5

Why the HBIC and the BMOC Have Very Little Control

ASK ASPIRING ENTREPRENEURS why they want to start a business, and you are likely to find one of the most popular motivations is to “be my own boss.” The ability to work for yourself might actually be another definition of the American Dream, especially for people working in small to midsize companies across the United States. If you have seen actor Steve Carell’s character Michael Scott in the television show The Office, this is not a hard dream to understand. In The Office, Michael is the regional manager of the Scranton branch of a paper distribution company called Dunder Mifflin. He represents an amalgamation of all of those stereotypical reasons people are frustrated with their superiors. In particular, he illustrates the frustration that you may be smarter than your boss and that your boss may be generally incompetent.

There is actually a name for the phenomenon of incompetent superiors: the Peter Principle. Introduced in 1968 by Dr. Laurence J. Peter and Raymond Hull in The Peter Principle, the principle says in part that, “In a hierarchy every employee tends to rise to his level of incompetence.” This principle also states that in a typical corporate structure (think corporate ladder) employees are promoted for doing well or at least for performing competent work. Eventually, each employee is promoted to a position where he can no longer do well (their “level of incompetence”), and they remain stuck there in perpetuity, unable to be promoted ever again. It further states that, “In time, every post tends to be occupied by an employee who is incompetent to carry out his duties” and “work is accomplished by those employees who have not yet reached their level of incompetence.”

So, when you work for a company, at some point up that company’s corporate ladder are a bunch of bosses incapable of being good managers and superiors. No wonder there is so much frustration.

It is never fun to work with someone incompetent, especially if that person is your superior. You may think that the way of escaping this scenario is through getting rid of your so-called bosses by working for yourself. You dream of running around with a T-shirt that says HBIC or BMOC (“Head Bitch in Charge” or “Big Man on Campus,” respectively). You envision yourself wielding some light-saber–esque type of wand that gives you the power to have everyone answer to you. You tell everyone what to do, when to do it, and how to look while doing it. You are now the boss, and you are in control. You say, “Jump!” and they say, “How high?” Right? Wrong.

The GAGOOS of Being the Boss

In a company, even with some incredibly incompetent people working above and around you, there are very few people who have a direct or permanent effect on what you earn. Outside of the outlier situations, like having a saboteur in the office, mostly there are a couple of people that have a real tangible impact on you, your career, and your paycheck. This probably includes your direct supervisor and may include, depending on the size of the company, a compensation committee, a group head, and/or the company or divisional president. These people hold the power to decide your schedule, your pay, who you work with, what projects you work on, and whether or not you remain employed with that company. That’s it. That is the full extent of their control over you, and if things don’t work out, you can cut bait and go to work somewhere else, with the only risk being the downtime it takes for you to find another company to work for.

However, employees tend to get the GAGOOS syndrome (otherwise known as the “grass is always greener on the other side” syndrome) and spend time daydreaming (and I do mean dreaming, because it is far from reality) about how great it would be to be the boss. Then, you wouldn’t have to work with stupid people, right? Then, you could set your own agenda and work with the best and the brightest minds around. Then, an incompetent fool wouldn’t be in charge of your destiny, and you would be the master of your domain, right? Survey says… (insert buzzer sound here) wrong—again.

The problem with the GAGOOS syndrome is that the grass is only greener in your head. When you get to the other side, you see that the light was reflecting on the grass in a certain way that made it seem much greener from far away, but up close, it is the same damn shade of green, or worse—the grass is actually brown and dying.

So, the premise that if you start your own business, you get to be your own boss and not have to answer to anyone is total GAGOOS. The reality check on this one is not pretty. When you start your own business, you actually have more people you work for. Yes—that’s right—more people to answer to, and more people who affect your future and your pay. These people have even more of an effect on you than any boss possibly could at any job.

How can that be, you ask? Let’s talk about some of the people that you, as a new business owner, work for, and how they can affect you.

Your Customers Are Your Bosses

I always say that the most important asset of a company is its customers, and I will reiterate that again here. If you have no customers—or more accurately, no paying customers—you have no business. It is impossible to have a business without any customers. This gives your customers unbelievable power—they own you. So, if you believe owning a business means you get to be the boss, forget it; the customer is the number one boss, bar none.

If you think that you have worked for some of the most incompetent, god-awful, foolish, horrible superiors before, they may pale in comparison to your new bosses—your customers. This is exacerbated if you work in a business that services end-customers (rather than a business-to-business scenario, which isn’t a picnic either). I have worked for nearly a decade and a half with businesses that sell products and services to the consumer; let me tell you that customers as a group can be beyond anything you have imagined.

Have you ever spoken to someone who works in customer service? If you don’t work directly with customers in your current job, then I suggest you speak with someone who does before going to work serving customers. Some customers will blatantly try to scam you or steal from you. I have spoken to numerous customer service representatives that have recounted stories about people wanting refunds because their dog chewed up a product and now believe it is “defective.” There are the representatives who work for a major bath and home retailer who explained that every year, right after Christmas, customers would return dozens upon dozens of used holiday tablecloths. One customer even had alterations made to the tablecloth to fit her unusually shaped table. The reasons for those returns—it “just didn’t work for me.”

There will be customers that will try to not pay you, there will be ones that try to nickel-and-dime you, customers who return products as damaged that they actually broke themselves, and customers who will take the product out of the box, replace it with something that you don’t even sell, and try to return it for a full refund. There will be customers who will dispute your charge on their credit card because they didn’t like the way they were treated or who will complain that the meal you served them was too cold and needs to be “comped” or discounted. Then, there will be customers who are so lonely that they will want to keep you on the phone, tied-up in person, or engaged in an email dialogue about all of their personal problems (none of which relate to your business).

You will send promotional emails to customers with a 50 percent discount on one item from May 1–6, and dozens will email back asking when the offer is good through, how much is it good for, and whether they can use it when they get paid on May 10. Guess what? All of these people are your new bosses. Lucky you—as a business owner, these are the people for whom you now work!

One of my favorite essays of all time is a perfect example of what you could face. It is called “Reservations of an Airline Agent,” written by Jonathan Lee and originally published in the Washington Post in the mid-1990s. Lee recounts his experience as an airline reservations agent who worked with customers to book flights. Here is one example of what he endured:

“. . . the woman who wanted to know why she had to change clothes on our flight between Chicago and Washington (she was told she’d have to make a change between the two cities)…asking a woman from New York what city she wanted to go to in Arizona, she asked ‘Oh . . . is it a big place?’…and a direct hit from a woman who wanted to fly to Hippopotamus, New York. After assuring her that there was no such city, she became irate and said it was a big city with a big airport. I asked if Hippopotamus was near Albany or Syracuse. It wasn’t. Then I asked if it was near Buffalo. ‘Buffalo!’ she said. ‘I knew it was a big animal!’”

I highly recommend you look up this piece online (it doesn’t have an official URL, but it’s all over the web; just Google it) and read it in full, as it is truly a gem and a great example of what you may have to look forward to in working with customers.

You have undoubtedly heard the saying that the customer is always right. The reason for that saying is that the customer believes that he is always right and if you don’t take care of that customer (right or not) he will soon become an ex-customer. He will also badmouth you to every person he knows, including other existing customers and potential new customers. So, now you have a bunch of different bosses that each think that he is always right, regardless of whether it is true or not.

This may seem but a small annoyance in the grand scheme of things, but let me reiterate why your customers are your number one boss. Unlike your boss at your current job or previous employers who may be able to exercise influence over you if you remain employed, your pay, and possibly who you work with, your customers have much more control and influence. Being fired from a job risks your salary, but if you are fired, you can quickly regroup and seek other employment. If your customers fire you, meaning that they don’t patronize your business anymore, you can’t quickly find replacements, and more than just your salary is at risk. If customers don’t patronize your business, in addition to having your salary on the line, you are risking the entire investment you have put into the business, and all of the collateral you have put up to secure any financing for the business. The customer has much more control and a firmer grasp on you than any boss at any job ever could.

Obviously, you do have some control over whom you choose to serve as a customer or client, as established by Michael Port’s “Red Velvet Rope Policy” in Book Yourself Solid. However, while you can choose to cut loose some potential or existing customers, you still need to have a paying customer base to have a business. And these customers will still dictate how you run your business because if it is not to their liking, they won’t patronize it. Therefore, the customer is still in charge of, or at least has a strong degree of control over, your business’s future. This is the case regardless of whether your client is a consumer or another business.

If you don’t like your boss, you can ask for a transfer or quit and find another job. If you don’t like your customers, you cannot just quit. You are tied down and committed financially and hopefully, emotionally as well. So, think about trading one, two, or a handful of bosses for dozens, hundreds, thousands, or millions of bosses, each with their own agenda.

Your Employees Are Your Bosses

If you have children, you may have realized that even though you as a parent and head of a household should control your household, you really don’t; the kids do. What you do is dictated by the kids, and you usually have to attend to the kids’ needs before you can even think about your own.

Your employees in a business are analogous in many ways to your kids at home. Technically, you are the boss, and you have the ultimate say about their employment with your company. But in many ways, you have to attend to their needs before you can worry about your own. To be productive, you need to set forth procedures for them to follow. If they screw up, you need to fix their mess. If they don’t show up, you need to cover for them. Sometimes, you need to be their personal psychologist and shoulder to cry on, too. And if your employees are not happy, they can wreak havoc upon your business (through sabotage, sheer laziness, or otherwise).

Yes, you control their employment, but they control whether your business is going to be successful and profitable through their performance. Oh, and they get paid before you do. So, who really works for whom?

Your Capital Partners Are Your Bosses

Many entrepreneurs can’t afford to fund their business entirely on their own. They require some sort of outside capital to start the business and to continue operating the business. In fact, even large-scale businesses use outside money (such as lines of credit from the bank) to manage the ongoing functions of their businesses. If you are not funding and supporting your business 100 percent on your own, but rather taking in outside capital of some form, those investors and lenders are also your bosses.

There are two types of investors who invest in new companies. One group is the unsophisticated investors. These are friends, family members, and acquaintances that either know you or know someone who knows you. These people probably don’t really understand your business—in fact they may not really understand business at all—but invest either because they believe in you, have some infatuation with your business idea or model, or because of peer pressure (someone else is investing, and they invest alongside them).

As investors, these people become co-owners of your business. Because they don’t work with you on a daily basis and yet you are using their money, they now want to get updates on a regular basis. They may want to put in their two cents worth of ideas, like telling you, “Don’t you think the store would look so much better with a singing plastic fish on the wall?” Or worse, they may want to come and hang out at your office or place of business. They bring their friends by to show off the business they invested in or demand free or discounted products and services. You will have to answer to these folks, because they are now co-owners of your business and therefore people you can’t ignore. These people, based on their lack of business sophistication, will at best, take up a lot of your time, and at worst, will make crazy demands on you and the business.

Then there are the sophisticated investors. These can come in the form of angel investors or venture capital funds. These are the glitzy investors that are hyped in the media and grace countless magazine articles and news programs. Sophisticated investors fund a tiny minority of all new businesses; for example, venture capital firms finance only a fraction of 1 percent of businesses each year. However, they often fund some of the biggest successes (although, in general, most of the companies in a sophisticated investor’s portfolio will not be successes at all). These investors look at two main things—the strength of the management team (and their belief that the entrepreneur has what it takes to make the businesses successful) and the size of the opportunity. They only invest in businesses that they believe have a business model that has the potential to be a huge winner, knowing that in their portfolios, one big winner will make up for all of the other losers.

Now, sophisticated investors are supposed to be, by definition, sophisticated, so they keep a close eye on the businesses that they invest in, and those businesses need to supply them with a lot of information. Sophisticated investors don’t manage businesses—that is not their job—but they do take their job as investors very seriously. The moment that the business is offtrack, and that means anything from not growing as quickly as you had originally hoped, to having greater expenses than projected—the types of issues that plague most businesses on a day-to-day basis—the sophisticated investors are going to make you answer to them. They are going to give their input and tell you what you need to do to manage the business better. If the business doesn’t improve, or improves but not quite to the magnitude that they want, they are going to take action.

Most sophisticated investors won’t invest in a company without substantial rights (these can come in terms of rights of the boards of directors, voting rights, or otherwise) to protect their interests and the interests of the investors that they represent. These rights nearly always include the ability to remove or replace the management of the company at its discretion. So, if you hit some bumps in the road, your sophisticated investors can actually fire you from your own company! This presents a serious Catch-22 for you, as the cachet, involvement, and capital of a sophisticated investor provides a lot of rewards, but certainly not without risks. Clearly, sophisticated investors, to the extent you take them on, are your boss; you answer to them. In fact, they can even fire you, an option they often give themselves in their investment contract if the business isn’t meeting its financial projections, or make significant operational demands on you, just like a boss at any other job can.

If you take out any type of a loan for your business, then your lender will also be your boss. Lenders provide money to the business based, in part, on staking claim to the business’s (or business owner’s) assets. That means that the bank or other lending institution will give you a loan, but in the agreement it says that if the business goes south, it has first dibs on the assets. Most new businesses don’t have a lot of assets or history, so many lenders require that the new business owner personally guarantee the loan.

A personal guarantee is exactly what it sounds like. It means that you agree that if you fall behind on payments, or if the business is struggling in certain areas and you aren’t complying with the specifics of your lending agreement (called covenants), in addition to handing over the assets of the business if there is any shortfall in value, you will guarantee that the lenders get their money back. This usually requires you to put up some other substantial personal assets, like your house, as collateral. So, if the business is in trouble, you risk not only your paycheck, but all of your business assets, the money you put into the business, and any major loan collateral, such as your home.

Your lender is also clearly your boss, and you have to answer to this boss properly or risk potentially losing everything.

Your Franchisor Is Your Boss

I am a big advocate of having people explore the entrepreneurship angle slowly and methodically. And by this I do not mean that you should spend all of your time strategizing and none of your timing doing. You need to take action, but sometimes in a series of steps that give you appropriate feedback and evaluation points along your journey. Franchising can provide a lot of guidance to new entrepreneurs to help them navigate the new business process (assuming that you are franchising from a well-established, successful franchisor). It helps to minimize, although not eliminate, some of the downside risk, or failure. However, it does this by limiting the franchisee’s choices and decisions in the business process, as well as upside potential.

What this means is that you are “sort of” your own boss. Actually, you really are not your own boss at all. You are what can best be described as halfway between an employee and a business owner, which means that if being your own boss is the motivation behind your wanting to start a business, you are not achieving that fully through franchising. On the Job to Business Spectrum, becoming a franchisee falls somewhere between a job-business and a business.

As a franchisee, you have to follow a number of parameters set by the parent franchisor. This is done to standardize the brand, goods, services, and customer experience at every franchise, so that whether a customer patronizes a franchise in Albuquerque, New Mexico; Camden, New Jersey; or Seattle, Washington, that customer has the same experience.

Franchisors also remove the decision making from you in many areas so you can focus on the blocking and tackling of running the day-to-day business.

Some of the areas that a franchisor may mandate are store location and size, signage, number of employees hired, product suppliers, uniforms, pricing, procedures, marketing practices, hours of operations, training, and ongoing improvements to the business. Franchisors will often audit or inspect franchisees and have secret shoppers patronize their franchisees’ businesses to ensure that they are up to par. They will communicate their vision and ask you to carry it out, while they share in your revenues or profits. They likely have the ability to terminate your franchise if you don’t follow their rules and standards. They may also be able to influence or limit how and if you are able to sell your franchise in the future. So, if you wanted to be the big cheese and not have to answer to anyone, then franchising isn’t going to quite cut it for you.

Everyone Else Is Your Boss, Too

If you thought that customers, employees, capital partners, and franchisors ended the list of who you really work for when you own your own business—just wait—there’s more! The complete list of everyone that you will have answer to when you are your own boss continues to grow. If you have office or retail space, your landlord will give you lists of rules and regulations you must follow (in the case of the latter, perhaps even telling you what hours you need to be open for business and what goods you can carry). Of course, landlords also want to get paid, and if you don’t pay them on time, they will kick you out. Your vendors also act as a boss. Vendors tell you when you have to pay them, what you can order and then, why they can’t meet your deadline, even when they originally promised that they would. Regulatory bodies tell you to file paperwork, apply for permits, and follow other rules and regulations, not to mention require you to pay part of your earnings as taxes.

So, what did you learn? As your own boss, there is a limitless number of people telling you what to do, day in and day out. This is probably not the vision you had in mind when you first thought about becoming the HBIC or the BMOC.

Stella Inserra, whom I mentioned in the previous chapter, thought she would be her own boss when she started Simply Dazzling Events. She said, “Most people think that wedding planning is about designing pretty things, but I have to do what the client wants, based on their aesthetic and taste. I am at their beck and call and at the end of the day we do what they want, not what I want. The customer is the boss, which did not occur to me before I started my business. I thought I would be the boss, but to generate income I have to accept the reality that my clients are my boss.”

In starting a business, you want to be in control of your own destiny. But the reality is that you are at the mercy of a wide variety of entities that you depend on for your business. Sure, they may not set the rules on what hours you need to work, or how to dress the way a typical employer would, but if customers don’t like your brand message or you aren’t working hard enough for them, they won’t patronize your business. You can set your schedule, as long as your customers are available and want access to your business during those hours. You can pick your uniforms, as long as your customers think those uniforms present an appealing and appropriate image to them. When you start a business, you can have employees answer to you, but if they don’t pull their weight, they can bring down your business. You can pick your vendors, but they can affect whether or not you have goods to sell to your customers in a timely fashion. In reality, as a business owner, you have less control now than you ever did before as someone else’s employee.

There is not as much freedom in the “freedom to be your own boss” as you might believe. Please be realistic about what being your own boss means, and the additional responsibilities and costs required to be in charge. The reality is that being your own boss is probably not a good reason to want to start a business.

EXERCISE 2:

TARGET FOCUS—MOTIVATIONS:

Evaluating Control Factors

Think about the people in the organization at your current job (or a job you may be applying for).

1. Write down the names and titles of the people who have control over your career and future. Call this the “job control” list.
2. Next to each name, write down what function(s) these people have control over, including:
   • your schedule
   • your salary and bonus
   • your location (whether you work at home, in the office, etc.)
   • your ability to be promoted within the organization
   • which people in the organization you work with
   • any other areas that are important to you
3. Go back to that list and cross out any names that don’t truly have the full power and influence to make a decision. When you are finished, this should be a fairly short list.
4. Next to each remaining name, write down how you can control these relationships to have more influence over your career path. Feel free to use new sheets of paper if needed.
5. Review the list and evaluate if the issues are specific to your particular company, or if would they improve by finding another job.
6. Now, create a second list of every person who may have control over your success in your own business. Call this the “business control” list. This list may include:
   • your customers
   • your employees
   • your investors
   • your landlord
   • your vendors
   • your franchise parent company
   • anyone else who may have some control over the success of your business
7. Write down what functions each of these people or groups has control over, including:
   • your schedule
   • your ability to make a salary or profit
   • your location
   • your ability to grow the organization
   • your ability to make choices about the business’s focus
   • any other areas of influence

Compare the job control list and the business control list. Do the lists surprise you? Do they justify your motivations? Use these two lists to further evaluate your motivations and make any necessary changes or notes to your baseline motivations list.

AN ILLUSTRATION:
Control, Mobility, and Freedom at a Job and When You
Own Your Own Company