{"product_id":"finish-big-isbn-9781591844976","title":"Finish Big","description":"\u003cb\u003e“No two exit experiences are exactly alike. Some people wind up happy with the process and satisfied with the way it turned out while others look back on it as a nightmare. The question I hope to answer in this book is why. What did the people with ‘good’ exits do differently from those who’d had ‘bad’ exits?”\u003c\/b\u003e\u003cbr\u003e\u003cbr\u003eWhen pioneering business journalist and\u003ci\u003e Inc.\u003c\/i\u003e magazine editor at large Bo Burlingham wrote \u003ci\u003eSmall Giants\u003c\/i\u003e, it became an instant classic for its original take on a common business problem—how to handle the pressure to grow.\u003cbr\u003e\u003cbr\u003eNow Burlingham is back to tackle an even more common problem—how to exit your company well. Sooner or later, all entrepreneurs leave their businesses and all businesses get sold, given away, or liquidated. Whatever your preferred outcome, you need to start planning for it while you still have time and options. The beautiful part is that if you start early enough, the process will lead you to build a better, stronger, more resilient company, as well as one with a higher market value. Unfortunately, most owners don’t start early enough—and pay a steep price for their procrastination.\u003cbr\u003e\u003cbr\u003eBurlingham interviewed dozens of entrepreneurs across a range of industries and identified eight key factors that determine whether owners are happy after leaving their businesses. His book showcases the insights, exit plans, and cautionary tales of entrepreneurs such as\u003cul\u003e\n\u003cli\u003e\n\u003cb\u003eRay Pagano\u003c\/b\u003e: founder of a leading manufacturer of housings for security cameras. He turned down a bid for his company and instead changed his management style, resulting in a subsequent sale for four times the original offer.\u003c\/li\u003e\n\u003cli\u003e\n\u003cb\u003eBill Niman\u003c\/b\u003e: founder of the iconic Niman Ranch, which revolutionized the meat industry. He learned about unhappy exits when he was forced to sell to private equity investors, leaving him with nothing to show for his thirty-five years in business.\u003c\/li\u003e\n\u003cli\u003e\n\u003cb\u003eGary Hirshberg\u003c\/b\u003e: founder of organic yogurt pioneer Stonyfield Farm. He pulled off the nearly impossible task of finding a large company that would buy out his 275 small investors at a premium price while letting him retain complete control of the business.\u003c\/li\u003e\n\u003c\/ul\u003e\u003cbr\u003eThrough such stories, Burlingham offers an illuminating and inspirational guide to one of the most stressful, and yet potentially rewarding, processes business owners must go through. And he explores the emotional challenges they face at every step of the way.\u003cbr\u003e\u003cbr\u003eAt the end of the day, owning a business is about more than selling goods and services. It’s about making choices that shape your entire life, both professional and personal. \u003ci\u003eFinish Big\u003c\/i\u003e helps you figure out how to face your future with confidence and be able to someday look back on your journey with pride.“I love Burlingham’s quest to understand why some entrepreneurs create a meaningful life after exiting their businesses while others suffer and wander without purpose. Practical and profound, fast-moving and thought-provoking, masterful in its clear prose and compelling stories—Bo Burlingham has once again done a tremendous service in deploying his craft.”\u003cbr\u003e—\u003cb\u003eJim Collins\u003c\/b\u003e, author of \u003ci\u003eGood to Great\u003c\/i\u003e and coauthor of\u003ci\u003e Built to Last\u003c\/i\u003e and \u003ci\u003eGreat by Choice\u003c\/i\u003e\u003cbr\u003e\u003cbr\u003e“\u003ci\u003eFinish Big\u003c\/i\u003e is for all those founder\/leaders who want to do more than take. . . . It is for the ones who want to leave something behind.”\u003cbr\u003e—\u003cb\u003eSimon Sinek\u003c\/b\u003e, optimist and author of \u003ci\u003eStart with Why\u003c\/i\u003e and \u003ci\u003eLeaders Eat Last\u003c\/i\u003e\u003cbr\u003e\u003cbr\u003e“Bo Burlingham is a liar. He advertises this as a book about entrepreneurs exiting their companies. Instead it is a book about doing business well and living a life of value. Remarkable research, remarkable prose, remarkable book. Bravo!”\u003cbr\u003e—\u003cb\u003eTom Peters\u003c\/b\u003e, coauthor of In \u003ci\u003eSearch of Excellence\u003c\/i\u003e\u003cbr\u003e\u003cbr\u003e“This book is a gift, a must read for anyone who has even an inkling that it might be helpful. It will reward you with both peace of mind and a significant ROI.”\u003cbr\u003e—\u003cb\u003eSeth Godin\u003c\/b\u003e, entrepreneur and author\u003cb\u003eBo Burlingham \u003c\/b\u003eis the author of \u003ci\u003eSmall Giants: Companies That Choose to Be Great Instead of Big\u003c\/i\u003e, a finalist for the \u003ci\u003eFinancial Times\u003c\/i\u003e\/Goldman Sachs Business Book of the Year in 2006. An editor at large at \u003ci\u003eInc.\u003c\/i\u003e, he has reported on the entrepreneurial revolution in America since the early 1980s and has witnessed up close the birth and development of the companies that have reshaped our world.\u003cp\u003e\u003c\/p\u003e\u003cp\u003e\u003c\/p\u003e\u003cp\u003eINTRODUCTION\u003c\/p\u003e\u003cp\u003eAre We There Yet?\u003c\/p\u003e\u003cp\u003eEvery entrepreneur exits. It’s one of the few absolute certainties in business. Assuming you’ve built a viable company, you can choose when and how you exit, but you can’t choose whether. It’s going to happen. You can count on it. \u003c\/p\u003e\u003cp\u003eThat this simple fact of business life comes as a shock to many owners of private companies is in itself a testament to how little attention the final phase of the journey receives compared to other aspects of business. Do an online search for business marketing, finance, customer service, managing, or culture, and you’ll find oceans of information. What’s available on exits is a mere trickle by comparison, and almost all of it has to do with maximizing the amount of money you can get from a sale of your business. But there are many other aspects to the process and they play a larger role than the size of the deal in determining whether the exit has a happy ending—that is, whether you “finish big.”\u003c\/p\u003e\u003cp\u003eOr so I have learned. When I set out to write this book, I didn’t know much about exiting a business. \u003ci\u003eInc.\u003c\/i\u003e magazine, where I’ve worked for more than three decades, had paid scant attention to the subject over the years. My introduction to it—and, I suspect, that of many \u003ci\u003eInc.\u003c\/i\u003e readers as well—had come from a series of columns I had written with veteran entrepreneur Norm Brodsky about an offer he’d received for his records-storage business, CitiStorage. Norm and I have been doing a monthly column in \u003ci\u003eInc.\u003c\/i\u003e called “Street Smarts” since 1995. (We’ve also written a book of the same name.) While he’d said on numerous occasions that he intended to sell CitiStorage someday, he enjoyed what he was doing so much that I imagined he was talking about the distant future. So I was taken aback when, in the summer of 2006, he told me he was in serious discussions with a potential acquirer.\u003c\/p\u003e\u003cp\u003eHe had recently attended an industry conference where he had met a partner in a private equity firm that had a significant stake in a competitor. The partner had asked Norm what it would take to get him to sell CitiStorage. Norm had named a price he thought was higher than anyone would pay. The partner didn’t bat an eye. Norm had then said that, in addition to CitiStorage, an acquirer would have to buy two adjunct businesses—a trucking company and a document-destruction company. That apparently was not a problem either. There had been a series of follow-up discussions. Norm told me he was waiting for the would-be buyer to send over a so-called “letter of intent” (LOI) outlining the preliminary understanding they had reached. He expected the LOI to be followed soon after by “due diligence”—the in-depth investigation that a buyer does prior to the negotiation of the purchase and sale agreement.\u003c\/p\u003e\u003cp\u003eNorm wasn’t sure where the discussions might lead, but he said this could be the opportunity of a lifetime. The money being discussed would be enough, not only to satisfy him and his two minority partners, but to share the wealth with his managers and employees. He also felt that the timing was right given his age, sixty-three, and the unusually high premiums being paid for companies like his in 2006. I told our editor at \u003ci\u003eInc.\u003c\/i\u003e, Loren Feldman, what Norm had said and he suggested we write about the offer in our column. When I relayed the suggestion to Norm, he said, “Okay. Why not?”\u003c\/p\u003e\u003cp\u003eAt the time, neither one of us had any idea what we’d just signed up for. It turned out not to be a column but a series of columns. For the next nine months, we chronicled the unfolding drama in as close to real time as you can get in a monthly publication. Nothing similar had ever been done before or is likely to be done again. Even Norm admitted after the series ended that, when we started, he didn’t really think the sale would happen. He said he wouldn’t have agreed to do it if he’d known in advance that we’d wind up giving a blow-by-blow account of the negotiations to the entire world.\u003c\/p\u003e\u003cp\u003eBut once we’d started, it was hard to stop, especially after it became clear that we were attracting a growing number of followers who eagerly awaited each new installment. At one point, Norm invited readers to send him advice about whether he should go through with the sale. Hundreds of e-mails poured in. People would stop him on the street or at conferences and ask him to share the latest developments that hadn’t yet been published. \u003c\/p\u003e\u003cp\u003eThe saga took many unexpected twists and turns, the most surprising of which was the last one. After much thought and discussion, Norm had made up his mind to sell. The series had become so popular by then that \u003ci\u003eInc.\u003c\/i\u003e’s editor in chief, Jane Berentson, decided to announce his decision on the cover of the magazine. But just a few days before the contract was to be signed, he learned that the ultimate decision maker among the buyers was the person he trusted least—a crucial piece of information that the other side had failed to mention. That fact and its cover-up made him question whether he could depend on the acquirer to keep its promises about the treatment of his employees after the sale. To the astonishment of everyone, including Norm, he decided to walk away.\u003c\/p\u003e\u003cp\u003eSo ended the real-time magazine series—but not the story. Norm and his partners subsequently sold a majority stake in the business to a so-called business development company right as the economy was sliding into the Great Recession. Although many more twists and turns followed, they occurred out of the public eye. Meanwhile, the response to the series had made me realize there was an enormous gap in the business literature and it had to do with the experience of selling a business. That experience was clearly a huge unknown to many business owners.\u003c\/p\u003e\u003cp\u003eIt was new territory for me as well. Up to that point, I’d had only a vague understanding of the exit process. I’d never given much thought to the details of when, how, why, or what it felt like. In my mind, the exit was simply an event that marked the end of a journey. I had always been more interested in what happened during the journey—the experiences people had, the discoveries they made, the obstacles they encountered, the joys and sorrows along the way. I’d also tended to regard exiting as a choice, not a necessity. I associated it with cashing out, and I associated cashing out with giving up. I had written many articles and three books about entrepreneurs who didn’t have the slightest interest in exiting their businesses, focused as they were on creating great, enduring companies. Some of these owners had walked away from nine-figure paydays rather than risk having their companies wind up in the wrong hands.\u003c\/p\u003e\u003cp\u003eBut, as time passed and we all grew older, it began to dawn on me—and on many business owners as well—that sooner or later they would have no choice but to take such a risk. We really weren’t going to live forever after all. The best the owners could do would be to orchestrate transitions of ownership and leadership that would improve the odds of their companies surviving and thriving after they were gone.\u003c\/p\u003e\u003cp\u003eBut how? Where do you even begin? For that matter, when should you begin? What are your options? How much money should you be looking for? What role models are there, if any? What pitfalls should you be aware of? How do you identify and qualify potential successors, if that’s the route you choose to take? Alternatively, how do you find potential acquirers? What sort of outside help do you need? How much should you tell other people in the company? What will you do after you leave? And on and on and on.\u003c\/p\u003e\u003cp\u003eOnce I took a closer look at exiting, I realized that it is a far more complex subject than I’d realized. It isn’t an event. It is a phase of business, just as the start-up period is a phase. As in a start-up, there are many factors that affect how successful the exit will be. For that matter, there are different ways to define what a successful exit looks like.\u003c\/p\u003e\u003cp\u003eThat was my hunch, at any rate. Granted, the books and articles I read on the subject all shared an assumption that an exit was successful if the owners didn’t “leave anything on the table”—that is, if they got the best possible price from the buyer. But none of these books and articles had been written by owners who’d actually gone through the process of selling their companies. Norm’s experience had shown that there was much more to it than getting a good price. I couldn’t help wondering about the experiences of other exiting business owners. And so I decided to find out.\u003c\/p\u003e\u003cp\u003eOver the next three years or so, I had conversations with scores of entrepreneurs who had exited, were in the process of exiting, or were getting ready to exit their companies. More than a hundred of those conversations were in-depth interviews that I conducted either in person or by telephone. While it soon became clear that no two exit experiences were exactly alike, it was equally obvious that some were a lot better than others. By that, I mean that some people wound up happy with the process and satisfied with the way it turned out, while others looked back on it as a nightmare and came away with deep regrets about the outcome. My question was, why. What did the people with “good exits” do differently from those who’d had “bad exits”?\u003c\/p\u003e\u003cp\u003eI had to begin by clarifying in my own mind what a good exit consisted of. For most people, I’d found, there were four elements:\u003c\/p\u003e\u003cp\u003e1)\tOwners felt that they’d been treated fairly during the exit process and appropriately compensated for the work they’d put in and the risks they’d taken to build their businesses.\u003c\/p\u003e\u003cp\u003e2)\tThey had a sense of accomplishment. They could look back and know that through their businesses they’d contributed something of value to the world and had fun doing it.\u003c\/p\u003e\u003cp\u003e3)\tThey were at peace with what had happened to other people who’d helped build their businesses—how those people had been treated, how they’d been rewarded, and what they’d taken away from the experience.\u003c\/p\u003e\u003cp\u003e4)\tThey had discovered a new sense of purpose outside of their businesses. They had new lives that they were fully engaged in and excited about.\u003c\/p\u003e\u003cp\u003eFor some people, there was a fifth element:\u003c\/p\u003e\u003cp\u003e5)\tThe companies they’d created were going on without them and doing better than ever, and they could take pride in the way they’d handled one of the most difficult tasks faced by any CEO: succession.\u003c\/p\u003e\u003cp\u003eIt was harder to generalize about bad exits, if only because what might be terrible for one person was sometimes unimportant for another. But I figured almost all owners would think they’d had a bad exit if they walked away feeling that the process had been unfair; that they hadn’t received the reward they deserved; that what they’d built was being destroyed; that their people were being screwed; or that they felt completely lost and had no idea what to do next. \u003c\/p\u003e\u003cp\u003eSo how had the owners who’d had good exits gone about preparing for the day they would leave? What were the patterns? Looking at them as a group, I could identify eight common characteristics, and I’ve organized this book around them.\u003c\/p\u003e\u003cp\u003eThe first was the same one I’d noticed in entrepreneurs who’d built great businesses, including those I’d written about in my book \u003ci\u003eSmall Giants\u003c\/i\u003e: These were all people with a crystal clear understanding of who they were, what they wanted out of business, and why. \u003c\/p\u003e\u003cp\u003eSecond, the owners who’d exited well had realized early on that it was not enough just to have a viable business. Most viable businesses are, in fact, unsellable. To create market value, these owners had learned to look at their businesses through the eyes of a potential buyer or investor.\u003c\/p\u003e\u003cp\u003eThird, they had given themselves plenty of time—measured in years, not months—to prepare for their eventual departure and had developed options, so that they, or their heirs, would never find themselves in a situation where they would be forced to sell under disadvantageous circumstances.\u003c\/p\u003e\u003cp\u003eThe fourth characteristic didn’t apply to all owners, but it was vitally important to a significant percentage of them, including those with the highest aspirations for their companies. I’m referring here to succession—specifically, the importance of leaving the company in good hands.\u003c\/p\u003e\u003cp\u003eFifth, happy former owners had had the right kind of help, which had come not just from professionals who specialize in the buying and selling of businesses but also from former business owners, who had learned how to do it by making mistakes in exiting their own companies.\u003c\/p\u003e\u003cp\u003eSixth, the owners had thought about and come to terms with their responsibilities to employees and investors. While every owner did not reach the same conclusion, those who had had good exits had all given the matter serious thought and were at peace with whatever decisions they had made.\u003c\/p\u003e\u003cp\u003eSeventh, these owners had also understood in advance whom they were selling their companies to and what was motivating the buyers. Owners who didn’t often had nasty surprises later when it became clear what the new owners actually planned to do. \u003c\/p\u003e\u003cp\u003eEighth, the owners who did best had a vision of what they would do after the sale and thus were better able to handle their metamorphosis from top banana one day to ordinary piece of fruit the next.\u003c\/p\u003e\u003cp\u003eThese eight factors, I found, went a long way toward explaining the vast differences in the experiences of the entrepreneurs I interviewed, and I couldn’t help but think that current and future business owners would benefit by knowing about them. That said, my purpose in writing this book is not to provide a how-to guide, but rather to illuminate the exit process by telling the stories of entrepreneurs who’ve gone through it. Many of those people have had good exits, as defined above. Other stories are cautionary, in recognition that we often learn what works by observing what hasn’t worked. In most cases, I have been able to use the real names of the people and companies involved. For several, however, I’ve used pseudonyms, in some instances because of my source’s legal commitments, in others to avoid gratuitous harm to the people mentioned. When I have disguised an individual, I have so indicated. Other than changing names and, in two instances, some telltale details about the company, I have reported what actually happened.\u003c\/p\u003e\u003cp\u003eAs in \u003ci\u003eSmall Giants\u003c\/i\u003e, the companies I write about are all privately owned and closely held, with one exception: Cadence Inc. in chapter 5, which I would describe as quasi-public. Three of the companies, in fact, were in \u003ci\u003eSmall Giants\u003c\/i\u003e: Zingerman’s, CitiStorage, and ECCO. There are some issues I’ve deliberately avoided—for example, the unique succession challenges faced by family businesses when ownership and leadership are passed from one generation to the next. There is plenty of information elsewhere on that topic. Nor do I address the unique challenges of very small businesses whose primary purpose is to provide the owner with an income. If they’re sellable at all—and the great majority aren’t—what’s being sold is a job, not a company. Nevertheless, I think that both family business owners and solo entrepreneurs will find much to identify with in the stories I tell.\u003c\/p\u003e\u003cp\u003eIn listening to the entrepreneurs I interviewed, I was constantly reminded of an old saying: You should build a business today as if you will own it forever but could sell it tomorrow. Most of the great entrepreneurs I’ve been privileged to know have followed that dictum. My friend and sometime coauthor Jack Stack of SRC Holdings (which was sold to its employees) makes the comparison to keeping up the market value of your home—fixing the roof, adding rooms, painting regularly—even if you have no intention of moving anytime soon. The same logic applies to businesses. Oddly enough, you’re far more likely to have a company that’s built to last if you simultaneously build it to sell. You’re also far more likely to have a happy exit.\u003c\/p\u003e\u003cp\u003eOf course, if you’re like most entrepreneurs, you’d probably prefer not to think about your exit just yet. Fortunately, the window for crafting a good one can stay open for a fairly long time. When you finally climb through it, you’re liable to make a surprising discovery, namely, that the process has helped you to build a better company. That’s what Ray Pagano found in 2004 when he began preparing to get his company, Videolarm, ready for sale: The company improved so much and so fast that he regretted he hadn’t started sooner.\u003c\/p\u003e\u003cp\u003e\u003c\/p\u003e\u003cp\u003e1\u003c\/p\u003e\u003cp\u003eEvery Journey Ends\u003c\/p\u003e\u003cp\u003eNow is the time to start thinking about your exit.\u003c\/p\u003e\u003cp\u003eThe day was beginning to sizzle at the Regatta Point Marina in Deltaville, Virginia, but the air was cool inside the \u003ci\u003eBella Vita\u003c\/i\u003e, which was resting quietly in its slip after completing its three-week maiden voyage around Chesapeake Bay. While an electronics specialist performed tests on the control panel, Ray Pagano, dressed in a T-shirt, shorts, and slippers, showed a guest around. “We have all the amenities,” he said. “More than we need, probably.” Tanned and trim at sixty-eight, he wore a vaguely sheepish smile as he conducted his tour of the vessel, a brand-new sixty-foot Selene Ocean Trawler that had been custom-made for him at a shipyard in China. It had been his gift to himself after completing the sale of Videolarm, the company he’d founded thirty-five years earlier, and a fine gift it was, with its beautiful cherrywood paneling, granite bathroom counters, and queen beds in the cabins fore and aft.\u003c\/p\u003e\u003cp\u003ePagano is clearly enjoying the \u003ci\u003ebella vita\u003c\/i\u003e for which his boat is named. He has none of the second thoughts or regrets that plague so many owners after the sale of their companies. Indeed, his exit has been as happy as anyone could hope for—in part because of his former employees, most of whom were still working for the company that bought Videolarm. “Every time I stop by, they welcome me with open arms,” he said. “That’s amazing to me. It’s more than I could have expected. I guess I must have done something right. I ask myself, what really made the difference?”\u003c\/p\u003e\u003cp\u003eTo answer that question, you have to go back to 2004, when Pagano began thinking seriously about having a life after business. Videolarm was twenty-eight years old and well established as a leader in its field, the manufacturing of housings for security cameras. Pagano had revolutionized that field in 1976 when, at thirty-three, he developed a housing that resembled a streetlight and used a much smaller motor than other outdoor security cameras. It took him the next eight years, however, to persuade the major camera manufacturers to try the apparatus. He scraped by, supporting himself doing installation and security consulting until he finally landed an account with RCA, which at the time was a big name in the field. That was all he needed. Pagano’s products performed as promised, and he was able to leverage his success with RCA to sign up other large customers, including Sony, Panasonic, and Toshiba.\u003c\/p\u003e\u003cp\u003eOver the next two decades, Videolarm’s patented designs became the industry standard. By 2004, they were ubiquitous. The company, meanwhile, was doing $10.4 million in sales, with forty-two employees, and Pagano, who had just turned sixty-one, was ready to move on. He had other interests and passions that he wanted to pursue, and a limited number of years to pursue them. The time had come, he decided, to think about leaving.\u003c\/p\u003e\u003cp\u003eBut how? He’d long had the notion in the back of his mind that one of his three children might someday take over the company. It had become clear, however, that such a solution was not in the cards. Selling the business was a possibility. So was a merger, or finding someone else to run it, although he was wary of doing any deal that would require him to stick around. “I don’t want an earnout,” he told one of his advisers, Gary Anderson, who chaired Pagano’s chapter of TEC (The Executive Committee, now called Vistage International), a membership organization for owners and executives of small to midsized businesses. “I want to sell it and leave. I have other things I want to do in my life besides this.” That same year, 2004, a competitor approached Pagano about selling Videolarm and named a price. Pagano took it to Anderson, who thought he could garner a much better offer if he made some changes in the business.\u003c\/p\u003e\u003cp\u003eAt the time, Videolarm was fairly typical of companies run by the entrepreneurs who started them. It was essentially a benevolent dictatorship. The entire business revolved around Pagano, who put his nose in every part of it and kept his managers on a short leash. Communication was decidedly top-down, and financial information closely guarded. CFO Janet Spaulding was forbidden to share it with other employees. Pagano himself made every important decision and quite a few not so important ones. Managers, for their part, were aware that he could “pull the rug out” from under them at any moment, as one of them said. “People respected Ray and feared him,” said Spaulding, “and I think the fear was sometimes greater than the respect.”\u003c\/p\u003e\u003cp\u003eOther employees shared those feelings toward Pagano. They knew he cared about them. They believed he at least intended to treat them fairly. They could also see that he held himself to the same standards he demanded of them. If there were any doubts on that score, they were erased when he fired his own son over an infraction of a company rule—a gut-wrenching decision that still brings tears to his eyes.\u003c\/p\u003e\u003cp\u003eBut autocratic management, benevolent or otherwise, can undermine the value of a company. Anderson noted as much in advising Pagano on how to prepare for an eventual sale. “You’re going to have to extract yourself from the business,” he said. “You’re going to have to bring up your management team, give them more responsibility, coach them more, and let them run the operation.” Pagano didn’t argue. He knew Anderson was right. Sale price aside, the number of potential acquirers, and thus Pagano’s own exit options, would be severely limited as long as he was essential to the company’s operation. He had to remake the business so that it could run without him if he wanted to improve his chances of getting a deal he’d be happy with.\u003c\/p\u003e\u003cp\u003ePagano decided, based on some research he’d done, that he needed to begin by giving everyone in the company a tangible reason to take on more responsibility. He believed he could accomplish that with phantom stock, which would allow people to benefit from any increase in Videolarm’s equity value without being given—or having to acquire—real stock. All employees, including assembly workers and office staff, would receive “shares” that Pagano would divide up based on salary and his assessment of how important each person was to the company’s long-term success. He told the members of his TEC group about his plan. Most of them thought he was out of his mind. But he was convinced it was the right way to go. So he rolled out the program, explaining to the employees that the phantom shares would entitle them to a portion of the sale proceeds should Videolarm ever be sold.\u003c\/p\u003e\u003cp\u003eThey weren’t sure what to make of the gesture. Pagano was notoriously tightfisted with money. Many of them thought the phantom stock program was some kind of trick to get them to work harder. They either ignored it or treated it as a joke. “To us, it was just pretend money,” said Spaulding.\u003c\/p\u003e\u003cp\u003eBut Pagano was serious—so serious that he proceeded to introduce his own, truncated version of open-book management, which involves teaching employees to understand and use financial information in their work. He’d read books on it, and while he couldn’t bring himself to go as far as some other practitioners, he was convinced that people needed a basic knowledge of the numbers if they were going to be able to figure out how they could improve a business’s performance and thereby increase its value. So he organized meetings to talk about financials. He began by asking employees to give their own estimates of sales and profits—and was stunned when they speculated that Videolarm’s sales were in the hundreds of millions of dollars (they were less than $11 million at the time) and that he was taking home millions of dollars each month. Pagano responded by walking them through an income statement and a balance sheet, noting the capital investments a manufacturer like Videolarm had to make, the taxes it paid, the government oversight it was subject to, the cost of the benefits it provided, and so on. Employees had many questions and comments. Pagano put out a suggestion box to capture them and took care to respond to each one. He also began writing monthly letters to employees’ families, which he sent to their homes, and invited family members to come in to view new products. “We truly wanted to involve everyone in the business,” he said.\u003c\/p\u003e\u003cp\u003eRealizing it was crucial to strengthen the management team, he made a conscious effort to increase the autonomy and authority of his three senior managers—in finance, operations, and marketing. He also sought out one of his former TEC chairs, Rick Houcek, who had formed a business called Soar with Eagles, which worked with companies to plan annual strategic meetings and develop implementation systems. Houcek urged Pagano to bring not just the senior people but all the managers together at an off-site meeting and let them develop an annual plan. The results, Houcek said, would go a long way toward achieving what he wanted to do.\u003c\/p\u003e\u003cp\u003ePagano announced a three-day off-site for everyone from frontline supervisors on up, about fifteen people. Houcek would facilitate. He told Pagano to just sit and listen while people aired their views on what the company needed. Pagano admitted it was hard not to feel defensive when his managers shared their grievances, but Houcek persuaded him to hold his tongue and let the managers come up with the plan. If he tried to force his plan on them, they would not take responsibility for executing it. In the end, the managers settled on about thirty ways to improve Videolarm’s management and performance, with specific assignments for each one. Thereafter, they began to meet as a group every month to review how they were doing on their commitments.\u003c\/p\u003e\u003cp\u003eMeanwhile, there were other changes going on. Pagano set up an incentive program for the entire workforce, based on achieving certain profit targets for the company and specific goals for each department. The targets were ambitious, higher than what the company had done in the past, and Pagano indicated that he intended to keep raising the bar as time went along. Not surprisingly, the program was again met with distrust, especially on the shop floor, but Pagano promised that he would reorganize the factory to make their jobs easier. He did, and productivity began to rise.\u003c\/p\u003e\u003cp\u003eAt the\u003c\/p\u003e","brand":"Portfolio","offers":[{"title":"Default Title","offer_id":44886863347941,"sku":"NP9781591844976","price":34.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781591844976.jpg?v=1767726912","url":"https:\/\/k12savings.com\/es\/products\/finish-big-isbn-9781591844976","provider":"K12savings","version":"1.0","type":"link"}