Street Smarts

by Norm Brodsky

  You might ask, why is it so important to enforce the culture? Why can’t different managers be al owed to have different management styles? The answer is, they can as long as they al operate within the same cultural boundaries. You should never have more than one culture in a company. If you let managers create their own subcultures, you’re inviting chaos and corporate politics. The inevitable conflicts wil create communications problems, morale problems, coordination problems, and ultimately turnover problems. Employees wil try to switch to the department whose culture they like best. You’l wind up with competing cultures, and you may lose some good people. In any case, a huge amount of time and energy wil be wasted internal y that should be focused external y, on making sales and serving the customer.

  As the person in charge, it’s your responsibility to make sure that different departments don’t have different cultures. In some circumstances, it may be your most important responsibility. It’s also one you can’t delegate. You can let another person play a critical role in defining the culture, as I did with Elaine, but someone has to enforce it, and you’re the only one who can. It doesn’t matter what kind of culture you want. It just has to be consistent throughout the company. Although there can be nuances in different departments, everybody needs to have the same understanding about how people can, or should, behave.

  That’s not to say al cultures are equal. I’ve come to appreciate that certain types of cultures are more efficient and effective than others.

  Specifical y, I can see that Elaine’s type of culture is better than the kind we had at Perfect Courier. Besides, who am I to disagree with my wife?

  Ask Norm

  Dear Norm:

  How enforceable are noncompete agreements, and what’s your opinion of them? I’m an engineer for a converting company and have thought many times about going out on my own.

  Victor

  Dear Victor:

  I don’t believe in noncompetes, and I don’t have them. They’re difficult and expensive to enforce, and I don’t think you need them if you run your business properly. That said, I think people should live by the contracts they sign if the contracts are legal. In the case of noncompetes, that’s a fairly big “if.” Courts tend to interpret these contracts in favor of the employee because they don’t want to prevent a person from earning a living. Obviously, you should get an opinion about your own noncompete from a lawyer.

  —Norm

  Pennies from Heaven

  Some people, I know, disagree with me about the importance of culture. They question how much it can actual y affect the bottom line. I believe it has an enormous impact. Indeed, I’d argue that culture plays a huge role in the success or failure of any company. How? By shaping the attitudes of employees toward the place where they work. Those attitudes, in turn, guide their behavior, and their behavior has a direct impact on the financial health of the business.

  Consider, for example, the phenomenon of creeping expenses—that is, the tendency of al expenses to rise over time. That phenomenon goes hand in hand with another one: the conversion of luxuries into necessities. By luxuries, I mean the expenses that aren’t essential to the company’s wel -being. You don’t find many luxuries in start-ups—at least not the successful ones. New companies that waste money on nonessential things don’t get very far. Smart entrepreneurs know that they have to make their start-up capital last as long as possible. So they lease used furniture instead of buying new. They fly Southwest or JetBlue and stay at Motel 6. They watch their telephone, postal, and office expenses like a hawk. They do al that reflexively because they realize that every dol ar they save wil help them meet the next payrol and give them the breathing room they need to get the business up and running.

  That habit of frugality tends to erode, however, as time goes along. People begin to spend more freely. They start investing in some things (computers, telephone systems, advertising) that wil help them maximize their potential to grow. At the same time, they let down their guard in other areas. They have the leeway to spend money on stuff they don’t real y need, and so they do. Along the way, often without anyone noticing it, luxuries become necessities, and the organization becomes a little sloppy. Salespeople start thinking they have to use cabs to get around town, rather than take the subway. Office clerks think they have to send packages by courier or Federal Express instead of by regular mail. Executives think they have to fly business class and stay in the best hotels. Expenses creep, and overhead bal oons.

  The danger, of course, is that something unexpected wil happen—it always does—and the company wil suddenly find itself desperately short of cash. At that point, many companies are forced to do first what should only be a last resort: they lay people off. Layoffs are the costliest way of dealing with cash flow problems. Although the employees who lose their jobs are the most visible victims, the whole organization suffers as the people who are left worry that they’l be next and start making contingency plans.

  By the time you’re in a cash crisis, however, it’s often too late to start thinking about alternatives like cutting back on the luxuries that have become necessities. The damage has already been done. The cash has already been spent. There simply aren’t enough cuts available for the company to get by without a layoff. That’s why the fight against creeping expenses has to be an ongoing struggle. Otherwise, everybody could lose.

  I believe there are two aspects to that struggle. They’re equal y important, and they both have to do with culture. The first involves creating an environment in which people care about the company’s welfare and go out of their way to help keep costs under control. It’s not enough to set budgets and hold top executives accountable for them. That’s part of the equation, but you can’t overlook employees down the ladder. Money can be wasted in more ways than you can count, and savings can come from places you’d never dream of looking. If you real y want to attack creeping expenses, you need to get everyone involved, which won’t happen unless people care enough about the company to lend a hand. And that won’t happen unless they know the company cares about them.

  Let me tel you about Patty Lightfoot, who was our executive assistant for several years. She’d been on the job for about three months when Elaine mentioned to me that Patty had a second job cleaning offices. “She earns $75 a week,” Elaine said. “She says she’s saving to go back to school.”

  By then, Patty had already impressed us with her reliability, resourcefulness, and intel igence. We knew we wanted to keep her. Normal y, she wouldn’t come up for a raise until she’d been with us for six months, but I saw an opportunity to send her a message. “Listen,” I said to the other executives, “if we give her a raise three months from now, it wil be nice. If we give it to her now, she’l never forget it.” They agreed.

  The next day, I cal ed Patty into my office. I told her to have a seat. “I understand that you have a second job you do at night,” I said.

  “Yes, that’s right,” she replied tentatively.

  “Wel , I’m afraid we can’t al ow that,” I said. “We need you to be fresh and wel -rested when you come here in the morning.” She slumped in her chair. “I also understand that this other job pays you $75 a week. We’re going to raise your salary by that amount so you won’t lose any income.”

  Her face lit up like a flashbulb going off. “Oh, thank you,” she said.

  “And one other thing,” I said. “You should know about a policy we have. Anybody who works here for a year can go to school, and we’l pay for it as long as you earn a Bor better.” Patty was beaming as she left my office. I had no doubt she knew we cared about her.

  But that is, as I noted, only half the battle. The other half has to do with another aspect of the culture. People have to understand that saving money is a priority, and the message has to come straight from the top. You can’t just talk about it, either. How you act wil convey your concerns far more effectively than anything you say.

  I’l give you an example from the early years
of Perfect Courier. As our growth accelerated, I began to see more and more signs of sloppiness and waste around the company, and it bothered me. My concern reached the boiling point one day when I found out how much we were spending on new pens. We had forty employees, and we were buying pens at a rate of forty per week. That was nuts, I said to my staff. They gave me strange looks. “Is it real y such a big deal?” someone asked.

  “Forty pens at $1 a pen is $40 a week,” I said. “That’s $2,000 a year. For pens! What else are we wasting money on? ”

  Now I have to confess that I was probably one of the worst offenders as far as pens go. If I borrow your pen, it almost always winds up in my pocket. I don’t even realize I’m taking it. I just slip it in and forget about it. At the end of the day, I’l have six or seven pens and no idea where they came from.

  That said, I was genuinely concerned about creeping expenses and determined to do something about them. So I decreed that henceforth no one could get a new pen from the office without turning in an old one. Guess what. The policy flopped. People would show up in need of a pen and have al kinds of excuses as to why they didn’t have an old one to turn in. They’d left it at home and would bring it in tomorrow. It was in their car; they’d get it later. Norm took it. Whatever. Two months later, we were stil buying forty pens a week.

  I was fed up. “That’s it,” I said. “Everyone has a pen, right? From this day forward, we wil never buy another pen. We’l take the money we save and put it in a special fund for employees. At the end of the year, we’l figure out what to do with it.”

  My staff went crazy. “You can’t do that,” they said. “We won’t get any work done. People wil spend al their time looking for pens.”

  “Don’t worry,” I said. “There wil be pens.”

  And there were. As it turned out, we got along just fine without buying pens. People quickly acclimated themselves to the new policy. I don’t know where the pens came from. I suppose some people bought their own, while others managed to find the ones we’d purchased in the past.

  Meanwhile, the pen policy became part of our culture, a perennial joke, especial y whenever I showed up for a meeting without a pen. “Are you kidding?” people would say. “You came to work without a pen? I’d have to go back to my office to get one.

  The company didn’t buy another pen for twenty years, until we moved from Manhattan to Brooklyn. Although the policy didn’t completely solve the problem of creeping expenses, it certainly helped. By going cold turkey on pens, we eliminated a little waste and sent a big message. The mere mention of pens became a reminder that we real y cared about control ing costs. I gave people other reminders at every chance I got, but I’m not sure any of them were as effective as the pen policy.

  It wouldn’t have worked, however, without the first half of the formula—the part about letting employees know the company cares about them. If they have the desire to help the company and know how you feel about creeping expenses, they wil not only cut down on the waste but come up with savings that wil knock your socks off.

  Which brings me back to Patty. I happened to notice one day that our Nextel sales representative was in the office talking to Louis, our company president. After he left, Louis came to see me. “Wow, we just got a great deal from Nextel,” he said. “We got $24 off our monthly rate.” That was impressive. We have about 125 two-way radios, and we’d been paying a monthly fee of $49 per phone. But apparently Nextel had a special going on whereby we could pay $25 per month and get 10,000 minutes col ectively. “That’s more minutes than we use,” Louis said. “We’d have to go up to more than 30,000 minutes before we’d pay what we do now.”

  So we’d be saving $3,000 a month, or $36,000 a year. “Great job,” I said.

  “It wasn’t me,” Louis said. “It was Patty.” One of her responsibilities was to check our Nextel usage. In the course of doing that, she’d found out about the special and brought it to Louis’s attention. I don’t mean to suggest that Patty found the savings because we’d given her a raise. She’d been a conscientious employee from the day she started. She might wel have figured out how we could save money on our Nextel bil even if we’d done nothing more than pay her salary.

  But by showing how much we cared about her, we may have given her a little extra incentive to do something good for the company. And who knows? If we hadn’t made it possible for her to quit her other job, she might have been so tired that she would have missed the Nextel special. In any case, it al goes to show how culture can have a direct impact on your company’s financial wel -being.

  The Bottom Line

  Point One: Your company’s culture can be your most powerful tool for finding and keeping great employees. Don’t miss the opportunities to shape it that arise every day.

  Point Two: The one thing you can’t delegate is the responsibility for making sure the company has a single culture, not several competing ones.

  Point Three: Expenses have a natural tendency to creep up over time. If you want to control them, you need to get everyone involved in the effort.

  Point Four: Look for opportunities to send the message to employees that you real y care about them, and that you want them to care about keeping costs down.

  CHAPTER FOURTEEN

  Selling Is a Team Sport

  Hiring is, of course, one of any company builder’s major responsibilities, and everybody makes mistakes in that area, especial y when it comes to hiring salespeople. I figure I’ve hired more than three hundred salespeople in my career and made just about every mistake in the book. What I’ve learned is that, for me at least, there are no shortcuts. It takes time to find the right people, time to train them, time to get them acclimated to our culture. Sure, I used to think I could accelerate the process. Al I had to do was hire hotshots who could start producing as soon as they walked through the door. But every time I tried it, I lived to regret it. Effective sel ing, I learned, requires a team effort, and—to build a great team—you need the right players. By that, I mean players who understand their roles and can work together to achieve the best results. Those salespeople, I found, were seldom the ones who could deliver the most sales in the shortest amount of time.

  Eventual y, I came up with four rules for choosing new salespeople. The first rule has to do with the candidates’ aspirations. There are, I believe, two categories of salespeople in this world. One type wil eventual y go into business for themselves. The other wil always work for somebody else.

  I like both types, but it’s the salespeople in the second category that I want to hire for my company.

  Don’t get me wrong. I have no problem with employees leaving to start their own businesses. I don’t even care much if they compete against us.

  I’d rather they leave than be unhappy around me. What I don’t like is turnover in my sales force. I want salespeople who wil stay with me forever.

  Other kinds of employees are different. If they don’t keep moving up in the organization, sooner or later they’re going to be overpaid. That creates problems for both you and them. You don’t have those problems with salespeople. What they get paid is general y based on what they produce. The good ones, moreover, can go on producing year after year. Those who do are invaluable to a business. Once I find them and train them, I never want to lose them. So I try to screen out the candidates who dream of having their own businesses. They may be great salespeople, but I know they won’t stick around. I wish them every success—somewhere else.

  That’s the first rule: hire salespeople, not entrepreneurs. The second rule grew out of some bad experiences I had with my first start-up. Like many young entrepreneurs, I was in a big hurry, and I thought I could save time and money by hiring my competitors’ salespeople. Since they were already familiar with the market and the business, I wouldn’t have to train them. They could hit the ground running. They might even bring some customers with them. At the time, they looked like a shortcut to growth. I found out, however, that they were just a shortcut to
trouble.

  For openers, most of them came with bad habits, which I could never get them to change. They’d learned every trick common to the industry and were constantly going for the quick sale. I wanted them to take a longer view, but they wouldn’t listen. They thought they knew more than I did. It turned out, moreover, that they weren’t such great salespeople. I had consistently better results with the salespeople I’d brought in from outside the industry and trained myself. So I got to thinking, maybe my competitors had good reasons for letting these salespeople go. Maybe I shouldn’t have been so quick to believe them when they told me what a terrific job they’d done for other companies.

  Did I wind up taking some market share away from my competitors? Yes, but it wasn’t worth the price. Buying market share by hiring your competitors’ salespeople does nothing good for your reputation in the industry. Maybe you don’t care when you’re young and brash, but eventual y you learn that reputation is a crucial business asset, worth much more over the long run than a few extra sales. So we established a new policy in the company: no hiring of salespeople from our industry.

  My third rule wil strike some people as narrow-minded, but it’s based on years of experience. The rule is that if you want to apply for one of our sales positions, you must have held at least two prior jobs in different companies, and one of those jobs has to have been in sales. In other words, we don’t hire salespeople straight out of school. Why? Because nobody is satisfied with his or her first job. Wel , almost nobody. There are always exceptions. But the vast majority of people find something wrong with the first real job they hold, no matter how good it is or how wel they’re treated.