Author name: Sam Gupta

In this episode, we have our guest Chris Grainger, who discusses how his company EECO, a large electrical distributor, needed to change the way they sold to their customers. He also touches on how they started their journey of thought leadership, highlighting heroes in their community, which has helped them strengthen their position in the market and acquire net new business in a whole new different way.

Chapter Markers

• [0:15] Intro
• [2:07] Personal journey and current focus
• [3:27] Perspective on growth
• [4:38] Chris’ podcasting journey
• [6:26] Who should lead thought leadership initiatives?
• [7:57] How to find thought leaders to lead content strategy?
• [9:29] How can thought leaders balance their priorities?
• [13:20] Content consumption behaviors and trends
• [14:51] Finding business from thought leader strategy
• [17:03] How manufacturers can start on a thought leadership journey
• [21:06] The role of industry influencers
• [31:59] Closing thoughts
• [34:17] Outro

Key Takeaways

• If you want it to really get out in front and serve your industry the best, you better be figuring out how to do it via video and be a podcast. You know that that’s really two really good mediums to work through.
• A manufacturing business, or business in general, you need to understand the value you’re bringing to the market you’re trying to serve, and the questions they’re asking, and answer those the best you can, and if you do that, then you will bring so much value.
• If a company wants to be that thought leader and get out in front of things, you got to look at your subject matter experts. They should be the ones leading a lot of the efforts and getting behind it.
• The way you consume content and just what YouTube has done for the world over the last couple of years. You know you want to learn how to do anything. You, you pick it up and go to YouTube, and you figure it out, and you need to be there. So somebody, if you’re in the B2B space, one thing that I’m spending a lot of time on right now is, what are the questions that the markets asking? And then, I want to be the thought leader in answering those questions.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Chris

Chris Grainger has been supporting the industry for 20 years. His passion is serving others and creating strategies to support the changing needs of manufacturing. He hosts the podcast EECO Asks Why which highlights the ideas and heroes that serve the industry with aspirations to inspire others. 

Resources

• Connect with Chris
  • LinkedIn
• Connect with EECO
  • Website | EECO Asks Why | LinkedIn | Twitter | Facebook

Full Transcript

Chris Grainger 0:00

My approach with the executives was every company is a media company. It’s just we sell different stuff. So we had to figure out different ways to approach the market, and this is the way did they graciously.

Intro 0:15

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned in to the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:50

Everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at this transformation consulting firm, ElevatIQ. The last three years have changed the way businesses operate, with podcasts and videos becoming the most consumed media for information consumption. But 80% of the B2B sales decisions are being influenced by industry influencers and consultants. Today’s businesses need to be thought leaders in their space, but who drives thought leadership in a company?

In today’s episode, we have our guest, Chris Granger, who discusses how his company EECO, a large electrical distributor, needed to change the way they sold to their customers. He also touches on how they started their journey of thought leadership, highlighting heroes in their community, which has helped them strengthen their position in the market and acquire net new business in a whole new different way. Let me introduce Chris to you.

Sam Gupta 1:43

Chris Granger has been supporting the industry for 20 years. His passion is serving others and creating a strategy to support the changing needs of manufacturing. He hosts the podcast EECOAsksWhy, which highlights the ideas and heroes that serve the industry with aspirations to inspire others. With that, let’s get to the conversation. Hey, Chris, welcome to the show.

Chris Grainger 2:05

Thank you, Sam.

Sam Gupta 2:07

So just to kick things off. Do you want to start with your personal story? And what are you focusing on these days?

Chris Grainger 2:14

Oh, absolutely. I went to Old Dominion University in Virginia and studied electrical engineering. And from there, I had a great opportunity to work for an electrical equipment company was a wholesale distributor servicing the industrial market in the southeast US. I’ve had many different roles at EECO, what we call it, and one of the most recent projects that I’ve been very blessed to be a part of is we were able to start a podcast at EECO called EECOAskWhy. And we focus on the people. And the ideas out there that that are leading industry and getting a lot of topics and guests out there to share their stories because we really feel that they are the heroes.

So that’s been a wonderful adventure and something that has really been just taken such a big piece of my heart and to serve others with this. And I actually got that started by working with our executives. I know you customize a lot of your message to executives out there. And my approach with the executives was every company is a media company. It’s just that we sell different stuff. So we had to figure out different ways to approach the market. And this is the way that they graciously let me try. And we’ve seen some really good results since then.

Sam Gupta 3:27

Okay, amazing. So I want to touch on a lot of different topics there especially related to changing the mindset of the media company. And obviously, my target audience is going to be CFOs and CEOs. Sometimes they don’t really understand what media company means. So we are going to dig into that. But before that one question that we asked, every single guest that we get here is going to be your perspective on growth. What does growth mean to you, Chris?

Chris Grainger 3:51

Growth means to me. It’s always moving forward and having an open mind to understand the changing landscape of what’s around you. If you look at B2B, and that’s the industry that serves in is the B2B industry. Since when COVID impacted it, things have been completely flipped upside down. And to be in the have a growth mindset, you have to understand, hey, the things have changed. And what do I need to change the way that I approach my work? Or how do I support people? Or just how customers or clients need support in the future? How is all that changing? Because I have to add value to that. And maybe the value that I had a year ago, pre-COVID, is not the value that customers and clients need right now. So growth to me is just that growth mindset of always being evaluating and willing to change.

Sam Gupta 4:38

So now, let’s talk about your story. Obviously, you started the podcast for a reason. And you mentioned that your goal is to find heroes from the community. So obviously, our CFO and CEO roles out here, we like to see numbers, and obviously, you know, we want to serve the community. But we also want to serve our customers, and we need to have a business plan behind that. So what was the genesis of your podcast? What was the thinking behind that? What were the changes that you were monitoring in the market, and what are you trying to get out of it?

Chris Grainger 5:13

Sure. I mean, from what we saw, customers were changing the way that they’re consuming content. If you look at the industrial market, there’s a lot of information out there that you can get straight from manufacturers, but we’re the distributor, we’re the middle guy. So we need to be the ones leading the message for our customers and serving them the best way we can with thought leadership.

And I started valuing, and listening to a lot of things and studying, listening to a lot of Gary V and understanding things that he’s promoting from, from a media standpoint, and just really apply that to say, okay, to our business, we’re not doing this, nobody’s doing this, nobody’s talking about these things. It’s just the same old traditional way about business for the vertical that we’re in. And we had a great chance to get out front and really lead the way and not that we just want to leave everybody behind.

But hey, we need to go. We want to go where they’re going and where our customers are going and help them in ways they hadn’t considered. And that has been the biggest impact for us. And so when we start talking from I know, you talk about CEOs and CFOs, from an impact standpoint, I think for them, it’s been, hey, what were the thought leaders here, and when you’re a thought leader in whatever space you’re in, that’s gonna have financial impacts at the end.

Sam Gupta 6:26

Okay. So when I look at your background, I mean, you were not part of the marketing department. Typically, these initiatives are led by the marketing department, right? So in your case, when you started this initiative, so obviously, you know, every company needs to be a media company, I get it. So when we look at our manufacturing and distribution landscape, where should the mindset start? In terms of starting these initiatives?

Chris Grainger 6:51

Most of the time, it does start in the marketing departments, you know, because you’re right, that’s where a lot of that that creativity, if you will, it’s not always engineering, like with my background, but yeah, you know, that’s okay. But I will say, for us, I have a colleague, that he’s our executive producer, Adam sheets, he’s my number one guy, and he really helps me on a lot of the production aspects. But really, I think if a company wants to be that thought leader and get out in front of things, you got to look at your subject matter experts; they should be the ones leading a lot of the efforts and getting behind it.

And that just takes a different type of thinking. And there are a lot of resources that I studied, continue to study out there to help me evaluate where I’m at and where I want to go. How can I bring the most value to the market? How can I that bring the most value to my employer and ultimately serve the people that I want to serve the best and? And I think that that approach really led us down this unique path where someone in engineering is leading the charge, if you will, for a podcast to serve the market.

Sam Gupta 7:57

So in your case, how did this all start? If I look at your company, the size of the company is fairly large. Right? And I don’t know if you were their top subject matter expert. How did they pick you to start this podcast?

Chris Grainger 8:11

Well, I think that, basically, it was the default. So I actually pitched it to the executives. I had our CEO and a vice president of sales. And I just set them down with our marketing managers. I had a business plan laid out on how I felt like this needed to happen, you know, the little capital we needed upfront to get it going. And a list of topics. I think I started the list with 20 or 30 topics I thought we could talk about and since and they gave the nod and said, do you think you can do it and I put my head down, I said, I think I can, I’d love to have a chance.

You know, and looking back now, we’ve interviewed so many guests, and 100, probably 150 or plus, but actual recordings, and we’re up to almost 70 episodes out right now. And we’ve increased our cadence to twice a week of four drops. So it’s been really wonderful. I’ve had a great chance to meet wonderful people just like yourself, Sam, and the podcast. It’s just it naturally connects you to so many people, you know, CEOs and high-level executives all the way down. For me, I get the most pleasure out of working with the guys that are into the plant, the girls that are in the plant. They’re the ones that are on the floor. We actually interview them as well. And that’s what brings me so much fulfillment out of doing the podcast.

Sam Gupta 9:29

So let’s say if I’m looking at one of the engineering managers in my manufacturing organization. Typically their days are going to be super occupied, and they need to report whatever they are working on. Right, in addition to that, the podcast is a humongous amount of work. I mean, it’s not an easy task at all. Each episode that we produce requires 20 hours of work. To be honest, that’s how much work it takes to produce a podcast. It’s not easy. So in your case, and I don’t know, you know, what was the personal driver you said that you were listening to a lot of shows from Gary V, which could be very inspirational, I get it. But again, considering the amount of work involved, what was the major personal driver for you to undertake such a heavy responsibility?

Chris Grainger 10:12

I needed a project moving forward that I could put my heart into, and quite frankly, just selling parts and being a distributor tied to a lot of commodities, which was not fulfilling for me. So I needed to find a way to have a greater impact, you know, on a greater community, and try to give people a voice that I feel I’ve heard these voices for years as servicing the market, but I’ve never just one on one. So this gave me an opportunity to amplify that voice and get out there and give me something that I really felt aligned with, with my career goals, the things I’d like to be learning about, you know, I was one of those engineers, man that I did the engineering work, I did the math, I got the diploma, I did all the work, but I’ve never really had the passion for being the actual the engineer who’s doing the design work.

I’m much more rather be networking or helping people achieve their goals and working alongside versus being tied to a cubicle doing, you know, PLC programming, for instance. So it was just a natural fit for me in what I desire for my career. It’s a take a path like this and learn skills like this. And this led to now new skills like video and an understanding how video editing and trying to bring that component to fruition, because you’re right, it’s a lot of work for every podcast episode if you treat the guests the way that they should be treated.

And we do blogs, a lot of social media posts, and then repurpose all the content and make case studies where we can where I’m writing three case studies right now based on some of some conversations we’ve had. So it’s just it really consumes you. But if it’s work that you’re passionate about, you know, you find the time, and you make the priority.

Sam Gupta 11:52

So what are there any compromises in your job responsibilities? Do you still have that job that you were doing on a daily basis? In addition to that, are you able to do this as well?

Chris Grainger 12:01

Yeah, so I’m still an engineering and services manager, I think what it does for you, as your responsibilities go up, and time crunch goes up, you learn to delegate, and you learn how to manage basically, this podcasting is just like any engineering project, you manage it, just like that. And if you have a schedule, and you have a process, and you get it defined, and you block that time, it works, you know, so you just have to work that into the regular work that you’re doing that while the other work that you’re doing, because this is the work, you know, and it all falls in alignment, I still have monthly one on ones with every one of my direct reports, we still have dashboards, we still have all our metrics, and I have automated a lot of that stuff.

So that the numbers that are important for us to be chasing are in front of us all the time, so my just my engagement with my team is a lot more meaningful, more impactful, but also understand to do this right. And to do video, right, and to do blogs, right? and case studies, right? You better dedicate time to it, or it’s just gonna be halfway done with no value to people out there that are consuming it. And then, you know, nobody’s gonna get any value from it. And that point, why are you even doing it? So just it really, if you approach it like an engineering project, I think for me, that’s been the biggest thing and just defining that process.

Sam Gupta 13:20

Okay, amazing. So you did mention during your introduction that the market is changing, and the way our leadership is working in the market, the kind of messaging customers like to hear at this point of time is completely different. So what are some of the things that you have noticed that have changed in the market in the last two, three years,

Chris Grainger 13:39

So much more is going to video, man. I mean, that’s, we’re seeing so many of our vendors, we support getting messages out via video. And that’s something I’ve just been doing so much studying on about how to get. You want to be a thought leader. If you want it to really get out in front and serve your industry the best, you better be figuring out how to do it via video and be a podcast. You know that that’s really two really good mediums to work through.

Because just think about the way you consume content and just what YouTube has done for the world over the last couple of years. You know you want to learn how to do anything. You, you pick it up and go to YouTube, and you figure it out, and you need to be there. So somebody, if you’re in the B2B space, one thing that I’m spending a lot of time on right now is, you know, what are the questions that the markets asking? And then, I want to be the thought leader in answering those questions.

I really don’t care about the features and benefits and all this other stuff, at least because everybody’s got that feature and benefits that they can do for you. I care about what are the end-users? What are the people out there in the market? What questions are they asking because they’re the ones I want to answer. And if I answered them openly and honestly, with a servant’s heart, the business will follow.

Sam Gupta 14:51

I’m a CFO here. Okay, Chris, and let’s say if you are trying to pitch me an idea or my team is trying to pitch me an idea. Obviously, I have a job to do. I would love to serve the community, but I need to do my job as well. And my job is to maintain the top line as well as the bottom line, right? So let’s say if you’re pitching me an idea, in your case. Obviously, you are a superhero, Chris, that you are able to do your job, you are able to do the podcast, you are able to build the content.

But let’s say if I am running a manufacturing shop, as a CFO, I’m not gonna find another place, to be honest. Okay, I need to find some budget to be able to run this initiative. And I need to know the ROI from the initiative. So in your case, have you been able to find any business using this effort?

Chris Grainger 15:38

Yeah, absolutely. And it came down to, for us, a couple of our actual guests that we came that we were able to bring on have, since then brought us in to have deeper business conversations to actually expand our business. Some of them we’ve never even done business with before. And now that they go through this experience, we help them figure out something about their market, right. They liked it so much. And as a connector, and you know, this very well, Sam as a connector, I’m watching who’s watching. Then, when they when I see that they’re, they’re interested, or they like something, I’m reaching out to him.

And then, all of a sudden, next thing, you know, we’re building that relationship even further. Because like I said before, the way pre COVID work for a B2B is not how it is now. So it’s the podcast that has given us opportunities to serve new clients, understand their needs, build trust, and we’re doing all this without ever setting foot actually in their plant.

And that when you think of it that way, nope, nobody’s done that. So that’s been for us in return for sure. And several pretty specific cases. But it’s been really neat to see how that works. And as it grew, we’re not even a year into the podcast for us. We’re still less than a year old. I’m so excited for where it can go because 2021 is the focus more actual in client conversations to understand what’s changing in the market.

Sam Gupta 17:03

Okay, so let’s say find the manufacturer or the distributor, and I sort of understand that there is going to be some value from the thought leadership, I’m not sure if I’m sold on it, okay, because, you know, you need to try before you can see some ROI. So what would be your recommendation in terms of starting on this journey?

Chris Grainger 17:20

I would probably really start with your blogging, really get good at blogs, answer the questions, again, that your market asks and answer them straight up and talk about, you know, the stuff like cost delivery, and it’s not about puking out what you’re great at, it’s about answering the question, right? Everybody wants to talk about how awesome they are versus, hey, this, let’s just answer the question because that’s, and then start monitoring that content.

There are all sorts of ways to do that. And we won’t get into that today, but see what’s working for you. But blogging, that’s something anybody can do. There’s no equipment required. People still consume a massive amount of written content. And then if you can get to be a thought leader in your space, by blogging, that’s going to open up avenues, particularly for us, we’ve noticed, like, if a blog takes off, you can bet your bottom line.

I’m going to be bringing that topic up on the podcast because, obviously, people are searching for it. And our number one most downloaded podcast happens to be our number one most downloaded blog. We linked them together. Now, every time that people open up that blog, they’re consuming our podcast, they’re learning more about us, we’re serving them at higher levels, and then the leads continue to come in.

Sam Gupta 18:31

Okay, so I like the pitch of our blog, that it’s not really expensive, because you don’t really require the gears, but not everyone is going to be an effective writer. And if that was the case, then everybody in this world would probably become an author, which is not the case. Right? And blogging is very expensive as well, it’s not easy, because if I asked my marketers, my writer is going to say, I’m actually going to charge you whatever $300 for a blog, that is probably going to be 500 words, and there is no promise for an ROI. Right? If I have the same pitch with the trade show, if I’m going for a trade show or something like that, I’m actually shaking hands. I’m making the conversations there. So why do you recommend that I should be writing a blog, and how do you see ROI from that?

Chris Grainger 19:19

Well, I’m gonna give you a reference that I think your audience may really find value in. And it’s a book written by Marcus Sheridan. It’s called they ask you to answer. And if you write the blogs and if you have a sales executive, CFO, CEO, and your focus is again, being serving your industry that at the to the top level that you can, what do you need to know? Well, you need to know the questions that whoever your end customer is, what they’re asking the heart of it, and then you focus on that.

Now, you’re right. Not everybody has top-level writers, but we all in whatever business we have had subject matter experts, a lot of times, the information is in everyone that works around our head. But you do have to gather that information. It could just be as simple as, as a brainstorming session, it can start off as just technical type documents, and then work with maybe you use up work or use different, outsource type of resources to get some marketing assistance to actually pretty it up, if you will, things like that.

But if you want to be the leader, you better find resources to get behind being a thought leader and content development because that’s the way the world is turning. And that’s why I said that that resource they ask you answer, you start walking through the principles of that book, and that guide if you will, that will put you where you need to be in making those decisions.

Because you know, it all starts with change. Next thing you know, you’ve got, you probably need a Content Manager, you maybe need a video choreographer that’s in your organization. And a lot of times, these types of roles aren’t thought about. But they better be because it’s changing so quickly. You better get it, you know, get on that train.

Sam Gupta 21:06

So what is the role of the influencer? So the more and more I’m noticing the market, Chris, the role of influence that is changing, especially in the B2B market, if we look at any of the expensive purchases, and I don’t know how expensive your equipment is, but in 90% of the deals that we come across in our space, they have some sort of influencer involved.

And obviously, these influencers are either social media, celebrities and again, social media celebrities don’t need to be somebody who’s doing fashion talk or music talk. They are either the manufacturing influencers or digital transformation influencers, or industry 4.0 influencers, and the more influence that they have, the more they’re influencing the deals. And there is a whole different ballgame here in terms of maintaining the relationship with the influencer. And the more we see LinkedIn the way it is going at this point in time, the way we see the podcast, and the video community the way it is going, I think influencers are going to be very relevant in the future. So what would be your thoughts on that? Do influencers matter? And how would you build relationships with the influencers?

Chris Grainger 22:14

So the answer does the influencers matter? Yes.

Sam Gupta 22:19

And why is it that because not every manufacturer cares for the influencer?

Chris Grainger 22:24

Why? Because again, look at how people consume content now and how they learn, and how they make decisions. I’ve read the stats all over the place, but somewhere between 70 and 80% of a buyer’s decision typically is made before they contact the distributor or the company directly. Why? Because they’ve consumed so much content online. So either you figure out a way, as a manufacturer of, or as a leader in the industry, to be out front in the content that they’re consuming, or you get left behind.

And if you’re a company like EECO like I work for, we don’t make anything, you know, we sell other people’s stuff, we are distributor, we are essentially the middleman between the manufacturer and the end-user. So for us, it’s even more vital to be that thought leader in helping get these topics and get in front of them and to be that thought leader for these topics for the industry, so that they see the value that we connect the dots that we can connect from for all the different types of solutions to bring to the table. So influencers are so important. If you start doing just like you’re doing with podcasting, and videos and blogs, and all that stuff, you connect, and you meet the influences, and next thing you know, you may be an influencer yourself as your network begins to grow.

Sam Gupta 23:39

Okay, so where do you see this going? I mean, obviously, podcasting is slightly newer compared to, let’s say, blog or video. But in the case of podcasting, I mean, right now, it is newer. So we have some categories, let’s say penetrated in specific niches or these spaces. But let’s see if everybody starts doing the podcasting. Do you think everybody is going to be equally successful with podcasting?

Chris Grainger 24:00

No, not at all. Because I think there are their stats out there. And, and a friend of mine, I believe he was on your show, Chris Luecke. He talked about the number. I can’t remember the percentage, but it’s over 50% of podcasts that start fail, and they never get past episode 10. So I mean, I think, you know, it sounds glorious and wonderful. You know, and I’ve talked to several people who are trying to start podcasts. And what I tell them is, you know, when the mics hot, that’s the fun part.

But there’s so much work before and after, and I related it to I used to work on race cars. And I told him, I said, you know, everybody shows up this on Sunday to see two cars out on a racetrack, but they don’t see all the work prior to leading up to, and they don’t see all the work afterward where you have to fix stuff to get tore up. Right. So it’s the same thing with podcasting. There’s so much pre-work and post-work if you want it to be successful and if you’re truly trying to serve people the right way. I think that’s what turns a lot of people off, man.

Sam Gupta 24:56

Okay, amazing. So let’s say we have this manufacturing value team, right. So you guys are distributors, and you see the value because you are not really carrying your product. You are slightly more marketing channel for your OEMs or the manufacturers. But do you believe that even for the manufacturers or retailers, they have to develop thought leadership as well? And if they do, you guys have sold similar products? Is there going to be any duplication in thought leadership when you and manufacturer retailers start doing the same thing?

Chris Grainger 25:27

I think it could be, but I think that’s good. I mean, I think the more you know, the more that manufacturers understand their fit. And that helps the distributor as not every distributor, Sam’s going to be like us and want to be the thought leader in and get out in front of a lot of us. Most distributors, rather, really want to just understand what the manufacturer’s features and benefits are and go talk about those because that’s easy.

So you know, we’re taking a much different approach. But I think any manufacturing business, or business in general, you need to understand the value you’re bringing to the market you’re trying to serve, and the questions that they’re answered that they’re asking, and answer those the best you can, if you do that, then you will bring so much value. And if there’s a crossover, I mean, there’s a crossover in what I do and what in what some integrators are doing. And I think there’s just, but that’s good. I mean, it’s just people are talking about these topics. And that makes it even more relevant.

Sam Gupta 26:21

Okay, so what is your perspective on some of these consulting businesses? So in the manufacturing ecosystem, we have a lot of consultants who don’t necessarily sell their physical products. They are primarily consulting. So do you believe that they should be answering these questions as well? And if they do, then what are they going to sell? Because that’s what they are selling?

Chris Grainger 26:41

Absolutely, they need to be answered, but they’re going to be selling, you know, you, you’re answering a lot of questions that people are asking, but at the end of the day, as a consultant, there’s still that one on one touch because everybody’s story is unique. Right? But you know, some of the high levels, the basic questions you get asked all the time if you were to lead that effort as a consultant, you know, and I’m trying to do this, I have another side hustle where I do financial consulting, or financial coaching on the side to help people and what my approach there is shifting to, I want to start asking the questions that people are, are asking about their personal finances, and just answer them and be the thought leader there.

And then from that, that’s gonna groom those leads. And when they come to me, they’re going to have a wealth of information that, hopefully, I’ve helped them with. But there’s still going to be dots that need to be connected, I think, as a consultant in any business, and just I just use mine as an example. That’s the value you bring you you connect the dots.

Sam Gupta 27:51

Okay, so you mentioned that you found a lot of heroes as part of your podcasting journey. So do you have any stories that you might be able to share of those needles? Do you want to highlight any of those?

Chris Grainger 28:03

They’re all so good. Sam, I had, you know, I guess one of the surprises I spoke to a gentleman, he was a president of a company in Virginia. And he has no social media presence. I think he has a LinkedIn account, but nothing else, an introvert, not very active. But just one of the most humble people I’ve ever met in my life.

His episode, man, it blew up like when we dropped it, it just all of a sudden a rocket ship. It came to show me how he’s such a servant leader. And he’s helped people so much throughout his career that they immediately wanted to hear what he said when that was released. So that was a really, really cool one. You know, we did a women’s series.

Sam Gupta 28:47

I want to discuss that further. So what were some of the key takeaways of that story? You know why it really clicked with people were just so compelling about that episode,

Chris Grainger 28:56

What it started with, he didn’t go to college. He went straight from high school graduated. He started as a welder at this company, traveling the country welding, earning every spot he got, right. And every time he made an advancement, his career was just through hard work, determination, and a servant mindset, and all the weight.

Like I said, He’s the president of the company. So obviously, it worked out very well for him. And he’s, he’s just done tremendous things. But that’s been that that was the big takeaway, just how it was not an easy road. But he never wavered once. He was always committed to serving people the best, helping them not get into political battles, and trying to figure out, you know, what’s in it for me, and that just propelled him to the top.

Sam Gupta 29:45

Okay, so did you do any sort of surveys with your listeners? You know, what was so compelling about that episode that resonated with everybody is it just the humbleness, which is great, but there must be something else to the story that really resonated with them, right.

Chris Grainger 29:58

I think what really would resonate, man, was just the authenticity of this gentleman, and how much he really impacted people because you, you can’t get certain stats from your podcast, as you know, depending on where you know, you publish at, but still, it’s only so granular that you can get to so it’s hard to really tell, obviously a lot in his area was a big lift force just in from a geography standpoint.

But I still think this, just his straight humility. And in his overall story is just something that really took off, of course, we do, quote, post on LinkedIn, and Facebook and things like that. So we’ll take snippets of every episode, and we’ll make quotes, and we’ll put little, you know, things out there, just little 30 minute blurbs out there. I think you do that as well. Yeah. And that that really worked well. And just, it really took off, man, it was really cool to see.

Sam Gupta 30:54

So yeah, so you were telling the other story. Do you want to share that?

Chris Grainger 30:57

Well, the other one that you so far is what stood out was we did a woman in engineering series. And that was phenomenal, man. I mean, I have two daughters, eight and ten years old. So that was a series that was passionate to my heart. And it just we had guests all the way from a young lady who just graduated college and going into engineering manufacturing, to we interviewed very high-level executive at a major manufacturer and from everywhere in between, from a work standpoint, work experience standpoint, and it was just it touched my heart.

My daughters listened to all. It was 11 episodes. They loved them all. They were very inspired. And just to hear how these women, all their paths were unique. But they all were so successful and just brought so much inspiration, if you will, to my ten-year-old in particular, and just how cool the different things went. I mean, they’ve talked about they’ve traveled all over the world, and then these different things and they would come to me that you know, this lady went to China or you so yeah, she did, man. So it was cool.

Sam Gupta 31:59

Okay, amazing. That’s it for today. Chris, do you have any last-minute closing thoughts?

Chris Grainger 32:03

No, this has been great, man. I mean, I just really appreciate them. I’m humbled. I’m honored that you asked me to be on. I wish you much success in the future. And if any of your guests would like to check out our podcast, I’m sure you’ll link that up in the show notes. And we’d be, you know, very appreciative for people to check us out as well.

Sam Gupta 32:19

Okay, amazing. And I’m gonna have a comment there. So I think I have hosted you as one of the most humble guys on my podcast. Okay. You are a servant leader. Okay, so the way the humble episode worked for you. I’m hoping that this podcast is going to give me the maximum number of downloads.

Chris Grainger 32:43

That will be an honor if that happens. And I really thank you so much for having me, man.

Sam Gupta 32:49

Thank you so much for your time. Really appreciate it.

Chris Grainger 32:51

Absolutely, buddy.

Sam Gupta 32:52

I cannot thank you enough for coming to the show and sharing your knowledge and journey. I always pick up learnings from our guests, and hopefully, you’ll learn something new today. If you want to learn more about Chris or EECOAsksWhy, head over to EECOAsksWhy.com and connect with him on LinkedIn. You can look him up with Chris Grainger on LinkedIn. If you’re interested in his financial coaching side hustle, head over to fmgfinancialhope.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check out the related episodes, including the interview with Katie Thomas, CPA from Leaders Online, who discusses the importance of personal brands and why personal branding is essential for personal growth and corporate branding. Also, the interview with Greg Mischio from WinBound, who talks about why manufacturing organizations need to adopt the approach of a digital twin to augment their sales teams.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode.

Outro 34:17

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Ted Needleman, who discusses the role of ERP consultants why they are pivotal for an ERP implementation, and why they play a huge role in user experience and training. He also helps us understand why modern systems are more user-friendly than legacy ones. Finally, he touches on the attributes you should be paying attention to while selecting a usable system.

Chapter Markers

• [0:19] Intro
• [2:47] Personal journey and current focus
• [4:39] Perspective on growth
• [8:10] The value of consultants for ERP projects
• [12:26] The importance of usability in an ERP system
• [14:24] The technological advancements in new ERP systems
• [20:34] The limitations of QuickBooks
• [23:29] The importance of recognized ERP vendors
• [25:48] What is an ERP?
• [32:59] Closing thoughts
• [35:01] Outro

Key Takeaways

• Those legacy ERP systems were designed to accomplish tasks and not to be usable. And the software that’s been written for the cloud is built on the knowledge of human factors.
• Legacy systems were designed where you have these big operations manuals to tell you every 15 pages to figure out how to input data into the fields. the new ERP systems are basically flowcharting your way through the system.
• Usability isn’t absolute. Usability is very much reflected in the level of the person, in the end, the entity that’s using the system. And as you get more and more sophisticated going through the system, it becomes more useful because if you’re printing out financial statements, you have to understand what they are.
• ERP is a chameleon. It is an accounting system. It is a manufacturing system. And It is a retail system. So it has to be what the business needs and every business is a little bit different. And an ERP system has to be flexible enough. It has to be configurable to a business without ruining other aspects of the application. It has to be scalable.
• If every ERP system did exactly the same thing, exactly the same way that we want to ERP system, it would only be one vendor. And it’s a difference rather than the similarities that you have to be aware of, and you have to understand how they fit in with your way of doing business.
• There are a lot of people, unfortunately, that have been put in that situation because ERP is working its way down from large enterprises down into businesses that would normally be considered small to midsize businesses. And that’s a new market over the last five or ten years for ERP vendors.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Ted

Ted Needleman has been a programmer, an accountant in public practice, the Editor in Chief of Accounting Technology magazine, and the Director of an imaging and printing test lab. He has been reviewing hardware and software for over 40 years and has published more than 4,000 reviews, articles, and columns totaling over 4 million words, as well as two books. He’s been a Contributing Editor for Accounting Today for the past 23 years, writed the Ted on Tech blog there, and is a frequent reviewer for PCMag, Digital Trends, and other sites.

Resources

• Connect with Ted
  • LinkedIn | Twitter

Full Transcript

Ted Needleman 0:00

Legacy systems were designed a long time ago. And it’s like having a 1940 pickup truck that you keep replacing the tires and the oil, and you patch the rough spots. I’m not saying any one particular vendor is in that situation, but you’re working with yesterday’s technology.

Intro 0:19

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:55

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host and principal consultant at digital transformation consulting firm ElevatIQ.

ERP systems are perceived to be complex. But why are they so hard to implement and learn? How do usable systems differ from the other complex systems? Does technology play a role in user experience? Why are ERP consultants so expensive? And why are they so critical for an effective ERP implementation? These are some of the questions you will have if you are reviewing a new ERP system today.

In today’s episode, we have our guest, Ted Needleman, who discusses the role of ERP consultants, why they are pivotal for any implementation, and why they play a huge role in user experience and training. He also helps us understand why modern systems are more user-friendly than legacy ones. Finally, he touches on the attributes you should be paying attention to while selecting a usable system. Let me introduce Ted to you.

Sam Gupta 1:55

Ted Needleman has been a programmer, an accountant in public practice, the editor in chief of an accounting technology magazine, and the director of an imaging and printing Test Lab. He has been reviewing hardware and software for over 40 years and has published more than 4000 reviews, articles, and columns, totaling over 4 million words, as well as two books. He has been a contributing editor for accounting today for the past 23 years, rated the TED on tech blog there, and is a frequent reviewer for PC mag Digital Trends and other sites. With that, let’s get to the conversation. Hey, welcome to the show. Ted.

Ted Needleman 2:41

I really appreciate your inviting me on. I look forward to talking with you about this.

Sam Gupta 2:47

I appreciate that as well. And just to kick things off, do you want to start with your personal story? And what are you focusing on these days?

Ted Needleman 2:54

Well, you know, again, I’ve got a kind of crazy background. And I think that most of it if you’re on LinkedIn, you can see some of it. But not all of it. I’ve been working in the fringes of ERP, and for almost 50 years,

Sam Gupta 3:12

I like crazy backgrounds because they are the most insightful people.

Ted Needleman 3:17

Yeah, you know, I started out in programming and IBM 1401, sign a 4k card system. I started as an operator, taught myself assembly language programming, got a couple of jobs, and worked my way up to what would be an IT manager position. Then, I had had enough. And my father, who was a CPA, had broken up with his partners and said, Do we want to come to learn accounting with me? And I had written accounting systems and programmed them.

So I said, Sure, let’s do that. And I went back to school while I was working for him. I got a degree in accounting and was all this time actually doing reviewing work on hardware and software. In fact that my first review was the Osborne accounting system for IBM. And from there, it’s been, you know, 40 years of reviews and 4000 of them are so well, a million words, two books, and was in public accounting for 12 years. And then the editor in chief of accounting technology for ten more, and I’m still 23 years later a contributing editor to Accounting Today. So you know, I think where you found me was the ERP reviews I’ve done for PC Magazine.

Sam Gupta 4:39

Yeah. So the next question is going to be slightly standard. After that, Ted, we have a very insightful conversation. And that is going to be the usability of the ERP system. And I believe that you are the most qualified person to talk about that because you have done tons and tons of reviews, and you have looked at pretty much every single system out there. But before we get there, what is your opinion perspective on business growth? What does growth mean to you?

Ted Needleman 5:03

Well, it depends on which side, which side we’re talking about. My concern with growth is the organization that’s implementing the application. And in order for that organization, enterprise to grow, it needs to have a couple of things. It needs to have a knowledge of the business, how the enterprise itself fits into the business framework.

And then, once you know how your business operates, then you have to figure out what your resources are and what you need. And then you know, it’s an evolving process and people that just say, Oh, I can use QuickBooks, well, maybe you can, maybe you can’t, if everybody could use QuickBooks, there wouldn’t be all the ERP vendors in the world. So growth is really a knowledge process. And it takes time. It takes expertise.

Ted Needleman 5:56

Sometimes if you can’t get somebody or somebodies that have the expertise that you don’t a consultant than an accountant, even sales engineer, you know, back in the old days, IBM had SEs, as systems engineers, and they would accompany the salespeople, and they would look at the entity and make suggestions of where IBM fits in.

And most of the vendors at that time, the hardware vendors, had the same similar approach. And to my mind, that makes a lot of sense. You know, I think. Unfortunately, some people, some enterprises, entities are afraid to ask for help. You know, they don’t want to appear not knowledgeable. And there’s nothing wrong with that nobody can know everything. And the more input you get from people that know something, the better decisions you’ll make and the smoother integration of the software application with your actual business.

Sam Gupta 6:53

Okay, so let’s say if I’m the manufacturing executive, Ted, obviously, I know about my business, I probably know my existing financial system, let’s say if I’m on QuickBooks, so why is it so important to hire a consultant?

Ted Needleman 7:07

Well, you may know your business, and you may have some idea of the capabilities of different software. But getting a good fit is a little bit more than that. Let’s take manufacturing as you can since you brought it up. Manufacturing is a pretty evolved process.

Even if you’re just making toothpicks, you know, this shop floor software is a resource allocation that has to be done both in terms of people materials, these logistics involved getting the stuff into the shop floor, running it through this process of making the products, and the bill of materials, there’s logistics shipping, it’s not just plugin, you know, boot up a CD, and you’re up and running. Even if the software does meet your requirements, it has to be operable by the people that are using it. And understandable out the output of the system has to be understandable by the people that have to make decisions with that information.

Sam Gupta 8:10

So let’s say if I have used, I’m already using a legacy ERP system in my organization, my employees are already familiar with the ERP system, I understand my processes better than a consultant who I’m going to train, do I still need a consultant?

Ted Needleman 8:28

Probably not. I mean, but to be honest with you, if you’re using a legacy ERP system, then there’s a reason that people move to different platforms legacy or ERP systems are running on hardware house usually, or software as a service hosted with is still running closely tied to the hardware, today’s newer ERP systems are very often operating in the cloud.

And there’s a couple of advantages to that. Not everybody will need them. But there are a couple of advantages. First of all, legacy systems were designed a long time ago. And it’s like having a 1940 pickup truck that you keep replacing the tires and the oil, and you patch the rough spots. I’m not saying any one particular vendor is in that situation. But you’re working with yesterday’s technology. And when those legacy ERP systems were designed, first of all, they were designed to accomplish tasks not to be usable. And the software that’s been written for the cloud is built on the knowledge of human factors.

Ted Needleman 9:29

Okay, you take to give you a quick example without going into a lot of detail. Years ago, when I was with an Accounting Technology magazine, I got invited by Microsoft to visit them in Redmond. And one of the things that they showed us was that their usability lab, their products, they were people in all kinds of people, secretaries, programmers, executives and had them use the software and photographed it and question them and you know, and try to discover the spots where people had difficulty, but you can’t always address every you know, everybody has different approaches.

So you can’t take everybody’s suggestions and put it into your kind of get a gumbo if you do that, rather than something really good. But the software is designed for the cloud has, by and large, been designed with human factors that can be considered. And in my mind, again, having done this reviewing, it talked with software vendors over the decades, usability is the number one fact in my mind. Yes, you need the functionality. Otherwise, there’s no point in implementing the software.

Ted Needleman 10:32

But I think if you can’t use it, it can have the most features of anything. Look at the fighter jet. Fighter jets got all kinds of stuff. It’s got missile stuff. It’s got radar and GPS. And it’s got altimeters and autopilots. That’s nice. But if you don’t know how to use it, you can’t fly the damn thing. And it’s the same thing with applications. If you can’t understand it, you can’t get the most out of it. You may be able to use it to some degree. And I think that software vendors in the ERP space have done pretty much a good job in making their software understandable.

They certainly have done a good job making it feature-rich. But let’s go back to the manufacturing example that you brought up earlier. Yeah, shop floor management and any kind of production organization have things like resource allocation, and the software may be able to help you. But you know, I’m not a big fan of the black box, I understand the need for it. I mean, I don’t have to know how my car is put together to know how to turn on the ignition and drive it.

Ted Needleman 11:34

But when you have processes that have a large effect on the way you conduct your business, you should have some understanding. Now ERP software will cooperate minimax and minimax used a simplex algorithm and replace transforms and all kinds of mathematical techniques to optimize your decisions.

But if you don’t have some vague idea of what it’s doing, then you really can’t understand the data it’s presenting you with because it’s just not gonna say, hey, more butter, less guns, which is really the prototypical resource allocation situation, you know, it goes into economics, but that’s resource allocation, a decent system will have some ties to project management, it gets involved, but you really have to have some understanding of the processes and some understanding of how you fit into those processes.

Sam Gupta 12:26

We want to touch a little bit more on usability. So let’s say if I’m the manufacturing executive, I don’t necessarily have the software background, and I’m trying to understand what makes a system usable. So give me some examples of, let’s say, if I use the same feature in the legacy system, how my life is going to be different in a usable system,

Ted Needleman 12:50

Well, first of all, learning the system is going to be different, okay, because legacy systems were designed where you have these big operations manuals to tell you every 15 pages to figure out how to input data into the fields, a current Acumatica, NetSuite, and similar mid-level, and your IFS is basically flowcharting your way through the system.

And there are different levels of knowledge that are needed at different levels in the organization. A data entry person needs to understand what kind of data it goes into, where it goes into, and what to do if it doesn’t fit. Right. On the other end of that system. The accountant or CFO, or CIO needs to be able to look at the output and figure out what it’s telling them about running their business.

Ted Needleman 13:34

So there are different needs at different levels. So usability isn’t an absolute, okay? Usability is very much reflected in the level of the person, in the end, the entity that’s using the system. And as you get more and more sophisticated going through the system, quite honestly, it becomes more useful because if you’re printing out financial statements, you have to understand what they are. But most of the time, you don’t have to do a lot of input. You’ll have templates that that will work for you this year versus the previous he is against budget this year is against last year’s budget. Those will be templated reports. And pretty much every year, pieces from that I’ve looked at, and I haven’t looked at everyone on the market as report writers where you can fairly easily construct your own custom reports. Now, that is another place where a consultant is really, really helpful.

Sam Gupta 14:24

Okay, so I’m getting that newer systems are slightly more visual than the older legacy systems. And obviously, report writing is great, too. So what has changed from the technology perspective? Let’s say if you look at the cloud landscape, is cloud slightly superior in building the visual system, then the legacy systems. Can you touch a little bit more from the technology perspective? What has changed?

Ted Needleman 14:48

Again, when you’re building software, a lot of times, you’re using multiple languages. You know, cloud software is not generally using some form of Java. The programming language has an effect back on the presentation of the system to the user. But basically, what’s happened in the last ten years, maybe a little bit less, is the rise of the customer experience CX.

And to a large extent, CX is very dependent upon the user interface. And systems that are that have been designed in the last decade, maybe where the, you know, where the cloud has really become predominant, are designed from the bottom up to present a user interface at different levels in the organization that wasn’t true of a lot of times of legacy. It’s a matter and legacy, the people had to adapt to the software, and the more recent cloud-based stuff, some of the really updated legacy software, the software adapts to the user.

Ted Needleman 15:45

And I think that’s a better approach in a lot of things. But again, I’m a big fan of consultants that you can’t know everything about, number one, your business. So on that side, probably an account, your accountant is helpful. And you can’t know everything about the capabilities and features of the software, no matter how good a salesperson they might have.

And somebody that’s done installations and knows the features can save you a lot of time and time is money. You know, it used to be when you had something like SAP, you know, are two years ago, it could take years to actually get this thing up and running perfectly. Effectively. Wait, nobody can afford that. Now, business moves too fast, life moves too fast, you need to get the stuff, figure out what you need, see how it works, get installed, and then make other decisions if you need to add or subtract or whatever, but you need that anchor, and you need it in place fast. And I think a lot of cloud-based software gives you that advantage. And using a consultant gives you even more of that advantage.

Sam Gupta 16:46

Okay, so let’s talk about a little bit of complexity. So let’s say if I’m bringing my QuickBooks instance up as an accountant, or let’s say if I hired an intern, they could figure out things like WooCommerce or Shopify pretty easily. But when it comes to ERP systems, there is this notion of complexity. So what makes ERP systems so complex that consultants are always going to be required?

Ted Needleman 17:11

That’s an easy one to answer. They’re complex because the businesses that they go into are complex.

Sam Gupta 17:18

I mean, let’s say if I’m using the QuickBooks. Okay, am I’m using WooCommerce. Okay, I have been running my business so far. But all of a sudden, I’m talking to my ERP sales guy. And they are telling me that you know what, you could do QuickBooks, you could do WooCommerce, buy on your own, but you cannot do ERP on your own?

Ted Needleman 17:39

Well, first of all, let’s talk about scalability, which is another consideration. QuickBooks doesn’t scale past 35 users. So if you’re running your enterprise, and you have more than that number of users, you’re so well, but generally, again, my view of this situation is, I mean, QuickBooks is a great program. It really is. It’s a great application, they have a lot of links through APIs to other ancillary applications, like retail CRM, but it’s a piecemeal approach.

And for some people, it works very well for others. Depending on how complex their business is QuickBooks, may have to make too many links and compromises, and every time you make a compromise, it impacts your business. Now, it may be worthwhile and money and time to make that compromise. But I look at a small business a little differently than most people, I think these days, and SMB doesn’t make a lot of sense to me.

Ted Needleman 18:43

In some situations, small and medium-sized enterprises make sense to me because the way we do business in the last five years through the Internet and globally has changed the way we do business. And you can have a two-person company that does manufacturing. It does kitting from pieces from all over the world, you may have multiple multi-currencies, and this is a two-person business. And they might be doing $10 or $15 to $20 million a year in revenue; QuickBooks isn’t going to help them. They’re going to need an ERP system to do that. They need something that can handle the complexities of today’s business. And the more usable that is, the easier it will be to get a match between the business and the application.

Ted Needleman 19:27

And that’s critical. You can go for an ERP system, and it can cost you $5,000 a month, and if you can’t figure out how to use it, you are spending money on something to say, hey, I’m running this, or I’m running that well. If you can’t use it, you’re not really running it. You’re spinning your wheels to a large extent. That’s like me buying a Mach truck to take home groceries from the supermarket.

There are a lot of people, unfortunately, that have been put in that situation because ERP is working its way down from large enterprises down into businesses that would normally be considered small to midsize businesses. And that’s a new market over the last five or ten years for ERP vendors.

When you’re dealing with those smaller businesses, they’re, First of all, they don’t have the expertise to understand a lot of the functionality with UI. They may be so feature-rich that it becomes confusing. So it’s a difficult situation right now for people. And that’s why I think consultants really fill in a gap there, they fill in the gap as educators, and I think that’s a valuable service that they provide.

Sam Gupta 20:34

Okay, so tell me a little bit more about QuickBooks. So you made a comment that you know QuickBooks does not scale after 35 users. Why is that?

Ted Needleman 20:41

The way it’s designed QuickBooks enterprise was designed with a custom database? They don’t use, and they don’t use SQL? Or they’ve stuck with a custom database, and the database has limitations. And quite honestly, you know, I think QuickBooks Online is probably a better idea for a lot of people. Because if you have more than a couple of users on a network, with in-house QuickBooks, close, you need some pretty heavy hardware as a server cloud. With QuickBooks Online, all you need is a Chromebook. You know you can run QuickBooks, and a lot of these a lot of ERP software, or browser-based. So it doesn’t matter what you’re running as long as you don’t have 15 processes on your laptop or desktop.

Sam Gupta 21:21

Okay, so let’s say if I’m the business guy, and I don’t really understand the technicals of these things. So let’s say if I try to run my business after 35 users, what are the implications for me? Is the server going to crash? Is the software not going to respond? And is it not going to work? Am I going to have disruptions in my business? So from the business perspective, what are the implications if I try to run my business past 35 users on QuickBooks?

Ted Needleman 21:45

If you don’t understand where the limitations of the app application are, both feature-wise and hardware-wise, you have no business implementing that software by yourself. The idea of QuickBooks Enterprise or QuickBooks Online is that you allow growing the in-house, standard desktop QuickBooks Premier because businesses are hopefully are going to grow. And as they grow, they’re going to need more users. They’re going to need more people. They’re going to need better reports. And they’re going to need more features. Now, I mean, I’m not trying to think QuickBooks. I like QuickBooks. But QuickBooks isn’t an ideal solution. For a lot of businesses these days.

Ted Needleman 22:23

I think that in general businesses that are enterprise driven rather than small businesses, QuickBooks has links to retail, but if you’re going to have multiple stores with multiple registers and take orders over the Internet, and web, sure, you could link in Shopify and other things.

But you’re much better off with a vertical system that’s designed for retail, both front and front, office, and back. And you can kind of shoehorn businesses into applications. But you’re better off not trying to force an application to do something it may not have originally been designed to do when there are options mid-level, which is mid-market is kind of converting over to ERP. An ERP is designed to be flexible enough to accommodate a lot. A lot of the ERP vendors do very, very good verticals. And you know, if it’s this line from the start to meet those kinds of requirements, you’re going to have a hell of a lot less trouble initially, and you’re going to have a hell of a lot less trouble over the long run.

Sam Gupta 23:29

Okay, so when we look at the vertical software, so since you mentioned that comment, right? So when we look at the vertical software, there are a bunch of them. So some of them may not be as popular. They could be regionalized. And we don’t even know if those brands are going to be stable or not. Right. So what would be your perspective, whether we should go for a name brand or not so recognized brands, but they might provide the functionality that I need as a manufacturing executive?

Ted Needleman 23:56

I mean, realistically, most of these vendors would not know when they started selling their software. Yeah. So if somebody comes along, and they’re not necessarily recognized, they may have a better way of doing things. And again, you need somebody. Not everybody in an enterprise in an organization is going to have the understanding of the processes in the organization, as well as the processes in the software, to be able to make a good match.

And sometimes the salespeople and in the software vendor, the ERP vendor can bridge that gap sometimes to your accountant can bridge that gap. And a lot of times, you’re better off just saying hey, help I you know, what’s the best choice to make because there are a lot of people that don’t need that.

Ted Needleman 24:46

There are a lot of people that have good CFOs and CIOs and great IT departments and they’re able to make those decisions on their own. Not everybody needs a consultant, but again, if you’re going to a new vendor, First of all, you got a problem with converting whatever you’re doing now into a new format. And this is a one-time deal for you in the organization at any entity, but it may not be a one-time deal to a consultant that’s really familiar with doing that kind of operation.

So it’s false economy to say, hey, I don’t want to pay this guy $150-$200 an hour, I’d rather waste $300 or $400 or $500 an hour, ten times over trying to do it myself. I think some of the time, it’s just a matter of not understanding what the process is of implementation. And again, that’s not a value judgment against anybody considering your ERP or any application for that matter. If you haven’t done it, how can you know what’s involved in it?

Sam Gupta 25:48

When we look at different ERP systems, and when we talk to different people, as manufacturing executives, we get different definitions of what an ERP is, to be honest. Okay, so in your perspective, what exactly is an ERP? Some people say that, you know, it’s an accounting system. Some people say that it’s an order management system. So how would you define any ERP?

Ted Needleman 26:07

ERP is a chameleon. It is an accounting system. It is a manufacturing system. And It is a retail system. It has to be what the business needs and every business is a little bit different. So an ERP system has to be flexible enough. It has to be configurable to a business without ruining other aspects of the application. It has to be scalable. That’s one feature of mid-range, you know, mid-market and ERP that you won’t find in a lot of the lower-end systems. But that’s changing because vendors like Xero, and Zoho, which are built on the cloud applications, are pretty much completely scalable because the databases that they’re built on are completely scalable.

And basically, accounting, especially as a database application, you know, you can call it whatever you want books, accounts, their fields in a database. And way that they’re most accounting applications is built on relational databases like SQL HANA. That’s one feature that you see in some of these lower-end things that are kind of modeled on an ERP model. But basically, I’d say, if I had to pick one characteristic of any ERP system, it’s adaptable. And that’s valuable because every business is just a little bit different from every other business.

Sam Gupta 27:26

Let’s go back to your comment about the new format of a new system. Typically, in the ERP system world, obviously, one system is definitely going to be different from the other one. So let’s say if I have been running my business on one ERP system for the last ten years, what is going to be involved for me if I need to switch to the new ERP system?

Ted Needleman 27:44

Well, first of all, it could be a nightmare.

Sam Gupta 27:48

Tell me more.

Ted Needleman 28:02

Well, to get a consultant because you’re in for a real ride going from one way of doing things to another is I’ll give you an extreme example. Okay. From my personal history, the first book I wrote, I wrote longhand on yellow legal paper, the yellow pads, and my wife typed it.

It was on an apple two, with a Z80 card running WordStar. Okay, so there’s a difference. I could type on an electric typewriter, which I had. I’m not really a typist. Even after all these years, in all these words, I’m still not very much of a typist. But today, when I have one of these, if I wanted to transcribe one of these sessions, like when we’re doing now, I would take notes, and I’d make notes, and I type it in and edit it today, I record it, I send it out to rev.com, they transcribe and send me back a Word file, and I do an edit on that or just highlight what I want to pull out of it.

So it’s different. When you’re going from an older type of ERP system to a newer type of ERP system, you may be doing the same types of operations, but you’re doing them differently. It goes back to usability. Today’s systems are designed. I hate to say the less. They’re less functional because they’re more functional. But that functionality is more accessible on new systems, and it was on old systems, and that makes a mental paradigm shift that has to take place in the company, you as the manufacturing exact to understand why you’re doing things differently and what the impact is going to be on your business positive or negative. And that’s a big jump a lot of times, especially if you’ve been using any ERP for 20 years.

Sam Gupta 29:38

Okay, so last time when I actually looked at different ERP systems, I got super confused because they all look fairly similar. Okay, so let’s say if I’m, as a manufacturing executive, I’m going in a demo, and I can see every single ERP system out there can probably do a sales order for me can probably do a purchase order for me and I have no idea how to differentiate how to understand what is going to work for me. So let’s say if you were the manufacturing executive. And if you were going in a demo, how would you identify a usable system from the heart to your system?

Ted Needleman 30:11

Well, if it was me, first of all, before I went to any ERP vendors, let’s look at your system, I would go to my department heads, and there are people that do data entry and understand what we’re doing. And what we’re doing that might be a little bit different from the way everybody else does it. Because every executive has their own way of doing it has their own way of looking at things, their own level of importance on different things. And you need to have a good understanding of what you need and what you want.

Okay, before you sit down with the ERP vendor, because at the base form, I mean, let’s take accounting because accounting, accounting is accounting. I mean, it doesn’t, it doesn’t matter exactly how you do it, there are standards generally accepted accounting standards, yes, that tell you what you have to have, as far as redundancy, you know, internal control, output has to be formatted, you know, for the SEC, or certified what it’s I mean, there are some standards that are set in stone by regulatory agencies and the users go into you go into a bank for a loan, they expect to see not only a P&L and a financial statement, they want a cash flow statement, they may want other things.

So you need to know what you do a little bit differently than other people might do. And that, you know, that’s the secret sauce. I mean, that’s what makes you successful, and that that accounting system, or that ERP system, or that ERP system as to support what you needed to do. And it may be a little different.

Ted Needleman 31:44

Every ERP vendor has a basic set of functions that they do. And you’re right, you know, it’s confusing. We, oh, we do this. Oh, and you go to the next one, oh, we do this, but it’s the same thing. I’ll give you a kind of an example. A car is a car, okay. But some cars are little cars. Some cars are performance cars. Some cars are SUVs, some cars, and pickup trucks.

And depending on what you need to, if you’re gonna haul wood to a construction site, you don’t want a Corvette, you may want to quote that, but you’re not going to be able to use a Corvette to haul sacks of cement. Yeah. So the tip is that you look at when you go looking, and you’re talking to ERP vendors, you ask them, How do you do this? What do I have to do to get this out of your system? Can your system do this? I did things a little differently than everybody else. Can your system handle that without a lot of fudging around and custom reporting?

And the first step in any acquisition is to know what you want to do with it. Yeah. And that if every ERP system did exactly the same thing, exactly the same way that we want to ERP system, it would only be one vendor? Yeah. Okay. And it’s a difference rather than the similarities that you have to be aware of, and you have to understand how they fit in with your way of doing business.

Sam Gupta 32:59

All right. That’s it for today. Do you have any last-minute closing thoughts, by any chance?

Ted Needleman 33:03

Yeah, I think when it comes down to it, you have a three-level match that you have to meet, you have to match the people in the organization, the features in the software, and the needs of the business, and you need to address all three of those things to make a good purchase.

And if you’re not, if you’re not capable of doing that yourself, and that’s not a dig on anybody because very few people are actually good at recognizing everything in a business. That’s why we have consultants, that’s why you have accountants, you have specialists that are doing it. And a lot of times, it makes a lot of sense to pay a specialist to take a look and give you a hand. I mean, I couldn’t build a house. I can frame at a wall. But I can’t build a house. I would never do that.

Ted Needleman 33:44

Well, again, it’s an understanding of where your limitations are and bringing onboard people in your organization and outside of your organization to boost those areas.

Sam Gupta 33:56

yeah. All right.

Sam Gupta 33:56

Thank you so much, Ted, for your time. This has been an insightful conversation.

Ted Needleman 34:00

So it’s fun talking with you, Sam, and I appreciate your asking me to be on.

Sam Gupta 34:04

I cannot thank our guests enough for coming on the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Ted, look up Ted Needleman on LinkedIn and connect with him. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check out our later episodes, including the interview with G.Brett Beaubouef, who discusses whether moving to the cloud guarantees business transformation. Also, the interview with Randy Johnston from K2 enterprises who touches on why process documentation is an essential ingredient for an efficient finance organization.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get out. Thank you, and I hope to catch you on the next episode of the WBS podcast.

Outro 35:01

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Damon Pistulka from Exit Your Way, who discusses why word-of-mouth or traditional marketing strategies are no longer enough for business growth. He also touches on his growth secrets and how they have been able to rule the market through the network effect. Finally, we touched on what strategic buyers or private equity look for when business owners try to sell their business. 

Chapter Markers

• [0:18] Intro
• [1:52] Personal journey and current focus
• [7:20] Perspective on growth
• [12:52] The network effect
• [20:21] The shift to e-commerce
• [28:53] The predictability of value on a weekly basis
• [31:42] What buyers look for in a business
• [36:15] Closing thoughts
• [39:19] Outro

Key Takeaways

• COVID really changed their effectiveness because those same people that were the road warriors that were out there visiting these potential clients and moving them down that funnel in person, we’re not able to do that this year.
• When you’re sitting down with a web design person, your problem will be that your web design isn’t good enough. Or if you sit down with a cold calling person, you’re cold calling is not good enough. But the reality of this is that’s not the case. It’s not a one solution fits all. You have to really figure out what your core problem is. And it could very well be that it’s one of those, but it could very well be that something else.
• You need to be measuring where you’re at consistently. And when you talk about how you translate operational performance. And I say all the way from the initial contact with the lead all the way through capturing money.
• Only about 20% of the businesses that are put on the market generally sell in it simply for that key thing is that the owner is too much too heavily involved are too much the value of the business and it’s gone when they leave.
• If you look at the statistics, less than 10% make it to the third generation, but those that put these kinds of systems in, they go multi-generational, and you know, sometimes they’re 100 years or more, but so these kinds of things are where we’re really the investment in this has such a huge long term payout, because succeeding the business, hey, you can you’re leaving the legacy you want.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Damon

Helping business owners and executives create legacy businesses, Damon is focused on identifying and executing opportunities to increase business value. With 20+ years of building and managing businesses in extreme conditions and diverse industries, Damon is committed to helping clients be their best, crush competitors, and dominate markets provides an unwavering focus.

Damon developed his skills as a business value and operational improvement specialist.  He is an expert at engaging internal & external teams to develop game-changing solutions that foster business success. He continues this work today with Exit Your Way® clients scouting the path ahead and keeping them on track while they work towards their goals.

Resources

• Connect with Damon
  • LinkedIn | Twitter
• Connect with the Exit Your Way
  • Website | LinkedIn | YouTube | Facebook

Full Transcript

Damon Pistulka 0:00

Business is not growing. I say, well, what are you doing now to do more outreach to potential customers? How are you trying to get yourself in front of those people? And I get a blank stare back, and they go, oh, it’s always been word of mouth. And that comes out inevitably in every conversation where I’ve had growth problems.

Intro 0:18

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:54

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ. If you’re an SMB lifestyle business and have had growth challenges, your end goal could be selling to an investor or a PE firm if you are a second or third generation with this, your business chances of survival would be slim. If you don’t follow the modern procedures for running your business. Operating a business has become even harder as the game has completely changed in the last three years, especially with COVID.

In today’s episode, we have our guests Damon Pistulka from Exit Your Way, who discusses why word of mouth or traditional marketing strategies are no longer enough for business growth. He also touches on his growth secrets and how they have been able to rule the market through the network effect. Finally, we touched on what private equity buyers look for when business owners try to sell their businesses. Let me introduce Damon to you.

Sam Gupta 1:52

Helping business owners and executives create legacy businesses, Damon is focused on identifying and executing opportunities to increase business value. With 20 years of building and managing businesses in extreme conditions and diverse industries, Damon helps his clients beat their best competitors and dominate markets. Damon developed his skills as a business value and operational improvement specialist.

He is an expert at engaging internal and external teams to develop game-changing solutions that foster business success. He continues his work today with Exit Your Way clients scouting the path ahead and keeping them on track while they work towards their goals. With that, let’s get to the conversation. Hey, welcome to the show, Damon. Thanks, Sam. So just to kick things off, do you want to start with your personal story and your current focus?

Damon Pistulka 2:45

Sure, Sam, I can do a little bit about that. My story really starts growing up on a large family farm in the Midwest. It’s something that not many people have the opportunity to do. When I started, it was smaller than it was when until my father grew up quite a bit. And my brother did. But you know, we had several 1000 acres that we took care of cattle and other livestock that depends on us. So from a very early age, I understood what it was like to have to take care of things, have to figure out a lot of things. And you know, in my early years, and through my teens, I really enjoyed learning about how things work from the standpoint that I was a mechanic of sorts; you had to be growing up on a farm like that.

Damon Pistulka 3:42

We were literally 30 miles away, almost from the nearest car dealership, and things like that. And it just, for example, I think even now the nearest Walmart is probably 40-50 miles away. So you know, the town I grew up in had about 300 residents, and I graduated with a class of 16. So I grew up in a much different environment than most other people that you’re going to talk to in business simply because of that. And what that is given me throughout my career is a foundation of when I’m in a manufacturing company, or I’m in a construction company or something, and I’m helping them with or e-commerce with those kinds of companies. I can relate to the people that are actually doing the tasks in the business, whether it’s someone sweeping the floor, running a machine, or driving a truck, I can understand what they’ve done and understand that position that viewpoint and I think that’s always helped me to really think about business holistically.

Damon Pistulka 4:45

And you know, after I grew up there, I went to school, got an engineering degree, did a fair amount of graduate work and industrial management, and then I was often and running facilities and then businesses mainland. The manufacturing space and ended up doing that for 10-15 years with investment-owned businesses and private equity-owned businesses. And ultimately, after I finished that in about 2009, I started doing my own consulting work. And then, in 2015, I started working with an old business associate Andrew Cross from Northwest.

At that time, I was a business brokerage that he had started shortly after we’ve worked before. So he and I did that for about a year and a half before we really started to look at how we were helping people in selling the businesses and what we really wanted to do, and what my vision had been since I was in my mid-30s.

Damon Pistulka 5:48

And running businesses for private equity investor-owned companies was to bring that same kind of focus into other non-investor-owned companies. So you know, the focus that they always have is we are growing this business to a certain value because there’s a definite exit point for us out there in the future. I saw how that worked. And I saw how much we were able to change those businesses and how much value we are able to create. And I wanted to do this in my 30s. But I really didn’t have the network around me to do it and with the right people. And that came together for us in 2016. And we’ve been going down that road very hard since helping people grow their businesses to the size they want, prepare them to sell, getting them sold, and just growing businesses, not just but and growing businesses, so they run better and helping business owners do that.

Damon Pistulka 6:39

So that’s, in a nutshell, me from where I started to where I’m at now. And I just, I’m so grateful that I get to do this on a daily basis helping these business people realize their potential, whether it’s a business team, a management team, helping them or people in the business, helping them reach their goals, or the business owners themselves finally getting their business to the point that they have toiled over for many years, to the point that it’s actually now providing a return for them, allowing them to step back from the business and really continue to, to grow without as much help from them. So it’s, I’m just thankful I get to do this.

Sam Gupta 7:20

Okay. And it’s interesting the way you mentioned the word growth because that is typically the second question that we like to ask every single guest that we have. So Damon, from your perspective, tell us what your perspective on growth is?

Damon Pistulka 7:34

When I look at business growth, there are two things that are slowing people down on business growth. One is squirrel syndrome. We, as entrepreneurs, are naturally attracted to shiny objects. And that is one of the first things that I usually have to myself. For myself, personally, we have to focus on what really is going to generate more revenue for the business, right? Because typically, someone goes into business because they’re good at something. So I’m going to open a plumbing business because I’m good at plumbing. And I know I can make more money than I was working at my plumbing job, and I’ll have more freedom. And I’ll do all these things. That’s why they get into business. It doesn’t matter if you’re a plumber, if you start a sheet metal manufacturing company, or you’re doing high-end aerospace machining, you know, these people get into business, typically, because they’re good at doing that thing, right?

Damon Pistulka 8:27

They’re not in business because they’re good at selling typically, or they’re good at business typically. So when you come back to why the first thing that’s limiting growth usually is you’re simply not focusing on growth and not executing the fundamental things that you need to do.

I mean, there are, I can’t tell you how many people you walk into, and you go, okay, talk to them about their business, and they go a business not growing like my one, I say, well, what are you doing now to do more outreach to potential customers? How are you trying to get yourself in front of those people? And I get a blank stare back? Yep. And they go, Oh, I’m not really, you know, my, it’s always been word of mouth. And that comes out, inevitably, in every conversation where they’ve had growth problems has been word of mouth. Or I used to have a really good salesperson, or they moved on or retired or something like that.

Damon Pistulka 9:20

And the fact of the matter is, is most businesses or if you say some businesses have not made the transition to really how people are buying today. And when I was actively selling in businesses in selling as a salesperson, General Manager, salesperson in these businesses back in the early 2000s. There weren’t social media really to speak of. You had a website, but it was more just a placeholder. It wasn’t a place where you could go and really get information about things and all the things now, and the buyer demographic at that point has changed completely from then until now.

Well, when you look at that, The ownership in these businesses, a lot of them are the same age as I am, they’re in their, their 40s, and 50s. And they’ve, they have not really moved forward to the point that they understand the way that the private equity buyers that are buying now from them really want to find out about them, research how they help people with their specific situation, and then get 75% of the way through the buying process, before they contact you all digitally, that I don’t care if this is an e-commerce business that sells shoes, or a CNC machining businesses, for the aerospace industry, it all happens the same now.

Damon Pistulka 10:41

And that’s where we come back to these companies. When we go, listen, you have to make sure that that part of your business is at least functioning. And then you have to make sure that you’re handling that input the leads that you’re getting from that the right way with a process that really works because the business owners have often relied on a salesperson or one particular sales process that seemed to work for them.

But they really don’t treat it, especially in some of this business, like manufacturing or something where you’ve got really high ticket items, right? Because let’s face it in manufacturing, if I close the sale, it can be 5 million, it could be 30 million, because of the length of the relationship and the contract sizes and everything like that.

Damon Pistulka 11:26

So we’re not talking about 100 or 1000 transactions. We’re talking about 10s of transactions here, even in 100 million dollar businesses, right? They’re going to bring on the big clients. So But what they don’t do is they don’t apply the same principles that you need to develop a good sales process like, okay, who do we have in our funnel? And where are they at?

And how are we helping them answer their questions, educating them on how we could potentially help them, and moving them down the funnel or funnel or out of the funnel because of the nature of manufacturing or large construction work, right? This, to me, the businesses are very similar.

Damon Pistulka 12:05

It was often the salesperson that had the contact that went out there and established that relationship and did that stuff. And, and still, those salespeople are still around today. But I think that 2020 and COVID really changed their effectiveness because those same people that were the road warriors that were out there visiting these potential clients and moving them down that funnel in person, we’re not able to do that this year.

And I think the companies that are actually taking the time to figure out how you’re going to do that, with a hybrid of digital and person-to-person to move people through that process, are much better off. But that’s one of the things that I really see is that they haven’t prepared digitally. And they haven’t figured out how to integrate the old and new into a more effective solution.

Sam Gupta 12:52

Yeah, and I could not agree more, especially with respect to some of these industries, manufacturing and distribution. Obviously, they are very traditional in the way they operate. And I want to go back to your personal story a bit. You mentioned that in 2015, you didn’t have much of a network, but you worked really hard from 2016 onwards, and it seems like you are in a good place. The way you are present, as in my opinion, digitally. I think you guys are doing amazingly well.

So obviously, when you come from a similar background as these manufacturers and distributors, and you had to figure things out yourself. So tell us your entire journey, how you started? What is the network? Number one, what was the network effect? What is the advantage of developing this network? So walk me through the entire journey that you have gone through in building your Exit Your Way?

Damon Pistulka 13:43

Yeah, what I really like I said, from ours, I was 35 or 36 when I envisioned the company. And what the vision of it was at that time, it is to see a company that was helping business owners grow their businesses, get them to the value they wanted. And then you can do what you want at that point. You can sell it. You can keep it. Or you can give it to your kids wherever you want to do and. And then I realized at that time that I didn’t have the network of specialists and people and resources really, that we’re able to do this, you know, I had done it with the teams that I had in these businesses, but to do it, like I envisioned with multiple companies at a time and creating extreme growth. It really took a lot more specialized resources. So I started as I said and 2015 and realized that I didn’t have enough resources.

Damon Pistulka 14:38

I was one of those business executives that had gone their career as many do. You’re focused on the businesses you’re working in. You’re not building that network. And You’re not getting those specialists around you that can really help you, and I recognize it kind of got slapped in the face with it. And I started working on LinkedIn, and I was lucky enough to start getting connected with some very knowledgeable people. I started working on it.

And I grew my network a bit. I met some other advisors and things and really started to get things moving. So, I went from a few 100 connections in 2015 to 2016, 2017. I probably had 10-12,000, something like that, and some advisors that I’ve met that really good. And then, fast forward that to 2019 is when I really took another look at it and said, okay, we were moving forward with our business, we had moved through some clients and really done some extreme growth with people that I’d met on LinkedIn.

Damon Pistulka 15:37

And I was like, for us to really take this to the next level we had talked about in 28, late 2018-2019. And we wanted to go national, and I said, Listen, I think there are two things that we’re going to have to do to go national. My partner and I were talking about partners. At that time, we were talking about it, we said, Wait, we got to be virtual. First of all, this isn’t the end of 2018. So we got to have a better network than anybody else.

I said, Okay, so that means that we have to either meet them in person, meet them online, get to know them, figure out what they do, and better than anybody else. That really is in started us down a journey of massive amounts of time on the road, massive amounts of time and LinkedIn. And ultimately, in 20 late 2019, I met a few people on LinkedIn that really, really unlocked the gates for me, so to speak of LinkedIn.

Damon Pistulka 16:30

And that was Ira Bowman, Mike O’Connor, a couple of guys. When it comes to LinkedIn, I respect them a lot because they understand how to grow a network and how to connect with that network and engage with them, and really do that. They helped me a lot in seeing how you can build a solid network and then how you help those people to then begin building those relationships.

And then I met people like Nick Dorsey, who taught me he was Nick was really one of the first people that I ever met online, and then on LinkedIn, and then met in person, and it comes to be now he’s a season ticket holder at the Seahawks as I am we go to games together when we can. We sit across the stadium. It’s a lot of fun. And you know, once I figured that out that LinkedIn is not a place for you to click your keystrokes in and message back and forth. But it’s a place for you to meet like-minded individuals.

Damon Pistulka 17:26

So you can take those relationships offline, and do them in video calls or in-person meetings, wherever you can do to get to know those people better and really build the relationships that you can and that you can on a much larger geographic scale with a platform like LinkedIn. And for me, honestly, that was in 2019, when that started to happen and started to gain some traction.

Well, fast forward to the first quarter of 2020. And COVID hit. Well, what happened, everybody that was working in the offices had to work at home, and now the user base on LinkedIn or the actual time on LinkedIn skyrocketed. Yeah. And efforts in the first few months of 2020. Well, I took that opportunity to really aggressively go out and meet people. And to the point that at the beginning of COVID, for us at the end of March or something like that, we were sitting there, it just hit me one day, I was like, Listen, these business owners, these advisors, these people are having trouble, they don’t understand, you know, this is just a new situation for so many.

Damon Pistulka 18:34

And I talked to Andrew, and part of the work I did was in turnarounds where you know, they put me into an investment group and put me into a really horribly poor performing company in a turnaround, right. So this is similar to what was happening with a lot of these businesses and COVID. I told Andrew, we were talking about it, I was like, it hit me over a weekend. I was like, dude, we got to be talking to people about this because they don’t understand the gut-wrenching decisions they’re gonna have to go through to save their business to keep, the employees employed, and all these different kinds of things. And we started having weekly video calls. Pretty soon it was, you know, we had two people on it, and we had six people on it.

Damon Pistulka 19:15

And then the next thing, you know, we were, we were at 50 Plus, and, you know, the zoom wasn’t really working for us. And we had to change platforms, we moved over to remote because it was a little better platform for us and what we’re doing, and here we are with that, you know, 30 or 40 of those events later, we still are doing them weekly, we still are got a really good group of business owners, executives, advisors that we talk with every week where we’re, we’re building relationships, we’re talking about clients, we’re sharing speakers that that that teach us all something every week and in throughout this, we were able to build our network, and this is what I hadn’t been able to do before and we knew we needed to do this to go national and really do it the way we wanted to.

So 2020 for us was a tremendous growth year for us internally as a company. Not only were we successful in selling some of the companies that we had been working with, and we have clients this year that were, you know, I’ve got a larger oilfield services client that they were down significantly, but they still made money.

Damon Pistulka 20:21

You know, and I’ve got, we’ve got ecommerce clients that that, you know, up 60-70%, and they could have been up probably 80 or 90, but we honestly that ecommerce companies in the year 2020, if you haven’t grown that much, I don’t know what you’re doing. Because this shift to e-commerce is so strong, so strong, we’ve got another client, that’s, you know, they’re up almost 200%.

And it’s the e-commerce businesses that are really struggling just to keep up with demand, right. So this building, this network, turned into a lot more for us because once we started doing that, we started doing a video with it. And we started building, building our video content on our website, we started then live streaming to LinkedIn, we started to do live stream shows two times a week, because, hey, we wanted to, to provide more information for business owners and executives that would help them grow, prepare their businesses, make them run better, and get them ready for sell if that’s what they want to do.

Damon Pistulka 21:24

And, and you know, so our, our weekly roundtable, we call it that we’ve had on Thursday mornings at 7:30 pacific that, as I said, it’s going and then we also had, I don’t know, we had 35 or 40 other live interviews that we do on Tuesdays and Thursdays at three o’clock Pacific. And I’ve really been fortunate to interview some fantastic people, some fantastic business owners, and share their stories.

Because through sharing those stories that they for some of the business owners that we interview, I mean, their stories are so amazing, because you can talk to a business owner that that started a business and their business today can be $50 million. But I will guarantee you without fail that it has not been a smooth road. And when you talk about growing a business and you talk about, you know the things that business owners need to do, I think people that are in business now need to hear that they need to understand that, hey, it’s not sunshine and rainbows it all the time, you’re going to have some great wins, but you’re going to have some challenges.

Damon Pistulka 22:31

And as you’re growing those businesses, I think hearing those things helps people. So for us, 2020 in the network building really exploded our ability to help others and just came to fruition and some things, and we talked about I had a client this year that had a really specialized software need. Through LinkedIn, I was able to find the exact resource they needed in literally, I put a post up I had within an hour, I had a few, I don’t know, five or six different suggestions, and one was the right one, and away you go.

This wasn’t available to me 24 months ago. Now that has helped us so much more because really for what we do. And when we’re helping a client grow, we’re not looking for a five-year relationship. But if we have those, that’s great. Our real goal is to take a business from point A, which could be that they’ve got, you know, 10 million in revenue, and they’re worth about 2 million or 3 million or 5 million or whatever the number is.

Damon Pistulka 23:31

And the owner really wants that to be $20 million and worth two or three times that that’s what we do, we go from point A to point B. So that is not a long-term thing for us. That is something where we want to be doing that as quickly as possible. So it takes specialized resources, right? Because you don’t want to haphazardly do that. And as many business owners know, they’ve, they’ve spent countless dollars on stuff that didn’t work.

So we try to go through those things ahead of time and knowledge to be really, really good at diagnosing what they actually need and set of the solution that’s in front of them trying to fit their needs. Because I forgot, I was reading a book earlier this year. It was. I can’t remember the guy’s name. But he coined it very well. He said when a digital marketing person that specializes in email marketing, and I don’t know if he uses web design or something like that.

Damon Pistulka 24:21

But he said, when you’re sitting down with a web design person said your problem will be that your web design isn’t good enough. Or if you sit down with a cold calling person, you’re cold calling is not good enough, he said. But the reality of this is that’s not the case. It’s not a one solution fits all. You have to really figure out what your core problem is. And it could very well be that it’s one of those, but it could very well be that something else.

So we take the solution agnostic approach going, listen, this is the challenge we need to fix. What is or the problem we need to fix are the things that we need to improve on. What are the best ways to do it, and we look at all the potential solutions?

Damon Pistulka 25:00

Because we’ve got this network now that I can do this, and we go, okay, let’s take this talk to these people, these specialists talk to the internal people work together to figure out what is actually the right solution, not just I was contacted by a great PPC person, they’re selling me Google ads, or I’ve got this great web designer that I know that tells me their web, my new website is going to solve everything we really go listen, in, our solution would look more like this.

It’s like, hey; you could redo your website. But that’s going to take you three months. And you know, it’s going to cost whatever, but really, your website has these key issues that we need to fix. Other than that, we don’t need to spend any more time because we’re here focus on growth in sales, because I don’t care about growth in visits to your website, it’s nice if it’s creating leads that are creating sales, everything we focus back on to is it’s got to be generating sales, those sales have to be profitable, that profit has to turn into value that the owner can realize, simple as that. So our solutions, like I said, are much more about,

Damon Pistulka 25:59

Hey, your website needs this work. We need to mix in some PPC. We need to mix in some social because data, we’re long term or some SEO, and do some things that are going to help you in the long term as well as the short term to get to growth you want because we got to hit your target, we got to be moving towards your target today. But we need to hit your target, which is even bigger, six months from now, or whatever we decide with that client. So when you get to network, you need a network like that.

Because if you don’t, then I know a good marketing person down the street, or that’s in your industry, and they’re going to, you know, do email marketing or whatever it is, it’s never a one-stop solution. And that’s putting those things together is where we really sell. And then as you grow the business that you know, we’re old school on the fact that we really believe well, old school, new school, wherever you want to talk about, I mean, in the private equity world, KPIs measuring performance has been the standard for many, many years.

Damon Pistulka 26:56

And in the private business, it’s not done for a large part just because those business owners don’t have the pressure that an investment owner does investment owner has a down month, they don’t, they have to go tell that to their investors, right, because they the investors get those updates they get those things are a public company, but I talk to business owners every week that have very good businesses might make them millions of dollars a year, but the monthly financials and the weekly or daily performance measurement falls off they’re don’t even consider that.

And that’s the basis of what we do. Because in order to make progress you need, you need to be measuring where you’re at consistently. And when you talk about how you translate operational performance. And I say all the way from the initial contact with the lead all the way through capturing money.

Damon Pistulka 27:50

When I say operation, I don’t mean that exclude sales, or finance or anything like that the overall operation of the business, if you are tracking that with KPIs from like I said, from that initial lead through the collection of cash, you are going to be much better off because if I’m sitting here today, and I have a have managed, you know, whatever you want to call it, you have a weekly meeting, to discuss with your internal managers, your internal teams, the performance in their areas, and then you talk about that from sales all the way to a collection of cash.

And you look at those metrics, and you see how they’re performing. And as an owner of the business, you can begin to rely on that. Because if those KPIs you’re using get you to a gross margin level of the business, you can then begin to predict your profitability each month. When you begin to be able to predict your profitability on a weekly basis, it drastically changes your business, the predictability of profits starts to turn it into a very desirable business.

Damon Pistulka 28:53

And this is where I really feel like the heart of how we help clients grow significant because you develop businesses that owners can then if you set up the team, right, and they’re able to do this, right, sometimes the owners have to be more involved and other times with the size of business and different things.

But when you put that predictability in on a weekly basis, and you start to understand that if I hit these numbers on a weekly basis, from A to Z, that my financials are going to look fine at the end of the month because you basically you’re taking your annual goals, you’re breaking them into monthly goals, break them into weekly goals, simple as that.

But when you start tracking, you’re addressing challenges on a weekly basis, and you’re hitting those numbers, and you get about three, four, or five months into this, and you can see it change and the owners about how they begin to get a new comfort level with their business because a lot of them sit around and go okay, I want to see how I did at the end of the month with the financials or they’re looking at the bank account and both of those things are not good.

Damon Pistulka 29:56

I just say they’re just not good. I don’t know a good way to do it, but because the bank account is really, you know, you might have big bills, you gotta pay whatever you have to look at, you’re just not looking the right thing we’re looking cash in the bank. On the other way waiting for the financials, you don’t know what the hell is going on, what’s the what if it’s, it shows your worst nightmare, it’s you just did just waiting for something bad to happen.

On either of those ways, when you put this predictability from A to Z in a business, you can tell that, listen, if my salespeople are doing what they’re supposed to be doing, that generally leads to enough sales, which generally leads into enough profit, which generally I’m measuring on a weekly basis, which means that I’m generating enough money to cover my fixed expenses, am I and give me the profit I want, it’s a whole new world, and we put that together, and then you just you put the right pieces in place.

Damon Pistulka 30:47

So you go, okay, we’re stalling on this part of the business, you know, maybe the operations aren’t keeping up, or you’ve got to do you know, you’re, then you’re just, you’re just do bottlenecking areas and adding new solutions, which we often have to because, you know, when you take a company, and you double it, and in 24 months, you know, you go from $10 to $20 million or something like that, because these e-commerce companies and some manufacturers to have that ability to do it, you have to run through structural changes, and you have to develop and implement structural changes in the business because you might have a whole another level of management that wasn’t there before.

But in 2001, I’ve got three customer service people on the phone, or account managers, and now I’ve got 10, it was easy to manage three, but now I have to have a manager for 10. You know, those are the kind of things that you have to go through and, and really understand and keep changing your metrics and changing your structure your business to keep up with it.

Damon Pistulka 31:42

But in the end, if a business owner is looking to realize the value from their business, either by taking out profits over a long term, and you know, using that to retire on or fund whatever else they want to do, or to eventually sell their business, this predictability and systematic achievement of goals is what a lot of private businesses don’t utilize.

Because they simply weren’t in that situation. It goes way back to when we started talking about they got into it because they were good in manufacturing or good and, you know, had a good product ideal. Yeah. And that’s why they got business. They didn’t get into it. Because like I said, there are good sales are systematically building a business. And that’s, that’s where I think there is our application. And what we do it is it’s, it’s a ton of fun. I mean, when you see these business owners realize that man, my business is worth something now, and I’ve got enough money, I can go on vacation now. And I don’t have to freak out and throw up three times a day.

Damon Pistulka 32:49

Because, honestly, that’s what it is, is it for most business owners? Is their life chained to the business? Right? Are they chained to that damn business? Because they feel like if they leave for a week, that’s gonna fall apart? Well, I know. Yeah, exactly. Right. If you see them what was good the kind of work that you guys do, putting the systems behind them in the ERP systems and, and simple solutions for these, you know, when you look at all this measurement stuff I’m talking about relies on good solid systems behind it.

And we’ve talked before, I’ve implemented a number of ERP systems and then said, it’s like, eight or nine now. And when you look at these things, if these things can give you actionable information, these measures out easily efficiently, that’s really what we look for, and those because we can use that and move forward. But these business owners can then go on vacation. They can step back from the business.

Damon Pistulka 33:45

And if it’s set up, right with the likes of the team, and everything clear goals, they will see that that business can flourish, and sometimes even better, without them around as much. And what that does, then is that helps them they’re a, they’re more profitable, you’re able to hopefully take more profits home with them invested however they want, anywhere they want to do, but then when you go, now it’s time for them to decide what they want to deal with their business.

Because the thing that sucks is we all get old, we are going to have to do something with that business. Right? Yeah. When you get to that point, and you go, listen, now it’s time for me to think about what I’m going to do with that business. And you’re in the first case where you didn’t do this work, right. And I’m changing my business. I’m still working that you look at that from the outside buyer perspective.

Damon Pistulka 34:33

And that’s very, very hard to sell. That’s why only about 20% of the businesses that are put on the market generally sell in it simply for that key thing is that the owner is too much too heavily involved are too much the value of the business in most cases, and that just how do you transfer that value forward? It’s gone when they leave so by creating these businesses that can sustain themselves. And grow and do that, really the owner becomes the architect of the overall they really laying out the goals and then making sure the money is there to do it or whatever they got to do.

Well, that’s something that a buyer, a new buyer, can come in and take over. Right? They can do that. And the real thing is that benefits both, I mean, because then they can realize that on their way out and do it, even if that’s a succession, right, because you don’t, I don’t care if you’re the first generation, the second generation, third-generation, family-owned business, if you put good systems in early, that business has a tremendously higher chance of success through the generational change.

Damon Pistulka 35:38

Because you know, if you look at the statistics, I think it’s like, less than 10% make it to the third generation, but those that put these kinds of systems in, they go multi-generational, and you know, sometimes they’re 100 years or more, you know, but so these kinds of things are where we’re really the investment in this has such a huge long term payout, because succeeding the business, hey, you can you’re leaving the legacy you want.

But also, if your business is consistently growing, and you’re going to say transferred to your daughter who’s going to run the business, and she’s going to continue to go. Your daughter wants to take a good wage. She wants to build value and have her own value in this company, right?

Damon Pistulka 36:15

So if you’re building value, well, then there’s more money to go around. Because this is what we see on the other side of this is okay, I’ve got a business that’s doing 15 million and, we’re making whatever we’re making $2 million a year off the business and, and the owner that, once associated to their, their daughter and their daughter, okay, I’m going to be pulling 500,000 out whether instead of the business owner now taking out 2 million, they’re taking out 1.5 million, nobody wants to really do that.

Or you want to structure a long-term buyout from the daughter to buy out long term from the current owner, the father or mother, whoever it’s onerous, they have to take the cash flow out of business to do that. Whereas if you’re growing that business, it’s actually new cash flow that funds the purchase of the business and or new cash flow that helps to provide money for everyone. You know, those are the things where I think that growth in family-owned businesses, multi-generational businesses is often overlooked.

Sam Gupta 37:11

Yeah, I agree. That’s pretty much it for today. Do you have any last-minute closing thoughts, by any chance?

Damon Pistulka 37:16

No, you know, I just think that if you’re stuck in your business, there’s a lot of help. And if that is the case, I mean, there there are just so many people that there’s so much good information out there, right? Just keep looking for it. Keep trying, you know, it’s you’re in the same boat as everyone else. So that’s, that’s why they can say, um, you know, I’m just glad for the opportunity today to talk to you and to talk a little bit about growing businesses, man.

Sam Gupta 37:41

Yeah, amazing. Love your insight. Thank you so much for your time. This is going to be so helpful for manufacturers and distributors, the way you have paved your journey, we can do the same as well. And by the way, the time that you spent, it’s done in like, three, four years. So anything is possible. It is just that you have to have a plan. And you have to have real good execution behind that.

Damon Pistulka

38:04
Yes, execution is key because a good plan is worth zero if you don’t execute it. Right.

Sam Gupta 38:09

Thank you so much, Damon. I really appreciate it.

Damon Pistulka 38:11

You bet. Sam, thanks a lot.

Sam Gupta 38:14

I cannot thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Damon, head over to exityourway.us. Links and more information will also be available in the show notes. If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Nick Jackson from the Mendota group, where he discusses what private equity buyers look for in a business when they buy. Also, the interview with Jim Gitney, where he discusses how the need for people processes and technologies change at each inflection point our business grows.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of The WBS podcast.

Outro 39:19

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Clay Coleman, who discusses the importance of a quality management (QMS) system. And why it matters for manufacturing and distribution companies. We also had a chance to discuss what manufacturers need to know about starting their ISO and QMS journey. Finally, we discussed how American Petrolium Institute (API) for Oil and Gas differs from other industries’ ISO needs.

Chapter Markers

• [0:00] Intro
• [2:09] Personal journey and current focus
• [5:54] Perspective on growth
• [7:03] Why quality management and QMS matters
• [12:19] What small businesses need to do to prepare for ISO
• [21:06] Pre-requisites before starting the ISO journey
• [24:25] ISO 9001 vs. American Petroleum Institute (API) Spec
• [27:20] How oil and gas quality standards differ from generalized manufacturing
• [36:58] Closing thoughts
• [38:04] Outro

Key Takeaways

• A quality management system forces a company to sit down and identify all of the little tactical steps involved in creating each of the processes pertinent to your company’s order fulfillment lifecycle.
• Even if you’re a small shop with three leaders and three workers, you still need to start with that org chart. You need to identify who’s responsible for what aspects of the company. And then add to your designees responsibilities as the Quality Manager and then dive into one of the first sections of in this example API.
• QMS is the quality management system, which is your book, a tier-one quality manual, supported by tier two procedures and work instructions, documented by tier-three forms and records of standard ops. So it is all written procedures that you can then leverage whatever tools you need. You don’t need an ERP system to adhere to a quality management system. You can do it all with Excel and by hand in a binder.
• At the end of the day, the quality management system is not simply undertaken. A quality management system needs to be thoroughly vetted by the decision-makers in your business. And if it’s seen that value is there, there’s a number of different ways to do it. A small businesses can become ISO or API certified without having to invest the fortunes. We’ve seen, with a few companies able to operate in industries with barriers of entry, such as quality management certifications.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Clay

Clay Coleman is an expert in international business development, process, and strategy specialist. He has 10 years of experience in IT / Quality Management System implementations, analyses, and advisory services.

Resources

• Connect with Clay
  • LinkedIn
• Connect with Gaslogix
  • Website

Full Transcript

Clay Coleman 0:00

It was very, very daunting. Seeing binders of here’s how to do a job and learning that there’s not one standard format that you have to adhere to was the opening of the door to unbox our Schlumberger engineers and start getting the innovation company like crazy out of our comfort zone.

Intro 0:26

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 1:02

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ.

Managing the quality of your product is not only required to provide a consistent customer experience. It will also be a requirement by customers and regulatory bodies in specific industries. The necessary amount of effort in getting certified and audited can not be underestimated, with significant financial risks for non-compliance.

In today’s episode, we have a guest Clay Coleman, who discusses the importance of a QMS system and why it matters for manufacturing and distribution companies. We also had a chance to discuss what manufacturers need to know about starting their ISO and QMS journey. Finally, we had an opportunity to discuss how API for oil and gas differs from other industries.

Let me introduce Clay to you.

Clay Coleman is an expert in the international business development process and strategy specialist with ten years of experience in IT and Quality Management System implementations analysis and advisory services.

With that, let’s get to the conversation.

Hey, Clay, welcome to the show.

Clay Coleman 2:07

Hey, Sam, how are you doing today?

Sam Gupta 2:09

Okay, just to kick things off. Do you wanna start with your personal story and what you are focusing on these days?

Clay Coleman 2:16

Yeah, absolutely. So I’m Clay Coleman, and I met Sam through a colleague of mine, Wayne Sadin, who I was working with over at Orion. And my journey to the discussion we’re gonna have today about being a quality management field. I just love it as I come from a background of analyzing it and have the opportunity to take a company from ground zero to an international provider of Donald tools. So just a little bit about my background to dive into that I started out as a pricing analyst for Georgia Pacific for the railroad’s division. And we did not have software for it. It was all macros, Excel, Access databases, and having to use OCR and stuff. So I went into consulting with a subsidiary of Capgemini called Sogeti and moved to Houston to focus on the oil and gas industry.

Clay Coleman 3:19

It was in that focus that I was exposed to Schlumberger and a number of other different large oil field service or oil companies in the area doing different engagements like SharePoint migrations ERP implementations. When we got into advisory services, where a lot of it came into reviewing and simplifying processes from that work, I went to Weatherford to go in the house as a process engineer. And then I was given the opportunity to help launch a company called Frontier Oil Tools.

It was a group supporting a company that was purchased by Schlumberger in 2010 or 2009 employees over in Russia and Eastern Europe with what we viewed in the US as commoditized tools, selling downhole tools that are used in the construction and completion of an oil well had certain barriers of entry. One of which was to become an API, which is the American Petroleum Institute, certified manufacturer of downhole tools and also certified provider of services for the install of said tools. But for today, we’re going to talk about manufacturing in particular.

Clay Coleman 4:48

I spent about six years long, six and a half years with Frontier Oil Tools, before moving on to go to a large public group to work on an ERP implementation with Microsoft Dynamics. And since then, I’ve helped launch a little company called GasLogix, where we are distributing natural gas by-products.

We’ve bought ownership rights to natural gas scrubber and storage group south of here. And we are doing a little logistics and distribution network set up across the US and the entire platform. I’m leveraging for that Zoho One.

So we’ve been asked to introduce an ISO 9001 quality management system for that energy company that we bought distribution rights for. And now I’m diving back in. So that kind of round circle with the Microsoft implementation and then working back on quality has brought us to conversations you. And I have been having back and forth, Sam, and I’m excited to dive into it a little bit today.

Sam Gupta 5:54

Okay, and I’m super excited to dive into that as well. But before we do that, but one standard question that we asked every single guest, and that is going to be your perspective on growth. What does growth mean you, Clay?

Clay Coleman 6:07

Growth, to me, means the ability to fulfill an order. You can go out there and sell, sell, sell. But if you can’t meet your obligations of the sale, whether that’s providing a product on time, a service that gets completed on time, etc. If you’re not able to live up to your obligations, you cannot grow in enabling the ability to meet those obligations as sales ramp-up is the creation of standard operating procedures, resulting in repetition. And those repetitions create data with which we can assess and continuously improve. I firmly believe that a quality management system forces a company to sit down and identify all of the little tactical steps involved in creating each of the processes pertinent to your company’s order fulfillment lifecycle.

Sam Gupta 7:03

So you know, as you mentioned, from the growth perspective, that growth is comprehensive. It’s not just sales, and marketing is slightly bigger than that. And quality management is obviously going to be a big puzzle of that. And you mentioned the quality management forces companies to think about their product quality overall and forces you to improve the process and efficiency as well. But let’s look at some more benefits. From the quality perspective, let’s say if somebody is starting on the quality management journey for the first time, why should they care about QMS?

Clay Coleman 7:34

So quality is kind of a big animal to tackle. And I think we want to start with identifying what a QMS is, and that’s a quality management system. Okay. And so ISO, the international standards organization as a standard called ISO 9001, is the blueprint of a quality management system that you would need at your company. And that blueprint would serve as each of the little processes. Some may have a lot of details. Some may not think that you need to have documented for your company with which you can standardize, implement, etc.

So I’m going to speak to API because that is where my experience stems in working with the American Petroleum Institute. The only difference between their quality management system requirements and ISOs is the addition of some oil-specific topics. So if I was looking to implement an API quality management system, I would go to API. It is the oil and gas industries regulatory body that provides certification to different applicants from API, they have their quality management system, and that provides your outline of processes that you need.

Clay Coleman 9:02

Now, you can take a look at that. So, in particular, this one is API spec, Q1 ninth edition. And that covers the ISO 9001 2015 edition, quality management system requirements that adhere at all industries in the US, well, internationally, API is pertinent to the US. At the end of the day, what you’re going to do is you’re going to get on API’s website. And you’re gonna download that quality management system spec.

When you first look at it, it’s just gonna look like an outline. And you’re gonna see a couple of high-level topics of quality management system requirements, a quality management system, what is your quality policy. And whatever your objectives may be, it’s a lot of high-level stuff in those first five or six sections. As you continue to look, you’ll eventually come to section five in reference to what we’re speaking about API spec Q1 for a quality management system, section five product realization. We’re going to talk a little bit about that when we dive into some specifics within here.

Clay Coleman 10:12

But at the end of the day, and navigating this first view, you’re looking at a tier-one quality manual. And that’s your high-level overview. We have all of these different processes documented. And here’s a little excerpt about what it is in each of those sections. In this example, section five has an association with what are called tier two and tier three documents. Tier two is your procedure or work instruction that accompanies that reference of the topic. Tier three is the form that gets filled out in conjunction with performing that action to record that transaction and serve as a record for you following the process.

So when we look at a quality management system from day one, here’s what I want to implement at the company. I’ve gotten in, and I now have API spec key one’s quality management system requirements. And as I read through each of these different paragraphs or subjects. I see that there are a number of tier two procedures that need to be documented that may or may not have an accompanying form to serve as a record of performing that procedure. We got to connect the dots top-down, bottom-up, at the end of the day, the high level of what that does, taking that view, to assessing the scale of the project. It’s going to be to implement a quality management system for your business allows you to read this 30 something page guide as much more than that, because not to scare anyone.

But a quality management system involves the documentation and standardization of all the processes in companying how your business operates from quote through a collection of invoice receivables,

Sam Gupta 12:19

Okay, so that’s a great description, Clay. So let’s say if I have a manufacturer or distributor. Also, let’s say they are a lifestyle business, and typically, lifestyle businesses are going to be that are less than $25 million in revenue. And they are typically founder-run businesses, right. So that’s how we describe the lifestyle business in the finance community. So let’s say you have a lifestyle business. And they don’t really have any of their processes documented. And they sort of have processes, but they are not as standardized. Everybody has their own way of following the processes. So what do they need to do to prepare to start the journey for ISO?

Clay Coleman 13:01

I think the first thing that in this example is that most companies need to do, who is asking for this. You got to get your decision-makers in a room and have everybody on the same page top-down that you want to implement and adhere to the quality management systems. So that’s step one. You need to get all of your decision-makers in a room, listen to the Ask, ask yourself, why do we need a quality management system? Is it worth it? And if so, you need to define some roles, responsibilities, and expectations of members of your team for the implementation of this system.

So you’ve got to define your actors and who’s going to be responsible for drafting and implementing the quality management system. And a lot of us in this WBS group have done different project management engagements. They are pretty familiar with a RACI chart you need. Even if you’re a small shop with three leaders will say and three workers, you still need to start with that org chart. You need to identify who’s responsible for what aspects of the company and then add to your designees responsibilities as the Quality Manager. Then you need to dive into one of the first sections of in this example API.

Clay Coleman 14:50

QMS details the responsibilities of a quality manager. You have to have your president or leader of the company sign off in support of that designee. And in the implementation of this QMS. So that’s step one, got to get everybody on the same page, got to get agreement top-down. You got to get somebody assigned to the project and granted the authority to do what they need to do to get this implemented appropriately. Or you need to work with the different business units that are going to be responsible for individual paragraphs and references within the quality management system.

Sam Gupta 15:05

Okay, so from your perspective, is QMS some sort of ERP system? Is that a software tool? Are you referring to the documentation and collection of a spreadsheet to call this system? What is your perspective on that?

Clay Coleman 15:27

So QMS is the quality management system. And the quality management system is your book. A tier-one quality manual, supported by tier two procedures and work instructions. It is documented by tier-three forms and records of standard ops. So it is all written procedures that you can then leverage whatever tools you need. You don’t need an MRP system to adhere to a quality management system. You can do it all with Excel, and by hand in a binder. I wouldn’t recommend it because there are retention periods on records, and yada, yada, yada, it’s pretty old school.

But you can still become certified without having to invest in any of these high-dollar tools. So when I talk QMS, I’m talking about your quality management system. It is your tier one, tier two, and tier three sets of documentation. Its purpose is to be wrapped up to serve as your standard operating procedures for each aspect of the business.

Sam Gupta 16:39

Okay, so let’s say if I’m going through tier one, tier two, and tier three. And I can relate that tier one is probably going to be a high-level summary of some of my processes. So what specific standards am I going to expect in each of those sections as I’m going through that document?

Clay Coleman 17:00

So getting into, and I’m going to talk API because there are ISO references throughout. It’s basically ISO with some oil and gas spefic additions. The first set of your tier one manual is to highlight what a quality management system is and its goal. What our company objectives are and what are our company’s high-level KPIs. And who’s responsible for the maintenance and continuous improvement of this quality management system.

After the first handful of paragraphs, you’ll then start getting into detail. As an example with API, Section four is all covering the intro pieces we had just discussed. Once you hit section five, section five is about product realization. Within product realization, you get a number of subsections 5.1 being contract review, so a review of the contract you just sold, whether that’s to provide a product or provision, a service, risk assessment, design and development inputs, purchasing, and then it walks through your manufacturing, how you’re, if say, if you’re making a product, where are you taking your measurements and validating that the product conforms all the way through that process, the way you need to look at it is it starts, everything starts high level, and then it just keeps getting deeper and deeper and deeper into the weeds.

Clay Coleman 18:35

So all of section five is going to be about provisioning that product. Then once you finish with that in continuing the example of API, once you hit section six, it’s all about your quality management, system monitoring, measurement, analysis, and improvement. So it’s about continuously improving this document. So Section four and starts in Section four. But in an API quality management system, Section four is your intro, your high-level overview of company application. Section five is the production and provision of whatever it is you sold.

And then section six is all about how we maintain checks and balances of this quality management system, ensuring that we’re doing what we say we do in our providing record of it. And section six is where you get into doing your own internal audits, hiring whichever certification body in this example API for external audits, etc. Once you’ve gotten through that, that’s the end of the quality management system. It’s an intro. Here’s how we do all this stuff. So as you can imagine, section five is where a lot of information is in section five is the primary target of the audit.

Clay Coleman 19:58

Then, section six is Okay, we’ve implemented this to IMS, how do we ensure that we adhere to it, because, as you said earlier, and I saw this at whether for a lot because whatever was made up of over 100, different acquisitions, people kind of want to work, how they’re comfortable. And the quality management system in forcing your company to document and standardize its procedures, which means all of your workers or those that are affected by those procedures now need to adhere to what’s documented, it can be a pretty radical change.

That’s why I say step one is getting all of your decision-makers in a room and assessing is it worth it for WBS and my concept of growth, meaning you can’t grow unless you’ve got the proper foundation, I would say a quality management system in forcing you to standardize and document all of these procedures and examples we just went through, creates a foundation with which you can then edit or build upon.

Sam Gupta 21:06

So give me some examples of those checks and balances that you mentioned related to different processes that I may have in my business. I get the idea overall, in terms of what you’re doing, but I’m still looking to see whether I have those checks and balances at this point of time, as they relate to my processes and purchasing as they relate to improving success in design, I may not have some of the approvals that some authorities might be looking for. So what are the examples of those checks and balances that I should be expecting, and I should probably have those in place before I embark on the journey of ISO?

Clay Coleman 21:42

Well, you know, I think a really good example that’s got some broad applicability for the context of our group with WBS is to talk about a sales contract review. So this and the order fulfillment lifecycle is when we are converting a quote to an active order. So we’ve quoted a customer, they’ve responded, we’ve gone back and forth with whatever adjustments, negotiations, etc., may be necessary. We’ve sent them the revised final details gotten in writing confirmation, that yes, we are ready to go on this quote, order it, etc., or begin the order.

A sales contract review, in an example, would be as simple as a one-page printout that just says customer name, quote, number details of the order, a little summary of the back and forth for whatever changes were required is, quote, accurately reflected. And this is all an internal sign-off. Put it in a folder or sign off, scan it, and put it in a digital folder. I prefer attaching it to any ERP system.

Clay Coleman 22:54

But I’m not going to speak about ERPs in case that’s not being used. It just needs to be related to the order at hand, the quote converting to order, and now you’re ready to put it into fulfillment. And so in the manufacturing world, I would have taken this formal quote, I would have attached my correspondence from the customer, I would have attached my sales contract review, which has the designated salespersons sign off because he’s accountable for yes, these details are correct to then release to my manufacturing lead to put into motion.

And that would kickstart the checking of inventory for material and buying new material if required. The print up of the work packet, the drawings, the getting it on the machines, yada yada yada everything downstream from there, but the value that a sales contract review brings to the table, as I think a really good example for something that ISO is going to be looking for is it holds that salesperson accountable for what is being pushed through your company to fulfill.

So if that guy sold this specific liner hanger to this company, all of the accompanying details that are in that quote, required for accurate fulfillment, have been checked off and approved by the salesperson, and it transfers the accountability to whoever your designated individual may be in your company. Instead of it being well, a bunch of finger-pointing when something goes wrong. Well, you did this wrong. Well, you signed off on it.

Sam Gupta 24:25

so let’s talk about API. So obviously, I can relate that API is probably going to be slightly more specific than ISO 9001. And there are going to be some oil-specific standards. So let’s say if I was doing the generalized manufacturing, and now I’m trying to move to oil and gas, okay, then I have no idea how oil and gas works. And you are trying to teach me how oil and gas specifications are going to be different from generalized manufacturing. So what are some of the things that I should be expecting in API?

Clay Coleman 25:03

So what’s great, and I would imagine it has similar applicability in medical and aerospace manufacturing. American Petroleum Institute provides what’s called a conformity matrix. And it is a spreadsheet outline of all the different subsections of a requirement referenced within specific paragraph x that need to be documented somewhere. And when you’ve finished creating all of these documents, you populate this conformity matrix with reference pointers to your internal documentation as to where that requirement is met.

That conformity matrix on the very left-hand side shows paragraph 5.1. Point two in the API requirement is 7.2, point one A through D. In the ISO 9001 2015 edition reference, it’s a quick scan if you’ve got familiarity with ISO, and you want to go into an industry-specific standard like API in this example, the conformity matrix by that certifying body is where I would start because as you review that spreadsheet, in the case of API, they’ve highlighted where requirement has no reference to an ISO requirement.

So it’s an outlier. ISO does not require this, or where they’ve identified that API doesn’t care about this requirement, even though it’s an ISO. So not required in the API paragraph. But this is an ISO number. So it’s a cross-check of what’s different. And it shows what additional details would be needed. On top of a standard ISO 9001 quality management system, that API would require to extend their certification. So a company can earn, you know, I just like to roundtable that a company can earn an ISO cert a number of different ways. It’s the industry-specific regulatory bodies that leverage that ISO cert and then add to it for their certifications.

Sam Gupta 27:20

Great. So from the process perspective of API, Are there going to be any differences in terms of how I should be capturing my transactions? How should I be recording my vendors? How should I be documenting my quality standards in the case of oil and gas? Are there going to be any differences from the general manufacturing?

Clay Coleman 27:36

No. So what that was one of the most difficult things for me to learn, especially being that my initial exposure to quality management systems was through Schlumberger, who basically had every step of your role, how to perform your responsibilities, and what those KPIs to measure that performance would be documented. It was very, very daunting. Seeing binders of here’s how to do a job learning that there’s not one standard format that you have to adhere to was the opening of the door.

To unbox our Schlumberger engineers in start getting the innovation pumping like crazy out of our design department, we took a lot of unnecessary step-by-step procedural with accompanying you need to enter in X, Y, Z in ERP, system area, etc. And just simplified it down. So to answer your question, when you’re looking at writing a quality management system, and you approach it with ISO first and are then wanting to specialize further with API certification, you can keep your ISO documents and gap-fill whatever those missing requirements as identified for the conformity matrix we were previously discussing have pointed out that ISO QMS will suffice for an API certification. As long as you’ve added in the additional requirements, that API is documented for the conformity matrix.

Sam Gupta 29:25

Okay, so how does the follow-up process look like so? Let’s say if I’m applying for the ISO, you know, I’m probably going to have some sort of inspector who’s going to review my process. So walk me through the journey, how the process and process of review and submission looks and how our follow-ups going to be year by year, and what, as a business owner, I need to do to make sure I have everything that my auditors are going to expect

Clay Coleman 29:52

in preparation for going down the road of implementing a quality management system. You need to know upfront that year over a year. You’re going to be internally and externally performing checks on yourself. Some industries don’t require an annual formal audit, whereas others do. And in some of those cases, others do until you become tenured at five years, or what have you. In approaching the implementation of a quality management system, you need to really, as a business owner or leader, look at it as we are now going to have written documented standard operating procedures that we need to adhere to if our QMS says we do it, we need to show it.

And if there’s the ability to show a record of having performed certain requirements, there needs to be an accompanying way to record that, that effort with API, the way this whole thing works is okay, your company has determined that yes, it is worth it. There’s value in implementing an API quality management system. We’ve gotten the spec from Q1. I’ve designated someone in our leadership group responsible for this project.

Clay Coleman 31:18

And I’m going to recommend if you’re starting from scratch, doing a little searching and finding one of these API quality management system training groups, kind of similar to prepping for a PMP exam, where it’s a little three-day overview because then that’ll provide you some templates. So you don’t just sit there spinning your wheels, trying to create all this stuff from a blank canvas. That’s not against the rules. If you’re provided something, and there’s not a legal issue there, you can use it. API doesn’t care.

But you need to have the framework for tier one, tier two, and tier three blown-out quality management system. By downloading the spec, you’ve got the guide to write your tier one manual. I’m just going to pause here and reiterate that you’ll save yourself some money, whether that be from time spent effort, etc., by going to one of these overview courses that provide you with templates and material with which to construct this, because it’s also going to get all of your verbiages lined up because an audit, they’re going to want to see your designee go full understanding of what a quality management system is why we’ve implemented it, how are we maintaining it, etc.

Clay Coleman 32:00

So to pick back up, you’ve gotten all your stuff, you’ve now written your tier one, tier twos, tier threes, you’ve practiced it. You need different industries to have different lengths of time before you’re eligible for audit, that it has to be an implementation in oil and gas, it’s six months. So you have to show records of this being implemented and followed for a period of time.

You then go to that governing body and submit your QMS tier one, tier two, tier three, your record of implementation, because you actually have to do a sign-in sheet for meetings to show that you had a meeting had a record of it, and record of conducting business in conformity with your quality management system. So whether that be inspection logs, if you’re a manufacturing company, and all of the job packets, it’s the details that are in that job packet.

Clay Coleman 33:44

All those records need to show that you have been doing what your standard operating procedures are written as for that period of time, API will assign an auditor, an audit date, and there will be some fees. The fees on this it wasn’t ridiculous for American Petroleum Institute. I believe it was under $5,000. It was all in on the certification fees paid to API, including the formal spec that I had to have from them. And so I mean, it’s you know, it’s not cheap. But that’s API.

I’m assuming manufacturing and aerospace are probably in the same area. But that’s, that’s why I say you know, it’s a lot of effort. But it’s not unattainable for a small business. This, you just have to be willing to commit to documenting all the nuances of how you conduct your business, implement it, and create records of following said process.

So rounding it up, you’ve written it, you’ve implemented it, now you’ve submitted to become certified. You’ll then have an internal audit that you conduct yourself, or you can hire a third party to do that. There are different ways, and then you have your formal audit where they review the performance of your internal, which is why I say you can hire someone. There are different strategies there that we can discuss later. And then also all the meat and potatoes of your tier one, tier two use tier threes, and nobody’s going to pass it on the first round, they’re going to present to your findings and findings need to be addressed, because it’s in nonconformity. In other words, you said you were going to do this, and you’re not, or where’s the record, etc.

Clay Coleman 35:30

And you have to do an investigation, identity why, and document what happened? Do we need to change any? And what was the impact? Does there need to be a change? How are we changing? How did you change? And how are you monitoring to ensure that there’s no backsliding? That’s the way that you address these findings. You then go year over year with that certification body where they’re coming in and checking in on you very much in the same style as your certification on it.

But at that point, it’s just maintaining. So once you’ve addressed those findings, and your first certification audit, to the satisfaction of the governing body, I say that because there may be some back and forth. But you’re basically logging into a website and attaching evidence of here’s how we changed this. Here’s how we’re following it. And they go, yes, Frontier Oil tools have sufficiently corrected these nonconformances. They have a sufficient quality management system for the API reference spec Q1 ninth edition for quality management systems. They are now issued a certification of conformance with sets back. Long story short, now you can advertise you’re an API certified manufacturer and provider of tools, and you’ve gotten past that barrier of entry required and upstream oil to get your tools down.

Sam Gupta 36:58

So that’s it for today. Do you have any last-minute closing thoughts?

Clay Coleman 37:01

At the end of the day, the quality management system is not simply undertaken. A quality management system needs to be thoroughly vetted by the decision-makers in your business. And if it’s seen that value is there, there’s a number of different ways to do it. In small businesses can become ISO or API certified without having to invest the fortunes we’ve seen, with a few companies able to operate in industries with barriers of entry, such as quality management certifications.

Sam Gupta 37:45

I just wanted to thank you for your time. And there are some serious insights here that manufacturers and distributors can definitely take advantage of. So thank you again for that.

Clay Coleman 37:57

Absolutely. And thanks for your time today, Sam. Happy to pop in here and share some thoughts on quality management systems.

Sam Gupta 38:04

I cannot thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learn something new today. If you want to learn more about Clay, head over to gaslogix.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check the related episodes, including the interview with Max Krug, where he discusses what actions businesses need to take if they encounter product quality or business performance issues. Also, the interview with Ian Pratt where he discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing further.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, you can rate us on your favorite podcasting platform. Or DM me on any social channels. I’ll try my best to respond personally and make sure you get out. Thank you, and I hope to catch you on the next episode.

Outro 39:05

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. And for more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Nick Jackson from The Mendota Group, who discusses. What lifestyle brands can do to enhance their value for strategic buyers. He also discusses what founders can learn from CEOs who typically manage the business acquired by PE firms. Finally, he touched on why they put a negligible value on technology when you buy lifestyle brands. 

Chapter Markers

• [0:00] Intro
• [2:28] Personal journey and current focus
• [4:05] Perspective on growth
• [5:53] why talent is important for a growing company
• [10:12] Ideal company for a strategic buyer
• [15:31] Factors why companies are in the market for buyers
• [20:08] Why do buyers put a negligible value on the ERP systems
• [24:14] What founders can do to increase the value of their company
• [27:02] Closing thoughts
• [31:17] Outro

Key Takeaways

• Employees are just a critical part of executing our strategy. These manufacturing companies are relatively complex, and they can’t be made successful with just a handful of people at the top figuring things out. So we want people again. We want our employees to feel like they understand the direction we’re headed, that they understand the financial and strategic expectations of the business. And we want them to feel like their position is very key to that whatever role they have.
• We really look at what’s the customer concentration, we really don’t want to see one customer be greater than, let’s say, 25% of the revenue unless there’s a really, really good reason for that concentration.
• We want to know that there are customers who the business has worked with, that are name brand decent-sized companies that we feel with some more specific and directed sales effort, we could, we could get deeper and more involved with those customers to grow the business because we all know that growth, the easiest growth comes from growing your existing accounts versus trying to win new.
• Make sure you understand exactly why you make money, you have to be able to demonstrate to somebody on the outside where the profitability is, why it’s existed, why it’s sustainable, and why it’s going to continue at a level that is, you know, at current levels are better.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Nick

Nick and his partner started The Mendota Group in 2000 with a focus on acquiring small to medium-sized manufacturing companies. In the last 20 years, Nick has worked on 19 different acquisitions which include all aspects of due diligence, negotiation, and financing of these transactions. Nick works closely with the management teams of their current holdings to help develop and implement strategies for growth. These companies collectively represent over $150MM of revenue and more than 750 employees.

Resources

• Connect with Nick
  • LinkedIn
• Connect with the Mendota Group
  • Website

Full Transcript

Nick Jackson 0:00

No, no one wants to buy a company where even though it was a million bucks for 5-6-7 years, then all of a sudden something happened in the market where popped up to $2 million. But that thing that created that pop is something that’s not sustainable, not predictable.

Intro 0:17

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:54

Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host and principal consultant at a digital transformation consulting firm, ElevatIQ.

Business buyers have a unique way of evaluating businesses. If your end goal is to sell your business, you may want to know what buyers value in a business as an asset to align your growth plans with their needs. Do buyers put more value on the team or the rest of the clients? Do they emphasize more on technology or products? When do you get a higher return on homegrown software or an off-the-shelf ERP?

In today’s episode, we have a guest Nick Jackson from the Mendota group, who discusses what lifestyle brands can do to enhance their value for strategic buyers. He also discusses what founders can learn from CEOs who typically manage the business acquired by PE firms. Finally, he discusses why they put a negligible value on technology when they buy lifestyle brands. Let me introduce Nick to you.

Nick and his partner started the Mendota Group in 2000, with a focus on acquiring small to medium-sized manufacturing companies. In the last 20 years, Nick has worked on 19 different acquisitions, which includes all aspects of due diligence, negotiation, and financing of these transactions. Nick works closely with the management teams of their current holdings to help develop and implement strategies for growth. These companies collectively represent over 150 million dollars in revenue and more than 750 employees. But that, let’s get to the conversation.

Hey, Nick, welcome to the show.

Nick Jackson 2:24

Hey, Sam.

Sam Gupta 2:28

All right. So, just to kick things off, do you want to start with your personal journey and what you are focusing on these days?

Nick Jackson 2:35

Sure, yeah, that’d be great. My name is Nick Jackson. I’m co-owner of a firm called the Mendota group. We’re a private equity firm based out of Madison, Wisconsin. We are what’s referred to in the industry as a funds sponsor, which means we do acquisitions of small manufacturing companies. We, my partner, and I invest our own personal capital and all those transactions, but then we partner with other capital providers to buy out those companies.

Our focus in the last 20 years of doing this has been looking for what we refer to as lifestyle companies that are in the range of a million to 3 million of cash flow, typically 10 to 15 million of revenue. And, you know, our focus is to kind of come in, provide the entrepreneur a transition to a different phase of their life, and then take a controlling interest in the company and work closely with the management team that exists there to kind of improve the company and move it from a lifestyle-focused business and move it more toward growth and, and profitable business for the future.

So we’re always excited to talk with any entrepreneur owner who’s not only looking for a way to sell their business but looking for better, better investors that can come into their business and help their team to grow into the future.

Sam Gupta 4:05

Okay, that’s very interesting, and I want to dig deeper into that. But before we get there, I had one comment. I appreciate you guys because you guys actually are sort of the catalyst for growth. And that’s the purpose of this podcast. Okay. We focus a lot on growth. So in your opinion, Nick, what is your perspective on growth? What does growth mean to you?

Nick Jackson 4:28

Well, it means to us as professional investors growth means two things. The obvious one is if we grow a company, the value of the company grows, and we as investors see an increase in the value of our investment. That’s the obvious one. But the more important one in my mind is if you have growth of a business and profitable growth, not just top-line growth, for the sake of creating more activity, but if you have profitable growth in a business, that requires a very, very clear strategy. It requires lots of challenges to be tackled.

And, lots of activities to be executed to really have growth. And so we believe that a company that is on a path of very, very strategic and deliberate growth will do a great job of attracting and retaining great talent. People don’t want to necessarily work at a company that’s just doing the same business for ten years. People want to be part of a winning team. And people want to come in and be challenged in their positions. And I think, you know, growing companies and working hard to win in markets is a big part of that. So we think growth is a big part of attracting and retaining great talent.

Sam Gupta 5:53

Okay, so that’s a very interesting point there. And I actually wanted to cover that later in the interview. And since we are already on that, so I want to cover that now. So why is talent so important for the growing company? And why do you believe that lifestyle businesses, and you refer to some of these starting businesses as lifestyle businesses, and I have seen a lot of other people referring to it as lifestyle businesses? So why is talent so important? And why do you believe that you guys are better positioned to attract the talent as opposed to the founders?

Nick Jackson 6:33

Yeah, well, I think, you know, as many people say, people are, are the foundation of a business, they really are especially a manufacturing business, we have many key people that are helping us make our product and get it, get a high-quality product out the door on time, every day. And then we have all the people you know, outside of our shop floor, who is helping to organize and, and be prepared to manage our financials and, and handle customers and deal with sales.

So employees are just a critical part of executing our strategy. These are, these manufacturing companies are relatively complex, and they can’t be made successful with just a handful of people at the top figuring things out. So we want people again. We want our employees to feel like they understand the direction we’re headed, that they understand the financial and strategic gets expectations of the business. And we want them to feel like their position is very key to that whatever, whatever role they have. And if they feel that they understand what they do and how it fits into our strategy, then we think they’ll be more excited about being on the team and moving us forward.

Sam Gupta 7:43

Okay, interesting, so you touched a little bit on the value of the company, and value could mean a lot of different things to a lot of different people. You touched a little bit on the revenue and cash flow as well. But right when you buy these companies, what do you look for in terms of value? Do you have any specific KPIs that you’d like to look for?

Nick Jackson 8:02

There are some very traditional valuation metrics that we use in the industry. You know, most in this part of the world, most people value the business on a what’s called EBITDA, which is earnings before interest, taxes, depreciation, and amortization. Or essentially, it’s a rough estimate of the operating cash flow of the business. And most people, most firms will look at some multiple of that value or the of that cash flow as a way to kind of set a valuation.

But then there are lots of other statistics, like how what kind of CAPEX is required in the business? And how consistent has that cash flow been over recent years? So you know, we use those metrics as kind of a quick early indicator of what do we think this business is generally worth? And then we use, you know, more detailed information, we gather and diligence to say, to what extent do we want to be at the upper part of that range or the lower part of that range?

Sam Gupta 9:00

Okay, interesting. So have you seen any specific red flag that you typically notice when you look at these companies that no, no, no, no, no, this is not the company? I definitely want to talk to you?

Nick Jackson 9:12

Sure. Yeah, there’s, you know, there are numerous times where we will begin the process of, of being engaged with a company, and we’ll look at their financials and learn about their earnings and start to get our head around what we think an evaluation is and one of the real obvious red flags is if we can find out that the earnings they recently had are somehow an anomaly to history.

No, no one wants to buy a company where even though it was a million bucks for 5-6-7 years, then all of a sudden something happened in the market where it popped up to 2 million, but that thing that created that that pop is something that’s not sustainable or predictable or stable for the future.

So that’s a big part of our early on processes, digging into the future. financials and digging into the reasons why the company’s performance is what it is and trying to draw conclusions about if we think that’s sustainable and something that we feel we can invest in long,

Sam Gupta 10:12

Okay, so I like to make the analysis comprehensive, okay. And I like to look at both perspectives. So the positive and negative, so let’s say, and my friend, Curt Anderson, and we did an interview with him as well. And he likes to refer to this as a soul mate.

So let’s say if you were looking for a soul mate here in terms of your company, in terms of your dream company, okay, what is going to be some of the metrics that you are going to look at on the balance sheet and financial statement? So let’s say if I’m trying to, you know, propose myself as your soul mate, Nick, and I’m presenting my financial statements to you. Okay, so how do you think I’m going to be your soul mate? I mean, what are some of that criteria?

Nick Jackson 10:47

Yeah, as far as specific metrics and financial metrics.

Sam Gupta 10:51

So let’s say if I showed you my financial statements, right at this moment, okay, and you are going to be like, you know, what, I am going to come after Sam because this is my dream company. Okay, I’ll do anything and everything to please them and get this done. Yeah. What is that dream company for you?

Nick Jackson 11:06

Well, Dream company for us is anybody that is any company that’s north of a million dollars of EBITDA, okay, closer to 2 million would even be better. But anything greater than a million dollars of EBITDA, we would prefer that that business that their EBITDA percentage is better than 10% of revenue. You know, we don’t like necessarily to participate in businesses that are very low margin, but very high volume, not to say those are bad businesses, but those don’t just don’t fit our skill set.

So we’d like to see a situation where somebody does at least 10% of their revenue. And then as far as the rest of the metrics go, it’s really looking at one of the particular things we tend to look at is how much of the company’s revenue exists as profitability after you take out variable material costs for the business because factoring a large part of the business is material.

Nick Jackson 12:01

Yes, we look at that revenue minus variable material cost as what we call material margin. And we like to see that be a fairly robust percentage, usually over 55%, if possible, because then that leaves plenty of room for the rest of the business with people and SG&A and costs, things like that, to still maintain good profitability.

And then you know, after that, after we’ve kind of determine those kinds of basic financial metrics, and we really look at what’s the customer concentration, we really don’t want to see one customer be greater than, let’s say, 25% of the revenue unless there’s a really, really good reason that concentration valuable, we want to know that there are customers who the business has worked with, that are name brand decent-sized companies that we feel with some more specific and directed sales effort, we could, we could get deeper and more involved with those customers to grow the business because we all know that growth, the easiest growth comes from growing your existing accounts versus trying to win new.

Nick Jackson 13:02

And then, you know, I think the last is kind of looking at the salary and compensation structure throughout the business, and just making sure that you know, things are in line, that there’s good equity and consistency across the business. And that, you know, there’s some good rationale to how people are paying and compensating their employees.

Sam Gupta 13:23

Okay, and do you pay attention to historical growth as well? I don’t know how many SMBs are or can claim that they are going, let’s say 10% 20% every year? I don’t know if that is even feasible. So do you look at that?

Nick Jackson 13:37

Yeah, you know, interestingly enough, that I think even small manufacturing companies can claim that type of growth, because oftentimes, you know if you think about it if we’re buying a company, that’s 15 million in revenue, and million and a half to 2 million of EBITDA, it’s likely in a market that’s very, very large. So if you’re a $15 million revenue company doing some type of metal forming or other product, there’s that market is huge.

Nick Jackson 14:07

And so doubling the business over the course of three to five years is not necessarily that outlandish, knowing that you’re still a very, very tiny piece of the market if you get the 30 million, so we look at historical growth to some degree so that we can understand what changed but again, by definition, we’re more interested in a lifestyle business.

And in that definition, the owner has achieved all of the financial success they want to achieve. The business is generating profitability and cash flow that meets the owner’s personal requirements. And so, by definition, the owner hasn’t really cared so much or really drove hard at growth. So we are looking for somebody that’s got a 15% pager because we know by definition, we’re buying a business that the owner didn’t care so much about that, and we’re hoping that we could come in for business with the management team on that kind of thing.

Sam Gupta 15:05

Okay, and so, what are some of the factors that these companies are trying to sell? Obviously, one of them is going to be, you know, the owner is competent, now they want to retire. That’s definitely one of the factors. What are some other factors that companies want to sell or want to hire you?

Nick Jackson 15:21

And when you say what they want to sell, you mean factors that they’re trying to tell us about in terms of why their businesses were buying or what they’re selling to their cause.

Sam Gupta 15:31

If they are in the market, they are there for a reason, either the growth has slowed down, or they don’t feel that they can grow by themselves, or, you know, the owner is just done, and they don’t really have a sustainable plan after that. So there must be a list of factors why these companies come to the market?

Nick Jackson 15:47

Yeah, I think most often, I would say that we’ve done 19 different transactions over 20 years. So I would say the majority of the time, the reason the owner is selling to us is that they’ve gotten to a point in their career, whether it’s what they’ve created wealth, or what their ages or what their family situation is, or whatever, they’ve gotten to a point in their career where they would like to kind of separate from the business and devote their time and financial resources to other factors, whether it’s retirement, whether it’s other businesses, whatever.

And so they’re looking for this transition out of the day-to-day operations of their existing business and to move into a different phase of their life. And the people that they have in their business are not able or capable of pulling off. Let’s call it a management buyout. So they need somebody to come in who can not only evaluate the business but as the wherewithal and the capital to be able to complete that transaction. And so that’s almost always the reason the person selling, Of course, they’re going to tell us about their company and why their team is great, and why their customers are great. And all those things that we evaluate in our due diligence process. But that’s almost always the instigator of somebody wants out, is just moving to a new phase of life.

Sam Gupta 17:00

Okay, interesting. So obviously, in your space, seeing people is not going to be as much of a factor in terms of creating that sustainable plan for the company. And when we look at the value of the company, people, process, and technology, these are going to be three factors on which you will evaluate. You know how much the company is going to be worth.

So in this particular case, let’s say if the owner or key executives want to retire, people are not as important. I would say, right, I mean, there are going to be other knowledge workers who you definitely want to retain. Otherwise, you might not be able to run the operations, right. But still, I don’t know how much price tag you are put on the people factor, but because you are going to bring the new audience who are slightly more capable of growing the company. So in terms of people process and technology, which is your biggest variable in terms of value. Can you touch on that?

Nick Jackson 17:50

Yeah, I actually would probably say that people and processes are the most important. Okay, technology may be the least important. And that may be confusing, but the reason I say that is, again, we’re trying to buy a company that has been stable and profitable but hasn’t been growth-oriented. So almost by definition, the amount of technology they’ve injected into the business over the last couple of years, whether it’s new machines or whether it’s an ERP system or whatever, is usually pretty diminishing because they haven’t felt the need to use that technology to support growth, because they haven’t necessarily cared about sustainable, significant growth.

So we put a lot of value on the people and the process. And what I mean by that is if a company has good processes in place, they not they may not be growth-oriented processes. But if they’re profit-oriented processes, meaning the team had a good way of maintaining profitability, even though revenues were fairly stable, that’s a reflection of a team that understands how to manage costs, how to keep pricing in place with customers, how to manage their purchasing process, right, those are all processes that are important to maintain profitability.

Nick Jackson 19:05

And then you know, we’re going to look at the people, and we’re going to evaluate all those people, because we’re going to keep nearly everybody in the business it we don’t ever go into a business buying it saying, Oh, these are all the people we’re gonna eject out of the business that just doesn’t happen. These are all great people. They’ve built nice, profitable companies. Some of them may not like our vision, so they may choose to leave over time, but we’re gonna keep the people, and so when we’re evaluating the people and setting our valuation, we know that these are people that can maintain the profitability of a business.

What we’re really trying to see is to what extent their people that can morph to our new philosophy of, hey, we’re gonna put this company on a growth path. And usually, we do have to bring in some others to kind of help bring an outside perspective, starting with a new CEO, but bring it outside growth perspective, but you know, we’re often evaluating most people to make sure they’re going to be excited about this new phase and be interested in, to, you know, join us on that new path.

Sam Gupta 20:08

Okay, so, we are actually going to touch a lot more on the technology aspect of this, because you mentioned that technology, you don’t put a lot of value, which is slightly counter-intuitive, in my opinion, most people would get that technology would have probably most dollars. And by the way, I mean, technology could be a lot of different things. And unless we are talking about the commoditized product here, then it’s a different case.

But technology could be your ERP system, it could be your machines, it could be your patents as well if somebody has paid, and I’m pretty sure you are putting a lot of dollars on that because that’s a fixed stream of revenue for you over the period of time, I don’t know, you know, how much expiration is going to be for parents, but typically that is going to be for like, you know, 17-30 years. So that’s, that’s a huge Jackpot for sure. So tell us, you know why you don’t put a value on ERP system. And I have seen lifestyle brands spending millions of dollars in building their unique processes. And I’m yeah, I’m hoping that they think probably they might be a software company, and they might be able to sell that out or, you know, millions of dollars, but you are putting $0. So tell us more.

Nick Jackson 21:18

Yeah. So first off, let me define technology in a couple of different ways. When we look at technology in a business, it kind of falls into three buckets. You know, as you say, the IP or product technology, our companies typically don’t have a robust set of IP. They’re not innovators, product developers so much. If it’s there, we would love it.

But that just hasn’t been very typical. These are fairly mature businesses. So a cutting-edge technology that translates IP is not real. The other technology is any technology for actually manufacturing the product, whether it’s machines, robotics, things to help with our quality systems, other automation, that kind of technology is very valuable to us. And to the extent that a team shows that they use it and not only use it to manage costs but use it to kind of convince their customers that they have a unique way of making the product and efficient manner that’s very valuable.

Nick Jackson 22:12

And then the last is really what you’re talking about ERP or other information systems inside the business. We would love it. And we’ve had some circumstances where the company we bought, the team was very, very plugged into the ERP system was using that data on a very regular basis to make good decisions about health and profitability. And to the end, we can tell from the day we start our due diligence whether people have a command of their data out of their ERP system.

So they do that gives us great hope and lots of good valuation we put on that because we know that team is really living by the data in their business. What we more often find, though, is that they use their ERP system for maybe basic accounting, a little bit of inventory, they don’t really use it for, let’s say, shop floor or scheduling or things like that. And what typically has happened is the invent the entrepreneur has been running the business for 15-20 years and has a complete command of everything about the business.

Nick Jackson 23:18

So if he or she is that intimate with the business, understands the margins, like the back of his hand, can do quotes on the back of an envelope, and understands you know, what’s broken in the business, if they get behind on shipment, that entrepreneur is not going to put a lot of value on an ERP. They certainly are not going to drop to $400,000 on an ERP implementation because they’re saying, I’ve run this business for 20 years, I know every aspect of it. And that’s great. And I don’t blame them for not investing in it.

But for us, when we come into the business, and we say okay, entrepreneurs moved on. Now we’ve got a management team that’s got to grow this business. And we got to decide where we want to invest capital and what customers and how we want to do, how we want to change pricing, and all these things that require good analytics and data having any ERP bringing an eventually any ERP system into that so that we all have better data is going to be really, really critical for the future. Okay,

Sam Gupta 24:14

So some of my audiences, obviously entrepreneurs, and as I’m pretty sure you would agree with me that they are super, super passionate, and as an entrepreneur myself and as entrepreneurs and lifestyle brand, we can do anything and everything. And we obviously work hard, right? Obviously, one of our goals is going to be to exit the company and probably maximize the number of dollars that we can get because these are our life savings, if you think about that, right?

So let’s say if you were us, what would be your advice from day one? Let’s say if I want to maximize the value of my company, I’m building a company, I’m building a manufacturing or distribution company, and I want to maximize the number of dollars that I can get as part of exit or as just a growing company. So what would be your advice?

Nick Jackson 24:58

Yeah, well, obviously the, as I mentioned earlier, maximizing the dollars of exit value is based on the level of your earnings. So that’s the obvious one is increased earnings. But that’s too easy. You know, I would kind of my advice to people as they’re thinking about an exit and preparing for an exit in our world is, first of all, make sure you understand exactly why you make money, you have to be able to demonstrate to somebody on the outside where the profitability is, why it’s existed, why it’s sustainable, and why it’s going to continue at a level that is, you know, at current levels are better.

Secondly, I think the more data so this comes back to the ERP question or other ways to have data for more data that people can provide to substantiate that conclusion of where their earnings are, and why, though, why they’ll continue that the more data, the better—so being really prepared with good solid data. And if they don’t have it today, start collecting it now.

Nick Jackson 26:01

So that they have it a year, and then the third thing I would say is to make sure that the team of key people, whether it’s the management team or other key people that they really understand. And they all agree with the conclusions that that entrepreneur has about why we make money and how that’s going to continue in the future. Because in the end, we want as buyers, we want to make sure that not only is the company profitable, but that everybody that’s critical on the team actually understands why they’re profitable and, and how they manage that, that they have a command of each aspect of their business.

And they can quote-unquote, manage that profitability. Not that they got a little lucky, a few new customers bought a bunch of stuff from them, and they had a little pop of earnings for a year. So it’s got to be intentional. And having the team be able to sit in the room with us and really explain where they make money and how their particular discipline or team affects that is really valuable to us.

Sam Gupta 27:02

Okay, so that’s it for today. Nick, do you have any last-minute closing thoughts by any chance that you might have for our listeners?

Nick Jackson 27:09

No, it was great, Sam. I appreciate the time. It’s been great to be on the show. And again, my advice to everybody is if you’re thinking about selling your business, and even if you’re in the evaluation phase, not quite ready to sell but want to talk to somebody who does this on a daily basis and want to learn about how to prepare, they can find me on the MendotaGroup.com. I’m happy to talk to anybody. I enjoy talking to entrepreneurs about their businesses. I have a lot of respect for the passion and the risk-taking that entrepreneurs bring to it and if I can be helpful to them as they’re evaluating the future exit, I would love to do that.

Sam Gupta 27:47

Okay, and I can attest to that. I mean, Nick is a fun guy. Everybody should reach out to him. It’s been a fun conversation so far. I have enjoyed our interaction. Nick, it’s been amazing. Thank you so much for your time. Really appreciate it.

Nick Jackson 28:02

Alright, Sam, thanks a lot. Have a great one.

Sam Gupta 28:04

I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Nick, head over to theMendotaGroup.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Damon Pistulka from Exit Your Way, where he discusses what buyers look for in a business while buying it from business owners. Also, the interview with Jim Gitney, where he discusses how the need for people processes and technologies change at each inflection point of business growth. Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure to get help. Thank you, and I hope to get you on the next episode.

Outro 29:06

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Ian Pratt, who discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing further. We also had a chance to discuss the specific steps executives need to take to undertake process improvement initiatives. Finally, we touched on why tracking unit costs is vital for lean or continuous improvement efforts. 

Chapter Markers

• [0:00] Intro
• [2:50] Personal journey and current focus
• [3:31] Perspective on growth
• [4:32] Importance of Quality of life
• [9:53] Difference between reactive and proactive planning
• [21:38] Process to work with a lean consultant
• [29:34] Closing thoughts
• [31:17] Outro

Key Takeaways

• Reactive planning, you’re constantly changing and dynamic. And, and people are getting frustrated because the information isn’t flowing around. And they’re not really sure what they’re supposed to be doing. In a planned approach, the information is flowing it starting at the beginning of the process and nice and evenly flowing through the entire process.
• Whether I’m working with an insurance company or manufacturing, what I find is quite often that the planning processes are the first foundation that’s wobbly. So if you can fix the planning processes, you can fix the rest.
• Assume that your quality could be 10% higher, your cost could be 10% lower, and your production could be 10% higher. If that’s your current problem, now go and solve it.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Ian

Ian is a hands-on business optimization practitioner who has 30 years of solid experience applying improvement methods across all elements of an organization, his experience is expansive covering a wide range of industry sectors and business functions.  

Ian has been directly responsible for the development of continuous improvement cultures and understands the relationship between all of the elements of the value stream. His deep and broad understanding of business context combined with his systematic approach to root cause analysis enables him to optimize the value stream achieving inventory reduction, improved consistency, and reduced process waste.  

Specifically, Ian’s strengths are demonstrated in his ability to re-engineer complex cross-functional processes to eliminate all forms of waste, automate process steps and develop people to have a broader understanding of the business environment and improved data for decision making. His ability to quickly engage stakeholders and adapt to new environments eliminates barriers to change. 

Resources

• Connect with Ian
  • LinkedIn

Full Transcript

Ian Pratt 0:00

I think four dispatch managers in 18 months and a lot of that was just driven from just this constant day-to-day crisis management and frustrated delivery drivers who were loading and unloading trucks because of communication Issues.

Intro 0:14

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:51

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host and principal consultant at a digital transformation consulting firm, ElevatIQ.

Growing a business is challenging. You might acquire newer facilities, your employees might be overwhelmed and might ask for additional resources, the process of growth could feel overwhelming, especially with operational challenges. You might feel that you’re spinning your wheels and your efforts are not paying off.

In today’s episode, we have our guest, Ian Pratt, who discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing further. We also had a chance to discuss the specific steps executives need to take to undertake process improvement initiatives. Finally, he touched on why tracking unit costs is vital for lean or continuous improvement efforts.

Let me introduce Ian to you.

Ian is a hands-on business optimization practitioner who has 30 years of florid experience applying improvement methods across all elements of an organization. His experience is expensive, covering a wide range of industry sectors and business functions. He has been directly responsible for the development of continuous improvement cultures and understands the relationship between all of the elements of the value stream is deep and broad.

With that, let’s get to the conversation.

Hey, welcome to the show, Ian.

Ian Pratt 2:48

Hey, Sam, thanks for having me here today.

Sam Gupta 2:50

Of course, my pleasure. Just to kick things off, do you want to start with your personal story and what you are focusing on these days.

Ian Pratt 2:56

My passion is helping organizations to release the untapped potential within the organization. I’ve worked with them recently with a window manufacturer whose inventory was overflowing their warehouse finished goods inventory. And I helped them untangle the problems in their planning processes so that they ended up with a lower, far lower level, about 15% of their original inventory. So that’s the sort of thing I do, but I tend to like to work with the leaders and coach them so that they have a sustainable business model after I’m finished working with them.

Sam Gupta 3:31

Okay, so obviously, I want to dig deeper into this story. That’s very interesting. And we are always looking to see how we can improve our processes, how we can improve our results. But before we get there, one question that we ask every single guest, and that is going to be, what is your perspective on growth? And what does growth mean to you?

Ian Pratt 3:51

Growth means two things, it’s looking that way at making more sales, but it’s also looking this way at making the same volume of output at a lower cost, which is growing the profit. And there’s probably a third angle for looking at growth.

And that is, what is the quality of life of my employees. So they come to work and have a positive experience. And going home with that positive mindset, or they come into work and having a negative experience and going home and taking that negativity into their social life. So there are three areas to look at growth.

Sam Gupta 4:22

Okay, bottom line, bottom line, and quality of life is what you meant mentioned, right?

Ian Pratt 4:26

Yes, definitely. Yeah, they’re all very important. And if you get the third one, right? The other two will happen for you.

Sam Gupta 4:32

Okay, so in your opinion, I guess the quality of life is likely more important is that the first driver that you consider when you get into any engagement? Is that always the first thing that you have in your mind?

Ian Pratt 4:43

It is the end game that I have in my mind. So always thinking, what’s the culture like here? Are people frustrated? And is there a good relationship and negative relationship between the manager and the employees and the employees engaged? Are they just going through the motions, but then I look at what are the systems that support and find that and how are they contributing to the current state.

So at the window manufacturer, there was a lot of tension in the warehousing dispatch areas. And the challenge there was to find the source of that tension solve that problem so that they could work in a more planned approach. And in that organization, the planning was incredibly reactive that someone would say this builder need to Windows tomorrow, can you make them now as of tomorrow, surely we knew about this five days ago.

So looking at how information flowed in the organization, how the employees were working, and making some changes to the way the information was flowing, so that there wasn’t the crisis management on a day to day basis so that the employees could have a plan and execute the plan, their quality of life improved, but inventory in the warehouse came down dramatically as well.

Sam Gupta 5:44

Interesting. So can you describe the tension a bit more? So I guess, you know, one thing that I’m hearing is there was the planning was reactive. I think you’ve mentioned that but expand on that a bit more.

Ian Pratt 5:56

Okay, well, when I went to the factory and talked to the people in the dispatch area, they would be venting frustration and anger. This is what we were meant to do today. But now, these two jobs would come in at the last minute, and we’ve got to sort this out. And then we’ve got to move all this inventory because we’ve got to get the stuff that’s behind there. And there’s just constant crisis management by the employees to try and meet a dynamic plan from the front office.

So there was they had high turnover, they had, I think, four dispatch managers in 18 months and a lot of that was just driven from just this constant day to day crisis management, frustrated delivery drivers who would load a truck, then they’d have to unload the truck and put a different product on the truck.

And then they’d go out and start their day. So they’d lose two hours in the morning, which would mean they’d have to work two hours overtime to finish their deliveries for the night. And then, you know, if they had soccer training that night, they’d be missing it because somebody somewhere the information wasn’t flowing in the right sequence to allow them to come in and execute their job from the start of the day.

Sam Gupta 6:56

So how did this all start? Was it growth was it employees in what was the real trigger for this tension?

Ian Pratt 7:03

The building industry in the region of the world that I live in, in Adelaide, Australia. The building industry is very seasonal. In winter, it slows down a bit, and then coming out of winter, it ramps up a lot. So you have that seasonality as a coming out of winter. You got the high demand coming in.

Quite often, people would order a house in January to be built in November because they know they had that slow period where you know when it rains, nobody’s working on site. So it was more this seasonality that was impacting them, they had grown, and the building was in a growth phase in this region. So their demand was going up.

But their systems weren’t able to cope with the increased volume throughput, plus the seasonal uplift in volume. That’s typical as well. They probably could have gone on as they were. They just would have kept turning over a lot of employees and spending a lot of time on money on overtime and rework within their deliveries, and they would have had to build a new warehouse for their excess inventory. But before they invest that money, that’s why they brought me in to have a look.

Sam Gupta 8:05

Okay, so the new warehouse was the reason, and there was the employee churn that you already mentioned. But if they have been in the market for some time, even if they have seasonality, most of the businesses have figured out, even if they are running on paper, how to accommodate for the seasonality.

So again, do you have any more background in terms of how this all started? Was it because of the loss of a key employee? Maybe an employee was there who was really good, he or she was really good at managing everything. And then they lost him or her, and all of a sudden, the hell broke loose. So what was the trigger? Do you have any more background on their vengeance?

Ian Pratt 8:46

Look, I’ve been in plenty of organizations that have been relatively dysfunctional on the inside for a large period of time. And at some point, the penny drops with the owner, or they get a new owner. In this particular case, the inventory had been climbing for a number of years and had reached a point where it exceeded the capacity of the current warehouse.

Okay, so then they’re like, Well, before we build a warehouse, we should look at why we are ending up with so much finished goods inventory. So they had to invest capital. They were at the point where they needed capital to continue functioning.

Sam Gupta 9:21

Right. So I guess, you know, let’s say if I am a business owner, and I’m looking to see what are going to be my symptoms when I should be probably reviewing my operations or the business performance, one of the symptoms could be that if I require excess inventory, that could be a good thing if I’m getting a lot more sales and revenue, but that may not be an as good thing, if I’m not getting sales, but I am maintaining excess inventory and having to build a warehouse. Would you agree with that?

Ian Pratt 9:45

Yes, definitely. I would look at that. At any point, if your plan is changing on the day you’re executing, it is a problem.

Sam Gupta 9:53

Okay. So describe to me more reactive planning. So what is the difference between reactive planning and proactive planning, and how would you change that.

Ian Pratt 10:02

Okay, so what happens in an organization is information doesn’t flow as nicely as you would logically think. So a customer places an order, then there’s a delay to you commence the manufacture, then you deliver it. And in the building industry, which is a little dynamic, because houses get delayed, the delay of the house requiring windows, that information wasn’t feeding through into the planning processes.

So for a reactive plan is one where you create a plan, but then you’re constantly changing it, which creates rework for everybody in your system. And you suddenly have an urgent order that needs to be done today. You get the people that start to quickly rush through one door, so you can get it out into dispatch, people have to wait around for that order, and then you get it loaded, and then take out this one door that was missed, or something urgently required. In a balanced planning process, all the information is flowing at the time that it is most critically needed.

Ian Pratt 10:53

So the change that I implemented to reduce the warehousing, which is at the end of the process, was to provide the person at the front of the process with a way of checking that the order wasn’t delayed before they started manufacture—so identifying what hasn’t has been delayed up from the first person in the manufacturing process actually controlled the level of inventory that you held at the end of the process.

So what that did is meant that almost never did you come along and say, Hey, we need to change today’s plan, or we’ve got an urgent order, because all the urgent orders have been sorted out at the beginning of the process, they flowed through in a normal fashion, and they just look like any other order.

You know, reactive planning, you’re constantly changing and dynamic. And, and people are getting frustrated because the information isn’t flowing around. And they’re not really sure what they’re supposed to be doing. In a planned approach, the information is flying it starting at the beginning of the process and nice and evenly flowing through the entire process.

Sam Gupta 11:51

Okay, so give me a little bit more about the size of the organization. So you didn’t mention that they had like four dispatch managers. But how large was the organization overall from the size perspective?

Ian Pratt 12:02

The organization employed about 70 people are manufacturing and dispatching windows for pretty well all of South Australia and part of Victoria. Yep. But the office I dealt with, which was the Adelaide Independent Business Unit, working with the general manager, they I think they employed about 70. And they made about 80% of domestic windows in our region.

Sam Gupta 12:25

Okay, so walk me through their systems, what they were using, what they were completely manual, what they weren’t any specific systems?

Ian Pratt 12:32

They had no ERP system in place, but they were pulling the data to commence manufacturing eight days before manufacturing before the delivery date. So then their manufacturing window was five days, but they were pulling the orders per day, eight days early. But what I did was analyze the data that builders tend to change the order, and 80% or 90% of builders change their order on day seven.

So I just shifted their preplanning from day eight, today’s six and provided a format that the frontline employees could look at and go right. Yeah, I can see where these orders all that. So they could then pick which one to start manufacturing—so empowering them to make choices on which order to manufacture based on the color code system that the orders had against them, those printed out.

Ian Pratt 13:21

So all the information was in their systems. It just wasn’t presented in a way that the employees could then use to make choices about what work they did. And what they had done was build contingency into each stage of the process. The person who produced all the work orders and got all the manufacturing diagrams together only needed one day to do it, but they gave them three.

If they were running late, they could still get it done on time. And they had all this contingency built into their processes. But that contingency meant that we were missing. They’ve pulled the manufacturing work orders to manufacturing, and then the system was updated after they pulled it. So the two pieces of information were not in sync any longer.

Yeah. So what a change has got the information to be in sync. And what they were working off of was a printed production order with a due date written on it. I had that due date removed and gave a separate list of due dates that could be updated, intraday, you know, can be updated to three times a day if you want to do to the first person in the manufacturing process. So they could go down and just pick which order to do next, based on the current system data.

Sam Gupta 14:23

So this seems to be an example of, let’s say, hand assembly. Their production floor must be very hand-assembled. It’s probably a job shop. So do you typically work with just the job shops and hand assembly shops? Or do you experience but do you have experience working with any other machine-oriented production floors as well?

Ian Pratt 14:40

I have in my early days. Yeah, definitely. More recently, though, in our region, we don’t have a lot of high-volume manufacturing. Okay, the automotive industry has pulled out of our region, okay. And now, a much more service orientated we mining services, farming, agriculture, those sorts of things and more dominate.

Then in the region, so yeah, I’m working at the moment with them a mining company, which has a high volume manufacturing, they actually produce the in a product, they don’t just dig it out of the ground that goes all the way through the process. So it’s more of a continuous production operation, probably similar to a lot of like plastics manufacturing these days. So yeah, I’m working with one of them at the moment and looking at coaching, they’ve probably got about 100 supervisors, and I’m coaching them on how to identify waste and eliminate it from their business.

Sam Gupta 15:29

Okay, so tell me a little bit more about this one. So what was the waste in this particular process that you just mentioned? And what do you do to move back?

Ian Pratt 15:37

Again, whether I’m working with an insurance company or manufacturing, what I find is quite often that the planning processes are the first foundation that’s wobbly. So if you can fix the planning processes, you can fix the rest. Now, the Perth the area that I’m working with, at the moment in the mining, that they have the same problem that they go to mine and area, but they’ve got surveyors surveying on the same day as the miners are trying to mine it and somebody is trying to add a water extension in there as well.

So that getting the planning so that it runs nice and smoothly, yeah, is their largest area of waste. And ERP systems are fantastic for if when you get them right, to help align all of your resources so that things are happening sequentially or happening in a nice smooth flow, rather than multiple people trying to work on the same part of the equipment at the same time, the area I’m looking at there, probably 50% of their time, is unproductive due to poor planning.

So we’re working on identifying the failures within the planning systems. But what we’re trying to do is, instead of a holistic program is coached the frontline employees and supervisors to chip away every day fix one problem, and at the end of the year, fix 365 problems, and things are a lot better. So that’s the style lean we’re trying to implement there.

Sam Gupta 16:55

Okay, so 50% unproductive is a lot. So what are some of the reasons why the process is 50% unproductive? Is it just because there is a lot of bottlenecks in the process? What are the core reasons?

Ian Pratt 17:04

Again, this is across all industries that are looking at have the same problem is that when the plan or not enough effort is put into the plan, people plan their next task after they finished their first task during the day. So they come in, they pick a task, they go to do it, they can’t do it, because there’s either some material missing or something like that, right.

So they put that aside, and then they pick up a new task. And then they go and execute that new task. And I’ve seen this in financial services, businesses that employ only six people, and then 50% of their time picking up on putting down work rather than doing it.

Ian Pratt 18:00

So if you ask the employees, are you busy all day, they are busy all day. Yeah, but they’re picking up a task and putting it down and picking up another task or doing something on them putting it down. They do not see anything all the way through. So and the same in the mining company. It’s about getting them to have an executable plan at the start of the day. So the employees can go out and do their first job, the second job, the third job, and the fourth job, and then come back and all those jobs are done, rather than going out to do the first job having a problem coming back, sorting that out, and then going to the second job.

So when I say it’s waste, the employees would say they’re busy. Yeah, but they’re not adding value. Yeah. And the same. What I find is when I’m coaching leaders, and we look at in the Leader Standard Work is that quite often leaders are incredibly busy as well, you’re in meetings, addressing email, they are firefighting, and all those sorts of things, but they’re not actually adding any value. So what we need to do is get people to let go of some of the inefficiencies and get them to have an executable plan at the beginning of the day, then execute the plan and focus the plan on the things that add the most value within the business.

Sam Gupta 18:42

Okay, so when you design these processes and plans, and sometimes those could be slightly prescriptive, and I don’t know, you know, how people react to them if they want any changes and those processes, are you going to have enough room in these processes to accommodate those contingencies.

Ian Pratt 19:03

Okay, so I don’t design any processes, what I do is I coach people on how planning processes generally work, and then they work out how that would work in their environment. Okay, um, what I talk about is very much the plan do check act cycle is that you when they’re doing their planning upfront and designing their processes that I talked about, use the 80-20 rule 20% of the effort to get 80% of a solution and then continuously improve it from there.

So build in the entire continuous improvement cycle out for three, six months. So you can put something in the monitor it and use visual management to display how you’re tracking whether your KPIs are improving as a result of your planning, and then you make changes, you know, do some root cause analysis, and you need to involve people from frontline to middle managers in that process. The middle managers bring more the commercial view, and the frontline will or problem-solve so that it actually works for them.

Sam Gupta 19:55

Okay. So when you do these coachings, what will be the deliverable that you are going to have to the operations manager? Is it going to be just the coaching? And then they are going to design the processes? Or do you engage, let’s say, for three to six months? How does the engagement work? Can you tell me a little bit more about that?

Ian Pratt 20:14

Yes, definitely three to six months. I turned down work; if people want me to just come in and give them advice, okay. The problem is 90% of people don’t know how to implement, okay, so if you just give them advice and come back in two years’ time, they’ll still be where they were. So I haven’t added any value. To me, there needs to be an improvement in business performance, that’s, you know, preferably five to 10 times the cost of my engagement and annual improvement to make it worth doing.

So if you can make your country an incredibly well-run business, looking at us how I can help you a little, but you’re doing really well, you’re going to pay me a lot, but not get a lot of benefit from it. So in that environment, I’d take more of a just a mentoring rather than a heavy load engagement. Yeah. But in organizations where there’s a lot of chaos going on, and you look at the guy, I know, I can give you ten times the cost of employing me.

So then I’ll come in for three or six or 12 months, whatever is required. And sometimes that’s only two days a week or three days a week for that duration, to help them understand their problem, fully understand the problem, identify possible solutions, and then help them implement and then do some iterations of learning and measure the improvements in performance either cost down, volume up, quality up, service up, whichever there is the key KPI for them, and then I help them to actually get that benefit. So the business performance is actually improved by the time I leave.

Sam Gupta 21:38

So let’s say I’m the manufacturing executive, okay. And obviously, I know that I have a problem. That’s why I’m talking to you, right? So I’m inviting you to my facility. Now you have to tell me how many days you need to be there at my site.

So let’s see if I’m inviting you today to my site. What would you like me to do in order to make sure number one, you have all the resources that you need to be successful? And how is the day going to be structured? How many resources do you need to be able to make sure you are able to get the data, the KPIs, whatever you need to be successful to do whatever you are going to do?

Ian Pratt 22:15

Okay, so, what I normally start with, if somebody comes out and says, looking and we’ve got a problem, can you come out and help us fix it is normally? So let’s just agree on a ten-day engagement upfront, and they go analyze your business. And I’ll tell you what the problem is, what the solution is, and how long it would take to solve that problem.

So trying, I’ve had people come to me, again, I want to give you a six-month contract, can you come here and fix this problem? I’m like. Since I don’t know if I can fix it in six months, I need to come and see the problem. I need to feel that I need to understand what’s broken in the business that’s causing that problem. So I can tell you whether or not I can actually fix that in six months.

You know, if their problem is the ERP system is really poorly implemented, then yeah, it’s gonna take them two years to get over that amount of money. The problem is just simple information flow, and problems with simple planning process their nets differently, like between six weeks and three months to get them on the right track.

Sam Gupta 23:07

So how do you find these KPIs? I mean, do you typically require the financial statements from my side? So let’s say if I invite you, and you are going to be two days at my site, and you want to look at, you know, what the problems are.

So let’s say one of the problems could be, I have excess inventory as well. And my employees are saying that they probably need a new warehouse, they need a lot more employees, and they are already overworked. And they are threatening me that they are going to leave my organization. So that’s my problem right now. And I’m inviting you to help me. So let’s say if I invite you, do I need to show you my financial statements to be able to find the KPIs, or how would you find the KPIs? And the KPIs come from looking at the value stream?

Ian Pratt 23:34

So okay, well, in a manufacturing business, one of the KPIs is probably the cost of unit sales. If you don’t know that, there’s your first problem, so we need to, and I’ve had gone to a client or timber mill, where they’d had no idea what the cost of any of their particular products was. So we implemented it took maybe two days, a very crude activity-based costing system.

And that identified that problem approximate cost center. We’re able to identify which products were losing money and which ones were making huge returns. And unfortunately, for them, the products that were losing money, we’re the ones that they produced in the highest volume and did to work with their customers to make them a lot more profitable.

But no, I come in and have a look at, like, what’s the value chain? You know, just some basic measures like what’s the cost per unit sold? What should the cost per unit sold be? If it’s a manufacturing business, there’s a lot of standard things like what’s your inventory, record accuracy?

Ian Pratt 24:40

How many days of inventory stock do you have? What’s your lead time? What’s your manufacturing cycle time, those sorts of standard metrics that come from an ERP system. So you look at those standard metrics to see what’s going on. You need to immerse yourself in the business. The manager can tell you exactly what’s going on.

And I’ll give an example a client said, you know, looking, my staff are telling me I need to hire more people. Yep. Okay, so let’s just use a basic formula to work out whether that’s true or not. How many units of work do you do? And How long do they take? Yep. What else? Do people do that? How long does that take? Let’s calculate it out.

Ian Pratt 25:00

And I calculate it and says, well, based on this. You’ve got too many people, yo, where are you losing time and the manager sit there and go, I don’t know. So you have to find out where the time has been lost in their business. And that’s normally stopping and starting or not prioritizing the work property having a problem in their planning system, or people not really being clear what their job really is.

So those sorts of problems exist. So you need to immerse yourself in the business and go and have a look and see and feel and see where inventory is building, where the lines are running, where it’s not running, where employees are frustrated. And what they’re saying is causing their frustration, which isn’t necessarily the actual problem, but it gives you somewhere to sniff around and have a look.

So you need to sort of look and see and feel, and then you’ll know what KPIs would fix the problems that I see in this business. And it’s different for every business, but I never look at the financial statements. That’s not necessary. But I quite often work with finance people to work out the cost of sales? Because quite often, that’s the one that you want to get a 10% reduction in the cost of sales.

Sam Gupta 26:25

So yeah, yeah, so interesting point about the cost of goods sold and cost of the unit, right? I mean, that’s very important. And the kind of, you know, customers we typically engage with. Obviously, not everybody is going to have the cost of the unit. And obviously, that’s going to be very important he as he mentioned.

So from your perspective, let’s say if they are not packing it, sometimes what they do is they are going to track really at the financial statement level and operations, people don’t really have any understanding of their cost of the product. Because what they are going to do is they are simply going to have the total cost, and they are going to divide it by whatever measurement they have to determine the cost. So that’s what the actual costs are, in your opinion, the cost of the unit is really important, especially in the job shops, right? So in your experience is most important for all of the businesses or somebody says what will be your perspective on that.

Ian Pratt 27:15

The cost is super important to understand. So that you’re not, you’re not trying to grow a line of business, that’s losing money. But the problem is a lot of people overanalyze costs. So they say, look, it’s you know, I’m paying my staff, they $40 an hour, I’ve got to add some cost of employment, I’ve got to add a percentage for the warehousing, or they add a percentage for this percentage for that, and then they have suddenly gone.

Should I add $1.50 or $1.60? It doesn’t actually matter. Yep, just right, with the best Cost of Goods, you can do it in the next one hour. And just what you know, if you need to refine the numbers, if the cost and the sales price are that marginal, that you need to refine the numbers, this is not a good product, what you need to do is look at, if you use a crude system, you should be able to say, yeah, this is roughly the cost. And so you say, hey, we’ve got to get our cost down.

Ian Pratt 28:05

So they start trying to reduce the numbers that are in the equation. Okay, but that’s just changing your baseline as well. So what you really want to do is say, What if we’re going to use these numbers? Let’s stick with these numbers. And then let’s see a reduction in cost based on this measurement, rather than an absolutely hugely precise measurement that takes six months to try and work out what is what exactly the cost is?

So we’re going to just look at what are the key contributors to cost and how do we those build up? And then let’s track those key contributors and see that we’re seeing a reduction in some of those key contributors. Now, that won’t be the absolute cost of sales, but it’d be an indicative cost of sales, which is better than what they have right now.

Sam Gupta 28:47

Yeah. And that’s a pretty good description. So basically, what you’re saying is just have the major contributors of the cost, maybe four or five. You don’t have to count for every dollar. And as long as you have that, that should be good for you. Right?

Ian Pratt 29:01

Yes. And some costs are fixed. Whether you include them or don’t include them, it doesn’t matter. Like we’re not going to reduce the number of overheads. So we might, but it’s unlikely that’s not the target. So if you’re not reducing planning to reduce the number of overheads, factoring them into the cost for improvement purposes isn’t essential.

And you can factor them into, you know, your costs, but you’re really looking at looking for the key cost leavers that you’re going to try and seek to improve and having those included, and then you can refine the actual cost with the overheads and other things that you’re not going to change at a later date.

Sam Gupta 29:34

Okay, amazing. So that’s it for today. Do you have any last-minute closing thoughts here?

Ian Pratt 29:38

Now I would just encourage them every manufacturing and operations manager and a mentor of mine said this to me when I was about 21 years old, and it stuck with me for those years is have a look at your business and assume that your quality could be 10% higher, your cost could be 10%, lower and your production could be 10% higher. If that’s your current problem, now go and solve it. So that’s probably the best lesson I could offer any manufacturing manager or CFO go and tackle that problem and, and you’ll do well.

Sam Gupta 30:06

Alright, amazing. Thank you so much for your time and insight. Ian, I really appreciate it. And I cannot thank our guests enough for coming on the show and sharing their knowledge and journey. I always pick up learnings from our guests. And hopefully, you learned something new today. If you want to learn more about him, follow him on LinkedIn. His LinkedIn handle is IanPratt. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business, you might want to check other related episodes, including the interview with Ram Krishnamurthy, where he discusses why costing strategies matter for ERP implementation and how to make an ERP project successful. Also, the interview with Dave Griffith, where he discusses why manufacturers must look for low-hanging fruits when exploring the path of industry 4.0.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help.

Thank you, and I hope to get you on the next episode.

Outro 31:17

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Carol Marzouk from Leadership’ N’ Soul, who discusses how to uncover and correct lingering toxicity before it stunts your business growth. We also had a chance to discuss the implications if you smell it but choose to ignore it. If you are looking to learn how to fix toxicity before it’s too late with compelling stories full of laughter, this is a must-listen episode for you.

Chapter Markers

• [0:00] Intro
• [2:50] Personal journey and current focus
• [8:51] Perspective on growth
• [16:14] Her personal story dealing with a toxic executive
• [25:08] how to uncover the toxicity and then how to fix it?
• [31:30] Story of internal communication issues resulting in a fatality
• [35:59] Closing thoughts
• [37:52] Outro

Key Takeaways

As CEOs, we have to learn how to recognize these conditions. And we have to know how to coach them because they’re in your organization. So if you find that they’re stunting your growth by doing this to other people, and these guys can manage up really well. So you’ve got to be very good at noticing this. And you’ve got to keep an ear out for other people saying things about their behavior.

The first rule with narcissists is to avoid anything that might upset their sense of self. Because they have this idea that they’re grandiose, they want to make sure that everybody thinks that they’re bigger than they are. And that’s to compensate for their sense of inadequacy.

Their ambitions can be used to motivate them because that’s what they live off of. That’s their currency. So you want to use that currency. Like, for instance, if they have high potential to succeed as whatever director or whatever their VP role is that they’re looking for or whatever it is, you want to use that as the carrot as the currency to motivate them, right. So the challenge is, of course, to avoid feeling their sense of grandiose grandiosity, so it helps to keep Conversations tactical.

When we give love, that means that we have love to give when we give kindness. That means that our cup of kindness is full and that we can give some of it out to other people. But if we don’t have it, how can we give it.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Max

Carol Marzouk, the “Executive Lion Tamer®” has spent 30+ years inspiring leaders and teams to impact the bottom line while retaining their “soul” and integrity.  She is known for using unconventional methods to get real results and helps clients take immediate action, leaving the theory in the office. She has worked with leaders in a variety of industries including manufacturing, distribution, and F&B.

Resources

• Connect with Carol
  • LinkedIn | Twitter
• Connect with Leadership ‘N’ Soul
  • Website | Facebook | YouTube

Full Transcript

Carol Marzouk 0:00

He did this for two years. And whether I was in France or China, Japan, Italy, it didn’t matter. He would show up. And he would say things like. You bring zero value to the company. And you really don’t know what you’re doing. You have nothing good to say; nobody should listen to you. And he would demoralize me, and it would always be right before I’d speak.

Intro 0:24

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 1:01

Hey everyone, welcome back to another episode of The WBS Podcast. I am Sam Gupta, your host and principal consultant at digital transformation consulting firm ElevatIQ. When you think of growth barriers, you might not think of corporate bullying and executive toxicity.

Sure every company has its share of issues. But how bad can toxicity and bullying get? Can it be catastrophic for companies? Cause fatalities? And invite lawsuits? If yes, they are significant legal and financial risks that have a massive impact on the bottom line and growth.

In today’s episode, we have our guest Carol Marzouk from leadership and soul, who discusses how to uncover and correct lingering toxicity before it extends your business growth. We also had a chance to discuss the implications if you smell it but choose to ignore it. If you’re looking to learn how to fix toxicity before it’s too late with compelling stories full of laughter, This is a must-listen episode for you.

Let me introduce Carol to you.

Carol Marzouk, the executive line tamer, has spent 30 plus years inspiring leaders and teams to impact the bottom line while retaining their soul and integrity. She is known for using unconventional methods to get real results and help clients take immediate action leaving the theory in the office. And She has worked with leaders in a variety of industries, including manufacturing, distribution, and F&B. She also does a lot of work in the M&A space focusing on the people and culture side that usually falls by the wayside as the financials are being discussed. Carol has held several leadership roles and has overseen the work of hundreds of employees. She has excelled as a speaker, consultant, coach, trainer, and facilitator.

With that, let’s get to the conversation.

Hey, welcome to the show, Carol.

Carol Marzouk 2:48

Thank you, Sam. It’s wonderful to be here.

Sam Gupta 2:50

Okay, just to kick things off. Do you want to start with your personal story and what you are focusing on these days?

Carol Marzouk 2:56

I would love to. I am from Mexico City. So my name is Carol Marzouk, and I was actually born in Mexico City, the fifth of five girls. Can you imagine that? Sam?

Sam Gupta 3:10

Oh, wow, look at that. That’s a lot of family.

Carol Marzouk 3:13

A family, a lot of family. My dad was actually born in Iraq. And then he moved into he moved to India, and then ended up in Australia. Then my mom’s side is from Syria and Italy. And then they ended up going to Mexico City. All sides were Jewish. So that’s why they had to escape. And so then I was born in Mexico City. And the reason why I got into this.

Sam Gupta 3:40

So I’m super confused right now because, you know, I don’t see any country that I didn’t hear. Tell me one country that is not there.

Carol Marzouk 3:49

I’m like the United Nations all in one. Name one. I’ve got it covered. My last name is from my husband. His family’s from Egypt.

Carol Marzouk 4:03

Just in case, we needed another country. I think the reason why I got into this field of, you know, working with toxic executives and conflict resolution and, and really working with, you know, the big egos in the workplace and, and growing companies at different inflection points and helping them deal with the people side that that constantly gets in the way of them growing their company is because, well, you know, being the fifth child, I was always kind of in the way of my sisters.

Sam Gupta 4:42

So you are telling me that you were bullied.

Carol Marzouk 4:45

I was. I was actually we were in Mexico City.

Sam Gupta 4:50

You have practical experience of being bullied, I guess, as a child.

Carol Marzouk 4:56

Oh my goodness. Sam. We were in the nine-story of our apartment building, and they wanted to see if the stroller would fly out of the veranda out of the balcony with me in it. And it was an experiment. You know, it’s like let’s see if Carol flies with the stroller, and so I always had to escape these death-defying things that my sisters would try on me.

Carol Marzouk 5:33

So it was really incredible, you know, and growing up, just always being the one that actually had to resolve the conflict between the sisters and then also my parents and my sisters. And I was always the one that was kind of brought in to mediate. And so I got really, really good at it.

Sam Gupta 5:55

Okay,

Carol Marzouk 5:57

And also, to survive, right? I had to learn how to survive amongst all these different personalities. I was like. We were all raised in different jungles. It was kind of crazy.

Sam Gupta 6:05

Yeah, I was a middle child myself, so I can see where you’re coming from.

Carol Marzouk 6:12

How many children? Three, three. Okay, yeah. So five and five girls are very different than you know, a mix or five boys. I mean, five girls crazy. They’re crazy. We’re all crazy.

Sam Gupta 6:27

Did you guys cry all the time?

Carol Marzouk 6:29

Oh, my goodness. Can you imagine that? When everybody was kind of on the same? Do you know you know what I’m talking about?

Sam Gupta 6:37

Oh, my God, I don’t even know if I’m supposed to be making this comment during the show, to be honest, and how that is going to come across.

Carol Marzouk 6:45

I’m sure everybody’s thick-skinned around here. And you can say whatever you want.

Sam Gupta 6:50

I hope people can handle my jokes. You never know. Right?

Carol Marzouk 6:52

I hope so. I hope so. Yeah. So it’s crazy. So growing up, that’s how I was, and I got just really good at it. And then and then, later on, I started working in, in law firms, and, and the, you know, big companies, and I always ended up being the mediator and being the ones that were being the one that worked in with the high-level folks and resolving their conflict and, and understanding how to coach them and mitigate the situation and how to get everybody to see the different viewpoints, and really have to understand the different communication styles and languages that everybody speaks. Even though everyone might be speaking English.

Everybody really does speak a very different language. Yeah. Right. And so that’s how I got into it. Sam, it’s quite interesting. And I was incorporated for a long time until I got into my own firm. And that’s how I got here. I’m internationally recognized. I have my certificates. You know, I typically don’t like to bore people with this.

Sam Gupta 8:00

you can describe them because we don’t, we can’t take the picture as part of the show. So you need to describe each of your certificates.

Carol Marzouk 8:08

Really quickly. I’m UCLA, psychology, communications. I worked with Yale School of Management for years and, of course, got my certifications for executive coaching in several different areas. And then also behavioral coaching. I have my Lean Six Sigma Green Belt certification, and oh, it’s just so boring. Sam, Please don’t make me. Um, let’s move on. Let’s move on. Okay, so let’s talk about how, how toxic executives can really be right under your nose.

Sam Gupta 8:51

If you are moving to the next question, then we have to have one ritual here. Okay. You’re not supposed to move on to the next question. The next question always is you have to tell me, what is your perspective on growth?

Carol Marzouk 9:02

Okay, well, Oh, goodness, we don’t want to mess with ritual.

Sam Gupta 9:06

Everybody has to go through that.

Carol Marzouk 9:09

Oh, goodness. Okay. My perspective on growth? Well, I think that, um, when you’re talking about growth, I think it’s always about being innovative. It’s, it’s always about thinking organically and inorganically. So always just finding new sources of growth and thinking about just value creation, right? And looking at the changes in your competitive landscape, understanding what your competitors are doing, and always staying ahead of the game. You know, a lot of times, we get really complacent. And I worked for a company for several years, and they had a monopoly for many years, until, you know, some other people came on board, and they were forced to get better, or just lose their platform. And so it’s really important to always have that perspective, and then, of course, understanding and managing your exposure to risk, right?

So I know you CFOs out there are always really attuned to risk, right? Many of the CFOs that I work with are very conflict-averse and not conflict-averse, risk-averse. And so managing that exposure to risk and how, you know, it’s related to our reputation. Our operations are also very important when we’re thinking about growth, right, and our financial volatility.

But that’s when I think about growth, I think about all of that, but being who I am, let’s be honest, Sam, the very first thing I think about which you know, is the bigger umbrella is the people side because if we are a people business, those people in our business are really part of the business that is going to take us to the next level. And if we as the lead as the top of the fountain, if you will, I always describe it, as you know, you’re the top of the fountain. And if you think about it as a chocolate fountain. I hope you are hungry. It’s like pure milk chocolate. Can you taste it right now.?

Sam Gupta 11:21

Am I gonna disconnect the interview right now to grab a bite.

Carol Marzouk 11:24

right. Um,

Carol Marzouk 11:30

We can’t give some to everybody right now. So if you’re the top of the chocolate fountain, right, you’re the CEO, the CFO, the CEO, and you’re pure milk chocolate, you’re, you’re the best leader you can be. Well, that’s going to go down to the next level and the next level and the next level. And, and if you’re not, right, if you’re not if I could take a video camera, and show how you are showing up as a leader, and how you are doing whatever you’re doing, how you’re behaving in order to grow your company. And if you’re comfortable with me showing that video to the rest of your company,

Sam Gupta 12:10

Would you please not share my voice with anyone? Please do not share my video with anyone, okay?

Carol Marzouk 12:23

If that’s you know, but if that’s if that makes you comfortable, right? If you would feel good about that video being used as training for the rest of the organization, then you’re doing a great job, right? Because serving on a leadership team, should be a privilege. And so back to the growth conversation. Again, it’s if you’re showing up as the kind of leader that leads to the kind of growth that your company deserves and desires, then your people are going to be doing the same.

Sam Gupta 12:58

Okay, amazing. So yeah, so before we move on to the next question, we need to set the expectations here, Carol. Okay. So you are actually coming to the executive podcast, okay. And we are the guys who pay you. Okay, and we’re calling them toxic, toxic executives.

Carol Marzouk 13:17

Oh, my God, I suck. That’s horrible.

Carol Marzouk 13:29

Um, the truth is, is that, um, so the CEOs, the CEOs, the CFOs tend to call me when there are other executives, wink wink, none of you guys. Other executives are behaving badly. And that’s, and that’s what happened. And I can give you some stories, and maybe it’ll resonate with some of you in the audience. I mean, you know, we’ve got, we’ve got plenty of them.

But the truth is, is that these are important only because the last thing I want for you or any of my clients is for you not to be able to recognize this and also for you to leave it untouched and let it continue. So that it stunts your growth, that is a problem for me, it is a problem for me because I’ve lived it in some corporate areas and because I continue to see it with some of you know, the clients that that come my way and it’s not okay, it’s not okay.

And the reason why it’s not okay is not only is it a cry for help from these people that are in executive positions, but it’s also not that it’s also ruining your company, but also ruining the people around you. It’s like a virus. It’s a virus. Right, and it’s, you know, we’re talking about the Coronavirus I used to talk about it as I’ve been doing this for almost 30 years, and yeah, I used to talk about it as being like the flu virus right when somebody sneezes on you, right? Imagine, right?

Carol Marzouk 15:23

And so somebody, I’m sure all of us have had that experience where somebody like gets too close and make coffee on you, or they sneeze on you. And it’s disgusting. Right?

Sam Gupta 15:39

Can we talk about something positive here?

Carol Marzouk 15:49

Yes. Let’s talk about something positive here. But um, in order to get to the positive, I have to talk about why. And I have to talk about No, no, Sam. No, we can’t talk about positive until you tell me. Look, Sam, I’m a doctor.

Sam Gupta 16:06

Okay, if you don’t talk about the disease, how are you supposed to cure people?

Carol Marzouk 16:14

That’s right. That’s right, sir. The positive thing is growth, right? We have to uncover the disease in order to cure it, right? Yes, so so with the sneeze, you can just go take a shower, because you know, you’ve been sneezed on, but when you have some of this stuff happening, sometimes you don’t know it’s happening. So you don’t know you need to take a shower.

Then pretty soon, you realize that you’re like, it’s, you’re really, really dirty, and you don’t know how that happened. And all of a sudden, you’ve got a whole bunch of people that are extremely either, you know, ready to throw in the towel, or there’s a lot of gossips, or they’re just not producing, or you know, and it’s just too late. And it’s because it started at the top with the executive team. So let’s, let’s talk. Do you want me to talk about some stories?

Sam Gupta 17:04

Please, please. And that’s how we are going to relate because right now, I’m actually thinking of washroom, to be honest, when I’m thinking about this conversation. Can we go back to the office?

Carol Marzouk 17:14

I know. Right? That’s, that’s, that’s me, I take you from chocolate fountains to sneezes to the washroom. Um, so let’s see one of the stories that I can tell you very close to my heart. And very well, it happened to me. I was in a very big corporation and was in charge of the growth, the learning and development, and growth for the whole executive team, but also for the whole enterprise, all of the different organizations under this enterprise.

I used to travel all the time, and part of my job was to grow the, you know, help the board and with the personal development and their growth. Also, I ran the leadership academies for all of the different groups. So my boss’s boss would actually go wherever I went, and he would, he would make sure to pull me aside, right before I got on stage to talk to the board, or to talk to the executives and to, you know, to deliver content or to make a speech. And he would say to me, Listen, Carol, I don’t understand, and just so you can, you can picture this Sam, he was Iris. Fine. So I’m five-two, I’m five-four on a good day, but 5’2″ usually.

Sam Gupta 18:43

That a height?

Carol Marzouk 18:44

Yes, yes. Height, height?

Sam Gupta 18:47

You look tall. Come on.

Carol Marzouk 18:48

Thank you. Thank you. That’s heels on. He must be between six-four or six-six. I don’t know. I guess it depends on if I was five-two or five-four.

Sam Gupta 19:00

But it could be frightening.

Carol Marzouk 19:03

Really long is, I guess.

Carol Marzouk 19:05

Yes, exactly. He has a very, very deep Irish accent. And he’s taller than me. And he just he would say to me, I don’t know why you’re working here. I don’t know why the CEO, who is my friend, wants you to work with the board. I don’t know why he wants you to work with him and run this program. He’s my friend. And I should be working with the board, and I should be running this program.

Now, he was two levels above me. And he had a really big problem with me. And he never, he would never give me anything good. He never said anything good. And he did this for two years. And whether I was in France or China, Japan, Italy, it didn’t matter. He would show up. And he would say things like, you bring zero value to the company. You really don’t know what you’re doing. You have nothing good to say. Nobody should listen to you. And he would demoralize me.

And it would always be right before I’d speak. So I got really good at kind of compartmentalizing it. I got very good at that. But for two years, he did that. And, and at some point, I felt like a fraud. Right. Like about two years into that, I felt like a fraud. Not a good place to be, I guess. Yeah, it was horrible. Here I am telling my leaders, you know, how to be the best leader and how to be a strong and powerful presence. It’s how to stand up, and all of this, and here I am taking this from somebody only because my paycheck is coming from this organization, and how can I stand up to this guy?

You know, and he literally, I mean, intimidated me, right. So I decided to do something about it. And so I decided that what I was gonna do was, I was just gonna ask him next time, he said that to me to tell me three good things that I’ve done. Yeah. And, and I did, I started doing that. And I was shaking. I mean, I was shaking when I said.

Carol Marzouk 21:17

Do you know what he said to be the first time that I asked him that Sam?

Sam Gupta 21:22

I am curious, though. I’m, I want to know,

Carol Marzouk 21:24

Yes. He said nothing. He said nothing. Yes. He literally said the word nothing. And then I did it again. Next time he did that. He just shook his head. Then yeah, and then the next time, he would just be silent. It took about four or five times. And he never said anything, anything, nothing, nothing positive. But I still kept asking the question. And so eventually, I trained him to know that I would be asking him, and he started getting uncomfortable.

Yeah, with asking him, and he stopped. And so I got him to stop. And so that was good. But you know, they, in the end, people like that they have this insecurity, right? Or they have this. This is like a narcissist. And the reason why I’m telling you that story, right? It is because we have to learn as CEOs as CFOs. And CEOs, we have to learn how to recognize these conditions. And we have to know how to coach them because they’re in your organization. So if you find that they’re stunting your growth by doing this to other people, and now, these guys can manage up really well. So you’ve got to be very good at noticing this. And you’ve got to keep an ear out for other people saying things about their behavior.

Carol Marzouk 22:47

So with these kinds of guys, if you know that there’s somebody that’s like a narcissist, even though you might be tempted to all of a sudden, like, have a loud wake-up call with them, right? The first rule with them is to avoid anything that might upset their sense of self, right?

Because they have this idea that they’re grandiose, they want to make sure that everybody thinks that they’re bigger than they are. Right? And that’s to compensate for their sense of inadequacy. And that’s okay, right? You’ve got to kind of feel a little bad for them because they have that sense of inadequacy and that insecurity. And so what you don’t want to do is call them out on that. Yeah. So while they may seem very confident, it conceals a very deep vulnerability. So your first goal as a CEO or as a CFO is to place your self-esteem on a firm foundation. Not to destroy it, you have to convey respect to him or her.

Carol Marzouk 23:47

And it needs to be recognized. So you know, what I’d like you to do is show empathy and initially gain their trust. So that eventually you can they can let you in so that you can talk about those dysfunctional behaviors. Now, for me that that works very well. Right now, I’m, of course, a third party, but that’s my bread and butter, right? I literally can do that. They trust me. And they bring down all of their masks.

But the important thing that I want you to understand is that their ambitions can be used to motivate them because that’s what they live off of. That’s their currency. You want to use that currency. For instance, if they have high potential to succeed as whatever director or whatever their VP role is that they’re looking for or whatever it is, you want to use that as the carrot as the currency to motivate them, right. The challenge is, of course, to avoid feeling their sense of grandiose grandiosity, so it helps to keep Conversations tactical. So that’s one story, Sam, the next story do me to go into a story about a fatality.

Sam Gupta 25:08

Yeah, I mean, I would definitely like to get into that. But I would definitely also like to discuss some sort of scientific method here that you might be using. So obviously, I can see this problem pretty much in every single organization. Okay. And the reason for that is because, you know, some of these subject matter experts, they may have been with the organization for a very long time, they might do way too much that executives even don’t have the power to negotiate with them, and they sort of becoming toxic is the word that you’d like to use, right?

They are extremely valuable for the organization. But at the same time, they are equally toxic as well, for people like you if you have to hang out with them. So I can see the problem. Right. So obviously, I want to cover the story as well. But more importantly, I want to cover the scientific methods that you used to number one uncover the toxicity and then how to fix it?

Carol Marzouk 26:04

Yes, yes. So the way that I uncover it, well, my process is, you know, it’s very simple for me, what I do is, I always meet with the person. So somebody comes to me and says, Hey, you know, Phil, this actually just happened yesterday, somebody came to me and said, this was in a manufacturing space. And the salesperson was, you know, bigger than life, right?

They make, they bring in a lot of money for the company. And, you know, I think like 2 million this one particular person brings in, and he thinks he’s just always right, and bigger than life, and etc. And so he’s having a really difficult time with the office manager with everybody because he will. Frankly, he lies a lot and appears to be greater than life. And, and so the, you know, the CEO is talking to me and saying, Carol, I don’t even know how to approach him to tell him to talk to you.

Sam Gupta 27:11

$2 million dollars, right. $2 million.

Carol Marzouk 27:14

Exactly, exactly. And, and, you know, the thing I told him is, look, this guy is suffering, that he’s making a ton of money. Um, he has more money than he knows what to do with. But he, he’s not happy. Because he also told me some other things that you know about his life. He’s not happy. And most people that are like that are not happy, because, well, you know that because look, Sam, like, you and I are laughing, right?

When we give love, that means that we have love to give when we give kindness. That means that our cup of kindness is full and that we can give some of it out to other people. But if we don’t have it, how can we give it and so so his cup of kindness has been empty for a long time, and his cup of understanding and his cup of all of that stuff, right? So he’s hurting this. This guy is in pain. And so what I asked him was, let’s think about the currency, why would he want to change? Why? What’s in it for him to want to even meet me, and it’s different for everyone.

Carol Marzouk 28:18

For this particular person, it was very important to have a good relationship with the office manager because for. It was a status thing that if the office manager was in sync with him that that means he owned the place. And so that’s what we use as the currency because right now, the office manager is not in sync with him. And so the way he’s going to approach it is, hey, you’ve got to meet Carol. She’s going to help us get her in sync with you. Right? Like, nothing’s wrong with you, right?

Remember, because we can’t deal with a narcissist or somebody that believes they’re grandiose, you can’t attack them at the beginning. You’ve got to gain their trust first. So yep. So that’s how you do it. And then once I talked to them regarding my approach, so once I get face to face with them, then it’s a matter of frankly, do I like them as people, right, and I don’t, I personally don’t work with anyone I don’t like, and even though these people are, quote, unquote, toxic in their workplace, or whatever it is, they’re really good people.

It’s just that they’re crying for help, honestly. And so that’s why they’re preventing the company from growing. And even though they’re bringing in money like this guy. He’s actually about to destroy the company if we don’t fix this because this woman is going to bring a major lawsuit that’s going to take them down. Wow. If we don’t fix this, I mean, it will take that company down.

Sam Gupta 29:49

Yeah, that’s going to be a huge P&L hit. I don’t know how big this company is. But lawsuits are not fun.

Carol Marzouk 29:55

Yes, it will take them down. He told me it’s gonna take them down. She’s got so much evidence against him and some other people that have abated and have the same similar issues because it’s a cultural thing. If you’re allowing that guy, there are other people too, right? So it’s a problem. And so once I talk, so once I talk to him, and he, you know, he has synergy with me, and he trusts that I’m going to keep our, our conversations confidential, because I do, and then we move forward.

And, and that’s the scientific aspect of it that he bases its therapy, it’s therapy for corporate Yeah, um, in a way it’s applying, it’s applying principles, therapy, Quinn’s principles, because I’m healing the parts of him that are unable to heal in the environment that he’s in.

But I’m also bringing him back into the environment and working in working with the environment that he’s in. So not only do I work with the person, but I also work with the people that he works with. So I work with the whole team every month so that it’s not like, Oh, this person’s got a problem, let’s send him to an island, right. Having fixed it’s no, it’s this person’s got a problem, we’ve enabled this behavior, we are enablers, we also have issues. We’re also going to fix those issues. And we’re going to watch this person transform as we also transform. So I meet with them every month.

Sam Gupta 31:30

Yeah, and people issues are always bigger. When you talk about any of the last transformations, whether you are talking about the ERP transformation, or digital transformation, or company transformation, whatever it is, I mean, you are going to have subject matter experts, and always that are going to be people issues that are always going to be the top issues because of that, your initiatives are likely to fail.

So yes, people issues, the biggest ones, and they need to be healed. So I absolutely agree with you there. Okay, so I want to cover your story, the fatality one, quickly.

Carol Marzouk 32:02

Sure, absolutely. So the fatality, one was a manufacturer, and this one again, they were in at an inflection point of growth. And one of the operators Actually, it was an operator, and he was moving into a supervisory position. And He was in the machine. Um, and he when he was kind of servicing the machine, and somebody turned on the machine, while he was in it, that screen on, on very crazy Sam, and the and then the guy, the guy passed away.

So that was a symptom of a huge problem in the culture. That hasn’t been dealt with. And it all started at the top, and the CEO didn’t want to see it because he didn’t want to deal with the people issues. It really did start with his executive team. And it just kind of, again, like the fountain, right, it just kind of went. And it just kind of dripped down until something happened that now OSHA is involved in, you know, a whole bunch of people involved. Obviously, I’m involved.

Sam Gupta 33:15

But what was the trigger? I mean, what was it? Was it because of the internal communication? Was it because they didn’t have any system for communication? What was the real problem here?

Carol Marzouk 33:24

The real problem was, well, they also were going through a merger. And so that’s partly why I also got involved just because they were going through a merger. So I was looking at the people side of the culture of the company, that that bought them out. But it was it had to do with the executives at the top knowing that there were issues with the processes and the systems. And so they weren’t the lean company. That’s not the issue. But the issue was the processes in place. They were not solid. They weren’t even clear.

Sam Gupta 34:03

Yeah, wait for a second here. So let’s say if we look at the landscape of the majority of the SMB businesses or lifestyle businesses, I mean, they don’t necessarily have a system or process coordination. This is not the way manufacturing companies are supposed to run. So they are typically coordinating either on paper or just manual. So do you see this risk with a lot of SMEs out there?

Carol Marzouk 34:22

I don’t see it that often. Although I just recently saw another one where there was a fire on a machine because it was rewired wrong, and it was almost going to bring the whole place down. So, um, it is scary because it is about communication. But more than communication, it’s about comprehension. And it’s about the supervisors. Really, it’s not just about handoffs; it’s about understanding that they need to see the whole thing through, and it’s about the leaders at the top caring and not staying in their offices, and Yeah, they’ll handle it.

That’s not my job, or I don’t want to think about the people side, or Yeah, I’ve got good people there, or it’s about them really looking and watching and doing 360s, and really paying attention to what’s really going on there. And not just thinking, Oh, yeah, well, nothing’s happened now. I mean, where this fatality happened, they’ve been, they’ve been in business for a long time. It’s never happened before.

Sam Gupta 35:28

Yeah, just because it never happened before does not mean that it can not happen today.

Carol Marzouk 35:32

Exactly. So yeah, this is an It’s not like I see it all the time. But I see it enough to say. I think the time has come where the CEOs, no matter how big the companies are, because I work with very, very big companies, and also small companies. And I have to tell you that no matter how big the companies are, the CEOs really need to have an eye on everything. At the end of the day, they’re the CEO.

Sam Gupta 35:59

Yep, I could not agree more. So do you have any last-minute closing thoughts by any chance?

Carol Marzouk 36:04

Yes, I would say I would just ask this question. What are you waiting for? That’s my closing thought is what are you waiting for? That’s it.

Sam Gupta 36:14

I hope that they are not waiting for such issues. These issues are serious. To be honest, we can laugh all day. But, in a manufacturing facility, people’s issues are serious. The communication issues are serious. And if you don’t have processes in place, this could happen to anybody, any company, any person out there. So Carol, even though we are laughing here, but again, this is a serious issue to make sure that you have internal communication in place, you have the right leadership in place, you don’t have toxicity in place.

Carol Marzouk 36:45

Thank you so much for having me on your podcast. Sam, it was a true pleasure.

Sam Gupta 36:51

I cannot thank our guests enough for coming on the show to share their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Carol, head over to leadershipnsoul.com.

Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Ben Baker from your brand marketing, where he discusses how internal communication influences growth. Also, the interview with Erin Koss, CPA from the Syte Consulting Group, where she discusses how internal communication helped her make a massive project successful despite unforeseen challenges.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of the WBS podcast.

Outro 37:52

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Max Krug, who discusses what actions businesses need to take if they encounter product quality or business performance issues. He also describes how statistical process control (SPC) could help in addressing such issues. Finally, he shares several stories in different manufacturing verticals, where he has implemented SPC processes.

Chapter Markers

• [0:00] Intro
• [2:22] Personal journey and current focus
• [2:57] Perspective on growth
• [3:44] How to accomplish double the growth?
• [4:25] Does SPC help double the growth?
• [10:48] How statistical process control differs from any other data gathering
• [15:21] AI predictive analytics versus SPC
• [21:44] Does SPC need an ERP system, or can it work standalone?
• [24:07] Which industries are the right fit for SPC?
• [28:34] Does SPC slow down the processes?
• [35:23] Closing thoughts
• [36:10] Outro

Key Takeaways

• If we’re getting the wrong measurements, we’re going to get the wrong behaviors, the wrong behaviors, the wrong outcome. So we want to make sure that the processes, we really understand what the next step in the process needs.
• If things start to go outside of normal ranges, and we don’t wait till we have a major problem before we react. SPC helps us understand when a process starts to drift, and we take action before it becomes a problem.
• Statistical process control is about understanding statistically how the process is performing. And if we start to see the process drift, there are rules around what an out-of-control situation looks like or what we call special cause variation, when we have specified variation, we react and correct it before we have a problem.
• Most manufacturers don’t understand with SPC you start with measuring the product, but that’s not the end game. That’s where you start to understand where is the variation in my process, and I want to make sure that the outputs are good every time we produce the product, but the power of SPC is driving it back to the process.
• There’s a measurement called CPK. That measures process capability. And depending on what that data is telling us, it tells us the frequency and how often we should take the measurements. Yes, we want to make sure that long term, the process stays capable.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Max

Max Krug, the owner of Future State Engineering, has 35 years of experience in operations, with a focus on manufacturing and distribution companies. He coaches companies to help develop operational excellence strategies and provides hands-on mentoring and implementation support for the necessary and sufficient actions to become a high-performing organization. His education is in Industrial Engineering, and he utilizes Theory of Constraints, Lean, and Total Quality Management techniques to achieve breakthrough performance improvement for organizations.

Resources

• Connect with Max
  • LinkedIn
• Connect with Future State Engineering
  • Website | LinkedIn | Facebook | YouTube

Full Transcript

Max Krug 0:00

Leave the process alone if it’s operated correctly and understand when it should take operator intervention to make adjustments and quality will improve significantly just doing those two.

Intro 0:12

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:48

Hey everyone. Welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at the digital transformation consulting firm, ElevatIQ.

Growth could be challenging with product quality and process waste issues. You can also see inflated costs and reduced profit margins if you don’t track scrap and waste appropriately. The problem could even be more significant if your measuring equipment is not appropriately calibrated or provide the necessary precision needed by your processes.

In today’s episode, we have a guest Max Krug, who discusses what actions businesses need to take if they encounter product quality or business performance issues. He also describes how a statistical process control or SPC could help in addressing such issues. Finally, he shared several stories in different manufacturing verticals, where he has implemented SPC processes.

Let me introduce Max to you.

Max Krug, the owner of future state engineering, has 34 years of experience in operations with a focus on manufacturing and distribution companies. He coaches companies to help develop operational excellence strategies and provide hands-on mentoring and implementation support for the necessary and sufficient actions to become a high-performing organization. His education is in industrial engineering, and he utilizes Theory of Constraints, Lean, and total quality management techniques to achieve breakthrough performance improvement for organizations.

With that, let’s get to the conversation.

Hey, welcome to the show, Max.

Max Krug 2:21

Hey, Sam. It’s great to be here.

Sam Gupta 2:22

Okay, amazing. So to kick things off, you want to start with your personal story and what you’re focusing on these days.

Max Krug 2:27

Yeah. So what I do is that I help organizations improve their performance. So my focus is really manufacturing companies. I’ve spent my whole career in manufacturing. I do a little bit in distribution, where I’m really looking to help manufacturers improve their business outcomes. And really, I am a hands-on guy working with the leadership, working in the organization to help them understand how we can do things better, how we can get better outcomes, and how we can drive better performance within the organization.

Sam Gupta 2:57

Okay, so tell me, what is your perspective on growth? And that is the question that we ask every single guest that comes to the show.

Max Krug 3:05

So my perspective is, I want to focus on operations to create the capability to deliver what the market needs or what the customers need. Too many times, I see companies go out, get a whole bunch of sales, and they can’t deliver on that, and they just make the customers mad.

So my focus is really, let’s make the internal operations capable of delivering what the customers need, and maintaining stability, and be able to deliver that even through the growth of the organization. So if we have customers that are satisfied now, what happens if we could double the growth of our current sales and deliver what we’re delivering now to our current customers? To me, that’s my focus.

Sam Gupta 3:44

Okay, so if I’m the manufacturing executive, obviously, you are exciting me. Who doesn’t want to double the growth? So tell me how you are going to help me accomplish.

Max Krug 3:51

First, we need to understand from your customers’ perspective, what their needs are, and then to be able to deliver on those needs better than anybody else in the market. So I’m trying to create a decisive competitive advantage by creating the internal capabilities to deliver on those needs, to the extent that no other competitor can, so I want to differentiate or the organization from what the competitors can deliver. Of course, that focuses on where in the operations do we need to have controls to make sure that we can deliver every time to the customers,

Sam Gupta 4:25

Okay, and my understanding of your work as you do a lot of work in the quality and SPC space as well. So say, SPC or quality, how to accomplish double the growth? Or is it the overarching work that you do that helps them accomplish this kind of growth?

Max Krug 4:40

I’m looking at the concepts of process control to help fuel the growth because we want the process to be stable. So what that means is the outcomes are predictable. I don’t care if it’s a manufacturing process, a machining process, a plating process, a sales process, a scheduling process. We want to make sure that those processes are capable of delivering what the next step in the process needs.

So I look at the customer-supplier relationship within the organization and say, Okay, this process. Who’s your customer? Let’s make sure that we deliver everything that’s necessary and sufficient for the next step in the process to complete their work. So I use best process controls an overarching philosophy to say, Okay, what is it the next person needs? Let’s make sure we deliver on that. And that makes sure that the process is capable of delivering on that.

Sam Gupta 5:30

Okay, so I like what I hear, but I need to know more about how this is going to happen. So obviously, you know, I would like my businesses to be predictable. I would like all of my processes to have some sort of KPIs. I have been trying this for the last ten years, but somehow I’m not able to get to the point where I feel comfortable with my processes. So what could be my problems?

Max Krug 6:00

So part of it is what I see in a lot of companies is everyone does understand who their customers are in the organization. Let’s first do is make sure we understand in the organization, who are your customers and really understand what do they need to do their job, then we go back and look at the process and say, okay, is the process able to deliver and I’m a big Pareto principle guy. So what that means is the 80-20 rule.

I would say most companies, I would go and look at 20% of their problems come from 80% of the causes. So if I can focus on 20% of the problems, I can eliminate 80% of the chaos that’s happening in the organization. 20% of your processes are creating 80% of the disruptions in the organization. So it’s all about focus. So if we can go in and look at those process options and put some controls in place, yes, you know, measurements need to be there.

Max Krug 6:56

But we got to make sure we have the right measurements. If we’re getting the wrong measurements, we’re going to get the wrong behaviors, the wrong behaviors, the wrong outcome. So we want to make sure that the processes, we really understand what the next step in the process needs. And so many times, I see people doing things, and nobody’s looking at it. I see it in reports all the time. And companies, oh, we’re generating all these reports. And, okay, who’s looking at the reports? I don’t know.

I just send it out. I’ve been sending out 20 years to this group of 50 people. And I said, Okay, stop doing that. Okay, and then see how many people come back and say, Hey, where’s that report usually send out every week? I didn’t get it this week. It’d be surprised how many people don’t come back and ask for that information. So typically, companies are sitting in what I call a sea of data, we have all this data that we’re gathering about our processes and our systems and our organization, but there’s no data I can see.

So it’s about having data that you can see to make decisions that are going to affect the outcome. And that’s the whole process control concept, right? We just want to have data that’s relevant to make decision-making the most of the other data is irrelevant. So there are very few points in the process, we need to actually understand are working well to make sure that the system or the organization is delivering what they need.

Sam Gupta 8:20

Right. So I completely agree with you there. I was an executive, if I had access to the data that I need to care for, obviously, that’s the ideal place to be, but it’s not as easy to accomplish. In my experience, you know, we have been doing a lot of reports in my organization, if in the ideal scenario, what I would like to do is I would like to have a dashboard where I can see all of my processes, I could see all of their outputs, I could see all of the bottlenecks between the processes, but is there something you have been able to accomplish and some of the engagements that you have done?

Max Krug 8:57

Yes. So we start out by understanding what the vital signs of the organization are. Like, think about your health, I only have a few vital signs I need to look at to make sure I’m healthy. My heart rates are good, my blood pressure’s good, my temperature is good, my breathing rates are good, as long as those are within normal ranges, I’m pretty healthy.

It’s the same in an organization. What are the drivers of your organization? Let’s put some metrics around those. Let’s monitor those metrics statistically and understand. Okay, as long as I stay within normal ranges pretty healthy. If things start to go outside of normal ranges, and we don’t wait till we have a major problem before we react. SPC helps us understand when a process starts to drift, and we take action before it becomes a problem.

Max Krug 9:49

So statistical process control is about understanding statistically how the process is performing. And if we start to see the process drift, there are rules around what an out-of-control situation looks like or what we call special cause variation, when we have specified variation, we react and correct it before we have a problem.

It’s a proactive approach, not a reactive approach. We can look at different processes and really focus on the bottleneck. So, where are the bottlenecks in the organization? We got really tight process controls around those because the bottlenecks dictate the outcomes of our organization. So if we can put process controls in the area where we have bottlenecks, we want to make sure that those processes stay operating within normal limits. Anytime the process starts to drift, we want to make sure we take corrective action to get it back in control before it goes out of control and becomes a major problem.

Sam Gupta 10:48

Okay, so you mentioned the term SPC. So I need to know a little bit more about that. And obviously, as an executive, I’m the CFO or CEO of my organization. Somehow I have figured out how to build the financial statements and how to sell my products, right? That’s the state. I mean, I’m not very good at maths.

So now, you are putting a lot of different terms there. You know, and I need to know more about why that matters, why the statistical process control differs from any other data gathering that I have been doing. For me, it’s just the dashboard. Right? So tell me how the statistical process control differs from just a regular data gathering.

Max Krug 11:32

Okay, so we can look at data in two ways. It’s either forward-looking or backward-looking. Most of the metrics I see in companies are backward-looking. So how did we perform the last quarter, the last month, the last year, and it’s all looking backward, statistical process control is looking forward. So we’re looking forward and saying,

Okay, this is how the process of performing as long as we can continue to operate. Under normal conditions, we can predict with high accuracy what the outcomes are going to be. So we want to be looking forward. The analogy I like to give is like, try driving home by looking in the rearview mirror of your car. How far are you going to get? So we don’t want to have metrics that are rearview looking. We want to be looking out the front windshield.

Max Krug 12:17

So if I understand, okay, these are the drivers of my organization, then I can put some I can take some statistics about the process, how it’s performed, and make predictions about the future. And if I first say, I want to understand is that process stable? Is it able to deliver what is necessary?

So we always look at trying to get process stability first. Typically, I see and companies, they’re swimming in problems, and they’re reacting and firefighting all day long. So we need to stop the firefighting. So that’s a reactive mode of operations. We want a proactive mode of operations. So what does that mean? It’s like stop the firefighting. Let’s understand what’s creating the firefighting. And then let’s put process controls in place so that the process doesn’t wander, doesn’t drift.

And if it starts to not create the outputs that we need, we take immediate corrective action. So the first step is always to get process stability. So what that means is, we’re able to understand what the things that have to happen in the process are? What are the inputs to the process, and make sure that they stay within desired limits? So we’re using statistics to make predictions?

Max Krug 13:28

Looking forward, we’re taking process data. And we understand what does normal looks like. As long as things are operating normally, the outcomes are highly predictable. So the first thing is making sure we do things consistently. So it’s inevitable, every company I go into that has a multi-shift operation, the first shift comes in, let’s take a specific machining center, they set up the machine, and second shift comes in, oh, that guy doesn’t know what the heck he’s doing.

He’s got it set up wrong. So he starts making adjustments to the process. And all of a sudden, we start having quality issues. So I see it all the time in companies where people think that they have more knowledge than the other guy, and they start making adjustments, and then the processes start to go out of control. So we want to prevent that from happening, saying, you know what, there’s only one best way to perform the process.

Max Krug 14:22

And SPC helps us to make sure that we’re performing that the best way, and we can see it if something changes. We can immediately react to it before we have a problem that gets you from a reactive mode into a proactive mode. Then once we get stability, now we can focus on capability. Capability means we’re delivering to our customer requirements. So think of the stability.

It’s the voice of the process, saying, okay, what’s the process telling me I’m taking data and the process and I take statistics and say okay, this is what the process is telling me then capabilities. What’s the voice of the customer? So can we make the process the voice of the process match the voice of the customer? Now we got a process of stable and capable, and SPC statistical process control makes sure that we keep those processes operating so that they meet the customer requirement. Okay.

Sam Gupta 15:21

So as an executive, you know, I get all these terms throwing around. And every time I talk to a person, I get a new term. So here you are telling me, SPC. And obviously, I get the picture between forward and backward. But that sounds like more of the predictive or prescriptive analytics. So is there any correlation between AI predictive analytics versus SPC?

Max Krug 15:43

Yes, so SPC is also the same thing, right? Predictive, right. So we want to be able to predict what the outcomes are going to be. So, of course, things are changing all the time. We have different sales. A mix can change within the organization, sales, demand can change, our material supply could change. So there are all these changes happening.

We want to make sure that those changes don’t affect the outcome of the organization. Employees are changing. So it’s a way to make sure that giving all the variables that can happen in the organization, that it’s still able to deliver what’s needed to the customer. And I’m talking the external customer, but also internal between process, that’s

Sam Gupta 16:23

Okay, so tell me a story of a customer where you have worked. So tell me the state where they were in? And then what work did you do for them? And then what was the impact because of that, because I’m actually trying to relate to what SPC really is, to be honest, okay, I don’t know if it is going to be a tool that I need to get in my organization.

So tell me a story where you have implemented this, and, and walk me through the history of the organization, give me details about what the organization was, what was their industrial products, you know, what they were manufacturing, and then the kind of work you did, and the results as well.

Max Krug 17:02

Okay, so I helped the company put it in statistical process control. They asked me to come in. They were having trouble with late deliveries for customers, high scrap levels, high reject levels, high rework, rework levels. And so they’re like, we’ve tried all these different things to try to improve, and we’re not getting any better.

I said, Okay, let’s talk about statistical process control and how we use that to help you get better. So again, using the Pareto principle, I would say 80% of their scrap is coming from 20% of their processes. So if we can focus on that 20% of the processes, and they were a company that was a powdered metal manufacturer, so they supply the lawn and garden industry.

Max Krug 17:47

So they do components for lawnmowers, snowblowers, that type of equipment that they’re supplying the OEM. And so they were having trouble. And so we started to look at, okay, their molding process. So if you’re familiar with powdered metal, they take metal that’s in a powder form, they compress it in a press, they run it through a sintering oven, they do some secondary machining and maybe some other processing in terms of heat treating, or plating and send to the customer.

So the molding process was the process that was giving them most of the problem. Of course, they were finding the defects downstream, right? It’s like, oh, after it’s centered, oh, these parts are out of spec. Right? So is it the sintering oven that’s causing the problem, or some of this stuff was filed after machining? Where’s the problem? So what we did is we said, You know what, it’s really back in your molding department that’s creating most of this problem.

Max Krug 18:35

That’s what we started, say, Okay, let’s see if we can put some statistical process control in the molding department. They looked at the parts and said, Okay, again, if we look at all the variables in the process, again, I would say 20% of the variables are creating 80% of the good quality. So we get to understand what variables are controlling the process. That’s where we want to put SPC in place.

So when we did the analysis, we found that the weight of the product had was a good indicator if the process was operating correctly. So if I had too little weight, that means all the features probably work to spec. If I had too much weight, that means maybe some things were oversized, or we had too dense of material. So we started to say, Okay, let’s just start simple. And let’s start capturing the weight of the product coming off the press. We know what normal should look like. We know the tolerances on the weight. So let’s start capturing samples of the process to see how the weight is how consistent it is from cycle to cycle, and from hour to hour, and from shift the shift. So we started collecting that data.

Max Krug 19:44

And I did SPC training for their people. So they understood the concepts of variation, what creates variation, how do we control variation, and again, we don’t need to focus on everything. We just need to focus on those critical few things that are creating the most disruptions. In the output, if we can control the weight that controls a lot of the process, so we started taking data. And it’s funny, because I said, Well, the first thing we need to do is make sure that our measurement system is capable.

So can the measuring devices that you’re using actually measure accurately and precisely? So we did a, we did a gage study and found out that the equipment is it can’t measure precisely and accurately. Okay, so I got to fix that before I start doing SPC because then I don’t know, the variation I’m seeing is it coming from the measurement system are coming from the process itself.

Max Krug 20:39

So we had to correct the measurement system. And we got that under control. Now we can see the variations all coming from the process. So we did the training, we get a software that we use, we started plugging the data. And then it’s like. We want to train the operators to be able to read the SPC chart. If I can’t read the chart, it doesn’t do me any good.

So it’s like having a roadmap. And I look at the roadmap. If I can’t read the roadmap, I gotta get to my destination. Yeah, I can’t. So the SPC is the voice of the process. It tells me what’s happening. If I understand how to read the SPC chart, it gives me information about what’s happening in the process. Now I can understand what’s going on.

And if things start to go out of normal condition, I can take immediate corrective action. So, in this case, their scrap levels came down by 75%. They right there, their delivery performance went up, their customer satisfaction went up less rework, less scrap, right cost savings, so there were huge benefits for the company.

Sam Gupta 21:44

Okay, let me ask you this, let’s say if you’re working with a customer, and it seems like they must have a really sophisticated quality department where they might have several steps in the quality processes, and they must be doing a really good job in tracking the scrap, right? So some of the customers that I work with, I mean, they don’t even track scrap, they don’t even track the rework. Again, I mean that data may not be available in the system.

So typically, would you require an ERP system before you can start the work? Are you going to interview people? How are you going to find out where the most improvement needs to be? Is it going to be just the process starting that you need to do you need to interview people? So tell me a little bit more about which customers are going to be the right fit for SPC?

Max Krug 22:30

Okay, so I run into a situation where they don’t have any data. So I come into that situation, what I do is I go talk to people, the people in the process know, if you talk to the operator, he knows how much scrap is coming off the process, even though we’re not tracking. We don’t need to have super accurate data to get started. Yes, if we have the data, that’s great. But again, all that scrap data collection is backward-looking, right? We want to be forward with anything.

So the SPC helps us look forward. So if we have that data, that’s great. But if we don’t have it, it doesn’t mean you can’t start right. So we just talked to the people in the process. They know what’s going on. And they know what the issues are. That’s just managed us never listened to them. So if we can gather that information to get started, you can see immediate benefits by putting in some simple process controls.

It’s like I said, with a company that does, we measure the weight because the weight is good, the sintering process is going to be good, the machining process is going to be good. We’re going to have a good product at the end. As I said, there are very few variables that actually control the process. So we don’t need to put all these sophisticated systems in place to measure everything everywhere. Use the Pareto principle and say, You know what, 80-20 rule good enough to get started and then focus on improving from there.

Sam Gupta 23:55

Okay, so do you see this being used in volume manufacturing as well? It seems like this must be applicable, more for precision manufacturing, where they are extremely careful about the quality.

Max Krug 24:07

Yes. So it’s interesting because I went into a company, and they were our job shop. And they had all sorts of process control issues, scrap issues, rework, the same issues we talked about. And I said, well, have you thought about doing some process control? They said, well, everything we do is different. I go yes, that’s why it’s called statistical process control, and not statistical product control.

So most manufacturers don’t understand SPC. You start with measuring the product, but that’s not the end game. That’s where you start to understand where is the variation in my process, and I want to make sure that the outputs are good every time we produce the product, but the power of SPC is driving it back to the process.

So, for example, if you do painting, for example, or powder coating or plating, what are the variables that control the thickness of the part and the adhesion? Well, it’s the cleanliness of the part and maybe how well the part is grounded. And also, in electroplating, it’s like my current level and my cleanliness of the part. Well, if I really want to drive it back to the process level, you know what if I took statistics and the concentration of my batch? Then if I maintain that batch concentration within certain limits, the parts have to be clean. So the power is really driving it back to the process level. What statistical process controls 95% of the companies still measure the product to take it to the next step?

You want to drive it back to the process and say, What are the variables that are controlling the process. And if I can maintain controls on those variables, now I’m doing real process control. So it can apply to any process. It doesn’t matter if it’s a machining process, painting process, plating process, heat-treating process. It can be applied to any process.

Sam Gupta 26:05

Okay, so tell me some more stories in different industries. So obviously, you told me about the powdered metal, you told me about the job shop? Tell me where else it could be applicable.

Max Krug 26:15

So easiest is high volume. If you’re high volume, repetitive, so I’d look at organizations as either high volume or job shop. So if you’re high volume, of course, you know, a lot of companies struggle with maintaining consistency of producing the same types of products over and over. So it definitely applies there. Again, we start with doing product, but we want to drive it back to the process, really doesn’t matter what industry. It can apply to any industry.

If you have customers that have high requirements in terms of quality specifications, that’s the best application. So I’m working with companies in the Department of Defense work. I work with companies that are in pharmaceuticals, automotive, or woodworking. So it can apply to any industry.

Sam Gupta 27:04

Okay, so let’s say if I want to start on this journey, right, and obviously, you are talking a lot about processes. But when I think of the processes as an operations guy, I’m thinking of any ERP system. And I don’t know if I need to have those because they are super, super, super expensive systems, right? So do I need to have an ERP or MES in place before I can start SPC? How would these systems talk to each other?

Max Krug 27:36

Okay, so you don’t need to have an MRP system because SPC is more taking data right from the process of someone’s taking measurements right off the process. They’re going to be putting that data. So there’s a bunch of standalone SPC systems that are you can either integrate with the ERP or you can just have them standalone.

So you don’t sort of necessary condition is you don’t need to have an ERP system up and running. And even if you do, right, a lot of companies I see the data and their systems garbage. So we don’t need to have super accurate data. To answer that question, you can start even if you don’t have an ERP system. You can start with a standalone. You need some type of statistical. And you could do it manually. But yeah, manually, then you need someone to collect all that data analysis, it is better to have electronically, so I prefer electronically, but the standalone systems can get you started right away, and they’re not really that expensive, especially for the return on the investment you’re going to get for investing in a system.

Sam Gupta 28:34

Okay, so next, let’s say if I’m the CFO, right? I’m always looking at what are going to be the implications of any of the initiatives. I’m looking at the opportunity cost. So it does seem like that, you know, probability, the customer satisfaction is going to improve, the quality is going to improve, but it seems like we might be adding additional steps to the process. So, if I’m not collecting today, then most likely, I’m actually going to be introducing these new steps. And that is actually going to slow my processes down. Right? So typically, with the SPC initiative, do processes get slowed down because now I’m introducing additional steps. I’m trying to weigh the pros and cons of the initiative. Tell me if there are going to be any new steps in the process if they are going to slow down the process to weigh it against the benefits that it is going to provide for me.

Max Krug 29:28

Yeah, so most times, you’re collecting data in the process now. It’s just putting that into a system that can actually give us feedback on how the process is performing. So if we take a machining operation, the operators doing the check. So whether he’s writing those dimensions down or not, it’s doing the same thing. It’s just capturing that data, and there are systems that you can actually connect Bluetooth with the gauge to the data collection, and you take measurements like you’re doing, and it automatically collects that data.

So there’s no actual extra effort by the operator to put this data into the system. The benefit is it’s going to give us the feedback and the process immediately. So that’s where we don’t have visibility now. So no extra effort, the benefit of having better visibility and the process. And we don’t want to have inspection-based quality, right. So if you have a bunch of quality tech quality engineers that are going around doing checks periodically, you can reduce that amount of work by having the SPC. So it’s actually gonna free up those resources to provide to do other things for the organization.

Sam Gupta 30:37

Okay, so let me make sure if I understand this, so let’s say if I have a bunch of equipment that is actually doing the quality work, right. And right now, my quality guys, maybe taking the samples from the product, and they might be noting it down. And that’s all they are creating the certificate of compliance. That’s what it’s called, from the quality perspective that some of the customers may require. If the manufacturers have, let’s say, in the pharma space, or in the oil and gas space, right, because they have to make sure that the products that you are providing comply with the quality.

So in most cases, that is going to be just the sampling process that most manufacturers follow. So in this particular case, let’s say if I have multiple pieces of equipment that are actually measuring the quality, so are you telling me that all of this equipment is going to be integrated with the SPC system, and as soon as the product actually goes through that particular process is tab is that going to measure let’s say, we measure the weight, the weight is going to be captured automatically in the SPC system? And then, in the next step, could be, let’s say, measuring the length that is going to be captured automatically in the SPC system?

Max Krug 31:40

Yep, yep, that’s correct. And then your certificate of conformance could be the outcome of all that data for that loss. So if you have like control, you collect that data through all the different process steps. And that’s your data that you’re going to submit with your certificate of conformance to say, Yep, our processes are in control. And here’s the proof that they’re in control.

Sam Gupta 32:01

Okay, but I mean, in my current process, I don’t necessarily measure every single product. But in this particular case, it does seem like that every product is going to go through the quality process. So it does seem like that this is actually going to slow my process down.

Max Krug 32:14

So you don’t need to measure every product. Again, it’s all about focusing on the ones that are causing the most harm. And again, I would say 80% of your quality issues are coming from 20% of your products. So I go into a company, they’ve been working years to improve quality and haven’t got any results. I go and say, well, my assumption is that 80% of your quality issues are going to come from 20% of your product. So what products are giving you the most headache? Oh, it’s this group. I say, Okay, my assumption next is 80% of the quality issues are coming from 20% of the processes.

So I drive back to the process and say, yep, these two processes are creating most of the issue, just like we did with that company saying, you know, what if we can control the weight that controls most of the processes downstream. Now let’s go there focus and say, okay, what are the variables that are creating the most issue, and if we could put some controls around them, let’s start there. So we started with the weight, significant benefit for the organization. So we don’t need to measure everything. That’s a misconception. We never need to measure the right things. And then measuring the right things, taking that data, and driving improvement from what the data is telling us, then we get breakthrough improvement for the organization.

Sam Gupta 33:26

Okay, so help me understand this a little bit more. Is it going to be more of the temporary initiative that I’m putting in? So let’s say if one of my products is actually giving me the most problem, and obviously, I’m looking at the process, not at the product level, right. So let’s say if there is any specific process there, which I suspect may be the cause of the problem in the process.

I can put my SPC system down at that step and see how that process step is performing. And as I get more data then am I going to get insights that, you know, what are the opportunities for improvement? And once I actually have the improvement done? Can I take the SPC system out? Can you tell me a bit more about that?

Max Krug 34:06

So the frequency that you want to take measurements and how long you want to measure is all a function of how capable the processes so there’s a measurement called CPK. That measures process capability. And depending on what that data is telling us, it tells us the frequency and how often we should take the measurements. Yes, we want to make sure that long term, the process stays capable.

But I’m a proponent of Dr. Deming was. Most of my training came through Dr. Deming’s teaching, and the original premise was to not do the same frequency and measurement all the time. It’s like let the process tell you what’s the capability and adjust the frequency of how often we do measurements based on the capability. So even with the company that did the powdered metal, the frequency of measurement wasn’t the same on every product.

Some products run much better than others. So we reduce its frequency, I noticed because we know the process is much more stable. And we want to push for quality at the source. So we want to have the operators give them the tools to be able to make the right decisions. I don’t need to have a quality engineer or a quality tech come to make the decision for the operator. I want to push that decision-making to the operator and give him the tools to make the right decisions.

Sam Gupta 35:23

Okay, amazing. That’s it for today. Max, do you have any last-minute closing thoughts, by any chance?

Max Krug 35:28

So I think a lot of companies think that SPC is a complex thing that we need to consider. It’s not. It’s really simple once you understand it. The biggest benefit of SPC is the two issues I see in companies. People make adjustments to the process when they shouldn’t, and they don’t make adjustments when they should. Okay. SPC will help solve those two problems. Leave the process alone if it’s operated correctly, and understand what I should take operator intervention to make adjustments and quality will improve significantly just doing those two things.

Sam Gupta 36:04

Right. Thank you so much for your time, Max. This has been a fun conversation. I totally enjoyed it.

Max Krug 36:08

Great. Appreciate your time.

Sam Gupta 36:10

I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learn something deeply. If you want to learn more about Max, head over to futurestateengineering.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business, you might want to check other related episodes, including the interview with Jason Chester, where he discussed the challenges today’s manufacturers face with changing consumer behavior. Also, in the interview with Dave Griffith, where he discusses why manufacturers must look for low-hanging fruits when exploring the path of industry 4.0.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get out.

Thank you, and I hope to get you on the next episode of the WBS podcast.

Outro 37:13

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Brett Beaubouef who provides insight into whether moving to the cloud guarantees business transformation. He also discusses how you can ensure business transformation with your Cloud ERP implementation. Finally, he provides a deep analysis of what to look for in a Cloud ERP Solution.

Chapter Markers

• [0:00] Intro
• [2:20] Personal journey and current focus
• [3:42] His perspective on growth
• [4:58] Does cloud ERP guarantee business transformation?
• [15:19] How would you ensure business transformation using cloud ERP?
• [18:39] How to find the best cloud ERP?
• [37:31] Closing thoughts
• [39:40] Outro

Key Takeaways

• The cloud ERP is a good enabler to help you in terms of transforming your business, but it’s really not the most important piece. And unfortunately, a lot of people in our community today and in the industry focus solely on technology or cloud ERP.
• All the money that’s spent towards the ERP implementation is typically spent on the implementation itself. And the least amount of money spent, and the ones that can have the largest impact, and that’s the individual people.
• A lot of customers think that this is something that doesn’t require a lot of effort. There are some misperceptions out there that also reinforce this thought. And it’s the misconception that cloud ERP is inherently intuitive. That’s almost like me saying to you that statistics is inherently intuitive.
• So when we’re talking about simplification, it’s about this philosophy and approach of utilizing what’s delivered out of the box as much as possible. That’s the basic value proposition for cloud ERP is that you can use everything that’s provided by that vendor. So that’s simplification.
• If it’s taking me two to three weeks to close my books, there is no level of trust, or it’s very minimal that I have with the cloud provider. So regardless of any technology, new technology they provide to me, I’m not going to trust it because I’m still having trouble doing the basics.
• Remember that you’re outsourcing your ERP IT services to a third party. This is the service, the software itself may work great. But if the service is inadequate, it’s really going to create a negative experience for the customer and for the users.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Brett

For the past twenty-five years, Brett has helped customers select, implement, and manage ERP solutions across five industries. Growing thought leader for ERP deployment and realization strategies. Brett is an ERP-published writer and author of an ERP agnostic blog called ERP the Right Way! With over 10k followers across 100 countries.

Resources

• Connect with Brett
  • LinkedIn
• Connect with ERP the Right Way
  • Website

Full Transcript

Brett Beaubouef 0:00  

One of the areas that traditionally they tried to reduce or skimp on is training—training the users. And it’s really the users that are going to have the most impact on if the ERP is going to successfully support the business or not.

Intro 0:20  

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned in to the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:56  

Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ. 

If you’re looking for an ERP in 2021, you might not even think of any other options than a cloud ERP. But what is cloud ERP? Does cloud ERP provide a competitive advantage? How do you ensure business transformation with cloud ERP? These are the questions you will have if you are at a stage where you can’t grow unless you implement a newer ERP system. 

In today’s episode, we have our guest, Brett Beaubouef, who provides insights into whether moving to the cloud guarantees business information. He also discusses how you can ensure business transformation with your cloud ERP implementation. Finally, he provides a deep analysis of what to look for in a cloud ERP solution. 

Let me introduce Brett to you. 

For the past twenty-five years, Brett has helped customers select, implement, and manage ERP solutions across five industries. Growing thought leader for ERP deployment and realization strategies, Brett is an ERP-published writer and author of an ERP agnostic blog called ERP the Right Way! With over 10k followers across 100 countries. 

With that, let’s get to the conversation. 

Hey, Brett, welcome to the show.

Brett Beaubouef 2:19  

Hey, thanks so much, Sam. Appreciate it.

Sam Gupta 2:20  

Okay, to kick things off, do you want to start introducing yourself and what you’re working on these days?

Brett Beaubouef 2:29  

Absolutely. So my name is Brett Beaubouef. I am an ERP thought leader as well as an ERP project manager. I’ve been in the ERP industry for the last 25 years, started out as a customer, then as a consultant, was really blessed to have the opportunity to work my way up the growth chain, if you will, doing technical consulting, functional consulting, solution architect, project manager, and then a practice manager. These last several years, I’ve been focused on how customers can generate maximum business value from their ERP investments that are through research, also doing surveys with customers, helping them to better understand what they have and how to best utilize those investments. 

So that’s my passion I’m on. On the side, as one of my hobbies, I write an ERP blog called ERP the right way. And I share my wits and my wisdom as well as it’s a great opportunity to get feedback and to learn from others. Cuz I’m still on this journey of learning the world of ERP.

Sam Gupta 3:42  

Okay, amazing. So before we get deeper into your background, and I have tons of questions there because obviously, you have a very interesting experience. But one question that we ask every single guest that we get here is, what is your perspective on growth? Brett

Brett Beaubouef 3:58  

Growth is necessary, first and foremost, right? Businesses, by their very definition, are a going concern. And in order to remain going, you’re going to need growth as the world has become more global, and competition is global. It’s no longer localized. Everyone is looking for opportunities for growth, not only from a competitive advantage perspective but in terms of their operations, their processes, the information, the data that they collect today, how can they leverage and use that to further their competitive advantage and actually grow? 

So my particular world I focus on is ERP, specifically, and cloud ERP. So I’m definitely researching working with customers to identify how moving to the cloud is one piece of their strategy for business growth.

Sam Gupta 4:58  

So Brett, tell me, does cloud ERP guarantee business transformation?

Brett Beaubouef 5:06  

Well, that’s an excellent question, Sam. No, the short answer is no. Technology is one component of a business solution. Within a business solution, I see it as people, processes, and technology. The cloud ERP is a good enabler to help you in terms of transforming your business, but it’s really not the most important piece. And unfortunately, a lot of people in our community today and in the industry focus solely on technology or cloud ERP. 

I can hear it now in sheer sales presentations that are happening with customers, look at these features, capabilities, look what this can do for you, and not really defining, okay, the story of how these technologies enable the business to be successful. In fact, if you really think about which component is the most important component of a business solution, again, we talked about people, processes, and technology in my 25-year experience, it’s people. It’s the individual business user. It’s that individual that’s keying in that purchase order every day and matching AP invoices against payments. Those are the individuals that are most important that really can drive the success of a business. And cloud ERP plays an important part as an enabler.

Brett Beaubouef 6:38  

However, what I found through my ERP career is the fact that all the money that’s spent towards the ERP implementation is typically spent on the implementation itself. The system implementation partners coming in to assist with the configuration, also in the products and the services that say the software vendor or reseller provides, whether that’s Oracle or SAP. And the least amount of money spent, and the ones that can have the largest impact, and that’s the individual people. 

So typically, as I work with customers, and of course, every customer wants to maximize the bang for their buck and implement ERP as quickly as possible. One of the areas that traditionally they tried to reduce our skimp on is training, training the users. And it’s really the users that are going to have the most impact on if the ERP is going to successfully support the business or not. Not only in terms of training and educating, but also in terms of organizational change, how their day in life will change. 

A lot of customers think that this is something that doesn’t require a lot of effort. There are some misperceptions out there that also reinforce this thought. And it’s the misconception that cloud ERP is inherently intuitive. That’s almost like me saying to you, Sam, that statistics is inherently intuitive.

Brett Beaubouef 8:20  

There are certain things that are not going to be inherently intuitive. They’re complex. And enterprise resource planning solution is not intuitive. There are certain aspects. They should be intuitive, like, for example, creating an expense report. Yes, or self-service for HR. Absolutely. But there are some other things or other configurations that need to be done that are not, in here at least intuitive. In fact, it takes a lot of thought. There are probably 1000 decisions that a customer has to make as part of a cloud ERP implementation. 

That was the case for on-premise. And guess what that is the case for the cloud. So really, what I tried to do in working with customers and giving them advice and guidance, is helping them to better understand how cloud ERP can support your business transformation. So one of the ways that we try to do that is to set realistic expectations. We can go back 30 years, and first when the ERP came out, and the functionality and the capabilities that were there in the present, and then you have seen the second generation of ERP and now the third generation, especially with cloud ERP, but there are certain things that ERP can do, but also what the cloud ERP can’t do. 

There are certain things that it is very good at doing, you know. Other expectations customers may have that are really not realistic. For example, let’s talk to a couple of those efficiently. Cloud ERP can help drive efficiency, primarily through standardization. Also, automation of manual tasks. 

Brett Beaubouef 10:29  

What I’m trying to say is cloud ERP can help you do smarter work. So in how does it do that by providing you additional insights into the data pattern recognition, highlighting those opportunities for you, cloud ERP can do that. Now, can it create a competitive advantage for a customer? Absolutely not. And if anyone tells you that, then they’re trying to sell you something. Keep in mind ERP is broad. It has been designed and developed to support a multitude of customers from a global perspective across multiple industries. 

And almost every cloud ERP vendor worth a grain of salt will tell you that it inherently has best practices engineered into its products and services. That’s a fair statement. Best practices are not competitive practices. There’s a difference. Best practices are common. So common across an industry or a particular country, people kind of figure out this is the best way of doing things. 

But Sam, let me ask you, say like we’re playing a game of chess, and you have something that you feel gives you an edge over me? Are you going to share that with me freely?

Sam Gupta 12:02

Definitely not.

Brett Beaubouef 12:05  

Absolutely. It’s the same thing when a company, they’re not going to really say, Hey, you know what, I’m going to share this with the world because it’s great. And everyone should be doing this, this, you know, this certain process this way? There are going to be activities and processes that are competitive, and competitive advantage is the most important. 

Now, from a cloud ERP perspective, it’s just going to provide a generic platform, right in terms of automating processes and workflows. And even maybe in the configuration might be a little unique for a particular customer. But when it comes down to those competitive advantages, it’s not going to be provided out of the box for any ERP cloud solution.

Brett Beaubouef 13:03  

But what’s most important is that the customer is still able to support those competitive advantages. And that could be via an on-premise solution. That could be via, say, a cloud environment, but something that is private, not public, that’s just available to everyone. So it’s important to set those realistic expectations. I know there are many stories that are out there that may say, X number of top industry leaders use this solution and other sales propositions that are driven towards showing that, hey, this customer is successful, and this customer is successful because they purchased this particular vendor, cloud ERP. 

Now, I definitely agree that it’s probably played a role in supporting that. But that is not by itself is the only reason there’s far more than that, especially in terms of competitive business practices and activities, also in the people. So it’s good that as you’re looking at different cloud ERP solutions, you understand what the software can do, but also what the software can do.

Brett Beaubouef 14:29  

And that will help you to ensure that you have appropriate expectations because if you don’t, a lot of the ERP implementations have been noted as failures. And by the way that they’re at relatively speaking, few failures, there are quite a few disappointments. A lot of those disappointments have come from unrealistic expectations of what the ERP would be able to do. And as well as not fully appreciating the role that ERP or cloud can play and supporting your processes as well as your people to be more competitive because they’re truly your competitive advantage. The software is just a software or service at the end of the day.

Sam Gupta 15:19  

Okay, so you do a lot of work in the business transformation space. And I want to make sure that we are covering everything that we can from the business transformation perspective. So let’s say if we want to ensure the business transformation using cloud ERP. How would you ensure that?

Brett Beaubouef 15:34  

Given what I’ve described in my comments earlier, another key area that I see a lot of customers not fully define or just assume will naturally happen is improvement in business performance. I think it’s very important that any customer undertaking a cloud ERP implementation gets a snapshot, if you will, of currently where their business is at, especially in terms of performance, so that when they go live with the cloud ERP solution.

They have a reference point to go back and say, okay, we’ve implemented this business solution. Has it truly improved business performance? You can look back at those metrics that you defined upfront to determine, okay, have we improved? Yes or no, some of the KPIs or key performance indicators will improve based upon doing an ERP cloud implementation, just for the sake of automating a manual task or eliminating variability.

Brett Beaubouef 16:44  

If you’re a student of lean principles, like I am, you know that a key to reducing cycle time is reducing the variations that can happen within a business process. Cloud ERP can be very useful in reducing those variations as well as making it more efficient. However, there are going to be some business processes that will not be improved. Those business processes tend to be more around the competitive advantage. 

And if anything, it identifies to the customer the fact that if you only depend upon cloud ERP to satisfy all of your strategic goals and your initiatives, you’re missing the point. There’s no cloud ERP solution that can do that. It’s part of the answer, absolutely. But also, you need to look at those processes and the resources that you have to make sure that they’re aligned to hit those KPI targets. 

So whenever I see customers do a cloud ERP implementation, they’re focusing more on the software or on the features than they are on the results, having the baseline, targeting your KPIs, managing your KPIs, of making sure that you’re focusing on the true business results. And not necessarily at these little silo points. Features that may add some efficiency may reduce some variations but has no impact on the end business result. And at the end of the day, that’s why you’re implementing the cloud ERP to improve business results.

Sam Gupta 18:39  

Yep. So let’s say if I’m thinking of implementing a cloud ERP solution, and I want your advice in terms of what I should be looking for in a cloud ERP solution, what would be your advice?

Brett Beaubouef 18:53  

First of all, I would advise customers would be to think outside the box. And do not just focus or leverage traditional approaches for software selection. I can summarize it into five key areas for me, 1) simplification; 2) repeatability; 3) reliability; 4) technology growth; and then 5) trust. 

So let me break down each one of those one at a time. Simplification, we briefly talked about this here previously, where we really want to simplify our management of a business solution. From a technology perspective, as simple as possible. The more parts you have in an engine, the more opportunities you have for a breakdown. So we want to keep that simple.

Brett Beaubouef 19:51  

Also, in terms of maintenance, having a simplified solution will make you, I’d be quite honest, more flexible and adaptable. A school of thought that was around, especially in ERP design and development, back in the 90s and early 2000s is that, well, if you want flexible and adaptable, we need to build more configuration options for you. Or we need to enable you to create more customizations. That worked fine in terms of the initial setup and tactically addressing specific flexibility or, you know, adaptability. 

However long term, it had adverse impacts, say like, for example, updates that you may receive from your ERP vendor. It was harder to take those updates because you’ve added and that additional complexity, if you will, in terms of customization. And don’t get me wrong, Sam, I’m all for customization, especially if it supports the revenue-generating activity. 

But if you’re telling me that, and I worked with a customer once, in this situation, that they needed 30 customizations for an expense module, and they sold life insurance. So I asked them, okay, why do you need 30 customizations for an expense module? Well, we want to be world-class in expense management. And I sat back and said, I hear you. But you don’t sell expense management. You sell life insurance.

Brett Beaubouef 21:44  

And I said, even if you do, it may save a minute or two of additional time for the individual expense reporter as it, but in the big scheme of things, you’re adding more work in terms of the level of effort to do an upgrade, number one, number two, you might need those resources that you’re focusing on, making maybe a siloed point solution, a little more efficient, could have a better impact in the entire business result. 

And another area in the business solution. So everyone has scarce resources, everyone has to manage the money that they have. And I just advise customers to make sure that they’re getting the most bang for their buck. If they tell me that, Brett, this is a competitive advantage, or this is a compliance issue.

Brett Beaubouef 22:40  

And I need to have this as it is all good. That makes sense. But don’t spend it was in an area that may have limited benefit from a functional perspective that has an adverse effect on the business result. So think in terms of that. So when we’re talking about simplification, it’s about this philosophy and approach of utilizing what’s delivered out of the box as much as possible. That’s the basic value proposition for cloud ERP is that you can use everything that’s provided by that vendor. So that’s simplification.

Now, let’s talk about repeatability, this kind of aligns with trust, but I’ll talk about it. Now you have a repeatable solution, you create a journal entry, and you can continue to create that journal entry. And you get the same result, Time after Time. Now, it’s a little different in the cloud; from the standpoint that you don’t necessarily are subscribing to software, you’re subscribing to a service. 

So from a service perspective, you want to make sure that that service is repeatable, that the services that the ERP cloud provider is providing to you are repeatable. It’s there. You put this information is you’re going to get that same result. And cloud ERP is now more mature than what has been in the past, say the last 10 to 15 years. But still, it’s important that that service is up, that’s available, because you may have the functionality there. But if the service is not up, then who really cares. So that’s what I’m talking about repeatability, which is also that availability, and that every time I do a certain transaction, I’m going to get that same result. 

Third, reliability, the service is up and running, also in terms of whenever I do have an issue with cloud ERP. I have a service desk to go to. Now with cloud ERP, you are outsourcing a specific part of your ERP IT support to the vendor. With cloud ERP, you’re outsourcing that service.

Brett Beaubouef 25:04  

As I work with cloud ERP customers, it has been an education that we had to do with our customers in terms of, right previously, you’ve had dedicated IT support resources there on-site available to you that you could just pick up the phone and call. Not so much in the cloud ERP. And here’s why. First of all, in cloud ERP, most support models are shared support. So there are no IT resources or support resources dedicated to one customer. They’re typically dedicated to multiple customers. 

Now, you can purchase additional support. But most cloud customers, again, the basic value proposition of reduced cost, most cloud customers don’t go with that option. So you have to appreciate knowing that. Okay, now I’m going to be reliant on a third party to provide me support. So reliability is important, not only that the services available, and that you can support your business with but also in terms of there are support resources there and available to you, that will be able to work with you if you run across a particular problem and they issue.

Brett Beaubouef 26:26  

Now, a lot of cloud ERP vendors will say, you know what, we provide superior support because we offer 24X7 service. The reality is, most customers don’t want to be available 24X7 because a lot of times, whenever there’s a support issue, there needs to be real-time interaction. And I don’t know of any customer that I’ve ever worked with that was happy to get a phone call at 2 am in the morning from an IT support resource in India saying, hey, I got time, let’s work on your problem. 

And they are like, no, please leave me alone. Go away. I’m going back to bed. So it’s some of those nuances that a customer needs to think through as they’re moving to cloud ERP. It’s not a bad thing, Sam. And it’s actually a reduction in cost. However, as you said, Nothing in life is free, and you get what you pay for. So as long as the customer knows that acknowledges that it can work within those boundaries, I think that’s good. The next area is technology growth.

Brett Beaubouef 27:45  

Again, this is where cloud ERP is superior because you’re on a public cloud. And all the customers are on the same software code, which enables the vendor to provide more updates quicker to customers than they had in the past. So say like, for example, an on-premise customer, you might get an update once a year. And they might then next a customer may implement it every other year, versus in the cloud, you’re getting an update either every three to six months. 

And it’s upgrade friendly, which means that the customer no longer has to go through a battery of tests and reviews of code, those features and that technology is provided with an update and is there ready to be leveraged and used by the customer. As far as selecting the right cloud ERP solution provider, I wanted to select someone who is always providing updates and leveraging the latest technologies. 

Even though as well as I have the choice of using that technology or not and I’m on a public cloud solution, if I decide not to use that technology or that capability, that’s okay. It’s available for other customers. They can use it, there’s no impact to me, but at least I have that technology there.

Brett Beaubouef 29:23  

Now let’s talk about Trust. Trust is very important in the cloud. Again, you’re renting it, are subscribing to a service, you’re outsourcing, part of your support, all these new technologies and capabilities are going to be available to you. However, if you don’t have trust in your vendor, and I really should stop using the term vendor and just call them a service provider because truly, that’s what they are. 

Say, like, for example, I have a provider, come to me with a quarterly update and say, Well, look here. Now we’ve embedded artificial intelligence and machine learning into our processes. And our customers can start leveraging and using those recommendations that are made by that functionality. Now, if I’m still as the customer, if I’m still having trouble trying to close my financial books, what are the odds, I’m going to be jumping with joy that AI and machine learning has been made available to me? Probably none at all, you know, it’s the basics, you know, you got to be competent in the basics. So that’s where it comes back to that repeatability.

Brett Beaubouef 31:24  

If it’s taking me two to three weeks to close my books, there is no level of trust, or it’s very minimal that I have with the cloud provider. So regardless of any technology, new technology they provide to me, I’m not going to trust it because I’m still having trouble doing the basics. And with me having trouble doing the basics, guess what? My business process performance is not where I expected it to be. And trust is very important. And since it’s a service, it’s not a one-time deal. It’s not like that the implementation is up, and we’re good; It’s every month; and it’s every journal entry that they put in.

You’re either adding or subtracting from the trust. And that really, I think, is a limit to customers in terms of how much they are really leveraging Cloud ERP. Now, to get the full value proposition that was articulated to the customer during the sales cycle, they need to continue to adopt the latest technologies, in the latest features, they need to continue their growth within the cloud ERP service, not maintain if they maintain, they’re basically losing money off the deal.

Brett Beaubouef 32:44  

So it’s important that it’s not a point in time. It’s a continuing solution. And again, we’ll encourage customers to continue to stretch and further leverage in use. Their cloud service is trusted at the end of the day. Now when I also talk with customers about what they should look for in the ERP cloud solution. And we talked a little bit about this in terms of having customization for particular non-revenue generating processes. You really need to focus on business processes in business results. 

Generally, there are three types of business processes, there’s revenue-generating, and of course, from revenue-generating, your target is to be as effective as possible. Now, sometimes being effective means you’re not as efficient. But that’s okay. Especially if you want to create a unique customer experience, but the customer knows and understands that. 

But for revenue-generating business processes, you want to be as effective as possible. That’s where your competitive advantage lies, and you’re not looking for a competitive advantage within the cloud ERP provider. You’re just looking for the enablers that will support you in implementing those competitive business processes. So that’s revenue-generating. 

Now, if I’m looking at revenue, support in revenue, supporting the business process, say like, finance or HR, my target is to be as efficient as possible, right? I don’t necessarily want to create a unique customer experience for each of my expense reporters. I want it to be competent and cheap. And I want it to be reliable.

Brett Beaubouef 34:34  

With compliance, the same school of thought, I want to be as cheap and as competent as possible, right. I don’t want to say like when you and we do our individual tax returns once a year. I don’t provide a lot have additional notes to the IRS. And I don’t care if they have to spend more time looking at my return as long as I get my return and I am compliant. I’m good with that. I don’t need a world-class solution that needs to do my tax returns. 

Even though when I work with customers, naturally, they will focus on things that may make them more efficient in their particular functional area, they may not be seeing the bigger picture in terms of the entire business process. And the organization in terms of right I have a need, or I have a want sorry, not a need want for HR particular process or activity, however, is that more important than a particular need, I have in my revenue-generating business process, which one will generate more money for the company in the long run, which one is going to further ensure those business results that my executives and my shareholders are looking for?

Brett Beaubouef 36:14  

So I would use these three broad types of business processes as a priority list, if you will, in terms of Okay, when I’m defining my requirements, okay, what’s most important to me, and you may have some uniqueness within a particular company. Sometimes it’s called differentiation. What makes you unique, but what makes you unique, may not be growing your business, and you need to look at that requirement from that perspective as well. 

Finally, what you look for in a cloud ERP solution is a good service. Remember that you’re outsourcing your ERP IT services to a third party. This is the service, the software itself may work great. But if the service is inadequate, it’s really going to create a negative experience for the customer and for the users. And guess what, when users can’t get a solution to their problems, they start looking at workarounds and then not using the software as intended. And then, that results in other consequences that will eventually reduce the business value a customer should be experiencing from their cloud solution.

Sam Gupta 37:31  

Okay, amazing. So thank you so much for your insight. Do you have any last-minute closing thoughts?

Brett Beaubouef 37:36  

Absolutely. So first of all, Sam was thank you for giving me the opportunity. I really appreciate it, you know, having this opportunity. I always say this to customers. And remind them that technology is just one piece in the business transformation puzzle. Technology should be viewed as an enabler but not the sole driver. 

Also, whenever you’re making an ERP selection, not only look at the software but also look at the services that are being provided. That’s, that’s vital and important. Also, look at how you select software. Just don’t look at the individual products and features. And assume that if you get all those products and features that will result in the desired business results you’re after, really take more of a business results focus in then have the ERP provider or vendor explained to you how their solution supports your desired results.

Brett Beaubouef 38:42  

Because at the end of the day, it’s business processes that create results, not functional silos, not bells and whistles, or the latest technology. It’s those technologies and those features incorporated into a business process along with the right business activities and people that will drive your business performance and then measure it. 

You don’t know what you have until you measure it. And you can’t measure what you have until you measure it. Identify upfront what those KPIs are? What are the things that are important? And then measure that as you go through your business transformation journey, you will identify the drivers to improve your KPIs versus just assuming implementing a cloud ERP solution will transform your business.

Sam Gupta 39:40  

Okay, I could not agree more. So with that, I just want to thank you for your time. 

I can’t thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Brett or his blog, head over to erptherightway.com. Links and more information will also be available in the show notes. 

If anything in this podcast resonated with you and your business, you might want to check other related episodes, including the interview with Erin Koss, CPA, who shares a story of an ERP project that was a massive success, despite disruptions from COVID-19. Also, the interview with Ram Krishnamurti, where he discusses why costing strategies matter for any ERP implementation and how to make an ERP project successful. 

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform. Or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. 

Thank you, and I hope to get you the next episode of the WBS podcast.

Outro 40:51  

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Katie Thomas from Leaders Online, who discusses the importance of personal brands and why personal branding is essential for personal growth and corporate branding. We also had a chance to touch on why accounting and finance subject-matter expertise is critical for marketers to reduce marketing spend. Finally, she also covered how executives can drive their employees to be more active on social media to generate opportunities. 

Chapter Markers

• [0:00] Intro
• [2:39] Personal journey and current focus
• [6:21] Her perspective on growth
• [6:38] Importance of subject-matter expertise for marketers
• [10:49] Importance of sales skills for executives
• [14:41] How operations and finance executives can improve their personal brand?
• [18:27] Why does personal branding matter?
• [23:44] Content strategies for finance and operations executives
• [27:58] Why does company branding matter?
• [30:53] Who should be accountable for company branding?
• [32:49] Closing thoughts
• [34:13] Outro

Key Takeaways

• When you can speak your clients’ language, and truly understand their business, it allows you to provide a lot better service to them and also to allow the message that you’re creating for them to resonate better with their prospect.
• To understand how posts work on LinkedIn, you have to recognize that there’s an art and a science to it. And the art is what’s going to really make your posts stand out in the art is going to be your stories, your experiences, how you actually teach or talk about a subject. And the science is going to be the tactics of the posts. So the length of the posts, the hashtags, the buzzword.
• Personal Branding matters because it’s ultimately how people do business with people. People buy from people and companies that they resonate with, they don’t just buy the product or the service because they buy from you, and how you put yourself out there, whether it’s positively or negatively, you’re creating a brand for yourself.
• There are four types of content. And when I say types, I don’t mean like video, text, audio, but really like four different sectors of content. And the first one is educational. So this is typically really easy for people to come up with. And it’s going to be like tips and teachings, action steps that people can take to reach their goal. It could be myth-busting.

Subscribe and Review

Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox

About Katie

Katie Thomas, CPA is the owner of Leaders Online, a digital agency that helps executives increase their influence, impact, and income through thought leadership marketing. Leaders Online serves clients all around the world and works with some of the top accounting and finance professionals.

Resources

• Connect with Katie
  • LinkedIn
• Connect with Leaders Online
  • Website | Twitter | YouTube | Facebook

Full Transcript

Katie Thomas 0:00  

You can get better. I think as we grow as humans and we advanced in our careers, we can get comfortable in what we’re doing and what we’ve always done and try something new. Just like with anything, say whenever you went to school for the first time, it’s uncomfortable, and we have to get over that. And that’s really what it is. It’s a lot of times having the confidence to try something new.

Intro 0:26  

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 1:03  

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at the digital transformation consulting firm, ElevatIQ. 

Growing a company today is no longer the same as it used to be five years back. Today, your customers expect you to be thought leaders in your industries. While we have been using social media to enhance our personal and company brands for quite some time. The game has entirely changed in the last three years. The companies that are actively promoting their brand and encouraging their employees to elevate personal brands will have a substantial edge compared to the rest. 

In today’s episode, we have our guest, Katie Thomas, from leaders online who discusses the importance of personal brands and why personal branding is essential for personal growth and corporate branding. We also had a chance to touch on why accounting and finance subject matter expertise is critical for marketers to reduce marketing spend. Finally, she also covered how executives can drive their employees to be more active on social media to generate opportunities. 

Let me introduce Katie to you. 

Katie Thomas CPA is the owner of leaders online, a digital agency that helps executives increase their influence, impact, and income through thought leadership marketing. Leaders online serve clients all around the world and work with some of the top accounting and finance professionals. 

With that, let’s get to the conversation. 

All right, Katie, welcome to the show. 

Katie Thomas 2:36  

Hi, Sam. Thanks so much for having me on.

Sam Gupta 2:39  

Just to kick things off. Do you want to start with your personal story and what you’re working on these days?

Katie Thomas 2:44  

Yes. So my name is Katie Thomas. I am a CPA, and I run an online digital agency called leaders online, where we help executives increase their influence, impact, and income through thought leadership marketing. So my career started out probably a lot different from many digital agency owners and service providers out there. I actually started out in public accounting. So I am a CPA, and I continue to hold my license today. 

And, you know, it’s interesting, because I got into public accounting, actually, in a way where I was going to college, I was working at my family-owned business at the time doing sales and marketing, I loved it. And everyone said you should get an accounting degree. Accounting is the language of business. And so I took accounting, I was like, wow, this is, you know, it comes really natural. To me, it makes a lot of sense. 

But it’s interesting, because all along, I was like, I just I don’t know if this is for me, but you know, the years go on, I graduate. And the next step is you might as well get your CPA because you went to school, you got a degree in accounting, and you should go and get the CPA. 

So I went ahead, got the CPA. Well, to make your license actually active, and you can pass the test, but then you have to work. So I went to work at a public accounting firm and went to work at Ernst and Young. The whole time while I was there, I kept wanting to do sales and marketing. 

I actually went to one of the partners there. After working there for a few years, I said I enjoy my work, and I was getting to work on some really great projects. But I know that my heart is in marketing and in sales and creating relationships with people. I really want to go into business development, is there an opportunity? 

And I got this blank look like, what are you talking about?

Katie Thomas 4:47  

You’re a CPA, and unless you’re a partner, there’s just really not an opportunity here. That’s when I recognized that the CPAs, and I’m sure are very similar for a lot of other similar professions out there, you really aren’t taught the skill set to grow a brand to create an online presence in today’s world. And then you get to this partner level, and you’re just expected to know how to do it. 

I thought, well, there’s probably an opportunity here to go out and help accounting firms. That’s where we started with doing just that. And so when I left, I took the skill set that I had learned at working in the accounting firm knowing their business and how they operate some of their pain points, how they serve clients, knowing how to speak their language and went to them and said, Look, here’s what we can do, here’s this opportunity, is this something you’re interested in. 

And it’s been a really cool journey to see how there are all of these amazing professionals out in this place. They have great businesses, they offer amazing services that transform lives, but their reach and the impact that they could be making. It’s not tapped into because they aren’t taking advantage of this amazing opportunity to market themselves and be confident and marketing themselves. 

Sam Gupta 6:21  

Okay, amazing. So, there are some very interesting points here that I would like to dig deeper into. But before that, I am going to ask one question that we ask all of our guests, and that is going to be what is your perspective on growth? Katie, what does growth mean to you?

Katie Thomas 6:38  

So when I hear the word growth, I think of getting bigger, getting better. And so of course, as humans, we can become better we can develop ourselves physically, mentally, spiritually, as business owners, we can grow a bigger business, create better bottom-line, but really when I truly think of growth, and what that means to me is how can we, as humans get bigger, create a bigger impact that spreads to more people and create a better world as a collective. So as people and as business owners, executives, it’s not just about becoming better as ourselves, but it’s about growing and impacting others along the way.

Sam Gupta 7:16  

So now we are going to move on to the other things that you mentioned as part of your intro. And one of the things that makes me super curious about your CPA designation, and you said you’re still maintaining that. 

That could be hard, I guess, as a marketer? Because and I don’t know, if you find the sales and marketing world, more exciting, I think you do, because that’s what you mentioned, as part of your intro. So do you still like going through the CPA curriculum? Or do you not?

Katie Thomas 7:43  

I like it because I think that everything that I have to do, for say, continuing education, not only helps me as a business owner and a leader become better and grow my business, but it allows me to understand what a lot of our clients are dealing with and help educate them on say, for example, this cares act that came out when COVID hit, or this new legislation that just came out allows me to stay up to date so that I can even help them communicate better with their prospect market and their current client.

Sam Gupta 8:18  

Yeah, and I find the thing very interesting, because, you know, I don’t know, if any marketers out there are actually going to have CPA designation, it’s very hard to find that, in my opinion. In my opinion, sales and marketing folks should have deep subject-matter expertise of clients’ business. 

This is the challenge that we have seen across manufacturing. And I asked this from marketing agencies that are focusing on manufacturing. Okay, why are you focusing on manufacturing? Can you speak manufacturing? And the same question I’m going to ask you, Katie, you know, you are speaking with accounting and accountants, right? you need to be able to speak their language. And I can almost guarantee that the other folks that are not CPA will not be as deep in their insights when they are writing the content. 

So in your opinion, having a CPA designation, does it matter? If yes, why?

Katie Thomas 9:13  

So it doesn’t matter from a sense of, are you capable of doing, you know, marketing at all, but like you said it, when you can speak your clients’ language, and truly understand their business. It allows you to provide a lot better service to them and also to allow the message that you’re creating for them to resonate better with their prospect. 

So I don’t want to say that it’s having a CPA designation is an end all be all, but I think that what having a designation like that. What it does is it helps qualify you to the applicable party that you aren’t just saying that you understand their business, but you truly you’ve been tested, and you’ve passed that test. So you really do get it.

Sam Gupta 10:11  

Yeah. And your clients don’t have to spend as much time in training you when you are writing content for them, creating the marketing collateral for them, you are probably going to understand when you walk in the door of your clients.

Katie Thomas 10:26  

Exactly. And it goes further than just coming up with topics. But it’s fact-checking the blog post. It’s making sure that we can write what’s relevant today. Because as anyone who’s tried to file a tax return ever knows, the tax laws are constantly changing. So it’s just the whole process of marketing becomes easier.

Sam Gupta 10:49  

Yeah, and you bring a very interesting perspective because you mentioned that blank look during your introduction with your partner. And if I go back to my journey, as well, and I have had sort of the crossover as well, a few sales and marketing roles, and a little bit of it of finance. And I can relate so much. 

So when you were growing up, you know, you had two choices, either you were meant for sales and marketing, or you were meant for the slightly more back-office job, but now more and more crossover I’m seeing in the market.

So in your opinion, when you had this, this journey in the partner firm, obviously, you, you must have realized that the CFOs don’t really have as the sales and marketing skills, or I don’t know if deep is the right word there, to be honest, to describe the sales and marketing skills. But everybody needs communication skills, everybody needs sales skills, to be able to succeed in their job. So what would be your perspective for CFOs and CEOs in developing those skills and why they are so important to have?

Katie Thomas 11:52  

Yeah, so I think that it first just comes with acknowledging that you may have great technical skills, but non-technical skills are equally as important. And what got you to where you’re at now can’t always get you to where you want to go. And so if you can look at it in the way of, I may be really good in this area. But I’m okay with accepting that when I try something new, I may not be as good, but I can learn, and I can improve, and I can get support from you know, maybe it’s someone internal to your company, or someone you hire, you can get better. 

I think as we grow as humans and we advance in our careers, we can get comfortable in what we’re doing and what we’ve always done. And to try something new. Just like with anything, say whenever you went to school for the first time, it’s uncomfortable. And we have to get over that. And that’s really what it is. It’s a lot of times having the confidence to try something new and recognize that it may be difficult, but there’s a lot of opportunities that we can capitalize on and create a bigger impact if we are to take that chance.

Sam Gupta 13:08  

Okay, so what are some of the specific skills that you see are missing in the, let’s say, you know, finance or operations executive that they can improve on?

Katie Thomas 13:17  

So if we’re gonna look at it from a marketing standpoint, I mean, there’s a lot of skills that any buddy can learn. But what I like to do is focus on, like, what are the things that you specifically need to be involved in, because there’s a lot of skills that you really you should just have a professional, it’s not the best use of your time. 

And the skills that they really should be investing time in is making sure that they’re, they’re actively participating in creating their personal brand and their company brand. Because whenever you think about all the brands that are popular and ones that people know, it’s because they give you feelings, they, you think about Nike, you know, it’s just doing it. It’s like an Olympics. There’s Amazon. It’s quick. It’s fast.

When you think about, like a personal brand, let’s say like, even like, Will Smith, he’s funny. They all give you feelings. And as CEOs and CFOs, we have to be actively curating and participating in developing that brand, and what feelings we want to evoke, and what kind of inspiration or motivation or change that we want our company to create through our products or services.

Sam Gupta 14:41  

Yeah, so the two words that you mentioned are personal branding and company branding. And I see a lot of changes overall in the marketplace. And in the last three years, especially the social media platforms like LinkedIn have come a long way at this point of time, especially for b2b businesses. 

So obviously, personal branding is huge because that actually helps with your career. Other folks need to know you. So whatever content you’re writing on LinkedIn, a lot of operations folks and the finance folks are becoming active on LinkedIn as well. But they are not as active as the sales and marketing folks. So I don’t know what is going to be your perspective on that. 

Katie, what would be your recommendation to some of these finance and operations executives on improving their personal brand?

Katie Thomas 15:26  

Oh, my goodness, I work with those exact people every single day. And if you want to create a personal brand online, you should absolutely start with social media. It’s not going to require a lot of your time. And you can create your personal brand, get it out into the world very quickly. 

But it’s gonna take you creating content because the content is how people get to know you. And I know from having the same conversation every single day with people just like you who are listening to this episode, that whenever you bring up creating content, it can be very intimidating because you may not know what type to create, you may think that you don’t have time to create it. 

But really, the truth is, Sam, the truth is that everyone has all the content they need inside of them, especially if they’re at this CEO level. And you don’t need a lot of time to create it. But what you do need to do is understand the different types of content that you can create. 

And some simple frameworks around like, how do you actually present that content so that people can easily consume it and take the action that you want them to take from that content? How do you actually get them to do it, and you can just use a framework?

Sam Gupta 16:48  

Okay, and this is my challenge working with marketing people, to be honest. I mean, they get deep into the content and copy. And let’s say, if I’m the operations or finance executive, I don’t even understand what content word means. So can you tell me what different types of content are? What can I create myself so that my personal brand is going to be stronger on social media?

Katie Thomas 17:08  

Yeah, so let’s just take it a step back. And whenever you think about creating content, we can think of them as creating posts. If we’re saying just creating a post on LinkedIn, you have to understand that, really, there’s an art and a science to it. And the art is what’s going to really make your posts stand out in the art is going to be your stories, your experiences, how you actually teach or talk about a subject, that’s good, what’s going to make it successful. 

Now, anyone can learn science. The science is going to be the tactics of the posts. So the length of the posts, the hashtags, the buzzword, but the art, that’s what’s going to make your content your posts stand out. So this is, this is your unique stories, your experiences, your ways of teaching. 

And that is really learning the art. That’s what’s going to make you successful. And if it weren’t for this art piece, social media wouldn’t be as powerful. But the great thing is, too many people worry about the science, the tactics, what hashtags I should use, but they forget about this art, and they lose touch with their audience. So the arts is what’s going to connect you to your audience, but the science that’s going to be kind of what helps speed up or enhance the art that you’re putting out there.

Sam Gupta 18:27  

Okay, so let’s talk about personal branding a bit more overall. Let’s say if I am an executive, okay, and I don’t know how much time it is going to take from my side on a daily basis in creating the content is going to LinkedIn, and I’m not even sure how it is going to help me. 

So tell me why personal branding matters?

Katie Thomas 18:51  

Personal Branding matters because it’s ultimately how people do business with people. I mean, people buy from people and companies that they resonate with, they don’t just buy the product or the service because they buy from you, and how you put yourself out there, whether it’s positively or negatively, not at all, you’re creating a brand for yourself. So if you actively develop your personal brand, you’re out there making an impact and creating an opportunity for you to try to create a perception that you desire. 

So let’s say you do nothing. You might be creating a perception that you don’t desire, but you can take charge of that and actively create the perception that you want, and you desire people to perceive a view of your company, your services, your products.

Sam Gupta 19:47  

So this could be very applicable for the sales and marketing guys, and you know, if I’m the operations or the finance guy, my expectation is going to be this is the job of my sales and marketing team. 

So why as an operation or a finance person, I should care for personal branding, and why I should invest my time in personal branding?

Katie Thomas 20:07  

Well, you should absolutely invest your time in it because you’re creating opportunities for not just your company but also yourself. I believe that as we actively develop ourselves, and if we’re open to sharing that we’re developing others, and we’re creating an opportunity for people to really connect with us on a deeper level, because as we share stories that people can relate to, and learn from.

And that’s a lot of what personal branding is, is, it’s just sharing stories and showing that you’re human, that’s going to create connections that you don’t know, what could result of them, whether it’s actually like a business opportunity for your company, or it’s a personal opportunity for a friendship, or maybe it’s another job opportunity down the road. 

Or maybe it’s a partnership opportunity where you start up your own company, you don’t know where that could lead to, and what opportunities but again, it goes back to at the end of the day, we’re all people, and we’re all striving for this collective growth as a society and as a world as a whole and you creating your personal brand. It’s just plugging right into that growth.

Sam Gupta 21:23  

So I’m completely on board with that. But let’s say let’s take a scenario, let’s say I’m the operations and finance guy. Obviously, I care for the world, and I care for the society as well. But I need to worry about my own priorities, too. I’ve got 24 hours on my clock. And I work, let’s say as operations or finance executive, I work for 15 hours a day, I have to take care of my family. And now I have to spend time on personal branding. As far as the opportunities go, I have a stable job. I don’t really care for the opportunities as much. So why does personal branding matter for me? 

I’m not necessarily looking for an opportunity. And you did mention that job opportunity down the road. So how big is going to be a factor, let’s say in the future, especially what we have seen in the last three years, with respect to personal branding, how much personal branding is going to be relevant in hunting for the next job,

Katie Thomas 22:22  

I think it’s only going to continue to become more relevant and more, much more of a say, the requirement that you have a brand there. I mean, just look at changes on social media platforms you mentioned, like the past three years, and everything’s changed. 

For example, on Facebook, a few years ago, you could create a post on your company page and get it seen by 1000s of people today. If you’re not paying and you’re not running an ad, it’s going to get seen by hardly anyone, most likely. So when are you are thinking about, like, why should I care if I’m that person who has a stable job, I am already working 14-15 hours a day, it’s to remain relevant. 

This is where the future is going. As you’re in this position, you’re part of your job, no matter what your job is, even if you’re a finance professional is you need to remain relevant. And part of doing that is active online. And it’s not, while you’re online that you know, maybe it’s connecting with other people in your position, seeing what they’re doing, what maybe they’re doing better than you what you can improve upon. It all goes back to, though, you growing and developing and staying relevant. 

Sam Gupta 23:44  

Right. So, let’s talk about some of the content that you mentioned. So let’s say if I’m the finance or operations guy, I don’t feel that I have anything exciting to talk about, to be honest. I’m not even sure how I’m going to be sharing any content. So what are some of the things that I can consider when I am creating these posts?

Katie Thomas 24:08  

So I like to say there are four types of content. And when I say types, I don’t mean like video, text, audio, but really like four different sectors of content. And the first one is educational. So this is typically really easy for people to come up with. And it’s going to be like tips and teachings, action steps that people can take to reach their goal. It could be myth-busting. 

So as the finance guy, you likely are really close to understanding what products and services you offer. Even if you’re in the financials, you understand what’s being sold. So what are maybe some myths around those products and services, what do people need to know about them, that’s all going to be educational. Then there’s brand content. 

So brand content is going to be stories about your journey, impactful moments in your life turning points that led you to where you’re at now, so maybe, why did you get to the position that you’re at? Maybe Why did you leave your previous job? It could also be like your why if you’ve read like Simon Sinek, it could be your hobbies, quirks, interest, anything that others can connect with.

Katie Thomas 25:20  

So what do you enjoy doing outside of your work? Where do you get some mental relaxation? What do you like to do on the weekends? All those things, they’re important people want to know that you’re human, then there’s also professional content. So what’s going on in your industry? Are there changes that are going to impact you, your clients? What’s going on in your organization? Are you looking to hire? Are you, you know, changing technology? What are you struggling with? If you’re open to sharing, maybe you’re What you are looking for. 

So new staff, new clients, networking groups, testimonials, you could a post community involvement also great. And then finally, what we see a lot of content and can turn people off social media is monetization content—so launching pitching promotions announcement that invites and monetization contents. People absolutely need to know what you have to offer them. 

But you just need to make sure that you’re not only doing that, and within that, we have these four categories. It’s really important to note that there can be overlap. One post could be in multiple categories. So let me give you an example. Let’s say that you, I work with a lot of accountants.

Katie Thomas 26:32  

So let’s say you’re an accountant, and you have an educational post about three ways you could reduce your taxes this year. And then at the end, you say if you’d like to learn some more tips, then go ahead and sign up for my webinar here. So you had a monetization piece, you did have some sort of promotional posts, but you also gave some education in it. Another thing was, let’s say that you’re, you know, an executive coach, you could say, here are three things that you need to consider this year when you’re looking to create a more purpose-led organization with transformative business results. 

And then again, you could say, you know, if you want to learn more about this, then be sure to sign up for my newsletter, where I send out weekly tips or, you know, something like that. So whenever you start looking at these different categories, we all can create branded content, we all have a story, we all have things that we like to do outside of work, or that got us to where we’re at now, none of us just ended up in the position that we are today. 

Just because we woke up, we did certain things. And same with educational content, you’re an expert in what you do. And you know, whether it’s teaching about your job or teaching about the product and services that the company offers. That’s, that’s all stuff that you can easily talk about and discuss.

Sam Gupta 27:58  

Okay, so now we are going to move on to the other topic that I really wanted to talk about, which is going to be company branding that he mentioned in the conversation. 

So in my opinion, I think the onus is really on the companies, how they want to position themselves on social media because from when you look at the organization perspective, or the company perspective, it’s one company, it’s not sales and marketing versus, you know, accounting and IT. It doesn’t work that way for the company. It’s going to be when we look at the company branding. It’s going to be opportunities for the company, the more opportunities that the company has, the better.

So some companies, especially when I look at some of the startup world, what they do is that they have incorporated this as part of their performance model, or as part of their comp model that you need to be active on social media. Everybody needs to be active. It does not matter whether you are a CEO or janitor. Everybody needs to be posting the content on LinkedIn, and everybody needs to be liking the content that companies are posting, or commenting or whatever.

Sam Gupta 28:57  

Because you know, when you let’s say your sales or marketing team is sharing the content, just five or ten people are going to be there. But let’s say if your whole company spends time on social media, now we are talking about 50 people trying to influence the content, trying to promote the content, that could be a big deal. 

So when I look at these startups, they’re really going after each and every employee and encourage them to go to social media and promote the content. But when we look at the bigger companies, they don’t necessarily have that. And in my opinion, we have seen this in the last three years. And this is probably going to be more relevant in the next three to five years that the companies that are promoting their employees to promote the content on social media are going to have a competitive edge. 

So what is your perspective on that? Katie, when it comes to company branding?

Katie Thomas 29:45  

Absolutely. I completely agree, Sam, and they’re going to, I believe, have a competitive edge, of course, from getting noticed by their desired market. But I also think that acquiring top talent is another big one, where they’re gonna have a competitive edge because, as someone says, fresh out of college or middle-aged and on LinkedIn looking for a new job, whenever I see this company that’s clearly communicating their brand, their values, what they stand for their culture. And I see a bunch of people engaged with it. I want to be a part of that. 

It’s just like going to say High School. People want to be a part of the group. They want to be part of the cool kids. And if you are creating that online, that community, that culture, then yeah, you’re going to get left behind. And I think that a lot of times people do that are starting to think about this, they think, well, maybe we’re missing out on, you know, the market share. 

But it’s like, what about also all that wonderful talent? That’s huge. As you know, getting the right people in your organization helping you build it is huge. And so I think we need to consider that too.

Sam Gupta 30:53  

So, where should the motivation come from? Let’s say if you were the CEO of a company, Katie, and you are, let’s say, if you were running a manufacturing or distribution business, and you want to make sure that you are able to tap the opportunities when it comes to personal branding, company branding, but at the same time, the employees need to be focused as well in their work, right, because you need to make sure you are making money, you are finding some opportunities as well because some of these efforts on social media could be harder to track when it comes to ROI. 

So, where should the drive come from? Where should the motivation come from? Does it need to come from the CEO? Or, does it need to come from HR? Does it need to come from sales and marketing?

Katie Thomas 31:35  

So I think it’s an interesting question. And you know, how people are motivated is different for everyone. I think that having a general consensus that encouraging everyone to post is great. Some companies I’ve heard actually offer you a bonus or an incentive based on your participation on social media. And that’s going to be individually each company if they want to do that. 

But I think that something that all companies can do, beyond just encouraging people to post, is helping them understand how they can do it. Because whenever we do something new, if we don’t have instructions, or feel like we can competently take that first step, then it’s a lot more difficult if someone can come in and not just say, hey, post on social media, but here are some samples of posts that you can create. 

Here are some formats that you can use. Here are some hashtags that you can use. And here are some ways that you can schedule your post here, maybe some places you can get stock photos, just a simple training, and education around it. That can go a long way to getting people to take part and being active on social media.

Sam Gupta 32:49  

Okay, amazing. Katie, this has been a fun conversation. I hope you enjoyed it. That’s pretty much for today. Do you have any last-minute closing thoughts? 

Katie Thomas 32:58  

Yeah, well, thanks, Sam. So thanks so much for having me. As the closing thoughts, it doesn’t matter if you’re talking about your company brand or your personal brand. People want to know that there’s a human behind you. So there’s a human behind the company, there are humans, and behind your brand, there’s a human. So anything that you do, as you’re looking to develop your brand. Just remember that people do want to know you’re human. 

So one of the things that anyone can do today is just to get on LinkedIn and spend 30 minutes and voice message, your newest connection, say hello, introduce yourself, and wish them well, that you will be shocked at how many people respond and are amazed that you took the time to send them a personal voice message. 

That’s really what I think is so important to remember as we are in a digital world is. You can’t replace yourself, and the more that you can have involved in it, the more success you’re going to see from it.

Sam Gupta 34:01  

Yep, I couldn’t agree more. The more human your company is, the better you are going to do with respect to your hiring with respect to your growth. So on that note, thank you so much, Katie, for your time and insight.

Katie Thomas 34:11  

Thank you, Sam. I appreciate you.

Sam Gupta 34:13  

I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Katie or leaders online, head over to leaders-online.com. Links and more information will also be available in the show notes. 

If anything in this podcast resonated with you and your business, you might want to check other related episodes, including the interview with Brian Burke from sellyourmac.com, who touches on his growth secrets, and how they became the fastest-growing company on INC 500 3x. Also, the interview with Corey Warfield from CoryConnects where he discussed how to hack LinkedIn algorithms and grow your company using LinkedIn strategies. 

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. 

Thank you, and I hope to get you on the next episode of the WBS podcast.

Outro 35:30  

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. And for more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.