Rule No. 1: We Will Not Have Civil Wars

Introduction:

This week, Shawn Busse, Paul Downs, and Liz Picarazzi talk about why it’s so easy for tension to break out inside a business. Liz sees tension brewing between her people in the office and her people in the field. Shawn often sees friction at businesses between sales and those who have to deliver what sales sells. Paul says there’s always the potential for tension when a project gets handed from one set of workers to another, and he’s created a very deliberate process to address it. We have, he says, “really tamped down the civil wars and started solving the problems, as opposed to letting them fester.” Plus: Are Shawn and Liz going to hit their numbers this year? And have the owners seen their health insurance rates for next year?

— Loren Feldman

Guests:

Shawn Busse is CEO of Kinesis.

Liz Picarazzi is CEO of Citibin.

Paul Downs is CEO of Paul Downs Cabinetmakers.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome, Shawn, Paul and Liz, it’s great to have you all here. Liz, I’d like to start with you. You told us a couple of weeks ago that you had put an idea in front of your EO group, whether to pursue investment capital or not. You also told us you were going to a big EO event. Has that happened?

Liz Picarazzi:
Yes, it has. I had a big dose of EO over those two weeks. The EO event is called Nerve, and it’s basically all of the Northeast chapters go down to Virginia Beach and have two and a half days of speakers and various pundits, activities, lots of social events. And it was my first time going to EO Nerve. I had a really great time, and it was coming at a good time, too, because I was discouraged and confused about a lot of things with the business. And there’s nothing like spending two and a half days with a bunch of other insane entrepreneurs to make you feel better.

Loren Feldman:
That was the context that you brought it up. You told us that there are times when you feel kind of alone as an entrepreneur and that it helps to talk to other entrepreneurs. Did it serve that purpose?

Liz Picarazzi:
It definitely did. And the other thing that those events tend to do for me is make me feel a little bit less crazy. So oftentimes, when I go to these events, I may be kind of out there: entrepreneur, very dreamy, very creative, very grandiose—definitely grandiose. I feel very self-conscious about being grandiose a lot of the time in my normal life. But when I get around 600 entrepreneurs who are all grandiose, it’s amazing.

Loren Feldman:
So you felt less crazy because everyone else was crazy.

Liz Picarazzi:
Exactly. Yes.

Paul Downs:
Who is the craziest person you met?

Liz Picarazzi:
Oh, boy, that’s a good question. I’ll just say that there are a bunch of people that are just all over the map with businesses they’re in. And that always makes me amazed. Someone may have made their living in manufacturing, sold their business, and then they start investing in real estate, and they get into crypto. And next thing you know, you’re talking to them at a cocktail party, and they have four businesses going in totally different areas.

And those are the people I always find to be especially fascinating—just how far their brains can stretch and just have such a wide range of activities. Some of them are probably profitable, some of them not, but they’re trying a lot of things out like an investor would do with having a diversified portfolio. So that may not exactly answer the question. But for me to be able to have like six balls in the air, and they’re all pretty different, is very crazy.

Loren Feldman:
You mentioned crypto. I don’t even know how to deal with that. I try to avoid it mostly. Was that a significant portion of the event? Was that something that was on the menu?

Liz Picarazzi:
No, I just find that a lot of entrepreneurs, particularly if they’ve sold their businesses, are into crypto—even if they’re skeptical—because they have the means to play. It’s like gambling, and they’re really fascinated with it. So I definitely would not say it was, in terms of the programming. But when you talk to people, there are definitely groups of people who are really nerds in crypto. And I have eight forum mates, and I think all of them are very well versed in crypto. Some of them are active investors, and I’ve done nothing on it. I have a barrier from trying to get into it or learn about it. I feel like it’s just, maybe, it’s above me. Or maybe it’s just a distraction, but it’s not for me right now.

Loren Feldman:
But you’re curious. Interesting. Paul, Shawn. Either of you putting money into crypto?

Paul Downs:
No.

Shawn Busse:
I have no interest in it. I can’t. I’m sorry.

Loren Feldman:
Don’t be sorry.

Paul Downs:
My son has been involved in it in a way that I don’t understand. And somehow he made a fair amount of money running a server that does a particular thing for some particular type of crypto. But it became irritating. He’s trying to sell it. And it’s just a giant pain, and he’s done with it. He assured me the whole crypto thing is crazy. Don’t get involved.

Loren Feldman:
All right, so to talk about something that might actually be of value to someone listening to this podcast, Liz, we communicated before this a little bit, and you talked about some tension within your business between, I think, people who are working in the office and people who are out in the field. Can you tell us about that?

Liz Picarazzi:
Yeah, I’d love to. And this was actually a problem—or a challenge, I should say—with my previous business, my handyman business. So in both of these businesses—Citibin, where we have installers, and Checklist Home Services, where we had handymen in the field—there has been kind of a schism that is always there—sometimes it’s better, sometimes it’s worse—around, probably: Do we understand each other? Do the people in the office understand the schedule that they’re putting on us in the field? Do we understand how long it takes to drive from southern Manhattan to northern?

There’s definitely a thought that we’re out of touch with what the field experiences and needs. And no one has said it to me in that way, but I do recognize the sentiment from my previous days in the handyman business where there are just the different skill-sets. There are different needs. Typically, in the office, we’re client-facing. We want to say yes to client requests. We’re not always going to be as realistic about how long things will take, because we’re going to do whatever we can to please our customer. And that is not something that we then feel in the field, because we’re not driving the truck. We’re not dealing with the gas, and the lights, and the tariffs, and the unexpected things that come up.

So this is just to kind of paint what it’s like as we grow. Everybody in the field feels that we’re out of touch in the office. And it’s kind of come to a head, because one of our most valued employees is going to be leaving. And largely, he’s quitting because of feeling like he’s pulled in every direction all day long, and he just gets exhausted. The other thing I should say about that employee is that he does tend to work in Times Square a lot, and he hates it. Like, he feels like it’s a hardship. And I have to agree with him, because I’ve been there with him a few times, with just the noise and the smells and the garbage juice and everything we’ve talked about on here before.

So I’ve had to look at: What are some changes that we can do—and I think there are quite a few of them—to bridge the gap? But it’s come up for me pretty intensely recently, and for years, I haven’t really felt it. But this divide is very apparent at this stage of the business.

Loren Feldman:
To what extent, Liz, is it a sales issue? I think it’s pretty common in businesses where the sales people who are incentivized to sell, sell more than can be delivered? Is that part of this?

Liz Picarazzi:
Not really. This is a lot more about logistics and moving things from one place to another, making sure we’re staffed correctly on the installations. If a last minute request comes in, do we prioritize it and drop everything else or not? And to my installers’ credit, we have been dropping things to be able to do something higher-priority a lot since the city work started. So if I hear about something in Times Square that needs to be addressed, I’m literally going to get someone there the very next morning.

And they probably think I’m being a little bit hyper about it. But you know, I want to do great with the city contracts. So it’s taking people who used to do residential installations day after day after day, to going into various neighborhoods, commercial neighborhoods, including Times Square, where there’s a really strategic imperative that we do it right away. And so you know, they feel like their schedule has been upended.

Loren Feldman:
Paul or Shawn, have either of you experienced anything along these lines?

Paul Downs:
I have. In a woodshop operation, there are a couple of natural civil wars that want to form all the time. And one is between the guys who are in the shop, building the work, and then the finishing crew, who are applying the finishes. Because the build guys build it, hand it to the finishing guys, and the finishing guys often discover problems or issues that should have been addressed on the shop floor. And the build guys often are thinking, “Well, we’ll just let the finishers fix it if there’s a ding in it,” or whatever. And I have experienced that situation sort of drifting out of control. And in recent years, I’ve implemented a number of things to really prevent that from happening, because I think it is extremely destructive.

I think that the first thing that I did was just think about where the natural schisms are going to form. And we have a sales team. We have a project-management team, who also does quality control. We have an engineering team. We have the shop-floor guys building the work. The finishing crew finishes it. And then a delivery-and-logistics operation, who are packing, shipping, and installing. And that means work is getting handed off from place to place throughout the process. And at each one of those handoffs, there’s the possibility of miscommunication and finger-pointing.

And my approach has been, first of all, to make sure everybody understands that these are natural points of contention, and that we have to manage it. And rule number one from Paul Downs is: We will not have civil wars. I do not want to see it. Nobody really enjoys these things. They don’t do a company any good. But the boss has to be crystal clear, I think—or that’s what’s worked for me. At all moments, when the conflict starts, it needs to be addressed immediately. And everybody needs to understand that the worst thing that can happen is these things flare up and get out of control.

And then in order to prevent that from happening, there are a number of things that we implemented that have been effective. And the first thing is that, when we try to address problems, we get everybody who’s involved in the same room to have the discussion. That is critical. You can’t listen to one side of the problem, as the boss, and hear all about that. And then 20 minutes later, listen to the other side of the problem, and then try to come to some kind of decision. That just really doesn’t work. Whoever is more persuasive is going to persuade you, and that may or may not have anything to do with the actual problem, because some people are just more persuasive. So I learned the hard way: Put them all in the same room when you address problems.

The second thing: When we’re addressing problems, we have a set of behavioral rules that everybody is quite familiar with, that talk about how you can have a discussion about problems. What is okay to say? And what is not okay to say? Is yelling okay? No, yelling is never okay. Are insults okay? No, insults are never okay. We’re going to have a model before we even start of what this discussion is going to look like. And I make all the participants actually read out loud what the rules are, before we even have the discussion—just to remind everybody, “Here’s how it goes.” You don’t interrupt somebody, and then that person has the duty to not repeat themselves. And there’s a bunch of them. And so you’re really imposing the will of the owner on everything that’s happening here in order to solve the problem.

But then another thing is that you actually have to try to solve the problem, and listen carefully to what the solution is, and then have regular means of people giving further feedback and further follow-up. So we have regular meetings every four to six weeks where we just go over issues. Again, everybody involved is sitting there. And it’s like a release valve so that people know there’s a way to address problems that isn’t just fighting with your co-workers. Those things have been pretty effective for me, and we have—over the last three or four years that we’ve implemented these rules—really tamped down the civil wars and started solving the problems as opposed to letting them fester. Now, Liz, with your crew, some of them being out on the road all day, the other ones in the office, how often is everybody in the same place?

Liz Picarazzi:
That’s a good question. We’re typically only in the same place maybe twice a month. And for this recent—I don’t want to call it an upheaval, but it feels a little bit like that—we did have a get together on Monday where we all got together and discussed perspectives and solutions. And there are a number of new things that we’re going to implement. But it’s also interesting that you ask, because we’re in the process of moving right now. And we’re deciding whether we want to consolidate everything into one space. So it’d be our office, showroom, warehouse, and woodshop—or if we just put the warehouse and the woodshop consolidated into one space, and we keep the office and showroom in its current place.

The reason I bring that up is that that is a big sort of a cultural decision of: Do we want to have physical divisions between where we work? Or do we want to have it all in one place? And I’ve been going back and forth for the last couple of weeks. We’re going to be making a decision tomorrow about the new space. But having people report to the same place in the morning is something I’d really like to have. I just don’t know if it’s going to be possible.

Paul Downs:
Well, I would recommend that you do that, if at all possible, because one of the ways that we manage our conflicts is just by A) we’re all in the same place. So rule number one is: When you have a problem, go talk to the person involved about it. I constantly see my people walking back and forth from wherever their normal workstation is to somewhere else to have a discussion with the other people. And I think it would be much trickier if had to get in a car and drive half an hour. So the physical arrangement of the space is either gonna emphasize or de-emphasize the potential for civil war.

The second thing is really just to be crystal clear with your people that you don’t want this to happen. You don’t want to see the behavior, and we’re going to do things about it. And you’re going to do them on a regular basis. Because if you just treat it as a one-time flare-up with a one-time fix, there’s no release valve. It’s just going to be another six months, and then a war will break out again. So I try to have all my people together for a Monday morning meeting where I just give them updates on the status of the company. But we have other meetings too where everybody who’s in a position to make a decision about these kinds of things is in the same room all the time, so that they’re seeing each other. If the people in the office never actually even see the people on the road, it’s a much trickier problem.

Now, I know other businesses—like I know a guy who owns a plumbing company where he’s got the same situation. There’s an office crew. Then there are the plumbers who are in trucks all day. And he has the same problem you do, Liz, which is that you get this natural division between the people in one place and the people in the other place. And as far as I know, the only solution is to get them in the same place fairly regularly and to set up procedures that are about releasing tension and solving problems and discussing these things.

Now, not everybody I know has the rules that we have about how to have that discussion. But I find that that just makes the discussion so much more fruitful if we agree on how we’re not going to do it, which is a lot of finger-pointing and blame and yelling and screaming and whatever. So that’s been my approach to civil wars, and I would say it’s been pretty successful.

Loren Feldman:
Shawn, have you had experience with this, either at your business or at businesses you work with?

Shawn Busse:
Yeah, a lot of what Paul just said, I’ve seen in action. And it’s funny you mentioned a plumbing company. We had a client that was a plumbing company, and it was horrible. I would say it’s probably one of the top five or 10 business threats to an organization. And what I’ve noticed is that it manifests for two reasons. I think reason number one—which might be Liz’s situation—is growth. And so the business has new needs than it had before, and so you’re having to change very quickly. And folks cannot understand the needs of different folks within the organization.

So the operations people—this is really classic, right?—are desperately trying to get things to a predictable system that they can repeat over and over and over again. While the sales and marketing and innovation people are, like, “Ah, there’s an opportunity over here,” and they’re constantly changing and reinventing. And so that friction is really kind of a growth-oriented friction.

And then the other reason for it happening is, within an established organization, it’s much more about politics and fiefdoms and power. And I think Paul’s insights into this are really smart. Because the tendency, as you become a mature business, is to organize by silos, so you can be efficient. And it’s those very silos that also can be the undoing of the business.

And so you really have to actively work to break down those tendencies of tribalism, and fiefdoms. And I think empathy for each other’s jobs is critical in that, and so having folks do the work that they’re not normally doing, or sort of sit with the person who’s doing the thing that they’re not familiar with, can be really helpful.

I’ve felt it myself too, in our organization. It’s been really detrimental. This happened maybe five or six years ago. We hired somebody who really tried to build that. They really tried to create the division, and it harmed us. It was really bad for us. It cost us probably hundreds of thousands of dollars. So I think you have to approach it like it’s really important.

Paul Downs:
Liz, what’s the impediment to having the single space? Is it just a question of the rent’s gonna be too high, or you can’t find the right place, or what?

Liz Picarazzi:
Well, so we’re in Industry City, and everything would be in Industry City.

Loren Feldman:
Explain what that is. What’s Industry City?

Liz Picarazzi:
Industry City is a large manufacturing, creative space in South Brooklyn that used to be all factories and warehouses. And now it’s a gigantic kind of entrepreneur complex for creatives. It’s really an amazing place. And I think there are 20 or so buildings on the campus, and we’re in one of them. And we’re thinking about putting everything else—the warehouse—in another one that’s literally a 10-minute walk away. So if you imagine a college campus, those two buildings are about 10 minutes apart. But if we were—and we can afford it, actually—to consolidate all in one space, we would want to do it, but it’s kind of complex with moving our office and everything. But it would be possible. But also, if we couldn’t be in the exact same space, we could be on the same campus.

Whereas now we have a warehouse that’s two hours away in New Jersey. We have our woodshop in another area of Brooklyn. And then we have our office here at Industry City. So this is a complex that wants to work with us to be able to consolidate everything together. They know that I currently have three checks going out to rent the three different places, and that I would really like to just write one check a month. So they’re working with us on that. They’ve been really generous with the negotiations. So I do have a good opportunity to, I think, make a decision not only about our space, but about culture. And that’s part of why I thought, “Wow, this situation, the schism between the groups could be… I don’t know, mitigated a bit by having a common space.”

Paul Downs:
I think it would be, and I would reiterate that, as the boss, one of your main jobs is to, first of all, acknowledge that there are problems, and that the problems are built into the nature of the business. So it’s not just because Joe does this, or Jane does that. Because there’s always a problem. I’m constantly talking to my people about the things that are happening in our shop, and just telling them that everybody has these problems. And they find that very comforting, because otherwise, it seems like we’re uniquely stupid, or that person is more irritating than anybody else on Earth.

And if you just say to them, “Listen, I talk to a million business owners. Everybody has this problem. And the only way to solve it is by continually working on it.” You have to acknowledge that it’s going to be there. You can’t say to them, “Hey, we’re never gonna have tension anymore.” And what I say to them is, “No, we’re gonna have tension. What we do is hard. And there’s always going to be these issues. And the question is: How do we manage it so that we can maintain team spirit and collegiality, and no one has to come to work afraid of somebody?” And that’s my goal. Not that you can eliminate these things. You can’t. But if everybody understands that it’s just part of the day, then it becomes much, much easier to manage.

Shawn Busse:
I think you see it, too, a lot—and you mentioned this, Loren—in the sales versus delivery side of things. And I’d say that’s probably one of the worst areas. Because the sales organization connects directly to revenue, they have a lot of power, and they can sort of get their way. And then the folks who are doing delivery can feel very powerless. I see that a lot, too. It’s tough.

Paul Downs:
That’s one of the natural arrangements of civil wars is that there’s a class issue baked into it. One of the other things that we do to discourage this—and this is probably easier in my situation than in yours—is make sure people do each other’s jobs as often as possible. So I can’t get a shop-floor guy to be on the phone with a client and sell something. That doesn’t really work. But the guys who are selling are on the shop floor quite a bit. My engineers are on the shop floor. I’m on the shop floor.

And so one thing that you might consider, Liz, is have ride-along days where whoever’s in the office—particularly the salespeople—are actually out there playing with the garbage juice. You deliver the message that: Nobody’s too good to avoid the bad parts of the job. And you at least have to understand what they are. And that could do a lot to lower the temperature of everybody.

Shawn Busse:
Hey, Paul, I’m kind of curious. So like, what Liz described as one of her tensions, I think, is that she’s making decisions that she thinks are really important for the company, and are like, right in the moment. You know, like, “We’ve got to do this thing because it’s an opportunity. It’s gonna pass us by. It’s really important.” And I also understand that, right? It’s like, “Boy, we’ve gotta pivot here,” and it causes friction within the organization. Have you worked at resolving that piece of it?

Paul Downs:
Yeah, a big part of it is, in my Monday meetings, I tell people when we’re about to do something different. Like, okay, yesterday, I was in the Pentagon. And the work we’re doing there is for the very highest levels of leadership. So I may say to the company, “Hey, we’re working on this job. It’s for these people. And this is critically important to the health of the company in the future. And here are the problems I see may come up, but I want you all to understand that we may need to juke and jump in order to solve these problems. And this is why we’re doing it.”

And so we’re doing various marketing initiatives with reaching out to new kinds of customers, and I have that conversation with my sales team: “Okay, we may get a call from this kind of person. Don’t treat them like the regular thing. This is a whole new world we’re opening up. Maybe whereas you would normally just send it through the process, no, you’ve got to send this one to me.” Or whatever, just tell people what the bigger picture is that makes those decisions in context.

So like, Liz, I hope you told everybody that you thought that being in Times Square was a big feather in your cap and the path to future prosperity. And then you have to kind of repeat everything that you say all the time. I think this is the most non-intuitive part of being a boss, is that you think you can say something once and go, “Okay, that’s settled.” Never. The more important it is, the more often you gotta say it.

Loren Feldman:
Paul, I gotta ask you, did you try a version of this technique as a parent? And did it work?

Paul Downs:
Oh, yeah. Definitely. [Laughter] I mean, when you teach your kids to say please and thank you, you’ve got three or four years of saying, “Say please or thank you.”

Loren Feldman:
I wish you had told me about this a few years ago.

Paul Downs:
No, I mean, it’s not dissimilar to that—with one exception: Your employees are not children. So they have the ability to understand more complex situations. And also, they’re not your children. You can’t treat them like children. What I’m trying to do is treat them like people who should know why they come to work and what the effect is of the thing that we’re doing. And it’s more like a courtesy to the employees to inform them what the bosses are thinking and where the company is going. And I think that that’s helped us a lot with employee retention and happiness.

Loren Feldman:
On that point, Liz, you mentioned that you lost a valued employee over this. I’m imagining you tried to keep that person. What kept that from working?

Liz Picarazzi:
Well, so he’s actually still here. He gave us a month’s notice, which was really nice. I am working on him a little bit, because I think that we could balance out the schedule with him doing less of the dirty work, quite frankly. The other thing that this situation has brought up for us is that we currently don’t bonus the field team. And I hadn’t honestly thought about that a whole lot before. And I realized, if I’m asking them to all do things beyond what they ever did before we got the city as a client, shouldn’t I recognize that through something other than just thank-yous and maybe an increase in your salary, but an actual bonus?

I feel like Frank and I did decide we’re going to bonus the field team this year, based on how they’ve gone above and beyond. And actually, he didn’t hear that yet. But I think if that’s communicated to him, that could help as well. I may have sent him a text that said, “You’re so good at your job.” Period. And then nothing else. He didn’t reply to that yet. But he’s very valued.

And I actually have to say, he did quit once before, like it’s a weird relationship. But we do have a history of sometimes having installers leave and then come back. So I’m hoping he won’t actually leave, but we’ll see. I mean, honestly, he has been doing a lot of the work in Times Square, and he’s so revolted. Like, he can’t even think of going there again.

Paul Downs:
Well, you’ve gotta listen to that. He’s over the top. You broke that one.

Liz Picarazzi:
I don’t know, Paul. I don’t want to say it’s broken yet.

Paul Downs:
What you said is not how I would manage my workforce. One thing, I try to, first of all, have individual conversations with people on a regular basis and tell them they’re doing a great job, and just be a cheerleader, walk around the shop. You know: Here’s a new guy. “How’s it going?” That personal relationship I’ve found to be effective for me.

I mean, I can’t comment on the personalities involved, but I think that everybody enjoys having someone say, “I see you. I noticed what you’re doing. You’re doing a great job. And it’s important. And thank you.” That’s the essence of what I say to all my people constantly. And again, repeating it. I mean, I don’t know, maybe I’m just convincing myself that I’m so great, but it does seem like people like to hear it. Part of your job as a boss is to be a cheerleader, and that helps people show up at work. It sounded like Liz had done sort of a tepid job of doing that with this person.

Liz Picarazzi:
I would not say it was tepid. I would say that the thing with texting, “You’re so good at your job” was a little bit kind of humorous. Because it’s almost like he wants to leave, but he’s a little bit on the fence. So we’re kind of having a little bit of fun with it. I mean, I feel like announcing the bonuses at the meeting, as well as adding some Saturday shifts in case they want to get paid time and a half, those are two things that are completely new.

I don’t want to say that it’s a complete schism, like we hate each other. I think we all get along really well. But there’s definitely a place where we’re feeling that each side doesn’t understand the other. And the conversation that we had on Monday is just going to need to continue.

Paul Downs:
Yeah, it’s got to continue. It’s got to be regular, because the feeling of frustration is going to be constantly bubbling up, and you’ve got to find a way to release it without having it get personal.

Liz Picarazzi:
Yep. Another reason why I really want to work on this is that we’ve had a couple of really good salespeople come up through the field. So they were installers, they worked in the shop, then they proved themselves really great at also working in the office. And now my top salesperson is someone who started on the shop floor five years ago. And I would love to replicate that.

I have another guy whom we’re kind of grooming to do the same. But I often have thought I would love to be able to hire these installers with the view of getting them to eventually work in sales in the office. And I think that was kind of—I don’t want to say misguided, but—very presumptuous that someone would want to take that path. And I often assume that they do want to take that path and try to groom people that way, but some people may just always want to be installers. And that’s good.

Paul Downs:
Who gets paid more: Office or installers?

Liz Picarazzi:
Office.

Paul Downs:
By a lot?

Liz Picarazzi:
Umm… Not by a crazy amount.

Paul Downs:
What does an installer make? I’m just curious.

Liz Picarazzi:
My installers make between $25 and $35 an hour.

Paul Downs:
That seems not terrible, although I can’t comment. Maybe in New York, $25 doesn’t cut it anymore. But they’re doing skilled labor where they have to make decisions, and they’re in front of customers?

Liz Picarazzi:
Not really. These are all outside installations. So they can go there with everything, with the van, everything loaded up, and do the installation, and not have any customer contact. And I do have several employees who don’t speak English. So we always need to be kind of careful about how that’s scheduled to make sure someone—if there is a client conversation—would be able to have it.

Shawn Busse:
I think the thing I would just raise my hand to say is, it’s been my experience that when there’s a challenge with an individual employee, for sure, money has never fixed that problem for me. I’ve always found that, when I apply money to the problem, that that person eventually leaves, and not that long afterwards. And it’s like, “Wow, this person is working really hard. Let’s move them up to the next pay scale,” etc., but they’re really under a lot of stress.

The money has never fixed it. I would just be curious, if I were in your shoes, what you’re trying to achieve with the money piece. Is the bonus more of a holistic, “We recognize this position is harder and different”? Or is it, “I’m trying to solve this one person’s particular issue”?

Liz Picarazzi:
Well, in this case, it’s that we don’t want only part of the company to be bonused, and the other not. It’s not about in between different people. It’s that the principle of: Everybody gets bonused based on certain criteria. Right now, only office gets bonused. And if I were them, I would notice that. No one’s ever really said anything, and actually no one’s asked for it, to be quite frank. Frank and I discussed it and thought this would be a really good thing to do, and it makes total sense. And why didn’t we think about it before?

Paul Downs:
I think that having a bonus program just for the office, you’re like begging for a civil war with that.

Shawn Busse:
No kidding. Yeah, it’s dangerous.

Paul Downs:
The other thing is that I don’t like bonuses as compensation. I think bonus should be extra, so that if your guy was doing whatever he was doing for 35 bucks an hour, and then all sudden, he’s got to wade around in garbage juice in Times Square and he hates it, then he should have had a raise. Or there should have been combat pay, or something for the times he had to do that. Some bonus in the future, undisclosed amount, undisclosed date, that doesn’t motivate anybody.

Loren Feldman:
What triggers your bonuses, Paul. Is it the overall profitability of the company?

Paul Downs:
I’ve gone through a lot of different formulas, and I’m back at the one that is called “rich and happy”—which is, when I feel rich and happy, I give out money. And now when I do it, I try to do it on a pretty equitable basis. I’m keeping my company informed of what our profitability for the year, the quarter is. Basically, every month, they’re updated on that.

And when I feel like we’re in decent shape, I say, “I will now, for the next payroll, implement a bonus pool of 40 grand,” or whatever it is. And here’s how we’re going to divide it: Whoever showed up, however many hours they came and worked, that’s your portion of the bonus pool. However many hours you worked, compared to the total number of hours in the shop. So vacation, sick days, don’t count on this. It’s like if you showed up, for however many hours, and you worked hard, which is what my people do, you’re entitled to that percentage of the overall hours.

Loren Feldman:
Not based on salary, then.

Paul Downs:
It’s not based on salary. If the guy who pushes the broom shows up the most, then he gets the biggest piece of that chunk. And that actually has worked out pretty well, as far as I can tell—although I think that getting honest feedback about things like this is very difficult for a boss. But nobody’s complained to me about it.

Because on the face of it, it’s fair in a way that a fourth grader would understand. And that, to my mind, is how you want to give up goodies. You want to have sort of the kindergarten idea of fair, so that nobody can can say, “That’s not fair.” Well, there’s a lot of different ways you can sort of game fairness to make sure that the people who are at the top end up with the most, but I like to just say, “We’re all in this together. Bonuses are divided, not based on salary, but on how often you’re here working.”

Loren Feldman:
Is that what you’re imagining, Liz?

Liz Picarazzi:
I haven’t thought it through well enough. I don’t want to say. I think I’m gonna have a bonus pool that is going to be overall for the year. And I need to just sit down and think about how exactly it’s going to be divided and how it’s going to be communicated. So in the meeting the other day, I didn’t specify anything, because literally, I had only thought it up like two days earlier. And I know it’s a big decision.

Loren Feldman:
All right, let’s take a quick break here. We need to hear from our sponsor. And we’ll be right back.

[Message from our sponsor, Work Better Now]

Loren Feldman:
And we’re back. Shawn, did you have anything you wanted to say?

Shawn Busse:
Oh, I just think the topic of bonuses is a huge area of discussion. And I think that folks do it for usually one of three reasons, which is, one, they’re trying to change behavior, which I don’t think that works. Two, they’re guilty, because they’re making so much money. And then three, which is I think Paul’s motivation: “Hey, these people are contributing to the goodness of the company, and I want to share in that.” And so I think it’s important to really try to figure out what your reason is for doing it. And I would really steer our folks away from the life-changing behavior with bonuses. I’ve just not seen that work.

Loren Feldman:
We should probably do a whole show about that. I’d like to move on to something else. Lately, I’ve been asking folks whether they’re going to hit their numbers this year or not. I’ve already had that conversation with Paul, who’s having his best year ever. Shawn, let me ask you, you’ve spoken about this being a difficult transition since the pandemic. I’m kind of guessing you may not be hitting your numbers. Is that right?

Shawn Busse:
Yeah, I mean, we knew this would be a hard year. It’s been a hard year, from a growth perspective. It’s been a pretty good year for customer retention, but yeah, the growth that I wanted to see and achieve over the long-term, we’re not anywhere near it.

Loren Feldman:
How is that affecting your thinking for next year? Are you starting to plan and budget for what you hope to do next year?

Shawn Busse:
Yeah, I mean, it makes everything harder when you’re not up and to the right, because there are certain decisions that I feel we need to make for the health of the business that are kind of in opposition to the financial trajectory. So, for example, I’ve come to the conclusion—not unlike Liz, I think—that having us all distributed is not good for the long-term health of our organization. So we need a shared space that we come to at least some number of days a week. So that’s a lease.

Loren Feldman:
You gave up your office during the pandemic. So now you’re thinking about taking a new one?

Shawn Busse:
Yeah, exactly. That’s the tough part about being an owner, is when to take risks that you can’t really say, “Well, what’s the ROI on that?” What’s the ROI on togetherness and a sense of shared community and the efficiency of communication—all those kinds of things? Quite candidly, our financials don’t really support it right now. But I don’t know that we can afford not to do it.

Loren Feldman:
We’ll be eager to hear what you decide. Liz, I think you told us at the beginning of the year that you were hoping to double your revenue this year. Are you on track to do that?

Liz Picarazzi:
We are slightly under. Currently, we’re 51 percent over last year to September. And then for the year, we are looking to be 86 percent over last year, so almost double. And we could do a push at the end and make that.

Loren Feldman:
Are you happy about that?

Liz Picarazzi:
I am. I’m very happy. I’m very happy, because some of the work that we thought we would do with the city this year is actually going to happen next year. So although it’s not counted in this year, I’m going to feel that our effort made to get those city contracts would get us to doubling. It’s close enough.

Loren Feldman:
What are you planning for next year? Are you going to double again?

Liz Picarazzi:
Definitely. Maybe triple.

Loren Feldman:
Wow.

Liz Picarazzi:
If we end up getting an actual beyond-the-pilot here, if we get a real contract for city-wide, we’re going to just blow it out of the water completely. If we expand to more cities, that also will be huge growth.

Loren Feldman:
If you were to triple, how many more people? How much more capital? How much more space? What does that mean?

Liz Picarazzi:
I think that would take me a couple of hours to explain things through. But I have to get serious with that. I know that, with at least some of my EO forum mates and other entrepreneur friends who have been in high-growth mode, I want to sit down and kind of say, “If you were me, where would you grow these departments? Who would you put in where? And when? And how much would you pay them?” I am feeling a little over my head with some of those organizational growth decisions that need to be made, or at least planned for. But I also kind of feel like I want to continue at this growth rate we’re at right now, to be able to somewhat more slowly make the decisions, which I know sounds dumb. But I don’t feel like if I had to make a lot of decisions really fast, that I would do a very good job.

Shawn Busse:
Can you clarify that, Liz? Do you want to continue the growth rate you’re at now? And you said you’re at a 50-percent growth rate? Is that right?

Liz Picarazzi:
We’re at about 50 percent as of now, but to the end of the year, if we’re tracking, we’re going to be about 86 percent over last year.

Shawn Busse:
So you want to continue compounding 80 percent?

Liz Picarazzi:
Yes.

Shawn Busse:
That’s a lot of growth!

Liz Picarazzi:
But I think I could. I mean, if things continue to go well, it’s possible.

Shawn Busse:
No, I’m not doubting it. I’m just sort of like, hearing part of you say, “This feels really fast, so I want to kind of maybe slow down.” But 80 percent doesn’t feel like slowing down. Maybe I’m not hearing you right?

Paul Downs:
So where are you going to find the installers?

Liz Picarazzi:
I am going to continue to recruit. We haven’t actually been actively recruiting much because we have like a friend group that is bringing in their other friends, and it’s actually never been an issue where—

Loren Feldman:
You have a friend group meaning you have installers, who—

Liz Picarazzi:
Installers who know each other, yes. So I have a group of like six Venezuelan friends from the old country who all moved over here to New York around the same time. They’re all completely legal and working in various capacities. But these guys have known each other for over 20 years. They work really well together. It has been great for me, because I have not had to be a team leader of a crew of guys. I mean, there’s an obvious leader to the group.

But there are only so many great Venezuelan installers in New York. We need to move beyond that a bit. So far, it hasn’t been an issue, because every time we’ve needed to scale up, we’ve been able to find people to work temporarily. But I need to tighten that up. We’re going to be recruiting on Indeed, Monster, and Craigslist. We haven’t done that in like over two years, because we’ve always been able to get other employees through this friend group.

Loren Feldman:
The last thing I wanted to ask you guys: This is the time of year when a lot of businesses find out what their health insurance is going to cost next year. I’m curious what you guys are looking at. Paul, you’ve always been very thoughtful and done a lot of research into this. What’s going on with your health plan?

Paul Downs:
I haven’t seen the numbers yet. But it’s never fun.

Loren Feldman:
Is that expectation based on anything other than it’s what always happens?

Paul Downs:
27 years of interacting with Independence Blue Cross, I know exactly what’s going to happen. So I’ve got no… My eyes are open here.

Shawn Busse:
It’s a totally broken system. I mean, there’s just no shopping around.

Loren Feldman:
Well, there is shopping around, isn’t there?

Paul Downs:
No. It’s utterly meaningless. When we look at quotes from the two major providers in the area, those companies are quite careful to make sure that you can’t directly compare whatever they present to the other company’s format of presenting. There’s never an opportunity to put two pieces of paper next to each other, and make sense of it. They go out of their way to make sure that doesn’t happen.

Shawn Busse:
Yeah, I mean, you can have these incremental gains. There are multiple plans available here in Oregon, and you could switch from this to that. And you can kind of save a little bit in the switch. But it’s just inconsequential, in the grand scheme of things. And really, what it boils down to here in Oregon, is whether you just go the route of the high deductible/HSA or traditional plan or I think it’s an HMO here, I can’t remember who it is, but that’s cheaper. But it’s also shitty. It’s just a broken system, top to bottom.

Loren Feldman:
On that note, my thanks to Shawn Busse, Paul Downs, and Liz Picarazzi, and to our sponsor, Work Better Now. Thanks for sharing, everybody.