Mastering Employee Management and Business Growth with Cameron Herold

You're not going to get a pay raise for doing a great job. You're not going to get a bonus for hitting great results. We're hiring you to do great results. We're hiring you to hit these bars. If you hit them, you get to keep your job. So it's just setting a very clear expectation of what we're looking for. And if you spend your time at the leadership team level coaching and growing and mentoring the A players, instead of spending our time with the bottom people, the A players attract more A players and then our job is to catch them doing something right. Right following the one minute manager and situational leadership. Because if we wait for them to fail, we'll keep seeing them fail. But if we only see them succeed, if we work on helping them succeed, if we work on, on them being successful, they will.

I recently acquired a company and I'm in the midst of systemizing that the same way I have my previous companies. But I now have noticed that in our space due to Covid and new people's ideas of travel, our business requires 14 days, 10 to 14 days for people to come and be present with us full time. It's, you know, 60, 70 hours a week. So it's very intensive. And I just would love more wisdom on acquiring competitors. We already are placing kind of loyalists, people who have been through our program and know our mission and our vision very well. We have opened other schools, we have done the gone down the whole franchising path. But I'd love to hear ideas for pitfalls, areas we might be missing. Because I'm not the smartest guy in the room.

I worked for the company years ago or Coach Company who did 21 acquisitions in three years. And then I also was doing the acquisitions for Gerber Auto Collision and Void Auto Body. Gerber went on to become the largest collision repair chain in the world. $2 billion. So in, in doing the acquisitions, we noticed a couple things. More often than not, the seller wants to go to the golf club and tell their buddies they sold for X. They have a dollar figure in mind. And most of the time and waste and churn is spent in all these negotiations for the deals that never happened. So what we learned to do was to give them a price that was reasonable but terms that were very favorable for us. And most of them took the terms and took the price and ran. So what we tend to price it at was roughly 1 times revenue and 5 times EBITDA. But we took the average of 1 times revenue and 5 times Ebitda the average of that, we would pay them that price. Day one, they would get 70%, we would finance from the bank, they would take 30% of that purchase price over three years and equal quarterly installments. We let them walk away day one in more often than not, we didn't want them to stay, nor did they really want to stay. So they were thrilled. There was no earn out. We didn't need the earn out. What we wanted to do was actually do the deals as fast as possible for reasonable prices and for really no money down. And then we could get rid of the waste, get rid of their finance teams, get rid of some of their marketing people, and really turn the business cash flow positive. Usually day one, we often got their person that they were like, yeah, this guy's a bit of a pain in the ass because he's always coming up with ideas. That person was often the best person to put in charge because they were the ones that wanted to change things. Second thing was on the integration, we never worried in the first year about changing the name. So we would have like our. If it was Boyd Auto Body, you know, it would be like Fred's Autobody, a division of Boyd Auto Body, or Fred's Autobody, a division of Gerber Auto Collision. For the first year. Second year, it would be equal. We would literally change the signage and it would go equal or change the banner on the website. It would be equal. And then on third year, their name would completely disappear. What we were worried about in the first year was integrating them into our culture, into our core values, into the history of the company, into our core purpose, into our bhag, getting them aligned with our vivid vision, really injecting them with a cult. And then in the. In the second and third quarter of the first year, it was getting rid of any of the people that were toxic, that were cultural cancers, that weren't aligned with that. And we looked at integrating systems in third or fourth quarter of the first year. We didn't worry too much about the systems in the beginning because once we had the people aligned, once we had the culture impact with people, they would then say hell yes to adopting or taking into the new systems. What we found was that anytime we pushed to integrate systems too early, we got the pushback of people because we didn't really have the trust. And it was very similar to a blended family where, you know, the husband's got a couple of kids and the wife's got a couple of kids and they merge and they try to parent the other kids too early. Before they have the trust in the relationship with those kids.

Beauty of putting the person in charge who wants to make changes and has lots of ideas. The direct idea of 70% upfront and 30% of three years, no earn outs.

I.

How would you change that? If the primary, like the primary thing I'm buying in these companies is the employees and the owners are employees, the owners are active, working employees, how would that change for earn out in that situation for you?

I still wouldn't keep the earn out. I would still probably get rid of the owner because once the owner's got most of their money, they just become a different human. Right? Yeah, they just don't want to be there. Right. So like now you can put in place a consulting agreement where you can pay them 350 bucks an hour or 500 bucks an hour for some help, but you don't want them, you want their key people to stay. So I would price it that way and with the earn out, just run it better. Like just, just get in there and get focused. Here's the key. If you can do nine out of the 10 acquisitions that you want to, because the terms are so favorable for both, versus trying to do 10 acquisitions and only ending up with one, I would rather do more faster. The other thing is we found bankers that were small regional bankers that you could have lunch with the president because the president of the company, the president of the bank, understands the entrepreneurial initiatives more than a big banker does. So when you can actually sit down with a banker and have lunch with them and show them your vivid vision, show them the model, they go, I get this, this is cool. They bank those things. They'll often consider the vendors 30% as equity in the deal as well.

Question on the hiring process. So we've actually spent an obscene amount of money on recruiters lately for mid tier senior level players. So directors and managers, four of the five, I think are not working out currently. You know, I look at the data and, and, and that tells the story and they're just not hitting the numbers that they need to. Can you help us understand how to hire more intelligently? So we've got a higher success rate in terms of, you know, we've, we've used recruiters. I mean, as a last resort.

The first one is with your job postings. Get a job posting written for the role that brutally polarizes the people who read it. So 50% walk away and go, there's no way I would ever want to work for a company like that. Which makes the other 50% go, oh my God, that's exactly who I want to be with. If you guys are ruthless and you're okrs and you're driven and you're work hard, play hard, but results first, then make that a point. If your culture is, you better live the core values and if you don't, your ass is walking out the door. Make that brutally honest. I've even sworn in job postings before because I swear a little bit and I really don't want somebody to join and find out three weeks later that I swear. So I'll say in a job posting, working with a slightly add, a little bit stressed, you know, manic depressive CEO. Oops, there's my first F bomb. Oh, well, you'll get over it. And I've had people that'll reply back going, I would never work for somebody who swears. Delete. I can't believe you swore. Delete. I had somebody who is recruiting a head of engineering for a pretty large tech company. They create the cardiac monitoring equipment that's on the space station. So they actually are on the space station and at Everest base camp. And they wanted their head of engineering to be kind of like their culture, which is like, go to the beach and go surfing too. So they wrote in the job posting, if you show up for an interview wearing a pocket protector and a tie, we're not even going to let you into the interview. You better show up with board shorts and a T shirt. Well, some of these engineering people were like, I can't believe you'd say that. Delete. Others were like, holy shit, I may have just found the holy grail. Like I get to be an engineer and go surfing. Yes. Second part is get your copywriters to rewrite your job posting so you polarize even more. Next one is raise the bar on pricing, right? If we pay peanuts, we get monkeys. I don't love the whole incentive packages and bonus packages because what tends to happen with bonuses and incentives is the people are happy for two weeks of the year, but they're not happy for the other 50 weeks of the year. And often as leaders of the company, we're making enough money, we can take out more money, we can do anything we want, we can go on all of our trips. But if you're a mid level or a normal employee, you need every paycheck to be able to just kind of pay all the bills and do everything. So what I like to do is pay them fairly and really require them to to hit bars. One of the things that I Put in the job posting and in the interview process as well, is you're not going to get a pay raise for doing a great job. You're not going to get a bonus for hitting great results. We're hiring you to do great results. We're hiring you to hit these bars. If you hit them, you get to keep your job. So it's just setting a very clear expectation of what we're looking for. Next one is to start one by one firing any of the toxic underperformers in your company, because it really sends a signal flare over the bow. And everybody gets the point really quickly that we're just not going to tolerate those low results. And if you spend your time at the leadership team level coaching and growing and mentoring the A players, instead of spending our time with the bottom people, the A players attract more A players. So that's the first kind of ideas. Second part is the bonus structure idea. And this is how you can replace executive search firms very quickly. Imagine if you put in place a recruiting bonus for your employees. That was $200,000. For any employee that finds us somebody who joins as a VP of sales, we will pay you four or 200 grand. But it'll get 40,000 a year for the next five years, as long as you're both still working for the company. So it's paid out at month 12, at month 24, at month 36, at month 48, at month 60, it becomes a retention bonus. The person who finds that person's not going to quit because they're getting another 40 grand a year. Your maximum exposure is probably more like two years, because most people only stay for two years in companies because they're Gen Y and they're flipping. We're teaching them to, let's say you're hiring a $100,000 person. Make the bonus 50 grand, 10,000 a year for five years, again paid at month 12, 24, month 36. When you put bonuses like that in place and you give your employees the swipe files to share on social media, to share on Facebook, to share on Instagram, to share on LinkedIn, some images and a link to the job postings, you'll find that your internal team can become some of your best recruiters.

We don't like to replace people. It takes forever to find somebody. It's expensive. So we'll leave a toxic underperformer on the MO. And how do you move past the fear of letting them go and having to step back into a role, having to backfill that and the Costs associated. And how do you identify a toxic performer?

How do you identify them are really the ones that are routinely breaking the core values, the ones that you're constantly either frustrated with at the leadership team level or frustrated with them one on one. You just know, right? When you have doubt, you have no doubt. And I think inside of our company's core values, that's why we should limit them to four or five core values. And we can have others that are aspirational values. But the ones that we're going to fire people based on are the core values. The core, core, core. They should be simple to understand phrases, they should be very easy to understand. And they should be the ones that were willing to fire people if they break them. And I think that's the starting point of when we know that they're the wrong people is when that stuff is happening. So the test that I work with people on now is because they'll always give me the reasons why they can't do it. I'm like, if you, if you knew that Bob, you know, who's somebody, Brian, that you, you don't have to say, let's say it's Bob. And you know, you gotta fire Bob. If Bob got hit by a truck right now, like if your phone rang, what's up? Bob's dead. What the. He was going to Starbucks. He's dead. He was hit. He got hit by a car. You'd have to replace him because he's dead. So you'd pretty quickly make a list of the top five things you have to do to replace them. Because you don't have three weeks. It's like, what are we going to do? So make a list on a post it note of what you're going to do to replace Bob and then fire Bob today. Do it nicely, do it with integrity, make sure that they're aware, give them proper severance, help them get back on their feet, get them out of placement, whatever, but start working on your post it note list and get moving. The other thing is, is to remember, like, you know, if you watch hockey, it's amazing. You watch these hockey teams when you got five players and a goalie and then they go shorthanded because of a penalty and they score a goal with less players, your current employees will rally because they would rather not have, you know, Bob Nicole around as well, right? They'd rather just have, you know, themselves and their, their core people sometimes.

From my point of view, the issue is Brian's like an expert level marketer and I feel like he really needs a cmo. But then I'm looking through the budget and I'm like, I don't think we, we have the pocket for the type of player he wants yet because the bar is so high. So I feel like maybe the expectations there are where we come into an issue where we're kind of churning through marketing managers and directors of marketing when we ultimately might need a stronger player. I don't know. Can you help me get through that barrier, Cameron, or what do you think about that?

Is there a specific example of where we are with it?

Yeah, we've got declining SQLs. So the 1kpi is SQLs. They're declining month over month and you know, they compose about 16% of our total new revenue every month, which is embarrassingly low as where it should be in terms of our targets.

First off, we have to go back and look like are the numbers that we have reasonable? Right. Or are we being unrealistic? They're reasonable and we have the right core values person. Do they need to be maybe in a different seat? Right. So we might have somebody who lives the core values, leads the company culture and they're not getting results. Those are tougher hires. Often we don't have to fire those people. We can often put them into a different seat. I had somebody one time who was doing a pretty good job in the customer service area, but not a great job and we were never really going to be able to get them there. And I sat down with him over coffee one day. I'm like, what do you want to do? And he goes, I just really want to work in finance and accounting. I'm like, oh my God, kill me. Like you actually want to work in accounting? He goes, no, I went to school for accounting. Like, I'm only doing this customer service job. I'm only managing our customer service reps in the call center to pay for my education going through accounting. I'm like, you know, we have the accounting clerk, a payroll clerk open in our role. He's like, oh my God, I would die and go to heaven. So we move the right person into the right seat and they excel. That's something to look for as well. And then secondly is sometimes if we have the core values people that aren't really getting the results, it's can we coach them, can we train them? But give them the 30 days, give them the 60 days and really coach and train them. And then our job is to catch them doing something right. Right. Following the one minute manager and situational leadership. Because if we wait for them to fail. We'll keep seeing them fail. But if we only see them succeed, if we work on helping them succeed, if we work on them being successful, they will. And if they know, look, you need to improve in these areas, it's not working out. If you don't improve, you're going to get fired. You tell them this on a Thursday and you say, I want you to take tomorrow off, not because you're getting punished, but to go home and think about it. And I want you to think about it through the weekend and come back Monday with what your plan is to start getting these results. What's your plan to turn these things around. And as part of your plan, what do you need from me? What do you need from the leadership team to help you be successful? If we like your plan, we'll keep you. 20% of those people come back Monday and they're like, you know what? I'm out of here. Because they don't want to change. They don't think they can change. The other 80% come back, and most of them have a pretty good plan. Sometimes we tweak it, sometimes we add to it, sometimes we just go, yep, let's do it. From that day forward, for the next 30 or 60 days, though, we have to be actively engaged in helping them hit that goal. We have to be cheering them on and praising them and loving on them, because then they'll be successful. But if we just keep pointing out for the next 30, 60 days everywhere they're failing, we should have gotten rid of them today. So you just kind of went over a PIP program. Yeah, a fairly entrepreneurial pip. Right, understood. The key with the per. With the personal improvement plans is we have to want it to work. Otherwise, just cut it. Now. It's kind of like a husband and wife or a couple that are going to go through counseling. If both people don't want the relationship to work, it ain't going to work. You have to go into counseling. Both of you want it to work and both working better together. Otherwise it's just going to blow apart in a pip.

We have the same thing here. Quick question on that. Do you, as a CEO, do you involve yourself in that conversation or do you. I've never been involved in a pip. We've given out many, but I haven't been there for them.

No. You have to make sure that your team knows how to run them and your team is doing a good job with them. And you probably want to jump in and see how the PIP is going to work and poke holes around it. Just, you know, it's a system that we have to know. Right. And if they've never done it, let's find somebody who knows how to do it to teach us. So we have a simple one to run with. Try to avoid the ones that are the big complicated bureaucratic.

So recently we have an employee who is a key employee who has cancer and is going to be out quite a bit. And so we're obviously working on a strategic crossover training plan and really trying to operationally line out her processes and everything like that to ensure success. She will be out on fmla, but she will also be capable of working. I'm just curious if anybody has had an employee who is a key employee who is out and obviously we're most focused on her health. We don't want her to feel stressed about work and truly she's stressed about work. She's so scared. So just any, any guidance surrounding that would be awesome.

First is, is to remember that and I, I do this at every of one of our in person COO alliance events. But I get everyone in the room to write down one thing on a post. It note that they're really struggling with one thing they're struggling with personally with a spouse or a partner or their health or financials or kids or whatever. And then they kind of throw them into the middle of the room, they crumple them up in a ball and they throw them into the middle of the room. And I talk about how to remember that everybody in the room is struggling with something that it could be a cancer or it could be a mom that's sick or a dad that died or a relationship that's breaking up or a kid that's struggling with school or sexuality or money issues or whatever. We can't prioritize cancer as the, the most important thing when every single person in our company is also struggling with something. So we have to really be empathetic to everybody is something. Secondly on the, on the, the, the covering people. Like in Canada women get 12 months maternity leave. So a woman who has a child can leave the company for 12 months and you legally have to give her her job back after 12 months.

I mean we are definitely going to look at all that and cross train. She's very open to everything so she's not like holding everything back. She, she even said I don't care, you know, if I come back and don't even have the same job as long as I get to work here. So she's an Amazing cultural fit. She's really good at what she does. But obviously at this point in time, we just are working to find the right people to help cross train. She has an employee in the Philippines, so that's really helpful, but I just didn't know if anybody else had any other really thoughtful things to say about it.

Like Heather said she is a key employee. And kind of before we found out about this, we were in talks of coming up with some sort of a handcuff idea specifically for this person. Like, what can we do to just really showcase how much she means to us as a company? And then all of this happened. So it's kind of that level up a little bit of like, how can we help her? But simultaneously we also want, you know, we want her handcuffed.

What I call it is the God forbid they ever quit people, right? They're in the very top quadrant. So if I do a simple matrix, a four box, and on the Y axis, the up and down axis, I have low results at the bottom, high results at the top, and across the bottom of the X axis, I have low core values to the left and high core values to the right. We're talking about the people that are like a 9 or a 10 in core values and 9 or a 10 in results that you handcuff them to your company. It's like, God forbid they ever quit. So people have talked about golden handcuff programs. A program doesn't work with individuals. Individuals are very, very different. It's like, how do you please a partner in bed? It's different for every partner. I mean, there's, there's some rough guidelines, but then there's some very, very differences as like, and it's interesting, as people, as we get older, you realize like how different other humans are in the bedroom. It's like, it's like there's no guidebook, right? Well, it's the same as a golden handcuff program. You can't have a program that's successfully going to handcuff your key people. They all have very different intrinsic things that'll satisfy them. For some, they want flex time. For some, they want more vacation time. For some they want more responsibility or less responsibility. Maybe they want more visibility with the board or more visibility with the press. Maybe they want you to buy a company and let them run it or spin off a division and let them run it. Or maybe they want to work on their executive MBA part time while they're doing it. So it's so different for each employee as to what they're actually looking for. So what we have to do is understand the needs and our intrinsic needs of our people and how can our company serve them in the, in the Chinese strategy world, it's called the ladder. In the roof, how do you give them a ladder to be able to get up on the roof? What's the ladder that each of your key employees need and how can you make your company that ladder and then you take away the ladder so they can't get off the roof. But by the way, if you're not looking to leverage AI in your business this year, if the rate of change outside your business is greater than the rate of change inside your business, you're out of business. Do you know that you can take an eight page legal agreement or a 20 page legal agreement, copy and paste it into chat GPT and say, please reword this as a one page summary written for an eight year old. Boom. You know when you delegate something to an employee, you delegate and you say, okay, go back and try it again, make it stronger, make it more, whatever, oh, it looks good, try this, try that, tweak it this way. We have to go back and forth a few times, right? It's learning the different prompts with AI to help it do what we want it to do. And it's also understanding AI and what it can do. Or it's us realizing, I'll never learn this, but somebody else could look at my business, look over my shoulder and see how we could leverage things to make stuff go faster and go leaner. But if you don't, your competitors will. There's an argument today. I was listening to these four brainiacs from the Silicon Valley the other day and they said there's an argument that exists that not a single job that exists today will exist in 2040. Not a single job that exists today. So the business is changing, right? If the rate of change outside our business is greater than the rate of change inside our business, we're out of business. It's adapt or change. It's adapt or die. How do we take a website that is just not producing for us and we make it produce a million dollars in sales a year for us? I would rip off and duplicate. I would look at other businesses in other industries that have websites that are producing and I would do what they're doing. I would look at Tesla and I would look at Apple and then I would compare them against Ford and Dell. Like if you look at Tesla and Ford or Tesla and General Motors, it's obvious why why Tesla's doing what it's doing. If you look at Apple and you look at Dell or you know, any other computer company, it's obvious why. Like, I bought $120,000 Tesla Model S seven years ago, thinking I customized my car and I like, and I'd never driven a Tesla and I bought it off a website and it came to my house. I was telling the CEO of Sprint, you are crazy to have stores where people have to go buy phones. The amount of OPEX and overhead and pain in the ass factor. Like, just make it easy for people to go online, buy the phone, get the thing, make it done, and get rid of 95% of all the other shit that you sell. I think we have to look at that like consumers don't want the same, you know, so, so go look at that, George. Look at, you know, it's, it's the same for restaurants that just work, right? Keeping it simple. Make the user experience high. Better photos, better marketing, better. Better captions, better landing pages, better incentives. Where do, where do we find the person that understands that and, and, and could put that together? Because we've had somebody who came in as a website manager and really he was a programmer, but he felt he could do the job. That wasn't the case. Maybe he was a good programmer, but didn't understand business. It starts with us understanding what we're looking for. So it's kind of like the Cheshire Cat who said, if you don't know what you're looking for, any road will take you there. We need to be very, very clear on what we're looking for in a head of marketing or a website person. And if we're clear, and then we say we want somebody who can design an online experience, an online store with this kind of feature and this kind of interface and this kind of look and feel. Show me the five others you've produced. But if we're not really clear on what we're looking for, then anybody shows up that way, right? We need to, we need to explain clearer what we're looking for. Instead of saying, can we make what we have better? Sure. I don't know what that better means. Does that mean faster? Does it mean nicer colors? You know, it's that kind of stuff, right?

So we, I'm very much a marketer from the old school direct response, you know, a la Dan Kennedy and Russell Brunson. You know, it's worked very well. We built our entire business on the backbone of webinars and direct response lead magnets. What's your opinion on trying to go upstream in terms of client size and more enterprise? You know, typically that targets the SMBs, people that are responding to direct response ads and webinars and whatnot. How do you. Have you found any great strategies to go upstream in terms of more enterprise level targets?

It goes back to the core of who you are as a company, the kind of core purpose of what you're doing, why you're doing, the kind of the essence of what your DNA is and who do you best fit with and resonate with. I don't personally work well with the corporate world. I don't understand the corporate world. I find it to be a longer sales cycle. I don't necessarily like the people that are in the corporate world, so it doesn't fit for me. There's other people that, that don't work well in the entrepreneurial world. Right. I could just. All it has to go back to what are you building? Why are you building it? What's your DNA like? Why does it serve you? The one experience I will share is that the grass is not always greener on the other side of the fence. Right? It's kind of like if you want your grass to be green, water it. There's companies out there that like Walmart makes a ton of money marketing to poor people and making very low margin on like, okay, and then you know who would be the opposite of Walmart that makes a ton of money marketing to super rich people, right? Well, people that sell private jets. So it's just more who are you, what do you stand for, what do you want to be and where does that right fit? I think is, is what I would focus on, but I don't think the grass is always greener. Every, every niche, every client type, there's going to be different. The different pain in the ass factor, I call it the PETA factor.