The Twenty One Clear Podcast

Part two of Adam's conversation with Norm Smallwood, co-founder of The RBL Group, picking up where Episode 12 left off. Norm and Adam move into stage four, otherwise known as "power", of Norm's four-stage leadership model. They then work through what it costs a family business when people are operating below the stage their role requires, why self-diagnosis of your own stage almost never works, and what it looks like to build a great career and a great company without ever needing to become stage four yourself.

21C links
Bumper music: "Still Hot" by Nic D, Connor Price © Lossless, 2023

Episode produced by: https://snapmarket.co

Chapters
[00:00] Welcome and Recap
[03:09] Naming Stage Four
[06:23] When Stage Fours Collide
[08:53] You Can't See Your Own Stage
[13:12] The Real Cost Isn't Bob's
[16:15] Succeeding at Every Stage but One
[17:32] What Makes a "Sue"
[20:45] What Buyers Are Actually Buying
[23:28] Quality of Leadership as a Line Item
[25:22] Willie G. Davidson and "Sounded Like a Harley"
[26:00] Julian Van Winkle and Making It "Taste Like Pappy"
[28:35] You Don't Have to Be Stage Four to Win
[29:45] Where to find Norm's four-stages assessment and how to reach Adam

Creators and Guests

Host
Adam Hatcher
Family Business Consultant

What is The Twenty One Clear Podcast?

The benefits of working with family include mutual trust, a shared long-term outlook, and quick decision making. However, your inner family business relationships can also cause chaos for the company and family.

What can you do?

Join us as we explore chaos proofing your family business so you can build a great company with a strong family around it.

21clear.com

Adam Hatcher: Hey there.

Welcome to the 21 Clear Podcast.

I'm your host, Adam Hatcher,
the founder of 21 Clear, a

family business consulting firm.

And with this and all of our other
podcasts, we wanna provide resources

to you that help you think about
your inner family business, the

unique way your family works in
and owns your company together.

This episode is part two of my
interview with Norm Smallwood.

Norm is the co-founder of the RBL
Group, or Results Based Leadership,

and he has a concept that I wish I
had known earlier in my career at

my family's company, a way to answer
that question, am I performing well?

Am I a high performer?

Are my family members high performers
compared to what this organization

and what our customers need,
and the people around us, too?

And Norm has a model, the four stages
of leadership, that once I saw it,

was as simple as it was challenging.

In episode one, we went through
stages one, two, and three.

If you haven't had a chance to
listen to that yet, I encourage

you to look in the show notes and
you'll see a link for episode one.

Go click there, start with that,
and then pick up with this episode.

In part two, Norm and I are gonna move
to stage four in his leadership stages,

and then we're gonna talk about some of
the consequences, both the positive and

the difficult or negative consequences
for understanding these stages and

applying them or for ignoring them.

And it's a fun conversation that draws
on Norm's, Norm's career experience.

I mentioned in the first episode,
over decades of leadership work,

he has worked with publicly
and privately held companies.

He's worked with companies that
were privately held and family

controlled or publicly owned and
still controlled by a family.

So when Norm talks, he's talking
about his experience and his study

of companies that understand the
full range of that conditional nature

of business, that marketplace that
doesn't care if you're family-owned.

It generally just wants to know what are
you doing for your customers and what's

happening to your financial performance,
your value, and your valuation.

That's the perspective he brings.

I hope episode one, when, when you
listened to it, was helpful, and I really

hope you enjoy this time we take in
episode two to flesh out the fourth stage,

but then really get into the impact of
what it means for you and your company.

With that, here is part two of the
conversation with Norm Smallwood

So what is stage four?

So stage three was you're able
to contribute through others.

That's somebody who's gonna be a student
of the organization, of their functional

area, of functional areas around them.

Differentiate that from stage four

Norm Smallwood: So the term we use, one
was dependence, two was independence,

three is influence, four is power.

So the, the, the shift from I need to
influence others in the organization,

others more senior people than me to
make the-- to, to, to bring information

together to make important choices
is the shift from three to four.

So, so in s-some of the other
characteristics of, of, of stage four.

So I'm-- the buck stops with me, right?

I get to make these decisions.

The, the next one is setting
strategic direction, right?

I'm not setting it for the
team, but the entire organ…

Even when you have a small organization,
it can be very difficult to, to,

to say, you know, holistically,
"Here's, here's where we're going."

Maybe small now, but it's that,
uh, vision of the, of the future.

In stage three, you're a
mentor, so you're working with

somebody like coach or mentor.

Mentor meaning that you're helping
somebody develop their skills

and spending the time to do.

In stage four, you don't see that as
much, and the term sponsor becomes more.

I'm gonna test the stage three people
to see which of these are able to cut

it and to, uh, move to the next level.

So and then representing the
business or the organization

to the outside world would be
another element of, of stage four.

So I've shifted from dependence to
independence to influence, influence

meaning the, the team and others, and then
stage four is the entire organization,

assuming that it's, you know, of some
size, and then setting direction,

um, sponsoring versus mentoring.

Um, anyway, so that's the, so that's
the, uh, that's the final, uh, layer.

And, and again, it's even in a very
large organization, there tend not to be

like less than five percent, uh, would,
would typically be in, in stage four.

You'd see maybe up to twenty percent
in stage three, especially if you

don't make it-- You, you don't have to
have some kind of formal nomination.

The more stage threes
you can have, the better.

Stage four, if there's too
many of them, they'll probably

fight with each other, right?

So, uh, you, you don't need
them, or they'll go off and

start their own thing, right?

So, uh-

Adam Hatcher: I heard you say stage
four, the thing they s- the thing

a stage four CEO would say is, "My
job is to ensure that the company is

utterly realistic about the difference
between where we are, where we want

to go, and the path to get there."

And you got three or four
of those together, you're

gonna have a lot of fights.

Norm Smallwood: Yeah.

Yeah.

Well, the thing, like I was at, uh,
Esso Resources for several years,

you know, early in my career, and
they, and s- they had stage four

technical people in, in jobs.

They had a chief geologist and
a chief geophysicist, and these

were folks who had huge influence
and really power, not influence.

They had power over the, the careers
of the geologists and geophysicists,

of which in exploration and
production, there's a lot of those

in, in these big oil companies.

And, uh, so is…

it's, uh, in Livermore,
there's 7,000 physicists.

One…

These are the guys that were doing
Star Wars in the Reagan administration.

But, but, but I remember the
guy that had the idea for Star

Wars was a g- guy in his 20s.

So this would be somebody very
early moved to stage four, had a

vision for Livermore to have a…

th- that, that's still important today,
the idea of a defensive shield for

the military of weapons that could
shoot down from space or from wherever

missiles coming in from other places.

So it, it sounds kind of
science fictiony, but, but it…

And it was completely bogus at the time.

It wasn't…

We couldn't really do it, but Reagan
convinced Gorbachev to stand down

because, you know, the, the belief that
Livermore was creating this, this Star

Wars invincible shield around America,
that was the really cool idea of a

young stage four guy, PhD physicist.

So, uh,

Adam Hatcher: So

Norm Smallwood: anyway

Adam Hatcher: is, somebody listening is
gonna think, all right, so if st- stage

two, three, and four can e- like, if stage
one, two, or three could accidentally

get in a stage four position, or maybe we
have, like you just described, stage fours

not in a CEO role, but because of our
company, stage fours in different places.

Norm Smallwood: Yep

Adam Hatcher: someone has right
now is, what's a way I can

figure out what I am right now?

Or if I'm managing my daughter,
my nephew, what's a way I

can help them see themselves?

'Cause they probably
have career aspirations.

Norm Smallwood: You know, the simplest
way to do it that's, uh, is that we're

self-deceived ourselves about this one.

This is, uh, the only person
who will be self-deceived about

what stage you're in is you.

Um, and so if you just had a, if you gave
somebody the descriptions of the four

stages and that works with you, I mean,
it could be a peer, it could be a boss, it

could, it could be your spouse, and, uh,
and just say, "Which of these do you think

is more the way I can like to contribute?"

Uh, there's a, I think, a ninety-nine
percent correlation in which those

around you would perceive you.

And, uh, time and again, you know, I've
seen people be three-- I mean, I've…

Remember, uh, the, the program where
people could defer working because

the company was downsizing, so
they would, uh, offer them degrees.

I remember this person who was
in, uh, this was again in an-

in another oil company where
they were, uh, called a landman.

You can see Billy Bob Thornton
in Paramount Plus's Landman

to find out what they do.

But, uh, this person was the landman,
went off, got an MBA, and came back a

couple years later, and when they were a
landman, they were perceived in stage one.

Came back a couple years later,
everybody in the organization saw

them still as stage one, and they were
sure that they were stage four, right?

So they wanted to start setting direction
and sort of arguing with the, with

the, um, with the other senior leaders.

And what you can do to be really helpful
with that is the, when you're coaching

somebody like that, it's, you know, the,
the conversation is better run something

like, "Well, you know, you perceive you're
in stage, um, four, but I've, you know,

I've talked to others, and there's sort
of a general agreement that you're in one.

So regardless of where you are, how
do you, how do we begin to show the

path that, uh, create the perception
that, that you're not there?

And the first one would be,
you know, show that you're in

two and then three and four.

We'll work you through this."

'Cause people can't go from one
to four in terms of the same

person, um, that quickly, right?

It's a, it's a tough, tough, tough road

Adam Hatcher: It's tough.

Well, and that's what I like about
the, you've and taught the stages is

'cause it gets to that question, in
a family company, you want to be seen

as a strong performer, not just by
your brother, not just by your father,

not by your uncle, but you wanna be
seen that way by customers, by the

business, at least in family companies
that want to build a great company,

uh, and stay together as family.

And this helps you see,
okay, I am stage two.

let me show people how to get to three.

So we have…

I wanna t- we've focused
a lot individually.

I wanna close this, uh, I, I wanna g- ask
you one more question and pull it out to

organizationally.

So it's important f- for any of us to
answer stage one, two, three, four for

our own careers, for the careers of the
family members around us, and the cost of

that is you can end up a job that's over
your qualifications or ov- you don't even

know the expectation and can be miserable.

And I saw a number that you wrote that
actually, in your studies, 50% of leaders

in most organizations are operating
below the stage required for their role.

Now, I know that when that's y- the
case, it makes people miserable, but I am

curious, when we think of answering that,
like, what's the cost to the organization?

If you've got family members who don't
know their stage or are operating below

the level of their role, and maybe
you got leaders that have been with

you for 15 years and they were your
friends when you started the business

and they're operating below, it…

In companies you've worked with,
Norm, what does that cost them if they

don't recognize it and address it?

Norm Smallwood: Yeah, usually, you
and I have had this conversation

before, so it's, uh, you know,
a little bit of a repeat of, of

that, but our listeners haven't.

So,

Adam Hatcher: Right.

Norm Smallwood: so, so,

Adam Hatcher: stage rated me.

For anyone listening
who's like, "Oh, no, no.

No, I went through this."

It's a pretty penetrating

Norm Smallwood: Yeah.

Adam Hatcher: uh, it'll
wake you up in a hurry.

Norm Smallwood: Well, what, what, I
mean, what happens, and it's, it, it's

in family businesses, it's, it's in…

It's so, it's such an easy mistake
to make, and I think it's a mistake,

is to assume that the, that the
person that we're most concerned

about is the leader, right?

It's, it's, it's Bob, right?

And so Bob's been around.

We know Bob's not very good and, and Bob
has, you know, created the conditions

where the, the business isn't profitable.

We've got disgruntled employees.

So you s- th- customers that aren't
getting the experience that they want,

and so it is, it's affecting the business.

So I mean, the first place I
go is the impact on employees.

So it's not about Bob, it's about the 10
people that work for Bob that don't get

any development, that, uh, if, if the,
if your company does employee engagement

surveys and you're in Bob's group and
Bob's an expert and Bob's competing

with you, um, it's, it sucks, right?

It sucks to work for Bob because then
you're probably looking for another job.

If you're, uh, if you have external
customers, you've got disgruntled

employees working for Bob, and
now you've got the employees

that are, um, excuse me here

Adam Hatcher: I, uh, you have
employees that are working

for him that are disgruntled.

They're probably customer-facing,
or some of them, and customers have

a sixth s- sixth have a sixth sense
for what's going on in the business.

I mean, what I hear you setting up

Norm Smallwood: Yeah

Adam Hatcher: y- tuh, this is the hard…

In family companies, you mix the
unconditional nature of family with

the conditional reality of business.

And if cust- and if you have unhappy
employees, you're gonna lose value in the

Norm Smallwood: You're gonna
have unhappy customers.

Yeah yeah

Adam Hatcher: you have unhap- happy
customers, you will absolutely lose value.

And so without…

What I like about the stages
is it, it does two things.

It answers that question of, what do I
need to be do- what kind of performer

am I, and what do I need to be d- to
do to be seen as a strong performer?

But it also sets the stakes.

member or not, if I can get people
in the right stage and match

the right stages to roles, can
build a great company probably a

Norm Smallwood: Yeah

Adam Hatcher: av- avoid a lot of f- family
fights and family meetings about, "Well,

that person shouldn't be this and that."

Like, we can do that and
keep the family together

Norm Smallwood: So yeah, let me, let me
just rephrase it slightly differently.

So at, at least my version of this.

You can be successful in
any stage except stage one.

And so the question is the, the
individual question, the question for

me is, what do I want in my career?

Do I…

And I can't, and, and we're
gonna take one off the board.

I can't be a, uh, an employee who
can't become an expert in the area

that I'm working in because over
time I become unsettled about it.

I feel like a failure.

People, other people look at me and
they, they think if I'm in a family-owned

business and I'm in stage one and I'm
leading something, then I'm clearly

a, uh, that was nepotism, right?

Because you should have
cleared me out of there.

So,

Adam Hatcher: as

Norm Smallwood: so I-

Adam Hatcher: have seen where families are
uniquely able to do this, and I know this

isn't the circumstance you're thinking of.

I have seen family companies that in
stage one will let people stay there,

particularly in the case of special needs.

Like, sometimes

Norm Smallwood: Oh,

Adam Hatcher: or

Norm Smallwood: okay

Adam Hatcher: yeah, stage
one, that can be long-term.

But absent that,

Norm Smallwood: Yeah.

Absent dad

Adam Hatcher: see people
progress in their career

Norm Smallwood: Yeah.

Well, and so you can-- The issue
in stage two, if I wanna be an

expert my whole career, is just
staying up to date technically.

If it's three, it's,
it's really being great.

Like, I've seen people in stage
three that are legendary for

developing the next generation.

Like, if, if you had your first job
opportunity, let's, let's go from

Bob to Bill or Sue, and Sue is known
for, like, working with people and

setting them up for success later.

And, and, and sh-she gets to be known as
a, a talent builder and a s-- and a, and

a, and somebody who this is where talent
is built in the, in the organization.

If you, if you get a chance to work
for Sue, it'll be great for you

later in your career 'cause she's
just so good at, at doing that.

And then in four, it's the
success of the business, right?

It's like Sue is great in three because
she's the generator and the, and the

supplier of talent for the future.

And then, uh, and then the stage four
one is the success of that if, if I

wanna be that guy, it's the, the person
who really grows the business and, and

has, you know, really happy customers
and employees who are attracted to come

and work with us because of the type
of leader and the opportunity, the type

of leaders we already have there, and
the, what I can learn by going there.

And that's, that's the kind of the--
That's what you wanna see versus, you

know, this is, you know, just a place
where it churns and there's no real future

there and, you know, it's, it's kind of a,
not the place to, to, not the place to be.

So but, but yeah.

Adam Hatcher: oh, sorry, go ahead

Norm Smallwood: No, no, go ahead.

Adam Hatcher: Oh, tha- so from a, and
from an ownership perspective, one

of the values of understanding these
stages, if you are considering your

family company, selling your family
company, stepping in, stepping into the,

a top leadership role in the company.

Let's say you've hit the right stage,
stepping into the top leadership c-

leadership role, in an outside investment,
trying to get some sort of liquidity out

of the business by bringing in outside
investment, be it a private equity stake.

It has got to be helpful
for understanding stages.

If you're about to

Norm Smallwood: Yes.

Yeah

Adam Hatcher: and you don't know how
many stage one, two, three, fours you

have, or if you're gonna try to liquidate
the business, and you've got a bunch

of stage twos and stage three and four
roles, somebody's gonna figure that out.

Like, you need to know that ahead of time.

I assume when you've worked with
companies, this has been valuable for

them to either understand the value
of the organization they're running

Norm Smallwood: Yeah

Adam Hatcher: "What hill am I
about to have to climb here?

What'd mom

Norm Smallwood: No, if you think,
well, if you think about when

you say, you know, if, if the
company's gonna sell or IPO then…

And, and you think about value, I mean,
the value thirty years ago was, you

know, what's the EBITDA of this business?

And then you've got some kind
of a multiplier in your industry

for the value of the company.

That's shifted s- to a place where, you
know, about twenty percent of value today

is the financial value of the company.

And it's easy to see this when
we think about investment.

When you make an investment, like if
you're gonna IPO or somebody else is gonna

buy you or you're gonna buy somebody else,
it doesn't matter, it's the same thing.

What you're valuing is the potential,
the future potential of this business.

What can we do?

So if the, if the company you're looking
at has a track record, a financial

track record, that's important,
but how much does it count for?

What you're hoping for is we've got-- we
can trust that the leaders in this company

will be able to continue to deliver the
right results the right way over time.

And the only way you can do that is
if you have leaders who can do that.

And the stages is a way to, you know, do
a proxy of, you know, how strong are the

leaders that we have to create, you know,
investor, customer, community, employee

confidence that, uh, because of the track
record and because of the perspective that

they have about the, about the future.

So absolutely.

And, uh, if you were to want
me to quantify it, we've

actually can quantify it.

We've, uh, um, in, in our work that we
published in CFA Chartered Financial

Account Magazine and others, we see,
uh, quality of leadership being about

twenty-five percent of the market cap
of, of a publicly traded company, right?

So, um, so if you have a, uh, you
know, a billion-dollar company market

valuation, about two hundred and fifty
million of it would be attributable to

the, to the quality of leadership because
they're the ones making the choices

about the future and what you're gonna
invest in, what your strategy is, what

your brand is, what your pipeline is.

Leaders have all the--
get to make those choices

Adam Hatcher: I remember seeing one of
the, one of the highest multiples val-

really one of the highest valuations
to revenue I had seen in my industry.

Uh, the industry my family company
came out of was a company whose,

though they were smaller than the
acquirer, their talent was so strong,

their top leaders were made the top
leaders of the acquiring company.

abs- to your point, that, I
mean, that's circumstantial,

but it complements your study

Norm Smallwood: Yeah, absolutely

Adam Hatcher: value.

And if people are thinking it's not all
about the money, that company, the one

being acquired, was also known as one of
the best places to work in the industry.

And so it not only creates value, but
for families that care about employee

experience and customer experience, having
the right leaders, their stages and in the

right roles inevitably creates a company
that's just better to work in and to own.

Right?

Norm Smallwood: right?

Yeah.

I like working for leaders who, you
know, create a vision, treat me well,

are interested in my future, who care
about our customers, yeah, versus, you

know, talking about, uh, um, you know…

But, it, it-- and like in some
places it's all financial or

it's all technical, right?

So, uh, interesting

Adam Hatcher: Well, and, uh,
and I'll close this with a, a

story here that you've told me.

Seeing the stages is okay.

Seeing the stages is great, then being
comfortable where you are and reaching

as high as you can reach is fine.

And some of my favorite stories are
when a family member or a family owner

could have probably grabbed the top, the
top job, but knew it wasn't for them.

Now,

Norm Smallwood: Yeah.

Adam Hatcher: know this person,
uh, but this is a story I, I enjoy.

So they're, uh, Willie G.

Davidson is of the Harley-Davidson
family, he was the chief style officer.

As I understand, Willie G.

was responsible for designing a couple
of the new, the new Harleys, uh, was

a cultural icon and ambas- and brand
ambassador for a company that very

much relied on its brand for its value.

And then my favorite thing
I ever heard about Willie G.

was that his job was to make
sure that each new model, quote,

"sounded like a Harley," which is

Norm Smallwood: Yeah

Adam Hatcher: just one of the
greatest job descriptions I've heard.

It reminded me of Julian Van
Winkle when he took over as

the third generation of Pappy.

He was the next generation that
was responsible for making sure

this tastes like Pappy Van Winkle.

But in Willie G.

and in Willie G.'s

perspective, and Julian Van Winkle ends up
selling to Buffalo Trace, to the Sazerac

company, so neither of them operated the
CEO job of the ultim- of the ultimate

company, either Julian or Willie G.

Smart businesspeople, but cultural
ambassadors with uh, with that

idea-shaping kind of ability.

And to me, those struck me as two
guys, as best I've studied them, were

clearly in stage three were deeply
comfortable being there and having

stage fours to guide the organization.

So you don't…

To be successful in a family company,
don't have to become the CEO.

You don't have to be stage four.

Norm Smallwood: No.

Adam Hatcher: to become a

Norm Smallwood: Mmhmm

Adam Hatcher: It's what can you be,
and being really great at it, and

being willing to go if you're able.

Norm Smallwood: Yeah.

No, I, I love the, the story of Willie G.

I, I, I mean, I've, I've, uh, my
fond recollection of, of working with

Willie G, and I've got today the Ride
Free Willie G, um, uh, autograph that

I asked him for at the, at the end.

But, uh, yeah, he was, uh, he, he…

I was supposed to coach him for
an afternoon and, and on some 360

feedback that he had, and he said,
"Do you mind if we don't do this?

Because I really hate this kind of stuff."

And, and I, and I said, "You
know, it's fine with me."

So we went to his house, and he showed me
his, uh, collection of motorcycles, and it

was one of the most memorable days for me.

Willie G didn't move a, an inch
on his, uh, people leadership

skills, and, uh, I became a
raving fan of, of Harley-Davidson.

So, um, I think it was
a great trade-off for me

Adam Hatcher: And if you hear
that story and he's the, the CEO,

it would make your hair curl.

But what I love is for
the chief style officer

Norm Smallwood: it was great.

Adam Hatcher: that is right on.

Norm Smallwood: Yeah.

Yeah

Adam Hatcher: I want them to hear it's
not that Adam and Norm are saying to be

successful you need to become stage four.

If you wanna be the
CEO, you need to become

You need to work to stage four.

But know where you are.

You did this with me.

to be the best you can in
that stage, and be willing, if

you're capable, being pushed.

And if you're evaluating family
members, don't be afraid to give

them a stage one, two, three, four
look, 'cause ultimately it's gonna

help them and help the organization.

Norm, this is such a huge

Norm Smallwood: Good

Adam Hatcher: family companies and talent
and evaluating, and I am deeply thankful

to you for both this model and for taking
the time to walk through it with us,

because I think for all the complicated
leadership ideas and models out there,

this is one of the best, simplest, but
most challenging ways of looking at it.

Thank you so much for
walking this through.

Norm Smallwood: Great to talk to you all
the time, Adam, and, uh, enjoyed it a lot.

And this is such a-- it's, it's a very
helpful perspective to have and, you know,

a good framework is, uh, is really useful

Adam Hatcher: When Norm and I finished
this conversation, I just want you to

know I walked away from the microphone
with a huge smile on my face.

He is so fun to talk to, wise,
insightful, honest, kind, but challenging.

The podcast reminded me of the roughly two
years we spent doing some deep looking at

and restructuring of my family's company.

I hope you got to experience just a bit
of that in episode one and episode two.

Two things I want to provide
to you in the show notes.

There is a link to RBL's website.

There you can get in touch with
Norm or the other consultants

that Norm works with.

That's how I got introduced to them,
and I encourage you to do the same.

Even in the first conversation,
you will learn things about

yourself and the company.

And then since we concluded the podcast
and the recording of it, Norm and

I talked, and he wanted to make his
four stages assessment available to

family companies regardless of size.

So you don't have to be one of
these large international publicly

traded companies to get access to
what I think is a critical aid in

helping you and your family company.

My email address is in the
show notes for this episode.

If you send an email to me and ask
for that, I'll connect you with the

assessment, and Norm and I want to
provide that to you just to give

you a little bit more of an insight.

So the show notes has a link to
Norm and also to my email address

to ask for the four stages.

I hope episodes one and two combined
help you get an additional insight

into yourself, your company, the
people who work there, both your

family and non-family members, and
I hope you've got a couple of things

that you can do to help you on your
way to building a great company while

you keep your family together with a
chaos proof in our family business.

Until next time, as my grandfather
would have said, thank you so

very, very much for listening