Your reaction to crisis determines the path your business is heading. Today, Eric Anderton shares with us some tips to help us navigate crisis. The biggest mistakes most CEOs make are panicking and hero’s syndrome. In this episode, Mark Brooks, the President of Permanent Equity, gives us a bird’s eye view of the different ups and downs that companies go through in their existence. Mark also discusses how CEOs should be leading through crisis. When you get a cross-functional team and lay all the cards on the table with that team helps a lot in becoming more rational during a crisis. To know more about leading through crisis, tune in to this episode now.
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Leading Through Crisis: Know Your Numbers, Nail Your Communication, And Manage Your Stress
How to manage your company through a crisis? That is the topic of conversation for this episode with my guest, Mark Brooks, the Co-President and COO at Permanent Equity. Mark is a second-time guest on the show, so you know that if I bring them back, it’s because they’re totally awesome. Permanent Equity invests with no intention of selling in family-held companies, headquartered in North America. They have twelve portfolio companies and a current capital base in excess of $300 million. Mark gets a bird’s-eye view into companies as they go through the different ups and downs of their existence. He has a particular interest in helping companies when they hit a crisis.
We talk about the importance of a CEO looking into their metrics and budgets, the importance of over-communicating appropriately to people, the nature of the crisis that you’re going through, how to collaborate with your management team to overcome a crisis in your company, how to make cuts, which cuts to make, and which cuts not to make in your business. Also, how to manage your own help, health, and peace of mind as you’re going through a crisis. I know you’re going to get tons of value from this conversation. Make sure that you are paying close attention. If you are a CEO or a president, this is the episode for you. Feel free to share it with others as well. Please give the show a rating or a review wherever you get your shows. Enjoy my conversation with Mark.
Mark, welcome back to the show.
Thanks, Eric. I’m really glad to be here.
I want to tell the readers our last conversation about incentivizing performance made it into my book, Construction Genius, as one of the chapters. I want to thank you for coming back on the show, and I’m hoping to have a similar, impactful conversation here.
I hope I can make the cut on the second book.
The topic is about managing in crisis. I want to begin right out of the gate by asking you. What are the biggest mistakes CEOs make when a crisis hits their business?
I’ll talk about two. One is panic, and the other is Hero syndrome. One of the first problems that we can create for ourselves is panicking when crisis comes up. Owners, founders, and CEOs of businesses tend to have a bias for action, and that’s why they are where they are. Sometimes, we find that our greatest strengths are also our greatest weaknesses. When we get into a time of crisis, we can be bent towards just doing things.
We go into fight-or-flight mode and just start reacting. We start calling people, doing things, maybe making discounts for our customers, or cutting people, and we don’t give ourselves time to sit down and think through what the situation means for our business and how we should be reacting. Panic is the first one. Sometimes, it doesn’t even feel like panic. It feels like, “I’m taking action. I’m doing what I need to do as the CEO,” which leads to the second problem, which is Hero syndrome. It can look like a couple of different things.
The first is, “I need to get us out of this. I’m going to take all of the responsibility on my shoulders. I don’t want anyone else to freak out about this, so I’m going to hold all the information close to the vest so that I can solve this and no one else freaks out.” That can lead not only to burnout, but frequently, when it’s an actual crisis, we don’t have the bandwidth to handle everything that needs to be handled. We’re not asking for help. We’re not confiding in friends and family that we’re going through a stressful time, so we tend to get unhealthy. Those are the two biggest mistakes, panic and highly related to that Hero syndrome or the hero complex of, “I’m going to be the one to get us out of this.”
Let’s talk about panic. First, how can I recognize that and begin to work through that emotional response to get to something a little more rational and more helpful when the crisis hits?
I’d combine a couple of different concepts. One is, I hope that you’ve got a group of folks inside your company, either your leadership team or a loosely affiliated group of folks who you can confide in with what the business is going through. Being able to share that with a group of folks inside the business who understand the levers that you have available to pull is a critical first step. I’m guessing the reason that you have them on your team is because they’ve got good ideas and have shown themselves to be capable operators and capable of handling their area. They’re going to think of things that you’re not in terms of responding to the crisis. We will tend as people to gravitate as individual contributors towards the things that we know best.
If you came up through the organization or your career on the sales side, a lot of your solutions to crisis are going to be related to sales. If you came up through finance, a lot of your solutions are going to be towards finance. If you came up through operations, you’re going to have operational solutions. Getting a cross-functional team together with whom you can be pretty honest about what the company is facing is a key first step. The second one that I would suggest is trying to get all the cards on the table together with that team. I’ve talked about this being determining a confidence interval. It’s not necessarily a budgeting exercise. That’s a big scary word for a lot of folks because it can take weeks and months to do.Getting a cross-functional team with whom you can be pretty honest about what the company is facing is a key first step to crisis management. Click To Tweet
Back of the envelope, it’s thinking through all the key financial levers of your business, and with that group of trusted individuals inside the company saying, “Given this crisis, what do we think is the best and worst case scenario coming out of this crisis?” Thinking through as the crisis unfolds and you get more data, if we start heading towards the low end of this scenario, what are the key decisions that we need to make to dig ourselves out of it? If we start heading towards the high side of this scenario, what are the opportunities that we can capitalize on that maybe our competitors can’t?
The first step is to get all the right folks in the room, some cross-functional expertise thinking about the different areas of the business. The second is for each of those people, we think this is the range of potential outcomes given this crisis as it unfolds. What decisions do we need to be making if we head towards the high side or to the low side so your menu of options is known at the beginning, and you’re not scrambling each time a new data point comes in to figure out what to do next?
Let me back up a little bit and ask this question. When you say crisis, what do you mean by that? What are some of the sources of crisis or crises, whatever the case is, that hits a business?
It can be a specific or secular decline in the top line of the business. If you’ve built your business on the back of a great government contract that suddenly goes poof, or you’re a sub and you’ve got a great GC that you’ve worked with for a number of years, and there’s management turnover, and you get dropped, there’s a concentration risk in the revenue stream of the business that goes away and you’re left with a big hole in revenue. The second would be a secular decline. What we’re seeing in a lot of parts of the construction market now is there’s a general slowdown in spending on construction. That’s another potential risk. Not just 1 or 2 particular customers going away, but all of your customers decided to spend less in general. That’s on the top-line side.
Through the entire stack of the business, this can look like a major lawsuit. It can look like the mismanagement that you’re responsible for of a very large project that’s going to lead to massive cost overruns and cost you a bunch of money. It can look like a key employee leaving at a really bad time, leaving for a competitor, or leaving to start their own thing that’s going to compete directly with you. Any number of these things, I would refer to as a crisis. Those are the things that we’re thinking of as we go through this exercise.
I’m putting myself in the shoes of someone who’s running a company. My first instinct, and this is just a lot to do with my own way of behaving, is to hold things really close to me and not talk about it. You mentioned that a little bit in terms of the Hero syndrome. I want to ask. How soon do I start socializing a crisis so I’m not chicken-littling it? Who do I start communicating about it first? It’s like if you have a crisis in your family, “Do I just talk to my wife about it, or am I going to bring the kids in?” My five-year-old is looking at me like, “Daddy, why are you stressing out?” Who am I bringing into these conversations? What is the timing of that socialization of the issue?
The first thing that you want to make sure of is that the crisis is real. It depends on your personality as a person also. I tend to be a more extroverted person, which means my processing happens externally. I want to talk to other people to process ideas. If you’re more introverted, you’re probably naturally predisposed to give in something a little bit more time to unfold as you’re thinking about it rather than wanting to go out and talk to people about it immediately. A lot of it’s going to depend on your personality posture as a person. The thing that’s common across all of those is to make sure that this is an actual crisis.
If it’s a key employee leaving at a bad time or going to a competitor, and they come to you and say, “I’m thinking about leaving,” let’s make sure that they’re actually serious about that before we get the entire leadership team spun up about trying to replace them, or a customer comes back and says, “I want to negotiate our pricing on contracts going forward.” Let’s get into the meat of that discussion and not jump to conclusions that they’re looking to leave us completely. That’s the first. Make sure that the crisis is real.
My recommendation would be as soon as you know that it is a crisis, start communicating it with some group of people, which gets to the second part of your question. The first people that you want to involve are the ones whose area of expertise touches the crisis. If this is a revenue crisis, then you want to be talking to your head of sales or your head of business development to talk about how you’re going to go after backfilling that gap in your revenue number. If it’s a legal issue, you clearly want to be bringing in your inside counsel or your outside counsel, whoever your consigliere is.
You want to be involving them in that kind of conversation. It should be subject matter specific at the beginning. Those initial conversations should be defining what the crisis is and what the potential impact could be. As a general manager type or a CEO type, they’re going to have the expertise that is going to better extrapolate what this crisis actually means for the business maybe than you would be. That initial conversation is, “I think this is serious. Do you agree that this is serious?” If that’s a trusted individual who’s got expertise in their area, then their answer should help dictate then who else you bring in on this.
If your head of sales says, “That’s a really big problem. We need to involve other people in it,” then maybe you bring in a couple of your key salespeople to discuss that. You’re bringing in your CFO or your director of accounting to let them know that you’re going to start seeing this flow through the books. It creeps out starting at the person who’s the closest to the issue helping you define that the issue is actually a crisis and, “This is what I think the impact is going to be.” As those other impacted folks get involved, you develop a more well-rounded understanding of the problem and how you’re going to get after it.
History is replete with examples of people who fail in crisis, either because of inaction or wrong action. Let’s look at the inaction side of it. In your experience, what are some of the biggest acts of inactivity that a CEO commits that cause them to struggle more in a crisis?
A lot of it has to do with what you’re measuring and how you measure it. You may be used to, in times of plenty, a certain cadence of updating your cost to complete, a certain cadence of talking to your supervisor as to going out and visiting jobs, and a certain amount of double checking on quotes before they go out the door. A lot of that stuff, you need to double and triple down on in a time of crisis. Your cost to complete from your PMs, instead of doing them once a month, we’re doing them every two weeks or every week because we need to be counting every dollar as it comes in, and making sure if there is cost creep on those jobs that we’re nipping it very closely.
If I change the cadence of my checking-in, how does that then balance with not wanting to create unnecessary tension in the organization, or at this point, have I already communicated, “Guys, we’re in a crisis here, and this is how we’re handling it?”
At this point, you’ll have wanted to communicate it. There’s this interesting part of human nature where if we don’t have an explanation of something that’s going on, we seek one. Usually, the rumor mill is what fills in those gaps. It’s not necessarily negative and people trying to be destructive. It’s just that the human brain craves explanations for things. When we as leaders create a vacuum and say, “I need you to do this,” which is weird and different from what you’re usually doing, and not explain to you why you’re doing it, you’re going to go out and talk to the woman sitting next to you and the guy sitting to your left and saying, “Why are we doing this? What do you think is going on?” That’s how the rumor mill starts to fill in those gaps.
Again, it’s not negative. People aren’t doing it to be subversive. They just crave explanation, which is why you’ve got to be on top of your communication with your team. We talk about updating reports more often. Also, you need to be increasing your cadence of communication with your team. If you’re used to doing a quarterly all-hands meeting with your team or a once-a-month meeting with your supervisors, you need to be doing that more often also. As the information changes, remember that you’re modulating your decisions based on whether you’re headed towards a high side, low side, or middle-of-the-road type of thing.
Increasing that cadence of communication, as you pointed out, you are going to light a few fires by communicating that the company is going through a difficult time. The way that you keep those fires productive like “I need the absolute best you have to offer for me,” that’s a good fire. How you keep it from being a distracting inferno is by continually communicating with people, “This is what I know now.” If they feel like they’re plugged into the pipe with the same information pipeline that their leadership is, then that’s going to keep it from being less of an inferno and more of a productive fire that’s creating good, healthy urgency on the team.
I want to ask this in terms of CEO communication. I think about World War II when Churchill became the Prime Minister of the United Kingdom. They were in a tough spot, and he became famous for his rousing speeches, tons of charisma, and bulldog determination. Let’s say that I’m an engineer. I started my construction company. I’m not really a charismatic guy or gal. How do I rally my troops in these situations when perhaps I come at a crisis with a very even-tempered demeanor or I don’t have a ton of charisma? Is that necessary in these situations?
It’s less necessary than we might assume. People value a level head in crisis. When someone can describe the situation in a very even-keeled manner, saying, “We lost our key customer, and this is what it means for us in terms of a percentage of our revenue, but I have faith in you, sales team and business development, to help us go fill that gap,” there’s a certain levelheadedness that people will appreciate. The rousing speeches can very easily be replaced by a level-headed plan for how you’re going to get after things.
What people want to know is that you’re thinking with a clear head and mind, and you and your leadership team have ideas to get after the problem and to quell the crisis. I don’t think we all need to be Churchills, but I think we need to have been thoughtful about, “What does this crisis mean, and how are we going to address it?” People like to know that you’re working towards a solution.
There’s also this phrase that many of us are familiar with, “Never let a crisis go to waste.” Sometimes, when I’m talking to construction companies, they’ve been working so hard for the last few years. Because of the volume of work, they’ve had to bring on people who frankly are B minus or C players. That leads to the whole issue of cuts when it comes to how you should address a crisis. When is the right time to begin to make cuts either in your overhead, your indirect overhead, or the direct overhead such as people themselves?
The right answer to this, which is not very helpful and is going to sound very preachy, is you shouldn’t have those B minus and C players in the first place. It happens to everybody. It happens to the best managers out there. In terms of thinking through cuts, you need to think through three different levels of cuts. The way that we like to think about those is fat, muscle, and bone. That’s how we categorize them. If you’re cutting fat, these are the types of positions that are nice to have. I’ll call them “luxury positions.” The extreme example is if you’ve got a massage therapist or a nutritionist on staff, that’s not a critical role to keeping the company afloat. That’s a fat type of role.
The second is muscle, which we would define as things that when they get cut can grow back. We do a hard workout, we destroy muscle, and it can come back from that, and sometimes, even stronger. We’re thinking about muscle, so that’s, “We need to trim down OpEx, so we’re going to cut our project management team by 25%.” Is that a painful cut? Absolutely. Is it going to make the other PMs work much harder than they were before? Yes. Is it a function that you can go out on higher again? Yes, you can. There are those muscle types of cuts also.
Cutting bone is a structural cut where you recognize that if it can be built back, it’s going to take years to do it. This is carving off maybe for sale or for liquidation entire divisions of the company, or locations that you would have to completely build back. Those are bone types of cuts, which are deeply painful in the short term. If they are going to be built back, it’s extremely expensive, both from a money or time perspective, and so you want to be very selective about what those cuts are. If I can expand on the cuts idea just for a minute, there’s this concept in oncology with oncological surgeons called margin. If you could tell how pale I am, I’ve had to have skin surgery before for skin cancer.
What they talk about is removing the margin around that spot. They’re knowingly removing a little bit of healthy tissue around what they know to be unhealthy in order to make sure that they don’t have to do it again. This is another thing that I recommend. If it comes to the point where you know you have to make cuts, there’s very little that is more demoralizing to a team than a cut followed by another cut.
You’ll see the productivity of your team absolutely fall off a cliff because all the time that they were spending being productive, they’re now spending gossiping with each other about when the next shoe is going to drop, and they’re going to be interviewing for jobs. If at all possible, if you do need to cut, do a slightly larger cut than feels necessary at the time to give yourself some margin in case things get worse, and you don’t have to go back and do cut after cut. The thousand paper cuts method of doing this is absolutely miserable.
I’d like to talk a little bit more about the luxuries real quick. Give me some practical examples of what you think are luxuries and what are perceived as luxuries, but they’re actually not, and they need to be kept even in crisis.
This is a slightly different answer, and I’ll come back to your original question. Sometimes, we tend to focus on things that feel like luxuries but are going to have zero impact on the bottom line. It’s like, “I’ve got that basket of granola bars at the front door. I’m going to take that away.” That’s a luxury. It’s a $150 item across the year. It’s the wrong thing to focus on. Focus your time based not on the percentages that you can cut or the things that feel like luxury items but on what they cost the business to maintain. There are even small things like that that are still there in a time of crisis and can be fairly meaningful to employees. Sometimes it’s the small stuff that’s the most meaningful.
I’m thinking about things that you’ve maybe outsourced because you didn’t want to have to worry about them internally anymore. You can bring them in-house and ask somebody to do a little bit more work. Given your current OpEx budget, you can cut that third-party supplier for that service. That would be an example of a fat thing. You can always go out and hire that third party. You’re not burning any bridges there. They’ll love to have your business back.
The key thing to remember is we want to be focused on the stuff that’s impactful, not just the stuff that we know on the surface is nice to have, like the basket of granola bars, but stuff that’s going to have a meaningful impact on your budget going forward. There was a second part to your question, the flip side, which is what feels like fat that’s not actually fat.
You made a good example there with the granola bars. I’m walking in, maybe I’m mad that day, and I see the granola bars, and I’m like, “Get these out of here. We’re not doing granola bars anymore.” Like you said, it’s $150. If you can’t afford $150 bucks, you really are in crisis.
Let’s think about this from a construction angle specifically, like truck allowances. Those might feel like fat to you, but we find very important pieces of compensation, especially for field folks. It has extreme personal financial consequences for those folks to lose their truck allowance, and it makes them think very differently about their commute to job sites. That’s a good example of, “I’m giving this guy $600 a month for a truck allowance. That’s fat.” I’d be pretty careful about that. Especially if you’re using them for high-performing employees, it’s probably less fatty than you think and more muscular.
People have been trying to talk us into a recession for the last couple of months. They haven’t quite succeeded yet, but they’re still working hard at it. With that in mind, coming out of the pandemic, we’ve got a bunch of hybrid work or work-from-home situations. Do you view that as an example of the fat that perhaps is going to get trimmed in a time of crisis where I’m going to start to bring my people back in because I need to manage them more carefully?
It could certainly be a casualty. My personal leaning on this is face-to-face is really important. We talk a lot about the trust bank. The highest bandwidth of trust transfer you can have is having a meal with someone. Slightly down from that is taking a walk with someone or taking a hike or something like that. Doing something physically outdoors with somebody is the next. You then get down to Zoom, phone calls, and text messages.
The trust transfer on those is very low to the point where we like to think if you’re interacting with someone that way on a normal basis, all you’re doing is taking withdrawals from the trust bank that you created with those higher bandwidth interactions. A lot of what we’ve been doing with the move to remote since the pandemic is imperceptibly but steadily taking withdrawals from the trust bank. Your relationships, especially with high-performing employees, count so much on an extremely high level of trust when you’re delegating out real meaningful decision-making.What we've been doing with the move to remote since the pandemic is in imperceptibly but steadily taking withdrawals from the trust bank. Click To Tweet
If you continue to let that atrophy and you’re not bringing people in, meeting face-to-face, sharing meals together, and taking walks, you’re going to find yourself in a critical situation, maybe even a crisis like this, where the trust bank is so low that you find it difficult to delegate those critical decisions when you need to get stuff off your plates so you can focus on another area. That remote could be a casualty. I’m going to sound like an old guy here, but I think there is a tremendous amount of value to being face-to-face with people so that you can build up that trust level with them just for times like this.
I appreciate that insight there. Let’s run through a scenario here. I have two project managers. One project manager has been with me for a period of time. They’re in their 50s. Their salary is $150,000 a year. With bonuses, maybe they get up to $200,000. I have another project manager. They’re in their early 30s. Their salary is more around the $90,000 level with bonuses. Maybe they creep up to the $150,000. I have to ask one of them. I have to choose between one of the two. Other than looking at the number, how do I go through that process of deciding which one I have to let go of?
I would like to think that you have some way of measuring the productivity of those two employees. A lot of it is going to depend on the type of crisis that you’re going through, and which of those it impacts the most. If one of them is in a different location where the economy is robust, and the other one is not, there are going to be some extenuating circumstances. The question is a little bit fraught with peril because one of those people is a protected class and the other is not. You have to be extremely careful from a legal perspective about how you’re making that decision. It shouldn’t drive the decision.
If we think a lot about the difference between performance and potential, what is somebody’s ceiling versus where they are now? If you believe that people perform on a curve, how steep is the curve for person 1 versus person 2, and where do they exist on it right now? Given the nature of the crisis, whose skillset do you need more? If this is a crisis that is going to define whether or not the business survives or not, you may need to go with the veteran employee who has been through a downturn before and knows how to operate, even though his or her ceiling is substantially lower than the ceiling of the younger person.
I hate to give you an it-depends type of answer, but there are a number of different factors. Depending on how severe the crisis is, you need to be optimizing for the survival of the business. If it’s not a survival question, then I’m probably going to opt for the person who has the higher ceiling because that’s more of a fat versus muscle type of decision. Can I rebuild that muscle? Yes, I can, so I’m going to go with someone who’s got a potentially higher ceiling and might be a leader in the organization for a long time. Again, it depends heavily on what skillsets you need to navigate the crisis now.
As you were speaking, I was thinking about how one individual might be a combination of muscle and bone. You have this older person who’s got a relationship with a key client. I just can’t let them go because if I let them go, then that’s a bone decision. Whereas if I let the younger PM go, that might be more of a muscle decision.
Even great managers will run into decisions like that, where somebody owns a key relationship, but you have to hang on to them, even though they’re a jerk. It’s a terrible situation to be in. If you’re reading this, and you’re going through a time of plenty now, and your business is robust and doing great, it’s good to think through what the next crisis might look like. Not in a paranoid way, but, “What are the decisions that I can make now when I have an abundance of resources that would make a dip easier on my business so I’m not having to make these decisions in a time of crisis and make them when things are better? I need to implement better visibility on how productive my PMs are versus each other, so I’ve got a better understanding of what my stable of talent looks like.” Making those kinds of decisions when things are going well can make navigating crisis easier once you get there.
We’ve got to go with The Godfather reference now, and I can’t remember the exact characters. In The Godfather, you had consigliere to the Godfather. The war broke out. The point is this. There’s a peacetime consigliere and a wartime consigliere.
Was it Robert Duvall?
Yes, Robert Duvall. The point being, Michael comes to him and says, “You’re a peacetime consigliere. Now, it’s wartime, and I need you to move you aside.” Let’s say I hit that crisis, and I have maybe my COO or my business development person, and they’re very much a peacetime type of person. I don’t want to cap them. I don’t want to move them out of the business completely, but I need to move them to the side and maybe reassign them for a period of time. How do I handle that conversation? Is that a realistic scenario there at all?
It’s very realistic, and something that you might run into. This is where I feel being completely honest and transparent with people buys you a lot, and being able to tell them, “We’re going to go through a difficult time here. I see qualities in person B that I need to elevate now. These are the things that I appreciate about you. For the time being, I need to have this person come alongside you to help fight this war with me.” This is why cultivating healthy, open communication with folks during times of plenty is important so that when we get to these difficult moments, we’re not trying to suddenly establish a trusting relationship with them so that we can have difficult conversations.Cultivating healthy, open communication with folks during times of plenty is important so that when we get to these difficult moments, we're not trying to suddenly establish a trusting relationship with them so that we can have difficult conversations. Click To Tweet
Being able to tell them, “I really need a complimentary set of skills to yours. I’m going to bring them up alongside you until this crisis abates. I need you to work together with them and teach them the things that you know.” Keep them involved. Don’t sideline them completely. If you have specific projects or pieces of work that you can hand to them at the same time like, “This is what I need you to focus on during this time,” that’s going to help them feel valued long term also.
It’s interesting because when it comes to cutting, a lot of the typical mindset is last in first out. If you were hired six months ago, then you’re probably going to be shown the door right away. It sounds like from what you’re saying, that’s not always the best approach to take.
I agree, it’s not. We’ve all had the experience of hiring someone who is a total crackerjack. The second she walks in the door, she gets the business. She understands how to prioritize. She understands how to get projects done inside of the framework that you’re working in. It’s difficult to let people go. It’s one of the worst parts of management. It’s extremely difficult to let people go with whom you’ve had a relationship for a long time. It is even more difficult than that to do that, knowing you’ve got less experienced employees that you’re keeping instead.
The challenging thing when we think about cuts is this framework of, “I’m cutting a few so I don’t have to cut all.” If I’m having to cut a few at the beginning, I need to do that in such a way with the mind of saving as many jobs as I possibly can. If the less experienced, lower tenured employee gets you there more effectively than the folks that have been around for a while, then a lot of times, that’s a trade-off we have to make. We’ve got to make the trade-off based on who is going to be the best bridge to the next version of the company.
There’s a lot of, “What got you here can’t get you there,” type of thinking in that, which can be really painful. These are people that we know about their families and have been to holiday parties together. I don’t mean to make light of these decisions. They’re gut-wrenching and terrible, and, like I said, the worst part of management. Your decisions now in a crisis are going to impact your future decisions exponentially. Making sure that you’ve got the right people on the bus is critically important.
You used the phrase gut-wrenching, which is something that a lot of leaders go through. There’s a physical, psychological, and emotional toll that comes when a crisis hits. They feel this tremendous burden of putting on a good face to the company. Not necessarily fake, but we are going to have blood, sweat, and tears, but we are going to win. What advice do you have in terms of getting outside help and somehow being able to marshal outside resources to help through a process for someone who’s in leadership?
It’s challenging because if you’re a founder of a business especially, or if you’re a CEO of a business that was founded before you, we let so much of our identity get tied up in our work and in this thing that we have built and we are building that when we suffer and run into challenges, it’s difficult for us to be honest with other people about that because we are taking ourselves down a peg because we’ve anchored so much of our identity to that. If you’re in a time of plenty now, start thinking about unwinding your identity from your from what you do for a living. It’s an important part of what you do, but making that who you are can be extremely painful when things go sideways.
It’s critically important to have people in your life who are outside of the business with whom you can confide about what you’re going through, a significant other, a dear friend, or someone you play tennis with. Having those people in your life with whom you can be honest about what you’re going through is critically important. This goes back to the very beginning of our conversation with the hero complex. You can run into the hero complex not just inside the business but outside of the business. You’re storing all this stress in your body, and it’s going to kill you, maybe not literally, but emotionally and spiritually. It’s going to eat you alive. Having people that you can confide in about going through a difficult time is key.
That’s essential there. Here’s the last question here as we’re summing this up. Let’s say I started my business in 2010. I’ve been in business now for several years, and I’ve built a successful business, but I’ve never really hit a macroeconomic crisis like ’08. I felt pretty good about myself, but maybe it’s because the rising tide has been rising all of the boats, and I’m not quite as good as I think I am. What advice do you have for the CEO who’s going through his or her first major crisis?
Again, it comes down to being willing to confide in and listen to those people around you. I’m not just talking about the folks outside of the business. I’m talking about the ones inside as well, getting their help, analyzing how critical this crisis is, and how much risk there is on the business as a result. In addition to bottling things up and the hero complex, sometimes we just get extremely insular. We’re going through a lot of pain as a result of this crisis. We don’t want to expose ourselves to more pain by having someone say, “CEO, Founder, you need to do this differently.” That’s even more painful to know that decisions that we made or are making might be a factor in this crisis.
You have to orient yourself toward the future of the business, not on the past. We need to be thinking about how we make this thing that we’ve had the pleasure of creating survive to the next greatest version of itself. In order to do that, we have to be open hands about the decisions that we’re making and their validity in the past versus the way that we need to operate now to navigate the crisis. To answer your question, it comes down to being open and honest with the people around you and being willing to let them be open and honest with you about the things that you might need to change in order to navigate the crisis successfully.You have to orient yourself towards the future of the business, not on the past. We must think about how we make this thing that we've had the pleasure of creating survive to the next greatest version of itself. Click To Tweet
Mark, tell us a little bit more about Permanent Equity and the work that you do with businesses.
Permanent Equity is unique. We are technically a private equity firm, but we’re very different from traditional private equity. We tend to partner with businesses that are interested in not getting flipped. We operate 30-year funds. We buy businesses without the intention of selling them, and we typically do that with little to no debt. We are fairly hands-off operators. We like to partner with the current management teams who are already in place and act as confidants and consultants as they run the business. If you’ve got a business that has been successful and you don’t have a great plan to transfer the business over, we would love to talk to you.
Folks who are reading this are construction companies. What type size construction company would you guys say, “This is in my wheelhouse”?
We typically look at businesses that have earnings between $2.5 million and $25 million. It’s a pretty big range, but that gives you an idea of the size that we’re looking at. In terms of the top line of the business, we have a very wide range of that. That’s the earnings band that we tend to look for when we’re looking for these typically family-owned legacy businesses that are looking to transfer for another generation.
How can people get in touch with you, Mark?
I am [email protected]. Hopefully, that’s easy enough to remember.
Mark, thank you so much for coming on again. I appreciate you diving into this idea of how to manage through a crisis. I know folks are going to be able to take some practical takeaways and use that to help them through the ups and downs of their business. I appreciate you joining us on the show.
I’m happy to do it. Thanks for having me back, Eric.
Thank you for reading the episode with Mark Brooks. I hope you enjoyed our discussion on how to navigate through crisis in your business. Feel free to check out Permanent Equity at PermanentEquity.com and learn more about what they do. If you are the CEO or president of your construction company, and you are currently going through a crisis and looking for some outside support in terms of a sounding board to help you navigate through the stormy waters that you’re in, please reach out to me on my website, ConstructionGenius.com.
In my executive coaching practice, I work with the CEOs and presidents of construction companies, helping them to overcome the obstacles and challenges that they face on a daily basis. I’d be happy to have a short chat with you about if or how I can help you and your company. Reach out at ConstructionGenius.com. You’ll see the contact tab, fill in your details, and I will get back to you within 24 hours. Thanks again for reading, and we’ll catch you on the next episode.
- Permanent Equity
- Construction Genius
- [email protected]
About Mark Brooks
Mark Brooks is President and Chief Operating Officer of Permanent Equity, a firm investing for the long-haul in companies that care what happens next. He and his team are responsible for stewarding their portfolio of 13 companies (and growing), 6 of which are in the construction industry. He is passionate about partnering with business owners to build organizations that will last forever.
Permanent Equity utilizes 30-year funds to invest in private companies with no intention of selling, all while rarely using debt.