Amazon Leadership Principle 1: Customer Obsession

Amazon’s many financial and corporate accomplishments are almost too numerous to mention.  A market cap twice its largest competitor – retail behemoth Walmart.  33% market share in all of eCommerce.  Almost $150B in annual sales.  Nearly $20B in operating cash flow.

These achievements are driven by a hard working culture guided by 14 leadership principles.  

Here’s the dramatic language Amazon uses to describe those unique principles:

Our Leadership Principles aren’t just a pretty inspirational wall hanging. These Principles work hard, just like we do. Amazonians use them, every day, whether they’re discussing ideas for new projects, deciding on the best solution for a customer’s problem, or interviewing candidates. It’s just one of the things that makes Amazon peculiar.

Notice how Amazon calls itself “peculiar.”  While some people might consider it strange for a company to use such a word in its description, I believe that its uniqueness is what sets the company apart from all other retailers and even many other hypergrowth companies.

Today, I would like to address the first principle – Customer Obsession.

Customer Obsession

Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.

As CEOs / other leaders, how many of you come to work every day thinking first about your customers?  Where your passion for earning and keeping “customer trust” borders on “obsession”?   

In my search practice, I strive to improve the customer experience daily.  Additionally, as a “COO Finder,” I’m always eager to learn more about the changing role of the Chief Operating Officer.  Thinking about Amazon’s first core value made me question whether I could do more for my clients and the COOs that I serve.  Hopefully, it will have the same impact on you.

Please feel free to share your “customer obsessions" with us.

Vulnerability is Sexy

When was the last time you felt truly vulnerable at work?  Are you a CEO who feels comfortable using the words “I don’t know” with your leadership team members?  Have you shared some of your fears with them?  Have you allowed yourself to be human?

Last week, I had the pleasure of attending the annual summit of the Small Giants Community in Detroit.  For two days, 150 leaders committed to growing a business with purpose grappled with topics such as culture hacking, open book management, and leading from the behind.

My favorite topic was vulnerability.  The presentation and interactive exercises were facilitated by the one and only Corey Blake, perhaps the only person to ever be filmed on a TV commercial dunking a basketball naked. 

Showing us this (rated PG) video was just one great example of Corey demonstrating the art of being vulnerable.   From the stage, he also shared intimate details from his life – relationships, ethical missteps, etc.  After each reveal, Corey invited us to “check in” with him and see how we were feeling. 

Early on, I found myself judging Corey and his decisions.  Yet, as time went on, I began to like him more and more – and relate to him in an emotional way.  Then we did our own vulnerability exercise with a person sitting next to us.  In 12 minutes, I felt close to this person, and told him something that I had not even shared with my own beloved wife of 17 years!

If I could share intimate details and bond with a stranger in less than fifteen minutes, imagine what would happen if you could build deep “vulnerability relationships” with your leadership team and other employees?  What kind of trust would that create?  How could that help you solve more difficult problems in your business sooner and better?

I’d love to hear your examples of being vulnerable at work and the impact it had on your business!

Vulnerably yours,

Adam

Artificial Intelligence (“AI”) – Coming to a Business Near You!

I recently read an interesting article in Talent Economy magazine about how Artificial Intelligence is being used to reduce / get rid of mundane administrative tasks that often fall on HR personnel.  There are two areas where AI will make a big impact on HR in the future – Recruiting and Employee Benefits. 

1) Recruiting.  Administrative tasks are part and parcel of the process of adding talent to your business.  This includes reviewing resumes, scheduling interviews, keeping track of candidate contacts, sharing candidate information with the hiring committee, etc. Application tracking systems (ATS’) address many of these topics, but few if any are able to keep up with changing behaviors / expectations of candidates, and many smaller companies are priced out of the best ATS systems. 

Artificial Intelligence in the recruiting process can help companies respond to candidate outreach via digital channels.  For example, a company called TextRecruit created an AI application called a bot to respond to job candidate text messages in a timely manner. 

But what should be done with Senior-Level candidates?  In the “sellers market” for talent that we are in today, the job seekers’ experience matters!   These senior level candidates expect person-to-person interaction, and are judging your company as much if not more than you are evaluating them. For this reason, I would advise against thinking about using today’s BOTS for key executive hires.

2) Employee Benefits.   As every HR Manager knows, building a self-service internal website with HR information doesn’t mean employees will actually use it.  Concerns regarding the timeliness and accuracy of that information, plus a habit of contacting HR with every HR question, certainly play a part.  What if people who reached out to HR via digital channels receive a response that seems like it is coming from an actual HR person when in reality that response is computer generated?  Will that be effective?  Include better or worse content than responses that come from actual HR people?  As content management and AI technologies get better, it will be interesting to run some studies to gauge comparative effectiveness.  Over time, I would expect AI to make a big impact in this area of HR.

You may be wondering when or if there will be a right time to implement AI capabilities in your business. 2017 will be a telling year as technology first adopter companies of different sizes are trying out these capabilities.  Their reactions will help dictate how quickly AI will be coming to your boardroom.

When do you need to hire a COO?

After reading a blog post by Dale Robinette (thanks Dale!), we realized that we gave our readers advice on how to hire a new Chief Operating Officer, but gave no advice on when it is time for your company to find a new one.

Here are a few thoughts on when to hire a COO:

1) If your current COO leaves, you need to find a replacement. Most businesses benefit from having a COO, and trying to run a business without an operations leader is a risk most business owners should not take.

2) If you as the CEO have too much on your plate, and you need someone to take a few things away from you that you either don’t want to do or are not that good at. It’s important to note that hiring a COO doesn’t mean you can’t handle the company, it means the reverse actually. Having a COO is likely to make your company run smoother. Check out my post on the The Seven Roles of the COO to learn more.

3) If you have new growth initiatives that you would like to devote your attention to, it can be a huge help to hire a good general manager to oversee the current business, so that it is not neglected in the process.

4) If your team is primarily made up of innovators or creators. While it’s great to have people who can come up with ideas, you need people to make these ideas a reality.

This is not an all-inclusive list of times to hire a second in command but these are some of the most popular reasons why companies decide to hire COOs.

Toxic Culture

Uber has been in the news a lot lately and F@st Company even wrote an great article on the fact that their problems are a result of their dysfunctional company culture. A Bain & Company survey of 365 companies around the world said that 81% believe that a company lacking a high-performance culture is doomed to mediocrity. Are you set up for success or mediocrity?

John Lankford, author of “The Answer is Leadership” wrote, “Values and norms are the building blocks of a company’s culture. Some companies constantly reinforce their defining principles by displaying them in strategic areas of the building. Other businesses treat them less formally, but no less seriously. In either case, every business – and, often, every team – has its unique “rules of the game” that ultimately define the overall culture. Whether formally displayed or tacitly acknowledged, though, if management approaches those values and norms as an afterthought, doing little or nothing at all to articulate them – the result will be deleterious. It cannot be overstated that your company’s culture is a reflection of its management team – always.”

So what does that mean for Uber and what can we learn?

Well, according to the F@st Company article, it was a product of many small failures. It was an issue for Susan Fowler, the woman who reported sexual harassment against a “well performing” manager. “HR’s failure to provide a safe environment in which employees can report misconduct left Fowler feeling unsupported. In the end, she felt she was left with no recourse but to ignore the harassment or leave.”

In addition, Uber has “company values.” It is reported there are 14 of them, but what do they mean if they aren’t lived by the entire team and backed up by leadership?

So, what can you do at your company to follow in the footsteps of the greats like Disney, Zappos, and others?

1.      Learn from Uber. Don’t just have words that express values, but reward them and initiate them.

2.      Communicate. Again, Uber was doing a lot behind closed doors, be open and transparent in your organization and everyone will see the truth.

3.      Find people like you. Yes, it is important to have diversity on a team, but you want people motivated by the same passion you have and will promote the culture you want to have.

4.      Finally, as Zappos’s Hsieh says, “Chase the vision, not the money.” Be true to yourself and the rest will come.

The culture question is a big one for me while searching for COOs at companies. This is a big important piece and the person you select needs to further your culture goals.

Bring a Little More Happy into your Life

Recently, I watched a documentary called “Happy” on Netflix. First, I really enjoyed it and do recommend it, but I wanted to share some important life lessons highlighted in the documentary.

People endeavor to become happy through either intrinsic or extrinsic factors.

The extrinsic factors include material things such as money or power.

This documentary claims that those factors do not provide for long-term (or even much short-term) happiness and suggests you focus on these three intrinsic factors:

·       Personal growth

·       Relationships

·       Desire to help others

By doing these things, you are not only making yourself happier but positively impacting others as well.

An interesting example of a country that has some of the happiest and least happy people in the world is Japan. 

In the urban centers like Tokyo, some people are so unhappy and not focused on intrinsic happiness factors, that they literally work themselves to death.  (There is even a Japanese word for this – Karoshi)

Far away from the hustle and bustle of Tokyo is the village Okinawa.  Amazingly, in the same country, are people who are some of the happiest in the world -- and live extraordinarily long lives as a result

The reason for the difference? 

Okinawans focus on all three intrinsic happiness factors.  Watch the film and find out how – and in the process help yourself bring a little more “happy” into your life! 

What is one meeting you can't reschedule?

As Chief Executive Officers, you attend a lot of meetings. Sometimes it can feel as if you attend too many. As a result, some meetings must be rescheduled because of time constraints.

Which meetings do you prioritize? The short answer is that you should always keep performance reviews on the calendar.

Why?

Because your employees have probably been anticipating (and perhaps worrying) about these meetings for some time. Rescheduling meetings with your own employees is a let down to them, and can cause them additional stress. This stress distracts them from work and hinders their performance on tasks.

So, how do you avoid rescheduling performance reviews?

Check both of your schedules and find a time during the week where you both are usually free. That way, something should not come up during this time. You can also mark yourself as out of the office and let your secretary or assistant know that you should not be disturbed during this meeting and that it is a priority.

In short, make sure your employees are your priority. It will lead to greater success.

Special thanks to Cyndi Gave for her article that inspired this post.

Nasty Bankruptcy: Why a Founder’s Brand is not Enough to Build a Great and Lasting Business

Reminiscent of its .com flopping predecessors, Nasty Gal filed for bankruptcy late last year after raising tens of millions in venture capital. It was a fantastic fall from grace for the company. Yet the brand of its founder Sophia Amoruso lives on - through her best selling book, a popular podcast, and a new Netflix TV series. 

This divergence between company and founder success can teach entrepreneurial CEOs some important lessons:

  1. A company is not its founder - and must take on an identity all its own in order to be sustainable
  2. There is no substitute for good, old fashioned business practices
  3. Growth needs to be properly managed in order to be sustainable

COO’s can help an entrepreneurial CEO grow the right way - and stay out of bankruptcy court!

Meet Tom Billingsly, CEO

Tom Billingsly never fashioned himself to be more of an entrepreneur than any other Tom, Dick or Harry. 

Yes - he did have ideas all the time about new business to business and consumer solutions. For example, easily programmable electronic arms for mail carriers to hand deliver the mail to each resident — without ever leaving the comforts of their 1988 Ford Festivas. Since he loved to play ping-pong but rarely had a playmate - why not develop a high-tech paddle which, when combined with the Oculus VR, could deliver a night of table tennis fun?

When his father Brad Billingsly Sr. died suddenly from a heart attack on the way home from the office on an otherwise sunny May day, Tom found himself thrust into the role of CEO of Billingsly Enterprises literally overnight. Brad Jr, his younger brother who lived closer to their mother Grace, delivered the terrible news on the phone. 

BRAD: “Tom - I have terrible news. Dad is dead. <PAUSE>

The cops found him in his car on the side of the road after a massive heart attack. When he didn’t show up at home within an hour of his scheduled time, mom called the cops. I called Attorney Brinkman right away. He came over with dad’s will. It clearly stated that his oldest son should run the business. Best I know - that’s you.”

TOM: “Brad - I’m in shock. Dad must have done that drive about 10,000 times. Never in my wildest dreams would I imagine that things would end this way”

BRAD: “Apparently - neither did he. Dad had no succession plan. He was the only shareholder. No other board members other than Secretary Brinkman.”

TOM: “What do I do now?” 

Loss is hard to manage and when a business is involved it can get even more complicated. Check back to learn more about Tom and his journey as CEO, the challenges he faces and how he handles them.

More Thoughts on the Seven Roles of the COO

A few months ago, I wrote about The Seven Roles of the COO, a topic that is often poorly understood or underestimated. I was amazed at the level of interest. I received thousands of views, hundreds of likes and a sizeable number of shares and comments. There were many COOs who raised their hands, confirming my belief that they tend not to be talked about or recognized and, when someone does focus on them, they get excited and willingly share what they do and why they do it.

In this post, I would like to explore “the rest of the story,” reflect on some of the feedback and provide some additional insights.

I choose to write about COOs because there is a lot of misinformation and lack of understanding about the COO role in today’s businesses. When people think about the leadership team in an organization, they will usually envision the CEO/president/founder, CFO or controller, and the head of marketing/sales, often overlooking the important role of the COO.

CEOs are top-of-mind because they attract attention and embody the vision of the organization. They are the face of an organization in the community, focused on big accounts and recruiting key people to support the company's vision. What they don’t like to do, or aren’t as good at, are the day-to-day operations that are key to business success. They do not usually enjoy getting immersed in the details and prefer to think about strategy and the big picture. When it comes to daily activities for operations, managing cash, ensuring employee engagement on a regular basis, meeting expectations and goals, etc., CEOs rely on a COO to make things happen.

COOs tend to be more introverted, drawing their satisfaction from getting the job done. They generally don’t need public acknowledgement. They don’t need the limelight; their reward is success. They often don’t aspire to be CEOs. The most effective function for COOs in smaller to middle markets is the second-in-command role and running internal affairs.

Almost by definition, COOs are very precise. They are collaborative, have opinions and like to express their point of view as constructive input. Those who responded to my post were eager to contribute to the conversation about things I didn’t include in the original blog. Because of the feedback, I now have a sense that the role is even more nuanced and complex. I think we could easily have a continued discussion about each of the seven roles I outlined as well as a few other roles that were mentioned by the people who commented. There is clearly more to discuss and explore about this topic.

As we begin the first quarter, I have a few suggestions for executives to think about:

1.    If you are a CEO and you are spending more than 25% of your time working IN the business instead of ON the business, then you should strongly consider hiring a COO to run your day-to-day operations. When you are caught up in running the details of the business, you are not using your time and talents to benefit the business. The time you are spending on running business details is draining you of the energy and excitement that you get from working on the business. Your employees sense your lack of satisfaction and it interferes with the overall vision you established.

2.    If they are in the role, COOs usually work hard with their CEOs to take as much as they can off the CEOs’ plate. COOs need to be relentless about doing this so that the CEOs can focus on business success.

3.    Sometimes CEOs are reluctant to hand something off. COOs need to know that it’s a process to get CEOs to delegate so COOs need to not just accept the specific role that is being assigned to them by the CEO, but to always ask for more and look for ways to make the business run more smoothly.

4.    COOs need to have a meeting with their CEOs at least once each week where the COO leads a discussion about key aspects of the business like identifying the goals for the week, examining upcoming projects and challenges, and identifying, discussing and solving issues.

Several CEOs weighed in on the impact of the COO role following my post. They understand that COOs make businesses better. The feedback I received from COOs demonstrates to me how passionate they are about what they do and how committed they are to doing their best.

My hope is that, through this blog, we can continue the conversation. I’d like to hear about what COOs are doing and how they are getting their organizations and CEOs to prepare for 2017. I will gladly share their insights in future blogs. If any CEO would like to have an individual discussion with me I am happy to have that conversation, too. 

Connect with me on LinkedIn at https://www.linkedin.com/in/adamkaplan1

The Seven Roles of the COO

I recently came across an article in Harvard Business Review that is as relevant today as it was when it was written over a decade ago.  Titled Second in Command: The Misunderstood Role of the Chief Operating Officer, the piece notes the “situational” nature of what the COO does. A person sitting in the COO chair may play many if not most of these roles during his / her tenure. The seven defining roles for the COO, based on his / her relationship with the Visionary CEO, are as follows:

1) The Executor. This is perhaps the best known role of the COO. While the CEO is out in the world building external relationships, the COO is focusing on the internal activities in the business which create enterprise value. Most effective COOs have a unique ability to get into the details and to bring focus and prioritization to tasks which most CEOs perceive as mundane, or below their interest level or pay grade. In fact, even if the CEO had the time to get involved in these areas, (s)he would either a. postpone; b. ignore; or c. participate minimally in these activities — with mediocre results expected.

2) The Change Agent. This is defined as having the authority to lead “a specific strategic imperative, such as a turnaround, a major organizational change, or a planned rapid expansion”. Why would the CEO generally not lead these activities? Due to the complexity of the activities involved on the people, process, technology and organization sides.

3) The Mentor. In this situation, a COO is brought on to mentor a CEO / CEO-in-training who needs additional skills to more productively assume that role. This could be the daughter or son of the founder who are part of an orderly succession plan at the family business. It could be done formally, with certain growth benchmarks on the part of the mentee, or informally through on the job coaching as needs arise. Additionally, the COO often mentors people on the leadership team, especially when those individuals are younger and less experienced.

4) The Other Half. A larger-than-life, extrovert CEO may bring on an introvert COO to “clean up her / his messes”. This is a scenario the COO needs to be careful of; sometimes, the CEO can be such a disruptive force in the day-to-day business that the COO will spend most of the time putting out fires and will be limited from participating in more productive activities that move the company forward.

5) The Partner. Partnership here denotes a “co-CEO” model. While this arrangement may “show” well, particularly at a company that emphasizes its egalitarian work environment, it rarely works. A few prominent examples of co-CEO relationships that did not work when the going got tough are: 1) Research in Motion, the maker of Blackberry (who never developed a viable strategy to compete for the Smartphone Market); and 2) Chipotle (whose food safety scandal extended for months instead of weeks and destroyed billions in shareholder value.

6) The Heir Apparent. Larger companies often use the COO role as a “parking spot” as part of a succession plan for the new CEO. In these cases, the COO will likely work on Special Projects or build up his / her skills in areas that are lacking, in order to be more well rounded when the succession is scheduled to take place. The only times I see this in smaller businesses is when the CEO at a family business elevates a successor into this role in order to increase exposure to the new leader in advance of a business transition.

7) The MVP. This consists of the promotion of a key staff person whom the company does not want to lose into the COO role. This is not a good idea. If a company does not have the right seat for a leader, even if that leader is well liked and a good cultural fit, then that leader should be asked to leave for the benefit of all parties.

In conclusion, it is clear the COO / integrator contributes to the growth of a business in many different ways. As we celebrate entrepreneurs who launch new businesses, let us remember the COOs who prioritize activities, manage complexity, and mentor and coach team members. Coming from diverse backgrounds, these COOs share a willingness to roll up their sleeves and do what it takes to power their companies to success.

CEOs / Visionaries - Which role(s) does the COO play in your business? Any roles outside of these seven that are worth mentioning?  Also, think about the top major strategic initiatives that have impacted your business over the past few years. Did you solicit help from an internal COO or outside consultant? What was the impact of that assistance? If not, do you wish you had?  

COOs / Integrators - which roles have you played over your career? Which activities do you find are most beneficial? What is your advice for an aspiring COO?

Many of the ideas in this article are also discussed in the great book Rocket Fuel by Gino Wickman of EOS Worldwide and Mark Winters. Rocket Fuel describes the Visionary (CEO) and Integrator (COO) relationship at small companies ($2m - $50m) in significant detail.  

Book Review: Small Giants by Bo Burlingham

There have been countless books written about very large corporations and the key to their success.  There also are many books out there telling how to grow your business.  The assumption in all these books is that you need to be growing to considered successful.

In Small Giants, Bo Burlingham refutes that idea by proposing that there are many companies that purposely choose to stay small, but are really successful organizations.  They just use a different measure of success than traditional revenue growth.

In this book, Bo highlights 14 organizations who he considers to be "Small Giants" (one of which is Ann Arbor's Zingermans Community of Businesses.)  As he studied these organizations, he found several 7 common threads (quoted from book's introduction):

  • First, I could see that, unlike most entrepreneurs, their founders and leaders had recognized the full range of choices they had about the type of company they would create.
  • Second, the leaders had overcome the enormous pressures on successful companies to take paths they had not chosen and did not necessarily want to follow.
  • Third, each company had an extraordinarily intimate relationship with the local city, town, or county in which it did business -- a relationship that went well beyond the usual concept of `giving back.
  • Fourth, they cultivated exceptionally intimate relationships with customers and suppliers, based on personal contact, one-on-one interaction, and mutual commitment to delivering on promises.
  • Fifth, the companies also had what struck me as unusually intimate workplaces.
  • Sixth, I was impressed by the variety of corporate structures and modes of governance that these companies had come up with.
  •  Finally, I noticed the passion that the leaders brought to what the company did. They loved the subject matter, whether it be music, safety lighting, food, special effects, constant torque hinges, beer, records storage, construction, dining, or fashion.

I found it very interesting that many of these companies had opportunities to grow very large.  These same organizations determined that bigger is not always better.  In the end, their organizations were much healthier when they were smaller.

It surely is an interesting read.  Especially for those who are burnt out from exponential growth and are wondering if there is a better option.  Even if you find your organization comfortably growing at a healthy rate, you will still learn from these organizations.  Take a look at the book...Let me know what you think

The Culture Piggyback

Last week I had the good fortune to participate in a video conference call on the topic of how to build, sustain and nurture a thriving corporate culture. The real time “fishbowl” was led by Art Saxby and Tom McCrary, CEO and Managing Partner respectively of Chief Outsiders. Chief Outsiders offers seasoned Chief Marketing Officers (CMOs) to growth-oriented CEOs on a part time basis. Art and Tom are part of the Small Giants Community — organizations who are small in size yet giant in purpose — which hosted the gathering.

Chief Outsiders has built a great culture consisting of passionate, committed team members despite some daunting challenges, including:

1) A workforce distributed across the US, whose members mostly work out of a home office and / or at a client site;
2) High achieving, hard charging team members with strong domain and subject matter expertise;
3) Anticipated first year earnings that are at a fraction of what the CMOs were earning at prior companies; and
4) Business owners who had never built a company like this before

So how did Art and Tom do it?

By intentionally establishing a culture that perpetually lives its core values, day in and day out.

A key concept that Art and Tom introduce to their team members early on is the concept of a “Culture Piggybank”. Simple yet extraordinarily powerful, the “Culture Piggybank” establishes the expectation that each team member will be constantly making “small deposits” of company-enhancing good deeds in line with the company’s core values into a virtual receptacle. Deposits could be helping a colleague on a difficult client assignment, interviewing new part time CMOs, or participating in practice development calls to grow the overall business.

In return, these team members will have the opportunity to make “withdrawals” from the Piggybank when needed at a later date.

This “social contract” among a “tribe” of people at Chief Outsiders sets a strong behavioral expectation of all its members. People who don’t act according to these cultural norms stand out immediately. It is then only a matter of time before those individuals self select out of the company or are asked to leave the organization.

Art and Tom are passionate about perpetually measuring how Chief Outsiders' culture is performing. One way they do so is by soliciting Net Promoter Scores (NPS) from their clients on a regular basis, and then benchmarking those score by period and by consultant. Additionally, Art travels to each region on a frequent basis, to make sure that he is having face to face meetings with all consultants as often as possible.  There is also an annual company-wide meeting, where tribe members gather to share successes, explore ways to get better, and generally enjoy being together.  A seminal event at this meeting is a dinner at Art's home - further reinforcing the family atmosphere at the company.  

The key point is that the annual meeting is a culmination of the day to day cultural investment each professional makes - which is precisely why it works so well. 

Do you have a great culture at your workplace? How is that culture built / sustained? What did you pick up from this post that you would like to bring to your company?  I'd love to hear your thoughts!

You just made $180 Million - How you would spend it is a great indicator if you are an Entrepreneur

Last month, in this column, I penned some thoughts about The Differences Between an Entrepreneur and a Small Business Owner.  My primary argument is that the main differences between the two lie in how each is oriented: The entrepreneur towards sales / growth and the small business owner towards operations / risks.

Today, I’d like to use a real world case study to dramatically illustrate this point — and will do so by highlighting the decisions made by one of the world’s most celebrated entrepreneurs Elon Musk. 

At 24, in 1995, Musk co-founded his first company, a software development firm Zip2, which he sold to Compaq near the height of the Internet Boom in February 1999.  This made Musk $22m richer. 

The next month, Musk invested $10m of that money (nearly 50%) into x.com - the predecessor to Paypal.  Fast forward to 2002 - @eBay wanted to vertically integrate into payments and acquired paypal for $1.5B — of which $165m went to Musk. 

At this point, Musk had roughly $180m in liquid assets.  A small fortune with which to comfortably live out his days?  Hardly.  Instead, Musk invests it all as follows:

$100m in SpaceX

$70m in Tesla Motors

$10m in Solar City

It is said that Musk invested all his capital - so much so that he needed help with his household payments in expensive Southern California!  

As a small business owner and not an entrepreneur, I would have handled each of these capital windfall’s very differently.  For one thing, I would have convened a team of top wealth management advisors and developed a life and investment plan that took account of my (and my wife’s) personal, professional and philanthropic priorities.  We would have then allocated the resources accordingly.  In my eyes, this would have been the responsible thing to do with so much money. 

What would you do with $180m?  How would you spend / save it?  Your answers will say a lot about how much of an entrepreneur you really are.

Looking forward to your comments!

Adam

The End of Sales?

Traditional wisdom holds that companies grow on the shoulders of their salespeople.  When starting out, usually the CEO plays that role.  Then, over time, the company hires dedicated salespeople.  Later, it often brings in a Sales Manager to oversee them.  

But what if a company grew and grew and grew - without salespeople?  When, if ever, would it need to hire them?  Hook Studios LLC, an ad agency in Ann Arbor, MI, is testing that proposition.  The company has grown to over $11m in revenues in 10 years.  It has never hired a salesperson and does not plan to do so, according to a recent Crain’s Detroit Business article.   Its rationale: “Our clients became our salesforce”, according to CEO Michael Watts. 

The benefits of not hiring a sales force are clear on the expense side: No expensive salespeople demanding the time and resources of the people “who do the actual work”.  

But what about on the revenue side?  Here the results are less clear.  While one clearly can get to $11M in sales without dedicated salespeople, getting to $110M or certaily $1B is probably impossible.

A good hunter salesperson will consistently open doors with new prospects, and bring new clients into the company.  Certainly new opportunities can and often do happen through a referral network of past clients, but the pace of those referrals may not be sufficient to meet growth objectives.  Plus - it takes growth out of the company’s control and moves it to a 3rd party.  Perhaps not an entirely comfortable thought for the CEO or management who have their own growth targets.

Also, without this control over growth, delivery planning becomes more difficult.  How do I know whom I will need to service if I don’t have visibility into not only current accounts but also the sales pipeline?  

Another benefit that salespeople can bring is market intelligence.  When engaged in a bidding processes, a good salesperson can gather valuable information on what a company’s competitors are doing.  This can inform market approaches in the future, as well as product development initiatives. 

Whether you believe in investing in salespeople or not, this discussion raises the question of what their role is / should be.  I believe an effective salesperson is like a consultant, bringing welcome perspectives and insights to each client interaction.  The actual sale should be the natural result of the buyer / seller relationship. 

Are you a salesperson?  What makes you relevant to clients today? 

Or do you think salespeople are or should be a thing of the past? 

Interested in your thoughts!

Recruiting Managers - are you out to lunch?

Less Than 3 of 5 View “Quality of Hire” as Most Important Recruiting Metric

No wonder recruiters rarely get the respect they desire.  According to the 2016 survey by LinkedIn Talent Solutions. only 39% of recruiting managers say “Quality of Hire” is the single Most Valuable Metric (“MVM”) used to track recruiting team performance.  That's fewer than two in five recruiters!

Here’s a link to the report.

This statistic really bothers me - and should bother all thoughtful recruiters.  Why are we doing what we are doing if not for the sole and overwhelming purpose of recruiting high quality people?  

Some might say that the reason why fewer recruiting managers chose the Quality of Hire MVM is because it is hard to measure.  I agree that some elements of quality, like beauty, are in the eye of the beholder - but surely we can agree that a salesperson who in six months develops a $5m sales pipeline and closes a $1m transaction is better than one who has a $2m pipeline with no wins?   

In any event, just because measurement is hard doesn’t mean that we shouldn’t keep trying harder and harder until we get it right.  

You might ask - what do the remaining 61% of recruiting managers believe is the MVM.  Primarily:

  • Time to fill (28%)
  • Hiring manager satisfaction (21%)

Regarding “time to fill”, it seems that these recruiters never knew or have forgotten the adage “hire slow, fire fast”.   It is true that Hiring Managers tend to wait until the last minute to search for a candidate whom they needed yesterday.  But this poor planning / lack of foresight / miserliness should not impact the search process.  Candidate due diligence now saves a lot of time and money later. 

Regarding “hiring manager satisfaction”, at least this is a metric that should be correlated over the long term with “quality of hire”.  On a short term basis, however, hiring manager satisfaction may simply be based on filling the position.  Or getting a candidate in who looks, talks and thinks like the Hiring Manager.  So satisfaction needs to be viewed with a grain of salt

In conclusion, I encourage all recruiters to think about why you are doing what you are doing.  If you are a recruiter to provide quality of hires to your clients, whether internal of external, then keep doing what you are doing.  If not, then I suggest that you get out of this business and find something else to do!

The Differences between an Entrepreneur and a Small Business Owner

Successfull entrepreneurs are lionized across America.  On a national level, we idolize well known leaders like Steve Jobs, Bill Gates, Ray Kroc and Arthur Blank.  

Locally, we heap admiration on the community dry cleaner who opened up a dozen locations and supports all the local baseball teams, and the grocery store owner who built a five-chain supermarket chain that took on the national grocers and won. 

Yet there are many more small businesses who never open a second location.  The McDonalds franchise owner.  The one person insurance agent.  The local car repair shop.  These owners view themselves and their businesses very differently from entrepreneurs.  These stark differences are highlighted in the below comparison:

Entrepreneur 

  • Sales oriented.  
  • Goal: Be as big as can be.  
  • Focus:  Calculated Risk Taking.  
  • Top Question Each Day:  Which opportunities should I be pursuing today to grow my business?

 

Small Business Owner 

  • Operations oriented.  
  • Goal: Stay in Business 
  • Focus: Risk Management.  
  • Top Question Each Day: How do I get though day without being hurt, hurting anyone else, or getting sued. 

 

Why do these differences matter?  They profoundly impact the ways service providers should approach their prospects.  Selling to an entrepreneur means selling your ability to help them grow; selling to a small business owner means selling your ability to protect their investment (and livelihood). 

This distinction is also very important from a service standpoint.  For example, a CPA firm serving an entrepreneurial leader should have the capabilities to answer questions related to his / her growth initiatives: taxes, incentives, purchase accounting, etc.  The same firm working for the small business owner probably can assign a fixed resource to manage the account for the duration of the relationship - and would not need more varied expertise. 

To sum up - the next time you find yourself approaching a prospective CEO as a potential customer or partner - ask yourself if (s)he is an entrepreneur or small business owner.  It can profoundly affect your future relationship - and your bottom line!

Hire for "Why" not for "What"

Conventional wisdom dictates that business owners at growing companies should hire people based on functional criteria.  For example:  

  • Your book-keeper not knowledgable enough for the accounting complexities that your business is encountering?  Hire a Controller.
  • Unable to expand the business beyond your personal network?  Hire a hunter salesperson.

My experience as an Executive Search consultant and both empirical research and anecdotal evidence suggests that leading with technical requirements (the “what’) is a mistake.  Instead, hiring managers should focus on passion (the “why”). 

One of the better articulations of this that I have seen is a Ted talk by management guru Simon Sinek who talks about companies who lead “from the inside out”:https://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action?language=en#t-337590

If only hiring for the “why” were so simple.  Instead, the following three requirements are essential:

  1. Know what you believe in (your and your company’s “why”).  These can be articulated in company’s core values, mission statement, etc. but are primarily lived through the shared experiences of your employees and your interactions with customers / vendors and other stakeholders.
  2. Assess the “why” in each prospective hire.  This is much harder to assess than technical skills.  In order to do so, one must spend quality time with a candidate getting to know him / her: motivators, professional and personal interest, etc.  Also, detailed reference checks can reveal what someone’s “why” has been at prior companies and whether it matched that company’s core values.
  3. Hire for the “why”.  It is not enough to pay lip service.  Companies must apply the “why” principle in real hiring situations.  

Wishing you success in finding your “why” and hiring for it!

Five Tips to Close Your Top Candidates in 2016

Finding qualified candidates for open positions in the strong job market we find ourselves in today can be challenging.  At the management and key hire level, the number of open positions is far greater than the number of qualified candidates, who may be hesitant to switch jobs when they’re feeling secure and being paid well.   As a result, once top candidates are identified, employers must be able to target, cultivate and then close them in a timely manner.

Here are a five tips to keep candidates engaged in your hiring process:

1) Set Realistic Expectations

When talking with candidates, provide a realistic description of the position.  Not only is this the right thing to do, most candidates would rather know the positives and negatives of a position during the recruiting process rather than being surprised when they start a new role.  Talk candidly about growth opportunities and challenges.  Candidates will sniff out marketing speak and hyperbole from a mile away, so be honest!

2) Share Your Company Culture

Make sure candidates have an opportunity to learn about your company culture. Provide opportunities for candidates to talk with multiple people about the organization and how it is unique. Tell stories that will give candidates a feel for your organization. Even better, provide opportunities in the recruiting process for candidates to experience your culture first hand. For example, give the candidate a tour of the office. Show him or her your common areas. Introduce him/her to people in the organization — the way you would if he/ she was starting work there. This helps the candidate imagine what it would actually be like to work for you.

3) Interviewing Is A Two-Way Street

Don’t make the mistake of focusing solely on whether a candidate is the right fit for a position while neglecting to consider if the position is the right fit for the candidate. During the recruiting process, it is key to find out your candidate’s interests and goals. Offer opportunities for candidates to ask questions and to learn as much as they can about your organization. This allows the candidate to discern if the position is the right fit for them.

4) Be Responsive

Keep candidates updated on progress throughout the recruiting process. If a candidate reaches out to you with a question, provide a timely response. Make every effort to keep the recruiting process moving forward. If there is a delay in the process, continue communicating with candidates regarding the position status.  Regular, honest communication will help to keep candidates engaged; on the flip side, process delays can result in a strong candidate who loses interest or accepts another position with your competitor! 

5) Show Appreciation

Give sincere appreciation to candidates for participating in the recruiting process. Candidates invest a signicant amount of time in the recruiting process, and employers should appreciate this investment. Have you ever thought of sending a thank you letter to the candidate, instead of him/her sending one to you?

Conclusion

As you prepare to recruit in 2016, review your hiring process and see how candidate-friendly it is.  Put yourself in the candidate's shoe.  Ask yourself: "If I was considering changing jobs, what would I be looking for from my hiring company?"  By building these five elements into your recruiting process, you will have more success keeping candidates engaged, and thereby put yourself in a position to make an offer that your ideal candidate can not refuse!

Do Sellers Think Enough about Buyers?

I recently read the book Lean Selling by Robert Pryor.  It was different than any other Sales Book I have ever read because it really wasn't about selling but about buying and the buying process.   

How many of us who are in sales are taught to "go for the close", "seal the deal", or "win the business".  These directives imply that the salesperson is acting upon some malleable individual who is waiting for you to save him / her from a perpetual state of analysis / paralysis.

The reality couldn't be further from the truth.  Buyers today are more educated, savvy, prepared than ever before.  This is true of both business to business and business to consumer purchasers in any domain.  What buyers need (and expect) is someone who will meet them where they are in their buying process and take them on productive and minimally painful purchasing journey. 

In short, buyers have a process (created by them, not by the salesperson) they need to go through to buy.  Salespeople need to apply lean principles to understand that process and make it as frictionless as possible for buyers who are willing partners.  Only those salespeople who put the needs of buyers ahead of their own will reap the rewards in the Buyer Economy.