How We Built a Barbecue Empire

Few things are more grueling than delivering an elevator pitch to a group of skeptical investors. Pork Barrel BBQ did it in front of 4 million TV viewers on Shark Tank. Nothing has been the same since.

 REALITY BITES:  Brett Thompson (left) and Heath Hall were barbecue hobbyist-until an appearance on ABC's  Shark Tank.

Chris Crisman

REALITY BITES: Brett Thompson (left) and Heath Hall were barbecue hobbyist-until an appearance on ABC’s Shark Tank.


ABC Shark Tank/Courtesy Pork Barrel BBQ

THIS LITTLE PIGGY: Thompson and Hall make their pitch. Barbara Corcoran thought Hall would make an adorable pig. He proved her right.

Did she just say I look like a pig? I think she just said I look like a pig! On national TV!

There are certain things for which even the most fastidious entrepreneur cannot prepare–a lesson that Heath Hall learned when he and his business partner, Brett Thompson, appeared on ABC’s reality TV show Shark Tank to raise funds for Pork Barrel BBQ, their sauce and spice-rub business. The two entrepreneurs had just completed their pitch before the show’s panel of investors. In just six months, they explained, they had developed and branded a line of barbecue products and now had 10,000 units going into production. “What if the 10,000 units doesn’t sell?” shot back investor Kevin Harrington. “You guys are starting out with a pretty good product,” observed software entrepreneur Kevin O’Leary. “It tastes great. But it is completely unknown as far as I can tell.”

And then it was New York City real estate maven Barbara Corcoran’s turn. “Heath,” she said to Hall, “I have to tell you, I can’t look at you without picturing you in a pig costume. You would look adorable as a real-life mascot.” The other panelists burst out in laughter. Heath was stunned–she just likened me to swine! He paused. “I guess I’ll take that as a compliment,” he said.

Corcoran was impressed enough with the co-founders’ ability to roll with the punches that she invested $50,000 in Pork Barrel. “I was sizing up how well these guys would bounce back when they were knocked down,” Corcoran says. “I don’t even like barbecue sauce–I couldn’t have been less likely to invest in this. But I saw two superstar salespeople.”

As it happens, a month later, in October 2009, when Shark Tank invited the entrepreneurs back for a follow-up segment, Hall made a big entrance–in a pink pig suit.

Shark Tank debuted in August 2009. The show lets entrepreneurs pitch their businesses to a roster of seasoned executives and investors. Since its debut, the “sharks” have heard 152 pitches from entrepreneurs, about half of whom have walked away with an average of roughly $180,000. The questioning by the panel can get brutal–Shark Tank‘s producers keep a psychologist on hand to speak with entrepreneurs if necessary. But the high stakes and drama have drawn a fan base: Season Three was the highest rated so far, drawing more than six million viewers for the premiere in January.

Hall and Thompson appeared on Shark Tank‘s sixth episode and remain one of the show’s biggest success stories. At the time of the taping, Pork Barrel’s products were in just four stores and had generated sales of about $5,000. Now, it’s one of the fastest-growing brands in the crowded and hypercompetitive barbecue-product niche, with sales of $3 million, a presence in 5,000 stores nationwide, and a Pork Barrel restaurant in Alexandria, Virginia. “Almost nobody makes it in this business,” says Dave Raymond, founder of Sweet Baby Ray’s, one of the top-selling retail barbecue brands. “But Hall and Thompson had the cojones to move this business forward.”

The brand was born one wintry night in 2006. Hall and Thompson, then legislative aides to Senator Jim Talent of Missouri, were working late on Capitol Hill amid budget negotiations. As one member of Congress after another took the floor to put forth one amendment after another, Hall remarked, “Man, what I wouldn’t give for some great barbecue right now.” The two began reminiscing about their favorite barbecue joints back home in Missouri. “It just kind of hit us,” Hall says. “Pork barrel spending projects, barbecue. Pork barrel barbecue. That would be a pretty cool name.”

That’s all it was until mid-2008. Talent had lost his reelection bid, and both Hall and Thompson had moved on to jobs in the private sector–Hall at the conservative think tank the Heritage Foundation and Thompson at the public affairs firm Mercury. In his spare time, Hall crafted six spice rubs. He and Thompson invited some friends from the Hill to try them out. Their friends were impressed. So the two men found a small manufacturer to make a rub. A few months later, they began working on a sauce.

Thompson landed Pork Barrel’s first retail customer by making a cold call on a local butcher. But attempts to break into big grocery chains were a bust. Though Thompson and Hall still had their day jobs and weren’t relying on the business for income, they were dismayed that they had little to show after sinking close to $100,000 into the venture. “Our desire was to build a real business,” says Hall.

But the two men kept at it, handing out free samples to anyone who expressed the slightest interest and even anyone who didn’t. One of those samples ended up in the hands of someone on the production team at Shark Tank, who e-mailed Thompson inviting the two to audition. Neither had heard of the show. But both had heard of its producer–Mark Burnett, who produced Survivor and The Apprentice–and decided to go for it.

Rather than play it safe and follow the producer’s instructions to submit a straightforward QA video, they gathered some political friends and put together a 60 Minutes-style profile of the company. Among the participants was Hall’s buddy the pundit Tucker Carlson, who tells the camera, “Pork Barrel BBQ–that’s the phrase on the lips of every Washingtonian in the know. And nothing brings this city together like pork.”

Six weeks later, the pair flew to Los Angeles for the taping. They had prepped exhaustively–creating dossiers on each of the five investors and spending more than 100 hours drafting answers to potential questions. The hard work paid off. “They had it all,” says Burnett. “Energy, a great idea, and an interesting story.” Thompson and Hall returned to D.C. under strict orders not to discuss the show before it aired. But they nonetheless soon learned about the power of national exposure. A hint that they were going to appear on an unnamed television program helped seal a deal with the Harris Teeter chain of grocery stores. And after a food blogger wrote that Hall and Thompson were about to appear “on a supersecret reality show,” the pair was approached by some Alexandria restaurateurs about opening a Pork Barrel BBQ-themed outlet.

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7 Companies Older Than America

Towle Silversmiths was founded in Newbury, Massachusetts, in 1690 by William Moulton II, the first silversmith in the region. For the next six generations, the Moultons continued making silverware, and in 1882, the family incorporated the company as the Towle Manufacturing Co. In 1990, the company was acquired by Syratech, a holding company, which was then acquired by Lifetime Brands, a bigger holding company, in 2006. However, Towle silverware can still be purchased directly on TowleSilver.com.

What It Takes to Stay ‘Made In America’

Innovation, a commitment to quality, and a hint of luck, are just a few factors enabling these companies to continue manufacturing in America.

 Born in the USA : Less than 1% of shoes sold in the United States are manufactured here. The Okabashi factory in Buford, Georgia, is bucking that trend.

Courtesy Company

Born in the USA: Less than 1% of shoes sold in the United States are manufactured here. The Okabashi factory in Buford, Georgia, is bucking that trend.

Mark Kent is a fifth generation yarn man.

His great, great, grandfather, Thomas Kent, founded Kent Manufacturing in Greenville, South Carolina in 1843. Today, the company has about 100 employees, many of whom who have been there more than 50 years.

And while pretty much all of the company’s competitors have gone international–moving plants overseas to India, China, and elsewhere–Kentwool continues to manufacture socks in Pickens, South Carolina, population: 3,126.

“We’re definitely iconoclastic,” says Mark Kent, the compay’s CEO and president.

In the late 80s and early 1990s, the Kent family “dabbled” in overseas manufacturing, but in 1992, Kent made a firm decision to stay local.

Virtually all his competitors were going overseas; was he anxious when bucking the trend?

 “I wish I could tell you the answer was no,” he says. “There were many nights when I toyed with the idea that ‘Man, did we make the wrong decision?'”

But Kent is more than pleased these days.

“Especially now, more than ever, there is an enormous amount of pride in our company,” he says. “At a time when the economy was doing poorly and jobs were moving offshore, there’s a feeling that we’ve done things that other companies haven’t been able to do.”


Taking Care of Customers by Staying Home

In 1960, about 26% of the American employees were engaged in some sort of manufacturing work. By the mid 2000s, that number shrank to about 7%. The reality was obvious: Labor costs were much, much cheaper overseas. In 2002, for instance, the average hourly rate for a Chinese manufacturing employees was $0.57. In the United States, it was $21.40. By 1998, outsourcing had become a $100 billion industry; by 2003, it had exploded to nearly $300 billion.

So as outsourcing became the norm, many American companies went offshore to manufacture products. But for the companies that decided to stay local, the road has not always been easy–whether it was retooling factories to make custom products, taking smaller margins, or even reducing the size of the workforce.

Dick Resch, the CEO of Krueger International, a Fortune 500 furniture manufacturer, took over the company in 1980. While most, if not all, of the company’s competitors have moved their manufacturing facilities abroad–mostly to India and China–Resch saw a future for the company in Wisconsin.

“I saw a niche for us in taking care of customers and not manufacturing in mass needs,” he says. “We retooled our factories to be flexible. That takes a lot of time and capital but we felt our goal was to be efficient and to have flexible manufacturing.”

Today, the company provides custom office furniture for companies such as Microsoft, Facebook, and Box.net.

“Living on the Knife’s Edge.”

The decision to manufacture locally can often be a sore subject between the company’s founder and the company’s accountant or CFO.

Consider Okabashi, a shoe- and sandal-maker that was founded in 1984 in Buford, Georgia, about 40 miles north of Atlanta. Today, less than 1% of shoes sold in the United are manufactured domestically, but Okabashi has decided to stay local.

Kerry Cunningham, the company’s executive vice president and CFO, says that when he joined the company seven years ago, the idea of manufacturing abroad–cheaply–certainly was a subject of conversation.

“When I came here, I looked at it like any accountant or CFO would,” he says. “There is no question that if you were to roll out the numbers you would make the assumption that you would need to manufacture this overseas. No question.”

But eventually, Cunningham came to see eye-to-eye with the company’s founder.

“We wanted to make sure it was a safe product,” he says. “Also, that it’s safe for the environment. We felt that if we outsourced, we may have risked one or more of those values. It definitely means that we don’t get the margins that we want, but we stuck to our values.”

Cunningham says the company has sacrificed profit by staying in the United States, but that moving abroad would have been detrimental long-term.

“Trust me, it was tempting to move. But that would have been a really bad short-term decision. In hindsight, it’s been a bad decision for this country,” he said. “When manufacturing began to get outsourced, we gave up the golden eggs, but we also gave away the goose.”

Slimmer margins in American-made brands are common. Steven Elliot, president of Oren Elliott Products, an Ohio-based manufacturer of capacitors says staying local since 1983 has saved his employees’ jobs, but it’s also forced the company to take smaller margins than its competitors.

“Markup is so low,” he says. “We make a 20 percent margin when we’re successful. We’re living on the knife’s edge.”

The Value of a Label

Kevin Parker, the owner of Powis, a book-binding company based in Berkley, Calironia, says that even though his competition will charge less than half the amount for their product–about $1,200 versus $4,000–he’s remained happy with his decision to manufacture locally, especially for environmental reasons.

“The pollution [in China]–it’s amazing how bad the air is,” he says. “It’s unconsciounable. It was very discouraging from that point of view.”

Interestingly, Parker also notes that his European distributors have pressured him to continue to manufacture locally.

“Europeans are really very negative about taking the product to Asia,” he says. “They make something of the fact that it’s U.S.-built.”

That “Made in America” label can pay off. Sean Bandawat, president of Jacob Bromwell, a kitchenware company that was founded in 1819, says customers are willing to pay between a 20% and 30% premium for items made in the United States.

Bandawat and his partner, Eric Stanton, acquired Jacob Bromwell in 2010. He says the decision to keep the company local, wasn’t all that hard. Besides, he says, “China isn’t any cheaper any more.”

In fact, he’s right. Chinese labor costs have been on the rise in the last decade. Bloomberg noted recently that an April poll of about 300 U.S. contract manufacturers showed that 40 percent “benefited this year from work previously done abroad.”

Perhaps these companies were on the right side of the trend.

“Insourcing is a trend I think we’ll continue,” says Dick Resch. “Done right here, I think we can be competitive on the world market.”

Kids & Career: 5 Ways to Have It All

A recent Atlantic cover story argues that you can’t hold a top job and be a good mom. But I beg to differ.

best apps for moms

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In my own bio I claim to have not given up the notion that I can “do it all”–have a fulfilling career and raise a family. So, I read with great interest the recent cover story in The Atlantic, “Why Women Still Can’t Have it All.” I was predisposed to hate the article, given the title. And yet I found the author Anne-Marie Slaughter, a Princeton professor and former State Department official, made some great points about the struggles of balancing motherhood with a big career.

But I do beg to differ on the overall conclusion. There are, of course, cases where a certain job and motherhood don’t mix, like Slaughter’s foreign policy job, which required she be out of town five days per week and see her kids only on the weekends. But that situation wouldn’t work for many dads or even childless executives either.

Working parents–along with those who want to hire us–can’t just throw up our hands and say, “That’s it, I can’t have it all.” Like any sea change, it takes persistence by those to whom it matters most to drive a change in attitude and redefine the landscape.

When my mom–a teacher–was pregnant with my brother 40 some years ago, the school told her that she would not be able to teach while pregnant. That’s right, teachers had to go on leave (without pay) as soon as they started to show because it didn’t look good. Hard to imagine now, but times they do change.

In my last article, “Five Reasons Your Company Needs More Moms,” I gave some advice to leaders on the value of hiring moms. And now moms, here are some things you can do to combine professional success with satisfaction in your commitment to family. You can have it all. Here’s how:

Make big strides early.

These days, most women are having kids a bit later, so take advantage of the time before they come. Work your ass off. Work longer, work harder, sacrifice some play time. You will move up quicker, gain more experience, and you’ll feel much better about taking some of the time back when you do have children.

Set your priorities and stand by them.

Make your intentions known.  If you know you can’t be in early or stay late, make it clear and don’t hide it. Don’t take a job that requires 8 a.m.-7 p.m. face time and figure you’ll slip in and out. Sheryl Sandberg, COO of Facebook (a.k.a. BIG job) says, “I walk out of this office every day at 5:30 so I’m home for dinner with my kids at 6:00, and interestingly, I’ve been doing that since I had kids.”  Come and go when you need to with your head held high, knowing that people respect your contribution AND your choices.

Don’t suck.

If you need to work less or differently than the rest of the team, you better be damn good when you do work. Don’t hang out at the water cooler, never ever put out sub-par work, and always be responsive to crucial stuff when it comes up, even if it means plopping your little one in front of the TV once in a while, which brings me to…

Skip the guilt.

My daughter eats far more mac cheese and hotdog dinners than I ever anticipated, and yes, on some days she watches more than the recommended 30 minutes max of TV. So far she’s surviving just fine, and worrying about it doesn’t do anyone any good. (For more on this topic, I love this blog post “Apologies to the Parents I Judged Four Years Ago.”)

Be flexible in your career choice. 

You may not be able to be a high-ranking official in the White House, but I’d argue that’s not a requirement for “having it all.” There are situations that will support your goal, so find them. The culture at my company–ServiceMax–explicitly values life/work balance and ALL of our leaders support it. It’s much easier to find a situation that works for you than trying to change an established culture that isn’t mom-friendly. And don’t lose faith: Someday the moms will change them all.

4 Strategies for Painless Sales

How do we want our customer to feel when they meet with us? That’s the key to our sales strategy.

salesman, black and white with bird on shoulder

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I just kicked out another pair of solicitors from our office suite. Nicely, of course. 

The young man and woman were well dressed, polite and trying to whip up some charming banter with me before launching into their spiel about printing solutions. I felt badly for them, and give them credit for taking a tough job in tough economic times, but I’m also annoyed they interrupted my 2:30 pm at-my-desk lunch to sell something we already have.

Their visit made me think about my own small business. I wondered: How do we make our clients feel? Unlike my competitors, my company never cold calls or shows up at an office unannounced. Mostly, we’ll contact our corporate colleagues and then we’ll listen. Sometimes they vent about their crummy job or don’t have time to talk because their hair is on fire — which is exactly when we can help. Our sales strategy isn’t complex, but it’s very effective: Be there when it’s hitting the fan.

Not every business needs a well-defined, matrixed sales strategy. Because we’re a professional services firm, we rely on personal contacts and referrals for painless selling. We use relationships built on value, loyalty and trust. That’s why my company uses four strategies when we sell:

Be Personal

My son’s first job in college was a telemarketer to alumni, calling people at home during dinner to ask for donations. After his first week, he hated it. “I can’t do this, Mom,” he said. “I feel sleazy and want to quit.” Two weeks after I thought he had quit, he said he was still on the job and succeeding, earning a lot more donations and having fun at the same time. How did he turn things around?

“I stopped using the script,” he said. “I just call and talk to people. Some people hang up on me like before, but mostly I just ask what they’re doing since they graduated and there’s no shortage of great stories. It’s fascinating to hear about their lives. Then sometimes they ask about my career goals, and the next thing you know, they wanted to connect me with a friend to help my career or donate to the school!” Genuine connections happen when people actually like what they do.

Be Picky

I’m damn picky about our clients. As a small business, I know we can’t be all things to all clients or we’d go broke and crazy trying. We make a conscious decision about the types of clients we want. If a potential client isn’t in our sweet spot, we refer them to freelance friends or kindly say no thank you. Sales isn’t so painful when you know who you are and stay in your lane. You can’t be everything to everybody, and a great many of your prospects just won’t be the right fit.

Be Passionate

Are you a true believer? Do you believe the product or service you’re introducing to your prospect is going to add value and make a difference? Are you doing the prospect a favor — or are you just trying to cram a slightly less expensive, less reliable toner cartridge down the office manager’s throat? When I know my prospect has a problem I can solve, it changes everything about my delivery and the impact of the conversation.

Be Patient

Ooh, don’t you just hate naggers? We know it’s important to stay visible and let prospects know what we can do, but we don’t nag them. Our service business, like many, is like the fire department. People know where we are but don’t really need us until something bursts into flames. Attorneys, tax experts, tech support, electricians. When you need them you want the best. It takes time to build simple awareness into a relationship of trust, but there’s nothing more satisfying than delivering in a big way when you’re needed most.

As entrepreneurs, we’re selling every day even if we’re not natural salespeople. Anyone who’s received a telemarketing call during dinner knows forced solicitation rarely results in a sale. How do those calls make you feel? Your own selling style should be thoughtfully crafted and constantly nurtured for truly painless sales.

Meet Inc.’s 30 Under 30, Class of 2012

John Hering, James Burgess, and Kevin Mahaffey pulled a phone-hacking stunt at the Oscars to prove a point about the need for mobile security. Now, their key product, Lookout Mobile Security, protects the devices of some 20 million users from malware, spyware, and privacy breaches. The app, which works on both Androids and iPhones, also allows users to locate their lost or stolen devices. Read more

How to Combat Digital Distractions

We’ve all been there. Here’s how to curb online workplace distractions and reclaim your productivity.

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Everyone does it.

You start off with an email, maybe it’s a newsletter. It takes you to an article to read and you read it. You get some good ideas and like what the author wrote, so you check her out.

She’s on Twitter! You decide you should follow her.

You log into your Twitter account and see that someone you follow has posted a video you just have to watch on YouTube. You check out that video and then the “videos you might like” shows you a few more you just have to watch. So, you do.

All of a sudden a meeting alert pops up right in front of your browser.

You’ve just lost 45 minutes of your life you won’t get back.

How do you regain focus and get the work done you needed to? Here are four ideas:

1. Close your email program.

My company, VerticalResponse, is an email marketing service provider, so I cringe when I say this. But sometimes you have to not be wed to your email. Block one hour off every day and close the window of your email client.

2. Turn off alerts (instant message, phone, etc.).

I wrote an Inc. article earlier this year about how much I dislike phones and IM disrupting meetings, but sometimes they just plain disrupt your day. If you don’t want to be completely unreachable, turn off your IM or alerts during a different hour than when you close your email down. Then you won’t hyperventilate at the thought of being totally disconnected.

3. Realize when “research” turns into surfing.

Sometimes I think the Internet was introduced to us by the pharma companies that hawk ADD drugs. One simple little Web page can rob hours of my life, but hey, here I go “liking” my friend’s cat pictures on Facebook and watching the baby laughing video … again!

My day usually starts off on Daily Beast for some quick news, then I head over to TechCrunch to read up on all of my favorite start-ups. I pop over to Inc.com where I’m sure to learn something that betters my business day. But does it end there? Never. Here’s what I’ve been doing lately: I force myself get up from my desk to “break” the habit, and walk out of my office to talk to people. Works every time.

4. Limit the number of windows on your desktop.

My husband has no less than 20 tabs open in his browser at one time. I don’t know how he does it. On top of it, with the ease of Apple’s desktop dock you can have tons of files staring at you at any given time. Here’s my solution: Every Friday, I take a moment to close down some windows I haven’t used in a few days, get rid of files on the dock, and clean up my desktop. Monday will look like a different day!

Do you sometimes feel like you have digital ADD? What do you do to focus? I’d love to know.

Did you enjoy this post? If so, sign up for the free VR Buzz weekly newsletter and check out the VerticalResponse Marketing Blog.

Starting Up? Think Inside the Box

It sounds counterintuitive, but launching your store inside a giant retail chain store could be a smart business move.

Flickr/Dru Bloomfield

Looking for the perfect location for your new retail business? Consider setting up shop inside a “big box” retail store.

That’s what has worked for N-Hance Wood Renewal, a franchise service that renews wood floors and cabinets with polyurethane, refreshing the finish and changing the color, if desired, at a much lower cost than traditional refinishing or replacement. About 40% of N-Hance’s business comes from its kiosks inside Home Depot stores. N-Hance first began selling franchises in 2006, and there are now 200 franchises operating kiosks in 1,400 of Home Depot’s 1,900 locations.

Setting up shop inside a big box store brings challenges you wouldn’t face when opening a storefront: There are commissions, fees for marketing and other details to negotiate; you may have to answer to the retail chain if a customer complains of poor service; and getting there in the first place requires pitching your concept to a large corporate entity that regards its in-store real estate as highly valuable.

It’s well worth the effort, according to Ben Davis, president of N-Hance. Here are four reasons why:

1. Customers come to you.

“Eighty percent of Americans who are considering doing something with their kitchens walk into a Home Depot,” he says. “We can send our franchisees to set up shop exactly where our customers are. It’s like opening a lemonade stand after thirsty kids are already lined up down the block.”

2. You get credibility.

“N-Hance is a relatively new company in a relatively new market space,” Davis says. “People thinking about doing a remodel rarely think about simply renewing and changing the color of their cabinets. Having our offering within Home Depot gives it great credibility. People who might have wondered about the quality of our service will think, ‘I’m sure if they weren’t able to delight customers, Home Depot wouldn’t let them sell within its stores.'”

3. Raising money is a snap.

Big chains don’t like doing things on a small scale. “It’s uninteresting to them,” Davis says. So if you’re a small company, the best approach is to either start with a regional chain and then move up to a national chain once you’re established, or start with a few stores within a national chain, but be prepared to ramp up quickly.

Either way, once you’ve got a big retail chain on board, investors will be too. “Saying, ‘We’re in 10% of this chain’s stores, and they’d be willing to put us into 100% tomorrow if we were ready,’ is very compelling,” Davis notes.

4. You can get richer faster.

“A couple of carpet installers I know set up in Home Depot a few years ago,” Davis says. Last time I talked to them, they had about $50 million in revenue a year. They could not have grown that quickly on their own. You just can’t replicate the distribution or foot traffic.”

Red Hat CEO: How Great Leaders Inspire Followers

After a while, even charisma and eloquence fade. What do you do then? Red Hat CEO Jim Whitehurst explains.

Red Hat CEO Jim Whitehurst

Flickr/Paul W. Frields

Here’s the second in my series where I choose a topic, pick someone smarter than me–which is a pretty easy task–and we trade emails.

The first was with Dave Lavinsky, the founder and CEO of Growthink, about the best way to learn to be an entrepreneur.

This time it’s Jim Whitehurst, the President and CEO of Red Hat, a $1.1 billion open source software and systems company. (If you’re running Linux, odds are good it’s Red Hat.)

Before joining Red Hat he was the COO of Delta Airlines; his job was to lead the company out of bankruptcy. Before that he was a director and vice president of Boston Consulting Group.

Yep. I’m screwed.

The premise: What companies project or “sell” to the outside isn’t always how they operate on the inside–especially where their employees are concerned.

Jeff:  Lots of companies say what they do best is listen to their customers… but if the owner doesn’t listen to his employees, I guarantee those employees aren’t listening to customers.

As an employee you act the way you’re treated, especially in a small business.

Jim: The nut of the problem, whether you run a huge company or a small company, is that you feel your job is to make decisions, move ahead, and get people to execute. Being decisive is positive. That’s what leaders do. So when someone questions your judgment, it’s painful.

Jeff: No doubt. I once moved 30 employees to a different shift. I thought it was a good business decision but of course it changed their personal lives completely.

So they complained. I thought I was right and didn’t really listen because I was caught up in the “I’m in charge” thing. A couple months later I realized they were right and I moved them back.

Jim: The most basic thing you do as a leader is get people to do what you want them to do. That’s an extremely limited view of leadership, though; if that’s all you accomplish, you’ll spend all your time supervising and directing.

Now if you can get people to think the way you think, then you can turn them loose. Certainly that’s better.

But when employees believe in what you’re doing, as a leader and as a business, they’ll walk through walls because now it’s no longer about you–it’s about them.

Jeff: That’s like the sports analogy, where belief and a sense of shared purpose often trump talent. But how do you get employees to believe? Billion dollar question.

Jim: There are incredibly inspiring leaders who are so eloquent and brilliant that people follow, but there are very few of those… and even fewer who can keep doing that.

Let’s be honest, after people work with you for a while, charisma fades. Even successful coaches eventually leave a team because they feel the players have stopped listening to the same message.

Jeff: And if you are incredibly charismatic, once the power of vision or inspiration fades, then what? If you’re a small business owner, you’re it: You can’t bring in Phil Jackson to take your team to the next level.

Jim: At Red Hat the employees are the inspiration. A key job of the leadership team is to support that inspiration.

Jeff: To some small business owners that sounds more like a democracy, and many started their own businesses just so they could make their own decisions.

Jim: It’s not a democracy. It’s a meritocracy. To engage people, you listen to them and make sure the best ideas win.

Take Memo List, Red Hat’s in-house communication tool. Basically it’s just a giant email list where every employee is subscribed. Everyone can give feedback, share ideas, criticize ideas… just like with open-source software, the best ideas rise to the top. Problems are brought to light and other people can jump in to make suggestions and add detail.

Jeff: That sounds good, but you’re left with the age-old management problem. Eventually, someone has to say yes or no, and if I’ve raised an idea I feel strongly about it doesn’t feel good when my idea gets shot down, especially by someone whose opinion is more “important” because they’re higher up the ladder.

Jim: Keep in mind the idea isn’t that people get to vote on decisions. Our social contract is that if you post a concern we will give you a thoughtful response: yes or no, and most importantly why. If you have a concern about something, it’s addressed.

Soliciting feedback is important, but responding to feedback is more important.

Again, a meritocracy isn’t a democracy. A meritocracy allows smart people to act on smart input from other smart people. That makes the business better and also generates a huge side benefit: Thoughtful people who like to be engaged want to work for companies who listen.

It’s like what pilots say to passengers: We know you have options, and if you’re smart and passionate and want to make things better, we’re glad you chose to work with us.

Jeff: I was on the wrong end of that once. There was a suggestion system and if your idea saved the company money you got 25% of the first-year savings. I turned in 20 pages of ideas including details for how to implement each one. After about three months my supervisor finally got back to me and said, “These are all great, but there’s no way we can pay you the $40,000 you would get. That would set a precedent we don’t want to set. So we’ll give you the maximum award for a non-tangible benefit: $300.”

Imagine my delight.

Even if money isn’t an issue, suggestions are still problematic. I was on a consulting gig in a manufacturing plant and an employee slipped me a list of ideas. I scanned it and said, “Hey, these are great–why don’t you give them to your supervisor and get the credit?” He said, “If it’s not his idea it must suck. Maybe they’ll listen to you.”

Jim: Sometimes as a leader your idea isn’t so great either. We changed our healthcare provider in Boston for what we thought were all the right reasons, but on Memo List we learned hundreds of things we hadn’t considered.

So we changed the decision.

Jeff: All that input is no doubt valuable, but when you really open things up it can be tough to find the time to deal thoughtfully with all the suggestions and input you can get. I put in a process improvement feedback system once and was absolutely flooded with ideas… it was great, but there were times I felt so overwhelmed I thought, “What the heck have I done?”

Jim: That’s true, but the coolest thing about a completely open feedback tool is the stuff you don’t have to do. For example, our Raleigh offices are at capacity so if someone parks across two parking spaces someone will take a picture, post it on Memo List, and say, “Come on.” Or if a conference room is left in a mess someone will take a picture, time stamp it, and post it.

That stuff really makes a difference. People much prefer to self-police than to be policed.

Jeff: I would think it could also get really out of hand. When I worked on the shop floor I can only imagine what some of my coworkers and I would have done with an open system like that. We weren’t exactly models of propriety.

Jim: Sure. At one point Memo List did start to get a little off track. There were hundreds of emails a day, some were just funny or conversational, others were a little rude… and I started to feel it was no longer serving its full purpose. So I said, “I think we need a set of rules.”

Immediately other people said, “No way. You can’t set the rules. If the CEO or an executive sets the rules for something intended to be open, no one will use it anymore.” So we gathered together the 10 people who tended to post the most and shared our concerns. They came back and said, “Let’s create a Friday List for fun stuff and for getting to know each other in a less formal way. And if someone gets too rude, we’ll self-police it.”

That was a good lesson. We knew we needed a solution but we let smart, engaged people actually solve it. We didn’t tell them how.

Jeff: The big challenge for some small business owners who want to implement a similar system would be dealing with some of the ideas–or criticism–that would naturally result… and being willing to let go of some of their control over how their company is run.

Plus it can be painful. I once asked a group of employees what they would do differently if they were me. I walked out an hour later feeling like the worst manager in the world.

Jim: You absolutely need a thick skin, but if you’re willing to take a little criticism–criticism that is being leveled at you anyway, just out of your earshot–all that dialogue makes your decisions better and makes execution a lot better. When employees are involved and feel they have been heard they are much more likely to execute well.

Take the big firms that bring in change management specialists. “Change management” is like advertising, and we’re so flooded with advertising we’re all great at tuning it out. But if you do your change management while you’re making the decision, by letting employees help create that decision, then you don’t need change management. You don’t need to convince people.

Change management is what you do to employees; when employees participate, change is what they do for the company and for themselves.

Jeff: An open culture was already in place when you got to Red Hat. You were at Delta Airlines, a company I imagine was fairly buttoned-up. I bet that was a culture shock.

Jim: I inherited a wonderful organization.

It sounds corny, but your mother is right: It’s better to share. If I have an apple and you have an apple and we exchange apples, we each still have an apple. If I have an idea and you have an idea and we exchange ideas, now we both have two ideas.

An open culture adds real value for customers and makes this a great place to work. We have fiercely loyal employees; some even have Red Hat tattoos.

Our people are passionate about what they do because there’s a fundamental good in open source–both outside the company and inside.