The secret business weapon

Speaker A: What's up, everyone? This is Alex, the host of Founders Journal. As you may know, I built Morning Brew from my senior year of college until we sold the business in 2020. And now I'm building a variety of businesses in different spaces and different stages. I'm, um, basically averaging one to two new businesses per year. And because of that, I have had the opportunity to test a ton of different products and services, ultimately landing on a core software stack that serves as my business operating system. Whenever I start a new company, I have my go to banking service. I have my Go to formation service. I, uh, have my go to domain hosting service. But probably the most important of them all is my HR service, Gusto. If you're a longtime Founders Journal listener, you know how much I think about people in the context of business. A, uh, business is nothing without its people. Which means a platform that helps me manage and take care of my people is invaluable. And that means I've tried every HR platform under the sun, always with the same exact goals in mind. First, I want a product that's intuitive and delightful to use. As a non HR person, I find the intricacies of payroll, benefits, taxes, compliance and expenses to be painful. So I just want something that makes my life easier. Second, I want it to be affordable. I'm a bootstrapper at heart. I started morning brew with $0 and I started story arb with $0 as well, which means I don't have infinite dollars to drop on SaaS products. And third, I want a platform that acts as my one stop shop for all things people. I want it to handle payroll, benefits, hiring, onboarding and taxes, all while integrating with all of the other tools in my business stack, whether it be QuickBooks, Slack, or Google Workspace. Well, Gusto hit the trifecta, which is why I am a customer and use it for every single one of my businesses. Yes, this is a paid sponsorship by the amazing team at Gusto, but I would sing their praises even if I wasn't being paid to do so. So if you're looking for a platform that takes the pain out of payroll, benefits and hr, I highly recommend you check out Gusto. And if you sign up@gusto.com Alex, you will get your first months free. Now onto the episode. What's up, everyone? Welcome back to another episode of Founders Journal. I'm, um, Alex Lieberman, co founder and executive chairman of Morning Brew. Today we are talking about eos, an operating system for running and scaling your business successfully. Since 2019, we have used Eos at

Speaker B: Morning Brew to scale our business from

Speaker A: 15 people and $3 million in revenue to 300 people and $75 million in revenue. Now. EOS is just one of several startup operating systems to pick from. There are okrs desired, future state, scaling up and others. More important than what system you choose is that you choose one that resonates with you and that you can consistently commit to. For a long time, EOS has been that for us. So today I'm going to break down

Speaker B: the system for you with the help

Speaker A: of a world class guest so that you can decide if EOS is right for you and your business. My guest today is Michael Gurdley, an entrepreneur and content creator. Creator who has a holding company of 12 businesses that do $100 million in annual revenue. His businesses span from a fireworks retailer to a paid community for business owners. Michael is an EOS expert, having read Traction, which is the bible of Eos, dozens of times and he has applied EOS to all of his portfolio companies. By the end of this episode, you will understand how EOS works. You will have tools to apply it to your business and you will understand if it is a framework that you want to understand more deep.

Speaker B: Hop into it. Michael Gurdley, Long time no talk. Welcome back to the pod.

Speaker C: It's a miracle we're wearing the same clothes as last time.

Speaker B: It's wild, it's wild. And no coordination whatsoever on making that happen. Um, we're talking about a topic that I'm really passionate about, as are you. I know, um, and it's incredibly important and valuable for entrepreneurs at any stage. Um, I'll just give the quick preamble that, um, in 2019, my co founder, Austin and I were talking a ton, like on a daily basis around this notion that we felt like we were being reactive to our business at Morning Brew. Like every thing we were spending our time on was to put out a fire or fix a problem that would just keep the machine running tomorrow. And we were having daily conversations about how do we get out of this, how do we move to a, uh, world in which we're proactive, where we're thinking and spending time on things that are a month, three months, six months in the future for the business. And one day, um, one of our investors for Morning Brew, who actually was, uh, the creator of the Snuggie, he told Austin, he was like, you have to read this book. And the book was Traction by Gino Wickman. Austin read it in a day. I remember he slack messaged me and he was like you have to read this today. Read the book. And we've run our business off of EOS since 2019. Scaling the business from, let's call it like 20 employees up to uh, 300 employees. And so my question for you is, I know you're really passionate about us. I want to start by understanding why is it that you've kind of taken this, this love to eos when there are a lot of other frameworks out there like scaling up okrs. What do you love so much about it?

Speaker C: Yeah, I think that EOS and well, basically every one of these like entrepreneurial operating systems or business operating system, they all kind of have the same ideas and so it's different flavors of the same thing. It's kind of like picking a CRM, like which CRM, uh, do you want to pick? And okay, HubSpot has its thing and Salesforce has its thing and other people have their thing. So you know, I think there's a level of choosing there and I tell people actually if you're going to be trying to run your business better, like 70% of it is just picking one of the frameworks and using them personally. Like you compare it to scaling up eos, um, okrs and other stuff. I don't like okrs, we can talk about that later. But um, I think EOS tends to be the one that is like the 8020 rule of the stuff that you really need to do business planning, strategy, vision, meetings, problem solving and all that stuff really well. And it's probably the one that's the most, uh, easy to self implement and get up to speed and start using immediately, which I really like. Um, and there's a trade off there, there's stuff that scaling up for example does that is bigger and badder than what's in EOS. But a lot of times when you're like under 50, people like that stuff doesn't really matter much. So that's why I spent a lot of time talking about eos.

Speaker B: Love it. So uh, can you give like a little masterclass on eos? So assuming that a listener knows nothing about Eos, but they're thinking about implementing an operating system within their business, what do they need to know about EOS to start implementing it?

Speaker C: Yeah, so there's uh, one of the phrases I like is to say that like 80% of all business tastes like chicken. And kind of the idea is like every business has to do these same common things, right? You have to like, uh, you have to have like a strategy, you have to have a Vision. You have to define your core values, you have to understand how you're going to compete in the market. You have to set goals, you have to have team meetings, you have to deploy your people in the right way. Like, notice I haven't talked about anything that is industry specific. I could have been talking about a law firm or I could have been talking about a coffee shop or like a media company. Like I just described all those things. But the way most of us historically have approached those things is by just yoloing our way into it. None of us ever got a CEO course in college. Uh, the books that you buy that teach you how to be a CEO or teach you about business are delightfully theoretical and a bunch of feel good crap and not very tactical. And so you know what, what has happened in the past 20 years or so is a number of folks have gone in and studied and said, what is the best practice for each one of these things? Like, what's the best practice for defining a vision for my company? What is the best practice setting goals? What is the best practice for us running our team meetings and how we're going to solve problems. Right. And put all of that into an encapsulated framework. These business operating systems that you could just take that off the shelf and just run it. And you can worry about the stuff that's really important for your business and not worry about like figuring out how to do vision and strategy and all that kind of stuff. So that's the case, that's the story behind. And I think the case for like using one of these operating systems is like, like it'll just like it allows you to work on the stuff you should be working on, which is like delighting your customers and not like figuring out how to run a team meeting.

Speaker B: Love it. So let's, let's go a little bit deeper into the actual tactics or uh, specifics of EOs. Like if I'm a listener, I'm wondering like, okay, uh, I'm bought into this idea that 80% of businesses taste like chicken, that there's these repeatable processes for setting vision, having meetings, goal setting, et cetera, what does that actually look like with eos? Like if I was to crack open a book or a uh, one pager that lays out all of kind of like the recipe or uh, the ingredients and like the step by step of implementing eos, what would I be reading?

Speaker C: Well, so first full disclaimer. Like I make no money from this. Uh, we did a previous episode on Effectuation. I've Also figured out not how to get paid by that as well. So like this is all like public service. I just want you to be, you know, as a business operator to do better. Um, and really EOs, if you look at it, they have a pie chart that describes that there's six parts to it. Uh, there's a planning part and I'll just list them all real fast and I'll come back to each other. The planning part, there's meetings, there's uh, a process part where uh, you define what all your processes are. There's uh, numbers where you take and define what your KPIs are going to be. There's an organizational chart part where you determine who's accountable for what. And then there's a meeting pulse where you're like deciding like where you're having like a regular cadence of meetings. And so in practice, what it really looks like is, um, starting with the first thing, which is like the vision part and the strategy is part of the process is it forces you to sit down and put together what's basically a one page business plan. And this is a pretty common idea where you force yourself as a company to define exactly where you're going to be 10 years from now, to the best of your knowledge, where you're going to be three years from now, where you're going to be one year from now, and where you're going to be this quarter and tie all of that together in a straight line path and then put that all in terms of those goals and your strategy on the front and back of a one page piece of paper and you're like, wait, we can tell our whole strategy for our entire company for the next decade, uh, on the front and back of a single piece of paper. And I will tell you, absolutely you can. And it's like, it's one of those things where it's like you and I see it all the time, Alex, where it's like, okay, uh, I could have written a blog post about this, but now I'm really challenged to have to spend three times as much time to figure out how to write it in one sentence in a tweet. And it's the same exact thing. But the beauty of when you encapsulate your entire strategy from vision culture goals, um, how you're going to compete in the market, what your guarantee is to your customers, who your target market is, when you define all that very concisely, is it creates this document that is just a beautiful document where everyone suddenly aligns around that because they can just read it in 30 seconds and understand everything about your business. So that's the vision aspect. Um, I will pause there because I'm going to run out of breath, but there's five other ones where you do that as well.

Speaker B: Okay.

Speaker C: Similar stuff.

Speaker B: We'll go through the other parts of the POD chart. But out of curiosity, do you, do you have this for all of your businesses like we spoke last episode about Scale path, Do you have this one pager for scale path?

Speaker C: Yes.

Speaker B: And, and would you be open to sharing like, what some of those statements are like, uh, in scale path, like, what is your vision? Uh, or like almost like just give it an example or two of what, what. When you've actually implemented this, how does it actually read in practice?

Speaker C: Yeah, so, for example, you know, the vision is we want to create a really big business. Um, you know, our goal is to have it be $100 million a year business or bigger at some point in the future. Um, so that's basically the vision for ten years from now. It's very well encapsulated. It's like, okay, our goal and we're all aligned around this is to be a really hugely impactful business in the future. Um, we've defined who our target market is. So there's a very concise sentence, um, that basically says, you know, we're targeting businesses between 500,000 and 5 million a year in revenue who both the CEOs and the business want to scale themselves and the company, um, and they're located anywhere that can function well in the western time zones. Um, in terms of competitive advantage, we've defined those things as well. And it's like, I just kind of whip this stuff out. But it's actually like the way you get there is you go away with your team and you go to an off site and you sit around for two days going through a structured process to argue about each one of those sentences for like two hours and then come down with a very concise thing of what you want. So we did the same thing for the core values, like what our mission is, like, why are we here instead of working on anything else. All of those are things that, you know, after meeting with your team and forcing yourself to have those really hard discussions, you come out with a lot of clarity about purpose, focus, and the, uh, answer to each one of those questions that every business needs to know.

Speaker B: Love it. Before we move on to the next, uh, part of the pie chart, I just want to talk quickly about rocks, which are 90 day goals obviously you talk about drawing the straight line from 10 year vision all the way down to the most micro, which is what actually matters over the next 90 days for your business. Are there any like, kind of best principles or rules that either EOS defines or that you follow for setting effective 90 day goals? In terms of, is there an owner of these goals? Are they done at the company level or are they done at the individual, uh, person level? Um, what makes a goal a good goal? Ah, elaborate on what a good 90 day rock looks like.

Speaker C: Yeah, so EOS has rules for everything and I follow like 95% of them sometimes. So I'm very entrepreneurial. So then I'm just like, okay, well we're not gonna do that. But I believe in the way they do. I believe in the way they do their goals. And um, so the EOS rule is every goal that's written, which they call rocks for no good reason whatsoever other than to make you feel like you're part of a cult. But, um, they have, uh, an acronym to describe them, that they're smart goals. They're specific, measurable, achievable, relevant and time bound. So if you look at goals, it's like, okay, we will create a marketing program that will generate a thousand leads by the end of the year. Okay, does it pass specific, measurable, achievable, relevant and time bound? Absolutely. In the end, that's the way EOS defines how you should build these goals. They have other rules around goals as well. I think you hinted about it, Alex, which is great. A lot of companies will just say, here's our goal, and then nobody actually responsible for it, or two people are responsible for it. Which when you apply, you know, you assign a goal to multiple people, then that means nobody's responsible for it. So like they will say, like, one person has to take ownership of this particular goal and go for it that way. So I, um, think those are most of the goals. The other thing that they do, which is super powerful, is there's a forced level of prioritization inside of eos, which is if you look at what truly pushes businesses forward, it's like three or four things you achieve each year, maybe five or six at most. And so there's a specific rule that for each year your top level goals can only be up to seven goals. You have to have a minimum of three and up to seven. Um, and you would say, wow, like our company has to do a lot more than that. And it's like, yeah, you're definitely going to keep doing other Stuff like, you also need to keep breathing. Like, that's not an excuse just because it's not a goal, but like, it forces you to focus on making sure those really important things get done above all. And then there's other stuff that happens and you track those things as well. But the company focus and the thing everybody's aligned around are a, these top level company goals. And there could be three to seven of those for, you know, for an individual year.

Speaker B: Love it. Um, let's keep it rolling with other parts of the pie chart. Where do you want to hit next?

Speaker C: Uh, I think, uh, accountability chart would be a good place to go. Or let's go to meetings. Let's go to meetings.

Speaker A: So, okay.

Speaker C: Um, you know, so the, the pulse of every company, either for good or bad, is meetings that are good or bad. Right. And like, the thing I love about the way Eos, uh, does things is it takes all of those shitty meetings that you have. And I don't know if a cursing podcast, but we just made it one.

Speaker B: Yeah, it's a cursing podcast.

Speaker C: And, uh, and it turns them into what I consider like high quality meetings.

Speaker A: Right.

Speaker C: And so like, uh, you know, we've all been to those meetings where like, things, one person is talking about an issue over here, like, people aren't potentially talking about the issue at all. You have all these things that are, you know, are all over the place in terms of what's going on with a particular meeting. So, you know, EOS has this defined cadence of meetings. Everything from your weekly team meetings that happen, uh, to your quarterly off sites to your annual off sites. And there's a cadence that's very fixed in terms of how you have to approach those when you run your business. Um, and inside of that is a very powerful framework, um, called ids, which is a three stage framework that everybody uses to solve problems. So it solves your problems where a lot of times you get 20 minutes into a discussion and you realize Jim was talking about a different issue than you were. And it's like, oh, well, let's be more structural about how we approach problems as a team and solve them and actually push the ball forward, forward. Uh, and this IDS process is like super powerful to do that.

Speaker B: And if I remember correctly, IDS is, uh, issue, discuss, solution.

Speaker C: Exactly. Yeah, you identify, discuss it and then you solve it. So identify. Like, is everybody talking about the same issue or what is the core issue? Uh, and so like an example of that is one time we looked up in one of my businesses and like, um, we were not getting shipments out on time. And it's like, oh, okay, well, like, well, why is that? Well, uh, that's because Jim didn't show up to work last week. Well, okay, well, what's going on with Jim, the warehouse manager? Well, it turns out the real issue is Jim is the wrong person to have in that role. So, like, you identified really quickly what the root of that cause is, and then we discussed that and then we solved it, which was, let's work on finding the right role for Jim over time.

Speaker B: Love that. I feel like that's a perfect segue into accountability, which I think you were going to talk about before. Uh, what does that look like within the EOS framework?

Speaker C: Yeah, so most companies end up having an org chart, which is like, you're the CFO and you're this and you're that, and like, that's fine. That's like who reports to who and you need to know those things. But EOS takes it a bit further, and EOS does this thing called an accountability chart. And the idea is it's a map where every major area of responsibility inside of your company is mapped back to an owner. And that means it's a bit different than an org chart, because your grouping of responsibilities, like as a founder, for example, if you're just starting, you are the cfo, the CEO, head of sales, all that kind of stuff, well, you're in all those buckets. But as people's jobs come in and the responsibility starts to get divvied up, you can see where those things get filled up by other names. And those boxes there are there. But ultimately, like, what it does is it creates a very powerful situation as you think about your organization, where there is an accountable person who is responsible for every function of that organization. And everybody knows what it is because there's this map called an accountability chart. And, uh, it ends up being much more powerful than having like, a classical organization chart.

Speaker B: And if I can't remember off the top of my head, but isn't there a way to basically evaluate if someone is the right person for the right seat? Isn't it like, uh, has. It wants it. Uh, there's like, basically three things to determine if someone's in the right seat.

Speaker C: Yeah. So it's, uh, it's a framework exactly as you're talking about to evaluate fit. Um, it's called GWC or gcw. Um, I'll start backwards. C stands for can do it. Like, can they do the job? Um, so that's pretty straightforward. Like do you have the skills, the ability, like physical ability, mental ability, all that kind of stuff? Want it? Like, do they want to do the job? Like, is this something they're passionate about? Like put me in accounting, I will not want to do the job. Sounds terrible. And then gets it is like the other stuff. Like it's like the cultural fit. Like do they understand the broader context of why they're doing what they're doing? Um, and so those three things together, you want to have everyone in your organization to have 100% GWC. And sometimes you'll see people that can't do it, but they want it and they get the culture and they're a great fit and everybody loves them, but they're in the wrong seat or they're potentially on the wrong bus with you. So those are things where you can use that framework to go through and evaluate your whole team and see like, okay, do we have the right people on the bus and are they in the right seat?

Speaker B: Love it. What else haven't we hit? Uh, in the pie chart, uh, metrics,

Speaker C: uh, there's a lot more detail to it. It's like a 250 page book. It's $12. Go buy it. As you can tell, I've used it a lot because I could give a 30 minute lecture on it. Uh, there is a whole KPI section. So most businesses are delightfully missing, uh, numbers about how their business is performing. And you want KPIs because it predicts your future. Your financial statements are really good at describing your past. So the whole framework that they have you use to build Weekly, monthly, quarterly KPIs to predict the performance of your business. Uh, there is um, a level of definition, um, of defining processes. Most businesses are, uh, all of the memorialization of processes is in somebody's brain and if that person leaves, you're screwed.

Speaker B: Great.

Speaker C: Uh, businesses have defined processes that are repeatable and get used over and over again. And so they have a section on that um, that you implement as well. And if it sounds like a lot, it's because this really is a lot.

Speaker B: It makes a nice. But the nice part of it being a lot is I feel like there's so many things in a business where you as a founder, an operator, CEO, um, it's important for you to like, think really critically and like kind of draw things up from scratch. But I think the beauty of this is it's a lot because it's basically codifying kind of, um, abstractable principles and ways of building a business that again, like you said, work across industries and, and it's done so in a way where of course, like, like you said, you don't have to implement 100% of an operating system for it to work for you. Maybe actually the, the optimal situation is 90% or 75%. But the beauty of this is a lot of it, you don't have to think about where it does basically give you a, an instruction manual for. If you follow this, it will stack the deck in your favor for running a well operating business and machine.

Speaker C: Million percent well said. We should, you should be, you should describe this.

Speaker B: Now I've probably read the book like three times. It feels like you've read it 30 times. Um, I have two more questions before we go. The first is you said earlier in the conversation you don't like OKRs.

Speaker A: And I'm just curious, what is it

Speaker B: about OKRs that you don't like?

Speaker C: Uh, I wrote a whole thread about okrs. Um, so two things I didn't really like about okrs. They um, they tend to have a lack of clarity in my opinion where it's like, like why do we need like objectives, key results and all this stuff. Like just like, I would rather just say the goal. Um, the other thing I really dislike about okrs and this is my biggest concern with it is it's very much um, very much a system that tries to be bottom up and very kumbaya and like great organizations don't work that way. Great organizations set a vision and head in a direction and everybody aligns to make that happen. And yeah, there's some people that take OKRs and then do them better than that. But every time I read John Doerr's book about it and I was like this is freaking chaos, this is terrible. Why are teams telling people upwards what their goals are going to be? It's like, no, no, your job as a team is to support the mission of the company. Uh, and go that way. So anyway, my two major complaints are it's unnecessarily complex and then secondarily like I think the best way for organizations to work is a uh, top down alignment. Like yep, just do that. And I mean if you look at it proof in the pudding, like who are the big success stories, you know from okr? Like John Doerr's book totally talks about Google. Well Google just happens to have the greatest money printer behind the iPhone in the history of civilization. Like you could give them crayons and play doh. And like they're going to turn out to be A beautiful business because they just print money no matter what they do. So like, uh, when I read the book I was like where are the rest of the successful companies using this? And it was telling when John Dorris didn't share. Like they don't run their bit, they don't run their venture fund on okrs. Yeah. Like if okrs are so good, why isn't Kleiner Perkins running okrs? Like so.

Speaker B: And I think that, I think that's also a very astute observation which is like um, whatever, causation, correlation, like just because a great business uses okrs, it's important to think about is the system, uh, the thing that's driving the success of the business or is it the product or is it some other variable which is spot on. Last question for you. For someone who's listening to the podcast right now and say they're in the position, uh, that myself and my co founder Austin were in in 2019 where we were looking for a system to implement, implement. We hadn't implemented one yet. We, we come across EOs because they've listened to this podcast and they're like, what do I do now? What should they do? How do they actually start implementing this?

Speaker C: You have a couple options. One, if you have a lot of money, you can hire consultants to help you. Um, most businesses tend to self implement and do the second option which is read the book and then just start doing the exercises and learning the process very well, uh, until they get to about 25, 30 employees and then at that point the business is big enough and has enough revenue where it makes sense to hire some of the consultants that will help people with it and take that off their plate. But, but when you're just starting out like go read the book, start doing it, sit down with your co founder, try to fill out the vto, which um, is a one page strategic plan. Start using the IDS process to solve problems, start running your team meetings that way. Uh, and that's the best option to do it. Read the book and then just start following it. And what I love about EOS is it's one of a small percentage of business books that are super highly tactical and there's so few business books that are that way. And it's just a recipe, it's a cookbook that you get off the shelf and I think it's 12 or 15 bucks right now, Amazon. Just buy the book and read it and uh, see if it speaks to you and if you don't feel like it speaks to you perfectly go, uh, read the Scaling up book or go read John Doer's book and see if you disagree with me. Whatever. Um, and go check some of these out. I think the most important thing, if anybody's listening, is just pick a framework and use it and It'll be like 80% of the battle or 60% of the battle or whatever it is. Most of them is just picking one. Even if it's a wrong framework because it will save you tons of time, conflict and pain. You know, if you're, if you're talking in circles with other people and heading in all kinds of different directions.

Speaker B: I'll link, uh, to the book in the show notes in case you're already sold on eos and want to start implementing in your company. Michael Gurdley, thank you so much for joining Founders Journal and excited, uh, to, uh, have you on again in the future.

Speaker A: That is it for today's Founders Journal.

Speaker B: As always, thank you so much for

Speaker A: listening to the pod and I will catch you next episode and if you

Speaker B: have any questions, you want to say what's up? Or you want to recommend a future, uh, episode, uh, or topic I should

Speaker A: talk about, shoot me an email to

Speaker B: alextoryarb.com that is Alex T O R Y a-r b.com thanks for listening.

Speaker A: Catch you next time.

Speaker D: This episode is brought to you by Snapdragon. Take the leash off your laptop with the processor that gives you long battery life. Work on the go. Jump between back to back calls. Stay locked in from morning to midnight. Get maximum performance even when unplugged. Finally, the freedom to move across the room or across the world is here. Snapdragon. That's how go to snapdragon.com laptops Snapdragon branded products are products of Qualcomm Technologies Inc. And or its subsidiaries.