Having Hard Conversations (Live Panel Discussion from 2022 MIT Sloan Search Fund Summit)
2:33PM Apr 20, 2022
Speakers:
Steve Divitkos
John O'Connell
Rafael Alfonzo
Jenna Whigham
Pete Seligman
Keywords:
business
ceo
company
sellers
employees
conversation
board
people
ceos
important
question
role
share
conversations
issue
rafael
context
team
difficult conversations
organization
Everybody, welcome to the panel on Having Hard Conversations. My name is Steve Divitkos. I am a former searcher and CEO and I'm now an active search fund investor. And I'm very happy to be hosting the panel this afternoon. I suspect that some of you may be feeling at least a little bit of fatigue given that this is the final discussion of the day. But if you promise to stick with me, I will promise to make this session as useful and as informative for you as possible. I suspect that all current and former CEOs in attendance today, I can attest to the fact that having hard conversations is a fundamental part of any CEOs job. In fact, on any given day, a CEO is likely to have at least a few of them. So know that this is both a skill and a practice that will be incredibly valuable for each of you along your respective leadership journeys. Joining me today is an awesome panel. And I'm going to ask that each of you please introduce yourself in a minute or less and then we're going to jump right into the discussion today. So John, let's start with you, please.
Okay, I'm John O'Connell. I got my start in business and big box retail it finance and operations for Marshalls, Sears Department Stores, and AutoZone. In 1999, I joined David Dodson in the creation of a search fund when river management which led us into the non hazardous liquid waste business, Wind River environmental. Took over Wind River in 2004. We executed 75 acquisitions over the life of the business and had two successful private equity exits, one in 2014, and one in 2017.
Excellent, thank you so much. Rafael.
Hey, everybody, Rafael Alfonzo, I'm an entrepreneur, investor, recovering lawyer. Most importantly, I'm a searcher just like many of you are or aspire to be. Maybe a little older, hopefully a little wiser, having been through the entire search cycle of buying or searching, buying, operating, selling a business, and Job Search. And again, before that, I was a co founder of a commercial solar power developer that grew to operate in six states before accident. Before that, I practiced law at a large international law firm. And before that, I served as an officer in the US Marine Corps.
Thank you, Jenna.
Hi everyone, I'm Jenna Whigham. My current position is the president of Abound Health, which is a health care company that provides non clinical care to adults with disabilities. I made my way to this company via search fund that my brother and I launched in 2019. Prior to searching, I worked at Anheuser Busch for a number of years in different operational roles. I graduated from Sloan in 2015. And spent my career prior to business school in financial services on the advisory side, and then a few years in private equity.
And last but not least, Pete.
I have run thanks for very much for having me. I've just woken up. So be kind. I am here in Sydney, Australia. So I guess I spent about 15 years in a range of corporate roles from investment banking, engineering, project management, construction, property, general management, a range of things, and then in 2012, decided that I really wanted to run my own thing. So I headed out to start up effectively a self funded vehicle to acquire a few businesses. Over the last almost 10 years, I've I've bought five of those. I've been the CEO of three exited a few and sit on the boards of those that are remaining. So as we sit here today, effectively, I'm a search investor. Now, taking the capital, I've recovered and reinvesting it in searches here in the Australia and New Zealand market.
Awesome. So let's dive right. So we're going to be breaking today's session down into three distinct components. The first is having hard conversations about dynamics internal to the company. The second will be hard conversations about dynamics external to the company. And then finally, we will conclude with hard personal conversation. So let's start with internal dynamics and Rafael, I'd like to start with you if that's okay. terminations are an unfortunate reality of running a company and many even experience CEOs still struggle with how to best handle these types of situations. I'm curious when terminating somebody, what is your experience taught you about both how to have that conversation with the individual being terminated most effectively, and just as importantly, how to communicate the decision to the rest of the company.
Thank you. It's one of the toughest conversations to have as a CEO. I think, for me, the best practice is to have a short, direct conversation that's forward looking with the employee that's being terminated, to inform them about the termination and to discuss transition assistance, severance benefits released for the company, etc. I think for a separate later conversation, you can talk about the reasons performance, they can vent, whatever, but I think you need to keep those things separate. And you need to be firm about that. The purpose of this conversation, Mike, is to talk about, you know, that you're not going to be working here anymore. And, you know, we're going to talk about transition assistance, severance, etc.
The reason for that is that, you know, this is one of the most difficult experiences that an employee is going to have, short of, you know, a family tragedy, it's going to be one of the hardest things they've ever faced. And they can get very emotional, depending on how they react, you could be a humiliating, you know, encounter. And so you want to avoid that, you don't want to argue, you don't want to bargain, you, yourself are human. And so you don't want to give any signals where you give false hope. So, so that's how I kind of look at it. You know, and you gotta be prepared, you got to prepare for every tough conversation. And so have your termination paperwork ready ahead of time, so you can have that forward looking discussion.
And then also make the list of what you want to collect. I remember, I didn't do that one time. And I remember I was in the middle of a termination. And the employees reaction was to just start packing up, they slammed their laptop shut. You know, they got their keys, and they walked out the door, and they were halfway down the hall and I remember, her, wait a second? That key belongs to the company car and come back here. I mean, those keys and give me your, give me your, your, your your access card, and then they got an Uber and they left and then occurred to me, wait, that laptop, that's a company laptop. We never got that back. We deducted it from his final paycheck, but we never got it back.
So be prepared for these for these conversations. And then with respect to communicating with the rest of the company, it's depends on the circumstances, right? So it's economic reasons, it's a larger conversation about talking to the company about, you know, tough times, if it's poor performance, you know, you can let folks know if they asked, it wasn't a fit. And then I think importantly, for me, anyway, if it's a character issue, I actually let people know that someone maybe wasn't upholding the company's values. I'm not going to get into details. But, you know, we do take the company's values seriously. And if someone's not upholding the values, we will terminate someone for that. And that's what happened to that case.
John, how about you and your experience, what have you learned about how to most effectively have that conversation both with the person who's being terminated as well as with the rest of the company?
Yeah, so I think there's actually three discrete portions of this one is the period leading up to it. If you've been following management best practices and communicating the performance issue with the individual, even though the conversation is going to be hard, it'll be less difficult on the difficulty scale, than if there had been no communication and you're blindsiding this person with the fact that they've been underperforming, and you're going to make the change. Same thing for instance, if you had, let's say, it's acquisition number two, and there's an office manager. And she's been described as being integral to the operation as well as a real firecracker. And then your observation is that she's mediocre. What she does is she's really disruptive and speak negatively about the business.
So you're going to make a change, that's going to be on the higher degree of difficulty, because there's no advance warning. And then actually setting up for the conversation as Raphael said, you need to have well thought through the severance package, all the details, have it documented in your legal documents. And have a witness there, and be mindful of the location and the time. So in the example I gave of the office manager, if it's a small office, you'd likely want to go off site for that type of conversation. So I think we really need to be attentive to the time of day, literally, as well as the location. And then on the execution piece. I think it's really important you establish what you're there to discuss. And there's not a lot of small talk. Mary, we're here to discuss today, your termination of your employment from the company.
What I want to accomplish during this meeting is I want to review with you the severance package we put together and make sure you understand the subsequent steps that you'll need to go through. And now in the easier conversation, we've done all the coaching before and the person knew that they weren't really performing. That part of the conversation is relatively easy. You'll move on to the review of the severance. But in those other examples, this is the part of the conversation that gets really difficult, because there may be a lot of pushback from the individual. Why are you doing this? You can't do this. And you really have to stay focused on communicating that what you're here for is to discuss the severance package and the steps to follow. And if that person wants to schedule an appointment with you, anytime in the next couple of weeks, you will do that.
And in my career, I've had one person reach back out to schedule an appointment to discuss the reasons for their termination, and they didn't show up for the meeting. So that part, you get over fairly quickly. So that's from an execution standpoint. And then also, one thing I would add is that the witnesses essentially, they're just to take notes on who said what, and so forth that should absolutely be coached to not speak, particularly if things become uncomfortable, the witness may feel a need to jump in, in some way. And I think that that would be a mistake. As far as communicating to the organization, I think face to face communications with people directly affected is important. Generally speaking, I wouldn't do an organization wide announcement, unless it was an organization wide, impactful role.
It's so important about framing what you say and what you do not say, in my experience, having to make terminations when I was the CEO, the loose straw man that I followed. And of course, we would put more meat on the bone than this is I would just follow four parts structure. Number one, you're terminated. Number two, here's what you should expect from us. Number three, here's what we need from you. Number four, goodbye. Now, again, don't be so succinct as to sound heartless, but in terms of structuring your dialogue, and choosing what to say and what not to say, I always found that to be a helpful framework. Let's move on to a different internal difficult conversation.
And Jenna, maybe we'll start with you on this one. I'm curious, how do you approach situations in which the company is facing some sort of meaningful challenge or problem it could be financial competitive doesn't matter? I'm curious, do you try to massage these messages in such a way as to shield or protect your employees from levels of concern and anxiety and worry? Or do you simply just tell them the unvarnished truth? I'm curious how you approach this and what you've learned about what and how to communicate when your company is facing some sort of meaningful challenge?
Yeah, I think, excuse me, I think about it kind of segmenting the employee population into two groups, the one is your senior management team. And in my experience, it's really crucial to create a team that has trust transparency, and the ability to talk through the challenges no matter what they are. And I think as the CEO or president, that's really beneficial for you, because you need to be able to have an opinion around the table that is based in fact and reality. And I think if you start shielding information from your team, your CFO, you won't get the right feedback that you might need to make the decision. So I think with the senior managers, you my my perspective would be to be as transparent as possible.
I think depending on the other layers of the organization, it gets much more nuanced. Specifically, we operate in a do good field, and it can be challenging for folks in our field to understand some of the nuances of tough business decisions. So I think it's so important to lead with transparency, but not necessarily, you don't need to give all of the information. So again, I like to think about the management team, fully transparent, full information, regardless of the challenge and then throughout the organization, tailoring the message to their level and their ability to kind of digest the challenge or the opportunity
Pete, how about you how do you balance letting employees in, so to speak, and transparency on one hand, with being thoughtful about creating potentially unnecessary levels of worry, or fear or anxiety within your employee base?
It's a really interesting question. And it's something that seqrchers I think face every single day, because they're constantly receiving a whole bunch of information, and then try and work out how to disseminate and act your way for the needs of the business at the time. I saw a really good, Simon Sinek quote, a few days ago, I'll paraphrase. But basically, transparency isn't sharing every single detail. It's about providing good context to your decision making. And I think that that's a great way of thinking about it. Because context is maybe a way of saying it as context is in the eye of the beholder in some ways. So, to Jennifer's point, depending on who the audience is, the context is going to be slightly different.
So if you're speaking to your senior management, who are the people around the table, helping you to make the bigger decisions around how you're going to deal with whatever the situation is, their context is more detailed than necessarily the context of someone that's in a particular role focusing on a particular activity. And so they need to know what's going to make their job as easy and successful as possible. And so in some ways, I've put myself in the audience's shoes. And I think if I'm in a branch office of a larger or generalization. And I've got a particular role to do, do I need to know every single challenge that the head office happens to be facing in relation to something that doesn't even have anything to do with what I need to do today.
Because you might feel good about being transparent and sharing leader, but potentially, what you're doing is you're creating anxiety within a team that's unnecessary, because you're giving them more than what they need to be successful in their job. Now, if being transparent means sharing things that are actually potentially going to impact each of those people, then that context is relevant for them. But if it's something that's going to potentially impact the business, or potentially impact other areas that don't relate to the job they need to do today, then it's almost cruel to be oversharing with them and burdening them with those issues that actually aren't going to really impact them and aren't going to make them a success. So I try to think, what's the information that I need to share with each of these people were actually these groups to make them as successful as possible in the role that they need to play for the business.
That's really helpful. One of the things that I found to be particularly helpful is the idea that the extent to which you share with somebody is positively correlated to the extent to which that person can actually help you solve that problem, which is to say that folks who are most able to help you solve whatever problem you happen to be facing at that time. Those are the folks that you let in kind of completely under the hood, so to speak. Continuing with our theme of difficult conversations related to dynamics internal to the company, Jenna, maybe we'll go back to you to start on this one.
In my own experience buying and operating a company through a search fund, when the most frequent sources of difficult conversations for me, particularly within the first year was actually with the sellers, the people from whom I bought the business. I came to learn that a nonfunctional or heaven forbid a toxic relationship with sellers can damage a company in ways that customers leaving or competitors fearmongering never could. So I'm curious what difficult conversations, if any, did you have with your sellers? How did you approach them? And what, if anything, would you do differently if given the opportunity to have the same conversation again?
Yeah, we were pretty fortunate in this regard. And I think it's a good piece of advice from the seller to us is make sure that you are not the key player in your company, craft your day to day, so that when you do decide to step away from the business that continues to operate. And I think he was really astute in building the business that way, knowing he would sell it one day, I think the most difficult conversation we had with him was when was the right time for him to step back. I think anyone who's taken over from someone who's run a business for a long time, it becomes their identity.
And there became a certain point that was that was obvious to me that his value is no longer in the day to day, but it was less obvious to him. And so having that conversation was was pretty difficult. You're someone new, and you're asking him to step away from something he built from scratch. So I think that ultimately was the most challenging conversation. But my advice to people is for challenging conversations is be as direct upfront and honest as possible. And you know, we got through the conversation, he's on our board, and we have a great relationship today.
John, how about you either in your experience as an incoming CEO, or the experience that you've witnessed as an investor and board member? What are some of the most frequent difficult conversations that you see CEOs having with sellers and maybe some mistakes that you've seen happen more frequently than not that CEOs make visa vie these difficult conversations?
One of the things I've learned over the years is I do believe that people generally act in their own self interests. And sellers may have an arm out, and they'd have an economic interest in the business performing well. But somehow, it seems like emotion, in many instances, plays a significant role in how they process information. So the most simple changes become very difficult with sellers. So being direct, being honest, and but also being consistent, is critical. And we went through a period early in Wind River where we had a seller's panel, who were advising us on the design of trucks and we couldn't get an agreement amongst you know, four or five industry experienced people on how to have a separate pump truck designed and we wound up having to disbandment. We went through actually a period of time where we were doing acquisitions and wouldn't do acquisitions where sellers came on board until we actually got our culture set and our processes set.
Let's move on to difficult conversations with respect to dynamics that are external to the company and referral. I'd like to start with you. The political climate, it's no surprise to any of idea that it's grown to become increasingly divisive over recent history. And some companies have made policy changes recently as a result of that. So, in September of 2020, the publicly traded cryptocurrency company Coin Base, went as far as announcing that it would ban political discussions from the workplace. In May of last year, a software company called Base Camp announced a similar ban. So what role, if any, do you think a small business CEO should play in either fostering these types of discussions or discouraging these types of discussions among their employees?
Well, with those two companies, I mean, how to go for them. Right? I mean, I think if I recall correctly, both of those companies saw a mass exodus of employees if there isn't a business school case. Now there, I'm sure there will be at some point. I mean, they lost a ton of employees, and they had to rescind those policies. So you know, that clearly was a bad idea. And in I mean, how do you define political speech, right? I mean, these days, you can argue you're talking about sexism, we're talking about racism is political. And you can't ban talking about that at work, because there could be violations of policies there, with respect to sexism, or racism.
So I just don't know that it works. I think that CEO, like, in my view, I think CEOs should encourage diversity of thought, as long as it's respectful. I think that debate, and disagreement is how innovation is fostered. And in any event, disagreement is just playing human right, you're not gonna be able to avoid it. So perhaps the CEOs role is more ensuring that employees know or learn how to disagree and respect each other's opinions, as opposed to putting a ban out there. Maybe modeling how to disagree. I remember, you know, I was running a business where there was a healthy debate about a strategic decision. And management and the board, both disagreed, basically, we had a limited service line offering in a limited geography.
And one group of folks wanted to take that limited service line and expand the geographic reach of the business. And other folks wanted to stay in the same geography and just expand the service line. So it's not about you know, external stuff. But it was this big debate. And so when we made the decision, and we knew that folks in the company wanted to know about it, and so we revealed to the employees that management itself had a disagreement, and that we'd had a healthy debate about why and it was a tough discussion, a tough debate. And we talked about how we resolve those disagreements, and move forward. And so I think that's the role of the CEO, is to encourage diversity and help folks, internally understand how to disagree respectfully and resolve those disagreements.
Thank you. Pete. I'm curious to get your perspective on this. If we agree that healthy debate and constructive disagreement with respect to business issues and challenges is healthy. Is that same thing true with topics like these that are inherently personal in nature? And if an outright ban is not the most constructive way to deal with these types of difficult conversations, what role do you think a CEO should play?
So I think it's really difficult. So I don't think that there's any real perfect playbook for it. I think what comes to mind for me is the fact that whilst the line is blurry, there does need to be a line between, you know, being at work and coming to be on that team, and being at home or in your community and being part of that environment. And I think it almost comes to that concept of, a lot of people talk about, and there's various views on this, whether or not a business is a family or whether they are a team. And where I'm starting to come more and more to is the fact that a company or a group of people that have come together in an organization, they're more of a team than a family. Like they are there to do a job and we're there to work together and be empathetic and, and have good relationships.
But we're a team there to achieve an outcome. And I think that we need to be empathetic to people's views and we need to be open to having conversations in you know, a productive way about things that are going on in the world generally. But ultimately, the context, again, is the business and the reason why we've come together and the fact that we've all decided to join this team to achieve this outcome. I think that if there are particular external or political or social factors that have some contextual relevance to the business that you're in, then it makes sense for the CEO, and the leadership and the ownership to have more of a perspective or a view on that particular topic. Whereas if your business operates over here, and there's a political or social issue that's way over the other end of the spectrum, it doesn't really makes sense to me for the business, or the CEO to have a position per se.
if then those topics and those kind of contexts and making their way into the business environment around a water cooler, or whatever you want to say. But that's more of an issue of how do I keep my team focused on the reason why they are here, and the reason why we've come together as a team to achieve these great outcomes. So I think it's a very gray and difficult and challenging area. And it kind of falls under that bucket of that kind of messy mix between the fact that all businesses are effectively made up of humans. But I think that it's important to kind of stay true to the fact that the business and the people within that business have come together to try and achieve something as a team. And how do we try and as much as possible, keep all the energy and focus and direction around those outcomes, and the things that we can do to achieve those outcomes.
So I want to stay on this issue of CEOs taking a stance on issues that are external to their company. And, John, I'd like to get your perspective on this. So employees more and more are expecting employers to take a stance on issues that are external to their company. A few recent examples include the murders of George Floyd and Breanna Taylor, the current war in Ukraine is certainly very top of mind for substantially everybody. What role if any, do you think a small business leader has in taking a public stance on these issues? Is it best to take a stance? Is it best to stay largely quiet? And how as a CEO, would you deal with potentially diverging opinions on these issues within your own employee base?
So I think the reality is that I would lean towards being remain remaining quiet. Where possible. You know, in 1990, there was a very contentious US Senator race in North Carolina, and Michael Jordan was asked why he didn't weigh in on it. And his response famously, was Republicans buy sneakers too. So you've got this external pressure, as well as the internal expectations that you may take position. I think, in general, empathy, and sensitivity should be displayed. But I would really try not to be able not to weigh in on the political aspects.
Jenna, how about you? What do you think about this?
I think I have a slightly different answer. I think that, like you said, at the outset of the question more and more, I think younger generations and employees are increasingly expecting companies to take a stance or acknowledge that an issue is an issue. So I think, without necessarily taking one side or the other on what you would call more contentious issues, you as a leader can acknowledge what's happening, like, for instance, the recent election that happened, you could weigh in by saying encouraging people to vote voter turnout, for instance, is something that's non controversial. Everyone's talking about the election, it's a way for you as the leader, to talk about it without necessarily taking a side that's going to anger one side or the other.
But I think in many cases, being silent, I think Breanna Taylor is a great example, can cause more issues for you as a leader than acknowledging that there's something going on and maybe encouraging conversation or pointing to information where people can learn more about what's happening. And then I think there are things that are much more black and white, potentially the Ukraine issue where leaders should acknowledge them, take a stance, and even guide the organization towards a certain direction. In terms of what's happening with that specific situation.
Rafael, how do you think about this question?
As a CEO, I would ask myself, what whether is it being silent, also taking a stand? I mean, I think that there's going to be an interpretation from the employees or the customers, or potential interpretation of being quiet about something. And I think, you know, as Jenna pointed out, I think that the answer to the questions in the predicate of the question, which is that employees are increasingly expecting, right. So the other thing I guess is that It, you know, we as leaders, we spend a lot of time developing and fostering the culture of a company. And we lay out these company values, we articulate them, we put them on the website, you know, you put them all over the walls or whatever. And so you know, how authentic is it to not take a stand on an issue if it happens to be contrary to company values. So that's how I think about.
Now, I think there is one giant elephant in the room visa vie, an external dynamic that falls outside of all of our control. And we've been living with it for the past two years in the form of the COVID-19 pandemic. I'm curious Pete, whether it was through COVID-19, or whether it was through some other crisis, either internal or external to the company. What about the past couple of years taught you about best practices about how to best manage a company through a crisis, whether that company is related to a set of circumstances that perhaps the company created itself, or in the case of COVID-19, a crisis that was entirely outside of their control?
Yeah, I mean, the last two years has been pretty interesting. And there will be a lot written about it in the years to come. I mean, it was quite from my own personal perspective, at the time when really COVID hit early 2020, I had just made a decision to move my family from Sydney to New Zealand for a year. I still was sitting on four boards of businesses in Australia on the East Coast. And when I made that decision, I was thinking to myself, it's only a three hour flight back to Sydney or Brisbane, I can easily just translate each month plan for board meetings, I can visit sites when I need to, it'll be fine. Literally, we landed in the beginning of March, two weeks later put into full lockdown borders shut and everything was closed.
And we couldn't leave New Zealand for the next nine months. And so very, very quickly, we were forced as an organization, across all the businesses that I own and on the board of, to work out how do you do that, you know, we had, I've got a mining services business that had offices in various states and all those state borders shut. And then we had to work out typically we'd fly people around as their specialization required. And we had to work out how to then satisfy those customer needs. So really, really quickly, as everyone did, a lot of things went online, and everyone got used to doing exactly like what we're doing now, as opposed to being on a stage in a panel you're online. But also, I think people got used to a whole range of different forms of communication and staying in touch.
And so, you know, when I was looking at this question, and thinking about how to distill it, I wrote down on a page, you know, crisis equals communication. So I think that, regardless of what that looks like, for you, communication is really a massive tool in trying to cut through whatever the crisis happens to be, again, we go back to what kind of information do you share? Well, that has everything to do with context for the particular audience that you're dealing with. But one thing that definitely made a difference during that period was frequency. So regardless of whether or not the information changed, or the depth changed, or the breath change, the frequency definitely increased.
That was something that I noticed across all the organizations that I was involved with, whether that was board meetings went from, you know, monthly to fortnightly and occasionally to weekly, you know, team meetings might have gone from monthly updates to, you know, weekly check ins, to daily stand ups. So frequency definitely increased. And I think also just being really clear about with those teams, again, in context about what's within your control, and what's not. And just being honest about that, and when you're on those calls, saying, look, we're going to deal with exactly what is in front of us and what's within our control. There are things that aren't within our control.
And we're going to have to respond to those as the information comes to hand. And being just really honest with the team about how you're making those decisions, I think is really important. But frequency is critical, some empathy about the fact that people are going to deal with that crisis in a different way. I mean, everyone's heard about all the issues with everything from concerns about COVID through to concerns about vaccines, through concerns about different perspectives on all that stuff. And I think being empathetic about people's perspective, but then being very clear about what the needs of the business happened to be from time to time. One last point I'll quickly make is that as a smaller business, we're typically a trying to think of the right word a situation taker rather than situation maker if that makes sense.
So as you know, price taker, price maker, or situation taker. So we were not in a situation where we could necessarily prescribe a lot of the criteria that we were going to be applying within our business because that was usually imposed on us by other governments or larger customers. So it was just a matter of being transparent with our team about sure, if you've got that position in relation to a vaccination or something like that. That's fine, we acknowledge that. But these customers have these requirements. And that's within their control. And our business need is to work out how to satisfy that and having open conversations about how to join those dots, I think is really important, particularly when you've got a very small business and relatively small teams.
Great, thank you. Let's transition to the final component of the panel today, which is difficult personal conversations. And Rafael, maybe we can start with you. It is my experience that the mood of the company generally reflects the mood of the leader. And said another way, company culture often tends to be a macrocosm of the CEO psychology. I'm curious to what extent do you agree or disagree with that statement? And then what have you learned about the pros and cons of sharing whatever may be weighing on you personally, at any given time with either your management team or your broader employee base?
I agree that the CEOs mood can set the mood and I think you need to be very selective about sharing. And you also just need to be mindful about regulating your emotions, generally, right? If you're having a bad day, you're having a bad day, you're human, if you can't regulate your emotions, you could cause a stir, right? People may tell themselves a story. Something's wrong with a company, or Oh, my gosh, what did I do? He's mad at me. It's like, you're just having a bad day. But I think that, you know, if there's something big going on, like, that's really weighing on you. I think it might be pretty hard to hide. And so, again, if it's big, I don't know that I recommend hiding it. I think folks again, can sense that there's something wrong.
So I think you need to be kind of selective and thoughtful about how you share stuff. So for instance, if you know, you're worried about losing a customer, at least the way that I might approach it would be, I might acknowledge that. And say, Look, I'm worried about losing a customer, but I have a plan. So it's funneling it productively, I'm worried about losing a customer. But I have a plan. I need your help on XYZ, and how can I help you? So funneling that product. Because they're going to sense something. Similarly, I think if you sense that folks are worried about something, I think it's okay to then sort of share their worry, and let's tackle this together, such that they don't feel, you know, isolated from you, or you're isolated. So just, you can bring the emotion, be selective and thoughtful about how you do it. That is kind of think about it.
John, how are you curious to hear your thoughts on this?
Yeah, you know, if you have, if you're in a business with 30 locations, I think the mood of the CEO is less impactful than if you're if you're centralized. So I think in that case, we have a number of locations, having a consistent culture that you've nourished and cultivated over time, gives you the ability, I think, to have some more credibility with the team. As far as sharing information. You know, if you're busting covenants, and it's causing you stress, and there's no reason to share that, with the company, I think you really need to be mindful as to what degree of information you share. But you should have I believe in in a circle of senior executives that are in our in the inside and are sharing, you're sharing all the information with them they shouldn't be aware of as much as possible.
You know, in the early days of my CEO tenure, I mistakenly thought that the CEO, the nature of the job is such that you must always demonstrate calm and steady demeanor and kind of an unfun, shakable, and unflappable personality. I think the unintended consequence of that, that I experienced, I think when you slam the dial a little bit too far in one direction is and I'm a little bit embarrassed to say that I got some feedback, saying I personally came off as almost a bit robotic. And some of my managers and some of the employees who felt comfortable enough talking to me about this, were almost wanting me to kind of humanize myself. And one of the ways to humanize myself was to share what was in fact weighing on me because particularly in those early days, my goodness, the list of things that weigh on you is a very long one.
So on one hand, you have this concept of vulnerability. This is something that we'll talk about in the most recent panel. I often say that vulnerability, it's so interesting to note that vulnerability is the trait that we most appreciate when we deal with others. And yet, it's the trait that we least frequently demonstrate when we deal with others ourselves. Doesn't seem to make a lot of sense. But again, if you're too vulnerable, then you risk employees potentially worrying unnecessarily. If you're not vulnerable enough, like I wasn't in the early days, you come off as a robot, Pete help me out. How are we supposed to do this?
Thanks. So I think that like most things, it's both. You need to be showing consistency and a good foundation. But as you say that vulnerability is really important. And I think it's got to do with the way in which you talk about those concerns. It's almost like trying to get the right balance about saying that, yes, there are things that so a comment that I make quite frequently for, for people that deal with me a lot, is I say, if it was easy, then everyone would do it. So it's okay, that it's not easy. And actually, that should be almost in a strange way, part of the fun that it's tough. But just because you think sharing that toughness, I think is is really important. But you do you're right, you need to do it in a way that doesn't show complete weakness. And I think there's a difference between being vulnerable and being too weak.
Because if if you're not there saying, yes, I'm worried about this. Yes, I think this is a risk, and I'm concerned, you need to then look in that with, but it's okay, I think we can get through. And I think that if we apply the right approach, and we work together as a team, and I think that vulnerability, just while I'm thinking about it, actually, it can be very powerful as an engagement tool as well. You know, particularly with your executive team around saying I'm concerned because of this issue. But do you know why? It doesn't completely set me back is because you're here and we can solve this together? Right. If it was just me, I'd be really worried. But it's okay. Because I know that we can work on this as a team. And I think that quite often it's a great way to then engage in that conversation with your executive team and even for them with their teams to be able to say, Yes, I'm worried, but I think we as a team will be okay.
Jenna, as someone who is currently in the CEO seat, I want to I want to start with you with this question. I know that when I was a CEO, I didn't feel like I had a lot of outlets available to me when I was going through something difficult. Rightly or wrongly, probably wrongly, especially in my early days, I was hesitant to share problems and worries and concerns with the board. Because I reported directly to them. And I didn't want to come off as indecisive or potentially not up for the job. I was hesitant to share things with my employees for all the reasons that we've discussed today, including wanting to project project certainty and strength and decisiveness. I was even hesitant to share things with my friends or my family, because I figured that they just there's no way that they could relate to what I was going through. That was all to say that I didn't really feel like I had any outlets to have difficult conversations for whatever was weighing on me personally. I'm curious as a current CEO, what what outlets have you created for yourself? And what advice would you give to current CEOs who feel like they don't really have an audience for the difficult conversations that they may need to have?
Yeah, I'll first say that a lot of what you just mentioned really resonates. I'm been in the sea for a little almost two years now. And specifically the piece about the board and the fear of being vulnerable and honest with your board was real. For me initially, I think my advice is, don't be afraid of that if a great board wants to help you and wants to hear about the problems in their Ross forum to be able to give you the right advice. So I think it took me a while to figure that out so that the board could become an outlet for me. The first thing I did when I joined the company was to join a CEO group. I'm sure many of you have heard of Vistage, there's YPO. There's a bunch of organizations that exists around the world to facilitate conversations like this.
And that's been extremely helpful for me in this issue process every month and you get a round table of 10 to 15 other CEOs who have been through similar situations. So if anything you're venting and just getting some feedback that may or may not be helpful, but provides that outlet where there's really no fear of retribution or overwhelming your family. And then the third thing I'd add, which goes back to the vulnerability question is at our company, we have this process every two weeks where the every team, and everyone on the team so myself included, does a personal and a professional, high and low from the prior two weeks, and it creates like a box effectively to have vulnerable conversations.
And it's expected. And so for that reason, I think the mood of the company then does not reflect the mood of the CEO, because you've created just this little box where people are sharing personal and professional lows, and it becomes a normal occurrence to have. So I think that's created a third outlet for me in terms of having the you know, my management team hear about situations that are challenging or causing either personal or professional lows.
John, let's hear from you, because you're a very experienced board member. I'll speak on behalf of both the aspiring CEOs as well as the CEOs who are very early in their tenure, I can tell you, and I can say this now with hindsight with a smile on my face, but there wasn't a smile on my face at the time, my first four to eight board meetings, I thought I was gonna get fired at every single one of them. And it's a completely irrational thought in retrospect, but such as the mind, the inner workings of a rookie CEO, there were plenty of problems that I didn't bring to my board largely out of fear. So as an experienced board member, get younger CEOs into the head of an experienced board member as it relates to this question of how much do I share with my board.
So first, let me say I think this is an area where multiple teams searchers have an have an advantage over independent number one, and number two, when I was coming up for Wind River, David Dodson was CEO, I was COO. And then when I moved to CEO, he moved to Chairman and we had also wilful antifungals atonic on our board who was was fantastic. And I learned a ton from from both of them. So as a board member, now I think the the perspective you should have is be open and honest, because I think that you, as we've heard here with this boogeyman being created in the closet that actually don't exist. And I think that it's more to your detriment to remain silent than it is to be honest and reach out for help. And a healthy board, CEO relationship, there is an open dialogue back and forth on that. So my advice would be be as open as possible, because it should be a judgment free zone, if you will, and is always going to be somebody there to help you with difficult decision making. If you keep things in and things go a little sideways, and then you hit hit the board with an issue that obviously should have been addressed earlier. I think that creates a lot of negative aspects to that.
Rafael, when you were CEO, did you feel like you had both a sufficient quantity and a of the outlet that you did have where they have a sufficient quality for you to have the difficult conversations that you felt that you needed to have? And what would you do differently if given the opportunity to do it all over again?
You know, I made a lot of mistakes as a rookie CEO, I think one of the things that I got, right was, you know, knowing to go to the board early and often. And so I had a pretty good relationship with the board. And in each of my other ventures, I've always gone to the board, I haven't really had a fear of that, particularly because if you think about it as searchers, you spent a lot of time kind of developing your investor base. You get to know the investors and then during your search, you get to know and then you help assemble the board. So hopefully you're picking folks that you feel comfortable with, at least those are the people you should get on your board, so you feel comfortable talking to them.
And then as Jenna was saying, you know, the CEO group, I mean, a big outlet for me was YPO I think, I've got my my fleece on. I wouldn't have made it without him. Right? A worldwide organization of 30,000 CEOs local chapter has 70 and I meet monthly with with a group of eight consistently, same guys and gals every month. And we just talk about the issues because if you think guys out there in the audience, and gals, if you think it's lonely searching, what's really lonely is being a CEO. And so you need somebody to talk to and so if you can find a group of CEOs and so maybe other searchers that you search with who helped become CEOs, you can talk with them, or you can get one of these groups, but but for me that was key and then also again, being very deliberate about how I assembled my investor base and then later board. So I knew those folks really well. And I could just pick up the phone and talk about anything. It's key. That's the whole purpose of the board.
That's right. That's great. Let's go to we've got 10 minutes left. So let's go to audience Q&A, the first one that I got early in the session, that any of you can jump on this, I love this question. As a CEO, how much financial information do you share with your employee base, and why? Any of you can jump on that.
I'll jump in quickly, I think that I would go back to context and I'd say, I share the amount of information that is appropriate for the audience that it's going to, and maximize that. So work out who they are in the team and share as much as possible in the context of the role that they need to perform. Ultimately, in some ways, it's not perfect. But it is one of the scoreboard metrics. And I think that if you have the right audience and the right metric, then it's a good way of kind of engaging the team in what needs to be done. And that could be because the financial information is going in the right direction, it might also be because it's going in the wrong direction. And that might then kind of provide some context as to why changes need to be made, but share as much as possible without kind of overstepping that contextual mark, I think.
Any other opinions, any differing opinions?
I would just add, I agree 100% of the context. But what we've done where we've decided that the context is it right for someone to see revenue and EBITA on the full P&L is converted to metrics that are relevant to their job in our business, that's like client hours, and net promoter score, all things that tie into your financials, but you don't need to share necessarily the bottom line with everyone.
I mean, right or wrong, what we used to do is, we would share a percentage of like, plan to actual, so hey, this quarter, we were, you know, X percent above or below revenue plan, and X percent above or below profitability plan. So they weren't getting the actual numbers, but they were knowing percentage wise. And that was, again, that was that was one of the scoreboard metrics, but it was right there. And so we could talk about it.
The other audience question that I got that I thought was a perfect example of a hard conversation that didn't occur to me when I was formulating the questions for this panel. But in retrospect, I remember having to deal with as a CEO, difficult conversations with customers, particularly as it relates to when you make a decision that is not in their interest. And the example that was used was a price increase, how do you communicate something like a price increase that is beneficial to you, and is not beneficial to your customers?
You know, these price increases are beneficial to the customer, you see they want a Counterparty that's healthy and profitable and stable and can deliver the services and you need to sometimes increase prices, so you can continue to deliver the service that they're accustomed to. And the last thing they want is for you to have misaligned pricing and costs and not be delivering proper service or maybe not be around later to deliver that service.
The only thing I'd add to that is I think that if it's a really big change, it's a little bit like bringing bad news to the board late if it's a really big change, because obviously, either something significant has happened in your environment that's led to the need for the change, or you've been a bit lazy in monitoring your pricing. And you haven't kind of kept up to speed with it. You need to think about the way in which you communicate it to articulate that. If it is literally you haven't changed your prices for 10 years, and then suddenly you realize, well, maybe we should change our prices. And there's no real driver, you need to be ready for a harder conversation. If it's something obvious, you know, steel price has gone up by X, then then that's usually something that they can deal with, because it must be happening to them across the board.
And I would say, if you're going to have a difficult discussion, make sure that you've thought through what the optimal price to go out with is. So any price increase likely is going to draw a conversation. So you may as well make sure you've optimized that if you're going to have that conversation.
We have time for one more question from Ben. He asked so this is specific to the search stage. He asked what guidance would you give to a searcher regarding how to bring a seller back to the negotiating table after a prolonged dialogue and prolonged due diligence. So this sounds like a deal that, unfortunately, as we've all seen many times before, has blown up in the very, very late stages, lots of water under the bridge, so to speak. Is there any way in your experience to have the most effective conversation with a view towards bringing that seller back to the proverbial table?
It's question, is it because the process blew up? Or is it because the, you need to just change the price after diligence and you realize you need to bring the price down?
I'm not sure what the context of the question was. So maybe Rafael, not to put you on the spot. But maybe, maybe we can cover both of those questions.
Maybe Pete wants to cover one of them. I think I talked over.
All right. I'll jump in with one you can grab the other one. So yeah, so So I would say that if it's I'll grab the price change one. And then you can grab the it's just gone stale one or something? I think if it's a pricing one. And this is retrospective, right? So it might be tough if you're actually already two years in, but for people that are embarking on new negotiations, that's an important one. I think whenever you're going into negotiations on an acquisition, it's really important to be clear around what your fundamentals are. Because what that enables you to do is during due diligence, as you learn things, you can have really good open transparent conversations with the vendor around why you're changing.
Because you know, we based our initial offer on X, Y, Zed. Now, as all of us have learned, including the vendor during due diligence, actually, it's not X Y, Zed, it's A, B, C. And so therefore, as a result, I can show you exactly how that's impacting the way in which I'm changing the structure or value or whatever of this deal. So it goes to kind of making sure that in the setup, and in the early stages of the negotiation, you're really clear about how you're structuring your view of their business, and the ways in which due diligence might impact your view of their business. So then you can have those conversations if things need to change in the future.
You know what we got one additional question. So I'm just going to actually jump in, because I think it's a good one, we've only got three minutes. So we'll have to keep the answer rather brief. From the perspective of a searcher, another potentially very difficult conversation is when your view of the sellers role is different from the sellers view of the role that they should be playing post close. Jenna, you talked about that earlier, I'm curious if you can expand on that conversation, because it sounds like a very delicate one where pride and ego are involved.
Yeah, and especially in our situation. So there's two of us coming in to replace one CEO. So three became a crowd very quickly, in terms of roles and responsibilities. And so that kind of opened the conversation with, hey, we can't have three people leading and making decisions, it's not effective. Again, I think transparency and why this is important for the organization was key. You know, in this case, he cared nothing more about what happened to his company after he left like there was genuinely some that was important to him, he had an urn out, he's on the board. And so portraying the conversation about this as the best thing for the company is to be clear about who's running the day and making the decisions was an effective tool for him. But I think, positioning it in a way that will resonate with what his motivations and goals are, and then being really transparent. And direct was was the approach that worked.
With our remaining two minutes, does anybody else have an experience share?
After our initial experience with sellers, we went through that period I described earlier where we didn't do any deals with sales came on board. And when we started to open the spigot back up again, I would not put sellers in line jobs. So I brought one in as vice chairman, and others in his as operational consultants, but not having line responsibility. And what I found more often than not, was after a period of time where they thought they'd be engaged, they start to enjoy some of the fruits of the sale of the business and so forth, and within a year will voluntarily moving down into a part time role. So I found to be very effective.
The only comment I'd make is there's the same thing I'd say about businesses, regardless of how much due diligence you do, you'll learn more about it the day after you bought it than any day before that right. And in the same way for the seller themselves and for you in regards to the seller. You'll never truly know what it is that they either do or want to do in the business post completion until you get post completion. So it's really really important to not overestimate how much of a spective you'll have on that until after you actually get in there. You just got to be ready and agile to respond, I think.
Very true. Perfect place to end. Thank you so much the panelists really appreciate your time.
