Leadership – In Rotary Projects and Business

Some things are the same everywhere. I’m writing this on the flight home from Antigua, following our Rotary project. Last week we were at one of our favorite schools, a prestigious private primary school.

We had some issues with the Internet, so I talked to one of the non-teacher employees about it and asked if the principal, Mrs. Pringle, was still there that day. He replied that she no longer worked at the school and said if she did still work there these issues wouldn’t be happening.

Leadership is leadership whether it’s a large business, small business, non-profit, or a school. Good leaders keep the situation under control when “things happen.” And, the employees know (a good leader from an ineffective one).

Here’s a different example. Because we didn’t do this project last year all of our students were first timers. So, no experience. While the teacher assigned team leaders, after a few days we could see changes. On one or two of our teams the natural, take charge kids stepped up and very quickly we had the real leaders. They were the ones who not only knew what they were doing but did what needed to be done and instructed others on what to do.

In your business do you see people stepping up? Business owners, do you allow this to happen (employees taking charge)? I ask because a dependency on the owner is something I’ve seen a lot of lately and it usually means a lack of delegating. Combined with customer concentration issues (the owner has the relationships with the few customers totaling 75% of annual revenue). It’s a huge issue, it scares business buyers and banks.

“One of the hardest things in life to learn are which bridges to cross and which bridges to burn.” Oprah Winfrey *

* Owners, burn the bridge where you control everything and cross the delegation bridge.

Developing Versus Developed (Countries)

I’m writing this from the island of Antigua where we’re here on a Rotary service project, “Improving Education Through Technology.” We have 10 Bellevue school district students from the technology program working on computer networks and installing Wi-Fi networks.

There are similarities and differences between Antigua and the US. Some of the similarities include:

It doesn’t matter where you are, people are people. Some are different colors, different sizes, have different customs, etc. But they all (pretty much) care about each other, their country, their friends, and families. We are warmly greeted here by not only the local Rotarians but people at the car rental place, hotel staff, restaurant staff, and others. It’s like we’re old friends.

There’s a lot of growth in both countries. Seattle leads the US in cranes and Antigua has numerous new buildings, businesses, and restaurants since we were here last year, just not as high.

The roads suck in both places and traffic stinks. We saw a bumper sticker here today reading, “Not Drunk, Avoiding Potholes.” Not enough capacity, poor upkeep, limited planning – it seems to be universal – with road construction everywhere.

Some of the differences are:

There’s a lot more respect for leaders and authority here. Imagine this in the US: at a planning meeting Sunday one of the local Rotarians was talking about a meeting we had Monday with the Prime Minister. Even though the Rotarian is in the “other party,” when questioned he said how he would respect what the PM said as he was “my country’s leader.” Imagine a Democrat saying that about Trump or a Trump supporter saying that about a Obama or any future Democrat President.

The US, and especially areas like Seattle, are fortunate to have a lot of growth, capital to grow, and money in general. Things are pretty good all across the country. In Antigua, there’s a lot of impoverishment, menial jobs, and limited opportunity. If some think there’s a huge divide in the US they should check out places like Antigua.

We’re here because there’s a great need. The Ministry of Education has pretty much said they won’t support the primary schools with technology. This includes helping the teachers improve themselves so they can teach better using technology and the many applications now available. The students know more about tech devices and how to use them than most of the teachers – and they want to learn via their devices, not via the old blackboard.

“Human relationships are vast as deserts. They demand all daring.” John Ruskin

Fussy Buyers & Naive Sellers

My friend Dennis Hebert with CFO Selections called recently regarding a client of his who is thinking of selling to his COO/GM. The holidays got in the way and then Dennis told me he felt they didn’t have a good understanding of what it takes to do a deal, so he gave them a redacted purchase and sale agreement. It caused them to pause and think.

Business sellers often underestimate the complexity of what’s involved in selling a company. It’s their cute little puppy so they think everybody will think it’s adorable. Even when others find it adorable there’s still a lot of work. The amount of detailed information requested by the buyer, bank, and attorneys can be overwhelming. Deal fatigue is common.

Most business people are optimistic, it’s a necessary trait, and sellers are no different. The complexity of a buy-sell deal can be extremely high and reduce optimism. It’s not like selling or giving away a cute puppy.

On the flip side, most business buyers are too fussy. I remind all buyers there are no perfect businesses and no perfect deals. Watch out for anything that looks too good.

No small business saves the world or changes western civilization. But these businesses do create jobs, wealth, and a lifestyle, for both the employees and the owner. In fact, boring is often best. Buyers need to answer the following three questions:

  • Can you see yourself going in there every day?
  • Can you add value?
  • Is it a viable business model that doesn’t violate your values?

The rest is analysis, due diligence, negotiation, etc. And, on the flip side to the seller underestimating the complexity of the process, the buyer needs to realize they can always ask another question, and they need to get over that impulse, and make a decision. As I write in the preface to Buying A Business That Makes You Rich, buyers will make a leap of faith and it needs to be off a chair not the roof.

“How desperately difficult it is to be honest with oneself. It is much easier to be honest with other people.” Author Edward E. Benson

What Sets Business Owners Apart

What’s the difference between being a manager and being a business owner? Let me use a sports analogy. I recently read the following about new NFL coaches (as it’s that time of year where there’s job turnover).

“If there’s one thing I’ve heard from new head coaches, it’s dealing with all the things he’s not anticipating, and still devoting the proper time to the things he was.”

In other words, there’s a lot more responsibility. You don’t have just your silo of duties, you have everybody’s silos. It’s like the owner who told me he came to realize while he didn’t have to know how to do everything in the business, but he had to know what needed to be done, who needed to do it, when it was to be completed, and what it looked like when done (correctly).

And then there’s the unanticipated. I learned many years ago, the hard way, you can’t budget the whole day because something will sneak in the side door and disrupt your schedule. It could be a client situation, a great new prospective client, a negotiation item, etc. But something will disrupt your day and the tighter your schedule the increased odds this will happen.

Similar is scheduling meetings too close together. Especially in today’s world of smartphones, giving yourself enough time between meetings is smart. Because the tighter our schedule the more likely Murphy’s Law appears by having the first person we’re meeting show up late.

Coaches strive to become a head coach; many executives strive to be owners. It’s often more work but with higher rewards, financially and emotionally.

“Success is relative: It is what we can make of the mess we have made of things.” T.S. Elliott

The Five Types – Buyers, Owners, Employees

I’ve been in my industry for about 25 years. I’ve seen a lot of business owners, business buyers, wannabes, employees; meaning people of all types. I’ve concluded there are five types, whether they’re business buyers, owners/sellers, or employees. When it comes to buyers this analysis is after I determine if the person is an offensive or defensive buyer. Defensive buyers rarely do a deal. They’re too worried about any and everything including the economy, the industry, the debt, the weather, and especially (although they won’t admit it) their own abilities.

All of these types have beneficial traits, and some have more detriments than the others. It depends on the person and their objective. And, it depends on the life phase the person is in at the time.

Driven by money– everybody is driven, to some extent, by money. Even the homeless, which is why there’s so much crime near homeless encampments.

The business buyer in this category probably has significant assets but wants more. He’s worried he won’t have enough in 20, 30,40 years. He wonders if the company he buys can scale from $1 million in earnings to $5 million and how fast it can be done.

When this is a business owner/seller, employees and buyers need to be careful. This is the person who tilts the pension plan to 90% to owner and 10% to the few dozen employees. She pays as low a wage as possible, provides skimpy or no benefits, and is extremely aggressive as she blends her personal and business checkbooks (deducts personal expenses on the business’ tax return thus cheating the IRS).

Employees in this category are often in sales. Sell more, make more. Others climb the corporate ladder just for the pay. Seventy-hour weeks, no problem because they’re making more than their friends.

Driven by accomplishment– Offering a broad-based opinion, these people make great buyers, sellers and employees. They want a great income but it’s not the top (or only) motivating thing.

The success driven buyer wants to grow and expand, create jobs, innovate, and feel good about what they’re doing. They’re the owners (I know many like this) who will say something like, “Our earnings are $2 million a year but I still take only $20,000 a month in salary and reinvest the rest in the business.” He’s focused on the end game.

Owners like this are often most concerned with legacy. When selling, it’s take care of my employees, do good by my customers, etc. because I want to take my grandkids here in 10 years and see how well you’re doing.

Success driven employees are what you want. While looking for career growth, they want to be part of a successful team and see the results of their work. Many become owners later in life.

Life Balance– here we can lump all three categories together. They want to work a normal work week, be productive, earn a good living and still have time for family, hobbies, non-profit work, etc. These people don’t accumulate vacations because they want to work more. Owners in this phase are often “coasting,” working hard enough to make their great living but not wanting to grow too much.

Lifestyle– This is where it gets interesting because what on the surface seems like a great thing, it’s something that drives buyers nuts.

The buyers not driven nuts by this are ones often featured in articles about franchises, main street (mom & pop) stores, etc. They want something they’re passionate about, with reasonable income. But most buyers are in the above three categories not this one.

Here’s what I mean, via the combination of a few real-life examples. The owner said they work from 8-4, make enough money to get by, get done what they get done, and there’s always tomorrow. No urgency, no emphasis on the customer, and surely no career path for the employees. And, not much value to a buyer who will figure they’ll lose the employees when they come in and want to grow the business.

Employees in companies like this tend to be ones with bumper stickers like, “A bad day fishing is better than a good day at work.” It’s a means to an end to them. In a book I’m reading, “Invisible Influence” by Jonah Berger, he says it’s tough for those who want to be successful to relate to these people as there’s not much commonality.

Hate the boss– some people just hate authority, no matter who it is. My thoughts are when these people get so sick of working for someone else, they buy or start something that’s a job and nothing more. Route sales fall into this category as does anything else where the job is task driven and there are no employees, because they probably (would) hate employees as much as they hate a boss.

Employees like this can’t wait to leave (every day, especially Friday, and eventually for good). They’re the bad apples that make the culture rotten and if they ever inherit some money they’re probably gone, into some business described in the preceding paragraph.

Conclusion

In my day-to-day goings on I see, and want to see, mostly success driven and life balance people. I see quite a few money driven folks, nothing wrong with them especially if they also take care of their team, and if I was in the private equity world I’d see a lot more of them. The lifestyle owners and buyers don’t cross my radar and I stay away from the last type.

Think of your clients, your employees, your customers, and others. I’ll bet you’ll find you have a lot of them with the same traits you have.

Technology is Changing Unexpected jobs

Can you think of many industries not affected by technology?

You might think construction as people still pound nails, drive screws, lay flooring, etc. But plans are now downloaded, iPads are prevalent on job sites, communication is by text, etc. Cars are nothing but a computer on wheels. Kitchens have become high-tech with Wi-Fi appliances, Amazon Echo or Google Home devices providing recipes, being a timer, and more.

I mention this because of a Wall Street Journal article from last year titled, “Technology Spells End Of Roughneck Boom.” It seems automation and artificial intelligence are replacing high-paying blue-collar jobs in the oil drilling industry. One expert said jobs like measuring well conditions thousands of feet underground could decline by 25%. Also, efficiency is improved, inspectors now get their efficiency-driven schedules determined by a computer algorithm, they use augmented reality glasses that send real-time feeds to the office, and get back data via those glasses showing him how to perform complicated tasks.

This improved efficiency reminds me of one of my favorite stories. Bill bought a company that, in simple terms, sold blocks of service time. A good analogy is a hotel; if they don’t rent the room today, they can’t rent it twice tomorrow. The company’s website was a brochure and within a couple months he converted it to an ordering system, almost eliminating phone calls and phone tag. The good news is he didn’t get rid of the employees he had them do productive marketing work to grow the business.

We’re going through something similar. We just upgraded to Salesforce. We’ll use 10% of its capability but if it does the one primary thing we want it to do it will more than pay for itself in saved time – and everything else will be a bonus.

Like most things, there are good and not-so-good implications from new technology, new processes, or anything else. It’s using the good changes to overcome bad changes that makes a difference.

“Perfection is like chasing the horizon. Keep moving.” (Author) Neil Gaiman

It’s what you don’t know that can hurt you

On our recent Rotary service project in Antigua one of the adults with us is a dedicated vegan, which is fine, and it’s because of a combination of allergies and health concerns.

I say dedicated because at one meal he found a little cheese in his salad and had a meltdown, dumping his whole plate of food. The next night pasta was on the menu and after we were done eating, I asked him why he eats pasta. He looked puzzled so I said it’s because most pasta has eggs in it.

His look was priceless, and he avoided pasta the rest of the trip.

We often make assumptions about things, including our customers, our products or services, what the customer wants, what’s important to employees, etc. when we should be asking questions. All my vegan friend had to do was read a pasta package label. We need to ask customers and prospective customers, what’s the objective? Or ask, why? (or why not?) they made certain choices.

When “Word of Mouth” Isn’t Enough

I’m talking to an owner who’s pretty darn proud of the fact he doesn’t do any marketing or have any sales effort because it’s all “word of mouth.” He tells me this knowing I know his friend (with the same type of business) in a noticeably smaller market that has two to three times the revenue he has.

My first thought was, maybe if you did some marketing, you’d be making more money, and more importantly, have a more valuable business. By his own admission, this owner spends a good amount of time working “In” the business. He’s working well under his pay grade when he does this and probably works more hours than he would if he grew the business.

Word of mouth is great, especially for businesses like mine where referrals are the platinum standard. But those referrals only come as the result of marketing. But for a more traditional B2B or B2C firm (like this one that sells to businesses, government, and consumers) there needs to be marketing plus some sales effort.

A salesperson should be calling on the businesses and government buyers letting them know about new offerings, building the relationship, etc. As consumers, what’s the first thing we do when we need a new product or service? Right, we Google it. Some SEO or AdWords is sure worth a try.

Marketing is what creates customers, which creates buzz, which leads to the word of mouth phenomenon, and even more customers.

“I don’t always follow my own advice.” Edith Wharton

Getting Culture Right

In November I had the pleasure of attending the all-staff dinner as part of the Farallon Consulting retreat (Farallon is an environmental consulting firm on whose board I serve). It was an exhibition of culture at its best.

While I only heard reports about the day’s activities (and happy hour) I witnessed a group of people on the same page. While there’s an endless supply of “bad” stories about managers, culture, etc. a good way to start the new year is to consider what a good culture means, whether you have a few employees, dozens, scores, or hundreds.

  • Realize even companies with the best culture still have issues, but those issues are at the other end of the spectrum from the shenanigans on The Office. It’s simply because people are people.
  • A good culture means better collaboration to achieve goals, whether it’s increased revenues, better productivity, reduced costs, or anything else. When employees work well together the boss (business owner in small companies) spends less time refereeing and more time strategizing.
  • When employees enjoy their work environment they want to work there, will do extra, will not be job switching and that means higher employee retention. Given the costs of replacing someone, this is huge.

There are a lot of people who help companies improve their culture, and it’s worth it (when done correctly). This month is a good time to assess your culture and do what it takes to improve it.

“Every day on Earth is another chance to get it right.” Steve Earle