Many are drawn to the CEO life, assuming it is a paradise. Although this position is indeed fulfilling career-wise, it comes with a long list of challenges. Eric Anderton chats once again with Michael Girdley, this time about the loneliness faced by every CEO. He discusses why they are usually the last to know about everything that happens within the team. Michael explains why CEOs should never call their companies a ‘family’ and the importance of getting support from an outside network. He also shares some techniques for conducting interviews and performance reviews.
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Beyond Business Books: The Unspoken Realities Of CEO Life With Michael Girdley
Combat Loneliness, Debunk The ‘Family’ Myth, And Bridge The Information Gap
We all know that the internet is a cesspool of nastiness, but it’s also an awesome place. The reason it’s awesome is because you can meet people like Michael Girdley. Michael Girdley is someone that I’ve followed on Twitter for a number of years. He’s been a guest on Construction Genius. It’s so great to have him on the show because he has built a number of businesses functioning as a CEO. As a result of that, he knows what he’s talking about. We’re going to dive into a number of topics around what it’s like to be a CEO and the challenges that you face as a CEO. Including the fact that your company is not a family, so you need to stop calling it that.
The CEO role is a lonely job. As the CEO, you are always the last to know. As your company grows, your job as a CEO changes, and that can be tremendously challenging. These are some of the very practical areas that we talk about. Michael is a practitioner, so he knows what it means to be a CEO and to function at a variety of different levels of a company’s growth. You’re going to enjoy this conversation. You’re going to tremendously benefit from it. I encourage you to think about 2 or 3 takeaways from this episode that you can immediately use to help you to perform better as a CEO in your company. I also encourage you to share this interview with other people. Thank you for tuning in to Construction Genius.
Michael, welcome back to Construction Genius.
I’m excited to be here. Let’s construct some stuff.
You put together a Twitter thread that caught my attention a little while ago. It was the fifteen things that are not mentioned in business books. We’re not going to dive into all fifteen here, but there are a few that I’d like to dive into. One of them is a CEO is a lonely job. Can you please tell us about that?
A CEO job done right is akin to the way military folks think about leadership. I’m a big believer in hierarchy is the optimal way to get a mission done. I think that expands to business as well. If you look at it as a CEO, the organization gets bigger and ends at a point at the top where the CEO is the only person doing that job. Unlike other roles where you’re 1 of 15 HR managers or 1 of 5 accountants and a member of the team, the CEO is typically one if not the only person without a peer in the company.
Similarly, you’re having to be a CEO of a small company. There are things you can say and there are things you can’t talk about with the people that report to you. They depend on you to be their leader, not their shoulder to cry on in terms of you bringing your problems to them. That’s where I think all that comes together to be if not the loneliest job in America, but definitely the loneliest job in each individual company.
You’ve been the CEO of a number of companies. You’ve built a holding company. How do you manage yourself personally? How do you manage that loneliness? What do you do to manage that and maybe the isolation you feel? Perhaps even sometimes the desire at times to overshare and having to control yourself there. Could you talk about that, please?
My job these days is I’m not a CEO of anything. If I am, that means there has been a problem. The CEOs of things that I’m involved in are doing their jobs. I had my tours of duty being a CEO. Now I find much more joy in supporting them, coaching them through their journey, and doing what’s right for them at this point in their life. In terms of how I deal with it personally, I feel like I’ve got an ample supply of those things. I’m in a CEO peer group. I have everybody involved in that CEO peer group. I have the fewest direct reports, which are two currently, of people that work directly for me. I’m in that group. That provides a great opportunity through lunches with peers, and through people that are in business and trying to achieve things hopefully, like I am. I get to talk to them there.
I’m in a number of online peer groups that are more informal. They’re mostly Signal and WhatsApp chats with people that are on a similar journey, whether they’re podcasters or Twitter content creators. I have friends. I think a lot of my friends are people that are folks on the same journey I am. In January, I go on a guy’s ski trip that I organize, and 14 of the 16 guys there were CEOs and business owners. People I could talk to about problems I’m having. I have my wonderful wife whom I can talk to about stuff all the time. I got plenty of shoulders to cry on and talk to. That’s a good way to go through life, at least for me.
It’s interesting because it sounds like you’ve been very conscious about that. Typically, a lot of CEOs get consumed in their businesses. As a result of that, they don’t necessarily have that outside network. How did you go about consciously developing that network, or is that just part of your personality?
For me, I tend to instigate things a lot. I’m a grand instigator on stuff. Those signal chats and stuff that I talked about, I started all of them. The WhatsApp chats. For my CEO peer group, I am the number one referrer of people to join the CEO peer group. I tend to be the person that’s like, “I’m going to go on a ski trip. Would you, eighteen people, like to come?”
It’s very much orchestrated. I wouldn’t say that’s very intentional. I would say that’s just my nature to be very logical and be like, “You know what would make this more fun? If I had fifteen fun people that I all like to go with me on this ski trip.” I figured out how to do that, which if you’re the organizer, you get to invite the people that you like the most, so I invited people that I like the most. That’s my strategy. To put that in perspective, to have 17 guys come on a ski trip, I invited 60 people and it was 17 that could make it. That’s how many people I know, I like, and I wanted to spend time with. That’s a byproduct of my nature. It’s just how I run things.
Let me ask you about the CEO groups. I know it’s a strategy that clients of mine have used. They have peer groups where they go with themselves and a couple of people from their organization. A CEO group is a slightly different flavor. How did you go about selecting a CEO group? What are the biggest benefits that you get out? What are some of the pitfalls to look for when you’re looking for that kind of association that you want to avoid?
In the universe of organized CEO peer groups, I’ll just talk specifically about the organized ones. There are ones that are organized based on business size and they’re the classical network. That’s where you see EO or YPO. I do Vistage. We launched one that’s for smaller companies who aren’t ready to be in an EO or a YPO yet called Scalepath. There’s that kind of network of peer groups that are organized based on business size. We’re targeting the $500,000 to $5 million revenue business size, less than 30 employees.
There are topical or industry-specific peer groups. One of my buddies is in one of those. Specifically, it’s just for people that own staffing companies. He’s in my Vistage group, and he does this topical one as well, so you see a lot of those. There’s one for SaaS founders or construction people and do that bucket.
I started in the EO Vistage type thing, and that was the journey I did. I first joined EO and for me, that was an exposure to what this peer network stuff could be. It was a forum-type situation where you meet in a small group, and then there are chapter-wide meetings that happen on occasion. I learned a few things being in EO. One is that I am a hard charger in EO. I wanted the meetings to be much more nose-to-the-grindstone type thing, with more accountability, and people pushing harder.
I ended up switching to the local Vistage chapter. I ended up working with a man named Tom Cuthbert. I’ve been one of his oldest members for the past ten years or maybe longer. I can’t keep track. It’s been a while. I liked it because Vistage, at least in Tom’s world, is much more hardcore as I would describe it. We’re very focused on pushing. He chairs the meetings. There’s a level of accountability. That matches my personality in terms of what I want to have. If I’m going to be going in on something, I want to go all in on something. That’s how I’ve been doing Vistage. When you think about joining a peer group like that, people think national EO is the same everywhere, or YPO is the same everywhere, or Vistage is the same everywhere.
The point I wanted to make is your local EO chapter, local YPO chapter, Vistage, TAB, or whatever one you decide to join is a reflection of the personalities that you’re working with of who’s running that local chapter. Even here in San Antonio, the different Vistage groups are very different. I wanted to be in some place that was pretty hardcore. There are versions of Vistage in San Antonio that are not as hardcore. That’s where you have to go shopping for a group that’s going to make sense for you in your culture.
I remember meeting with a group. I was considering joining a group that I won’t name. I go meet with the guys, and it was all guys in the group. That was the first red flag for me. It would be ten of us. All guys show up and they’re like, “We’re going to do an interview with you on Tuesday at 2:00. We’re going to meet at this bar.” I was like, “Bar? Who goes to a bar on Tuesday at 2:00? You’re either an alcoholic or a loser.” That’s in my mindset. We go to a bar and everybody is drinking on Tuesday at 2:00. I was like, “I want to be part of a serious group that values stuff.” They proceeded to tell me about all the times they got together, partied, did extramarital stuff, and got crazy. I was like, “Aren’t we 35 years old? This isn’t the right fit for me.”
That’s where the interview process is so important to go in and understand, is this a group I share values with? Do they have an attitude like I do? Do they have the same objectives? Interview them to make sure it’s going to be a good fit for you. That was super eye-opening to me. I was like, “Why are we doing tequila shots at 2:00 on a Tuesday? This is not the group for me.”
Let me go back to something you said earlier at the beginning of your thought on why a CEO is a lonely job and this idea of hierarchy. You said that in your experience, hierarchy is the best way to build and execute a business. Yet oftentimes, it seems with younger generations, the thought is we don’t want to be hierarchical. We want to be collegial. We want to be teamwork and all that stuff. How does that hierarchal perspective play with the hiring of younger people into your organization?
Millennials typically bring that because they look at the world from a very different universe than our generation, and much different than the Baby Boomer generation. In my CEO peer group, they had us one day separate a speaker into generational groups. Each generation proceeded to separate and do a little task on their own.
The Millennials all went off and did their thing. The first thing the Baby Boomers did was spend five minutes worrying about who is going to be seated where in their little area. What’s the hierarchy? How are we going to get together? How are we going to make sure I see everybody be deferential to the right people? Who’s going to be the leader? The Gen X of which I’m a group because I’m 48, we walked over and one was like, “I’m in charge. Let’s go this way.” We then started doing the work and we were done quickly. I didn’t say our work was better but the Boomers were still figuring out who’s in charge because they have a different mindset to it.
To me, that ties back to when you’re interviewing people, you have to think about each person coming in comes from a different place. They’re a different generation. They have different upbringings. They’re wired differently in terms of how they think about stuff. My answer to that is each one of those groups will bring strengths towards how you’re going to achieve your mission but also weaknesses that come with it. I think you’re talking about one of the challenges in dealing with Millennials.
That’s where during the interview process, I’m being very stereotypical. There’s an interview process for Boomers or Gen X or Gen Z. You have to make sure that they’re going to be aligned with you in terms of how you’re thinking about the mission. There are some companies that run as a kumbaya, “Let’s make sure everybody gets taken care of. We don’t care if we make that much money.” I know some companies like that. They can have fun guys. That’s your call if that’s what you want to run.
I have a friend. He makes several million dollars a year. He could make several million dollars a year if he ran his company differently, but he runs it closer to being a public service than he does getting rich. He’s pretty rich. He can be richer but he doesn’t want to be, which is fine. That’s where during that interview process when people come in as themselves, you want to understand, “Are they going to align with your core values of how you think about stuff?”
For me, we have a mission. We want to try to create things that are going to achieve as people and as a company. Either you’re going to be in line with that or not. If you’re not in line with that, then there’s probably a better company for you to work at. It’s just not ours. That ties back to this idea of the mission has to trump other stuff for a reason. The way to get everybody to achieve the mission the most efficient way is to align everybody towards a single goal and you do that through a hierarchy. That’s the logical reason for how that all comes together.
Let’s talk about the interview process real quick. You brought it up. What are some of the best interview questions that you’ve used particularly around this area of whether someone is going to accept this idea of hierarchy or specifically someone is going to fit in with your mission and your culture? What are some of those questions?
The best question or the best line of questioning for me is to understand what somebody’s past has been. Most people come in, or you meet them at a party, or they come in through an interview process, they’re telling you who they are. It’s like the old line, “If somebody’s telling you who they are, you should listen.” The best predictor for what is going to determine how somebody’s going to act in the future is how they’re acting up until now.
For example, if I interview you and I discover that in college you were not the fastest person on your swim team and you decided to quit, that gives me a pretty good indication of what you would do in your first job. If I hear that you did it again in your second job and your third job, or there’s a pattern there, that pattern is going to give me a great predictor of how you’re going to perform when you come to work with me.
Let’s say you’re somebody who came into a company and you pursued exclusively your personal agenda at the expense of the company’s mission, I’m pretty sure you’re going to do that when you come here. When I interview people, I spend a ton of time understanding, “Tell me about your story. Tell me what motivates you. How you’re wired. Where you’re coming from. What was your college experience like? What was your first boss like? What was your second boss like? What did you like there? What did you dislike there? Why did you leave?” All that gives me insight into what you’re going to continue doing because it turns out humans are predictable. We keep doing the same thing over and over again. That’s my strategy to understand that and give you a good idea of how somebody has to perform in the future.
When you’re asking them about their past, typically, I think this happens usually in their late teens or early twenties, but there’s a pivotal moment where something changes, and their behavior changes. That then establishes a new pattern. Do you ever notice that?
It happens all the time. Almost everybody has 1 or 2 formative things that happened in their youth that comprise a little shell and a little core of how they act today. For example, I was in an interview and the gentleman or gentlewoman was talking about his/her family getting evicted three times before the age of fifteen. They would get rousted out of their house in the middle of the night. The echo of that is this person has gone on and has zero debt in their life. They are living the absolute possible way that it would be impossible for them to ever get evicted again.Almost everybody has one or two formative things that happened in their youth that comprise a little core of how they act today. Click To Tweet
If you think about what happens there, you see extremes that happen to a kid or a person in their formative years. That echoes back in how they deal with everything. You see people that were abandoned by their parents. I’ll tell you what my hangups are. I’ve done this thing enough to know. I got 2 or 3 chips on my shoulder, and I’m still working through them, but that’s okay. As long as your response to them is a healthy thing, that’s fine.
As somebody wanting to get to know you as a person, as you’re coming into a company or a work environment, I want to know how you’re wired so I can create the best environment around you so you can thrive when you come to work here. All that is fine. I’m not going to beat up somebody because they act a little different now because of that childhood thing that happened. All of that is fascinating to me. It’s clear that I get excited about it, but it’s great to understand people that way.
You have to take your time there from what you’re saying and go into the past because the past is the predictor of the future. As you’re saying, people changing particularly as adults is something that’s very difficult. If you’re picking up those patterns of behavior, expect those when you bring that person on board.
A million percent. They’re not perfectly predictive but they happen.
They do. When it comes to hiring, it’s not a science. It’s an art and a little bit of science. You have to be looking for those patterns. Another one that you said that I like and this is particularly good. I’m out in California, so you hear this a lot in California. You said, “Your company is not a family. Stop calling it that.” Go on that one.
I have so many good rants about this. I am wired that I hate stuff that’s disingenuous. It’s stuff that’s like, “Don’t blow smoke up my butt. Just tell me how it is.” I think that it’s perfectly that. When somebody’s like, “Our company is a family.” That is total BS. Nobody fires their cousin because business went down 20%. You don’t fire your mom. It doesn’t happen. You may get estranged from your mom, but you don’t fire her from her job, box up her stuff, walk her out to the curb, or negotiate a severance agreement. The problem with using the familial “We’re a family” language is you’re sitting there lying to your employees, and it’s bad language.
When you double click on it and you ask people, “Why are you using that language? Why are you saying we’re a family?” It’s because what you’re trying to say is, “I am using a lens of looking at you as an employee or a teammate that you’re a person first, that I care about you as a person, and that is going to be my lens of how I think about everything that I’m going to do with you. I’m going to use a human-centric lens, not a machine-centric lens to think about you. You’re not a tool for me.”
People use the language so sloppily to say, “We’re family,” but it’s not. It’s a fake thing and everybody knows it when you say it. That’s why I encourage people to be like, “We’re an all-star team.” This is the language I use. “We are an all-star team. We’re on a mission. That is the focus here. I didn’t adopt you, but I am going to treat you like a human being, like a person first. I am then going to balance that with us trying to achieve this mission and go from there.” That’s my whole rant against the family thing. Every time somebody uses that language with me like “We’re a family” or whatever, I know they’re about to screw me. They’re going to rip me off because it’s so bad.
Does that interact at all with this idea that it’s hard sometimes for people to fire people or to let people go because of that perceived family dynamic? Does that ever play into it?
It potentially does. I think most people are risk-averse or failure-averse. They delude themselves, “Jim is going through a tough time. He’ll come around. Eddie will come through. He started out great. It’d be so difficult to replace, Jill. She’s been here forever.” At its core, most people are lazy and self-delusional, and it tends to be that way. They’re scared. They don’t want to admit they made a mistake. Those are all very difficult. It’s going against so many aspects of human nature. I think that’s why we don’t help people move out the door as quickly as we should on a recurring basis.
I can recall a time in my life. I’m thinking back twenty years plus. I was working for a small entrepreneurial company. I was a high performer in that company, and then I hit a rough patch personally and my performance dipped. The CEO came beside me. He asked me what was going on. He put his hand around my shoulder, and he supported me through that. It lasted for a period of time, and then I came out of it. You mentioned something about someone’s performance dipping. How do you distinguish between someone whose performance is temporarily dipping and someone who’s no longer performing at a level that they were performing at and need to go?
One of the frameworks I like to use to think about people is your contribution to the company or your fit at the company is not single-dimensional. The one I like the most is the one EOS has, the Entrepreneurial Operating System. They have a people analyzer that uses three dimensions. Do people want to do it? Can they do it? Do they get it? What you’ll see is the highest-performing people hit all three things. Can they do it? Do they have the mental horsepower and skills to do the job? Do they want to do the W? Do they have the right cultural fit? Do they want to achieve and do good things, and then get it? Are they in tune with your culture, your mission, and the way everybody gels? Do you fit the culture?
What you’ll see is some of those are lacking when somebody is not performing well. It’s typically one of those three areas. For example, if the problem is a can-do-it problem. In your case, you could do it before but you’re not able to do it right now. That’s a temporary thing and you can start to work with a person on a personal development process to get them there. You’ll see things also where there are people who are not mentally capable, or they can’t assume risk, or they can’t be precise enough to do the job right. In that case, you should be realistic about, “We’re not going to fix that. You need to find a better job. This is not the right job for you. You’re not a bad person, we just asked you to do the wrong job.”
In your case, you were going through a rough spot and that’s where a boss can use a framework like that. Another one is to understand, “This is a temporary thing. Let me be part of looking at you as a human first, and then help you develop back to where you used to be before and get you there.” That’s that temporary versus permanent problem. In your case, it was temporary and I’ve dealt with that. You just work with the people as best as you can.
Sometimes the idea of wanting that motivation, you have a high performer. All of a sudden, for whatever reason, they lose their desire to be in your company, they’re done, and they’re checked out pretty fast. Do you ever see that happening?
Yeah, in all kinds of versions of that. I had a person working with me fifteen years ago. He had a bad back injury. He got on opiates to deal with the pain. He went from totally motivated and in tune with everything, to his W and G went off the cliff. He didn’t get it anymore. He wasn’t in tune with the culture. He didn’t have any focus anymore. The drugs took over. We’d be on calls and he’d be in crazyville 1 out of every 3 calls because it wasn’t the right fit anymore for him.
There are all kinds of factors that can get you there. I’ve seen it with drugs like that. I’ve seen it where people go through trauma with their family or personal trauma. I’ve worked with CEOs in the past where they’ve had a kid pass away. It’s transformative for them. Ultimately, you do what you can to help those people and do what’s best for them but not at the expense where the company, the other teammates, and the owners are going to have to suffer extraordinarily for that. It’s always a judgment call, but trying to do right by the people is the best thing.
How do you personally manage to maintain your motivation and your drive in the business environment when you’re feeling pressure personally? In some of the things that you spoke to there, what do you do to either compartmentalize or keep focused as you’re going through your business journey?
I am fortunate to be wired this way. When I’m engaged in something like the past minutes we’ve been talking. It turns out I like everything that I say. It all turns out super genius. I have a great ability. When I’m present, I’m present. I also feel very fortunate to be getting older. You and I are of a similar vintage, but the shifting of hormones over the years has been one of the best things for me. I am so much happier as a 48-year-old than I was a 28-year-old than I was an 18-year-old hormonally. Whatever is changing, it’s great. I’m flat as a pancake all the time. I don’t get too excited. I don’t get too down.
I have the gift of experience now where I know, “I’m super tired that’s why I feel down or that’s why this is bothering me. I need to take a nap.” I’ve seen the movie enough times that I know how to deal with it. Those are the two things. The gift of experience and the gift of changing biochemistry make things a lot easier. I highly recommend getting older.
I’m with you there. There are the blessings of old age, as well as the challenges. Let me go to this other area that you talked about. I’m thinking of a friend of mine who’s a dear guy. He’s been working on a startup for many years. Every time I talk to him, “You need to sell something before you keep working on this idea.” All he’s doing is working on the idea and pouring time and money, but he hasn’t sold anything yet. Tell me about that idea of selling first.
It turns out that the best way to build a great business is to get and build something that people want. The best way to find out for sure if they want it is to get it out there as quickly as possible and try to sell it. That’s this mantra that I have where you go out and you find people who are ready to be early adopters of your thing and get them to put some money down. Get them to commit to your thing.
Truly, that helps you understand much more than what they tell you they’re going to do, and what they say their problems are or not. The whole economics, the revealed preference idea. It helps you dig past all of the psychological BS that people have. Their need to lie to you and be polite like, “That’s a great idea.” It cuts through all of that when you’re like, “I’m glad you like the idea. That’ll be $200. It’s not worth $200 to you? What is it?”
I had a conversation with a future potential partner in a new venture with me. I was like, “Here’s what we got to do. We’ll go have ten meetings and we’ll see if anybody wants to buy this thing. That’s the first step.” He’s like, “Before we build anything?” I’m like, “Absolutely, because that’s the biggest risk here. Does anybody want to give us money for this?” You go sell it first and understand if people are willing to try to put money down on it or commit to it. That tells you much more than any interview, guess, expert research, or Gartner report. Who cares? Let’s see if we get some money.
In the world of construction, the context being because of the risks involved with entering into projects, you start small. You go out to an owner or something like that and say, “You got a small project I can work on?” You build that. You get some money for it. You learn, and you grow from that point right there. Let me go to this other idea here. The CEO is always the last to know. As a dad, I can appreciate that. That’s something where I’m always having to be on the leading edge asking how things are going. Tell me about CEO is the last to know.
I’m curious as a fellow dad, do your kids rat each other out when they want to get back at each other?
I have five kids. My 16 and 17-year-old come in and say, “Dad, the eight-year-old, you know he’s behaving a punk, right?” What they do is they’re on my mindset in terms of how a child should behave. They’re always pointing out, “You need to deal with that.”
That’s so funny. Go do some parenting. This is a dynamic I would notice in being a manager, then a director, then a VP, then a CEO. I would go talk to some trusted person on the staff. Almost universally, you’ll see in every high-performing company that the senior-level staff has one person who runs around in the lubricant in glue. Everybody knows Jill or Jim because they all love Jill or Jim and they’ve been Jill or Jim’s ear about everything. The CEO ends up doing the same thing. It’s like, “I love talking to Jill. I’m going to go talk to her.”
I discovered 4 or 5 times, I would go talk to Jill or go talk to some teammate who is pretty plugged in. I’d be like, “Have you noticed that Bill’s performance is slipping lightly?” They all would say the same stuff, “You’re just noticing now.” It would happen over and over. It led me to understand that those connections that happen inside of the company, across all those people, you have 50 people, they are all chitter-chattering because they got nothing else to do. They’re gossiping, talking, and complaining about Bill, Ed, or so-and-so employee for letting them down. The frustration is almost universal.
I can see this now because part of my job is to do performance reviews for CEOs. Part of what I do is I go talk to every one of the CEO’s reports and some other folks as well, and I get feedback from that CEO. You would think, “There’s going to be a lot of nuances and different things that people say about that CEO’s performance.” That is not the case. Almost universally, people will say 1 or 2 things are going well and 1 or 2 things are going poorly. Everybody says those things about the CEO. Everybody knows. The CEO has no clue.
Is there any difference between the performance reviews you do for the CEO and someone in a different position?
The main difference is in terms of my ability to have insight in terms of what that person is doing. If you’re managing somebody and you’re doing a review of them, which is typically how it’s done, you as a manager is understanding their priorities and their ability to complete tasks. As a board member doing a performance management process for CEO, I’m not telling them what to do every day. CEOs are supposed to be autonomous in terms of self-prioritization and projects.
I’m seeing things at a board level. That means for me to be able to do a good review of them, I have to go get data from other people who are the CEO’s peers who are working with them very closely in order to do a good job of it. Other than that, it’s the same stuff. You get data. You have a meeting of the minds with the CEO about how and what they should be working on. You develop a plan and you manage through that plan the next year to help them become their better selves over the next twelve months, then you do it again.
I know you have a process that works very well for you. Can you very briefly outline your performance review process so people can glean from that?
You can find it on my Twitter and website. I wrote it down for free for people because that’s what I do for fun. The basic process is one where I alert everybody and work with the CEO to understand, “Who are the people that can best give us insight on your performance?” That could be 6 to 8 people. The second step will be the CEO writing a self-evaluation using a standard set of questions. It reflects back on their past year’s performance.
In parallel, I write a review and answer 4 or 5 questions based on what I know about the CEO. We have a standard set of questions we do for that. Based on the list that I put together with the CEO of people who know and are working with them the most closely, we will put together and send these other folks a data-gathering exercise. That will be all done through Assess, a software app. They’ll fill out the stuff and then I get all the data. In many situations, I will read through all the data and I will analyze it before I meet with the CEO. I may go have phone calls and further conversations with peers to double-click on stuff because you’ll miss things in the writing.
Based on that, the next step is to get together with the CEO and we go through the data. It’s like, “Here’s what I heard. Here’s what people are saying. Here are some challenges. Here’s what you said. Here’s what I said.” You get it all on the table. The last step is we synthesize that into a set of goals that are going to be things you’re going to work on for the next year. In my one-on-ones with them in meetings and board meetings, we track those.”You were supposed to work on being more available. What have you done this quarter about that? Tell us more.” Hopefully, over time, that check-in, one-on-one, and me probing helps them develop new better habits. In the next year, hopefully, the news is better in that particular area, and then we do it again.
How many specific goals do you set from the performance review typically? Is there a range?
I try to keep it relatively 2 or 3 or fewer. A big mistake people do in performance management is, “Here are the eighteen things you need to work on.” As opposed to saying, “Let’s pick the top two.” The danger is if we’re doing eighteen things invariably, you try to do too much at once and you work on none of them. You’re much better off picking a couple. Pick your battle and then move on to other ones the next year. A lot of those numbers 10 through 18 that were important don’t show up the next year anyway. You’ll end up with new problems. You might as well just focus on the top two.The biggest mistake people make in performance management is telling others to work on several things instead of picking the top priorities first. Click To Tweet
There’s another one, and this will be the last one that I’ll ask you specifically from the list. The CEO’s job changes at each stage of the company. Please describe that a little bit.
This is the idea that there are inflection points as a company grows where you’re adding another layer of management. If you fix this hierarchical idea, that’s conventional in terms of how people organize businesses. Let’s say that you’re starting a company. The CEO is the individual contributor, strategist, and doing everything. You’re selling the first whatever. The challenge is that can only grow to a certain level before you have to start hiring help. Let’s say that’s $500,000 a year in revenue, which is about where lawyers can top out in terms of revenue, and you start to hire help.
Suddenly, you’re a manager, and your job changes again. Now, your manager and player-coach. You have people working for you. The company grows to a certain point. That structure of a single manager and employees can get you to a million dollars in revenue or a million-half dollars in revenue. You then have to add another layer of management. At that point, your job is to do some of what you were doing before, but now you’re managing the managers because you have two layers of management under you. It continues on.
Eventually, you get to a point where you’re managing VPs and VPs have directors, and directors have managers and individual contributors working for them. Your job has to change again because mostly, instead of making sure the managers have their priorities straight, you’re coaching VPs on how to deal with directors who are dealing with their level of stuff. Your job changes as the organization grows and it coincides with this adding different layers of management each way up the org.
That idea of your job changing, how does that fit in with the framework that is in the traction book about the difference between a visionary and an integrator?
EOS dances around the idea of telling people there are certain CEO jobs that maybe aren’t the right ones for you. In my case, once a company gets too big, too process-oriented, or too standardized, I’m not the right CEO for that. EOS implies you can stay forever, and I don’t think that’s true. I watch what Marc Benioff or Mark Zuckerberg have done to take a company from just a PowerPoint to $100 billion. To me, that seems like magic. I don’t have that capability in there. I can’t do that. I’m too shiny object-oriented and too fluffy in terms of how I approach it.
Similarly, that’s the job of the integrator, which is typically a COO who’s internally focused, integrating all the functions of the company into one. That changes, just like the CEO job changes as well because your reports underneath you are doing the same thing. EOS is very stringent about it and I think it’s totally right. The optimal structure is visionary outward-facing CEO, and then an inward-facing COO who is making the trains run on time.
If you look at Facebook, Facebook had that. You had Sheryl Sandberg. She made the trains run on time and Mark could go do stuff. You look at when Facebook recently started to go off the rails, Sheryl retired in place a few years ago, and then finally left the company. Now, there’s not that person any more as far as I can tell. That was the moment Facebook started to make some real mistakes because there wasn’t that counterbalance to Mark’s vision inside the company. I don’t know anything about Facebook, but just to illustrate the idea. I buy into that visionary integrator combination, but both of those roles change at each stage of the company’s evolution.
I was thinking about Amazon with Bezos. He seems to be both in a certain way. He’s an ass-kicker but at the same time, he’s got this big-picture idea as well. What do you think about that?
I don’t know anything about Amazon, other than everybody tells me it’s a terrible place to work.
That’s what I mean by being an ass-kicker.
They’ve got a machine down over there. I’ve had friends that have gone to work there for 12 or 18 months. They’re like, “They paid me a lot but all my hair fell out and my blood markers went to crap and my doctor told me I needed to quit.” I hear that over and over again. I have friends that have been there for twenty years and love it, so I don’t know. I don’t worry about it too much beyond hearing the rumors. I think Jeff Bezos is somewhat retired at this point. The only pictures I see of him now are on Instagram.
Can I get some of those steroids? Can we get some of those, do you think?
You totally can. Philosophically, I don’t buy it. Everybody wants a pill when you should just work harder or eat better. That’s my advice to you. Eat better.
Let me go back to the visionary thing real quick. If I’m a visionary, what are 2 or 3 things that I need to do? I know plenty of guys like this. They’ve built a killer company. They’ve sold a bunch and they’re selling really well, and then they struggle because the operations have issues. As a visionary, what are 2 or 3 things that I need to be doing on a weekly or monthly basis to make sure that my operations are dialed in?
Most visionaries are delusional about being good operators. Most of them are convinced they’re good operators because they built a business from $0 to $10 million or $0 to $20 million. You can wheel a business to that despite flaws. Number one, be realistic about how you’re wired. As a younger man, I thought I was a good operator. I am not because I’ve seen good operators. I know how they operate. They don’t have the same strengths I do, but they don’t have the weaknesses I do.
That’s where every delusional visionary entrepreneur should be realistic about where they’re good and where they’re not. From that, you can start to do so many good things. You can start to trust people that are potentially better at those things. You can stop yanking the chain of your company to every single shiny object that potentially you’re going to be chasing. All those things start with being true to who you are and being realistic that you’re not some God’s gift to the universe because you built a $10 million company. That’s hard but it’s possible to do it while doing it with a lot of mistakes.
One last question. This is not on your list but I want your perspective on this. What advice do you give to CEOs about hiring family members?
I think it’s a pretty bad idea. In my organization, we have strict anti-nepotism policies. We don’t hire family members. We don’t do business with family members. That even applies to us as owners. There is no weird stuff going on in terms of all that because it creates challenges. For example, one of my companies was partnering with a relative of mine. We discovered that the whole company was slowing down one day a month in order to make sure this one relative as a partner was happy. It was 0.01% of the business, but it was costing us millions of dollars, so we don’t do it. I think that’s the best way. Don’t hire family. Keep it simple. I try to avoid drama. That’s the way to do it. I know there are other people who disagree with me, but they’re crazy people.
As a dad, you have a couple of kids, is that right?
They’re looking at you. Our children learn so much just by osmosis and by hanging around. It’s funny how they turn out in a certain way. How do you communicate to your children in terms of involvement in business and your expectations for them, etc.?
We are very prototypical Gen X in terms of how we’re going about stuff. I think that is a reflection of the pendulum swinging between the generations. You had the greatest generation and the Baby Boomer generation who have proven to be much more prescriptive for their children in terms of what they want for them. We have done the other thing which is, Gen X prototypically as parents treat their children as peers. They were like, “You can build the life you want. We’re here to support you.” I think we’re doing that, so that’s the way the pendulum has swung. I’ve told my kids, “There’s no expectation you do anything in family businesses. You can go do whatever you want.” The trade-off there is, “Once you graduate college, you’ll probably get a small nest egg and then we’re kicking your butt out of the nest.”
That’s what I was going to ask you. I’m glad you mentioned that. When we’re in business, we have enough finances to support our kids, perhaps more than other people do. What is your philosophy on that?
We believe very strongly that people who’ve never faced adversity have a very high likelihood to turn out poorly in life, either being listless, misdirected, or malcontents. We do not protect our kids from adversity. We coach them through how to dust themselves off and go deal with it. We don’t want to have a situation where our kids leave and think things are going to continue to be handed to them. That’s our whole approach to it.People who have never faced adversity have a very high likelihood to turn out poorly in life. Click To Tweet
Generally, we’re telling our kids, “You shouldn’t expect to get an inheritance. You shouldn’t expect that you’re going to get your first job with us. In fact, I’m not going to give you one. You’re going to have to go make your way in life, and then maybe someday we partner on stuff. Maybe someday you get an inheritance. Other than that, we’re going to give you every opportunity possible, but it’s going to be your decision to work hard and try to achieve them.” The balance there is like, “I don’t want you to graduate with a disadvantage, but I’m not going to give it to you for free. You’re going to start the race at the front of the line. We’re not going to pick you up and carry you to the end of the line,” which I think a lot of parents do, and it’s a huge mistake.
I know you’ve just launched this new venture and I want to make sure that you have an opportunity to tell us a little bit about it.
Part of the challenge of having too many ventures is, “Let me pitch all twelve things I do.”
No. Just give us the one.
I envy these other people that are content creators and they just promote one thing. It’s like, “Look how nice and easy that is. You just sell this one thing over and over again.” Being a co-operator, it is what it is. We incubated a new business. It’s called Scalepath. It’s at JoinScalePath.com. Basically, it’s a peer group but it’s designed for people who aren’t ready to be in a Vistage, an EO, or anything like that. We want to help people that are in the $500,000 to $5 million-ish and 5 to 30 employee range get out of their business, scale it, and build it to a point where they can live a better life. We see businesses as a tool for you to live your best life. We’ve created this community.
The unique thing that we’ve put together is when we went to go talk to small business owners, we discovered 80% of their problems are all the same stuff. How do I hire? How do I do a budget? What do I do as a CEO? How do I do all-hands meetings? Those 100 problems or so that every single business has, no matter what industry you’re in, but at that size, you all have those things. We’re building playbooks in a library where you can pull up one page and say, “I trust this. This is the best to do a sales compensation plan or to do a marketing plan.” That one page gets you there and gives you the answer you need right now, rather than going to try to do some six-week course on marketing or whatever.
That’s the whole thing. It’s launched. We’re taking our first 100 members. We almost are filled. My business partner is filling that up. It’s all done at a price that small businesses can afford. It’s online completely. You can be anywhere. It’s $200 a month as the starting price for the whole thing. We’re excited to get it going. The reaction has been good. The first cohort is going to fill up and we’ll build something big out of this.
If you are in that $500,000 to $5 million range and you’re looking for a peer group, you have to check this out because the nice thing about Michael is that he knows what he’s talking about. That’s super helpful. I encourage you to go to JoinScalePath.com and check that out. Michael, you’ve been very generous. I appreciate your time. We could almost do the Joe Rogan here but we won’t. I’ll respect your time and let you go about your day. Thanks for joining us on Construction Genius.
A hundred percent. Congratulations on your success, Eric. I’m proud to be your friend and I appreciate the time.
Thank you for tuning in to Construction Genius. I hope you enjoyed my conversation with Michael. Make sure you check out JoinScalePath.com if you are in the range of $500,000 to $5 million in business and you’re looking for a peer group. I promise you that Michael’s insights and support will be tremendously beneficial to your organization. Thanks again for tuning in to Construction Genius. Make sure that you give us a rating or a review wherever you get your podcasts. We’ll catch you on the next episode.