EP45 - Moonstruck - You talking to the owner here!

Hey everyone, thank you for joining us. I'm the ESOP guy. We are on a journey to an ESOP. I want to say thank you for joining today. For those that are brand new to the podcast, I wanted to say welcome. This podcast is a resource that we've produced to help business owners and corporate management to determine whether or not they, they should even think about an ESOP or employee stock ownership plan as a strategy for their business. So those that have been with us, um, they know that we have a website. So please go to our website at journey to an ESOP.com and check out all of our episodes. So again, thank you for joining. Today, I wanted to start with this. Well, Mr. Castorini, what do you think? $10,800. That seems like a lot. There are 3 kinds of That's the kind of pipe you have, which is garbage, and you can see where that's got. Then there's rus, which is pretty good, unless something was wrong. And something always goes wrong. And then by It costs money It costs money because it's safe. I think we should follow Mr. Cascarini's advice, heart. It costs money. It costs money because it saves money. The title of this episode is, that's because you're talking to the owner here. That's my New York accent. So from a customer's pers perspective, what does an ESOP really mean to the customer? That's what we're going to talk about today. A lot of times what we talk about with ESOPs is the benefit to the employees, the benefit to the selling shareholders, but today I wanted to get into the benefit of dealing with an ESOP company. In terms of the customer's perspective, and ESOP is a powerful uh business because of many, many things, but one of the things I think it delivers so well is the products and services to their customers and differentiates them in that way. And I think it creates a very successful opportunity for the company. So, as we go through this, I just wanted to remind you, please, if you like what you hear, subscribe to the podcast, rate and review the podcast. And also share it with a friend. So I'm in my, one of my partner meetings recently, and I was talking about one of our partners who had a bunch of dogs, I guess he has like 8 dogs. And I said, hey, you know, that sounds like the movie Moonstruck with the Italian grandfather. And Who had, he had a bunch of dogs and he would walk them on the streets of Manhattan and he would, they would howl at the moon and it was, it's it's a great scene of the movie. So, so going into that, the movie, I realized, um, I'm sitting in that room with the partners and These, these guys have never heard of this movie. So first off, I wanted to say that that made me feel really old and I'm like, what? Um I know that this podcast, you know, is not about movies as much as I like to make it about movies. Um, but Listen, this is a movie about romance and love. Moonstruck is probably one of the best movies I've seen about that. It's also, and this is where it applies to us today. It's also about the customer experience, particularly in the scene that I played about the father who owns a plumbing business in New York, in Manhattan, and he explains to the couple who owns a condo about their pipes. I love the scene as it illustrates what many of us in business really know is that as a business owner, We can get across to the customer, what our business can do to help them in a way that incorporates all sorts of, um, I guess belief and feeling and, and resonates. And I mean, you can call that sales, but I think deep down, uh the business owner has the uh uh a, a connection to what they do, the reason they do it. And I think that's a really important um aspect of being an ESOP company. In business, we want to call this type of behavior ownership thinking, which I'm really borrowing from a book written by Brad Hams. And I don't think he invented the concept. I think that technically speaking, business owners invented the concept of ownership thinking, but I think what he's, he incorporated the idea into this book about understanding how ownership thinking can benefit your company. And what I like about the the concept is, is it does categorize and it gives us a good name for the behavior that we would get in a business if we were able to get our employees to think like the owners. And have them step into their jobs on a day to day basis with a level of passion and energy that is similar to the owner. And so, what I love about ESOPs is that the ESOP businesses have the potential to create that kind of culture. Way more in, in terms of when I think about this is, is when I think about a lot of companies that strive after ownership thinking, I think what happens is a lot of times the uh the, the performers, the high performers of the business, um, that are employees really kind of rise to the top. And what the ESOP though does it has the potential for your entire rank and file to become more and more like ownership, owners are more and more have the attribute of ownership thinking and incorporate that into how they Um, do their jobs. We often talk about businesses using ESOPs to retain key people. And I think that's really good, but I think that the, the gist of this, the benefit of this is that the customer gets to deal with employee owners that are more in tune with their needs. So that's what we're gonna investigate as we go further through this podcast. Now, before we really get into the benefits to the customer, I want to stop and say first off, as a business consultant. And also being a business owner for 20 years. One of the things that I think we all have to think about is how do we measure what a customer actually thinks about our business, about us as um their, um, as they are our customer. What do they think about the, the service? What do they think about the product? What is it, what's on their mind and The worst thing that can happen, I think for, for many business owners is you lose a really good customer. That's probably one of the worst feelings you can have in business. And you go back and think, well, what happened? Why did we lose that customer? What was it price? Was it uh service? Was it, you know, and we're just scrambling. And wouldn't it be great to kind of know before that happens? That we are in a situation where the customers aren't, aren't really happy with what's happening or really aren't um in a place where they're, they, you know, consider you very valuable to what they're doing. So, so a lot of that is, is uh having a reliable source of information. So I really need to speak to, and I think this is important because when I talk about the benefits of a of a customer, when a company goes towards an ESOP or becomes an ESOP company, I think the idea is that it's difficult to even know what those are, unless you have a system that can measure what your, what your customer satisfaction is. And what I'm going to speak to you right now is one that's, I'd say is a fast growing trend in business. And it is called the net promoter score. So if you've not heard of this before, um, this is a way that you can measure the customer satisfaction in your business. And so, every business I think would need some type of way to measure the customer satisfaction because as the company grows and you can take on new customers, as, as time goes on, you might have done a really great job for a customer and then over time, it may kind of go to a point where it's, it's not as um noticeable and your customer starts looking for other options. So it's really important, I think for all companies to be thinking about what is, what are the ways they're measuring customer satisfaction and the nice thing about the net promoter score is we'll get into it is that it does incorporate a very simplistic model that gets reliable results and it, and that's the reason it's, it's gaining so much popular, popularity with business. So, Logic says if I ask a question to a customer, and I want to know, you know, I have a lot of different areas that we touch on with the customer. So Logic says I need to ask all these questions. And so what happens a lot of times, a company would send out a, a survey to a client or a customer, and they would have all these different questions, maybe 100 questions, so they could really get a better idea and, and analyze that data and, you know, and change things. So, But the problem is, is obvious. Nobody has any time as a customer to complete that type of survey. So, the concept of net promoter score. You know, and I kind of say again, this is, as it gains popularity, at least 2/3 of Fortune 1000 companies are using the net promoter score, as of this, this statistic came out of May of this year, May of 2020. And this includes most of or all of the financial service companies, airlines, telecom companies, retailers, and others. So if you are unfamiliar with this, you probably have been touched by it and that's because you've received an email or a phone call asking one simple question and that question is on a scale of 0 to 10, how likely is it that you would recommend this company, whatever the company is, to a friend or colleague. You were probably asked a second question also, why did you give the answer you gave? And so this metric was introduced in the world, um, to the world in an article, 2003 article from the Harvard Business Review by Fred Reichlen. He's a Bain consultant and he basically says in this, um, that the idea behind this survey, this net promoter score is it focuses on loyalty and treating people right, he says. He found that companies that focus on earning the loyalty of customers are taking over the world. They simply make more profits, they pay employees more money, they keep employees longer, they reward investors better, and it's a circle of, of loyalty, so it all basically builds on itself. So this is one of those critical success factors that you could boil it down and say, If you're in that, in this right range of your net promoter score, you should be, your business should be working towards, you know, a higher and higher level of success. So it, it goes on and as we look at what the the the net promoter score does is it gives um a, a breakdown of those rankings. So again, if, if I ranked um whether or not I would refer this company to one of my friends, I'm gonna rank that between a 0 to 10. And if I go to the scale or the factors behind that, a 9 or 10 is going to mean I as a customer, am a promoter of that company. So clearly, what do we want? We want 9s and 10s. If I am a 7 or 8, that means I'm a passive. I'm actually um indifferent or I'm not really, you know, I'm not negative, but I'm really passive. And so, you know, that's, you know, that's not very far off the, the trail. So, uh, someone's response is gonna be, you know, 9 or 10 is gonna be exuberant. Yeah, I love this. I love what, what these guys are doing. 7 or 8 is kind of like, uh, I, I'm OK with it. Now we get into a 6 or lower, and that is gonna be termed a detractor. And a detractor is um going to be a negative for a company and be one of those promoters that just work the opposite. They're gonna be one that Um, does not take into, you know, they're gonna actually be saying bad things about the company possibly. So, so clearly very simple data and you can look at very quickly. Some companies are using this in their dashboard, and they're the CEOs and the corporate management groups are just being able to look at this number all the time, um, as they do it frequently and it's, it is also helping if when you start building companies for sale to have a net promoter score. And the reason that's important is because what happens is that you can clearly document. that your company has a high net promoter score. And so if a company is going to buy you, it's going to be able to look at that and say that's a, that is a valuation point. That is something that would, should give you more in a higher valuation because they're buying a customer group that is very happy. And so, a company that has existing clients or customers that are very happy, it's much easier to transition that into a new business as they, as they roll that in as a primary asset of what they've just purchased. Now, in, in the article that I read regarding the loyalty effect, it also talked about um this idea of not chasing a number and this was quoted by Deborah Campbell from Verizon, who uses Net Promoter Score, and she basically commented, it's really about understanding what our customers want and need from us. And what, what I really like about that comment or that quote, for companies that are going towards ESOP is there is a sense. For companies, and this is somewhat of a cultural thing too. It's not, it's not necessarily just about ESOP companies, but it's a cultural concept of, of business related to customer service. And if I am trying to get anything out of a number, what I really have to do is understand that customers are just people. People have needs. And they have desires and wants, and if my company is, is in this place where they're, they're trying to meet those needs and desires, it could be um very proactive service for a firm like ours. It could be um for products, it could be, you know, innovative products that, that the company is thinking about using or, or, you know, ahead of the curve. It could be a lot of things that we don't really understand cause those needs and wants and desires from customers can change over time too. And so what I think was nice about what she's saying, and I think this is really an important point for ESOP companies because of the the concept of ownership thinking, is that if we focus our initiatives and our efforts on really understanding not only what our customers need and want from us, but also what they're going to need in the future. What this net promoter score does is it allows us to track how well we're meeting that need on an ongoing basis. And it gives us something then to have a conversation about with our customers that says, hey, where are we, if I'm gonna call a customer and I'm the sales rep or if I'm gonna call the customer, I'm the CEO or I'm gonna just make those kind of phone calls that I think are very important to customer service. The question might be, how are we meeting your wants and needs? How are we meeting your wants and needs from the last couple of years to now and to where do you see us helping you in the future? You know, and those, I think that kind of question is going to answer a lot of um what I, what I would say are very critical areas of understanding. Nothing really, nobody does well when we go through and we make a big plan in our business and And it doesn't execute well with our customers. So, so again, this is a critical thinking. What, uh, when I, I bring it back to the ESOP. What's really cool about this is that ESOP has owners that own the company that are your rank and file that are dealing directly with the customers, whether that be in the field. Um, on the phone, um, maybe it's, it's, you know, even just shipping the product, just anything that, that customer or that owner or that employee owner has the ability at that point to be thinking about what we're talking about here is what is the experience the customer is having in the moment that that employee owner. is touching the customer. And I think that type of mentality, this is why ESOPs are so much more powerful because you can multiply that type of thought process across the entire company. And I think by measuring it with an a net promoter score, it gives you a lot more information or insight into how you're doing with that. So we'll leave that for now and I would say there's a lot of ways to measure customer satisfaction and I don't want to just say I'm promoting the net promoter score, but it is something that is gaining a lot of traction. In our, in our own business, we've, we've used different types of, you know, ways to, to measure, but I think it's really important as an if you analyze your company's success, think about how you are measuring the customer satisfaction. So now if we transition from here, and we get into this concept of ownership thinking. I'm gonna cover a couple um ownership thinking, you know, concepts that I got from an article written by Martin Swieling, and The, the article covers these, these are kind of attributes of ownership thinking and I think they're they're important because they help us to kind of step into the concept of an ESOP and think how would my, how would my employees be a little, how would they be different if I could move through the ESOP and also convince them of their, of their situation as employee owners. I don't think it's as simple as I just created an ESOP, so, by the way. So we're going to cover 8 based on this article. The first is connect every action to a business focus on customers. And I think it speaks for itself, but I think the idea behind this is. And sometimes we get focused on other things we think are so important in our, in our business world. And if that, if the customer's experience isn't at the, at the highest priority of what we're thinking about, I, I believe that can be a problem for, for companies with the way their employees see things. And, and I don't want them to pick on younger people, but as we start seeing younger people work into service positions, Um, there's a, there are some absolutely great younger people doing these types of jobs, and that's, you know, the people that are waiting tables and, you know, serving coffee and different things. But I've noticed for myself a trend where I don't get eye contact from people in retail stores a lot anymore. They're, they're just, I don't get that sense of, hey, they're thinking about me and this experience. Maybe it's a, it's, I'm going to the grocery store line and And, you know, they're, they're working with, you know, all these different people. Um, I, I feel like there's definitely a, uh, a sense where that, uh, or that experience has been eroded and, and this is a very important point. I think every employee needs to focus on the customer experience. Second would be, and then again, principles of ownership thinking. Don't forget to work on the business as well as your role. So if your job in a business is processing transactions, you need to work on ways of enhancing the transactions from a customer perspective. And so kind of the example I gave was the idea that you're shipping the product to a customer. And so, what does it look like? I mean, is there anything in that process? Is it um that you could do to make the customer experience more, um, More, more impactful that they're, they're served so much better. And so I think that sometimes people answering the phone may, they, they may have an opportunity to enhance the customer experience. The third would be be willing to invest in effort before expecting results. And so I think that a lot of times with employees, when they expect a raise or promotion, they, they accept this new responsibility and Um, they're not really ready for that yet. And some, sometimes when you have an employee that has ownership thinking, they're really thinking about what's really right for the customer. So they may not want to step into that role until they're really ready. Um, so sometimes employees are like, look, I want to get raised. I want, I want to get a promotion right away. I've been here for, you know, 6 months and I should be promoted right now. And we know as business owners that they're not really ready for that yet. One of the, one of the rules that we use in our businesses. really be doing that job that you want to be promoted in for almost a whole year before you get promoted. Then we'll promote you and you'll get the title and everything else, but it needs to prove itself out as a rule of thumb, and it's not always gonna be the case, but that just helps us to stay on track with it. An employee with ownership thinking is thinking about how they could be um a better employee for the whole, the better the whole company. Communicate. The fourth is communicate the business justification for your efforts. So being busy or working long hours does not always mean larger value to the business. So your help in quantifying the return of the business will solidify what your career looks like. And so going through this ownership thinking concept is. is you, um, as you work, you know, what you're working towards, you need to always be thinking about the value you're creating. So a good example of this is if you have a brand new employee who's um just working in a job and they're being trained and they're working a lot more hours just to, you know, do what they're doing because they haven't worked through that learning curve of training yet. What they need to realize is they haven't been able to transfer the value that the business is going to need from that job. And if you start thinking about every single job position in a business has a point of creating Value for the business, I think it starts to open up. If employees that are employee owners start thinking about how much value they're creating, and, and less about how they're, how many hours they're working or how many, how many measurables they have, because they don't always connect, then I think the business grows stronger and more cohesively. The 5th would be realize that your growth is related to business success. And so as you grow in your business as an employee owner thinking this way, then you will have, um, you will basically help guide the business and create more value and help the business succeed. And again, as an employee owner, what you're seeing is the value back to you is the business grows in valuation and you as an employee are going to earn more, you know, in more wealth because of that. The 6 would be recognized career growth requires changing with the business, and nobody likes change and the the bottom line is, and we saw it this year, has been constant change. COVID hit, everybody was just, you know, pivoting and a lot of companies were doing some things radically new and different. So an employee owner, an employee that has an ownership thinking is going to have more, hopefully more Aptitude for change and being able to adjust and adapt as things go on. 7th is highlight your productivity and efficiency rather than workload. And again, this is back to the value point, um, but quantify your results in terms of cost per transaction. So when, when you're thinking about the employee, uh, owner, when, what happens is they're hopefully creating KPIs or key measurable um data points that they can track and determine. Whether or not they're really truly adding value to the business instead of working this many number of hours, what they really need to be focusing on is um more efficiency at the work that they're doing and how would they measure that? Um, what would they have maybe profit per unit of, of, of what they've produced? There could be many different measures, but being able to measure those and and and be very conscious of those is very important. And then finally, the culture of an employee owned company and employee ownership thinking is going to constantly be recognizing and recommending ways to improve team engagement, and they're going to be promoters. And one of the cool things about the net promoter score that I wanted to mention is that they're actually using it also. To, as we only measure one question and that to measure an employee owner or employee's actual um engagement of the company as well, instead of having this long engagement survey that we might use, their employees are like, would you recommend working for this company to one of your friends? And I think that's, that could be a very valuable metric for the company to employ before an ESOP and after ESOP just to see what would the culture be. But an employee owned owner is going to be thinking about how they promote the business inside and mentor other people constantly looking for improvements, um, and be really like a strong promoter of the company in ways that are being, you know, constantly moving the company forward. So let's just say this all happens and we're able to kind of hit these 8 points that we talked about briefly, and we become an employee owned company. What are the benefits that this might bring to a customer? So we're gonna, we're gonna walk through a few of those. And just talk through like what would it look like. So, when we, when we start off with this idea, then we, now we're, we're at the place of thinking about the customer. What the, the bottom line with this first one is this customer service is going to be if the employee owner, if the employee ownership culture really takes root and there is change, um, the customer service is naturally going to be cultivated, it's going to be better. Because customers are going to be dealing directly with the owners of the company. And so what I like about this is that, you know, when, when they call the company and say, you know, you ever call a, a, a company that you're not happy with, it could be an airline, could be the insurance company. Um, sorry, but it could be, you know, you probably have examples in your head that you're like, yeah, I, I definitely want, I'm not happy with the way this company is treating me as a customer. And you get somebody that you're talking to on the phone and you know. That they don't care. I mean, they don't give a, they don't care at all. It's like, it's so frustrating. Um, as people, we want to be cared about. I just, we know that. And So wouldn't this be powerful if the opposite were true and you found somebody on the phone that was like, hey, Mr. um, hey, Mr. Hayes, this is so and so. I'm really sorry this has happened to you. These are the things I'm gonna try to do to work this out. And you had this person that, that on the other end of the phone, felt like you were talking to an owner. But now suddenly, they say, hey, you know, I'm, we're an employee owned company. I, I care about everything we're doing or you know, because I'm an owner, that's gonna come across, that's gonna resonate. And that's why I love the, the, the example of the father and moonstruck selling pipe because you can sell. He, he cares about what he does so much and you, you get that passion, you get what that comes across. So an employee owner is going to be able to cultivate that type of customer service. And I think that's, that's going to be key if we start thinking about what are the benefits. Now, as a customer, we don't want to change everything. I don't want to change my insurance company every year. I don't want to change, um, You know, who I go do my dentistry with or whatever. But if I have a bad customer experience, I'm not happy, I'm going to change those things. And so what we do for the customer and that is we build something so that they don't have to change. And they can continue to grow with your company and become long-term customers. That's what we do. And that's one of the, to me, one of the greatest benefits of, of becoming an employee owned company and nailing this part of what we're talking about. So the other, the other ideas of this is that I'm going to be served as a customer better because my employee owners are not only going to be more engaged, but because they're going to be so interested and passionate about what they do, just like the guy talking about copper pipe, they're going to know, because they're going to have taken the time to research and make sure they know their job so well. They're going to know the, the product and the service offerings of your company. To the customer, they're going to have more institutional knowledge, they're going to have more understanding of the customer's value that we're creating for the customer. And when a when an employee owner is able to communicate that to a customer, man, that's super powerful. I mean, that's where things really happen that as an owner of a business, you want to happen throughout your entire company. But it and it becomes frustrating when it doesn't happen because you're like, why does, do my employees not think like this? Why did they not communicate the way I communicate? And that's one of the things I love about it because the employee owners have something in it. They are stakeholders with you, and they, they, hopefully if they're the right people, they will, um, You know, pull all of that together in what they're doing. And on the customer side there, you know, how great it would be to work with somebody that is very knowledgeable and wasn't, you know, saying, hey, I can't help you, let me transfer you to another person or, and then you get transferred 15 times and you're like, would it be nice if this company actually cross-trained their people and so that they could tell most everybody um that it wasn't that someone's department that you had to wait on, on hold again for. So, We all know what we're talking about. We've all had bad experiences. So when we look at something and it's a great experience, we get super excited. And I know, I know I do. It's, it's more fun to deal with companies that have great customer service. So and then and then the final thing I'm going to mention for customers as a benefit. And again, this comes back to having a long term relationship. So all of these things start to work in place. And as this happens, the customer experience becomes um consistent. And what that does for a customer is that it allows them to You know, they know that they're getting the best possible service, and they know they're getting all of these things, and then consistently building a long-term relationship, what that allows the customer to do is to um plan their business better. Because now they have this, say it's your, their supplier that they're dealing with, and they're the customer and their supplier is consistently delivering and, and they know that they don't have to worry about that. It just makes their business so much easier to plan on their side too. So that's a benefit that we can help a customer with because they're in the same boat. They need, they need all these things to work and if they are buying your product or service, it's because they need it. And so by, by this, by this happening, by them experiencing more consistency and having longer term relationships, it becomes better for their business down the road as well. So I think that is, as a benefit as well. So going through all of these, I know that um it's a, you know, it's been a buildup process of thinking about how do we measure our customer satisfaction, how do, what do employee owners or what is ownership thinking really look like? And as we tie that together, those are your key benefits of a customer that I think are really, really valuable and it does cultivate better customer service. It does create a more knowledgeable employee staff that can help uh customers with more value, and it does create longer term customer relationships. So I hope that helps. Uh, I do think this is, this is one of those podcasts that I think really speak highly and Um, promotes an ESOP very well because, again, a lot of times if we focus just on employees and selling shareholders, I think we have a great argument to do an ESOP, but I think as we go into the customer side, it just makes it so much stronger. So I wanted to finish with this. When the moon hits the sky like a bigger pizza pie, that's amore. And amore means love. I hope this helps you in thinking deeper about ESOPs and how they might help your customers to Love you more and be a long-term customer. Please subscribe to the podcast and share it with a friend and join us next time when we take another step on this journey to an ESO.