Revisiting an Old Friend – The Importance of Employees

I read a short article recently where the writer was describing his frustrating experience when making a food and beverage order, which he repeated twice, had it said back to him, and it still was wrong. His sub-headline was, “It’s hard to get good help these days.”

I’m sure he was being somewhat sarcastic, but it’s true. It’s really hard to find good people and keep them. Almost every business owner or executive I talk with tells me the same story, which is, they could grow faster if they could find more employees. Notice I didn’t write “good” employees.

I know businesses that have stopped doing drug tests for positions not requiring one (like for a commercial driving job where it’s a requirement). A friend was surprised last year when his new employer told him they don’t do drug testing (and this was not in a state which legalized marijuana, which adds its own set of issues).

On July 30, 2018 the Wall Street Journal had a front-page article titled, “Employers Eager to Hire Try a New Policy: ‘No Experience Necessary.’” This is a big swing from the post-Great Recession era when talent was abundant, and employers could be fussy. This covers a wide range of industries from mechanics, to programmers, to management and everything in between. The article also mentions reduced drug testing and reduced background checks.

Which bring us to the situation facing most business owners, which is, “How do I attract and retain good people.” In fact, I have added this as one of the first few things an owner should do when preparing their business for an exit.

One of my favorite stories is about a business buyer who, when the seller said he couldn’t talk to the key people prior to the deal closing, said to the seller, “You may think I’m buying your business but I’m really buying your people.” Private equity groups buy management teams and individuals buy an operation having capable people with diverse responsibilities.

What this means to an ongoing operation is invest in your people because they’re hard to replace. The tech firms get this with all the amenities they offer on and off campus. Most people work for small companies because they don’t want to be one of thousands. My friends at Pacific Tool have monthly BBQs, at Pacific Studio they have regular “Beer Fridays,” and Spectra Labs has Tacoma Rainiers tickets for their staff.

But it starts with hiring good people. Another of my favorite stories is about when a client almost gagged when I recommended he hire two new salespeople with a monthly base salary double the highest they had ever paid before. He smiled three months later when both of those salespeople were into commission (and in record time). They were worth it!

Finally, all of the people who can help you grow don’t have to be employees, especially if you don’t need them full time. You can outsource bookkeepers, controllers, CFOs, IT experts, HR, sales experts, C-level management, and more.

Conclusion

Computers, machines, and artificial intelligence can replace some people and improve productivity. But you still need people, good people. Find them and keep them. The cost of replacing them is incredibly high.

When All Employees are on the Same Page…

At a meeting with a group of clients last week our presenter, my friend Hugh Blane, asked an interesting question – “Can every employee articulate your strategy and their role in accomplishing it?” The question stumped a few people and in a test phone call to one client’s company the manager receiving the call was a bit indecisive with the answer. It’s a good exercise to make sure employees, especially those who have customer contact, know the firm’s strategy and value proposition.

When Free is Best

We had just begun a multi-hour car trip, tuned the radio to XM’s Bruce Springsteen station, and they were starting a replay of one of his concerts, from Seattle! As they play these concerts they promote the website, www.live.brucespringseen.net, where you can buy entire concerts (at reasonable prices).

To the best of my knowledge the Grateful Dead were the ones who took it a step further and started not requiring all content to be paid for (albums, tapes, CDs, etc.). (Just look how it’s proliferated on YouTube.) They encouraged fans to record shows and share the bootleg recordings. On the other hand, I understand keeping tight reins on content like movies where the only way to make money is via ticket sales or DVD or streaming rental or purchase. But if the objective of the content is to sell concert tickets, services, or something else, the more (free content) the merrier.

For the Kindle version of my books I allow readers to share with others. I’m glad to have people share what I’ve written or said (as long as the attribute it to me).

Think about this for your business. What can you put out in the world that will lead to more business? Have a problem with your garage door, appliance, vehicle, plumbing or electrical? There are tons of YouTube videos on how to solve the problem.

Become the expert and then let others know you’re the expert.  Because, for every person who can figure out how to do something via a YouTube video, your book, or anything else, there are multitudes who will need your help.

“In the beginner’s mind there are many possibilities, but in the expert’s there are few.” (Zen master) Shunryu Suzuki

One Track Minds Means Inefficiency

I look across the lake (figuratively) at Seattle and its City Council. I see a bunch of single issue councilmembers with no big picture focus or strategy. This was confirmed by the headline in the July 19 Seattle Times about how the city wants to push forward with more bike lanes. The sub-headline was about how transportation officials see obstacles, mainly all the existing construction downtown.

But Seattle has a couple councilmembers who only care about having more bike lanes (forget the homeless, mentally ill, etc., we need bike lanes). Without effective leadership you have a dysfunctional organization, whether it’s a government, business, or non-profit. And it got me thinking of a few businesses I know and their issues.

  • A friend doesn’t believe in business plans, strategy, metrics, job descriptions, etc. Is it any wonder the firm bounces around and he spends almost as much time doing things like driving a truck as he does running the company?
  • Another firm has a COO who runs roughshod over the owner. He doesn’t listen to the owner, won’t hire people for needed positions (he can do it all), and makes sales at low margins. No leadership, no (positive) results.
  • A past client thought delegation was a sign of weakness. So, he had his hands in everything. From bidding (his expertise), to sales (he was good once it got to the technical part), and accounting (of which he knew almost nothing, especially regarding the balance sheet).

During speaking engagements, I tell audiences a good business buyer and owner is someone with skills managing people, processes, systems, and money (to some varying degree). The people part is the most important, especially giving them the latitude to grow.

“The art of delegation is one of the key skills any entrepreneur must master.” Richard Branson

“You always hear about delegation, but people make the mistake of delegating and not following up. I give authority, but I stay in touch. Otherwise it doesn’t work.” Wayne Huizenga

Predicting Business Success and Sports Drafts – A Crapshoot

We were trying to help a young friend of the family with his job search (before and after insisting he meet with Matt Youngquist at Career Horizons). Whether it’s just him or because he’s a millennial but he was pretty full of himself. We think his attitude was (is), “I’m smart, I’m cool, and I’m in digital marketing so companies will be chasing me.” His effort reflected this.

I kept telling him it’s expensive for companies to make a hiring mistake. No matter how good someone is, they’re going to take their time, do multiple interviews, and thoroughly vet everybody. He never seemed to get this.

Which brings me to the topic of this memo. It’s hard to predict results. Sports are exciting because of upsets. The person with a chip on their shoulder often turns out to be the best employee.

  • With all the pre-employment tests, interviews, background checks, and more, it’s still a crapshoot. I remember helping a client as he hired a supposed super-star salesperson in his industry. Everything, and I mean everything, aligned the way you’d want it to. And the guy was a bust.
  • When I’m coaching or mentoring people new to the advisory world I hear all the right things when it comes to marketing. Then the real-world hits. I remember one of our Partner On-Call franchisees who said all the right things but couldn’t get over the barrier of, “I’m selling myself not a big company.” He couldn’t handle being the guy at the desk where the buck stops.
  • In the buy-sell world it’s always tough. The seller must, absolutely must, feel the buyer can successfully run their baby, I mean business. The buyer must trust the seller to the extent they feel everything is on the up-and-up, so they’ll have every opportunity to take over and run with it.

The above is why when you find a good person, keep them. When you find a good business strategy, implement it. And when you find what works for you so you’re productive and happy, go for it.

“Never think you’ve seen the last of anything.” Eudora Welty

Getting the Owner Out of the Way

I posted recently about seeing a rash of mangled financial statements. I wrote it’s my top item owners should fix to increase value, and just behind this is getting him or herself out of the way.

In the last couple weeks I ran into companies where the owner:

  • Is the only one who does the bids.
  • Spends over 80% of his time doing “billable hours” work (a professional firm).
  • Makes 90% of the sales.

Who wants to walk into these situations? What you want is a company, like the one whose owner I met last week, that has the structure to allow the owner to take three or four boating vacations (a week or so each) in the middle of their busy summer season.

The three items above are what’s known as a serious dependency. The boating-owner company is an example of management depth and successful delegation.

Wanted: Accurate Financial Statements

Once again I’m in the middle of a deal where the seller treats accounting like a weak little step-sister. Garbage in-garbage out syndrome, co-mingling businesses, no controls, blending of the business and personal checkbooks, etc.

Solid financial systems and (therefore) accurate financial statements are one of my four top things an owner can do to increase value and prepare for a sale. After the run of mangled financial statements I’ve seen this year it’s my number one reason, with a bullet. Set the accounting up correctly, keep in under control, and you’ll spend less money than having your accountant correct it every year and have to adjust it when the business is sold.

FYI, my other top things business owners/sellers should do are 1) Show you can grow, don’t just say it, 2) Get rid of dependencies, especially on the owner (lots of those this year too), and 3) Prove you can attract and retain good people.

You’re Camping, You Don’t Need to Wear Underwear

We were fishing along the shore and came across the campsite of a group of early-teen canoeists who were just waking up and making breakfast. All of a sudden I heard one say the title of this memo.

There are certain things we need all the time and some we need some of the time. I’m not going to offer an opinion on if you really need to wear underwear when camping. Go with your preference.

In life we all need certain things from food, water, shelter to Maslow’s hierarchy of needs. In business there are also some basics and they include:

  • A solid competitive advantage, which includes your value proposition. Your competitive advantage is why people pay what they do so you can make a profit, stay in business, and support your employees and their families.
  • A way to let others know about your value, i.e. a good marketing plan. Even the most valuable brands in the world like Apple, Google, Coke, Microsoft, etc. do marketing and advertising. Nobody will do it for you.
  • Good operations and delivery. This could be production efficiencies, being organized, having solid systems, and more.
  • A way of knowing how you’re doing. This means accurate numbers and monitoring them to make sure you’re not off track.
  • Finally (for this essay), a solid team. Because if there’s a dependency on the owner or certain key employee there’s a catastrophe waiting to happen.

Take care of the basics, do the things you’re supposed to do, and good things will happen.

“Doubt can motivate you, so don’t be afraid of it.” Barbara Steisand

 

Moving a Deal Along with Empathy

When working with business buyers and sellers I’ve found those who demonstrate empathy to those on the others side get things moving faster (than those who simply approach it as a transaction).

This was recently highlighted by the actions of a client of mine. They noted how the other side wanted to proceed in the areas of pace, disclosure, relationship, and more. They quickly changed their process and focused on how the other side wanted to proceed.

And guess what? The relationship is incredibly solid and we’re ahead of schedule.

Which Employee Would You Want?

A little after they opened at 9 am on the Friday before the July 4 weekend I went to get a haircut. I wasn’t the only one and was told it would be about 20 minutes. So, I walked across the street, got a cup of coffee, checked emails, etc.

I came back 17 minutes later and instead of two stylists there was only one. After a few minutes another customer told me the other stylist didn’t feel good and was across the street getting food. (My thoughts flashed to my friend Steve Brilling’s stories about owning hair cutting franchise businesses and his biggest issue being the punctuality, mood, and condition of the stylists.)

The stylist came back, went behind the counter, and ate her food. By now there were five or six people waiting. Two other stylists were scheduled to start at 10 am, one arrived about 9:45, and the other at 9:50. The first saw the situation, quickly got ready, and said he’d start early (and I was next). The second proceeded to setup, clean his equipment, and watch the clock. At 10 am sharp he took the next customer.

So which employee would you want, the one who jumps in to help or one who watches the clock? What about the one who showed up not prepared to work and had to take 30 minutes off to get food and eat it (and 9 am is not an early start to the day, is it?).

The above is not uncommon, just substitute any industry. Every business is looking for employees, great, good, and even not-so-good. Employers tolerate mediocre people because it’s better than the other options. Companies are moving away from drug testing to get people.

This is why I added, “Show you can attract and retain great employees” to my items of what owners should do to make their businesses more attractive to buyers.

“Your employees come first. And if you treat your employees right, guess what? Your customers come back, and that makes your shareholders happy. Start with employees and the rest follows from that.” Herb Kelleher