How To Know When To Leave Your Company as a COO | Cameron Herold (Podcast 386)

They don't want to hear you talk about your business like it isn't your hobby. It's what you do to make money. And for all of us who go, well, it's my hobby. Well, guess what? I don't want to hear about your hobby. You don't want to hear about my hobby? Right. I don't want to know what you do for. I don't want to hear what you hiring VA's. You don't want to hear about me and my co alliance. I want to know what are you doing, where are you going, what's cool in Australia, what have you seen, where are you traveling to, what are you learning about, what are you exploring? What's your favorite movie? I want to know that you kind.

Of give a background on, you know, how you started your journey.

Yeah. So I got very well known for being the second in command of a company called 1-800-GOT Junk. And I grew them from 2 million in revenue to 106 million in revenue in six years, including opening them up in Australia back in 2004. We hired someone over for Skype back then. But prior to that, I built two EO qualifying companies where I was a partner in two companies and I was in a forum with Brian, who is the founder of what was called the Rubbish boys, and became 1-800-got junk. So for four and a half years, he watched me build two other companies. We built the largest collision repair chain in North America. In Canada, it's called Boyd Auto Body. United States, it's called Gerber Auto Collision is now a $2 billion company. And then I also built a private currency company that we built and sold. So he got to watch me build these two companies where I was really the second in command and a minority partner in both. And then after that, he asked me if I would join him. So I no longer qualified for EO because I was no longer a partner in the company, but I was his second in command, or coo. We built that up. And we built such a strong business with a lot of growth. We ranked as the number two company in Canada to work for. And all of these EO chapters started asking me to come and speak to explain what we were doing and how we did it. And then why was it that I was able to do this four times? So that was kind of what began my career. Wrote a couple of books back in the early days. I've now written six books and my most recent is called the Second in Command because I started an organization similar to eo, but no entrepreneurs are allowed to join. I started a group called the COO alliance, which is the only mastermind of its kind in the world for the second in command. And that's really kind of where it all started and where we are today.

Oh, that is amazing. What an achievement. So when did you join eo and yeah, like a little bit of the journey because I know a lot of our listeners are from EO here.

Yeah, I joined EO back in 1995. It was originally called Y EO, it was the Young Entrepreneurs Organization. Bern Harnish founded it. And I was very busy, didn't have time, had all the excuses why I couldn't go. And I met with a guy named John Mara and his wife Joan. And they convinced me that if I was too busy, the business was running me, I wasn't running the business. And that really stuck with me and I was like, damn it, I need to join. So I joined eo, got into a forum and I really got into EO right away. I jumped in with both feet. I got onto the board. The next year I got onto the international board. In my third year I led forum. I went to globals, I went to universities, I went to GLCs. I really immersed myself in the community. And because I did that, I grew my brand. But I also grew my confidence as an entrepreneur. And then I also really grew my skill set in realizing I didn't have to know how to do it, I just had to know the people who knew how to do it and do what they were doing. And that really was my, my starting point. And then I luckily met Brian who was in my forum. Actually I was in forum for a year before he joined us. He joined us doing 993,000 a year. He barely was just under the million dollar mark. He was a 26 year old garbage man. And we said, yeah, we'll let you join. And it was called the Rubbish Boys. But I had already built a franchise or two franchise companies by that point. So he was watching me and learning from me. We became very, very close friends. I started really helping and influencing him on growing his business, franchising for the first time hiring his first franchisee, who's now an EO member as well.

Wow, that is impressive. Okay, so let's talk about the new book because obviously that is, you know, the foundation you probably covered so much. Like can you share with us, you know, what are some of the things that we can get, you know, some of the questions we can get answered in your book.

One is I Guess, you know, what is a second in command and why do I hire one or why do I need one? Another one be like, you know, where do we find them once we have them, what do we do with them? So if I kind of back up, I'll, I'll start with that. The reason I called the book the Second in Command is we've had a lot of title inflation in companies. A lot of entrepreneurial companies gave out big titles to people who either didn't deserve them, didn't really have the roles and responsibilities to match that title, nor did they have the compensation in place to match the title. You know, maybe they had a head of marketing that was really a marketing manager or a director of marketing. They called them a chief marketing officer because they didn't think the title meant very much. But chief marketing officers earn 250,000 to 450,000 a year. If you've called somebody a chief marketing officer and you're paying them 120,000 a year, they're probably a director of marketing, very similar to the second in command role. It could be an operations manager, could be a project manager, could be a chief of staff, executive assistant, VP Operations, or maybe a coo. But it depends on the roles and responsibilities, the level of strategic insight they have, the amount of P and L responsibility they have, the amount of autonomy they can have in their role, and the amount of salary you're willing to pay them that determines the title. So instead of me calling it the COO Handbook, I called it the second in command to kind of, that's the first part is, you know, what are they? Well, the second in command is really the yin to the yang of the CEO. They're supposed to be good at everything the CEO sucks at. They're supposed to love working on all the areas that drain the CEO of energy. And what's very different about the COO role, I was a very good COO for Brian in Brian's company at the stage of growth that his company was in. Their current COO who's taken them, you know, up to 450 million in revenue, would have been a horrible COO for the first six years because he wasn't entrepreneurial. He didn't know how to build a franchise company. So like I was perfect for that six and a half year season. Eric has been perfect for the last ten year season. I also was such a good second in command for Eric's company, but I would have been a horrible COO for Naomi Simpson from Red Balloon Days, or I would probably Be a horrible COO for your company because I don't necessarily match your strengths or your weaknesses or the size of company you're in or the industry that you're in. It's a very unique role. When you're looking for a coo, you have to really know yourself before you know what you're looking for in that partner.

Okay. And so what is the best way to find one? Is it then really someone coming from the bottom up and over the years turn into one or, you know, what are the chances of actually someone from outside?

Yeah, it's very rare that you're going to be able to bring someone from inside of your company and allow them to scale after you've gotten to about the 5, 10 million revenue mark. When you get to about 5 or 10 million in revenue, you're starting to bring outside experts that have the wisdom, have P and L responsibility, have the autonomy. They've built three or four companies before and they know what they're doing. It's very hard to groom those people from inside because you're often promoting people to their level or ceiling of complexity in an earlier stage company. Yeah, you promote from within because it's often the better the devil you know than a devil you don't. Right. Or you're promoting somebody who knows the business, they know the culture, and they can figure it out as they go. But you can't afford to figure it out as you go. When you're going from like the 10 million to the 100 million zone. If your company has a lot of deep industry IP or very deep industry domain experience that you need like an engineering firm or something where, where they really have to understand the industry. You can often bring them in from the industry into your business and they can learn the culture. Most COOs of bigger companies have to be good at all the people side of the business. So things like situational leadership, coaching, delegation, growing people, managing conflict, running meetings, stuff that junior managers haven't done enough of to be able to continue to scale. When I was leaving, 1, 800, got junk. For me, it was a massive company, right? 3,100 employees operating in 330 cities, operating in four countries, 13 operating P Ls. It was big. And they replaced me with the former president of Starbucks usa. And Lonnie came in and said, what a cute little company. Because she'd come in with this big, you know, industry experience. So you can't promote somebody from within forever.

Wow, that is so interesting. So this leads me to like, what is the situation when You've got your second in command for a period of time. Now you're needing a new one. Like what happens to the previous second in command? Where do they go?

I actually talk about that in my book called the Party's Over. So this was a Thursday Morning, May of 2007. Brian and I were having our normal breakfast before our leadership team meeting and I ordered my traditional eggs Benedict and Brian would normally order an eggs Benedict as well. And he ordered grapefruit. I was like, grapefruit? You never ordered grapefruit in your life. You've my best friend for like 10 years, grapefruit. And he looked at me and he said, I think it's over. And I started to cry and he started to cry. And his point was I was the right person to take them from the 2 million to 106 million, but I was the wrong person to take them from a hundred million to the billion. And yeah, we were dysfunctionally crying. Brian actually made me take a taxi home and he drove my car home because I was incapable of driving. It was the right decision. It was very hard. But what he recognized was I was the right person for the season and to match him and to do everything we needed. But once the company got to that corporate kind of adult size, I didn't have those skill sets to scale the company. So he had to then go out and find the person for the next season that the company was in.

Wow, okay, that's really interesting. And so if you are looking for someone who's the second in charge, is it most likely that they expect shares or, or, or is it a pure salary that's, that's enough to actually retain and make them really work hard?

Yeah. The idea of giving equity in lieu of compensation or equity as well as compensation really only started back in the early 2000s and it was started in the dot com era where companies were giving out equity because they didn't have cash to be able to pay as well. When the first global financial Crisis hit in 08 09, no employees just wanted equity. They wanted to be paid as well because they watched all these companies implode. So it became a trend to give away equity in companies. But a lot of Gen Y and Gen X CEOs have gotten very bad at saying no. We've forgotten how to actually say if you want equity, buy it on the stock market or start your own company. And we've started giving away equity when it's not necessarily needed. We did a survey of hundreds of second in commands and only about 5 to 10% of them have equity in their company. 90% of their leaders have been able to recruit them and bring them in without equity. When Brian brought in the former president of Starbucks USA to replace me as COO, it took him 12 months to find her very solid, very seasoned. She was getting about $400,000 a year base pay plus some long term incentives, zero equity. So here's somebody coming into a company to really scale it up and he didn't give her any equity.

So.

So I think giving equity is something you can do, but not something you have to do. What we have to do is get better at recruiting, get better at building a culture that is so strong that you can entice, but you don't have to give equity away to anyone in your company unless you want to.

But do you think that the world has changed where people are expecting more? Because that's just the way there's all these employee shares and everything else. It's so different to that back in the days.

I think so. But I also think that parents have gotten to the point that they keep giving to kids, giving to kids, giving to kids, and then we have a bunch of spoiled kids. It doesn't necessarily make better kids. It's often made these kids that feel entitled, but they don't necessarily have the right to feel the entitlement. We've given out participation ribbons to kids coming in 12th place in a running race and kids haven't learned how to deal with failure. Again, I'm very in touch with it because I run an organization of second in commands from all over the world today. And 95% of our members of the COO alliance have no equity. And these are people running $50 million companies, $100 million companies, publicly traded companies. The general idea is that you give away equity, but in practicality, not very many companies are doing it. The other part is that in practicality, when you give away equity, it's often such a small amount that it's not really worth much anyway that you can actually pay someone a little bit more and retain them and keep them. You can give them more vacation time. Like in Australia, you're used to giving six weeks vacation. For a North American company, if you give six weeks vacation, you're amongst the best in the world in North America, giving. So you create a better culture. It doesn't always have to be equity. So no, I would say that if I wasn't running the COO alliance, if I hadn't got the Second in Command podcast where I've interviewed 320cos I would say I might be out of touch with what's happening but it's not necessarily the trend that we're being sold is. I think Gen Y gotten very good at asking for it. Gen Y, like you get an executive assistant coming in saying, you know, I need equity to join you as an ea. That's because they're getting good at asking for lots but it doesn't mean that it's normal.

Yeah, okay. Interesting to know and glad to know too. So when someone then hires a second commander, what should they be doing? Like what have you been seeing the best practices of the owners. Like what should they be spending their time with to grow the business?

Once you hire a second in command, the CEO should allow themselves to step back, become more visionary, focus on culture. Definitely inspect what you expect. Definitely don't abdicate. You know, don't give all the roles and responsibilities to your second command and walk away from it. You definitely want to have some line of sight, some visibility. Do your skip level meetings, take a look at metrics and dashboards, have open dialogue with your CEO and their direct reports on an occasional basis so that you know what's happening and you stay in touch until you know for sure that everything's working. It's like the little engine that could, right? I think I can. I think I can. You need to know that it's going well, not hope that it's going well. And I see a lot of CEOs will often, oh, they're so glad they've hired the second in command. They just dump everything on their plate. That's when mistakes can often happen. In fact, that's what happened to Brian at 1-800-God junk 12 months after he fired Lonnie because he really abdicated the whole company and things started to go horribly sideways. She took the company from 106 million down to 70. That was because he had pulled away and just assumed that because she had the skills she'd be able to run with it. But I don't think the onboarding was that strong. I don't think the line of sight and visibility was that strong. And culturally there was a disconnect from hiring the right person. She had the skills, but she was too corporate for an entrepreneurial organization.

Wow, that is so interesting. It's so true. I can, you know, I remember some of my own personal experience with my own husband's business where he hired someone and basically just said, oh, you've got all the qualifications and skills, so run with it. Because I Don't know anything. But that's when you lose touch with your business. So. So, yeah, it's just a great highlight to show that even if you hire someone really experienced and skilled, they still need some transition time. So, like, how long do you think that transition time is when you're working with anybody, even in this role?

For sure. A year. I mean, it really takes at least six months to a year for the COO to truly know the culture, to truly know the people, to truly be able to, you know, understand everything, to truly understand that industry. For them to have built trust in their direct reports and the team and the market, it's at least six months to a year for them to. To really, really be able to kind of completely run in sync with you, where they're, you know, they can complete your sentences and they can read your thoughts.

Yeah.

In the first 90 days, the second command that you're bringing into the company should almost be making no critical business decisions at all. In the first 30 days, their job is just to do nothing, to listen, to sit in on meetings, to go for lunches over zoom or in person with every director and every manager, to sit in on customer calls, to go through training programs, to listen in on sales calls, to sit in on business area meetings in every business area, and just to observe and make notes of all the things they want to change. In the second month, their job is to go back and look at all the things they want to change and kind of test their hypotheses for each of those things. You know, maybe they think they have to fire Bob. They go and talk to three or four people. They go, nope, I need to fire Kelly. I need to handcuff Bob. I want to integrate this new software. It's like, oh, nope, we need to maybe delay that for nine months. I think often the CEOs, because they come in with so much skills and so much excitement, and the CEO needs them to do the job, they often start too quickly. It's almost like hopping in a car and driving away and then go, oh, we're going in the wrong direction.

Okay. And so I guess we have to have the budget, you know, the buffer to be able to wait out before this person can kind of generate the return on investment that we're after. Because I think. I think that's the problem. You're paying a lot of money thinking, hey, I need to grow fast, but you can't in this case. Is it?

Exactly. And one of the key things I've noticed as well is often entrepreneurs Hire the second in command before they actually need them. So here's a really good kind of phrase that everyone listening needs to ask themselves. If you don't have an executive assistant, you are one. And for most of us who don't have an executive assistant yet, we need to hire the EA first, then we can go out and hire the second command. If you hire the EA and you can take a lot of the admin off your plate in the early days, it will free you up for often 12 months before you truly need that real good second in command. The EA will take a lot of things off your plate to free up the time for you to spend with your team and on strategy and on the bigger business ideas. Secondly, once you hire the second in command, you need to put a plan in place for them to generate four times their cost within the first 12 months. So if you're paying them 300,000, they have to somehow be able to generate an additional 1.2 million to have enough gross margin left to make that decision worthwhile. By putting a plan in place to do that and then executing on that plan that you often get value at the time you need it.

Yeah, that's interesting. Because I'm in the VA business, I help people hire va, so it's very hard for me to understand how founders don't have like an assistant or va because it's just kind of like part of what I do. And I have come across companies that are a little bit bigger and the founder themselves don't have anyone to kind of like support their role.

You know why it often is? It's often because the CEO has lost sight of what matters in their life. And the only thing that is feeding them with the dopamine rush is the idea of being busy and building their company. They're not in love with their spouse, they're struggling with their relationships, they're struggling with themselves. They've lost sense of their hobbies and activities. They don't really do much with friends, so the only thing that makes them feel good is work. So they would rather be busy and on that hamster wheel feeling like they're productive. Because if they delegate all this stuff, they're like, what am I going to do with my time? And instead of actually knowing what they would do with their time and wanting to have stuff to do with their time, whether it's work on the, on the bigger parts of the business or spend time growing people, but they don't know how to grow people. So they'd rather manage email like they're avoiding stuff often it's a real skill for them to be able to fill their time with productivity or a better life.

Wow, that is so interesting. I never thought of that. And so this leads me to now that you've worked with so many, you know, even founders as well as second in command. You know, what is true happiness in in life, in business? Sometimes we stand off starting a business for freedom so we can be happy. And then like you said, we're caught in this hamster wheel, we have more time, then we go and start another company or then we're going to try to keep growing, growing that we're always busy as founders. So what's your piece of advice around, you know, a happy life?

We only start a company for one of three reasons. Either to give us more money, to give us the freedom and time, or to kind of put a stake in the ground or a flag in the ground to say that we did it right, to have that sense of accomplishment, to feel good. Well, once we've got the business going and up and running, we've done that, we've got the flag in the ground. Once we're making enough money, we've got enough money. Like we can always want like a bigger plane or a better vacation or whatever, but we've got enough money so we know we've got that. And then it's the free time. But if you don't have a bucket list, if you're not chasing down goals, if you're not doing things for fun, if you're not spending time with your kids and your spouse and your hobbies, then you often don't try to capitalize on that. And I think that's where entrepreneurs can really have that well rounded life is to remember that it's not just about business. At the end of the day, none of this actually matters. Like this is just what we do to make money. We're all going to die. Like none of us are getting alive, right? So it's by reconnecting with your sense of self and your hobbies and your passions. And it's why my wife and I sold everything two years ago and we travel full time, is we want to go explore the world, we want to spend time with friends. I work very hard on my business when I'm working and then I completely disconnect and unplug. I've intentionally filled my day with fun and with friends and with activities so that my business has purpose. And the other part is we don't want to go to a cocktail Party and listen to our friend who's a lawyer talk about being a lawyer. We don't want to listen to our friend who's a doctor talk about medical. We don't want to talk to our friend who sells insurance talk about insurance. They don't want to hear you talk about your business like it isn't your hobby, it's what you do to make money. And for all of us who go, well, it's my hobby. Well, guess what? I don't want to hear about your hobby. You don't want to hear about my hobby? Right. I don't want to know what you do for. I don't want to hear what you hiring VA's. You don't want to hear about me and my co alliance. I want to know what are you doing and where are you going, what's cool in Australia, what have you seen, where are you traveling to, what are you learning about, what are you exploring, what's your favorite movie? I want to know that a lot of entrepreneurs have disconnected from that and that's what's sad.

And what led you to deciding a few years ago, okay, I'm going to intentionally design my life? And what were the first few steps that you did so that others could go, okay, how do I get started into this journey?

So I had written a vivid vision for my business years ago. In fact, I helped Naomi Simpson with Red Balloon Days write hers back in 2010. We used to call it a painted picture. And the idea was describing your business in its finished state three years from now, describing every aspect of your business. So I thought, what if I did that for my life? What if I described me as a dad, as a husband, as a friend, as a lover, as a person in my community? What am I doing for fitness and for fun and my hobbies and for self growth? And I wrote a four page description of me three years in the future. And when I started to chase that down and share that with people, I started to make changes in my life. There's people in EO that that saw me 12 years ago. I weighed 40 pounds heavier than I do today. I was drinking, I was smoking, I wasn't healthy. Now I'm in the best shape of my life. I'm happy, I'm doing some cool. So then my wife and I wrote a vivid vision for our marriage. What are we doing together? What are we doing? Like, so it's having these future state goals and we share those with everybody. Then we started writing bucket lists. We both have a published bucket list that we share online with 150 things that we're chasing down and crossing off our list. We also keep track of all the things that we've accomplished on our list. So I think it's those things. And it was by realizing that I didn't have anything to talk about other than work. And once I did, I became more excited about life and I think people became more excited about hanging out with me.

That is so cool. We're very aligned because I too have designed my life through that just by working with a coach. And I even titled myself as a semi retired founder now because I realize I work kind of half time and half. Like I say to people, I'm still busy, just busy doing other things like family and travel, rather than just. What I found is I started starting more businesses and then I started to feel burnt out because I was wearing the hats of a startup again. It's because you have free time and you have more ideas to do.

You know who one of the best role models in the world that this is is? Richard Branson. I mean, we've all seen him having so much fun, letting his hair down, kiteboarding, playing tennis, going to activities, hanging out with his kids. He's just having a good time, wearing costumes, being silly, and growing these massive companies.

So while we're having fun, what do we need to make sure that our second in command doesn't get burnt out, has all the support and resources.

Our job as the CEO is to shine the spotlight on the CEO to make them look good, to make sure they're taken care of. Very similar to our spouse. My job as a husband is to care for, support and, and help my wife to have her best life. Her job is to help me while the CEO's job is to shine the spotlight on the CEO, to help them remove obstacles, make them look good. So our job is to help them and support them and be their confidant and remove obstacles and help guide them, both of us, with each other.

With the second in command, are they responsible for everything in the business? Meaning like you can now just throw, you know, whatever new idea or insight, and then they just kind of digest and have their own executive team underneath them?

It depends. It's like, is my wife responsible for cooking and cleaning and laundry? No. She hates cooking. She likes cleaning. So she does the cleaning. I do the cooking. I like going to grocery stores. She hates grocery stores. So what's my wife supposed to do? Whatever she loves. What am I supposed to do? Whatever I love. Oh, wow. We found a partner who loves to do the stuff that we don't. So the second in command is supposed to do the stuff that the CEO doesn't want to do and isn't good at, which means you have to recruit someone who loves to do the things that you don't. As an example, I did not run IT and finance, but 70% of our COO alliance members run IT and finance. The other 30% don't. Some of the CEO alliance members run sales and marketing, some don't. It's all dependent on what does your CEO entrepreneur do? What are they good at, and are you the match to them?

Okay, so this leads me to realizing that, so we're still wearing the hat of a CEO. So one day we don't want to wear any hats and kind of like have a. A business that is like an ATM machine almost, or you're like an advice. Only then you would need a CEO and a CEO that can work hand in hand because. And they work.

Yeah, because the CEO has to be in charge of vision and culture and strategy. So if you're going to move more into a chairman role or like an owner role, and you're going to have the business running it for you. Yeah. You need someone to take that role for you, and that could be a CEO or a president. It is very rare that a CEO moves into the CEO role. It's more like Sheryl Sandberg, who is the CEO for Facebook for 16 years, didn't move into a CEO role. She didn't want to be CEO. Right. It's like, I don't want to be a wife, and a wife doesn't want to be a husband. I just want to be a good husband. Right.

Okay, I gotcha. Ultimately, like, with everything you're doing, like, what do you want the world to remember Cameron for?

I'll think about less of what I want the world to remember me for. And it's more. It's. What do I want my kids to describe me as? I don't want my kids to say what daddy does to make money. I want my kids to describe me as a dad, as a husband, as a father, as a friend. I want them to talk about the fact that I love traveling, that I go to Burning man, that I like music, that I love cooking. I want them to talk about the fact that I loved exercise and loved skiing and golf and tennis and vacations with them. That that's kind of what I want to be remembered for in terms of the rest of the world. There's too much out there for me to focus on, but my kids and my spouse. And then I also want to be able to look in the mirror and like who I see looking back at me. That's probably the most important thing that I worry about as well.

Be very frank in what it is you need the job description, the geography, the experience, everything so that they're not spinning their wheels and wasting time giving you candidates that are not what you wanted or needed. Also, like, be open to their input because they're the experts, right? If you've hired them to help you, let them help you.