the structure of goodwill

In "The E-Myth Revisted", Michael Gerber distinguished between the operational work that entrepreneurs do "in" the business and the development work they do "on" the business.

In a professional service organization, there is a big difference between say a dental "practice" and a dental "business". A practice is a group of people performing technical services and a business is something quite different. In a practice, when I'm not working, I'm not earning, In a business, I can earn without working.

Accountants define goodwill in a business as the difference between the book value of the assets of a business and its market value. Capital assets are worth either what someone else is willing to pay for them if the company liquidated or what the accounting and tax rules determine through an on-going process of depreciation.

The value of any practice is pretty much the capital value of the assets, without much goodwill. Most accounting, law, engineering, architecture, dental and medical practices don't have much value over and above the physical assets required to perform the service. The same is true of any service practice.

A business has value over and above its capital assets and the wages I draw from working in it. From this perspective, the higher the goodwill I build into my business, the greater the premium I earn, either as profits I take from the business when I'm not working in it or the price I fetch for it when I sell it.

It's possible to consciously create goodwill in a business. Business development creates goodwill not business operations. This is hard for masterful service practitioners to grasp. Simply doing good work creates very little goodwill. It might create high wages for me, but the reputation I have for doing good work does not necessarily benefit other people on my team and it likely does not benefit someone who buys the business from me.

Goodwill has four components: brand, product, system and culture.

The brand is the name of the business. In time, the name comes to symbolize the value shared by the owners, staff and customers or the business and the reputation the business has for doing great work. With a strong brand, customers are willing to pay higher prices and stay bonded to the business for longer. The brand is everything that the business presents to to it's people: logos, taglines, slogans, the design of uniforms, interior spaces, signage, the statements of mission, vision and values.

The product is the package of everything the business delivers to a customer to satisfy their needs in ways that are better and different than other competitors. It's not merely the provision of a technical service–like pulling teeth, designing a building, writing a financial plan–but a way to structure the process, experience, results and relationship with a customer as a robust program of activities to create the most value.

The system is the set of all procedures, mechanisms and technologies that a business relies on for getting the work done in an efficient and timely manner. The system supports a team to come together around common business goals and manages the transmission of business objectives through each member of the team. It includes all job descriptions, ways to communicate and make decisions and resolve conflicts and the rules that determine how everyone get's rewarded for the work they do inside the business.

The culture of a business is its spirit. Culture is how the business smells and tastes and feels. It's like an invisible mist that guides the growth of the enterprise towards a common vision. A strong culture leads each member of a team to go above and beyond the call of duty and make the kinds of contributions that increase profit margins and cashflow.

Without a business that has a structure for creating goodwill, an entrepreneur has at best a high paying job. The true economic value of a business comes when entrepreneurs build a brand, product, system and culture that creates higher buy-in, quality, efficiency and cashflow. A business with a goodwill structure either generates higher residual income or a higher sale price.

planting seeds

Recently my father, brother and I had a very enjoyable, very warm and very entertaining lunch together.

This is an interesting and apparently strange result considering that several years ago I had written off my father and decided not to pursue any further relationship with him. I don't remember the reason why I made that choice, but like many sons, I was very angry at my dad for something that I thought he did to wrong me. It was the same for my brother.

When I announced to my coach that I was "done with my dad", he said basically that he understoond and respected the decision and that I was free at some point in the future to change my mind if I felt like it. He DID NOT say: "attempting to write off a relationship with a parent won't work" or even more directly: "you're wrong". Even though I understand that point, I would have likely dug in my heels and entrenched my position, going into what can best be described as a stubborn and self-righteous "fuck you" mode. No chance of progress in that space.

My dad was left for adoption by very wealthy, aristocratic parents from England, after having been conceived by scandalous means out of wedlock. He was denied his family, his name and much of the fortune due any heir. As a result, the concept of "honour" is a very big concept in my family.

There is a costly downside to honour as a core value. As a family system, we are prone to making severe, self-righteous judgements about each other (and everyone in general). It's easy for any one of us to feel wronged and then make a big drama out of it. The Hanna men are easily entrenched. This is a common issue in many families and teams.

What worked about coach Phil's comment was that he did not activate the self-righteous side of my honour by making me wrong. He acknowledged my choice as one I'm entitled to make and then he simply left some space open for me to change my mind in the future. It took a few years of subtle watering and nurturing for the flower to bloom but it ultimately did bloom and much quicker than it would have had he taken the more adverserial approach of criticizing my position. I softened in time, as did my brother, as did my father. We now have a relationship as father and sons that I think we all wanted but at one time were too hurt and angry to create and nurture. That's the value of a coach.

For more on our relationship and team coaching service, go to http://www.stepup.net/

redefining success

I've heard Brett Wilson speak several times on the lesson he's learned in the process of becoming very successful by what most people would define as very successful.

Success and happiness are not the same thing. They seem quite compatible, but the processes for creating each are quite different.

The economic melt-down that we've all been going through as the "great recession" revealed the mass North American project of attempting to purchase happiness. This is the essence of unhappiness: people were doing work they hate for people they don't like and buying stuff they don't need with money they don't have to impress people who don't care.

Happiness seems to reside in good health, good relationships, a portfolio of cool things to do with my time and the good work that I might do to contribute to the quality of life for other people. I think Brett would agree. It's not money and it's not the stuff that money can buy. Those are fine as an accompaniment to a happy life and they are not what happiness is made of.

For help with the pursuit of happiness and the redefinition of success go to Keith Hanna at http://www.stepup.net/.

near life experiences

As a climber and guy that drives a lot, I've been through numerous life threatening situations. I have survived all them, obviously, and learned something vital about myself in the process. I am grateful for all the times I came close to perishing and while they were all fun the first time, I do not need to repeat any of them.

The value of a near death experience for me is that it forces a rather large amount of perspective into my mind all at once. It's easy to lose perspective and let the daily stresses and struggles dominate my experience. When I contemplate the loss of my life, I reconnect with the value of my life.

The pursuit of near death experiences as a way to recharge the zest in one's life hardly seems sustainable. For the last few months, I've been working on reconnecting to the value of my life in a subtler and ultimately safer way.

During my day, I've begun to pay attention to the moments of well-being I feel, how fleeting they may be, and even the rarer times where I feel bliss.

For example, one week I was late for a meeting so Tania dropped me off downtown and took the car, instead of me dropping her off and using the car to get to and from my appoints all day. So I walked everywhere. Some of the segments between my meetings that day were quite far, but I frequently had those positive feelings.

As I've been logging these moments and searching for the patterns within, I'm piecing together a new concept for how I want to live my life going forward. The quieter voices, that sometimes get drowned out in the noise of a busy life, are sometimes the ones with the most to say.

lag time

My wife Tania and I began golf lessons this spring and had our second one this past Saturday. I had been taught how to play at the age of seven and despite a twenty year break from the sport discovered I had pretty good body memory. This is the first training Tania has had but she learned how to figure skate starting at age three and completed that whole program over fifteen years. She is thus very athletic and has had the experience of mastering a sport from the ground up.

Our golf pro Cam has been teaching us drills. Golf has been coming back for me pretty quickly and I've gotten bored with them. But Tania is very disciplined and just does the drills.

For Tania, the ball is not yet going straight and up, but all over the place. Even so, Cam is very pleased with how she is mastering each component of the golf swing and stance. So even though the results are not there yet, she is in the process of mastering this very complex sport.

There is a lag between practicing something and the results showing up. It is possible and likely to be doing very well at something and assuming that I'm not doing well just because the results have not shown up yet. We all have to be prepared to have patience, discipline and joy during the lag.

from me to we

For the past six months, I've been the chairman of a committee of extremely competent and committed coaches in charge of producing an award ceremony for the local chapter of the International Coaching Federation.

Last week, we awarded two Prism Awards to two very deserving organizations in Calgary, in front of an audience of 350 people. Brett Wilson delivered a powerful keynote address and Beverley Mahood and Kunny Munshaw inspired us all with the great music they've written and performed. By pretty much any account, the event was a great success and went a long way to build profile for professional coaching in Calgary. For me it was the best team experience I've had.

The event was the brainchild of last year's board, under the direction of then president Gord Aker. Gord and the board decided it was time to do something big. I think as coaches and as an organization of coaches, we sell our selves short and get caught thinking small about the contribution we have to make to society, organizations, team and individuals. It's a relatively new profession and we have not yet established our profile in the world.

Last year's board asked me if I could speak to Brett Wilson to see if he would be the keynote presenter (I'm his coach). Brett is a well-known entrepreneur and philanthropist in Calgary and has made a name for himself as one of the Dragon's on CBC's "Dragons Den". Such a high-profile consumer of coaching would no doubt help us build profile. As an association we were starting to think big.

I decided to volunteer on the committee that was producing the event, since Brett was my client. Then the chairman of that committee moved to Edmonton, so I thought I might as well volunteer to be chairman. Then the new board for 2010 needed a vice president and apparently the vice-president's job is to produce the Prism event, so I was volunteered for that role as well.

At first I was the only person on the committee so I articulated a vision for the event, coaching in general and the chapter specifically, along with a plan to execute the awards ceremony. Most of the directors signed on to the committee, realizing how vital the event was. Then a very cool group creativity kicked in and took over. It seemed that once there was a document that expressed the feeling and intentions of the team, the team took off and action followed.

I learned a lot about being a leader during this process and a lot about being on a team as I watched my colleagues take the lead. I was certainly not everyone's boss since we are all volunteers and yet everyone stepped up in ways that were certainly beyond my imagination. Nor did I make up a vision for me and try to sell it to the team. I think the team, myself included, had this feeling of size, burbling up for many years that wanted out. It's also very clear to me that I am and we are a part of creative process that neither started nor will end with me and us. I simply had the good fortune to come along at just the right time and put words to a very important feeling we all seemed to share. It seemed like my primary responsibility was to maintain a strong belief in the project, the team and each person on the team, making sure that the contributions of each team member meshed with the contributions of the other team members.

And, we pulled it off.

holding the space

I was once given the task to assist a Canadian company and an American company it bought to merge. The senior people met in Kananaskis for two days to consider the strategy they would follow to move the joint entity forward.

For most of the first day, there was an atmosphere of acrimony in the room as twelve different people from two different camps considered what was truly most important.

In the afternoon I started a conversation about core values. It's difficult to build a new entity without a conversation about what realy matters to the participants. Within a short time the participants took over the conversation and came to clarity with very little direction from me.

At one point I was just off to the side saying nothing, marveling at how much progress they were making apparently without me. And yet the new level of harmony was a direct result of my presence in the room.

When it gets challenging, I think the job of the leader is to affirm the core philosophy of the group, even as they have forgotten it in the moment. I've always had the strong belief that despite our differences, as human beings we are all one. There is indeed a place of common ground in every group no matter how conflicted the group is. If my belief in the whole is greater than the conflict of the parts, I will amplify the version of that kind of thinking in each person and the group will find a way to resolve it's conflict.

One of the functions of a leader is to create an environment in which people have the invitation to grow. The word environment means "space around the mind." The philosophical dimension of a business might seem to some as flaky and woo woo, but it is the most powerful and practical force in a team. All value begins in the minds of creative people and only comes to fruition if they give it space to manifest.