November 23, 2013

Ignoring this Brian Tracy Rule Cost me over $400,000

There are two kinds of “success coaches”, those that are speaking from real world business experience and those whose real world experience consists solely of being…”a success coach”. Charlatans like Joe Vitale or the wannabe Steve Pavlina are typical of the latter.

Brian Tracy is the exemplar of the former. I love Brian Tracy, his core message is pretty much the same throughout most of his work, but it’s a good one. Sometimes I need to hear something about a dozen times before it finally sinks in (just ask my wife).

His Secrets of Self-Made Millionaires is a fantastic entry-level seminar which I make a point of re-listening too every few months or so.

I was recently recounting the story of a particularly disastrous CXO level hire at one of my companies to a longtime mentor and I mentioned Brian Tracy’s maxim on hiring and firing:

Question: When is the appropriate time to fire somebody?
Answer: The first time it crosses your mind.

When I heard that I chalked it up as draconian and figured I had to agree to disagree with him on that one.

There is an old adage (I think it was coined by Canadian political satirist Ben Wicks) who once quipped

“Experience is something you don’t get until just after you need it”.

Well now I no longer disagree with Brian Tracy on it. He was right, I was wrong to disagree, and my ill-informed opinion on the matter cost me close to $500,000, maybe more.

That’s right, had I just followed that advice the first time I heard it, I’d be nearly half-a-million bucks richer now. And believe me, I’m not one of those super-rich dot com guys that can blow a half-mil on lunch, blow and hookers. Half a million bucks to me is non-trivial money.

I had hired a long-time customer to come into one of my businesses as a C-level hire. He talked a great story and his technical expertise seemed to lie in a direction I wanted this company to go. He was also a remote hire, he lived in another country and was flying in monthly to flog the troops in person.

It wasn’t long after I started that I began to dread having telephone conversations with him. It seemed that every time we spoke on the phone it cost me a pile of money, as he sought budgetary approval on this equipment or that initiative.

I had seen the effects of C-level hires not being empowered by their CEOs, usually founders (like me) who simply could not let go and relinquish control over certain aspects of the business. They would micromanage and then hamstring the poor hire until everything just fell apart.

Seeing that happen, I vowed never to do it. So I swallowed my discomfort, stepped back and gave the guy room to run.

Not a lot of much happened over the next few months. Other than a lot of money got spent and then I noticed morale going down. About 3 months in I found myself repeatedly wondering if I was getting any bang for my buck from this guy. Were we actually accomplishing anything that we weren’t already in the process of doing anyway? Would things be any different with or without him?

<—- that moment, right there. Is when I should have fired him.

Instead, I held off and hoped. Hope is evil. Hope is for losers. When you find yourself “hoping” for an improvement that should be your cue right there that you’ve taken a wrong turn and you need to course correct immediately. Hope is different from optimism. Optimism is having a healthy confidence that your plans will bear fruit, even in light of some speed bumps. Hope is when you know, deep down, that things have gone pear-shaped but you want them to somehow, magically improve without you having to making a tough decision or a painful course correction.

Over the next 8 to 10 months (yes, it went on that long. This is not my proudest moment), the guy spent a huge chunk of the company’s cash reserves and things got to the point where we were seriously considering letting a few people go to conserve cash. Christmas was cancelled – both bonuses and even the Christmas dinner party.

We were scaling back everywhere (including my own drawings) and then one day he sent me an email

“Dear AntiGuru [not my real name];

When you get a chance, can we please talk about compensation and get some defined information about what my options are.

We had some short discussions in the past, but I need to get to a schedule of hard numbers and what can and cant be done.

As an opener:
Your currently paying me $6000 every two weeks.   I would like to see this number go up to $8,500 every two weeks.   I know that I am worth this (and considerably more).
Let me know if and when this would be possible.  Im not ignorant of our current financial circumstance, but I do believe there might be a few options to make this happen [he was alluding to earlier suggestions around firing some people he didn’t like to free up their salaries] Based on recent information I know that have a gross value in excess of 200K to an organization.

Currently, I am passing on work to make the move successful, just passed on major offer and am hopeful that you can make some arrangements to get me a little closer to where I need to be.”

A few days later I had to sell some long-held public stock (of another company) in order to make payroll and I had one of those “moments of clarity” that all us alcoholics know so well:

That this was never going to stop. This person delivered NO value to the company, in fact just the opposite, he was sucking out every last drop of liquidity and would continue to do so until it was all gone. I had hired a productivity and morale vampire, and I had turned him loose on the business.

The next day I fired him, freeing him up to pursue all those lucrative opportunities working for us was presumably holding him back from. About 6 months later he emailed asking for a letter of reference, I guess none of those opportunities materialized.

After apologizing to my staff for making such a horrendous and costly mistake, both morale and cash-flow improved immediately. But it took a long time to recover. I figure all told, it cost around $120K in salary and expenses, and about another $140K in mis-allocated capital,  and maybe $200K in opportunity cost, not to mention about 2 years total of lost time, lost productivity and lost competitiveness. The clean-up process was an eye-opener as it turned out that not only was he not accomplishing much, all his work in his supposedly core competence turned out to be unusable.

[ I need to interject an important point here: that none of this was the guy’s fault. Everything bad that happened to the business out of this was completely and totally my fault. I didn’t face unpleasant facts early, I didn’t put proper controls and reviews around him, I didn’t set the deliverables clearly, and I didn’t challenge him when goals were not met. This was a 100% management failure on my part, and mine alone. ]

Looking back I realize  that I have made some absolutely dynamite hires in my businesses and the common thread across all of them was this:

Not once had I ever considered letting any of them go.

In fact it was the opposite, very early after bringing them on I’d find myself worrying about retention. How am I going to keep them? What will it take to keep them engaged and interested? How can I clone them?

You never consider firing the good ones.

You only consider firing the bad ones.

Going back to my history as an alcoholic, it’s similar to something I heard a long time before I got sober: If you ever ask yourself “am I an addict?” then the answer is Yes.

Same deal here.

Brian Tracy has it down.