Five Irrational Fears
What keeps you up at night? Blair interviews David about the five most common fears that he has seen in the consulting work he has done with over 900 firms.
DAVID C. BAKER: Hi Blair, how are you?
BLAIR ENNS: I'm super...fantabulous.
DAVID: Did you pause because you didn't know how to say that word or because you were ready to lie?
BLAIR: I don't know, and I'm actually short of caffeine too. I'm doing real well, thanks. As my father would say, "Any better and I'd cancel my health insurance." I'm not that good, I'm actually recovering from a cold, I'm not even 100 percent but...
DAVID: As a Canadian, that's a very empty threat, let me just tell you that.
BLAIR: I know. It is, yeah. Most people don't get that joke up here. Did I ask you how you are?
DAVID: No, but I don't think you really... Nobody cares.
BLAIR: Let's just dive in.
DAVID: Yeah, let's go in.
BLAIR: Today, we're going to talk about what keeps you up at night. You've got some fears that I think you've uncovered through all the work that you do with agency principals and owners of expertise, expert businesses. You've uncovered some common fears, I guess you have a list of five fears that we're going to talk about today. These are the, correct me if I'm wrong, but these are the five fears that you see as those things that are keeping agency principals or owners of other types of small businesses up at night, is that correct?
DAVID: Yeah, exactly. I mean having worked with 900 and some principals now, it's just like I keep seeing these things pop up and they're generally illogical, so I just started writing them down and got five. There's probably more, but these are the five that seem to be swirling everywhere all the time.
BLAIR: You've been at 900 some odd firms and holding for a while. Are you in semi-retirement or what? When are you going to hit triple digits?
DAVID: Well, I've nearly exhausted everybody that will work with me in the world, so I think there's maybe like four or five weeks left, so yeah, pretty soon I'll be done.
BLAIR: Yeah, 1,000 and out.
DAVID: I'm out, baby.
BLAIR: Then we'll open that pizza shop. The first of the five fears on the list that keeps agency principals up at night. You've got, "Losing the critical employee who finally lets me pull out of the day-to-day." Now, as somebody who's transitioned in the last few years from a solo consulting practise to a business where I'm relying on, quite heavily on team members, I read that one and I just kind of clutch my heart a little bit. That's at the top of the list for a reason.
DAVID: People, they're building their businesses and they figure, "Okay, so I've got to get some of these things off my plate." They get the easy things off the plate, the low hanging fruit, and they know that there's still some things left that they need to get rid of, they're not going to be able to hang on to them but they're not easy to get rid of, and yet they're really important. Maybe that's managing client relationships. Often it's something like that, right?
Sometimes it's the creative, like creative director or something but usually it's managing client relationships. They're holding their breath and all of a sudden it's like, "Oh yes, I've found the person that's going to be able to let me concentrate on what I need to do to help me scale this business." The person comes in and everything is great at first.
Sometimes there is no problem, there's no reason to fear, but other times, this person turns out to be not as qualified as you thought or a jerk or something like that. In those times you feel like, your instincts tell you, you need to pull the pin. You need to reverse this, you need to get rid of them, for whatever reason but you're terrified of doing it because it's taken you so long to get this off your plate.
It's this irrational fear like, "This is the first time I've ever been able to get this off my plate and I don't know if I'll ever be able to get it done again, so I'm just going to live with whatever I don't like about this person who has freed me up." Does that make sense?
BLAIR: Yeah, so you're saying what that person is doing for you is so immense in reality as well as in your mind that it kind of covers over some sins. You let them get away with some things, maybe it's performance in other areas, maybe it's attitude, cultural fit.
BLAIR: Fraud and embezzlement, whatever it is, and then losing that... You're saying it's the fear of losing that person is what keeps people up at night?
DAVID: It's the fear of going back to having to do those things that you finally got off your plate. This person has helped you, but it comes will all kinds of baggage, and you would let them go if it weren't for this fear that it will take you too long to find the next person, the second person to help get this stuff off your plate.
Principals will live with this, literally for two or three years, because they haven't gone through multiple cycles of getting things off their plate, and then finding somebody else who is just as qualified. That's new to them, the notion of finding great people is new to them, and so it terrifies them to sort of reverse that process early in, early on as they start to learn that.
BLAIR: It sounds like you are seeing a pattern here of that first really valuable person or person who's valuable in this way that it allows me to free myself up to do other higher level things is very often, and correct me if I'm just reading something into this, but it sounds like the pattern is that that person is very often poorly skilled or inadequate in other areas. Is that a common occurrence?
DAVID: Yes, it is because we don't know how to hire the more expensive people. In the early days, you hire who you could afford and you sort of put up with the rest that came with it, the lack of qualifications or whatever. You trained them, you kind of liked the fact that it was a blank slate, they could learn your bad habits, but yeah, they're your habits so you're okay with that. You just don't know what it means to hire somebody really expensive.
You have all of these pent up expectations about this expensive person, and so the divergence, what that person is capable of and your expectations are so widely apart that the first great person you hire typically doesn't work out. Hiring that first person, the process is what sets the expectations for the future. You almost, like you never want to be a principal's first expensive person. You want to let them get that out of their system and be the second or third.
BLAIR: What's your advice to the principal or business owner who has just lost that very person that you're talking about?
DAVID: I think whatever I say to them I don't think matters too much at that point. I think what they should do is really just touch base, have candid conversations with other principals that have been there, that were there several years ago and have gone through it just to give them some assurance that yeah, you're going to find other great people, don't worry about it.
BLAIR: All right. The second fear on your list that keeps agency principals up at night is, "Employees knowing how much I make."
DAVID: Right, and it's always the principals making a lot of money that are nervous about this. It seems like the ones who aren't making much money are very open about it. Either because, and they're just open at the beginning until they start making a lot of money, or they're open just as a, sort of a philosophy of choice. The ones that are making a lot of money, they think that their employees will resent this.
The truth is that if you're working hard as a principal and making a lot of money, and if you have a good culture, your employees do not care how much money you make. If anything, they love it when you make a lot of money. I mean, they don't want you to flaunt it. I had a boss one time, there was a layoff of about... This was a 30 person firm I think, something like that. About six people were let go, and the next day he pulled in with his new red Corvette and parked it in the front. Now that's not what I'm talking about, right?
Most principals when they say, "A lot of money," they say that and I kind of imagine what that is and then I look at it and I'm saying to them, "No, that's not really a lot of money. You ought to be making a lot more money than your highest paid person, and you shouldn't be nervous about that." It's a really weird fear. I think principals have this, there's this latent fear that employees will, I don't know what it is, resent them for making a lot of money, and they don't, good employees don't. They love it.
BLAIR: How far do you think this concept of open book management should go when it comes to finances, what people make, what the principal makes, and even profit?
DAVID: Yeah, great question. I don't think we ought to hide it too much, except I don't think we ought to reveal what other people make, I don't think that's healthy. I've tested this multiple times, like giving employees the option, so like on a whole, almost like a retreat day. We set up stations, like go to this station, learn about what we're planning in the future. Go to this station to learn about the finances. Go to this station to learn about some service offerings we're considering. Here's our past performance.
Most of the time, employees don't care that much about the financial side of things and there honestly is no connection that I've been able to see between more openness and better performance, so I think it just doesn't matter all that much. Information should come with training because most folks don't have financial literacy, most employees don't so it's really... I think it's useful to be open with them to a fairly loose degree as long as you help them understand what it means.
BLAIR: Do you think, because the principal's compensation is made up of salary and profit, and you might add something else to that. Do you think that from firm to firm it's a wise thing for the principal to be sharing the profit, either as a percentage or a total dollars?
DAVID: Sharing the information or the profit itself?
BLAIR: No, sorry. Sharing the information.
DAVID: Yeah, I think that's fine. Again it's, to me it's like I don't think, well I should clarify. I don't think principals should tell employees what they make, I don't think that's useful, but I just wouldn't work too hard to hide it, especially from the higher level employees. In terms of profit, I think it's fine to share that as well.
The older I get, the more open I think principals should be and the more open I want to be. I've often toyed with the idea of just posting my financials, mainly because I think there ought to be some connection between success in the marketplace and to what degree your clients listen to you.
BLAIR: Yeah, you and I have talked about this before in private conversations. The idea of why would you take advice from a consultant who's not earning, if not more than you, than certainly what you would expect a successful, high level consultant to be earning.
DAVID: Right, yeah. You told me you were making $80,000 the other day and was really proud of you. I was like, that's great.
BLAIR: I meant that day.
DAVID: Touche, okay you got me there.
BLAIR: The third fear on your list that keeps agency principals up at night is "ungratefulness" or this idea of being taken advantage of. Explain yourself Mr. Baker.
DAVID: Well, because there is a certain personality type behind principals who are successful, there's also a downside in that the traits that are common on the good side that make them successful, they share the same traits on the downside as well. Those are typically two, primarily lack of control when they feel out of control, or when they feel like they're being taken advantage of.
It's useful to know that as a principal, what makes you successful comes with those two things, so when you feel either or both of those rising, like you feel the red rising to your ears, then just slap yourself. Give yourself a dope slap and say, "I'm probably overreacting here." You can see this very frequently like at Christmas time, if the principal gives out Christmas bonuses, and it just kind of pisses them off.
The first year, it's a lot of fun to give these out and after that, it just feels, like they think it feels more like an entitlement, and they don't enjoy the process, and they feel like they're being taken advantage of. It's just good for principals to recognise that that comes with the territory. That when they feel like they're being taken advantage of or feel out of control, to relax, take some deep breaths, give themselves a dope slap if necessary, and recognise that that's part of their personality and they need to manage that.
BLAIR: Wow, that's really great advice. I can identify with both of those scenarios, one more than the other, but the idea that come on, it's just you. It's not, this isn't real per se, you just have a heightened kind of propensity to experience things this way.
DAVID: Yeah, exactly.
BLAIR: I do remember working for a guy, an agency owner, many years ago now. A few of us had gone out for a drink and I was sitting there thinking or maybe somebody said to me, "You know what? We always assume that because he owns the business, he's going to buy the drinks. I mean, of course it's all expensable, but I'm just going to buy, I'm going to buy drinks tonight." He was shocked, absolutely shocked and I thought, it's probably a little gesture that probably I felt like it went a long way just because who knows how many times there's that resent of having to pick up the tab.
DAVID: That is a perfect example because I'll bet you that most of the times, he didn't mind picking up the tab but he did feel this little tinge of, "I bet they expect me to do this every time." That's a great example of that.
BLAIR: Item four. Fear number four on your list of what keeps agency principals up at night, "How we compare to other firms."
DAVID: Yeah. This comes up usually twice in every engagement but particularly at one place. I always start onsite engagements under the total business review with a benchmarking, and of course, built into this notion of benchmarking is benchmarking yourself against something, against other firms. We talk quite a bit about where they measure up, like financially, utilisation, employees, quality of the work and so on. It's fairly innocuous, we don't know each other all that well at this point.
After a couple, two, three, four days of working together very intimately, like talking very openly about anything, nothing's off the table. Right before I leave they'll just say, "Okay, with all the firms you've worked with, how would you rate us?" I mean, and I hate that question because I'm duty bound to be honest.
What I do is kind of, if I'm caught off guard, if I'm tired and haven't anticipated the question coming right away, then I'll just scurry around in my mind and think of something where they're really doing better like, "You're located in a really exciting city." No, I'm kidding, I don't say that. There's just something how they just want to know... They don't care so much about how well they're doing, they care more about whether they're doing better than somebody else. It's just a really interesting phenomenon.
I don't understand what's underneath that, but they do care more about being... Like they might be in some really, they're both really slow but, "As long as I'm a little faster than you, I'm okay." It's just a weird sense. I think it might come from the fact that so many firms are so poorly positioned that everybody is a competitor.
If these firms were better positioned in the marketplace, then they wouldn't be as, I guess they wouldn't be as nervous about somebody moving into their space because their space would be very clearly defined. You also find there's not as much openness, there's not as much sharing between firms, and so it's a weird thing. It's just this competitiveness that I don't think other industries quite have.
BLAIR: Yeah, that's interesting. Do you get the question about, specifically about a firm's quality of its creative product?
DAVID: Well I get that very, very often, yeah. I'm not sure I'm the best judge of that, but I'll tell people like, "Yeah, it's one of the best I've seen. It's like I would, if I wasn't already working with a firm that I've worked with for years, I would love to work with you folks" or "You're one of the top 10" or "I'd love to send referrals to you."
BLAIR: You're completely disingenuous about your response to this question.
DAVID: Oh no, no, no. I meant like I really do mean that but then most of the time I'll say, "Your work is good enough," that's what I'll say, "It's good enough, it's fine. I don't think it's remarkable, it's good enough." Then other times I'll say, "It looks... It really needs some help. You could do better." I think I learned that phrase from you. It's a friendlier phrase. "You could do better" or "Maybe you shouldn't have somebody..." or "Looks..." No, that's all I say.
I think some things a little meaner, but I never say anything mean. It's just... I do think they need to know that it's good enough but it doesn't matter all that much. Clients don't notice that like principals think they do.
Yeah, for sure some clients do, but somebody who's on the business development side of the equation, my pat response to that question is usually, and it's not pat because it's not true. It's largely true and applicable to most firms I talk to. I usually say, "You're creative is pretty good. You shouldn't win or lose business because of it." That's the answer and they go, "Oh, oh, okay."
BLAIR: I mean do they read between the lines there or are they just satisfied and move on?
DAVID: They're never satisfied but I think the point I'm trying to make is being communicated and that's don't overstate the importance of the quality of the creative product, again, with the exception of some clients.
DAVID: I think that's usually communicated. I often, in terms of the question, "How do we measure up against other firms?" I often reply with my two questions. I say, well, there are two questions that I always ask myself about my clients' businesses. The first is, would I want to own this business? The second is, would I want to sell this business? Would I want to be your business development person on the front lines? Then I give them my honest answer to both of those questions and they can do with that whatever they will.
BLAIR: Sometimes is the answer to one of those yes and the other one no, or is always both yes or both no?
DAVID: Yeah, I can't think of any specific examples, and I've asked it dozens of times but I do know there have been some yes and no's, not universal no's or universal yes's.
BLAIR: Right, right, That's a very interesting way to look at it.
DAVID: I don't think of myself as a particularly good salesperson, so what I'm selling, I really need to feel like what I'm selling is special or different. Not this idea that I believe in it, I think that's just a ridiculous line but that I'm selling something that's different. Give me something that's different, and I feel like I can sell it and would enjoy selling it.
BLAIR: Yeah, good. Now the last item on your list of the fears that keep agency principals up at night is "the perception that the firm is in trouble." That's perception in the market or among employees or competition, is that what you're talking about here?
DAVID: Yeah, and it would be true for all three of those. Like my competitors out there, my employees, yeah, everybody. It's interesting because there are some cases, quite a few cases when they should be doing something for the health of the business that could be interpreted as an impending sign of failure. For instance, laying people off or there's just so many things that fall in that category. Like, "I don't want to lay somebody off so I'm going to take this work that I know we're not going to make any money on. At least it's cash, it's not profit, but at least it's cash." They makes these... When in fact, the truth leaks out eventually.
In our world now, and I'm not sure this would have been true 10 or 15 or 20 years ago, but in our world now, authenticity is embraced. There's also this sense that listen, any good firm can go through a struggle. I mean I've gone through it myself. You remember, I called you and asked if I could meet with you because I was like lost. Every business can go through that and it's natural. If we don't acknowledge some of the struggles we have every once in a while with the right people... We don't put it on the front page of our website but with the right people, then we're just simply not being authentic.
I think that the marketplace that these firms operate in value authenticity and they just need to do what's necessary to run their businesses, and they shouldn't worry a lick about the perception out there. If a competitor is going to misuse information, they're going to make stuff up and misuse it. It's just not anything to worry about. I wish it wasn't so central in principals' minds because it really keeps them from doing the right thing.
BLAIR: That's interesting. I can think of a few agency principals I know who have been in tough times financially and they've picked up the phone and they've called their best clients or former clients and kind of put the cards on the table and say, "Hey, we're going through a bit of a rough patch right now, I could use whatever work you could throw our way."
I think that's just so honest and vulnerable, and people really appreciate when you show your vulnerability. Good clients, those kind of relationship buyers who value you being there for the longterm, whether they're working with you now or not, if they can step up and help, they'll step up and help.
DAVID: Oh, absolutely. Yeah, yeah. That's good.
BLAIR: All right, this is a fantastic list. I'm sure there are... What are two of the things that maybe didn't make the top five that you might want to throw in and talk about? Things, what other things keep agency principals up at night?
DAVID: Oh, I think if they have a client concentration problem. In other words, they've got one client who represents too much of their business. It's interesting because some principals sleep fine at night. Those are the ones that have managed a client concentration problem all their lives, and when they lose one client they find another one, mysteriously.
Then the other half of the principals are terrified, and I'd be in that camp I think. I didn't even have that on my list, but that's something that definitely keeps them up at night. It's kind of related to this last one too, like doing the right thing and hanging on. Related to that it's like, "Oh, I hate to lose this team." That's another fear they have. "It took me so long to build this team." I just don't understand that at all. I mean, I do understand it intellectually, but it's like, "Really, you..."
What I help them think about at that point is, "Okay, do you want to give them a month of severance or do you want to hang on another month and then give them no severance?"
BLAIR: Yeah, interesting when you pose the question that way. All right, this has been really helpful and again, I'm sure there's all kinds of other things that keep business owners and agency principals in-particular up at night. Those are five big ones. Thank you so much for this David.
DAVID: Yeah, you're welcome. Talk to you later Blair.
BLAIR: Bye, bye.