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Mikitani’s Rule Of 3 And 10: How To Predict When Your Growing Health & Fitness Business Will Break (Plus What To Do About It)

By John Berardi, PhD

Hiring and Training

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As your company grows, the things you were doing just yesterday will stop working. Hiroshi Mikitani’s “Rule of 3 and 10” helps predict when those “breaks” will happen. And, in this article, I’ll share some strategies for what to do next.

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Time To Hire Some Help

You have a growing team and a business that’s on the rise.

Great news!

So you start hiring team members to help out with various tasks around the company, particularly important but “lower leverage” activities like:

  • answering phones and emails,
  • shipping products,
  • servicing clients,
  • posting on social media,
  • and more.

The goal, of course, is to continue to free yourself up for the higher leverage activities that grow the business. Activities that only you can do.

But things don’t always work out like you’d expect.

I experienced this first-hand when Precision Nutrition grew from two to about 30 team members.

Is There Such A Thing As Too Much Help?

Even though we were a team of 30, Phil Caravaggio (PN’s co-founder) and I were still operating as if we had a small team of “helpers”.

Everyone reported to either me or Phil, and we were the key decision makers on every project. This meant we were constantly in meetings or having one-on-one conversations with team members.

Ironically, our time became consumed with managing people doing lower leverage activities. Which meant there was still no time left (and no one available) to do the high leverage growth activities.

On top of that we were overworked, overstressed, and doing our jobs badly. Team members were left directionless for long stretches of time and they were starting to lose their enthusiasm as well as their confidence in us. We were all flailing and weren’t quite sure why.

I’ll never forget one meeting we had during that time.

Phil and I were giving a product and marketing presentation and I could see one of our team members rolling his eyes and shaking his head. Finally, he stood up and blurted out that our data were poorly collected, our conclusions facile.

He wasn’t quite right, but his criticism did wake us up to something important. Our team members were feeling disconnected and losing sight of our vision.

The Rule of 3 and 10

A few months later, I was listening to a podcast mentioning something called the “Rule of 3 and 10,” put forward by Hiroshi Mikitani, founder of Japan’s largest e-commerce retailer.

Over the years, Mikitani noticed that “everything breaks” at predictable intervals, specifically when companies triple in size. In other words, they break when you grow from one to three employees. They break again when you get to 10, again at 30, again at 100, again at 300, and so on.

Mikitani’s multibillion-dollar company now employs over 12,000 people so he’s seen a lot of breaks.

But what does he mean by “everything breaks”?

Simply that the things you were previously doing, and seemed to be working—processes for decision making, business systems, marketing, sales, accounting, payroll, benefits, infrastructure, scheduling meetings, leadership structures—become less effective and/or begin to produce unintended consequences.

Mikitani’s rule explained clearly why we were struggling. We were expecting the same organizational structures, work processes, and communication systems to serve 30 people just as well as they had served 10 people. And they were, predictably, failing.

Further, when the team was small we could focus nearly all our efforts on what we were putting out into the world. However, as we grew larger, we had to think about how that work got done.

Specifically, we now had to consider how to most effectively engineer work groups where different people, holding various roles, could effectively collaborate, make decisions, and get things done at a high standard.

(Without, of course, spending too much time on “inside the wall” activites vs. “outside the wall” activities).

Something Good Got Done Without Me!

I still remember the first time I knew we were making progress in this area.

At the end of my workday I walked out to the end of my driveway to collect the mail. I discovered a revelation! A thick packet had arrived, outlining my family’s new PN-sponsored health insurance plan.

This was so awesome, not only because we finally had healthcare, but because I didn’t have to make any decisions about it. Heck, I didn’t even know anyone was working on this!

Just a few months prior there wasn’t a single thing I didn’t know about and have to be part of the decision-making on. But now, with our new organizational structure, the team was doing awesome things without needing my input at all.

Thinking About Organizational Structure

There are entire disciplines devoted to studying how to organize teams (from functional structures to divisional structures to matrix structures to flat structures) and how to lead those teams (from top-down hierarchies to flatarchies to holacracies).

And, if you’re operating a small business, it’s probably not necessary for you to go down the rabbit hole to learn about them just yet.

However, if you’re over 25 team members and growing fast, I highly recommend the classic Reframing Organizations by Lee Bolman and Terrence Deal. It shares four key frameworks for understanding organizations and what they need to be successful.

Want To Learn More? Dive Deeper?

Then download this FREE sample of my latest book, Change Maker.

Change Maker shares the tips, strategies, and lessons I learned growing Precision Nutrition from a two-person passion project to a 200 million dollar company that’s coached over 200,000 clients, certified over 100,000 professionals, and revolutionized the field of nutrition coaching.

Whether you work as a health coach, strength coach, nutritionist, functional medicine doc, or rehab specialist, Change Maker will help you discover the right direction to take, the fastest way to make progress, and the practical steps required to build the career of your dreams in health and fitness.

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