It was fun to watch South Africa play soccer in the opening round of the World Cup.
The South Africans have never been a strong soccer nation, but their team was determined and unified around the common goal of winning. The stadium was packed to the gills, with tens of thousands of people all desperate to see their team win. And as the CBC cameras panned around the countryside and in the bars and on the streets, it seemed 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 Spencer — to run the business day to day. Over time, Spencer proved himself to be a reliable manager. He was good with clients and he could deal with the administrative side of running our business.
To keep Spencer motivated, I gave him a good salary and a share of our profits each year. Spencer was doubly motivated to increase our pre-tax profit because I gave him 12 per cent of whatever profit we generated below $200,000 and 20 per cent of every dollar of profit we generated above $200,000.
As the primary shareholder, I was thrilled when Spencer delivered larger and larger profits year after year. He was earning 20 per cent of every dollar we made, but I was making 80 per cent. What’s more, Spencer 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 Spencer.
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 Spencer 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 Spencer’s bonus. Understandably, Spencer wasn’t keen on the idea, and we both dug in our heels.
We found ourselves on opposite sides of just about every decision, from building a new website to compensating our salespeople: Spencer 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 Spencer 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 Spencer.
Eventually, Spencer and I agreed to part ways. I felt as though I had squandered an opportunity. Spencer was a superb performer when our goals were aligned, but as my goals changed and we became misaligned, the same things that had made Spencer an outstanding performer — tenacity, drive and passion — made him a formidable thorn in my side.
In the end, I had to postpone my plans to sell the business by a year while I rebuilt the relationships with his clients and employees.
Special to The Globe and Mail
John Warrillow is the author of Built To Sell: Turn Your Business Into One You Can Sell. Throughout his career as an entrepreneur, Mr. Warrillow has started and exited four companies. Most recently he transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model subscription business, which he sold to The Corporate Executive Board in 2008. He is the author of Drilling for Gold and in 2008 was recognized by BtoB Magazine’s “Who’s Who” list as one of America’s most influential business-to-business marketers.
