The Mistake-Admitting Entrepreneur

Posted on January 24, 2021 by anentrepreneurswords

Crows are remarkably intelligent and can live 20 years. They typically have a wingspan of more than three feet and weigh nearly three pounds. A crow can fly up to 60 miles per hour and have been found as high as 14,000 feet in mountain ranges. Being smart, fast, and able to fly to great heights make them particularly hard to catch. A few years ago I had to catch one so I could eat it . . . metaphorically speaking of course.

To be a successful entrepreneur we must have an acquired taste for crow. We have all heard the saying “to eat crow” which connotes humiliation and having to admit the making of a mistake. Sometimes our ego gets in the way and we do everything we can to avoid admitting that we made a mistake. We may point the finger at others. Or we may try and cover up the mistake hoping that its results will somehow vanish into thin air. I can tell you that all these tendencies are mistakes.

One of our companies is involved in acquiring apartment properties across the country. We sold two such assets within a much shorter holding period than we had initially projected because of an opportunity to generate substantial profits. Members of our team prepared a detailed spreadsheet that showed how the sale proceeds would be distributed. These were large and complicated transactions with several tranches of equity provided by different investors. I was pleased to call two such investors to deliver the good news that they would be receiving a significant multiple of their original investment. Needless to say, they were thrilled.

Within days, I received a call from my partner who oversees our apartment acquisition business unit. Apparently, there was a bust in the calculations and these two investors would be receiving less than what I had told them. They were still receiving a substantial gain on the sale, but not quite as much as the expectation I had set. The mistake was honest and unfortunate, but it still had to be acknowledged. Thus, I went about the task of eating crow.

I called both investors and said the following, “I’m sorry to tell you that the distribution figure I provided the other day was erroneous. We made a mistake in calculating the sale proceeds and your new amount is $X. Happily your profit is still much greater than we projected when you made your investment three-and-a-half years ago. I wanted to get back to you as soon as I learned of the error and I hope that you will still be interested in looking at future investments with us.”

Because we are a team, I did not point a finger at the person who was responsible for the calculation. Instead, I said that “we” made a mistake. I did not make up an excuse for what had happened. Simple but painful. The result was an expression of understanding on the part of both investors. I am sure they were disappointed but there were no angry words and in both cases an indication of interest in looking at the next deal.

Relationships are built on trust and can be strengthened in situations where things do not go as planned. But this happens only when honesty and transparency are the top priority.

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.

Bad News Bears

Posted on January 5, 2020 by anentrepreneurswords

Uh-oh. Jack just learned that he did not win a contract that was supposedly all but certain. He was counting on this deal to make his quota and had been bragging to the vice-president of sales and his co-workers that it was in the bag. What’s more troubling is the fact that he’s been under the gun by upper management over the past few months to improve his production. Now what?

Jack has to deliver the bad news. The first thought running through his head is that he’s going to be fired on the spot. He’s deep in debt and has a wife and two small kids at home. What does he do? Unfortunately, Jack chooses to do what so often happens in situations like this. He fudges the truth. He tells his boss that he hasn’t yet “heard the final word” from the client. Jack holds onto a thread of hope that he might be able to salvage the deal.

It’s obvious that delivering bad news is never fun. It actually starts with an organization’s culture. What is the reaction to bad news by the leadership? Is there screaming, yelling and threats? How about chaos and recriminations? If so, this sets the tone for anyone on the wrong side of having to report unfavorable results. It’s human nature to try and avoid painful encounters of this sort. Thus, some people may have a tendency to stretch the truth, fudge the facts or outright lie about the situation, rather than endure the wrath of the boss.

In a healthy organization, delivering bad news is just another routine task to be performed. The enlightened leader will encourage team members to openly talk about what isn’t working including setbacks that have recently occurred or are anticipated. He or she will work with the team to understand what went wrong and how to avoid a similar result in the future. There’s no negative emotion or drama associated with this analysis. In so doing, team members feel safe in bringing news of any sort – good or bad.

A leader who operates in a fair and even-handed manner is entitled to expect full and total integrity from the team. The team member in a healthy organization who fudges the facts like Jack did should be dealt with in a severe manner. Here’s the calculus. I won’t blow up and make you feel lower than whale poop, and you owe me complete transparency. It’s as simple as that.

If you are part of an organization that struggles with bad news, first look inward and remember that it’s a two-way street. If the organization is unwilling to react in a calm and measured way, then it cannot expect team members to want to deliver bad tidings.

There’s another element to delivering bad news. It may be that the leader does not have an angry tantrum at all. This individual may always be very upbeat and optimistic. But members of his or her team may still not want to tell it like it is. Why? Because they don’t want to disappoint him. In many situations feeling like one has let down a co-worker or a leader is a powerful motive to duck or delay the inevitable. It’s circumstances like this where the leader must take care not to send any signals that he/she may be disappointed. In fact, this leader should go out of his way to encourage members of his team not to equate bad news with a disappointed boss.

One way to solve this dilemma is to embrace failure as simply a step in a process. A forward-thinking entrepreneur will model this attitude by sharing his or her failures with the team. Being vulnerable in this manner may encourage others to be more comfortable doing the same without fear of disappointing the leader.

Let’s replay Jack’s scenario with a different twist. Jack learns that he did not win the contract. He immediately goes to his boss and explains the facts of the situation. His boss says, “Jack, this reminds me of a situation a few years ago where I was positive I was going to win the brass ring only to be left holding the bag. But I scrambled together a radical new approach and took a long-shot by asking to see the client one last time. Believe it or not he changed his mind and I won the deal after all. You might try the same approach.” Maybe Jack went on to win the deal and maybe not. Regardless, there was no hesitation when it came time to deliver the bad news initially.

Delivering bad news can be done in a matter-of-fact fashion if an organization’s culture encourages it. If not, we can expect that people will take extreme measures to avoid this unpleasant task.

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 Transparent Entrepreneur

Posted on December 1, 2019 by anentrepreneurswords

There’s a priceless element to an entrepreneur’s success when it comes to his or her customers, employees and investors. This element can be broken. It can be elusive. And it can be very difficult to regain when lost. Of course, I’m talking about “trust.” But this isn’t so much a blog about trust as it is one of the foundational components to building trust. Let’s explore the concept of transparency.

Transparency is a word that is used a lot these days – sometimes it becomes a bit trite as well as overused. Don’t you just love print advertising and television commercials that implore us to “trust” the company peddling the product? My guard goes up when I hear this sort of naked appeal – I probably am much more cynical about companies that resort to this messaging. If we start with the premise that “trust” is the given baseline, why then, is there a need to say, “Trust me?”

If I do a poor job of delivering what I promise to my customers, I’d much rather admit in an open and honest manner that I screwed up. Too many times we see companies stonewall, deny and otherwise obfuscate when the train goes off the track. This results in mistrust rather than accomplishing whatever we had hoped for by not being transparent. The old saying that the cover-up is worse than the crime certainly applies here!

Transparency begins with the basic core value of integrity. Either we have it or we don’t. We use this core value to guide us in the actions we take to fulfill transparency. I know that there are those who will say, “I’d like to be more transparent but in today’s litigious society I can’t say what I really want to say – I’ll be sued if I do!” However, there are ways to be open and honest without creating legal jeopardy.

We must also remember that most people don’t like surprises – at least not the negative kind. This is especially true when we’re working with our team members and investors. A number of years ago we acquired some land and launched a residential subdivision which turned out to be a bad idea. Shortly after we completed the purchase, installed the streets and sold our first three lots, the financial world came to an end (2008 – 2009). Our lot sales came to a screeching halt and remained very anemic for several years thereafter. We had raised substantial investor equity for this project and needless to say, the lack of sales was a difficult thing to report. Nevertheless, we dutifully wrote and sent investor reports every year laying out the facts. There was no sugarcoating, nor did we try to sound overly hopeful. Eventually there was good news to report and we were naturally pleased to do so. I’ve been told by several of our investors that they never lost confidence or trust in us because we were totally transparent throughout the process. It also helped that we explained in detail what we were doing to try and solve the problem.

Transparency means getting in front of the message rather than being behind the curve. Here’s an example. We learned that a major employer was about to close its doors in a market where we had an apartment property. Immediately, we contacted the investor and let him know that this was happening and apprised him of how we thought this closure might impact the property. We also laid out our plan of action for minimizing the negative impact to the investment. He was also an investor in another property in the same market that was handled by one of our competitors. He told us he never heard from the competitor and appreciated the fact that we delivered bad news as soon as we knew it. Our transparent approach built trust and enabled us to do more business with this investor.

Transparency is one of the cornerstones of trust. By operating with integrity, we are never afraid to deliver good news or bad, and share all that is relevant with our customers, team and investors.

Trust Me . . .

Posted on December 25, 2016 by anentrepreneurswords

There’s a priceless element to an entrepreneur’s success when it comes to his or her customers, employees and investors. This element can be broken. It can be elusive. And it can be very difficult to regain when lost. Of course I’m talking about “trust.” But this isn’t so much a blog about trust as it is one of the foundational components to building trust. Let’s explore the concept of transparency.

If I do a poor job of delivering what I promise to my customers, I’d much rather admit in an open and honest manner that I screwed up. Too many times we see companies stonewall, deny and otherwise obfuscate when the train goes off the track. Of course this results in mistrust rather than accomplishing whatever we had hoped for by not being transparent. The old saying that the cover-up is worse than the crime certainly applies here!

We must also remember that most people don’t like surprises – at least not the negative kind. This is especially true when we’re working with our team members and investors. A number of years ago we acquired some land and launched a residential subdivision which turned out to be a bad idea. Shortly after we completed the purchase, installed the streets and sold our first three lots, the financial world came to an end (2008 – 2009). Our lot sales came to a screeching halt and remained very anemic for several years thereafter. We had raised substantial investor equity for this project and needless to say, the lack of sales was a difficult thing to report. Nevertheless, we dutifully wrote and sent investor reports every year laying out the facts. There was no sugarcoating nor did we try to sound overly hopeful. Eventually there was good news to report and we were naturally pleased to do so. I’ve been told by several of our investors that they never lost confidence or trust in us because we were totally transparent throughout the process. It also helped that we explained in detail what we were doing to try and solve the problem.

Transparency is one of the cornerstones of trust. By operating with integrity we are never afraid to deliver good news or bad, and share all that is relevant with our customers, team and investors.

You can also listen to a weekly audio podcast of my blog. What you hear will be different than what you read in this blog. Subscribe on iTunes or wherever you get your podcasts. You can also click on this link – Click here to listen to Audio Episode 24 – Disruptive.

Tasty Crow

Posted on December 27, 2015 by anentrepreneurswords

Crows are remarkably intelligent and can live as long as 20 years. They typically have a wingspan of more than three feet and weigh nearly three pounds. A crow can fly up to 60 miles per hour and have been found as high as 14,000 feet in mountain ranges. Being smart, fast and able to fly to great heights make them particularly hard to catch. Recently I had to catch one so I could eat it . . . metaphorically speaking of course.

To be a successful entrepreneur we must have an acquired taste for crow. We’ve all heard the saying “to eat crow” which connotes humiliation and having to admit the making of a mistake. Sometimes our ego gets in the way and we do everything we can to avoid admitting that we made a mistake. We may point the finger at others. Or we may try and cover up the mistake hoping that its results will somehow vanish into thin air. I can tell you that all of these tendencies are mistakes.

Within days, I received a call from my partner who oversees our apartment acquisition business unit. Apparently there was a bust in the calculations and these two investors would be receiving less than what I had told them. They were still receiving a substantial gain on the sale, but not quite as much as the expectation I had set. The mistake was honest and unfortunate but it still had to be acknowledged. Thus, I went about the task of eating crow.

Because we are a team I did not point a finger at the person who was responsible for the calculation. Instead I said that “we” made a mistake. I did not make up an excuse for what had happened. Simple but painful. The result was an expression of understanding on the part of both investors. I’m sure they were disappointed but there were no angry words and in both cases, an indication of interest in looking at the next deal.

Relationships are built on trust and can be strengthened in situations where things don’t go as planned. But this happens only when honesty and transparency are the top priority.

Lost Art

Posted on November 1, 2015 by anentrepreneurswords

Harrison Ford starred in the classic movie, Raiders of the Lost Ark. Bill Murray and Scarlett Johansson starred in Lost in Translation. Richard Dreyfuss played the lead in Lost in Yonkers. The television show Lost in Space ran from 1965-68. And entrepreneurs star every day in the Lost Art of Negotiation. Why is negotiation a lost art? I believe that too many of us see negotiating as a competition.

Google gives 90,500,000 results for the word negotiation so there’s no shortage of material about the subject. But I don’t want to focus on negotiating techniques – that’s not the point of this blog. Instead, I’d like to offer some ideas that may be helpful in making the negotiating process more productive.

If we start with the premise in a negotiation that we want to win, then it becomes a competition where someone (not us) is going to lose. From here we harden into our “positions” and the tension begins. There is a better way. First, we need to see a negotiation as an opportunity to solve a problem. It’s actually a dual problem – one for us and one for another party. Trying to solve just our problem may be far more difficult than figuring out how to solve for both parties. What do we do when we solve a problem? We start by clearly defining all elements of the problem. Then we catalog all of the possible solutions. Our innovation and creativity come into play at this point.

In the process of attacking the problem we establish our bedrock principles. For example we may resolve that no matter what, we will always be respectful. Perhaps we commit to avoid getting hung up on personalities. Or we may decide that regardless of how dirty the other party may play, our approach will continually reflect total integrity. Ultimately our analysis leads us to the bottom line for the most critical factors to the outcome we believe will best solve the problem for both parties.

Recently I was coaching a business owner about the potential sale of her company. I asked her what her bottom line number was and she gave me a figure. Then I asked her if negotiations led to a value that was $50,000 less than her bottom line number, would she sell. She replied in the affirmative. So we went back and forth with the $50,000 question until we finally reached an amount that she absolutely positively would not accept. The takeaway for her was that the initial figure she thought was her bottom line number actually wasn’t.

As we engage in a negotiation we listen to and understand what the other party is telling us. This information is then overlaid onto the problem we have identified and our array of solutions is applied. We avoid confrontation by working from a set of facts; seek agreement wherever possible, and constantly narrow the scope of issues.

Being in the commercial real estate business I’ve been in continuous negotiations in one form or another for more than 40 years. You can read all the books you want and watch all the videos in the world on negotiating strategies. And if you pay attention to them you can easily end up getting too cutesy. I have found that a pretty straightforward approach has been extremely successful for me. I don’t try to outthink the other party or construct a series of chess-like moves. Instead, I know what my bottom line is and I know the principles that I want to maintain. If I have to violate my principles to get to my bottom line I’ll withdraw. And I’ve learned that transparency and respect have been more valuable than anything else.

Entering a negotiation as a creative opportunity to solve a problem for both parties puts us on the same path. Bedrock principles and a clear understanding of our bottom line is then the recipe for a positive outcome.

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