When Goals Are Misaligned
It was fun to watch South Africa play soccer in the opening round of the World Cup. The South Africans have never been a particularly strong soccer nation, but their team was determined and unified. The stadium was packed to the gills, with tens of thousands of people all desperate to see their team win. And as the cameras panned around the countryside and in the bars and on the streets, it seemed to me that all of South Africa shared a common goal.
It reminded me of the feeling you get when you're in a company and everybody knows what the target is and everyone is motivated to achieve it. It also reminded me of the time I was misaligned with my general manager and how disruptive that was.
When I owned my marketing services company, I brought in a general manager—let's call him Chris—to run the day-to-day business operations. Over time, Chris proved himself to be a reliable manager. He was good with clients and could deal with the administrative side of running our business.
To keep Chris motivated, I gave him a good salary and a share of our profits each year. Chris was doubly motivated to increase our pre-tax profit because I gave him 12 percent of whatever profit we generated below $200,000 and 20 percent of every dollar we generated above $200,000.
As the primary shareholder, I was thrilled when Chris delivered larger and larger profits year after year. He was earning 20 percent of every dollar we made, but I was making 80 percent. What's more, Chris was so good that I was able to step away from some of the daily operations and take some vacation for the first time in years. Profits and cash kept rolling in, and my stress levels diminished.
Then one day I decided to sell the company. I didn't tell Chris.
As I prepared the company for sale, I started to learn about what would make an acquirer willing to pay more for my business, and I was told that buyers want standardized, long-term contracts with customers.
The crack in my relationship with Chris started almost immediately. I explained to him that I wanted to get all of our clients to sign a long-term contract and that I thought we should be willing to offer them a discount in return for their commitment. The discount would cut into our profitability for the year—and therefore Chris' bonus. Understandably, Chris wasn't keen on the idea, and we both dug in our heels.
We increasingly found ourselves on opposite sides of just about every decision, from building a new website to compensating our salespeople: Chris wanted what would increase our annual profit, and I wanted to focus on what would increase our value in the market—which was related to profits but not always exactly aligned.
Things went from bad to worse as Chris started to shut me out of client relationships. He turned employees against me, and we became a fractured company with some staff loyal to me, others to Chris.
Eventually, Chris and I agreed to part ways and I had to postpone my plans to sell the business by a year while I rebuilt the relationships with my clients and employees. I felt as though I had squandered an opportunity.
Chris was a superb performer when our goals were aligned, but as my goals changed and we became misaligned, the same things that had made Chris an outstanding performer—tenacity, drive and passion—made him a formidable thorn in my side.
John Warrillow is the author of Built to Sell: Turn Your Business into One You Can Sell. He has started and exited four companies. Most recently John transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model subscription business, which was acquired by The Corporate Executive Board. In 2008 he was recognized by BtoB Magazine's 'Who's Who' list as one of America's most influential business-to-business marketers.
JOHN WARRILLOW | Columnist | Sellability
John Warrillow’s new book, The Automatic Customer: Creating a Subscription Business In Any Industry will be released on February 5, 2015. John is also the author of Built to Sell: Creating a Business That Can Thrive Without You and the founder of The Sellability Score, a company dedicated to helping business owners improve the value of their company.