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Hey folks, welcome back to The Testing Psychologist podcast. Today is a business episode and a big episode for you EOS fans. I know that there are some of you out there who are following along with this implementation of the Entrepreneurial Operating System or EOS in [00:01:00] our practice.
This is, I’m losing track, maybe the 10th or 11th episode in the series as I chronicle our journey through implementing the EOS framework and our practice. If you have not checked out the other episodes, just do a search for EOS and you’ll find them. There’s a lot of background and history, so it’s a bit like jumping into a soap opera right in the middle. It might be tough to do so if this is your first episode.
I am talking today about the first step into our second year of EOS. This is talking about our annual two-day retreat, which we completed two months ago depending on when this episode airs. And there’s a lot to share here. Two full days of EOS work and lots of changes in our practice as we continue to implement this [00:02:00] system.
Before I get to the episode, if you’re a practice owner and you’d like some group coaching and support, I have mastermind groups at every level of practice development: Beginner, intermediate, and advanced. You can get more info at thetestingpsychologist.com/consulting.
All right. Let’s jump to my discussion of our two-day annual retreat for EOS.
All right, let’s get right to it. In this true spirit of EOS, I’m not going to beat around the bush and do a lot of fluff. So I’m talking about our two-day annual retreat. The last time we left off it was mid-January 2023 and our team had just finished our last quarterly [00:03:00] pulsing of 2022. We scheduled our annual for early April, and as I said, this is the first step into our second year of running EOS. It’s actually about 15 months into running EOS.
A quick word on the cadence of EOS. You start strong. Once you sign up and decide to work with an implementer or a consultant, you do a full-day meeting with your leadership team, or in our case, if you don’t have a leadership team, you bring in all the folks who might be good candidates for your leadership team, and you go through the process of selecting that team.
So you do a full meeting, then 30 days after that, you do another full-day meeting and 30 days after that, you do another full-day meeting. This gives three full-day meetings in the first two months, and it really serves to propel [00:04:00] your business forward with the EOS system and start to gain a little bit of momentum as you implement it. And after that, you move to one full-day meeting every quarter and then a two-day annual meeting.
Just to orient folks to the whole process and let you know where we are at with that, this is our first annual, like I said, it was two days back to back. In our case, we cleared out a Thursday and a Friday, and as always we rented a conference space in a co-working area here in town. We’ve used it every single time.
Now, you could, of course, just do the meetings at your practice. I think that getting out of the typical business setting is nice to shift the frame a bit and give people a fresh perspective. It’s also nice. It does give it a little bit more of an off-site retreat kind of feel. So we get lunch catered, and we turn off our [00:05:00] phones. We just zone in on business development.
Heading into this annual meeting, I was very excited, as always. The longer that we do EOS, the more I look forward to these meetings. To have the team on board and share this leadership process is really indescribable. I didn’t realize that I was carrying so much weight and responsibility in our practice and honestly not doing it well. And so it’s been very encouraging as we implement this system. Spread the leadership love.
This meeting was a little bittersweet though. We lost our clinical director about a month before the annual retreat. She is resigning. On one hand, I am absolutely supportive and glad that that individual made the right choice for themselves and their lives, [00:06:00] and it gave us a chance to really tighten up as a leadership team here at this annual meeting. On the other, it is always hard to see someone leave, especially someone in such a key position who has been a part of our practice for many years, 5 or 6 years. Parting is always hard and there were some silver linings I think too to this situation. So little bittersweet coming into this annual knowing that we had lost one of our leadership team members. I was nonetheless, very excited.
Let’s talk about the structure.
The first day of the annual meeting is big-picture stuff. Our consultant described it as a 30,000-foot view. So we started off by reviewing our prior year. We looked back at the goals that we set at the beginning of our EOS implementation, which was fascinating just to see [00:07:00] what we thought was important back then and the targets that we set.
We reviewed our prior quarter’s numbers. At every meeting at EOS, you set a quarterly profit and revenue target. This was an interesting process for us because I had never really talked openly about the finances of our practice. And now I have the entire leadership team on board rallying toward these revenue and profit numbers. So we reviewed our prior quarter’s numbers and we tried to figure out if we hit those numbers. In our case, we did hit the revenue number. We slightly missed the profit target. We were a little low. And we just did a review. We checked in. We wanted to see how we did.
Now, EOS is huge on accountability, and I’ve talked about this before, but [00:08:00] this is not a system where you go through and set goals and then they get lost. Goals or rocks or targets remain front and center in EOS, and our consultant holds our feet to the fire every time we come to these meetings. He goes through the list of our goals and our targets, and we just have to say whether we hit them or not. There’s no, like he says, storytelling allowed. We can’t explain why or why not. It’s just a yes or no. I like that stark nature of the discussion. It’s very concrete.
We spent a lot of the day in what’s called team Health. For those of us in the mental health field, this is just straight, simple team-building stuff. The exercises were not complex. They were not incredibly deep or meaningful necessarily, just from a big-picture standpoint. If you [00:09:00] heard these things, you’d be like, that’s basic icebreaker 101, but they were really powerful actually. And a lot of this was based off of a book called The Five Dysfunctions of a Team.
If you have a leadership team or well any kind of team in your practice where you theoretically work together, I would highly recommend reading The Five Dysfunctions of a Team that’s written by a guy named Patrick Lencioni. He’s written several business books and he writes these books in the form of a fable which means, he uses a fictional story to illustrate non-fiction, in this case, business concepts. A pretty compelling and a very short read. Actually listened to it a couple of times just cause I liked it.
The Five Dysfunctions of a Team was the name of the book that we read, and some of those dysfunctions include [00:10:00] lack of trust, avoidance of conflict, no accountability, not being on the same team, and no tracking of progress. So they’re worded differently, but that’s the general idea.
We did a couple of exercises to build our trust essentially. We initially started off and answered a few questions about ourselves, things like the hardest part about growing up, our hometown, how many siblings we have, our first job, basic questions like that, but just the act of answering those questions and then sharing them with one another was deepening even for a team that I would consider to be pretty connected already, both from just being in the mental health field, but also I think the personalities on our team are more prone to connection and depth than maybe some others. So this was [00:11:00] helpful even for a team that I’ve considered is pretty connected.
We did a second exercise, I think it’s called the Johari Square. The idea here is that everyone shared something that they appreciated about the other person and shared something that they would either like you to stop or start doing. So we went around the circle and say, if it was my turn, everyone would go in order and say one thing that they appreciated about me. We go all the way around, everybody takes a turn, and then we start back over and each person shared something that they would like me to start or stop doing.
So as you can tell, this is a little bit of a balanced exercise where of course you get some positive feedback, but then it also encourages your team to share some things that are more constructive. And so in my case, [00:12:00] I got a lot of appreciation for being able to handle a lot and being pretty efficient and productive. But the recommendation for something that I should start doing is to be more nurturing to our team. So it’s the idea that I can get lost sometimes in just being focused on productivity or task management or concrete goals, things like that, and I could really open up and be a little more nurturing to our team.
So, great feedback. It totally resonated with me. Of course, it is hard to get feedback anytime. I find that I have a love-hate relationship with constructive feedback where I desperately want it, but then it is super cringe and really hard when it happens. And so that definitely held true, but ultimately, our team held the [00:13:00] space and I think we all got pretty valuable feedback through this exercise. So, like I said, these are relatively simple in the team-building world, but they were super connecting and we all walked away feeling more dialed into one another and felt like our team reached another level of depth.
The next thing that we did was something called an organizational checkup. So this is a structured quiz of sorts that is built into the EOS model. It has 20 to 30 questions that just address each of the six key components of EOS- that is vision, people, data, process issues, and traction. You can find more on the EOS website which is linked on the show notes. I’m not going to go into depth into each of those areas, but it, like I said, addresses each of those areas through some questions. It’s a [00:14:00] liker scale where you get to rate different aspects of your business that correspond to these areas. So this was cool.
We took an organizational checkup at the beginning of our work and it was nice to compare our answers to the beginning of EOS. Things have changed a lot and we are doing much better. We are in the, I think, success range of about 80%. So, our organization improved quite, I think back in the beginning, we were down around 30%, so this was really cool. We’ve come a long way. But it also gave us a good insight into the areas that we are still struggling. And I think for us, we had some struggles with or some gaps that remain with communicating our vision, having the right people in the right seats, and documenting our [00:15:00] processes. So we’re still working on those things.
The next activity that we did was just a SWOT analysis, so if you’re not, I don’t know why you would be familiar with that, but if you are, it’s strengths, weaknesses, opportunities, and threats. It’s an acronym, SWOT. Also interesting. These are the kinds of things that I think we all hear about and might dip into here or there, but to have such a structured way of approaching it, and deliberate times set aside was really helpful. So it’s just an exercise where you list out the strengths of your business, the weaknesses of your business, opportunities for your business, and threats to your business.
In our case, our strengths are incredible referral sources, a fantastic team, leadership that truly cares, and things like that. Challenges were things like communication, and documenting processes, like I mentioned. Opportunities, we [00:16:00] identified lots of opportunities in the community to expand our practice and to invest more in our employees. And then threats are things from the outside that might threaten the success of our business. And those are things like unhappy employees, inflation and insurance reimbursement, things like that.
So what we took from that was it generated a lot of issues for our issues list. And if you remember, in EOS, there’s a leadership meeting every week where we start with a list of designated defined issues and we work through them and try to solve them. So there’s a connection here between the SWOT analysis and generating lots of issues for our issues list.
As we started to wrap up the day, we checked in on what’s called our Vision Traction Organizer. This is a document that holds our values, [00:17:00] our core focus, our niche, our marketing strategy, and our three-year picture. So a large document that, actually it’s not that large, it’s one page, but it aggregates a lot of important information for your business.
So we kept our values, which was nice to check in a year later, and realize that our values were still very relevant and fit. We tweaked the core focus a bit. So previously, our core focus was we bring amazing people together to provide research-informed, strengths-based counseling, assessment, and training that truly helps our community thrive. We separated that into a true core focus and then a niche. So our core focus is bringing amazing people together to help our community thrive. Our niche is providing research-informed, strengths-based counseling, assessment, and training. So a little tweak, but[00:18:00] important nonetheless.
And then we tweaked our three-year picture. This was actually really important, and I’ll say a little bit about this. So the three-year picture for revenue and profit initially had a lot of emphasis on growth, so growing revenue, bringing in more money to the practice, but we had a discussion during the EOS meeting where we addressed what’s called the rule of 40%, and this is a loose rule that typically applies to software companies that essentially addresses the relationship between growth and profit or revenue and profit in a business.
And the rule of 40% is that in any given year, the percentage of growth compared to the previous year and the percent of profit should equal about 40%. So let’s take an example of that. So let’s say in any given year you want [00:19:00] to grow your company by 20%. The likelihood is that your profit will also be about 20%. 20% + 20% = 40%.
If you choose to grow your company by 40% year over year, so this will mean you go from, say, $1,000,000 in revenue to $1,400,000, then you may have 0% profit. So the idea here is that there is an inverse relationship between revenue, growth and profit. And this was illuminating for us. We’ve recognized that we have grown by anywhere from 40% to 80% every year, year over year since we’ve been a business, and so we tweaked this to flatten out the revenue curve over the next three years and be less aggressive with hiring so that we can really dial in our systems and amp up the profit.[00:20:00] So that’s how we ended day one. I walked away very charged up and pretty tired as always, but I love this big-picture visioning stuff. I love having the team on board talking about the finances and it was great to connect with my team and feel a little bit more of a deepening of our leadership vibe.
Let’s take a break to hear from our featured partner.
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Let’s get back to the podcast.[00:21:00] So then we moved to day two, we went home, we slept, we came back. And day two in the EOS annual cycle is more like a quarterly pulsing. So we got more into the nitty-gritty and talked more details. So we reviewed our three-year picture, confirmed that balance of revenue and profit was going to work for us and we were all on board. We reviewed our issues list. We did what’s called a keep, kill, combine, so we had a lot of issues on our issues lists that were related to one another, so crossed off the ones that we didn’t need, combined the ones that were very similar, and decided to focus in on the issues that mattered most.
We spent a lot of time on the one-year plan. So this was just a revenue and profit plan for the following year. I know I just talked a lot about the revenue versus [00:22:00] profit, and just in case anyone may not be tuned into that difference when I say revenue, I mean top-line revenue. This is just the amount of money that you bring into your practice. So it would be called gross revenue. People call it top line revenue/income. It’s the money that you bring into your practice before any expenses are taken into account.
So if you do 1000 sessions a year at $100 per session, you make $100,000. That’s your top line revenue. Profit on the other hand is like net income. Some people call it net income. Profit is the amount of money that’s left over after all the expenses. So if you make $100,000 in a year, but you spend $95,000, then you have a 5% profit margin. You have $5,000 left over. You have to pay taxes on that which eats up anywhere from [00:23:00] 15% to 30%. So you end up left with, let’s just call it, $3500, maybe $4000. So anyway, difference between revenue and profit.
So we dialed in the revenue and profit goals for the following year. Again, flattening the revenue curve a bit so that we can focus more on profit. We talked about our rocks for the quarter. If you remember, Rocks are the most important priorities- the house-on-fire items that absolutely have to get done in your business in the next three months, or the business will fail. That’s a little bit of hyperbole, of course, but you get the idea. So we’re supposed to identify the most crucial items to be working on for the next three months.
In our case, we’re pretty good at identifying rocks but we struggle greatly with making them SMART goals. [00:24:00] You may have heard of SMART Goals. SMART is another acronym, so many acronyms, that stands for specific, measurable, attainable, realistic, and timely. We tend to identify rocks that aren’t very easily measurable and sometimes aren’t very specific. We’ve also struggled a little bit with realistic. So our focus was to identify rocks that were all of those things, like I said, especially dialing in the specific and measurable part.
I can give you an example of some of our rocks. And again, these are the most important things that we need to accomplish over the course of the next three months in our practice. So in our case, we have company rocks: These are big picture for the practice. And then each [00:25:00] individual typically has a couple of individual rocks as well. Each individual on the leadership team.
Our company rocks were to outsource our HR services. So the rock was to research and decide on an outsourced HR component or an outsourced HR solution. We have a rock to hire a clinical director to replace the one who resigned by the end of the quarter. We have a rock to research and propose a new structure for compensation and benefits. So these are just some examples of rocks that we identified.
And then on the individual level, some rocks that we identified were roll out a sliding scale, roll out a trainee satisfaction survey for our interns and postdocs, and [00:26:00] create and get feedback on an employee satisfaction survey. So these are just some examples of things that we identified as being particularly important in our practice for the next three months.
So we defined our rocks, tried to make them smart, and then we spent a lot of time IDSing. So in the EOS world, IDS is an important acronym that stands for identify, discuss, and solve. And this is where the issues list comes in. We IDS.It’s kind of a verb. We IDS everything on our issues list. We identify the issue trying to get down to the core problem that we’re trying to solve, we discuss the problem and then we offer a solution.
EOS is big on not just talking. This is relevant for all leadership teams, but I think especially relevant for leadership teams in mental health. We can just talk, talk, talk, talk, talk, talk, talk [00:27:00] about things. And this really forces us to get down to the core of the issue and propose a solution.
And it really gets at the philosophy that not every solution is going to be perfect, but done is certainly better than perfect. So the idea is to identify some kind of solution, test it, and then adapt from there.
We spent a lot of time on two somewhat related issues. The first one is whether or not we’ll continue to support people in working in other venues whether it be another practice or a university or community agency. We spent a lot of time talking about whether that fits with our vision. We also talked about the possibility or a restructuring of hours in our practice and how to create a plan [00:28:00] for each clinician that is predictable and consistent and has clear expectations about how work is going to break down in terms of clinical hours versus administrative and leadership hours.
We also spent quite a lot of time working through the responsibilities for the visionary and integrator roles. I’m the visionary in our practice. And the integrator is typically an individual who takes the vision of the visionaries or takes the visions of the visionary and actually makes them happen. So the integrator is more boots on the ground, detail-oriented making things happen.
What we found is that neither of us are really doing what we’re supposed to be doing. I am still doing a lot of integrating in terms of daily functioning and running the business, and our integrator was primarily just being our HR [00:29:00] person more than anything else. And she’s not happy with that. I’m not happy with doing so much day-to-day operation. So we made a real commitment and we had a lot of discussion around how to pull me out of the daily operations so I could do more visioning and big-picture business development and let our integrator truly integrate our practice and oversee our leadership team and get the HR stuff off of her plate. That’s why we’re outsourcing it.
So what that meant very concretely is, as an integrator, she is taking over running our staff meeting, she is taking over a lot of our finances, she is going to be managing the leadership team, so doing more one-on-one check-ins with our leadership team more regularly. There was one other responsibility that I cannot remember at this point, but the idea is that, [00:30:00] theoretically, she is stepping into more of a maybe you call it a director role, but that allows me to step out of day-to-day operation.
So all in all, we did a lot over these two days. It was a nice combination of big-picture and micro-level intervention. So by the end of the second day, I was pretty exhausted, but also wired. We came out of the session with a really connected leadership team with some deepening of our relationships, and we’re getting a lot better at defining really smart goals and rocks. It feels like we’re making big hard decisions to move our practice forward and continue making the leap from “friends who work together” i.e., a loose practice structure with very poorly defined expectations and accountability to a legitimate business.[00:31:00] There is some grieving there, of course. I think with the business vibe comes more structure and expectation, which creates the opportunity for people to be unhappy and potentially leave if they don’t like the structure and expectations. Now we had problems with the other structure too, though, when things were too loose and expectations weren’t clear. Different types of people struggled with that.
So, this is something that has been really hard as a leader, is to navigate this whole dynamic. I built the practice with the intent of creating a close-knit group of folks who genuinely enjoy one another and their work. And it is not mutually exclusive, of course, to running a successful and profitable business, but I have found that the larger we get, the more we have to focus on the business. And that means disappointing some individuals and potentially [00:32:00] excluding some team members if they’re not a good fit for this new structure where we’re evolving the expectations of making things a little bit more clear and maybe even requiring certain work plans for individuals versus letting people do what they want.
Anyway, I continue to wrestle with the EOS mindset which puts the business over the people, not in a negative way necessarily, but it’s the idea that you do what’s best for the business versus what’s best for individual people. That’s really hard, especially when there’s a close connection with many of my employees and I don’t like people to be upset or mad at me. So, that’s my work as a leader and something we’re working through as a leadership team, [00:33:00] but it’s just becoming more and more evident as we grow and really try to dial in the business that a big part of that is consistency, structure, and expectation.
I’d love for you to join me next time for the update on our first quarterly pulsing of year two. That’s going to happen toward the end of June as we try to hit a higher profit margin and potentially roll out some new structures and policies and expectations for our staff. So stay tuned and as always, thanks for checking out the podcast.
All right, y’all. Thank you so much for tuning into this episode. Always grateful to have you here. I hope that you take away some information that you can implement in your practice and in your life. Any resources that we mentioned during the episode will be listed in the show notes, so make sure to check those out.
If you like what you hear on the podcast, I would be so [00:34:00] grateful if you left a review on iTunes or Spotify or wherever you listen to your podcasts.
And if you’re a practice owner or aspiring practice owner, I’d invite you to check out The Testing Psychologist mastermind groups. I have mastermind groups at every stage of practice development, beginner, intermediate, and advanced. We have homework, we have accountability, we have support, we have resources. These groups are amazing. We do a lot of work and a lot of connecting. If that sounds interesting to you, you can check out the details at thetestingpsychologist.com/consulting. You can sign up for a pre-group phone call and we will chat and figure out if a group could be a good fit for you. Thanks so much.
The information contained in this podcast and on The Testing Psychologist website is intended for informational and educational purposes only. Nothing in this podcast or on the website is intended to be a substitute for professional, psychological, psychiatric, or medical advice, diagnosis, or treatment. Please note that no doctor-patient relationship is formed here, and similarly, no supervisory or consultative relationship is formed between the host or guests of this podcast and listeners of this podcast. If you need the qualified advice of any mental health practitioner or medical provider, please seek one in your area. Similarly, if you need supervision on clinical matters, please find a supervisor with expertise that fits your needs.