Three Ways to Grow: Build, Partner, Or Buy

Every year, I speak with nearly a thousand CEOs in detail about their companies. One of the key topics that I talk to all those CEOs about is their strategy for achieving future growth. Whether that’s expanding a business geographically, or even by entering new emerging markets, every CEO has a choice about how to achieve that goal of growth.

It turns out, regardless of what your growth goal is, you have three options to get there: Build, Partner, or Buy.

Let me explain what I mean by each of these options.

Continue reading Three Ways to Grow: Build, Partner, Or Buy

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Mercenary or Patriot–Which Should You Hire?

When you’re hiring, think beyond the skills and experience a candidate might have and assess whether you want a patriot or a mercenary.

When you’re thinking about hiring people, especially those in mission-critical-type positions, you need to use caution because the stakes are so high anytime you make a bad hire. But beyond whether they are an A, B or C Player and the skills and experience a candidate might have, you also need to assess whether they are a patriot or a mercenary. Let me explain.talk to us

The Patriot
Patriots are employees who seek to join your company because they believe in your organization’s purpose and mission. They want to contribute to the cause. Maybe they are drawn by what your company does or how you do it because it resonates deeply with their own personal beliefs. This can be a very powerful draw for some job candidates, many of whom might even be willing to make personal sacrifices like taking less pay, relocating their family or even working long hours for the opportunity to be part of your organization. Patriots are also deeply loyal to the organization and tend to stick around even when times are tough and the bullets start flying. We often see startups filled with people like this who choose a job based on its higher purpose rather than higher pay because the organization doesn’t yet have the resources to offer much in terms of compensation.

The Mercenary
Mercenaries, on the other hand, choose their next job based on how it will benefit them as an individual. You can identify a mercenary right away just by looking at their resume, where you’ll find lots of short tenures and plenty of job-hopping – something that’s common in job areas like sales and software developers. That’s not to take anything away from a mercenary’s skills: they are usually very talented and in demand. The tradeoff is that, unlike the patriot, if a mercenary’s personal needs aren’t being met, they are likely to jump ship at the first sign of trouble. Usually, they are just there for the money.

Why The Distinction Matters
One reason its critical to understand whether you are hiring a patriot or a mercenary is that your choice will impact your culture. Patriots are the people who live your culture on a daily basis and do things the way you want them done. Mercenaries, on the other hand, don’t always think the rules apply to them – especially if they are producing results.
While mercenaries can be very valuable to the growth of your company, you need to understand that they also carry a risk to your culture – at least depending on your business model. If you run a bond trading firm, for example, you might rely on a staff of 100% mercenaries – and that’s a good thing. But for most of us, especially those of us who want to build a company and a culture for the long haul, we need to be careful about how many mercenaries we have on staff relative to our patriots.

Consider the example of a company a friend of mine owns that operates in the government contracting space. It’s a tough business that relies a lot on relationships and social networks to be successful. That means that having a top-notch business development person is critical to any company’s ability to land new business. These folks have a very specialized, and valuable, skill-set – which means they can be hard to find and retain.

In the case of my friend’s company, he was fortunate to hire one of the best business developers around. And this guy delivered: he landed several large orders for the company (that he was well compensated for, by the way.)
But it also became apparent that digesting the work involved with those contracts was going to take my friend’s company at least a year to work through before they would be able to go out and bid on any new business.

Guess what happened? My friend’s business developer jumped ship rather than risk earning less by waiting for the company to chase new work.
This is a classic case of what happens when you hire a mercenary versus a patriot, someone who would have been willing to shift roles or jobs in the interim as a way to stay with the company and be part of its success over the long haul.
Both patriots and mercenaries can play important roles in your organization’s success. Just know what you’re hiring up front so you can plan best for the long run of your company.

Why You Need to Honestly Assess Your Talent

Many companies rate their talent well above average. Besides being untrue, this is a dangerous strategy as your top performers will leave you if you do.In the mythical town of Lake Wobegon, made famous by Garrison Keillor on National Public Radio, it is said that all the children are above average.While you might laugh at that joke, it’s worth asking: are all the people in your organization rated above average and how do honestly assess the talent in your organization?

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Continue reading Why You Need to Honestly Assess Your Talent

Run Your Business Like You Are Never Selling

To get the best value when sell your business, keep your focus on building a great business, serving your clients, growing your revenue and profits and exit will take care of itself.

Many of the CEOs and leadership teams I have worked with over the years have fallen into the same trap: they get overly focused on selling their company to a strategic or financial acquirer or worse, going public. At one level this is understandable since it is a dream for many, if not most, entrepreneurs and leaders to create a lot of personal wealth through a wildly successful exit from their business. That’s why it’s so common to meet business leaders who seem to think of nothing else.

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But if you make the notion of selling the primary driver of your business, at the expense of continuing to grow a great enterprise, you’re making a critical mistake.

All too often I hear business leaders tell me that they can’t make that new IT investment or ask an under performing executive to leave the business because they are just treading water until the sale of the business closes. No one wants to spend any money, or rock the boat when it comes to key personnel, because they don’t want to jeopardize their big payday.

Strategic buyers and investors are looking to buy companies who have great executive teams in place that not only deliver results in revenue and profits now, but who also have built in the upside to deliver growth into the future. And a pile of recurring revenue is sure to help!

So when a potential acquirer looks at a business that is clearly doing its best just to keep the status quo and not making the right moves and investments, they will see right through that and wonder if the company is now too risky to invest in. Smart buyers and investors look for companies that are continuing to thrive, grow, and make smart decisions – not those who are just passing the buck.

What do you think would happen if an investor approaches your company and asks which members of the executive team they should hang onto – and which ones they shouldn’t? If you immediately give them the name of a vice president who isn’t performing, you can bet the investor’s first question will be: “Why haven’t you gotten rid of them already then?”

Or, let’s say you have been holding off on making that big investment in a new IT system your team has been begging for. What you will find is that when an investor learns about that, they will discount their offer price for your business by the amount it would take them to make that same investment at the very least.

That’s why the best strategy to get the best price for your business is to continue to focus on building a great company – not on trying to sell it. If you were to make the investment in the IT system now, you might even be able to extract a premium from a potential buyer because you have laid the foundation for future growth because of that investment.

Believe me I speak from experience. A few years ago, I, too, was in the process of selling my company. We had received such a rich offer from a public-traded company we couldn’t say no to. At the time, my CFO and I were the only ones who knew the transaction was in the works. As it happened, my VP of engineering wasn’t performing at the time. I had him on an improvement plan for the prior few months and he just wasn’t getting any better. I knew it was time to make the move and help him leave the company. But rather than worry that I would scare off our potential buyer, I let them know what I was doing and why. I told them I was making a decision that was in the best interests of the business – and that was going to be my focus regardless of what happened with our transaction. The buyer was impressed: they told me they appreciated it. The deal eventually went through, before we even replaced that VP.

If you want to get the best price or value when it comes time to sell your business, keep your focus on building a great business, serving your clients, growing your revenue and profits and the great valuation on the exit will take care of itself.

 

Treat Your Business Partnership Like a Marriage

Business partnerships fail frequently. But we can learn from how people in good marriages manage their relationships to improve the odds.

Starting a business is no small endeavor, especially if you’re doing it alone. That’s which why many entrepreneurs choose to partner up. Having a partner helps make starting a business seem less risky because it gives you two or more brains instead of one as you go along your journey. The same goes for joint ventures and other forms of business partnerships. And there have been some fantastic business partner success stories over the years like Pitney & Bowes, Hewlett & Packard and even Ben & Jerry. blue-contact-us

 

But along with the successes come plenty of partnership horror stories. In fact, there are many parallels between going into business with someone and getting married. Even the statistics aren’t even as good as the success rate of marriage, where just about half of all of the relationships fail over time.

What that means is that when it comes to forging a business partnership, there are some lessons you can apply from the world of marriage to help improve your chances for success. Here are some tips to consider:

  1. Be Thoughtful About Who You Partner With.

Have you ever met anyone who got married after just meeting someone? That kind of thing only happens in the movies. Why? Because we all want to spend time dating someone and getting to know them before we get engaged to them. You should have the same attitude when it comes to choosing a business partner. Don’t jump into anything too quickly. Take your time to vet the other person and make sure you have the kind of chemistry that will last through the good times – and especially the bad ones – before you make the commitment in time and treasure to start a business together.

  1. Plan For The Break-up.

Nobody likes to think their relationship will fail, but the statistics are sobering: more than half of all partnerships, end in divorce. That means that right from the start, when you and your business partner are crafting a partnership agreement, you need to be planning on how you will end your relationship on good terms. Think of it like a pre-nuptial agreement for your business. That means detailing out how you will value the business when one partner wants out and how the buy-out will be structured.

If you don’t have this agreement in place and you hit an impasse in your relationship, you will find that things will get ugly – and fast. That’s because the incentives are all wrong. The partner who wants to leave the business wants to keep as much as he can while the partner who is staying wants to pay out only enough that it won’t impact the business. If you don’t have a way to structure that deal until emotions are high, you not only risk further damaging your relationship, you might also put the entire health of the business at risk as well.

I know of one example where two partners in a management-consulting firm went through a buy-out where they didn’t have an agreement in place when they started the business. The end result was that the partner who stayed with the business was forced to pay a premium to buy out his partner – which left his business with a massive debt burden for the next six years. That could have been avoided with better planning at the start.

While it might seem strange to plan for your partnership breakup from day one, you’ll be happy you did it later on.

  1. Work At It.

People’s objectives and goals in life change over time. That’s as true in marriage as it is in business. That means it’s inevitable that at some point, your partner’s goals will begin to differ from yours. The key to overcoming those changes if you don’t want to end your partnership is to constantly work on your communication and on setting clear expectations for each other.

I met the principals at a financial services firm where the two partners faced this very dynamic. One partner was solely focused on growing the firm while the other partner was comfortable with the level of wealth they had already achieved. While one partner was playing to win, the other was playing not to lose. It took extended discussions and concessions to find a way to move forward that keep them both happy.

They key is that they discuss those differences and learn to compromise on solutions that work equally well for both of them moving forward – or they could face the prospect of a partnership divorce.

  1. If All Else Fails, Get A Counselor.

If you and a partner reach a point where your interests and objectives are diverging fast, it can become very challenging to work out those differences by yourselves. That’s when it can really make sense to bring in someone to help facilitate your conversations similar to how a marriage counselor might work. In the case of a business partnership, you could turn to a mentor, a board member, or even a third party facilitator who could sit down and listen to the issues objectively. While those discussions might result in a decision to break up the partnership, a counselor could help you reach that point much more amicably and with less emotion than you could on your own.

The key point is that if you’re thinking about starting a business with a partner, head into that relationship with your eyes open because while you might be mitigating risk on one end, you’re also increasing it on another.

Apple’s Boring Mission Statement and What We Can Learn From It

Thousands of hours have been wasted talking about mission statements that are, quite frankly, boring. The best mission statements, are both inspirational and to the point.

Mission statements are critically important to your organization because they drive alignment in your organization toward the vision of what you want to get done. That’s why it should be the inspiration that your organization rallies around. Unfortunately, many thousands of hours have been wasted talking about mission statements that are, quite frankly, BORING! talk to us

The best mission statements, on the other hand, are both inspirational and to the point.

Consider the example of Apple. When Steve Jobs started the now iconic company, his mission statement was: “To make a contribution to the world by making tools for the mind that advance humankind.” Wow; that’s something I would get out of bed in the morning for.

But as much as Apple has contributed to the advance of technology, the company has come under increasing criticism that it has lost its way since Jobs passed away in 2011.

One of the changes the company has made in the years since is to change that original mission statement, which now reads like this: “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and is defining the future of mobile media and computing devices with iPad.”

 

Which mission statement do you prefer? While the newer version is very specific about what the company does, it certainly fails to meet the criteria I suggested earlier: it’s not inspiring and it’s certainly not brief and to the point.

Now compare Apple’s latest mission statement with some other major companies. For many years, Pepsi’s mission statement was: “Beat Coke.” That’s certainly simple and while it doesn’t get into the tactics of how they will fulfill that mission, it gives everyone in the organization a clear vision of what they need to accomplish.

Another great example comes from Medtronic, the medical device manufacturer, whose mission statement is: “To extend human life.” That’s an exciting mission and certainly something that is inspirational for anyone who works inside the business producing products like pacemakers and defibrillators.

But you don’t have to be a major corporation to have a great mission statement. I worked with a business that competed in the exciting field of humidity measurement. It’s not a big market, maybe $500 million in total, but this company established its mission as: “Global domination of the humidity measurement industry.” Not only is that clear and inspirational, it gives everyone plenty of scope for the business to aim at over the next several years.

What happens in situations like what we see with Apple is that you are trying to please everyone. You worry about offending someone, or leaving someone out. But by trying to be inclusive and non-offensive, you lose that focus and inspirational tone you need for your mission statement to be meaningful. That then leads you down the path of a favorite quote of mine from the movie RoboCop where executive Dick Jones says, “Good business is where you find it.” It basically means, “We will do anything for anybody, if we can make money”. That’s not too inspirational.

In other words, you chase every opportunity you can–which can be the worst thing for your organization to do. As I have written about before, your organization is actually defined by what you say no to.

Worse than trying to please everyone are mission statements designed by committees. Mission statements are also like strategy in that they are best done in smaller groups–preferably one using the seven plus or minus two rule. When you give the job of crafting your mission statement to a committee, you end up with boring, multi-syllabic paragraphs that say a lot about nothing, much like the one from Apple.

So take another look your company’s mission statement. If you start yawning when you read it, it’s time to make a change by making it shorter, tighter and more inspirational. Grab a small team – be bold, say no to lots of things and inspire your team!

The 1 Best Question to Use in an Interview

There is a single question that you can use to assess whether candidates understand the job and if they are A or C players.

The secret to hiring your next great employee might come down to how someone answers a single question. And you won’t be asking what kind of tree the person would be or about her Myers-Briggs profile. It all comes down to measuring performance. Let me explain.talk to us

The authors of the book Who suggest you can immediately begin to distinguish A players from B and C players, beginning with your initial phone screen. You do so by telling a candidate exactly how you will be measuring his or her performance in the job you’re hiring for.

How candidates react will tell you plenty about them. C players, for example, probably won’t be able to hang up the phone fast enough, since they don’t want any part of being measured. A players, on the other hand, will take your bait and get excited for the chance to excel. They might even up the ante by asking you what’s in it for them if they really crush it and exceed your expectations.

It turns out there’s an even better question you can ask candidates to help assess if they are true A players once you have them in for an interview. I learned about this magic question from Joel Trammell, the CEO of software company Khorus, who I wrote about in my book Great CEOs Are Lazy.

Joel believes that CEOs can’t delegate hiring decisions to someone else like HR. He perfected his hiring method by interviewing every single one of the hundreds of employees in his company.

Doing those interviews, Joel found that there was a single question that helped him assess whether a candidate understood the job being applied for and what he or she needed to do to excel in it.

“If I was to hire you, how would I know if you were doing a good job?”

This is a great question because it forces the candidate to put herself into the job and be thoughtful about how she might be measured by you, her boss. The answer you get will tell you a lot about the candidate’s maturity and comfort level with having her performance measured.

If you ask a C player this question, for instance, you might get some stammering followed by some noncritical metrics such as he will show up for work on time and not take extended lunch hours.

A players, on the other hand, will give you exactly what you’re looking for. Let’s say you are hiring a software engineer. When you ask an A player the magic question, he might respond by saying you will know whether he is doing a good job by using three metrics: the total volume of software code he produces on a weekly or monthly basis; the quality of the code based on a limited number of bugs; and his on-time delivery rate in which he hits the targets he said he would.

This would be a great answer because each of the metrics is measurable and quantifiable. You know if you had a group of engineers who were all willing to be measured on those metrics, you’d have a high-performing team.

Similarly, if you were hiring a salesperson, you might want to hear her answer the magic question by saying that you could tell she was doing a good job if she was exceeding her quota and selling profitable business, and her customer satisfaction rating was off the charts.

A key point here is that while you might know what you want to hear from a candidate, leave some wiggle room to be surprised and to learn something new about the position from an A player–someone who might think of a metric you’ve never considered.

The beauty of asking the magic question is also that, after the candidate gives you his answer, you pause for a second and say: “Let me write these down because, if I hire you, this is exactly how I will measure you after you start your new job.”

In other words, you can use the answer to the magic question as a great onboarding tool in which you have eliminated any chance that your new hire will be surprised about what is expected of him after he starts his new job.

How magical is that?

Want to Win? Keep Your Strategy Short and Sweet

When it comes to communicating about your strategy with your organization, and ensuring you don’t out think it, the phrase to remember is: keep it short and sweet.contact is we help you grow

Everyone who runs a successful business believes that they have the best people working for them. And that’s no accident since we invest so much time and effort in screening and interviewing people to ensure they are smart, capable, and a culture-fit all in one.

But the truth is that no matter how hard you work on attracting and hiring the best of the best, the collective intelligence of your organization is still just about average, especially if you have a larger operation. Maybe your organization is the exception and you are really, really good at hiring–but that only means the total team might be 5% to 10% smarter than everyone else. It all comes back to averages. It’s just a mathematical reality.

At the same time, one of the aspects that set great leaders apart from the pack is that they tend to have special skills–particularly the ability to see over the next hill and make connections and correlations that the rest of us can’t. Much of that ability comes from experience, knowledge, and the ability to do complex thinking. These are the people who can see into the future, if you will, since they are the ones who are great at mapping out the kinds of strategies that put companies on the fast track. They can anticipate how doing A plus B, contingent on C, equals Z.

Guess what happens, though, when great leaders like this try to explain their complex strategies to the average worker? They get looked at quite literally as if they were from another planet. Sure, most people might understand A and B, but how the heck did you get all the way to Z?

To put that another way, great leaders need to learn to not out think their organizations.

What this means at a practical level is that when it comes time for you as a leader to explain your company’s strategy, you need to pare it down. Yes, you can talk turkey with your senior leadership team. But when it comes to company-wide communication, make things short and sweet enough to give your team the information they need to act without overwhelming them. Boil it down to a maximum of three elements since that’s the maximum amount of information most of us can process. Not seven, not five–three is the magic number. Then take those elements and repeat, repeat, repeat as a way to drive them throughout your organization.

Consider the classic example of legendary CEO Jack Welch’s reign at GE. At the time, GE was a massively complex organization worth more than $100 billion with its fingers in all kinds of industries like light bulbs, locomotives, jet engines and finance. You can imagine the kind of complexity that went into managing the strategy for that kind of multi-pronged business.

But if you worked at GE at that time and heard Welch speak, he would have focused over and over again on just three things: globalize the business, drive service and recurring revenues, and improve quality throughout the company by embracing the discipline of six sigma.

Of course, Welch could peel the onion or dive deep whenever he needed to. But it was by repeating those three basic elements that he knew he could get everyone in his organization, no matter how average they were, aligned without fearing of talking over their heads.

I actually had a similar experience with a boss, Paul Snyder, earlier in my career. Paul was the CEO of High Voltage Engineering and, while we weren’t on the scale of GE, we were a multi-faceted and growing business with thousands of employees. But I remember even to this day the three things Paul repeated over and over again about our strategy: make the numbers, grow the business and invest in the people. Guess what we talked about every time we got together?

Boom: easy enough for anyone to remember, including me–for many years! That’s the real value in not out thinking your organization. So when it comes to communicating with your strategy with your organization, and ensuring you don’t out think it, the phrase to remember is: keep it short and sweet.

The Secret Ratio Great Leaders Use to Evaluate Talent

Great leaders focus in on what we can call the “Talk/Do” ratio. Put simply, they measure how much their employees talk and communicate compared to how much work they actually get done.

How do you go about evaluating the talent in your organization? There are obviously many different performance metrics you can look at. But sometimes an employee’s verbal skill and presence can cause you to overlook their real impact. talk to us

That’s why when it comes to evaluating the

talent in their organizations, great leaders focus in on what we can call the “talk/do” ratio. Put simply, they measure how much their employees talk and communicate compared to how much work they actually get done.

 

When you go through the process of categorizing your team in this way, you’ll find that most of your people will fall into one of three buckets. Not unlike how Goldilocks evaluated her porridge options, you’ll see that you’ll have some that are “Too Hot,” others who will be “Too Cold,” while the best will be “Just Right.” The real value of using this metric is to then use it as a coaching opportunity to get as many of your team into the “Just Right” bucket as possible. Let me explain what I mean.

“Too Hot” or Talk/Do Ratio Too High

We all know the people who talk all day long–and yet get very little done. Their verbal skills are usually impressive and it is hard to penetrate what is really happening without real effort. These are your “Too Hot” people; the ones who blow too much smoke. There is an old English phrase that applies here that goes: “At the end of the day, when all is said and done, more is said than done.” It applies to this group.

They are also the folks who can have a negative ripple impact on the rest of the organization because they eat up other people’s time in meetings and impromptu chitchat. As a result, everyone gets less done. These are people I also define as amplifiers. The coaching opportunity here, obviously, is to let these folks know that they quite simply need to spend less time talking–and more time getting things done. Try not to lose focus on their accomplishments due to their verbal skills.

“Too Cold” or Talk/Do Ratio Too Low

What leader doesn’t love the employee who keeps their mouth closed and their head down so that they get enormous amounts of work done? Sounds like a dream, right? While it’s great to have such productive people, it can actually be a detriment to the rest of the organization if they aren’t talking enough about what they’re doing–and when they’re going to do it by–to get everyone on the same page. We see this a lot with highly technical and introspective talent, like programmers, who would prefer to be left to themselves to work. The coaching opportunity here is to help these folks understand how engaging with others in the organization can make their work even more effective and engage the team.

“Just Right” or Talk/Do Ratio Correct

Finally, you have the people who have learned to strike the perfect balance between talking and doing–your “Just Right” bucket–their Talk/Do ratio is right on point. These are the folks who communicate without sucking people into too many conversations or meetings while also producing the right amount of output. The more people like this you have on your team, you’ll be amazed at how the level of cohesion and productivity begins to skyrocket. The only coaching lesson they need is to be encouraged to keep up the good work.

Realize that each organization has their own ratio and the right ratio for a high performer within that organization needs to match the business. Some require high communication to be successful and others expect people to put their heads down and work. When you are thinking about the Talk/Do ratio – you need to include the context of the culture.

So when it comes to evaluating the talent in your organization, consider using the Talk/Do Ratio to ask whether someone is Too Hot, Too Cold, or Just Right. Your organization will profit as a result.

If you want to learn more about other characteristics other great leaders share, check out my new book, Great CEOs Are Lazy, which is available for sale on Amazon now.

 

The Error of Uniform Time Allocation

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This article is excerpted from the book Great CEOs Are Lazy (Inc. Original Imprint, 2016)

A lot of the mediocre and hardworking CEOs we have run into over the years are exceptionally good at what we call “peanut buttering.” When it comes to allocating their time to the various tasks and stakeholders in their businesses—their boards, their supply chains, their investors, their communities, etc.—these CEOs do their best to spread their time as evenly as possible across all of them. The concern, of course, is to make sure everyone feels like they’re getting the CEO’s attention. In this effort, the CEO will work very hard, sometimes as much as eighty or more hours a week. The bad news is that this is the surest way possible to dilute the CEO’s impact on any one issue. Unfortunately, this concept of tending to every stakeholder is taught at many major business schools, which only perpetuates the error. This is done, in part, because CEOs aren’t certain what actions will drive the business forward; consequently, they work on all fronts, hoping one will yield results.contact us now

Lazy CEOs, on the other hand, play favorites with their time. Rather than allocating a uniform amount of time to everyone and everything, they give usually between 30 and 50 percent of their time specifically to the task of removing the constraint(s) in the business. Remember this: It’s only the work done at the point of the kink in the hose—the constraint—that will truly make a difference in your business. Whatever time is left gets distributed to the other stakeholders—some of whom may get zero CEO attention then, or perhaps forever. In an ideal world, smart CEOs would build a strong organization of individuals who would handle all of the work that is not at the point of constraint. That way, the only work our Lazy CEO would do would be to remove each constraint as it arose.