GameStop, Pay inequality, External help for leaders, Right people on the bus & Most important KPI
31st January 2021 Evolution Partners Newsletter
“$81.5 billion of Warren Buffet’s $84.5 billion net worth came after his 65th birthday. Our minds are not built to handle such absurdities.” Morgan Housel
Hope you’re Thriving!
I took a few days off last week to celebrate a family members birthday and again travelled to the south-west of my state. During the time down there, I was due to record a podcast, but the place we were staying was a little too noisy, and so I arranged to head to a friend’s house, who would be at work, to record the podcast in silence.
I was taken around to the house on the morning of the recording and warned: “Beware of the cat! When people have stayed here before it has crept up on them and jumped on their back, scratching and attacking them. Oh, and whatever you do, don’t let the cat get out of the house”.
Now I’d been watching a show called Alone where 10 people are dropped in the wilderness and need to survive by themselves, and some risk attack from cougars from behind, so the warning was timely. I attended the pre-podcast meeting for about an hour, and the cat was asleep on the couch, not moving once. Great I thought, forgetting about it. Then we start recording, and within 3 minutes Kevin, my co-host asks if there is a baby crying in the background? Of course, I knew it was a meow, and I looked down and saw the cat looking up at with me with the evilest cat eyes I’d ever seen, making a sound like damaged bagpipes in a spin dryer, standing by the door asking to be let out. But I needed to focus on the show, as it’s also recorded on video and people can see what’s happening.
Then the cat starts walking in circles around me, making ‘the noise’ and effectively trying to psych me out. Waiting for the ‘attack’ I acted quickly and asked Kevin a leading question, knowing the video would focus on him, and not show me to viewers. I muted, jumped up, grabbed the cat with outstretched arms and ran to lock it in a bedroom, avoiding injury and making it back just in time for the end of Kevin’s response.
(This fun-filled episode will be released next week — 43 The top 7 best practices for weekly meetings).
So much for stress relieving time off.
The logic behind GameStop
I suspect 100 times this week I’ve thought don’t talk about GameStop in the newsletter. Everyone has covered it. I’ve read so much about it as I’m sure you have. I don’t need to explain how stocks work and espouse who is the protagonist and who is the antagonist. After all, it’s been done more than enough by many, someone’s even making a documentary about it.
And yet, like a moth to the flame, here I go.
After reading a lot about the whole GameStop saga this past week, here are a few thoughts.
Firstly this is the best article I read, written by my friend Kaihan Krippendorff, one of the best strategic thinkers I know.
Broadly he is stating that professional investors don’t invest on fundamentals (they invest on market forces and follow each other) and a company’s value is not determined by its fundamentals, but instead they invest based on the leader’s ability to convince people to bet on them. Another way of saying it is that Amazon has attracted investors that believe that Amazon CAN create a future value much greater than the current financials imply.
He then goes on to discuss the co-ordination of retail investors such as WallStreetBets and how this impacts strategic options for the future.
Secondly, this illustrates the importance of the Ambassador role for leaders from my book Made to Thrive. These enigmatic leaders such as Jeff Bezos or Elon Musk can access cheap capital mainly because of the work within their Ambassador role because they are convincing people to bet on them.
Thirdly, I dug into the quarterly reports for GameStop from the past few years and found some interesting things.
- As Kaihan noted in his article, … the GameStop “balance sheet shows that the ratio of their company value to the actual tangible assets they hold is almost exactly that of Amazon’s. In other words, the premium that investors are placing on GameStop’s management to create something great with the tangible assets they have is about the same as Amazon’s investor’s place on their management team.”
- The GameStop strategy documented in the reports was consistently anchored by four tenets over the years. 1. Optimize the core business. 2. Build a frictionless digital ecosystem. 3. Become the social/cultural hub for gaming. 4. Transform vendor partnerships. And what did they do about that strategy recently? On January 11, 2021, GameStop added rocket fuel to their collective Ambassador arena, adding Ryan Cohen, co-founder of pet online retailer Chewy (which was sold to PetSmart for $3.35b in 2017), and Chewy’s former COO and CFO to the board. These were people who could execute the strategy and people were convinced enough to bet on them. This has potentially now provided cheap capital to execute their strategy further.
Your takeaway for this?
The Ambassador role isn’t a soft feel-good thing. The Ambassador role for leaders is often used to provide enormous strategic and financial advantages.
The logic behind pay inequality
Through the pandemic, online counselling and therapy for employees has been booming as the mental anguish of living in a pandemic, coupled with the broader trend over the past few years to seek external help to support employees with issues have come together. For UK based Spill CEO Calvin Benton, who started the firm only 2 ½ years ago, he’s seen sales grow 40% through the pandemic year, with 100 companies on their books, and 13 full-time staff.
Says Benton “So we tried this experiment where we paid each of us an equal amount of money – regardless of experience, regardless of role. We wanted to challenge the traditional model of pay. We decided on £36,000 a year for everyone. We calculated that was a decent living wage for London.”
But Benton struggled to find people in traditionally higher-paid roles and was overwhelmed in lower-paid roles. “We really struggled to attract senior talent for the software role. And it got to about three months in when the salesperson started asking to be paid according to sales targets they’d achieved, saying the fixed salary wasn’t working for them.”
At the same time, Calvin was getting overwhelmed with applications for the £36,000-a-year clerical jobs he was advertising.
In the end, he decided the equal pay approach failed, and they needed to align with more powerful market forces to get the right people. But in the process of the change, they moved to a fully transparent pay model, where everyone knows how much everyone else is paid, which Benton says was a success and creates great harmony in the office.
Read the article here We tried paying everyone the same salary. It failed
The logic behind external help for leaders
This week saw the release of an interesting report from global consultancy EY titled Six priorities for Boards in 2021.
According to the report, the 6 priorities are;
- Overseeing strategy to create long-term value
- Promoting enterprise resiliency in the face of uncertainty
- Focusing on workforce transformation and new ways of working
- Leading on diversity, equity and inclusion
- Guiding an ESG strategy that drives stakeholder engagement and value
- Challenging board composition and effectiveness
Within those priorities, under the last point of ‘challenging board composition and effectiveness,’ it recommends that directors “Contemplate using a third party to provide objectivity and facilitate or improve the board evaluation process and actionable outcomes.”
Much like the change driving growth in online counselling and therapy for employees mentioned in the article above, where firms are seeking external help to support employees, firms are also recognising the value in external, objective facilitators or coaches and the vital role this plays in improving strategy, priorities and results.
Using the logic behind external help to help your company
If you’re running a business with $3m to $10m revenue and are considering having a third party provide objectivity and improve actionable outcomes as recommended by EY above, I’m currently assembling a group that might be a great fit for you. It’s a much more affordable way to establish a leadership team with discipline, a strategy and scale. I’ve currently got 3 teams committed and have an opening for a fourth, as there are four leadership teams to a group. Also this group “might” be virtual, running on Zoom, so if you’re spread out across cities as a leadership team, or aren’t based in Perth, this might be an opportunity for you.
Learn more here and reply to this email to discuss with me.
This week on The Growth Whisperers podcast
On episode 42 of The Growth Whisperers, Kevin Lawrence and I talk about the following.
Getting the right people on the bus
This week on The Growth Whisperers we’re talking about the very first thing you’ve got to do in order to build a great business, to get the right people on the bus.
Jim Collins said first who, then what. Before you consider what to do with your business, you must first have the right people in place.
It sounds really simple, but there is a lot of thinking and work that goes into building an outstanding team of the right people that are going in the same direction as you, in your business. Kevin and Brad discuss the 6 important things you must do to get the right people on the bus.
Listen to The Growth Whisperers
From the vault
4 reasons this is the most important KPI you are not measuring.
If you were to really consider it, what would be the most important number in your business?
If you had only one number to measure and judge as the most important, what would that be?
If you had a background in sales, you might suggest revenue, or (if you had a successful background in sales) perhaps Gross Profit.
If you had a background in accounting you might suggest EBITDA or shareholder return.
And if you had a background in engineering or operations you might suggest projects delivered on time, on a budget or billing utilisation.
I put it to you that when you look for the most important number in your business you will find that you are probably not measuring it and it is probably not a priority for your people. Yet this number is the most important KPI that is not only ignored but is the most accurate predictor or leading indicator for Net Profit.
Upcoming Event 1
As a part of the Evolution Partners network, you can save $100 on tickets to see the best-selling author of Good To Great, JIM COLLINS at his live global virtual event: Jim Collins – The Roadmap To Greatness on Tuesday 23 February 2021.
All New Findings & World-Changing Insights
Coinciding with the release of his new book, BE 2.0. business leaders and their teams will be among the first to receive Jim Collins’ highly anticipated business-changing framework, “The Map”.
A one-page framework, The Map distils 30 years of Jim’s revolutionary Good to Great® concepts into a single roadmap to build an extraordinary organisation; one that sustains high performance, leads and shapes its industry and remains great for generations.
SECURE YOUR ‘FRONT ROW’ SEAT IN THIS IMMERSIVE EVENT
One of only five business authors in history to sell more than 10 million copies worldwide, Jim has authored six best-selling books, but his appearances are rare.
This live virtual event provides direct access to Jim for 2.5 hours of deep learning, allowing time for Q & A on how Jim’s extraordinary guide to business success can be implemented into your company in 2021.
YOU WILL LEARN:
Drawing on three decades of rigorous research, Jim will equip you with:
• The Map — a one-page framework taking you on a sequential path to implement the Good To Great concepts
• How to achieve the outputs of a great company: superior results, distinctive impact and enduring change
• What great companies have in common that distinguish them from their competitors
• Critical strategies, disciplines and practical tools to build a great organisation
Align your leadership team with the most significant thought leader of our time.
Upcoming Event 2
My business would be so much easier if I didn’t have to deal with people!
There are many challenges in the world of business but getting the right people doing the right things, consistently, is the biggest most CEOs and leaders face.
I believe that most people have great intentions – then life and their own issues get in the way.
So, I’m excited to share that we are doing a two-day virtual Topgrading training session, with Chris Mursau, president of Topgrading. Chris is a master Topgrading professional, and a great guy to spend time with.
For the past few years, we’ve hosted a live session, for our clients and network, to learn Topgrading together. This year, my podcast partner Kevin and our team have been working with Chris Mursau on virtual sessions, which we’re pleased to bring to you, in the new year.
The training is designed for two or three people from your company to attend. This provides the best chance of implementing it and creating the changes you need.
If you’re not sure, watch our Topgrading webinar. Chris and Kevin talk about what it takes to build a notably stronger team and how your hiring process can drive that.
HERE ARE THE DETAILS:
Topgrading Virtual Workshop – Feb 2 & 3, 2021
7:30 am to 2:30 pm PST
Immerse yourself in the secrets, shortcuts and proven methods of Topgrading:
- Get hands-on experience conducting chronological interviews and creating thorough Job Scorecards
- Receive personal coaching from hiring expert and Topgrading President Chris Mursau
- Immerse yourself in the proven methods to hire high performers who will drive your company to succeed.
Following the Workshop, participants also receive:
- A complimentary 1-hour coaching call
- Access to an online tool kit
- A two-month free trial of Topgrading Online Solutions (TOLS).
For more information or register, please contact me directly by reply email.
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