If you want to maximise your return on investment for the time and effort that people put into the products you’re creating, fostering a culture where your team genuinely cares about the products and your customers is essential. When individuals feel ownership over what they create, they naturally invest more of themselves into their work. This sense of ownership is crucial; people care about things they have a stake in.
Cultivating a Culture of Continuous Improvement
To achieve this, we need to cultivate a culture of continuous improvement. Yes, I know it sounds like buzzword bingo, but hear me out. The essence of this approach lies in hypothesis-driven practices. Here’s how it works:
- Generate Ideas: Start with a hypothesis or an idea.
- Test and Gather Feedback: Implement a small-scale version of that idea and gather feedback from customers.
- Adapt and Improve: Use the feedback to refine the idea, doubling down on what works.
This iterative process allows us to pivot—changing our direction based on what we learn—or, in some cases, to kill an idea that isn’t gaining traction. Take a look at the infamous Google Graveyard; it’s a testament to how even the giants can make tough decisions about what to invest in.
Understanding the Financial Context
For your team to truly care about the product and the customers, they need to understand the financial context of their decisions. Unfortunately, I often see organisations, particularly in professional services, shielding their teams from financial realities. This is a dysfunctional behaviour that can lead to poor decision-making.
Imagine trying to run a business without any knowledge of your budget, spending, or revenue. How effective would you be at making decisions? The same applies to every member of your team. If they lack insight into the financial implications of their work, they may make misguided choices about which features to build or how to build them.
Advocating for Team-Level P&L
I advocate for every team to conduct their own Profit and Loss (P&L) analysis. This means understanding:
- Value Contribution: What value is your team bringing to the business?
- Cost of Operations: What does it cost to operate as a team?
The goal is to ensure that the value generated exceeds the cost. When teams are aware of these metrics, they can make informed decisions that align with the broader business objectives. This entrepreneurial mindset empowers team members to consider how to maximise their contributions within the context of the product.
Aligning Short-Term and Long-Term Goals
As a business owner, CTO, or CEO, you’re likely focused on both short-term wins and long-term sustainability. This dual focus should extend to every team member. If you hide financial information from them, you risk them making decisions that don’t align with the company’s goals.
- Short-Term Wins: Identify quick revenue-generating opportunities.
- Long-Term Objectives: Consider how to build sustainable income over time.
By integrating financial insights into the daily operations of your teams, you’ll foster a culture of accountability and informed decision-making.
Conclusion
In summary, don’t shield your teams from financial realities. Instead, empower them with the information they need to make sound decisions. Implementing team-level P&L analyses can lead to higher returns on investment and greater value delivery. When every member of your organisation understands the financial context of their work, they’ll be better equipped to contribute meaningfully to your business’s success.
Let’s embrace this shift together and watch as our teams thrive in an environment where they feel ownership and responsibility for their contributions.
If you want to maximize your return on investment for the time and effort that people put into the products that you’re creating, you need to try and enable and foster a culture where the people that are working within the context of your products care about the products and your customers. They care about what it is that they’re creating because they feel that they have ownership of it. People care about things they have ownership of.
There are a whole bunch of ways you can do that. You’re effectively fostering a culture of continuous improvement. Kind of a little bit of buzzword bingo there, right? But the idea is that when we talk about hypothesis-driven practices, we’re having an idea, we’re trying a little bit of that idea, we’re getting feedback from the customer, and then we’re adapting that idea to be better. So it’s double down, right? We’re going to invest more in this because it looks like it’s awesome.
We’ve got pivot, which is we change what we’re doing based on what we learn, or we’ve got kill it, which is stop investing in it and do something else. Like, don’t keep doing this. You see Google are doing this a lot. There are two websites: Microsoft graveyard and Google graveyard. It’s products that Microsoft and Google have killed over the years. Some of them are very high profile, some of them are lesser known. The more high-profile it is, probably it’s been invested more money in it, and more people liked it, but not enough people. It didn’t make enough of an impact to continue to invest in it for the cost that it is.
So if we want the people that are doing the work to care about our product, to care about our customers, and to spend money, which is their time, right? That’s their time. Every time they do something, they’re spending your money. Every person in your organization is spending your money. If we want them to spend that money diligently, I don’t like that word, with care, then they need to understand the context within which they make that decision about whether they do this thing or they do not do this thing, or they do it this way or they do it that way.
In order to do that, and this is something that I see lots of organisations doing, I consider it a little bit of a dysfunctional behaviour. I see lots of organisations doing, especially professional services organisations, but also product organisations as well. They shield the people doing the work from the finances of doing the work because it’s all shifted off to a finance department. What that does is remove the context of money from the people doing the work.
Imagine you trying to run your business and make decisions about what you’re going to invest in and what you’re not going to invest in, but you had no information about budget, you had no information about money, you had no information about spend, you had no information about revenue. How good are you going to be at making successful decisions to make a successful business if you don’t have access to any of that information? It’s going to suck, right? You’re going to make bad decisions because you don’t have all the information. That’s every member of every team in your organisation. They’re right now potentially making bad decisions about what features they build, about how they build those features because they don’t understand the ROI effectively of what it is that they’re doing.
They might think it’s going to provide value, but do they actually know? And do they know what it costs to make? I’d advocate for every team doing their own P&L. What value are you as a team bringing to the business? What do you cost? I want value to be higher than the cost. If you’re a team and you’re thinking about those things, you’re going to make different decisions because you have additional context. You turn every member of every team into an entrepreneur trying to figure out how do we maximize what we’re doing in this work within the context of this product? How do we maximize the value that we return? What should we be working on? Well, we should be working on this stuff over here because that’s going to give us the biggest return, right? Biggest short-term return, biggest long-term return.
When you’re thinking, you as a business owner, you as a CTO or CEO, are thinking about how you invest in your company. You’re thinking about short-term wins to generate revenue quickly. You’re thinking about the long-term objective of the business and how you’re going to make money in the long term and sustainable income. That’s all part of the story. It needs to be for every member of every team. You can’t, if you hide that information from them, if you obfuscate it and create a filter so they don’t see any of that stuff, they’re going to make bad decisions.
So don’t shield them from that. Build that into the story of how a team operates. Do P&L with every team. Have that filter up through the organisation, and I guarantee you’ll see higher return on investments and higher value being delivered.
