“When you don't have good instrumentation, you spend a lot of time worrying about what you don't know.” - Brick Thompson, CEO
In addition to the demands of leading a company, PE-backed executives face intense pressure to deliver regular performance updates to their sponsors. PE firms often have a broad portfolio of varied companies, so risk management is essential, and the executive will be asked to provide reliable data and accurate analysis (AlterDomus, 2019).
In our podcast episode, Data Visibility and the PE-Backed Executive, Blue Margin founders, Brick and Jon Thompson, discuss their own experience as PE-backed executives. Sponsored by One Equity Partners, their platform company grew overnight from 30 to 500 employees, and the impact of poor visibility was quickly discovered.
They found themselves spending 50% of their time “managing the Board” and the majority of the remaining time trying to gain insight into performance and operations as the leaders of 5 aggregated companies.
It was chaotic, to put it mildly.
The lessons learned led them to the conclusion that poor data visibility is at the root of most, if not all, business issues. The same holds true for the 250+ clients Blue Margin has worked with, and the thousands of companies we've interviewed along the way.
Quick takeaways:
- Midmarket executives who don't use data analytics and dashboards to manage their companies are destined to remain in a reactionary mode, frustrated by marginal results.
- Poor visibility is a major issue companies must overcome to advance their value creation plan.
- Shared visibility is the most effective, expedient way to organize a team and create a culture of accountability.
In short, the best way to surface operational, financial, and sales metrics is through business intelligence. Aside from satisfying investors’ needs for accurate data and analysis, added data visibility allows executives to proactively plan and prioritize, democratize ownership of the VCP, and instill accountability throughout the org chart.
For the transcript, click here: full transcript
Listen to the full episode below (or anywhere you listen to podcasts).
About Us
Blue Margin helps private equity and mid-market companies quickly organize their data into dashboards, the most efficient way to turn strategy into action, and create a culture of accountability focused on growth and profitability. We call it The Dashboard Effect, the title of our book and podcast. Our mission is to accelerate your value creation plan.
For Further Listening
Resources
AlterDomus. (2019, November 6). Private Equity Executives Under Pressure. Alter Domus. Private Equity Executives Under Pressure | Alter Domus
Full Transcript
Brick Thompson:
Welcome to The Dashboard Effect podcast. I'm Brick Thompson, Founder and CEO of Blue Margin.
Jon Thompson:
And I'm Jon Thompson, Co-founder.
Brick Thompson:
Hey Jon, how's it going today?
Jon Thompson:
It's going well, thank you.
Brick Thompson:
So, what are we talking about today?
Jon Thompson:
So, today we're talking about the experience of being a private equity-backed executive (which we have some experience with), and what that's like when you lack visibility.
Brick Thompson:
Yeah, we definitely do have some experience. We have some war stories about that, too. So yeah, tell me your high level thoughts on this. What are the problems that generally come with not having visibility?
Jon Thompson:
So we have an official stance in our marketing world over here that midmarket executives who don't use data intelligence (data insights, dashboards, etc.) to manage their companies will be stuck reacting to problems and will be frustrated by mediocre results. And that comes from having talked to 1000+companies worked with 200+ clients and having been in that world ourselves.
Brick Thompson:
Yeah, and there's definitely some unique demands that come with being PE owned, especially in the midmarket, that you might not know about if you hadn't done it. Anybody who's listening to us today, who's PE owed will know about this. One of the hardest things I found being PE owned in a company you and I started back in 2000 and sold to a PE firm in I think 2004? Is that right? Was that my time running the company went from about, I don't know... 80 or 90% running the company and 10% working on personnel and investors and stuff to basically 50% managing my board and my PE investors and only 50% left for working on the company. And I found that very frustrating. And I think that can be a common thing that happens.
Jon Thompson:
Yeah, I mean, you've got 24 hours in a day, you're basically hired by the sponsoring PE company to coordinate every department, every employee, etc, around the value creation plan. You've got to stay in the role of strategic thinker, trying to stay in your highest and best use, try to see what's working and what's not, try to address those things, see what's coming around the corner, try to be strategic, and directing resources to capitalize on all those things. Meanwhile, you have a lot of pressure to perform from your board, and a lot of pressure to provide visibility into what's going on to them, let alone to yourself on a daily basis to see what's happening.
Brick Thompson:
Yeah, exactly. You know, I think it might be actually kind of interesting to talk about our specific story. Do you want to kind of lay it out a little bit?
Jon Thompson:
Yeah. So imagine three buddies working in the cell phone industry in Vegas, being encouraged by yet another sibling to hop on the dot com wave and put together a business plan. We went out and then hustled to raise venture capital, and we raised about 7 million bucks. Went through that experience that every young, naive entrepreneur has thinking "We're millionaires!", all of a sudden high-fiving in the hallways, and built the company up. Had a nice office in downtown Denver, and then attracted the attention of a private equity firm, One Equity Partners, which was the PE branch of Bank One. And that's where the fun started.
Brick Thompson:
Yeah, you could put it that way. Actually, it was a great group of guys. The board was really smart. But I was the CEO of our small firm (there were just 30 of us), and I was really stuck by not having good visibility to the business. Which meant I had to spend a ton of my time just gathering data, putting together slides, being able to explain things to the board when they had questions. And, you know, with my hindsight now understanding what's possible, especially in the world of modern BI, oh my gosh, it would have changed my life to have that back then. Yeah.
Jon Thompson:
Yeah. And in fact, when we later got back to our technology roots... so that was a technology company technology was designed to manage telecom expenses for enterprise clients, which believe it or not, was a category in business back when telecom was a major expense line. And we became the lead or platform company for five company roll up and that PE purchase and it was challenging. So, having spent, like you said, a lot of our time, (if not a majority of our time) trying to figure out what's happening and trying to explain that to the board, rather than executing, focusing resources, prioritizing, strategizing, etc. When we started this business, Blue Margin, our goal was to help companies take advantage of cloud services like Office 365, Google Apps, and so on. And, funny, having gone through that PE experience, our only demo for Office 365 was SharePoint, and it was our internal version of it. And it was peppered with graphs and charts and business intelligence, if you will. And as we demoed it, clients really were drawn to that. And within about two years, it became clear, that's the main thing that people need is better visibility. And we became a all in BI company.
Brick Thompson:
Right, right. So we started thinking, we're going to sort of do generalized, cloud infrastructure and very quickly pivoted to BI, just as a side effect of our personal internal infrastructure having a bunch of BI on it and customer saying, "Hey, we want that." So, that was kind of an interesting progression there.
Jon Thompson:
Yeah. And it came down to the root issue. So, if you remember back then, Brick, we had our Blue Core process for getting to root issues. In fact, we thought that was our main business was how do we help companies not deal with surface issues, but what's our methodology that we took from your stint at Bridgewater, the big hedge fund? How do we help them get to the root issues and then solve those? And it turned out, at least from the lens we were coming from, that visibility (or lack thereof) was the thing that drove so many issues that companies were having and trying to advance their plan.
Brick Thompson:
Yeah, exactly. I know, for me, personally, (I think a lot of executives have this, as I talked to talk to customers, clients out there), when you don't have good instrumentation, you spend a lot of time worrying about what you don't know. So you know, for me personally, if something is not going right in the business, but I don't have a clear view into the specifics of that. I sort of create a worry boogeyman around that thing. And as soon as I get good visibility, good instrumentation that goes away. And it's sort of a lesson I've learned so many times in my life. I can think back to when I was, you know, a young person just out of college sort of living paycheck to paycheck and trying to make ends meet. And I can distinctly remember a couple of times being worried about being able to make rent or make the car payment, and having a large amount of anxiety around that. But then as soon as I sat down and did a budget and understood exactly where I was, that large amount of anxiety went away, I now knew what my bogey was, I knew what I needed to do to fix it. And I've learned that same lesson so many times in business. And, you know, if I could give anybody advice, who's running a business on how to lower the stress level and make it more enjoyable, is just get your instrumentation dialed-in. You know, don't spend time wondering what's going on, and therefore worrying about the boogeyman, but find out exactly what's going on. Even if the news is bad, you'll worry less. You'll know what you have to do to fix it.
Jon Thompson:
Yeah, I learned that lesson every time I'm in a meeting and space out for 30 seconds. And then I wonder what was just said, and it may be nothing but not knowing makes you feel untethered in the meeting, you're not sure where to go. It's very unsettling, and just tuning in makes all the difference to feel grounded and be able to stay with the conversation. Go ahead.
Brick Thompson:
Yeah, no, that's that's definitely true. Where you spacing out right then when I was talking?
Jon Thompson:
I was.
Brick Thompson:
I figured. You know, the other thing as I was thinking about this discussion today, the other thing I realized, became so much easier in running a managing a business or part of a business was, as soon as I had good visibility into my data and my numbers, you know, (not just numbers, but numbers that really told me what was going on, around the things that I cared about the most). All of a sudden, I was able to hold people accountable to their responsibilities in a much better way. And not in a "crack the whip" way, but just in a way that we could sit down over numbers, and really know what was going on. Most people really want to do a good job and really want to own their responsibilities, but if they don't have a clear view on how they're doing against those, it can be hard to get in sync on that. And, as a manager, I can start to become demanding because I'm worried about it. Maybe it's warranted, maybe it isn't, but it's really hard to get in sync and have that conversation.
Jon Thompson:
Yeah, yeah, I think that is true for every at least new PE backed executive. Suddenly you have an infusion of cash, you're expanding, rapidly growing, you're doing acquisitions, and it can feel like (or you may have the false impression that) your job is to carry the full weight of
Brick Thompson:
Yeah. And we've seen that with clients many executing this value creation plan that they've put in your hands or they've developed with you. But that's not the case. I mean, you can keep going up the ladder until you're running a country, somehow, you've got to do with those same 24 hours. And what we found here, what really got us excited about BI as a company, is that it became a way to democratize the ownership of what we're trying to do. So if each person has the instrumentation that gives them feedback on how they're doing against their area of the business. And if that rolls up into a central narrative for how's the company doing against our plan, then you have this shared accountability. You have this same phenomenon you get in a sporting event where each player, each coach, all the fans are looking at the scoreboard. Everyone's accountable to the clock, the number of timeouts times, I can think specifically of a huge one we had with a where you are on the on the field, what the score is, and each person knows their role in that. And there's no sort of sitting in the corners, or pointing fingers, or developing factions, or firing up a political efforts to make sure that you maintain good graces. It's just here's your area of the business that you own. If you can spread that ownership out, you take that massive burden off the shoulders of the executives, and share it with people appropriately. client that had a lot of technicians out on the road in trucks fixing stuff. And one of the big determinants of their profitability was utilization of those techs. So, if they could keep those guys doing work that they could bill customers for, (as opposed to, you know, doing paperwork or other things), it increases the profitability a lot. You need less technicians to get the same amount of revenue. And simply by providing good visibility for everybody (the technicians, the dispatchers, the managers), it changed the situation immediately. It allowed everybody to take responsibility for that number, so technicians could know "Where do I stand in comparison with, you know, my colleagues and with the goal?" and managers knew who they needed to talk to about how to maybe do things more efficiently and so on. So it can almost create a self-managing situation, or at least pushes the management to the right level.
Jon Thompson:
Yes, I think it comes down to accountability. Something that's it almost sounds like a dirty word. It sounds like "that doesn't sound fun." But in fact, it's what helps people get to where they want to go. And it's taken me my 54 years to begin learning that. Most recently, I have never been a person of habit except for brushing my teeth (you'll be glad to know.) You're a guy who can do the same thing over and over for years. I envy that, but that's not how I'm built. And working out falls into that. And my wife went and found a trainer that meets with us for 30 minutes, three times a week. He sits there on the video and says, "Next thing you'll do is these iron cross push-ups." Okay, so we're gonna do those next. That's all he does. Barely corrects anything. He just shows up. And for the first time in my life, for almost two years running now, I've worked out consistently better than I ever did when I was in sports in high school for short stents, etc. It makes all the difference. And if you can operationalize that, if you can get that into how your company runs where there's a built-in accountability. It's highly visible. It's up in lights. Everyone sees it, it's shared. You have unleashed, I think what could be argued to be the most effective motivator of people out there.
Brick Thompson:
Yeah, totally agree with that. And on the workout, I can vouch for Jon's working out. We were doing some wake surfing with Jon's brother-in-law behind his ski boat. After Jon took his shirt off and jumped in the water, I was a little embarrassed to myself. Maybe need to get that guy's number.
Jon Thompson:
That's why I do it.
Brick Thompson:
The other thing for me about good instrumentation, especially if you're in the management ranks is figuring out having it help you figure out how to prioritize what you're working on. Because I know for myself, sometimes I can get really into sort of a pet project or something that I feel like I want to work on, as opposed to maybe what I should be working on. And not even consciously, just kind of happens, but when I have good instrumentation, it makes it really obvious for me, where I should be spending my time, where my staff should be spending their time. It is just a huge, huge help in figuring that out in terms of efficiency of how we spend our time during the day.
Jon Thompson:
Yeah, yeah. The other thing that I learned as we got into this love of of dashboards, was that it became a way to take strategy and put it into action. So you have 1000 meetings, you talk about our next marketing initiative, and you say, we're going to do a social marketing push or some such thing. And six months later, we found that we would be talking about that same thing. "You know, we ought to do is a social marketing push. Yeah, that'd be great!" We'd write it up, we'd find our old notes and say, "What happened to that idea?" And so we took on a loose policy of if something's worth doing, it's worth putting on a dashboard. And if it's not worth figuring out the dashboard, and defining the metrics that make this thing function, it's not worth doing. I love that idea of how do you take ideas, which get bandied around and the board pressures you for.. "How's that coming? What's happening with that initiative or that strategy?" How do you put that into action besides sitting people down and saying, "We've got to do this," and pressuring them and having this reactive, painful micromanagement. The way you do it is put it up in lights, so everyone can see it. And suddenly that social pressure, that accountability, that group effort kicks in.
Brick Thompson:
Yep. So yeah, I agree with all of that. I mean, you and I preaching to the choir, preaching to each other here. Hopefully, for some of our listeners, this is ringing true as well. You know, one of the things that as I'm talking to people about what we do in our business that I hear is, you know, "I'm just too busy to even come up for air. How the heck am I gonna get BIdone? I can barely get my job done. I can't add another big initiative here." And , you know, that's a real real problem. I know, you've got some thoughts on that.
Jon Thompson:
Yeah, well, we have that issue with every client. We have it internally. And too broad brush and say, "It's simpler than you think. You just got to get started, and it all take care of itself," is not accurate. It does take some effort, it takes a focus. I think of, of data insights now as it needs to be one of the pillars of your organization. Because I think business is largely about visibility. If you can't see what's happening, then you're no different than anyone else out there reacting to what just happened. So, it does come down to visibility. But I think your question is how to get started, you know, what's the short path? Or at least how do you get this ball rolling? What we found is the most effective and where a lot of companies falter. Where we falter many times, is defining those value drivers, drivers, the defining the metrics that translate into the outcomes. And you might just do an a thought exercise or an exercise with your group of what are the six most important metrics/value drivers, that we need to keep an eye on to make sure that our plan is on track? And you might think upfront, you know, it's I think that's obvious. It's its profit, its EBITA, its top line revenue, and its sales funnel. But often those are at the end of the spectrum. Those are the outcomes. On the far other end of the spectrum are very controllable, but low-predictive activities. Like, how many dials, how many times we've picked up the phone, how many ads do we put out there. Those sorts of things. And somewhere in between is the area that has decent predictability and is manageable. So looking at how many conversations have we had with prospective clients? How many networking events did we go to? And how many folks do we talk to? What sort of response are we getting to emails? Those sorts of things. And depending on your business, it might be technician utilization, might be obsolete inventory management, it might be cash, might be different things. But defining this if you are limited to six, what are those metrics that determine if we're on track or not? That's the first place to start. And I have other thoughts, but I'd better take a breath.
Brick Thompson:
Yeah, so so that makes perfect sense to me. It is a bit of an art sometimes figuring out the right level to get those metrics. And really the right level is often very context dependent. So when you're sitting at the senior leadership table, you might need some pretty high-level metrics, like profitability, and sales and so on. But then, if you're sitting at that table and then talking to your head of sales after the meeting, and you know, there's a problem there, you saw it at the highest level, they may need a different level. They may need more of those upstream metrics to help them figure out where things are going wrong. So, you know, they might look and say, for example, "Oh, our sales, our flow through the funnel is fine. We have good velocity, we're converting the percentage of deals that we think we should. But we still don't have enough of a pipeline. So what is it?" Okay, so sounds like that's maybe lead generation. So we go back and look at that and say, "Okay, what are the things we're doing in lead generation? And what are the key metrics that tell us how those various initiatives are going?" And then going down to the next level, you might have someone who's in charge of a piece of that lead generation, and they may need yet more granular metrics. But do you have thoughts on where the right place to start? Let's say you're a company that just doesn't have much in place for BI to start with. What's sort of the right level? Do you start at the top? Do you start in the middle? Do you find sort of the place that's having the most pain? How do you think about that?
Jon Thompson:
Great question. And I don't think there's one answer. So it depends. On the one hand, if you can start with the OKRs, the objectives and key results for the company, the big numbers that are the value creation plan, and you can lay those out against the various business functions: so sales, and finance, and HR, and so on. And you can see those at the highest level, that's a win. But oftentimes, on the other hand, you have a situation where there's an acute issue or lack of visibility, lack of accountability, lack of ownership, is really hurting a key area and you have this point of constraint in your business, it can make sense to start there, because ultimately, you're trying to seed this potential for a data-enabled company, a data-driven company. And if you miss early on, it can be a tough uphill battle, and most companies have missed more than once. So find that area where you're going to get the most bang for the buck, some nice combination of light lift and high impact. Start there.
Brick Thompson:
Yeah, that makes sense. And you can sort of go at different levels at the same time as well. But I agree with you. Find where that true pain point is, and dig in there. Every business has reporting already, and so if it's working well enough at a certain level, then you can can really sort of be strategic about where you dig in here.
Jon Thompson:
Yeah, there's one other thing that we've noticed over the last decade working with a lot of companies and having various successes and failures in various projects. And that is that a consistent denominator for our most successful engagements is that there is an operative in there on the client side, a counterpart to us, who is the person that stands on the bridge between the data, the numbers and the business strategy. So they're often an analyst type. And we find that a lot of companies make the mistake of saying, "This sounds like an IT initiative, we need better visibility, we need better control and insight into our data. Let's get IT on it." And ITbegins working on that from an arcane, technical vantage point, doing their best to make things make sure things don't break, and all the things that IT does well. But you're looking for someone who first and foremost is thinking about, "Where are we headed as a business? What needs to happen for us to get there? Who's responsible for what pieces, and what numbers do they need to be accountable to, to drive that bus forward?" And then understands, "Here's our systems. Here's the data, I can talk to IT. I know how to get this stuff." So, finding that operative and saying, "Hey, we have an initiative of getting better visibility in the company. Better accountability and ownership. We want you to head that up, and let's start out by defining our key metrics, and then see what might be a good first area to start." That's the beginning.
Brick Thompson:
Yeah, that makes sense. And I can definitely think of cases where the CIO or the head of IT was that right person, but it really just needs to be a person who is connected deeply with the strategy of the company. So you know, that feels like a whole podcast topic, in itself. It might be interesting to come back to that one. Because I think that whole question of about how to pick the right key stakeholders, and then how to engage them efficiently. Because often the right ones are the most expensive ones to get their time. I think we should talk about that.
Jon Thompson:
Yeah. Another topic that would be good that's sort of the next step in my ad hoc steps here is this is where a lot of companies fall down is how they design their dashboards. They go to the subject matter expert, let's say VP of Sales, and they say, "What do you want to see on your dashboard?" and they start throwing out metrics that matter to them. Not realizing that their process for moving the ball forward for managing their area of the business is first awareness, then some analysis to get to why this is happening, and then the details to be able to take action. We can dig into that topic on another one as well. It makes all the difference.
Brick Thompson:
All right, I like it. All right. Well, let's do that soon. I think we're coming to the end of our time here today. It's been fun sitting down with you doing this. This is our first one together other than we recorded a short introduction for an interview you did (which was great, by the way), but I think we'll wrap for the day. It's been fun. Thanks.
Jon Thompson:
Yeah. Thank you.
