In the episode Bob Shearer, the co-founder if Shearer’s Foods talks with The Failure Guru on what he learned along the way to building a $1.1 billion company, his dedication to people, family business difficulties, and common mistakes he sees aspiring entrepreneurs make.
In this first official episode, Matt C puts his failures out there for everyone to listen to. He is interviewed by his close friend, Brian Donovan, a successful Hollywood actor and someone who knows where all of Matt’s “bodies are buried”.
In his introductory episode Matt tells you why he is focusing on failure to not only help you succeed but to be able to be okay with failure when it happens.
Understanding how will bring you clarity and peace this year.
How will you suffer in 2020? This is not a question that I will answer here. It is one that you will need to answer.
In my article “Are your employees suffering”, I wrote about how it is our nature to focus on pursuit and avoidance, and per Buddhist teachings, it is this pursuit and avoidance that leads to suffering. In case you did not read the article or are not familiar with the concept, below is a graphic from it that illustrates this and here is a link to the full article in Medium: https://medium.com/swlh/are-you-your-employees-suffering-d10ec9d9bfe?source=friends_link&sk=2b5fab1dd8608cd99e5212e00c117de0
This principle is very applicable in business and is probably the main source of dysfunction in companies because this pursuit and avoidance is part of human nature, and until Skynet takes over, companies will continue to be run by humans. That does not mean that the Middle Path philosophy cannot be cultivated in business, it just takes a lot of time, and attention, and needs to be an integral part of the overall culture.
However, once you learn to cultivate it yourself, it will change your life. To demonstrate how you can apply this to your life on a very specific basis, I will walk you through how I applied it to mine for 2020.
Starting point: In the fall of 2019 after losing my job I decided that I was going to pursue a vocation based solely on my gifts and developed around what I like to do, while eliminating things I don’t like to deal with. I came to this after reading the book, Let Your Life Speak, by Parker Palmer. I bought the book six months before reading it but never read it because I didn’t want to question that which I already knew.
My gifts: helping & mentoring people, being a leader and fixing things.
Things I don’t like: Managing people (there is a difference between leadership and management), holding people accountable, politics & drama. These alone, pretty much make it impossible for me to work in a leadership position at a company.
With these things in mind, I began to write about things I am passionate about in business based on my experiences: How and why businesses and people fail, why great cultures are elusive, and what we can do about each of these.
I then decided to build a business based around these things and set off to make it happen. The chart below illustrates where I am as of yesterday and where I intend to be by the end of 2020.
As we entered 2020, I started, with the help of my coach, to lay out specific objectives and tactics that I would need to implement in order to make this into a business. Easy-peasy, we are all familiar with doing this and have done it our entire careers.
Then I decided to apply the suffering model that I have written about to my goal. I have two choices. Number one, go for my goal while pursuing and avoiding the things below which will cause me suffering or number two, I can choose to encounter these things as they arise then continue on the path to my goal.
Well, I hate to suffer, have done enough of that and can always get a part-time job to pay the rent so its choice number two for me.
A great way to think about this concept of the Middle Path is to think of it in terms of its other name: The Path of the Warrior. The idea here is simple. Before we had drones, combat was hand-to-hand with swords, knives and knuckles. On the field of battle, the warrior did not spend time ruminating on the pursuit of success so that he could get a promotion, and he did not ruminate on failing or getting killed. Ruminating on the field of battle would only get him killed. He lived in the moment, dealing with things as they arose while traveling the path to victory.
By reflecting on the things that I would pursue and avoid in 2020 on the way to my goal, I am better equipped to recognize them, pick them up, examine them, then put them down and move on. Otherwise, I will spend all of my time hacking away at the bamboo below instead of staying on track.
I could probably stop writing here because I am sure the concept is clear and am sure that if you apply this to your 2020 goals and beyond, you will not suffer. You will sleep better, have more confidence and make better decisions while on your way accomplishing your goals. However, understanding what you will pursue and avoid is an uncomfortable exercise because it requires an honest introspection of what makes you suffer. You must put yourself out there for your biggest critic: you.
To help you get beyond this, I am going to take you thru my own introspection…making it public to my friends and the entire internet. If I can do it here, you can do it in private.
I will suffer as a result of pursuing the things below as I pursue my goal:
Quick success. I am impatient, hate long sales cycles and have always made immediate gratification a central focus in my life. Good luck to me, trying to go from making $1.09 writing last year to an annual run-rate of $100,000 in twelve months if I focus on quick success. Bring on the suffering.
High income. This has always been important to me as a measuring stick, and because I have always liked the things that made me look successful. If I make this a central focus, I may make decisions on my way to my goal that lead me selling out my mission of creating a vocation based on my gifts and one that does not include the things I hate to deal with. With my network, I could get back into the turnaround consulting business by the end of the day today, have 3-5 employees by the end of the year and be on my way to making a lot of money. No thanks.
Acceptance of my concepts by my peers. Let’s face it: Buddha and business? I don’t think I need to expand on this one. If you know me, you know that I don’t mince words, swear a lot and love a good pissing contest. I like tangible things and am not comfortable with putting concepts like this out there, except for the fact that I have found that they work.
Looking successful to my peers. This has always been important to me and is impossible to attain because no matter what I “achieve” someone will always achieve more. Please pass the suffering, I want more.
My peers talking with one another about how well I am doing. I want my friends to talk to each other about how well I am doing. For this to happen, I need all the above to happen as well. I am good, but not that good.
I am not going to go thru the avoidance side because they are the opposites of what I will pursue. Just by reading the list above, you can see how all-out pursuit of these things and avoidance of their opposites will only cause me to suffer while trying to attain my goal. Attaining it will be hard enough as it is, I don’t need to suffer for reasons that are ultimately meaningless in life and to my goal. I will deal with them as they arise by taking the Path of the Warrior.
So, how will you cause yourself to suffer this year?
In Q1 of 2020 I will be launching the Failure Guru podcast where I will interview executives of failed businesses to dissect what happened, why it happened and what they would have done differently to avoid failure.
It promises to be very insightful, personal, emotional and full of lessons we can all use. If you know of anyone who would be interested in telling their story, please send them my way.
Also…my blog has been refreshed to add information on my executive coaching practice, speaking topics, as well as a short bio on me. I am open for business and looking coaching and speaking opportunities.
Thanks to all of you who have been active in supporting this, here is a peek at the cover art for the blog:
Working outside of your core competencies can put you out of business.
By their nature, many entrepreneurs are idea generators, and have never had an idea they didn’t like. I was the same way back in my twenties, which was only amplified by that fact that I had another trait entrepreneurs have: I was always swinging for the fence.
If you have read some of my previous posts you already know that when my sister and I were running the family candy company, my decision making was guided by my ego. In the quest to grow, many of the decisions I made led to making products that sold great but were more costly to make because they involved manufacturing procedures that we were not competent in or couldn’t pull off on a large scale. Not only that, I didn’t anticipate all of the bottlenecks this would create which added costs that I did not capture.
Had I “stuck to my knitting” in the first five years of the business, we would have only made products that we could manufacture efficiently with the equipment we had. The result after five years would have included some of the following:
- We would have had the business paid off.
- We would have been profitable.
- We would have been debt free with a balance sheet that could support growth.
During that five years I would have also been able to put together an executable strategic plan for years five thru ten instead of swinging for the fences all the time with my latest, greatest idea. Like many entrepreneurs, I knew a home run would make us really profitable.
The “home run” came when we landed the Starbucks account. For three or four years I had been submitting potential products to them, only to receive rejection letters (yes, companies used to do that). I kept all of these rejection letters with the intent of framing them along with our first PO and a copy of our first check from them.
During that time, we developed a Bavarian pretzel that was coated in peanut butter melt-a-way then covered in milk chocolate. This was an industry innovation that, while slightly outside of our core competency, was not entirely because we packed and sold them in bulk to coffee bars in Nordstrom cafes and in the coffee bars that Eddie Bauer used to have in their stores. I was dying to sell these to Starbucks.
One day I received a call from the buyer at Eddie Bauer telling me she was leaving EB, couldn’t tell me where she was going but would be calling me when she got there (How many times has that happened to you?). EB was headquartered Seattle. I was chomping at the bit, and yes, she landed at Starbucks.
I flew out to Seattle and took her and the buyer I would be working with to what at the time was the most expensive dinner I had ever taken a customer to. I remember calling the number on the back of my credit card after we got the bill to see if I had enough credit to pay the $350 bill!
The buyer wanted us to create what would be another industry first: a chocolate covered s’more. Keep in mind two things before you read about the product: First, it had to retail for $2.99 and be packed in boxes of six. Second, it takes all kinds of expensive automation to make this product if you plan on making any money on it. Automation we did not have. The volume was enormous.
This s’more was a graham cracker with caramel on it, and marshmallow on top of the caramel. Those are two separate procedures we would need to do by hand, at separate times, before ever covering them in milk chocolate and then decorating them with dark chocolate. We did not have the capability to do the contrasting decorating. Below are the steps to making it and whether or not that step was automated or manual for us:
- Making the caramel: manual
- Making the marshmallow: manual
- Applying the caramel and marshmallow: both manual, thru a hand funnel on graham crackers that were hand place on large trays.
- Loading them on our enrober to be chocolate coated: manual
- Chocolate coating: automated
- Cooling: automated
- Packed into individual bags: manual
- Bag sealed: manual
- Bag labeled: manual
- Box packed: manual
- Box labeled: manual
- Box taped: automatic
- Boxes stacked on pallets and shrink wrapped: manual
I can’t recall exactly but I think we sold these for at most, $1.80. The bottlenecks alone probably cost more than the selling price and we would get POs for 20,000 cases at a time.
This product threw my entire manufacturing operation into complete shit shows when we had to make these orders. But hey, I was growing the business. We even had to subcontract the labeling of the bags prior to a production run because we couldn’t keep up the labeling. When I finally purchased a used flow wrapper, it helped the packaging but worsened the bottlenecks after that because we didn’t have automated case packing.
The product was selling well, and the buyer wanted to come to our booth at the Chicago candy show. We were not exhibiting there so I flew out to take her to dinner, essentially, to use up one of her nights so that a competitor couldn’t take her out. At that dinner, she wanted us to make another product for her. I won’t go into detail on this one, but it was even harder to make than the S’more and there was no way I was going to take on an even harder product. I just lied. If you knew me then or have read my earlier, “How to Fail” post entitled: Sell,sell,sell, you know I would not walk away from this. The complexity of this product eventually led to us losing all of the Starbucks business. The S’more ended up going to a competitor I could not stand, who had been making simple, chocolate covered graham crackers for them for years. He was good at sticking to his knitting and had the cash to invest in the automation.
At the time, we were only doing about $1M per year in business and I can guarantee you that both of these products for this huge customer had negative gross product. In other words: We were taping dollars to boxes when we shipped them an order.
Takeaway: Growth is good, but growth that is out of control and not supported by a written and achievable strategic plan is not. Growth grounded in a desire to make it big and do so fast, can put you out of business. Yes, there are times when you need to pivot and times when you need to go for it. But decisions to do so are only made after critical contemplation and analysis. Otherwise, stick to your knitting, make money in ways you know you can while setting yourself up for future growth.
What is the root cause of failure? Businesses fail for many reasons some internal and some external. Experts will tell you about the many ways to pursue success and avoid failure. Patrick Lencioni, Jim Collins, and Verne Harnish each have amazing business minds, are top thought leaders and are people I admire and whose lessons I use every day.
But even as we develop a great team, create a flywheel and put effective systems in place, what is missing? There is something going on in the minds of everyone in the company from the people on the production floor through the C-Suite that has influenced their lives from a young age and became even more dominant when they entered the workforce because they need to earn a living so they can put food on the table, clothes on the backs of their children, put them thru college and save for retirement. And those are just the basics.
For most of us, there are two constant struggles in our minds that hold us back, keep great businesses from being even greater and bad businesses from surviving.
First is the avoidance of failure. No matter how great things are going in your company, you and your employees will always be striving to avoid failure. Why? Because failure makes you look bad, can hurt your career and potentially ruin the company. This avoidance of failure becomes self-limiting, stifles creativeness and can sow dysfunction because most people will do anything not to be seen as the cause of a problem and deflect it onto someone else if it means protecting their ego and their job.
Second is the pursuit of success. We want to climb the corporate ladder, we want that bonus, we want to look good among our peers, we want our boss to praise us, we want, we want, we want. A business is made up of individual contributors and it is impossible for everyone to get an MVP trophy. This leads again, to self-serving decisions and dysfunction.
Have you ever been in bed with your wheels spinning, thinking about work? That is your mind working to avoid failure and pursue success so you don’t look bad.
This pursuit of success and avoidance of failure is human nature. We are naturally competitive and all have fight or flight triggers. This will never go away. However, as leaders, if we can create an environment of recognition where the relentless pursuit of success and avoidance of failure breeds unhappiness, dysfunction and drama, we will have a much better chance of having a company that lives up to is mission, purpose and values…while making money.
I would like to say that I came to this through years of research but I actually stole the idea, or, as they say in the knockoff business, “copied with pride”, found that it had an application in business and then I realized that I have lived it throughout my career.
This idea is based in Buddhism. Through my own personal journey of avoidance & pursuit, I started reading about Buddhism in the book called When Things Fall Apart by Pema Chodron. In the book I found the following concept about the cause of suffering. It can be summed up by the diagram below:
Buddhism suggests that there is a better way, The Middle Way or The Middle Path…The Path of the Warrior. On this path, like the warrior, we don’t avoid and pursue. We accept that we will encounter these successes and failures and we experience & deal with them AS THEY COME, we OWN them and move on.
As I wrote above, at the end of the day, all people in an organization have to feed their family, pay bills and save for retirement. They also reach for “Self Actualization” as Abraham Maslow wrote in his paper A Theory of Human Motivation. If this suffering can be minimized, Self Actualization becomes more attainable.
Knowing this, replace the words in the diagram above with words describing situations present every day in business:
Why does Buddhism also refer to this as the Path of the Warrior? My interpretation is because a warrior cannot contemplate victory or defeat in battle because doing so will surely lead to their death. For them, there is no time during battle for worrying about these things when the objectives are victory and survival. They are not interested in whether or not they will be promoted or demoted, and whether or not they will look good to their commander or peers.
This pursuit and avoidance is not supposed to be overt in business because business is supposed to be about teamwork and win-wins. The problem with this is that we are wired for pursuit and avoidance. How effective and how rock solid can your cultural foundation be when you and your employees, in the back of your minds, spend every day in this mode? Have you ever made a decision based on self-preservation or one that will allow you to avoid looking bad? Have you ever deflected a question from your boss or answered one in a vague way. If so, that is your mind avoiding looking bad.
Because of the suffering brought on by this pursuit and avoidance, what mistakes are being made, what dysfunctional current is flowing below the foundation, what turnover are you experiencing and how is all of this impacting everyone’s well being, your customer’s satisfaction, your bottom line and your ability to not just achieve but surpass your strategic objectives?
While we are wired this way, leadership can create an environment that minimizes its impact. One of the most important aspects of this environment is that it is one in which people are encouraged to own their mistakes, talk about what they learned from them and can be comfortable doing so because their boss supports them. When you run your next management meeting, try having your team go around the room and talk about a mistake they made in the business recently that they would not normally talk about in a public setting, start with yourself and you will see the levity in brings to that meeting.
Below is one of my favorite images that illustrate this concept of The Middle Path.
Here’s a question for you: Where does your mind spend its time in this photo? What about the minds of your employees?
People hate to make decisions and let’s face it, your people are not nearly as smart as you or they would have your job. Micro-managing gets a bad rap but the fact is that it streamlines your business because it ensures that every decision will be in line with what you want and it will also ensure that if and when your employees do make decisions, they will take a long time to contemplate them because they will be afraid of being wrong. And being wrong will only be further proof to them that you are the smartest person in the room.
Micro-managing is also really important to keep the company nimble and, on its toes, so that it can change at any time. Micro-managing accomplishes this by allowing you to constantly change your mind as you contemplate all of the fast decisions you made while trying to sleep at night. The more you thoughtfully approach second guessing your decisions, the more times you will change and tweak them and since everyone follows your lead, they will need to pivot. Knowing how your decisions always evolve will only further demonstrate to your employees that you know what you are doing and have the confidence to change course as needed.
Micro-managing also helps ensure that you will have a stable workforce because it will weed out the people who think they know their department, the company and the industry better than you do. You will be left with a loyal workforce who are so happy that they don’t have to make any decisions, they will never leave.
The downside to micro-managing is that when you do fail, it will be harder for you to blame other people but like any good decision maker, you know how to prioritize and since your goal is to create an Epic Failure, micro-managing takes a top priority over blaming others because having people smarter than you (if they even exist) making decisions that are based on succeeding will only make it that much harder to fail. You’ll find someone to blame later.
Given that I had a “growth at all costs” mindset at 23 years old with my thirty seconds of business experience and virtually no scar tissue, it stands to reason that the only thing I cared about was growing the top line and assuming that the bottom line would take care of itself. While that has validity…it is the balance sheet that determines whether or not your company will ever get to the point where the bottom line is taking care of itself. This is a trap that many entrepreneurs fall into…and I even took accounting and finance at John Carroll University! Go JCU!! While our income statement at Caiazza Candy may have shown profitability (which was rare), the balance sheet showed many warning signs. What were some of the signs I would have seen if I weren’t ignoring the balance sheet you ask?
- That my bills were coming due before my cash was going to come in (negative current ratio) and that I would fall behind paying suppliers.
- That my inventory was growing as a result of the fast growth which was putting my cash on ice until I could convert the inventory to receivables and then to cash.
- That my leverage was getting so high I would not hit bank covenants, even with positive EBITDA.
- That I was funding losses by borrowing on my line of credit which meant that I would not be able to pay my line off as required in my loan agreement, not only because of the losses, but because the value of the underlying A/R and inventory was less than the line balance.
At the end of the day, in addition to my actions, our lousy balance sheet was what was driving us out of business whereas a strong balance sheet would have allowed us to survive the “Idiot Curve”.
Takeaway: Profitability is obviously crucial. But no matter how profitable you are, you need cash to survive and grow or to survive until you turn the corner. A profitable company can go into bankruptcy if it doesn’t have cash. Allowing your balance sheet to become illiquid and heavily leveraged because you are not paying attention to it may have the consequence of putting your company out of business, but between now and then, while you are trying to fix things, it may have one of those wonderful consequences called an “Unintended Consequence” that will put you and your team in your own private hell at the time you can least afford to go there….we’ll explore that one soon.
Hiring and retaining great talent has always been difficult for those who are striving to build a profitable and enduring business. However, as evidenced by the way you run your business, you want to fail. So how can you ensure that you hire the wrong people to help you achieve your goal? While one may think that is easy to do…just hire somebody woefully under qualified for every position and just like that you will fail! But wait…would you rather be a flash in the pan failure or would you rather fail in an epic manner? If you are looking for a quick way to fail, don’t waste your time reading my blog. My blog is for those who want to go big or go home, my blog is for those who want to f$!k up big-time.
So, hire people who are qualified. But while interviewing, make sure you both develop a quick connection with one another. Let that person sell you on why they should hire you. After all, lesson #1 was “Sell, sell, sell” so you need good sales people in every functional department even if they are not directly selling. Additionally, hiring people that you are able to personally connect with is a great way to surround yourself with people who worship the ground you walk on, because after all, as a leader it is important to be liked. If you are not liked no one will be willing to put up with your micro-managing, no one will crave your attention and above all, you won’t have people around to validate your ideas, strategies & objectives. In other words, you won’t be able to surround yourself with people who tell you what you want to hear.
Because some people are really good interviewers they may be able to fool you into thinking they like you (which is probably easy in the first place) so I have used a great question towards the end of the interview that really puts them on the spot. At the end of the interview, after I have stopped talking about myself and my company, I ask, “So…enough about me, now why don’t you tell me about me.” If they can get through that question without stumbling, you’ve got yourself a winner.
Takeaway: Just as important as hiring a qualified person is hiring someone with whom you have formed a connection because that connection will ensure loyalty which is critical when it becomes apparent to your employees that you are taking the company down because if they leave, you won’t have anyone to blame.