Adam Coffey, Author of the Private Equity Playbook, on Navigating the Stages of Growth for Sustainable Success

Transcript

Adam, welcome to the show.

Adam Coffey 00:03:00

Aydin, good to see you. Hello to all your listeners out there.

Aydin Mirzaee 00:03:03

Yeah, very excited to have you on. As I was telling you before we hit record, I’m a big fan. Read two of your books. I know you have three, possibly more. Do you have more than three, or is it the three?

Adam Coffey 00:03:14

There’s a fourth one coming out in another month, so.

Aydin Mirzaee 00:03:17

Oh, wow. Super exciting. Super exciting. Can you tell us what that is?

Adam Coffey 00:03:21

Yeah. So I’m committed to at least one every two years, and so I enjoy doing it.

Aydin Mirzaee 00:03:27

Oh, amazing. Amazing. Can you tell us what the topic is of the new one, the next.

Adam Coffey 00:03:31

Book coming out, which is in a month? The private equity playbook was my first book. I wrote it during 2018, and it came out early in 2019. It’s more than five years old now. A lot’s happened in the world over the last five years. So it’s the second edition of the private equity playbook that’s being released in another month. And so bunch of new content completely went through the entire book, expanded certain sections, and excited about it. It was kind of like a Marty McFly moment, though. This was the first book, but in the first book, now I’m referring to my other books, which actually came after the first book was written, but because it’s a second edition, it’s now it’s like back to the future.

Adam Coffey 00:04:12

So that’s what’s coming out. It’s the second edition of the private equity playbook, and that book has never left the top ten since 2019, since it was released. So thank you to everybody around the world who continues to make that book fly off the shelves.

Aydin Mirzaee 00:04:26

Yeah, that’s awesome. And again, that’s how I first got introduced to your work. So one thing that might be a good intro is, as I have it, you started in the military. You spent some time at General Electric. You learned about management philosophies and things like that, and then you went on into becoming the CEO of your first company. And maybe just walk us through that journey just so everybody can kind of get a sense for your background and what kind of things you achieved once you became CEO during your tenure.

Adam Coffey 00:04:56

Sure. I think for all of us as entrepreneurs and business people, it’s like life is a set of experiences. I was in the military as a young guy. Military taught me about discipline, teamwork, and leadership. I was an engineer. Engineers are typically meticulous planners. There’s always a plan in place that was very helpful to business. I’m a pilot.

Adam Coffey 00:05:16

Pilots don’t take off unless we know where we’re going. And if you’re thinking about, like, a typical private equity type of five year hold period, or I’m building a company to sell one day, knowing where you’re going, and then deconstructing the trip. That was a useful pilot skill. Being at GE, working for Jack Welch during the Camelot era of GE tech doesn’t exist. Number one on the Fortune 500 list. Companies growing so fast, it’s doubling in size every 2.8 years. It was GE who informed my thinking about how to run a big business. What was the good growth rate for a big business, or any business, for that matter? And then 21 years as a CEO building three different companies for nine different private equity firms kind of parlayed all of that previous experience.

Adam Coffey 00:06:05

And I did 58 acquisitions, and I have almost two and a half billion in exits as a CEO. And I got bored. I totally got bored after 21 years of building companies and decided I need a different challenge. So I hung up my CEO cleats and said, I’m done. I just turned 60, and I’m like, I’ve got ten years left in my career. I’m going to spend the next ten years educating as many human beings on the planet as I can, and I’m going to teach entrepreneurs how to beat the odds, how to be successful, how to use the tools that I learned through my career, and teach people how to build a successful business, but on a smaller scale than these giant companies that I was building. And it’s been fun. It’s reinvigorated my career.

Adam Coffey 00:06:52

I work more hours today than I ever did as a CEO.

Aydin Mirzaee 00:06:56

Oh, wow.

Adam Coffey 00:06:56

But I’m having fun and have clients all over the globe. I’m working with 68 different companies right now. And so it’s been a lot of fun. And all of it was a cumulative experience. Don’t think for a minute that, hey, I got an MBA at age 50. And so it’s like, never stop learning and enjoy the journey, and don’t think that any time you’ve ever spent was wasted, because it’s not. All of these things that we learn are cumulative. And the only reason I can write books about it and help others is because I’ve already stepped in every pothole and made every mistake a guy can make.

Adam Coffey 00:07:30

And so by me making mistakes, I can help you avoid making mistakes, then that’s kind of my journey.

Aydin Mirzaee 00:07:37

Yeah, I love it. And so today you’re writing, you have a big following on LinkedIn, and so is most of the work that you’re doing. You’re coaching CEO’s of fast growing companies.

Adam Coffey 00:07:47

So I work with private equity firms. I work with about a dozen PE firms. I help them evaluate investments, I help them evaluate leadership teams. I serve on boards, I coach their CEO’s mentor. I also work with founders. So it’s interesting because I’m on both sides of the table. So with private equity firms, I help them identify risk. I help them with value creation planning.

Adam Coffey 00:08:10

I help coach to mitigate risk of execution. They’re paying a lot of money for companies and there’s a lot of risk if they don’t execute effectively. When I’m working with founders, I help them eliminate risk. And so I help them learn how to scale, learn how to do a value creation plan, learn how to maximize and put together a strong leadership team and help them eliminate risk so that when a private equity buyer eventually comes calling, they trade for, call it an outsized multiple. And so I’m maximizing value on kind of both sides of the table. And then third thing I do, I write my books, I teach seminars globally, and I do coach and enjoy working with, I’ll call it executive MBA students at a bunch of different universities that I speak at regularly.

Aydin Mirzaee 00:08:56

Yeah, awesome. Very cool. So I’d love to dive in. Maybe one of the places that we can start. Like you said, CEO, for 21 years you’ve helped hire CEO’s, you work with a lot of companies. How would you define the role of a CEO? Like what do you think a CEO’s main jobs are? And do you think that they’re different at various stages of growth or once you’re a growth stage company, it’s about the same. How do you think about that?

Adam Coffey 00:09:19

These are really good questions. So to unpack some of that. First of all, you know, I think about leadership versus management. Managers manage things. They handle the affairs of a company. Leadership. You know, leaders inspire people. And if you’re going to excel at one of these two things, you know, the CEO’s primary role is to inspire people.

Adam Coffey 00:09:42

It’s to build a strong culture. It’s to be the leader of that culture. We don’t have to be the smartest people on the planet. As a CEO, I can surround myself with talented people. Matter of fact, I would tell you, if I’m the smartest guy in the room, I’m in the wrong room. And so I can hire subject matter experts who are great at sales or at marketing or manufacturing or operations. A CEO’s primary role as you’re scaling. I’m not talking about startup.

Adam Coffey 00:10:08

I’ll get back to startup in a minute because I think there is a different skill set there that is important to have. But I think the biggest, you know, I’m the chief cheerleader, I’m the chief entertainment officer, I’m the chief culture builder. And it’s all about inspiring people by articulating, creating and articulating a vision, creating a shared aspiration that causes people to be inspired and to work hard to achieve something that is special. And hey, I’ve run some companies in some pretty boring industries, but we had great cultures and people loved working there and they loved coming in to work in the morning and they brought their friends when we had openings. And so I’d say chief skill that a CEO needs to have is an ability to articulate a vision, a shared vision, and get people to aspire for more, to achieve more. And that all starts with culture. But in the startup days, if we’re coming out of the gates, if we have an idea, it’s like we need to be an anal retentive control freak. I call it the Happy meal effect.

Adam Coffey 00:11:12

And so right now, anybody listening to this broadcast knows what McDonald’s is. And if I go to any McDonald’s anywhere in the United States, many places in the world, and I order a happy meal, I know exactly what I’m going to get. I’m going to get a red cardboard box with yellow handles, you know, it’s going to have a cardboard hamburger in there, apple slices that were packaged 100 years ago, and a little thing of fries and a toy, you know, it’s like, and I know it’s consistent. Everywhere I go when we’re getting out of the gates and we’re building a company and we’re looking for that initial success, we have to be anal retensive control freaks. And if you think about just business in general, there’s 34 million small businesses just in this country. Only 7% ever get to a million dollars in revenue. Only 4% of those get to 10 million in revenue. And the people who find success learn how to make sure that they create the Happy meal effect so that there’s a consistency, delivery of product or service, whatever that company does.

Adam Coffey 00:12:14

The problem with most entrepreneurs is those who beat the odds and are one of the 7% who get to that million dollar mark, they remain a control freak and eventually they top out. They get to about 20, 30 million in revenue. Is my experience that I see. And all of a sudden, they have no more bandwidth. But the control freak part doesn’t go away. And this is where entrepreneurs need to learn how to grab this shifter and change gears and go from being the anal retentive control freak, the first chair player in every section of the orchestra, to becoming a conductor, and to become that person who inspires and creates that culture, hires great people and empowers them, holds them accountable, but empowers them to achieve and to own different pieces of the business. And so there’s a multiple skill set at place. You know, at Ge, I was a turnaround guy.

Adam Coffey 00:13:10

I was thought of as an expert in operations, but as a CEO, I need to put the operations away. Think of it this way. Let me use an analogy. We’re in a big ocean lining vessel and we’re out at sea. The captain of the ship needs to be on the bridge, because the captain of the ship needs to decide to what course that ship is going to take. And if I’m too in the weeds and operations, I’m spending too much time below decks. I’m not on the bridge watching where the ship’s going. And so a CEO’s place is to inspire, to lead, to articulate the vision, to hold people accountable, to be the chief Rah rah officer, to hire that core group of people and empower them.

Adam Coffey 00:13:55

And it’s not to be an anal retentive control freak who’s below Dex micromanaging everything, but you need that to start. So for your startup people, we have to be control freaks to create the happy meal effect. Then we switch gears, learn how to inspire others, hire good people, get out of the way, and hold people accountable. And if you can master these basic skills, then I think you can go far as a CEO.

Aydin Mirzaee 00:14:19

Yeah, I’m really glad that you talked about both of those things, because I think one of the challenges with leadership advice in general is there will be something that people say, but it’s all about context. This is true, but it’s true in these sorts of cases. And in these other cases, maybe you need a slightly different approach. And it is really cool to hear you actually articulate that, because you’re right. If you’re a startup founder and you start by on day one, before you have product market fit doing the orchestra leader role, maybe that’ll work, but chances are that it might not.

Adam Coffey 00:14:53

You’re going to burn a lot of cash. You’re going to burn a lot of other people’s cash because you’re hiring that team. It’s like, no. So I call it their stages of growth. And how we act is different in each stage. And a startup is different than a company with 50 million or 100 million in revenue. But there, again, that’s very different than a company with 700 million or a billion in revenue. Entrepreneurs who can recognize these different stages and the different behaviors and consciously kind of shift gears and adopt different behaviors, they’re the ones who find the most.

Adam Coffey 00:15:26

I’ll call it long term sustainable success.

Aydin Mirzaee 00:15:29

Yeah. And so you worked at GE, and one of the things that GE did at the time, Jack Welsh and team day, I don’t know if they invented it, but they certainly were one of the poster childs for this idea of stack ranking employees having very rigorous performance management programs in place. I’m curious how you thought about, obviously, growing up in GE and then running your own company. I’m wondering what methodologies you use for performance management and what kind of things work for you in the companies and what kind of approaches do you recommend to people you advise today?

Adam Coffey 00:16:05

Well, if you go back to the early days of GE and performance management, there was this thing, if you’re old enough, people will remember. And if you read about it for sure, and there’s case studies about it, it’s like GE used to turn over the bottom 10%. It was forced. You know, it was forced. There were a players, b players, and C players, and C players were not long for the earth, and we would turn over the bottom 10%. And that worked for a while. However, that forced pruning of the bush, if you will, and that forced turnover. The hardest thing for human beings to do in general, is to make personnel changes.

Adam Coffey 00:16:40

Most of us tend to care about people, and we genuinely want to see people succeed. And we wait too long to take action, potentially on someone. So Jack didn’t allow that. He forced that turnover. But after a few years of doing that, there was no bottom 10% anymore. You know, you got very compressed. It’s like, we had a players, we had B players, we didn’t have C players. They’re all gone and they didn’t make it.

Adam Coffey 00:17:04

And so we started to relax that mentality that C players must be let go. And so we moderated. But I think what Jack essentially was doing is he was teaching the business world of that era. It’s like to be successful. It requires a plan, a strategic plan, and we’re not talking about. Jack always used to talk about, we can’t do it when there’s a thousand things wrong. We can’t do a thousand things at a time. We need to do four or five or six things at a time.

Adam Coffey 00:17:34

And if I can’t measure the performance, I don’t know if my actions are having an impact. And so while I’d like to fix it, I I can’t fix it, because I can’t measurement and see if I’m having an impact. So handful of initiatives must be measurable, must have metrics put around them. Someone’s got to own each of these initiatives in an organization, and we need to hold people accountable to their performance. And so I don’t think I ever let go of that original mentality. I recognized early, though, as the CEO, that culture was kingdom. I don’t manage revenue from the top down. I was a service business.

Adam Coffey 00:18:12

And if you think about your company and you think about, geez, I can’t store service in a box, put it on a shelf, and when a cat scanner breaks, when I’m running a medical company, I can’t pull down a box of service and sprinkle it on a broken cat scanner. It magically works. It’s people, my product. So if you can’t store your company’s product in a box and put it on a shelf, your product’s people. And if your products people, then culture is everything. And if I have a strong culture, I get an engaged workforce. They take care of customers. Customers give us more stuff.

Adam Coffey 00:18:43

Revenue range from the sky. Revenue is an output of culture and engagement. But that doesn’t mean I coddle people. So I was always known for building very strong cultures and companies. People loved working there, but that didn’t mean that it was easy to succeed there. I held people accountable. It’s like, I’m going to take care of you. I will bleed for you.

Adam Coffey 00:19:04

I will take the hill, which I learned in the military as a servant leader before we knew what a servant leader was. And someone put a name on it. And I’m going to take care of you, but I expect you to get up every day and to work hard and to be engaged and to do your best to make a difference. And so my thinking has certainly morphed. I think in today’s world, the biggest challenge any entrepreneur has if they’re trying to build a big business is finding enough employees, finding enough people. It’s like people don’t want to work anymore. Everybody wants to be a TikTok star and make a million dollars as an influencer. And it’s like, you know, I’m sorry, but most businesses need people, and it’s hard enough to get people to come, we have to treat them well, but at the same time, we have to hold them accountable.

Adam Coffey 00:19:47

And we can’t just coddle them and hope that we’re going to get good output from these people. And so I think there’s a balance in there somewhere between how we drive, how we hold people accountable. And generally speaking, what I find is that every job, in every company, at every level, there’s two or three or four key metrics. How do I know when I’m being successful? And I believe in using relative ranking, which came from GE. So if I have a workgroup of ten people, I want to know who’s my best, I want to know who’s my worst. I don’t want to give reviews at their twelve month mark. I want to give all ten people a review at the same time. And I’m going to look at those basic key metrics of each of their performances and I’m going to ultimately rank them one to ten.

Adam Coffey 00:20:35

And if a typical company has a 3% wage pool or 4% or 2%, pick your number. My top of the scale is going to get double bank raise. My bottom is going to get nothing. And if it’s a really good workforce, then maybe the bottom gets one and this person gets a little bit less than double bank. But it’s like I’m going to pay people who perform. And so when I think of this mentality, I give you another example. I ran a lot of blue collar companies that had a lot of guys and trucks. And so how do you decide who gets a new truck when you’re buying new trucks? Well, most companies would say, well, the guy who’s got the oldest truck with the most mileage on it gets the new truck.

Adam Coffey 00:21:12

Well, bull, you know, sorry, but in my world, the person who’s got the best metrics gets the new truck. And that best person in the truck, a construction company or service business, they may get a new truck every year. And the person on the bottom who’s not performing well, they get the crappiest hand me down truck I’ve got and they’re going to get the newest hand me down, crappiest truck the next year. So it’s like, I think about effort, I think about metrics and ranking people’s performance in a workgroup and then assigning, call it the reward, whether it’s raises or perks or bonuses or what have you, based on that individual performance. And I think most employees, when they come into a business, they don’t mind having certain key metrics that they know that they’re responsible for. In most of my experience, people actually prefer that kind of environment. I don’t have to guess or wonder. And if I’m in a tough patch and I’ve got to lay someone off in a work group, it’s no surprise to anybody.

Adam Coffey 00:22:14

When these metrics are published, they’re visible, and it’s like that low performer knows they’re the lowest performer. And if I let that person go, it wouldn’t be a surprise to anybody in a workgroup. And I think when people know how they’re going to be rated, how their performance is going to be measured, then they know the rules of the game and they can choose to play it either because they want to be on the top or they just don’t want to be on the bottom. They want to be somewhere in the middle. Generally speaking, a lot of those behaviors that I learned, call it back in. I’ll even go back to the military. It’s like the best at one rank were promoted to the next rank and et cetera. And so between all of these different life experiences, I think they all helped inform my thinking about building a company and building an accountability in a workforce.

Adam Coffey 00:23:01

But we also looked at things like employee engagement scores. And it could be simple. It’s like, do you like working here? Yes or no? Would you recommend this company to a friend if we had an opening? Yes or no? And do you think that we treat you fairly? And so I always had one goal as a CEO. My one goal was I wanted to create an environment where employees could spend their entire career in one place. And to do that, I had to do four things. I had to pay a fair wage, or I’m going to lose talent. And in today’s world, we can’t afford to lose talented people. We have to pay fairly, have to have good retirement plans, have to have good benefit plans.

Adam Coffey 00:23:41

Most importantly, we have to create opportunity. You know, we have to create opportunities for people who seek growth potential. I started my career as a guy in a trial engineer coming out of the military. I was a field service engineer at GE. I was fixing Cat scanners and mris in a hospital environment. And I knew I didn’t want to be a guy in a truck for 40 years. God bless the person that did, because they taught the next generation how to do the work that we were doing. But I wanted to get out of the truck.

Adam Coffey 00:24:09

I wanted to become a service manager. I wanted to become a branch manager, a district manager, a regional manager, a vice president, a chief operating officer someday. I wanted to be a CEO. So we have to create opportunities for good people to run who want to run. Otherwise we’ll lose them. I measure everything. I would measure my employee engagements. I would measure my turnover rates.

Adam Coffey 00:24:31

And I did care about people. But I’m not going to create an environment where they get paid to do nothing. You got to work hard. You work hard, I’m going to take care of you. I’m going to bleed for you. But you need to work hard because the company needs to continue to propel itself forward.

Aydin Mirzaee 00:26:07

This is super interesting, just around the way that performance management has been done, you know, has changed over the course of time, and it goes through different waves. We went from like annual reviews to quarterly to continuous and everything in between. But I think the things that you said that really resonated with me is this idea of creating a transparent environment where you always know where you stand. I mean, that’s just a great thing to do. And I agree with you that people will likely want to know that, and they want to know what it takes to succeed in an environment.

Adam Coffey 00:26:40

And let me just say too, from a CEO perspective, people need to be transparent. You want to be a CEO that’s respected by people. Your goal and objective isn’t to be loved by all. It’s like a politician. Half the world’s going to hate you no matter what you do. My goal was transparency. I didn’t keep secrets unless I had an NDA that forced me to keep a secret. My last company, I had 3000 employees.

Adam Coffey 00:27:01

I would do monthly town halls and a thousand people would pull over and spend 15 minutes of their day with me. And I would be talking to them a thousand at a time. And then we would record it so that the other people. And so being transparent is you have to walk that walk. And I think in today’s world, a leader who talks a good game but doesn’t live it very quickly is exposed for the fake that they are. You know, it’s like when you care about people, when you’re transparent, it’s like I would talk to them about the good, the bad, the ugly. Here’s what’s working, here’s what’s broken, and here’s what revenue is, here’s what earnings are. And boy, I tell you what, 3000 people knew how much EBITDA we had.

Adam Coffey 00:27:41

Only about 800 probably knew what the hell EBItda was. But they all knew what we had and they knew I would walk into a company and say, I’m going to sell this company in four years and I’m not going anywhere. I’m going to keep going. So are you. But I’m going to be kicking shareholders out, bringing new shareholders in, because we’re going to grow and I’m going to create a billion dollar company and at some point it’s going to go public. You’re going to get a chance to be an owner of it. It’s like, here’s the ten year vision and shareholders will be coming and going. I would have dress up days around headquarters when I’m selling a company and saying, hey, I’ve got potential investors coming in.

Adam Coffey 00:28:15

Everyone dress up. Be on your best behavior tomorrow.

Aydin Mirzaee 00:28:17

That’s awesome.

Adam Coffey 00:28:18

We’ve got investors coming in and so many entrepreneurs are just, everything is done in secret. I’m going to go to the dankest, darkest hotel room, 20 miles from headquarters because I don’t want anybody to know that I might be thinking about selling this. And I’m like, I’m announcing it’s dress up day tomorrow. I’ve got investors coming in. I would start the year by showing a graph. Here’s revenue and earnings today. When we get to this point, I’m going to kick our current shareholders out. I’m going to sell it, bring in a new set.

Adam Coffey 00:28:44

And as we’re getting there every year, it’s like, okay, this is the year. This is the year that it’s happening. And I explain to them the difference between private companies and public companies and private equity backed companies and founder led companies. And it’s like transparency is everything. And I think today’s employee wants to be working in an environment where the leadership is transparent, where they understand the good, the bad, the ugly. They know the vision, and they buy into that vision and they participate in the success.

Aydin Mirzaee 00:29:16

Yeah. So I think this makes a lot of sense on the transparency. So it sounded like you said you talked about all of the things. So, for example, if you had a situation where things weren’t looking so rosy and if you weren’t able to turn things around, that you might have to have layoffs or something like that, would you announce those sorts of things in advance, too? Like, was it that transparent?

Adam Coffey 00:29:38

You know what, I wouldn’t necessarily pre announce it that in 30 days I’m going to lay off 20 people. But certainly I’m transparent about what’s happening. And I always tell people, look, I’m the captain of the ship, and there’s 3000 souls on this ship. And if I have to throw one overboard to save the other 2999, then, by God, I’m gonna do that, because that’s what the captain of the ship does. But that doesn’t mean I don’t care about that person. It doesn’t mean I don’t put them in a lifeboat and strap a pillow on their ass as they’re falling off the train. So I do have this one weird little tidbit that I can share with you. In my life as a CEO, I have had to fire people many times over that 21 year career, including my ten years at GE.

Adam Coffey 00:30:19

So 30 plus years of management. And to this day, anybody that I have fired who once upon a time worked for me was on my staff. I’m still friends with them. They still follow me on LinkedIn, they still reach out, and they like stuff that I post on social media. It’s like, there is a way to be respectful of people and respectful of a need for change. And it’s never about what their failures were or they were a dirt bag. I treated people, all people, with respect. We did our best if we were in a negative situation to try to take care of people.

Adam Coffey 00:30:55

I remember during COVID when Covid first hit, I was owned by Aries Management, one of the largest PE firms on the planet at the time. And people talk about these cold hearted bastard PE people who don’t care about people. Aries started a foundation in every portfolio company that they own, which is like 100, and they put in a six figure sum into each one of these companies foundations, and they said, take care of your employees. Take care of the people who are impacted by Covid, people who were sick at that time and had to miss work for an extended period of time, people who lost loved ones. And so it’s like we cared about people greatly. But there came a time, I remember in 2020, it was like the lockdowns disrupted a lot of businesses in different ways. And there came a. A time in the summer of 2020 where I had to lay a bunch of people off.

Adam Coffey 00:31:43

I didn’t like doing that. And we did our best to take care of people, but it’s like, you make tough decisions that have to be made. And I was always a turnaround guy. So when I was hired, it wasn’t because the company was performing well and it was growing like a weed. It was. This thing screwed up beyond repair, and we need somebody to come in and fix it, and then out of the ashes, build a culture, and then grow it like it’s never grown before and sell it for a massive multiple and make shareholders a bunch of money. And that was my role. And so I was always in a turnaround type situation.

Adam Coffey 00:32:18

So there’s. You learn through experience that, hey, how we treat people matters. There are times, and I can tell you that the reason why I got hired in the first place is because another CEO before me, or the one before that or a founder didn’t do incrementally the things that needed to be done year after year after year. And because of their neglect, the company finally got to a point to where a turnaround guy like me needed to come in and do ten years worth of housekeeping and cleaning in one fell swoop to save something that had gone astray. And so if we would just take the time to call it, to do the maintenance on the house that needs to be done year in and year out, the company would never get into that kind of position. So I talked about a couple of different concepts there. It’s like we have to make tough decisions. I remember once being in a room with a couple hundred CEO’s, and we were debating the topic.

Adam Coffey 00:33:18

We had, like, a thousand plus years of CEO experience. We were debating a topic, when is the right time to let someone go? And the collective wisdom of that room went all over the map. But when we were done arguing about it, the collective wisdom was, the first time you think it might be necessary is the time that you should act. And every day or week or month or year after that, you are no longer managing in an optimal fashion. Call it the performance of your company. You’re afraid to make the tough calls. I’m a people person. I used to tell my HR leader in every company, it’s like, look, I’m going to work to rehabilitate people.

Adam Coffey 00:33:59

To me, the glass is always half full, not half empty. And this is my weakness. And you need to kick me in the ass when you see me coddling somebody that I need to action on, and I should be kicking them off the bus rather than constantly trying to work with them and save them. I think we also need to recognize what our strengths and weaknesses are and then surround ourselves with people who don’t give us groupthink, but create a good, diverse base of thought that we can then leverage in situations to propel the company to the next level.

Aydin Mirzaee 00:34:34

Yeah, and I love how you said that in the majority of cases, even when you do have to decide that, you have to sub a person out and sub another person in that, a lot of times you can maintain a good relationship. So I’m wondering if there are any good tips or tricks on, because inevitably, for a growing company, you’re going to need a new set of talent that needs to come in, that wants to do the roles that the next version of the company needs. And, yeah, and yeah, so this is a common thing. How do you do it so that you can continue to maintain?

Adam Coffey 00:35:05

Well, let me start by telling you what happens if we don’t. If you’re a small business owner who aspires to be a big, big company someday, and you promote someone and they’re a vice president or a c level executive in a small company. Every company that I built was growing at better than 30% a year, which means they were quadrupling in size every five years. And so you take a company with $100 million in revenue, and it’s 500 million just a few years down the road, and it’s pushing a billion, and within ten years, and it’s like we’re going to outgrow people’s skill sets. And what usually happens in a small company is if I promote someone too fast and as I’m getting bigger, that person can no longer handle the job. I add a new layer. I add another person horizontally, and very quickly, I get top heavy, and I have way too many executives or I have too many layers of management rather than having developed the talent that I had be my first goal and objective. And if they can’t make the journey, actually helping them off the bus and bringing in someone who can, it’s like, what happens is I wind up getting my entire company out of whack.

Adam Coffey 00:36:16

You know, geez, I have a regional manager, and that regional manager can handle this size business. And so therefore, I hire two, three, four additional regional managers, and I got a bunch of them where if I had a good regional manager, you know, at that level, they could do twice as much as that person that was in that role. And so that’s what tends to happen is we put band aids on the problem by creating additional layers of management. And so I’ll tell you, that frequently has happened to me. I just get done selling a company. A ton of money was made, bunch of millionaires created in a leadership team. And then I’m now retooling with a new owner who’s looking at it and saying, I got to go from x to four times the size. And I’m now I’m the manager of the baseball team who just won the World Series, and it’s a new season.

Adam Coffey 00:37:03

And I’m looking at the pitchers I got out in the bullpen, and I’m thinking, this person just won the Cy Young Award, but they’re not going to get me back to the championship next year. And key players start getting traded. It’s like, boy, this happens with every, every great athletes on a team. They’re on a championship run. Think about Tom Brady. You know, Tom Brady won all these Super Bowls and yet got traded, you know, at the end of his career, and then went, won another Super bowl to show the world that he was still on top. But it happens to all of us. We do need to retool from time to time.

Adam Coffey 00:37:37

Time. And so there were times where I’m sitting around and right after a company’s been sold and a bunch of people made a bunch of money, I’m looking at my team and thinking, do I have the right people on the bus, in the right seats for the journey ahead? And if not, I have to make the tough call now. And they’re going to go through the stages of grief. They’re going to be shocked, then they’re going to be angry, then they’re going to negotiate, and then there’s going to be some level of acceptance, and I’m going to power through that with them, and then I’m going to help them get the next job, and I’m going to be a resource for them for the rest of their careers, and I’m going to not just kick them off and ignore them. And so I think, for me, that’s why I still maintain good relationships with people that I’ve had to let go. It’s because at a human level, they helped me win a championship. And I felt at a time that I needed different talent on the field to continue to be competitive as we were growing to the next level. And so how we treat people matters, but when we don’t and when we ignore the obviously, then what results is our overhead costs start going through the roof.

Adam Coffey 00:38:41

We add layers, we add more width, and before you know it, we’ve got a whole bunch of leaders and not enough worker bees, and we’re out of balance and the performance of the company starts to drop off.

Aydin Mirzaee 00:38:54

Yeah, it’s very interesting. And like you said, if you neglect these things for long enough, you need to hire a turnaround expert to come take care of the years of, let’s call it, management debt that has accumulated.

Adam Coffey 00:39:06

Yes.

Aydin Mirzaee 00:39:07

And being able to take care of those things, I did also want to, just as a final topic, talk to you about culture, because one of the things that you did mention is that people loved coming to work and loved being part of the company. So I’m curious, what are some of the things that you did? So when you would take over a company, how would you turn around the culture in the process?

Adam Coffey 00:39:27

You know, I tell people oftentimes when I would get to a company again, these were turnarounds. Every company I led started with a turnaround. I’m John the Baptist. I’m one voice crying out in the wilderness, talking about this company that has fallen into this state of disrepair or malaise and how I would start by articulating the vision and really starting to connect with people. And so I’ve done it differently at different companies, but it starts with, generally speaking, if I’m evaluating a company, I’m coming into it. I would ask HR for a census before I ever got there. Asked the people who are hiring me, the board of directors. I’m looking for an HR census.

Adam Coffey 00:40:08

So if I take my last company as an example, 3000 employees. Well, we had 1900 guys in trucks service. We had 425 construction workers. You know, we got 1500 service techs. I got 60 some odd salespeople. It’s like, and I want to know, where are the people? Where are all the people? And then I want to go spend time working with those people. I want to immerse in the company, in the culture. I want to understand what people do for a living.

Adam Coffey 00:40:31

I don’t want to look at a spreadsheet and see numbers. I want to see people’s faces and jobs. And I want to have walked in their shoes, even if it’s only for half a day or a day. I want to understand the people, and I’ll make friends with people, call it in the trenches. So I call it my informal feedback loop. I’ll have a staff who sometimes tells you what you want to hear, and I’ll sanity check if I’m driving change in an organization. I can drive change much faster than the culture can assimilate the change. And so I need to know when I need to back off, when I’m pushing too hard, and I keep that informal feedback loop.

Adam Coffey 00:41:08

You know, I’m driving a lot of change. I’m getting information from metrics and from a leadership team. I’m sanity checking that with people I’ve got relationships with in the trenches, and I can understand how I’m driving culture, but it starts with articulating the vision and taking that message to everybody in the company, and I acknowledging the problems and issues that we’ve got and asking for them to give me a little bit of time to do the things that I need to do. I’m here. I’m one voice crying out in the wilderness. But I promise you, good times are coming. And so always transparent. And so I call it.

Adam Coffey 00:41:46

I made a lot of visible investments. When I got to my last company, there was about a 40% turnover rate. Employees. It’s like, how the hell are you supposed to grow a successful company if 40% of your people are walking out the door every day? It didn’t seem logical to me. I got to dig in to figure out, why are people leaving the company? And it was a different answer in different parts of the country. And we started fixing it in all the different parts of the country. Within twelve months, turnover was reduced by more than 50%. And it wasn’t always wages, it was wages in the Pacific Northwest, because we were competing with a heavy union crowd that was trying to pick off our employees in Texas.

Adam Coffey 00:42:22

It was. It had to do with paid days off and sick days, which wasn’t mandatory in Texas. And their brothers in California were getting it, but they weren’t getting it because of where they lived. And so I learned about what was causing the turnover. I made visible investments to fix some of these things, which means the company had to be willing to make investments. So that’s kind of the hockey stick before it turns around and starts to come back. But I. But there were tangible results, and so people would see, okay, the guy told me what he was going to do.

Adam Coffey 00:42:56

By God, I see him doing it. Who would have thought he would have restructured management, invested in us. And so at first, it’s, people give me the benefit of the doubt. But very quickly, my actions reinforced what I told them I was going to do. Okay, he told me what he was going to do. Now I see him doing it. It’s a different kind of world than what I’ve been used to, which is no transparency, people not talking to me, just laying off people and doing these restructure after restructure, trying to figure out how to make the company profitable again. And so it’s, I articulate the vision, I communicate it throughout.

Adam Coffey 00:43:35

I start to take action. I make sure that they see me doing what I said I was going to do. I build the credibility very quickly. I could turn companies around. You’re talking months, not years, months. And people who had stopped engaging because they weren’t on the inside, understanding what was going on with that lack of transparency, now start getting reengaged. They start working hard. Employee engagement start scores start going through the roof.

Adam Coffey 00:44:03

And so it starts with brute force, but it starts with vision and then walk in the walk.

Aydin Mirzaee 00:44:08

Yeah, I’m definitely seeing a theme in all the topics that we’re talking about. It just goes back to this idea of, again, you have to have a shared vision. You have to set it. You have to show people that you’re executing against it. You have your informal feedback loops, like you said, you have your employee engagement surveys, and all of them fit into the same puzzle pieces, come together so that you can execute on that one goal as a CEO. So, Adam, this has been an awesome conversation. We’ve talked about so many different topics. Obviously, the role of the CEO.

Aydin Mirzaee 00:44:38

We’ve talked about performance management. We’ve talked about creating a great culture and so many topics in between. The final question we always like to end on is for everybody in the audience looking to constantly get better at management and leadership. Are there any final tips, tricks, or words of wisdom that you would leave them with?

Adam Coffey 00:44:58

I would say a couple of things. First and probably foremost, never stop learning. The minute you stop learning and the minute you think you’re God’s gift to anything is the day you stop growing and the day the problems start to happen. So surround yourself with good people. If you’re a small business owner or in a startup, peer groups are a great way to engage other leaders to talk about topics. You know, you’ve got groups like YPO and vistage, and I’m a consultant and a coach. There’s a lot more people in today’s world who are open to the idea of coaching. Boy, roll tape back 2030 years.

Adam Coffey 00:45:34

Yeah, there wasn’t a lot of that going on when I was starting out, and there was a lot of youthful arrogance and exuberance that a successful person used to have. And I think the world’s kind of morphing, and I think social media certainly has helped. And just the electronic digital world has become so much smaller. I’ve got clients all over the globe. It’s like, and so build a support network. If you don’t have it, challenge your status quo and never stop learning. Whether it’s reading books or taking courses. I can look on the wall in preparation.

Adam Coffey 00:46:05

I knew I was going to be hanging up my CEO cleats. I went to a university and I became a certified director. It’s like, I know I’m going to spend more time on boards of directors. I’m going to go learn about being a director. What constitutes being a good director? As I told you, for me, I’m in school teaching, and then I’m a student at age 50. It’s like, never stop learning. There’s always more that we can learn and build a support network. And if we do these things, we have a higher probability of being able to leverage, call it shared wisdom and shared expertise from others, which will help accelerate our own journey and help us prevent from kind of stepping in those.

Adam Coffey 00:46:45

Those potholes that we all fall in from time to time. So I think that’s probably number one, never stop learning. You know, it doesn’t matter how old you are or how successful you think you are, there’s somebody out there who’s a lot more successful than you, and you’re not God’s gift to anything. So be a good steward to people. Take care of people. They’ll take care of. You have a strong culture, but that doesn’t mean we don’t hold people accountable. So keep learning, keep investing in your people, and your journey will go far.

Aydin Mirzaee 00:47:13

That’s great advice and a great place to end it. Adam, thanks so much for doing this.

Adam Coffey 00:47:16

Aydin, good to see you. Yeah, we didn’t even really talk about private equity. We’re gonna have to come back another time, talk about finance and all that good stuff. This was all about leadership, which was great. That was kind of refreshing. Yeah.

Aydin Mirzaee 00:47:28

We’ll definitely have to have you on once the, the new edition comes out. And for everybody, we’ll link to your books into your LinkedIn page and the show notes, and hopefully we’ll. We’ll send some people your way there too.

Adam Coffey 00:47:40

Sounds great. Talk soon.

Aydin Mirzaee 00:47:42

And that’s it for today. Thank you so much for tuning into this episode of the Supermanagers podcast. You can find the show notes and transcript at www.fellow.app/supermanagers. If you like the content, be sure to rate, review and subscribe so you can get notified when we post the next episode. And please tell your friends and fellow managers about it. It’d be awesome if you could help us spread the word about the show. See you next time.