Recently I had the opportunity to interview Nolan Bushnell and Jason Crawford, co-founders of Modal Systems, a LA based virtual reality start-up company.  Nolan is a serial entrepreneur who has founded many companies, but you probably recognize Atari and Chuck E. Cheese as his most notable.  My full interview is available on iTunes here.

The most notable lessons for entrepreneurs from the interview:

1. Leaders are always learning.

I had an outline of issues to discuss with Nolan and Jason, but the interview quickly moved away from any planned discussion.  Soon we were discussing base reality and philosophy.  The discussion covers philosophy, management issues, and what are common traits of creative people.  As the discussion illustrates, both Nolan and Jason are constantly learning.

2. Entrepreneurs are creatives that have interests in many different areas.

Both Nolan and Jason have interest in many topics.  Jason comes to the VR world from a music background.  Nolan’s an engineer by training, but is responsible for founding the video gaming industry as we understand it today.

3. Chance plays a role in entrepreneurship.

The background of how Jason and Nolan connected an eventually formed Modal is interesting.  It also shows that there is an element of chance that comes into play for entrepreneurs.  Entrepreneurs have to be flexible, and opportunities arise unexpectedly.

However, while chance plays a role, entrepreneurs take advantages of opportunities.  The discussion with Nolan and Jason illustrates that they are always thinking about the opportunities presented to them.  They are always thinking about how to improve the status quo, and when chance opens up an opportunity, they act on it.

4. Being good in school does not equal success as an entrepreneur.

I’m a strong believer in a good education, but simply because an entrepreneur is in the top of his or her class does not predict success in business.  Nolan is a prime example of this, he almost brags about the fact that he was close to the bottom of his engineering class in college.

5. LA’s startup-eco system is strong.

 

Enjoy the interview.  The first part of the full interview is posted on my YouTube channel as well:

Recently I had the honor of moderating a panel discussion on issues facing restaurant operators in California.  The panelists were Joseph Pitruzelli owner of Wurstküche, Francis Drelling General Counsel at Specialty Restaurants Corporation, Naz Moin former director of Human Resources at PizzaRev, and Madelyn Alfano owner of Maria’s Italian Kitchen.   

 You can listen to the discussion on my podcast available on Spotify (link here) or iTunes (link here).

 Even though the discussion is focused on the hospitality industry, the lessons are applicable to companies, owners, and human resource managers operating in nearly every type of company and industry.  This Friday’s Five covers the top five points I took away from the discussion: 

  1.  There is no one background that is best in determining success.  As you will hear, the panelists all are successful in their respective companies, but all have different backgrounds, and backgrounds that you would not necessarily think would make them successful in their respective positions.  Pursue what interests you, and you will be successful.   
  2. Single restaurant owners face the same issues as multi-unit operators.
  3. Hire for personality – everything else can be taught. 
  4. Back of the house workers do affect the company culture. 
  5. Employees should not be surprised when they are let go.  Constant coaching, counseling, and documentation is critical in managing employees.  Also, remember to give positive feedback to employees who you see doing exceptional work.   

I would like to thank the panelists again for joining me for the excellent discussion.  I hope you learn as much as I did from the conversation.

I recently read an article from the Harvard Business Review published in 1981, Managing Human Resources, by William Skinner.  The article raised great points about the lack of respect human resource departments receive in companies at the time.  The article is as timely as when it was published nearly 40 years ago.   Skinner’s article really hit a nerve for me in that companies manage, measure results, and set long terms goals for their functional departments, but these same type of management tools are not often used in human resources.  The article also illustrates that the issues existing nearly 40 years ago, are still persistent today.  Here are the five key lessons for me from the article illustrating why human resources is such a difficult field to manage:

1. Obtaining employee commitment to a company is difficult

Aligning the long term goals of a company with the often short term goals of employees is difficult at best.  Companies are working on 5 or 10 year plans, while employees are focused on the next year’s wages, job titles and potentially moving to another company for a better position.  As Skinner points out, “it’s rosy idealism to think that every employee is going to turn on and perform with 100% devotion to a company and its objectives.  Short-term economic interests are in clear conflict….Further, political factors such as Nader’s Raiders and the anti-big-business wing of the Democratic party exploit employees’ distrust of business, the corporation, and managers, whom employees often see as being out for themselves and siding with their corporate basses against the employee.”

So what is HR’s role to help with employee commitment?  Executives in the company need to understand that HR’s role is a long-term function, and provide HR with the time to develop and execute goals over a 5 year period (or even longer as Skinner recommends).

2. As companies grow, they lose their competitive advantage

Larger the company, the larger the risks are in trying new approaches to HR or employment practices.  Skinner points out that larger companies are inherently more conservative about innovation: “Decisions become more sensitive, have longer shadows, and, understandably, executives may become more cautions and may procrastinate or pass the buck when they can.”  Small start-up companies have been utilizing their size and ability to adapt quickly has a competitive advantage in the technology industry for years now based on the same assumption – big companies are less likely to innovate because they are the established player.  As the incumbent, the management team takes a defensive posture, not an innovative one.

3. Hiring is hard

Skinner sets outs that hiring is difficult: “Subtle differences in job and personal skills and in attitudes toward work and employers have made selecting an outstanding set of employees even more difficult.”  Skinner cites “mass education” as an issue that makes selecting employees even harder.  More of the population has a college degree, but this does not necessarily a good indication of how well the employee will do.  This is especially truer today.

The hiring aspect of HR’s function needs to be more than getting new employees through a new hire orientation and providing them a parking card.  HR needs to be involved in the hiring process to develop a process to ensure the best employees are hired, as opposed to simply filling empty seats.  I strongly believe that having A employees will lead to brining in other A employees.  Permitting B employees to pervade a company will result in only being able to hire C employees.  Hiring is hard, but the selection of employees determines the success of the company.

4. Managing people is hard

The issues facing HR are different than those facing other departments in a company, such as finance or marketing.  HR must manage morale, a HR manager’s decision are based in conflict, and each interaction with employees varies based on personalities.  On top of this, there is also  the ever changing legal landscape and legal obligations the employer faces, which often times the employees do not want to follow (for example getting tipped employees to clock out for an unpaid 30-mintue meal break when they are waiting to collect tips from a large party).   HR managers that can navigate these issues, and do it while maintaining a positive employee morale are a very rare breed, but necessary to a successful company.

5. There is a natural gravity towards alienation

Skinner points out that there are many forces that if left unchecked, are driving employees to become alienated from the company.  Therefore, HR must ensure that managers in the company are trained well on how to communicate with employees, able to listen to employee complaints, and when it is appropriate to involve HR in critical issues.  Managers within the company are the tool to stop alienation, but they must have the tools and know-how to accomplish this.  The process of having employees committed to the company, and trust the company, is a long-term process that can easily be destroyed by a single lawsuit or complaint.  I also view employee alienation with a direct correlation with increase in employment lawsuits.  Employees who are treated with respect, even when are confronted with their inadequacies for what the company needs, may not be happy with the decision, but they will be more likely to respect the decision.

If you know Garyvee, you may be asking yourself how could an employment law blog rely upon advice from someone who has not only admitted, but takes pride in, the fact that he checked out of school in the third grade, does not read books, and uses language that makes most standup comedian’s performances seem tame?  However, to underestimate Gary is a huge mistake, and he brings a refreshing and realistic view of the workplace as it exists in 2016, that many companies could learn some important lessons from.

Gary is an entrepreneur who has a noted career in growing his family wine business from $3M to a $60M business in five years.  After that, he started Vayner Media, a digital marketing company, that now employees over 600 employees.  His is also an angel investor and venture capitalist.  I’ve recently listened to the audio version of his new book, The #AskGaryVee Book, twice in the last couple of weeks.  In listening to the book, I realized that his perspective on the workplace is the modern perspective that I’ve often advocated for on this blog.

For today’s Friday’s Five, here are five lessons from The #AskGaryVee Show (Gary’s Youtube channel) that employers must understand:

1)      Where are the best place to hire employees these days?

Search key terms on twitter search and do the homework.  Do the work.  Search terms about the items the employee would be doing, going to the person’s home page, and then email them asking if they are looking for a job.  It takes time, but you have to put in the work.

 

2)      How do you handle “Eeyore” employees?  The one that always sound like they’re whining and pessimistic.

Fire them.  Energy is very important, and dragging down the team is bad.  Not having the smarts is better than being a downer on the team.  It is pretty easy to see who is enthusiastic about their work.  Also, it is incredible how a small group of employees can affect the company.  Managers have to be careful not to confuse this with being an introvert.  Being introverted is something that needs to be recognized, and not looked down upon.  Moping is different than being quiet and introverted, and being introverted is not necessarily a bad quality to have.

 

3)      On your team, is it better to have employees that specialize in one thing or someone who can wear multiple hats?

Both work, but Gary is a fan of a jack of all trades.  He hates when people use the excuse that they are great at one thing to stop from getting better at another thing.

 

4)      Would you support Vayner employees writing their own books and curating their own content streams/personal brands?

Yes.  You cannot say you want to build around the employees, and then suppress them.  Leaders have to believe so much in themselves that they are not afraid to help employees grow.

 

5)      As a guy who loves hustle and people, what is the “unforgivable sin” one of your employees could make?

Gary is not worried about people’s work ethic.  While hustle may be the leader’s skill, and being able to work long hours, it does not have to be the skill of employees.  The only sin is to not figuring out a way to play nice with the boys and girls they work with.  Being disrespectful or being selfish is completely unacceptable, as is creating conflict.

I just discovered How to Start a Startup, which is a series of videos published by Stanford University on YouTube with some outstanding speakers. The problem is that the class videos are so great, I have a hard time turning them off. Case in point, this week I watched Ben Horowitz’ lecture: How to ManageBen is a rap enthusiast, and venture capitalist in Silicon Valley.  He offers excellent points and perfect examples about how managers have to analyze difficult requests from employees from many different perspectives. Definitely worth devoting the 50 minutes of your time to watch (embedded below). It is by far the best presentation on management I have ever listened to, and I’ve had my share of management classes (by the way, Ben’s book, The Hard Thing About Hard Things is a great read also).

In the lecture, Ben discusses the very difficult situation of addressing an employee’s request for a raise. Ben’s point is that the easy way out of the difficult managerial decision is to simply agree to the raise. This is the easy way out, everyone in the room is happy, the manager is liked by the employee, and the employee is obviously happy.

However, as Ben mentions, this can create other issues across the organization:

However, you knew there was going to be a however, you have to think about it from the point of view of the employee who did not ask for a raise. They may be doing a better job than the employee who did ask for the raise and in their mind they are going, “Ok, so I didn’t ask for a raise and I didn’t get a raise. They asked for a raise and they got a raise. What does that mean?" One, you’re not really evaluating people’s performance. You’re just going, whoever asks, gets. That means I either need to be the guy who asked for the raise, though that’s not how I feel. I do my work and I don’t necessarily want to ask for a raise. Or I just need to quit and go to a company that actually evaluates performance. You can really make the person who doesn’t get the raise feel pretty pissed about it. Don’t think that when someone is walking through your company doing the "Shmoney Dance," that other people aren’t going to notice.

Not familiar with the Shmoney Dance? Click here.

In addition to Ben’s point that CEOs or supervisors responsible to determining pay rates need to have and follow a formal review process for determining raises, it is important to note it would be bad management to ask an employee to keep their pay details confidential because doing so runs afoul of California law.

This leads me to point out five areas of employee compensation or off-work conduct that cannot be regulated by an employer under California law:

  1. Employers cannot prohibit employees from discussing or disclosing their wages, or for refusing to agree not to disclose their wages. Labor Code Sections 232(a) and (b).
  2. Employers cannot require that an employee refrain from disclosing information about the employer’s working conditions, or require an employee to sign an agreement that restricts the employee from discussing their working conditions. Labor Code Section 232.5.
  3. Employers may not refuse to hire, or demote, suspend, or discharge and employee for engaging in lawful conduct occurring during nonworking hours away from the employer’s premises. Labor Code Section 96(k).
  4. Employers cannot adopt any rule preventing an employee from engaging in political activity of the employee’s choice. Labor Code Sections 1101 and 1102.
  5. Employers cannot prevent employees from disclosing information to a government or law enforcement agency when the employee believes the information involves a violation of a state or federal statute or regulation, which would include laws enacted for the protection of corporate shareholders, investors, employees, and the general public. Labor Code Section 1102.5.

I don’t have any personal knowledge of how Steve Jobs was as a manager, but every account I read of him was that he was demanding and in your face. While this can be an effective management style of some, it does come with some associated costs.

Increased litigation costs
Unless your start-up has a huge backer and litigation budgets are not a concern, being a demanding manager that only says what is exactly on your mind when it comes into your mind may get good results, but it will also invite litigation. Don’t get me wrong, there is nothing illegal about being a demanding manager at work, but a lot of people probably don’t understand that. Also, over 20 states have proposed legislation to make bullying in the workplace illegal, but none of these attempts have become law – yet. Plus, even if the employee understands it is not illegal behavior, it creates an environment where the employee wants to get even with a manager or founder for how they were treated. This leads them to talk to a lawyer, which may lead to a lawsuit based on some other ground. Even if a lawsuit filed against a company is frivolous, it will take time and money away from what the company is supposed to be doing. This can cause a huge stress on a start-up company.

Good employees have options
If you treat your superstars badly, they know they will find another comparable job in this economic climate. Jobs and Apple created an environment where only the best work from everyone was tolerated. Jobs said that this helped the company maintain its “A” players because they did not have to be around B or C players. While I can see this rational, unless the company is Apple with an existing reputation, a lot of employees will not put up with an over demanding, unfriendly workplace. And many talented employees left Apple because they did not like Jobs’ style. The loss of good employees (who probably go to work for a competitor) asserts a huge cost on a start-up.

It still comes down to management style choices. But the choice to be like Jobs will have a cost associated with it. And if the company is a start-up, these costs may not be worth the perceived benefits.

Apple, Virgin America, 1965 Ford Mustang, and Mike Rowe. These are examples of Guy Kawasaki’s idea of Enchantment. In his new book he sets out to help readers understand what enchantment is in order to strive to be enchanting. Some have called it an update of How To Win Friends And Influence People for 2011.

Here are the ideas that caused me to dog ear the pages they were on and stood out for me:

  • To be likable, you need to find shared passions with others. To do this you need to do your homework, but it is easier today than ever to do so thanks to Google. Long gone are the days of reviewing back issues of newspapers to find out about people.
  • On launching a successful venture: “Perhaps [most presentations achieve] antienchantment, because people leave less intrigued than when they knew only rumors. Enchanting launches are more than press releases, data dumps, one-sided assertions, and boring sales pitches. They captivate people’s interest and imagination by telling a compelling story.”
  • Tell personal stories when conveying ideas. They do not need to be “epic” stories.
  • Marketing is turned upside down post-Internet – people depend on opinions of their friends and casual acquaintances more than “experts.”
  • Provide social proof. If everyone else sees other people doing it, then it must be ok.
  • Find something you agree with an opponent with before entering into negotiations. Small talk can often establish items in common, which will help lead to a successful resolution.
  • Embrace technology – especially social media.
  • Tell recruits for a company that you want them, and repeat often – even when they are employees.
  • Learn how to resist enchantment so that you are not enchanted by someone who does not have your best interest in mind.

It is also important to note about what is missing from the book: a chapter on price. As Guy puts it, “It is not about the money.” The book is a good reminder for business owners, human resource managers, and employees alike about what it takes to be successful today. Guy explains in more detail about what it takes to be a successful HR manager or have a successful HR department in my interview with him (or click here to listen on iTunes).

Despite your teachers, friends, boss, colleagues and family members telling you otherwise, you are a linchpin. You are a genius that can succeed in the new economy. Seth Godin’s new book, Linchpin, sets out to challenge you to unlearn what school and society has rewarded in the past, and to let us all know that we are linchpins (if we make the choice to be). 

I just finished reading an advance copy of Linchpin, and have to recommend the book to anyone who either manages people at work or for anyone who has to work for a living. I have read many of Seth’s other books which provide prophetic insight how the Internet and technology have changed marketing and business forever. Linchpin similarly argues that technology is changing the business world dramatically, but the book focuses more on what these changes mean for individuals, and the new opportunities and rewards for those who chose to be linchpins.

What is a linchpin?

The term is defined by the Merriam Webster dictionary as: “(1) a locking pin inserted crosswise (as through the end of an axle or shaft); (2) one that serves to hold together parts or elements that exist or function as a unit <the linchpin in the defense’s case>.” Seth’s theme throughout the book is that a linchpin is an artist who challenges the status quo, and in doing so creates value, and in doing this become indispensible. An artist is not necessarily someone who creates a painting, but Seth says a lawyer, engineer, salesman, politician or a mid-level manager in a large company can all create art. Seth argues that “art is the ability to change people with your work, to see thing as they are and then create stories, images, and interactions that change the marketplace.”

Is it hard to be a linchpin?

Definitely. As Seth observes, “Nothing about becoming indispensable is easy. If it’s easy, it’s already been done and it’s no longer valuable.” But as Seth argues, in today’s world to be “successful” you have no choice but to be a linchpin. Not being a linchpin relegates a worker’s work into a commodity, which makes the worker easily replaceable by the next person who will do the work cheaper.

The book covers the shift in economics that the Internet has developed, which has opened up so much more opportunity. In the past, the bourgeoisie controlled the capital to invest in factories. The proletariat workers had little leverage in the equation because they do not possess the capital to create their own factories. Today, however, “the proletariat own the means of production.”   With the new economy, we have to unlearn the factory mind-set that we have been programmed to live by over the last 100 years – which rewarded showing up for work and following the rules. The Internet has changed this.

While technology has changed the rules of the game, individuals need to make a choice. Society does not reward blind rule-following, but instead requires linchpins who do not have maps telling them what to do next. This is difficult, as we are conditioned by society to follow the status quo and to fit in. Linchpins understand this, and must continually fight off the tendency to give-up, conform and to take the easy path by simply following the rules (Seth refers to this tendency as the resistance).

What does this have to do with employment law?

Well, as a blogger, I have read Seth’s blog for a couple of years.  Before I read the book, I thought it would have no relationship to employment law what-so-ever.  But, only a few pages into the book I realized that this book is a must read for managers and human resource professionals. Companies need to realize they now need linchpins within their organizations, and they need to allow employees room to be linchpins, instead of drowning out these productive individuals by forcing them to conform. Seth notes that “Great bosses and world-class organizations hire motivated people, set high expectations, and give their people room to become remarkable.”  This book is not only a wake-up call to managers about what type of employee is needed in today’s workplace. 
 

I completed two seminars (one for California and the other nationwide) last week for BLR on conflict management in the workplace, and I thought it would be a good time share a few additional thoughts on the topic. I’ve encountered a lot of skepticism about this topic – especially from other lawyers – that it is a “touchy feely” topic. I am not claiming a manager can learn everything she needs to know about the topic in one seminar, but it is clearly a skill that supervisors and managers need to develop to be successful. If there was not conflict in the workplace, or if it was simple to deal with, managers would be out of a job. Thankfully for managers, this skill is not easily learned, and takes years of experience to develop. Here are a few tips to assist in the process.

Don’t avoid or ignore workplace conflicts.

Letting conflict fester will lead to litigation. If managers get involved in workplace conflicts early and often, it is more likely that the situation will be dealt with before a party thinks their rights have been violated and they need a lawyer.

Have a discussion with both workers involved in the conflict together.

Lay a few ground rules for the discussion:

  • Everyone will be heard (the supervisor will have to enforce this rule)
  • One speaker and one conversation at a time
  • Challenges are acceptable, must be respectful
  • Focus on issue (project, assignment, task at hand, etc.)
  • The workers can only use “I” statements NOT “YOU” statements (Example: “I received the information too late to include in my report.” Not: “You got it to me too late.”)
  • No personal attacks – criticism must be of acts, not the other person (Example: “That project is a waste of company time.” Not: “You are wasting my time.”)
  • Set clear guidelines on what is expected of the workers on a going forward basis (It is recommended to document these steps.)

Know when conflict crosses the line to create legal liability.

Managers should always be thinking about whether the conflict crosses the line from simple workplace disputes or personality conflicts into actionable harassment, discrimination or retaliation.

Provide reprimands the right way.

Managers should think through how to approach an employee when giving them a warning, either verbal or written. Here are a few suggestions:

  • The warnings should not be administered in front of other employees.
  • The manager should think through how the discussion will go, and possible responses to different reactions from the employee.
  • Set out the clear expectation of what the employee needs to do to correct the problem.
  • Document the warnings – even verbal warnings to employees. If the warning is a written warning, have the employee sign the warning.  If they refuse to sign it, record on the document that the employee refused to sign.