CEO: Your business hitting puberty? Here are some hints to see your way through

Austin, Texas
Who’s S3?

Have you had a child go through adolescence? At nine years old, my daughter is approaching puberty and, not surprisingly, my wife and I are learning about what to expect.

You can guess where I’m headed.

The more I read, the more I see not only what my daughter will go through, but what S3 is going through right now. According to “those who know”, adolescent children start finding their individuality at 9-13 years old. They are no longer liking what you like and acting as you act; they are unconsciously pulling away, trying to find themselves.

You have no longer hung the moon for your company.

Mark and I, founder-executives, find our adolescent company more challenging than ever, sometimes sulky, other times shining with bright energy. But always unpredictable. We are nagging more. We are constantly faced with employee conflict and confrontations which we mistakenly believe as distractions from our real jobs.

Has your little startup grown into a pre-adolescent? Here are some signs:

Your original inner circle of advisors is unhappy

Your big decisions are resisted

You spend more time on employee issues than client issues

Your office is developing politics

And the final blow came to us at our last S3 company meeting like a 2×4 to the face. No longer beholden to one or two big clients, the only way S3 could fail is if we failed each other.

Relax. Apparently all companies at this stage are faced with the same challenges. The question you must ask yourself is if you plan to see them through or give up and either sell out or remain small.

But if you decide to see your company’s way through to adulthood, there are a few things you can do. And don’t wait as long as S3 did to examine them. And in case you’re wondering, we’ve decided to see mighty S3 through to senior citizenship.

Five hints for handling your company’s adolescence:

1. Evolve your inner circle of advisors as necessary (yes, you need the help)
2. Examine your operations and business model. Are you concentrating your focus and money on your differentiated value?
3. Check the balance of your management team. You need a father and a mother
4. Go to lunch with your employees one-on-one and in small groups
5. Stop making operational decisions–now!

The last one is critical. Yes, you may have exited the day-to-day delivery, but this is different. You must exit the direct decision making. I’m not saying that you do not impact them but rather do it behind the scenes through your inner circle as a coach.

In short, parents and executives of adolescent children and companies must drudge through this stage to see their offspring grow into fine adults. It’s no wonder why many companies stay in pre-adolescence. It’s easy, fun, and unlike a human, there’s nothing physical to make you confront the change.

But if you know what to expect and decide to persevere, some day your child and your business will tell you, “thanks for seeing me through that tough time in my life.”

**Additional reading

On company adolescence: Doug Tatem’s No Man’s Land: What to Do When Your Company Is Too Big to Be Small but Too Small to Be Big

And child adolescence: Dr. Carl Pickhardt’s The Connected Father

About S3
Founded in 2002, S3 solves business crisis problems with custom back office solutions in the financial services, healthcare, and IT outsourcer verticals.

CEO: Man versus Machine–how to choose?

Austin, Texas
Who’s S3?

(I just love this image)

Scoop! The Blockbusters near my house is closing. What in the world could possibly be responsible for a market cap nose dive of nearly $6 billion?

Well, of course you know: you don’t need a human to pick out and pay for a movie rental.

Nor do you need a human to take your credit card payment at a tollbooth. And when you need cash to pay the babysitter, you can go to an ATM after the movie. And if you do your own market research and decide to buy 10 shares of Google, you no longer have to call a broker–you can buy the shares online. Books? www.amazon.com.

But hold on a minute. Retail banks discovered that their customers need people to take deposits and answer questions. People who have problems with their PCs, credit cards, flights, or mobile phone service would rather talk to a person than an automated voice response system.

Savvy companies like Southwest Airlines understand the value of having real people answer the support line quickly. They also employ up to 15 times more people to coordinate flights than their competitors. What have they done? Southwest has determined that these non-automated, human resource-heavy activities offer differentiated value. And with almost every industry metric, they’re demolishing their competitors.

So enough about Southwest. Let’s talk about you–here are some questions you, as the CEO, need to ask yourself:

1. What is the differentiated value (“DV’) of my company? Why do our clients buy from us?
2. Which, if any, parts of my business can be automated without jeopardizing my DV?
3. If you cannot automate any of your DV, can you keep making money as you get more business?
4. Got no DV? Can you get some by automating or by un-automating?

Your task is to determine when should you automate and when should you “invest” in the inefficiency of a human. But be prepared for a bumpy road. The IT research houses and your CFO and CIO will look to automate as much as possible and hire as little as possible. But for those “automatable” situations which are complex or emotionally charged, like when your phone is disconnected or you need to deposit a $5,000 check, or weather hits the airport and the gates change, you need a person to deal with the situation.

It’s up to you–the CEO–to figure this out and persuade your over eager CIO and penny-wise CFO to do something completely counter-intuitive.

Use people instead of computers.

Want to invest in S3? Save us both some time and read before you call

Austin, Texas
Who’s S3?

edit: Well, they’re still calling. Thought I’d recycle this and leave it on the top of the website for a while.

S3 has taken no investment capital in its 7+ years of doing business and I finally thought about why we haven’t. After all, investment capital ostensibly helps you grow fast, provides great advice/rolodex and liquidity to the founders and employees, right?

I’m sure that’s true under the best of situations, which according to VCs only happens 1 out of every 10 or so tries. So regardless of how great you think your company is, the would-be investor believes the odds are stacked against you and that affects the terms under which the company ownership gets the $. Now, S3 wouldn’t be taking VC money but if you’re starting up, you might.

And while private equity is less the worried father, there are still risks for them and us were we to take money. So back to S3.

Given the hit the status quo has taken, it’s time for VCs and private equity companies to get creative. Let me assert that a different way: in order for you to invest in S3, you are going to have to break with the status quo. Otherwise, we’ll just continue to grow with success capital, something that’s worked out pretty well so far.

Here you go, hang on tight:

Preference on shares
Sorry, none for you. Your shares will be on equal grounds to the founders and employees. Yes, your capital is worth a lot of value. But we’ve worked our butts off around here and you haven’t. If anything, your shares should be subordinate to our employees’. And if you get all pissy about it, they will be…

Board meetings
Once a year, if you’re lucky, and it will be at some nice off-site venue that you pay for. Having been the powerpoint-assembler for Board meetings in my past life, the time investment does not match the value.

5 year forecast
Can you guess? Again, the mythical model is just that. If you want to invest in S3 you’ll have to invest in its actual historical success and its people. I’ll not be beholden to a model and have it influence the company’s tactics.

Controlled growth
Wow. This is a really big one. We have statistical models for the headcount and infrastructure needed to grow revenue. If we can’t get the necessary monthly recurring fees from it, we don’t do it. If you force us to adhere to an obsolete, arbitrary financial model, we’re placing our clients at risk of delayed or poor delivery.

We’ve had all this growth without a dedicated sales person (note we have a world-class relationship person, though). Think about it: that means all our growth has been referral, which means we do what we say and provide great service.

If you’re huffing and puffing about this, I completely understand. And it will probably be a while before we think about selling equity. But if you have the guts…

(512) 450-6720

About S3
Founded in 2002, S3 solves business crisis problems with custom back office solutions in the financial services, healthcare, and IT outsourcer verticals.

Startup CEO: How to know when you’re big enough to advertise

Austin, Texas
Who’s S3?

S3's first ad in October's Trader's Magazine

At S3, we have fairly firm ideas on what and when to advertise. Going on 7 years of brand building, we’re now at the point of brand defending.

Just so you know where our heads are, here are our definitions of both:

Brand Building
You are a new player in the market and most of your target market has not heard of you. Simple test: at trade shows when you’re mingling with prospects, what percent of them knows your company and its market position? While there’s no set percentage, you’ll know when you have it. The topic of this article assumes your brand is generally perceived as good, by the way.

Brand Defense
Your products or solutions have been in the market for some time–probably 1-2 years. You were able to sell your stuff because it was better, cheaper, or an option to a poor vendor. But now the competition has caught up and have a product that’s as good or better than yours and cheaper. And your service may or may not be perceived as bad by your clients (hint: find out).

Getting your logo and people out in the market frequently tells your client base that you’re still around and, depending on how you put your face out there, still doing well. Simply showing up at their offices and buying them lunch or dinner is enormously valuable to your company’s perception.

What we’re really talking about is a multi-pronged effort to retain your client base, which is something S3 is thinking through now. There will be a post on it in a year or so, along with our advertising strategy, if we can assess how well each worked.

Advertising is just one of the tools you should strongly consider–but only once your company’s brand and market position are well known.

About S3
Founded in 2002, S3 solves business crisis problems with custom back office solutions in the financial services, healthcare, and IT outsourcer verticals.

CEO: Take a lesson from Obama’s Nobel: how “forward promotions” can be an important tool in your company’s success

Austin, Texas
Who is S3?

The Obama Nobel announcement surprised a lot of people, including the man himself. Many will say he hasn’t earned it, but that’s missing the point; the committee believes he will earn it.

I completely understand where the committee is coming from–sometimes you want to place the burden of success on people before they achieve it. In your company, there are those people whose potential has not been realized for various reasons–maybe no one’s ever “believed” in them before.

At S3 we watch our people very closely for those who want to move up to a leadership position but you have to watch out for the suck-ups. But sometimes you, as the CEO, must make the move for them.

“Forward promotion” is an interesting tool you should use when the time is right. You see that potential, you have the need, and you go for it. Take the chance. Promote that person and see them puff up with pride and possibility.

You’ll have to monitor the situation closely and enlist the help of the talkers in your company, but it’s never failed at S3.

So, think about rewarding an employee for what they’re about to do rather than what they have done. It’s the ultimate gesture of your confidence in them. And if you’ve chosen wisely, the loyalty and good work you’ll get will make the extra effort worth the risk.

About S3
Founded in 2002, S3 solves business crisis problems with custom back office solutions in the financial services, healthcare, and IT outsourcer verticals.

Want to Invest in S3? Better read this before you call.

Austin, Texas
Who’s S3?

edit: Well, they’re still calling. Thought I’d recycle this and leave it on the top of the website for a while.

S3 has taken no investment capital in its 7+ years of doing business and I finally thought about why we haven’t. After all, investment capital ostensibly helps you grow fast, provides great advice/rolodex and liquidity to the founders and employees, right?

I’m sure that’s true under the best of situations, which according to VCs only happens 1 out of every 10 or so tries. So regardless of how great you think your company is, the would-be investor believes the odds are stacked against you and that affects the terms under which the company ownership gets the $. Now, S3 wouldn’t be taking VC money but if you’re starting up, you might.

And while private equity is less the worried father, there are still risks for them and us were we to take money. So back to S3.

Given the hit the status quo has taken, it’s time for VCs and private equity companies to get creative. Let me assert that a different way: in order for you to invest in S3, you are going to have to break with the status quo. Otherwise, we’ll just continue to grow with success capital, something that’s worked out pretty well so far.

Here you go, hang on tight:

Preference on shares
Sorry, none for you. Your shares will be on equal grounds to the founders and employees. Yes, your capital is worth a lot of value. But we’ve worked our butts off around here and you haven’t. If anything, your shares should be subordinate to our employees’. And if you get all pissy about it, they will be…

Board meetings
Once a year, if you’re lucky, and it will be at some nice off-site venue that you pay for. Having been the powerpoint-assembler for Board meetings in my past life, the time investment does not match the value.

5 year forecast
Can you guess? Again, the mythical model is just that. If you want to invest in S3 you’ll have to invest in its actual historical success and its people. I’ll not be beholden to a model and have it influence the company’s tactics.

Controlled growth
Wow. This is a really big one. We have statistical models for the headcount and infrastructure needed to grow revenue. If we can’t get the necessary monthly recurring fees from it, we don’t do it. If you force us to adhere to an obsolete, arbitrary financial model, we’re placing our clients at risk of delayed or poor delivery.

We’ve had all this growth without a dedicated sales person (note we have a world-class relationship person, though). Think about it: that means all our growth has been referral, which means we do what we say and provide great service.

If you’re huffing and puffing about this, I completely understand. And it will probably be a while before we sell equity. But if you have the guts…

(512) 450-6720

About S3
Founded in 2002, S3 solves business crisis problems with custom back office solutions in the financial services, healthcare, and IT outsourcer verticals.

Startup CEO: Shy and need to be extraverted? A few tips from the geeks at S3

Austin, Texas
Who’s S3?

edit: is it “extra” or “extro”-vert? I chose the former because it was “extra” before Jung popularized “extro”. Call me sentimental. In truth, I thought “extra” was more contemporary and made more sense. You say, “extraterrestrial” and “extraordinary”, right? “Extroordinary” looks funny. And I like to see language evolve or at least put right, you see.

Does it surprise you that people think you’re standoffish? Do your employees think that you’re hard to talk to or even a little scary?

I’m with you–on Myers Briggs, my introverted score is 90%. When I’m reviewed by employees they say that I’m unapproachable and a little frightening. The best one? “You’re like the stern father we don’t want to disappoint.”

Make no mistake–you must be social as a CEO–your people, both extra- and introverted, will key off your moods and how you choose to interact with them. You surely don’t want them to think you’re dissatisfied with them or snubbing them, unless you are. Then of course, being you, it’s almost impossible to hide.

If you read Del Jones’ USAToday interesting article on introverted CEOs you’ll feel a bit better knowing that you, too, can succeed as a shy CEO.

And yet, if you’re just starting out as a CEO or on the social circuit, you may need a few more tips to get you comfortable. I’ve observed the introverts at S3 who have stepped out of their comfort zone and thought a lot about my experiences and how I learned to deal with it.

At Work
1. Recharge. Great advice from one of the CEOs in Del’s article. Go for a run or ride alone. I have movie night late on Saturdays (more evidence of my great social life) all alone. It’s also important to let your spouse or roommate know that you really need this down time, so forward them this article to read. As with the blackberry-in-the-toilet article, maybe it will provide them with an outside perspective on how much of an “artist” you are.

2. Get out of the office! It’s so tempting to stay in the office, isn’t it? Most of the leadership team at S3 are quite introverted and don’t talk enough. And because we needed more space, we knocked down a few walls over the weekend. This week, the company leadership will move out in the open to talk and shoot spitballs at each other.

Rod Taylor. How can you NOT talk to this guy?

At Social Gatherings
1. Imagine they’re old friends. Briefly picture the person you’re meeting as a good friend you haven’t seen for years. This sounds hokey but really works. The person notices your more relaxed body language and warms up to you, making it easier to keep talking.

2. Bring an Extravert. Ok, I know it’s pathetic and a cop out. But having a Rod Taylor (don’t tell me you don’t know who he is) with you at the big events is the only way I’ll get around.

Of course, you don’t have to fake it. But if your co-workers know you’re shy and see you making an effort, they’ll admire you for it. As for the big social gatherings when I don’t have an extravert to depend on?

I stay home and watch a movie then admit my failings. To myself, I mean.

CEO: Can your employees handle the truth? Why transparency the key to preventing a bailout

Austin, Texas
Who’s S3?

Yes, they can handle the truth

Throughout the S3 office, employees see 3 charts:
1) Monthly recurring revenue per employee

2) Last year’s monthly recurring revenue compared to this year’s. We calculate the monthly bonus pool from the difference

3) “Where revenue goes”, which shows the cost components and profit from our monthly income statement

Every employee knows who’s on S3’s capital chart, what the pipeline looks like, our strategy (or lack of one) and whether we’ll sell equity or not. They know our valuation and the implied value of their shares.

In the past, we were less forthcoming with our “sensitive” information. We just didn’t see the need. And we usually waited too long to tell bad news.

Man, were we wrong.

Since we started sharing everything–including our worries, bad news, and questions–a few things have happened:

1) Everyone feels more responsible for the company’s future–management isn’t shouldering the entire burden

2) We trust each other more

3) More perspectives and solutions are available for problem solving

The last is as important as the first two; not only are we getting great ideas, but those employees who want to step up as leaders or future entrepreneurs are getting on the job training.

Why is “management” typically opaque?
It’s understandable if you’re a public company and are forbidden from sharing insider information. But private companies have no excuse. If you’re withholding the interesting and bad information from your people, at best you’re generating distracting rumors. At worst, you’re stoking the coals for the fire sale.

At S3, employees are getting used to asking questions they thought were taboo. The way we see it, if we talk about something that makes an employee too nervous, then he or she should start looking for another job.

Another nice side effect is how it helps families. When spouses or parents ask questions, they can get facts; not speculation.

Your company exists only because of your employees. And if you want to sustain growth you’ll have to trust them.

Your company depends on it.

About S3
Founded in 2002, S3 provides custom back office solutions for business crises in the financial services, healthcare, and IT outsourcer verticals.

Small biz CEO: Interviewing transitioning military? 3 tips to make a good hire (and avoid the slackers, Yes Men, & screamers)

Austin, Texas
Who’s S3?

edit
* If you’re a service member reading this, great job. Tells me you’re doing research on how to fit in with the civilian world. But if you’re interviewing at a small business, know what you’re getting yourself into. Take your time finding the right fit for you. Finally, you can always call me for advice: 512 450-6720.

* If you’re the hiring authority, you owe it to the service member to talk to her. If it’s not going to be a fit, tell her why and direct her to a different kind of company, using your network.

===========
S3 was started by 2 former Marines and 2 young smart guys. As described in my first post, we were diverse, complementary, and somewhat cartoonish. I am one of the former Marines, having left my beloved Marine Corps in 1994.

Since then, I’ve observed a lot of former military in the knowledge work place and learned to quickly recognize the ones to depend on and the ones to avoid. If you’re a small business owner or HR person, you probably want workers who fit this profile:

* self-starters; take the initiative
* great communicators
* can work well under pressure
* great follow-through
* aren’t Yes Men; will tell you the unvarnished truth then help with a solution
* fit in immediately; you don’t have time to ferret out a 9-to-5′er

Sounds like the stereotypical Marine or other service member, doesn’t it? But just like every other big enterprise, the military breeds slackers, Yes Men, and screamers. Here are 3 quick ways to identify the ones who may not work out in the unique small business culture:

She calls you “sir”
Holy cow, what a ridiculous, horrible mistake. This former Marine doesn’t realize that most civilians are slightly frightened of service members, especially Marines. They, according to the stereotype, savor the opportunity to kill people. And even if you’re not scared, it’s an alien world to you. Calling you “sir” fuels this fear or discomfort because it just doesn’t happen in the civilian world.

To sum this one, a candidate who calls you “sir” may be a Yes Man or at least will require some significant indoctrination–time you may not have as a start up or small business.

Uses Military Jargon
Going to “the head”, looking for “pogie bait”, “fire for effect”. This candidate could be trying to impress you with his service, which is a major red flag. Slacker in disguise, beware.

RHIP (rank hath its privileges)
Acronyms are a separate subject and acro-spouters are to be avoided at all costs. But that’s not specific to military; rank, is. The military officer or non-comm is used to having lower ranks carry his bags, not question his orders, and generally defer to him. I was always uncomfortable with this as an USMC officer and I think that endeared my men to me (occasionally I fall into “Captain Holt” though, and give orders, which embarrasses me). How to spot this? You put him through the same test you do any candidate: how does the he treat your receptionist? The server at the restaurant with you? Your other employees? Does he insist on taking his coffee cup back to the break room?

This imperious character can be bred from backgrounds other than the military. Just be aware that this is usually more of a problem for the service member.

To sum, former service members can make fantastic employees–far better than your average civilian. Just make sure they’ll work in a small business environment before you…pull the trigger (couldn’t resist).

Startup CEO: How to spot the “Yes Man” before he bankrupts your small business

Austin, Texas
Who’s S3?

Hooray! An opportunity to relate a military anecdote to the start up world. Be patient, then thankful I don’t remember Sun Tzu all that well.

As a Marine Corps officer at 29 Palms, California, we platoon commanders were given the opportunity to “call in” F18s with live bombs–direct the lead jet where to drop its bomb then, within half a second or so, call in a correction for the second jet, who’s following just a second or so behind the lead. As the jets were on their way to the target area, we lieutenants had to give them a 9-line brief. It’s a simple form to fill out which includes distance to target from an identifiable point, elevation, where friendlies are located, etc.

My fellow platoon commander comes up to me a few minutes after I had completed mine and gives me the, “hey bud, help me out, here.” Now, 9-line briefs are something we learned in school. They are incredibly straight forward–they must be when bullets are flying around you. I declined to help him, the fair-haired Yes Man favorite of the company commander, for the first time.

Well, he somehow got the brief done (probably asked one of his Marines) although he screwed up his adjustment for the second jet. The pilot tersely declined to accept the Yes Man’s correction and release his 500 pounder on top of us. Later in Somalia, LT. Man, Y. tried to lead his platoon on foot across an open field, chasing down some Somalis who had taken cover after firing some pot shots at them. Again, a smart Marine wisely told the rest of the platoon to hold fast.

I quickly became an expert Yes Man spotter, something which has proved useful as S3’s CEO.

The Yes Man hoards bad news and mooches off others to do his work. If enchanted by the Yes Man, you’re liable to make some decisions which can demoralize your people and/or lose business. You may end up firing the person who refused to “carry” the Yes Man, letting a process problem continue, or incorrectly dealing with a contract negotiation or dispute–all the while promoting him/her and letting the cancer spread.

You surely know that they’re around. But just in case you’re not the perceptive type, here are some pointers on how to spot them:

1) They never complain; everything’s always great
2) They can artfully trash other employees
3) You find out bad news through other sources

The consequences of not spotting a Yes Man won’t get a bomb dropped on you in the business world, but may get you dumped on in other, bankrupting ways. Learn to spot them and be thankful you can fire them, unlike the Marine or soldier or sailor who just gets pushed from unit to unit.