The only way to truly know what's happening in your business

So let's say you're on the board of a company or you own a company and you don't work in it. You're running and doing kind of oversight of that business in the way most businesses do. You have a board of directors, you're having owner CEO meetings, and let's say you go through quarter by quarter, month by month, and you have these meetings and something kind of feels off. And the thing that's off and the thing that has you suspicious is the numbers that you're seeing don't tend to match the story of what's going on and what the CEO and the management is telling you. And look, by and large, CEOs are going to tell you things that kind of match their perception of what's going on. And like most employees, if you ask an employee how their job is and how they're doing, they'll tell you they're doing a good job. Most people don't want to be doing a bad job. They think they're doing a good job. And CEOs will tell you a story and tell you a narrative that things are going pretty good with the company or that things that are going poorly are just bad luck. So you'll hear that narrative. But then you look at it and you say, well, man, the numbers don't match what's going on here. The numbers are telling me this company isn't doing very well. The KPIs aren't good or they're nonexistent. And the stuff that's coming in from the accounting department and the finance department, those numbers may not even be like if they're on time, like they tell a different story, which is the company's not doing well, might be shrinking, might be losing money, profits might be going down, expenses might be going up. Like all these things, like you'll look up and say, hey, like the story and the perspective I'm being given in the boardroom doesn't match what's happening in reality, right? In something that can't be told as a story, which is what the numbers say. I've been in this situation before, even to the point where one of the things I do is annually I'll do reviews of CEOs in the portfolio. And if I'm on the board of a company, we'll go in and I'll talk to the CEO, I'll go in and talk to employees, I'll go in and look at the numbers and all this kind of stuff that's going on and get people's feedback to the performance of the leadership and of the CEO. And I've been in, in situations situations where the numbers have looked terrible, the numbers have looked underperforming, the story in the boardroom has been, hey, we're doing pretty good. And I'll even get feedback from the other employees that the CEO is doing a pretty darn good job. It's fascinating. And so here you are, or in my case, here I've been, on a board where you look up and you say, hey, like, the numbers say one thing and everything I'm hearing otherwise is saying a different outcome. Like, These things don't match. Like, there's got to be something going on. And I've come to the conclusion, when you get to this point, there's only one way to handle that's, that's like foolproof, uh, and that's to actually get you as the board member or owner out of the equation. And the way I've seen this done, and the way I've done it myself, is you actually go find somebody that you trust who's an independent third party to go into the company and figure out what the hell is going on, what is really happening on the ground, and what is the true story. Because the numbers are telling you one story, and the management's telling you another, something's happening and you got to figure out what it is. Learn this technique by watching private equity firms. So if you look at private equity firms, they tend to have these people that are called operating partners. And operating partners are basically operational specialists. They are different than the deal guys and girls. So those are the folks that put together the deal, supervise them. They're the spreadsheet jockeys. They're in there kind of figuring out and doing the market analysis strategy and all that kind of stuff. They're the ones with the MBAs who basically Well, they don't operate. They tend to do strategy and capital deployment. The operating partners are different. They're longtime operators who have been in the trenches and worked inside of companies, oftentimes as CEOs. So they know what good looks like and they know how operations should be done inside of a business. And those are the type of people that could go in and really suss out if the business is being run well or it's not being run well. And so finding an operating partner like this, somebody with good communication skills, good ability to understand and listen carefully of what they're hearing from folks and look at the data and look at the details of stuff and get in a room with somebody who's an employer or whatnot and actually hear their truth of what's going on. Finding somebody like that, and the model has been that I've done is you go and you send that person in and they'll embed themselves in the company for a month or two months. And it usually doesn't even take that long to figure out what's really going on when you're in this situation. And the people that are good at this, they have the ability to go in and build trust with folks because frankly, they're trustworthy type people with good personalities who are wise. And also that runs into the other thing you tend to see here, which is employees, when given the opportunity, they want to do a good job. They want the company to win. And if you're in this situation, oftentimes the company's not winning and it shows in the numbers. And these operating type folks, whether you call them a consultant or an operating partner, they're the ones who can go in, embed themselves in the company, and the employees want to help them because they want to win. You could say like, hey Michael Girdley, you're the, owner of the company, or you're on the board, like, why can't you go in and do this? The thing I've learned, which is— could just be me outing myself as a terrible leader that people don't feel comfortable talking to or don't have trust in— but my thesis is, and the thing I've learned, is that you as an owner, or you as the boss of bosses, uh, create a really tough situation for people to open up and for details to really be shared and for trust to really be had. Because oftentimes people who are intimidated or scared of sharing something that might get them in trouble with their boss, because really these CEOs and these bosses, especially the ones that are maybe vindictive or the ones that operate like tyrants in their company, like they've put fear in their employees. If that person shares something with the chairman or the owner and the CEO finds out about it later, man, those CEOs have a ton of power to really basically, well, not only just run those people outta the company for sharing something and being disloyal. But secondarily, like, they can hurt their chances at getting their next job. I mean, there's a lot of damage people can do to people's careers, unfortunately. The vast majority of employees, unfortunately, in the way kind of Western hierarchical business structures work, are incentivized not to share stuff like this. They're incentivized to keep their mouth shut, keep collecting their paycheck, and keep going. And not all cultures are like, the US in this way, but it's a situation that, well, it's a reality and it's a real problem. Man, I've run into it more than once. Like, it's just rough. Besides this advice that maybe there's stuff that you as an owner or a board member just can't learn and you need to find somebody else to go learn it for you. I think the other advice and learning is the moment you suspect there's a gap between what's happening in the company with what you're hearing from reporting and from leadership, that's when it's time to go put somebody on the ground. You don't wait until some employee comes and whistleblows. None of that stuff. The moment it smells funky, that's when you as a board member should jump on it. Reason why you want to jump on this stuff aggressively is by the time you suspect it, it's pretty far along. That's always the case. You're operating as a business owner or as a board member with limited information. So you're having to piece together the hints and stuff that you see. And the thing that's really good about piecing those things together is your gut. And your gut and intuition are something to be trusted in this situation. And look, worst case, you're out a bit of money and you've paid somebody to go in and find this stuff, and it's not as bad as you suspected. But best case is you discover it is just as bad as you suspected, and it's time to make a change in the business and in leadership. And the good news is the sooner you make that change, the easier it is to dig out of whatever hole you're in, because the deeper that hole gets dug, man, the more painful and the longer it takes to dig out of it. That's what I know. Thanks for being here, and, uh, we'll catch you next time. Let me know what you think in the comments below. Bye.