I’ve had partners who used the whip.  There certainly are times when you have to discipline. However, my contention is that the whip needs to be used very sparingly—and never as an immediate reaction.  If you whip someone (verbally, of course), you may get a burst of incredible performance.  But you will inevitably lose your long-term productivity (and your top performers) if you punish too often. 

I have seen people who use the whip over and over.  Soon the people around them reach the breaking point and basically say,  “I don’t care. Whip me to death. I am done.”  They check out, and apathy sets in.  I know a young, up-and-coming executive who was a master with the whip.  Unfortunately, he was so hungry to prove himself that he burned through all the people around him.  Now, no one in our area will work for him. 

There is a fine balance between knowing when to reward and knowing when to discipline.  When there is an out-of-bounds problem, discipline needs to be meted out.  In our home, we do not have the long lists of rules I have seen some parents enforce.  Instead, the rules we do have are rules that fit with our core values, and we are very strict with these few rules.  I often say to my kids.  “You will make some mistakes.  That is how you learn.  Just don’t make the big mistakes!”  Too many little rules can create confusion and can actually undermine the more important rules. 

Seeing the Value in Failure

In my current company, we have set four sets of quarterly goals this year.  Honestly, I hope we miss one of these goals.  I do not want to miss the first set or the second, but if we miss the third goal it gives me a opportunity to point out that this is what a little failure feels like, and your success is not guaranteed.  I’ve managed teams that developed a bit too much ego.  That can lead to arrogance and missed goals.  If you handle such situations well, it will bring your team back to where they’re hungry and want to win again. 

For years I have proudly proclaimed the strategy of sitting underneath the table of feasting giants and eating the scraps and crumbs that fall from the table. A bootstrapper’s dream is to get into that little market segment that isn’t being addressed by several large players, exactly.

In Bootstrap Business I go so far as to outline a landscape matrix that actually shows how to very deliberately get between several large companies and make sure you don’t infringe on their territory, while still eking out that little crack of opportunity.

I have deployed this countless times. There is; however, one danger. When the market starts to mature, sometimes the giants reaches down and pick up the scrap, and in the process–squish you like an ant.

Indeed, this happened to my team this week. Google released a new algorithm update and indeed it dramatically changed our channel. Simultaneously, another giant that we work with got up from the table. When the two big fat giant bellies hit each other we got squished in between. Needless to say, it’s very painful when that occurs, and it can actually be life threatening to the business.

In this situation, I believe we will recover, but it’s caused me to outline three distinct things that you need to do when deploying this type of opportunistic strategy.

1. Understand the giants eating patterns. How long do they eat? When is it time for them to move? In the case of Google, they release algorithm updates every so often. So, when you see the signs of movement you better get out from underneath their feet as they get up from the table.

2. Give yourself cushion either to the left or to the right. This means, have the ability to either push to your supply side or push to the customer side. If you get squished right between two giants with no place to move, you end up getting your margin squeezed, squeezed, squeezed.

Transactional businesses are wonderful, because they provide a repetitive income flow, but if you are not careful you can end up getting squeezed right to death. Either own the customer and control it, or make sure that you can control the supply cycle. I have discussed this principle many times and I have always stated:
-    Never maintain only one supplier.
-    Never rely on only one customer.

Well now I need to kick myself in the pants, because in the businesses currently getting squished, we basically have one supplier and one customer. That is always a precarious situation to be in.

3. Move from the table as quickly as you can. Once you get profitable, make sure you can then quickly move and transition to a place or a pocket where the giants aren’t quite as likely to rumble over the top of you. Once you’ve filled your belly, look for the exit door as quickly as you can.

I still contend that finding a really hot sector that is on a wave, where there are giants pounding the table, and where money and scraps are falling onto the floor–is a great strategy. Just beware there is a downside. I’m personally committed to using these opportunistic businesses to leverage and become viable quickly. Then I rapidly move in to more value transactional, longer-term engagement types of businesses. I encourage you to try it too.

The moral of the story is…keep your head up and your eyes open when you are sitting next to giants.

Tonight I attended the 90th Birthday Party of my Uncle Dan. As I entered the room I saw my aunts, my uncles, and all of my extended family. I was instantly thrown into déjà vu.

I grew up in a very peculiar environment. My father lost both of his eyes at the age of five and is completely blind. He is a brilliant man. After completely his schooling he served as the County Attorney for 36 years. If you got busted in our community you were going to jail.

My uncle was the mayor for most of the time I was growing up. I had two aunts that also lived close by and you’ve never had your ear chewed on or your arm twisted and bent until one of them got a hold of you.

I stepped into the party room and my Uncle Robert (the mayor) instantly cornered me and proceeded to tell me about a pipeline that was coming in and I remembered that I better put my A game on. You see, half of my family is extreme strong Republicans, the other half Democrats and there is no middle ground in this family. When you stepped into a dinner table in my family you had not only better have your logic lined up, but you better bring your A game with presentation. This indeed is a family of very strong opinions.

I watched with great delight as the head table, seated with all of these siblings (all of them over 85 years old) proceeded to table and espouse their views of the world. I took great joy in understanding of where I got my strong opinions.

I have two resounding thoughts that fall out of this little experience. The first is: Have opinions. Take a stand. Don’t be afraid to espouse and stand up for what you believe in. The reality is, it adds value and if you don’t do that, then you are nothing more than a flag flapping in the wind.

Here is the second. I have often stated (and many of you that have followed me, have often heard me state) “A stupid man never learns from his mistakes, a smart man learns from his mistakes, and a wise man learns from others mistakes.”

We need to pay honor to the sages in our lives. Those who have went before who have made a difference. Tonight I was able to sit around with this group of individuals and watch with great interest as they espoused their views and beliefs and indeed through my life I have been able to learn much from these great individuals. I pay respect and honor to my Uncle Dan on his 90th Birthday. I honor my Aunt Louise and for her feisty, dog-headed determination. I honor my brilliant wonderful father and my Uncle Robert and those uncles and aunts that have went before me.

We need to make sure that we honor and pay respect for those that have knowledge that we can learn from.

Keep Your System Simple

It’s important to not overcomplicate your system of goals and rewards.  In one of my early ventures, I created a chart that had eighteen different targets to hit and a simple “REWARD” written across the top.   My employees were unclear as to what the priorities were and what the reward would be.  I have found it’s best to have three or four target goals to hit, with a very specific reward at the end.  The goals we typically fail to achieve are the ones that are complex and unclear.

Employees should also feel free to devise their own systems (within reason, of course).  My son and his friends came up with their own motivating reward.  They had a Burger King crown they kept in the office.  They were all highly competitive, and they would have contests to see which one could create the most web links on a given day.  The winner then got to wear the crown.  The reward didn’t cost me anything, and it was fun to see these seventeen-year-old boys engage in an all-out push to optimize their web sites, just for the reward of wearing a paper crown. 

One of the benefits of having a team set its own goals and rewards is that the members learn to govern their own behavior.  That way I don’t have to micromanage my teams.  

Avoid the Entitlement Mentality

When I was managing Mitsubishi Electric, I was still young and not completely financially stable myself.  I had an awesome killer team that was also young and hungry.  I began the practice of taking them out to lunch every Friday.  I would pay for their lunch myself because I didn’t feel the company should have that expense.  This was my personal way of showing my appreciation.  A few months into this, I ended up in a tough stretch where I was traveling almost nonstop.  As a result, there were a few Fridays where we didn’t make it to lunch.  Soon, there was muttering and complaining.  Morale dropped.  These employees had become so accustomed to going to lunch each Friday that they felt they were entitled to this perk.  What started as a good intention led to my being the bad guy because I did not consistently provide them with their expected lunch.

I had a similar experience with my crew of teenagers.  I would stock the fridge with food and soda pops so they could grab something to eat after they finished school and before they started to work.  A few times we got so busy I failed to replenish the quickly consumed food items.  Almost immediately, some of the boys started murmuring, “I can’t believe it, there aren’t any burritos or Hot Pockets in the fridge.”  If I have erred, it is because sometimes I have rewarded too quickly or too often.

Allow For Some Flexibility

Situations change, and sometimes you need to change with them.  I’ve lived through shifts in markets where even though my team gave an incredible effort, they fell a bit short of the original goal.  In those situations I still gave the reward so the team didn’t lose steam.  However, be careful not to reward when the reward is not merited.

I employ a group of mothers who work for me from their homes.  They are motivated and hard working.  I told them once that if they had ten consecutive days of making $500 in profit, I would give each of them a large bonus.  These women worked their hearts out.  At the end of the period, I saw that while they were only clearing $300 to $400 on the weekdays, on the weekend their profits were $800 to $1,000.  Even though they did not have the ten consecutive days, on an average they were well over the target I had set.  I told them that in this instance, average really does count for something, and they earned their reward.

Last night my wife and I had a rotten guacamole, terrible night. I had been traveling all week long doing lectures and I was dead tired. I got home at 9:30 or 10:00 p.m., spent a little time with the family, and finally made it to bed about 11:30 p.m. At midnight someone began banging at our door, the dogs started yipping, and come to find out our second son had forgotten his key and was banging on the door to get in. We painted smiles on our faces, went out to let him in, spent a few minutes talking with him, and then crawled back into bed.

At 1:00 in the morning we heard the shower running and couldn’t figure out what was going on. The dogs start barking again, and at this point I almost didn’t dare go back to sleep.

We were again woken up at 4:30 a.m. when in stomped our 3rd son, ready to go to Drivers Ed at 5:00 in the morning. Again at 7:00 a.m. the 4th son headed to school and finally at 8:00 a.m. our final son departed. By the time we get him to school, needless to say, very little sleep had actually taken place.

My wife and I did eventually get a hearty laugh out of it when we figured out who had been showering in the middle of the night. We discovered that Nathan (Drivers Ed son) had looked at the clock wrong, got up at 1:00 a.m., showered, got dressed and completely ready, and then realized that the clock had said 1:00 a.m., not 4:00 a.m. I still chuckle thinking of it now.

This pretty much sums up the counsel that I gave in three of the lectures this week. The sequence of Zigging and Zagging is critically important. There is a reason why Zig #1 is Drive to Profitability, Zag #2 is Add Resources, and Zig #3 is Add a Scale Element.

Indeed the timing is critical.

So frequently people attempt to jump directly to Zig #3, which is a scale element. This is exactly what Nathan did this morning—causing havoc to our entire family. It of course is the perfect thing to do…have a shower and get dressed…but 1:00 in the morning is not the perfect time to take the action. The same thing is true with scale and so many other aspects of your business.

You see, when you are making cookies–how you put the ingredients in, and the order in which you put them in, is as important as the ingredients themselves. The sequencing and timing of how we build our businesses and how we take action is actually the trickiest part of making a perfect batch of business cookies…or getting a good nights sleep…or getting dressed properly and appropriately.

Remember when you are zigging and zagging: Zig #1 Drive to Profitability, Zag #2 Add Resources, followed by Zig #3 which is a Scale Element. Don’t get tempted to jump directly to Zig #3. Always nail it before you scale it.

What Will Motivate Your People?

Before developing your system of rewards, remember that what motivates one person may not motivate the next.  When I was general manager of About.com’s web services division, I had a highly talented engineer named Earl who worked for me.  He was, without question, one of our brightest engineers, but I continually struggled to figure out how to motivate this guy.  I regularly gave out bonuses, rewards, and incentives that everyone else loved, but Earl did not seem to care.  Nothing I offered seemed to motivate him, and I knew his contributions were affected by his apathy toward my rewards system. 

As we were planning our first Christmas party, I finally figured out what motivated Earl.  During a planning session, he asked if he could play a piano number for the entertainment.  I didn’t think much about it, but told him that would be fine.  The night of the Christmas party, Earl walked in, all decked out in a tuxedo, complete with flowing tails.  When he sat down to play the piano, it was clear he cared deeply about his performance, and he delivered his delightful number with the flare of a concert pianist.  Everyone cheered and clapped for him, and then he stood up and gave an overly exaggerated bow.  From that point forward, I knew what motivated him.  He didn’t care about things or money.  He loved recognition and any opportunity to perform and take a bow.

As the New Year began, I implemented what I dubbed “Lunch and Learn with Earl.”  Twice each month, we’d have a Lunch and Learn where the company would buy lunch and the junior engineers could visit with this master engineer.  They would ask him questions, he would impart his wisdom, and at the end they would all clap and Earl would beam.  The junior engineers learned a great deal from Earl, and Earl loved the recognition.  Productivity went through the roof. 

I had another employee who would always get really excited about the rewards I proposed, but before she achieved her goal, she would simply go out and buy the same thing she was going to be rewarded with.  And while she did good work, I knew she could be doing far more.  This pattern caused me immense frustration, but I finally found out that what she really wanted was for us to pay for her tuition at school and call it a scholarship.  By listening carefully to things she said, I learned that her parents had plenty of money, but they had always drilled into their children how they had gone through college on scholarships.  This young woman had good grades, but because she had no real financial need, she hadn’t been able to get a scholarship.  So, I developed a reward system that provided her with the scholarship she so desperately wanted.  

It’s also important to figure out what the people you are trying to motivate do not want.  I’ve learned that a reward for one person may actually feel like a punishment for another.  A few years ago, we established a reward for the young men who were working for CastleWave to go to Las Vegas and see the Blue Man Group.  We set up a very specific goal and also very specific rewards, which included going to the Stratosphere and riding on a roller coaster set atop of one of the tallest hotels that juts out over the city.  These boys, with one exception, worked extra hard because they loved the idea of this trip.  When they weren’t focused on the work, it was all they talked about. The exception happened to be a different personality type.  He was one of our key engineers who was a little shy and did not like big crowds.  In fact, the thought of going to Las Vegas with a bunch of loud teenagers couldn’t have been less motivating. 

Gratefully, he came to me and let me know that he really did not want to go on this trip. So, I found something else that motivated this engineer, and took the other boys when they reached their goal.  If I had ignored his needs, the outcome might have been tragic.  He was a key member of the team, and he could have subconsciously tried to sabotage the goal for the rest of the group because he did not want to go on the trip.

For the past 25 years I have been a strong supporter of a large, not for profit, youth organization that helps young men become strong, valiant adults. I have contributed financially, but more importantly—I’ve contributed endless time and personal resources.

Thursday I had occasion to go into the regional offices for some administrative approvals on behalf of a young man attempting to do a service project. As I walked in I actually bristled, expecting a negative exchange. Regretfully the very negative exchange I was hoping not to encounter, did in fact occur. As I approached the high desk, a smug woman peered over her glasses at me in a condescending manner, before any words were spoken. The following exchange was caustic, demeaning, and completely inappropriate. In the end I was denied both verbally and emotionally. The organization refused to discuss this young man and his project.

As I drove home I not only felt a bit of sadness, but a little bit of right indignation. I came to the conclusion that I would not be able to support this organization any longer.

The woman behind the desk had no idea who I was, my background, or the level of contribution that I have made to the organization through the years. Sadly most of my peers and influential colleagues have privately expressed this same level of frustration with the organization.

Although very powerful in its values, the organization does not espouse to live and operate by these same values. Instead the leadership conducting the bureaucratic portion of the business reflects values that are the exact opposite of helpful, friendly, courteous, kind, and cheerful.

When I think of failed businesses I know some met their demise because of these kinds of rough exchanges.

The reality is—as we treat our customers poorly, as we exchange caustically or negatively—very seldom do we get the luxury of having someone come out and vocally make a proclamation like I have just made. We live in a world of social media, and tweets and like buttons. Therefore what happens is word spreads, customers vote with their dollars, and they quietly vanish.

In your business, remember to take care to be respectful, to listen, and to treat your clients kindly. You never know who will be walking through the doors or standing across the desk from you. It is now easier than ever to share bad customer service stories.

Repeatedly mistreating an individual has a huge negative impact. Each interaction has social consequences that can literally make or break your business.

Luckily, I have several inverse examples of this too. I am continually impressed every time I pull up to my local tire store and the individuals run out to my car to greet me. They actually run out to my car to greet me.

I’m equally impressed with the organization where I now buy all my computers. I’m basically in love with Apple. Every time I go into one of the stores the geniuses at the bar greet me appropriately. They are courteous. They go out of their way to engage and help me resolve my problems. Often they go to the point of covering things that aren’t even under warranty.

Now what is the result of that kind of behavior?

Well, I don’t have any PC computers; every computer in every one of my offices is now a Mac. That’s the result of treating a customer properly. You catch more bees with honey.

Indeed, I begin where I started. We vote with our dollars and we go silently for good or for bad.

This morning I had a delightful conversation with an individual named William Hackett Jones. For the last three or four years I watched with great respect for William as he carved himself out of an almost impossible situation.

Several years back I taught a course on Bootstrap Business. William was there. He runs a translation service, and he was actually on the verge of declaring bankruptcy over in Russia. Then he learned about the principles I follow and changed his course. He came to the firm conclusion that indeed Bootstrapping and Zig Zagging was the methodology that he wanted to follow.

So now without any venture capital and without any funding, William has truly subscribed to the Value Equation. It goes something like this:

Value Equation

Intellectual Capital (value of being smart)

+

Relationships Capital (value of those great relationships that he had developed)

+

Not Taking Funding

=

Adding Value that indeed helped build his business

I am thrilled to state that although it took William several years he has grown that business. He’s taken it from being on the very cusp of bankruptcy to thriving business (one that is also projected to be a million-dollar business this year).

William is now preparing to hire his first executive admin, which means he is now at the critical phase of adding resources and processes. It is all very exciting for me.

I must admit it was really fun to listen to the lightness in William’s as we talked, compared to the conversation that we had a year or so ago.

It is really fun to see the fruits of the labors of those around me. It’s always fun and exciting to have a business succeed. But it is even more exciting to see others applying these powerful Zig Zag Principles from the book, as well as those from Bootstrap Business. The success stories that are now starting to flow back to me are absolutely thrilling.

I respect you William. I look for great things. You have a great bright future in front of you. You are definitively making this zig zag turn. Hold strong. We will be watching you carefully. And I will give everyone an update on the success that William has going forward. Keep Zig Zagging in Russia.

Every year at the end of the year, my wife and I sit down and prepare our goals for the next year. This year one of the major things we added to our list was cut those around us, each other, and ourselves a little more slack.

Too frequently we wind it so tight and demand such a high level of performance from of ourselves, that we miss the real, joyful opportunities around us.

The reality is no one is perfect. 

Each of us makes mistakes–irrespective of trying to do our best. Sometimes we just have to live in this messy imperfect world, bungle a little bit, and accept it. I have found this in business too. I have found this in my spiritual life, and I have found this in my personal life. Often times the biggest tragedy that occurs is being too harsh, too critical, and too demanding on ourselves (and at times, on those around us).

The truth is we actually perform at a much higher level when we take the pressure off a little bit. If we cut ourselves, and those around us a little slack, the end results improve.

Now, I’m not proposing that we subscribe to a level of mediocrity either.

This week there was an event that I became aware of, and one that really drove this point home for me.

A young man that I know is having a couple of small challenges–nothing serious, but still a series of challenges. Recently this brought him to a conversation with two spiritual leaders. When I became aware of this, my heart was instantly frozen and softened simultaneously. This enigma because I know that one of those spiritual leaders is a very harsh, direct, smack-it-down kind of individual, where the other individual is kind, generous, tender, loving, building and supportive. 

I was anxious about the implications on this young man’s life. I knew that the first individual would indeed buoy him up, support him, lift him, and help him reach his height, despite several small mistakes. On the other hand, I was afraid that the other individual would want to smack him down, sequester him, and destroy him. 

The reality is that at some point we will be in the same position, if we haven’t already been there. Then we all need (and appreciate) people cutting us some slack.

We live in an imperfect world. There are going to be mistakes made. The challenge I give to all of us is…do your very best. The key then, is to is keep things going. 

I often tell my team members, “I expect mistakes. Great! Go make mistakes, just don’t make the really big ones.” 

I tell my sons the same thing, just don’t make the really big ones! That’s how we learn. If you have team members that are not making mistakes, I would argue that they are not trying hard enough. They are not pushing the envelope enough!

Again I close where I started.  Cut me a break, cut yourself a break, and enjoy the moments of life a little bit more.

As you have been rushing from goal to goal or from zig to zag, have you ever found yourself asking, “Why am I doing this?”  If you haven’t created and implemented a system of rewards for yourself and those around you, you’re going to find yourself burning out long before you reach your beacon in the fog.  Success and money alone are insufficient motivators.  I have found that if I tie a reward to the successful completion of each zig, I stay far more motivated than if I never pause to enjoy some benefit specifically tied to its completion.  And I find I’m much more enthused about beginning the next zag. 

We humans are really not much different from Pavlov’s salivating dogs.  If we catch a glimpse of a slab of meat, we will drool, salivate, and do just about anything to get to it.  My family has what I view as miserable, little dog that is half-poodle and half-Chihuahua.  She is the most high-maintenance little mutt I have ever met.  She does not like me, and I do not like her.  The problem is the rest of my family loves this dog, so she and I have put up with each other. She will have absolutely nothing to do with me, unless I have a little piece of meat in my hand.  Then she views me as her best friend, and her behavior shifts dramatically.  She pants and begs and pleads for that little piece of meat.  And, more important, she will do anything I ask.  Interestingly, she does not like just any kind of meat.  She likes the little slices of cheap lunchmeat that I am sure are not healthy for dogs.  Our other dog will eat anything I give her, but not this little mutt.  From the day we got her, I have had to find the things that specifically work for her. 

We all have things that motivate us.  The legendary football coach Vince Lombardi said, “Coaches who can outline plays on a blackboard are a dime a dozen. The ones who win get inside their player and motivate.” Recognizing that reality, and then consciously and deliberately motivating yourself and your teams using rewards, is one of the most powerful tools I have found, whether it’s in my personal, family, and professional life. 

When planning and executing each zig and zag, you should attach a reward to each target.  If you find the right rewards for your people, once they hit their goal they will be willing and even anxious to turn toward the next goal. 

Every great leader knows how to motivate people.  It does not matter if you are a CEO, a coach, a school teacher, a middle manager, or a parent, a big part of your job is being the psychologist or therapist who knows how to put out little rewards that get the people around you to behave consistently in working toward the goals you’ve established.  Lee Iacocca said, “Start with good people, lay out the rules, communicate with your employees, motivate them and reward them.  If you do all of those things effectively, you can’t miss.”  Lee Iococca (b. 1924). U.S. Businessman. Talking Straight (chapter 4, “Good Business—More in Management”)(1988).