By Gino Wickman & Mike Patton
The story of one company’s successful implementation
of the EOS system discussed in Traction
CHAPTER 1
THE INCIDENT
Sitting in her car, Eileen Sharp stared intently at Vic’s SUV parked across the lot. For a brief moment, she envisioned gunning the engine and ramming it. The hint of a smile appeared at the corners of her mouth.
Eileen was angry and frustrated with Vic. For the first time she thought of ending the partnership with her childhood friend. After a few moments, she gathered herself and regained some resolve.
“I’m not walking away from what we’ve built these last ten years,” Eileen said under her breath. “You just don’t turn your back on a $7 million company and 35 employees.”
Still, what her business partner had done in the meeting was a new low. The fact that he’d said it in front of the other leaders was unforgivable. She couldn’t just let it go.
Suddenly Eileen realized she was late for the Business Roundtable reception. She took a deep breath and checked herself in the rearview mirror. As she pulled out of the parking lot she muttered, “That son-of-a-bitch.”
Four hours earlier, at 1:00 P.M., Eileen had rushed into the conference room carrying her laptop and a mound of paperwork. Determined to begin Swan Services’ quarterly executive committee meeting on time for once, she had scurried around all morning and skipped lunch to prepare the presentation and numerous reports that would tell the “story” of the last 18 months.
This had been the first tough stretch in Swan Services’ history. Until the last year and a half, the company had been profitable and had grown quickly. Swan was still doing well, but the steady growth had stopped. Everything seemed to be getting more difficult—winning new customers, keeping them happy, operating profitably—you name it. She had always taken pride in her work ethic, but recently the demands of her business required so much attention that she regularly missed important events with her husband and two children. For the first time Eileen was frustrated, and she could tell that other members of the team were frustrated, too.
Eileen burst through the conference room door, ready to apologize, once again, for being late. Instead, she found only two of her five colleagues. Sue Meecham, Swan’s VP of Sales, was reviewing the latest pipeline numbers. Eileen’s longtime friend and business associate and the acting Director of Marketing, Art Pearson, was stowing his overcoat and briefcase in the corner of the conference room.
“Hello Sue, hi Art—any sign of the others?” she asked.
“No,” replied Sue. “Unless you count Evan racing by a minute ago and looking relieved to see he wasn’t the only one late.”
Eileen rolled her eyes, dropped her materials at the front of the table, and asked Art to help connect her laptop to the LCD projector. In walked Carol Henning, Swan’s Controller. Eileen distributed presentation folders to the three executives and began bringing up the PowerPoint presentation she had prepared. VP of Operations Evan McCullough entered looking rushed and disheveled. And then the team waited.
Vic finally strolled through the door at 1:14, still in the middle of an animated phone conversation with what sounded like a prospective client. He made a few exaggerated gestures to the rest of the team, making it clear he was attempting to end the call. Eventually he hung up, sat down, and apologized as only Vic could.
“Sorry, guys. That was the procurement guy at Shoreline Industries,” he said. “I’ve been trying to pry that deal out of his hands and back under the control of our buyer for so long, I think we used a slide rule to put the bid together.”
The entire team laughed—even Eileen. She tossed her founding partner and CEO a folder, strode to the front of the room, grabbed the remote control, and launched into her presentation. Over the next 60 minutes, she detailed the troubling signs that had developed in the five quarters since the company’s “breakout year":
• In Swan’s eighth full year, revenues grew at a record pace and exceeded $7 million for the first time. However the company hadn’t managed to hit its quarterly revenue goals since. Against projected growth of 14 percent, revenue had grown only 1.5 percent in the prior year, and was flat in Q1 this year.
• Profitability had taken a beating. On the heels of a great year, the team had invested heavily in a foundation for further growth. Those investments had not yet paid off.
• Pinpointing the cause of these problems had been difficult. Eileen had been studying the issue for three quarters and now felt comfortable sharing her findings with the team:
○ Swan’s sales team had missed its new revenue goal in three of the last five quarters.
○ Existing customers had begun leaving—a new phenomenon. At first the occasional defections seemed trivial, but the trend was disconcerting.
○ Labor costs had increased significantly. Swan had begun adding people and upgrading talent last year in an effort to ramp up to its five-year goal of $20 million in revenue.
○ Despite Swan’s paying more for talent, a few key employees had resigned abruptly in recent months. None cited internal issues in exit interviews, but Eileen had come to believe that Swan’s once great culture—one devoted to being a genuinely fun place to work hard and get great results—had begun eroding.
None of these issues was new. The team had discussed each one at some length in prior quarterly meetings—often staying late into the night and ordering pizza but rarely reaching agreement on anything, much less a plan of action. The prevailing sense was that the primary cause of all of these issues was somehow outside of their control.
One quarter, the economy was to blame. The next it was the software conversion. Last quarter Vic had actually used the terms “bad mojo” and “funk” in an attempt to quantify the problem—suggesting that the company had lost its “Midas Touch.”
“Dwelling on all this bad news drags us down,” he had said, staring directly at Eileen. “We’ve lost our swagger and—while I know some of you will dismiss this as metaphysical mumbo-jumbo—I’m convinced we have to get that swagger back at all cost.”
At the time Eileen had taken Vic’s observation in stride. She learned long ago to ignore his constant baiting and avoid getting sucked into titanic battles over trivial matters. Instead, Eileen analyzed the situation thoroughly and carefully prepared her plan of attack for today’s meeting. She had entered the conference room intent on staying positive and focusing on solutions to the 13 things she believed the executive committee actually could control. But first, she needed to present her mountain of evidence to convince them Swan had a right to expect more.
Eileen methodically made her case; the data was irrefutable. Despite a larger budget, Swan’s marketing efforts had produced fewer qualified leads. The sales team’s close-ratio had declined and it had more frequently offered discounted pricing on the deals it had won. In Operations, revenues per employee had fallen while errors and missed deadlines were up.
As she walked through the troubling details, Eileen saw the mood in the conference room change. Arms were uncrossed. Heads began to nod. Notes were taken. Near the end of her presentation, Vic pushed himself away from the conference table and held his hands up dramatically, as though he had eaten too much at Thanksgiving dinner.
“No mas, boss,” he said with a smile. “We get it.”
When the laughter subsided, Eileen suggested the team take a quick break and return ready to start solving problems. In high spirits, she headed for the ladies’ room. That’s where a nightmare scenario began to unfold.
Eileen heard someone slide quickly into the restroom before the swinging door closed behind her.
“Um, Eileen?”
“Yes, Sue—what is it?” said the startled leader.
“I don’t know exactly how to say this,” she began. “So I’ll just spit it out. I think it would be best for all concerned if I left Swan, effective immediately.”