It’s Bonus Season. Are You Feeling Generous?
Introduction:
This week, in episode 85, Paul Downs, Jay Goltz, and Laura Zander talk about the bonuses they plan to pay this year—and how their bonus plans and philosophies have evolved over time: Are the payments a reward for company performance? Are they a reward for personal performance? Are they supposed to motivate? Or are they just a thank you? Then the owners talk management, a discussion inspired by last week’s episode with Dana White about navigating the space between being a pushover and being a jerk. Plus: Are 360 reviews good management or are they kind of creepy?
— Loren Feldman
Guests:
Paul Downs is founder of Paul Downs Cabinetmakers.
Jay Goltz is founder and CEO of Artists Frame Service and Jayson Home.
Laura Zander is co-founder and CEO of Jimmy Beans Wool.
Producer:
Jess Thoubboron is founder of Blank Word Productions.
Full Episode Transcript:
Loren Feldman:
Welcome Paul, Jay, and Laura. It’s great to have you here. As always, I appreciate it. Here’s where I want to start today. It’s bonus season. We’ve had a couple of tough years and a very tough labor market, and I’m curious: Are you guys feeling generous? What are you thinking as we approach the end of the year? Anybody?
Jay Goltz:
Well, I can jump in. I’ve said for years that the match on the 401k plan really isn’t—and I hate this word, but I have to use it here—fair, in that the people who have higher incomes, spouses who work, they can afford to put away more. They get a nice little company match of a couple thousand dollars. And the person at the bottom who makes $43,000 a year, who’s got two kids at home, can’t put any money away. They get nothing. So that’s always troubled me.
And I’ve just figured out, in my world, at least—I’m not telling anyone else to do this—I give a yearly bonus for everybody in production, like 30 bucks a year. So if they’ve been there 10 years, they get $300. If they’ve been there two years, they get $60. And I feel like I might bump that up some, and that way, at least, the people who can’t put money away are getting something. There’s no perfect solution in my mind.
Loren Feldman:
Yeah, Jay, I think the thing about the 401k is a really interesting point that people tend not to think about, but I’m curious: Do you think of that as a bonus? I mean, I know it’s money coming out of the company coffers, but do you think of it as a bonus?
Jay Goltz:
Yeah, sure. You don’t have to have a 401k plan. You don’t have to match it. And here’s the other thing that’s happened: Now that I’m 65, and I’m looking at my own retirement, I am concerned about my key people’s retirements, and I’m looking at how much they’ve got in the 401k plan, and I am trying to structure it so everyone will be… I want to know that when they retire, everybody’s in a good place. So I am paying more attention to it now, and the company’s bigger than it used to be, and hopefully I have more cash flow now that I can afford to do that.
Laura Zander:
I was gonna ask about this $30 per year of work. I think that’s really interesting. Do you increase that every year with inflation?
Jay Goltz:
No, but I do occasionally. You know, it doesn’t sound like a lot, but I’ve gotta tell you, I’ve got plenty of people with me for 20 years. They’re getting 600 bucks, so it’s not bad. And I think everyone appreciates it.
I’ll tell you what I did: I was trying to do a profit-sharing thing where I used to give out—and then we hit the bad years of ‘08, ‘09—and every year, I’d have to have the meeting, and say, “Listen, guys, we’re still not where we need to be. I can’t give it.” And it used to weigh on me, and I finally realized that we’re talking about, I don’t know, 7,000 or 8,000 bucks, and I just decided I’m giving it to everybody one way or the other—unless things are really bad.
And I can’t tell you the weight it lifted off of me. I feel completely liberated, and they really appreciate it. And it’s just not that much money. And all I can say is, people just need food and money. They need money to put food on the table and take care of themselves, and they’re not my partners. And when things are really good, they’re not getting bonuses. And when things are really horrendous, they’re not getting money taken away. So I just feel good that the people who have hung around are getting something, and it works for me.
Loren Feldman:
By making that switch, you removed any sense that the bonus is based on performance. Do you think you lost anything by doing that?
Jay Goltz:
Not at all. Because my manager is very good at sitting down with people at their raise review and telling them why they’re making what they’re making. And if their performance goes up, he pays them more. And I feel good. It keeps that system clean.
And then also, it takes the whole issue on the raise reviews of, “Well, I’ve been here for longer.” Well, you’re getting a bonus for that. It just takes that out of that whole mix. So I feel very good that we’re paying people appropriately and according to how productive they are, and giving them a bonus for being around for years. This obviously saves the company money if you don’t have to change people. And all I can say is my turnover is very low. My average person’s been with me for 11 years. My turnover is less than 10 percent. And we’re not talking about people making $80,000 a year. We’re talking about people making $40,000, $50,000, $60,000 a year.
Laura Zander:
What do you do about the people who are making $80,000 a year?
Jay Goltz:
Well, many of those people are on some kind of commission, or they get some kind of percentage, and then there are others who I do have a bonus thing that I’m setting up for that level. In my mind, in my way of thinking, this is not a one-size-fits-all thing. I’ve got different categories of people doing different kinds of things. And I’m trying to do something that works for all the different groups. So some groups get their 401k matching, some people are getting commission, some people are getting bonuses.
Loren Feldman:
Paul, what are you thinking this year?
Paul Downs:
Boy… We have cash to give out substantial bonuses, but what I’m going to do with it is pay down long-term shareholder debt instead. And that goes with my basic theory of bonuses, which now is: Rich and happy. I’ve got to feel rich and happy. And if I do, then I give out goodies. And if I don’t, I don’t.
Laura Zander:
Basically you mean pay you and your brother back some of the money that you’ve put back into the business. Is that right?
Paul Downs:
With a little luck, we can pay all of it back, and it’ll be about half a million bucks. And yeah, frankly, I never expected to be able to pay it back. I pay my people well, and so a lot of the profit that would lead to an annual bonus is just going trickling out every payday in above-market wages and in things like health insurance. And so I’ve tried a more formulaic profit-sharing-slash-bonus scheme in 2014, 2015, and gave it up after, just like Jay, a string of bad years when there just wasn’t any.
And what I’ve come to realize is the formulas I came up with were just handcuffs on me. They forced me to take out money that I probably shouldn’t have. And I was trying to motivate more productivity on the shop floor by giving people a very defined piece of whatever they produced. But as Jay pointed out, you never go back to employees and ask them to give money back when the times are tough. They just don’t have it. So in my mind, for a company of my size, it’s just not reasonable to try to make it a formula.
Loren Feldman:
Do you think it was motivating?
Paul Downs:
Briefly. What I tell people now is that the company needs to make money so that the company can take care of the employees. And if it does, then we have the ability to at least cover the health insurance costs and some of the things that we do operationally that are expensive in a way that’s very invisible to the employees. Flex time is something that has a definite negative effect on our ability to manage certain aspects of production. But everybody really values it, so we have it, but the company is less profitable, I’m pretty sure because of that. Although we probably are retaining employees that we wouldn’t have otherwise. So, I mean, I don’t know. That’s why at the end of the day, it’s just like: Do I feel rich and happy? Yes, give them money. Do I feel troubled? Keep the money.
Jay Goltz:
I think employees respect the fact that we don’t lay people off unless it’s a last resort. I think they’re happy. They get it. They understand we have to stay in business and we have to be profitable. And this whole—I have to open up this can of worms—this whole phrase you keep hearing, “people over profits,” that is a false choice. That’s like saying, “You’re in a cave. Loren, you’ve got two choices: I can give you air. Or I can give you water. Which one would you like?” And you could go, “Oh, I need the air.” Great. Well, you’ll still be dead in two weeks as you don’t have any water. I mean, you can’t run a business without a profit. So the people are going to go down the tubes with it anyway.
Do I believe in profit over safety? No, I think it’s horrible what Facebook’s doing. They know that their stuff is causing problems, and they’re still doing it. Profit over the environment? Terrible. They shouldn’t be polluting rivers. Profit over ethics? Terrible. But profit over people? I don’t know what that means. That’s just a false choice.
Loren Feldman:
Paul, you’ve told us that you are tremendously, remarkably transparent with your employees about the company finances, right down to how much money you take out. Will they have any sense that this year you’re choosing to pay—
Paul Downs:
Yes. Every Monday, I get up there and tell them basically how much cash we have and how much we expect to get and a bunch of different financial metrics. They know how much I make.
Loren Feldman:
And they know that you are going to pay yourself back, rather than pay bonuses this year?
Paul Downs:
Yeah, I’ve been telling them for months. For the last 20 years, we normally had somewhere between $100,000 and 250,000 bucks in the bank. And then, at the end of January this year, we had $800,000 in the bank. And I was like, “Okay, we’ve got cash. So we can invest in equipment,” which we did, “we can invest in shop improvements. I’ll spend some of that money. But I’m going to pay down this debt.” Because A) servicing the debt costs money. It costs about 45,000 bucks a year, because I’ve never paid much principal back to anybody. But I figured, well, at least I could pay him a decent interest rate. So, just wiping all that out. Two thirds of it is to me and the other one third to my brother. My father just recently passed away, so his thing, I guess, ends up in my lap.
But anyway, it’s a chunk of change, but then it does lower our operating costs. So I mean, I just tell them. The one thing that I’ve noticed, at least with my crew, is that they’re remarkably flexible about going along with my plans. I guess I’ve never really strayed near the this-is-intolerable boundary for any of them, because I’ve never gotten any pushback whenever I tell anybody stuff like this. I would not necessarily recommend that for other business owners. Everybody’s got a different situation.
Jay Goltz:
No, and the fact is, you’re a good boss. You treat people with respect, and it’s a nice environment, and they should be happy. I had a guy that we laid off, right when the pandemic hit. Frankly, he just was overpromoted and wasn’t getting the job done, and he’s a good guy, and I like him. But we had to do what we had to do.
I’ve gotta tell you, two years later, we just brought him back. He’s happy, we’re happy. He said the place he was working—this is his word, not mine—He goes, “They were savages.” The owner would come out of the office screaming at the top of his lungs, swearing, and it was freaking him out. He’s happy to be back and I’m happy to have him back. The fact is, if you treat people with respect, that’s good.
Loren Feldman:
Did you bring him back at a lower salary?
Jay Goltz:
A little bit. Ten percent less, but he’s reporting to the other guy who used to report to him. And you know what? He’s happy, and I went right over to him the first day he came back to welcome him back and gave him a hug and said, “I’m glad you’re back.” I didn’t have a whole long discussion about it, but how many people do you know who can get the toothpaste back in the tube?
Laura Zander:
That’s so timely. We just had to demote somebody who had been promoted two days ago. So we’re kind of trying to figure out, “Is this gonna work out? How’s it gonna go?” They took the demotion. So we will see.
Loren Feldman:
Laura, what are you thinking in terms of bonuses for this year?
Laura Zander:
Um, I really enjoyed listening to Paul and Jay and hearing what they do, because it’s very different from what we do. What we do is we look at what our profit is—and we’ve only had two years in 20 that we didn’t have a profit—and then we take a percentage of that, and then we just divvy it up.
Paul Downs:
How do you divvy it up?
Laura Zander:
I have an Excel spreadsheet that I’ve been using for, I don’t know, 15 years. What I do is I have three columns, so I add up all the hours that were worked for the year. And then I have all the hours that each of the employees worked for the year and what that is, as a percentage of hours worked, and then I have a column that is how many years they’ve worked. And then I have a column that is—one through five—how valuable they are to the business, if you will. Culture-fit-wise, how much hustle they’ve put in this year. And then I have a formula that gives me a weighted percentage of what they should receive of the booty. And then I take a look at that, so I let Excel do the math there, and then we kind of round it and weight it. And I sit with the managers and say, “This is what the math says. Now, what do humans say?” And then we just kind of compare.
Loren Feldman:
Does that take you as much time as I’m imagining?
Laura Zander:
Nah, it takes me a couple hours. But I enjoy it.
Jay Goltz:
Okay, so the question is, do you think they compare—not think, I’m telling you: They compare how much they got.
Laura Zander:
Absolutely.
Jay Goltz:
I would question whether you wouldn’t be better off leaving out that last part about how much hustle. That should be in their paycheck every week.
Laura Zander:
Totally.
Jay Goltz:
So I’m saying, I loved it up until then. I love the years. I love the spread. All objective, no one can argue with it. Everyone knows the formula. Like, when I give out my bonuses, everyone knows exactly why. I go from the lowest to the highest, like, “Okay, this guy’s getting $800.” And it’s a fun thing, and they hear the number, and no one can argue about it. Who can argue with the guy who’s been with me for 30 years?
Laura Zander:
And that’s a great point on the: “If they’re not hustling, they shouldn’t be working for us.” And so I think that I did that 10 or 15 years ago because I wasn’t a good manager, and I didn’t have good managers. And we weren’t doing a good job of making sure that the people who weren’t hustling were out. So now we’re in a much better spot where we’ve got 95 percent of the people we want to be there. We only have one or two people who we’d be happy if they left.
That said, the reason that I’ve kind of kept it in there is because it’s feels like every year, we have one or two people who maybe started the year really well or created tons of problems for the first half of the year or the first quarter or whatever and had these meltdowns and sucked up a lot of time and energy and, therefore, money. And they just haven’t been as easy to work with. Their wage is already their wage. Like, what are you going to do?
Jay Goltz:
Stop giving them raises.
Laura Zander:
Well, but let’s say we already did. Let’s say we gave them a raise in January because they were doing really well, and then they had a six-month meltdown.
Jay Goltz:
So the question is, this clearly emotionally makes you feel better that you’re getting back at them on some level. But the question is: Is it really helping anything? That’s my question. So they got $300 less or $200 less. Is that really getting you what you want? In my mind, what you should want is for them to step up to the plate and start doing a better job. Is that really getting you that? Or are you just feeling better that, “Great, I got 200 bucks out of them”?
Laura Zander:
That’s a great point. That’s a really, really good one.
Paul Downs:
I have another question, which is the formula, as you described, it doesn’t really take into account the initial compensation. In other words, if everybody worked the same hours, and they were basically the same person, they would all get the same amount. So how variable is the amount that comes out the other end of the formula?
Laura Zander:
It’s not. It doesn’t take into account their compensation. It takes into account hours worked.
Jay Goltz:
So that means it’s clearly more significant to the person. Giving someone who makes $38,000 a year a $500 bonus, that’s clearly bigger to them than someone who makes $70,000. You’re giving them the same $500. And there’s nothing wrong with that. I don’t think there’s anything wrong with it.
Paul Downs:
That’s always been my theory with the bonuses. We actually divided it so that everybody in the company got the same amount, and I think that making it proportional to the hours worked is a nice twist.
Jay Goltz:
Absolutely.
Paul Downs:
But my feeling was that the bonus pool only resulted from the efforts of all the people, and I never liked the idea that the more highly compensated people got a bigger share of the pool. The guys who are pushing a broom are actually just as important to me to get the work out the door.
Jay Goltz:
So the question is: Is this a motivating thing? Or is it a thank you? And in my mind, I have a quick answer to that: It’s a thank you. That’s all it is.
Paul Downs:
That’s my feeling, too.
Laura Zander:
I love the thank you, and actually, I’m glad that you mentioned that because I think it was a year ago or two years ago, we kind of changed our terminology. And we said, “It’s not a bonus. This is more of a thank you.” And the percentage of the profits that we give out as a thank you has changed based on how stressful the year was. So in years where things have been incredibly stressful, we’ve given out a bigger percentage, because we feel like people have put more into their job.
Paul Downs:
And have you ever explained the formula to the employees? Or is it a mystery box?
Laura Zander:
No, I explain it. And I say, “You guys are going to get different amounts, and the amount is based on the number of hours that you worked.” So that kind of accounts for people who maybe just started nine months ago, or people who only work part-time. So that kind of equalizes that, and then it’s based on, you know, blah, blah, blah. So, yeah, I explain it all.
Jay Goltz:
Wait, let’s go over the blah, blah, blah. So then you go, “And if you’ve pissed me off, you’re going to be getting less than if…”
Laura Zander:
No.
Jay Goltz:
Well, how do you handle that part of it, then? Or do you not talk about that part of it? Is that the Secret Santa part of it, where you just don’t mention that you’re taking a little adjustment at the end if they pissed you off?
Laura Zander:
No, that’s a good question. Let me think about how we phrase that, but it usually has something to do with, we have a court, so when we do reviews, we do two different kinds of reviews. We do a performance review, and then we do a core value review. And so we say that at the end of the year, it’s really based on core values, and what your core value score is. I don’t say that specifically. But we have six different kinds of measures, six different core values, that people get reviewed on.
We’re very transparent about what those core values are. They’re up in the warehouse, or they were until we moved this week. So people know what they are, and they know—for the most part, they should know—where they’re lacking and where they’re doing a great job, because we do lots of peer reviews during the year and blah, blah, blah. So that’s the third part. It’s based on core values.
Loren Feldman:
I haven’t heard you mention peer reviews before. How does that work?
Laura Zander:
Maybe you guys call them the same thing, but it’s a 360 review. So when a milestone comes—maybe they’ve been here for 90 days, or they’re at the 90-day mark in a new position in the job, or maybe it’s their annual review—we’ll hand out anywhere from three to six peer-review packets. And we give them to the people who either they work with, who work for them, or blah, blah, blah, and then have them fill those out.
It’s again, these six core values, and we ask them, “How caring do you think this person is? How much of a team player? And give us examples.” And so we get lots of examples, and then we sit down, and we say, “Okay, here’s the summary. Here’s a synopsis of kind of where you’re at and how well you fit into our environment.” So yeah, that’s what we’ve been doing for… God, I don’t know, maybe 5, 6, 7 years.
Loren Feldman:
I know some people are very uncomfortable with the idea of 360 reviews and the notion of asking employees to—
Jay Goltz:
Add me to that list. Extremely uncomfortable. I’m cringing. I’m just cringing. I just cannot imagine sitting down with someone and going, “Well, here’s what your coworker said about you. They don’t think you care.” Oh my God, it’s like, you’re up to the pearly gates, and you’re being judged for the kind of person you are. I’m uncomfortable having coworkers managing each other.
Laura Zander:
Yeah, but okay, so let me give you an example. I did a review with somebody recently, and I gathered all the feedback. And this person is a great employee from a productivity standpoint, from a hard-skill level, but has really had a hard time kind of fitting in with everybody else, kind of rubs people the wrong way, blah, blah, blah. And so having these peer reviews, that gave me an opportunity—and you know, it just depends on the delivery. I mean, I’m not gonna just read it and say, “So and so says you suck. So and so says that you have resting bitchface.” Instead we talk—
Jay Goltz:
There are people who say you rub them the wrong way, I don’t even know what that—what does that mean?
Laura Zander:
And that’s the point of getting the reviews. We can dig into getting specific examples. “So here was an example when you responded this way, the perception of what you said was that you were angry, or whatever. You may not have been angry. But that was the perception.”
And in our environment—which I realize is very unique, it’s different. We’re in a very creative industry. So we have a lot of very sensitive people. It’s just a tool to explain and to kind of go through some examples of an area that you may not realize is kind of irritating other people. And you can do it in a really kind and productive way. We’ve had great results with it. It’s worked really, really, really, really well. Because, again, we give people specific examples. And we’re not like calling them out.
Loren Feldman:
Well, wait, if you’re giving a specific example, they know who ratted on them. Right?
Laura Zander:
Not necessarily, but sometimes, sure.
Jay Goltz:
No, I would argue that what you’re talking about is, there’s a word for it: It’s called management. So I might do the same thing you’re doing, except it’s not called a 360 review. That’s the question.
Here, I’ll give you my quick thing. You’ve got your values? Here’s our four. It’s real simple. It spells “MICE,” easy to remember. “M,” mutual respect. Screaming at people is not mutual respect. Being rude to people is not mutual respect. “I” stands for integrity. Nobody’s stealing that I know of. Back in the olden days, 30 years ago, I would go to use the saw that’s got a cord on it, and the cord was cut in half by accident. Someone cut the cord, and they ran and didn’t tell anybody. That stuff doesn’t happen anymore. If someone does something wrong, they say, “Hey, listen, I accidentally cut the cord.” So we don’t have that anymore.
“C” is customer-driven. If they’ve got to come in early or stay late, they know that’s what we’re all about. We have to do it. So people are there. And the last one is “E,” which is enthusiastic. I’m in an artsy business. I need people who are into what we do, whether it’s selling furniture or framing pictures. If it’s just putting bottle caps on bottles, they’re probably not going to be happy here. So it works for us.
Loren Feldman:
But Jay, I’m sure you have tension between employees from time to time.
Jay Goltz:
Yes. We deal with it.
Loren Feldman:
Well, how do you deal with it? Is it that different if you go to the employees and say to them, “What’s going on? Are you having problems with so and so?”
Jay Goltz:
That’s why I’m saying, I’m not sure what I do is that much different than what Laura does. Usually someone complains to the manager, and then the manager will sit down and go, “Listen, let’s talk about what happened yesterday.” And they flesh it out. I don’t know that what she does is that much different than me. There’s just something about the 360 degree thing where you’re asking everyone around them that makes me cringe a little bit.
Paul Downs:
But the thing is the interval. How often do you do a 360? Once a year, it’s a big event. I’m sort of in Jay’s camp and I try to give people feedback. First of all, I have one-on-one meetings with every employee three to four times a year.
Laura Zander:
Let me just throw out that maybe it’s the terminology. Maybe it’s not really a 360 review. It’s more the formal process of getting some feedback on a regular basis. But we’re getting this feedback every day. When we sit down and we do a review, nothing should be a surprise.
Jay Goltz:
Well, here’s the one difference. We don’t have a schedule. If something happens, we deal with it an hour later.
Laura Zander:
One hundred percent. Same thing.
Jay Goltz:
So I’m just suggesting, my guess is you and I are doing almost the same thing. I don’t call it a 360 review, because I’ve got to tell you, that’s a big business term that is screwed up from what I’ve read and doesn’t have a great reputation.
Laura Zander:
We want to deal with it in the minute. Like I said, when we do a review for somebody, nothing should ever be a surprise because we should have already talked about it. But what we like is having that very specific time to sit down with somebody and really evaluate: How did the last year go? What do you want to accomplish next year? What do you think your strengths are? What do you think your weaknesses are? Here’s where you’ve improved. Here’s where your peers say that you’ve improved. Or here are the things that people wish you had done a little bit differently or whatever.
Jay Goltz:
And my argument is, that’s called management.
Laura Zander:
Yeah.
Jay Goltz:
Now, do you get a 360? Laura, do they tell you what they think of you?
Laura Zander:
No.
Jay Goltz:
I’ve gotten some calls about you that I want to talk to you about, that you’re rubbing some people the wrong way. But I don’t know if this is the appropriate forum to have it in. So we’ll talk later.
Paul Downs:
Are you serious?
Jay Goltz:
No. But did you notice how dead silent she got?
Laura Zander:
Yeah.
Jay Goltz:
That’s my point. You see, this is the problem with 360s. I don’t want a 360.
Laura Zander:
I don’t either. I don’t either!
Jay Goltz:
I’ve got to tell you, I feel very good that I have half a dozen people who work with me who will come into my office and say, “Jay, I think you’re looking like a jerk with this,” or, “You’re being a jerk.” Or, “Jay, you’ve got to rethink.” They’ll tell me, and it’s a beautiful thing. And I appreciate it, and I always appreciate it. That’s my 360 review: every day, every moment. And I get it at home, too. [Laughter]
Loren Feldman:
All right, on that note, let’s take a quick break to hear from our sponsor. And then I want to ask you guys a couple questions about the interview I did last week with Dana. So we’ll be right back.
[Message from our sponsor, Work Better Now]
And we’re back. So as you guys know, last week, I caught Dana at an interesting time. She was just back from this great trip to Germany. But while things went really well there, when she came back, she was hit with a couple of resignation letters that kind of shook her. And we talked that through, and one of the things that came out was that she was kind of questioning herself in her role as CEO and trying to navigate that territory between being a pushover and, what she called, being a “bitch.” Laura, can you relate to that at all? And do you think it is something that women struggle with more than men?
Laura Zander:
Well, I’m not a man, so I don’t know if I would struggle with it less if I were a dude. I mean, I have told you before, I feel like Jay and Paul are infinitely more confident and kind of cocky than I’ve ever been.
Laura Zander:
But I totally related, and actually, after I listened to the episode, I sent Dana a note. I remember kind of getting caught up in this, “I need to be tougher, I need to be tougher.” But being like that is not who I am. And what I realized was: I don’t need to be tougher. I need to be clear, but kind. I needed to improve being clear about what I wanted, as opposed to dancing around stuff. But I needed a better manager. I needed somebody to be that buffer between me and my employees so that I could still be a nice person and be who I am.
Jay Goltz:
Okay, I have to jump in. I can’t take any more. Let’s forget the word “tougher.” Let’s forget the word “bitchy.” How about just being a pushover? Because that’s really what this comes down to. It’s being a pushover. You know what you need for the business, and the person’s not doing it. And you allow them to push you over. So my argument is, you can be nice and not be a pushover at the same time.
Laura Zander:
I agree. But I think where my hackles went up just a little bit was she was giving the example of talking to somebody who needed to send an email or something and I think they needed to leave early to go pick somebody up or something. What I wasn’t clear on is, sometimes there’s being flexible, and there’s being strict just for the sake of being strict. And I’ve made the mistake of being strict for the sake of being strict because it feels like that’s what you’re supposed to do. Whereas there are times when it doesn’t matter if the email gets sent in three hours. We have a really flexible environment, and I’ve been talked to that I’m too flexible in that way. And that’s where having a really good manager comes in, who is a little more strict than I am and doesn’t allow me to get pushed over—because I am a pushover.
Jay Goltz:
I have the answer. This is easy. You are transitioning from being the manager to the leader. The leader shouldn’t be doing that stuff. I don’t ever do that stuff at all. I have nothing to do with that stuff. Everyone else is doing it.
Paul Downs:
My comment on the Dana situation is, again, I agree with Jay that saying “bitch” and saying this is a man-woman issue is not helpful. What we’re really talking about is whether people are dying to avoid conflict and do stupid things because of that, or whether they lean into conflict because they enjoy it. Those are the two ends of the spectrum.
But the other thing that’s not coming up is that different organizations and different types of employees really require different management techniques. I’ve noticed that much larger organizations deal with their employees just by having systems and not having flexibility, and I think a lot of that is the fact that by the time you get to 100 people or 10,000 people, you really can’t be flexible with everybody.
Whereas me with 24 employees who are all pretty good people, I can be extremely flexible. And so things that I do that, in a different situation may look like conflict avoidance or leaning into it, one or the other, I just have the freedom to do that. And in different companies it just looks different.
Jay Goltz:
Well and the key is: Does the flexibility harm the customer? That’s why I went through my four things. Like, if you want to send an email to a vendor to question a price and you’re three hours late, who cares? But an email that a customer was expecting to get by one o’clock needs to get out by one o’clock. So it’s about: Can you afford to be flexible on a particular issue?
Loren Feldman:
All right, let me give you a different example. This past week in The Morning Report, we highly highlighted an obituary for Aaron Feuerstein, who for a time may have been the most famous business owner in America. He was famous because he declined to move his textile mill out of New England, when everyone else in the industry was leaving and going south—and because he continued to pay his workers, including Christmas bonuses, right after a devastating fire just completely destroyed his plant. He kept everybody on the payroll, he borrowed a lot of money to rebuild in the same place. But as a result, he ended up bankrupting the business and losing control of it. It was taken over by another company and ultimately moved to the South. This happened, I think, in ‘95. All these years later, I’m curious what lessons you guys take from this. What was this an example of?
Jay Goltz:
Of forgetting that your job is to make sure the business stays profitable. And I want to absolutely add to this: He was a wonderful human being. I totally can sympathize, empathize that he wanted to take care of his employees. You know, going bankrupt doesn’t mean you went broke. It means you stuck a lot of people for money. So on one hand, he was lovely and wonderful to his employees, and he hung a bunch of people at the end for probably millions of dollars that he didn’t pay the bills on that maybe put them out of business. So it just illustrates once again, our job is to take care of our people and to take care of the business at the same time. Not one or the other.
Paul Downs:
Yeah, I agree with Jay. I mean, I tell my people all the time, “If you want the company to take care of you, we’ve got to take care of the company.” And there are moments when the flow is in one direction or the other, but a lot of it is about being honest with people about what the situation is. Like, if we’re doing well, tell them, and then we’ve got goodies to hand out. But if things are bad, you have to go back and say, “We’re in a bad situation, and I expect if you like working here, and you don’t want to have to go work at Home Depot or something, then we’re going to have to take care of that company at this point. And that’s going to mean sacrifice.”
Laura Zander:
Same page. That goes back to this whole bonus conversation at the end of the year, or the thank you.
Jay Goltz:
Keep in mind, he paid all of his employees. They could have gotten unemployment. Maybe it would have been smarter to just let them go on unemployment for two months, and then come back to work. I mean, there are ways of doing it without putting yourself out of business. And I’ve been through—in 43 years—six recessions? 2008 was brutal. I mean, I’ve lived through this stuff.
Paul Downs:
Well, he may have had a personal fortune. The interesting thing would be to dial back three years when, presumably, he’s still competent to say, “Hey, what do you think about that now?” That would be an interview.
Loren Feldman:
Well, that interview was done, and he said he would do it all over again.
Paul Downs:
He must not have suffered all that much from the decision personally.
Jay Goltz:
Or he doesn’t care that, at the end, he stuck, you know, 50 vendors and put half of them out of business.
Paul Downs:
Well, you don’t know the details.
Jay Goltz:
I don’t know. I don’t know that. I don’t know. I’m just saying, all I know is when you go bankrupt, that means you didn’t pay some people.
Loren Feldman:
Last thing: We just got a pretty scary inflation report. Prices are up the most they’ve been up in 30 years. You guys concerned?
Jay Goltz:
I’m not. I save my concern for things I have control over, so you can name 20 things that I could be concerned with if I wanted to be neurotic and nuts and not sleep at night. Here’s one more thing. There’s nothing I can do about it. It is what it is.
Laura Zander:
Same page.
Jay Goltz:
And I’ll deal with it as it comes along. There’s 20 other things you could say, “Are you concerned?” No. I save concern for things that I can fix or adjust or—
Loren Feldman:
So it hasn’t hit you yet.
Jay Goltz:
It has absolutely hit me.
Laura Zander:
What are you gonna do, though?
Paul Downs:
There’s going to be pressure to raise wages and prices.
Jay Goltz:
Yeah, I’ve done that.
Paul Downs:
We are always trying to raise our prices any time we can sneak it by somebody, but raising the wages is a much different issue, because my company is not all that profitable to start with. I mean, it’s an extension of the bonus conversation for us. If I just start handing out raises, then that’s really going to be bad for the company. So I’ve been steeling myself for that conversation about, “Hey, I need more money for gas,” or whatever. And my response is, “Get rid of that pickup and buy a Prius,” but I don’t know how far that’s gonna go, you know? I don’t know how it’s gonna play out with my people.
Loren Feldman:
Where is it hitting you, Paul? What prices are hitting you?
Paul Downs:
The prices, I actually don’t even know. I haven’t dug into it in the last few weeks. When they measure the inflation and release that number, a lot of it is stuff that doesn’t affect me directly. People’s rents or housing prices or gas prices. We’re not running a fleet of trucks, so I don’t really care that much about gas prices. But I do have people who drive an hour every day to work—a lot of them—and so if they’re feeling pinched, and they don’t want to give up whatever vehicle they’ve got, then it becomes something I’ve got to deal with. And I don’t particularly want to have to have that conversation.
Jay Goltz:
Yeah, stuff is going up in cost. I’ll tell you what, there’s an opportunity here. There’s always an opportunity. The opportunity is: Your competitors are going to start making really bad decisions now. They’re going to have a really good employee who deserves a raise, who needs to get a raise, and they’re not going to give it to them. And they’re going to quit, and they’re going to come and work for me.
Or there’s a really good product you sell that’s gotten more expensive that people really like, and you continue selling it and other people are going, “Oh no, it’s too expensive.” They’re going to stop selling it. Or they’re not going to raise their prices, and they’re going to go broke because of it.
These times are what makes the difference between… smooth seas make a poor sailor. That says it all. These are the times that make you a better business person, and you’ve got to navigate this. And the knee-jerk reaction of people who are afraid is they usually make bad decisions, and it takes some people out. There were 25,000 frame shops in America 20 years ago. Now, there are 8,000.
Laura Zander:
Yeah, for us, it hasn’t necessarily hit us super hard yet, but I’m anticipating that it will. So we’ve shifted our business model. We’re just focused more and more this next year on profit margin and reducing the volume and reducing how much stuff we’re doing, but making each thing more profitable. We’ve been working really hard, on the Texas side of things, on making each person more efficient. So our goal is to have fewer people but to pay each person more. Because we are rebuilding this business, we have a lot of opportunity there.
Loren Feldman:
My thanks to Paul Downs, Jay Goltz, and Laura Zander. As always, thanks for sharing, guys. I really appreciate it.
