8 Keys To Developing A High-Trust Business Culture

Tony_Hsieh_ZapposEstablishing and maintaining the right company culture is a major key to success in any business these days, especially with the growth of the millennial generation of workers. It has a huge impact on productivity, as well as morale and loyalty to the company. In this age of interactive social media, your culture image quickly spreads to customers, and determines their loyalty.

Everyone knows and admires the leaders, including Google and Zappos, but most entrepreneurs have only a fuzzy idea of what to do to get there. If you are looking for specifics, as well as the science behind it, you should take a look at a new book, “Trust Factor – The Science of Creating High-Performance Companies,” by Paul J. Zak. He says trust is the key to a good culture.

Zak is the director of the Center for Neuroeconomics Studies at Claremont Graduate University, and he has studied the connection between trust and performance all over the world. Trust causes the brain to release oxytocin, which stimulates productivity and raises motivation.

So, how do you build trust? He cites eight leadership actions, which I also recommend, from a non-scientific perspective, as a mentor to entrepreneurs. Start with these to build the great business culture you need to succeed today:

  1. Show appreciation for individual contributions. Your team, and every individual, needs regular recognition for their accomplishments. The most effective recognition is a daily “thank you” from leaders, and positive feedback in front of peers. Monetary rewards are nice, but don’t generate the long-term trust and loyalty you need to set the culture.

  2. Make sure everyone knows what you expect. No team member feels good or performs well when they don’t know what needs to be done. Regular communication, both written and oral, is the place to start. It’s actually important to set high expectations – people like to be stretched, but not broken, for the highest morale and productivity.

  3. Let team members take control of their work. Employees don’t like to be micro-managed. Make sure the challenge is clear, but let team members do the job in their own way. Always be prepared to mentor and assist, but empowering people to share their expertise and choose how to do projects engenders the culture you need to win.

  4. Flatten management levels. A recent Gallup survey reported that 81 percent of employees would prefer to manage themselves, if their company created the right culture for it. Multiple levels of management work against this, and are not really needed when team members take more responsibility for their actions, and select their own teammates.

  5. Share more information about the business. Only 40 percent of employees report that they are well informed about their company’s goals, strategies, and tactics. All the evidence says that openness promotes trust and loyalty, rather than burdening the team. Being open is a two-way street, requiring active listening, inclusion, and responsiveness.

  6. Practice employee caring and empathy. Actions speak louder than words in building real rather than artificial relationships with the people around you at work. Caring and empathy don’t require tolerating a lack of respect or inability to perform. In fact, just the opposite is true – recognizing problems and doing the right thing are the ultimate caring.

  7. Invest in employees’ career and personal growth. Leaders who show real interest and commitment to their employees as “whole persons” quickly generate trust and loyalty. Everyone wants feedback on their performance, new career options, and work-life balance guidance. This requires leader effort daily – annual reviews are not the answer.

  8. Demonstrate honesty and vulnerability. The best entrepreneur leaders today build trusting cultures by being warm, competent, approachable, and relaxed. Everyone knows who is in charge, but the leaders don’t hide an occasional shortcoming, and are openly honest without negative emotions. They favor a “leadership by all” culture.

It’s important to get it right the first time, because repairing and replacing a negative workplace culture is far more time consuming – change is always difficult. Equally important, you need all the productivity and loyalty you can get right up front with a startup. In addition, very few people get a second chance to be trusted.

Marty Zwilling

*** First published on Huffington Post on 01/21/2017 ***

money-entrepreneurUntil the recession a few years ago, market research indicated that as many as 90 percent of the roughly 20 million American small business owners were motivated more by lifestyle than growth and money. More recently, the desire for extra income has become the key driver in new startups, according to a 2015 study. It seems that more people are focused on money today.

Being called a lifestyle entrepreneur should be a point of pride, not an insult. The term applies to anyone who places passion before profit, and intends to combine personal interests and talent with the ability to earn a living. This usually means not taking money from equity investors, since investors want fast growth, high profits, and an exit event, to allow investments to be recouped.

Of course, even lifestyle entrepreneurs want to be happy, and want their business to be “successful.” According to William R. Cobb and M. L. Johnson in their classic book, “Business Alchemy: Turning Ideas Into Gold,” these different success expectations are what separates a lifestyle entrepreneur from a growth entrepreneur:

  1. Owner is the only one “in charge.” Every lifestyle entrepreneur starts their business to be their own boss and follow their passion, so they don’t even think about having investors, a board of directors, or going public. If you think corporate bosses are tough, wait till you start spending investor money, or try satisfying Wall Street and stockholders.

  2. Insist on being engaged at the transaction level. If you are living your passion, you want to interact with customers, and “touch and feel” the product every day. Growth entrepreneurs find that this fun world quickly changes to managing personnel problems, tuning organizational structures, and dealing with testy investors.

  3. Income generated is part of the owner’s personal income. The legal structure of these startups is usually a sole proprietorship, a Limited Liability Corporation (LLC), or a sub-chapter “S” Corporation. Under all of these, net income flows easily into your personal income. Corporate versus personal growth really becomes a lifestyle decision.

  4. Startup funding comes from personal savings and family. There is no free lunch for money. Non-equity funding has to come from personal sources, or government grants, or bank loans. Of course, that doesn’t dilute the owner’s equity, but it may well limit you to organic growth, versus international rollouts and acquisition options.

  5. Business model to maintain lifestyle is the primary driver. The lifestyle entrepreneur chooses a business model to make a long-term, sustainable and viable living, working in a field where they have a particular interest, passion, and talent. They operate the business to sustain a minimal level of cash flow necessary to support the lifestyle.

  6. Maximizes owner personal tax privileges. This means that owners can look for every opportunity to get a personal tax advantage from the business, like charging vehicle operating costs to the business, renting facilities from themselves, or managing business and personal travel.

  7. Enjoy being visible and active in the local community. Lifestyle business owners usually benefit and enjoy being a part of the local Chamber of Commerce, Rotary, and other civic organizations. These can become part of balancing your lifestyle, rather than part of the stress of business-driven networking.

  8. No exit planned until retirement. A lifestyle business becomes an integral part of an entrepreneur’s identity and their life. If, and when, the time should come to “exit” from the business, they will often seek to transfer it to a family member, or simply close it down.

In my view, lifestyle entrepreneurship should be growing in popularity, rather than shrinking, as technology provides startups with the cheap digital platforms needed to reach a large global market. Also, more women have been jumping into entrepreneurship, and they have long wanted to make their business and personal lives and aspirations work more in harmony.

Younger Gen-Y entrepreneurs also tend to be more passionate, idealistic and not driven by money, so I would expect to see them trend up in lifestyle entrepreneurship. I’m told that Mark Zuckerberg of Facebook started out as a lifestyle entrepreneur. I wonder if his billions today have changed his mind?

Marty Zwilling

Business-People-Team-Business-Meeting-WorkplaceStarting and running a business is hard. Don’t believe the old myth that with a few hours of work a day and a great web site, you can get rich while you sleep. I have found that the most successful entrepreneurs and business executives have an impressive work ethic, and they surround themselves with a team of comparable commitment. Business is more about people than product.

As an angel investor in startups, I often find myself looking harder at the quality of the team and the leadership, than at the details of the product and business model. I’m a strong believer that a great team can achieve success with a less impressive product offering, while potentially disruptive technology often goes nowhere due to a team with an uninspired work ethic.

The challenge for you as a business professional and leader is to develop the work ethic you need to compete, and to recognize the essential elements in every partner or team member you associate with. In my experience, and from the thoughts of others who have “been there and done that,” here is my list of the top elements you should be looking for:

  1. Focused on customers and team, rather than “me, myself, and I.” The best work ethic for business is all about serving others, or win-win relationships rather than win-lose deals. These will provide the competitive edge you need with customers and less-focused team members. You need team members who genuinely enjoy delighting others.

  2. Demonstrates an ability to listen and learn. Investors don’t fund people with large egos, and your business won’t thrive with similar people on the team. No single person knows enough to solve every problem in a business, so the best business executives are always anxious to listen and learn from others, especially mentors and customers.

  3. Dependably and reliably delivers on commitments. Never makes excuses. People who always take responsibility for their actions are a joy to work around, and are appreciated by other team members and customers alike. As an investor, you can rely on these business people to do everything possible to deliver, despite unusual challenges.

  4. Consistently professional in business communication. This starts with responding to phone calls and emails in a timely and professional manner, and extends to thoughtful and unemotional exchanges in all discussions, business or personal. For your own business, the right time to address expected norms is during coaching and before hiring.

  5. Treats everyone with respect, and expects it in return. This also includes showing an understanding of the value of customers, and honoring the line between work and play. Investors read this as being trustworthy of their investment, and an appropriate role model for all business constituents. Solid relationships are critical to every business.

  6. Shows initiative and enjoys giving more than receiving. Initiative is all about giving now and assuming a payback later, rather than the other way around. Of course, leaders need to encourage this action by making their objectives clear and rewarding results rather than effort. People with this work ethic are seen as ambitious and dedicated.

  7. Always display confidence and a positive attitude. No business thrives with people who can only see the negatives and risks, or don’t have the confidence to believe in themselves. The attitude that people display is most importantly the outward expression of internal views. You need positives to radiate to the team, partners, and customers.

While there are encouraging signs that the work ethic in many businesses is improving, the latest Gallup poll still reports that almost 50 percent of employees are “not engaged” and 16.5 percent are “actively disengaged.” Your challenge is to rise above these statistics by smart hiring, effective training, and building a culture of customer, society, and team focus.

Google, for example, has been recognized for years as fostering a culture and work ethic that gives them record levels of productivity, high customer satisfaction, and employees who are known to be driven, talented and among the best of the best.

Through this approach they achieved the early investor funding they needed, but more importantly they continue to achieve a level of business success and satisfaction that every business envies. Match their focus on work ethic, and you too can join them.

Marty Zwilling

*** First published on Inc.com on 01/05/2017 ***

road-sign-scam-alertSome aspiring entrepreneurs are so desperate for funding, or naïve, that they ignore the obvious signs of scams and rip-offs on the Internet, praying for a windfall. One would think that with all the sad stories and tools published over the past twenty years, this problem would be behind us. But people are still begging for more technology or laws, often to protect them from themselves.

As examples, I present my list of ten of the most common ways entrepreneurs can be victimized by ignorance or greed, based on questions and stories I get from entrepreneurs and associates. Most of these are easy to avoid if you do your homework up front, but can cost you dearly if you get sucked in. Use the common sense suggestions to avoid the pain:

  1. Decoy investor scam. Here someone who is not a registered financial broker contacts you on the Internet, tells you about all the people they know with money, then turns around to ask for a “retainer” or fee to cover their time and efforts. No real investor or venture capital firm asks for money from the company they are intending to invest in.

  2. Off-shore unsolicited investor offers. Unsolicited foreign investors that contact you on the Internet need extra scrutiny. If you feel confused by conflicting time zones, differing currencies, and up-front costs, it’s time to run the other way. The SEC and local law enforcement agencies can’t help you much with foreign scams.

  3. Deposit required to hold your terms. In this scam, you are offered a very attractive term sheet due to close in 90 days or so, with a deposit required to hold your position while due diligence is being conducted. Don’t count on ever passing due diligence, or even getting that deposit back. Professional investors don’t work this way.

  4. Loan offer in lieu of investment. Watch out for unsolicited loan offers via the phone or Internet that seem to offer quick approval, but require mandatory “premium fees” or “processing fees” up front, payable by money order or electronic transfer. Even if you pay the fees, you probably won’t see the money and won’t find the lender.

  5. Phantom fund investors. These solicitations, usually via the Internet, claim to represent a large fund that they can’t disclose, until you have been “qualified” for the investment. They promise to provide all the info at the time of close, after you sign a non-disclosure agreement. The close will never happen, but you will be stuck with large services fees.

  6. Pump and dump stock schemes. Don’t fall for claims from “insiders” who offer stock that you can turn around quickly. It’s usually stock that has been artificially pumped up by their big buy, who take their gain when you buy, and leave you with a big loss on their dump. A variation is “short and distort”, where their profit comes from short selling.

  7. Work at home to fund your startup. Beware of any offer that asks you to spend money before you can make money, to buy a starter kit, education, or tools. For more details, see this recent article from the Better Business Bureau outlining the most common pitches to avoid.

  8. Cash transfer assistance funding. I continue to be amazed that some government agency reportedly still gets 100 calls per day from victims of the Nigerian unclaimed cash scam alone. People who fall for this one must be really greedy. The best answer is the age-old wisdom that if it sounds too good to be true, it’s not true. Delete the message.

  9. Chain emails leading to a windfall. This is the classic pyramid scheme where you get an email with a list of names, asked to send a few dollars to the person at the top of the list, add your own name, and forward the updated list to a number of other people, resulting in a huge return to you. You risk being charged with fraud if you participate.

  10. Won the lottery. How can you win a lottery you never entered, usually in another country? A simple inquiry or response to one of these emails will get you permanently tagged as a prime scam candidate, meaning a flood of new deals. Delete these quickly.

Beyond the cases mentioned here, if the message or approach sounds suspicious, I recommend you visit Snopes.com, a website detailing thousands of known scams and hoaxes. With this website, and about 75 others like it, I find it hard to believe that user naïveté is the problem.

If people could get past their greed, hubris, sense of entitlement, and use common sense on the Internet, these problems would fade away due to lack of return. I’d much rather see your entrepreneur resources and energy focused on real opportunities to improve the world we live in.

Marty Zwilling

Social-Sustainable-businessBusinesses are finding that being socially responsible can be great for the bottom line, as well as good for employee morale. Of course, a company still needs to make a profit to survive, but supporting a worthy cause can be the most profitable brand building you can do. Witness the growth and popularity of Patagonia in outdoor clothing, and Ben & Jerry’s ice cream.

Both of these are incorporated under the new structure of a Benefit Corporation (B-Corp), now offered by 30 states in the U.S. For example, Patagonia donates one percent of their sales to environmental charities, and Ben & Jerry’s awards five social change grants annually.

In fact, most of the advantages can accrue to any business type practicing corporate social responsibility (CSR). Zappos, owned by Amazon and selling shoes online, has dramatically enlarged their business by donating shoes to charitable organizations, and by fostering an exciting internal culture through a focus on the well-being of their employees.

As an advisor to many new businesses, I see a host of advantages for every new business by being socially responsible today:

  1. Expands the potential customer target market size. Social contribution and sustainability are features that appeal to a whole new class of customers for any solution. These features are extremely important in penetrating customer sets in different cultures around the world, and more discerning customers in every geography.

  2. Incents customers to pay a premium price. Sustainability and social responsibility are ways to extend your exclusivity and added value, thus lowering risk, improving profitability, and justifying a premium price. All stakeholders see this as an advantage, encouraging new investors and raising the valuation of your business.

  3. Increases customer advocacy and loyalty in all markets. These days, existing customer advocacy is a key attractor of new customers. In addition, according to recent statistics, the cost of bringing a new customer to the same level of profitability as old ones is up to 16x more. Loyal customers post great reviews and bring in many new friends.

  4. Is seen by customers as a competitive edge. Most millennials and customers of all ages these days strongly believe that all businesses must be socially responsible, and make that a top criteria for selecting a solution source. It’s a message that you can use both indirectly and directly in your brand positioning and marketing.

  5. Improves your team motivation and productivity. Sponsoring social initiatives and providing time for employees to support their own initiatives builds loyalty, pride, and motivation among team members and disparate organizations within the company. This makes everyone in the company more engaged, more responsive, and more productive.

  6. Improves employee retention and attracts better candidates. Company success is driven by the quality of the team members they can attract and retain. If your business is recognized as providing a socially responsible culture for employees, as well as comparable initiatives outside the business, the best and the brightest will join you.

  7. Provides governance flexibility and financial grant opportunities. B-corps are given relief from the sole directive of maximizing shareholder profits, to reduce investor suits. With targeted social initiatives, they may also qualify for government grants, alternative energy rebates, and philanthropic initiatives in support of their efforts.

  8. Makes your business more attractive to investors. Investors look for teams with real passion, integrity, and an attractive message. They see a commitment to social change as great positioning for the long-term, with sustainable value to customers and owners alike. They look for that balance between maximizing profit and expanding the market.

A potential offset to all these advantages is that balancing act that is required between social initiatives and the focus on making more money for survival. It takes a strong and adept business leader and entrepreneur to make the right tradeoffs. It’s time to take a hard look in the mirror to see if you are ready to take your business to the next level. The opportunities are endless.

Marty Zwilling

*** First published on Inc.com on 01/02/2017 ***

non-verbal-communicationEffective communication is an absolute requirement for successfully starting a business, but it doesn’t come naturally to many entrepreneurs. Communication is considered a social skill, and inventors and engineers, for example, are not known to be social butterflies.

Founders have to communicate their ideas and products to investors, business partners, and the rest of the team. Then, hopefully, come customers, distribution channels, and going public or merging with an attractive buy-out candidate. Communication is not just talking, but also writing, body language, and “actions speak louder than words.”

John Spence, in his classic book “Awesomely Simple” says that the single biggest problem he has to deal with in client companies worldwide is the lack of open, honest, robust, and courageous communication. He narrows down the problem to the following six aspects of communication, and I agree:

  1. Honesty. This element is without question the most important in building strong communication in a startup. The implementation is simple – just tell the truth all the time, every time. It’s a lot easier than trying to remember what you said the last time, and people notice quickly. Build a culture of truth, and others will follow your lead.

  2. Empathy. It is one thing to be honest; it is another thing to be brutally honest. Tell the truth in a frank and direct, yet respectful and empathetic, way. Shoot straight with people, but don’t shoot them between the eyes. Body language and sincerity are important here.

  3. Courage. You need the courage to put even the most difficult and challenging subjects on the table and lead the discussion. Don’t wait until tomorrow, hoping the problem will go away. Courageous means that team members have the nerve and confidence to question authority, rather than dutifully fall in line behind a bad direction.

  4. Safety. If you want people to tell the truth, you have to make it safe for them. Here is where your actions speak louder than your words, and louder than any written policies. If you obliterate someone for telling you the truth, you will never hear the truth again. If you are caught in a lie once, you will never be believed again.

  5. Intellectual rigor. Although people should be safe, ideas should not be. In an intellectually rigorous culture, theories are tested, and people welcome, even encourage, critical examination of ideas and information, regardless of the source. The goal is for only the strongest ideas to survive.

  6. Transparency. The hallmark of great leaders and organizations is that they share as much information with all of their stakeholders as often as they possibly can, in multiple contexts. Yet many leaders will tell me that they are continually amazed to hear the common complaint “why didn’t anybody tell me this was happening”.

Spence says that the best way to improve your organizational communication levels is to improve your own interpersonal communication skills. Luckily, these are skills that can be taught and learned. It takes practice and hard work, but with time, it is possible to greatly improve.

The key skills for superior interpersonal communications are effective use of body language, focused listening, expert questioning, using multiple sensory modes, providing both logical and emotional arguments, and listening for ambiguous or emotionally loaded words. But these are subjects for another day.

If you are one of those entrepreneurs who struggles with every email you write, take heed of the importance of the basic principles above, and take inspiration from the fact that you can and will improve your skills, if you are willing to work at it. But make no mistake about it, being an entrepreneur who does not communicate is not an option. Start today, and do it every day.

Marty Zwilling

career-advancementEveryone knows that that startups are risky, but they also expect that the job will be exciting and potentially very lucrative (think early employees at Facebook and Google). Yet we have all heard stories about the high turnover, unstructured work environment, lower base pay, and unpredictable expectations from the top.

Assuming you are lucky enough to get hired, what can you do to survive, and even stand out above the rest in this environment? Here are some tips from a classic book by Harvey Mackay, “Use Your Head to Get Your Foot in the Door,” which work even better in a startup than they do in a bigger company:

  1. Make yourself indispensable. The truly indispensable person in a startup is a problem solver, because every startup has plenty of problems. Very few people are willing and able to take on any challenge, and make it work. You can’t outsource that one.

  2. Volunteer. This is related to the first item, but more specifically means the willingness to take on tasks that others could and should do, but hate to do. There will always be a place in this world for the person who says, “I’ll take care of it.” And then does it.

  3. Stick out and shine. Many employees like to keep a low profile, thinking that will minimize their workload, but it also maximizes their risk. It pays to be visible in any way that’s positive for the company. It could be managing the company picnic, or being the office “go-to” person for computer questions.

  4. Don’t hang out with gloom and doom. Some people love to gripe about management, the pay scale, and career opportunities. Even if you never utter a negative word, don’t tag along with this bunch, or you will be written off as a silent sympathizer.

  5. Be a builder … and a rebuilder. When the organization changes, be the first to help the new organization work, even when it costs extra hours and sweat. If you see a customer service problem hurting the company, step up proactively with a proposal to fix it.

  6. Always position yourself as number two to your next career opportunity. Initiate activities that improve your chances of being the chief’s backup. Then focus on ideas that will likely get your boss promoted. You will likely be the dark horse that fills the slot.

  7. Persevere. In a struggling economy, it’s so easy to throw in the towel. Executives always have their eye out for people who do the opposite and engage in tough challenges. These are the ones who stick with finding a solution even after many reversals.

  8. Educate yourself one notch up. Study the resumes of managers on the next level and do your best to match or even surpass their career credentials. Not just degrees, but loading up on books, business journals, and blogs that your top executive favors.

  9. Pay attention to your image. You attitude and the clothes you wear assert your authority to subordinates, peers, the media, and customers. Your company is spending real money on its image, so make your own personal “brand” an asset to the company.

  10. Think big picture. Some issues aren’t worth winning. You can win the battle and lose the war. If your boss takes credit for one of your ideas, use it as an opportunity to point out how you think alike, rather than berating him in public for the lack of attribution.

In the real big picture, if your prime focus is keeping your current job, you are already in trouble. You should be thinking about your promotion to the next level in this company, the next level in the next company, and then on to starting your own company. The satisfaction of creating jobs is a lot greater than keeping this one.

Marty Zwilling


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