Interview With Lloyd Shefsky in Boca Raton, FL by Lisa A. Ditkowsky
I recently had the pleasure of conducting an extensive sit-down interview with Global Business Consultant, Lloyd E. Shefsky in Boca Raton, Florida. Lloyd Shefsky is a top worldwide business expert on what makes entrepreneurs and their companies successful and built for longevity. He teaches entrepreneurs how to make money in business and how to keep making money in business for multiple generations of families / owners. Mr. Shefsky is friends with some of the top CEOs in the world, including Howard Schultz, CEO of Starbucks, James (Jim) Sinegal, CEO of Costco and Ross Perot, Jr., to name just a few global business leaders.
Lloyd Shefsky founded Chicago law firm Shefsky and Froelich as a 29-year-old young man; recently his law firm merged into Taft Law. The Taft Law firm focuses on all areas and sizes of business, from start-up to multi-billion dollar businesses.
Lloyd Shefsky, both a J.D. and CPA, has written two books. The first, “Entrepreneurs Are Made Not Born – Secrets from 200 Successful Entrepreneurs”, was published in 1994. Lloyd Shefsky’s second book, “Invent, Reinvent, Thrive: The Keys to Success for Any Start-Up, Entrepreneur, or Family Business” was published in 2014. Lloyd Shefsky is finishing his long tenure as founder and co-director of The Center for Family Enterprises at Northwestern University’s Kellogg School of Management. Innovation and Entrepreneurship are his current focus in business, and Mr. Shefsky is currently completing his third book, this one on Vision and how business visionaries succeed.
Following are the Questions & Answers from my extensive business interview with Lloyd Shefsky, worldwide, highly-sought-after, business consultant.
Academies of Tel Aviv / Jaffa, Israel Entrepreneur's Class
Q: WHAT RANKS AMONG THE TOP BUSINESS LESSONS YOU LEARNED IN YOUR OWN CAREER AS A BUSINESS OWNER?
- “Trust: If you don’t trust someone, don’t do business with them…I don’t care what type of contract or conditions are set up. The odds are that you are going to lose.”
- Relationships: People and Ideas - “People are the most important.” Ideas – “There is a whole world out there; the world doesn’t revolve around you.”
Lloyd Shefsky’s third book will be about Visionaries whose stories teach how to “Learn to expand your vision and to see peripherally even while you are focusing. That is how you see opportunities.”
“With relationships, it’s not just about having them. It’s about learning something in the process.” Relationships, Lloyd said, are an important component of getting and keeping clients. He told young lawyers to tell “a lie”: “I am going to be in your neighborhood.” Schedule a breakfast. Then, tell five more people you’ll be in the neighborhood, and to them it is not a lie. “It’s much better if you go out to the client. In their environment, they will prove more open and revealing.” “They’re proud of their facility or their office or whatever it is they have.” Lloyd urged not to be like most lawyers. Lloyd sees clients’ legal problems and needs while comfortably situated in the clients’ offices.
- Help People: Most of the time helping people helps your business, can lead to referrals. “The odds are that they will pay you back someday. But you have to let them know you are helping them. Always give customers the impression you are adding to the equation, not taking something away.” Lloyd uses his boyhood experience working at a produce market as an example. “It is better to underestimate pounds (in produce) than to overestimate and have to take something out. Give clients more than they expect, go beyond the description.”
Q: WHAT RANKS AMONG THE TOP BUSINESS LESSONS YOU WALKED AWAY WITH AFTER CONSULTING THE WORLD'S TOP CEOS?
Bob Walter of Cardinal Health did a lot of very inventive things. “You don’t need to come up with a new idea if you can figure out how to apply others’ good ideas to your situation.”
“Be exceptionally good to your employees and your customers,” is a needed tenant that Shefsky attributes to both Howard Schultz of Starbucks and Jim Sinegal of Costco. “They go through all sorts of pains to be good to their employees and their customers. People notice it, and it pays.”
“Some of the dumbest people I’ve ever heard of and met are people who put arbitrary limits on what (the amount of money or compensation) people can make.” Lloyd cited First National Bank of Chicago, Allstate Insurance Company and IBM at some points in time in their histories. First, he cites Stan Golder of the private equity firm GTCR because Golder’s boss put limits on what he could earn. Next, he cites Allstate Insurance Company in the early 1970s. Using only a few percent of Allstate’s capital, the VC (Venture Capitalist) arm accounted for nearly half of the company’s income. Yet, the head of Allstate said “no” regarding raising key employees’ pay. They said “no” to the idea of key employees making more than the CEO. Finally, Lloyd cited IBM computer in the early 1980s. There was a salesman who filled his year-end quota in January. The heads of IBM would not let him sell anymore because they did not want to pay him more money. His name was Ross Perot. He quit.
I asked Lloyd what companies are doing differently today to capitalize on the learnings of a “Blue Ocean Strategy” as defined in the landmark 2005 “Harvard Business Review” book “Blue Ocean Strategy”. Lloyd Shefsky cited Apple Computer, Amazon and Netflix. I related the companies to “Blue Ocean Space” or creating new market share in the non-shark infested “blue waters”, as opposed to the overcrowded, bloody red waters. Lloyd Shefsky did not include Facebook because, “before Facebook, there was nothing,” he said. Lloyd agreed with me that Google created a Blue Ocean Strategy, because “Netscape did search before Google, but that was minor.”
“Nobody has a better return policy than Costco.” Shefsky called the Costco Return policy “One of the several ways they differentiate themselves.”
“The guys who do really great homework create giants.” Shefsky cited Tom Stemberg of Staples.
On Sinegal of Costco – “He (Sinegal) viewed it as a membership contract, and he felt he owed it to them (the members).”
Shefsky described the importance of being “Silent and Listen – It’s not what I say, it’s what I listen to.”
“You have to learn how to read people.”…“You just have to listen and pay attention.”…“People are too interested in telling their own story.”…“Know what your strength is.”…“Sell what you are strong at.”
These business strategies may seem obvious, but it is amazing how many Sales and Service professionals talk themselves out of a deal or push products and services that they don’t understand or really believe in. Lloyd’s platitudes are worth absorbing.
Q: IN YOUR DECADES OF BUSINESS CONSULTING WITH TOP CEOS, WAS THERE ANYTHING THAT STRUCK YOU AS A "DIFFERENT WAY OF DOING THINGS" THAT TURNED OUT TO BE A SUCCESSFUL BUSINESS GROWTH STRATEGY THAT YOU HADN'T SEEN BEFORE?
Shefsky cites Costco again. “There was a drug at Walgreens for $300.00. Jim Sinegal sold it for $10. Costco pharmacy has a limit on markups,” said Shefsky.
“Costco gasoline is lower cost, and you need to be a member,” said Shefsky. “A news guy asked a customer, and he did not even know how much lower the price of the gas was”. Yet, the customer waited in line and paid for it because of the Costco presumption that it was “a good deal”.
“It is amazing to me what a great leader can do with this specific frame of mind and how powerful that can be.” Shefsky is not only referring to lower-cost deals and merchandise, but the draw of an exclusive membership. I know from being a business member of Costco for more than a decade that they try to layer exclusivity with more exclusivity. For example, my credit card is not good enough to buy their “cheaper gasoline”. I would need to specifically use an American Express credit card. However, I do not want to be a member of the American Express “family”. Therefore, I am excluded from being extended credit to buy anything at Costco. I still shop there.
For Costco customers who have not heard, June 20th, 2016, was the Costco switch date they began accepting Visa Credit Cards and stopped accepting American Express Credit Cards. Of course, new improved deals and incentives are offered for those who shop with the specific Citibank Visa with the new rewards and incentives attached to it. This is just the latest example of Costco “selling exclusivity and membership” once again. I believe they feel that they have won over all of the loyal Amex users and want to now try to win over Visa users. I’m there.
Q: YOU HAVE WORKED THROUGH COUNTLESS POLITICAL ADMINISTRATIONS. DURING WHICH ADMINISTRATIONS IN PARTICULAR COULD YOU FEEL BUSINESS PROSPERITY IN THE AIR, AND DO YOU ATTRIBUTE IT TO CERTAIN POLICIES OF THOSE ADMINISTRATIONS?
“I don’t believe political administrations help. Reagan deserves the most applause because he was the first president who used the bully pulpit to try and get people to recognize the importance of entrepreneurs.” Shefsky said that prior administrations did not do that for entrepreneurship in America.
“George Bush Jr. and Obama talked about entrepreneurship but didn’t really do anything about it.” Shefsky highlighted “A big fear of economic politics” and “Fear of promoting the 1 percent who give jobs to the rest.”
“Our tax laws are a joke, an absolute embarrassment, anachronism, etcetera, old political thoughts, not meeting the needs” of family business in America. “The Estate Tax should be fixed…Double tax on distributions should be fixed.”
“Bill Clinton (re: entrepreneurs) – He would love to get their money, but that was it,” said Shefsky. “Clinton was just lucky he happened to be President during the greatest bloodless revolution ever.” (“Computers, Internet, at the right place at the right time.”)
Q: WHAT FACTORS DO YOU THINK ARE MOST RELEVANT TO A STRONG COMEBACK FOR MAIN STREET IN AMERICA?
“First and foremost, fix education. I am embarrassed that government has not voted to do this.”
“Improve R&D. The government has been abysmal at promoting R&D. Once you get below military, there’s no good politics and no good action.”
“Wrongdoers in business (industries) should be punished criminally.”…“The fact that no one went to jail for 2008 is astounding.”
Shefsky referenced the book, “The Big Short” – “Places in it that are an understatement” (with real estate and mortgage brokers).
Q: What political environment in general have you found to be most successful to small business success?
“You need good government.” By this, Shefsky clarified, “People who serve the constituents and aren’t so focused on getting elected.”…“We need term limits, shorter campaigns.”…“Three years to run is bizarre.”…“You need collaborative government. We don’t have any of that.”
“We have to change the approach of the media…The media gave up the Constitutional protection of “freedom of the press” when they became more entertainment than pure press.”
“We need more investment in the U.S. by government…If they would lower tax on bringing income back into the U.S., we would have trillions repatriating into the U.S.”
“We need a bigger system and investment in educating people and job training.”
Q: WHEN WORKING WITH FAMILY BUSINESSES, WHAT FINANCING STRATEGIES DO YOU SEE MOST OFTEN WORK?
“Money is not a good enough answer; it’s where the money is…It can’t all be distributed to the family.” Upon the death of the family business owner(s), the family must have sufficient cash to pay estate taxes. If there isn’t sufficient cash flow both to reinvest in business growth and to make distributions to family members, then maybe some of the family should go out and get jobs.”
Shefsky noted that Family Businesses get bank loans. “VC (Venture Capital) tend not to buy into family businesses because families rarely want to give away any control at all.” PE (Private Equity) tends to buy control as a prelude to buying all of the business.
“Warren Buffet always takes a controlling interest with an option to buy more,” Shefsky said, noting that Marmon is now held by Berkshire Hathaway Group. Marmon was founded in 1953 by Jay and Robert Pritzker in Chicago. Marmon excludes the Hyatt hotel brand business entity.
Q: I HAD A BUSINESS OWNER TELL ME RECENTLY THAT HIS COMPANY TAKES OUT LARGE COLLATERALIZED LOANS AND USES THOSE LOANS TO SECURE MONSTER LINES OF CREDIT, AND THEN LETS TAX CODE INCENTIVES ALLOW THE GOVERNMENT TO PAY OFF THOSE LOANS...ARE THERE STILL A LOT OF LOOPHOLES IN TAX LAW THAT FAVOR SMALL BUSINESS CREATION IN AMERICA?
“The movie industry has a huge lobby, and their loopholes are huge.”
“Small business has never had good tax loopholes; they can’t afford lobbyists.”
Q: YOU HAVE SPENT YOUR MOST RECENT CAREER RUNNING THE CENTER FOR FAMILY ENTERPRISE AT NORTHWESTERN UNIVERSITY'S KELLOGG SCHOOL OF MANAGEMENT. WHAT ARE THE MOST IMPORTANT FACTORS TO ENSURE THE LONG-TERM SUSTAINABILITY OF FAMILY BUSINESSES GLOBALLY?
“The key is planning ahead, and the most important is succession planning.”…“The oldest generation hates to let go.”…“Most people don’t do sufficient advance planning.”…“They have steered things in such a way that the kids don’t have a solid basis of experience for doing things themselves, and it becomes a vicious cycle.”
“Dividing shares of family businesses on death equally amongst kids should not be the default position in the way parents deal with their children.”
2014 Center for Family Enterprises Leadership Award for Brown-Forman
(l-r Ivan Lansberg, Garvin Brown IV, Chairman, Lloyd E. Shefsky, Paul Varga, CEO, of Brown Forman, John Ward)
Q: WHY DO YOU THINK MOST FAMILY WEALTH AND FAMILY BUSINESS ARE GONE BY GENERATION 3 AND THAT MANY DO NOT EVEN SUCCESSFULLY PASS TO THE CHILDREN OF THE FOUNDERS/OWNERS?
Shefsky pointed out a paradox:
“If you grow a business and grow it for making money, that is good business. Otherwise, successive generations create too many mouths to feed. On the other hand, if they’re good, it grows; when it gets big, there is eventually no one left in the pool good enough to run it.”
“You wind up with an inability to deal with succession in the right way.”
Shefsky mentioned CEO, Board Leadership, Succession, Governance success, shareholder success as issues to be considered in passing family businesses successfully through the generations of family members.
Primogeniture means that “the first son takes over." He tells the story of a tribal chief in Zimbabwe who appointed the little grandson.
“Some of the best family businesses do the same thing.”
He cites the Pritzker’s grandkids listening to one side (grandfather’s) of business calls. Similarly with Henry Crown, Ross Perot, Lester Crown, the current leader of the Crown family, and others.
“They worked hard at teaching the kids from a very young age what they wanted to teach them.”
- “If it ain’t broke, don’t fix it.” In family business, this is often the thought, he said.
- “But that’s the way grandpa always did it,” Shefsky cited an oft-quoted rationale for continuing to do things the old way which no longer works in the modern world.
Shefsky quoted Baron John Acton – “Absolute power corrupts absolutely.”
Shefsky also said, “Market share corrupts, and big market share corrupts big time.” It leads to arrogance, laziness and stupidity, he said.
Q: I KNOW THAT WITH PUBLIC COMPANIES, THERE ARE FIVE THINGS THAT COMPANIES CAN DO WITH EXCESS CASH. WHAT ARE THE MOST SUCCESSFUL WAYS THAT SMALL BUSINESS AND FAMILY BUSINESSES CAN DEPLOY EXCESS CASH FOR MAXIMUM RETURN ON INVESTMENT?
“Economists have a rule that companies will deploy excess capital the best they can, but when they distribute money to shareholders, it is a clear sign that they do not have a better place to deploy it.” Lloyd says that is what special dividends and buying back shares of their own stock is really about.
“Family businesses should be building up their companies for the next generation.” “Or reinvent the business so the next business has enough to feed the next generation’s mouths.”
Private family businesses vs. public companies – “In public companies, it is controlled somewhat by the presence of public shareholders who may have different interests.”
“Families should work on aligning their interests. In private companies, families must control the temptation to use the company as their piggy bank. Yet, there is a need to develop wealth outside the family business to provide for estate taxes, etc. Family businesses are a continuing series of paradoxes.”
Q: WHAT DO YOU HOPE THE BIGGEST TAKEAWAYS ARE FROM YOUR "INVENT, REINVENT, THRIVE" BOOK?
“Entrepreneurship is not a cataclysmic event. You have to keep reigniting that rocket over and over.”
Q: WILL YOU TELL US ABOUT YOUR FOLLOW-UP BOOK IN THE WORKS AND WHY YOU ARE WRITING IT?
Lloyd E. Shefsky in office
“A WEALTH OF VI$ION$, Business Visions You & Others Can Buy Into,” Shefsky said is the working title of his third book, due out early next year.
Lloyd Shefsky explains his rationale for writing it. “Successful business leaders have different kinds of vision, suitable for their various talents and circumstances. Understanding that can help you become a successful business leader.”
“I get to interview some of the greatest business people in the world.”
“I love to write and teach.”
“I’ve had about half a dozen great mentors in my life.”
In college, Prof. Norman Sigband, the author of the first and best books on Business Report Writing, had a major influence on my respect for and dedication to improving communication.
Q: THE CORPORATE WORLD HAS BECOME MORE LITIGIOUS (OUR SOCIETY IN GENERAL) THAN EVER. HOW DO YOU ADVISE YOUR BUSINESS CLIENTS THAT CAN'T AFFORD TO HAVE A LAW FIRM ON RETAINER TO PROTECT THEMSELVES, THEIR BUSINESS IDEAS, AND THEIR INTELLECTUAL PROPERTY IN THIS LITIGIOUS WORLD?
“You have to become very realistic about your patent. You don’t own the world.”…“Don’t over-rely on patents. The law is going very much against the small inventors and their patents.”…“The cost of taking a patent through the appeals process can be millions of dollars.” Shefsky cited the software industry as an example.
“Ideas alone are not patentable.”…“Business model patents” – Shefsky explained that courts are very negative on those right now, stemming from a Supreme Court case seven years ago.
“You have to be ready to build that business faster than anyone else so big guys want to buy you and small guys can’t catch up.”
Q: WE HAVE HEARD SO MUCH ABOUT TECHNOLOGY DISRUPTING THE LEGAL FIELD, FINANCIAL FIELD, HEALTHCARE, YOU NAME IT. DO YOU HAVE ANY SPECIFIC ADVICE FOR FAMILY BUSINESSES REGARDING HOW TO BEST INCORPORATE TECHNOLOGY TO ENHANCE THEIR BUSINESSES WITHOUT IT REPLACING THE HUMAN CAPITAL?
“Good technology does not replace humans; it enhances them.”
“Technology does not replace professionals. It replaces part of professional’s work.”
“Technology replaced a lot of nurses, a lot of doctors’ and surgeons’ functions.”
“Technology is now starting to replace diagnostic functions for doctors.” Shefsky cites three private companies out of Israel. I remember that in a previous meeting with Lloyd Shefsky, he mentioned that he is a private investor in promising Israeli companies.
Nir Barkat, Mayor of Jerusalem, in Lloyd E. Shefsky's Office
“Big data – what IBM is doing with the controlling and use of big data.” Shefsky cited the Watson commercial with the little girl as an example.
“We are almost there, but technology will never replace doctors.”...“Doctors will leave medicine because the government controls the price of medicine. Price fixing never works long-term. Even doctors recognize that; fewer are recommending their kids go into medicine.”
“Pharma has to listen to the government.” The government controls them.
“The U.S. Government is the number one customer in medicine.”
Q: IF YOU WERE TO START ANOTHER BUSINESS IN THIS THIRD OR FOURTH STAGE OF YOUR CAREER, WHAT BUSINESS SECTORS INTEREST YOU, AND, SEPARATELY, WHICH BUSINESS SECTORS DO YOU FEEL EXCITED ABOUT THAT YOU THINK ARE POISED FOR GROWTH THE NEXT 100 YEARS?
- Healthcare (but he said it would be “remote” for him to start a healthcare business)
- Education – “We need it so much, and it will happen.” Shefsky said that we need to sell the need for better education to everyone, so we can overcome the lack of commitment by government and resistance by teachers’ unions.
Q: WHY DID LLOYD GO INTO ACCOUNTING AND LAW?
“When I was 5 years old, I had a cousin who was 20-something (Lloyd Shefsky’s mom came from 13 kids).”…“Cousin babysat, read law books, ignored me.”
“Goldstein on Trial Technique” – 5-year-old Lloyd wouldn’t return the book to his cousin and read it in 1.5 years.
At the end of junior year of high school, the principal came by and asked Lloyd where he was going to college. Lloyd told the principal, “I don’t know.” The principal told him to go into accounting. (reminds me of “The Graduate” and the go into “Plastics” advice), Lloyd stays in touch with people, his high school principal, his home room teacher. The principal was thinking “FBI Agent,” his personal dream. Lloyd found that out many decades later, but, by then, he had already taken the Principal’s advice and gone into Accounting and Law. He is thankful to his principal; the advice, however misguided, worked out well.
INTERVIEWER, LISA DITKOWSKY, CFP®’s CONCLUSION:
I think it is clear from Lloyd Shefsky’s thoughtful responses to my couple hours of intense Interview Questions that Lloyd’s third book will be a much-anticipated 2016 business book release. Lloyd Shefsky’s whole concept: “Learn how to expand your vision and see peripherally even while you are focusing. That is how you see opportunities,” is fascinating.
“A WEALTH OF VI$ION$, Business Visions You & Others Can Buy Into” is poised to be Shefsky’s most successful book to date.
In my extensive interview, Shefsky provides detailed business advice and successful entrepreneurship strategies for business of all sizes. Particularly interesting to my business owner clients are Shefsky’s tips and warning signs for Family Businesses. He has counseled and consulted with the top business leaders in the world – from the biggest name Family Businesses to the CEOs that helm Fortune 100 and S&P 500 Companies. Shefsky’s words of wisdom are far too relevant to ignore, unless you have no aspirations of being the next Pritzker, Trump, Sinegal or Shultz, to name a few successful entrepreneurs.
Please Note: All emphasis (bold and underlining) added at discretion of Interviewer to highlight key points.
Lisa Ditkowsky, CFP®
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