Monthly Archives: April 2022

The Frozen Hostage Entrepreneur

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Damon has a problem. His staffing company is four years old and growing like crazy. Bottom line profits have doubled year-over-year since he launched the firm and several members of his team have been with him from the very beginning. Sounds like a dream story so far, right? But as I said, Damon has a problem. A key member of his organization, Mason, has become increasingly disruptive. Mason is in a position of leadership and works tirelessly – the business would not be where it is today without him. Unfortunately, the way he treats others is unacceptable. His approach is command and control. He bullies. He yells. And he threatens. Other members of the team go out of their way to avoid dealing with this individual and everyone walks on eggshells when they are forced to interact with him.

Damon isn’t blind to the problem. He has counseled Mason on many occasions. The result is always the same – an apology and a promise to change. But change is either short-lived or never happens at all. Within days he’s back to his old ways. Damon has offered to pay for therapy but is met with a benign sort of resistance. Mason agrees that he will consider professional help but never follows through to begin receiving it.

Recently Damon began thinking about making a change and terminating Mason. He considered all the chaos and hurt feelings caused by this person. But he also recognized that Mason has some unique skills not to mention important client relationships. On the one hand Damon knows that Mason has already caused the departure of several team members over the past 18 months. Yet, he worries that letting Mason go might cause the loss of certain clients. And who would be able to step in and have the domain expertise to function as effectively as does Mason? Damon doesn’t know what to do and as the days and weeks go by, the problems with Mason persist. This is a classic case of The Frozen Hostage.

In effect, Damon is allowing himself to be held hostage by Mason. And he’s frozen into a do-nothing position. Does any of this sound familiar? Many of us undoubtedly have similar situations that exist in our own organizations. We want to try and make things work to everyone’s satisfaction. We all want our “Masons” to turn over a new leaf and start treating others with the respect they deserve – then everyone will be happy. Not one of us wants to take that deep breath and plunge into the icy waters of our “Mason’s” exit. We are convinced it will be messy and painful. So, we procrastinate. And our inaction causes more suffering within our organizations.

I will be the first to concede that dealing with an issue like this is not pleasant. We develop loyalties, especially where we know someone has busted their rear to help us build our business. But eventually we cannot tolerate the behavior any longer and realize that we need to put an end to the madness – especially if our “Mason” isn’t interested in truly modifying his behavior.

The path toward “thawing out” the Frozen Hostage is straightforward. We need a plan. It starts with determining whether we can abide our “Mason” until we find a replacement for him. In either case, we must identify the process for finding the replacement. The plan includes developing a clear understanding of Mason’s role and accountabilities and looking for vulnerabilities. Then we tackle the vulnerabilities including technical skills and processes, as well as internal and external relationships. What is the timetable for implementing this plan? What is going to be announced and when? Who is going to cover the different roles and accountabilities on an interim basis after Mason departs? If we are lucky enough to surreptitiously hire his replacement, how are we going to ensure that our new team member hits the ground running without stumbling?

When we are the Frozen Hostage, we aren’t inclined to create this plan of attack. We just keep hoping that things get better, and we don’t have to take drastic action . . . except it never seems to work out that way. By forcing ourselves into the planning mode we begin the thawing process.

As leaders, becoming a Frozen Hostage causes serious morale problems within our organizations. Knowing that we eventually must take an unpleasant action, a logical planning process for replacing a key team member can make the path a bit smoother.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

The “Do You Know Who I Am?” Entrepreneur

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The actor, Alec Baldwin, purportedly was riding his bike the wrong way near Union Square in New York and was stopped by police officers. After uttering some profanities, he produced this gem, “Don’t you know who I am?” We’ve all heard this before. Someone isn’t getting his or her way and so they play the “Don’t you know who I am” card. This statement is reflective of the ultimate entitlement mentality. Entrepreneurs are often on the road to success – sometimes in a big way. This success may lead to wealth, fame, and power. What it doesn’t produce is entitlement.

Let’s define entitlement a bit more clearly. There are certain circumstances where entitlement is perfectly legitimate. For example, suppose we pay through the nose to fly first class on an airline. There are perks that inure to our benefit when we pay extra for them. Similarly, if we pay a premium for a luxury automobile, there will likely be some special treatment that we receive at the dealership when we arrive for service. Again, we are entitled to this special treatment because we paid for it.

Now, contrast this with the guy who always parks his luxury car in a “no parking” zone. Or the woman in an expensive mink coat who cuts in line at the grocery store or the theater. Or in 2009 when a young woman ordered a hamburger in a fast-food restaurant and upon asking her name for the order, she replied to the server, “You don’t recognize me? I’m Miley Cyrus!” I don’t know about you, but I cringe when I witness this kind of behavior. This type of entitlement mentality is not the legitimate kind.

As leaders we’re role models whether we like it or not. Our team members are watching every move we make. If we happen to be in the public eye, there are many more eyeballs and ears that are taking notice of everything we are doing and saying. Oh, and they are judging us AND our organization at the same time. It’s one thing to have a great deal of self-confidence and assertiveness – this is entirely necessary to succeed in today’s rough and tumble world of commerce. But the line is crossed when that self-confidence and assertiveness becomes boorish, arrogant, and aggressive.

The whole issue is one of self-esteem. The way we see ourselves comes from within and not from the outer. It’s probably no secret that people who are shoving their fame, fortune, or power in the face of others, are acting from a feeling of low self-esteem. Sometimes the resulting sense of misplaced entitlement leads to destructive actions such as heaving drinking, drug use, gambling, extramarital affairs, and other sorts of outrageous behaviors.

There’s absolutely nothing wrong with driving a luxury automobile, wearing expensive jewelry, and clothing, or being on a magazine cover. It’s how we feel about ourselves and how we treat others that matters most. Country singer Dolly Parton is one of the nicest and most humble mega-stars on the planet. Soccer star David Beckham is super polite, and actress Jennifer Lawrence is known for being very down-to-earth and easy to work with. There’s no doubt that all three are members of the rich and famous class. And yet they aren’t overcompensating for their insecurities (and they may not have any) by displaying an attitude of entitlement. They, and many others like them are gracious and put others first.

Our station in life is not a rung on a ladder. Instead, it’s simply a steppingstone that is part of a long and winding journey. Each of us is on a similar journey. When we offer a helping hand to others our lives are enriched.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

The Work-Life Balance Entrepreneur

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We’ve all heard the constant drumbeat over the last several years about work-life balance. It’s the notion that we must find a healthy equilibrium between our work and everything else that is occurring outside of work. It’s an admirable and noble goal and certainly achievable . . . to a point. I don’t mean to burst the proverbial bubble, but there are situations where it just isn’t going to happen. Let me explain.

When I joined my company in 1975, we were a fledgling organization founded just five years earlier by an entrepreneur’s entrepreneur. We were scrapping and clawing our way to success. The competition was fierce, and we were in a “take no prisoners” industry. Back then you did whatever it took to win and keep business. I worked 100+ hours a week. I remember arriving at the office at 3:00 AM to get a head start on the day and would routinely see one of my partners leaving at the same time to go home and get a few hours of sleep before tackling it again later that morning. I still recall being at the office on New Year’s Eve at 11:30 PM working on an important proposal that had to be in the hands of a prospective client at 8:00 AM on January 2. We didn’t complain; we didn’t whine; we weren’t even aware of the term “work-life balance.” When our children were born, the juggling act became even more acute. I’m proud to say that I never missed any of my daughters’ school or sporting events though I know there were mad dashes at times to be present.

What would have happened if we had not worked the crazy hours and made the sacrifices along the way? There’s no way to know for sure, but I suspect that we would have missed opportunities and our company would not have grown and succeeded the way it has. Early on, I skipped vacations. I loved what I was doing, and my wife was immersed in her career. Did I feel like we were deprived of a more satisfying life at that point? No. I had a long-term view that if we invested heavily at the beginning of our lives, we eventually would be able to enjoy the fruits of our labor later in life. And this was not about “paying my dues” as a young whippersnapper. I never saw it as a climb up the corporate ladder. It was 100% about building a profitable business that was sustainable for the long haul.

Which brings us to the environment today. I’m thrilled that members of our team do not have to work 100+ hours a week. I’m ecstatic that members of our team can spend more time with their families and friends and have healthy interests outside of the business. But I can guarantee that if we were starting from scratch, someone would find it necessary to do exactly what we were doing in the 1970s and 1980s, and that is work long hours with a singular focus on long-term success.   

The bottom line is that in start-up situations, it’s going to be very difficult to experience today’s definition of “work-life balance.” If you are an entrepreneur and thinking about starting a business, I encourage you to not do so if you are unwilling or unable to make significant sacrifices to establish your enterprise successfully in the marketplace. You would be better off working for a company where someone else has already made those sacrifices that have led to a high level of achievement. Fortunately, my story is a happy one. I have been able to integrate multiple facets of work and personal interests into a wonderful and fulfilling life. I don’t compartmentalize work, philanthropy, family, friends, civic, etc. Everything blends together. But it would not have been possible had I (and others in the organization) not invested my time and talent in an extremely focused manner many years ago.

Work-life balance is possible in the right situation. For an entrepreneur desiring to launch a new endeavor there must be a recognition that there will be large sacrifices regardless of how smart one is able to function.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

The Warren Buffet-Listening Entrepreneur

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We all know that life is full of risks. Some are more serious than others. I hold the view that I’d rather “manage” risk than “take” risk. I’ve said before that taking a risk seems a bit arbitrary. “Gee, I think I’ll try to run across this eight-lane expressway right now!” Sounds silly, right? But in a way, that’s what taking a risk seems like to me. While it may not be as spontaneous as this overdramatized example, taking a risk feels like gambling. Meanwhile, managing a risk is calculated. It is studied and planned. Risk mitigation strategies are developed. If I’m to run across the eight-lane expressway, I’m going to figure out every possible way to do so as safely as possible. That’s risk management.

One very important element of risk management is a concept that was espoused by one of the most revered investors of all time, Benjamin Graham (1894 – 1976). And this concept is practiced today by his acolyte, Warren Buffet. The concept is that of margin of safety. Entrepreneurs absolutely must understand margin of safety – but every member of society would benefit from practicing it as well. Graham and Buffet narrowly defined margin of safety as the difference between the intrinsic value of a stock and its market price. I look at margin of safety on a broader basis and define it as the difference between success and failure. In some cases, this difference can be razor thin, and in others, it can be as wide as the Pacific Ocean. The key is to take the steps necessary to push the margin as wide as possible.

In our businesses, organizations, and lives in general, we have an opportunity to become expert at creating margins of safety. One of our companies purchases apartment properties. Because we tend to hold these assets for five to seven years or longer, there can be a great deal of uncertainty about the future. What can we do to stack the deck in our favor and create a healthy margin of safety when we’re looking so far down the road? Obviously, we make year-by-year financial projections that are based upon a set of assumptions. Those assumptions include rent levels, rent increases, operating expense levels, expense increases, occupancy percentages, rates of return on which a sale price can be calculated and various aspects surrounding debt financing. The Excel spreadsheet is quite comprehensive with all these assumptions and projections – but how do we overlay a margin of safety on the process?

With one of our properties, we obtained a certified appraisal as a part of the due diligence process that indicated a value $3 million higher than we paid for the property. That’s a margin of safety right there. Perhaps we budgeted an initial increase in rents of $110 after making several physical improvements but were able to achieve $200. Our assumptions might have anticipated a stabilized economic occupancy of 91%; but we were able to operate at 93%. Operating expenses may have been right on the money, but rent increases averaged 3.25% each year rather than the 3% that we had forecasted. And remember our baseline started $90 higher than the $110 initial increase that was projected. In summary, we pushed several levers to create several different margins of safety that when combined, produced a much better bottom line throughout the holding period than expected. In so doing, we are better protected from market factors that could degrade the future value of our asset.

The principal takeaway here is to find as many margins of safety as possible. If we make decisions based upon 100% optimal results, there’s no room for error. Then a blip in the market or a miss with operations could mean failure. I have learned the hard way that if there’s no way to create sufficient margins of safety, the risk I am contemplating may be too difficult to manage. So, I move on to something else.

Developing the concept of margin of safety is an exercise in positive thinking. We are looking for ways to increase the probability for success – and that’s always a good thing.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.