Paul Giannamore: One of the most important things to do is to take a step back, break down the business into a myriad of routines, think about how they interact together as a system, and then document them.
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Paul Giannamore: Fat Pat. I’m down here in Puerto Rico with no water. I asked my wife over coffee, “When did running water become common in the industrialized world?” Let me ask you that, Patrick. When was that the case?
Patrick Baldwin: There's an interesting history lesson. Why do I think of the Roman Aqueducts? I have no clue, Paul. That was way before the industrialized world.
Paul Giannamore: Let me make my question more precise, when was indoor plumbing common? You're right, there were aqueducts, but those were large-scale products taking waste out of the city as opposed to piping fresh running water into a home.
Patrick Baldwin: Since you clarified your question, I still don’t know. In 1845.
Paul Giannamore: Pretty close.
Patrick Baldwin: No kidding?
Paul Giannamore: Yeah. 1829 was the beginning of it. In the 1840s, it became more common amongst the wealthy and then it wasn't standard fair until early the 1900s.
Patrick Baldwin: By the way, no hands, and I didn't google it. That was a wild guess. It's things we take for granted. I feel your pain. I'm thinking about when we had no running water and no electricity. My deepest condolences.
Paul Giannamore: I'm here in the office and there is running water, at least for the time being. I was thinking about the episode and decided to switch it up a little bit based on a lot of the comments that we've gotten. We asked the question about expanding and what is important for our readers. I was going through those. Of course, everyone likes something different so you can't please everyone. There were a lot of folks who like it when we get into the nitty-gritty, so to speak, on certain topics.
We're in the middle of winter, it's February 2023, and the season is upon us. I was in the coffee shop yesterday, the one that you've been to, abutting the office here. I didn't pay attention to this at the time but when we were talking about what show should we do, it all hit me. I was sitting there having a cup of coffee and at the table next to me were a boss and a new employee. The boss man was trying to explain to the employee a variety of different processes at the business.
I'm not exactly sure what business it was but he was talking about how we measure inventory, how we scan the stuff, how it's important to do X, and how it's important to do Y. This young girl was sitting there and she was taking notes looking thoroughly confused. Patrick, I thought we were at the start of the season. What are some things that owners can do out there to make 2023 a little bit more efficient and a little less chaotic?
As you'll recall, we had John Roberts on here, The Modern Firm, and that Impossible book. One of the things he does talk about in the book is people, architecture, routines, and culture. Of course, I'd like to add an S in front of that and call it SPARK, with strategy. We've never talked much about routines and routines are a lot of the almost automatic processes within a business that happen almost subconsciously.
Somebody calls the firm and says, “I have a problem.” “We're going to schedule a technician. What's your issue?” Try to sell it over the phone. You've got how credit cards are dealt with, you've got the accounting process, and you've got a variety of routines that live within an organization. The majority of the time, they're not standardized or documented because firms start small and you don't have to do that when you're one person.
When you hire another person, you sit down with that person. I'm a one-man shop. I hire a technician. The wife might be answering the phone and doing some bookkeeping work. I sit down with a technician, you're going to ride along with me, we're going to get you a license, take care of, and you're going to learn on the job. It then goes from there and you have this transfer of tacit knowledge. Business owners who are the architects of their firm never sit down and think about how routines will be organized in a systematic and methodical way.
Over time, what ends up happening as the firm gets larger and larger is chaos grows at an exponential rate. Some firms sit back and try to unpack all the routines within the organization, standardize them, and make them efficient, and others do not. By the way, I can see the results of that. As the firms grow over time, you can tell the ones that have focused on understanding routines and attempting to pull the chaos out of it.
Back to the cafe discussion, these basic routines within an organization like managing inventory. How are things scanned? How are we counting inventory? How are we ordering inventory? That's something that should be documented, there should be a checklist for that. In a pest control business, how is it that we answer the phone? What's acceptable language? If you take high-end hotels like The Ritz-Carlton, for example, they have their own almost encyclopedia of vernaculars. I can't remember what it's called. I've seen it before.
Patrick Baldwin: Lexicon?
Paul Giannamore: Yes, exactly.
Patrick Baldwin: Is that the right term?
Paul Giannamore: I believe so, Patrick. We're going to let you have it. Things as basic as, how do we greet a customer when somebody calls in? What's our methodology for selling the account over the phone? Is there a standardized process for entering it into field routes, pest packs, service suites, or whatever you're using?
A lot of this stuff has never been documented. How do we deal with checks? How do we deal with credit cards? When you look at the bookkeeping and accounting routines within an organization, that's where a lot of chaos lives. These routines have never been established, they've just grown out of necessity. I think about coming up on the season and some things that people can do to get themselves organized is to take a step back and look at every different department and aspect of their business.
Get your team together. It's the middle of winter and it's slow so get your best technicians together and say, “Let's formalize a training program. Let's put together our own body of knowledge.” When you show up at a customer's home, where do you park your truck? When you approach the door, how many times do you ring the doorbell?
When they open the door, do you stand back? Are you putting booties on? Are you wearing gloves? All of this body of knowledge that's transferred tacitly, for those of you who haven't taken the time to do a step-by-step of every different routine in your organization, can be extremely helpful. That's where I'd like to go, Patrick.
Patrick Baldwin: I'm still thinking about the name of the coffee shop.
Paul Giannamore: Don Juan.
Patrick Baldwin: It's not San Juan?
Paul Giannamore: No, it's Cafe Don Juan. That's where I lost you.
Patrick Baldwin: Not at all. It’s interesting because what ends up happening if something is not documented as you grow is it becomes this operator. You tell me, I tell so-and-so, and so on. All of a sudden, whatever the founder was originally doing is now 5 degrees or 10 degrees of separation, “So-and-so told me this.” They modified it and morphed it into what worked for them and then so on. We documented a lot of stuff, especially when we went through the franchise process because then we delivered a system to the franchisees but that was years ago.
It even came up at NICOA. We were having dinner with a couple of companies there. The attention span today is so short. TikTok is changing our brains if we just sit there on TikTok. Going from what you're talking about at Don Juan, watching that oral presentation of our inventory processes, is written the way to go now like documentation? Do we need to do video clips? It’s like, “Here's how you pull up to the house.”
Paul Giannamore: You can do video clips. You have the concept of some people like to read, other folks like to hear things orally, and some prefer video. Most of the documentation that I see tends to be written. You can effectively set up a nin-house Wikipedia that's searchable. Atlassian provides that. There are a lot of software companies out there that'll allow you to put together an in-house Wiki where an employee can log on and search for a topic.
Certainly, in trades like pest control, you can get technical in how inspections are performed, how applications of certain products are applied, and so on and so forth. There's a lot of benefit in that. I also think there's a benefit to general office routines. I started to think about this after I was listening to this chaotic conversation in the coffee shop. I started to think to myself, the majority of the management consulting industry is built on entropy within an organization and the lack of clearly defined routines. That's what these guys do.
Patrick Baldwin: Did drop entropy on me?
Paul Giannamore: Yeah. It becomes chaotic over time. You don't have these formal systems in place and these guys go in there and try to clean up the mess. If you're an owner, you can do $10 an hour of work or you can do $20 an hour of work. You can go out and spray bugs and do $25 an hour of work or you can continue to move up the ladder. Every hour of production for you becomes of higher and higher value and that's how you create wealth.
Ultimately, for the wealthiest of society, an hour of production from them is $5, $10, $15, or $50,000 per hour as opposed to $25 per hour. Sitting back and thinking about the organizational design of your business and thinking about how you're going to set up the routines is extremely high-octane, it's a pain in the balls, and no one wants to do it, I get it. It's painful. If you're not in this alone and you've got a team, your team should be on this.
We did this here years ago at Potomac. I’ll credit Erika for extensively running a focus on setting up appropriate routines and she did a great job when we internally documented every aspect of the process. We've got checklists for everything. When materials are put together, we go down checklists. When we're going through financial statements, there's what you see and then there's a cause and effect behind those.
She's got 800 questions or so on financial statements to understand what's going on behind the scenes. That way, we don't miss anything. We’ve documented everything and we've got checklists. Whereas, before, it would take us a month to fully vet and value a pest control company. This was years ago. Now, it can be done at lightning speed because we've got it all documented. Those routines are all on paper.
Patrick Baldwin: I think about it and it makes sense for the office and administrative tasks that are repetitive inventory service. I could see it for the most part. A house is a house. For the most part, they're similar. What about sales? What if an owner happens to start a business and doesn't have much formal sales training and begins to document what he does? He might have built his business on relationships in the community, hires a salesperson, and that salesperson can't follow the same process because they don't have that intangible. How's he going about documenting sales?
Paul Giannamore: I don't suggest folks document and routine things that they know nothing about. When you look across pest control, for example, an extremely litigated area that a lot of people don't know about is a lot of these door-to-door businesses are suing each other because they have their sales manuals, “I sold for XYZ company last summer. I've got all their sales materials, their manuals, their protocols, and so on and so forth.” I take that stuff and I start Paul's Pest Control and I start using that and then the owner of the other company finds out and he sues me. I've been involved in at least ten transactions over the past last five years where the actual client was going through some litigation either as a plaintiff or a defendant for that purpose.
Patrick Baldwin: I had no clue.
Paul Giannamore: I would say that sales expertise, at the end of the day, owners need to look around and say, “What can I go out and buy on the open market? Can I go out and bring somebody in, bring Patrick Quigley, or one of these guys in who knows how to sell, help me train my staff, and help me document that?” If sales is an important routine, it should be documented and there should be a process to it.
I've had these discussions over the years with guys like Tony Sfreddo and Andrea, who we had on the bus. She was the sales manager for Triple S. When you get into it, there's a process for commercial sales, how many calls you need to make, how you should go out, and cold canvas. What do you say to these people? You go out to Joe's tool and die shop, how do you approach that? What do you give them? What materials? How often do you follow up? How many calls should you be making a day? There is rhyme and reason to that and it can be put together and it can be documented on paper.
Patrick Baldwin: I’m curious, based on a big need right now. We talked about this as recently as David Dart's interview. What's the process for hiring and recruiting? I don't even know where I'd start.
Paul Giannamore: I love the fact that you asked that question because we talked about Thinking, Fast and Slow.
Patrick Baldwin: I started reading it, Paul.
Paul Giannamore: What did you think so far?
Patrick Baldwin: It's a slow read. It uses big words, Paul. Two syllables, I’m like, “What?”
Paul Giannamore: There's a chapter in that book, Patrick, and the chapter is Intuition versus Formulas. In that chapter, he talks extensively about the use of algorithms in hiring processes. For example, he takes a variety of different cognitive biases like the Halo Effect, for example, which we're not going to go into. You'll have to read the book. Kahneman talks a lot about if you want to interview somebody, you're hiring for a position, some people are good interviewers, some people are not, and it's difficult if you're the interviewer to not be biased based on a variety of things that you see from the candidate.
In this book, there's a guy named Paul Meehl, who was a psychologist way back in the day. I don't remember the years but I do remember the name of the book, it was Clinical Versus Statistical Prediction: A Theoretical Analysis and Review of the Evidence. What he talked about is in order to make great hiring decisions prior to an interview, you should have a small handful of specific predictive questions that you've determined. Your entire interview should be focused on those specific questions and you should mathematically rank your interview candidates. Overwhelmingly, you'll have better success in making hiring decisions.
When you get to that point of the book, we won't belabor it now, but we can talk about that, and that's routinizing your hiring process. Inevitably, businesses don't have set questions. Let's say you're hiring a technician and I've seen a million different processes. Let's say you got Fat Pat's Pest Control out there, you got 40 people, and your branch manager might say, “Fat Pat, I need another technician. Get some applications. Let's get some people in here.” Maybe the branch manager does the first round of interviews, six people, whittles it down to three, and then they come into you. Fat Pat sits down and does the interview.
The extreme majority of firms don't have a formal routine, not a documented routine for how they're going to make that decision. Putting thought in advance as to the types of predictive questions that you could ask, spending time with your team in order to identify the characteristics and traits of the individuals that you want, and then figuring out the questions that will allow you to get honest and true answers as opposed to walking away from the interview and having all your own biases based on how they've performed in the interview is an extremely valuable aspect.
Patrick Baldwin: Not that I think about it, even similarities, we go to the same church, we love Chick-fil-A, or we grew up in Grapevine. I'll have vulnerabilities based on two humans that have common traits. I love it, quantifying it. To think it can make a process out of that. Fat Pat is going to be awesome.
Paul Giannamore: He ends the chapter by saying, “These preparations should take you half an hour or so, a small investment that can make a significant difference in the quality of people you hire. To avoid halo effects, you must collect the information on one trade at a time scoring each before you move on to the next. Do not skip around to evaluate each candidate, add up the six scores. Because you are in charge of the final decisions, you should not close your eyes. Firmly resolve that you will hire the candidate whose final score is the highest. Even if there's another one whom you like better, try to resist your wish to invent broken legs to change the ranking.”
“A vast amount of research offers a promise. You are much more likely to find the best candidates if you use this procedure than if you do what people normally do in such situations, which is to go into the interview unprepared and to make choices by an overall intuitive judgment, such as, ‘I looked into his eyes and liked what I saw.’’ That's the last paragraph of the chapter. You can read about algorithms in the hiring process in Thinking, Fast and Slow. I'm glad you asked that question because you asked me what would be particularly helpful to a businessman and there's a ton of that in there.
To round out the routines discussion, I do think that there's an opportunity, Patrick, for people here in the middle of winter to sit back and say, “Let's find the most mundane, boring, and thoughtless processes within our organization. We can start with answering the phone, we can start with how information has entered into the computer system, and so on and so forth. If you break down each routine and do its smallest chunk and think through that and document it, this is not a difficult task. You're not sitting down putting together an operations manual for your entire company.
What you're doing is taking one routine, one automatic function, and saying, “How should this be replicated throughout the organization?” Documenting that on one page and then having a drink and saying, “I have accomplished something.” Over a few months, if you get your staff involved in this, it'll give you guys the opportunity to debate what we should and shouldn't be doing in the first place and flush out routines that have gone awry.
Patrick Baldwin: If you have the ability to hire someone to come and begin documenting as an observer, don't interact, just observe. Document this process, “How does this person do on the phone?” If you have multiple people answering the phone, without a documented process, they're probably going to answer it differently. You've got to figure that out. Get consistent.
Paul Giannamore: Certainly, if you've got five CSRs and everyone's doing their own thing. It's an opportunity for you to sit down with your CSRs and say, “Let's standardize this. How do we want the rest of the world to view our firm from the second they call us?”
Patrick Baldwin: In your years of experience, all the deals you've done, do you see a glass ceiling, for lack of a better word, or upper limitation for the companies that don't have this document? They come to you and say, “Paul, we want to sell.” You're like, “Where are your processes?” All of a sudden, you're like, “This is why there's so much untapped potential in your business because you don't have processes lined out.”
Paul Giannamore: Oftentimes, folks will come to us and the first part of the valuation process is the financial aspect. As I always say, the financials are the results, those tell us the what. There's then the cause and effect behind that. The deeper you get into the organization and start to ask questions, you can understand quickly those who have formalized and systematized the routines within the organization because it becomes repeatable and replicable. It is difficult to grow a business of scale if you haven't done that.
You can do it. Tacit transfer of knowledge happens every single day. What I mean by that is in a non-written form, from one employee to the next. There's always going to be that aspect. The things that are so mundane, that's where we look at it and we say, “This is simple. It doesn't need to be documented. Answer the phone, talk to the customer, and enter it into the system. We get money in and it gets deposited on Friday. It's simple.” Those are the things that should be written almost in stone that this is exactly how it's done because it's a whole hell of a lot easier to train a new employee with those systems and rules put into effect.
Patrick Baldwin: What's the risk? Is there an upper limit that you see or it's chaotic when they're ready to sell?
Paul Giannamore: I've never done any empirical or scientific study on this but I can tell quickly the ones that grow at a rapid rate have made this process replicable versus those that have not. When you look around the industry, you've got a lot of big companies that have been around for a long time, and some of them are slow growing. You've got a lot of companies that are relatively young and growing at a fast clip.
I'm not just talking about door-to-door guys that are throwing accounts on the doors. There are traditional businesses out there that aren't doing any door-to-door sales that are growing at 15% to 20% per year. These are the guys that are focused on building their business as a system and documenting routines and thinking about strategy and thinking about the architecture of the business, which is where the real work of a manager is. A manager is not supposed to be out servicing clients and is not supposed to be out putting out fires. How the manager does high-octane work is by organizing the routines and the resources of the firm.
One of the most important things to do is to take a step back, break down the business into a myriad of routines, think about how they interact together as a system, and then document them. Once you've done that, there's an answer to everything. You bring out a new employee, you hire a new CSR, and every single thing is documented, “This is how we answer the call. This is how we deal with this issue.” The customer calls.
Patrick Baldwin: “Thank you for calling Fat Pat’s.”
Paul Giannamore: I called Fat Pat’s, “My name is Paul. You looked me up. I've been a customer for two years.” I say, “I'm seeing a lot of ants around here,” or, “I've got a problem,” or, “I've got this or that.” Is it a gut response that we'll send a technician out immediately or is it not? At what level do I need a re-service or are you coming out in a few weeks so I don't need a re-service right now? What specific problems am I having? I feel like we're in an industry where there are a lot of retreats that happen that probably otherwise shouldn't have happened if somebody like a CSR was trained appropriately to ask the right questions to calm me down and let me know that my next service is right around the corner and so on and so forth.
Patrick Baldwin: I've heard this more recently than before. Even a couple of months ago, this wasn't even on my radar as far as CSRs. It happened. Once it was brought to my attention, I was like, “You're absolutely right.” The CSRs are like, “Yes. We're going to send out and do a retreat.” That's how we had ours trained. Make the customer happy pretty much at all costs. As long as it's warranted and they're on the plan, get us out there.
There were a lot of times that we could have avoided that additional cost by digging in and maybe if we ask 2 or 3 more questions just down the road and offer an alternative solution. I think about also how could we have incentivized our CSRs to do so. Some basis of customer retention would be important but also a number of retreats would be two ways instead of paying a CSR hourly. Tie them into the benefits incentives.
Paul Giannamore: That's an important aspect of documenting the routines. How do we handle certain issues and standardize them? Of course, this requires thought so you have to think through it, and thought is painful. You have to sit down and think about thresholds as to when you're going to redeploy or retreat versus not. You should also be thinking about what communication do you want to have with your customers.
When I was at POWER, I remember having some discussions with folks and there was a lot of discussion around notification. Do we notify in advance? Do we notify that we've been there? How much time do we spend communicating? There's this gut reaction in the industry that we want to overcommunicate. We want to just be in front of our customers all the time and we want to communicate. The flip side of that is who gives a crap about talking to their pest control company? I don't know.
There is a way to find that out. If you've got a big enough customer base, you can do an experiment. You can put customers into different cohorts and you can try different things. It's always good to talk to other operators that have experience. As I've always said, most of these guys don't measure stuff. I have seen a thousand times an owner look me square in the eyes and say, “It's X, Y, and Z,” and it turns out to be the exact opposite.
In my business here, I don't do feelings, and I do math. It's important for business owners to start to think through testing and looking at data. I'm not talking about differential equations. I'm talking about basic arithmetic to help you understand so you can bifurcate your customer base and you can split them up into different groups and you can test communications.
Patrick Baldwin: What are some of those biases you've seen where owners assume things are in order and then they start measuring it? They're like, “I had no idea.”
Paul Giannamore: It starts at basic levels where owners don't understand how many of their customers are on recurring programs versus one time. What's the average price point of their customer base over time? It's basic things. Of course, a lot of guys will experiment with different areas of marketing, “We're going to try a postcard campaign.” I have seen postcard campaigns work well and I've seen them be dismal failures.
They do a bunch of postcards. They don't measure the response to that marketing. They have a gut feel, “Was the phones ringing more? What did it have to do with the weather? Did it have to do with pest pressure or did it have to do with the campaign?” No one knows because they haven't tracked it. Everyone is always doing all this bro-math. If you read Thinking, Fast and Slow, you'll realize that the human mind is abysmal at statistical thinking. It says some basic mathematics where you can start to moneyball out your business.
There are guys in pest, lawn, HVAC, and the field services space if I look across the spectrum, who have gotten good at putting a number on everything so they can understand. and I'm not talking about the financial statements. The financial statements are one thing but in order to understand leading indicators for things and in order to understand measurement for capital allocation purposes, those don't show up on your P&L or your balance sheet.
Those are you in a discreet manner saying, “Project A, we're investing $50,000 into this project. Let's think about how we're going to measure the return on that particular project and document that.” That's a whole other episode. We can talk about capital allocation and measuring returns on specific investments within the organization. We'll talk about that at another time because we can go down a rabbit hole on that.
Patrick Baldwin: I'm going to hold you to that. That will give me some time to read the book. This is exciting. In franchising, we thought we had a lot of the processes documented but even talking now, there's so much more we could have documented. It was in paper. In one page, here's a process. In one piece of paper flip, here's the next. We took them through ServicePro. We wanted all the franchisees to be on same CRM at the time. That's what we had everyone on and took them through that.
I didn't even think about the legal side though and that's interesting. Over time, I've built all these processes out. I've invested a lot of time, effort, and money to document this if there's a risk of someone walking away with it and recreating and getting a jumpstart on their own business. You mentioned that you've seen that.
Paul Giannamore: To me, I don't pay that any mind. You can almost make that stuff open-source and let the world see it. At the end of the day, if we think about it from the resource-based view of the firm, it's a unique amalgamation of people management, incentive structures, and so on and so forth. It's hard to replicate by looking at the routines. The routines are only one small aspect of the business. I would never not do something because I thought somebody else could walk away with it and compete with me.
Patrick Baldwin: That's fair. I'm laughing over here. It probably feels like it's not worth spending any effort protecting it but can you quantify that? How do these legal matters turn out as they're firstly fighting with each other over, “You stole my SOP.”
Paul Giannamore: The ones that I've seen are almost exclusively the door-to-door guys and they put together their sales manuals and their different processes for how to approach people on the doors, what do you say, rebuttals, this and that, and so on and so forth. What ends up happening is these lawsuits tend to be a misappropriation of trade secrets and this, that, or the other. Inevitably, it's settled. I don't know that any of them have been adjudicated. The majority of them file a lawsuit and then a settlement payment is made.
For me, it's not so much that stuff is state secret, it's more so that somebody spent the time, put it together, had an employee who left, took it, and now they're out there doing it. They might not even be competing directly with them. They might be on the other side of the country. Now that guy is pissed off and he's like, “I did all that and you're out there using it and you signed a document that says you can't take any of this stuff so I’m going ahead and sue you.” It's more of a retaliation than it is protecting something that would otherwise harm the individual that created it, to begin with.
Patrick Baldwin: There you sit on the Board of Directors for a company, Bravo. Not asking if you practice what your preach but I'm wondering if you have them documenting all these processes and if you're doing anything and telling them to protect it or make it open, like, “Don't worry about it.”
Paul Giannamore: This has been the year of doing that. It is military-grade systematized. There was a book called A Behavioral Theory and they talk about how to define a routine. Cyert and March, back in 1963, said, “Our general term for all regular and predictable behavioral patterns of a firm is routines. We use this term to include characteristics of firms that range from wealth-specified technical routines for producing things through procedures for hiring and firing, ordering new inventory, stepping up production of items in high demand to policies regarding investment, R&D, advertising, business strategies, and so on and so forth.”
They then go on to say, “Most of what is regular and predictable about business behavior plausibly subsumed under the heading routine, especially if we understand the term to include relatively constant dispositions and strategic heuristics that shape the approach of a firm to the non-routine problems it faces.” They go on to say they include all of the processes, policies, and procedures, official and unofficial, formal and informal, that shape how information is gathered and transmitted.
Decisions are made, resources allocated and performance monitored, and activities controlled and rewarded. The allocation of decision authority within the firm and what decisions are made by which people, at what levels, and what oversight or review is the key element here. The processes also include the routines through which work is done and the mechanisms through which these are altered.
These features may involve explicit contractual elements as well as implicit contracts, more or less formal shared understandings about how things are to be done. That's a lot of big words to say, stuff that happens all the time within the firm, those automatic processes and systems, and those are routine. That's where it comes from, in the early 1960s. Its evolutionary behavioral economics within the firm is where this comes from.
Patrick Baldwin: You talked about at POWER if you are not doing your highest and best use of time as a CEO and a strategist, that's value destruction. I can imagine putting a number on it, $5,000 an hour, whatever that is, that is going through and being the one to document the process and get everyone on the same page is pretty much the highest and best use of time.
Paul Giannamore: When we talk about value creation, sitting back and thinking about these things and getting your team involved, and documenting the routines within the organization, this becomes replicable and scalable over time as you build additional locations. Now you're running Fat Pat’s in Waco and you say, “We want to have a Dallas operation.” Now everything is routinized, it's all documented, and you can send somebody up there and it becomes a lot easier to open up a new operation. They're not going to have the same exposure as your main office but now you've got that all documented.
What's interesting here is Cyert and March also make comments about activities controlled and rewarded, decisions made, who's the individuals that are making the decisions, that need to be systemized too. Who makes decisions about what? In so many organizations, people aren't sure who's ultimately accountable for things. You have these systems, so to speak. We've talked about EOS, which I don't know much about. I've blazed through one of those books. We had one of those EOS guys on the show a while back.
A lot of that is shortcuts to this stuff but this is why I like to go back to the literature and think about, how did this begin? Also, to go back and think about things from a people in architecture or routines and culture perspective and not just shortcut stuff. If managers educate themselves on how to build a replicable and scalable business that has systems and routines that are organized and documented, if you spend the time educating yourself on that, you won't need those shortcut systems, you've done the hard work, and you understand the theory behind it.
Patrick Baldwin: If Fat Pat’s expands from Waco to Dallas and they're following the same routines and then they're managed to make sure that they're following those routines, it's instilling the same culture or at least 90% of the same culture between those two branches. When the companies get together, they're on the same page and working in the same direction versus where you probably see it. At least on the back half of M&A, you have two different companies that you've effectively meshed together that have different processes, and different cultures, and that's where a lot of that infighting is. I can imagine that happens between two branches if you don't have this document.
Paul Giannamore: Culture, of course, is a difficult thing to change but it's extremely powerful. I think about down here in Puerto Rico, for example, they've extended a variety of different tax incentives down here on the island. A lot of the folks down here, the politicians talk about making this Singapore or the Caribbean. Because you change a law, it doesn't necessarily change a culture that's built up over centuries. Because you go into Pakistan, change a variety of laws, and liberalize things, it doesn't change the culture because there's path dependence. There's a way that things are done.
If you think about when the Soviet Union fell, there was a culture in place and there were things that were acceptable. Even in the US culture now, what the state gets away with would have never flown 100 years ago or 200 years ago. If you think about an average American 200 years ago, filing all this government-formed BS, all these taxes, all the state interference with private affairs, these are guys, 200 years ago, that were settling their disputes in duels in front of saloons.
Now it's perfectly acceptable. In a culture now, there's the feeling that even if you're a moron, you have to go to university. That wasn't the case 200 years ago. Culture changes slowly over time and it's effectively the accepted values within a certain class of people. I do notice differences in cultures between companies as you notice differences between cultures inter temporarily, meaning US 1800s versus US today versus the United States versus Pakistan versus the Philippines, and a variety of different things.
Culture, of course, is extremely important. I often find myself in debates with people when I'm traveling. You go to a lot of third-world countries and you scratch your head and say, “Are we in this situation here because of the government?” Everyone always blames the government for corruption but how much of it is a culture and how much is the culture allowing certain things to happen?
That would never happen, for example, in Switzerland. I spent five years in Switzerland and that's a country where, virtually, you could smell freedom in the air. It's how the United States was under the Articles of Confederation. They don't even have a strong central state there. It's the culture that manages that place. You don't need laws in Switzerland, it's the way things work. We'll talk about culture another time.
Patrick Baldwin: Does Switzerland produce its own energy?
Paul Giannamore: It does not.
Patrick Baldwin: It's dependent on someone else.
Paul Giannamore: Correct, as is Japan.
Patrick Baldwin: I shouldn’t pack my bags yet. The smell of freedom sounds mighty nice.
Paul Giannamore: You're in a good spot in Waco for the time being, Patrick. You were talking about packing your bags so was Myrtle Beach what I said it was going to be?
Patrick Baldwin: I'm glad you set the proper expectations before I went on the trip. I'll tell you what, NICOA put on a great conference and that's a great group of people to be around. My wildlife experience is slim to none but I would even say it's probably insulting if they heard me say that I used to do wildlife because it was on a minor scale compared to what they do. I loved it though, great people. Myrtle Beach itself, I'd recommend the tour guide path from the airport to Marriott Hotel and back, it's the way to go.
Paul Giannamore: It hasn't changed since I've been there.
Patrick Baldwin: No.
Paul Giannamore: Do you have any other travel planned in the near term, Patrick? Any other conferences?
Patrick Baldwin: I'll be in Melbourne, Florida. Seth and I will be both speaking at WolfPack Summit, which is home inspectors and pest control. It'd be a fun show. Jerry Schappert is speaking there so it'd be great.
Paul Giannamore: A lot of inspection businesses are now doing pest control.
Patrick Baldwin: I thought about it in terms of wildlife getting into pest, pest getting into wildlife, home inspectors getting into pest, and pest getting into home inspectors. It's adding more add-on services. Hopefully, that doesn't become a problem.
Paul Giannamore: I'd be interested in your report back from that conference given the state of the domestic real estate market at present.
Patrick Baldwin: We shall see. I'm going to Melbourne, Florida. Do you have any travel? When's Dubai?
Paul Giannamore: I'm not sure if I'm going to do Dubai. I have to do London and then Ireland.
Patrick Baldwin: Goodbye Dubai.
Patrick Baldwin: Goodbye Dubai. After that, I'll probably come back to PR for a week and then I have the Philippines and Seoul, Korea. I'm looking forward to some chicken and beer. Maybe a little bit of soju down in Korea. Have you been to South Korea?
Patrick Baldwin: I have not been to South Korea. I've been to Manchester, England, London, Paris, and Myrtle Beach. It's all the same.
Paul Giannamore: Today is the 11th. I'm leaving on the 20-something for the UK.
Patrick Baldwin: That's awesome. Tell my friends hi for me over there or cheers.
Paul Giannamore: I certainly will. All right, Patrick, until the next episode.
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