Stop Hiring Operators. Start Building Systems.

0:00Hey, everybody, Roland Frazier and Ryan Dice here with another episode of The Business Lunch podcast. Welcome. And I'm not even going to say we're live this time. I mean, we're live right now, but it's a continuing discussion. I believe we're live. Ryan does not, you know, which is gives me some concern about Ryan. But more importantly, you had some things that we've been kind of futzing with that you wanted to chat about. So let's talk about it. Yeah. I mean, it's this concept of an operator in a business, right? What is an operator? We get the question a lot of times when, because we're working with a lot of entrepreneurs who, frankly, are like us.

0:34They're more, I hate, I hate the term visionary because it just sounds like that you basically just like visionate all day. Like, I don't know, like, look at me, like, it's not real work. It's just, I just sit here and I have ideas. Now go do them, which is not what it is. But I do think that we tend to, you know, attract and work more with people who are like us. I mean, entrepreneurs who are more on the visionary side, which doesn't mean they don't have some operational responsibilities. Of course, you know, of course they do. But most of the folks who work with just wish they had an operator.

1:04And so I've just been thinking about that idea of like, what is an operator? Because we have an operator, you know, in our business, we have a guy, our business partner, Richard, you know, who is the operator. And I think we all kind of collectively realized that we'd sort of took Richard out of the operator role, and almost kind of like asked him to sort of be a visionary alongside of us, but never really define that. So yeah, I just thought it might be good to have a discussion just around this idea of like, what is an operator? How might an operator vary from maybe an entrepreneurial CEO? And just, you know, what that might mean for folks, if you're feeling like you're in the weeds of your business, you know, you talk rolling about no longer like not having to work, you know, in or on, but over the business.

1:43So for those who want to, you know, get over the business a little bit more, feel like they can, you know, maybe exit the org chart one day, they're gonna need an operator to do that. And so what are you looking for? How do you how does that role define? So I'm just curious, like before we, cause I've been, I have the luxury of maybe doing a little bit more research on this than, than perhaps you have. So I always think it's fun to throw things out at you without any preparation whatsoever. And just see if what your kind of general idea is of the job description of an operator, what they do. Well, I mean, I think it depends on, on what level you're looking at for the operator.

2:13If you're talking about kind of somebody who is going to be primarily in charge of making the business go and sit at the top of the org chart? Or are we talking about somebody who's doing a specific role within the company? You're so smart. Pisses me off sometimes. Because it took me, because as I was answering the question, I realized what you just went to immediately, which was, well, it depends on the role, right? Because what I realized is that operators and organizations come in a number of different shapes and sizes depending on where they are within the org. So I was going, I was like, actually, you know, a personal assistant and an executive assistant, they're an operator.

2:49like for that person at that level. And like a project manager, you know, is an operator for a project, you know, and then you get into like an operations manager and maybe they're an operator for a division or a business unit. You might have a director of operations, a VP of operations or even a COO, right? And so, yeah, that was kind of the first distinction is that there are operators at every level. And I think to me that was very helpful because what that means is that if you're an entrepreneur, you may not need to go out there and hire a COO. And I mean, how many times have we heard that?

3:25I think I need to go hire a COO. And it's always a freaking train wreck, right? It's like, maybe you see the project manager or an ops manager or something like that. I had a really good, and I told you about this, I had a really good conversation with a fractional CFO company that is one of the ones that we were looking at working with. And the distinction that he made when we were talking about, we're looking for somebody to take over the finance department. And he said, well, you've got three different categories of people there. You've got bookkeepers who make entries. You've got controllers who are a little, who are a significant actually step up from a bookkeeper, but really focus on the present.

4:12And then you've got the CFO on the present and internal of the company. And then you've got the CFO who focuses on the present and supervising the bookkeeper and the controller, but also looks to the future by creating budgets and then tracks actual to budget and also interfaces with external people like banks and credit facilities and things like that. And I thought that was really an important distinction that I hadn't thought about as much as I should have. and I think with what you're talking about in the operations role that you also have, like if I was gonna go down from CFO, if we started at C-suite and we say, CEO is the ultimate operator, but is one of the most misunderstood titles that exists because the CEO's real job is not to spend much time in the day-to-day operations of the business.

5:11It's to coordinate the delivery of the vision from the board of directors into the hands of the other C-suite people that are going to make things go. And they're not really operating at all, but you could call them an operator because they are the head of all operators. But then if we looked under each of those functions and said, well, we've got a CEO and we know what she or he does, then we've got CFO, which we have those three levels, bookkeeper, controller and CFO. and then we've got chief operating officer who really is the one that's supposed to be the head of the show. And under that, you'd probably have like a VP of operations or a head of operations, which is one that we use so we don't have to give that other title when it's not yet appropriate.

6:05And then under them, you might have a manager and the manager might be a mid-level person all the way down to a project manager that would be really in charge of a very specific operation. And then on the marketing side, you can go all down that side too. And so I think one thing that's really helpful is for us to think that really, we have these different levels of quote unquote operators that fill each of these roles. And even within those roles, we have a tendency to accidentally take a bookkeeper and call them a CFO or a project manager and call them a COO. And that's not going to really help us because we need more sophisticated people that have completely different job descriptions and functionality in those roles.

6:56So that's kind of, to me, that's what that gets me thinking about. How about you? Yeah, I mean, like when I was doing, I'm trying to find just like a definition because you're right. The operator is, to a certain extent, it's you just described everybody and you described nobody, right? So I'm trying to think like, what does an operator do, whether they're a COO or a VP of ops or a director of ops or a project manager? And ultimately, like this was the definition that I wrote down that's kind of an amalgamation of all the other ones I heard. So they build process and structure around what the business needs, then hires the team and assembles the resources and hires the team and then holds them accountable to achieve the desire of objective.

7:34So basically, it's this is what it needs. Now, it's not necessarily their job to come up with the need. Right. Because that's generally going to be the CEO's job. They may inform it. But if we're going to say what you said before, and this is like classic Fred Wilson, you know, there's three things that a CEO is responsible for. Set the vision, hire and retain the best people. It does not set the vision. That's just wrong. Well, that's, I mean, that is pretty standard amongst like at least carry and inform the vision, right? I mean, it depends on the structure. But very often it's going to be the CEO that's going to set the vision.

8:08It might be approved by the board. But if you're going to look at like what is like, what do a lot of the definitions out there, they would say the three things are set the vision, hire, train, retain the best people, and then don't run out of money, right? Basically hold the purse string. So you would disagree with that definition for CEOs? I would on most of the accounts, interestingly enough. Like, so set the vision. That's absolutely the function of the board. The board says, this is we're taking a look at everything and we're setting the vision. and then they're responsible for the governance of the company, the CEO is to implement the vision of the board.

8:44And very often the CEO is part of the board or in a smaller company, the CEO might be the board. In which case, yes, the CEO is doing that, but not in his or her capacity as the CEO. They're doing it in the capacity as being the sole director. And then seeing that it doesn't run out of money isn't really the CEO's job. That's the finance people's job to say, hey, what do you want us to do? Oh, let's create a budget for that. And then we're going to track and let you know if something's not working out. And what was the third thing? So just so I can disagree with all of them. Hire and retain the best talent.

9:22Yeah, so for the CEO, that would fall to the CEO with respect to the C-suite, but they shouldn't be hiring people down under that either, right? And it's just, to me, it's interesting. So I think with all these, so I would absolutely disagree with you on the vision part. Because I think that vision by committee is a train wreck. Man, you've been wrong before. It's no big deal. I'm totally cool with that. I would though, man. I mean, I think that vision by committee, like I think that as a board, like if you're truly dealing with a real board, they're going to put a CEO in place who can, and their job is to be like, here's where I think we should go.

9:55And they either agree with that and they support them in that vision or they disagree and they fire them. And so I agree that the board would have general like oversight and essentially like veto. But what that's going to look like more times than not is, you know, are we going to hire a, you know, a CEO that has that has a plan, but especially if you're talking about like a founding CEO, like somebody who was the I mean, obviously, the company was their idea. Yeah, it's just because they they sit in all those spots. So yeah, I mean, I will agree. Yeah, I agree that the board ultimately approves the vision.

10:29And if they don't, but I mean, at that point, if the board disagrees with the vision that the CEO has, whether you want to say proposed or set, right, ultimately, the board is going to approve it. But I would say, I mean, if a board, it's the CEO's job to bring forth a vision, right? Here is what I think we could and should do. And the board can say, you know, yes, no, maybe so, discuss it. And at that point, if the board's like, we completely disagree and the CEO's like, well, I think you're wrong, then the CEO's got to go, right? The board's not going anywhere, the CEO's got to go. So in terms of who sets it, I mean, I would say that it's ultimately the CEO's job.

11:05They got to be in it enough to know here's where we should go. So maybe we're saying the same thing in different ways, but I would totally think that the CEO's job is to set the vision. In terms of the people, I agree with you at a micro kind of thing. But like, if you're going to say that, that the CEO is going to hire, train to retain the best at the C level, then that should trickle down. I agree there. I've heard that interpreted as and therefore a CEO should be in every interview. Give me a freaking break. That's a terrible use of time. But they should at least set the if they're going to help define the culture in and around the values, and that should help, you know, retain it.

11:40And then in terms of cash, I would also agree the CEO is going to leverage the help of the finance people. But in terms of deploying and approving how resources are spent to the extent that the board is given that discretion, I think they're the ones who, you know, if the company runs out of money, ultimately that's going to be the CEO's fault. Now, if they're running out of money and the CFO never said anything about it, well, then that's a problem they get fired too. Or if the CFO is flat out lying, then I agree. But yeah, so assuming those three things, broadly speaking, then really from an operator perspective, the vision is pretty much set.

12:18Their job is to say, OK, in light of this vision and where we're going, let's unpack its different component parts and figure out. So this is A, that's B over there. What's all of the steps in between? And that's what and then now how do we make it real by bringing together all the different resources? That's what I personally kind of suck at. Like I can see down the future where it needs to go, but how we get from here to there is not always like my thing. And I think that's the distinction of, you know, of the operator. So the B to Y person. Yeah, that's a good way to look at it. And, you know, and in the in the earliest days of a company that looks like somebody who's just doing the, you know, it can look like an admin person at the lowest levels.

13:04but I think when you start to have somebody who they're not just doing work efficiently and effectively but they're actually now beginning to build systems and processes and they're saying you know what if we were to actually go and get this over here work with this team we could do that better now they're pulling resources together and understanding how to do that then now I think that's when you're dealing with somebody who's a project manager or an ops manager director all that other kind of stuff as like you said the needs of the company fit so would you say though So when most people say I need an operator, they really want somebody that's primarily responsible for the day-to-day workings of the company.

13:41Well, I think with a lot of the folks, they don't even know what that means. What they're basically saying is I want somebody to do all the stuff I don't want to do, which can be dangerous depending on what falls in that category. And so I do think it's important to know like what are the things that you're, you know, what are the things that you're going to hand off? But yeah, I mean, I do think practically speaking, it looks like the day to day, right? Because the day to day is that resource allocation and project management. So then if we were trying to step it up for people, would you say the first step is know the role of the operator?

14:14Yeah. Know the specific things that need to get done. If we're going to define it as B2Y, which I do think is a pretty good definition, what all goes into that? Because it can't just be, you know, you do all this stuff that I don't want to do, so I can just sit over here and visionate. Right. I think that's really, really, really tough. It's a tough role to put somebody else in. So then step one is know the role with the complete description of the outcomes you want those people to be responsible for, right? Yeah, I mean, I think you've got to be clear on the rule. I would actually say step one, even before that, is you've got to have some kind of an operating system in place already.

14:52I think it's brutally difficult to bring somebody in from the outside and have them kind of build up and define your company's operating system when they don't know anything about the way that anything's structured. But wouldn't you want the person that was going to be doing that to be able to bring that in? Like think about most of the CEOs you know that are not operators. They're not gonna know where to start with the operator. Like they'd be the, they wouldn't necessarily be very good people to put that in, would they? Yeah, I think they need help for sure. Because I mean, most CEOs are so in the weeds, they don't know up and down.

15:25I would argue that's what we do at the Scalable Company, right, is helping entrepreneurs systemize their businesses so they can get outside of it a little bit. And most of them, when there's a process or a framework in place, they can figure, oh, yeah, okay, so that's that. Like, they can connect the dots. I think it's great if you already have an operator in place that can drive that, incidentally, because CEOs like the idea that they're generally, you know, bad at driving it all the way to Z. And so, but I think where it's difficult and where I've seen this fail is when a visionary CEO just hires an operator and says, okay, come in and fix all this stuff.

16:03Right, right. That can be really, really tough. It's like, okay, everything's broken, fix it, like, just make it happen. And the CEO won't engage in the systemization process. So it's better if there's like the kernel of some kind of an operating system there, that now an operator is coming in and optimizing it. Because where it can get really devastating is if an operator comes in and starts changing things that the CEO didn't even realize was kind of the secret sauce. Okay, so step one, choose an operating system. Step two, determine the role for the person who's going to be this operator. Yeah, that sounds about right.

16:38Okay, and then what next do you think? I mean, I think you gotta bring somebody in and allow them to start to do the role, leveraging that operating system to get some stuff done. I would hop up first to how do we find that person? So what does the search look like? So now we know we have an operating system and we have a role. Now we've got to fill that role. What do you think the best way to do that is? Yeah, I mean, well, that's when now we're out to recruiting and hiring, right? Which is always the toughest part. And this is where it's gotta be a combination of, you know, job posting and depending on the level that you're hiring for, maybe even leveraging a recruiter.

17:15Yeah, because it is hard. And I'll tell you, the people that you want, guess what? They're working for somebody else, right? I mean, almost exclusively. I would throw another one in there too, because you've done such a great job of this. I think that finding, before you even search, creating the environment that clearly states what the company is about and attracts the right people and repels the wrong people. even and and I mean not that they're bad people just they're not the right fit I really think that having that and maybe it's this goes back to your first step because it's part of the operating system but that like that character diamond and we believe video values thing is to me really critical because you have to be able to to be sure that they're the people you'll sit down and as our J-Cron says have tacos and tequila with, but also that is aligned with you on what you want value-wise for the company, especially if they're going to be in a hiring, like if they're going to be kind of at the top of the pyramid to hire the people that are down below, they've definitely got to be about as in alignment as possible with the culture of the company, right?

18:30Yeah. And I'm baking all that into that step one with the operating system, right? So the operating system is both, of what's the source code, kind of the algorithms, the processes and procedures of kind of running the business. And again, that's not gonna be as well-defined, you know, if a visionary entrepreneur is running it than if you've got a, you know, a trained COO Six Sigma black belt comes in and does it, right? But there's gonna be the kernel of something there, right? It may be scribbles on a whiteboard that somebody took a picture of, but there's a general idea of like, this is generally how we do this thing.

19:02This is generally how we go out and get customers, is generally how we fulfill on the customers. A couple of checklists and SOPs and things like that, right? There's some job descriptions of some of the people that work there. They're old. Like there's going to be the kernel of some bit of that. That's all kind of the source code. And then there's the user interface, right? There's the piece that's like, what are the metrics that we're looking at? And again, they probably don't have advanced dashboards, but there's a couple of things here and there that they're looking at. They've got a general meeting rhythm, even if it's super loose.

19:31That's all kind of in that user interface. But yeah, that last piece, which is the one you're talking about, you know, the central processing unit, like that chip, like that thing that is the heart and soul, you know, of the business, that's its culture, right? And that's going to come down to, you know, shared goals, where we headed, shared purpose, shared values, a shared understanding of what we're good at and not good at. And yeah, all of that is encompassed in this thing that we would call an operating system. And that's, I guess, what I'm saying. That has to be maybe not completely built out, but largely informed by the visionary founder CEO or it gets lost.

20:12That's when Steve Jobs gets fired and everything goes to crap because all that either wasn't codified or it was thrown out intentionally, right? So that has to be there. And I think you can have an operator who's there helping to bring it about. But if you have an operator just come in from the outside and say, well, this is all dumb and you suck at this stuff and let me go in and fix it. You got a John Scully situation. You got, frankly, and you remember this, what happened to us about 12 or 13 years ago, right? Yeah. Where somebody comes in from the outside, doesn't understand what makes the business work.

20:47They run off all the good people, build fiefdoms from all the, you know, not so good people and the business just tanks. And so, yeah, I think that's definitely step one. you know, figuring out, and I think when you said figuring, like step two, figuring out what B2Y is, that so much of that is figuring out, do I really need a quote unquote COO right now? I mean, if B2Y doesn't mean leveraging, you know, a handful of directors who all have managers under them, who all have dozens of team members under them, then no, right? You probably need a, you know, a project manager or an operations manager at this point.

21:21I think shockingly, a lot could be accomplished with a project manager. That a project manager is by definition a manager, right? So it's like when you have more than one project to manage, you maybe want to move beyond the project manager. But when you just kind of have a couple simple things to get done, that's, you know, that could be it. So let's take a break and then come back and see how do we find these people. Let's talk about that and then anything else you want to cover. So we'll hear from our sponsor and then we'll be right back. Hey, Business Lunch listeners, we're going to get right back to the show.

21:59But Roland wanted me to invite you to a brand new training that he's doing on acquiring businesses with no money out of pocket. It's something that he's talked quite a bit about on the show, but he's doing a free training where he's going to walk through the entire process. So if you want to get access to that, go to businesslunchpodcast.com slash epic. That's businesslunchpodcast.com slash epic, and you can get signed up.

22:21Okay, so we got a couple of steps. We've got the operating system, which we talked about quite a bit. And then we've got the kind of what is the outcome? What is the role? How do we find these people, Brian? What do you think? Yeah, and I mean, there's gotta be a job description, which that's what we kind of talked about in step two, right? So getting clarity on what you're looking for, because if you don't know what you're looking for, you'll either never find it, or even worse, you'll always find it. You'll find it everywhere. You know, you'll have like some waiter that seems nice and organized.

22:48So we have that. Now we just go to the operator store and we buy an operator and put them in our business, right? Yeah, I think that it's out there. You're gonna need a leverage recruiter. I think you're wise at a certain level to leverage recruiters, but really it's ultimately on the CEO to go out there and network and find this person. I mean, man, all the best people that we've got, you know this, like they've come from my network and your network. And I think who better than the CEO to trumpet the opportunity and the benefit and the values of coming and working for this company. And I think where it's really, really hard is you gotta hang out in different circles.

23:21Because entrepreneurs are operators aren't hanging out in entrepreneurial circles, not the ones you want. So, yeah, I think, yeah, that that is a you really don't want an entrepreneur as an operator. I think they'll end up competing with you. You'll you'll smash heads together and good things don't come. I don't think you want employees that are entrepreneurs really either. But so assuming that we've got the role now and the CEO, let's say so step one, if you know somebody, great. If not, then what do you think the best way is for the CEO who's frustrated because they're telling you that they need a operator but can't find anybody?

24:01I don't have a great answer to this. I think to me, this is kind of the most difficult question to answer. And I don't know. I mean, I've asked this question. I've been asked this question. It is a combination of a lot of things and they all suck. Right. It's a combination of going out and networking and hitting people up on LinkedIn. Right. To grow that network. It is a combination of getting out into circles that you don't know, asking around, you know, it's why it's smart to be in different types of business and industry masterminds. I do believe it's hiring recruiters, which are painfully expensive.

24:32And oftentimes you're paying them even when they don't find the person. Right. I mean, so, but I think that this is an important enough hire. and I think it is so disconnected from what most visionary founder type CEOs do that you have to go outside of your bubble and it's gonna be uncomfortable and likely expensive. And I think if you just accept it and lean into the suck and just have it be, this is something that I gotta do because it's a part of the job and it frankly is gonna make your life so much better, then you'll do it. If you try to shortcut it, then you'll do what I've done a number of times, we've done and you'll hire people who are bad fits and for one reason or another.