Culture Starts With the CEO

[00:00:00] The bankruptcy almost was encoded in the original deal that I negotiated at 24 years old. I negotiated an incredibly bad deal to buy that company. I negotiated absolutely horrendous lease. So part of growth, what I'm hearing is the maturation process of being able to look. That thing was helpful to me. That got me to this point. I need to reconsider that because it's not going to get me to the next thing. And that's just growth. It's like your business is a perfect reflection, you know, your actions.

[00:00:27] It's like your actions have manifested exactly what they should. And so if you're perfectly happy with that and you just want that, then that's great. But if you're wanting something different, you have a different vision or a different goal, you're going to have to change your actions. Welcome to Sales and Cigars, the podcast for entrepreneurs where the only smoke we blow is cigar smoke. I'm your host, Walter Crosby with Helix Sales Development.

[00:00:53] I'm really excited about today's episode with Mike Chipwit from Insight. Insight's a managed IT service provider out in the Bay Area. But the topic is culture and core values. A large percentage of this audience are business owners who have core values. So the next three episodes are all for you. I break down our two-hour conversation that I have with Mike into three episodes.

[00:01:18] Mike and I talk about creating core values, what those values should represent and not represent. And as a CEO, you have the greatest impact on strategy and culture. Those two things are linked together forever. So the next element to this is how do you structure the values so everybody knows that they're clear and everybody is able to live them within your organization, the entire team.

[00:01:42] And the third episode is how you operationalize these values into the business, into all of the business decisions you make, increasing retention of employees and creating growth. Really excited about this first episode because we get into his background, we get into the values and what you might want to do is think about what you have, make sure that they're memorable, make sure that they really fit your strategy. I'm just excited about this.

[00:02:10] So go grab a cigar, a cocktail and strap in for another exciting episode of Sales and Cigars. Thanks. So Mike, I appreciate you taking some time out of your schedule to bump in here for a conversation. Appreciate it. Yeah. Well, thanks for having me on, Walter.

[00:02:40] And thanks also in advance for the time and attention of your viewers. We're going to talk about something that is important to our audience, entrepreneurs, business owners. Culture is something that we talk about as business owners and entrepreneurs, but we don't really know how to set it. And in our pre-conversation that we had, you had some great ideas. We'll get into the book you're writing, but I really love this framework you have.

[00:03:10] So before we jump into the conversation, you're an entrepreneur, run successful business. Why don't you share a little bit about your entrepreneurial journey with the audience? Give them a little perspective because you understand culture and business. Well, yeah. So I've got kind of a weird story. It's even the older I get, the weirder it seems. But when I was 24 years old, my co-founder and I bought an IT services organization. We took an SBA loan.

[00:03:40] We bought an IT services organization from these older gentlemen. They were older at the time. They're probably my age now. And it was in January of 2000. And three months later, the bottom fell out of the dot-com bubble, which kind of was the source of demand for this business. We probably should have went out of business that first quarter.

[00:04:04] Somehow, a longer story, we ended up going for four and a half years, but ultimately the enterprise failed in 2004. And we were kind of, I don't know, pot committed to the idea of entrepreneurship, so to speak. And we started a company following the bankruptcy called Insight. That was in 2004. And today, you know, all bootstrapped, same founders, by the way.

[00:04:33] It was me, my co-founder. And then we brought two other partners on when we started Insight from the previous business. One was a high school buddy of mine, and another was just a guy that we really formed a great relationship with in the previous four and a half years. Insight, so it started with just like the four of us. No money, you know, total bootstrapped. Today, it's about $35 million in revenue, about 140, 145 employees. We do IT managed services.

[00:05:02] So the first business was more of a value-added reseller. You know, we sold networking gear and did some integration services. This business model is more we kind of tie into the operational IT. So we're help desk, sysadmin. We do everything for our customers. Back then when we started Insight, it was a very new idea. And then, yeah, so we grew it 100% bootstrapped from kind of zero to $35 million.

[00:05:28] And it's a profitable business. So I think 15% to 20% EBITDA margins. It grows. It's not a moonshot business, but we didn't get to $35 million overnight. So, you know, I think something CAGR is in the 12% per annual or something with a target of around 14 and a half, which is about what we can kind of do with, you know, cash flowing everything on our own anyway.

[00:05:58] But it's been a great business. And I think the other element to this that might be interesting to your audience is that the business is a, the strategy of the business, if you will, is maybe the weakest component of it. It's highly competitive. So, and, you know, we, we compete in the San Francisco Bay Area, Napa Valley, San Diego, Orange County, and Hawaii, actually. It's just kind of a strange geography, but we're, we're in Honolulu.

[00:06:29] And there are hundreds, if not thousands of competitors in each one of those markets. You know, the Bay Area has at least a thousand people who do what we do. So there's very low capital barrier to entry. So it's highly competitive, which, which means that if you don't have your act together on the culture side, you're just not going to make it. You're certainly not going to grow. So what we learned is how to develop what I think is just a truly amazing culture to be a part of, to lead.

[00:06:56] Really proud of, of what it ended up, you know, becoming over time, you know, kind of, especially from the perspective of being 24 year old CEO, totally incompetent to now I'm 50. Um, and then I look back at what, what the, what the company is and what it's become and, and how we treat customers, how we treat each other and the kind of the success we have while really doing, I think, good for, for human beings, both on the customer and the employee side.

[00:07:22] You know, but entrepreneurship, to me, it's, it's, it's the heart of this country. Um, we're, we're, what make it happen. And, and your size business, uh, takes a big chunk of that because you're, you're taking care of your family, right? But your family is not just your, your immediate family. It's the family of the business. And then each one of those have, has families and then they have a community that they go into.

[00:07:48] I don't think entrepreneurs get enough credit for what drive this, our economy, the, the fortune 100. Sure. They're important and they do things. Um, they misbehave more than we do. I think, um, in a, in a large sense, especially the people down in your part of the world, maybe a little farther north. Um, but what did you learn?

[00:08:15] Like, what was one big takeaway that you, you guys took away from the, I'll call it a failure, but like from that, from that first, uh, reboot where you, where you started over? Is there anything that, that's really informed you, um, from the business perspective besides culture? Because we'll get into culture. You know, it's a, it's a tough question. So people are always really trying to want to, um, understand what I learned from the bankruptcy that it's kind of funny, right?

[00:08:44] The bankruptcy almost was, was encoded in the original deal that I negotiated at 24 years old. I negotiated incredibly bad deal to buy that company. And I, I, I negotiated absolutely horrendous lease. And then, um, to, to, in order to get out of the, the, I had to go into this other element of business that wasn't value-added reselling because that there was no demand there.

[00:09:11] So we ended up going into software development and we, we kind of, the, the person who was working for the company that had that capability was, was untrustworthy. And they ended up after we developed that whole business and we sold and we spent a bunch of time developing a Microsoft gold certification partnership. And we, we built customer base that, that gentleman walked out with the entire base of revenue, leaving us completely crippled. So that's, so it was, we trusted the wrong people, you know, we partnered with the wrong people, we negotiated bad deals.

[00:09:39] It was all encoded in the, in the, in the system kind of from the beginning. And it was a complete lack. It was just, you know, it was like young hubris and, um, and, and naivety, those two things don't go together. Right. And you kind of need, you know, that, that hubris is a double-edged sword a little bit, because if I didn't have that confidence, I probably would have never done. I would never been an entrepreneur at all, but ultimately it kind of strangled me.

[00:10:04] So, you know, um, basically what I learned was how to be a businessman, but I learned it over four and a half years. You know, I learned how to, I learned how to spot kind of dark tetrad actors, so to speak, you know, the Machiavellian type and how not to, not to, not to engage with those types of people. And then I, I also learned how to negotiate good business deals, whether that's a lease contract or, or, or whether it was a deal for an acquisition or something like that. And, um, and so, yeah, and I learned how to lead and I learned how to sell.

[00:10:33] I mean, this is a sales and cigars, but the first skillset I learned from 24, at that time at 24, I was a CEO. I never managed a person. I never sold a deal. The only deal I had negotiated was the business deal that I just purchased. And maybe I had an inflated sense of how well I did to do that. And I hadn't sold things and I didn't know how to read a balance sheet, much less. I was very weak on the profit and loss side. I was, you know, I had an electrical engineering degree. Um, so it wasn't like I had even had a fundamental business knowledge. I didn't understand accounting very well.

[00:11:02] So the first four and a half years was just basically like re drinking from a fire hose, reading everything, getting the basic skills I should have had to begin with to, to, to take the assignment. But I did learn that. So when we started, you know, insight, I already knew how to sell. I kind of understood operations. Um, I, I was starting to learn how to lead and manage. And, um, and so, you know, it was what it was, it was, it was, uh, it was, uh, you, you, you earned your MBA on the street.

[00:11:30] Like, like a lot of us do, like you kind of get your business degree by getting your nose bloodied and black eyes and, you know, being expensive. It's probably cheaper to, to go to Stanford, but it, you know, it's much more practical. So, uh, you know, I don't know if you know this about my background, but so, so when I was 24 years old, I lived in the city called Castro Valley and I was commuting to the city called Emeryville.

[00:11:55] And then I was running all over the Bay area, um, you know, trying to, to, to, to make new customers or whatever. And I basically traveled with audio books, you know, I'd go to Barnes and Noble at the time I go to the business section. And I, I read at least one a week. I mean, at least one a week. And then if they were really good, I'd get the paper back and I'd go back through and with a highlighter and I'd hand it to my team. And then we try to discuss it, negotiate it, figure out how to integrate it.

[00:12:21] So when you say I had an MBA kind of from the streets, it was like, yeah. And a lot of thought leadership. Um, and then, you know, I got in such a habit and became such a student of business because I was following all these thought leaders. I actually had the idea to go back and do an executive MBA at, at, at the university of California, Berkeley at the time they had a partnership with the Columbia business school. And so I actually have an MBA on top of that. I did that in 2000 kind of 2009, 2010.

[00:12:48] So, um, yeah, so I, I got, I kind of got my MBA before I got my MBA, uh, so, so to speak, but I, it was also just, you know, it was, I don't know how to explain the level of it. The heightened interest I had, it was like, I was so, so in survival mode, trying just to figure out how to survive that. I was just so motivated and so focused on trying to figure out how to do what I was being called to do.

[00:13:14] And, um, so yeah, that I learned a lot in that, in that regard, the credibility from that story for this audience is, is huge, right? Because many of our, of our, our, our listeners, you know, are running businesses or they're entrepreneurs. They've made mistakes. Some of them, they've been able to, to, to get their way out of it. And sometimes it's, it's been incredibly painful.

[00:13:39] So it's a, that's a great setup for, you know, this, this idea of what a CEO, uh, should be focused on. And, and, and I'd like to kick us in this direction. One of the things you said to me when we spoke a few weeks ago was that the responsibility of the CEO is, is strategy and culture.

[00:14:01] So why don't we start there, um, and then kind of work our way into core values, um, and then, and then, and just, and just get how they're structured and then operationalizing them. And, and just so the audience is aware, um, we're, we're going to split this, uh, probably into two episodes cause it's, we're going to get kind of deep into this. Um, and I don't want to, I don't want to cut things short just because we've got a timeframe. So strategy and culture, CEO's responsibility. So, yeah.

[00:14:29] So let me, let me paint a visual. I, I, you mentioned my book at the beginning, so I've been doing some writing. So we'll kind of test out some ideas here on the podcast row show and see how they sit, see if they make the book. But, um, the visualization is, you know, your business is a, is a big ship and strategy is the direction of your ship. Okay. So leadership, you, you might be first attempted to think, well, leadership must be the rudder.

[00:14:55] And I think that's mostly true, but the, but the number one leader, the CEO is actually what I'll, what I'll call the Becker rudder. And a lot of people don't know about a Becker rudder. So let me explain what the Becker rudder is. So the Becker rudder is this tiny little rudder that sits inside the actual rudder of the ship. And it actually pivots the opposite direction. And then what happens is fluid dynamics moves the whole rudder, the other direction with, with ease.

[00:15:22] And then that, that, that rudder, the fluid dynamics moves the whole boat with ease. So the CEO is the Becker rudder. It, it, it's the tiny little mechanism that, that rotates the rudder, which might be the leadership team, which rotates the whole boat, which is the company. And so, you know, ultimately, you know, another way of visualizing this might be, you have an employee who's not getting it done at their job. And, you know, let's say you're the CEO and you know, the employee is not getting a job.

[00:15:52] You might be like, well, we should terminate that employee. But at some level, you know, you get to a side where that's not your job. That's the manager of that employee's job. So in fact, if you have an employee who's not getting it done, then it's that manager's fault. But really, if the manager's not getting it done, then it's really their manager that's not getting it done. And once you start figuring this out, you know, all, it all rolls right back up to you as the CEO. It's your job to command the whole, the whole structure.

[00:16:20] And it becomes really, really challenging to command the whole structure, you know, directly. So what do you actually do then? What is the point? What is the locus of control? What is the Becker-Rutter momentum? And that's ultimately culture. So culture is the behavioral norms that define the decision frames that everybody is making throughout your organization. What do they value? It's the domain of values.

[00:16:49] You know, so how do you, as a CEO, manage culture? And I mean, I think that's the main, how do you play that role of the Becker-Rutter, so to speak, to drive your whole ship? But there's a, I mean, it's a great analogy to kind of create that visual for the leader. Because you're, it's not that you're going opposite of the rudder, but you're making the organization, the leadership team's job easier to turn that big, huge boat, right?

[00:17:17] When you said big boat with a rudder, I'm thinking aircraft carrier, battleship kind of a deal. And as your organization grows, you go from that little rowboat right up to the ski boat, to the yacht, to the bigger boats. The idea that we're responsible for that as a CEO and learning how to create that culture is part of this structure.

[00:17:45] And that you're ultimately responsible for everything. And I think that's important because it all comes back up to whoever's sitting in that captain's chair, right? No matter what happens in the boat, it's that person's responsibility. And that's what you just said. Yeah, I think that's totally fair, by the way. Although, in a very technical way, the Becker-Rutter is actually pointing the direction that the ship goes. And an ironic way. But the real point isn't that.

[00:18:13] The point is that it's fluid dynamics that's doing the work. The boat turns with ease. That's the point. If you manage the locus of control properly, you can move this giant ship, letting the universal forces move the ship as opposed to just fighting against it tooth and nail. Your people are going to resist even good strategic direction changes because actually there's just a huge momentum for inertia, essentially.

[00:18:43] Nobody really likes to change very well. And so, if the leader wants to steer strategy, they have to do it with ease and playing to the natural human norms. So, you know, one of the things I also talk about, you know, so we're going to hit culture. But, like, maybe there's some, there's even something that sits above that, which is the leader themselves.

[00:19:08] So, you know, one of the things that I found was that when I was a younger person, my internal motive was, I just want to say immature. Like, I don't know how else to describe it. You know, it was something like, you know, my parents were divorced. I was the youngest of five boys. I didn't like being on the bottom of a hierarchy at all.

[00:19:32] I didn't like authority figures, coaches, teachers, you know, I was just like, I was just, so I was driven to entrepreneurship in this kind of, from this immature advantage of trying to avoid somebody else's hierarchical power on me. And it was very childish. It was very childish, child of origin motive. And then maybe there was some kind of, even add in a couple other childish motives, like trying to prove something to my father, for example, or, you know, trying to achieve financial safety or something.

[00:20:01] And that's not really a childish motive, but it's what it has in, in, in, in adjacent to the other three is it's not motivating to a single other human. Like nobody cares about my desire to avoid a hierarchy. Nobody cares about my financial, my personal financial security. And definitely nobody cares about me proving something to my, my dad.

[00:20:21] Um, and so because my, my motives as a leader were immature, they, they cultivated resistance amongst the people who were following me. And even though I could say the right things and, you know, or whatever, like my facial expressions, the way I might react to things, you know, what, what, what, they could feel it. They, they, they could feel it. And, and so, um, nobody wants to, nobody cares about those things.

[00:20:49] So when, when I personally was able to. We'll say transcend those sources of motive to something more idealistic, truly. Like when I was able to be like, yeah, I'm not really, I don't really care about those things anymore. You know, I don't care about owning all the locus of control. I, I, I can be a good follower if I need to, not just only a leader. I don't resisting hierarchical power sources just because if they're like useful, then I'll, then I'll lock into them.

[00:21:17] Uh, when I was able to be like, yeah, you know, I have what I need mostly, and I'm not so scared of not having what I need. And, and I could plug into more idealistic, uh, motives. Then I shaped the path then for a lot of other people to be like, yeah, I'm, I'm interested in doing what this, what this human beings do. And they seem like they're, they're not, you know, Machiavellian narcissistic trying just, it's all about them. They're, they're really seem to be into this mission that we're trying to do. And I can work for somebody like that. And then the, and then you, you shape the path for followership.

[00:21:47] So I do believe that one of the big things that leaders have to get over is their own, their own like childhood trauma, so to speak. And, and what, and it's very difficult, Walter, because a lot of that stuff is what got you to where you're at. So, you know, like when I think about what I work really hard in school, I was like pretty much a straight A student, you know, in my engineering program.

[00:22:11] Like when I think about all the achievement oriented things I was doing, they like, it was, it was serving me up to a point, you know, and then all of a sudden it was the same thing that served me to got me to a, to a spot where I was a CEO at 24. That same very thing created plateaus in my, my ability to go beyond that. And then I had to go, oh my God, like I have to really go fight against the thing that actually got me to where I, where I am in order to get to the next, to the next, to the next marker. So you do have to change too.

[00:22:40] And it's, it's not a, it's not a total like denouncement of, of that part of your, your, the chip you had on your shoulder that got to where you're at. You need to drop to go to the next place. It's like, you can still acknowledge that it did help you get where you're, where you're, where you are. Yeah. I mean, we are who we are and we have to be able to, to self analyze and realize we all have those things that our parents said to us or something that occurred to us or occurred to us during that adolescence.

[00:23:11] And it, and a lot of times it forced us, it pushed us to do the things that we did. And I'm 10 years older than you. And I'm still unwinding some of those things so that I can grow. So part of growth, what I'm hearing is, is, is the maturation process of being able to look. That thing was helpful to me. That got me to this point.

[00:23:38] I need to re, to reconsider that because it's not going to get me to the next thing. And that's just growth, whether it's be revenue or personal growth or sales growth. It's really being able to look at what's working and what's not working. And I don't know that we're ever done with that. Yeah. I think it's just too easy to look for external factors. It's the market. It's the strategy. It's like, it might just be you there.

[00:24:04] And that's, even though that's harsh, it's good news when you figure it out because all of a sudden you have the locus control back when it's external. You know, it's like very confusing. The world's a tough place. And then when you, when you, if you're willing to be humble enough to be like, oh my gosh, it's just me. Then all of a sudden, you know, the, the transformation is totally back and you have, you have the locus of control back and, and you can maybe grow. And once you grow the, you know, I like to say to other CEOs, it's like your business is a perfect reflection.

[00:24:34] You know, your actions. It's like, it's like your actions have manifested exactly what they should. And so if you're perfectly happy with that and you just want that, then that's great. But if you're wanting something different, you have a different vision or a different goal, then you're going to have to change your actions. And the, the thing about actions is actions, actions are a by-product of belief. So, which are a by-product of how we think. Yeah.

[00:25:04] So like, you know, they're, they're actually a by-product of let's say story because like you, you, you think they're a by-product of like some facts of circumstances, but they're really a by-product of the narrative structure you lay on top of those facts. So once you, if you are able to see your story a little bit different and you're, and you change your beliefs about the world and life, then all of a sudden the natural actions you're going to take in the world are going to be different.

[00:25:29] And my, my position on, on this, as it relates to leader is that the more idealistic you can truly be, you know, as it relates to your, your vision, your vision, then the easier it's going to be for other human beings to follow you. This is just completely rational. When, when you think about the way you are, like, do you want to follow somebody who's all about them? Like, no, like you just don't. And neither does anybody else. And so, you know, that's, that's the.

[00:25:59] That's the, it's looking in the mirror, but really taking stock of what you're seeing and thinking about those stories that, I mean, I have a story that I didn't realize it until last quarter. That's something that my mother said to me when I was like 10 years old has always stopped me. It was like the ceiling. I kept bumping my head against. And once I realized that that was what was there, she didn't mean anything by it, right?

[00:26:29] It wasn't some, you know, malicious thing, but it, it stopped me from going to another level. I kept bumping my head up against it. And if we don't look at that, we're, we're, we're not going to be able to take the next step. And as a leader, we're going to get stuck. I mean, I. Can I just make a comment on that? So, you know, you're saying, Hey, something my mom said to me, the reality is it's much more likely something that her father or her mother said to her.

[00:26:59] And it's even more likely it's something that their parents and so on is generational. There's this very interesting study about rose blossoms. It was something like, um, they brought these rats. It was, I think it was rats. It could have been Guinea pigs or some, some animal like that, but they, they put rose blossoms in the air and then they shocked the, the, the mice. This is called mice.

[00:27:22] And then well, after that, that generation of mice had passed, I think it was like three generations later, the mice still shuttered when rose blossoms went into the air. And then if you start really thinking about it, it's quite rational because like what happens is right. The, they, they just modeled the behavior of their parents who modeled the behavior of their parents who modeled the behavior of the parents.

[00:27:47] And they're, you know, every time the rose blossoms were in the original group just shuttered like crazy, like they were going to get shocked. And so, you know, that was like what everybody did. And, uh, and, and, and you could see this as it relates to any kind of trauma, you know, somebody who's been abused, they're going to teach their children to be cautious, whether they do it verbally or whether they just walk the way that they react to the world. And then you're going to pick up those, those patterns. So at some point in time, you have to ask, like, do I want that programming?

[00:28:17] I mean, where did that programming even come from? Did it really come from my mom even, or is it the spirit of my great grandmother? Like, I don't even know where the programming came from, but regardless, is it serving me and really get, get deliberate about saying, Hey, this is programming that maybe serve me for a period, but might not get me to where I'm going. And I might have to reconsider some new programming. I mean, and there's actually some really effective ways to reprogram yourself. There's visualizations, affirmations.

[00:28:42] There's a, there's a series, there's a suite of tools to, to, to, to reprogram yourself so that you can be who you want to be as opposed to who you currently are. But you got to, the first step to that is recognizing that that story that I've told myself, right? Cause I used it to go farther. I used the story to go farther and then, but the story was still there. Right. And then I would, I would, I would cause it to pause. So we got to be able to get ourselves out of that story and, and, and move forward and, and grow as a leader.

[00:29:11] So, I mean, there's, there's a lot of that looking at our belly button and constantly being conscious of what, what might be getting in our way and, and, you know, reflecting on that on a regular basis. That's really important for a CEO to, to do, or anybody that's leading, even the managers, right? We, we got to reflect on what we're doing and what we're putting in front of, of the people we're, we're leading.