when a client sees enough value that they keep us roped in. Yeah. For the extent of the journey.
Lee Murray
00:06:22
Yeah. That's such a great distinction between, one company and another and how they would use a framework like an iOS or, one like yours.
Lee Murray
00:06:33
I want to jump into our conversation about the five obsessions. but before I do that, I wanted to have you kind of just frame out a little bit more. I know in our pre call, we talked about this idea of going from good to great and then great to elite. right. To help us understand what does an elite organization look like versus, you know, the tried and true, great. You know, good to great, right?
Michael Erath
00:06:57
Oh, no, I appreciate that. So, you know, in good to great Jim Collins, one of the things he talked about that was that that was required for the organizations that went through the build up and breakthrough was that they were all led by disciplined people, engaged in disciplined thought and taking disciplined action. And so there was this this really high standard around around discipline. And several years ago, I saw an interview with Nick Saban that really resonated with me. And it's where I why I decided to coin this term elite organizations and use elite to describe what we're actually going for.
Michael Erath
00:07:35
And he said that I believe he was he was quoting Freddie Kitchens in this, but he talked about everyone having five choices in life as to how they do things. He said, we can be bad at what we do. we. And that's a choice. We can choose to be average at what we do. We can choose to be good. And he said most people won't go beyond being good. And it's ironic because in Good to Great, Collins opens the book by saying, good is the enemy of great, right? Because we settle. But he then goes on to say, but you can also choose to be excellent, or you can choose to be elite. But if you choose to be excellent or elite, you have to have a special discipline, a special focus, a special intensity and drive and passion to do things to a very high standard in a high level all of the time. And if you don't have that, you likely will never get beyond good. And as I started to reflect on entrepreneurs, I know companies I've worked with, the ones that I feel like have truly become elite.
Michael Erath
00:08:37
When we started to think through what is it that separates them? It really is the obsession they have around these five principles that, that we've discovered, that are really time tested and somewhat timeless, and transferable across multiple industries. And so that's, that's really what we started to focus on. And I think the definition of a lead is going to be different for each organization and for each founder. you know, elite for some people is to be the biggest in their industry. Some it's to be the most profitable, summits to, you know, have the highest enterprise value or be valued at the greatest multiple. For others, it's a self-managing organization that allows them significant freedom to do things they want to do. And and this their business becomes an investment for them. So the definition is different, but it's really about being so committed to what that looks like to you that you will, in fact, obsess about the things necessary to get there and not just profess that that's what you want to be, but actually put it into practice.
Lee Murray
00:09:40
That's amazing. Thanks for that, explanation. And I think that's, I completely agree. and it's perfect bridge into, our conversation about these five obsessions. you know, and I think the, the goal here with this conversation is to try to bring as much practical value to these, founder CEOs are listening, as they're, you know, here we sit. end of, 20, 24. And this is probably going to publish early 2025. So everybody's kind of in that mindset of what are we going, how are we going to get better next year? Right. and so tools that's what we're that's where we're about to jump into. So, why don't you walk us through the five obsessions and then I'll just sort of insert my ideas as we go?
Michael Erath
00:10:24
Yeah, absolutely. so the the first of the five obsessions we say is great people. I think we have you've got to take a who first approach and, and in the organization and any, any transformation or change that you're going to drive starts with getting the right people.
Michael Erath
00:10:43
and so when we talk about great people, these are people that are highly aligned around the organization's values. And, you know, core values has become such a buzzword and so commonplace. I had a I had a meeting this morning. We call it a fit audition with a prospect that decided to become a client. And I was asking about core values. And one of the partners, there were about seven people in the room. One of the partners said, yeah, we've got we've got six core values, but I bet you nobody in the room could name all of them. Yeah. And so I asked the team, I was like, oh, okay, you know, question posed, who can name them. and of the seven people, they were able to state two of the core values. Right. So okay, so you don't have core values to start with. but really getting clear on core values, we go through a discovery exercise and full credit to EOS. And you know, Wickman, that's where I learned the process, the discovery process to get to those.
Michael Erath
00:11:36
and he writes about it in traction. Anybody can go look it up. Yeah, but I've run into companies before where we did this short, simple exercise to discover core values, and they were blown away and said, you know, we've had three day off sites with a marketing firm to take us through core values. And they were they looked great on the website, but we didn't know how to operationalize them. They didn't we didn't love them. It just it was marketing. And I think those were a complete and total waste of time. they don't do you any good. And so great people or people who are really aligned around your true values as an organization, they behave consistently with those. For example, here at next level growth, we have for it's take ownership, be resourceful, have a thirst for learning and be fun to work with and people who come to work for us. We filter really hard on the front end to make sure that that's a good fit, because if they show up and embrace those and behave consistently with those values, they will do great here.
Michael Erath
00:12:30
The technical stuff we can teach anybody if they just have those values and mindset. Yeah. but if that doesn't sound like how somebody wired, I want to stop the interview process and stop wasting each other's time. Yeah. so when you fill the organization with people who share those values and truly at a, at a core DNA level, believe those things and live those things, and the performance side of that, the other side of that, they have not only the skills and experience, but also the desire and passion to perform their roles to a high standard. Those are really your A players. They're the great culture fits. They're the high performers in the organization. And so we have we have created what we call a next level accountability chart to begin to set clear expectations around performance. And I'm a big believer that when it comes to frustrations with people within our organizations, the underlying cause of most of our frustrations is unclear expectations. Right. I think I know what's expected of me, but I'm not sure my boss thinks I know what's expected of me, but they haven't really clearly articulated it.
Michael Erath
00:13:41
They they're frustrated with me. I'm frustrated with them. And it just it creates chaos. Right. And so we have designed this and I go into great detail in the book, about this and how people can kind of do this on their own. But for every seat on an org chart, if you think about it more as a as a chart of accountabilities for every function, every employee needs to understand what is their mission in their role. And that's a it's kind of one sentence, 30,000 foot view. But what's the consistent deliverable that I need out of the person in this role in order for them to be successful? Yeah, I need to I need to make that clear, because now if we understand that we have something we can begin to measure performance against and provide feedback and guidance and coaching and mentoring. Right. The second component is what we call a most critical outcome. And I think a lot of organizations die from too much data, too many KPIs. People don't really know because there's just too much noise.
Michael Erath
00:14:39
I'm very focused and we're very focused here at next level growth on outcomes. And so the most critical outcome would be for any given seat. What is the most critical outcome that that seat controls or significantly influences that proves successfully achieving their mission? And the other question it answers is it has to also prove that the company is getting a return on investment for the individual person in that role. So if you can answer those two questions with a measurable outcome, we're now establishing a clear mission for someone, but we're also establishing how we're going to measure that so they know if they're winning, if they're not winning what they need to target and go after. And then the the final component are obsessions within the seat. So there's typically 2 to 5 obsessions, depending on on the role. it could be things like, for example, a, take a chief revenue officer or a sales manager who's in a leadership role in an organization. One of their obsessions might be to own the sales playbooks, execution and outcomes. Right.
Michael Erath
00:15:52
So that's a very clear statement. And if I accept that role, I need to take ownership of our sales playbooks. So that means for for me as their guide. Like if I don't believe you have good ones, send me a copy. Well, we haven't documented them. They're in my head and I just explain them to people. Well, then you have no sales playbook. Yeah. Right. right. And so. But they also have to own the execution and the outcome. So that means I have to own the training and ensure that everybody's properly trained. I need to make sure that we are measuring the right things to determine that people are, in fact, following our processes and ultimately that they're getting the outcomes that we want. And if they're not, if we're missing our sales goals, I own those sales processes and playbooks. I need to go back to the drawing board and figure out how to make them better. If I can't do that, I'm likely not the right person to be in that seat.
Michael Erath
00:16:39
And so, with a handful of obsessions like that in every role, we start to get great clarity on what's expected of us, whether or not we're meeting those expectations and performing. And if you build that as a system into the organization, you truly start to build among your people a true economic engine that drives the value of the organization over time and drives the growth of the organization. So that's that's really kind of how we we focus on and look at great people.
Lee Murray
00:17:10
Yeah, I love it. There's so many layers there of value for everyone involved. I think it's I think it's amazing. one, you know, kind of perspective that I got. hearing what you're saying is it's, you know, a lot of this is kind of from the perspective of the, CEO leadership, you know, installing this. But if you look from the perspective of the employee receiving it and being engaged with it, they're getting a ton of value as well. I mean, they're they're going to be able to work at an organization where there's clarity around, where they fit.
Lee Murray
00:17:46
And that doesn't happen in a lot of organizations. It just doesn't.
Michael Erath
00:17:50
And in fact, you know, I often I asked the question this morning, I often will ask, if I survey your most recent hires, would they likely tell me they had a great onboarding experience, or would they tell me they got waterboarded? And the reality is, most employees, when they go to work for a company, get waterboarded. Yeah, right. We throw them in too fast. We don't give them enough training. We don't give them playbooks to follow, and we expect them to perform when they when they have a poor onboarding experience, they don't stick as well. But if you imagine, like if you have a great 90 day onboarding process for those first 90 days with a new employee, employ, and at the end of those 90 days, they feel connected to their boss. They feel a connection to the organization. They feel supported. They know what's expected of them. They know if they're winning or not.
Michael Erath
00:18:38
they have a great experience. And those employees not only perform faster, but they stick longer because they, they, they, they get an emotional connection to the company and their boss. Yeah. And that's a higher level connection. That's right. Right.
Lee Murray
00:18:53
It's ownership. It's like it's more it's really what they're doing is they're owning their role more, you know, intrinsically. And that's, that's not really I mean, that's that's like finding the right person and giving the right environment. right. And that's essentially the system you're saying. And what I see is this is I think iOS does the right people. Right.
Michael Erath
00:19:13
I think this is, yeah. I mean, it's a Jim Collins analogy from the bus analogy, but it's going.
Lee Murray
00:19:18
Well beyond that.
Michael Erath
00:19:19
Right, exactly. and it's it's getting very Specific in terms of having tools and measurements in place to coach and develop people and know how to do it in the right way. So for people who are familiar with iOS, the performance concept they call GWC get it one at capacity to do it.
Michael Erath
00:19:41
And you look at the you look at the seat the person is in as a whole, and it's a binary yes or no. They have the desire capacity, and skills to, to perform that role. The way we look at it is when you take the mission, most critical outcome in each of those obsessions, rather than look at the seat as a whole, look at each individual, one of those. And has the person been meeting exceeding or failing to meet expectations? Because you may have somebody who's doing just fine and the majority of the role. But there's one area where they're not they might still get a yes in the GWC logic. And so they don't get the coaching and development they need versus if we acutely, acutely look at every single one of those things. You might be performing really well in all areas, but there's an issue with one specific area and now that highlights it. So if I'm the boss, I can work with my direct report and figure out what support do you need? What is there something you need from me? Is there is there something you need us to invest in? Is there training you need? Like what's causing that deficiency? And let's get that coached up so that it's no longer an issue and it helps you elevate your performance.
Michael Erath
00:20:54
Yeah. so that's why we've tried to really build the more the more, empirical data into it and greater specificity to get more value out of the operation, because at the end of the day, it's how you operationalize these things that matters. It's being able to do them in theory and check the box doesn't really make you any better.
Lee Murray
00:21:12
Right? Yeah. So okay, you have you have the five we're going through and the great, great people being the first one. I don't know if this was intentional, but to me it seems like a great people being the most important, right? It's almost like foundational, correct? That's why you built it.
Michael Erath
00:21:29
That's why it's at the top of the model.
Lee Murray
00:21:31
Yeah. Okay. So then as you build from there, where where do we move next.
Michael Erath
00:21:35
Yeah. So the second obsession is an inspiring purpose and there's some intentionality there. So you mentioned right people right seats earlier. And that really kind of started with Jim Collins analogy and Good to Great, which came out in 2001.
Michael Erath
00:21:47
I believe there's a third leg of that stool, however. And so one of the things I like to ask entrepreneurs when I'm talking to them is what percentage of your marketing budget was spent internally marketing and telling your story to your team members? And they always I always get these funny looks like, what do you mean?
Lee Murray
00:22:07
What do you mean what? Percent. Zero.
Michael Erath
00:22:09
Right? Zero. That's typically the answer. And the point is, if I, if I came to work for an organization and I was aligned with the core values, and I had the skills to perform my role. I'll be a good employee, I'll be a good team member. But if that so. So let me back up. Steve Jobs once said that the most powerful person in the world is the storyteller, right? And if you think about it over time, there's a tremendous amount of truth to that. Great orators, right? People. People will follow them in droves.
Lee Murray
00:22:43
People have been elected because they're good orators, right?
Michael Erath
00:22:45
And people have done a lot of evil things in the world because they're good orators.
Michael Erath
00:22:49
Right? So it's it's a double edged sword, but it's the power of the story. Right? Is what that really reinforces. And so I could be a great fit culture and performance and I'll be just fine as an employee. But if the company can capture me emotionally and give me something to emotionally connect to, that's purposeful. I will always bring more creativity and passion and drive to my work because again, it's a higher order connection. There's a great, and Simon Sinek s talk around his book The Infinite Game. There's a segment where he talks about trusting teams, and he talks about this difference between liking what you do and loving what you do, and the higher order connection. It's hilarious the way the way he says it. And he's he's such a great speaker and he and he's got a really interesting sense of humor. But he talks about the difference of somebody saying they love where they work or they love their job compared to liking it and it being a higher order connection. And he said, do you love your wife? If the response is, I like her a lot.
Michael Erath
00:23:48
That's very, very different, right? Right. Love is emotional, like it's relatable. And so if we start to understand why do we exist as an organization, how do we differentiate ourselves? And we've got all this external marketing of how we talk about our value. But then when we turn inward and start thinking about what's our purpose beyond making money, he even talks about Simon Sinek and, the Infinite Game. He talks about a just cause. But if we can really start to articulate what our belief system is and help people understand what the positive outcome is, either for our customers or clients, or maybe internally. what is the good that we're trying to do as an organization that starts to give people something they can emotionally connect with? And when I can now start to connect my job with how it contributes to us doing that thing that's really powerful and positive, I have something that can start to capture my heart and my emotion, and that will change the game for me. So inspiring purpose is not only really having a great differentiated external strategy for for how we provide consistent, differentiated value in the marketplace.
Michael Erath
00:24:58
It's also about how we inspire internally and how we communicate internally. The reason people have so much trouble with change management is we tend to do a really bad job of explaining the purpose before we just implement the change. Yeah, right. if we slow down and And connect around purpose. Change is actually often a good thing. People say, oh, nobody likes change. Well, you know, one of the people I was speaking with this morning said, well, actually, change is great. Like, I love getting new clothes, right? You know, a new car or whatever, that's changed. And it's great. But I understand the purpose behind it, right?
Lee Murray
00:25:32
Yeah. I 100% agree. I mean, I'm sort of my DNA is for wired for the why. So it's not hard for me to go there. In fact, it's I have to really push myself to the how more than the why. Okay. More than you know, but a lot of people have trouble going to the why that lead companies and that's that's really what you're talking about.
Lee Murray
00:25:53
I mean, if we spent more time around the vision and the purpose, you're going to capture these people that are are great people, great in their position that could do bigger things.
Michael Erath
00:26:04
And, you know, it's interesting also because we we also work with a lot of commoditized businesses. you know, you start thinking about, you know, home service companies or distributors or things like that, where it's it's pretty commoditized. Oftentimes they struggle to figure out what that is and how to communicate it. And what I always love to ask, and this is something all of our guides do, is starting with the founder. beyond making money, why did you start this business and just keep digging away at that until they get to something emotional? and then also turning to the team and saying, okay, so besides your paycheck, why do you choose to stay here? What is the company do that gives you reason to stay? And what does it do on its best days that causes you to go home? Delighted to be part of.
Michael Erath
00:26:58
And so the more we can get a conversation going around that eventually somebody will say something and it's like the lights come on and everybody's like, that's actually it. And sometimes with these commoditized businesses, it's actually their inspiring purpose is more about what they do internally for their employees and team members and families than it is externally for for a customer or client. Yeah.
Lee Murray
00:27:22
Great. I'm making notes here. So, you know, the first one is all about great people. Second one's having an inspiring purpose, that you can rally. Those people are even more than rally capture. I love that language that captured them emotionally. Where do we go next?
Michael Erath
00:27:39
So. So next is when you. When you fill the organization with great people, you've got them aligned around and motivated by an inspiring purpose. We've got to give them optimized playbooks. And so I don't I don't I try to be clear not to confuse process playbooks with procedural documents, work instructions, SOPs or God forbid, like the ISO 9000 stuff that gets you a certification but nobody ever looks at again.
Michael Erath
00:28:06
Yeah. this is really the idea of kind of high level workflows, checklist to follow to make sure we don't miss steps. It's not it's not checklists and workflows to be limiting, but it's to really systemize the things in the business that need to consistently happen in order to deliver a certain result. And so when people are trained on how to do their jobs and they have checklists to follow or these playbooks to follow, it just prevents them from missing steps. And so I think if you if you think about the entire ecosystem of professionals, if you think about professional musicians, take an orchestra, for example, they're playing off of the same sheet of music, and each instrument knows what the other instrument and the other musicians will be doing based on the fact of their working off the same composition. successful, you know, American football teams, they're running plays and they're studying and practicing plays, and those plays are designed to get certain outcomes. At the end of the day, the teams that executed their plays better are likely the ones who win, right? Among the ecosystem of professionals in the business world, we're the only professionals that don't value playbooks and practice.
Michael Erath
00:29:27
But we expect people to perform. Yeah, right. And it seems like a bit of a, you know, a bit of an oxymoron to when you really think about that. Sure. so the idea is to really look at, you know, from a sales perspective, like most businesses, there's an optimal process to take a target market prospect or lead through to becoming a client or customer. Right. And oftentimes we don't systemize that. We don't train people to it, and we end up with ten people on our sales team doing it ten different ways and wondering why some are successful and some aren't, and there are so many things we could systemize and replicate through process playbooks and then continually optimizing those as we go. There's a great, you know, one of the one of the early thought leaders in the 20th century around process was Edwards Deming. He was the one who worked with Japan after World War Two and was a big part of the quality movement in Japan. And there's a quote that's attributed to him that every system is perfectly designed to get the results it gets.
Michael Erath
00:30:40
So if you want a different result, you need a different system. And so I encourage people to think about anywhere in your organization you have frustrations. That's an outcome. You have a system in place that's perfectly designed to get you that frustrating outcome. So break it down and look at the system that's actually being executed that's leading to that result. And what do you need to change in that system to get a better result.
Lee Murray
00:31:06
Yeah, because essentially it's a machine. I mean, it's it's, you know, a machine can be made up with various systems in internally, but but conceptually, that's what you're building. If you have put materially in one side, you're going to get a certain product out the other side. So if you want a different product or a different version of that product, you need different material, right?
Michael Erath
00:31:25
And I don't I can't remember. So is it or sharp. There's a, there's a quote of his as well. He was the founder of I can't remember if it was the Ritz-Carlton or the Four Seasons.
Michael Erath
00:31:33
I, I don't recall which which of the brands, but there's a quote widely attributed to him that you systemize the predictable so you can humanize the exceptional. Yeah, I love that. And what he what he means by that, right is if if all of the routine things are systemized and we don't really have to think about it, it frees up our mental capacity to humanize experiences because we're not constantly dealing with firefighting and things like that. Right. So so that's really key with optimized playbooks, which then if we if we think about now having an organization filled with great people, they're inspired around our purpose, why we exist and what we do in the world. They've got optimized playbooks. Like any great sports team or any great professional organization, we have to instill a culture of performance in order to get results and outcomes. And so this means that we have to be looking at the right data. We have to be listening to what the data tells us. We have to be consistently coaching people up that are underperforming.
Michael Erath
00:32:40
And if we can't get them coached up or if they're not coachable, won't take the feedback. We have to be coaching them out and not tolerating underperformance and mediocrity, for any extended period of time. And so we've got to have that constant sharpening of the saw. there was a I'm a member of Genius Network, and we just had our annual event last month. And one of the people that Joe Polish interviewed in that, was Doctor Jordan Peterson, and there was a statement he made that really resonated with me. We're actually going to have this quote put up on our walls and our meeting spaces. But he said that enabling someone's failure is not a noble cause. And if you think about within organizations, dealing with people issues is really difficult because there's an emotional component to it. These people have families. Yeah. The conversations are hard. most of us want to be liked. And so when we have to come off, you know, tough on somebody, you know, there's all kinds of reasons that we avoid that, right? But then what happens is we have people who are they know that they're not performing in their role.
Michael Erath
00:33:50
They're frustrated by it. We're frustrated by it. The organization's frustrated how the customers are probably frustrated. it's doing them a disservice, even though dealing with it is difficult. And so we have created different systems and approaches to recognize where that's happening, being able to identify it and then give leaders a series of tools and steps that they can follow that are all time bound, so that we start with less aggressive or less intense support and coaching. But if that's not getting the individual to level up their performance, it leads to more and more crucial, conversations and actions that eventually will lead to an exit if we can't get them coached up. Yeah. And I what I tend to find is and I think this is pretty true across all of the companies we work with is with a good culture of performance in place, the highest percentage of your underperformers are able to level up and perform at least two expectations, with some coaching and support and clarity. And they're just fine. It's not a problem. The ones who can't often will self-select out and will leave the organization without you having to fire them because they realize they can't make it and they can't hide from the accountability.
Michael Erath
00:35:16
So as a result, they choose to go somewhere else, which is beautiful because now they're not your HR problem. You gave them an opportunity, you gave them clarity. You did the right thing. They just realized they weren't going to make it. They left. That's best for them, the organization, everyone else. the percentage of people who do actually stick around to get fired is very, very small. so you you just you have to be true to the system of how you manage those things and manage performance and let the system kind of do its do its thing.
Lee Murray
00:35:48
Yeah. I think this makes me think of, that saying of you'll fail or fall to the level of your systems. And I think that is so true because if you have these playbooks in place and that's what you're you're optimizing for, then and again, going back to the first couple principles of, you know, inspiring purpose, great people and all that's in place, it becomes now a much more beautiful thing in your organization, because people are inspired to do great work in their role that they're owning, above these, kind of rudimentary things that they're not getting bogged down anymore.
Lee Murray
00:36:25
They're, they're going to have time and space, mindshare, actual time on their calendar to work and be, to humanize the piece of their work that can be humanized, whether they're client facing or internal or whatever. Right. It's all valuable. so everyone wins. I mean, when you have a employee coming to work every day excited about what they're doing, and that's going to happen in large part because number one and two, but because of three, because they're allowed to then, you know, they're kind of sort of given this freedom to work on the things that matter to them and to the company.
Michael Erath
00:37:00
Right. Yeah, exactly. And then that leads to then the fifth and final obsession, we refer to as growing profits and cash flow.
Lee Murray
00:37:09
And let me you so you, you talked about we talked about great people, inspiring purpose, optimizing playbooks. Culture was.
Michael Erath
00:37:17
Of performance. Yes. Culture. Yeah. Culture performance we just talked about was the sauce.
Lee Murray
00:37:21
All right. So that was all part of that.
Lee Murray
00:37:23
All right. I just want to make sure we weren't missing one. Yeah. Now the last one. Yeah.
Michael Erath
00:37:26
Yeah. And then the fifth is growing profits and cash flow. And one of the things for me that has become clear, and it's been somewhat of an evolution of thought for me and in full transparency. But I find that most entrepreneurs and even most, most business coaches and a lot of the systems that are out there look at profit and cash flow as a result of you doing everything else right. And in theory I accept that. But I also think in practice that it's intellectually lazy to say that. I think to truly build an elite organization, you have to be intentional and proactive about things you have within your control that will help you grow profits and cash flow. Because if you believe in your purpose, that's the fuel you put back in the engine. And if you treat it as a byproduct, that's exactly what it will be, and that's all it will ever be. So we work with the companies, and this is another reason that for me, it was very important that all of our partners and guides have to have had full personnel accountability.
Michael Erath
00:38:30
They have to have been a president and CEO or owner and preferably an owner, because we've got to be willing to look at things like our pricing strategy. are we, you know, on our cost of goods sold? Are we are we really negotiating hard to pick up another half a percentage in gross margin? Or are we accepting what we accept and trying to work to it? cash conversion cycles? Are we really studying and looking at how we improve our cash conversion cycles? there are so many different things that we can look at. Do we are we taking time to understand what Jim Collins talked about in good to great hour profit per acts, and that one economic ratio that drives our economic engine and are we making decisions around it and constantly trying to optimize that that ratio. And so I think the the organizations that take that seriously, they find significant amounts of profit and cash flow simply by being more analytical and focused without having to spend operating expenses to go get it. and the more we do that, the more we can invest in a players, the more we can invest in great training systems, the more we can invest in great software and tools and technologies to help people help their jobs become easier.
Michael Erath
00:39:52
Also to help us reach more people, to do greater things. And so I just think it's intellectually lazy to not be obsessed about how we do that. And at the end of the day, you know, if you don't have any profit, you can't fulfill a purpose. If you have no profit, there's no payroll. you can't treat it like it's a bad word, right?
Lee Murray
00:40:12
Yeah, 100%. I mean, this is why we're in business is to make money. And I think your point to the having owners, is critical because, they're the ones that get to enjoy the profits or lack thereof, the full financial risk, right, of a company versus a president or CEO, to a little bit lesser extent. And their their perspective is mapped to, you know, maybe a long term incentive or some kind of incentive. And that's where they kind of stop. or could they could stop. They can't own that full PNL. you know, down to, you know, profit. right.
Lee Murray
00:40:50
But I think that's a great mechanism to get president CEOs thinking about that full PNL and from almost like from an owner's perspective, I don't know. That's what stuck out to me.
Michael Erath
00:41:02
Right. No, you're absolutely right. And so really, those those are the five principles that we work with companies to obsess around and to continually optimize and improve. And when you do that, those those five principles will evolve with you. currently our smallest clients, about a $3 million, professional services firm, our largest is an $800 million construction company. Right. The same five principles apply on both ends of that extreme. Yep.
Lee Murray
00:41:34
That's cool to see. I mean, I like that because, like you were saying from the beginning, EOS has its place, but it kind of does cap out. And to know that you can have something that's fluid as you scale your organization and helps you to scale. that's that's good.
Michael Erath
00:41:50
Right? And in all honesty, none of us care where the tools come from that our clients use.
Michael Erath
00:41:56
We just want to make sure they understand the tool. They're using it properly. It's getting the outcomes they want, and they're really, really obsessing about how well they're doing it, where it comes from. I don't care. We don't need the credit for that. We don't need to be the ones who created it or owned the IP. we just need them getting outcomes. Right.
Lee Murray
00:42:15
So kind of a kind of a maybe an odd question for you. these principles, do you, do you utilize these or to deploy these in your personal life or maybe like with your family? have you thought, have you do you do that? I guess because it seems like it would totally map it.
Michael Erath
00:42:32
A lot of it does. the challenge, with. And it's interesting, you brought this up. one of the things my wife will often say to me, we've got two adult sons now. Is. Why can't you why can't you handle things with our kids like you do with your clients? Yeah. And the reality is, I'm too close.
Michael Erath
00:42:57
Yes. And. And that's really the reason I like. I'm a big believer that that professionals, you know, having a therapist that you see from time to time is a great thing. Yeah. yeah. And so, you know, there are a number of people. Bill gates is one, one of the former CEOs of Google. I'm his name is slipping me right now, but have all said that everybody needs to have a coach, someone someone who will observe what you're doing and give you perspective from the outside in. And I think these principles, I think, translate well into how you build a family vision, how you establish values for your family, things like that. Yeah. At the same time, it's difficult to do when you're so emotionally connected. Yeah. because it just.
Lee Murray
00:43:48
That totally makes sense. And I get it, too, as a father of three. you know, that's kind of what's going through my head as we're as subtext to this. but, yeah, I mean, it's it's sort of like being in a company trying to deploy this versus having a consultant come from the outside and help you deploy it.
Lee Murray
00:44:04
It's going to be so much more effective as a with a consultant leading you along the way. Right.
Michael Erath
00:44:10
Exactly.
Lee Murray
00:44:11
Yeah. So you have a book obviously. That's what we've sort of been going through, a little bit here. It's coming out in March of 25.
Michael Erath
00:44:18
yes. March 4th of 2025. it's called five Obsessions of Elite Organizations. And, there's a the website is Five obsessions. Com anybody who's interested in, discounts around the release date, you can sign up for information there. it'll be available, paperback, hardcover. And I'm recording the audiobook early January, so the audible should launch right about the same time as the book. one of the things that I was I was really impressed strategically, when Gina Whitman wrote and released traction was he decided to, in essence, through the book, give away the majority of what he was getting paid to teach his clients. And he did that for a couple of reasons. I think one was to be able to reach more people and genuinely to help more people.
Michael Erath
00:45:13
Sure. but also knowing that a number of people who would read the book would realize they would get more value hiring an expert to help them. And so I really tried to follow the same approach. Five obsessions will go into will go into great detail, giving you the tools that we use with our clients, walking you through how to use those tools, giving you examples. So for companies that want to take the do it yourself approach, whether that's affordability or you're just wired to want to do it yourself, yeah, this will be a great resource for you to do it. The hope being that many people will realize that that hiring an expert to be their guide, is a better and easier option, and that it will bring them back to us. One of the things that I'm in the process of right now, that that's been really kind of a fun project to go with, that is I've been building a clone, an AI clone of me, with all of the content that I've created over ten years of doing this as a guide, and my, my prior life, owning my manufacturing business.
Michael Erath
00:46:20
And so in the book, there will be links and QR codes to connect with this clone. So for companies that are self implementing, they can subscribe to use the clone and they can interact with it and ask it questions. So for example if somebody is working on their accountability chart and they're struggling to come up with the right mission for a role, they'll be able to either through text, there will be a phone number. You can actually call and have a conversation with the clone. and there will also be a video where you can interact in a video conference with the clone and ask the questions. And so based on all of the knowledge that I've trained the clone on, it will be able to answer a lot of these questions. It's it'll never be the same experience as actually working with somebody and a group of people being able to really ideate on things together. But for someone who wants to try to self implement this as maybe their first step. Yeah, the the the the goal and the hope is that this will provide them a deeper level of insight and guidance that will make it more valuable to them and allow them to take it a lot deeper.
Michael Erath
00:47:36
whether they choose to ever engage with one of us full time, in person or not. And so the thought is, I think, I think what we have to share is incredibly valuable. And so I want to reach as many people and entrepreneurs as we can with that. and then again, for the ones that want to make an investment and having somebody, you know, again, think about, you know, climbing Mount Everest, if you're going to do that with a leadership team, you're probably not going to just read a book and go climb the mountain. Yeah. You're gonna you're gonna you're going to rope in with a Sherpa. And that's right.
Lee Murray
00:48:07
And have a super interesting, such a cool idea. I'm glad you're doing that. I think that that's going to prove to be such a value of so many ways that are not even seen right now, right? I mean, one being that the more people, the more times people use it, the better it gets. so, you know, I could see a definitely a community coming around this and it also being a stop gap for those that have hired you and maybe don't want to bother you at 2 a.m. because they're in a meeting on doing something.
Michael Erath
00:48:34
Exactly. If I'm on vacation and harder to reach, they have, you know, they have an outlet where they can probably get their question answered. Yeah.
Lee Murray
00:48:42
So yeah, that's that's really cool, I love it. Okay. So, to send people your way, where do we send them?
Michael Erath
00:48:48
so the book is five obsessions. Com they can also go to next level growth. Com at that website, next level growth. Com there's a link to a page that's about our approach. And if they go to that page there are six different articles that go into a lot of detail around each of these obsessions. And that was actually the the foundation of what became the book were those articles. So that's some place that that you could go in advance and begin to get some information. they can reach out to me or one of our guides through the website. we've got we've got a business health assessment they can take to kind of get a feel for how well they're performing in each of those obsessions. Yeah.
Michael Erath
00:49:30
that's available on the resources page of our website. We've also got a pretty robust YouTube page. if you go to YouTube slash at Next Level growth or just search next level growth on YouTube, we've got a lot of videos on there, a lot of content, both from podcasts, but also just some some nuggets from us as guides. Yeah. so there's a lot of content there as well that people can connect with. and really just focus on whatever they're using, whatever they're doing currently, how they can take their business and their life to the next level.
Lee Murray
00:50:03
Love it. Michael, this has been an amazing, conversation. I appreciate again you coming on.
Michael Erath
00:50:07
Absolutely.
Lee Murray
00:50:07
You've delivered so much value to this audience. I know there's a bunch of people listening to this that are in that, you know, sort of resetting planning, you know, mindset thinking, how can we take our organization to the next level? And you just given them a ton to think about and, and a lot of great call to actions for them to go find other resources.
Lee Murray
00:50:25
So thanks again.
Michael Erath
00:50:27
Awesome, Lee, I appreciate it very much. This was great.