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Welcome to the Self-Storage University Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn-around and operate self-storage facilities. And your host is a partner in one of the largest real estate portfolios in the U.S. with nearly $1 billion of holdings, Frank Rolfe.
Ever since they built that first self-storage facility back in China in a cave around 3000 or 4000 years ago, I'm sure they came up with the question, which was, how do we motivate the manager to make this business a success? This is Frank Rolfe with Self Storage University podcast. We're gonna talk about motivating managers, how to get managers simply to do what we want them to do. Now, Warren Buffett once had the quote, he said, "Without enthusiasm, you have no energy. Without energy, you have nothing." So the first rule if we want to get managers to do what we want is to try and motivate them through commissions and bonuses. And we would call this using the carrot.
In the old analogy of trying to make the horse move forward, you have the carrot and the stick, and the carrot the horse walks towards because it wants to take a bite out of the carrot. And every once in a while, as it walks forward, it does grab the carrot and take a nibble off of it. But how do we create the carrot? Well, the first thing to think about when you're trying to motivate a manager with a carrot is what is their currency? What makes them, like the horse, want to move forward? Because horses love carrots. But horses would probably not be moving forward if you dangled from the string a food that they don't naturally like.
So what food do horses not like? I don't know. I know I don't like Brussels sprouts. So I know if you dangled on a string a Brussels sprout in front of me, it wouldn't make me want to go forward. And with many of your managers out there, it's not just money that is their carrot. Sometimes managers have other things they like, and we call that finding your manager's currency. So what is a manager's currency? A manager's currency would be those things that they hold so dear it makes them alter what they do.
Some managers, what they really want is free time, paid time off. That's what they would want for their bonus or reward. Another manager might love baseball. They want to go to the baseball game so bad. And you might say, well, give them the money to buy the baseball tickets if that's what they want. But you can't do it. If you give them the money, they'll feel too guilty to ever buy the tickets. They'll give it to a family member, they'll use it on a gift, or their spouse won't let them use it at all. But if I dangle baseball tickets to them on that string, that'll really get them to perform much more so than the same amount of cash, because they know the cash will never allow them to get what they truly, truly love.
So if we're gonna use the carrot approach, the first thing we have to do is figure out our manager's currency. And some managers, what they really want isn't even a currency. They just want praise and support. They want someone that tells them, "Hey, you're doing a great job. I really appreciate you." And just on that, it will make them move forward aggressively because that creates their enthusiasm, which creates the energy which gets the job going. But then you have some managers that even when you dangle that delicious carrot in their currency, whatever it may be, it has no impact at all. They seemingly just don't do an exemplary job just seeking the carrot.
So let's talk for a moment about the stick. Now, what the stick is means there's a punishment for them not hitting their goals, and typically that punishment is losing their job. Now, before we can even think about using the stick, we have to come up with a way to measure their performance. We have to come up with accountability using statistics. While you can use the carrot in a more broad brush, kind of ambivalent way, you can't use the stick unless you're being fair about it. And you can't be fair about it unless you really have stats that you can measure, stats like collections and occupancy. You can't just have it on a gut feel of, "Oh, yeah, well, you're doing a bad job," because you have to translate it into something that is fair.
So we've got to build a system of accountability of statistics before you can even think of using the stick. And then if we're gonna use the stick, we've got to explain to them what we expect them to do, what is a winning performance versus a failing performance. And you have to think that through, you've got to say, "Okay, well, let's see, here's where we are in occupancy. But, gosh, the market's kind of bad right now. So I don't think I can tell them that, oh, yeah, you gotta take us from 60% occupancy to 80 in a month." You have to really think through what it is, because if you're gonna punish people and feel okay with that, it has to be based on some pretty reasonable expectations.
You also need to know what your labor laws are, because with many managers, you're not allowed to even do those types of things without giving them certain types of notices and things like that. So you gotta get that under control. But the key item when it comes to using the stick as opposed to the carrot falls back to a study that was done years ago. I remember watching it on PBS, and it was trying to unlock the concept of the good coach and the bad coach, the friendly coach and the mean coach. And here's what they did. They took 10 college basketball players, they had them shoot 10 free throws each. And they assigned all the players to one coach and then another coach. And the one coach was super friendly, and the other coach was super hard, disciplined.
So the nice coach would say, "Yeah, give your best shot. Well, that wasn't too bad," every time they made their shot. But the tough coach would say, "You'll never make it in the NBA if you can't make at least eight of these 10." And they would say things like, "I can't believe you missed that one. My gosh, you'll never make it in the pros." And here was the end result. The mean coach won every time. The nice coach lost every time. They reshuffled the players over and over and over. It didn't matter. The tough coach always won.
So perhaps in the carrot and the stick, the stick is the more successful version of coaching your manager. Is that true? I don't know. It appeared to be true in basketball. But I think most of us would prefer that our manager performs well based on the carrot. That's a lot more happy way to manage your self-storage facility. Now, another way that some owners feel that they get the job done in figuring out how to motivate the manager is just to throw them right into the property without a lot of education or really a lot of discipline or oversight and just see whether they sink or swim. I don't think that method is very fair.
Most people do not inherently know how to manage a storage property. And many people will not do well if there's not some kind of structure. You can't just throw people into something entirely new, an all-new endeavor, and then expect them to somehow figure it all out and do well on your behalf. So I think you have to basically work the carrot to its fullest extreme, probably have the stick, but maybe do that in the background. But one important item to always think about when you're trying to motivate managers is you're trying to motivate them because you haven't hit your goals yet. If you hit your goals, you wouldn't even be caring about motivating them because they're already getting the job done. And that brings back an old saying: it's easier to change people than to change people.
So if a manager is not hitting the targets that you're trying to hit, maybe the best thing to do of all, rather than the carrot or the stick, is just to change the managers. Over and over again, you will find storage properties struggling which suddenly do fine because the managers were swapped out. The bottom line to it all is don't let a manager take control of your property. Don't let the manager cast you into the bucket of either good property or bad property. You've got to manage them. You've got to create positive energy. You have to move forward. But if they can't get the job done no matter how much you try, it's probably time to make a change. This is Frank Rolfe, the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.