#117: How to Design Your Org Chart

Speaker 1 On this episode of the founder podcast, we're going to teach you guys how to build out your own accountability chart for your business.

Speaker 1 Now, you might be thinking, Levi, Chris, come on, I've built out organization charts for my company before in the past. What's the big deal?

Speaker 1 Well, there's a big difference between an accountability chart and an organization chart.

Speaker 1 A lot of the times, as you're building and growing your business, you might be thinking, Well, I'm going to put this org chart together based around what people I currently have.

Speaker 1 The fault of that is you're relying relying on people and not processes and roles.

Speaker 1 An accountability chart is you designing out your company based off of roles and you can plug different people into those roles.

Speaker 1 And sometimes some of your employees or team members might have to do and perform multiple roles at the same time.

Speaker 1 The other cool thing about having a great accountability chart is being able to apply that as a recruiting tool.

Speaker 1 With a really well thought out accountability chart, you can then leverage this for recruiting opportunities to show different growth and paths of growth within your company.

Speaker 1 So that's all going to be discussed on this episode of the Fountain Podcast.

Speaker 2 First off, we are going to dive into what you probably commonly refer to as your org chart, but what we like to refer to as our accountability chart. The org chart is interesting.

Speaker 2 It's usually one of the foundational things that is really screwed up about most organizations. Typically what you have, so we're going to jump on over here to the iPad.

Speaker 2 In a typical org chart of a small business, you got you as the business owner, you right here at the top. And then below you,

Speaker 2 you have every single department. You got 30 different people that are reporting to you.
You have some crews that are coming to you. You have the outside bookkeeper.

Speaker 2 You have all these different things. And it becomes very horizontal.

Speaker 2 The goal is we want to create good quality accountability across your organization where everybody knows where they fit, who they're accountable to, who they communicate through,

Speaker 2 who they report through. And so that's where we jump into the accountability chart.
And the reason why we don't call it the org chart, a lot of times people in org charts, they silo themselves.

Speaker 2 And a silo would be, for example, if you had you

Speaker 2 and you broke it down correctly, say you only had three people reporting below you and they had three and this person had three.

Speaker 2 A lot of times a silo would would start to

Speaker 2 be created here where these are the this is only place where they communicate, talk, associate, are held accountable, so on and so forth. You want to avoid silos within your organization.

Speaker 2 What you do want to encourage is is open communication across all channels, all departments, everything that's going on within your organization.

Speaker 2 You want good open communication, but you, what, within your accountability chart right here in this line, that is where you want to create accountability.

Speaker 2 And that's the reason why we have called it accountability.

Speaker 2 This is where direction is given, and people are held accountable to their productivity, to their... key performance indicators or more commonly referred to as KPIs.

Speaker 2 You're going to hear me in this section talk a lot about KPIs. That's what I'm referring to is a key performance indicator, something that indicates that I am performing or doing my job well.

Speaker 2 And so backing up, when we talk about creating a great org chart or a great accountability chart, we're talking about creating a roadmap. Earlier in the culture aspect, we talked about why.

Speaker 2 you need to have a good five-year plan of where you know we talked about mission and vision statements, where's this company going, everything.

Speaker 2 The accountability chart ends up being your roadmap of what you're trying to create. So, what you need to do, this is a practice.
I need you to pull out a piece of paper right now

Speaker 2 and I need you to draw what does my accountability chart look like right now.

Speaker 2 So, accountability chart

Speaker 2 right now.

Speaker 2 And then, what we're going to do is an ideal accountability chart. This would be

Speaker 2 based off of who I have in place right now,

Speaker 2 what would be ideal,

Speaker 2 and then my five-year accountability chart.

Speaker 2 And so, I want you to just imagine

Speaker 2 that

Speaker 2 five years, where can your organization grow? What can you go and accomplish in five years?

Speaker 2 It's been said that we overestimate what we can do in one year and vastly underestimate what we can do in five to ten years. And so, I want you to really think big.

Speaker 2 Now, I'm going to give you an example.

Speaker 2 When I started my solar business out in my garage in 2017, I was thinking five years in advance, and I thought, man, if I could just have a 500-person organization doing $100 million a year, that would be it for me.

Speaker 2 That would be awesome. And so that's as big as my mind could think.
To give you an idea, five years later, we were doing 223 million with a thousand person organization.

Speaker 2 So like that's how vastly, and I'm a big dreamer. I'm a big thinker.
I'm somebody that thinks like, man, I can go and like literally take over the world.

Speaker 2 And I was only half the size of what we ended up going and being able to create. So I want you to think about that right now.
Okay. What does my five-year plan look like?

Speaker 2 And, you know, it doesn't have to be what Chris Lee's five-year plan. It doesn't need to be 500 employees.
It doesn't need to be 1,000 employees. It doesn't need to be $100 million a year.

Speaker 2 Look at where you're at right now. Say you're at $5 million a year or wherever you're at.

Speaker 2 What is the kind of growth that you would like to experience

Speaker 2 over the next five years? Is it 25% CAGR? CAGGR is the compound annual growth rate. So 25% a year, if I took five and I grew by 25%, I would be at 6.25.

Speaker 2 And then I grew by 25% from there, which would be me at like 7.75 or somewhere around there, or close to 8%. And from there, I'd go to 10.
And then 10, I would go to 12.5.

Speaker 2 And 12.5, I'd go to whatever that ends up being. And so think about what kind of growth you want to experience.
What would be a picture-perfect revenue

Speaker 2 amount?

Speaker 2 Because from revenue, we're going to be able to back into what this accountability chart will look like. What does my roadmap need to look like to be able to accomplish that five years from now?

Speaker 2 And so, think as big as you possibly can: is it 20 million? Is it 100 million?

Speaker 2 Let's use 100 million as an example. Okay,

Speaker 2 so here we are.

Speaker 2 We're currently at 5 million in annual revenue, and we want to go to 100 million. Now,

Speaker 2 what you want to do is back into how you build out

Speaker 2 this perfect accountability chart.

Speaker 2 But before we build this perfect accountability chart, it is important that we understand what I refer to as the law of management, as I'm underlying here on the iPad.

Speaker 2 The law of management says that any one person can manage between three and eight people.

Speaker 2 and the reason why there is a range is the lower level the people so if like you are a manager and you have technicians whether they are installers or service people or sales reps or lead generators or you know account technicians or whatever they may be one person can manage eight lower level people.

Speaker 2 And then the further that you go up the accountability chart, the less amount of people that you should be managing all the way to the top where the top guy in the organization or gal in the organization like yourself, say you're the CEO, you should have three, four, max five people that report directly to you.

Speaker 2 And so this is the law of management that you have to stay in, that no one person should be managing more than eight people and a lot of times needs to be airing on the on the lower side.

Speaker 2 And the reason for that is that you just don't have enough bandwidth and energy to be able to hold that many people people accountable.

Speaker 2 And now you're probably thinking, man, Chris, I manage way more than that. I am talking to people left and right.

Speaker 2 They think they're accountable to me, or maybe you're not even accountable, but you're actively like involved in what they're doing.

Speaker 2 What I mean by management is one, you hold them accountable to their key performance indicators. And

Speaker 2 two, you give them direction on what they should be doing. And now you're probably thinking, well, Chris, I give direction to everybody in my organization.

Speaker 2 And that's where we've got to stop you and say, stop it. You are cutting out the legs of your management team.

Speaker 2 If you have management in place and you're going to their subordinates, those that they are managing, right? So say this is you

Speaker 2 and you have your manager

Speaker 2 and you have the technician

Speaker 2 and you

Speaker 2 are going and talking with the technician, totally fine, right?

Speaker 2 We encourage open communication, but not only are you talking but you're actually giving direction hey i need you to do this i need you to do x and and you better be doing three a week because i last week i only saw you do two a week that's you holding them accountable and giving them direction you've got to stop with holding accountable and giving direction once again totally fine to communicate hear ideas see what's working what's not working so on and so forth but the second that they ask for direction or you decide to give direction you have to involve this person right here, their manager, quit cutting their legs out from underneath them.

Speaker 2 They are the person that you have to implement.

Speaker 2 And so if somebody comes to you and they ask for advice, you got to say, hey, you know, do you want me to tell your manager or do you want you to tell your manager and get them involved into this actual issue that has arrived and that they should be holding that person for accountable.

Speaker 2 So first and foremost,

Speaker 2 you need to abide by the rule of management. Do not manage more than eight people.
And like I said, that you as the CEO and founder, chances are you should only be managing three to five people.

Speaker 2 And that goes all the way down the organization. Second, quit cutting out the legs, and your management team needs to be trained for mid-level managers that have managers below them.

Speaker 2 They need to be trained the same exact way. Okay.

Speaker 2 So understanding this, understanding the law of management. Now, what I'm going to start is build out my sales side.

Speaker 2 So any good organization is going to have, you're going to have an integrator, somebody that integrates.

Speaker 2 Sometimes this is your president.

Speaker 2 This is a COO. This can be kind of whatever.

Speaker 2 Above them, I like to refer to this person as a visionary,

Speaker 2 somebody that's kind of giving overall direction.

Speaker 2 The integrator, the COO, the president, whatever you want to call them, they should have three

Speaker 2 people below them. You got sales and marketing,

Speaker 2 you have ops,

Speaker 2 and you have finance.

Speaker 2 Some of this may be outsourced, depending on how big you are. Maybe you're outsourcing your sales and marketing, maybe you're outsourcing your finance, whatever.

Speaker 2 This is the structure that you're going to use. And so when we talk about building the structure backwards, you want to start with the sales and marketing.

Speaker 2 Because if you have a goal of a hundred million, it's easiest to be able to determine how many salespeople you that

Speaker 2 you need based off of how much revenue per rep can be generated. In our industry, we know that one rep

Speaker 2 should generate about two and a half million

Speaker 2 per rep.

Speaker 2 Okay, so if two and a half million per rep is generated, how many reps do you need? That would equal, I need 40 sales reps.

Speaker 2 And depending on your model, maybe you're using a setter-closer model. A setter would be your marketing, somebody that goes out and knocks doors or qualifies cold leads or whatever it may be.

Speaker 2 And the closers would be these sales people.

Speaker 2 And some people actually do like a setter-closer in one. And so maybe you need twice as many people, right? Maybe you need 80

Speaker 2 sales reps

Speaker 2 in that type of sense. Okay.
So it really depends like the kind of structure, the kind of go-to-market strategy that you have with your sales and marketing. So those are really your two choices.

Speaker 2 Do I want a set or closer model or do I want a closer that literally manages everything from the initial

Speaker 2 interest all the way to the close? And that's a decision that you have to make. Knowing, so let's go back to the 40-rep example.

Speaker 2 Knowing that the law of management says three to eight, I need at least five teams. Okay, so five teams,

Speaker 2 each team is eight reps,

Speaker 2 and then above those teams would be a region, and I would say a region should be two to three teams.

Speaker 2 So, call it two regions.

Speaker 2 And then

Speaker 2 maybe a VP of sales and marketing.

Speaker 2 Not only is the VP of sales and marketing managing the regions, but he's also managing a director of marketing.

Speaker 2 And under that director of marketing, you might have brand.

Speaker 2 So either a technician or a manager of brand, you have organic.

Speaker 2 You'd have paid.

Speaker 2 There we go.

Speaker 2 So you got organic. You got paid.

Speaker 2 You have internal.

Speaker 2 Internal marketing is very vital.

Speaker 2 This is like somebody that is running your competitions for your salespeople, buying the swag, designing the swag, the look, the feel of all your office, those type of stuff.

Speaker 2 So, and any one of these positions, just kind of depending on what you imagine this being, right? So,

Speaker 2 you would break it, this whole thing has to be broken down by revenue, okay? And so if we know, like, for example, $100 million,

Speaker 2 we're going to divide that by, say, your your average ticket. Remember, we've talked about ATV.

Speaker 2 Say it's 40,000 in this particular example.

Speaker 2 What does that mean? That means that you're going to be doing 2,500

Speaker 2 installations of your particular product, right? 2,500 times 40,000 equals 100 million. So then you break it down by

Speaker 2 cruise,

Speaker 2 which is going to be in the ops. And the whole thing, so same thing for marketing.
Marketing would be like, okay, how much can one person manage for paid advertisement? And how much do we know? So

Speaker 2 each system

Speaker 2 costs us, say, our CAC

Speaker 2 equals $1,500.

Speaker 2 We'd say $1,500 times 2,500 systems, whatever that number is. Let's break out our calculators here.
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Speaker 2 We're going to be walking through this. I want you to be doing the same thing in your

Speaker 2 numbers. You need to understand: okay, what is my CAC?

Speaker 2 What would actually 100 million look like of my product? What's my average transaction value?

Speaker 2 You can, from there, so you divide 100 million divided by your average transaction value means how many transactions you have to have. In this case, it's 2,500.

Speaker 2 And then if my CAC is $1,500 per transaction, I times my CAC times 2,500.

Speaker 2 and I would know,

Speaker 2 so $1,500 times $2,500.

Speaker 2 I know that my marketing spend is going to be $3,750,000.

Speaker 2 Okay.

Speaker 2 And say

Speaker 2 one paid ads manager that is managing YouTube and Instagram, and another one's managing this, that, and the other, and they can manage up to $2 million a piece.

Speaker 2 That would mean, okay, I need two guys or gals in my paid advertising.

Speaker 2 And then organic, maybe I just need one person. So I'd have one here, two in my paid, one in my brand, and maybe one in my internal.
So to go and manage

Speaker 2 a director of marketing, oh, I almost forgot. And my...
My guy over content is going to kill me. He's actually listening to this right now.
Of course, under my director of marketing, I need content.

Speaker 2 So, in my content team, what would content for a hundred million dollar company look like? Would I have a videographer? Would I have a graphic designer? Would I have an editor?

Speaker 2 Would I have a colorist?

Speaker 2 Whatever it may be. And the beauty of it is some of these things could be outsourced and managed internally.

Speaker 2 For example, if my director of marketing, he, for example, didn't want to go and hire somebody that's going to create all the content, but he wanted to go to a third-party

Speaker 2 company. He could do that, but this this would be considered a person that they have to manage and still kind of under that same law of management.

Speaker 2 So you have your content and say, Okay, what does that look like? Is it a videographer? Is it? And as you can see, we are building backwards all the way up.

Speaker 2 Then you go and you're going to do the same thing. Oops,

Speaker 2 this is getting ugly. I apologize.

Speaker 2 So the same thing would be for ops.

Speaker 2 Okay.

Speaker 2 And the question would be: okay, how many deliveries can one crew do? So I would say one crew

Speaker 2 can go and install four per week.

Speaker 2 Like I know what capacity is. And if you don't know what your capacity is or what it should be, go and look at the industry.
And a lot of times we are, and this is actually key for growth.

Speaker 2 Like you need to see what's actually possible out there. Too often, we hold the bar very low.

Speaker 2 Like in the solar industry, what I've seen is like crews that take two and a half, three days to complete an install.

Speaker 2 Meanwhile, I have crews that can go and do a 40 or 50 panel install in five to six hours, right? And so, like, what is possible?

Speaker 2 What do you imagine economies of scale when you get to the hundred million? Like, what are they going to be capable of? Because this is the roadmap that you're going to be creating.

Speaker 2 So, I'd say, okay, one crew does four a week, and you're going to times that by they're going to work 48 weeks.

Speaker 2 Okay.

Speaker 2 So 4 times 48 to be 160, 192.

Speaker 2 So then I would take 2,500,

Speaker 2 divide that by 192.

Speaker 2 And I'm going to say that's roughly 13 crews. We'll call it 14 crews.

Speaker 2 So now I know that every crew should be managed every three to four crews,

Speaker 2 three to four crews

Speaker 2 should be managed by one foreman.

Speaker 2 So in this example, we'd say we'll divide it by three. We need five foremen.

Speaker 2 And the question would be, okay,

Speaker 2 is this over,

Speaker 2 does a foreman over each location? Or can you actually have can you actually have six crews in a location? And this really depends on like population and everything.

Speaker 2 So all of these things that are what you have to think through. You got to think of geography.

Speaker 2 What's the population? How much saturation can one area handle? Is it 200,000 people? Is it a million people? How many

Speaker 2 What is your runway in which you can plan to be able to service one particular area? And so, like, all these factors have to go in. And this is

Speaker 2 a long process

Speaker 2 and by no means easy. And frankly, that's the reason why most companies aren't growing because they're not willing to go through this type of process.

Speaker 2 But you, I know you're committed because you paid to, for this course.

Speaker 2 And so I need you, your assistant, and your management team to go through this exercise and properly build this out. Okay.
So say you decide I can have max two foreman in a location.

Speaker 2 So I'm going to say three locations,

Speaker 2 and every location has to have one warehouse manager

Speaker 2 and one admin.

Speaker 2 Okay, so now what I'm able to do, I'm going to go and build my ops backwards. Okay, so I have maybe a VP of ops,

Speaker 2 and below my VP of ops is going to be

Speaker 2 construction

Speaker 2 manager

Speaker 2 or director of construction

Speaker 2 and then a director internal ops

Speaker 2 Internal ops sometimes in the construction world this is maybe pre-con or whatever you want to call it. So, from my director of construction, I know that all of the foremen are going to

Speaker 2 maybe make the decision that foremen actually report to the warehouse manager. So, we know that there's going to be three warehouses.

Speaker 2 So, warehouse manager, same thing, same thing. Under each warehouse manager is going to be

Speaker 2 foreman,

Speaker 2 foreman. And one of the ways to actually simplify this, you can just put a number by that and then not build this out, right? So you're going to have two foremen,

Speaker 2 and then you're also going to have an admin. Okay, so as you know, we're sticking to the law of management.
Maybe there's an inventory manager or whatnot that you're going to implement here.

Speaker 2 So they're going to have three to four people.

Speaker 2 Maybe you have capacity to increase this to three foreman, and those three, and a particular warehouse can get up to nine or 12 crews, or whatever it may be.

Speaker 2 And then below the foreman, we're going to have our crews,

Speaker 2 and then also our foreman.

Speaker 2 And then you're going to have maybe a service department, so a service manager or service crews, right? Like this is, depending on your industry, this is how you build it out.

Speaker 2 And so you build it from the ground up by doing calculations of what they are capable of doing and then utilizing the law of management to to build this out.

Speaker 2 And you go and you go through this and you're going to do this for each, your sales and marketing, your ops and your finance and deciding is it going to be internal? Is it going to be external?

Speaker 2 Are we going to hire it out? But in five years, is that going to be all internal?

Speaker 2 Obviously, the more things that you can have internal, the more value that you're going to create in your business, the more desirable it is going to be for an outside organization to come in and buy you up because you've created all this complexity.

Speaker 2 And it's not necessarily about the complexity, but actually the value that is created within your org chart or your accountability chart.

Speaker 2 And so, really, just understanding that as you go through this, this is going to be your five-year. So, this is what we're talking about: creating your five-year accountability chart.
So, going back,

Speaker 2 what does your accountability chart look like right now? Is it a disaster? Does it

Speaker 2 follow by the

Speaker 2 law of management? Has it just kind of taken place by default as you slowly hired and be like, ah, report to this person, or I don't know who you necessarily report to, or do this, that, or the other?

Speaker 2 So that's fine. You just need to know where you sit right now.
Knowing that this is my five-year and I've gone through the exercise and said, this is where I want it to look like.

Speaker 2 What changes can you make in today's accountability chart that are going to be more aligned? Can you create a good law of management?

Speaker 2 Now, the beauty of this is there's going to be positions that exist at that five-year plan that do not exist today.

Speaker 2 So, what you can do is use that five-year plan and say, okay,

Speaker 2 this one person actually holds three different positions and and they need to be clearly identified that they are separate positions, but you wear all three of those hats, which is fine.

Speaker 2 If you don't have the volume to support it, it's okay for somebody to hold three different hats. And what that does is it creates an indication, okay?

Speaker 2 So, like, for example, in sales and marketing, maybe one person

Speaker 2 does

Speaker 2 brand,

Speaker 2 does organic,

Speaker 2 and does paid. And that's okay, right?

Speaker 2 Like when you're when you're small, you need to be nimble, you need to be feisty, but they need to build out these positions as a separate role and responsibility. So,

Speaker 2 on the accountability chart, going back over here, like this position, this is what we call a role, okay?

Speaker 2 A role

Speaker 2 is essentially a title, what you do, kind of describes it. Like the more descriptive, the better.
Get creative. It doesn't need to be like the rest of the world.

Speaker 2 It doesn't need to be COO or whatever it may be.

Speaker 2 Get creative with the role. Below it, there needs to be three to seven responsibilities.

Speaker 2 And a responsibility is what does this

Speaker 2 for somebody to go and do their job, what do they need to do? Like, so if it was, for example, paid advertising, it would be create new ads,

Speaker 2 structure a campaign, launch a campaign analyze campaign kill kill campaigns that aren't working promote campaigns that are right these are different responsibilities that could exist underneath the paid role now early on when somebody is wearing one person is wearing three different hats or three different roles

Speaker 2 they just need to distinguish where are the what are the what are the different roles and what are the responsibilities that go underneath each role and as you grow, and that person becomes bogged down, and they're not able to really fulfill their job at a max.

Speaker 2 Okay, which role am I going to take off and give to this little person over here that we're going to hire and run our paid advertising?

Speaker 2 And then now I'm just going to wear two hats, and it's going to be the organic and the brand. And so, going back, every single role needs to have three to seven responsibilities.

Speaker 2 With that role, there needs to be two to four KPIs. And what is a KPI again?

Speaker 2 Key performance indicators. What this is, is a definition of winning.
Okay. What does it look like in this particular role? So let's keep using paid advertising.
Okay.

Speaker 2 So you would, as the manager, and here's the crazy thing is like, You can hire people to go and build this stuff out, but ultimately it's your responsibility.

Speaker 2 You either need to like closely monitor how it's done. This is the work.
When we talk about working on the business and not in the business, this is the on-the-business work.

Speaker 2 You're probably tying yourself up and like doing things out in the field or actively managing people or whatnot.

Speaker 2 This is the kind of work that you need to be doing, actively defining what does it look like for this role to win. And like, for example, in this, it would be okay.

Speaker 2 campaigns launched and you could be like over

Speaker 2 certain time frame, right? Maybe that's how you say this person is winning.

Speaker 2 I would say if it's paid advertising, cack

Speaker 2 over timeframe. So cost of acquisition over this week, this month, this quarter, right? Like that is

Speaker 2 big. And obviously they play one part of this role, but the sales team plays another part, right? Closing rate and so on and so forth.

Speaker 2 It also be leads generated.

Speaker 2 And then there's, you know, there's always sub categories to all of these is like quality of leads generated,

Speaker 2 cost of leads generated.

Speaker 2 There's all these different things, but coming up with two to four KPIs that their manager, the person that is like the director of marketing, right, say they're reporting to the director.

Speaker 2 And the director says, all right, let me see your KPIs. Maybe it's on a board, it's in software, it's on a piece of paper, whatever else it is.
And they say, okay, show me your KPIs.

Speaker 2 Boom, I got 1,500 CAC. I've generated this many leads and done this many.
Bravo. Okay, you're winning.
This person that's running this role needs to understand, am I winning or am I losing?

Speaker 2 Because a lot of times they don't, like, that's the hard thing in business. When we don't

Speaker 2 adequately define the responsibilities or the KPIs, that's when people are like, what? Like, like, I thought I was doing my job. I thought I was doing my responsibility yet alone, yet alone.

Speaker 2 My manager expects something completely different. These are the expectations that you have in every single role.
Remember, a role is

Speaker 2 independent of people.

Speaker 2 You should be able to plug any different person into a role.

Speaker 2 Another mistake that we make as business owners is we try crafting a role around this type of person. Well, they're really good at this and they're really good at that.

Speaker 2 Let's kind of define a role. Like, no, what does your ideal role look like in your accountability chart? And then then is this person the right person?

Speaker 2 We're going to talk about that in the next video when we talk about right person.

Speaker 2 And we've actually already spoken on this a little bit, right? Right person

Speaker 2 and right seat.

Speaker 2 But then diving deeper, we're going to talk about

Speaker 2 SOPs, standard operating procedures to actually fulfill on this responsibility. That's going to be coming up in the next video.
So what I need you to do, I know this video is a lot.

Speaker 2 In fact, it's the longest video that we've had in this whole course.

Speaker 2 I need you to go back and say, All right, what does my current accountability chart look like?

Speaker 2 What do I want my five-year accountability chart to look like? I'm going to work backwards. I'm going to use my executive team.
So, you know, pause this thing, go back. It's going to be incredible.

Speaker 2 What does that look like ultimately?

Speaker 2 And then today, what is that, my ideal accountability chart look like? How do those merge? Where's the roadmap? Then go through,

Speaker 2 start defining roles. Oops.

Speaker 2 Start defining roles of each in the accountability chart, three to seven responsibilities. And then in the next video, we're going to talk about creating those SOPs for those responsibilities.