BiggerPockets Money Podcast - The Hidden Systems Great CEOs Use Every Day

Episode Date: March 27, 2026

What does it actually take to think like a CEO? In this episode, Scott Trench breaks down the essential “CEO toolkit”—from strategic thinking and financial fluency to culture, decision-making, and crisis management—giving you the frameworks and systems you need to lead effectively, whether you’re running a company or simply trying to make better, higher-stakes decisions in your own life. To go beyond the podcast: Kick start your financial independence journey with our FREE financial resources - https://biggerpocketsmoney.com/ Subscribe on YouTube for even more content- www.youtube.com/biggerpocketsmoney  Connect with us on social media to join the other BiggerPockets Money listeners - https://www.facebook.com/groups/BPMoney We believe financial independence is attainable for anyone no matter when or where you’re starting. Let’s get your financial house in order! Learn more about your ad choices. Visit megaphone.fm/adchoices

What if the reason you're not reaching financial independence has nothing to do with how much you earn, but everything to do with how you think? Today, Scott is breaking down his CEO toolkit. Yes, it was originally aimed at people who eventually want to become a leader, but there are tactics every and anyone can take away to become better employees. Welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen. With me as always is my used to be a CEO co-host, Scott Trench. Thanks, Mindy. Great to be here. And just love the executive function that you bring to every single one of these podcasts here every day. So yeah, as you said, Mindy, I was a CEO. And so I was trained to think like a CEO. There was a little bit, there's some instinctive, I like to think there's some baseline passion for bigger pockets for the world that, you know, of personal finance and financial independence that came in and some skills I brought to bear on that. But the toolkit of becoming a CEO was trained in me by my former boss, by many, many mentors, but primarily by a former boss. I'd like to give a shout out here to. His name was Mike Zawalski. And Mike has been a CEO or operating chairman, a CEO coach or boss for many, many years across many different experiences.

And I was very fortunate to give a chance to be mentored personally by him for five years. And one of the things he told me to do early on in my career was build my CEO toolkit. The playbook I use, the frameworks I use that I can apply to many situations. And so I thought I'd share that today, heavily inspired by the things he taught me, and say that this is something that I think many more people should do over the course of their careers. This is a hard one toolkit, right? It takes many years to really define and build artifacts, the types of spreadsheets or presentations or those types of things that you use. The decision-making process is you bring for hiring someone, firing someone,

hiring someone, managing for developing a strategy or a plan of some kind in your organization. What makes something good or bad? And being able to apply that to unknown situations is super valuable. You will need this if you ever want to lead a product and technology function. If you ever want to lead a finance function, if you don't want to lead an operations function, if you ever want to lead a P&L unit, if you ever want to lead a legal or HR function, you will need some version of this, whatever you call it. And I thought I would show what I've built here today because I'm passionate about it. The other thing is now that it's been a year since, you know, almost a year since I stepped down, I don't want the skill set to atrophy

too much without me being able to review it if I ever want to draw from it again in the future. And you're just giving it away for free here, a bigger pockets of money. Copying it is very difficult, right? The framework, you will have to build your own, right? And another thing that comes in with the toolkit is your opinion should be brought to bear on this, right? I make decisions in my playbook, right? One thing, you know, I'll talk to somebody from an HR department and they'll say you should never tie the compensation adjustment to the performance review. And I say, no, the compensation adjustment is directly tied to the performance review. And there's a direct chain from what we said we're going to do this year, how you did, and my assessment of your

contributions to the compensation change you get. Some people say it's a bad practice. Other people say it's a great practice. I have chosen in my toolkit. And that's one example, for example, that I think will come in from this. And people will and should deviate from from, from, each of these items, if they were a CEO, and people will have to build their own as, as that reflects their style as an executive or a leader of any capacity in any organization they run. When you want more, start your business with Northwest Registered Agent and get access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest today. Northwest

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So I appreciate you doing this for our listener, Scott. And section number one, you have titled Foundational Artifacts. And one of the very first thing is delegation of authority. I really, really like that you are already thinking about delegating your authority on page one, day one of your job as a CEO. Talk to me about this. Each of the people that I worked for over the years in various versions, this was a non-issue. Who makes what decisions?

But codifying it in a document that says, oh, this person decides whether or not to sell the company. This person chooses the auditing firm. This person sets the board meeting cadence. This person approves the annual budget. This person makes the annual budget. This person makes hiring or firing decisions or raise or promotion decisions up to this threshold, beyond which this person makes it. There's a very detailed set of decision making that goes, you know, decision making a

authority that is relative to the size and scale of a business. And just putting that down on paper and going over it and aligning with it with my boss, the board, for example, removes a problem. We actually built this and then never referred to it again effectively. And that's why it's powerful as a day one artifact, right? But if it didn't exist, there would be that confusion. But because we knew it, every once in a while, I'd go and reference it and there wouldn't be an issue. Right. I would just know, oh, this one requires approval from this person. This one does not. We can move forward, right? And so, you know, over time, as trust is built, that's not an issue, but that's like a core day one artifact. There's probably a version of that that could make many people's

lives easier that are working right now if it was actually addressed, right? So that's one. The second component here is compensation philosophy, right? There's how are we going to pay the people that work for us? It's a very fundamental item here. And there's different, there's right ways to do it. At an organization that I run, like a bigger pockets, I'm looking to, for different bands for different skill sets, right? Somebody I'm expecting a fairly administrative role from. I might pay at the 50th percentile and expect a 40-hour full-time effort, and that's it. And we're going to treat them fairly and give them opportunities to grow in those times of things. But that's where we're going to go. We're going to hire the 50th percentile for that.

An executive, I might want to pay at the 65th or 75th percentile and expect much more. Like, we're not going to work for this. This is not a 40-hour-a-week job. This is a 50- or 60-hour our weak job. We're going to expect you to bring much more, and we're going to expect you to bring a more experience or, you know, a proven track record into that position. And defining that across these roles, I think is really important, right? And like I said, not everyone will agree with that, right? Different, different organizations. People will react strongly. No, this is how it should be. Everyone should be paid at the 99th. Everyone should be paid at this level. You know, we should outsource to a different, a foreign country and go much, much lower cost. No, this is how I bias the organization

an organization that I run in most case, or that I believe I would run in most cases, with a compensation philosophy. And then the third foundational artifact is a definition of strategy. Strategy kills organizations because it's misused. It's talked about, it's like this wishy-washy word that can reflect the pay grade of the person making a decision or the size of a decision,

but that's not what strategy is. Strategy is fundamentally about the hard choices of concentrating on a few focused objectives that coherently work together to produce an outcome, right? It diagnoses, it comprehends what's going on in this company's market. It provides a guiding policy like Costco has a great strategy, right? Their guiding policy is very clear. We're not going to have a fancy-mancy store. We're going to have an open warehouse.

We're not going to sell, offer a large selection. We're going to offer a limited selection. We're not going to allow you, we're not going to cover the last mile. we're going to only allow purchases in bulk. We're not going to have premium necessarily artifacts. We're going to have high quality, but we're going to compete with the providers in areas where we think the costs are not low enough because our goal is to drive good quality products at a low price.

That's a great guiding policy, and it defines what they don't do. IKEA has a very similarly strong strategy. And then there's a set, and then strategy is fundamentally about action as well, right? A strategy is useless if it cannot be realistically achieved by the organization. in there. And so a diagnosis, a guiding policy, a set of coherent actions. This is straight from good strategy, bad strategy by Richard Rumelt, one of the first books I recommend people read if they ever want to lead. Or in general, if you want to study business books, you should add to top your list because it defines this term. And as you train your brain to think in strategy and

dismiss what people are calling strategy falsely and recognize it when even when it's not, you know, when a real strategy comes to you, that's not bound in that term, that's super powerful. So those are the first three things, because I don't want to be talking about strategy if it's not meeting this definition because then it's not strategy. It's just something that sounds important

or is a large scale decision, but it's not actually what the organization fundamentally needs to do to win. So those are the three kind of day one pieces that come in to the organization. Okay. Let's talk about strategic placement. next? Strategic planning is a hypothesis, right? So it's a guess. And I believe that almost everyone

that comes into an organization, myself included, needs to come in with that guess, right? A lot of people like to wait 90 or 100 days to diagnose. And that's not how I'm, that's not how I'm going to do it, right? We're not going to do that. We're going to act much more quickly and get to hypotheses much more quickly and test them much more quickly. So a strategic plan is a 12 to 20 page document. It's not overwhelming. It's not hundreds of pages of D. It is a simple thought process on how to win in a given industry. A strategic plan is a document that follows that procedure. It diagnoses what the problem is in the organization.

What it appears to me, the problem isn't an organization. It provides a set of guiding policies that would begin to take advantage of the company's strengths, competitive weaknesses or whatever else is there. And then there's a set of actions that can be undertaken almost immediately that can begin moving towards that strategy. strategy, that strategic diagnosis instead of guiding policies. And my bias as a CEO is to come in and immediately begin moving towards that direction. I will bring that strategic plan in place. I might spend 30 or 60 days modifying it based on impact from stakeholders around the company or executives or those types of things. But I have that bias to act almost instantly in most situations. And that

makes me a bad fit as a CEO, potential candidate for some organizations and potentially a great fit for places like what bigger pockets was, right? Where we need to, where we can, there's, there are low stakes to trying things moving quickly through them and then moving on to the next opportunity. And that quick decision making is much more important. I might be a bad fit for someone like a SpaceX, right? Like a, like a, where you got to launch a rocket. And if you don't get that right, there's a really big problem downstream.

It's a one, one shot at success there. So that, those are kind of the, the, that's, that's one of the first things that I would basically say, I'm going to come in, I'm going to come into the inner. process or the interview. Before I accept the job, I'm going to present that and get alignment from the board of directors and maybe some of the executive team and say, here's my initial hypothesis. It may change after we conduct our process, our strategic planning process, which is a several-month detailed initiative to refine and test those assumptions. This will map out the customer journey, pain points, monetization opportunities, and competitive analysis.

But that's where I'm going to start with. And this is the bias I come in with. And I believe you must come in with bias in order to do good strategic planning. If you can't, you're going to be way behind the rest of the bell curve. Probably not a good candidate for that particular job or role if you do not have a strong bias from day one. Support for the show comes from public.com. You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic options plays on the side. The point is, you're engaged with your investments, and public gets that. That's why they built an investing platform for those who take it seriously. On public, you can put together a multi-asset portfolio for the long haul.

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Please explain what financial fluency is in regards to the CEO toolkit. There's a couple of truths about business in terms of building a valuable business that I think are really important. So first is revenue quality, right? So someone selling a lifetime membership, for example, has a terrible business from a revenue valuation perspective. This is not a business that can be sold one day. You've collected the cash up front and you must service it forever, right?

That's a terrible business, right? A one-time service is also relatively low value, right? A recurring service is more valuable. A product that is sold one-off is not very, is not very, is not. is more valuable than a one-off service potentially, but not as valuable as a recurring product, like a subscription. So predictable recurring revenue, customers that come back over and over and over again are what build the foundation for a business that can actually sustain paying employees over long periods of time that can actually, you know, predictably grow, and that can be

borrowed, that creates revenue streams that can be borrowed against. That's a much more valuable business. So revenue quality is a core consideration. If there's opportunities to solve problems in ways that produce predictable recurring revenue at the same rate as other, you know, one-time services or one-time products, that's a much more valuable business, right? Next up is unit economics, right? So when we sell a book, right, there are costs that go into selling a book, right? Somebody's got to market the book. Before we can get to that, when we sell a book, we got to print the book. We got to ship the book, right? Those are hard cost. There has to be a price that the book sells at above the cost, those hard costs to make,

to even have it be bothered, you know, be worthwhile to print and ship. There are also unit economics that come with a book launch, right? Somebody's got to write the book. Somebody's got to edit the book. Somebody's got to record the audio book, those types of things. And so we have to build maps for each of these types of products that say, how profitable is a book launch and how profitable is each incremental book and make sure that we're building a business that actually can generate profits in there because if profits can't be sustained, then you cannot continue solving the core customer problem. Cash conversion is another one here. Businesses can have a lot of revenue, but not generate a lot of cash. I'll use real estate as an example for a proxy for this, right?

So if I have a rental property and I have to, and I get $50,000 in net operating income, right, because I got $75,000 in rent and I had $25,000 in expenses, that's $50,000 in net operating income. But if I had to replace the roof that year, that's, I only get $25,000. So it says that my EBITDA, my net operating income or my EBITDA earnings before interest, taxes, depreciation, and amortization are $50,000, but I'm really only making $25,000. That's a problem, especially if next year I got to do a foundation repair. And the year after that, I got to redo the siding, right? That can kill you. And that's a very common problem in businesses that show EBITDA, earnings before interest taxes, depreciation, and amortization, without actually tracking that through to cash

conversion downstream. There's a lot of ways that you can get fooled by profitability that doesn't actually translate to cash flow. So these are basic financial fluency items here. And then there's capital allocation, right? You know, if the business generates profits, I've got choices about what to do with that. I can fund more growth. I can hire people or, you know, attempt to build more things. We can buy companies. We can pay down debt. We can distribute the cash to shareholders. or we can buy back shares from shareholders, right? Those are all valid uses of cash. And how that cash is used has an enormous impact,

almost as much impact on return profiles for the business as the actual growth and cash flow initiatives for there. This is something that you need to know on day one of being a CEO? No, you don't need to know this as day one as a CEO. You don't need to know, you don't need to have a complete toolkit when you take the job for an executive position. here. But you got to have components of the toolkit in place, right? This is what I've developed at the end of being a CEO. No way could I have talked like this when I took the job in 2018, right,

as a 28-year-old. This was trained for me and learned across, this was part coaching for my boss, part things that I learned and discovered for myself, and part the aggregation of the best ideas from books and resources that I read over those years. That's what a good toolkit looks like. And it will ever, this will evolve over time. This will, you know, this will change and evolve and grow as I learn things or get persuaded to move off of the positions that I currently hold in this. But that's what I think. Like, think about if you're going into an interview process and you're able to talk through some of these things, you have a much higher chance of getting the job, I believe, if you're able to go through this kind of, this kind of thinking in the context of your divisions, division leadership, right? Like a CFO who's talking through this stuff is going to pass test one.

There's going to be other tests downstream, but this is a core test that I want to look for in financial fluency for a CFO. If they can't talk like this or cover most of these topics, missing one or two, that's a problem. They're not ready for that job. Yeah, I think this is a great set of documents and information for somebody who is looking for a leadership role to read through this and pick and choose, oh, okay, for my specific leadership role, I know that I'm going to need to use these. These are probably not going to be so important, so I don't need to focus on those right now. I can build up my competency in this level and then go and try and find a new job if that's their goal. Go and pitch myself to be promoted if that's their goal. I think this is a great overview of things that it shows that you're doing the work and you're doing more work than a lot of the people that you're up against.

You don't have to master all of these things. you won't have these things mastered by the first time you take a role. But if you've got a hypothesis that you can refine, you can refine that, right? You can bring this to somebody and they can tell you, no, I don't like that. I was on a call once learning from other CEOs, like some kind of mastermind. And the question was, what happens when an executive leaves? Right. And the CEO's response was this. He said, when the executive is terminated for performance, I always conduct an external search to replace them. when the executive is leaving because it's a retirement, it's been a very long run,

they've got a great opportunity, some sort of positive departure signal we almost always promote from within. How the heck do you come into a conversation with that framework, right, without having that as a nugget in there? And then, you know, of course you're going to disagree with that or whatever, not think through that in your current position. But when you're at that, when I was at that moment in time, at that point in my career, that advice was like, oh, I'm ready for that advice.

I'm ready for that as a bias as a strong, strong bias in that type of situation. That is brilliant. That is a great tip and not something that I would ever think of. But I can totally see how that is the path that you absolutely should take. Rotten apple spoils a whole bunch. Maybe, maybe not, but you don't want to chance that when you're firing somebody for performance. Go outside. Get somebody else.

There's going to be exceptions to that as a rule. But, but like that instantly clicked as like, yeah, that's like, to happen. And I don't know if that's if that's the right call for somebody who's learning to be the next CEO or whatever in there. But I think you should definitely, if you work at a division and you know that your boss has been terminated for bad performance, that somebody external is coming in, and that's going to shake things up. That could be very good or that could be very bad. It's probably going to be a consequence for people who are not willing to change to whatever the new executive comes in with. So you are almost certainly likely to be very much at risk

if you are not Johnny on the spot and ready to adapt. And that could be. be a career changing opportunity for you if you are. But that's the kind of thing that that comes in there because, you know, a CEO who comes in and judges your executive leader not right is going to hire almost certainly an external candidate if they're good as a strong bias in a high percentage at the time. And that is going to create change that is going to come in, right? And so this, hopefully these, hopefully this playbook is helpful to people that are listening, not just because they can build their, their own versions of it over time, but because it'll tell you how CEOs and and private equity thinks to some degree in terms of how to run a business.

Well, let's talk about running a business. Let's talk about governance and cadence. That's up next in the toolkit. Sure. So there's kind of two cadences that are central to running a business. One is the cadence with my bosses, the board, and the other is with the constituents, the employees who work at the company, right? So these are, my view, should be mirrors, right?

I try to run what I believe to be as transparent an organization as possible. I literally tell every new employee. the strategy in the early days, one-on-one, if I can, at a small company or in batches, if it gets a little larger in there. And we walk through, here's the strategy, here's how we define strategy, here's what we're trying to do and what we think we're going to do. Here's our results so far. Here's what the current work and progress is. Here's where you fit in in there, right? So that's kind of how we think about it. But from a cadence level, you'll see two mirrors here, right? One is we have a weekly or semi-weekly 90-minute one-on-one with my board chair. Right. And I'll go

over and accept the agenda and say, here's what I'm working on right now, here are my problems, here's a thing I'm struggling with, here's what, here's some wins on this, here's some updates on the thing you asked about last week. The second is going to be a weekly KPI package and a 13-week rolling cash flow forecast. So this says here are the core, you know, 20-ish KPIs that we're looking at, maybe a few builders, buildups to those. Here's the activities that we've promised that we're doing, human activities that we're doing at the organization to drive those numbers. and then here's a forecast for cash flow so that we don't run into any surprises there or have any any timing issues that you're going to worry about.

And as you do that over and over and over again and revise it every single week, you know, the first few weeks you could be very bad at predicting cash flow, but by, you know, week 13, you're getting much better, right? You know, year two, you're not having massive surprises on there unless there's structural changes in the business. Then there's a monthly financial reporting package and call to go over that. Here's what we said we were, here's what we thought we were going to be at the end of the, you know, here's what we budgeted for at the beginning of the year. Here's where we thought we'd be at the end of last month. And here's what we actually came up and here's what the changes were. Then there's a monthly operating review, which is where I bring an executive, one of the executives on a rotation to present a divisional update to the board in there. That's useful for two reasons. One, it gets the executive a chance to talk to the board. And two, it gets the board a chance to assess each executive. And if there's a problem developing and we're trying to coach somebody, through it, we can kind of tell whether they're accepting the coaching and feedback and making the

changes needed or whether there's a bigger problem brewing. So there's not an event where I'm surprising the board with. I've got to make a change here at this particular level. Then there's the quarterly board meeting, which is a process I drive and push through and say, here's what the biggest issues of the company are. We're going to structure it. I try to spend a disproportionate amount of time. I don't spend an hour in each division. I spend 90 minutes or two hours on the biggest issue, then, you know, 30 to 45 minute chunks in the next two, and then an update on the remaining bits, finances at the end. And then there's an annual business plan and review, which is similar to a board meeting, but it kind of says, here's, you know, we go through a process there that says,

here's where we want the shape of the P&L to look next year, kind of like revenue-ish here, then we go to each division. So that's the top down, right? Kind of, here's what we're thinking. We're okay with this kind of range-ish? Great. Now we go to the executive team and we say, what do you, what are you going to do to make these happen? And they say, oh, we need more money and we need more, you know, lower targets. Okay. And we have a negotiation back and forth over time and align on this one-on-one and as a group. And we present that to the board. So that's board level cadence. And I do almost the exact same thing with the company. I have a weekly or semi-weekly one-on with each of my executive team reports. I have a quarterly check-in

against our scorecard goals in planning process that builds directly into the board decks. I have year-end compensation reviews and performance reviews. There's a weekly metrics review that all company team members are invited to. And that just spits right out to the board. I don't show like 13 week rolling cash flow forecast unless there's a reason to with the employee base in there because that can be held inside the finance team. But the KPI check-in is the exact mirror usually of what we send to the board. There's a senior leadership team meeting for 90 minutes, monthly internal operating reviews. So that executive, when this is working well, will have their team, their directors, present their operating review. And they'll use those slides and

give them credit in the board room up the chain. We'll just literally rip and repeat them. And then there's the quarterly all hands meeting, which is almost always a direct derivative from the board meeting, if I can, or I'm stealing as many slides as I can, so that the team is seeing what we're using at the board level. And you can't always map these perfectly,

but the more you can, the more you build trust, I believe, over time. And then we have skip levels with direct reports. So this sounds like a lot, but it's really not. It's really about 10, 15 hours a week of cadence, right? that pulse from time to time, and it can get really late when we're not in a board meeting or operating review week.

And so my schedule can have 30 to 35 unstructured hours in a week with this cadence, and yet I've got a very rigorous structure in place. And that free time is very intentional because then I can focus my attention on a problem for a quarter or so, or until it's resolved or until the opportunity is realized, or two quarters, in some cases, if I need more time, and then reset and move on to the next thing. once that's in place. So that's kind of the cadence item there. Everyone's got a different cadence. That's the one I settled on as my happy place. Well, I like this cadence. And I'm remembering back to the bigger pockets. I had your calendar on my calendar so I could schedule podcast

recordings. And I would see these meetings all the time. I don't know if this is like a no-brainer to anybody else. I wasn't in any of these meetings. But knowing that I, if I was going to be in these meetings, knowing that I had to be there every week and I had to present, and I had to be present, makes me think more about what I'm doing. If you had these once every other month or, you know, once a quarter, oh, crap, how do I do this again? I can't remember what I'm supposed to be doing. If you are an employee and you want to earn your way into these meetings, start doing some of this stuff that Scott's talking about. Look at your own little job and give your boss a report every week or month and let them know what it is you're doing. You're, you're showing that you're willing to do

the work. You're working over and above what's being asked of you and you want to grow. I'll be really clear. I would change this depending on business context, right? So, so like if, if I had a very seasonal business, for example, like that, like we had that Christmas tree lighting business or whatever. Yes. That guy, like, this would be silly to do with that context, right? This is a business that's, this is a, this is a media business that had that, right? That Christmas tree business, what I would be doing is I'd be building out a projection of what I thought sales and operations would look like during the season. And I'd be really intentional about following that curve, right, across there. How am I above or below that curve of sales and interest and operations

in there that I thought would be in? Then I would spend a lot of time reviewing it. They'd probably sit back and work on something strategic or some other other lines for the other eight, nine months of the year. So it's mapping this to the context. That's really important here. But I would certainly put in that rigidity to that portion of the seasonal business, if that was a hundred-person business, you know, that required the, you know, executive oversight to do, not just a single person. This would be silly for one person, Christmas tree-lighting business to do. But I'm using that as an example of the seasonality. Like, there would be differences in this approach if the sales process was a monthly

a subscription product or something like that, or a tax business, for example. But anyways, I digress there. next up is the hiring and performance management process, which is the whole key to this. I think this is the, after setting the strategy and saying, what are we going to do and how do we win? And do I understand a customer? It's, it's how do I say, here's my plan. How do I actually get it to get it executed? And how do I get the people that I'm hiring to improve upon the plan? Right. I should be handing them, I should be handing a draft, a good idea of what I need my, the CFO to do. And they should take that spirit and improve upon it, right? If things

are going well. So this is where, this became central to our process here about what I call a unicorn search. Right. So if I want to hire an elite CFO for an organization, something's in a really critical position, what I do is I actually invent a fake person first. Right. I say, hmm, if I could like, if I could write that on a piece of paper and invent this person, what would their skill set be, right? Well, they would have experience, you know, at several repetitions at businesses just like ours. They would. have a they would be insanely efficient at closing the books and completing the monthly reporting package. There would be no errors or the errors would be so infrequent that they'd

be memorable in the context of this. That's how that's how strong the basics are. They'd knock out all those basics right away in the first 90 days. I don't have to worry about it. I don't even think it about it. I just hit a report every month and it's always right and it tells me what's going on and why. Then we move on to value added finance and this person is a strong operational leader. I can I can hand off portions of the divisions that are in trouble or that that need extra attention to them so I can focus on the next big opportunity and they're strong executive presence in the room, very rigid, very making sure that things are moving forward there. They're aligned. They push back and say, here's what I think. I don't have to babysit them

with the board. They go directly to the board. I don't want to go interface to the board about why this line item was higher or lower last month. The CFO was going directly to them. and I trust that relationship because I'm sitting next to them every single day and we're talking about these things on a regular basis. They have an M&A framework. They're very rigorous and thorough, but also understand what we're trying to do and are not just conservative cost cutters. They're aggressive revenue, or aggressive about revenue opportunities and growth in there. So I'll put that down, right? Those are hard-won situations, right?

You, if you're listening to this, are probably thinking about your own boss or your bosses in the past or people that have worked for you. and saying, here are the things that they did rel, and here are the things that I wish they would have done. So invent the perfect person, right? Then, once we have the invent fictional perfect person, I create what's called a set of first round draft picks. So these are going to be, if I could wave a magic wand and poach people from the industry,

it would be this person, this person, this person, this person, they're actual people, right? And then we go outbound to those people and invite them to apply for the job, right? That's typically done with an executive recruiter at this level, but you could do this with your HR person. And in fact, Nigel, our old HR guy, used to do this for me in certain roles that didn't warrant an executive recruiter function. We also do the second round draft picks or whatever in there.

And then we'll post the job because we may miss people as well as part of that. So from there, we have our interview process, nothing special about our interview process necessarily in there. I don't, you know, this is standard rigorous stuff where we'll have executives talk to people. But the real thing that I think is really important about our interview process or the one I would bring is, is at the end of it, I asked the executive to use my definition of strategy, diagnosis, guiding principles, specific action, and tell me what they think they need to do in the first 90 days, first year, at the company. And that's a presentation that's specific and actionable in there. And when I like it, I redraft my job description or the whatever, offer them the job with that. And that's what they go to town

executing on. So I don't lose this first 90 days so common to executive. hires where they go in and play this, you know, I'm going to, I'm going to learn and whatever. They're going to learn too. Like, we're not going to go in and just make a big mess right away, but we're going to come in with a clear hypothesis about what to do in the early days. And we're going to align on that with the executive and the board so that if there's a hiring plan, that's part of the job acceptance. If there's a, you know, change or change in roadmap, you know, that's going to be part

of the hiring process. So that's a really critical process for me. I'm spending a lot of time on it intentionally because that is such a huge component of the CEO job in particular, such a huge component of executive function as well. And again, last thing on this, a big part of this is knowing what good looks like in this person. And I try to be very prescriptive about this. I have what's called a scorecard that is alongside the job description that says this person's mission is to, for example, bring a culture of value-added finance to the entire organization. And then it will be very prescriptive about the outputs. Finance 101 is knocked out after 90 days.

We don't talk about it. We don't worry about it. You're not coming to me telling me you can't do important work like M&A or strategic planning because you're bogged down and closing the books or building the financial, you know, building the projection for the next month. You're knocking that out in a reasonable period of time, 40 hours a month, 25, 30% of your time. You're spending the rest on driving the business. And if you're not up for that, you're not going to work out here.

That's because that's in the scorecard before we hire Jeff on this. And that then is updated every year with the executive in alignment. And I give a performance review based on how much of that we complete or not. So that's central. That's my whole job, I believe, is refining, is deriving these artifacts, these performance management artifacts from a central strategy and making sure that they are more or less executed across the year. And yeah, there's pivots and changes from time to time. But that's the job. Scott, that all sounds like that came out of experience.

Yeah, it's opinion, right? Like, what you're getting from me is an opinion about how a business should be run or how I would want to run the business. And not everyone agrees with that opinion, right? So, like, that's what's great. Like traction or EOS or or four disciplines of execution or, you know, other CEOs that are more, that are very kind of creative or sales oriented or whatever are going to have different opinions about how to run a business. And this is my opinion about how it ought to be done. And that's, that's what that's what the tool. it is, right? You bring your opinion to bear on this, right? There's no, there's no hedging in these these areas, right? I'm very prescriptive about it because I find the advantages of that and of a strong hypothesis and a bias for action to far outweigh the very real consequences of those, of those, biases. So one of the things I really appreciated at bigger pockets was the culture and the values. It wasn't just values on a board and nobody ever looked at them again. It wasn't a culture of, well, however it happens, that's what the culture is now. Talk to me about your ideas on culture and values. Sure. So, you know, I am one of the things I kind of come in and say is this is not a family.

This is a pro sports team, right? We're not, like this is, we're not a family here. We're here for you if you have a personal emergency or those types of things. But this is, this is a place where we're going to perform and we're going to work hard. And there's a job to be done and that job needs to be done. And that's, that's a, that's a requisite for employment on an ongoing basis in there. And, and in that respect, I don't think that culture is like some poster on the wall or set of stated core values. I think it's an aggregation of what you do every day as the leader or as the executive team. It's what gets rewarded, what gets tolerated, and what gets addressed in the organization. And so I don't really like come in with a bias towards these specific mission

statement or values that are written down necessarily. I'm fine with a wide variety of variations that a team might come up with. But the values that I kind of exhibit in here, bias for action, you know, a strong hypothesis, strategy, being accountable, responsive, knowing your business, being able to talk somebody through it. It's not useful if you are really good at your job, but no one understands what you're doing in there. I'm going to probe and find out, and you must be able to present what you're doing in some capacity that I can reasonably understand over some period of time. Those are values that, that the organization will ultimately reflect after, you know, with this kind of system or this

set of the set of structure in there. And so that comes down to what we do, right? Like showing up time on time or prepared, giving your full attention to the conversation at hand, right? Asking questions. Not just asking questions every time when it's unnecessary, but making sure that like when there's an operating review and I'm attending, I might ask somebody who's a frontline employee 10 questions in a row about an important area of the business, if that's a leverage point. And if they're not ready to answer that, that's fine. I'm not going to grill them on the spot and say, oh, you've got a good trouble. But I do expect them to know that over time if it's a core leverage area.

And I expect everybody to be ready for a question from me on these things. I view it as a term of respect that I'm paying attention and asking questions. And if your view is that it's intimidating, that's probably not a good fit for you, that organization in there. And you'll probably opt for something else over time in there. So that's kind of the standard there and how I would try to model it. And then it's also about recognition, right? Calling out people who are doing great work and making sure that there's a culture for me to say, say what I'm seeing, making sure that that's rewarded. But also that the, that I'm getting a feedback loop of stuff I can't see from other folks.

So that was where we had things like the gratitude channel or the shoutouts at our all hands meetings, for example, that go on for several minutes until there's like a 60 second awkward pause, for example. because I couldn't see. I don't always see, despite this effort to attempt to understand the organization, all the things that folks, especially where my attention is not intensely focused, I don't always see what's going on in these other areas. The biggest problem I see in culture in a company, and that can absolutely destroy your company, by the way, as a bad culture, is the high performer who is a cultural cancer.

This is just part for the course, right? There's always like a, there's always, always, almost by definition, somebody who's your best player, right, at a given time, right? Like, that's just part of the reality for business, sports, whatever. And that person sometimes behaves wonderfully and sometimes does not behave wonderfully. But almost always down the stack at some point, there's somebody who's behaving poorly, who is in the top echelons of performance. And you have a choice.

You just know this is a given, because it happens at every company and every sports team eventually, right, over time. and it's just how are you going to handle that situation? And it almost never is the right call just allow that person an exception environment in there. There are a couple times where that backfires, and where addressing it can be very unpopular, for example, but it's almost always the right call in the end to address that and hold, say, you're going to be held to this standard or this is not the right fit for you in there. And again, that is a part of the job that every CEO or every division leader, essentially will confront in their career over and over and over again.

You've got to have a playbook for doing that. So I think the playbook is identify it early, develop contingency and alternatives to this person very quickly, and attempt to change the leverage position of that individual. And then if you're going to let it age, which you sometimes have to in certain situations, you name a date by which you're going to address it. It's not I'm going to reflect this next year, revisit it. It's by October 31st. we are going to have a decision on this person and we're going to give them an ultimatum.

That will be, you're going to adhere to these standards that everyone else is. Or we're going to, you know, we're going to change up things. And that's a really difficult task. I am glad I never had to deal with that. But I did have to deal with that. I was the coworker who was dealing with this toxic individual and what's going on? Why is this person allowed to continue to act like this? It feels very frustrating from this point of view.

And I have worked at companies where the CEO absolutely did not have this toolkit. And they're like, they're at top performers. So whatever. You're going to lose a lot of your other, maybe not top performers, but really good performers. You're consistent employees. The institutional knowledge, I've been here for eight years. And you're allowing this one person to remove my eight years of institutions. institutional knowledge because I can go get another job. I don't need to deal with this person.

And or I can just leave. You know, I could just retire and be done. Having this, this toxic person is like having a playbook for handling a toxic person, I think should be number one, Scott, but I've never been a CEO. I'll allow it to be down here in number six or whatever. Eight or nine times out of 10 when you, when you handle these situations, you're able to find a good resolution. The person adapts or evolves or concedes to changes that are being imposed on the situation. And one of two times it's a big problem, right? And so it's like it's a real risk. Like this is not a, a situation you can blow over and just say, everyone conforms. It's you have to have a plan to address these. And you will, you will address it over and over and over again across a leadership experience in

some form or other. Scott, next up is crisis and scenario management. Can you give me a real quick overview what this means? Part of the job is making sure that profitability targets are hit, revenues hit, those types of things from a budgeting perspective, right? There's a strategy and then there's the constraint of needing to put up the financial performance for the business and that is necessary to sustain execution towards the strategy. So a big part of that is the contingency plan, right? So what are you going to do if things will go wrong? You have to do this as part of your budgeting process.

And the best first step is the budget is the bonus plan, right? So a bonus plan is funded if we hit our profitability target, right? There's a little bit of circularity there. So you have to have a strong CFO to model it. But if you model a good bonus plan, if we hit our profit target, the bonus plan funds. It scales if we do better than that or hit certain KPIs, but you must hit the profitability target to that. And in that case, if things go poorly, you just begin to lower the bonus plan at the beginning of the year. And it's a bonus. So typically employees understand

this, but it's actually a really important tool for modeling mild variations to plan in the first bit. After that, there are projects that you will not execute, right? That will get cut on a go-forward basis. This is before we get to, to, you know, harder decisions like core contractors or employees. And then there is a premeditated reduction in force or layoff plan that is codified in there and says, this is the amount of headcount. It doesn't necessarily name names, but this is the amount of head count, we will eliminate if we begin to fall below this target and think we're going to come in below this. And you have to make that decision in the annual planning process and not at the moment in time because executives cannot be forced to make the hardest decision of their lives.

for many of them at the worst possible times. So you're making the scenario plan beforehand. These are all playbook items, right? So there are plenty of times when the playbook does not apply and you've got to play ball and figure out what the heck you're going to do in a situation that you have not planned for, don't have a framework around.

But for whatever you can have a framework for, I think it's really powerful. Next up is customer and market intelligence. At Bigger Pockets, we think this was a two-way street. You use detailed analytics and you invest heavily in understanding patterns of customer behavior, what they're saying, what they want. And then you talk to them over and over and over and over again.

How many podcasts we've done here, Mindy? 700 and something. 700 times I've talked to a customer or someone that this industry touches on this podcast. And then I've also had how many calls with customers, how many times have posted the forums, how many times in the Facebook group, how many social comments, how many response to the blog posts? So the aggregation of those is essential because it tells you which questions to collect data on. And then the data tells you whether you're right or wrong about the.

that customer insight at scale. And then that informs the next set of questions downstream. So it's a circle that never ends in terms of customer and market intelligence and data feedback, right? You can't do one without the other. There's no analyst that can just design a perfect data collection system. You have to know which question to ask and you have finite resources about how to ask and when to ask those questions. And we got org design. Org design as a function of what your business needs.

I almost always will bias at this point to a P&L ownership structure, right? There's a like, there's different schools of thought where, you know, marketing handles leads, then sales handles the sales and then the operations handles the support. I'm a big function of, I want the entire P&L from revenue to cost owned by somebody. So I know when revenue is going down, who to ask, they can impose that different structure in place. And I'm fine with the matrices or the complexities or the tradeoffs that come with it. But I find that if revenue is not accounted for in a business, then really big problems begin to emerge, and it becomes very thorny to unpack them

if different parts of the customer experience of the business are owned by different leaders who are not necessarily on the hook for dollars coming in. So the structure is designed first, and then people are placed in the structure second. I've got my structure, and then I've got my fictional perfect people, and then I've got the people who are developing into those roles or who I need to hire to put into those roles inside of that structure. The rest of my toolkit is, you know, 25 pages or so of scorecards, right? Very prescriptive descriptions of what I think an excellent head of product or head of technology or chief financial officer or head of marketing or CMO or whatever it looks like in great detail.

The qualities that I think they should have, the mission of their role and then the specific example outcomes. that I would want to see in the first year after hiring them. And that we will not go through today on there. And I may not publish that as a part of this because some of that. It's hard to do that in an illustrative example without, you know, talking about stuff that's not, that shouldn't be shared about inner workings of of bigger pockets, for example, or, you know, my experiences in there. I also have some certain executive failures that have come up over the years or failure patterns.

And a failure is not like, you get fired if you fail. A failure is like something you need to develop or figure out, right? So mine was for a long time conflict resolution. I was very averse to conflict and I was very skilled at finding ways to not have a hard conversation with somebody and instead promote them or move them off of a problem that was really important and get somebody who could solve it onto the problem. And this kind of blew up in my face, you know, seven or eight years ago at one point. And my boss gave me very clear feedback about this failure pattern, this avoidance of conflict

that I needed to address. And it was really life-changing for me and very hard. for me to accept the feedback as well. But there are many failure patterns like that that we can get into at some point. I've also posted about that on social. That's the essence of the playbook, right? There's the toolkit.

There's also hard artifacts, right? Like what is an example product roadmap or what is an example, you know, delegation of authority or those types of things that go along with it. Some of those I have, some of them I need to map out and build at some point, right? But those are, that's it.

That's how I would run a business. And you can see, like, I would not be a good candidate for some businesses. I might be an excellent candidate for other businesses with this playbook. And that, that I think will help people, you know, you probably disagreed with me in 20 places listening to this or didn't like it or wouldn't want to work for me or maybe you loved parts of it or whatever. But that's who I am and how I do it. And that will only help you if you can build, evolve to something like this in your field, I think, if you're listening to this.

I enjoyed working with you, Scott. I still enjoy working with you. This is what I do. I mean, I still do versions of this like light down versions for bigger pockets money here with what we're what we're talking it's just there's no i don't have to bring the intensity of the CEO every single day um to the situation or put in these like 60 hour weeks in order to do it but it's there's there's all these pieces that translate yes there's always pieces that translate i can see that if i was looking for a new job i could prepare myself for a job interview so much better than i did the last time i prepared myself for job interview, which was 11 years ago. Yeah, wow, that was, it was, it's almost 11 years ago now. This would be very helpful for somebody who was looking to a level up their career. I think that,

I think there's a lot of tips for people in this episode. And I thank you for sharing this, because this is not something, this document, I'm looking at the document right now. This is not a document that you can breeze through in five minutes. It's not a document that you breeze through writing in five minutes. This is absolutely a lot of hard. hard-won knowledge. And I think that our listeners will appreciate it too. Thank you, Scott. I think a lot of organizations would hate it, but also benefit greatly from implementation of a structure as rigid as this one. And there's a lot of advantages that come from it, even though it leaves nowhere to hide in the organization around that because the CEO is personally

drilling into the most important lever at almost any given time in there. And that makes it very difficult in there. And that's not something that a lot of people, that some people, That's something that some people really don't like in there. I've gotten feedback about the CEO is directly asking me questions in this. Well, yes. Yes. Yeah. That's going to happen here, you know, here.

Those are the people that don't need to work there anymore. That's this. I am very proud of the hard one knowledge. And I think this is like a core skill set. And I wanted to make sure that before too much time passed, I'd written it down. So in case I ever need to use it again at some point later in my life. Well, Scott, where can people find this document? Oh, you can find it at biggerpocketsmoney.com slash resources.

I may in the future create a page like CEO slash CEO toolkit, but for now it's at slash resources. You can download it. It'll be a word doc. You can modify it or use it to inspire things. You can create a list of artifacts. You'll probably need to create spreadsheets or PowerPoint presentations or whatever if you really want to do this.

But what I would recommend is the takeaway from today's show is start doing this. Put a draft together for your job. Do it at work in dead time, right? This is your job. You'll be using it at your job for many years. It'll make you better at your job. And one day, whenever you want to go interview for that next job, you'll be able to bring this toolkit and translate it in there.

And if they don't like your toolkit and your style that you've hard developed, that was the wrong fit for you anyways. Go find somewhere that will do it. You're going to impress way more than you're going to scare away if you come in with a clear opinion on how to do your job. And if you scare away that person, that's not the person you want to work for anyway. If your toolkit is genuinely excellent. You probably also want to get a lot of feedback on it.

And again, my toolkit, this is not all me, right? This is not me. I did not come up with this. This is borrowed from EOS, from four disciplines of execution, from countless hours of coaching from various board members, from Josh Dorkin's best practices, from Mike Zawalski, best practices, from books, from resources, and from little nuggets like that one CEO's comment on some call from years ago,

all built up to build this, right? And that's how yours will be, and it will be constantly evolving, right? There will be things about this in 10 years. If I ever use it again, changed. You just suggested people get feedback on their toolkit. I'm going to ask people to give you feedback on your toolkit. If you've downloaded this, if you've listened to this episode, downloaded the toolkit and you want to reach out to Scott. His email is scott at biggerpocketsmoney.com, and he would love to hear from you. Yeah, I will also say this, I love this stuff. I don't,

I don't love the pressure, the tension, the long work weeks, the hard conversations, and all those things in this, but I love the, I love business, personal finance, all this kind of stuff. So if your organization could benefit from this and you want some free only consulting on pieces of this, I'm happy to also talk about that. I love doing this and would love to scratch that itch some way in there and if I can be of help. Just like we answer all the questions we get from personal finance folks on a weekly basis here that email us. So please do. We're very accessible on this. And I'll all put a stop. to that if it gets overwhelming at some point. But for now, like, we love it and would love, love all that.

We're happy to answer any questions. Yes, we are. And if you have a question for me that is not CEO related, Mindy at Bigger Pockets Money.com. If you have a question for me that's CEO, I'm just going to forward it to Scott. I think this is a great stopping point. Should we get out of here? Let's do it. That wraps up this episode of the Bigger Puckets Money podcast. He is Scott Trench, former CEO. I am Mindy Jensen saying, so long, ping pong. I love Matt, said no one ever. Nobody starts a business thinking, you know what would make this more fun? Calculating quarterly estimated taxes. But somehow every small business owner ends up doing it.

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