Why You Should Make It Easy For Employees To Leave
Don’t invest in finding ways to make people stick around. Just make it easy for them to leave. That is the best retention strategy and it is pretty simple.
It may seem backward. While companies everywhere spend a great deal of time and money creating employee-retention strategies, I’ve found you can actually build a happier workforce by focusing on the opposite. I co-founded Call-Em-All, a group calling and texting service, in 2005. It was important to me to build a staff that would be as engaged and energetic as possible. Disengaged employees? Raise your hand and opt out. We’ll help you on your way.
Because we don’t want to retain the wrong people, the freedom to walk away is deliberately built into our compensation strategies. Take our 401(k) plan, for example. Employees are 100 percent vested in the plan right away. From day one they can take advantage of our 6 percent dollar-for-dollar match. Our profit-sharing plan was built with the same goal in mind. The last thing I want is an employee hanging around waiting until bonus time to leave. I’d rather say, “Take what you earned and find another job before you sink the rest of us with you.” That’s why we give our profit-sharing bonuses quarterly instead of annually.
Of course, we try to hire smart right off the bat. One of our key competitive advantages is having a talented, engaged workforce.
To get here took some effort. First we had to define our culture as written in our manifesto, live up to it and then hire to it. Once everyone was on board, we developed a wolf-pack mentality, which is almost self-selecting. The wolf pack says we are not going to let anyone into our environment who doesn’t pull his or her weight and doesn’t fit. I owe it to my employees to bring in people who are worthy of working with them, so I am personally involved in every hire. We have an intensive recruiting and interviewing process. Good hiring is the No. 1 way we defend our culture. You want an employee who embraces the company’s values, not a functional, transactional employee. Does this person approach work in the same way we do? Will this person bring passion and energy to the company? Could I disagree with this person? How would he or she handle that? If the answer to any of those questions is negative, then regardless of their capabilities, we do not hire them.
Sure, it can be difficult to find talented employees who fit into our culture. And sometimes it’s a bitter pill to give someone a bonus for not sticking around — but both of these beat the price of retaining a disengaged employee. Although we have a great culture, it is not permanent and it is not impenetrable. One of our first employees, for instance, worked with us for five years. I still respect her, but as we grew and brought in more people, she had to share her responsibilities and ownership with her peers. She struggled to change as the environment around her changed. It affected not only her performance but also the performance of those around her.
After she left, it was like a breath of fresh air. However, we still wanted to do the right thing and give her time to find another job; we paid her three months of compensation and I also personally offered to serve as a reference for her.
We are big into energy here and believe that one person’s bad energy can impact the whole company. People had to work harder to make up her workload until we found someone else, but they were more than happy to do it. There was no longer anyone draining their energy.
That said, I don’t immediately get rid of people who are no longer engaged in their job. I encourage them to talk to me so I can try to find a way to get them re-energized. I tell my employees: If you see something else here you want to learn more about, raise your hand and do it. One of our customer service team members told us he wanted to learn about the technical side of our product. We looked for places to let him get a taste of the work and to test him. Each time he liked it and was able to do more. Now he is a liaison between our customer service and engineering departments. He plays a crucial role that saves us time and resources and is taking his first programming class. It is a happy ending for all of us.
Brad Herrmann is president and co-founder of Call-Em-All.
What George Washington Can Teach Evergreen Entrepreneurs
The entrepreneur’s life seems to involve endless toil and anxiety punctuated by the occasional success and, sometimes, an hour of cheerful distraction. That’s how it is for me, anyway. So when I strolled into a primitive flour mill at George Washington’s Mount Vernon estate in Alexandria, Virginia, one evening in October, I thought I was in for the distraction part of my chosen field.
I assumed Washington’s famous plantation would serve as a mere backdrop for the intensive two-day leadership workshop the Tugboat Institute set up for us. Hell, what could a wealthy ex-president in a powdered wig possibly teach a bootstrapping tech-savvy modern businessman like me?
I soon had my humbling answer: a lot.
Washington was, in fact, a vigorous entrepreneur and innovator. The lessons he learned managing his business affairs at Mount Vernon helped win the Revolution and shape the world’s idea of democracy and free enterprise. Yeah, Washington would have been a fabulous mentor.
By the way, he didn’t wear a wig. Or chop down a cherry tree, sign the Declaration of Independence or use wooden teeth. He was fortunate, sure. Washington’s family owned land and slaves and his father, Augustine, successfully farmed tobacco. Yet Washington’s life was full of challenges. When he was just 11, his father died. Washington’s uncles didn’t provide him with a formal education. In fact, Washington took his first job at age 15. A relentless reader, he was self-taught, and expected the same of the others he was leading. He believed a person can control how prepared he is for success, but not success itself. Like many of the greatest modern entrepreneurs, he had no college degree.
But was he Evergreen? Would he have nodded knowingly at the Evergreen 7 Ps? I think yes.
Purpose. After eight years leading the Continental Army to victory — Washington did it without pay — he formally handed back to Congress his commission as commander in chief. In London, George III asked the American-born painter Benjamin West what Washington would do now that he had won the war. "Oh," said West, "they say he will return to his farm." "If he does that," said the king, "he will be the greatest man in the world." Washington would repeat this act by serving as president of the United States for two terms and returning to his farm. Unlike most other revolutionary leaders — Napoléon, Stalin, Cromwell — Washington walked away from power twice to serve the public good.
Perseverance. Washington understood that perseverance was in itself the key to victory. During the eight years of the Revolutionary War, he lost more battles than he won. Through seven winters, he never left the Continental Army’s encampments, even during the famously frigid winter of 1777 to 1778, when he and his men trained and suffered at Valley Forge, 20 miles north of Philadelphia. Throughout the war, he avoided a single climactic battle that could have wiped out his army — until his decisive win at Yorktown.
People First. As a battlefield general, Washington learned (after many defeats on the battlefield) to listen carefully to his lieutenants — unlike his British counterpart. The habit stayed with him as president, when he relied heavily on the advice of brilliant (and often rival) cabinet members like Alexander Hamilton and Thomas Jefferson. And yet he owned hundreds of slaves. “People often ask us if George Washington was kind to his slaves,” said our Mount Vernon tour guide. “The answer is that there is absolutely nothing kind about slavery.” That said, Washington willed that more than 100 of Mount Vernon’s slaves be emancipated upon Martha Washington’s death — an act that no other slaveholding president, not even champions of human rights like Jefferson and James Madison, repeated.
Private. The notion of taking private ventures public was gaining steam in Washington’s day. The Philadelphia Stock Exchange was founded in 1790, and Washington did form a joint equity enterprise to improve navigation on the Potomac — the investors’ capital went to build canals around waterway hazards in the river, benefiting all. Yet Washington kept his Mount Vernon enterprise private. And he never indebted it so severely that lenders could pressure him for control.
Profit. Washington was intensely mindful of profits and always wanted to maximize the value of what he produced as markets changed. Though he had to abandon day-to-day management during the Revolution and later as president, he constantly wrote letters to his managers at Mount Vernon inquiring as to the farm’s operations and profitability. He invested in thousands of acres of land around the country, and he was arguably the wealthiest president in U.S. history.
Paced Growth. Washington sought opportunities for paced growth even in the last years of his business life. His operations expanded from tobacco to wheat, livestock, sheep, a mill, a fishery, a self-sustaining estate and more. After leaving office in 1797, Washington returned to Mount Vernon and, with the encouragement of his farm manager, James Anderson, entered the whiskey-distilling business. Though Washington lived only two years after leaving office, these two were his most profitable ever. In 1799, his distillery produced nearly 11,000 gallons of whiskey, making it the largest whiskey distillery in America at the time — yes, even bigger than Jacob “Jim” Beam’s.
Pragmatic Innovation. Washington was fascinated by new labor-saving technologies and made a lifetime commitment to practical experimentation. He kept regular correspondence with other thought leaders to keep on top of market changes, best practices and new technologies. He played a major role in developing America’s mule population and pioneered various agricultural methods. “He not only signed Patent No. 3,” notes Robert Shenk, senior vice president at George Washington's Mount Vernon, he “also installed the automated mill technology (as a licensee) into his Mount Vernon gristmill described in that patent.” At Mount Vernon’s flour mills, he paid dearly to import highly advanced French millstones whose carved milling surfaces could cut wheat and other grain with scissorlike precision. The resulting flour was fine, pure white and highly valuable. It would pass for what a modern baker would refer to as “cake flour.”
So what did it all mean? I have heard Dave Whorton, head of the Tugboat Institute, argue that the concept of running a business in an Evergreen way is revolutionary but not really new. It’s part of an old but enduring tradition that the world has forgotten how to celebrate. It was inspiring to consider Washington’s life as evidence that Dave is right.
Yes, Washington probably would have called Mount Vernon Evergreen. And maybe, one of our lecturers commented, his greatest Evergreen project was the United States itself.
Stephane Fitch is the CEO and Founder of FitchInk.
The Virtue Of The Four-Day Workweek
The greatest thing I ever did for my maternity apparel company, Ingrid & Isabel, was give my employees a four-day workweek.
I did this initially for myself, to create the kind of work-life balance I had always dreamed of having in a career. But it turned out to be just the right spark for corporate success.
Setting the dependable, realistic target of getting our work mostly done by Thursday evenings has inspired focus and efficiency without sacrificing deep thinking and creativity among my team. They feel accomplished, challenged and happy. And, best of all for my Evergreen business, it has created a culture where people work harder and smarter, and they are productive and stay with the company longer.
Before I launched Ingrid & Isabel in 2001, I spent most of my early career in advertising pulling all-nighters and flying from meeting to meeting. For a while, that was thrilling. I felt very important. But when I became pregnant with my first child (and couldn’t button my pants, leading to my Bellaband invention), my ambitions changed. Instead of the frantic pace of many businesses, I wanted to create an environment where everyone collaborated and worked together as a team in the most efficient way in four days so we could sign off and enjoy our weekends. I wanted to do more than give lip service to work-life balance. I wanted to empower my employees to succeed both at work and at home.
I remember pondering the creation of a company that had set days and expectations unlike a traditional company, and I ultimately settled on eliminating Fridays. From the beginning, my customers and vendors were informed that our offices were closed on Fridays. Because it’s the way we have always operated, we have found that our partners, big and small, respect our schedule. Of course, if there is a huge project or meeting that requires our appearance on a Friday, we cheerfully comply. But most of the time, our three-day weekends are left untouched. On average, most Ingrid & Isabel employees come in on Fridays a little less than once a month for only a couple of hours.
Just as we set a precedent with our clients and customers, I have done the same with our employees. For the most part, having a four-day workweek has been extremely beneficial for my company. The intensity and furious activity that propels us to get our work done by Thursday evening spurs our brains and makes us highly productive. Ingrid & Isabel has grown every year—it’s never stopped. Even during the recession, we were financially successful as it coincided with the launch of a less expensive line at Target, which only carries two maternity lines on the floor—one of which is ours. We are carried fleet-wide at Target, and we are the No. 1-selling maternity vendor for many of our retailers. The Bellaband (our signature item) is the No. 1-selling maternity accessory in the category.
There are some challenges that come with doing business this way—mostly around hiring and retaining employees. Because we offer a four-day workweek, we also offer a salary around 80 percent of market rate. Young, hungry candidates who want to earn as much as they can and move up quickly struggle with this concept. But for young workers, we offer more than just a short workweek. Because we are a small company, we expose them to the entire business process. We are constantly working on innovation and researching new products. In a workplace with greater upward mobility and a higher salary, young workers can be limited in what they can contribute because they are mostly serving the needs of other people. At Ingrid & Isabel, we embrace expansive thinkers who are just as comfortable rolling up their sleeves and tackling mundane tasks, like data collecting, for example, as they are being involved in top-level strategic, product and financial meetings. The work is broad and entrepreneurial.
So, we have to be upfront from the beginning about the salary, and we need to be honest about the fact that it’s expensive to live in a city like San Francisco. The hires that I find do the best with us are those at the manager and director level—and I have learned how to find the best personalities within those titles that could be a great fit at Ingrid & Isabel. These are people who care very much about what they do, have an innate curiosity about their work and enjoy witnessing their individual contributions when we implement new ideas and reach pregnant women in the best and most meaningful way. They tend to be less concerned with title and more interested in the value of what they do. They may be seeking better work-life balance, starting a family or just looking to take more vacations.
But at the other end of the spectrum, we don’t want people who think a four-day week means an easy ride. So, to weed out the candidates who might not be very productive Monday through Thursday—or who might need a larger, more structured work environment to meet productivity goals—we have a rigorous interview process. We have multiple people across functions interview each candidate, with me personally meeting each person, sometimes three times.
So, does it work? Well, Ingrid & Isabel’s revenue is up year over year in double digits percentagewise. I think we get better at what we do every year because we’re highly trained and motivated as a team to be productive. Just as we suggest smart—not excessive—shopping to pregnant mothers, we try to be smart about how we conduct our business. We do what’s important during a timeframe that makes sense; we create boundaries and expectations and deliver on them. Because of this, we have earned great respect in our industry.
Every other year, I ask my team if they want to go to a five-day workweek, which would come with a raise. Everyone, hands down, says no. And there you have it. It’s working for us and personally working for me. My three-day weekends are treasured.
I am thrilled to be part of the 14 percent of small companies who offer their employees a four-day week.
Ingrid Carney is founder and CEO of Ingrid & Isabel, the maternity clothing company behind the Bellaband.
The 116-Year-Old Evergreen Business
Choosing the Evergreen path can sometimes seem like a daunting challenge. Many entrepreneurs ask themselves: Can I build a business that will be profitable and grow strong without outside investors?
My company is proof that yes, you can. I am the third-generation owner of San Francisco-based McRoskey Mattress Co., which my grandfather cofounded in the late 19th century. Over 116 years, McRoskey has remained a private company dedicated to its people and paced growth.
My grandfather and his brother, and later my father and uncle, made the decision to create a quality product and maintain a steady course while doing so. They didn't follow trends unless there was a valuable reason to add a material or change the construction technique. To this day, we never do something new to save a nickel.
Staying Evergreen can be even more challenging when you operate in a city built on quickie IPOs. Over the years, outside investors have made inquiries, but I’ve avoided any such pursuit or discussion. The reason is simple: When I look at companies that are public, it seems to me it just puts up barriers between the manufacturer and the consumer. That is not what I want for our carefully cultivated company.
Instead of searching for investors, I focus on quality and customer service. I rely on a long-serving administrative and sales staff that customers have gotten to know and trust over the years. I have many employees who have helped several generations buy mattresses for their families.
In turn, our loyal customers are willing to pay a premium for the McRoskey brand. Prices, for instance, can be $2,100 for the Basic Twin set and $8,400 for the Natural California King set. We always look for customers who think sleep is important—and then try to intersect with them at the right moment. One big challenge these days is convincing new customers to look at McRoskey rather than stopping by a Sleep Train store or ordering a trendy Casper online. We do this by staying focused on building mattresses and box springs that provide enduring comfort.
There have been other challenges along the way. A 1998 fire damaged our San Francisco showroom. I managed to turn the disaster into an opportunity to renovate and update the space. Five years later another fire hit a showroom under construction in San Jose. We redirected merchandise to a newly opened showroom in Los Angeles. But after three years, I decided to close that store in order to fully focus on the Bay Area.
The 2008 financial crisis hit McRoskey Mattress Co. as hard as any fire as people opted to keep their old mattresses a little bit longer. Like many business owners during that time, I had to lay off some staff and reassess procedures. In the end, dealing with these tests was a healthy exercise.
Over the past three years, sales have been relatively flat. With the economy rebounding, I am now working hard to improve revenue. We have refreshed our brand to place more emphasis on the fact that we are the manufacturer. These changes are reflected in stores and online where customers can now purchase all of our bedding products.
When your business has been around for 116 years, I think it becomes—philosophically at least—a little easier to weather the cyclical ups and downs. Being the torchbearer for my family business keeps me on my toes, but I don’t feel oppressed by it. Even when there are pressures, I like to rise to the occasion.
I sleep very well at night.
Robin McRoskey Azevedo has been the CEO of McRoskey Mattress Co. since 1990. McRoskey Mattress Co., which first opened its doors in 1899, is headquartered in San Francisco.
Six Ways Evergreen Companies Can Attract Top Talent
“Why should I come work for you?”
If you’re a recruiter for a sexy Silicon Valley start-up that just landed millions of dollars in new funding, this is an easy question to answer. Outrageous perks like free dry cleaning, free gourmet lunches and sleep pods might seem, on the surface, more exciting to job seekers than the steady, paced and profitable growth an Evergreen company can boast.
Evergreen jobs offer a compelling, and safer, choice for many job seekers. But drawing in prospective employees can take a little more spin and creativity.
For the past six years, Carolyn Betts has been helping companies hire employees through Betts Recruiting, her San Francisco-based international talent-recruiting firm. When Betts and her team decided to make her company Evergreen, she shifted her own hiring habits. The pivotal question she says she asked herself was: “What makes an Evergreen company attractive to our current employees and to job seekers?”
The answer boils down to the unique culture every Evergreen company creates with its employees. The trick is making sure potential employees are aware of this culture—and that they’re weighting it just as heavily as they are the cafeteria offerings at the venture-funded start-up next door.
To entice people who would be drawn to the myriad benefits of working for an Evergreen company, Betts knew she had to promote and discuss her company in a different way than her public counterparts were talking about theirs. She came up with six ways for Evergreen recruiters to attract the best employees:
- Build—and promote—your employment brand: Betts says it’s important to both create a culture and make this culture widely known. “After the Tugboat Institute Summit, I looked up Balsam Brands,” Betts says. “They have an awesome website that is 100 percent focused on their culture.” Beyond creating a substantial website, get your employees talking online. Have them rave about the office culture on employee review sites like Glassdoor. You want potential employees to easily find out that your company is Evergreen and learn about the long-term cultural advantages that come along with that. Another popular way to boost your company’s appearance is to use social media. Instagram and Facebook are great platforms on which to display and share photos of the things that your company does to put its people first.
- Tell recruits during the interview process that you are Evergreen: Explain to potential hires what Evergreen is and what it means for your company. “When I tell people, they’re excited, because most people really do want to find a place where they can dedicate themselves to an important purpose for a long time,” says Betts. During an interview, she builds in some time to explain the difference between working for an Evergreen company and working for a venture-backed company. “In an Evergreen company, employees can expect a lot more loyalty from the owner and clear, simple objectives,” Betts says. “If an employee wants to be at a meaningful job with a purpose-driven team, he or she should consider Evergreen over an unpredictable and at times volatile ride at a venture-backed start-up that must grow big fast to satisfy the requirements of past and future exit-oriented funders.”
- Don’t just tell—show: Provide recruits with videos that show what life is like at your office. Even better, let them walk around your office and talk to current employees. Let them see your company’s culture in a transparent, up-close manner. “The frustration is trying to keep up with the Joneses,” Betts says. Recruits, especially in places like Silicon Valley, are used to walking into venture capital-funded businesses and being bombarded with free lunches, gym memberships and other such perks. Yet, offering perks is easy—building a culture of truly treating people well through thick and thin is not.
- Ask potential employees what they want: While this is a staple in any job interview, asking an employee what he or she wants out of a job over the long term is critical for an Evergreen recruiter. “This is how you find out if someone is focused on a short-term economic exit or aligned with your purpose and with the work and life benefits of a career in an Evergreen company,” Betts says. “This way you vet the people who are the right fit.”
- Hire for culture first: “One of the core values that our recruiting firm brings to the hiring process is finding not just the right person for the job but the right person for the company,” Betts says. A person is more than just his or her resume. Being able to integrate into a company and truly add value goes beyond having the right number of years of experience. It’s about having the same values, work ethic and goals as the rest of the company. A strong culture protects the company from people who prove not to be value aligned and rewards those who are.
- Strike while the iron is hot: “In today’s environment, move quickly for the right person,” Betts says. “But don’t shorten the interview process.” She says you can power through an interview process in a week, making sure all vital people on your team have a chance to meet or interview a recruit for fit. “You should be super excited about hiring this person, and that person should feel the same.”
Betts has one final tip for Evergreen CEOs who want to scale or build their businesses: When it comes to hiring everyone except your direct reports, “get the hell out of the way.” Allow your team to judge and make the hire. Of course you may want to meet the person. But never nix a recruit your entire team is voting for. “It’s your baby, your company—but you’re not going to love everyone walking in the door,” Betts says.
An Evergreen company has a lot of natural advantages in being purpose driven, profitably growing and putting people first for the long haul. When recruiting talent, it’s up to you to show job seekers that you’re the smart choice for a challenging, meaningful and successful career and life.
What Evergreen Entrepreneurs Can Learn From Marathon Runners
When Jeff Maggioncalda decided to train for a half marathon earlier this year, he did what many people do—he pushed himself to run as fast as possible.
“In high school track, I used to train so hard that I would vomit,” says Maggioncalda, the former CEO of Financial Engines. “I’d been coached that the harder and faster you train, the faster you’re going to improve.”
Maggioncalda knew that was not great for his health, so he did some research into the science of running, which showed that this theory was wrong. He stopped pushing the needle into the red and instead embraced a method called lactate threshold training. Put simply, lactate threshold training teaches that training at a slower pace—one that matches your current cardiovascular fitness level—actually maximizes your rate of improvement with respect to both speed and distance. Running more slowly at a consistent heart rate helps most runners improve their pace more quickly than if they train faster.
The idea behind the method is that as you exercise, you produce lactate. Anyone who’s overdone it while working out has probably heard of lactate—its buildup in the muscles is correlated with the phenomenon known as “the burn,” though it isn’t the cause of that sensation as previously thought. Runners can find their “lactate threshold,” or the intensity of exercise at which there is an abrupt increase in lactate levels, using a heart rate monitor. Once Maggioncalda learned how fast and at what heart rate he should run to keep clearing lactate from his body, he could run at a brisk pace for a longer period of time. By slowing down, he could go faster and longer.
Maggioncalda sees a parallel between this kind of training and running an Evergreen business. During his 18 years at Financial Engines, he learned to value slower, long-term growth over the quick hit.
Financial Engines was founded in 1996 by Joseph Grundfest, Craig Johnson and Nobel Prize winner William Sharpe; Maggioncalda was their first employee. Sharpe was concerned that people managing their new 401(k) plans didn’t know enough about markets to shepherd their accounts smartly. At the time, the plan was to build a company that would educate the masses about investing.
Financial Engines tried out many different business models, including selling educational software, selling software to advise people on their investments and selling a complete advising platform to investment companies.
As for any new company, there were plenty of bumps along the way. But Maggioncalda’s darkest moment came in 2001. The company had decided earlier that the quickest way to grow would be to sell to large enterprises—big advisory and brokerage firms that could use its products to more cheaply advise smaller clients. But it was becoming increasingly clear that this model wasn’t working.
Maggioncalda slowed down and looked at the feedback he was getting from customers. He realized that most 401(k) investors didn’t just want advice—they wanted someone to manage their accounts for them. He also realized that enterprise customers wanted too much customization for a scalable long-term business. Under his leadership, Financial Engines changed course to become a 401(k) managed account business. That meant laying off employees in the enterprise division and spending to build out resources like a call center to provide customers with human help when they needed it. These changes slowed the growth of the company but put it on a path to greater success.
After 19 years, Financial Engines has become the largest independent investment advisor in America, managing over $100 billion in 401(k) plans and serving more than 9 million individual investors.
“Although our investors didn’t like us growing slowly, we saw that this was the core business we should be in,” says Maggioncalda.
He’s thought back on that transition often while training with the lactate threshold method. The lesson he learned then is one Evergreen entrepreneurs can embrace now: They realize that investments that produce slower near-term growth often produce higher long-term gains. And with this long-term perspective, they can transform their companies into world-class businesses that create value not only through earnings but also through happy employees and executives who find satisfaction in working for more than just a quick exit strategy.
Maggioncalda’s training partner for the half marathon was his 17-year-old daughter, Lindsay. Despite her age advantage, Maggioncalda’s “go slower” training enabled him to race by her side for the full 13.1 miles, and they crossed the finish line together.
Jeff Maggioncalda was co-founder and was CEO for the first eighteen years of Financial Engines.
Stick To Your Guns
When you launch a new company, there are two courses open to you: follow the crowd or go your own way. Following the crowd might bring you fast money and quick growth. Going your own way can mean lots of long nights worrying about bringing in the money your company will need to grow.
But I would advocate that you stick to your guns. Going with the market is often the path of least resistance, but carving your own path is usually far more rewarding—and one of the advantages of being an Evergreen business.
I choose to go my own way, and I have never looked back.
In scaling Acceleration Partners, I had a vision of a marketing company that helped our clients grow, had integrity and was built around sustainable principles—for myself, my employees and my clients.
That meant going against the tide.
A few years ago, there was a lot of easy money in digital marketing as a result of venture capital firms overfunding e-commerce businesses, which then had huge marketing budgets to spend. Traditionally, marketing companies get paid a percentage of the client’s marketing spend. So the best way to earn more money is to convince the client to spend more money.
In my mind, this model made no sense. How does spending more of my client’s money help my client? I believed (and still do) that a flat fee-based or performance-based model is a better way to go. It helps control costs and aligns incentives, motivating agencies to manage client money as if it were their own. I believed strongly that clients would stick around only if they felt they were getting value for their money. And I wanted clients who would stick around.
Believe it or not, my way was sometimes a hard sell. There were many accounts we didn’t land because the client wanted to go with the old model. For example, a few years ago, subscription boxes were all the rage. It seemed like there wasn’t anything that couldn’t be put in a box and sent to your home each month. Those companies had tons of recently raised venture capital to spend and called us looking for help. However, we saw how competitive the market was, and we didn’t feel like any of them could be successful with a fee-percentage model. We talked with them about slower ROI-driven programs, but they all wanted faster top-line growth and we decided not to take that on. Two years later, most of these companies are out of business or have been sold.
If we had taken the easy route, we could have grown faster and hired more people. But as the owner of an Evergreen business, I value sustainable growth over quick hits, where you scale up for something that can’t last. There were times when I had pushback from within our team, when people were anxious to do more hiring. One or two times, we took work that we knew was outside our sweet spot and probably wouldn’t be successful. But we never felt good about it. It hurt morale. We almost lost an employee over one such decision. Everyone is now on the same page that sticking to our guns is the best way to grow our company.
And it’s working.
We are now the agency of choice for many blue-chip e-commerce companies, and over 90 percent of our business comes from referrals. Slowly, we’re seeing the rest of the market come around to our way of thinking. Clients are demanding more accountability from the agencies they work with, and firms have to adjust. Because we stuck to our principles, even through the hardest times, we’re now ahead of the game.
If you’re passionate about an unconventional approach, stick with it and be unwavering. That’s your core mission. It’s easy when your message is aligned with the market. But when you are going against the tide, it’s hard to hold the course. You and your team need patience and perseverance—plus a commitment to being profitable early, so that you can sustain the business until the market comes around to your point of view.
If you are on the right side of history when the tide turns, you will eventually thrive and grow. And people will respect you for being consistent in your values and convictions.
Robert Glazer is the founder and managing director of Acceleration Partners, a digital marketing agency focused on profitable customer acquisition. He also founded The Fifth Night charitable event and helped his daughter launch Coupons Help, a site where kids can donate coupons to local food pantries.
Letter From Sun Valley: How Two Days with the Tugboat Institute Changed Me and My Company
I recently wrote in the Evergreen Journal about a phrase that crossed my mind as I drove from the airport in Boise, Idaho, to Sun Valley to spend a few days at the Tugboat Institute Summit 2015 in early July. The phrase is from a proverb in the King James Bible, and my old boss, Steve Forbes, has taken it as his motto: “With all thy getting get understanding.”
I can honestly say I came away from the Summit with an extraordinary number of fresh ideas, insights and perhaps even some of that rarefied understanding. And I wanted to write a personal note about the experience for Tugboat Institute members who weren’t able to attend, as well as for other business owners who’ve been on the fence about joining the Institute. If, like me, you’re intrigued by the Evergreen concept and by the Institute’s events, I hope this note will fuel your curiosity and prompt you to join and participate in the future.
As a writer and a bureau chief at Forbes for 12 years, I spent half my working life learning about, writing about and critiquing—often in acid terms—other people’s businesses. Now, I’m a business owner anxiously bootstrapping his way through year five of running a firm upon which an increasing number of families depend for their livelihood. How much understanding did I get at Forbes? I can cheerily admit it: not nearly enough.
For somebody like me, the Summit was manna. This was an intimate group, a collection of 70 people—mostly fellow CEOs and thought leaders—who arrived ready to unplug from their workaday responsibilities and speak openly and freely in a collegial environment. No press. No entourages. Just a community of businesspeople who, whether their businesses’ revenues were $5 million or $1 billion, all wanted to help one another figure out how to run an Evergreen business in a world that sometimes only seems to value go-for-broke ideals.
The theme of this year’s Summit: People First. It’s one of the 7P’s that Evergreen companies consider sacrosanct. The Summit was stacked with speakers to answer every question that has ever plagued me about how to create a healthier company of employees.
How could I do better at hiring and motivating great people? Here was Quest Nutrition president Tom Bilyeu to explain how he makes interviews really meaningful. How should I get employees to care about the bottom line? Here was SRC Holdings chief executive Jack Stack to explain how he opens his books to his people—and relies on them to help him keep his P&Ls and balance sheets healthy. How should I keep my most senior people from getting poached by competitors or leaving to start their own firms? Here was Zingerman’s Community founder Paul Saginaw to explain how he encouraged his former deli employees to cofound a dozen businesses that have expanded the Zingerman’s empire.
How should I help my people balance their work lives and their family lives? Here was noted psychologist David Surrenda to explain how to make the limited number of hours we get with our families count more. What would a workplace that gets the most out of employees look like? Here was author and Great Place to Work founder Robert Levering to talk about how it isn’t really about the perks, but rather about trust.
And on and on. There’s an art to learning, of course. To prime our neurons, readying them to absorb the flurry of mind-bending ideas, Tugboat CEO Dave Whorton pulled out all the stops. On the first evening, Dave got Tugboat Institute cofounder Chris Alden, a master puzzler, to put together a series of scintillating riddles that my teammates and I had to work together intensely to solve. The next day, after an intense morning of workshops, Dave had champion mountain biker Rebecca Rusch and world-famous mountaineer Ed Viesturs lead us on a challenging trail ride or hike in the heat. It was all in good fun, but the intensity was real. We were being pushed out of our safety zone, all the way to that unsettling edge where old assumptions look a little less safe and learning becomes possible.
By dinner on our second night, I was deeply inspired. As singer-songwriter Caitlin Canty played her guitar and sang, I looked around the room and made eye contact with a few of the extraordinary people I’d been spending time with. I realized these weren’t just fellow businesspeople—they were new friends. They were people I would look forward to seeing again and again in future years. It was a moment I will never forget.
One of the most exciting developments took place on the third day. In an informal discussion led by Dave’s team, we talked about how members of our Tugboat Institute community could end up becoming a source for one another of not only wisdom, insights and inspiration, but also permanent capital: Evergreen backing Evergreen.
When I first encountered Dave, I was intrigued by his description of the ideals of Evergreen business. Putting people first? Pacing growth? Seeking pragmatic innovations? Emphasizing private ownership? I hadn’t realized there were many serious businesspeople who still valued such things. And as Dave explained his plan to make the Tugboat Institute a touchstone for such business owners, I was electrified.
It so happened my own firm had received a takeover offer from a much larger, established firm just weeks before Dave and I met. I was uncomfortable with the notion of selling, yet I had felt enormous pressure to take the deal as a way of ensuring our continued rapid growth. Two weeks after meeting Dave, I rejected the offer. My firm is doing fine—and I’m a new member of the Tugboat Institute. We’ll use the lessons I’ll learn from my fellow Tugboat members at future Summits in Sun Valley and other events to keep the company on a sustainable, Evergreen path.
Remember that proverb snippet that was running through my head en route to the Summit? Since returning from Sun Valley, I’ve looked up the full quote: “Wisdom is the principal thing; therefore get wisdom: and with all thy getting get understanding.” In the wake of the Summit, I’m more sure than ever that I’ll never consider a buyout offer. I don’t need an acquirer’s money to overcome the challenges my firm faces. It’s new wisdom that will ensure my firm’s survival. And someday I hope to share my own hard-won wisdom with both my firm’s senior management and with new friends from other Evergreen companies.
Culture Is The Water We Swim In Every Day
I have a favorite quote from author David Foster Wallace that I feel speaks directly to company culture:
“There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says, ‘Morning, boys. How’s the water?’ And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, ‘What the hell is water?’ ”
Culture is the water we swim in every day.
Say you’re the CEO of a small business that has grown to the point where not everyone knows one another. You notice an increasing number of conflicts between different teams. You’ve read a lot of articles that suggest a strong company culture is the solution to these types of growing pains. But what, exactly, do we mean when we talk about culture?
Culture is something we tend not to think about because it surrounds us all the time. It is a set of organizational values that unites employees with a common purpose and a shared set of priorities. All organizations have a culture. The question is whether you know what water your company swims in—and if you can use it to your competitive advantage.
Company culture is often ignored as a strategic asset because it’s difficult to define and quantify. Much of today’s media coverage confuses culture with manifestations of culture such as brand attributes, free lunches and unlimited vacation.
Think about companies like Google and Twitter that are renowned for their cultures. What comes to mind? Maybe ping-pong tables? Maybe groundbreaking innovation? The hype ends up being about superficial trappings or specific attributes.
What’s more, Google and Twitter are like the prom king and queen of company culture. Other companies chase these cultures instead of finding their own.
So how should an Evergreen CEO define company culture? At Pomello, we propose a model based on three principles:
1) Align culture with business strategy. Identify the authentic values that drive behaviors that will make your team successful and don’t worry about emulating the company that just got written up in Forbes or TechCrunch.
2) Build cohesion by living your values and hiring for fit.
3) Measure success by evaluating culture over time and be open to changes dictated by shifting strategy.
Netflix arguably started the current wave of interest in company culture. In a now-famous 124-slide PowerPoint presentation, CEO Reed Hastings explained the firm’s values by highlighting specific behaviors it rewards (for example: employees who take smart risks demonstrate the value of courage). His value statements weren’t meant to impress; they were meant to paint an accurate picture of Netflix. They were authentic.
A second company I like to highlight for the cohesiveness of its culture from top to bottom is First Republic Bank. Its culture of customer service is embodied by its employees—from the executive team to the frontline customer relationship associates. It is unusual to see such consistency across an organization. I attribute that to a commitment to hiring and promoting staff members who best fit the culture.
Finally, I want to draw attention to SAS, another pioneer of strategic company culture. CEO Jim Goodnight once said, “My chief assets drive out the gate every day. My job is to make sure they come back.” SAS successfully structures its culture of creativity and well-being to yield results that are valuable for the firm. While the majority of the software industry experiences turnover above 15 percent, SAS’s turnover is consistently in the low single digits. This extraordinary retention rate both reflects and contributes to a healthy corporate culture.
When you have an authentic and cohesive set of values, lived by leadership and rewarded in employees, you achieve the organization-wide equivalent of charisma—a magnetic quality that draws people in. At the company level, culture attracts the right talent, keeps them engaged and optimizes your most valuable asset.
Catherine Spence is co-founder and chief product officer at Pomello (www.pomello.com), a predictive HR analytics company based in Silicon Valley.
Know What You Want
But what do you want?
The summer my son turned 7, he told me he wanted an i-something for his birthday present. His friend Mark had an iPod, his friend Noah had an iPad and he saw that I had an iPhone. He wanted an i-something.
I didn’t know what to tell my son about his i-something request. I thought he was a little young for an i-something. So I asked one of my mom friends for advice. She shared a mantra that she heard from her mother whenever she wanted something that her friends had but that her mom didn’t think she was ready for: Every family is different. It’s not defensive. It’s not an excuse. It’s just that every family has its own circumstances, its own agenda and its own history.
So does every company.
When I got out of business school, I was wired to think that my mission as a CEO and a co-founder was to maximize shareholder value. We had a deeper mission at our kids clothing company, Tea— to inspire global connection and curiosity for families. But we still obsessed over creating shareholder value.
We had an investment banker come in to tell us what our company was worth and how we could make the most money for our investors. We told him about our company—the way our design team members travel around the world, immersing themselves in culture, and then bring a little bit of the world back with them—and about our steady growth and profitability. He took all the information, made a spreadsheet and looked at comparables. When we went over his findings, he started by asking us just one question: Why do you have single-digit EBITDA?
He thought that either we should be seeing double-digit profits or we should be spending every penny on shoot-for-the-moon growth. It was totally puzzling to him why we would operate this way. I had the same answer I had for my son: Every family is different.
At Tea, it goes back to where Emily Meyer, my co-founder, and I come from. Emily’s mom grew up in Texas in a big family that didn’t have a lot of money. But in 1963, as a 21-year-old student, she traveled to Canada and Europe to study. She was away from home for a year and a half. When she returned to Texas, it was by cargo ship because she couldn’t afford normal passenger fare. From hearing about her mom’s adventures—and her mom’s determination to make something she valued greatly actually happen within her means—Emily learned the power of exploring. She learned how to make the foreign a little more familiar. (Emily’s mom recently hiked the Camino de Santiago on her 70th birthday.)
My dad was an IBM man from the moment he interviewed (at his fraternity house at Ole Miss) until the day he retired, 26 years later. When we started Tea, he couldn’t give me much advice in the ways of Silicon Valley, but he told me what he’d learned in all his years at IBM. He said if we could make a great product that customers love, and we could make a profit, everything else would work out.
We make great products that our customers love, products that bring the world into our customers’ lives and homes. And we also make a profit. We use some of it to grow our business, but we want to have enough so that we can always make our own decisions.
That’s what we want.
I taught the business plan class at Stanford Graduate School of Business for a few years, and almost every student came in thinking there was just one path: You come up with an idea, you schedule a meeting with venture capital and you draw out your business plan on a napkin. The next thing you know, you’re going public, and it’s a grand success.
I used to tell my students that before they march down Sandhill Road, they really need to know what they want. Of course they want to start a business, but they have to figure out what that means for them, for their family and for their company. I’m always repeating that to them: Know what you want. Know what you want. And I’m telling myself that, too. We have to know we don’t just want an i-something. We want to build something great.
For me, that’s an Evergreen company that will someday mean more to my sons and my sons’ children than that i-something ever did.
Leigh Rawdon co-founded Tea Collection in 2002. The San Francisco-based children’s clothing company is inspired by global cultures and modern design and dedicated to ethical sourcing and giving back. Rawdon received her BA in English from Davidson College and her MBA from Harvard. Travel is important to Rawdon, Tea’s CEO. Everyone who works at the company receives an annual international travel allowance.
