The Complex System: Story of an Entrepreneur

Finance Shminance

Yup, I failed macro economics in college. That was freshman year. I really hated the class so much I never bothered to take it again even though anyone could take a freshman class over and take drop the lower grade. That added a 0 into my GPA. I still managed to eek out a 3.2, but imagine how much better it would have been; rather I don’t need to imagine, I guess I could just do the math, but I didn’t really care much for those subjects either.

Soon after I started having some entrepreneurial success my father suggested that I take some finance classes. He tried to impart on me the value and importance of being able to read and understand financial statements. It wasn’t so much that I didn’t regard the sound advice; quite contrary, I knew it would be useful and that I fully believed it due to the repetition of that same counsel in the various business books I’d read. Insomuch that I didn’t heed my father’s direction, partially due to my own obligation to do things my way (that’s another post entirely to be sure) and partially because I just didn’t enjoy it.

I winged it. And as my business evolved, financial sophistication became increasingly more vital. I’d say I made an effort to understand and manage by it, and to some reasonable extent I did that with success. But it wasn’t until recently that I truly discovered the benefits and was inspired by results of financial scrutiny.

As I’ve said many times before, ironically some advice I did take from my father, I hired people smarter than me, or at least more worldly in ways I was not. This capacity has served me well, and the hiring of Dan Morefield has opened my eyes to financial management. Weekly we study our P&L, cash flow, balance sheet and so forth. Without question just keeping a watchful eye and regularly examination of these documents from trained perspective has made a dramatic impact on our business. In fact, from Dan’s perspective it’s less about his understanding of the numbers as it is for him to ensure that we, the management team, understand the numbers. His diligence in our comprehension of them is in an effort that we discover problems early and make sound decisions.

As someone who failed economics, you could say I’m a poor student. But I think perhaps I didn’t have the right teacher.

Fear, Does it Motivate People?

A buddy of mine got me thinking about fear as it relates to motivation. He presented the argument that fear is an effective motivator when you can actually affect the outcome. In other words, if someone has control over what they are afraid of, then it motivates them; otherwise, fear, when it surrounds something that is out of your control, is a de-motivator.

It’s pretty logical I think. If you tell an employee they should fear losing their job because there are plenty of other people that will work harder for the same pay and responsibility, that’s something they have control over. But if you tell someone they should fear losing their job if you’re your venture funding falls through, that’s something they can’t do anything about.

In discussion with my friend about this topic, he said this was just common sense. But in my experience, the fear we use to motivate others is often based on things they have no control of. By just understanding this simple concept, two great things can be achieved. First, people can be effectively motivated by fear; and second relates to what I’ve seen to be the most effective motivator of all, the feeling of being impactful.

When people feel like they are having an impact. When they really know the job they are doing is actually affecting the company in a significant and positive way, they get feel good; the more impact, the more motivation. When fear is used in a way that allows someone to actually affect their situation, they can fully embrace it and take actions that will have an impact. That’s a pretty strong motivator.

Show Me the Data

When I first met Matt Coffin I vividly recall him hammering the importance of metrics. I can’t tell you how many times he said LMB was metrics driven. Intuitively I knew what he meant, but it was anecdotal at best. By that I mean I knew it was important, but I really couldn't tell you how to get it or even benefit from it.

As I've matured as a business leader I've come to realize with piercing intensity the importance and value of good data. Right now there is nothing more important for me. What I now see is that good data is the cornerstone of good decision making. And even though I believe in trusting my gut, which has gotten me far, without specific and measurable data, it's only a matter of time before your gut starts to miscalculate.

Sounds simple and obvious, right? Well so is going to the gym or healthy eating. Simple but not easy. Establishing metrics, gathering good data and putting it all to use is hard work and requires some real strategic thinking. My biggest challenge over the past few months has been in this area.

A few days ago I came to a pretty big realization that guys like Matt Coffin probably figured out long ago. In my hunt for good intelligence I've been pushing my management team to give me more reports. I need a report for this or an update on that. I've probably been driving some of these people downright mad. At the end of the day I could care less about reports. Really I don't want them; they waste paper and don't tell me what I really want to know. It's really about what the reports can "tell" me. Ironically, this is probably why reports in software really don't help (our software is no exception).

I think the trick is to transform my passion for data into a passion for answers. People understand questions; they understand how to find the answers to those questions. Getting the data that leads to answers requires asking the right questions. That's my job and I've got some work to do.

Get Out the Way

I've been told, the minute I start doing someone else’s job, the minute they leave. My experience is that when I do someone else’s job, I rob them of the opportunity to excel. And when people aren’t excelling, it's only a matter of time before they're out the door for one reason or another.

I bring this up because of how powerful this realization has been for me. I'm very hands on, and I regularly go out of my way to "help" people that I work with. The key distinction is that while I think I'm helping someone, I'm really just doing their job. When I do that, I not only keep them from growing into the role they've been hired to do, but also limit the amount of time I can spend doing my own role. This is a pretty common mistake that entrepreneurs make. I think most entrepreneurs don't even realize they do this, and more importantly, they have no idea it is this exact behavior that limits the growth of their businesses. That's the irony of it. We think we’re doing our company well by working harder and harder to do another’s job, but we’re doing just the opposite. After all, if I don’t focus on steering the ship, who will?

I know this because I used to do it. Of course, old habits don't die easily, but I've really been successful with in this area and I surround myself with people who remind me that my role is CEO, and that my role is not their role. So like the title of this post says... "Get Out The Way"!