It’s not just about the juggle of different hats that an entrepreneur must wear, although that aspect is a healthy bit of what any aspiring entrepreneur must learn to master.
Eventually, inevitably, there comes a time in every young and growing company where its shareholders (whether that’s one person, or many), its management, and its employees are faced with the chore of crossing a very tough paradigm. This paradigm is not an option, unless management chooses death of the business before true life can begin. It is the paradigm of a company (and all that encompasses) to become structured. To become more “corporate,” if you will. So the problems come when entrepreneur-minded people are faced with the desire to keep the entrepreneur spirit alive and thriving but also see the need to incorporate structure within their company. It’s a fence-riding phenomenon that is still beyond me.
Over the past month or so, I have been working with my management team to develop our first set of policies and procedures in writing... an employee policy manual. Granted, in a labor-intensive industry like the one we’re in, these were probably long overdue. Lucky for me, I’ve had some great employees along the way that allowed us to get by without them. But, alas, that time came to a head when we opened our second unit, which contained twice as many employees as our first. So, essentially, our company tripled in size in what seemed to be an instant.
It’s easy to just go on with the day-to-day and not see any immediate need for structure in this sense. That is, it's easy if you become good at letting the little things pass. However, the little things become big things and then employee morale hits rock bottom because there’s no longer a unified standard to guide them in their jobs. We almost missed this boat altogether.
We started noticing visually, verbally, and also sensing it in the air, that the company seemed to be somewhat divided. Those who did things “by the book” were viewed as the “bad guys” and the others were viewed as the obvious “good guys”. Funny thing is, there was no “book” to go by, so it made things even worse. Those who pushed others to do it the right way were simply seen as mean and unfair. And, therefore, there was no form of accountability for anyone else to do the right things. What were essentially the “right things” became an object of debate, personal opinion, and hearsay.
So then comes the process of going from a truly, pure entrepreneurial company to taking one closer step towards a uniformed corporate structure. It can be very ugly and hard, but this is what we faced… somewhat compressed:
Start with the negative. We had some issues of bad-mouthing coming from certain employees and even shift leaders regarding other employees and shift leaders (which we refer to as management). We had to deal with this directly and let it be known that this was by no means tolerated. We started with the most influential employee and worked our way down.
Uproot the weeds. If we couldn’t get attitudes and actions to change, we got rid of them altogether. This was the rare issue for us, thankfully, although we did have to do it. However, if you leave these people in position too long, things will go back to where they were and more than likely get much worse (because you fail to set an example for others to follow).
Start writing policies. In the midst of us correcting some unhealthy behavior, we were writing and re-writing our would-be policies. We started meeting once a week and soon we were meeting almost daily. It’s amazing what sort of things you simply don’t think of until someone does them!
Start over. We met with all our shift leaders Monday night and introduced them to their new policies and procedures and then met with all employees on Wednesday to give them their policies. It was a huge shift for them and a long list of to-dos and not-to-dos. And we were fairly extreme with our rules… but it’s easier to ease up than it is to tighten the reigns after the fact. However, on a positive note, this meeting represented a clean slate for everyone. Granted, habits - good or bad - are difficult to break overnight.
Get leaders to lead. The reason we met with our shift leaders first was to get them to buy into everything and get on the same page. Results come from the top. What leaders do in moderation, followers will do in excess. So make sure your leaders are leading in the right direction!
Follow through. The worst thing you could do is to implement all these new policies and procedures and not discipline those who don’t follow them. You have to anticipate the time when you will have to make an example of someone. In fact, that often helps set the tone of seriousness and expectations from upper-management. If someone breaks a rule, and no discipline results, then you should never expect anyone else to follow them either. You no longer reserve the right to.
Grow your manual. Never expect your policy manual to ever be complete. Things will change, new issues will arise that will merit a mention in the book, and new policies will often prompt new policies. I think that the more you can communicate to your employees through the manual, the better. This is, in essence, a roadmap of where the company is going and should communicate the overall culture and expectations of its management and shareholders.
Policies and overall structure are, without a doubt, inevitable to any growing company. And their presence doesn’t have to imply that a company’s entrepreneurial spirit is on its way out the door. In fact, good, thoughtful structure will make things much more seamless and should always be created to allow for change and adaptation. When this is done, then the entrepreneurial spirit can actually thrive within the organization.
The Origin of Being Cool
There are not many times when a person such as myself is given the opportunity to pick the brain of someone as established as Al or Laura Ries, authors of Positioning (Al co-wrote with Jack Trout), The 22 Immutable Laws of Branding, The Fall of Advertising and the Rise of PR, and most recently, The Origin of Brands. This afternoon, however, I got to chat with Laura about their newest release (which has already become a favorite of mine), and how their theories can aid in saving not only the big brands of today, but also the start-up brands of tomorrow.
First, a little bit about Al and Laura Ries. The father/daughter duo run the Atlanta-based consulting firm Ries & Ries which touts a resume of clients such as Southwest Airlines, Burger King, Frito Lay, Pappa Johns, IBM, and Intel, just to name a few.
For now, let’s jump in to what Laura had to say…
BJ: In The Origin of Brands, you give a list of the 10 most valuable brands (the list is included below). Of these 10 brands, which 2 are in the most trouble and why?
Laura Ries: Nokia. They have gone away from what made their brand so strong, cell phones. Now they have the N-Gage (the video game, MP3 playing, cell phone, all-in-one product) and other similar products. By doing this, they have missed out on many strong cell phone developments.
McDonald’s. They have been extending their menu for quite sometime now and with very little success. McDonald’s was made famous by making hamburgers. However, they now have over fifty items on their menu.
(Note: In The Origin of Brands, Al and Laura point out that the average McDonald’s unit in the US does $1.5 million in sales and the average In-N-Out Burger – which maintains a burgers-and-fries menu – does $1.9 million.)
The world’s ten most valuable brands and their estimated values, as determined by Interbrand, the leading brand valuation company (this list is given in greater detail in The Origin of Brands)
1. Coca-Cola ($70 billion)
2. Microsoft ($65 billion)
3. IBM ($52 billion)
4. General Electric ($42 billion)
5. Intel ($31 billion)
6. Nokia ($29 billion)
7. Disney ($28 billion)
8. McDonald’s ($25 billion)
9. Marlboro ($22 billion)
10. Mercedes-Benz ($21 billion)
BJ: In your opinion, what is the most overlooked skill that many entrepreneurs skip over when building a company?
Laura Ries: Trying to do too much. Many entrepreneurs have a lot of great ideas. That’s the problem. They should decide which one is the best one and focus all their efforts on that idea.
Also, all entrepreneurs need to spend a lot of their time and efforts on PR. They should work on their communication skills and their skills in dealing with the media. They need to become comfortable in dealing with the media. Every business needs a 3rd party endorsement whether that’s word of mouth, media coverage (i.e., PR), or advertising. However, advertising isn’t as credible as the others.
(Note: Al and Laura wrote an amazing book, which I mentioned above and have on my book lists called The Fall of Advertising and the Rise of PR. This book is a great tool for any entrepreneur.)
BJ: In The Origin of Brands, you discuss the differences between convergence (where industries merge) and divergence (industries branch off to create new categories and becoming the first in the new category). If a company already exists and then learns about the theory of divergence, what should they then do now, since they do not have the luxury of becoming the first in a new category?
Laura Ries: Aim at becoming a strong #2. Many companies have done this with some great success. Pepsi vs. Coke, Target vs. Walmart, Lowes vs. Home Depot.
However, you can’t be a carbon copy of the industry leader. You have to be opposite of the leader and attack the difference (Pepsi aimed at being the choice of a new generation, suggesting that Coke is for old people; Target aimed at becoming cheap chic, etc.).
Or you can simply tweak the category. The point of divergence doesn’t have to be a revolutionary difference. It could be something like locations or operations based.
BJ: OK, Laura, what if an entrepreneur comes up with a great idea to become the first in a new category and then learns the idea is already in action elsewhere?
Laura Ries: Being first doesn’t always mean actually being the first to do something. It’s more important to become the first in the mind of the consumer for that category. So even though some other company is doing what you want to do, they may not yet hold the position in the mind of the consumer for that specific category.
(Another Note: Al wrote the cult classic book called Positioning, which he co-wrote with Jack Trout in 1980. This book was based on a psychological positioning that each product has in the mind of the consumer. The best way to hold a psychological position is to be the first in the category and, therefore, the first in the mind of the consumer. I highly recommend this book!)
BJ: OK, Laura, last but not least, give me your top 3 books you would recommend to anyone who’s starting up a company, excluding your own books.
Purple Cow: Transform Your Business by Being Remarkable, by Seth Godin
The Anatomy of Buzz: How to Create Word-Of-Mouth Marketing, by Emanuel Rosen
The Tipping Point: How Little Things Can Make a Big Difference, by Malcolm Gladwell
Getting What You Paid For
Some of the Day One stuff you’ll learn as an entrepreneur is that everyone is lined up to give you their advice. In fact, you can observe this no matter what your profession is. Perhaps it’s just easier to notice when you’re running a start-up.
Everyone is ready to tell you why your idea won’t work or why it’s too risky or what corporate structure you should use or not use. All of this advice, of course, is free. But beware. Don’t forget the phrase: “You get what you pay for” which in this case, is nothing.
This is not to say, however, that all free advice is worthless. If that were the case, then the life of an entrepreneur is therefore made infinitely easier by definition. However, what makes our day to day (especially in the beginning stages) so difficult and in need of good discernment is the attempt to decipher what advice is actually good wisdom and which of it is garbage (though a good amount of the “garbage” is meant by good intentions). And, to add insult to injury, not all paid-for advice is gold. Sorry to make a complex issue even more so!
This is, in fact, one of my biggest concerns on a daily bases. Who do I listen to? My parents? My investors? My marketing consultant? My employees? My wife? My associates? My attorney?
Not that all of these sets of people represent a different view from any other… that just depends on the subject at hand. I have, of course, discovered a way to practice a form of “process of elimination” in terms of which message to listen to and which to cast aside.
Consider the source. This may seem like common sense, but in practice is often isn’t as easy. When you’re getting multiple sets of opinions at any given moment on any given issue, often (in what seems to be an easy solution) we as humans tend to lean towards those we’re closer to or towards those we simply perceive as smarter or more respectable. Every person more than likely has a specific area that they’re good at and others that they’re not good at. However, many people attempt to lay claim to knowing about subjects that they in fact do not. Is someone giving you financial advice? Are they where you want to be financially? If not, then perhaps they’re not best suited for giving such advice. Is a person giving you marital advice? Are they a 3-time divorcee? There may be something wrong there as well (granted, it’s never wrong to learn from someone else’s mistakes!).
Be prepared for it. Get your mind ready to receive the most ridiculous advice you can imagine. Not only that, but the more successful you become, the more advice is thrown at you. Get good at nodding and smiling. My former mentor actually advised me not to pursue the real estate location I wanted for my newest unit because he had some misconceived view of the leasing company. However, not only was this one of the most sought-after spaces in the market, but they were very accommodating to us and took a chance on a very young company and concept. Good thing I didn’t listen to that one.
Grow your advisor team. Do this one by one. Don’t expect to get your team complete over night. Sometimes, certain people won’t work out as expected. See this and act on it. Don’t drag your feet. Advisors are the most crucial part to any successful business. But remember, they’re just advisors, not decision makers. Unless you have given up 51% of the company, you are still the end of the road, which brings me to my next (and last) tip…
No matter what, you still pull the trigger. This is something that’s been difficult for me to grasp. Perhaps it’s lack of confidence (since I’m fairly inexperienced), but I tend to have a hard time carrying all the weight of decision-making responsibility. But that comes from fear. More specifically, a fear of failure. But failure is inevitable. And failure is not a bad thing… fear and pride are. Regardless, you have to become comfortable with the thought that the ultimate fate of your company lies directly on your shoulders. There are others (like your investors and board of directors) who share that risk with you, but if you still own a majority, then the final decision is on you. Don’t let this paralyze you, though. The worst decision is no decision.
It feels like I've been neglecting my blog lately... and perhaps I have. So, it normal fashion, I'll just over-compensate! In addition to posting a new entry by tomorrow evening, I will be posting my first interview entry on Monday, July 12.
The interview was with marketing/branding guru and best-selling author Laura Ries. It turned out amazing and I'm excited to see what everyone thinks.
Come back tomorrow for a new entry and be sure to come back on Monday for my entry from my interview with Laura.