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3 Rules You Must Follow If You Want Your Company to Be Exceptional

If you want your company to be the best, there are three rules.

Catherine Clifford

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  1. Be better.
  2. Don’t be cheap.
  3. 3. There are no other rules.

That’s according to a recently released book co-authored by Deloitte director Michael Raynor and strategist Mumtaz Ahmed, The Three Rules: How Exceptional Companies Think (Portfolio/Penguin, 2013). Raynor, who earned his doctorate from the Harvard Business School, and Ahmed, along with a team of researchers, analysed a database of 25 000 companies across hundreds of industries spanning 45 years to identify those companies that were statistically “exceptional.”

What is exceptional?

Defining “exceptional” was a project in and of itself, but it began with one question: “How much of a difference is enough to make a difference?” What Raynor’s team ended up doing was generating something of an actuarial table for business success.

“If somebody says I am 82 years old. Is that person old or not? Well, if they live in the Northern Islands of Japan, that is early middle age because those people live forever. If they are from Tanzania, they are probably the oldest person in the country. What counts as old is a consequence of your context.”

What makes a company great?

Raynor and his team also developed a mathematical algorithm that corrected for age of business, date, amount of debt, size and industry, among other variables.

The goal of the analysis was to strip out the effects of luck and variation to come to an answer to the question: “What do managers do to make companies great?” says Raynor, who is based in Mississauga in Ontario, Canada.

After identifying 344 top performers, Raynor and his team, who officially started working on the project in 2007, looked for common traits to define how those exceptional businesses acted.

The team largely came up empty.

However, when Raynor and his team started to look at how those exceptional companies think, the principles started to become clear.

Related: 7 Leadership Lies You Need To Stop Believing

The principles of greatness

They are as follows:

1. Better before cheaper. Differentiate yourself from your competition based on quality, not price. While you may achieve some level of success undercutting your competition with cheaper prices, you will almost never become exceptional on a price-based model.

2. Revenue before cost. It will be more valuable to your company to drive your revenues higher than it will be to drive your costs lower. Cutting costs may result in some degree of success, but, most likely, your company won’t sustain an exceptional level of greatness.

3. There are no other rules. Technology, talent, markets, people – it can all change. But don’t mess with Rule 1 or Rule 2.

Exceptional companies include long-haul trucking company Heartland Express and teen clothing retailer Abercrombie & Fitch. The companies are all publicly traded companies, larger than the sorts of companies that many young entrepreneurs may have on their hands. But Raynor says the three rules still apply to younger, smaller companies, if with a modicum of compassion in the application.

Choose a direction, not a route

Consider the rules “a compass, rather than a map,” says Raynor. “You are lost in the forest and somebody says civilisation is North. If I hand you a compass, I have done you a favour. You still have to be creative. You can’t just walk straight north, you will bump into a tree, walk off a cliff, do whatever it is you do. And so sometimes you have got to go East, West, double back South even and really pay attention to cost for a while, but you want to make sure that over time, you are pushing your company in one direction versus another.”

Very often, new start-ups are especially cash strapped. And Raynor recognises that. But the rules of putting quality and revenue first still apply on a comparative level.

“If you want to have higher profits than your competitors, the way to do that systematically is not to have lower costs than your competitors,” he says.

Raynor cautions that this doesn’t mean businesses should put “gold-plated Aeron chairs and Godiva chocolates in all the conference rooms,” but that businesses should figure out where they are better than their competition and exploit that gap with higher prices or higher volume, not lower costs.

“It is all about your relative position. If you want to be relatively more profitable, you want to have relatively higher volume and/or relatively higher price” than your “relevant” competition, he says.

What sets your business apart from your competitors?

Catherine Clifford is a staff writer at Entrepreneur.com. Previously, she was the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Catherine attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. Email her at CClifford@entrepreneur.com. You can follow her on Twitter at @CatClifford.

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Business Leadership: Leading A Culturally Diverse Business Team

The question every successful business leader needs to consider – How do we collectively experience joy and manage and/or avoid suffering as a business and as a team?

Dirk Coetsee

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As I witnessed the rain dancing against the window panes of the Mega mall in Midvalley, Kuala Lumpur, Malaysia I started reflecting on how to lead a culturally diverse business team.

Thousands of Malay, Chinese, Japanese, and Europeans passed me in the hallways of this gargantuan construction and the Dalai Lamas’ wise words reminded me that at the core of it all, irrespective of what your nationality is or what your belief system is, in general:

“We all want to experience joy and avoid suffering”

A key question that every team leader should carefully consider is how do we collectively experience joy and manage and/or avoid suffering as a business and as a team?

How can we as a diverse team be united in the joys of experiencing an expanding and successful business with a wonderful and constructive culture and avoid the suffering of a failing business and the negative experience of a toxic culture?  These are of course ‘loaded’ questions because inherent within these questions are the birthing of other key challenges –

How can we as Leaders create a relatively stable and inspirational environment from within which it is easier for each individual to unlock their vast potential when vast differences in upbringing, schooling, world views, and religious beliefs exists within one team. Especially when considering the ever changing and evolving business environment within which we operate?

Fulfilling the role of a Business Leadership coach, trainer, or life coach as the situation demanded over several years I have coached, Lead, or trained Pilipino, Chinese, Malay, African, and European people. A very key learning from my experiences is that a “cross cultural and shared understanding” can be created that transcends any spoken language or any national culture.

Related: Leadership – Lead Your Team To Dizzying Heights Of Productivity And Business Success

This common language and culture has many elements but for the purpose of this article I will focus on the three key aspects:

Have a united and focused purpose

When a united and focussed purpose exists for the business team that they collectively place higher than themselves the barriers of differences in upbringing, schooling, and world views can dissolve within their shared purpose. As business leaders we cannot refer to purpose too much, even more importantly that that, we must be living, walking and talking examples of the businesses’ purpose.

Related: Leadership: The Principle Of Authenticity

To simplify the concept of purpose it can be said that purpose is the highest intent for, or the very good reason why we do what we do. That reason is or should be even more important than ourselves. When we really love what we do and sincerely so our performance is likely to be very good, on the other hand if we totally dislike the line of business that we are in or totally despise our role within an entrepreneurial venture we are likely not going to unleash our unlimited potential.

It could be argued that the sole purpose for having a business is to make a profit. Through this article I argue that that is not a strong enough reason to sustain you and make you thrive even through difficult times. The strange thing is that when you truly live your purpose with all your might and tirelessly inspire your team to do the same the money comes anyway…

 Servant heart and attitude

Rabindranath TagoreRabindranath Tagore famously said:

“I dreamt that life was joy. I awoke and saw that life was service. I acted and behold service was joy.”

A servant heart is universal and transcends cultural difference, a sincere and giving smile is a beautiful language of its own that needs no translation. If that ‘servant heart and smile’ is underpinned by well-developed people and technical skills it multiplies into a potent combination of character, experience, and wisdom that has great influential power within any culture.

Related: Leadership: What Is Your Why? (Read Purpose)

Whether it is through the use of interpreters, and even if it takes great patience, even when a lot of mistakes are made, persevere until everyone in the team understands that servant leadership is the key to winning the minds and hearts of others.

When all in the team becomes aware that we were only ever meant to master ourselves and thereby become better servants to all, this heightened awareness can unlock the unlimited potential within individuals in the team.

Respect for people and their worldviews

poet RumiMy favourite poet Rumi said:

‘The wound is where the light seeps in’

Respect all as we could not understand each individuals’ pain and hardships unless we went through it ourselves. Have compassion for all as we, in general expect compassion when we go through hardships. We can only imagine what sets of beliefs we would entertain where we to grow up in a completely different culture.

Related: Leadership: Honesty Is The First Chapter In The Book Of Wisdom

My endless curiosity and determination to learn has served me well as a coach for when your interest in others is sincere they tend to ‘open up’ to you and share and thereby you fasttrack your own learning and gain insights into your co-team members worldviews which in turn greatly enhances the team dynamics.

Be authentic and acknowledge your vulnerabilities, ‘wounds’ and shortcomings and be proud of your strengths for then your team members will help you to overcome your weaknesses and learn from your strengths.

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15 Ways To Command A Conversation Like A Boss

If you’re the one talking, it’s your responsibility to make sure others are listening.

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Conversations can elicit a range of emotions. They may be daunting, or they may be dreaded. They may be awkward, or they may be monotonous. The good news is, you, as a participant in any conversation, have more control than you think about whether these emotions overtake the dialogue.

Having a successful conversation is about striking the balance between preparedness and flexibility, between explaining your thoughts clearly and knowing when to pause or check in. It’s about being upfront about your preferences and ideas while being open to adapting them based on what comes of the discussion.

A fruitful conversation stems from establishing a rapport with someone. Show them you know where they’re coming from. Clarify that you understand what they’ve said. Be respectful of their time and don’t dictate back to them how you perceive them to be thinking or feeling. Keep questions open-ended. Experiment with new conversation settings or styles. And don’t give in to the internal voices that try to convince you to defer too much or suffer in silence.

To help you get your points across and help others convey theirs, read through the following 15 tips, which expand more on the ideas above.

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Being A Born Entrepreneur Doesn’t Automatically Mean You’re A Born Leader

The person who has the vision to start a company might not be the person to grow the company.

William Harris

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More often than not, we tend to think of entrepreneurship and leadership as synonymous qualities.

Entrepreneurs are expected to break new ground, be innovative, start something new. It only stands to reason they would naturally take charge of what they’ve created and lead it.

However, it turns out that the required skills of an effective entrepreneur are almost entirely different from the required skills of an effective leader. As many CEOs of growing companies can tell you, there’s a vast difference between creating a business and growing one.

One of the primary reasons great entrepreneurs including Bill Gates, Steve Jobs and Henry Ford were so influential was precisely because they were both master entrepreneurs and leaders.

Related: Leadership: Honesty Is The First Chapter In The Book Of Wisdom

To successfully grow a business, an entrepreneur must learn how to become an effective leader. Here are the five leadership skills every entrepreneur must master:

Delegation

Entrepreneurs, and especially solopreneurs, who run growing businesses are eventually shocked to realise it is impossible to do everything by themselves. Most entrepreneurs are uncomfortable with the idea of delegation. They want to do everything themselves because they have a natural sense of ownership over their work. They find it difficult to believe anyone else would do what needs to be done. After all, they were the ones who built the business from scratch all by themselves.

The reality is, though, as a business grows, so does the amount of work that needs to go into running it.

Leaders understand their own time and energy are finite resources. Great leaders understand that, to be most effective in the company, they must play to their strengths and delegate their weaknesses to others who are more qualified.

Steve Jobs famously played a very small part in building the OS and designing the original Apple computers. He knew how to grow a business, so he focused on what he could do and wisely left it to Steve Wozniak and his team to execute his vision.

Communication

lone-wolfThe perk of being a lone wolf is that you know exactly what needs to be done and the right way to do it. But, that has to change when you find yourself a leader.

We all have horror stories of working for a manager who didn’t communicate instructions effectively, which inevitably leads to confusion and frustration from both parties. As a leader, you’ll need to clearly and succinctly explain everything from your vision to administrative tasks to your employees.

But, communication is not a one-way street. You need to know what to say and how to listen. Effective leaders don’t simply give orders. They accept feedback and criticism, as well.

A constant bridge of communication between a leader and an employee not only reduces inefficiencies but also leads to a healthier and more productive workplace for all.

Related: The One Leadership Trait That Will Ensure You Succeed At Anything You Do

Inspiration

Entrepreneurs seldom lack in the inspiration department. They were passionate enough to start a business themselves, but not everyone shares their enthusiasm. A key skill of any good leader is to inspire the people around them.

It’s not enough to simply tell people what their job is and expect them to do it. To get the most out of your team, you have to make them believe in your vision and feel like they’re actively making an impact in their role. This is especially important when working in a start-up.

The good news is that anyone can become an inspiring leader as long as they create a clear culture around the company’s vision, values, and beliefs.

When Howard Schultz returned to Starbucks as CEO, he quickly realised the majority of his employees were no longer focused on providing customers with a positive experience. This led him to shut down 7,100 stores one day to retrain all baristas on making an espresso. This bold move not only sharpened his employees’ technical skills, but also quickly brought Starbucks’ ultimate vision back into focus.

Coaching

As an entrepreneur, you should be well aware of just how powerful a mentor can be to personal and professional growth. As a leader, if you want your employees to be as effective as possible, you need to do more than just give them orders.

Along with giving them the resources they need to do their job well, you also need to be able to help them move forward in their own careers.

This can be as simple as offering them training in skills they are interested in, giving them more responsibilities, or spending more one-on-one time with them. Leaders should be able to do more than just lead from the front; they have to be able to provide support from behind as well.

By adopting a coaching mentality, you can be assured of your employees’ loyalty to you and your vision. Plus, helping your employees achieve their full potential means they’re more likely be an asset to you and your business.

Related: How To Make Speedy Decisions As A Leader

Adaptability

It should go without saying that being innovative and adaptive is key for entrepreneurs. But, instead of only using their knack for problem-solving on market opportunities, leaders are also focused on providing solutions for problems within the company.

A large part of running a growing company is learning how to deal with internal problems like employee disputes, disorganisation, or a lack of motivation. Employees will always look to the leader to solve these issues.

When no clear-cut solutions are present, leaders need to be able to think outside the box. One surefire way to quickly lose both the respect and trust of your employees is to outsource the solution to someone else or avoid responsibility by blaming others.

Last-minute changes and mishaps happen in any business, so it’s up to the leader to adapt quickly and show everyone else the right way to handle these situations.

If entrepreneurs who have the passion and innovation to start their own businesses can develop these five skills of great leaders, they will be most effective in leading those businessess into growth and a bright future.

Read next: What Kind Of Leader Are You?

This article was originally posted here on Entrepreneur.com.

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