Tag: Family Business

I Don’t Care About My Job

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In the past year, I have used this phrase three or four times when in conversations with people with whom you would not normally utter those words. I used them with two shareholders, my boss and chairman of the board, and in a job interview.

These are normally words spoken by an employee over a beer with a friend or co-worker while either complaining about their boss or their company, talking about their job search or simply explaining that work is not the most important part of their life.

This article isn’t about all the reasons the companies cause people to feel this way about the hand that feeds them. Rather, it is about why you shouldn’t care about your job, and if you manage people, why they shouldn’t care about theirs. I write a lot about the intersection of human nature and business, and how managing and understanding the basics of human nature is critical to building a culture with structural integrity.

To illustrate this, let’s take a look at Maslow’s Hierarchy of Needs below:

Based on the above, I need my job to cover the most basic needs for myself and my family. Once I have that covered, I want my job for reasons of belonging and self-esteem. I use the word “want” instead of “need” because for some people, those needs are met elsewhere, but since this blog is about business, let’s assume that your job helps contribute to the attainment of this need. If you care about meeting the basic and psychological needs above, you darn well better care about your job or you won’t have one.

However, this hierarchy means there is an inherent conflict of interest between you and your company. That is, as long as your needs trump those of the company’s, you will always be pre-disposed to make decisions in your own self-interest as opposed to what is best for the company. Examples may include:

  • Not speaking up in a meeting when your opinion differs from everyone else’s
  • Not calling out your boss (in private please) when he or she is making a decision that is not in line with the company’s mission
  • Deciding not to stick up for a co-worker who may have his or her back against the wall
  • Not pushing back on your CFO when they are making a decision on a customer that could have a ripple effect that won’t be felt until it is too late

Assuming that your company would not keep you employed if you were not effective and right for the company….stop caring about your job. Let it be known when needed that you don’t care about your job, but rather, you care about the company and will only make decisions that are congruent with the company’s goals.

If you are doing a good job in the first place, one of two things may happen when you stop caring about your job and start acting solely in the best interests of your company. First, your job satisfaction will increase because you won’t mull over throughout your entire commute home what you should have done or said in the management meeting, bitched about it to your partner all through dinner, and thought more about it while trying to be present with your children. Second, if not caring about your job doesn’t go over well in the office, you may end up eventually firing yourself and finding a company where respectful dissent is valued and encouraged because at the end of the day….what’s best for the business is ultimately what is best for all stakeholders.

Structural Integrity

How to build a culture that will enable your business to stand the test of time.

Photo by Les Anderson on Unsplash

The pyramid of Khufu is thought to have been built around 3,200 B.C., and as with all of the other Egyptian pyramids, has stood the test of time like no other man-made structure on earth….and they were built on sand!

For years the pyramid has been a symbol used in business to visually show the characteristics or general steps that need to be taken to reach the pinnacle of success. It is a very effective tool for communicating what needs to be built on what, and what priorities come first in order to reach a goal, whether it is a departmental goal, a company goal or cultural goal. There is always a foundation on which all other layers are built and each layer supports the next until the pinnacle is placed on top. If you work for a company, chances are there is a poster somewhere depicting a pyramid. Here is one I once used to use to illustrate what is most important when it comes to production:

But is it really the best symbol of a business? I don’t think so, and here are some reasons why:

  1. Pyramids are build on sand, sand shifts.
  2. Once the foundation is built, its size is dictated. You cannot add on, and you still need to pay the utilities even if you don’t occupy the whole thing.
  3. As for occupying it…there is only room for one person.

Chances are, you don’t work in a pyramid. You work in a building, whether it is an office building, your home or your neighborhood Starbucks.

The building in which you work must have structural integrity or it will fall down. A great culture is the same…it must have structural integrity. It must have the same basic components of a building to have structural integrity.

It is often said that a great culture is the foundation of a great business. We need to think of culture as an entire building, not just the foundation, for two reasons. First, we work IN a culture, just like we work IN a building. And, second, a structurally sound culture is made up of key components that keep it from imploding on itself…just like a building. To illustrate this, let’s look at the main structural components of a building as they relate to building a great culture. The diagram below is from fema.gov and illustrates this perfectly.

Source: http://www.fema.com

Footers: The Four Absolute Values

The most important part of a building is its footing. The purpose of a footer is to spread the weight of a building across a larger surface and to keep the foundation from shifting. From a cultural standpoint, footers represent The Four Absolute Values. What makes these specific values so important is that, unlike the Operational Values discussed below, Absolute Values take courage to live by. Values differ from company to company, and are meant to be a set of guidelines for how the business is operated. They tend to be words such as integrity, excellence, hustle, creativity, etc. However, these Four Absolute Values must be present as footers in the culture because it is these values that the rest of a culture is be built upon. These values must be lived by top leadership to set an example for the rest of the company. They are “Walk the Talk” values. Without them, dysfunction will eventually breed. When leadership lives by these values, others will have to courage to live by them as well, resulting in trust throughout the organization. The Four Absolute Values are the following:

Transparency. This value is about information (financial, directional, etc). When a company is transparent with its information everyone is on the same page, there is no need for guessing, and rumors. Employees are always privy to the information necessary to understand exactly where the company stands, where they stand in the company, and whether or not the company is the right place for them. Too many times, leadership is not transparent because they are concerned about losing people or hiding things. Newsflash: employees always know what is going on because people talk. Transparency by leadership allows the narrative to be controlled, creates a sense of comfort for all employees, demonstrates trust, and keeps everyone on the same page. 

Integrity. Integrity is defined as “firm adherence to a code of especially moral or artistic values”. It is about doing what is right, not what is convenient for the individual for self-preservation reasons. Although self-preservation is a human trait, if it is engrained in a company’s culture there is no way that all stakeholders will benefit from the company’s results. When integrity is lived throughout the organization, employees know that they can count on their managers and on their co-workers.

Ownership. This is one of my favorites, the importance of which took me years as a young business person to understand and practice. I can recall meetings when the CEO would come down on a VP because of something that happened relative to that person’s department. So many times, I would hear the VP deflect blame to another department or worse yet, to one of their direct reports. This led to a lack of trust by those around that person. If you have read Patrick Lencioni’s The Five Dysfunctions of a Team, you know that a lack of trust is the primary reason for dysfunction. Lack of ownership also leads to something we all hate: more meetings. When Ownership is lived as an Absolute Value by leadership, it provides a space whereby all others are more willing to take ownership without fear. It provides a space where it is okay to admit to a mistake, learn from it and move on. 

Humility. If, like me, you grew up in business in the 1980s this is not a value that we tend to think of as inherent in high-performing CEOs and leaders. However, it is the type of value that is critical in business today, not just for leaders but for entire companies. Humility as a value signifies to the organization that leadership is “free from pride and arrogance” and signifies the same to all stakeholders as well as the outside world. In his book “Good to Great”, Jim Collins refers to the Five Levels of Leadership with Level Five being the pinnacle of great leadership, and where humility is a given. Couple humility with killer instinct and your competitors won’t know what hit them.

Humility is an antonym of “Ego”. Probably 99% of the mistakes I have made in business, and failures I have had in business were because of my ego. Ego can cloud your judgement, it can drive away good employees and can be a huge warning sign to investors. Ego, is what can lead you to ignore the voice in your head that knows what is best and to lead you to not listen to others. On the other hand, Humility is what allows us to listen, it slows us down, it allows us to be considerate of others. Without humility, the other three Absolute Values will be elusive. A good friend of mine in the finance business once remarked that before they invested in a company, they always tried to find out what the CEO’s reputation was like from people like the security guards in the lobby or the people who cleaned his or her office. Did he or she know their names, talk to them, etc? If you are out to quickly build a business, sell it for F.U. money then sail into the sunset, humility may not be that important as a Absolute Value. But if you are trying to build something enduring…it is essential.

As a leader, if you can nurture these Absolute Values in yourself people will stick with you thru thick and thicker, because in return for living these values you will earn the type of trust that lasts a lifetime. Construct the company’s foundation on these footers and there will be no limit to how high you can build.

Foundation: Purpose

Capitalism, without question, has generated and spread more wealth than any other economic system in all of human history. It created an entire middle class in the 1900s, enabled the United States to help the good guys win WW’s I and II, enabled us to spend the Soviet Union into insolvency, and has led to some of the worlds greatest medical and technological advances. There is one problem though: That darn human nature, AKA, Adam Smith’s “Invisible Hand”. Human nature has had the unintended consequence of creating and perpetuating social problems that could have been avoided had businesses always operated for the benefit of all stakeholders and with a pursuit of not just profit, but Purpose.

In 2019 The Business Roundtable issued its periodic “Principles of Corporate Governance” and for the first time since it started doing this in the early 1980s, it endorsed the notion that corporations need to exist not just for the benefit of its shareholders but for ALL STAKEHOLDERS. One hundred eighty-one CEOs signed this document. In signing it Alex Gorsky, Chairman & CEO of Johnson & Johnson remarked about the newly worded governance principles: “It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders

Back to the 1980s: When I was in college recruiters would come to campus for large companies espousing how we could have long and prosperous careers with their particular company. As candidates we just cared about landing a job, landing one for as much money as possible, and one that gave us the best chance of climbing the org chart. In exchange for that, we worked crazy hours, traveled incessantly and put up with bosses who would think nothing of dressing us down in front of our coworkers. Profits and bonuses were all that mattered.

Today, labor is mobile. We live in a gig economy where employers need us more than we need them and where business has the ability to help address some of our biggest social and economic issues in ways government cannot.

Businesses are in the unique position being able to help with these social issues specifically because in business, IT IS about the money. Profits allow for reinvestment in the business, and towards it’s Purpose. This cycle of reinvestment can become a flywheel for Purpose.

Also, money is nothing more than a medium of exchange. When businesses also serve a Purpose, that Purpose itself becomes a medium of exchange. For example, if the Purpose of Dorky Donuts is to help young, disadvantaged African-American children to graduate from high school and attend college or trade school while at the same time becoming a 5,000 store chain in pursuit of Profits, it gets to convert that Purpose into cash and exchange it for the labor of people who want to work at the company, not just because they like to eat jelly donuts and help build a 5,000-store chain, but because the Dorky Donuts’ Purpose is important to them. It is part of the reason they “took their talents” there in the first place.

Authentically pursuing a Purpose as well as profits is critical for attracting and retaining the best talent, and for ensuring that the business is operated for the benefit of all stakeholders. Those stakeholders include not just shareholders, employees, customers, and vendors, but the community at large.

Columns & Beams: Operational Values

Columns and beams are used to support the weight of a building’s upper floors and its roof. They give structure and shape to the building and determine outer limits of the building since they support the outside walls. All business activity is conducted within these columns. 

Operational values are values that describe the characteristics looked for in team members and the way in the company “does business”. They are not Absolute like the footers, and as such, can change as the business progresses thru its life cycle. 

For example, a startup may have survival oriented values as their columns: hustle, fail fast, creativity, and passion. Although I have seen many mature companies that desperately need these startup values, if their culture was great from the beginning, they would have adapted. That said, a large, mature company may have values that refer more to stability while still leaving room for entrepreneurialism.

The number of columns and beams also determines how high the building can be built. With Purpose as the foundation and the Four Absolute Values as footers, there is no limit to how high business can be built.

Exterior Walls & Roof: Mission

All buildings must have exterior walls and a roof. Why? Because they keep the elements from getting in, allow for a regulated environment inside and keep people from falling out. They are boundaries. 

A company’s mission is commonly addressed in its mission statement which refers to three things: what the company does, for whom it does it and how.

Without a mission, there are no boundaries, no sense of direction or clear idea of what the company’s core competencies are. This is most critical for companies in the startup and growth stages of their lifecycle where cash is short, and where potential investors value focus as much as performance.

Windows: Vision

Windows represent the company’s vision, possibility, and creativity. Like windows in a car, they allow us not just to see where we are going, but to decide where we want to go and see who is coming towards us. While mission is who, what and how, vision is “why”, it is the dream that is held in place by the walls.

Mechanical Systems: Business Processes

Without HVAC and electrical systems in a building we wouldn’t be able to see what we are doing, be very uncomfortable doing it, and as such would make a lot of mistakes.

In the culture we have built above, think of these as the business processes that are put in place to ensure the efficient and profitable operation of the business. Lack of good processes can be detrimental to the culture we just finished building and can rot it from the inside out. Process tends to be ignored when building a business or in times of distress, and while they need to change as the company does, they are critical to helping people live and work by the company’s values as well as allowing for efficient operation and maximization of profits.

What about people?

You may have noticed that I left out the notion that people help form a great culture. Well, as Ray Kinsella heard from the voice in his cornfield in the movie Field of Dreams, “If you build it, they will come”. 

That is because if you run a business based on the Absolute Values of integrity, transparency, ownership and humility while serving an economic and social purpose that is maximized by the proper Operational Values and stay true to the company’s mission and vision….you will attract the right people, the type of people who want to be part of something special.

I would love to see how some of my readers can apply this method to create a culture with Structural Integrity. I promise, it will bring to the forefront aspects that you are missing in your culture. It will also bring clarity and a state of tactility to the often nebulous picture of what a great culture looks like. Hit me up at matt@thefailureguru.biz and show me what your cultural model would look like using this tool.

Bests to all of you for a happy, health and prosperous 2020.

Failures wanted for my podcast!

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:

Stick To Your Knitting

Working outside of your core competencies can put you out of business.

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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.

Are You and Your Employees Suffering?

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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?

How to Fail Lesson #004: Micro-manage.

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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.

Don’t Do What I Did #003: Created our Private Hell by ignoring the balance sheet.

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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.

HTF Lesson #003: Hire the Wrong People

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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.

HTF Lesson #002: Stand for Nothing

This one is pretty straight forward. If you stand for nothing, it will allow you to stay flexible which is incredibly important to accomplishing #001 Sell, sell, sell. What do I mean by “Stand for Nothing”? It can be interpreted as “Be all things to all people”. That way, you are always sure to keep everybody happy, which as you know, is really important to creating a great culture. It also means not developing any values by which your company operates. Values are tough to uphold when you are growing fast and can change at any time depending on the situation. Values also keep you confined to certain lanes, which means you will never get to move into the passing lane.

Values also get in the way of maximizing failure because if you abide by them it can lead to a solidly profitable company. Who would want that when the excitement is in failing, after all, who doesn’t love a good train wreck? There are many examples in business and politics where having values that you live and operate by lead to success but remember, your goal is to fail.

Takeaway: Culture, values and purpose (the latest buzzword) will impede on your ability to fail…avoid them at all costs.