Weekly Thoughts

Here is something that caught our eye this week:

Know who you’re working with

This past week, one of our companies had a key operational person quit with little notice in the heat of the busy season.  In small business, these types of things happen and can have a tangible impact on the company and cause a management fire drill.  Of course, there are typically many reasons people decide to leave, but the chief issue with this situation was clearly monetary.  Here is the timeline of events:

1. Chenmark company hires employee after multiple interviews and positive reference checks.
2. Four weeks in, the employee refuses to work that day unless he is issued an immediate raise.  The company gives in to some of the demands but not others.
3. Five weeks in, the employee provides notice that he is leaving for another opportunity providing better wages.
4. Five weeks and 2 days later, management receives a letter from the employee’s spouse stating upon what terms the employee will stay (a doubling of current wages and free housing).
5. Five weeks and 3 days later, company says no to demands, and the employee departs.

Now, some might say the company should have given the individual what he was asking for and kept him on for the sake of operational continuity.  Clearly, this would be the best short-term financial decision, and Chenmark is all about maximizing free cash flow, right? From our standpoint, the decision to say no was made for the following reasons:

1. The type of person who will hold you hostage once, will hold you hostage again.  What’s to say this person won’t decide they need more wages next month?  When does it end?
2. Giving in sends a message to the rest of the team is that the company accepts this type of behavior, and all of a sudden, there is a much larger issue.
3. Culture matters.  A person who acts this way is also likely to discuss their dissatisfaction with the rest of the team – thereby creating a negative culture. When these people are identified, it’s important to remove them from the company as quickly as possible.

Now, what can we learn about this situation? First, the company didn’t have a backup plan, which resulted in acquiescing to the initial demand for more money (i.e,. the employee had all the leverage in the situation – and knew it). Second, the company had to hire a key individual from the outside and did not have the opportunity to grow their own talent.  Hiring people is really hard, and when you’re hiring off the street directly into a critical role, this type of thing can happen. It’s happened in the Chenmark network multiple times since inception and is the key reason why we started our GVP program (btws, we’re still hiring!)  The company is working on a longer-term management training plan but was caught in the short-term having to hire externally.  Ultimately, the company hired a mercenary, not a missionary, a framework we refer to often at Chenmark.  From a 2017 Weekly Thoughts post on the topic:

“As Chenmark expands, we’ve been thinking a lot about people. We believe that we are only as good as our network, and at the core of that network are the people we’re fortunate enough to identify and partner with to operate and oversee portfolio companies. At the moment, we feel relatively at ease with how to measure raw aptitude as there are a multitude of services available to evaluate analytical, communication, and problem-solving skills. However, the challenge at the forefront of our recent internal discussions is how to reliably find, recruit, and empower people with the ‘right stuff’ for the Chenmark team — namely those who share our values, regardless of their background or technical expertise. This week, we read about how venture capitalist, John Doerr, distinguishes between different types of leaders:

“Mercenaries are driven by paranoia; missionaries are driven by passion. Mercenaries think opportunistically; missionaries think strategically. Mercenaries go for the sprint; missionaries go for the marathon. Mercenaries focus on their competitors and financial statements; missionaries focus on their customers and value statements. Mercenaries are bosses of wolf packs; missionaries are mentors or coaches of teams. Mercenaries worry about entitlements; missionaries are obsessed with making a contribution. Mercenaries are motivated by the lust for making money; missionaries, while recognizing the importance of money, are fundamentally driven by the desire to make meaning.”

For us, one of the key points is not that missionaries don’t want to make money or be successful — they do. Rather, missionaries believe that success can and should encompass some sort of significance.”

Of course, it’s not as if people wear name tags identifying themselves as mercenaries, so hiring the wrong person happens despite the best intentions.  However, in the world of small business, every individual matters.  Unlike at large companies, one person in a key position can create huge issues if they depart abruptly. And sometimes, the rational thing to do is work with them until you develop a longer term plan.  As more companies come into the Chenmark network, we are very focused on addressing these potential pain points and making sure we have the right type of person in those pivotal roles.  Unfortunately, that is an endeavor that can take years, so in the meantime, we’ll just have to manage our way through with a smile on our face.

Have a great week,

Your Chenmark Team

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