Five Obsessions of Elite Organizations with Michael Erath

Five Obsessions of Elite Organizations with Michael Erath

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Alright, welcome back to the Daily Mastermind, George Wright III with your daily dose of inspiration, motivation, and education. And we're joined in studio with a guest here today, I guess virtual studio, I should say. Michael, how are you?
Doing well, thanks George. Yourself?
I'm doing great. I'm doing great.

I'm glad we had a chance to visit a little bit more before the show because I think people are gonna be very happy about some of the strategy tactics and stuff we're gonna talk about today. So I wanna give you in our audience here a little bit of introduction as to who you are. Because I think background matters, right?

Everybody knows my background, but they also know that if I make time for a guest, it's somebody that has that proven background and so they can really learn. So listen, if you're looking for some strategy and tactics today, we're getting into it.

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Michael Erath’s Background and Early Career

Michael Erath is our guest, and he's the founder of Next Level Growth, author of Rise, and most recently The Five Obsessions of Elite Organizations. He built a $45 million empire early in his career, lost everything overnight, and rebuilt from scratch. Today, he coaches CEOs on how to scale with clarity—not chaos.

As I was growing one of my large corporations, I actually had a personal coach. This is the type of individual that you need if you're trying to get to the next level.

Michael, I really appreciate you being here, man. I hope that at least gave some type of a background for you, but I really want people to get to know where you came from. So can you kinda lay the backstory a little bit for 'em here?
I appreciate that. So the short version: I was second generation in a family manufacturing business. We manufactured hardwood veneer for the furniture industry, millwork companies, dorm panel companies, kitchen cabinet companies, people like that. When I got involved in the late '90s, we were about an $8 million business, primarily domestic, with most of our customers in the Mid-Atlantic.

In the late '90s and early 2000s, there was a mass exodus to Asia in manufacturing. I had to reinvent the business early in my career, shifting to an international export model. My father was 44 when I was born, so by the time I was out of college and getting involved, he was winding down.

One of our main challenges was sourcing raw materials, which was highly competitive. I decided to vertically integrate the business. I brought on a partner and created a timber merchandising subsidiary. We began buying standing timber and large parcels of forest. My partner merchandised everything we didn’t use, and we retained the logs we wanted at better cost and with more control.

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Challenges and Setbacks

He and I became best friends. I was even his son’s godfather. But in 2008, I discovered he had embezzled half a million dollars and was committing bank fraud in the entity he managed. That whole story is what my first book is about.

I navigated it outside of bankruptcy, but we did liquidate and lost the business. We used the proceeds to pay off the bank and creditors. My father had passed, and although we had transacted my mother out of the company through estate planning, she was still on a $6 million bank guarantee.

So, I had to figure out how to protect my mother’s net worth and my wife’s and my own. I worked with the Special Assets Group to avoid bankruptcy—it took 18 months. It was an education in biweekly reporting and stress.

My partner served two years in federal prison. My wife and I kept the equity in our house and avoided bankruptcy.

We moved to Ohio and restarted a business from scratch in the same industry. We outsourced production to a contract manufacturer in Ohio, and it was during that phase I began building systems and structures that created guardrails around blind spots to prevent the same pitfalls.

I grew that business to $7 million and started down the path of EOS® (Entrepreneurial Operating System). In 2015, I exited that business and committed to coaching—taking everything I learned and using it to help others.

Initially, I worked as an EOS Implementer™ for six years. But I grew frustrated with how prescriptive these systems were. That led me to create Next Level Growth—not a prescriptive system, but a principled framework that creates flexibility.

I found that when systems take primacy over the user, they feel too rigid. I wanted to flip that: focus on the user and their desired results, making the system secondary and customized.

There’s a quote I love, often misattributed to W. Edwards Deming, but actually from healthcare CEO Paul Alden: “Every system is perfectly designed to get the results it gets.” If you want a different result, you need a different system.

That realization helped me look at all the subpar outcomes in my life and understand they came from systems—often created by default—that needed changing.

Yeah. It's interesting because I talk a lot about that in business and in life. You are either creating a system, but make no mistake. Their systems are being created regardless. You're conscious, your subconscious, the things you're doing. I think that is a great roadmap for what we're gonna talk about today…

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Unpacking Resilience and the Shift to Systems Thinking

So that kinda leads us into what I wanna unpack next. Because I always find, and one of the qualifications I have to get a guest on the show is their background, their proven background, what they've done. But I also feel like that's the foundation for what makes you who you are and why things work.

So I wanna back up to just a minute. When you had this failure, which led to everything else—leadership, resilience, and the things it takes to get to where you're at—because your system, and we're gonna break down the book here in a second, goes through some real paths that are based on users. But it comes out of a place a lot of people might be in, where they're struggling. How did you, from a mindset and professional standpoint, go through such a big setback with this $45 million business going under? And was that what pivoted you into systems, or have you always been a systems guy?

The systems part was something I learned over time. It wasn’t always my background. Though I score high on Kolbe's Fact Finder—so I do default to systems and processes—I hadn’t really unpacked and understood them early on.

As for resilience, when I coach others on discovering their core values—what I call behavioral core values—I agree with Gino Wickman’s view in Traction that they’re discovered, not created. They already exist within us.

At Next Level Growth, we have four core values:

1. Take ownership
   
   
2. Be resourceful
   
   
3. Have a thirst for learning
   
   
4. Be fun to work with (because life’s too short not to)
   
   

Looking back, I see how “take ownership” was a driving force. I gravitate toward people who do that. I struggle to maintain friendships or partnerships with those who don’t.

So when the financial crisis hit and I had to deal with the Special Assets Group, we hired a retired FBI forensic accountant to help us. Most companies at the time were throwing in the towel. I didn’t. I showed up and took ownership.

I told the bank: “If you liquidate this company and its equipment, you’ll get pennies on the dollar. But if you give me some liquidity, I’ll manage an orderly wind-down and get you significantly more.” I was one less fire to fight, and they took a chance on me.

It worked. The bank was made whole. The creditors were made whole. My wife and I took a haircut, but we had that “live to fight another day” mindset. We were in our late 30s, and we were willing to rebuild.

I love it. Tell me again what those four core values are?
Take ownership, be resourceful, have a thirst for learning, and be fun to work with.

I love those. And this leads me to one of the main questions I wanted to ask you. For the listeners, your experience becomes the foundation. What I love about your book and system is that it's personalized. Because people react differently to the same situation. But with your values and system, regardless of their personality, they can apply a clear structure. So talk to me about the book—The Five Obsessions of Elite Organizations. Why did you decide to write a book?

I’ve always enjoyed writing—blogs, posts—and I’ve reached a point where I wanted to share these concepts beyond those who can afford high-end coaching.

Our clients usually need to be at a certain free cash flow threshold to work with us. But there are so many entrepreneurs who aren’t there yet. I wanted to reach them and provide not just concepts, but some “how-to” steps.

So the book is about showing them how to create their own custom approach. And to support that, I built an AI clone trained on our material. For a nominal subscription, it serves as a virtual coach to provide guidance based on everything we teach.

That’s smart. It reflects how people have shifted from paying for information to paying for interpretation and now access. Also, I noticed something about your book design. The way the title is styled—Five Obsessions and Elite Organizations—it feels like it speaks to both sides of the equation. Can you walk us through these obsessions?

Absolutely. And yes, you’re right—Five Obsessions and Elite Organizations are separate but interdependent. To achieve elite performance, you must obsess over certain principles.

This idea came in part from a Nick Saban video on YouTube where he says we all have five choices in life: be bad, be average, be good, be excellent, or be elite. If you want to be elite, you need special discipline, passion, and focus—constantly.

I started seeing the same five principles in top entrepreneurs, sports dynasties, and high-performing organizations. These five obsessions are:

1. Great People – Everyone talks about Jim Collins’ “right people on the bus,” but no one teaches you how. We created systems to assess cultural alignment and performance for every role and how to coach around it.
   
   

Let me pause you there. These apply to individuals, leaders, and organizations, right?

Absolutely. Whether you're a solo entrepreneur, team leader, or corporate CEO, these five obsessions apply. In fact, we’ve had leaders implement them in just their team, and within a year or two, executives notice the performance shift and adopt it company-wide.

That’s powerful. So number one is great people. What’s next?

2. Inspiring Purpose – Most companies spend all their marketing budget externally. Rarely do they market to their own people. We teach you how to articulate your organization's purpose and connect it to each individual’s goals. When people emotionally connect to their work, they bring more energy and passion.
   
   

Are you talking about aligning the company’s purpose with the individual's goals?

Exactly. Both matter. We use the idea from Simon Sinek’s The Infinite Game—define a just cause—and build internal alignment. As Ken Rusk said on your podcast, every company should help employees feel like they can achieve their life goals through that company.

I love that. So now you’ve got great people, aligned with purpose. What’s number three?

3. Optimized Playbooks – This isn’t about SOPs. It’s about high-level plays and checklists. Human nature creates shortcuts and chaos. A sales team of ten doing things ten different ways is a problem. We teach teams to build brand-standard playbooks with flexibility inside guardrails—just like athletes call audibles within a game plan.
   
   

That makes perfect sense—like systemizing the predictable so you can humanize everything else. That’s such a powerful concept.

Absolutely. It’s something Isadore Sharp, founder of Four Seasons, said: “You systemize the predictable in order to humanize everything else.” That became a guiding principle for us. Systemizing the repeatable tasks frees up creativity and allows your people to shine where it matters most.

If I’m an employee and I know exactly what’s expected in the systemized part of my role, I don’t waste mental energy trying to figure that out every day. Instead, I can focus on delivering excellent customer experience, innovation, and value creation.

So you’ve got great people, inspiring purpose, and optimized playbooks. That’s already a winning team formula. What’s number four?

4. Culture of Performance – This sometimes makes people uneasy, but it’s not about a punitive performance culture. It’s about creating a transparent, clear environment of expectations.
   
   

In my experience, the majority of friction in manager-employee relationships comes from unclear expectations. People need to know what “winning” looks like in their role. When they accept the job, they should also accept the standards and expectations.

We define what success looks like culturally and executionally, then measure it. If someone isn’t meeting expectations, we coach and develop them—but we also assess coachability. If they can’t or won’t respond, the system helps them exit naturally.

That’s powerful. Creating a culture that self-regulates without drama is a game changer. And like you said earlier, each obsession stacks—if you’ve got great people with purpose and playbooks, they’ll perform better. Or at least you’ll know quickly who won’t.

Exactly. That leads us to the final obsession.

5. Grow Profits and Cash Flow – This is the one people like to say “just happens” if you do everything else right. I find that intellectually lazy. Elite organizations are intentional about pricing strategy, cash conversion cycles, and incremental improvements.
   
   

You need to understand your numbers—deeply—and teach financial literacy throughout your company. If you truly believe in your purpose, profits and cash flow are the fuel that lets you amplify that impact.

Absolutely. It’s not “build a great business and profit will come.” You need to design for profit. I always ask entrepreneurs to explain their pricing strategy, and I get blank stares. There’s often no strategy—just a markup or market comparison.

Exactly. Which means they’re not thinking about value differentiation, margins, or how pricing affects their ability to reinvest in their mission.

These five obsessions—great people, inspiring purpose, optimized playbooks, culture of performance, and profit—create a framework that can be personalized and scaled. And that’s what we help organizations implement.

That’s what’s so unique about your approach—the personalization. The fact that these are obsessions, not just ideas or best practices. When someone’s obsessed with excellence, it drives everything.

Right. If you’re obsessed with purpose, obsessed with your people, obsessed with performance—it permeates every part of the organization.

So let me ask you—where do most organizations go wrong? Of the five, where do they fall short the most?

I’d say two main areas.

First, they avoid hard conversations. They let underperformers stay too long, hoping things will magically improve. There’s a great documentary on professional poker players that explains the difference between pros and amateurs. Pros fold bad hands quickly. Amateurs keep chasing that one card. Leaders do the same with bad hires or bad fits—they wait too long to make the call.

Second, they fixate on cost instead of value. They’ll stick with a B or C player to save $15,000 a year, instead of hiring an A player who could generate five times the value. They don’t think about the ROI—they think about cost.

That’s such a good point. Hiring A players is an investment. You’re basically getting high ROI talent with 0% interest over 24 months. And the indecision of not making that hire—or keeping someone who’s underperforming—costs you even more.

Exactly. And if you have systems in place to define, measure, and coach performance, then you can take those hiring risks confidently because you’ll know within 90 days if they’re going to deliver or not.

That makes sense. And again, both issues—indecision and under-investment—are mindset issues. Which ties back to why you personalize your systems to individuals. Because that mindset has to shift first.

Yes. And that’s something we evaluate during the early conversations with potential clients. We don’t have a sales process—we have a confirmation process.

That’s refreshing. Explain that.

We’re not trying to sell anyone. We’re trying to confirm that they’re a good fit. Our guides all have limited capacity, and our flywheel is built on raving fan referrals. If someone doesn’t have the drive to operate at a high level, they won’t get great results, and they won’t become a raving fan. That hurts our business.

So we’re protective of our time. One of our guides said it best—we’re not auditioning for them. They’re auditioning for us.

That’s a mindset shift in itself—one of confidence, value, and clarity of purpose. And it’s something any high performer should adopt.

Absolutely. And we’re not looking for people who already have all the right habits. We’re looking for those with the intention and willingness to build them.

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Final Strategy Advice and Resources

So before we wrap, let me ask you this: Regardless of where someone is at—whether they’re a solopreneur, a CEO, or scaling their team—what final piece of strategy would you give them? Where should they start?

Beyond everything we’ve talked about regarding systems, one of the most impactful ideas I’ve come across is from Dan Sullivan’s book Who Not How. The premise is simple but powerful: Most entrepreneurs misidentify a “who” problem as a “how” problem.

My background is in operations, not marketing. Early on, I wasted a lot of time obsessing over the how instead of finding the right who. As entrepreneurs, we make the mistake of thinking we need to be the right person for every function of the business.

That mindset is a major bottleneck. Until you shift to thinking, “Who can do this better than me?” you’ll stay stuck. It’s natural to want control, but scaling requires delegation to the right people—not just anyone, but high-ROI talent who aligns with your obsessions.

So if you're stuck, it may not be a problem of needing more information or time. It might be that you haven’t found your “who.”

That’s brilliant. And it aligns perfectly with everything we’ve discussed. If you want to build an elite organization—or an elite life—you need elite people and systems around you. So where can people go to connect with you and take the next step?

Start at NextLevelGrowth.com. That’s the hub for everything we do.

You’ll find:

• Access to the book The Five Obsessions of Elite Organizations
  
  
• Downloadable frameworks and resources
  
  
• Information on our AI-based coaching companion
  
  
• Backgrounds of our partner guides—all of whom are former owners or CEOs of YPO-qualifying businesses
  
  

You can also visit FiveObsessions.com to go straight to the book page. It’s available on Amazon and Audible as well.

And if you prefer video learning, our YouTube channel has a ton of tactical videos—short, focused advice on real problems that leaders and entrepreneurs face.

Perfect. For everyone listening, I’ll make sure those links are all included in the show notes so you can access them quickly. I highly encourage you to check them out. Connect, download the book, subscribe to the AI coaching companion if you’re serious about building something scalable and sustainable.

And before we go, I just want to say thank you again, Michael. This was one of the most valuable conversations we’ve had on the show—truly actionable and deeply insightful.

I appreciate that. It’s been great, George. Thanks for having me on.

Absolutely. And to our audience: No matter where you are, it’s never too late to start creating the life or organization you were meant to build. That shift you’re avoiding, that decision you’ve been delaying—it’s time. Surround yourself with the right people, build with purpose, and don’t settle for average.

Be elite. Be obsessed with greatness. And as always, connect with us on Instagram, Facebook, or YouTube at The Daily Mastermind. Let me know what’s working, what you’re struggling with, and most of all—let’s celebrate some wins together.

We’ll catch you again later this week. Have a great day.

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Summary & Highlights

• Learn about the Five Obsessions of Elite Organizations, including great people, inspiring purpose, optimized playbooks, performance culture, and profit strategy.
  
  
• Visit NextLevelGrowth.com for coaching tools, frameworks, and the AI coaching assistant.
  
  
• Explore Nick Saban’s leadership mindset, Dan Sullivan’s Who Not How, and Isadore Sharp’s Four Seasons philosophy.
  
  
• Understand the ROI of hiring A players and building elite performance systems.
  
  
• Watch more insights on Next Level Growth’s YouTube Channel.

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About Michael Erath

Michael Erath is a seasoned entrepreneur who transformed his family's $8M business into a $45M global enterprise. After facing significant setbacks, including the Great Recession and internal fraud, he rebuilt his career by founding Next Level Growth. Michael is also the author of best-selling books like RISE: The Reincarnation of an Entrepreneur and The Five Obsessions of Elite Organizations.

Resources:

• Website: nextlevelgrowth.com
• LinkedIn: Michael Erath
• YouTube Interview: Key Habits of Successful Organizations

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