How to Overcome Your Company’s Beautiful Constraint with Ric Franzi

40. How to Overcome Your Company’s Beautiful Constraint with Ric Franzi

“Having a transformer mindset enables you to figure out how to not just survive but thrive.”

—Ric Franzi

Podcast Transcription

Hello, I’m Michael Kurland, CEO and Co-Founder of Branded Group, an award-winning California based facility service company that services multi-site commercial properties such as retail, restaurants, healthcare facilities, and educational institutions.

Welcome to the BeBetter podcast! Each week, I interview thought leaders from a variety of industries who will share their stories and the lessons they learned as they strive to be better for their clients, partners, employees, and their community. Are you ready to Be Better?

Michael Kurland (00:02):

Welcome to another episode of the BeBetter podcast. I’m your host, Michael Kurland. Joining me today is Ric Franzi, speaker, author, podcaster, board chair, and entrepreneur. Ric, welcome to the show.

Ric Franzi (00:21):

Thanks, Michael. It’s a pleasure to be here on the BeBetter podcast.

Michael Kurland (00:25):

Thanks for being on the BeBetter podcast. Why don’t you tell the audience a little bit more about all that you do and who you are?

Ric Franzi (00:33):

My professional background is pretty simple. For a big part of my career, I was in the corporate world. I left the corporate world in 2007 as the President and General Manager of a $70 million manufacturing company. I left in 2007, because during that time of running that company, I had joined a peer group for other business leaders of manufacturing companies. I realized how valuable that experience was to me and helped contribute to the growth that we had in the company and myself personally, and I decided to dedicate the next chapter of my career to helping do for other business owners what that group did for me when I ran the manufacturing company. Since 2007, I’ve been writing books, speaking, doing the podcast since 2009, and I lead CEO peer groups for Orange County entrepreneurs of fast-growing companies.

Michael Kurland (01:28):

That is a lot of stuff. That’s excellent. Thank you for doing all of those things. Let’s dive into the first bit, which is podcasting. I don’t know if the audience knows this, but you’re actually one of the main reasons why the BeBetter podcast exists. I came on your podcast twice and you said, “You got the face for radio [both laugh], so maybe you should think about doing your own podcast.” You’re really the guy that’s sparked that interest in my mind to start exploring that. So, audience, this is the guy that made the BeBetter podcast happen.

Ric, I guess we’ll start with saying thank you for sparking my interest. Let’s talk a little bit about your podcast and where it started, where it’s gone, and all the other people that you helped start their own podcast as well. I’m not the only one.

Ric Franzi (02:28):

I’m really proud to see it come full circle, and now I’m a guest on your show. It really gave me goosebumps there for a second, actually, as we were talking about that. Thank you for that.

I started in March of 2009, and the reason why I did was I had published my first book and I was being interviewed. I had a public relations firm and an agent that were getting me interviews for the show. One of them was with Debbra Sweet of Leadership Talk Radio, which was a podcast. It was a 20-minute hit on the book. After it was over, I felt this overwhelming sense of wanting to do something for Debbra because she gave me a chance to talk about my book. I thought, “I would like people to feel that way about me here in Orange County. It’s nice how I feel about her.” I never met her personally. We just did the show. That led to literally a month later hosting my first podcast with my public relations guy because I didn’t have any guests lined up. Since then, I’ve done 1600 interviews on 1300 podcasts. It’s been a great experience. As you said, we are the longest running business podcast here in Orange County. Frankly, in 2009, when we started, people didn’t really understand podcasts, so we called it a radio show because we streamed it live. Now, it’s a radio show/podcast.

Michael Kurland (03:48):

I can remember the first time going on your show and I was so nervous because it is live. I’d never been on a podcast before. I think you were the first one, maybe the second one. The one that I went on the first time was recorded, so if I made an error, it could get edited. On your show, I was like,” I can’t swear. I can’t do anything wrong.” I just remember sweating profusely. I don’t know if you were aware of that, but I remember being a little nervous.

Ric Franzi (04:20):

We had a great conversation. Such a good conversation that, on occasion, I have brought guests back. Not usually as quickly as you and John came back on but because we were actually going a little bit deeper into this concept, which is now the branding for your show about being better. That’s one of the unintended consequences of doing the radio show was how much exposure I was getting to entrepreneurs like you, who were building great companies and learning from kind of what I think are the best practices of how you did it. How you approached it. There’s no one, simple formula for making a successful company. You’re all individuals, and I revel in the fact that people can do it very differently and end up having a very strong culture with a very successful company. That’s kind of what I’ve tried to feature on The Critical Mass, radio show, and podcast.

Michael Kurland (05:09):

I think you’ve done a great job doing that. Clearly, you’ve been on the air for 12 years. Longest running show in Orange County. You’ve done over 1600 interviews. I think you’re my 37th interview. Think about that. That’s over 100 times. I can’t even do math right now, but it’s over 100 times or something like of more than I’ve done.

Let’s talk about some of your favorite podcasts. What’s one big takeaway that you’ve had or one big guest that you’ve really enjoyed having that sticks out in your mind?

Ric Franzi (05:44):

Sometimes you think the bigger names are going to be the most impactful interviews and that’s not always the case. Years ago, I had a gentleman on the show; his name is Jeffrey Scott. One of the companies that he was leading at that time was a software development company. One of the things that they did is for every client that they enrolled, they gave a certain number of hours to a nonprofit that that client could select to do software development for them, programming, whatever that nonprofit might’ve needed. That was my first exposure. This was a long time ago. It was pretty early in the history of the radio show. It was really my first inside look at a company that put at the heart of their business some type of social responsibility, which was novel for me at that time. What I came to learn from the interview with Jeff- it’s still up on the archives- is what that did for the culture of his business, as far as the employees feeling good about this give back, working for free, frankly, for nonprofits. What it did for his brand in the marketplace, and how it differentiated his business in the sales process. If you’re looking for the ROI beyond the positive-ness of what he did, the fact that clients would specifically tell him on times, they picked going with his company because of the fact that there would be this give back that he was doing. He didn’t do it for that reason. He did it because he believed it was the right thing to do. There was this reciprocal benefit, which really opened my eyes to looking for other companies that have a sensibility to them.

What I have found over the years is the new generation of entrepreneurs, call them generation X, call them millennials, call them now Z, that idea is not a foreign concept. It’s no longer novel. If you look at the conscious capitalism movement and the B corporations, there’s an ever awakening sense that successful entrepreneurial companies can be successful and also have a business purpose that is bigger than what their business revenue generating model is.

Michael Kurland (08:04):

Thanks for bringing that up. That sounds like it was obviously impactful all these years later when it was a novelty then. To your point, that’s why you had us on your show for the second time was our give back initiatives. We aligned with Habitat for Humanity and we donated time with them. We’ve actually morphed our program. We donate a meal for every service call we complete to Feeding America. We have employees in 13 different states, however that gets donated, whether it’s through food or working in their local pantry. We did it because it was the right thing to do too, not because we were trying to gain any sort of ulterior motive. To your point as well, we were able to get new business out of it just because of that. People went with Branded Group because they knew we had a One-for-One program.

Ric Franzi (09:05):

What we also talked about was the culture and how you can attract talent. How it differentiates you in the competition. Right now, the competition is for talent. It’s employees for many companies. This is a point of differentiation that I think translates and resonates well. If you’re building culture, you sort of want people that find that to be something that they can be proud of when they come to work.

Michael Kurland (09:29):

Thank you for bringing that up. That’s exactly right. We have such a high retention rate, even post COVID, of people that really want to be at our place because they want to be better. One of their biggest things, you said it earlier, is that they are proud of the company they work for because of our social initiatives. They’re able to go give back to the community in some sort of way and that we make that important for them. I think that’s all great information, and I’m glad that guy stuck out in your mind. All these years later, it’s become not novel.

Ric Franzi (10:05):

I’m really glad to see that.

Michael Kurland (10:08):

Me as well. If all businesses just took a little bite out of that apple [Ric laughs], we’d be in a better place.

Ric Franzi (10:15):

I agree.

Michael Kurland (10:16):

Let’s shift gears a little bit here. Let’s talk about A Beautiful Constraint. This is a book that we were talking about yesterday that you’ve read that you feel really passionate about. Tell the audience about A Beautiful Constraint and then let’s go into what you want to talk about with that.

Ric Franzi (10:32):

The book came out in 2015. It was written by two entrepreneurs; one in San Francisco, called Eat Big Fish is their company. Mark Barden is one of the two authors. I was struck by this book because in their business, Eat Big Fish, they work with challenger brands. Challenger brands are generally companies in a marketplace that are the smaller competitors that are competing against larger companies and, by virtue of their size and scale, feel that they’re at a disadvantage because they don’t have all the resources that their larger competitors have. What Mark and his business partner realized is they found some very common similarities that could be replicated by other companies within those successful challenger brands. In addition to their direct experience with these firms, they conducted research, they found articles, and they talked to academics about what they were seeing so that they could kind of paint a bigger picture than just what their direct experience was proving to them.

I was excited about this book. I interviewed Mark Barden on one of my LinkedIn live conversations last year because COVID had introduced last summer a lot of constraints on businesses. People trying to deal with it and figure out how to be successful, given the new reality. I thought, “Man, this book and what are the key ideas there are more appropriate now. It was in 2020, and it’s still in 2021 and probably in 2022. It might have been in 2015. I wanted to bring those concepts to entrepreneurs like you and your audience. I speak on this topic. I’ve been leading webinars against it because I just believe it really can help companies to actually create a better future when given a constraint, which is sort of counterintuitive.

Michael Kurland (12:27):

Great information. We talked about this on the pre-show yesterday. Let’s get into the big how-to’s of what it is and the skeleton of what it is so that the audience can understand.

Ric Franzi (12:42):

There are really just four points. The first one is critically important, which Mark and the team found how important mindset is. The leader’s mindset. As we know, the leader’s mindset permeates the culture of the organization, whether it’s intentional or not. We are kind of that. One of the sayings that they have is: we are the stories we tell ourselves. Research shows that companies that have a positive outlook towards challenges, solve problems 20% to 40% more efficiently and effectively than those that aren’t able to be resilient about that. A positive culture. The mindset of the leader. I work with business owners like you, Michael, that are running middle-sized companies’ fast growth. You’re meeting a lot of challenges because you’re growing. It’s how you approach those challenges- the newness of them – that really can have downstream effect.

The second thing they found was this idea that they called a propelling question. Imagine when your company encounters a constraint and what we used to do that worked so well no longer is getting us the results that we had expected or require. There can be a challenge to the organization, and usually what many organizations do is they just work harder at the same thing, trying to figure out how to get a little bit more efficiencies or effort out of that. The design of a propelling question is intended to have the leader ask his or her organization question that reframes their thinking. A quick example is the Audi race team that works on the cars for the 24-hour Le Mans race. What they found in their research is that the chief engineer went to the design team, and said and they had not won that race before. He said to them, “How do we win this race if our car can go no faster than anybody else’s car?” Now, their whole life was about material properties, sensors, technicians, whatever, to make the car go faster. When the chief engineer took away from them, they were forced to look other places for a solution to the question and answer. What they found is that Audi has a diesel engine that they never considered putting into the car before that because they didn’t look at it that way. They put a diesel engine in the car because it’s a more fuel-efficient vehicle, so it doesn’t come off the track as often. That forced constraint caused them to think differently, find an alternative. That led to them winning the race that year and then they won the 24-hour Le Mans the next two years. They won three years in a row before the rest of their competitors could figure out how to overcome the innovation that they had. That’s an example of an internal constraint, which you can put on your company. I’m also looking at how the economy puts external constraints. There’s just two more very quickly, Michael. There’s this ‘can if’ idea. They write about this ‘can if’ culture. In other words, when the leader asks the propelling question, “How can we win the race of our car can go no faster?” You can have the organization go, “Are you crazy? That’ll never work. We’re out. We’re not even going work on it.” You have to have a belief system because we are the stories that we tell ourselves that there’s a way to solve this. They have a whole “can if” map, which is a bunch of vectors off of the question. We can if we resource it differently. We can if we look for a different way of propelling the car. This tool allows the organization to develop a culture of (1) we’ve overcome these constraints before, so we can do it again. We are the stories we tell ourselves, and (2) here’s a map from which we can begin to brainstorm and ask questions and maybe do discovery.

The last thing they talk about is when you’re in a constraint, which many of us are from COVID, look at your resources with a fresh light. Don’t look at them how you use them pre-constraint but look at them how they might create an opportunity differently in the future. The example that I use there is Joe Gibbs racing. Joe Gibbs is in NASCAR. He’s a former Washington Redskins coach, but he owns a racing team. Pit crews and pit time is very important to NASCAR. They were looking for all these ways to do it better. What he introduced to them is a different set of talent, which were former NFL players or college players who didn’t make it to the NFL who had such athletic prowess that by putting them in the pit, they were just innately better at doing their job because they were athletes. It totally gave them a competitive advantage for a period in their industry. Resourcing differently, looking at your ecosystem, mindset, propelling question, “can-if” culture, resources differently.

Michael Kurland (17:41):

I think that’s very pertinent, especially like you said, coming out of COVID or going into COVID. Companies are looking for a lot of different ways to get back to where they were in 2019 in terms of bottom line. I can tell you for us, I think we just went through this exercise in 2020. We had 75% of our workforce furloughed when COVID hit because we didn’t know what we were up against. When Jon, who you also know, and I sat down, wanted to furlough the sales team. I actually said, “I think that’s a terrible idea because if we want to bring people back then we got to keep selling, right?” Our goal was to get all of our employees back in the office as fast as possible. I said, “Why don’t we instead of furloughing this sales team, why don’t we double down and hire more salespeople?” That’s what we ended up doing, and we doubled our sales team during COVID. What it’s done now is exactly what we had hoped it would do is led to explosive growth through a pandemic. From January 1st until today, May 26th, we’ve hired 50 new people on top of brought back all the people that we furloughed that we could bring back. We’re at a roster of 115 employees now. I think that’s exactly what you do. We can bring the people back if we hire more salespeople, and look at where we are now. I don’t know if there was a propelling question in there, but I think it was very relatable to what you were saying, so thank you for that. I think, audience, that’s a great tool for you, A Beautiful Constraint, published in 2015. If you guys are having some sort of issues, I think look it up.

Ric Franzi (19:33):

I need to just respond to what you just said.

Michael Kurland (19:37):

Totally.

Rick Franzi (19:37):

What I didn’t mention in the mindset is they found three types of mentality that happened at the leader level and then the company level, when confronted with the constraint. The first one is a victim. That mindset and that culture says, “How do we let this constraint have as little as impact on us as possible? How do we reduce our expenses? How do we cut down? How do we hunker through and get through this bad time? We’re victimized by it. We’re going to survive it, but we’re going to shrink from the challenge.” The second mindset is a group of people who are neutralizers, who say, “We may not get our original goals, but how do we get as close to it as possible? What can we do?” The mindset they found that turns constraints to be beautiful is what you exhibited, I believe, which is this transformer mindset. It says, “No, we’re not going to take a step backwards. We’re going to figure out how to not just survive but thrive. We’re going to put some risk in the business maybe to do it, but we believe we’re going to get a result that others wouldn’t by shrinking back.” I think your experience is a testament to that.

Michael Kurland (20:53):

Thank you. It worked the way exactly the way we wanted it to. Obviously, there was other changes we had to make. I had to have the sales team focus on essential businesses as opposed to normal brick and mortar retail that we were heavily involved in and that also worked as well. Thank you for bringing that up. Again, A Beautiful Constraint, audience. This is a book that you should all be reading if you are having any sort of post-COVID issues or any issues with your business at all.

Let’s shift gears one more time here. We were talking about racing here, so I think shifting gears is apropos. [Both laugh] Let’s talk about your peer group consulting practice. You’ve been doing it since 2007. That’s 14 years in the making, so you are an expert on that. Let’s hear what you do with that.

Ric Franzi (21:50):

This started from my direct experience when I was in the manufacturing company. I wanted it to grow. I wanted it to be more profitable, but it was a $50 million company with 700 employees. It was a large organization. What I learned from that experience is that I didn’t have to have my business structured the way it was structured. The only way I learned that was from being in a peer group with other people who were running companies who were structured very differently than me. I was awakened to the fact that there might be other ways to build this business so that I could release its latent potential. I think experience is the best teacher in business, but some business lessons are best learned vicariously through the experiences of others.

Michael Kurland (22:33):

Yes!

Ric Franzi (22:33):

We can learn from hearing a story. We don’t have to always directly experience it. From being in a peer group, it actually led me to redesign my business from a traditional, functional division business to a business with value lines or profit center managers, where I set up distinct smaller businesses. Because what I recognized from being in the peer group is some of the smaller companies had much closer focus on their markets than I had as a generalist, and I needed that. I created people within my company that were running $12 or $15 million businesses in aggregate that brought me up to the $50 million with profit loss responsibility. I don’t think I would have ever come up with that because nothing in my experience I’d ever done that. From talking with these peers in my group, I said, “I could do that.” I want that level of understanding and commitment to the business that we’re lacking here as being this $50 million business, which is really a conglomerate of a bunch of smaller businesses.

The other thing they taught me was that I needed to be more efficient in my manufacturing. They really helped me to see how I could streamline because I thought I needed bigger, more plant. From bringing my problems to the group, they helped me see how we might using things such as Six Sigma and the Toyota production system and other technologies that made my existing plant equipment much more efficient and effective. It was through that process and seeing, we grew the business from $50 to $70 million. We improved its cash flow, and its profitability. I would have never had those kinds of breakthrough ideas if I would have been kept grinding on the problems inside my own business, with the resources I had available to me at the time.

Michael Kurland (24:21):

I totally agree with you. I recently joined a peer group myself, and it was for similar reasons just to get different insight. It’s lonely at the top when you’re the CEO. You are looked at to have all the answers, but we don’t always have all the answers. Sometimes there’s a problem that you just can’t figure out, and maybe the answer’s as simple as just changing your state of mind or hearing, like you said, vicariously someone else’s experience with said issue. It can just flip things on its head. Like you said, being able to do that has allowed you to go from $50 to $70 in a very short time.

Ric Franzi (25:04):

I really saw that through COVID. Back in April, the peer group meetings that we were having, “What’s PPP?” “Can I apply for PPP and the economic injury disaster loan at the same time?” “How do those work?” There was a lot of uncertainty. We came around the campfire. We shared each other’s experiences. We got a collective intelligence and then every member who thought they qualified, who wanted to go for either their idle or their PPP or both, were successful in getting it. We had a little more sophistication around the second time, but PPP round two was a little more confusing. We had the same need to share experiences. It really became for many members a place where they could go to go, “Not sure what’s happening. Need to figure it out. What are you seeing in a confidential, trusted way where you actually hear the truth about what’s going on in business from peers who you know, like, and trust?

Michael Kurland (26:05):

Great points. I can tell you that Jon is also in a different peer group. In his peer group, it’s exactly what you just said. They helped us navigate through PPP both. Helped Jon, which helped Branded Group, navigate through with the PPP both times. Helped him navigate through with the SBA loan and then just recently helped us navigate through the ERC. That’s the big one now that that no one knows how to do that. We were able to figure that out and now we’re going to get the employee retention credit as well. It’s definitely been so beneficial for Jon growing as a person in that peer group, Branded Group growing as company in that peer group, me growing as a person in my peer group. I think you can say a testament to what we’re talking about here. You also grew as well and obviously your company grew. Highly recommend it. Let’s talk about your book, The Critical Mass: The 10 Explosive Powers of CEO Peer Groups.

Ric Franzi (27:17):

When I came into this field in 2007, I was reading everything I could and understanding value of our groups. I didn’t realize until I was doing that, that there was never a book that was written about why people like you and Jon and others join these groups. And I thought, “Hey, I’ll write the book. I have years of experience as a member, and now I’m leading them. I’m chairing these groups.” I wrote the first book ever. It’s called it, Critical Mass because I believe when you get the right people in a room, you create this critical mass of energy; the 10 explosive powers of CEO peer groups. It was really based on a blend of the groups that I led, were leading then, and my experiences as a member. It really talks to the different things that can happen from as simple as a safe haven. A place where you can go and you can have transparent, vulnerable conversations with peers, without any reciprocal downside to that, which is so hard for leaders to find who are running SMPs. All the way to what I consider maybe is the highest order power, which I call “molecular” in the book. What I mean by molecular is I witnessed it myself and in my community that by going each month and being open to getting input, being open to being vulnerable and explaining a situation, sometimes that may even reflect on you in a way that isn’t always positive. Maybe you made decisions that were wrong or whatever. Over time, you become a better leader because you learned to ask for and get advice, not just from your peer group, but from your leadership team and from the employees and, molecularly, you rewire yourself to some degree to become a better leader.

Michael Kurland (29:07):

I think that is so true. I can tell you from my experience that has happened with me. I used to think I had to have all the answers, or I had to figure out the answer that I didn’t know by myself. Now, I know that I can let the people that I’ve put in place to do their jobs, help me get to the answers that I may not necessarily know. I think it’s an ego thing because when you put the title CEO after your name, you feel like you have to have all the answers. You feel like you are on an island by yourself, trying to lead through whatever storms you may weather. Then you realize that you don’t, and there’s other people out there like you that are doing the same thing, like you said, vicariously, done some of the mistakes you don’t want to make but have also learned how to do some of the things you do want to repeat in your company.

Ric, I think that that’s great. I’m actually going to get myself a copy of Critical Mass and start reading because it sounds like something that I definitely need to read. I appreciate that.

Ric, it’s been great having you on the show. I’ve really appreciated this conversation. It’s been eye opening and also, I always want to pay homage to someone who’s helped me in my career. Thank you, again, for everything you’ve done for me. If the audience wants to get ahold of you, how can they do so?

Ric Franzi (30:36):

I prefer to connect with people on LinkedIn. If you type in Ric Franzi, I’ll come up. Reach out to me, and let’s become a first level connection. Let’s have a conversation. If you want to call me: 949-887-4104. Old school, baby. Give me a call. I answer my cell phone all the time or you can text me. That’s fine, too. Those are probably the easiest two ways to connect.

Michael Kurland (31:05):

I always love when someone gives their cell phone number out because I don’t know if you know what you’re getting into. [Laughs] I don’t know if I would do that, but I applaud you for doing it. Ric, again, thank you for coming on the show. It’s been great. Audience, until next time.

Thank you for tuning in! I hope that today’s episode inspired you to become a purpose-driven leader in your career or your community. There is no doubt that when we lead with purpose, we can change lives. If you enjoyed today’s show, I’d be grateful if you would take a moment to rate us on your preferred listening platform.

To learn more Branded Group’s “Be Better” experience and how we provide industry-leading on-demand California based facilities management and special project implementation, visit us at www.branded-group.com. Be sure to follow us on social media and you can also reach out to me directly on LinkedIn. Until next time, Be Better.