January 2020

Episode #276: More Metric Mania

Episode #276: More Metric Mania!

What you can measure you can manage. Tying metrics to strategy has become critical in business, and this can create all sorts of moral hazards. An article from the September-October 2019 issue of Harvard Business Review explored some of these hazards in “Don’t Let Metrics Undermine Your Business,” by Michael Harris and Bill Tayler. Ed and Ron dig into this article and continue a long-standing conversation about metrics. Below are a few key points. Click play above to listen to the episode.

  • Strategy is abstract: metrics give it form. Strategy is blueprint: metrics are concrete, wood, drywall, bricks

  • Trap: focusing on the metrics that represent the strategy.

Wells Fargo opened 3.5M deposit and CC accounts without customer consent—cross-selling strategy (“Eight is great”). This scandal led to the following costs:

  • Initial fines ($185M)

  • Reimburse customers: $6.1M

  • Class-action lawsuit: $142M

  • 2017, accrued $3.25B for future litigation expenses

  • 2018, Fine by Consumer Financial Protection Bureau (CFPB) $1B, and Office of the Comptroller of the Currency (OCC)

  • CEO Timothy Sloan resigned March 2019

Wells Fargo Bank never had a cross-selling strategy—it had a cross-selling metric! Its strategy was to build long-term relationships but it was hijacked by numbers.

The authors describe this as surrogation: mentally replace a strategy with metrics. They lay out three strategies for reducing surrogation:

  1. Get people responsible for implementing strategy to help formulate it

  2. Loosen the link between metrics and incentives/compensations

  3. Use multiple metrics—no single metric captures the strategy


 
As long as measurements are abused as a tool of control, measuring will remain the weakest area in a manager’s performance.
— Peter Drucker
 

Ed and Ron also answered the following email question from Jean:

Ron & Ed -

As a fan of your podcast, I thought I would reach out with my question. I co-founded a firm 3 years ago to provide accounting as a service. We target small & mid-size companies who need all the skill sets of a larger company accounting department without all the people. We are growing and would like to add profit sharing and/or bonus to our compensation.  I am interested in metrics that other firms use for measuring profitability in general and for compensation. Do you have any recommendations?

Regards, 

Jean

[See our Episode #243: Team Member Compensation for Ed’s formula on profit-sharing]

Other books and resources mentioned during the show include:

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Here are the books Ron and Ed discussed during the bonus episode this past week:

Episode #275: The Top 10 Books We Read In 2019

Did you read a good book in 2019? Ed and Ron sure did!

We read some GREAT books in 2019 and we went over them in detail during our show this past week. Click the audio link above to listen.

I think we ought to read only the kind of books that wound and stab us. If the book we are reading doesn’t wake us up with a blow on the head, what are we reading it for.
— Franz Kafka
A good book is the best of friends, the same today and forever.
— Ancient Chinese Cookie Proverb

Here we are! Starting with Ed’s top 5:

…and shifting to Ron’s top 5:

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Here are the books Ron and Ed discussed during the bonus episode this past week:

Episode #274: Subscription-Based Law Firm — Jon Tobin, Counsel for Creators

Certainly Lawyers Cannot Use The Subscription Business Model, Until They Can!

About Our Guest:
Jon Tobin is a graduate of the UCLA School of Law, where he studied intellectual property, business law and international law under the nation’s top-ranked practitioners. While at UCLA Law he served as one of two editors-in-chief of the UCLA Journal of International Law and Foreign Affairs. Before studying law he worked for years as a designer and software developer, so he knows what it means to work in creative industries and how things actually get done. He deals with matters involving copyrights, trademarks, software, design, licensing, business, art law and contracts. Jonathan speaks and writes regularly about legal issues facing technology and creative ventures and has given talks for the American Institute of Graphic Arts, the California Community Foundation, UCLA Law, and at a variety of design and technology conferences. Admitted to practice in California and before the federal court of the Central District of California.

Ron and Ed touched on a wide range of topics about Jon’s business model over the course of the hour-long show. Here are Ron’s questions:

  • Tell us about your history. You moved from a career in technology to law, and then saw how to combine them?

  • Did you ever work in a large firm before you started your firm?

  • You wrote a great article at Attorney at Work, “We Built an Affordable Subscription-Based Law Firm for Creatives,” where you discussed when you started practicing, you tried many things—seminars, consultations, etc.—but then landed on the subscription plans for businesses and created The Creators’ Legal Program. Where did you learn about the subscription model?

  • This model puts the relationship at the heart of the business doesn’t it?

  • Before we get into your pricing, one of the questions you must get from your colleagues is “How do you make money like this? What if people keep calling your, or camp out in your office? How do you answer their objections?

  • You set a $95 per month price level; it’s very reasonable, and it’s quite a constraint. That forced you to do some very innovative things, didn’t it?

  • You developed your own system to handle the volume of subscriptions. Did you develop your own applications, or were you able to buy program off-the-shelf?

  • You’re specialized—creative people/industries (writers, artists, app developers, clothing companies, architects). This is a great niche because it’s growing. Talk about how you market to them.

  • It’s easier to do subscription if you’re niched as opposed to a general practitioner, isn’t it?

  • Pricers have a saying: Innovate for growth and price for profit. In your article, you discussed adding additional services over time, such as live Q&A, free trademark services, and some services you’ve taken away. Talk about the process you use to decide what to keep and what to remove?

  • If one of your customers comes to you with a service that’s not covered by the subscription, how do you price for all the other services lawyers do?

  • What about litigation? [No chance!]

  • Could you see how it would be possible to do litigation under this model?

  • When you decide to provide the noncovered service for free, you’re pricing the relationship and not the services. You’re investing in the relationship and building lifetime value.

  • You also discussed metrics and KPIs. The subscription model demands different metrics/KPIs—they are future directed, not backward looking. You are obsessed with:

    • Lifetime customer value

    • Net Promoter Score

    • Churn rate

  • Are there any others you’ve found valuable?

  • Do you find that 20% of your customers utilize 80% of your resources, and many others are paying for that peace of mind?

  • Have you found other things you can provide to those who underutilize your services?

  • You wrote you want to move from hundreds of members to tens of thousands. How scalable is this model, Jon?

  • What advice would you give to a legal firm wanting to convert, or experiment, with this model?

 …and here are Ed’s questions:

  • Explain your customer in-take process? Do people come to you with an event, or do they just want access to a lawyer?

  • You have four services listed on your website, are the other three services included if you join the subscription service?

  • Have people come to you with an event, join, discuss the issue with you, and then leave?

  • You flipped the model, charging for the consultation rather than giving it away in order ot get the services.

  • Have you found that you don’t need a large customer base, or are you looking for a larger customer base given your price point?

  • Are you comfortable at the level you’re at, or do you and your partner have plans to expand

  • You’ll stay in your niche, and build additional services for creative people?

  • When you refer customers to other firms outside of your niche, do you get referral fees?

  • Are you trying to develop relationships with other firms that practice within this model?

  • Have you given any thought to offering different levels to your subscription pricing?

  • Options would allow you to innovate for growth.

  • What were some of the unintended benefits you found in practicing this way?

  • How long have you been around, when did you start your firm? [March 2013, brought partner on 2016, subscription revenue became significant part of the revenue around 2018].

  • I notice you have a blog on your website. Do you provide those posts to your members before they go public?

  • Let’s talk about one of your posts, “What Does California AB5 Do?” Give us the background of this law.

  • What should businesses do because of AB5?

  • The provisions that affect Uber and Lyft are delayed until 2023, is that right?

  • One of the articles you wrote talks about LegalZoom (“LegalZoom Alternative: Businesses Search for the Ultimate One”). What are your thoughts on LegalZoom?

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #273: 2019 — The Year in Review

Ed and Ron looked back at 2019 and discussed their favorite TSOE shows, guests, and discussed notable people we lost during the year.

RIP: Gone, but not forgotten

  • Tim Conway, Conway died on May 14 at the age of 85.

  • Don Imus, 79, Dec 27th.

  • Georgia Engel, The Mary Tyler Moore Show star died on April 12, her talent agent Jackie Stander confirmed to PEOPLE. She was 70. Also on Everybody Loves Raymond.

  • Katherine Helmond, Helmond, who famously portrayed mother Mona Robinson in ABC’s Who’s The Boss? for eight years and Jessica Tate on Soap, died on Feb. 23 of complications from Alzheimer’s disease at her home in Los Angeles. Also on Everybody Loves Raymond.

  • Doris Day died on May 13She was 97.

  • Ken Kercheval, Kercheval, the actor best known for his longtime role as Texas businessman Cliff Barnes on the CBS soap opera Dallasdied on April 21. He was 83.

  • Carol Channing, the saucer-eyed, gravelly voiced Broadway barnstormer whose offbeat personality and marquee value fueled such Golden Age musicals as Gentleman Prefer Blondes and Hello, Dolly!, died on Jan. 15, her publicist B Harlan Boll confirmed in a statement to PEOPLE. She was 97.

  • Peter Tork, Peter Tork, the blues and folk musician who shot to stardom in 1966 as a member of the Monkeesdied on Feb. 21. He was 77.

  • Daryl Dragon, Daryl “Captain” Dragon — half of the legendary 1970s pop duo Captain & Tennille — died on Jan. 2, 76.

  • Denise Nickerson, The actress, best known for playing the gum-chewing Violet Beauregarde in 1971’s Willy Wonka & the Chocolate Factory, died on July 10. She was 62.

  • Beverley Owen, Owen, best known for playing the original Marilyn Munster on season 1 of The Munstersdied in late February. She was 81. Her costar Butch Patrick, who played Eddie Munster, announced the news on Facebook on Feb. 24, writing: “Beautiful Beverly Owen has left us. What a sweet soul. I had the biggest crush on her. RIP Bev and thanks for your 13 memorable Marilyn Munster episodes.”

  • Herb Kelleher, 87.

  • David Koch: The billionaire industrialist and philanthropist died on Aug. 23 at 79 after “many years of fighting various illnesses,” according to his obituary. Koch had assets worth nearly $50 billion.

  • T. Boone Pickens, 91.

  • Ross Perot, 89.

  • Lee Iacocca, 94.

  • John C. Bogle, 89, Mutual Fund Giant.

  • Henry Bloch, 96.

  • John Paul Stevens, The former Supreme Court Justice died on July 16. He was 99. Stevens, who was appointed by President Gerald Ford in 1975, 

  • Gloria Vanderbilt, CNN’s Anderson Cooper confirmed the death of his mother — the heiress, socialite and fashion icon Gloria Vanderbilt — on the network on June 17. She was 95.

  • Paul Volcker, 92.

  • John Dingell, a Michigan Democrat and the longest-serving member of Congress in U.S. history — who in recent years delighted his 264,000 followers on Twitter with biting commentary and wit — died on Feb. 7 at home in Dearborn. He was 92.

  • Carol Spinney, Big Bird, 85.

  • Ken Baker, Ron’s Brother, R.I.P.


Our Top 5 Favorite Shows with Guests

  1. Episode #257: Third Interview with George Gilder Sep 10, 2019

  2. Episode #262: Survivor’s Obligation — Interview with Chris Stricklin Oct 15, 2019

  3. Episode #263: Interview with Andy Armanino Oct 21, 2019

  4. Episode #267: The REALLY REAL Second Interview with Rory Sutherland Nov 19, 2019

  5. Episode #226: A Priest and a Rabbi... Jan 28, 2019

Our Top 5 Favorite Shows on Topics

  1. Episode #255: The Soul of Silicon Aug 26, 2019

  2. Episode #252: On Rory Sutherland's Book - Alchemy Aug 5, 2019

  3. Episode #233: Pricing at Starbucks March 18, 2019

  4. Episode #250: INFLUXUS RECIPROCI FALSUM Jul 22, 2019

  5. Episode #225: The Real Monopolies: Occupational Licensure Jan 21, 2019

Our Top 5 Most Popular Shows from the Audience

  1. Interview with Joe Woodard

  2. Lost Chapter of Implementing Value Pricing

  3. How to Fire a Customer

  4. Lawyering Up

  5. Interview with Tien Tzuo

 

Ron’s Podcast List

  • Uncommon Knowledge, Peter Robinson

  • Free Thoughts

  • The Tom Woods Show

  • Conversations with Bill Kristol

  • EconTalk

  • Conversations with Tyler [Cowen]

  • Hayek Program Podcast

  • Planet Money NPR

  • NPR On Point

  • Cato Events Podcast

  • The Remnant [Jonah Goldberg]

  • Rabbi Daniel Lapin Podcast

  • Reason Podcast

  • The Editors (NR)

  • Mad Dogs and Englishmen

  • Conversations with Nick

  • The SoHo Forum Debates

Bonus Content is Available As Well

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #272: Free-Rider Friday, December 2019

Our Last Free-Rider Friday of the Decade is Now Available! (…and our first LIVE show of the year this coming Friday)

We had a great conversation and talked through quite a few topics in the grand tradition of Free-Riding with the news. Here are Ron’s links from the show:

Here are Ed’s links from the show:

Don’t forget that you can subscribe to The Soul of Enterprise in your favorite podcast player so that you never miss an episode.