Category Archives: Business Exit Strategy

Want What You Have

Attitude is everything in business.Having spent over four decades in the world of business, I find it particularly interesting to observe general philosophical truths playing out in that world of commerce.

I recently bought a copy of a book based simply on its title: I Love Capitalism!  I was not familiar with the story of Ken Langone, the author, and I was ripe for a stout defense of capitalism, in an era where I seldom here much praise for our democratic capitalistic system.

While I enjoyed the stories Ken laid down during the first half of the book, I was concerned this might simply be another “let me tell you how smart and wealthy I am” autobiography. But I kept reading and, although Ken is neither shy nor particularly humble, his stories eventually drove home some valuable life lessons. 

One such lesson concerned a large U.S. company where Ken was a board member, and a horse race at that company among three top executives seeking to become the next CEO. Ken decided to recruit one of the “losers” in that horse race to take the reins of a company whose startup financing Ken had arranged years earlier and where he still sat on the board. Ken’s company, by the way, was producing revenues of $90 billion at the time, so this was a big job for whomever he recruited as CEO. He eventually brought one of the “losers” on as CEO and Ken’s company performed well financially for the next several years. 

The “loser” was very well compensated in the form of both stock options and annual salary. At a time when the Enron and Worldcom scandals were making headlines and the media was shining bright lights on all boardrooms with regard to excessive executive compensation, Ken and the board started looking at creative ways to improve the appearance to the outside world of that generous compensation package. When they attempted to discuss some of those variations with the “loser”, he would have none of it. Ken eventually tumbled to the fact that the “loser” had never gotten over losing. In spite of his hard work and accomplishments at Ken’s company, he could not get past having lost the CEO race at his prior company. In the words of Ken, “He lived in a permanent state of feeling ripped off. Just like a guy who can’t get over being dumped by a girl…” Probably no pay package would have been generous enough for him to put that past behind him. 

I can think of a couple times in my career when I didn’t really want what I had. How about you? Consider the following possibilities.

Maybe, in spite of having great operating people, you decide it’s time to recruit a high powered Chief Operations Officer, and you find the perfect candidate, and you think you have sold that candidate on joining your organization only to be turned down at the eleventh hour. Then you lick your wounds, bemoaning the fact that you’ll never find another perfect candidate, and you totally ignore the long-term, high-performing, loyal operations staff who have helped you build the company.

Or maybe you invest hours and hours pitching a huge potential customer, only to lose to a competitor, and now you’re burning hours in recriminations of what you could have done differently – all this while your present loyal customers are suffering from lack of your attention.

Or maybe you sell your company for enough money that you no longer have to work and you can spend your time and money doing almost anything you want, but, looking in the rearview mirror, you find yourself pining away because you think you should have held out for a higher price.

Can we agree that none of these scenarios is healthy…or even rational?

Strive to want what you have. Attitude is everything.

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A Big Fish in a Small Pond?

small business hiring corporate manager

Salmon Coming Home

Not long ago I read John Dini’s excellent blog post on importing a manager from a large organization into a small company. When I recently heard a tour guide comment on sockeye salmon migration, it brought to mind John’s exposition. Let me explain.

The tour guide had declared that as the salmon return from the vast ocean to the stream where they were hatched, they must make the transition from salt water to fresh water. He highlighted the fact that, as they entered the brackish waters near the mouth of the river or stream, they lingered – maybe days, maybe weeks – allowing their body to make some important adjustments to their new environment. [Although I have no empirical evidence to offer, I suspect the percentage of salmon making it all the way home has increased since the advent of those navigational apps for their cell phones. I mean, really, how do they find their way back? But I digress.]

It’s been my experience that a significant percentage of the Corporate Migrants decide to return to the sea, or are asked to find another body of water in which to swim.

As a business owner, you may have several good reasons for wanting to bring an experienced large-company person into your fold. Their background in systems, in planning, in structuring, and in thinking broadly about crucial decisions can be invaluable to a small business management team. If you are positioning the business for your own eventual exit, they bring an outside perspective and professional expertise that can be very attractive to a potential buyer. However, in the words of Paul Simon, “…a man hears what he wants to hear and disregards the rest.” True of business owners, be they men or women. So don’t disregard the risk that the imported large catch can also be ineffective or even disruptive.

Like salmon, some who leave Corporate America are indeed returning home. They see small business as a better fit for them, for whatever their reasons, and they are correct. Others, however, are simply looking for a resting spot prior to returning to the sea. Your recruiting, hiring, and onboarding processes need to take this into account. Here again, you will likely be tempted to hear what you want to hear and disregard the rest because you consider the candidate such a valuable find. In truth, you may be flattered that they would even consider coming to work for you. Get past that. Dig deep to try to determine all the motivations for the candidate’s interest in your company.

Then, if you both agree to move forward, bring them aboard in a manner that allows them to acclimate. Both the migrant and the organization need time to make adjustments. They will probably see many areas where changes would strengthen your organization. But they also have the potential to damage a healthy culture in the process of pushing for change. You are the filter through which their initiatives must pass. It’s your job to help orient the new hire to a significantly different environment. If, after a fair amount of time in your brackish waters, they are not meshing, it becomes your job to return them to the sea. By that time, they have probabl come to the same conclusion, even if they haven’t yet admitted it to themselves.

I’m not saying you should never bring a Corporate manager into the fold. I’m saying be diligent if you do.

Long in the Tooth

Sometimes the primary job of the CEO is coachingI’m not all-in anymore. That was the latest expression from a business owner who is pondering his changing role in his business. Other lips have delivered the same message in different code: I’m not sure what my job is anymore or I seem to be focused more on my personal vision than on my business vision.

Business owners almost invariably reach a point where they are confounded about their own role in the business and not sure what to do about it. Occasionally this is an indication that it’s time to sell or give away the business. More often, however, the owner is not interested in retiring just yet – only in finding his or her appropriate role in a business that has evolved over time.

In the great American pastime of baseball, there is a parallel. As an example, Andres Blanco currently plays for the Philadelphia Phillies and is all of 31 years old. In baseball years, he’s getting a little long in the tooth. The Phillies are in a rebuilding year, and Andres is a utility infielder. The future of the team consists of younger infielders who are destined to eventually become starters at second base, shortstop or third base, if they aren’t already playing that role. Blanco plays all three positions well, but in this rebuilding season is playing an even more important role. He’s become a model for the younger players on how to conduct oneself as a major leaguer. He models and advises the younger players on everything from the hard work required for game preparation to handling post-game interviews.

That’s the parallel to the “I’m not all-in anymore” business owner. At some point, the greatest contribution you can make to your own business is to develop the younger talent. It’s to model appropriate behaviors, coach the younger employees who lack experience, and encourage those who are still learning and making mistakes. That often is a full time job for the long-in-the-tooth business owner. But even if it’s only half a job, that’s fine. Do it well, and spend the other 50% on the golf course or fly fishing or drag racing or traveling.

Andres Blanco, the mentor, will likely become a coach when he retires from playing. Coaching baseball, or coaching your younger employees…neither is a bad life.

By the Numbers

I’m going to go out on a limb. I know what talent is lacking in more of your employees than any other. It’s an ability to understand and work with numbers. Expense budgeting, price analyses, sales forecasting, reviewing a profit and loss statement or a product line margin analysis, understanding cash flow or a balance sheet, comprehending both the value and the burden of debt.

Whatever your business, I’m sure you have some really good employees,who do their jobs really well, whether they are dealing with operations or marketing or whatever. You’re able to get away with financial incompetence in most positions in your company. But if your management team lack facility with the numbers, we probably have a problem, Houston. 

If your succession plan or exit strategy relies on managers who are not able to read a balance sheet; who do not understand the long term impact of pricing to achieve volume; who do not appreciate the value of debt as a tool, or the suffocating crush of too much debt – if the keys to your successful retirement are in the hands of such staff, then both you and your business are in a bit of trouble.

If you are guilty of tolerating financial ineptitude, you owe it to yourself, your business, and your employees to turn it around. You may not have the capacity to personally teach a key employee how to deal with the numbers, but it really is your job to find some thing or some body that can. 

Dismount!

Every CEO sometimes holds onto a bad idea too long.

Riding a Dead Horse (not really)

There are some subjects that are difficult to approach positively.  This seems to be one of them.

Every CEO occasionally finds himself or herself riding a dead horse.  It could be that new product program that is consistently delayed and where the projected cost to manufacture is much higher than the original estimate.  Or that new employee whose performance is so far below what you anticipated three months ago during the final interview.  Or it might even be your entire company.  Maybe you’re worn out, ready to move on, and have never really created the entity that you envisioned when you founded it.

Regardless of the situation, you feel the right decision in your gut.  Your gut understands that you are riding a dead horse and that the only appropriate next step is to dismount.

Contrary to my opening statement, this negative post really does have a silver lining.  Dismounting creates a better situation.  Killing the new product program frees up resources that can be more profitably applied elsewhere.  Terminating or reassigning the failing employee eliminates drag on the organization and allows the individual to find their true niche – either within or outside your organization.  Selling your company to a strategic buyer who has the resources or market position to make it a success is good for you, your employees, and probably the overall economy.

The timely dismount can be every bit as potent for your company as any new initiative might be.  So, how are your feet stuck in the stirrups?

Uniquely Yours

It’s not just lonely, but also unique at the top. You must hold yourself accountable for certain responsibilities that cannot be delegated to others. The challenge is that, if you’re like most CEOs, you also hold yourself accountable for many items that could indeed be delegated.

If you are buried in the weeds of your business 24/7, your business will eventually bury you. Yes, most CEOs must devote significant time to working within their business. But if you haven’t already developed the discipline of spending at least 2% of your time each month (about a half day) stepping back and working on your business, your business is likely to continue to run you rather than the other way around.

What are those unique accountabilities that only you can assume?

  1. Establish your vision of where the company needs to go, and communicate it clearly and frequently.
  2. Find and retain employees who can help get you there.
  3. Lead the creation and routine updating of company goals, strategies, and action plans that will help get you there.
  4. Protect the corporate assets (physical and financial) while making sure you are using them to help get you there.
  5. Assure that the various parts of the company are coordinated and working together to deliver customer value at a profit, and to help get you there.

In a sense, being CEO has a lot to do with attitude and perspective. Consciously accepting this higher level of accountability is a way of your ultimately exiting your business on your terms.

Why not keep score for a few months? Copy the list of accountabilities and keep them close by. Make a daily or weekly note of your estimated time spent in each of the five areas. Hold yourself accountable – or get somebody else to do so – for tracking how much time you actually spend on these important areas. Then make appropriate adjustments.

Family Business Best Practices

The CEO of a family business must deal with an added layer of complexity to the challenges of running a successful enterprise.

Family Businessmen

I recently facilitated a meeting of five business owners, all of whom lead a business with other family members involved. They were gathered to share best (and worst) practices based on their own experiences. The discussion focused on bringing the next generation into the business, and preparing them to take the helm. Here are the most significant truths that emerged:

  • The next-generation family member should start out “mopping the floors”. They need to earn the respect of other employees.
  • Establish the discipline from Day One of differentiating between “talking business” as employer-employee, and “talking personal” as mother-son.
  • A young family member in their teens entering the business, even on a part time basis, creates special challenges. Their lack of real-world work experience makes it harder for them to understand the necessary separation between family and business relationships.
  • They need exposure, over time, to all areas of the business. Ascertain whether the organization can compensate for their weaknesses and allow them to play to their strengths if and when they assume the leadership position. Be willing to accept the fact that they may not be cut out to eventually run the business.
  • You must manage your expectations, which may be distorted because you are personally close to the family member. Allow them to surprise or disappoint you, and make necessary adjustments to your expectations and plans as they do.
  • Differentiate between compensation and business ownership. Compensate based on contribution to business results. Allocate ownership based on any family considerations you deem to be fair.

Running a business is challenging. Leading a family business adds another layer of complexity which only family business owners can fully appreciate.