The CEO Project Podcast

Welcome to Andrew Davis, a super creative guy, he came out of media, spent time with the Muppets had a digital marketing agency that he sold. And now what he does is he is primarily a speaker, so he gets in front of audiences, inspires them and educates them, and entertains them. He's spoken to our CEO group before and a couple of our clients as well.

Andrew Davis:

My focus today is helping people challenge the conventional business and marketing wisdom by really rethinking some of the things that we've always been taught and traveling around the world and teaching those to people and writing books. I got my start in the media business. I worked in television right out of college I worked for the Jim Henson Company which is where I learned how marketing and business really work, because the truth is, at the Jim Henson company, they really don't make much money on selling media properties. Selling Sesame Street as a nonprofit doesn't make any money. What makes money is creating content that people fall in love with and characters that people can't get enough of so that they can license all of those characters.

It was a real education in the power of media to inspire people to buy things they didn't know they needed. And after that, I worked at a series of startups in the startup boom of the late 1990s. I started my own agency with a journalist friend of mine named Jim Costco in the early two thousands. Then we sold that in 2012. And since then, I've just been traveling the world and writing books, and kind of challenging myself to find out how things really work in the new world we live in.

Jim Schleckser:

Share with the audience what it means from your perspective to differentiate.

Andrew Davis:

We live in a world where being different is something that's really important and we tell people to be different all the time. We've got to look different. We've got to get people to notice us and get more awareness in the marketplace. But the truth is, in the last six years, I've spent a lot of time looking at what really differentiates you in the marketplace today. And looking and sounding different is great, but actually being different is the real true differentiator. So if you can create an experience that feels different for your clients that's where you can win over an industry. What happens is if you create a good client or customer experience, most of the brands that are successful in doing that start marketing that experience as the differentiator.

Many people spend all this time saying we need more leads; we need more customers. We need to raise awareness to get more people in the door or onto the website to buy the stuff. And the truth is, if you have a bad customer experience, you're just shoving people through a bad experience. I really truly believe the way, to start transforming your business is to start with the very next customer you get and really rethink the experience by differentiating it from everybody else in the marketplace.

Jim Schleckser:

I love the idea of becoming an attractive force versus pushing this big heavy rock up the hill all the time. How do you recommend we start?

Andrew Davis:

Let me give you two just quick concepts that you just have to embrace to understand how what I call the loyalty loop works. So you first need to understand the moment of inspiration. The moment of inspiration is an instant in time that sends you on a journey you never expected. For example - to buy anything, it could be a car. You get your lease-end notification. That lease end letter that Nissan sends you is an instant in time that's going to send you on a journey to buy a new vehicle. That's a moment of inspiration. A moment of commitment is the instant that you trade money, data, or time, for information to support a cause or to buy a product or a service. The big change in the moment of commitment today is that we need to understand that sale. The sale isn't the only moment of commitment. If you fill out an online form, if set up a calendar appointment with someone, if you ask for a quote from someone as a consumer, you are trading data for an experience, and that data is worth something. If you understand those two concepts, just the moment of inspiration and the moment of commitment, what you want to try to do is build a real experience.

For more examples and valuable insights into creating customer loyalty, listen to the full podcast.

This episode of The Lazy CEO Podcast is about creating advocacy. We have Heather Hansen, who is the CEO of Advocate to Win, and she is going to talk to us about advocating our positions and persuading people. Heather shares her background as a lawyer and how that has led to her expertise in persuasion and expertise. Heather defended doctors in medical malpractice cases. One of the things that made that job the hardest is that every single person in that courtroom was a patient.

Everyone saw the case through a patient's eyes, and her job was to change their perspective and help them succeed in the case through the doctor's eyes. And that is the main job of an advocate. This led Heather to this practice of advocacy and teaching advocacy.

What is Advocacy?

Advocating is influencing, it's persuading, it's convincing, it's changing minds, it's changing hearts. It's helping people believe what you want them to believe, and it's turning other people into your advocates. The first question to ask is who is your jury? And CEOs have many juries. Their board is a jury at a particular time. They're stakeholders, their clients, their customers, and their team. But we have to know who the jury is so we know how to speak to them.

Compassion, Curiosity, and Credibility

Credibility is where we focus - the belief triangle. You want your jury to believe you. When you make a promise, you keep it. When you set expectations, you meet them, you want them to believe in you, and that you have the experience, the talent, and the capacity to do the thing you promise to do. And the part that most people forget is to believe that you can help them, that you understand their problem, their perspective, their point of view, and that you can help it. There are times, especially for CEOs, when you must knock down someone else's credibility or question someone else's credibility. How do you do that effectively, how do you use due diligence and look for inconsistencies to make decisions that are going to serve the people that you want to serve?

TIP: Questions are magic.

A great question can mean the difference between winning and losing a case.

1. You can't prove it until you believe it. You have to have that energy of belief. It's one of the parts of credibility. It's energy and evidence. You have to have that energy of belief and then the evidence as well, in order to help your jury of clients, customers, stakeholders, and board members believe as well.

Empathy vs Perspective

Empathy is feeling what others feel and perspective is seeing what they see. And you must not necessarily feel what they feel. For example, in the courtroom, defendants are frustrated, angry, scared, and confused. If their lawyer feels those feelings, they are not of service to them. So the empathy piece isn't always imperative depending on the situation, the perspective piece, which is what you're really talking about, is the cognitive part. Seeing what they see is imperative. Seeing it from their perspective and owning it is a credibility multiplier. Use your perspective to own where there are problems and boost your credibility.

Advocating for Yourself

Here is an example - a woman came to the CEO to advocate for a change in their policy with respect to working at home and taking care of children. She was a very strong advocate. She had stories, she had evidence, she had the energy of belief and he listened to her and he decided that she was right. And this is even though she was advocating. Then once he made the change to the policy because she had advocated so well, she became his strongest advocate. She told everybody in the business, she told everybody outside of the business, you need to come work for this company. There is no one who can advocate for you and your ideas and your potential better than you can because you have your stories and your evidence and your passion and your heart, and you know what your negotiables and your non-negotiables are. These tools will help you with your outer jury that we've talked about, but also with your inner jury, the part of you that decides what to believe and how to go out and then share that belief with others.

How do you overcome the mental baggage around self advocation? I'm not supposed to brag. I'm supposed to be humble. You're not framing your stuff as, I'm awesome, I'm the best. Look at me, I deserve it. It's, you need me to do this. And this is why, if I had the cure for cancer, I wouldn't be bragging if I told people I had the cure for cancer, I would be serving them by making it available to them. Stop thinking about yourself and they start thinking about how your experience, training, talents, and passion can serve their jury, then you will stop feeling like they're bragging and will be able to step into that energy of passion and excitement that actually is extremely persuasive.

Building Referrals into Our Business

We all want more referrals for our business. We don't just want a Net Promoter Score, we want them to be advocates. What's the difference? The difference is it's not just saying this is a great company, it's saying this is a great company and this is why. And so you turn people around you, into your advocates by advocating for them. So seeing things through their perspective builds credibility, which ultimately builds trust, compassion, and curiosity about their needs. You leave the people around you with stories, evidence, and energy to go out and advocate for you.

Three Powerful Questions

1. Tell me what you want me to know.
2. Where are they right?
3. What am I missing?

For details about these three powerful questions as well as more examples and stories about advocacy, listen to the full podcast.

Heather Hansen

For over twenty years Heather was a trial attorney. Her job was to help diverse groups of people believe in her case so that her client could win. She honed the tools for her clients to build credibility quickly so they could persuade diverse juries to see things from their perspective. Now she is sharing the tools with you.

Heather has worked with organizations like Berkshire Hathaway Home Services, Google, Sav A Tree, the American Medical Association, Call Miner, and LVMH to help them make the case for their services, products, ideas, and their teams. She's also shared these tools at Harvard Business School, Stanford Law School, and The University of Pennsylvania, and with audiences across the world.

Heather has combined her experience in the courtroom with her degree in psychology, her certification as a mediator, and her television work to develop her 5Cs of an Advocate.

With these tools, you can overcome objections, banish doubt, build credibility, and change people's perspectives.

This episode of The Lazy CEO Podcast is about determining when it is time, as a Founder, to bring in an outside CEO to run the company. We have a gentleman named Nick Wilkinson. Nick was a CEO that was brought into a company called Binary Tree that one of our members Steven Pivnik had founded, and he was trying to position for sale and upgrade the talent. Nick was the guy he identified and ended up bringing into the company.

Nick's Background

Originally from the UK. After graduation from university, Nick spent the first 10 years of his career in the British Royal Air Force. After the Air Force, he joined what was then a pretty small company in the UK called Computer Sciences Corporation, CSC, which Nick subsequently spent the next 20, almost 25 years rising through the ranks of CSC from a consultant all the way through for various account management roles to ending up as a direct report to the CEO in, at that time was like a hundred thousand people company with 16 billion in revenue.

With a great career in the UK. he was lucky enough to do some interesting jobs, which brought him to the States. He also lived in Australia for a few years and really assimilated a huge amount of knowledge and expertise on how to run large-scale organizations. Back in the early 2010s he was the CEO of a private equity-backed company backed by Bear Capital which was also in the IT services area. And that company and Steven's company oftentimes coexisted with clients. They didn't do the same thing, but they did, provided complimentary services.

Here is more of the conversation between Jim Schleckser, CEO of The CEO Project, and Nick Wilkinson.

What was the size of the company, the training company, and the IT space prior to coming to Binary Tree?

The private equity company was mid-market. It was of comparable size to Binary Tree. I made a decision when I left the large corporate world that I didn't want to go and do the same thing again, I wanted a change. I wanted to have more direct visibility of what I was doing and how it affected the business. I wanted to be a CEO. And I decided that I wanted to try that in a different financial structure, a different capital structure. And that's what led me into the private equity world.

An important component of being able to step in as a CEO for a Founder is rolling your sleeves up and not needing somebody to do everything for you. In the founder-owned company, there aren't a whole host of staffers and people to do things for you.

A lot of entrepreneurs get dazzled by the resume. They see your big career and think, this guy's brilliant, but then they bring that individual in, and they can't do the big to small translation. You obviously made the transition successfully, but what would you characterize as the differences? Most people can't make that transition. You did. What were the differences and why were you able to do it where maybe others might not be able to?

A big part of it is personality. And I'm trying to answer the question without blowing smoke in my own direction. You've got to be reasonably self-effacing and modest, the servant leadership things. I know what it felt like to be at this level, and then a mid-manager and the senior manager and management. I had walked a mile in other people's shoes, and I was always willing to empathize with them and try and see things from their perspective. I've always been someone who's espoused lifelong learning. In addition, the founder must have a certain willingness to change and to listen, but at the same time a clear sense of what it needed to be successful in his or her company. That chemistry is important.

If I was trying to figure out if somebody had the right profile or didn't, what would you recommend as the two or three questions to figure out if they've got the profile with you?

If you were faced with a new opportunity with a big customer because a CEO must be capable of going out and meeting with customers, what do you do? How do you approach that?

Shortly after I arrived at Binary Tree, we traveled out to the middle of nowhere and gave the pitch. We didn't win the business, but the fact that I was willing to be the one who made the deck, I went to Kinkos to get it photocopied. I helped prepare the guy to give the pitch and everybody thought, if this guy isn't here just to tell us what to do, he's willing to do it himself. So, a question that gets a potential CEO to show that they would do it themselves, that they would be there in the trenches with people as opposed to telling them from back at HQ. That would be a good way to frame something

How do you follow the legacy of the Founder and establish credibility? How do you establish a relationship with the team?

Moving into a CEO role in a new company, not a company that you've been in for some time, promoted into, you must have a balance between the drive to implement the things that got you the job, with the need to really learn about the business, to respect the fact that your knowledge of it is superficial when you've been outside it. You must learn how it actually performs. Where's the value really created? Who are the heroes? Where are the tensions? Where are the hidden gems? How it really works. So, it's that balance between listening and doing, which is always the case for a CEO, but extremely important in those first 60, or 90 days. If you move too quickly, then the organizational will or the body will reject the organ transplant as one of my advisors once said to me but if you move too slowly, you've missed your opportunity, and your authority diminished. And people wonder, why did we make the change then? So, you must have a plan. And revisit the plan with the founder, hers, or his DNAs in the company, and who better person to give you feedback on whether well, that would work, but I wouldn't try that you need to keep that relationship going. It's really that balance between listening and doing that's essential.

How much of your original plans survived?

Most things that I expected that we would do, we did. Did we do them in six months? No. One of the things that you must learn in smaller companies is that you must take smaller steps. The organization is not robust enough to do dramatic change. There are capital constraints. You must temper your ambitions with the, with the resources that you can muster.

For more about the board, sacred cows, the difference between working with PE firms and Founder owned companies, and other lessons learned, listen to the full episode of The Lazy CEO Podcast.

About our Guest - Nick Wilkinson

After my initial period of military service in the Royal Air Force, I have enjoyed a successful career across a wide spectrum of the IT software and services industry: a proven CEO in private equity and founder-owned companies and extensive, global multi-functional leadership experience in a publicly traded corporation. I have also established myself in the entertainment industry as an author, screenwriter, and producer. In all my activities, I relish transformational challenges and managing through the lifecycle of devising strategy, establishing a vision and purpose, building, motivating, and sustaining an outstanding team, and executing for results. I cultivate win-win relationships with customers, partners, and colleagues. And, perhaps most importantly, I bring optimism and a healthy sense of humor and perspective to every situation.

This episode of The Lazy CEO Podcast is about both performance reviews and employee feedback. There is tension around performance reviews, did I achieve my goals? They have a lot of stress around them. People don't like to do them for that reason, both sides. We will talk about both performance reviews and feedback as the yin and yang of engagement with employees. If you think about feedback as a more continuous process and a performance review is a more periodic kind of engagement, annual or biannual or whatever your pace is, they kind of work together. At one level you'd say the feedback over time should aggregate into the performance review. And in fact, one of the rules around performance reviews is there should not be any surprises around performance reviews. Some organizations are eliminating the annual performance review. They're basically saying, if we're doing a good job of continually giving feedback, we don't really need to do a performance review. Some dispute that because there's a bit of a formality that's got value in a performance review.

Two Extreme Cases

Gen Zs want continuous feedback on how they're doing. If you told them every day -red, yellow, green, or on a scale of one to 10, they would like that. They are the generation that grew up with- how many likes did I get on my post? And how many friends do I have? How big is my network? And they're constantly measuring themselves for acceptance and how are they performing and where they fit in. You can not give Gen Z too much feedback.

The opposite of that is when we get feedback from people that do not have good self-awareness and they do not appraise themselves accurately. When there was a complete mismatch in their view of their performance and the boss's view of their performance. This is when there is a ton of stress, so the boss is questioning, what am I doing wrong that I've not communicated to this person where they stand? And, part of the answer is it's them.

Standard Performance Review Model

An annual performance review is still important. Let's reframe performance reviews as a coaching opportunity. An opportunity to talk about the good, the bad, and what we're going do to make them better. That's your standard good, above average, performing employee review. How did they perform against their objectives? As a leader, you must set clear objectives - specific, measurable, action-oriented, time-based, achievable, all that has to be true about the objectives. They are very observable, third-party observable. You know if you did them, your employees know, if they did them. So when we sit down and say, did you achieve the specific objectives that we had for you this year? That should be a relatively easy conversation if you did a good job of making them measurable. So we go through the achievements, 1, 2, 3. You got an A on this, a, B on this, and a C minus on this one. The second thing that a lot of people miss when they're doing a review is how you got the job done. So they're only focused on the achievement of the item and they miss how you did the job. How does your boss perceive you in this organization and how you got the job done? Are you effective in working with others to get the job done? Did you work and play well with others?

When somebody does the job in a way that doesn't match your culture, they shouldn't be in your organization over time. How did you get the job done? What did you do well, and what did you do poorly on there? And then based on that, where do we need some development? And given where you want to go, so this is where the career conversation comes in. Do you want to be a vice president? Here are the three things that you don't have that you need to be a really good vice president. So let's figure out how to get you those things. We need to teach you some financial skills that you don't have, or you need to understand the product development process.

Finally, what else can I do to help make you successful? And that's a bit of a servant leadership view of the universe. I'm here to serve you, I'm here to help make you successful. But it is a worthwhile question particularly if they know you're going to ask it. Let them know, I'm going to ask you that question. And they have a little time to think about it. And then ask, what can I do to help make you more successful? That is a really good question.

Giving Feedback

The key is to always be very specific in your feedback in the performance review. I'll give you an example of that. If I said you know, Sharon did a really great job on the CEO summit this year. That's one kind of feedback. Another kind of feedback would be- Sharon, the CEO Summit went awesome. I loved how you took full responsibility for it. I love how you solved problems and didn't bring them to me. You just dealt with it when it did become a big enough issue, we talked about it and you just solved it. There was never any drama. You organized everybody seamlessly. You did it with good spirits and everybody had a great time as a result. That is very specific feedback about the actions taken and why she's getting positive feedback. So, when you're giving feedback, be as specific as you possibly can.

For the low performer. Did you hit your objectives? No. Did you get the job done? How did you get it done? People that are low performers don't generally cause a lot of problems because they want to keep their head below the radar. They know they are non-performers, most of them. And so, they're not going to make waves.

It's the people that think they have earned the right to be a jerk that generally are, and they have developmental needs. You will need to spend time on what they need to do to become fully competent in the job they're in because they're not meeting standards. The need to be specific in feedback is particularly true when you've got somebody who has low self-awareness. For example, we have not made a single date commitment for delivery to a client in the last six months. Here's the scorecard. You were late by at least three weeks on every single commitment that you've made. There are 10 jobs that have been in there for six months. That affects our sales and our revenue if we can't do the application engineering. Now I've been very specific. It's quantifiable, it's observable.

Performance Plan

We're going to get into a performance improvement plan- these numbers are unacceptable. They need to all get green and on time within the next three months. If they don't, we're going to have a very short conversation and it's going to involve you exiting the organization. So now we're on a performance improvement plan which is more severe than a negative feedback kind of conversation. You're going to have them sign. Not that they agree, but that they have received. The reason why it's important is if you do end up terminating that person, you want a paper trail that says we had multiple conversations about this person's performance. Here are the documents. We were completely clear about what was going on and that's why they got terminated. And so the annual review forces that documentation discipline that if you ever end up in a litigious situation, you've got it as opposed to normal ongoing feedback.

For more examples, and incites about feedback and performance reviews, listen to the complete episode of The Lazy CEO Podcast.

The Lazy CEO Podcast guest on this episode is Stephen Drum. Stephen is a 27-year, Navy Seal retired combat vet and he now speaks on leadership, some of the lessons that they learned and developed through his many years of leading people through dangerous, high-stress, mission-critical, environments, which we can all learn a lot from as we run our business.

Here is a little bit of the conversation between Jim Schleckser, CEO of The CEO Project, and Stephen Drum.

Jim:

What is warrior toughness? How do you measure it? As CEOs we would really like to figure out when we hire somebody when the fire starts, are they going to run to the fire or away from the fire? What is toughness?

Stephen:

Well, to set the scene quickly, I'm sitting there, and we have what's called an all-hands call. That's where the whole entire command will sit and either the commander or somebody from outside will come in. So we're doing an all-hands call in the chapel, which is the biggest place where everybody can all sit. And the chief of naval operations, who is the head admiral of the Navy, comes in and starts talking about his initiatives. And one of them was toughness. I have the bright idea to stand up and say, sir, how do we define toughness? How are we going to measure it? And how are we actually going to train it? Little did I know that about six months later, I would be locked in a room with a clinical psychologist, and a chaplain and the three of us would be charged with figuring out how to get our sailors tough.

There were some things in the fleet that hadn't really been going well. If you think of like the fighting sailors from World War ii, we kind of lost that. And now we have things going on, ships colliding, missiles being fired; we need tougher sailors. And so of course, the first thing was we had to define what it is. And so, we defined toughness in three areas.

1. First, you have to take a punch and keep on going. There's the tactical definition, but also the life definition. So, literally, we're on a ship, friends wounded, comrades are injured, and I have to get back up. I may be personally injured myself and I must get back in the fight. But it also takes a punch in my career. I didn't get that promotion. Maybe a loss of a relationship or loss of a loved one, but I have to get up and move forward.
2. Next, I must perform under pressure, in the clutch. It's one thing to know the skills to say, I've been trained, I've practiced, but can you perform under pressure? Can you regulate those emotions? Can you maintain your calm and your composure? And lastly, the day-in, day-out grind. And that swings both ways. That's a high-tempo operation that we would see in the seal teams, multiple combat operations a night for six months. The grind and the toll that takes both physically, emotionally, and mentally. But then also the other side of that coin, let's say a radar operator on a destroyer in the middle of the ocean, at the end of that six-month deployment, staring at a screen. 99.9% of the time, nothing happens, but people are going die if that person is not locked on in case something does. So, it's having that attention and commitment to that level of engagement for a long, protracted period.
3. Finally, having the fundamental values, and beliefs, and knowing how to take action and behave in a way through principles that support those values and beliefs. Because not only do we need people that recognize this, therefore they can arrive at a higher level of commitment to what we need them to do. But we need our sailors, our warfighters, to be people of character. It's one thing, to accomplish the tactical objective, but we need people to be people of the right character to make good moral and ethical decisions as well.

Jim:

Can everybody get there? I'll give you an example. I was on a board of a company and, and we had some tough times, like missing numbers, bank covenant violation. The bank was ready to take the keys to the building. It was interesting to watch the performance of the executive team. Some ran toward, like we call it, ran towards the fire, right? They said, how can I help? What can I do? Let me take something on, let me right others.

Can everybody be brought to the point that they would run to the fire? Are they born or can they be made? And I always default to decide that yes, people are more predisposed to have certain traits, characteristics and attributes to make them more gregarious, whatever that is. But ultimately, I believe that we can build that even if you tend to be an introvert, you can still do things. For example, I refuse to believe that somebody who's introverted can't go out and be a good sales rep.

Stephen:

I also believe that you can always be tougher. There must be a level of commitment that says this is important, and I'm going to do everything possible for me to set the table for my success, and for my team's success. You can do your very best, but if you at the end of the day cannot be bought into that concept, then I'm going to have to exit you from my sphere.

Jim:

And that does happen. We talked about how this applies to the business environment. You could argue the stakes aren't quite as high, but the ideas certainly translate. How do you translate that line of thinking to a business environment and give an example or two of how you've seen it work?

Stephen:

The concept that I talk about is the X and I think it's important. My book is called Life on the X, but the X goes back to my time in the military. And it's a military doctrine term, but you can think of it as X marks the spot. So if you rope out of a helicopter onto the rooftop of a building, we call that landing on the X.

I'm going to line up all my efforts and all my preparations to make sure that I show up, that I can handle curve balls, that I can pivot, that I can adjust, and that I can learn. Every engagement that you make, you must be intentional, whether it's internal to your organization, to your customer, or to your partner. I must make sure that I align the skills, I identify the gaps in my performance so that when I walk in there, I'm calm and composed, but I also have that level of, okay, I'm hovering above, I can make a decision. I'm not too close to the problem. So really it's about regulating your emotions.

For more of the conversation between Jim and Steven, listen to the full Podcast.

Thank you to our guest...

Stephen Drum is a combat-tested retired Navy SEAL Master Chief who has 27 years of experience leading and developing high-performance teams. As an in-demand speaker and consultant, he helps individuals and organizations such as CDW, Horizon Pharma, and 9 Energy develop leadership and performance strategies, so they can plan, prepare, and execute at the highest levels when it matters most.

Steve has trained and led U.S. and foreign partner special operations forces on high-risk and strategically vital missions across the globe, including combat operations in rag and Afghanistan.

He recently co-developed and taught "Warrior Toughness" training for The U.S. Navy. This vital program fundamentally changed the culture of the Navy in how it trains and prepares young sailors and officers for the acute stress of intense combat operations.

During his Navy career, Steve has personally trained thousands of elite military soldiers and Navy SEAL candidates, helping them succeed in severe training courses and overseas combat operations.

In this Episode

Today we're going to talk about some specific ways that you can become more purposeful in your organization. Let's just start with the audiences that care about this. Everybody does at some level, but there are three specific audiences that are highly attuned to purpose.

1. Gen Zs - they have no fear about going to get another job because they've grown up in an environment where jobs were always available. And those of us that have been through a couple of cycles have experienced times in our lives where job jobs were less available, but this group has never experienced that. This group generally believes that since they are working, they might as well make a difference in the world in some way. They are looking for purposeful places to work.
2. Millennials – like Gen Z are looking for purposeful work.
3. Midlife Crisis Boomers - there is a point in a Boomer's career where they are talking about what to do next year. We are going to make more money and grow our revenue and that's the plan. Is that what life is about? The question of purpose at work became a present problem and issue at that time. And if they cannot find purpose in their work, they go find purpose outside the business.

So, what should we do differently? And, why would we want to have significance?

1. To attract millennials, attract Gen Z, retain them, and midlife crisis people that are looking for significance in their life.
2. To attract the right kind of people.
3. To retain the right kind of people.

It's about doing something amazing so you're going to see a different kind of retention if you can find people that are in the tribe that buys into your purpose. But it will also mean that some people aren't the right fit for you. The choice to be purposeful in a particular direction may exclude a large group of the population that doesn't buy into what you're trying to get done. And that's okay. The ones you do get are going to be way more loyal, way more retained, and way more committed to the purpose.

How do you demonstrate purpose? Here are a couple of examples:

At minimal levels of significance and purpose - donate money. Organizations have done this forever. Support junior achievement or Boys Club and Girls Club, support the United Way, whatever the organization is, and make donations to the community, or to the environment.

That is a great way to add purpose but is often not aligned with the greater business purpose and where you're going and the tribe you're trying to build.

Slightly better than that is a giving committee, and this is a case where the people in the organization decide where the money's going. Most of the monies that are going to be donated to whatever charities in the community are determined by the giving committee of employees. This is a great way to engage the organization in where the money goes. Employees that are donating time, donating money on top of that is a great combination. So time and money get extra time and treasure if you will give extra leverage in the giving committee's consideration. But more than that the giving committee is connected to the community so their ability to figure out what's important and give to need points in the community is better.

An interesting way of having everybody in the organization on the giving committee is to say, if you give, we will match it. One simple move here is service days. If you want to go and give service to some organization, the company will give you time to do that. If they go spend half a day working in the soup kitchen or helping sort clothes or working with the Girl Scouts, they're going to come back with a whole different energy around work.

Finally, there's a lot of power in your giving aligning with your business as well. This one takes a little more thought than stroking the check to United Way, but I think it's three or four notches more impactful and powerful in terms of building your culture and aligning what you do with your charitable giving.

For examples and perspectives on B Corps and aligning your charitable business into your business model, list to The Lazy CEO Podcast.

A conversation between Jim Schleckser and Dave Warren

Jim:

Today we going to talk about several important business topics for CEOs with a long-term member of The CEO project and a friend of mine, Dave Warren. Dave is a serial entrepreneur. He started and owned, a couple of different businesses, but he's kind of a student of business. Dave really appreciates business as much as I do. Tell us a little bit about that business and why you started that business versus any other business you might get into.

Dave:

From the time I graduated from college, I was looking for a business to buy. The day I graduated, I found a partner and tried to buy the bookstore I had been working at, but quickly realized that, even with the best of intentions, if you didn't have a little capital. Then, contrary to my dad's advice, who had a 40-year career in the oil industry. His advice was, whatever you do, don't get into this business. And of course, like every good son, I just ignored him and got into it.

At the end of the day, it's what you've seen and what you grew up with. So I got into the oil field, started out in field service, then got into manufacturing, and then into distribution. And then in 1995, I was working for a company in steel distribution and went to them and said, I think there's a different way to structure this business. At the time it was very transactional. I said I think there's a different way to put supply chains in place other than this transactional model that everybody's been using.

I went to the owners of that business and said, what do you think? And they said we like what we're doing. But I felt compelled to try this and so I started it with two partners. We just started doing what we did, servicing the heck out of the customers and providing solutions. And they knew they could come to us, with issues or problems or things that they were trying, to solve, and we would come up with an answer. We kept reinvesting in the business. We got up to about 70 million in revenue over about an eight- or nine-year period.

At the time, there was a lot of talk about the oil industry not going to be a domestic industry anymore. So, we figured we needed to get into, either needed to be a good, small regional business or we needed to expand the business and go global. So over about a period of 24 months, we did two acquisitions, one in the US and one a UK subsidiary of a French conglomerate. We tripled the size of the business. Each one of those was doing about 70 million in revenue. We basically put together a global footprint and looked at kind of the geographies of the products on the customers, and we did a three-dimensional matrix on what we wanted the acquisitions to solve. By the time we finished that 24-month period, we had solved most of what we wanted as far as what our vision was on how to service the market. We put in supply chains, support for manufacturing and operations on a global basis for people globally building, equipment for drilling, and downhill tools.

Jim:

Interesting. Follow the customer, right? If I see the customer migrating, I go with them, or I don't. What was the competitive advantage compared to the transactional companies that could do exactly what you could do? They could buy and they could sell, but what made what you did differently? Was it, was there an engineering element? What were the pieces that made that business different?

Dave:

Back to the partnering idea. We convinced customers to let us behind the curtain, we would talk to them about their forecast, and their bill of materials, and then tried to rationalize because every part was designed kind of as a unique part. With its own unique raw material. What we tried to do was, was rationalize and consolidate their spending into a smaller number of raw material SKUs.

Then we would consolidate that demand over multiple customers and try to drive everything to a consistent supply chain inventory. So, we were able to buy by doing that and with the scale that we had, we were able to look at various customer demand points by region and then work with the mills and the suppliers to bring in higher volume. Plus, we were able to give the customer value by lowering their individual transactional costs.

Jim:

Did that translate into loyalty because you're trying to move from transactional to relational? Did it work or did they say, thanks for all the help, now let's talk about your price

Dave:

It worked for a while. But competitors started catching up. The business as you see now, even the oil industry cycles dramatically. It goes from a period of oversupply to undersupply quickly. In times when they were having trouble getting material, there was a lot of loyalty in times when there was a business downturn. There was kind of a diminishing loyalty on both the supplier and the customer side, depending on where we were in the cycle.

Jim:

Let's go over the capital structure, this is expensive stuff and you're holding a lot of inventory for these people. So, talk and tell us how you financed all that inventory.

Dave:

We financed it primarily with debt with the idea after we got things kind of rationalized, we got the synergies out of the business. We would deal by bringing in a partner to take some of the debt out. Unfortunately, it happens quickly, and demand falls off quickly. There's a huge supply chain requirement in place, and it doesn't happen overnight. There's a lot of capital that must be deployed and people need to have a comfort level that it's safe to deploy it and the industry's going to continue to be supported over an investment time.

Jim:

So, you brought in partners, was that debt and then later equity, and obviously it's a cyclical business, so you hit a downturn. How did your equity partners or your debt partners react? And what did that look like? The reason why I want to go down this path, Dave, is there's some learning in here I think for people about what can happen good, what can happen bad in that, and maybe what you want to do before that to protect it.

For more of this conversation about business models, capital structure, and managing investors, listen to this episode of The Lay CEO Podcast.

Thank you to our guest, Dave Warren

Helping companies position for growth and scale-ability, Dave has led diverse and multimillion-dollar revenue streams with businesses in Texas, Mexico, Louisiana, Oklahoma, Edmonton (Canada), the UK, Dubai, Singapore, and Korea. With expertise in capital formation, capital raises, and scaling, Dave founded a global family distribution and manufacturing company in the mid-90s growing it from zero to $500M in sales and 800 employees at the peak of our business. They grew exponentially in the alloy metals industry in the highly volatile oil and gas sector. In this journey, Dave has built and scaled businesses and led great people. Dave has driven growth organically and through acquisitions. His expertise includes growing early to mid-stage businesses with an established track record and adding product lines, growing the customer base, and expanding global operations.

At The CEO Project we work with CEOs of a variety of sizes on their most difficult issues, but today we are focused on one that everyone is concerned about - building a predictable growth engine into your business.

The first thing to think about is a grid that was developed by Bain Consulting. Customers are on one axis and products on the other new, new, and old for each one.

• Existing product, existing customer, which is the cheapest and most reliable way of delivering revenue into your business.
• New customer, existing product, which has more risk because we don't know the client and it does take time. There's some analysis that says the cost of acquiring a customer and selling them something versus the cost of selling something to an existing client is four times higher.
• New product, existing client, which has relatively lower risk, but it does take a while because they have to go through some sort of acceptance and sign up and maybe change from an existing supplier.
• And then the hard one, and the one that a lot of us focus on, maybe inappropriately, is new product, new market or new customer. This is the hardest, takes the most money, and takes the most time. And in terms of thinking about a predictable revenue growth engine, it is not particularly useful.

Why are existing customers the key to our growth engine?

The first element of growth is retention. And specifically recurring revenue. We want to see as much recurring revenue as possible in your business model or at a minimum strong repeat revenue of clients that you count on to come back to you every year. Retention of clients is the cheapest way to keep revenue. When you think about losing a client, every time you do that, you've created a hole that you have to then go fill before you get to grow. And so spending money on retention is of very high value and a very high rate of return on investment.

4 Components of Retention

There are four components of retention that indicate why people leave you in the relationship. And this is whether it's recurring revenue or non-recurring revenue, just generically they choose not to do business with you anymore.

1. Do you have a competitive offer? A realistic assessment of the landscape of what's out there and what the options are. You need to have a product that is competitive in the market first. Now you have some advantages on that. It doesn't have to be exactly the same. You could almost be a little bit behind if it is an existing client, but when we get to new clients, you will have to have some level of advantage.
2. Have you built trust? And the way we build trust with clients, it's really simple. We do what we say we're going to do. If you're an organization where if we say something, we do it and we consistently meet our obligations, you'll build trust in clients and therefore desire to continue the relationship kind of alongside that is how they feel about the relationship.
3. Do they match your culture? When you engage, they engage and that means the receptionists, the customer service people, the engineers, the salespeople name it, they engage with the people in a way that they would want to be treated.
4. And then the final one is switching costs. Are there designed friction points to make it difficult to move from one supplier to another? The biggest single one that we can identify as a mutual investment in the relationship is if they've spent time to make their systems adapt well to your product. Investment in the relationship increases the switching costs.

To learn more about building long-term relationships with your customers to create your growth engine, and how to use Linkedin to warm up your leads through your digital marketing efforts.

In this Episode…

Jim Schlecker and Sam Watson, discuss the complexity of the multinational business and managing multiple presidents. Sam shares his story.

Sam's headquarters is here in the US but is spread around about 40 different countries. They have meaningful, 50 plus headcount in probably 10 or so countries around the world. Their geographic spread both in terms of customers as well as manufacturing and employees and quite vast. In terms of the nature of the products that they are selling - they are all sort of marine water oriented.

One of the things Jim has talked about previously in terms of the goodness of a business is recurring revenue. Customers repeat a lot with them either through the course of the year or over like a five-year period. A race boat is a consumable product. If you look at their customer base, it's quite solid and approximately 80% of them are repeat buyers. Their mass-building business is more focused on the top end of the market, the big soup yachts and the race boats in particular. And they tend to be kind of repeat owners in the background. They might have different boats and sometimes cross between different parts of the business, but they are big capital projects. In general, pretty good predictability about what they are going to get next year. Customers repeat on whatever cycle, depending on the product.

Sam is a leader leading leaders. They have their own P & L inside each of these businesses. He is in constant contact with them throughout the week. There are issues boiling up around the business that Sam gets in touch with them to solve. And that always gives him a touch point to just check in on how things are going. Sam focuses on tracking to the budget and the sales KPIs.

Jim and Same also discuss budgeting, 5-year planning, strategy, and the importance of running a high-functioning organization virtually. To learn more about success in multi-unit businesses, download this week's episode of The Lazy CEO Podcast.

Resources mentioned in this episode:

• Samual Watson on LinkedIn
• North Technology Group on LinkedIn
• Jim Schleckser on LinkedIn
• The CEO Project
• Great Ceos Are Lazy: How Exceptional Ceos Do More in Less Time by Jim Schleckser

Sam Watson, North Technology Group, CEO

Sam is a leader with multinational experience and a track record leading large teams across multiple geographies and time zones at the most senior level. Sam is an expert at managing the challenges of global communication and demonstrated ability to drive change & develop buy-in to a global business direction. Sam has extensive experience in M&A, Integration, Strategy Development & Planning, Product Development, and Talent Acquisition and Retention.

We all know the math that the cost to retain a client is 20% of the cost to acquire a client.

From a sales and marketing point of view, if you can retain the clients that you bring on board, you're way ahead of the game because you don't want to have to go out and spend literally five times as much money to go acquire new ones. It is one thing to get them, but you need to keep them. Keeping them is what's interesting for a good recurring revenue business. This Podcast will talk through the elements that were identified in a scholarly piece of research. This study validated, with large statistical studies, real data about businesses and the success or not success they've had based on a couple of factors.

There are really three things you need to pay attention to if you want to retain clients. One is the tangible elements of your product and your relationship. The second is the intangible elements around the relationship. And the third is customer expectations.

Tangible elements of your product and relationship

Within tangible factors, there are really three tangible factors you need to focus on when you're thinking about trying to retain clients.

1. Barriers to exit. So once somebody's in a relationship with you, are there barriers that prevent them from exiting that relationship? And obviously the higher the barriers to exit are, the better you're going to retain them.

• Limited external alternatives are an absolute barrier. To the extent you can make your product unique enough that there really is not a comparable offer in the market, you're going to improve your retention.
• The next one is the utilization of the system. This is a little more applicable to software, but if they've got a high degree of utilization, and high rate of retention. Gartner discovered through market research that people that didn't use the product, didn't renew their subscriptions. What Gartner did is they intervened about six months before the renewal date and they began training people on utilization, driving them to get value out of the subscription. And what they found is if they could get them to use the product, they increased their retention rates.
• Investment in your system and investment in the relationship increases the rate at which they are retained. If they spent the time, effort, and money to link all the APIs and pull the database information, etc.

1. A competitive offer. It needs to be on par or superior to the alternatives available in the market, at the price. What are their features? What is their functionality? What are the price points? And how do I compare to that? This is exactly what your competitors are doing. They are looking at the options, they're comparing it to yours and they're saying, how does this all stack up?
2. Relationship factors. Do I trust you? Are we cooperative? The idea is that you're going to try to generate a sense of moral obligation in the client because you are giving first. You are giving to try to build the emotional obligation. Adaptability, cooperation, delivering high-quality service, etc.

Intangible elements around your relationship

An active relationship with the management, sitting down with them and talking to them on a regular basis. Communication builds trust. It allows you to demonstrate openness, and competency which builds trust.

Managing custom expectations

There are two elements to consider, one is customer selection and the other is expectation management. Customer selection means you shouldn't sell to marginal clients. Once in a while, we are all in a competitive scenario, we're trying to sell somebody, and we know it's a little marginal. Like the product isn't the perfect fit. Our price isn't just right for them. We get the client anyway. Odds are you've acquired a client that's not going to be retained because they're not profiled perfectly for your offer. The price isn't right. The product isn't right.

One of the things to do early in the process is to set expectations for performance. Let's get clear about what the product does and what it doesn't. Let's get talk about, talk about our restock cycles. Let's talk about product availability. We're at 99.5. It won't be better than that. In some cases, you may want to embody that in a service-level agreement.