Developing Leadership across Multiple Organizations with Sam Palazzolo

Today on the show, we talked to the managing director of a venture capital group about how to develop strong leadership across a collection of organizations in order to deliver great results. Welcome to the Life as Leadership podcast. I'm your host, Josh Friedemann. And our guest today is an entrepreneur, venture capitalist, author, leadership professor, and nonprofit philanthropist.

He brings a variety of value creation topics to entrepreneurs and business leaders. His ideas and actionable takeaways are captured in his five books, the most recent being The Influential Leader, Leading at the Tip of the Spear. Here is Sam Palazzolo. Sam, welcome to the podcast.

Thanks for having me, Josh. So I like to start off every single interview with a few questions that help us to get to know you better as a leader and give us some insight for our own lives. Are you ready for these? Sure.

Fire away. What is some lesson, saying, or experience that continues to influence your leadership to this day? Oh, this is a good question. You know, I'm super fortunate.

I have had really great leaders that I worked for when I was kind of cutting my teeth in the corporate workforce. I was born and raised in the restaurant business, though. And I would still say that everything that I do today comes from that restaurant background, from a level of service, the quality of an integrity of what it is that we produce. All of those types of things come from the restaurant background that I have.

But as I mentioned, I've been super fortunate. I work with some really awesome leaders out there. Use three descriptors to finish this sentence. A leader is.

I think a leader is someone that sees. I think a leader is someone that does or they do. And I think a leader is someone that delivers. And that's kind of the approach that we have at my firm with the business transformation consulting work that we do.

See, do, deliver. That's our approach. What is a question that leaders should be asking either themselves or others? I think the, this is another great question.

A leader should ask themselves how it is that they can do more, but operate at a higher dollar production value. So in other words, if they put a dollar value on their most recent hour, what was the dollar threshold that they would earn if they were a consultant? And how is it that they can bill themselves more and do more in the process? What's a book that you would recommend to leaders?

The book that I recommend to every leader besides mine, obviously, because that's self-serving. But the book that I recommend to everyone is Robert Cialdini's Influence and Persuasion book. It was really the work that I did with Robert when I was with Toyota Lexus. we were attempting to try and figure out how it is that we could sell more vehicles, sell those vehicles at greater gross profit, and have customers not only return to repeat repurchase, but advocate on our behalf.

That's kind of the study that we conducted at Toyota. Robert's work as the foremost expert in social psychology on influence and persuasion at Arizona State was crucial to that work. So his work, and I think he just came out with a new addition. And I think he threw in another or a new principle of influence and persuasion, having to deal with the social aspect of life today.

If you could get every listener to start doing something this week to help them be a better leader, what would that thing be? I just had this conversation this morning because I work with a series of coaches. We have a sales coach that works with me. We have an executive coach that works with me, and I have a chief of staff who acts as kind of an all-around executive coach.

The thing that we are looking at is, you know, let's do it. That's kind of our motto for 2021 is catch up. In the past, we typically have, and I'm an accountant by training, so I'm probably guilty of it, Josh, where there might be a little analysis paralysis taking place. We want to make our best calls given the information that we have at present and then launch forward.

And the catch-up methodology or motto for 2021 simply comes from, you know, in the past, we've waited. We've waited too long. Instead, this year, we've gone for it. And we're running where we've walked in the past or maybe stop to read some of that analysis.

So those would be the things that I would say that I would pass along to leaders that are listening to this. If you're going to do one thing, take action, right? Force people to catch up with you as opposed to trying to coordinate and pull others along with you. Now, finally, and I want to ask you about that a little bit more because I feel like a lot of leaders are probably in that place to some degree, different levels, depending on what their business is, what the responsibilities are.

But I want to get to this last question first, and we call it our arbitrary but insightful question. And it's this, as a general life principle, is it better to ask why or why not? You know, this is the half glass full, half glass empty principle, right? I think it's always better to replace a why question with a what.

Why questions tend to drive from our psychological studies to what it is somebody's thinking, a what question, if you can rephrase it, will drive towards the heart or the emotions that are involved. So we want to move away from, you know, heady answers and move it more towards what are the emotions and the gut check that we need to compensate for. So maybe a curveball in and of itself, why, why not? I would ask, how can you rephrase those into a what type of a question.

That's what we do at the firm. That how it is that we are trained We be back with the rest of our interview right after this As the leader of your organization you have a lot on your plate You work most of your day leaving you little time to think about your own development There's a resource for you, and it's called the Leadership Action List. Get the best leadership development tips for leaders by leaders at leadershipactionlist.com.

The best news? It's free. Once again, for a year's worth of weekly leadership development, Download the Leadership Action List at leadershipactionlist.com.

I'm excited to interview you today, talk to you a little bit about your experience as a venture capitalist experience, helping businesses grow through consulting as well. First of all, though, I'd love to hear from you a little bit about your book, The Influential Leader, Leading at the Tip of the Spear. Maybe riff a little bit on the tip of the spear idea, because that is directly connected to your business. Yeah.

So in 2012, I successfully exited from a tech startup. I formed Tip of the Spear Ventures, which is the venture firm that I still reside at today. We're celebrating our 10-year anniversary in 2022. The motto comes from really the Marine Corps.

First in wins. And I did a lot of work when I lived in San Diego with the Department of Defense, the U.S. Navy and the U.

S. Marine Corps. And really what it comes down to is that the essence of leading at the tip of the spear, the leader is and there's a bazillion leadership books that are out there. I don't even know if we Google searched or did a search on Amazon, how many would come up today underneath a leadership topic.

But I felt like they were all the same rhetoric. They were all the same, I'll put it into the noise, that weren't allowing leaders to actively improve and actually not only lead themselves better, but lead those that they led better. It all starts with leading yourself. If you're not leading yourself effectively, you should realistically believe that no one is going to fall in line behind you to follow you as a leader.

So it all begins with leading yourself. That's where leading at the tip of the spear of the leader came from. And could you talk a little bit about how you approach your business? You are interested in investing in companies, but you also are interested in helping them to grow through your firm, through consulting.

Could you talk to us a little bit about the two of those? Are those things that are often combined or is that a unique approach for you? I think it's a unique approach within the private equity space. I don't consider it to be a unique approach, though.

I come from big consulting firms like Deloitte and Change Management Group out of Chicago. And so prior to the tech startup, I had my own consulting firm where we dealt with change and with leaders specifically. When I went to form Tip of the Spear Ventures, I had one of my senior partners ask me if we were going to put the band back together, so to speak. And I said, yeah, I would love to do that.

But I wanted to do it a little differently. I wanted to have two sides of the house at the firm. One side, very much a business consultancy. We've kind of morphed the change management methodology to be more business transformation.

That's more of a McKinsey-an, Deloitte-an type of a phrase. I think it's still change at essence. The other side of the firm, though, is a venture firm. We do three things really well.

One is we help early stage entrepreneurs that are post revenue of a million dollars plus with some of their venture activities. Grow, scale, anything we can do to help take that idea from launch pad to lift off in a smoother trajectory. That's what we're all about. Second thing on the venture side we do is business funding.

We'll work with organizations to help them in a funding capacity. Most entrepreneurs think of funding solely as raising capital. It's a mistake. You will give up equity.

You will end up doing a bunch of presentations to folks who have no intention in investing with you or your company. But they'll string you along and it'll be a tremendous time suck for you. We think a better model is customer funding. And it's some of the work that I did with the University of London to help identify five different areas in which entrepreneurs can raise funds through customer activities.

The third and final area that we do on the venture side of the house, we're a really good M&A firm. We're late entrance to the party. We've only been in the space for about the last three years. But we love baby boomer led organizations that are in those unsexy industries like manufacturing and construction.

But those baby boomers have led those organizations for years. They don't have a clear line for secession. No heredity, no kids, no nieces, nephews, no second in command who can step up, wants to buy the organization. We love those businesses and we love partnering with those leaders as they go off and enjoy the rest of their retirement years.

So do you have a group of people that you draw from to begin staffing, to begin building out the leadership team for those types of organizations? Or what does the process look like to begin bringing in some new people, some new blood to take that organization to the next level? So we will typically always ask if there's a second in command or somebody who remains at the organization that really should be elevated to that leadership position. Call them a president.

We generally try to give that type of an individual ownership stake, equity in the organization. So that way they truly have skin in the game. If there is none, then we'll look to secure that from an external source. We work with a series of recruiters that will help us find best talent, geographically friendly to where the opportunity is.

And our footprint is really the domestic U.S. So we've worked with a series of recruiters. And we're also super excited.

This fall we launching our Entrepreneur in Residence program where we going to onboard six entrepreneurs who rather than go the startup route want to do this acquisition route but want to be owner operator They want to be hands on boots on the ground so to speak leaders within an organization that we acquire together. So that's a little bit about what our methodology is. But first and foremost, we always ask if there's anybody, any second in command, that would be a great person to elevate to that president position.

I'm curious about, from a leadership perspective, how much do you try to bring a common culture into all of the businesses that you invest in, that you help with? Are you looking to bring some alignment there, or do you just want to make sure that you're able to provide the support as they need it for their own culture? Yeah, we typically look at it from the perspective of we're very respectful of the legacy of the previous leadership regime, the previous owner, and what it is that they've built over the past 20, 30 plus years.

But it is one of those things where we want to indoctrinate them into the tip of the spear methodology and culture. And part of that consists of, you know, we do a monthly roundtable with all of our presidents that are the owner operators in place at the businesses. That type of a roundtable, Josh, consists of getting together for a full day. Typically, we'll have one of the leaders that's on the hot seat, so to speak, where they get to talk about either that million-dollar opportunity that they're trying to chase down, or maybe that million-dollar expense that they're trying to avoid unnecessarily.

And it's really from a roundtabling perspective that they discuss what that challenge or opportunity is. There's a round of clarifying questions. And then there's a round of actionable advice presented. It's up to the leader then to take that information, say what it is that they're going to do as they move forward, and then report out at the next monthly meeting.

And so that's kind of how it is. That's our culture. It's one of change. Go figure.

For the group that has a business transformation consultancy. But it is one of those things where it's a continuous improvement initiative. That's kind of the Kaizen methodology that I learned when I was with Toyota Lexus, kind of the never-ending continuous improvement. And so that's what we're all about, and that's what we want to have indoctrinated.

We don't look at that as necessarily, if you think of a business as cake, we don't look at it as replacing the cake as much as just putting a real nice icing on top of it. So I like that monthly roundtable approach that kind of has a mastermind sense to it. I'm curious, how do you set people's expectations to where they're open to asking for that help? Because I can imagine that in at least certain situations, certain people could bring an ego to the table that would make it more difficult to open up about their difficulties, especially as the top of the organization.

Yeah, great question. We're a sharing culture, right? To a fault, I will share. I had the opportunity to work with a leader one time who described sharing as their gift, and I want to pay that forward with the work and with the leaders that we do.

Sometimes ego is an issue, but I think it's one of those things where it's a confidential atmosphere. It's a safe atmosphere. You're with your peers, and let's face it, it is lonely at the top. There's not a heck of a lot of places to turn to, to look for guidance, perspective, sharing.

And that's really what the atmosphere that we want to create. It's been really amazing, though, to look at the leaders who have come in. They might have been a little standoffish. We obviously we attempt to interview for that.

But it is one of those things where once you get the hang of it and you recognize that this is a way to not only grow my organization, but to scale it. And the sharing aspect of it, you know, we've kind of adopted a Deloittean partner model when it comes to compensation for our presidents or the owner operators that are boots on the ground. You know, they obviously get the majority of their compensation from their own operations performance, but there's also kind of a partner pool sharing, something that Deloitte and all the other big consulting firms have implemented where annually the reserves, the monies that are left over, portion of that gets distributed to the partners.

Likewise with us, we distribute a portion of each one of the enterprise's operations to the presidents, these owner operators that are boots on the ground. So they've got a vested interest not only in themselves, but in everybody who's sitting around that table with them. Do you recommend they take that or other types of things that you might model to their own organizations and play at that organizational level as opposed to the larger venture capitalists? everyone comes from different businesses to the roundtable.

Do you recommend they take that to their own organization? Yeah, absolutely. I think some of the early success I had as a change consultant was doing exactly that. It's getting together a cross-functional group, a group of team members from the organization that are from different departments and have them come together over an opportunity or a challenge.

Identifying what the current state is, describing what the ideal future state is, and then kind of architecting, how do we get from here to there? And a lot of that can be driven back to the organization from those mastermind with principles. So you mentioned earlier running where you've walked. I'd love for you to talk a little bit about that and maybe give leaders who are listening to this podcast an idea of how they might be thinking through running where they've walked.

Yeah. And I mentioned I'm an accountant by training, so I have the opportunity to perform the analysis paralysis moment. I'll give you a recent challenge that we experienced at the firm. We were a long-time investor as well as we used the tool of one of our tech startup firms.

The tech startup was acquired by a private equity firm, so a good lesson for us. The private equity firm that acquired the tech offering they did a couple of things that really kind of reflected poorly on the industry They did the typical things of they stripped out some of the services They did away with the bulk of their customer experience or their customer satisfaction or service team. And lastly, they raised the prices, not just like a 10%. They went for the gusto.

They almost 3X'd what the prices of this tech offering was. And it's a SaaS offering. And I couldn't believe it. my traditional sense would be that I would want to analyze what exactly was going wrong.

Maybe the folks who were leveraging it within the firm, maybe they weren't utilizing it properly. But in talking with them and then talking with the company, we found out that, yeah, we're utilizing it to the best of our abilities. The services that we used to have access to were no longer available. It wasn't like we even could buy them if they were available.

They just stripped them out. The support took forever to get back with us and even to get back with me. And you would think I'd be running an inner loop within the leadership of the firm. But the thing that we also looked at was what are the costs associated with this?

The costs, Josh, I mentioned they were they're almost three X what they were before. Throw on top of that, there's probably a frustration cost that I would put into not only what I needed to manage from a team perspective, but for myself, which was probably equal to the 3x expenditure. But we ended up going with another provider, a strategic partner in the tech space who had a very similar and we think better. We didn't go with them originally because, as I mentioned, we were in the space as investors.

And looking at it, we decided to go with them even though they are about a 10x type of an expenditure. So it's significantly more expensive. But I think it sets itself up for us to operate better in the space with more bells and whistles that we can leverage in the future for different opportunities. And in hindsight, all of that took us about 48 hours to come about.

And in the past, that might have taken, I mean, heck, it could take five plus weeks to do where we sit on it. But we're getting better at the let's run instead of walking. And that's kind of what our motto was this year. We knew we were going to get into it, into those moments where we'd be telling people, well, catch up.

And we're there. And so it's kind of gratifying that we're really practicing what it is that we've preached. So running versus walking can look any number of ways. in that situation, was it a matter of stripping away other decision-making layers?

Was it not weighing the pros and cons and taking as much time there, maybe doing the cost-benefit analysis? What is it that helps you to run? I think we, like a lot of leaders, you know, we're just thirsty for more input. We're thirsty for more data to analyze, Right.

But at a certain point, it becomes not necessarily you're thirsty anymore. You're just looking to oversaturate. So you're already hydrated. You're just topping off.

And we I guess the lesson that we learned, Josh, is, you know, let's just make the best call that we can. And let's let's do it. Let's monitor the results to make certain that we're getting the best results that we can afterward. word, but let's make a call.

This is what change management and business transformation is all about, is making the best decisions that you can, given the data or the content that you have available. So that way you can make a decision and then monitoring it for best fit application. We've kind of lived and died by that from a consultancy perspective. And now we're actually doing it within the firm.

We've been doing that, I should say, since we launched back in 2012. But it's really gratifying to just think that we kind of eat our own dog food here, right? And that's not too common out there in other consultancies, professional service firms, etc. Well, before we finish today's interview, I'd love for you to share with the listeners any final thoughts, whether it's something you want to reiterate from our conversation or something we just haven't had a chance to talk about yet.

Yeah, I would say that we have a unique business transformation approach that see, do, deliver, model, that methodology. We can put it in the show notes. You can have access to what that approach looks like. It's a one-page overview.

You can have a step-down meeting with your team. If you're interested in taking an even deeper dive into business transformation, we have a 37-page, 128-question self-assessment workbook that we created on the topic of business transformation. We'll make that available to your listeners as well, both of which are excellent resources to help get yourself started or to continue to maybe sharpen the spear as you drive forward to achieve the goals that you want to set. So you've just shared a few resources for listeners.

We'll have links in the show notes. But if people have really connected with what you've shared today, is there anywhere else you'd like for them to go to find out more about you and the work that you do? Yeah, they can find out more about us at Tip of the Spear Ventures. I also started a 501c3 nonprofit that is executive education focused.

It's called the Javelin Institute. You can find out what our offerings are there. But those are the two primary places, Josh. Sam, thanks so much for your time today.

It's been a pleasure. Thank you. I hope you enjoyed today's episode. If you want to follow up, remember, as always, links are in the show notes below.

Until next time, keep living and leading well.