I am very excited to have Jeff Hahn joining us. Jeff, welcome.
Thanks, Michael. it’s great to be with you.
Your clients include Whole Foods, McCormick, Vital Farms, tequila and beer brands, Oklahoma Natural Gas, Lone Star Rail District. We’re going into why you’re going to have two distinct brands and types of clients but first, how did you get into the PR and marketing consulting business? What were you doing before that?
I think you can come into this business in two ways. You can grow up as an agency person. That means right out of college you join an agency typically through a series of internships and then find a home that you grow up in through. There are tens of thousands of agencies across the US, so you can make a great career inside of them and grow up into some of the big shops like Edelman for example, which is enormous. If you like to create deep expertise, you can stay with a boutique shop and focus on a particular subject. I came into this experience from the in-house side. I was a corporate communications guy for fifteen years. In those roles, I did just about everything from employee communications to advertising and all of the things in between, public affairs. I did financial communications work. I spent a lot of time in media relations all within one company that was Motorola semiconductor.
When you made that decision to go out on your own and start your own business, who was your first client?
I joined an existing firm that were twelve people then and about a year later, I bought it.
How did that work? Why did you decide to buy that firm?
There are some interesting dimensions to that. One of them was that the firm boutique here in Austin was well-regarded, well-known, had a good client base. Outside entities the big PR shops were sniffing around and they were starting to add phone calls with the previous owner about buying her. I had lunch with her one day and said, “Why don’t you let me buy it?” She was shocked at that.
Why did you want to buy? Where was that desire coming from?Starting on your own means you have an expertise that is known and understood so you can begin with your first clients. Click To Tweet
It’s one of these fascinating experiences in my career where I thought to myself, “For the first time, I’m going to take control. I am tired of working for other people who I’m frustrated by. I don’t want to have someone look at me over top of a performance review and give me a number two or a number 73 or whatever subjective number I would get for that year. I’d like to test my wings and have the marketplace decide.” In that, it’s a bold stroke especially since I had no agency experience, but that was several years ago. I’m glad that I did it. I’m the captain of my little ship and I think it’s the most wonderful thing in the world.
Why did you decide to buy an existing company rather than just go and start your own?
There are risks on both sides. Starting on your own means you have an expertise that is known and understood so you can begin with your first clients. I was a generalist all the way. I knew the semiconductor business pretty well, but in order to serve that industry, you have to be a big shot. I came then on the agency scene without deep expertise that was marketable to be honest. By buying a shop, I bought a book of clients. Here’s the other risk. I had to go borrow the money to buy the clients and buy the shop. Once you sign that piece of paper, as my banker says, debt focuses the mind.
Was it at a low six-figure, high six-figure, seven-figure, eight-figure purchase? What range was that?
The debt that I bought was $1.5 million.
On top of that, was it appraised on the initial significant sum or was that the bulk of it?
That sucked the bulk of it. There was a little bit more. Just for example to capitalize the firm, the biggest owner wanted to extract some capital. It was a little bit more but when it was all said and done, it’s right in that range, $1.5 million or so.
Looking back, would you say that doing that, going ahead and buying a firm as opposed to just going and starting your own, was that the right decision for you? Did you have moments where you thought, “I should start selling myself?”
It was a great decision for me because in coming out of an amazing corporation like Motorola, I was there for fifteen years in-house. You’re trained to think like a big corporation. You have the tools, you get the training, you have the expertise to manage and create a big system. For me, it was a terrific choice because I got to bring over and implement a lot of those big corporate ideas into a tiny little place, twelve-person shop and watch them work right away and create value. For me, it made a lot of sense. In fact, it was a good move versus trying to start on my own and build up a network of people. I had the network of friends, the network of clients and some infrastructure already in place. I could add extra value to that by taking it to a new level.
Before you got involved, how are they winning business? What were they doing to get new clients?
Almost 100% word of mouth and referral.
When you got there, did you do anything differently that helped you to achieve even greater growth?
That’s a matter of time. The answer is yes but it took a long time. I first had to learn just how to work the network that I had bought. The previous owner was terrific. She was a great mentor to me. We’re still quite good friends. She taught me a lot and made a lot of introductions. You start to learn that this is about referrals and who you know. During the course of time when content creation, thought leadership and all of the tools that are now available came online, you can shift into a much more scalable idea with one challenge. You have to show real differentiation by going deep into expertise.
You mentioned about scale. I want to dig in. What do you mean when you said using these tools, using content and thought leadership to scale the business, to scale to the marketing side of it? For you specifically, what did you decide to do that helped you to achieve that scale and growth?
Our first big challenge was that our firm, Hahn Public, was an undifferentiated firm. We did everything from change tires and wash windows to manage crises and do promotional videos. Creating differentiation was the first big challenge and finding the right positioning for the brand meant that we would take Hahn Public, focus it on public service organizations like infrastructure, public utilities, public education, public health. We’ve got a positioning there still pretty broad if I’m honest. We split the brand one more time and created Apron Food PR. Now we’ve got a portfolio on the food side of the business where we’ve created a lot of deep expertise from a client’s health standpoint. We are continuing to drill into that area.
Let me jump in here because I’m really interested to understand. You have this one company and decide to focus more on the utility side, that’s Hahn Public, and then you decided to create Apron, which is more working with food brands and doing PR and communications. Why not stay with Hahn Public and just drill down and build that? Why did you decide, “Let’s go and add a whole other brand, a whole other company,” for what I see on your website you’re using much the same team to work with both brands and build both of them but they’re very different? Why not focus in on one instead of adding a second?
That’s the magic behind the scenes or behind the curtain. We use a lot of the same team and they move back and forth between the brands. In marketing, for example the food industry, you have to show up as a food specialist. In the public entities, they want to know you have a public entity, public communication specialization. The utility world is interesting and complex. They want to hire agencies who know that space. Splitting the brands provides you the opportunity to demonstrate expertise and in-depth.
I’m going to play devil’s advocate here to hopefully bring a bit more clarity to everyone. Why not just say, “Let’s use all of our resources to go after the public utility transit, all that kind of public services and build a much larger firm or focus on growing our revenue in that one area instead of diversifying into food?”Profit sharing eliminates the end-of-year entitlement feeling. Click To Tweet
Here’s where the $1.5 million comes back in. You’ve still got to pay the debt. That means I didn’t want to let go of clients that separated into one brand or the other.
At that time, you had clients on both sides. You had some food clients. You had some public service clients and so what you saw is, “Rather than keeping the business as is than continue to work with all different kinds of clients, let’s break into two brands. We could serve our existing clients but also become specialists in these two unique areas. I’ll go out using that specialization to go get more business, but each for food and utilities public services.” Is that correct?
That’s exactly right. We’re opening up multiple revenue doors but still positioning ourselves as a specialist.
What impact would that have specifically for your revenue and growth? Let’s fast forward twelve months from when you made that change, what did your overall revenue look like?
The impact was not immediate, maybe over 24 months I can tell you, we doubled our revenue.
At that point, you felt this was a good decision?
Yes. There are other points when I feel it’s a terrible decision because of creating marketing brands. Just to give you a sense of the chaos I like to create in my own mind, I market four different brands, one for media training and one for web design services. I let them be separate brands, so they’re not trapped inside of Hahn Public or Apron. They’re separate brands too, so I’m tumbling around with four brands right now.
Do you ever feel like that is maybe holding you back? I have three companies running the same time. Sam, my business partner and cousin, we’re running three companies and we often felt by having three companies we can’t focus 100% on anyone. They’re all growing but they’re all growing a lot slower than they could if we are just focusing on one specifically. We ended up selling two of those companies over a period of time so we could focus on consulting success. In your case, you have four different entities, four brands running at the same time. How do you deal with that? How do you ensure that those companies are still running smoothly and growing and that they’re not distracting you and your team from realizing the potential of any given brand?
There are two ways that I pull it off. The first is that each of the brands has a senior manager. That senior executive is in charge. I have effectively said, “This is your company.” On Public Apron, I’ve got managers to run those as their own brands, their own teams and the same with our Predictive Media Network, same with our White Lion Interactive web service. Each has a senior manager. That’s number one. Number two then is that there is a complementary nature to each of the brands. There is a moment in time in the future when I think they will all come together and work together. That is done right now in some bits and pieces. For example, we have a food client who uses our media training services and our web services. They white label up into Apron. I’ve got three channels of revenue where before, I might have only been able to get one.
The key is having a senior manager essentially, they’re like the “owner.” They’re leading the ship. You’re overseeing all of those managers. I believe your team now is about eighteen people or so?
I only saw the eighteen or so listed on the website, so now double that number. How do you motivate and incentivize your team to maintain a high level of performance and to ensure that you’re getting the most out of them?
One of the most important maneuvers I made early on in the ownership of the business was to create a profit-sharing program. That eliminated the tradition of giving bonuses, which has a number of benefits. Profit-sharing is then accompanied by an open book meeting every quarter. We have the quarterly business review where I open the books of the firm, share the financials with every team member and help them see, “These were the decisions that you as teams made. These were the rewards of those decisions. Here were the downsides where things didn’t work out.” I will share that information so that they have a sense of, “If I make decisions, if I make a contribution, I’m going to get a reward.” The profit-sharing then comes after every quarter business review. That’s been the carrot and stick method that’s helped me share that sense of ownership, having each brand have a senior executive, senior manager in charge of it. It also gives them room to navigate. My job is to support them not the other way around.
Specifically, I can just imagine people are thinking, “This idea of a profit share for my team member sounds interesting.” What does that look like? How does it work? As much detail as you’re able to share here, how do you structure those profit shares? What percentages are we talking about? What’s it based on? As much detail as you can degrade, Jeff.
Every quarter, I take 25% of the net profit, set it aside in what I call the ROC. The Return of Contribution pool. The ROC pool has 25% net. The other part of the profit goes to reinvestment in the business for the most part, R&D, our new projects, new initiatives. ROC pool gets set. I take everyone in the organization, put them into a multi-formula spreadsheet and distribute the ROC based on merit. Some of those factors in my formula include the liability. How much revenue does that person bring in? Utilization, how much admin time? How much billable time? How much new business time? I think about that. There’s also a non-billable contribution metric that I put into my formula. For example, a person may be tasked with helping us create a new product or bringing online a new initiative in-house. That’s not billable time. We still would see that as valuable.
This non-billable contribution number that I put into my formula and then new business wins. That’s a real sign of maturity on the senior team’s part. If they can score those, that can go into the formula as well. Everyone in the firm, all 36 participate in the profit-sharing, I use that formula to spread out the ROC each quarter. I mentioned that eliminates the end of year bonus. That’s been an enormous help for me in a couple of ways I’ll explain. End of year bonuses in my experience creates a sense of entitlement. I start comparing what I got last year to this year. If I’m not happy, then even though I got free money, I think the owner is somehow or another withholding rewards from me. Profit-sharing eliminates the end of year entitlement feeling. The second thing that it does is profit-sharing allows us to match rewards up closer to performance. Good quarter, good ROC, then we start again.
For example, you have someone that’s done some great business development for you and they get X percentage. Based on that and based on the profit, they receive Y payout. Next quarter based on what you’ve entered in there, would their percentage of that 25% potentially go up or down?
It goes up and down. There’s never a quarter that’s the same. Some people have gotten significant profit share payouts. Others not so much but it all goes into the formula in a merit-based way. Most important I think is the equity that is displayed in that we all benefit together. There is this notion of shared value creation but not all of us get the same amount of profit share.People management is tough because it is a completely different dimension of business ownership. Click To Tweet
What would maybe be the lowest percentage that somebody could receive as a profit share? What might be the highest that they could get of that 25%?
On the low end, it might be a variety of factors, 5% of their base pay. On the high end, I’ve done as much as 30% of base pay.
Is that based on like you consider what their base pay is and making that decision or are you just saying, “Here’s the 25% and then now we go to divide this number of people by that?” and give them the appropriate percentages so it all adds up?
Typically, I don’t judge it on base pay because you might have a junior member of the team who did something that lights out, knocked the cover off the ball before you want to use. I would have no problem giving them enormous profit share. That’s completely out of line with their base pay.
Do you ever have other team members go, “I heard that Johnny got this profit share this month or this quarter. I only got this and I felt like I was working hard and I’m more senior. Why is that happening?” Any dynamics like that within with team members?
It’s not happened here in the several years that I’ve run the program. For a couple of reasons, I think the open book financials give everybody a good context of why the amounts that they can expect. They don’t have this overwhelming curiosity of, “Look how much I got. Why is this?” In the quarterly business review, I’ve told them the story of the company from a financial standpoint. I’ve set the narrative and explained, “Generally here’s where we are and here’s what you can expect.” That bleeds off any of this behind the scenes curiosity about one another. The other thing is I don’t link profit sharing to any particular system. It is something I do on my own little laptop, by my own little self. I handed over to the paycheck processing and no one else knows about it. There’s some goodness in keeping that mystery to yourself even in a pretty democratic firm like ours.
Clearly, you’ve leveraged your team and helped 36 people to achieve growth and scale. A lot of people, a lot of consultants have fear and are concerned of adding team members because they don’t want to get into the people management business. What would you say to them?
Trust your instincts. People management is tough. It is a completely different dimension of business ownership. I had the benefit of some amazing learning experiences at Motorola on the people management side so I’m very comfortable with it. If you are very uncomfortable with it, find a mentor who can share with you. Here’s exactly how you have to talk to people to get them into one place or another. You’ve got to have someone teach you that it is a learned skill all the way.
Is there one thing that you do aside from these quarterly open book sessions? Is there one other tactic, approach or principle you use that you find is integral to the success of your team and your company and management of the team?
When it comes to the ongoing culture of the place that helps the place self-manage to a certain extent, we have installed quarterly checkpoint dialogues.
What does that look like?
Checkpoint dialogues consist of five questions and the five questions are not about performance. The five questions that are asked, are asked by the supervisor to the employee about their personal circumstances and experience. For example, one of the questions is, “Do you have a meaningful role here at the agency? Yes or no? Are you able to contribute in a way that allows you to fulfill your professional and career aspirations? Yes or no? Are your personal circumstances whether that’s gender equity, anything that might be unique to you taken care of or acknowledged by the firm?” Those are three of the five, but the supervisor asks those questions. The staffer responds yes or no and has to fill in the blank, “Why did you answer yes? Why did you answer no?” This is a cool way for us to drive meaningful conversation not about performance, but about people’s collaborative capability inside of the agency.
Is that online or how do you get them to provide that feedback?
It’s all person to person, all face-to-face.
They have to say yes and then explain so it’s not something they write down and submit. It’s just done live.
I’ve learned over the years we’ve had to create systems that require inputs, but I am an enormous fan of face-to-face and grown-up conversations. When you get into the practice of checkpoint dialogues, you lose your fear of grown-up conversations. That’s an important skill which we augment the fourth of your four per year. I use a tool that is called the Nine-Box Grid. The Nine-Box is Cartesian X, Y. On the X-axis is potential, your alignment to the culture, and an understanding of how far you can go here. On the Y-axis, it is performance. That performance potential creates a Nine-Box grid in between. Box one is the far upper right hand. Box nine is the far lower left box. The performance conversation that we have is between supervisor and staffer. Put yourself on the Nine-Box. Where do you feel like you are relative to your aspirations? The supervisor has the opportunity to put theirs on the Nine-Box. The gap is where the grown-up conversation is, “You put your dot here. I put my dot there. Let’s talk about the difference.”
I could see how these steps of conversations would be beneficial and I love how they’re done face-to-face not just some online submission that might even go candidly. It’s good to have grown-up conversations. That’s fantastic.
In the Nine-Box, once that exercise is done, you don’t enter any of those results into a system. That piece of paper is immediately shredded. It goes no further than between the employee-manager relationship.When you get into the practice of checkpoint dialogues, you lose your fear of grown up conversations. Click To Tweet
How about you? How do you get looped into those conversations not feedback?
I will, with my senior team, do a Nine-Box roll up and they’ll help me understand generally where their team members are. We have a senior team meeting about that. We call it a calibration session, just to make sure we all feel that a person is being acknowledged, recognized and utilized to their potential.
You’ve talked about and offered some best practices that you use at your company, what you do with your team to achieve high levels of performance. What habit have you developed personally that you feel is central to your success as a consultant, business, agency owner and leader?
The most important thing that I have created for myself because it’s intuitive to me and I’ve taken the advice of Charlie Munger, Warren Buffett’s partner. Charlie talks about this Latticework of Models. The Latticework of Models is exactly what I use in my consulting work with clients. I have created almost like a mobile that hangs from the ceiling. This Latticework of Models from a consulting skill standpoint allows me to assess virtually any situation, and very quickly pull the model into play that addresses or allows for a rich conversation to solve that particular problem. I have a deck now of 22 models. I’ve memorized those and I’ve used them so much that it’s second nature to me. There are all kinds of books on mental models. Charlie Munger, in his Poor Charlie’s Almanack talks about the importance of them. For me, that’s been the key. There is one reason why I can teach my team these models. I can scale their abilities with these models and I’m happy about that. It’s a differentiator for us in terms of our capability.
Can you offer me an example of one of those models briefly?
I talked a little bit about the Nine-Box Grid for example, that is a model that we use internally. For clients, I might use in a crisis communication event a model that I invented called Reputation Dissonance. A Reputation Dissonance is a model that shows in a crisis situation, a crisis communication team or crisis management team that needs to do five things well in a matter of between 90 minutes and two hours. If you do these five things in this sequence and I’ll show you the sequence and why it works, then we can solve any situation that you’re in and get control of the narrative in the media.
How do you build a model? Someone reading is going, “This makes a lot of sense. I can see the value of it. I have ideas I know how to get things done in whatever industry I’m in,” but they haven’t yet documented or built out that model. What are the steps they need to go through? What should they be thinking about to develop their own models?
Typically, you’re going to find yourself in a circumstance where you have way too many options, way too much ambiguity. When a particular question comes up, there’s gnashing of teeth and wringing of hands. Anytime you have that feeling, you’ve got a chance to create a model. You’re going to laugh at this, but I’ve got this giant notepad in a drawer here with about 40 colored pencils. The way you start mapping your model out is to put variables on it. Typically, one of them is time. Another is money or resource. There’s a third one. That’s just the vexing problem like these things all collide together and make a mess in a particular situation. That is a perfect opportunity for a model to provide clarity on all of the options that are available and how you prioritize them.
Jeff, this has been an enjoyable conversation packed with value. I want to thank you again for coming on and just offering these best practices and experiences and taking us a little bit into your journey so far. I want to make sure that people can learn more about you and your work. You have four different brands and entities. Where is the best place for them to go to learn more about your work?
They can go to ApronFoodPr.com. On Apron Food PR, they can listen to the podcasts that we’re doing too, which we learn from experts like you that have helped us understand we’ve got some fun things that we can talk about especially if you like learning about crisis situations in the food industry. Breaking Bad News is the name of the podcast.
Jeff, thanks again for coming on.
I enjoyed it, Michael. Thank you very much.
- Jeff Hahn
- Hahn Public
- Apron Food PR
- Predictive Media Network
- White Lion Interactive
- Poor Charlie’s Almanack
- Breaking Bad News