In this Expert Insights Series episode, Blue Margin co-founder and Chief Strategy Officer Jon Thompson hosts Paul Stansik, Operating Partner at ParkerGale Capital. Paul works with management teams to drive organic growth through improved sales, marketing, and leadership effectiveness.
Click here to watch this episode on our YouTube channel.
Paul and Jon discuss:
- How to use vulnerability to build trust and improve team performance
- Why he chooses to show "Less Data, More Often" to portfolio executives
- How to improve portfolio companies with data-driven dialogue and a weekly Sales Metric Playbook
Prior to joining the firm in 2019, Paul served as a senior manager at Bain & Company in private equity, and VP of Sales at financial research firm ITG. With an MBA from Wharton, Paul is a prolific business writer and popular expert guest.
Check out Paul's writing (https://pstansik.medium.com/) and ParkerGale's podcast, PE Funcast (https://www.parkergale.com/podcasts).
Blue Margin helps private equity owned and mid-market companies organize their data into dashboards to execute on strategy and create a culture of accountability. We call it The Dashboard Effect, the title of our book and podcast.
Visit Blue Margin's library of additional BI resources here.
For a free, downloadable copy of our book, The Dashboard Effect, click here, or buy a hardcopy or Kindle version on Amazon.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Jon Thompson (00:04):
Welcome to our Blue Margin Expert Insights
series. We're glad you joinedus. This series is for private
equity and mid market executiveswho want to use data and
dashboards as the formula forexecuting growth plans more
quickly and predictably. I'm JonThompson, co founder of Blue
Margin, and today I'm hostingPaul Stansik from his office in
(00:24):
Chicago. He's an operatingpartner at ParkerGale Capital.
ParkerGale was founded in 2014.
It's a boutique firm thatemphasizes value creation
through operational improvement.
With 10 active portfoliocompanies they exclusively
invest in profitable NorthAmerican technology companies
and assume a majority ownership.
Prior to joining ParkerGale in2019. Paul worked for five years
(00:47):
at Bain & Company in privateequity, leadership and talent
and merger integration. BeforeBain, Paul lead as VP of Sales
for ITG financial research firmand earned his MBA at Wharton.
Paul's a prolific businesswriter (we've enjoyed his
articles), and a contributor toParkerGale's podcast PE FunCast.
We'll include links to hiswritings and to the podcast in
(01:11):
today's show notes. AtParkerGale, Paul works with
portfolio executives to drivetop line growth, including
sales, marketing, and leadershipdevelopment. In his words, he
helps emerging tech companiesfinish the work that founders
started by making the most oftheir big growth opportunities.
Some might call him Dr. Paul forhis ability to inject growth
(01:31):
steroids into companies- we cameup with that. Growing companies
is both an art and a science,and I'm excited to better
understand your methodology.
Paul, welcome. Thanks forjoining.
Paul Stansik (01:42):
Jon, thanks for having me. Yeah.
Jon Thompson (01:44):
So to start, what's the typical revenue of
companies you invest in? And-and how can PE operating
partners best help thosecompanies That they invest in,
break through the ceiling Thatthey've established and scale to
the next level? Yeah, we're
Paul Stansik (01:59):
typically buying b2b software businesses from the
founder. And we're much past thestage of finding product market
fit. In most cases, thecompanies we invest in have
hundreds of happy customers,they're happy because the
product works. So This is a verydifferent model than, you know,
(02:20):
the venture capitalistslistening in who are trying to
guess What the next big thingis, we found something That
works inside of our companies.
And now we're trying to scale itup. And that's where our
operations team comes in. Somost of the time, we're catching
businesses when they're in thethe range of call it 10 to 30
million in ARR. But it varies. Imean, we do one thing, we try to
(02:43):
focus on What we know we're goodat, which is b2b software,
helping finish the work thefounder started, which you
mentioned. But there's a lot ofwork That goes into That, which
I think is What we're going totalk about today.
Jon Thompson (02:56):
Yeah. And is it typically operating efficiency?
Or is it expanding the marketfor them finding better
applications for the technologythey have built is all of the
above and many more,
Paul Stansik (03:06):
It's kind of all the above? I mean, the fun thing
with What we invest in is, It'sa regression, not a hypothesis,
right? So with a big base ofcustomers who bought from us
before who've given us years offeedback, we kind of subscribe
to the Dolly Parton School ofoperational philosophy. She's
got This great quote, whichgoes, you should find out who
(03:28):
you are, and then do it onpurpose. And when I think about
What we do in our operationsteam, that's kind of it. I mean,
What we're doing is analyzing,reflecting, talking to the
management team, and ultimatelytrying to figure out What is
This business already look likewhen It's operating at its best,
and then pulling the levers Thatwe can pull? So That happens a
little more consistently?
Jon Thompson (03:49):
Probably saying no to more things, trying to,
Paul Stansik (03:53):
which is a hard thing, as you know, someone
running a business. But yeah,that's part of the art
Jon Thompson (03:58):
of it, right?
Yeah, I'm reading This bookcalled essentialism, he talks
about saying no to very goodthings. If they're not in the
bull's eye like
Paul Stansik (04:05):
That one. We've, we've given That one away at a
few of our summits. I think I'mlooking at our office bookshelf,
and I think I can see it from myoffice over here. Yeah.
Jon Thompson (04:13):
Okay, great. So I appreciate That. In the current
economic uncertainties That seemto I don't know maybe That maybe
that's a permanent state. But Pand portfolio executives are
looking for ways to morepredictably drive growth and be
data driven. I'm curious aboutParker gales prioritization of
data. How do you view it data asa value driver or value lever?
Paul Stansik (04:40):
At a philosophical level, I think It's just part of
your job if you're being a goodpartner and being a good
investor, and certainly our jobon the operating team. I kind of
think, you know, coming in, Ithought This was going to be a
lot like my role in consultingwhere you diagnose the problem
and you Drop your solution off,and you kind of dust your hands
(05:02):
off and move on to the nextthing. And while there's some
elements of That, I think wesupply some of That diagnostic
power for our businesses andhelp them learn faster, What can
be improved, or What could beimproved. data for us is part of
our job of keeping score. And Ithink that's one of the really
(05:22):
important elements of help Thatwe provide. I think we'll talk
about the role That data playsthroughout the portfolio
shortly. But for mostbusinesses, and most founder
owned businesses, keeping trackof KPIs and metrics and just
measuring performance, That is anew thing. It is extra work and
teams need help doing it. So Ithink It's our job to help them
(05:44):
do That work to help buildsimple, consistent reporting,
That not only to answer yourquestion gives us as investors
visibility into what's going onhow the business is performing,
and What needs fixing. Butsomething the management team
can use to have a betterconversation every week with the
team without us in the room. Sothere's a bunch of different
(06:04):
answers to That questions. Butthe first thing That popped into
my mind is It's It's one of themost important foundational
elements of support That weprovide from our operations
team.
Jon Thompson (06:14):
Yeah. And we'll dig into it. I know there's some
pitfalls, even when companiesare looking at the numbers. I
mean, you know, back to the daysof wooden ships, they were
tracking numbers and so on. Butlike you say, It's a new thing.
So there's, there's a certaindimension to it. That's new. And
we'll we'll dig into That. Oneof your recent articles you
(06:36):
mentioned there's a differencebetween being data aware and
data driven, That might betowards What I was speaking to,
what's That difference?
Paul Stansik (06:45):
Well, the way I see it, being data aware, It's
kind of like This. So mostmanagers only look at their data
when they absolutely have to.
And too many of them out thereuse numbers, kind of like a
defense attorney uses evidence,they use it to protect
themselves. And It's only thereto get them out of a jam. Right.
(07:07):
And so when you think about ifyou've ever been a part of a
business that's in This cycle ofOh, the board meeting is coming
up, or Oh, a fundraising roundis coming up, we better get the
numbers ready. And they talkabout the numbers in This third
person sense That you go and yougo and get them when It's time
to impress someone important.
(07:27):
That I think is a situationwhere you might find yourself in
a data aware mindset. A datadriven mindset is, you're
answering the same questionsThat every management team is
there to answer, how is thebusiness performing? What do we
have to do next? What do we needto fix together? But instead of
answering those questions in agut instinct kind of way, or
(07:50):
just with the feeling orwhatever is happening That day?
You're answering them ashonestly as you possibly can.
And inside of most businesses,the most honest answer is
quantitative, at least in part.
So that's the way I think aboutdata aware is, you know, the
numbers are there, you're goingto get them whenever you have to
get yourself out of a jam, datadriven is you're asking yourself
(08:13):
the same questions every teamdoes. But instead of just firing
off That gut instinct, answer,you're using the numbers and the
objective measures ofperformance in your business, to
answer the questions as honestlyas you can, and ultimately, to
make better decisions Thatimprove the performance of That
business.
Jon Thompson (08:33):
Yeah, and It's curious being in a business That
is oriented around data forquite a while now. Why folks
would resist That, besides, theobvious of you don't want to say
things are not going Well. Eventhough I imagined as an owner
investor, you would more respectand trust someone who says we
have a problem here, as opposedto someone who's trying to put a
(08:54):
veneer on everything. That's theobvious bit. But we've
subscribed to This book, TheGame of work, wrote a book
called The dashboard effect.
It's all about how humans reallythrive on having some empirical
reference to What they're doingand knowing if they've won or
lost and What the score is andWhat needs to happen next. And
in business That seems to driftaway in the myths for some
(09:15):
reason, What is the what's thepsychology, in your opinion,
That keeps founders from wantingto drive their business by data
be data driven? And is That asymptom of why they're where
they're at? and why they need aParker Gale to get them to the
next level?
Paul Stansik (09:34):
Yeah, It's a big question. And if you know, we
extended This podcast to twohours, I think we could we could
fill the entire time on Thatquestion. I think there's a
biological answer to Thatquestion. And there's a there's
a business answer That question.
The biological answer is we arenot wired to be vulnerable in
front of each other. Right? Weare tribal beings. And you know,
(09:54):
1000s of years ago, if youcouldn't sense very quickly
about whether you were in agroup or out of a group, you
were in trouble like you couldhave, you could have brought
physical harm on yourself, andThat wiring is still in us. So
we're always trying to sensewhether a group is going to
accept us. And at some level,we're always trying to behave to
be accepted by the group Thatwe're a part of. And so when you
(10:17):
think about opening up, you'repart of a business or a team and
exposing the warts and the flawsand the mistakes and the things
That are going wrong. That's ascary thing. And It's not a
scary thing, because It'slearned behavior, It's scary
thing of how we're put togetheras a species, right. And so if
you think about That biologicalreason That vulnerability is
(10:39):
hard for us as human beings. Andthen you think about the typical
team structure, especially inthe last couple of years, where
teams are spending less timetogether in person, where people
just have fewer collisions inthe office. And I would say most
teams out there haven't done thework they should be doing to
build the trust that's necessaryfor them to have conflict and be
(11:02):
vulnerable and talk about thethings That are broken and That
need fixing, and argue aboutWhat the best solution to those
problems might be. So if I just
Jon Thompson (11:14):
could interrupt real quick to get back to
essentialism, I was justlistening today on the way in,
but he speaks to That exact samething. There's a physical pain
That comes with not beingaccepted. It's brief, and the
respect is long term. Andgetting used to That is tough. I
mean, we're pain avoidancecreatures. But I like What you
say, if you build the trust, itmakes That hurdle a little bit
(11:36):
easier to get over. Sorry tointerrupt, but That was just
right on point,
Paul Stansik (11:39):
no 100%. And there's tons of research studies
out there That underscore Thatpoint That our brains are
actually wired to treatuncertainty the same way That
they treat physical pain.
Because if you think about it,whether you were walking through
a scary forest back in the day,or happening upon another group
of humans, or whatever it was,if you weren't kind of sensing
whether there was danger or not,if you weren't a little bit
(12:03):
paranoid, you probably weren'tgonna turn out in a very safe
environment, right. So I thinkthat's an important point is if
you are in a team environment,where people are not sure
whether It's safe, to talk aboutthe things That are broken, the
things That need fixing thethings That aren't going That
(12:23):
Well, or just to expose the mostobjective version of an answer
using data, like, we are goingto err on the side of being more
protective, being lessforthcoming and being less
vulnerable. So, you know, we'retalking about data, we're
talking about numbers, we'retalking about the quantitative
lens, on a business. Butultimately, if you want to
(12:43):
become more data driven as aperson, as a company, as a team,
you need to build a foundationof trust. So in That moment of
truth, when someone is decidingwhether it makes sense to give a
protective answer, versus avulnerable answer, if you
haven't set That foundation,where people know That safe,
you're gonna have a really,really hard time having a
(13:04):
different conversation aboutyour business without doing That
work.
Jon Thompson (13:08):
And I imagine It's not just saying to folks, hey,
by the way, It's safe to bereal. But It's getting in the
practice, over and over andover.
Paul Stansik (13:16):
Yeah, and I'm a big disciple of Patrick Lencioni
stuff, we work with hisconsulting firm in our
portfolio. And I've been in theroom for many of these off sites
where a management teammanagement team starts to come
together, they start to decidewho they're going to be as a
team, and they actually practiceThis act of getting vulnerable.
And I think the biggest thing isthe leader has to go first. And
(13:39):
the leader has to recognize whenThat moment of truth happens,
and someone makes the choice toexpose a little bit more and
talk about the difficult topicor bring up the thing that's
broken or point out the negativetrend. Because if the people
don't see the leader modelingThat behavior, and if they
actually don't get recognition,when they make That choice,
(14:01):
we're going to slide back intoThis more protective, less data
driven, less honest conversationabout the business. And we're
probably going to wake up acouple years from now wondering
why our performance wasn't sogood. I can trace That right
back to That moment, where youdidn't make it absolutely clear
That that's the conversationThat we have, and That no harm
will come to you by having Thattype of conversation about the
(14:22):
business.
Jon Thompson (14:23):
Yeah, numbers are great as a bridge for That kind
of vulnerability because they'reobjective. But as you mentioned
in some of your writing, It'seasy to use those numbers and as
you said before as a sort of ashield or a spin or whatever. In
your work prior to your currentposition where you were equities
analyst selling selling equitiesanalysis, you talk about
(14:47):
separating signal from noise.
You're going into companies nowas an operating partner. Is
there a methodology for gettingto those those few signals and
set Writing them from the noise?
And if so, What is Thatmethodology?
Paul Stansik (15:03):
Yeah, I mean, some people have the playbook or they
just plunk it down on the firstday of the investment and say,
This is how we're going to doit. It's not up for debate,
we're going to run This processevery week or every month, and
It's going to be the same forevery company in our portfolio.
And, you know, part of me wouldlove to get to a state of the
(15:26):
world where we could do That,because it would be way easier,
it would be way more rinse andrepeat. And it would be nice to
have That kind of certaintyabout What it takes to improve a
business. I think the realityis, there's some timeless
principles and timelessquestions That if you ask them,
and you answer them, honestly,you're gonna uncover things That
are useful to take stances on.
And by the way, That stance canbe do nothing, because It's not
(15:49):
important yet, or we don't havethe ability to do anything about
it yet. We'll talk about That aminute. But the way in which you
answer those questions, theorder in which you do the work
to be able to surface That dataand the things That the
management team are ready for,those are all different business
by business. So I think ourapproach in general, you know,
(16:10):
on the spectrum of, we don'thave opinions on how a business
should be run, and the companiescan do whatever they want to,
there is a dogmatic paint bynumbers approach to growing a
business and having a successfulinvestment. We're somewhere in
the middle. And I think in myworld of growth, and sales and
marketing, it all starts withanswering questions. And so
(16:34):
we're going to finally publish ahandbook That we use inside the
portfolio This month, wherewe're actually open sourcing the
questions That we ask ourcompanies to answer every week
and every month, and we sharethe actual Format of the
Reporting That we use to answerthose questions, as honestly as
we can. But it starts withagreement on What questions do
(16:54):
you want to have answered as amanagement team? What questions
do we have to have answered tofeel comfortable as investors
and how much overlap is there?
And That can be a prettypowerful alignment exercise,
because we always discover thesame things. One is, there's
there's a ton of the samequestions That we both want
(17:16):
answered. And two, there arevery natural forums That come up
every week, every month, everyquarter in the life of a
business, where a managementteam has to have conversations
about how things are going,where things are going and What
changes they need to make. Andwhen we have That conversation,
and we start from a place ofLet's just answer some questions
(17:37):
in the best way That we know howone That drops people's gloves,
because you don't start from aplace have, thou shalt do
reporting. And This is What thereporting needs to look like.
And you sort of honor the factThat data is only as good as the
dialogue it creates. So Let'stalk about What dialogue you
want to have as a managementteam, and how we can help you
(17:57):
arm yourselves to have the mosteffective and improvement
oriented dialogue you possiblycan. Because, you know, again,
going back to the idea of dataaware versus data driven, if
you're an investor, and you putyourself in a situation where
you hand over a report, oryou're asking for KPIs, or
you're asking for numbers, andthe only reason those numbers
(18:19):
are being produced is to appeaseyou as the investor. Some people
might disagree with me, but Ithink you're doing it wrong.
Because What are you doing,you're creating extra work for
the management team that'staking them away from running
the business. And there's nodialogue around those numbers.
They're just chucking them overthe fence and hoping you leave
them alone for a little bit.
Right. So
Jon Thompson (18:38):
But isn't it the case That the PE manager or
owner is looking to take a smallbusiness, you know, It's been
run like a family and trying toturn it into a business That
scales. And that's going to runinto conflict with the status
quo and the patterns and thebiases That the owners have had
(18:59):
for a long time. But buteveryone is aligned That we're
trying to maximize return oninvestment in This business,
trying to maximize multiples andat exit and so on. I imagine
there's there's good alignment,and yet conflict there. Does it
take a while to get theexecutives to switch how they're
(19:20):
thinking towards scaling fromcomfortably running the business
up and running for however long?
Do you get there just throughthe numbers? Does it take some
time? How quick do you get toThat new place where you're
aligned on those numbers?
Paul Stansik (19:35):
There's a couple of different factors in your
question. And we can we can talkabout whichever one is most
interesting to you, or whicheverone might be most interesting to
the audience. One I think isalignment around. What are we
doing here? So What is the goalfor This investment? What is the
plan for This investment? And ifwe wake up 12 months from now,
and say we accomplished ourgoals? What does That mean? Like
(19:58):
What numbers will we point toand say As we were at 100% of
plan, and the second piece ofThat is incenting people so they
can actually get excited abouthitting That plan because it
makes a difference in theircompensation or advancement or
equity or or all three. Right?
So That seems very obvious. Butif you skip That step of
painting, the vision of why theheck we invested in This thing
(20:21):
in the first place, Like WhatDid We Learn and diligence That
just got us really excited,building the plan with the
management team and havingcrystal clear buy in That This
is What we're going for, for thelong term. And This is What a
successful 12 months look like.
And then building the incentiveplan so That not only are you
excited, viscerally about beingpart of That journey, but you do
(20:43):
really Well, if we end up ontrack, I think that's the most
important piece, the harderpieces, you're talking to the
changes That are necessary forThat. And it goes back to the
idea of being data driven, likein most cases, What are we
doing, we're asking a businessto do slightly different things.
And It's done in the past, notto sell a new product, not to
(21:04):
talk to different kinds ofcustomers, not to make some
technological quantum leap inWhat they've built. But in most
cases, just to have slightlytighter operations and make some
few high leverage improvementsand how they do things. But
ultimately, like, companiesdon't change, people change,
right. And so every investmentcase, every thesis, every model
(21:27):
ultimately comes down to thepeople inside the business doing
things slightly differently. Anddoing things differently, is
hard. And This is where our jobbecomes, you know, sometimes
I'll say I'm, I'm a consultant,therapist, Spy and coach all at
the same time. And That coachingpiece becomes really, really
(21:48):
important when you're askingpeople to do something different
than, you know, the 10 or 20years of history for how the
business has operated in thepast.
Jon Thompson (21:55):
Yeah, just want to call out a point you made there,
which is sort of the start startwith why principle. You know, if
you're told by a physicaltherapist do these four moves,
and they don't explain why oryou know, breath work or
anything like That, and theydon't explain, Here's the
mechanics, Here's What happens,Here's how it improves things.
Here's how you're going to feel,Here's the benefits you're going
(22:17):
to receive. It's just It wouldtake a you know, a robot to do
those things. But if you canspeak to Here's, Here's why it
pays you Here's, Here's the goodthings That happen. You got to
make That bridge and I think itcould be easy, from sort of a,
you know, a serial businessexpert to say just do This,
trust me. And you don't get theinternal change of people. I
(22:40):
just a quick tangent. Well, It'soften said That you don't invest
in a business, you invest in thein the leaders. Do you look for
those who are already embracingthe vulnerable truth of the
data? Or is That not necessary?
Paul Stansik (22:56):
Yeah, I mean, I kind of look for three things.
And This is grosslyoversimplifying because we, we
have very strong opinions onWhat an executive hiring process
looks like. But we also spend alot of time crafting, both the
job description and theassessment process to fit the
first 12 months of What needs tohappen in That person's part of
(23:19):
a business. But regardless ofwhether you're talking about a
CEO, CRO CMO, I tend to be veryinvolved in all three of those
searches inside the portfolio,I'm kind of looking for the same
three things, regardless of theposition. First, I'm looking for
high standards. So does Thisperson have a crystal clear
vision of What good looks likein their area of the company.
(23:42):
And with a CEO, That doesn'tmean they have to have a PhD
level understanding of finance,marketing, sales, technology,
engineering, if you know Thatperson, I'd love to meet him.
Most of CEOs That we work withspike in one or two of those
areas. And that's that's all youneed in most cases, but they
have high standards in theirarea or several areas. The
(24:04):
second piece is they have themeans to detect whether those
standards are being met. So theydon't just have strong opinions,
but they're not afraid to sticktheir nose into what's going on.
And notice when things arefalling short of their high bar.
So there's This nice pairing of,hey, I know What good looks
like. But I also have Thisawareness DNA where I'm going to
(24:26):
do the work. Some people callThis management by walking
around to notice where peopleare falling short and to be a
coach and help people helppeople catch up. I say the third
thing That I look for is they'renot afraid to self critique.
Right? So we do a lot ofbehavioral work in our interview
(24:46):
process. And one of my favoritefollow up questions to any
question That you start with isWhat would you do different?
What do you think you screwedup? If you had to do it over
again? What would you do and I'mlistening very closely. The two,
if a person is actually botheredby the plan That they use back
in the day, because withhindsight, they can see all the
(25:09):
mistakes That they made, how offthey were in terms of their
initial assumptions. And theyaren't afraid to critique
themselves a few years later.
And they're just looking forways to get better. Because
again, the first thing we talkedabout, if you have someone That
knows how to do the job, Well isgoing to help notice when That
job isn't being done up tostandard. And they're going to
model the vulnerability Thattheir team needs to have That
(25:30):
different kind of conversationabout improvement opportunities.
That's when I start to getexcited. And that's when about
halfway through an interview, Istart to go from assessing to
selling mode, because that's anequal part of equal important
part of the search process.
Jon Thompson (25:46):
That's great.
Let's segue to top line growth abit. Just to jump from That last
question CEOs. Do you typicallywant them to in those various
veins, they could have a PhD andone of them to be business
development in some form? Or isThat not essential? I know
you're investing in technologycompanies.
Paul Stansik (26:05):
So when you say business development, are you
talking more kind of go tomarket or more m&a?
Jon Thompson (26:10):
I was thinking more go to market, strategic
partnerships, channels,marketing, sales, those sorts of
things.
Paul Stansik (26:17):
Yeah, I mean, my bias is I like to work with CEOs
who really want to get involvedin sales and marketing. We have
great CEOs in our portfolio whospike in That dimension. And we
have great CEOs who spike moreon the product and engineering
dimension. I don't believe Thatthere's one right answer. Okay.
(26:38):
I think ultimately, thesequencing of how you build the
management team, and more of thecollective intelligence of That
management team and how It'scoming together, needs to
dictate What the CEO needs to beuniquely great at, right?
Because if you have, Let's justsay This is a hypothetical, but
Let's say you have a businessThat has really big chunky
(27:01):
gnarly contracts, like trueenterprise grade, seven figure
deals, and you need your VP ofsales to be uniquely great at
just wrestling those deals tothe ground managing multiple
stakeholders advancing the ball.
Maybe in That case, you'rewilling to cede the ground of,
hey, if we could choose betweenThis person just being a deal
(27:22):
architect versus the revenuescientist, like really into the
metrics understands things. Thesecond decimal point, This is
when we say strategy is aboutmaking hard choices, that's a
hard choice, because we wantboth, but there are trade offs.
That's a situation and probablyI want a CEO, who was more in
the weeds on go to market hasstrong opinions, not so they can
(27:44):
second guess their VP of sales,but so they can complement their
natural strengths. And bycombining the two of those
people on a management team, youcreate This organism where
between the two of theirstrengths, you kind of cover all
the bases when it comes to go tomarket. So I think It's super
important. And This is somethingI've learned as I've gone along.
(28:04):
Yes, making the right decisionfor each member of an executive
team is important. Butunderstanding how you're
covering the bases from acollective sense, with a
management team and the tradeoffs That are inherent in That.
That's a bit of an art form. ButIt's an art form That we try to
keep at the forefront,especially in the first year of
(28:25):
an investment where we might beconstructing That management
team, we're at least adding toit.
Jon Thompson (28:32):
Yeah, you're just continuing with the argument
That there's not a formula, butthere are frameworks there their
bounds and principles That youwork within. But speaking of
formula, you advocate for aweekly set of metrics around top
line growth and a weeklymeeting. You advocate for
sharing less data. More oftencan you speak to sort of your
(28:57):
your approach to That is you'retrying to drive top line growth?
Paul Stansik (29:01):
Yeah, ultimately, we we were investors were
quantitatively driven. We likehanging out in spreadsheets, and
we like measuring things. And welike noticing a trend,
especially when That trend isgoing up into the right. And
that's great. But again, if wearen't creating a more honest
conversation inside of thebusiness, and if we aren't
(29:23):
helping the management team,either enable themselves or
learn how to have a conversationwhere they notice how the
business is performing. Theyhave a really good sense of What
the leading indicators are. Sothey know not only how This
quarter is going to go, but hownext quarter is going to go. And
they're comfortable having Thatconversation using numbers. Like
(29:44):
even if we have the best data inthe world we have failed, right?
Because ultimately we need to betalking about and looking at and
having the same conversationThat the management team is
having. So putting the salesthing aside for us I can like,
There's This great quote, Ithink it was Dan Gable, who's a
very, very successful Olympicwrestler. And his big point is
(30:07):
if something is important, do itevery day. And if something
isn't important, don't do it atall. Right? So frequency,
Trump's intensity. And if youwant someone to have a different
conversation about how sales andmarketing is going, you should
be compressing your operatingcycles and allowing them to
practice having Thatconversation as frequently as
(30:30):
possible. So businesses, theyhave This kind of natural rhythm
to them. We think in terms ofweeks, like when we complain
about, you know how the week isgoing at work, you're like
working for the weekend. So youcan start over the next week,
It's unrealistic to have amanagement team at a growing
software company have a reallydata driven conversation about
what's going on every day. Sothe next click up in terms of
(30:54):
the rhythm that's even possibleis just once a week. So
ultimately, we feel like we'redoing our job if we're enabling
the management team, to have abetter conversation about how
sales is going, how marketing isgoing, how the business is
performing on a weekly basis.
And back to What we talked aboutearlier, how do you enable a
better conversation? You answerquestions, really, honestly. So
(31:15):
This will come out in our weeklysales metric playbook. But we'd
like to give This the Schpeel atthe start of an investment in
the first board meeting where wesay, Hey, we're probably going
to be in This together for aboutfive years. That's 60 months,
that's 260 weeks, I think, 20quarters. Yeah, check my math on
(31:36):
That. Let's not waste a singleweek. Let's make every week a
good week. And that's a bitaspirational. Like every, every
business has bad weeks, it makesfor a nice speech. But it also
sets up an interesting pointrelated to being data driven,
which is, how can you tell ifyou're having a good week or
(31:59):
not? Is it a feeling thing? Isit a like a vibe in the office
thing? I don't think so, I thinkIt's a two part test of whether
you had a good week or not, ifyou're giving yourself a chance
to hit your target for Thisquarter, from a growth
perspective. So if you'reconverting pipeline to revenue,
that's pretty good week, right?
(32:22):
You're setting yourself up tohit your number. And if you're
creating enough newopportunities for next quarter,
so setting yourself up for thefuture, you're also having a
good week. So again, how can youtell if those two things are
happening? Are you givingyourself a chance to hit the
number This quarter? And are youcreating enough new
opportunities to hit the numbernext quarter? And how do we
(32:44):
typically answer those questionsinside a business That hasn't
yet become data driven? Oh, youknow, we talked about the deals
That we're excited about, wetalked about This big, you know,
chunky deal that's been in thepipeline for a year That we
think is finally going to closeThis quarter, we kind of get
into the What I call thestorytime of sales, and the
drama around the individualdeals and whether they're going
to close or not. There's anotherway to answer those questions,
(33:06):
which is an honest assessment ofWhat the pipeline looks like
versus your plan. And thenlooking ahead to next quarter,
how many new opportunities arewe creating That are truly
qualified? And are we gettingbetter at creating new
opportunities? Every singleweek? So there's more questions
That we asked our companies toanswer in our weekly reporting
pack, we could talk about Whatthose are. But taking it back to
(33:29):
What are we trying to do here,we're trying to spend five years
with a business and help them dothings a little bit better. And
in doing so, we want otherinvestors and other companies to
take notice of the good workThat they're doing. We don't
want to waste a week when we'redoing That we want to have 260
Really good weeks in a row. AndIt's possible for us to know,
really, honestly, reallyobjectively, whether we're doing
(33:52):
That each and every week. Andthe way That we do That is we
answer to questions every singleweek. Are we giving ourselves a
chance This quarter? And are wegiving ourselves a chance next
quarter? And we answer That withsimple numbers? And that's What
I mean when I say less data moreoften all you need is enough to
answer those questions. But It'simportant to answer those
questions as honestly aspossible, and then have a
(34:14):
dialogue around them saying,based on What these are telling
us, What stance are we takingabout What to do next?
Jon Thompson (34:23):
That's great. We we have already hit our time.
Like you said, we could talk allday just about question number
two, I guess last question whenyou are looking to harness their
data for using it to drive thebusiness. Do you have a
methodology to use a data lake?
Do you end up using BI toolsTableau Power BI any of those
things? Is it a clipboard with apen Excel spreadsheet? What do
(34:46):
you do?
Paul Stansik (34:48):
Somewhere in the middle? I mean, we This is one
of those areas where we're alittle less prescriptive. And
typically when we get deeperinto an investment, we will have
companies That will makeinvestments in BI tools. I like
to start people on spreadsheets.
Partly because I'm not a biexpert, I'm starting to play one
on TV. And I think I'll getthere eventually. But to me,
there's some kind of magic inmaking the executive What I call
(35:13):
put their fingerprints on thenumbers. So even though It's
extra work, if you if you forcesomeone to take the numbers out
of Salesforce or out of HubSpot,or whatever it is, and get a
touch, as they're transferringit into a very simple
spreadsheet, you're giving theman opportunity to notice things
in That trend That if allthey're doing is pulling up, you
(35:36):
know, a dashboard and a BI tool.
It's just an extra touch. AndWhat I've found is for a busy
executive, especially in thesales or marketing side, where
they're managing multiplepeople, they're kind of playing
This player coach role,engineering and environment
where you're forcing them to geta touch on their performance
(35:58):
dashboard, That additional touchgoes a long way to making it not
just This thing That they'reserving up for the investors,
but That they're using to noticewhat's going on inside of their
business. So talk to me in acouple years, and maybe I'll
nail the big thing. But for now,I don't know forcing someone to,
to handle things and kind of geta taste of a dish that's coming
(36:20):
out of the kitchen. It's It'skind of This sneaky trick That
seems to help make these thingsstick and ultimately drive a
better conversation about what'shappening inside of the
business.
Jon Thompson (36:32):
Yeah, so getting him to own those numbers a bit
more and get some ancillaryinsights as they're going along.
And just the context and notjust being served up a pie chart
and a number.
Paul Stansik (36:41):
Yeah, it goes back. Like another way of saying
less data more often is itdoesn't have to be perfect. It
just has to be theirs. Right.
And I think ownership is a greatword That encompasses all of
That. Good insight.
Jon Thompson (36:54):
So your sales metrics playbook. I'm sorry, if
I titled it wrong. When is Thatcoming?
Paul Stansik (36:59):
It'll be out in the next couple of weeks. I
think we're recording This onMay 3. So come and hunt me down.
If It's not out before themiddle of the month, I'm putting
the final polish on it. Weinclude a little bit of our
philosophy in there about justhow we think about This stuff,
how it shows up inside ourportfolio. But I think
especially for folks That areinterested in making This leap
going from data aware to datadriven, I'm also going to
(37:21):
include the actual template Thatwe give our companies That
answers the same questions Thatwe're asking for each and every
week. So that'll be out by themiddle of the month. And like I
said, come get me if It's if Imissed That deadline,
Jon Thompson (37:35):
and publicly available, right? Yes, sir.
Sharing. Okay. So we'll get Thatprobably before we publish This
and get it in the show notes. SoI look forward to it as long as
you don't delay.
Paul Stansik (37:45):
This is a public commitment, and It's a
intentional forcing function forme. So thanks for helping me
build it.
Jon Thompson (37:51):
Yeah, you bet.
Paul, It's been a pleasure.
Thanks so much for sharing yourinsights and taking the time.
Yeah, thanks. Yeah, take care.
Welcome to our Blue Margin Expert Insights
series. We're glad you joinedus. This series is for private
equity and mid market executiveswho want to use data and
dashboards as the formula forexecuting growth plans more
quickly and predictably. I'm JonThompson, co founder of Blue
Margin, and today I'm hostingPaul Stansik from his office in
(00:24):
Chicago. He's an operatingpartner at ParkerGale Capital.
ParkerGale was founded in 2014.
It's a boutique firm thatemphasizes value creation
through operational improvement.
With 10 active portfoliocompanies they exclusively
invest in profitable NorthAmerican technology companies
and assume a majority ownership.
Prior to joining ParkerGale in2019. Paul worked for five years
(00:47):
at Bain & Company in privateequity, leadership and talent
and merger integration. BeforeBain, Paul lead as VP of Sales
for ITG financial research firmand earned his MBA at Wharton.
Paul's a prolific businesswriter (we've enjoyed his
articles), and a contributor toParkerGale's podcast PE FunCast.
We'll include links to hiswritings and to the podcast in
(01:11):
today's show notes. AtParkerGale, Paul works with
portfolio executives to drivetop line growth, including
sales, marketing, and leadershipdevelopment. In his words, he
helps emerging tech companiesfinish the work that founders
started by making the most oftheir big growth opportunities.
Some might call him Dr. Paul forhis ability to inject growth
(01:31):
steroids into companies- we cameup with that. Growing companies
is both an art and a science,and I'm excited to better
understand your methodology.
Paul, welcome. Thanks forjoining.
Paul Stansik (01:42):
Jon, thanks for having me. Yeah.
Jon Thompson (01:44):
So to start, what's the typical revenue of
companies you invest in? And-and how can PE operating
partners best help thosecompanies That they invest in,
break through the ceiling Thatthey've established and scale to
the next level? Yeah, we're
Paul Stansik (01:59):
typically buying b2b software businesses from the
founder. And we're much past thestage of finding product market
fit. In most cases, thecompanies we invest in have
hundreds of happy customers,they're happy because the
product works. So This is a verydifferent model than, you know,
(02:20):
the venture capitalistslistening in who are trying to
guess What the next big thingis, we found something That
works inside of our companies.
And now we're trying to scale itup. And that's where our
operations team comes in. Somost of the time, we're catching
businesses when they're in thethe range of call it 10 to 30
million in ARR. But it varies. Imean, we do one thing, we try to
(02:43):
focus on What we know we're goodat, which is b2b software,
helping finish the work thefounder started, which you
mentioned. But there's a lot ofwork That goes into That, which
I think is What we're going totalk about today.
Jon Thompson (02:56):
Yeah. And is it typically operating efficiency?
Or is it expanding the marketfor them finding better
applications for the technologythey have built is all of the
above and many more,
Paul Stansik (03:06):
It's kind of all the above? I mean, the fun thing
with What we invest in is, It'sa regression, not a hypothesis,
right? So with a big base ofcustomers who bought from us
before who've given us years offeedback, we kind of subscribe
to the Dolly Parton School ofoperational philosophy. She's
got This great quote, whichgoes, you should find out who
(03:28):
you are, and then do it onpurpose. And when I think about
What we do in our operationsteam, that's kind of it. I mean,
What we're doing is analyzing,reflecting, talking to the
management team, and ultimatelytrying to figure out What is
This business already look likewhen It's operating at its best,
and then pulling the levers Thatwe can pull? So That happens a
little more consistently?
Jon Thompson (03:49):
Probably saying no to more things, trying to,
Paul Stansik (03:53):
which is a hard thing, as you know, someone
running a business. But yeah,that's part of the art
Jon Thompson (03:58):
of it, right?
Yeah, I'm reading This bookcalled essentialism, he talks
about saying no to very goodthings. If they're not in the
bull's eye like
Paul Stansik (04:05):
That one. We've, we've given That one away at a
few of our summits. I think I'mlooking at our office bookshelf,
and I think I can see it from myoffice over here. Yeah.
Jon Thompson (04:13):
Okay, great. So I appreciate That. In the current
economic uncertainties That seemto I don't know maybe That maybe
that's a permanent state. But Pand portfolio executives are
looking for ways to morepredictably drive growth and be
data driven. I'm curious aboutParker gales prioritization of
data. How do you view it data asa value driver or value lever?
Paul Stansik (04:40):
At a philosophical level, I think It's just part of
your job if you're being a goodpartner and being a good
investor, and certainly our jobon the operating team. I kind of
think, you know, coming in, Ithought This was going to be a
lot like my role in consultingwhere you diagnose the problem
and you Drop your solution off,and you kind of dust your hands
(05:02):
off and move on to the nextthing. And while there's some
elements of That, I think wesupply some of That diagnostic
power for our businesses andhelp them learn faster, What can
be improved, or What could beimproved. data for us is part of
our job of keeping score. And Ithink that's one of the really
(05:22):
important elements of help Thatwe provide. I think we'll talk
about the role That data playsthroughout the portfolio
shortly. But for mostbusinesses, and most founder
owned businesses, keeping trackof KPIs and metrics and just
measuring performance, That is anew thing. It is extra work and
teams need help doing it. So Ithink It's our job to help them
(05:44):
do That work to help buildsimple, consistent reporting,
That not only to answer yourquestion gives us as investors
visibility into what's going onhow the business is performing,
and What needs fixing. Butsomething the management team
can use to have a betterconversation every week with the
team without us in the room. Sothere's a bunch of different
(06:04):
answers to That questions. Butthe first thing That popped into
my mind is It's It's one of themost important foundational
elements of support That weprovide from our operations
team.
Jon Thompson (06:14):
Yeah. And we'll dig into it. I know there's some
pitfalls, even when companiesare looking at the numbers. I
mean, you know, back to the daysof wooden ships, they were
tracking numbers and so on. Butlike you say, It's a new thing.
So there's, there's a certaindimension to it. That's new. And
we'll we'll dig into That. Oneof your recent articles you
(06:36):
mentioned there's a differencebetween being data aware and
data driven, That might betowards What I was speaking to,
what's That difference?
Paul Stansik (06:45):
Well, the way I see it, being data aware, It's
kind of like This. So mostmanagers only look at their data
when they absolutely have to.
And too many of them out thereuse numbers, kind of like a
defense attorney uses evidence,they use it to protect
themselves. And It's only thereto get them out of a jam. Right.
(07:07):
And so when you think about ifyou've ever been a part of a
business that's in This cycle ofOh, the board meeting is coming
up, or Oh, a fundraising roundis coming up, we better get the
numbers ready. And they talkabout the numbers in This third
person sense That you go and yougo and get them when It's time
to impress someone important.
(07:27):
That I think is a situationwhere you might find yourself in
a data aware mindset. A datadriven mindset is, you're
answering the same questionsThat every management team is
there to answer, how is thebusiness performing? What do we
have to do next? What do we needto fix together? But instead of
answering those questions in agut instinct kind of way, or
(07:50):
just with the feeling orwhatever is happening That day?
You're answering them ashonestly as you possibly can.
And inside of most businesses,the most honest answer is
quantitative, at least in part.
So that's the way I think aboutdata aware is, you know, the
numbers are there, you're goingto get them whenever you have to
get yourself out of a jam, datadriven is you're asking yourself
(08:13):
the same questions every teamdoes. But instead of just firing
off That gut instinct, answer,you're using the numbers and the
objective measures ofperformance in your business, to
answer the questions as honestlyas you can, and ultimately, to
make better decisions Thatimprove the performance of That
business.
Jon Thompson (08:33):
Yeah, and It's curious being in a business That
is oriented around data forquite a while now. Why folks
would resist That, besides, theobvious of you don't want to say
things are not going Well. Eventhough I imagined as an owner
investor, you would more respectand trust someone who says we
have a problem here, as opposedto someone who's trying to put a
(08:54):
veneer on everything. That's theobvious bit. But we've
subscribed to This book, TheGame of work, wrote a book
called The dashboard effect.
It's all about how humans reallythrive on having some empirical
reference to What they're doingand knowing if they've won or
lost and What the score is andWhat needs to happen next. And
in business That seems to driftaway in the myths for some
(09:15):
reason, What is the what's thepsychology, in your opinion,
That keeps founders from wantingto drive their business by data
be data driven? And is That asymptom of why they're where
they're at? and why they need aParker Gale to get them to the
next level?
Paul Stansik (09:34):
Yeah, It's a big question. And if you know, we
extended This podcast to twohours, I think we could we could
fill the entire time on Thatquestion. I think there's a
biological answer to Thatquestion. And there's a there's
a business answer That question.
The biological answer is we arenot wired to be vulnerable in
front of each other. Right? Weare tribal beings. And you know,
(09:54):
1000s of years ago, if youcouldn't sense very quickly
about whether you were in agroup or out of a group, you
were in trouble like you couldhave, you could have brought
physical harm on yourself, andThat wiring is still in us. So
we're always trying to sensewhether a group is going to
accept us. And at some level,we're always trying to behave to
be accepted by the group Thatwe're a part of. And so when you
(10:17):
think about opening up, you'repart of a business or a team and
exposing the warts and the flawsand the mistakes and the things
That are going wrong. That's ascary thing. And It's not a
scary thing, because It'slearned behavior, It's scary
thing of how we're put togetheras a species, right. And so if
you think about That biologicalreason That vulnerability is
(10:39):
hard for us as human beings. Andthen you think about the typical
team structure, especially inthe last couple of years, where
teams are spending less timetogether in person, where people
just have fewer collisions inthe office. And I would say most
teams out there haven't done thework they should be doing to
build the trust that's necessaryfor them to have conflict and be
(11:02):
vulnerable and talk about thethings That are broken and That
need fixing, and argue aboutWhat the best solution to those
problems might be. So if I just
Jon Thompson (11:14):
could interrupt real quick to get back to
essentialism, I was justlistening today on the way in,
but he speaks to That exact samething. There's a physical pain
That comes with not beingaccepted. It's brief, and the
respect is long term. Andgetting used to That is tough. I
mean, we're pain avoidancecreatures. But I like What you
say, if you build the trust, itmakes That hurdle a little bit
(11:36):
easier to get over. Sorry tointerrupt, but That was just
right on point,
Paul Stansik (11:39):
no 100%. And there's tons of research studies
out there That underscore Thatpoint That our brains are
actually wired to treatuncertainty the same way That
they treat physical pain.
Because if you think about it,whether you were walking through
a scary forest back in the day,or happening upon another group
of humans, or whatever it was,if you weren't kind of sensing
whether there was danger or not,if you weren't a little bit
(12:03):
paranoid, you probably weren'tgonna turn out in a very safe
environment, right. So I thinkthat's an important point is if
you are in a team environment,where people are not sure
whether It's safe, to talk aboutthe things That are broken, the
things That need fixing thethings That aren't going That
(12:23):
Well, or just to expose the mostobjective version of an answer
using data, like, we are goingto err on the side of being more
protective, being lessforthcoming and being less
vulnerable. So, you know, we'retalking about data, we're
talking about numbers, we'retalking about the quantitative
lens, on a business. Butultimately, if you want to
(12:43):
become more data driven as aperson, as a company, as a team,
you need to build a foundationof trust. So in That moment of
truth, when someone is decidingwhether it makes sense to give a
protective answer, versus avulnerable answer, if you
haven't set That foundation,where people know That safe,
you're gonna have a really,really hard time having a
(13:04):
different conversation aboutyour business without doing That
work.
Jon Thompson (13:08):
And I imagine It's not just saying to folks, hey,
by the way, It's safe to bereal. But It's getting in the
practice, over and over andover.
Paul Stansik (13:16):
Yeah, and I'm a big disciple of Patrick Lencioni
stuff, we work with hisconsulting firm in our
portfolio. And I've been in theroom for many of these off sites
where a management teammanagement team starts to come
together, they start to decidewho they're going to be as a
team, and they actually practiceThis act of getting vulnerable.
And I think the biggest thing isthe leader has to go first. And
(13:39):
the leader has to recognize whenThat moment of truth happens,
and someone makes the choice toexpose a little bit more and
talk about the difficult topicor bring up the thing that's
broken or point out the negativetrend. Because if the people
don't see the leader modelingThat behavior, and if they
actually don't get recognition,when they make That choice,
(14:01):
we're going to slide back intoThis more protective, less data
driven, less honest conversationabout the business. And we're
probably going to wake up acouple years from now wondering
why our performance wasn't sogood. I can trace That right
back to That moment, where youdidn't make it absolutely clear
That that's the conversationThat we have, and That no harm
will come to you by having Thattype of conversation about the
(14:22):
business.
Jon Thompson (14:23):
Yeah, numbers are great as a bridge for That kind
of vulnerability because they'reobjective. But as you mentioned
in some of your writing, It'seasy to use those numbers and as
you said before as a sort of ashield or a spin or whatever. In
your work prior to your currentposition where you were equities
analyst selling selling equitiesanalysis, you talk about
(14:47):
separating signal from noise.
You're going into companies nowas an operating partner. Is
there a methodology for gettingto those those few signals and
set Writing them from the noise?
And if so, What is Thatmethodology?
Paul Stansik (15:03):
Yeah, I mean, some people have the playbook or they
just plunk it down on the firstday of the investment and say,
This is how we're going to doit. It's not up for debate,
we're going to run This processevery week or every month, and
It's going to be the same forevery company in our portfolio.
And, you know, part of me wouldlove to get to a state of the
(15:26):
world where we could do That,because it would be way easier,
it would be way more rinse andrepeat. And it would be nice to
have That kind of certaintyabout What it takes to improve a
business. I think the realityis, there's some timeless
principles and timelessquestions That if you ask them,
and you answer them, honestly,you're gonna uncover things That
are useful to take stances on.
And by the way, That stance canbe do nothing, because It's not
(15:49):
important yet, or we don't havethe ability to do anything about
it yet. We'll talk about That aminute. But the way in which you
answer those questions, theorder in which you do the work
to be able to surface That dataand the things That the
management team are ready for,those are all different business
by business. So I think ourapproach in general, you know,
(16:10):
on the spectrum of, we don'thave opinions on how a business
should be run, and the companiescan do whatever they want to,
there is a dogmatic paint bynumbers approach to growing a
business and having a successfulinvestment. We're somewhere in
the middle. And I think in myworld of growth, and sales and
marketing, it all starts withanswering questions. And so
(16:34):
we're going to finally publish ahandbook That we use inside the
portfolio This month, wherewe're actually open sourcing the
questions That we ask ourcompanies to answer every week
and every month, and we sharethe actual Format of the
Reporting That we use to answerthose questions, as honestly as
we can. But it starts withagreement on What questions do
(16:54):
you want to have answered as amanagement team? What questions
do we have to have answered tofeel comfortable as investors
and how much overlap is there?
And That can be a prettypowerful alignment exercise,
because we always discover thesame things. One is, there's
there's a ton of the samequestions That we both want
(17:16):
answered. And two, there arevery natural forums That come up
every week, every month, everyquarter in the life of a
business, where a managementteam has to have conversations
about how things are going,where things are going and What
changes they need to make. Andwhen we have That conversation,
and we start from a place ofLet's just answer some questions
(17:37):
in the best way That we know howone That drops people's gloves,
because you don't start from aplace have, thou shalt do
reporting. And This is What thereporting needs to look like.
And you sort of honor the factThat data is only as good as the
dialogue it creates. So Let'stalk about What dialogue you
want to have as a managementteam, and how we can help you
(17:57):
arm yourselves to have the mosteffective and improvement
oriented dialogue you possiblycan. Because, you know, again,
going back to the idea of dataaware versus data driven, if
you're an investor, and you putyourself in a situation where
you hand over a report, oryou're asking for KPIs, or
you're asking for numbers, andthe only reason those numbers
(18:19):
are being produced is to appeaseyou as the investor. Some people
might disagree with me, but Ithink you're doing it wrong.
Because What are you doing,you're creating extra work for
the management team that'staking them away from running
the business. And there's nodialogue around those numbers.
They're just chucking them overthe fence and hoping you leave
them alone for a little bit.
Right. So
Jon Thompson (18:38):
But isn't it the case That the PE manager or
owner is looking to take a smallbusiness, you know, It's been
run like a family and trying toturn it into a business That
scales. And that's going to runinto conflict with the status
quo and the patterns and thebiases That the owners have had
(18:59):
for a long time. But buteveryone is aligned That we're
trying to maximize return oninvestment in This business,
trying to maximize multiples andat exit and so on. I imagine
there's there's good alignment,and yet conflict there. Does it
take a while to get theexecutives to switch how they're
(19:20):
thinking towards scaling fromcomfortably running the business
up and running for however long?
Do you get there just throughthe numbers? Does it take some
time? How quick do you get toThat new place where you're
aligned on those numbers?
Paul Stansik (19:35):
There's a couple of different factors in your
question. And we can we can talkabout whichever one is most
interesting to you, or whicheverone might be most interesting to
the audience. One I think isalignment around. What are we
doing here? So What is the goalfor This investment? What is the
plan for This investment? And ifwe wake up 12 months from now,
and say we accomplished ourgoals? What does That mean? Like
(19:58):
What numbers will we point toand say As we were at 100% of
plan, and the second piece ofThat is incenting people so they
can actually get excited abouthitting That plan because it
makes a difference in theircompensation or advancement or
equity or or all three. Right?
So That seems very obvious. Butif you skip That step of
painting, the vision of why theheck we invested in This thing
(20:21):
in the first place, Like WhatDid We Learn and diligence That
just got us really excited,building the plan with the
management team and havingcrystal clear buy in That This
is What we're going for, for thelong term. And This is What a
successful 12 months look like.
And then building the incentiveplan so That not only are you
excited, viscerally about beingpart of That journey, but you do
(20:43):
really Well, if we end up ontrack, I think that's the most
important piece, the harderpieces, you're talking to the
changes That are necessary forThat. And it goes back to the
idea of being data driven, likein most cases, What are we
doing, we're asking a businessto do slightly different things.
And It's done in the past, notto sell a new product, not to
(21:04):
talk to different kinds ofcustomers, not to make some
technological quantum leap inWhat they've built. But in most
cases, just to have slightlytighter operations and make some
few high leverage improvementsand how they do things. But
ultimately, like, companiesdon't change, people change,
right. And so every investmentcase, every thesis, every model
(21:27):
ultimately comes down to thepeople inside the business doing
things slightly differently. Anddoing things differently, is
hard. And This is where our jobbecomes, you know, sometimes
I'll say I'm, I'm a consultant,therapist, Spy and coach all at
the same time. And That coachingpiece becomes really, really
(21:48):
important when you're askingpeople to do something different
than, you know, the 10 or 20years of history for how the
business has operated in thepast.
Jon Thompson (21:55):
Yeah, just want to call out a point you made there,
which is sort of the start startwith why principle. You know, if
you're told by a physicaltherapist do these four moves,
and they don't explain why oryou know, breath work or
anything like That, and theydon't explain, Here's the
mechanics, Here's What happens,Here's how it improves things.
Here's how you're going to feel,Here's the benefits you're going
(22:17):
to receive. It's just It wouldtake a you know, a robot to do
those things. But if you canspeak to Here's, Here's why it
pays you Here's, Here's the goodthings That happen. You got to
make That bridge and I think itcould be easy, from sort of a,
you know, a serial businessexpert to say just do This,
trust me. And you don't get theinternal change of people. I
(22:40):
just a quick tangent. Well, It'soften said That you don't invest
in a business, you invest in thein the leaders. Do you look for
those who are already embracingthe vulnerable truth of the
data? Or is That not necessary?
Paul Stansik (22:56):
Yeah, I mean, I kind of look for three things.
And This is grosslyoversimplifying because we, we
have very strong opinions onWhat an executive hiring process
looks like. But we also spend alot of time crafting, both the
job description and theassessment process to fit the
first 12 months of What needs tohappen in That person's part of
(23:19):
a business. But regardless ofwhether you're talking about a
CEO, CRO CMO, I tend to be veryinvolved in all three of those
searches inside the portfolio,I'm kind of looking for the same
three things, regardless of theposition. First, I'm looking for
high standards. So does Thisperson have a crystal clear
vision of What good looks likein their area of the company.
(23:42):
And with a CEO, That doesn'tmean they have to have a PhD
level understanding of finance,marketing, sales, technology,
engineering, if you know Thatperson, I'd love to meet him.
Most of CEOs That we work withspike in one or two of those
areas. And that's that's all youneed in most cases, but they
have high standards in theirarea or several areas. The
(24:04):
second piece is they have themeans to detect whether those
standards are being met. So theydon't just have strong opinions,
but they're not afraid to sticktheir nose into what's going on.
And notice when things arefalling short of their high bar.
So there's This nice pairing of,hey, I know What good looks
like. But I also have Thisawareness DNA where I'm going to
(24:26):
do the work. Some people callThis management by walking
around to notice where peopleare falling short and to be a
coach and help people helppeople catch up. I say the third
thing That I look for is they'renot afraid to self critique.
Right? So we do a lot ofbehavioral work in our interview
(24:46):
process. And one of my favoritefollow up questions to any
question That you start with isWhat would you do different?
What do you think you screwedup? If you had to do it over
again? What would you do and I'mlistening very closely. The two,
if a person is actually botheredby the plan That they use back
in the day, because withhindsight, they can see all the
(25:09):
mistakes That they made, how offthey were in terms of their
initial assumptions. And theyaren't afraid to critique
themselves a few years later.
And they're just looking forways to get better. Because
again, the first thing we talkedabout, if you have someone That
knows how to do the job, Well isgoing to help notice when That
job isn't being done up tostandard. And they're going to
model the vulnerability Thattheir team needs to have That
(25:30):
different kind of conversationabout improvement opportunities.
That's when I start to getexcited. And that's when about
halfway through an interview, Istart to go from assessing to
selling mode, because that's anequal part of equal important
part of the search process.
Jon Thompson (25:46):
That's great.
Let's segue to top line growth abit. Just to jump from That last
question CEOs. Do you typicallywant them to in those various
veins, they could have a PhD andone of them to be business
development in some form? Or isThat not essential? I know
you're investing in technologycompanies.
Paul Stansik (26:05):
So when you say business development, are you
talking more kind of go tomarket or more m&a?
Jon Thompson (26:10):
I was thinking more go to market, strategic
partnerships, channels,marketing, sales, those sorts of
things.
Paul Stansik (26:17):
Yeah, I mean, my bias is I like to work with CEOs
who really want to get involvedin sales and marketing. We have
great CEOs in our portfolio whospike in That dimension. And we
have great CEOs who spike moreon the product and engineering
dimension. I don't believe Thatthere's one right answer. Okay.
(26:38):
I think ultimately, thesequencing of how you build the
management team, and more of thecollective intelligence of That
management team and how It'scoming together, needs to
dictate What the CEO needs to beuniquely great at, right?
Because if you have, Let's justsay This is a hypothetical, but
Let's say you have a businessThat has really big chunky
(27:01):
gnarly contracts, like trueenterprise grade, seven figure
deals, and you need your VP ofsales to be uniquely great at
just wrestling those deals tothe ground managing multiple
stakeholders advancing the ball.
Maybe in That case, you'rewilling to cede the ground of,
hey, if we could choose betweenThis person just being a deal
(27:22):
architect versus the revenuescientist, like really into the
metrics understands things. Thesecond decimal point, This is
when we say strategy is aboutmaking hard choices, that's a
hard choice, because we wantboth, but there are trade offs.
That's a situation and probablyI want a CEO, who was more in
the weeds on go to market hasstrong opinions, not so they can
(27:44):
second guess their VP of sales,but so they can complement their
natural strengths. And bycombining the two of those
people on a management team, youcreate This organism where
between the two of theirstrengths, you kind of cover all
the bases when it comes to go tomarket. So I think It's super
important. And This is somethingI've learned as I've gone along.
(28:04):
Yes, making the right decisionfor each member of an executive
team is important. Butunderstanding how you're
covering the bases from acollective sense, with a
management team and the tradeoffs That are inherent in That.
That's a bit of an art form. ButIt's an art form That we try to
keep at the forefront,especially in the first year of
(28:25):
an investment where we might beconstructing That management
team, we're at least adding toit.
Jon Thompson (28:32):
Yeah, you're just continuing with the argument
That there's not a formula, butthere are frameworks there their
bounds and principles That youwork within. But speaking of
formula, you advocate for aweekly set of metrics around top
line growth and a weeklymeeting. You advocate for
sharing less data. More oftencan you speak to sort of your
(28:57):
your approach to That is you'retrying to drive top line growth?
Paul Stansik (29:01):
Yeah, ultimately, we we were investors were
quantitatively driven. We likehanging out in spreadsheets, and
we like measuring things. And welike noticing a trend,
especially when That trend isgoing up into the right. And
that's great. But again, if wearen't creating a more honest
conversation inside of thebusiness, and if we aren't
(29:23):
helping the management team,either enable themselves or
learn how to have a conversationwhere they notice how the
business is performing. Theyhave a really good sense of What
the leading indicators are. Sothey know not only how This
quarter is going to go, but hownext quarter is going to go. And
they're comfortable having Thatconversation using numbers. Like
(29:44):
even if we have the best data inthe world we have failed, right?
Because ultimately we need to betalking about and looking at and
having the same conversationThat the management team is
having. So putting the salesthing aside for us I can like,
There's This great quote, Ithink it was Dan Gable, who's a
very, very successful Olympicwrestler. And his big point is
(30:07):
if something is important, do itevery day. And if something
isn't important, don't do it atall. Right? So frequency,
Trump's intensity. And if youwant someone to have a different
conversation about how sales andmarketing is going, you should
be compressing your operatingcycles and allowing them to
practice having Thatconversation as frequently as
(30:30):
possible. So businesses, theyhave This kind of natural rhythm
to them. We think in terms ofweeks, like when we complain
about, you know how the week isgoing at work, you're like
working for the weekend. So youcan start over the next week,
It's unrealistic to have amanagement team at a growing
software company have a reallydata driven conversation about
what's going on every day. Sothe next click up in terms of
(30:54):
the rhythm that's even possibleis just once a week. So
ultimately, we feel like we'redoing our job if we're enabling
the management team, to have abetter conversation about how
sales is going, how marketing isgoing, how the business is
performing on a weekly basis.
And back to What we talked aboutearlier, how do you enable a
better conversation? You answerquestions, really, honestly. So
(31:15):
This will come out in our weeklysales metric playbook. But we'd
like to give This the Schpeel atthe start of an investment in
the first board meeting where wesay, Hey, we're probably going
to be in This together for aboutfive years. That's 60 months,
that's 260 weeks, I think, 20quarters. Yeah, check my math on
(31:36):
That. Let's not waste a singleweek. Let's make every week a
good week. And that's a bitaspirational. Like every, every
business has bad weeks, it makesfor a nice speech. But it also
sets up an interesting pointrelated to being data driven,
which is, how can you tell ifyou're having a good week or
(31:59):
not? Is it a feeling thing? Isit a like a vibe in the office
thing? I don't think so, I thinkIt's a two part test of whether
you had a good week or not, ifyou're giving yourself a chance
to hit your target for Thisquarter, from a growth
perspective. So if you'reconverting pipeline to revenue,
that's pretty good week, right?
(32:22):
You're setting yourself up tohit your number. And if you're
creating enough newopportunities for next quarter,
so setting yourself up for thefuture, you're also having a
good week. So again, how can youtell if those two things are
happening? Are you givingyourself a chance to hit the
number This quarter? And are youcreating enough new
opportunities to hit the numbernext quarter? And how do we
(32:44):
typically answer those questionsinside a business That hasn't
yet become data driven? Oh, youknow, we talked about the deals
That we're excited about, wetalked about This big, you know,
chunky deal that's been in thepipeline for a year That we
think is finally going to closeThis quarter, we kind of get
into the What I call thestorytime of sales, and the
drama around the individualdeals and whether they're going
to close or not. There's anotherway to answer those questions,
(33:06):
which is an honest assessment ofWhat the pipeline looks like
versus your plan. And thenlooking ahead to next quarter,
how many new opportunities arewe creating That are truly
qualified? And are we gettingbetter at creating new
opportunities? Every singleweek? So there's more questions
That we asked our companies toanswer in our weekly reporting
pack, we could talk about Whatthose are. But taking it back to
(33:29):
What are we trying to do here,we're trying to spend five years
with a business and help them dothings a little bit better. And
in doing so, we want otherinvestors and other companies to
take notice of the good workThat they're doing. We don't
want to waste a week when we'redoing That we want to have 260
Really good weeks in a row. AndIt's possible for us to know,
really, honestly, reallyobjectively, whether we're doing
(33:52):
That each and every week. Andthe way That we do That is we
answer to questions every singleweek. Are we giving ourselves a
chance This quarter? And are wegiving ourselves a chance next
quarter? And we answer That withsimple numbers? And that's What
I mean when I say less data moreoften all you need is enough to
answer those questions. But It'simportant to answer those
questions as honestly aspossible, and then have a
(34:14):
dialogue around them saying,based on What these are telling
us, What stance are we takingabout What to do next?
Jon Thompson (34:23):
That's great. We we have already hit our time.
Like you said, we could talk allday just about question number
two, I guess last question whenyou are looking to harness their
data for using it to drive thebusiness. Do you have a
methodology to use a data lake?
Do you end up using BI toolsTableau Power BI any of those
things? Is it a clipboard with apen Excel spreadsheet? What do
(34:46):
you do?
Paul Stansik (34:48):
Somewhere in the middle? I mean, we This is one
of those areas where we're alittle less prescriptive. And
typically when we get deeperinto an investment, we will have
companies That will makeinvestments in BI tools. I like
to start people on spreadsheets.
Partly because I'm not a biexpert, I'm starting to play one
on TV. And I think I'll getthere eventually. But to me,
there's some kind of magic inmaking the executive What I call
(35:13):
put their fingerprints on thenumbers. So even though It's
extra work, if you if you forcesomeone to take the numbers out
of Salesforce or out of HubSpot,or whatever it is, and get a
touch, as they're transferringit into a very simple
spreadsheet, you're giving theman opportunity to notice things
in That trend That if allthey're doing is pulling up, you
(35:36):
know, a dashboard and a BI tool.
It's just an extra touch. AndWhat I've found is for a busy
executive, especially in thesales or marketing side, where
they're managing multiplepeople, they're kind of playing
This player coach role,engineering and environment
where you're forcing them to geta touch on their performance
(35:58):
dashboard, That additional touchgoes a long way to making it not
just This thing That they'reserving up for the investors,
but That they're using to noticewhat's going on inside of their
business. So talk to me in acouple years, and maybe I'll
nail the big thing. But for now,I don't know forcing someone to,
to handle things and kind of geta taste of a dish that's coming
(36:20):
out of the kitchen. It's It'skind of This sneaky trick That
seems to help make these thingsstick and ultimately drive a
better conversation about what'shappening inside of the
business.
Jon Thompson (36:32):
Yeah, so getting him to own those numbers a bit
more and get some ancillaryinsights as they're going along.
And just the context and notjust being served up a pie chart
and a number.
Paul Stansik (36:41):
Yeah, it goes back. Like another way of saying
less data more often is itdoesn't have to be perfect. It
just has to be theirs. Right.
And I think ownership is a greatword That encompasses all of
That. Good insight.
Jon Thompson (36:54):
So your sales metrics playbook. I'm sorry, if
I titled it wrong. When is Thatcoming?
Paul Stansik (36:59):
It'll be out in the next couple of weeks. I
think we're recording This onMay 3. So come and hunt me down.
If It's not out before themiddle of the month, I'm putting
the final polish on it. Weinclude a little bit of our
philosophy in there about justhow we think about This stuff,
how it shows up inside ourportfolio. But I think
especially for folks That areinterested in making This leap
going from data aware to datadriven, I'm also going to
(37:21):
include the actual template Thatwe give our companies That
answers the same questions Thatwe're asking for each and every
week. So that'll be out by themiddle of the month. And like I
said, come get me if It's if Imissed That deadline,
Jon Thompson (37:35):
and publicly available, right? Yes, sir.
Sharing. Okay. So we'll get Thatprobably before we publish This
and get it in the show notes. SoI look forward to it as long as
you don't delay.
Paul Stansik (37:45):
This is a public commitment, and It's a
intentional forcing function forme. So thanks for helping me
build it.
Jon Thompson (37:51):
Yeah, you bet.
Paul, It's been a pleasure.
Thanks so much for sharing yourinsights and taking the time.
Yeah, thanks. Yeah, take care.
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