EKMH Innovators Interview Series
An interview series spotlighting global tech influencers, disruptors, visionaries, and of course, innovators.
Some days business opportunities for women can still feel stuck in the 1980s; consider the catchy yet disturbing lyrics to the classic Dolly Parton song, “9 to 5"…
Then entrepreneur Sherry Deutschmann and her alter-ego Lucy enter the room. Offering more than just a cup of ambition, Deutschmann exemplifies how empathic service, contagious devotion, candid advice, “uncommon” common sense, investment funding and profit sharing make the difference. Could Deutschmann’s version of an employee-centric workplace be the future of work?
Several years ago when Deutschmann offered her then boss a clear vision of how to improve profits and overall team morale, he brushed off her suggestions and said no. She quit. She then founded and became the CEO of LetterLogic, Inc., an Inc. 5000 company for ten consecutive years during which she grew debt-free to $40M and then sold in 2016.
A successful serial entrepreneur, author, and passionate advocate for entrepreneurship, Deutschmann attributes LetterLogic’s profitability to its unique culture in which she implemented her vision, focusing on employees’ needs first, before those of the customer or shareholder. Featured in The New York Times, Forbes Magazine, Business Leaders, Inc. Magazine and Fast Company for her unconventional employee-centric work culture and success, Deutschmann was also honored by President Barack Obama as a White House Champion of Change in 2016. She also served as a member of the National Women’s Business Council, a non-partisan federal advisory council created to serve as an independent source of advice and counsel to the President, Congress, and the U.S. Small Business Administration on economic issues of importance to women business owners.
She founded the peer-to-peer membership company BrainTrust in 2019 and continues to serve as its CEO, dedicated to helping women entrepreneurs grow their businesses to $1M in annual revenue while also broadening their influence in the world economy. Deutschmann tirelessly advocates for women entrepreneurs, benevolently connecting like-minded women in business like a fairy godmother-angel investor. In addition to being the CEO of Sunset Ventures and a SheEO Super Activator, she also just published the empowering book Lunch with Lucy: Maximize Profits by Investing in Your People.
Deutschmann recently posted advice for fellow business leaders about how to respond to the covid crisis: listen and lead with empathy.
“As a serial entrepreneur, I believe it is the absolute responsibility and privilege of business owners and leaders to put the needs of our employees before the needs of the customer, the shareholders, and ourselves,” she wrote. “What does that look like in the days of COVID-19…coming close on the heels of devastating tornadoes in my hometown of Nashville, TN? It is a basic human need to be heard, to have a voice, to matter…and your people need it now more than ever. Now that business has slowed (or come to a screeching halt for many of us), NOW, TODAY, take the time to listen to your employees. Will it be difficult? Probably. But you need to know the impact to them and their families and you need to hear it directly from them. Don’t do this via text or email. Pick up your phone and call them. Ask a few questions and then shut up and listen…”
I had the pleasure to meet Deutschmann via Skype and email to learn more about a range of topics including her new book, successful profit-sharing-employees-first MO, the importance of “skin in the game” investing, “radical generosity”, women in business and effective interviewing tactics. Readers, I thought Sherry Deutschmann was a force before I read her fantastic new book and Amazon bestseller, Lunch with Lucy. Full disclosure: I want to have lunch with Lucy. Paella at Martinez. Anytime. Our interview follows.
EKMH: When hiring team members, which type of qualities have yielded better results than the “right” education? What advice do you have for those applying for their dream jobs, who may be potentially viewed as “unqualified”?
Sherry Deutschmann: Since I only have a high school education, it would be hypocritical for me to focus on education when it comes to hiring. Instead, I hire for a culture fit. I look for people who display simple human kindness and empathy. I ask questions like: “What has been your favorite community service project? What did you like about it?” I want to know that they have innate empathy - the ability, no matter their background, to think about the needs of others.
When applying for any job, I advise you to interview the company even harder than they are interviewing you. I’d ask questions like the following: “What has been your employee retention rate over the last 5 years?”; “In your last five exit interviews, what were the reasons given for why someone chose to leave this company?”; “Tell me about the last two people you promoted from within and why?”; “Who is your favorite customer and why?”. Then, do your research on the company and be prepared to talk intelligently about what they do. I hate it when we interview prospects who don’t ask questions.
EKMH: Why do you choose to prioritize “uncommon” common sense employee-first practices over customers and shareholders? Why and how did you introduce monthly meetings and maintain a transparent profit-sharing plan at LetterLogic?
Sherry Deutschmann: If your company is like most, where up to 70% of employees are ‘disengaged’ - unhappy in their work and just going through the motions, OF COURSE you are going to have serious service and quality issues that will make it harder for you to keep employees and keep customers. My strategy, putting the employees first and ensuring that they knew they mattered, created an atmosphere where they could focus on taking great care of the customer…and through the profit-sharing plan, they had a vested interest in doing so.
How did I come to that conclusion? Prior to starting the company, I had worked for another company in the same industry and we found it very difficult to keep our customers because we provided very poor service. When I started my own company competing with my former employer, I determined that if I focused on taking great care of the employees, they would be able to take great care of the customer. Having extraordinary service would create customer loyalty, and the customer would be willing to pay a premium for our services. THAT would take care of the shareholders. That strategy worked. We were the most expensive in the industry and still grew enough to be named to the INC 5000 list for ten straight years (that’s a list of the fastest growing privately held businesses in the US). We rarely lost a customer.
I started our unique profit share from the beginning. Unlike any other profit sharing plan I had ever heard of, we required that the company give 10% of the net profit to the employees MONTHLY and EVENLY. This means that everyone, regardless of title, got exactly the same dollar amount. Mid-month, every month, we gathered all employees together in one room. Lunch was catered and we discussed the financial results from the previous month. With the actual figures on a screen, we reviewed the total revenue together – and the net profit, and then all the numbers in between. If we had a great month and the profit pool was large – we would know exactly why. If the profit was down, we could reflect on what went wrong in the last 30 days and be able to pinpoint the cause and discuss ways NOT to repeat those problems.
This is the thing: How can you expect employees to help you make money when they do not fully understand how the company makes money? When you are open with employees, they are able to connect the dots between their behavior and the bottom line. And with the profit-sharing plan, they are uniquely incentivized to change their behavior and make better decisions. Seems pretty simple to me!
EKMH: What’s holding back other businesses from adopting this innovative plan and having “skin in the game”?
Sherry Deutschmann: With most people, it’s just that they have never thought of sharing the profit in this way. When they hear our story, they have an epiphany - a real “aha” moment - because they can just imagine how their employees would react and how it would be beneficial. Still, there is fear. Fear that it’s too generous and there won’t be enough left for the founders. They are wrong. When you give your employees a 10% sliver of the pie, they help you make a much, much larger pie. In essence, every employee becomes a member of the sales team, telling everyone what a great company you have.
EKMH: How did Lunches with Lucy take shape, effect real change and ultimately transform LetterLogic, the business which you founded, led and successfully exited in 2016?
Sherry Deutschmann: As the Founder and CEO, I routinely had lunch with employees early on. I realized that the act of going to lunch with the “CEO” was intimidating for many. So I created an alter-ego, “Lucy,” a co-worker, not the CEO, and reserved Wednesday lunch hour for any employees to have lunch with Lucy. They chose the restaurant and had the ability to invite anyone else to join us for lunch. Usually it was just the two of us, but sometimes they invited a family member or a co-worker along. I got to know my team and learn about their hopes and dreams. I learned firsthand what they thought I was doing right or wrong as the leader of the company. I listened intently and acted upon what I learned. These lunch outings became the most important times I spent running my company each week.
EKMH: We need more “Lucys” in the world... What’s the difference between your “Lucy” and a “Karen”? What steps can Lucys take to improve company culture and help their team members achieve success while maintaining a healthy work/life balance?
Sherry Deutschmann: Karen is only concerned about Karen. But Lucys are leading with empathy – the ability to see the world through the eyes of those around her. She understands that her company depends on those employees even more than they depend on her. The best thing “Lucys” and “Lukes” can do to improve company culture? Give their employees a voice and then LISTEN to them. Create and guard multiple ways to hear from them. And pay them a fair living wage - just put yourself in their shoes and see how far you would get if you were living on what you pay them!
EKMH: Please comment: Last year VC investment in all-female founding teams hit $3.3 billion, representing a puny 2.8% of capital invested across the entire U.S. startup ecosystem, according to the latest data collected by PitchBook. This year women hold 37, --just 7.4 percent -- of Fortune 500 CEO roles. How can women gain more VC capital, power and stronger voice in the US economy? At BrainTrust, what advice do you give to female entrepreneurs, especially those considering quitting their jobs to found their own companies and/or those who have already launched?
Sherry Deutschmann: The deck is stacked against us, but change is coming. Take a look at SheEO - an organization created by Vicki Saunders to see that women get the funding they need. Instead of trying to fix a broken system, SheEO built a new system - one that has women (in four countries and growing) gifting money to a pool of funds that is loaned to women entrepreneurs at ZERO interest. As the women repay the loan, it goes back into the pool to be loaned to another woman - a perpetual cycle of “radical generosity.”
Only 11.5% of women-owned businesses have employees. Without employees, we get stuck working IN the business as opposed to ON the business. It’s not likely that you will attract investors if you stay that small because the return on investment just is not there. My advice to women entrepreneurs: Think Bigger! Be objective about your business plan and be willing to adjust or pivot.
There are now dozens of organizations, mostly women-led, to fund women-owned businesses, so get out there! Be loud and vocal. If you have an investable business, there ARE absolutely investors for you.
EKMH: How have mentors and mentees continued to play an invaluable role in your own career? How do your active roles as SheEO Super Activator and Sunset Ventures CEO create potential opportunities for women in business?
Sherry Deutschmann: I try to surround myself with people who are smarter than me - and people whose life experiences have been very different from mine. THAT is where the real learning and growth comes from. Interestingly, I think I have learned and grown as much from my mentees as I have from my mentors. Finding the right mentor is hard. It’s rare when you find someone who believes in you, holds you accountable and pushes you to be the best versions of yourself. Invaluable.
I’m rabid about SheEO and the way it allows women to help one another. SheEO has offered incredible investment opportunities - allowing me to get in at the ground level for companies that will be global brands!
EKMH: And last but not least, in our call you mentioned Essentialism: The Disciplined Pursuit of Less by Greg McKeown and Built to Sell by John Warrillow, as books that influenced in your career. Why? Which other books would you recommend?
Sherry Deutschmann: Essentialism haunts me. I want to read it again today! John Warrilow’s book is not out yet, but I got an Advance Readers copy and found it really valuable for any entrepreneur who want to sell their company. Other books that have inspired and challenged me include: Ego is the Enemy by Ryan Holiday (a MUST!), and all of Patrick Lencioni’s books, but especially The Five Dysfunctions of a Team.
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