Have We Been Too Generous With Employees?
Introduction:
This week, Mel Gravely, Jaci Russo, and William Vanderbloemen talk about the possibility that, after several years of the Great Resignation and the labor shortage, some owners may have given away the store. We all know the risks of not offering employees enough. What are the risks of offering too much? How do you even know when you’ve crossed the line? The owners also discuss why this might be a good time to consider acquiring other businesses. “I think this is a time to double-down,” says Mel. And Jaci explains how she and her team are reviewing everything the company does to see if AI can be employed to improve each and every process. Oh, and one last thing: How exactly, in this day and age, are business owners supposed to keep track of all of the subscriptions—and all of the subscription log-ins—that they and their employees have acquired through the years? How much money are they spending on stuff they no longer use? “Thanks a lot,” responds Mel. “I’m starting to sweat.”
— Loren Feldman
Guests:
Mel Gravely is CEO of Triversity Construction.
Jaci Russo is CEO of BrandRusso.
William Vanderbloemen is CEO of Vanderbloemen Search Group.
Producer:
Jess Thoubboron is founder of Blank Word.
Full Episode Transcript:
Loren Feldman:
Welcome, Mel, Jaci, and William. It’s great to have you here. In our email exchanges this week, Jaci, you raised an intriguing question. I don’t want to put words in your mouth. But what I read into your question was this: We’ve been through this really interesting period, a challenging time with the pandemic, the Great Resignation, the labor shortage—which I’m not sure is completely over yet. But in trying to build a culture and a business through all of that, one that attracts and retains employees, how do you know if you’ve gone too far? Is that a fair reading of the question you were raising?
Jaci Russo:
That is a very fair reading. And I would add to that, I’m in Lafayette, Louisiana. From a salary perspective, we skew lower than national averages—even state averages. And so, is it enough to meet the state average? Do I need to get all the way to the national average? Where is the line for fair and equitable these days? And am I building the culture or being taken advantage of?
Loren Feldman:
Is this primarily an issue of the pay, the dollars, or is it all of the above?
Jaci Russo:
I think it’s all of the above. We’ve always had a flexible schedule, from when we started in 2001. You could work from home or work from the office. And it’s about being a mature adult and knowing what you needed and taking care of it. So there were very few rules around that. We moved into COVID, and so that became even more so. We’ve always had unlimited paid time off. And really, 23 years in, it’s worked very well. I can think of one time when I felt like that was maybe a little bit taken advantage of.
But so, then coming through COVID, we’ve now added to that a four-day work week, pretty impressive increases in pay, a paid professional development trainer who comes to us once a month, paid one-on-one coaching. And so I’m thinking, am I adding more stuff? Have I added too much? When do I know that I’ve reached the line?
Loren Feldman:
Did something trigger this thought?
Jaci Russo:
I think that I can attribute part of my success to the fact that I’m always asking the questions: Am I doing enough? How can I do more? Where’s the right balance?
Loren Feldman:
But now, it’s: Am I doing too much?
Jaci Russo:
Right now, that is the question. Have I reached the sweet spot? Or have I gone too far past the sweet spot? So, nothing’s wrong. I just sat down and analyzed the numbers from last year. And everybody did their salary wishes—you know, “This is what I would love to be making.” And I’m thinking: If I can’t afford it, do I push to it? If I can’t afford it, do I find a way to push to it? Where’s the line?
Mel Gravely:
Interesting.
Loren Feldman:
Mel, William, have either of you thought along these lines at all?
William Vanderbloemen:
Oh, that’s the tension I think everybody that I’m working with is facing. So I don’t know if it’s helpful, or if it’s discouraging, but I would say, Jaci, that you shouldn’t feel alone. And I think particularly what we’re seeing is—as we deal with the reality that hybrid is probably here to stay, some kind of remote work, and also the tension that there’s a whole lot of productivity that happens with people in the office—I think the dilemma that I sense business owners facing is: if I’m going to ask people to be in the office, it better be the best office ever. And it better be someplace people want to come. So they focus on building culture, and they raise pay, and then they put in the Ms. Pac-Man machine or whatever the thing is that makes people feel like it’s fun. And then it’s like: When is it too much?
And I’m a huge proponent of Millennials, Gen Z, and now Gen A. I’m very bullish on our future with them. But there is that common perception I’ve heard for years that, “Well, they’re entitled.” Now, maybe that’s because they got a participation trophy for everything ever. They got titles way before they should have. But I do think it becomes a bit of a black hole. The more you feed this into the culture—“Here’s something I’m entitled to”—the more it becomes a problem. Man, I wish I had the magic formula to tell you how to figure out how far is too far, but you are not alone. And that is the tension I hear a lot of leaders managing right now.
I will say, looking at jobs reports, unemployment rates, all the things that have been a wreck since the Great Resignation—I think that’s over now. And the pendulum, which had swung hard toward the employees holding most of the leverage in negotiations, is swinging back toward employers. It’s not as easy to go get a job as it was. So that may mean that you don’t have to pour as much into culture. And then, having said that, the longer you can keep somebody and not have to hire me as a search firm, the better off you are. And if spending some on culture keeps people a little longer, then I think retention and the value creation of retention is what I hear business leaders wrestling with as they manage this tension. Does that make sense?
Jaci Russo:
It makes perfect sense. And I loved what you said about getting them back into the office. We just invested heavily into taking what was a pretty cool ad agency office vibe—we have both Ms. Pac-Man and Galaga—and we expanded it. Our creative team was, like, “Hey, we’ve done this open-office vibe for two decades now. We want rooms. We want our own offices.” And so we built independent, individual, 10 offices, 11 offices, so that each of the graphic designers has their own space, but it’s no ceiling. And so, it’s both still open and unique and individual. And so that seems to be making them want to be here.
Retention is my word, because I want to make sure we’re retaining good people. We’ve got the greatest team we’ve ever had. How do I keep them happy? And I guess that’s why I’m asking the question: What’s far enough? What’s too far? Where’s middle?
Mel Gravely:
Yeah, I don’t know how many people you have. But just a couple things came to my mind. The way I see this, because I think we lean in pretty hard toward people first, as well, and retention is a big driver behind that. But we’ve also got other things to our culture that we want to be intentional about. So it’s not just to retain. It’s to retain and to support collaboration. It’s to retain and to support high performance. It’s to retain and to support our inclusive environment. It’s to retain and to support high levels of customer satisfaction. And so we tried to get very specific about the why of the culture, not just good culture. So people say, “I just wanna have a good culture.” Well, yeah, but like, let’s define specifically what good is.
And then to me, you take a long-term view, like you would a portfolio of investments. So you named a bunch of things, and I would call that the portfolio: pay, work conditions, office environment, flexibility, all that stuff, right? Paternity leave, maternity leave. All that stuff is the portfolio of stuff. And the question is—and I think this changes over time—which instruments in that portfolio are providing return? Because some of them don’t matter. I’ll give you an example: We’ve got a division in our business that they do not value long-term incentive at all.
Jaci Russo:
Oh.
Mel Gravely:
They just don’t care about long-term incentive.
William Vanderbloemen:
Totally agree with that.
Mel Gravely:
So the portfolio, including long-term incentive for them, they’re like, “Okay, I’ll take it. But could you give me two more bucks an hour, because that’s really what I care about?” And so, figuring out and making sure you stay contemporary around your portfolio balancing. If you see it as a portfolio, then you can kind of manage it that way. And checking in regularly: employee-engagement surveys.
And if your team is small enough, I’d just talk to them and find out, in my one-on-ones, what matters. And once you’re like, “Yeah, I’ll take it, but I don’t really care,”—because it’s all costing money, right? And so, I take away the things they don’t care about, and double down on the things they do care about. And in three years, that’ll probably change. That’s my thought.
Loren Feldman:
Mel, are you referring to, like, a retirement plan? Is that the kind of thing that’s too distant for them to be concerned about?
Mel Gravely:
Yeah, for some of our employees, even the yearly profit-sharing is too far out.
Loren Feldman:
Wow.
Mel Gravely:
But for sure, if I enhanced our 401(k) match, they’d be like, “Okay, that’s cool,” but they don’t care. They just don’t care. And I’m not judging them. What we often do is to create the portfolio based on what we value. And I think we’ve got to ask our people, if it really is about them: What do you value? And then how do I create that portfolio for them?
Loren Feldman:
Although it creates an interesting tension there, because you may think they’re valuing things incorrectly and that they really need the retirement plan. How do you think about that?
Mel Gravely:
Yeah, so in this scenario, what we’ve done is made sure we retained a retirement plan for them. But we treat it differently than we treat another division in our company, because they value the long-term piece of it. So we didn’t take it completely away, Loren, but we’ve bifurcated the two organizations enough so that we can tailor it toward what those organizations like and appreciate.
It is unfair, and it is against one of our values of valuing the individual, to tell them what they should value. I’m not allowed to tell people what they value. I’ve got to listen to what they say and value what they value, because they may be in a life circumstance where, you know, they’re right.
Loren Feldman:
Jaci, I’m curious. It’s kind of obvious what the risk is if you don’t do enough, you could have an empty office. What do you perceive as the risk if you’re doing too much?
Jaci Russo:
That’s a great question. I don’t think that I would ever be accused of not doing enough. I’m a lot every day. And so, the doing too much for me, it’s about: I don’t want to create a sense of entitlement—which, I don’t think this team are those people. I am always cautious, because we’re getting ready to gear up our interview cycles again. And so I want to make sure I’m not attracting people who are coming just for the benefits and are going to be a bad culture fit with the rest of the team. I don’t want to bring in any toxic people. And I want to make sure that we are all in a good place.
And I’m really listening to what Mel just said about making sure that we have the… I love the way you said it. I can’t repeat it. So I’m trying to paraphrase it. Just about making sure we’ve got all those right fits together. Because it’s like, how do I make sure I am giving them the short-term that they want and the long-term that they need? Because I’m a firm believer in the long-term.
We do 401(k) match and vest from day one, because that is so important to me. And I think maybe I care more about them saving for their retirement than they do, and I’m okay with that. But then I think about: Oh, wait, you don’t want profit-sharing and commission and bonuses? You just want a bigger salary? Well then, are you really invested in the growth of the company? And then, should I care about that? Because you don’t own it. So should you care about it as much as I do? No. So these are the things that swirl in my head.
Mel Gravely:
Yeah, I think those are all the right things, though. And that’s why I like to look at this thing as a portfolio, because it can be balanced. I can make decisions to move money from here or there. But Loren, you asked an interesting question: Is there a risk of doing too much? Or what is the risk? And I think there’s absolutely a risk of doing too much, and it has nothing, in my mind, to do with entitlement—although that could be one of the outcomes.
To me, the risk is it could make you uncompetitive. So something has to give. You’re only able to bill the customer what you can bill the customer. And imagining that your fees and your value proposition are lined up, then there’s only so much margin to be spent on people. And if I get it out of whack, I can either become uncompetitive with my customer or become uncompetitive with my ability to make money and my ability to reinvest in the organization—not just as people, but in innovation and other technologies that I might need or in R&D. And over time, I can erode my ability to be competitive. So I am worried about doing too much—not because I don’t want to care too much. It’s because there’s only a dollar to go around.
Jaci Russo:
Right. That’s smart.
Loren Feldman:
William, I think I heard you agreeing with Mel about the issue of people not thinking long-term. How do you deal with the question of whether you give people what you think they should have or what they think they should have?
William Vanderbloemen:
Well, I’m learning as I go, Loren. Two things that I have found personally that help—and I’ve heard from colleagues who also own businesses that they have the same learning—one is, anytime I’m about to add a benefit or a piece of culture to the office—even down to: Do I sign a 10-year lease on the nice office space or not—I’m asking myself: Is this a one-way street? And what I mean by that is, there are some benefits that I’ve seen in business that are very, very hard to revoke.
Here in Houston, we have a massive turnover within the energy industry. Everybody kind of bounces around once bonuses pay out for the prior year sometime in March. The energy recruiters go crazy, because everybody’s ready to move to the next thing. So there’s always the retention question, and one of the things that the oil and gas industry instituted many years ago—it may be in other places as well—it’s called the 9/80 workweek. Is that a term you guys know?
Jaci Russo:
No, tell me.
William Vanderbloemen:
Okay, so the idea was: Look, it’s kind of the predecessor to remote work or hybrid or take all the vacation you want. There are a lot of iterations of this get-your-job-done-and-we-don’t-care-if-you’re-here kind of mantra. So 9/80 meant: We’re going to work 80 hours in two weeks, and we’re gonna get it done in nine days. And every other Friday, you have off. And half of the company is the A team, and half the company’s the B team—not by value, just by grouping. And half of you are off this Friday. The other half are off the next Friday. And, you know, it sounded great.
The byproduct was the team that was there on Friday wasn’t getting anything done. A lot of them were using their PTO for the Fridays they didn’t have off. And there was no policy in place for: You can’t keep taking Friday as your day off. And then, years later, when this became kind of untenable for a few companies, they tried to take it back. And they put pay raises in. And they put better food in the cafeteria. And it didn’t matter. The 9/80 was kind of a one-way street. And the company that was a really good company that tried to revoke it couldn’t get anybody to come work for them.
So the question I’m asking, in my mind, is: Is the benefit I’m offering going to be harder to undo than then the benefit that it reaps for doing it? And, like I say, I’m still figuring that out. We’ve tried to gamify everything. Our COO did a wonderful job. A lot of our work is very collaborative and very difficult to do remotely. So we have consultants on the road, but the in-house team, they really benefit by being together. But you’ve got to do some things remotely. So Jennifer, our COO, said, “What if we did this? We’ve got five core teams in the office. We’ll set stretch goals for them every month—real stretch goals, not fake ones. And if the team hits the goal for the month, the next month, they can do Wednesday’s remote until they don’t hit the next month’s goal.”
So she found a way to keep it from being a permanent fixture in our culture, and more of an earned reward. And that’s worked really well for us. “Is ending it gonna be more painful than the good that I get from instituting it?” would be kind of the baseline question that I ask when I’m trying to figure out: How do we do this? And is this too much?
Loren Feldman:
Jaci, did you worry about that when you went to the four-day workweek?
Jaci Russo:
Oh, well, I did a lot. Because I knew that once we started it, we weren’t going to get it back. And Michael, my business partner and husband, was adamantly opposed to it. Like, “Absolutely not. We’re not doing this. This is a mistake.” I’m like, “Okay, let’s just try it for three months and see how it goes.” And so we had real clear communications with everybody,
Loren Feldman:
But you knew you couldn’t do that, I think you just said.
Jaci Russo:
Well, yeah, but that’s how I got him to agree to it. Are you not married? Do you not understand the way people work together? [Laughter] Come on, Loren. Yes, that’s how I got my way. But so we communicated with everybody that it was a three-month trial. We were gonna test it out. And I’ve mentioned this on the show before: I went to the two people who have the hardest time with deadlines and constantly say, “I’ve got too much, I’ve got too much,” and said, “Hey, I’m about to take a whole workday away from you.” Before I can finish the sentence, “We can do it.” And I said, “But you’re—” “Nope, we can do it.” And to their credit, neither of them have missed the deadline or needed to punt a project. They have managed to get done in four days what they could not do in five days before.
Loren Feldman:
Mel, I’m curious how, when you’re thinking about these kinds of issues and other issues managing a business, you factor in the role of your economic outlook. I don’t think any of us are economists, and no need to pretend that we are. But the expectations for the economy have been bouncing around so weirdly the last couple of years. We’ve been assured a recession is coming. It’s never come. And in talking about the risks of going too far here, obviously, the risks get greater if the economy struggles. How do you think about that at a time like this, planning for the year ahead?
Mel Gravely:
Great segue. We try not to plan too short-sightedly. So what I mean by that is, we wouldn’t not bring a new employee opportunity to our team because we were worried about the next year. We might make less money that next year, but our horizon is so much longer that we’re okay with a tough year. And I don’t mean losing money. But I mean maybe not hitting our growth objectives, maybe not maximizing our profitability. We’ll trade off in other areas.
But we wouldn’t pull back on an employee benefit. We wouldn’t not make a decision to employ one because of the economy. I’ve never been in a conversation in our company where someone said, “We’d better not do that now because of a looming something else.” And I think that’s the advantage of having a longer-term perspective. And since we’re privately held—I control most of the shares—if I’m willing to say, “Well, let’s just make less money next year,” then that usually makes the conversation much more strategic.
Loren Feldman:
You probably didn’t say that earlier in your term as owner of the business, I’m guessing.
Mel Gravely:
I’m not sure. You know, we’ve never lost money either. So that does make it easier.
Loren Feldman:
Oh, that helps.
Mel Gravely:
But I was older when I started this, Loren, or when I bought it. And so I do think early on, we made really long-term decisions and believed that they were going to, over time, work out for us. And there were many years where we just decided, “Okay, we’re just going to make less money.” But what we want to do is so important for who we want to be that we can’t not do it.
Loren Feldman:
How about you, William? How do you think about the economy when assessing your hopes for the coming year?
William Vanderbloemen:
Most of our work is executive search for faith-based organizations. So, churches, faith-based schools, faith-based nonprofits, even the faith-based for-profits of the world, like Chick-fil-A. So in the faith-based world, the old joke is: The only thing more recession-proof than religion is alcohol. [Laughter]
I don’t know if that’s true or not, but—maybe it’s because we started in the fall of 2008, which was a stupid time to start a business— but we haven’t had a, “Oh crap, the external factors of the economy have vastly shifted our forecast for the year.” Maybe it’ll happen. Maybe it’ll happen this year or next. But to me—
Loren Feldman:
Wait, it happened during COVID, right?
William Vanderbloemen:
Well, that would be the one exception. I didn’t go to business school, but I learned a lesson during COVID. If all of your clients close indefinitely, it will change your calendar and your P&L. [Laughter] So I kind of laughingly say: We had to make a massive reduction, as Loren knows, during 2020. We still did not lose money that year—and that’s a whole other podcast episode. But since then, ‘21 was our best year ever. ‘22 is better than that. ‘23 was massively better than any year we’ve ever had.
So we’ve just been very fortunate. And I might not be the right guy to ask, because we have introduced a new idea into our potential client base—I don’t wanna say new industry—but a new option. And it is very quickly gaining traction as the normal way to do things. So maybe if I’d already saturated the market, the economy would make me go, “Oh, gosh, we’re gonna lose 10 percent of our customers.” But we have so many new clients every year that I don’t know that I have the most sober view of what the economic outlook does to our planning. Does that make sense?
Mel Gravely:
Yeah. By the way, I want to add that caveat: Of course, we paused every thought during COVID. So, thanks, William, for reminding me about that. And you know, it does matter when you start. I mean, I bought this company in 2009. So it was as bad as it could get in 2009. So I’ve only seen improvement—not steady, but general improvement, in construction volume and our ability to attract new customers. So I’m with William. I’ve not seen a really, really bad storm. So, Loren, my mind might change, if I do.
Loren Feldman:
Are any of you thinking of making serious investments in your business this year? And is that related to the economy, or just related to your position in your various markets? Anybody?
Jaci Russo:
We are. We’ve looked at acquiring another agency, and so we’re continuing to evaluate options like that. We think it’s a good time to grow. We had the great fortune of growing during COVID, and the next year, and the next year. And so, we’ve just finished our fifth straight year of growth. And time’s ticking. I’m only going to be around so much longer. So I want to make sure I’m maximizing every opportunity I’ve got.
Mel Gravely:
I’m with Jaci, though. I think this is a time to double-down. And I think there are gonna be more opportunities. I think people are gonna be parachuting out of their businesses. They got kind of happy over the last few years. I think reality will start to set in over the next few, and the grind will start again. And I think there’ll be some opportunities for acquisitions.
We are almost constantly working on a deal or two right now. And they don’t all work out. They don’t all close. But we think it’s a good time. We particularly want to come out of the next three years with just a whole lot more capability. Forget size, we want more capability. And with that will probably come size, too. But its capabilities to do a broader set of things is what we’re after.
Loren Feldman:
So not size, just for the sake of size, but buying skills, people with talents, that you don’t currently have?
Mel Gravely:
Yep, and some vertical integration, so we can do a little more self-performance and control our own destiny in some areas. But not growth. Like, I don’t know if we’d buy a company that had a profile just like ours. I’m not saying we wouldn’t, but it just wouldn’t be as attractive as it would be to buy a subcontractor or something that enhances our capabilities.
Loren Feldman:
Jaci, have you ever bought a business before?
Jaci Russo:
I have no frickin’ idea what I’m doing. But I’m gonna figure it out.
Loren Feldman:
Can you tell us where you stand? How far along is this?
Jaci Russo:
Oh, no, no. This is all in the early planning stages. I’ve been doing due diligence research. I’ve found a really great company to help me do some evaluation—because I don’t know what I’m doing—and figure out some of the nuances. But again, it’s about—
Loren Feldman:
Do you have a target?
Jaci Russo:
No, no. [Laughter]
Mel Gravely:
Your inner reporter is coming out, Loren. You want to break a story right here on the podcast.
Jaci Russo:
No, but we would leak it to Loren first. If you’re going to break a story, Loren Feldman’s the guy you go to. No, right now, it’s really about: What would that look like? Am I the leader who can take that on? What gaps do I want to fill? I know that we have some deficits in some of our abilities, some things we sub out. So what would it look like if we were able to handle it all in-house? That’s an exciting idea to me.
Loren Feldman:
Actually, the reason I ask is because it relates directly to the conversation we started with, about culture, because you’re going to bring in a group of people who are used to a different system, and you’re going to have to decide where to move them.
Jaci Russo:
Exactly. And you know, when people talk about rebranding, it makes me laugh, because they’re always, I think, referring to brand identities and logos—which we do. But that is the least important aspect of combining companies or acquiring a company. It’s all about the culture, the processes, everybody understanding how they fit into this new entity. That is way more important than what color the new logo is.
Loren Feldman:
Mel, I think that’s what you told us, essentially, when you talked about your rebranding.
Mel Gravely:
Yeah, absolutely. And we did an acquisition in 2014, and just now—I mean, I would say in the last 18 months—became a core part of our company. It just takes a lot of time and a lot of intentionality. And I think the rebrand was our opportunity to actually include them in a real way that made them feel like it. But expectations and metrics and culture and all of that stuff is just so different when you bring somebody else in.
Loren Feldman:
Did you learn anything going through that process that you think, if you were doing it again, you could speed it up a little bit?
Mel Gravely:
Yes, I would have probably exited some of the senior team faster. [Laughter]
Jaci Russo:
Nicely said.
Mel Gravely:
Yeah, I love them, and they’re great people. But they just were struggling with change, which made it hard to get the rest of the organization, their organization, to change. And I felt loyal to them. That’s just my tendency. And I would have probably moved faster to find a way to get them to another place.
Loren Feldman:
William, have you ever considered buying another business?
William Vanderbloemen:
Yes, I have.
Loren Feldman:
…And?
William Vanderbloemen:
Just considered two yesterday. When I was nine, I was a paperboy—Loren’s heard this story—but there was one road that had one customer that paid me $2 every two weeks, and they had a Rottweiler with no leash. I was his daily highlight. He waited on me all day to chase me on my bike at nine years old. And so I finally realized the routes around me were very poorly organized and probably just randomly drawn. I got to know about three buddies who had the routes around me. I bought them all out, redistributed the routes in a denser way, kept the denser, better one, and sold off the rest, which included the dog. [Laughter] So that’s my most successful venture. I should have quit at nine. I peaked at nine.
I bought a competitor about a year and a half into our search-firm start because they were really good. And frankly, I’d rather them work alongside me than against me. I bought another small company halfway between now and then to enhance our work. And I looked at two other firms just in the last week that are in a position to sell, and do we want to do that or not? I think the answer is no, for a lot of different reasons. But the short answer is, yes, I’ve considered it.
Loren Feldman:
And what’s the appeal? Because I’m sure you’re acutely aware of the risks.
William Vanderbloemen:
There are a lot of risks, and I’m pretty picky. But growth can happen organically or through M&A. And all of ours, with the exception of purchasing two companies over the years, has been organic. And frankly, search firms during the pandemic remind me—I think it’s a Warren Buffett quote—he quoted someone else who said, “In big recessions and depressions, when the tide goes out is when you see who’s been swimming naked.”
And a lot of guys were swimming naked in my world, and they’re just not in great shape right now. And they might be a good asset, if they could come up under our umbrella and use some of the things we’ve built out that could make them a more profitable option.
Mel Gravely:
Yeah, I think we’re gonna see more and more of that, that these companies that ate too much—and it wasn’t healthy food—they’re gonna start getting a little sickly. And I think there’ll be some opportunities there. I agree.
Loren Feldman:
William, have you thought about—I’m sure you have—the cultural aspect of bringing in another group, at this point?
William Vanderbloemen:
Yeah, actually, I just said no to a company yesterday. And you know, maybe that’ll change, but two things were the issue. One, back to Mel’s point, they had paid their people so well, they weren’t competitive as a company. And so their EBITDA was way outside the fairway that we’ve set for what works and what doesn’t. And for us to get them in that fairway would require—I mean, there’s probably a nicer way of saying it—gutting a lot of the people and changing the salary structures. And that’s a problem. And that’s going to lead to bad culture.
But then the second piece was—these are wonderful people, love them—they operate very differently than we do, and I don’t know how much we would be able to pull them into our culture. And we’re not really interested in changing into their culture. So those are the two reasons I passed: culture and then they just weren’t as profitable as they should be. And to fix that would be even more detrimental to the already tenuous culture match.
Loren Feldman:
I hear a lot of business owners say that it just makes sense to focus on the things you can control. You can’t control the Fed. You can’t control the economy. Look at your own business. Make your decisions based on what you see in your own world. But there’s got to be a line there somewhere when you just keep hearing: recession, recession, recession. It’s gotta be hard to just ignore that.
Mel Gravely:
Yeah, I think, let’s just think about what can kill you, right? I’ve never seen a business go out of business because they under-ate, that they decided to grow a little slower. I’ve never seen that be a problem. I have seen it be a problem when someone says, “I’m going to grow 23 percent organically this year,” and they go out and they price that way, they hire that way, and they treat their customers that way.
And so to me, when there are question marks in the air, you can’t control them, but you can’t ignore them either. And I say: Put your head down, build a plan that is more conservative than it might normally be, and then go get after it. And go get after it hard, and expect to be successful. Don’t talk yourself into a doom loop. Or you suck, because you said you would.
Loren Feldman:
Jaci, in one of your earlier appearances on the podcast, you made a reference to how you, as a marketing agency, sometimes try things out in your own marketing of your own business before you try using them for your clients. And I’ve been wanting to follow up on that ever since. I’m curious if you’re trying anything now and learning anything about what’s working right now.
Jaci Russo:
We try everything out on ourselves first because I could never imagine gambling with my clients’ investments. And so I’m willing to gamble with my own, but not theirs. And so, if we’re going to try out a new software, or a new system, or a new approach, or some new way to configure the analytics of a series of digital ads, I’m gonna put my money out there. I’m gonna see how it works for us, and then learn from that to now say, “Hey, we did this thing, and this is how it worked. And so we want to do this thing with you.” I feel much better about that than saying, “I don’t know. We haven’t tried this before, but give me a bunch of money, and we’ll see how it goes.”
One of the things we’re doing right now, which we really started last year but we’ve solidified it, is we’re taking every single thing we do in this company—literally everything we do—and we are finding which AI, and what set of prompts, help us do it better. And we’re creating a master document to see—obviously, humans need to be involved in every step; I don’t see that changing anytime soon—how can I go from typewriters to computers at every step along the way?
And in some places, we’re finding immediate improvements. Some, it’s like, “That’s not as good as it was before. Let’s keep working on that one.” And so eventually, we’ll be able to use some of these tools for our clients. But right now, we’ve got some people working on this full-time, because we know it’s important for us to continue to up our game.
Mel Gravely:
So give us a little bit more. Like, can you give us an example so that we could make it concrete? Because I got a little excited.
Jaci Russo:
Yeah, sure. So, okay, one of the things that we do is a process that’s really based on best practices. But we made it our own and named it and kind of said, “Okay, this is our version of how to do a strategic brand plan.” We call it Razor Branding. It has four core elements: focus, promise, connection, harmony. Focus is who we’re talking to. Promise is why they should listen to you. Connection is what we’re going to say to them. And harmony is where we’re going to say it. So when we’re done, we have a very robust plan. Nobody really wants a plan. They want solutions, but this is how we get to the solution.
Okay, so each of those big headers has, I’m gonna say, 15 sub-points underneath it. So I’ll go to focus: demographics. Well, we have, for years, subscribed to a ton of research, to give us a really good understanding of our target-audience demographics. I’m a media buyer in a past life. So I live and die by that. Well, it’s been interesting that by utilizing different AI platforms with a different series of prompts, we’re able to sometimes enhance that data, sometimes contradict it, and almost every time improve it. And so now, as we’re working up our demographic profiles with input from the client—because they have these customers—we’re able to use this information for who else is out there, that’s a mirror that we can kind of clone their best target audience.
And so now, it’s like: Okay, wait, we have this whole other layer of analysis information that we can now put into it. And I’m finding that those profiles are getting better. They’re getting deeper. They’re getting smarter. And some of it’s kind of a V8 moment of, “Oh, gosh, we should have thought of that.” But some of it’s, “Oh, that’s really good.” And so then we run it through for the psychographics. And so again, it’s data in, data out. There’s only so much it can give. It still needs us. But we’re better now.
Mel Gravely:
Yeah. Jaci, I wonder, are your clients kind of middle-market? You know, thinking, I don’t know, make up a number: $100 million to $3 billion in size?
Jaci Russo:
We’re B2B, primarily. And so, we’re professional service and manufacturing. Professional service, we tend to skew as low as about 25. But yeah, we hover in that $100 million, really to about $500 million. The big publicly traded guys aren’t as much fun. They don’t move as fast. I like a nimble client. I like a client who wants to grow.
I don’t want the No. 1 in the space. I want the three to 10, because those guys are hungry, and that’s who I want. And so, then in manufacturing, we skew a little higher there. We’re going to be $250M up to probably about $3 billion. But that’s where we find they have enough budget that we can do some things, but they’re not so bloated that they don’t want to change anything.
Mel Gravely:
What you were describing gives them the kind of data that those publicly traded companies have. And you’ve provided it to them, because they’d have no other way to get there. So the value you create for them is enhanced by that.
Jaci Russo:
Correct. So what I think we’re going to end up with is our same Razor Branding process, but on steroids, with a lot more intel than they could have gotten or afforded on their own, that we are now able to really leverage for them.
Mel Gravely:
Yeah, you know, I just spent a bunch of money with a marketing firm—which I never would have thought I would have done, never would have thought. It started out to be a $50,000 “let’s just kind of freshen up things.” And it turned into much, much, much, much, much much, much, much, much more than that. And I never thought I would value it as much, and the reason I felt this way about marketing firms is because they couldn’t give me enough tangibility. And when you show up with more data, your solutions were probably great before all that, but they felt greater to me because you had more data backing them up with the tools you’re talking about that you guys are working on right now.
Jaci Russo:
Yes, absolutely. So, to circle all the way back to Loren’s question, that’s one of the things that we are test-driving on ourselves right now, because I would never waste client time on this. But it’s going to really benefit the clients in the long run.
Loren Feldman:
Jaci, I know, this wasn’t your intent, but when you went to your employees and said, “Please, let’s figure out what you’re doing that AI can do better or improve,” some of them, I suspect, might have felt you were asking them to write their own obituaries. Did you have to deal with that at all?
Jaci Russo:
I don’t always know what they think and don’t tell me versus what they think and do tell me. So I didn’t receive any pushback or concern or furrowed brows. But I did preface it beginning, middle, and end with: I still need people. People are still important. Humanity is necessary. I just want better intel. And so I want to go find the tools to get us better Intel. And they’ve been here a long time. And so, I feel like they know me and know my word. And so, I don’t think I have a problem.
But I figure as we continue to work on this, I will continue to make some emotional check-ins to make sure everybody knows I don’t want to be a company of one person. And I think there has been a running joke in this company for its entire 23-and-a-half-year history. Everyone knows that Michael and I have a better marriage because we don’t talk to each other all day. I know we work together, but we don’t have to talk to each other. We don’t have to talk to each other because of all the people between us. [Laughter] There is job security for them in the fact that I want to keep a happy marriage. And so it all works out.
Mel Gravely:
I’ve literally never heard that one before, but I like it.
Jaci Russo:
I mean, I don’t know how family businesses work when the family has to actually work together. I have a family business, but I don’t actually talk to anybody in my family all day. And it’s awesome.
Mel Gravely:
Is it just you and your husband, or are there other family members there too?
Jaci Russo:
We had four kids, Mel. So they just keep showing up at the doorstep looking for jobs.
Mel Gravely:
Wow.
Jaci Russo:
But no. So one of our’s is about to graduate in film editing. And I mean, we do a lot of videos here. So she has been our No. 1 video editor for most of her college. And she’s made it very clear that she is not a commercial editor, that she’s not a video editor. She’s a film editor. I’m like, “Well, you know, they shoot films on video now, right?” But no, she’s already figured out her path to L.A., and she really does want to work in that environment. And that’s where her skill-set is. I’ve seen some of her capstone film work. She is a really good film editor. She’s an okay video editor. [Laughter] So I supported and encouraged that quite a bit.
And then, we’ve got a chemical engineer. So we don’t even understand what she says. We just try to get her to not talk at dinner, because it makes no sense to us whatsoever. And then a therapist, who will be graduating in two years and going to grad school. We need her to talk more at dinner because we all need a little bit of her input. But the oldest is our one saving grace who I think we will eventually convince to come back. He’s in Nashville right now. He got his MBA, and he’s working for another branding agency, because he went off to go do big things for big people. And he’s working for a married couple. [Laughter]
Mel Gravely:
Is that right? Wow.
Jaci Russo:
Sweet justice. But it’s true. I have some family business clients. They’ve grown and grown, and they’re on the second and third generation. And they work directly together all day, and I think, “Man, that’s tough.”
Mel Gravely:
So Jaci, your original premise of starting this conversation around: How do you know if you went too far? Did you get any input from us that felt like value, something to help you think about it?
Jaci Russo:
Oh, absolutely. And you know, I love that Mel’s playing the role of Loren today. [Laughter]
Loren Feldman:
I was gonna say! That was too good a question, Mel.
Mel Gravely:
Jaci, you could not call me out on that.
Jaci Russo:
It was good. It was really good. One of my commitments is: How do I become a more active listener and ask better questions? I’m just gonna study at the feet of Mel. That was great.
Mel Gravely:
I’m so sorry. I’m never gonna be invited back.
Loren Feldman:
I’m gonna leave now. It was nice talking to you guys.
Jaci Russo:
But no, I do think it did. It actually helped me quite a bit. I feel a little more crystallized on feeling good about what we’ve done and not feeling like I’ve gone too far. And really kind of thinking, “Okay, how do I do more?” Because the more I can retain these great people, the better my company is. And I thought that the point being made about not pricing us out of the market and not becoming too far in the sense of: We can no longer be afforded then. Okay, well, now I have a line.
Loren Feldman:
We are just about out of time. I think we have time for one more quick question. Jaci, in the past, you’ve raised the issue of how difficult it can be to manage costs, especially when it comes to subscription expenses. Can you tell us quickly why that’s come up, why that’s an issue for you?
Jaci Russo:
So, I’m sure like every business, we have subscriptions, and it used to be magazines. We subscribed to magazines. They would arrive in the mail. I knew what we spent. We got it done. Well, now it’s all these online subscriptions. Our software’s online. Our project management. Our accounting.
And so when I am the owner of the subscription, it’s easy. But I’m not always the owner of the subscription for a lot of reasons, because somebody else needs to be the one logging into it. And that double-factor authentication thing is crazy, you know? And so what are we doing these days? Are they paying for it and getting reimbursed? Am I paying for it? And then, when they leave, I gotta figure out how to get the login back? How do we track it? Am I going to use one of those online, “we’ll manage your subscriptions and tell you what you need to cancel things”? Because I like Netflix. I’m not ready to get rid of that. But workwise, I don’t feel like I have a handle on it.
Loren Feldman:
That’s an interesting question. Maybe there’s a business opportunity there.
Mel Gravely:
Well, you just struck the fear of God in me, because what I don’t know is what I don’t know. I bet we’ve got subscriptions everywhere. Thanks a lot. I’m starting to sweat.
Jaci Russo:
Here’s where it came up, just so you know. So my entire creative team has very expensive subscriptions to the whole Adobe Suite, which they need to do their jobs. I’m not questioning that. And all of those are in one place. And so that monthly amount is divisible by the number of graphic designers. And so, I know that. That makes sense.
But on a different credit card—and we run everything pretty much through the one, because I like the miles—on a different credit card, I have this one Adobe subscription. So I called Adobe, I’m like, “What up?” And they were like, “Nope, we don’t have that credit card listed.” I said, “Okay.” They said, “We don’t have a login.” So Adobe, the credit card company, and I are all looking at this, and none of us can validate it. None of us know where it’s coming from.
Loren Feldman:
But you’re paying it every month?
Jaci Russo:
But I can’t figure out how to stop it. So the credit card company says, “This is crazy. We’re just gonna cancel the card, and we’ll send you a new card, and that’ll end it.” And it didn’t work. And it’s back. And now, none of us know why it is, and none of us know how to stop it. And I’m thinking, “Well, if this is just this one $32.95 cent a month example, how many others of those are slipping in on the main card that’s supposed to be used for this?” Because I wouldn’t have noticed it, necessarily. And so, here we are.
Loren Feldman:
It’s not just software. I mean, Jay Goltz told us a couple years ago, I think, about at his warehouse, he had gas canisters or something. I’m gonna get this wrong, but there was a physical product that he had. And he was paying a monthly fee for it. And whatever the gas, or whatever it was, was used for, it hadn’t been used in 10 years or something. So he had been paying thousands of dollars per year for years. So it’s not just new with software.
Mel Gravely:
Ugh, great. [Laughter]
Jaci Russo:
Sorry, Mel.
Loren Feldman:
I’m not hearing any solutions for you. Jaci.
Jaci Russo:
I’m not either.
Mel Gravely:
The only thing I can think of is, we use Concur as our tracking tool for expenses. And if everyone has to use that tool, at least, at some point, everything ends up in the same place and is reviewable. I used to get it until I stepped down, but every month, I’d get a sheet to approve people’s expenses. And so I would see what they use their credit card for. And it’s the only way to get reimbursed for your expenses. So if you had a tool like that, you could catch some of that, but I can think of multiple examples of it…
Jaci Russo:
Right, right.
Loren Feldman:
Well, if anybody listening has any good suggestions, please shoot me an email, and we will discuss it in a future podcast episode. You can reply to your Morning Report or email me directly at loren@21hats.com. Unfortunately, we gotta go now, but my thanks to Mel Gravely, Jaci Russo, and William Vanderbloemen—if you didn’t notice, William had to cut out a little bit early—and to our sponsor, the Great Game of Business, which helps businesses use an open-book management system to build healthier companies. You can learn more at greatgame.com. Thanks, everybody.
