Help Your Clients Solve Their “Unknown Unknowns” – Sheon Karol
Key Points From This Episode:
- Why Sheon makes the argument that it’s important to find advisors and service providers with a broader understanding, rather than a niche understanding.
- Insight into what Sheon means by ‘unknown unknowns’.
- Why professionals push clients towards a solution that may not be in their best interests.
- What business owners should be looking for in professionals when hiring.
- The two ways that advisors tend to steer companies incorrectly.
- The importance of a financial incentive to the advisor to do what is best for the client.
- How a professional can display to their clients that they are a broad-based advisor.
- How the professional can get ahead of the client in terms of what is important to the client.
- How to ask the right questions to get your clients to think about the unknown unknowns.
- How to develop the right skillsets to become a broad-based adviser.
- The importance of having humility.
[0:00:04.5] AD: Welcome to Branch Out, a connection builder’s podcast, helping middle-market professionals connect, grow and excel in their careers. Through a series of conversations with leading professionals, we share stories and insights to take your career to the next level. A successful career begins with meaningful connections.
[0:00:21.1] AD: Hey everyone, welcome to the Branch Out Podcast. I’m your host, Alex Drost. Today’s guest is Sheon Karol, a partner with Paladin, a middle-market advisory firm. Sheon and I discuss how professional service providers can add value to their clients and prospects by helping them solve their unknown unknowns. I hope you all enjoy.
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[0:00:50.1] AD: Sheon, welcome to the Branch Out Podcast. I’m excited to have you here today.
[0:00:54.5] SK: Thank you very much, Alex, it’s an absolute delight to be with you.
[0:00:57.9] AD: Talking to our listeners for a minute, the reason I had asked Sheon to join our show and ultimately come on today, is Sheon authored an article for Entrepreneur Magazine and the argument that the article was making is talking to entrepreneurs and to business owners in saying that as a business owner, it’s really important to find advisors and to find professional service providers that had a broad set of experiences and a broader understanding, rather than finding those niche providers that are maybe more focused or more targeted in one specific technical area.
I thought it was a really interesting approach and I thought there was a lot of merit to it and so Sheon and I have talked about this quite a bit and what I’d like to do today, Sheon, is just kind of say, turn to you and say, let’s start with discussing what do you mean with that? What’s the whole point of this article, why do you make this argument and then let’s peel back into how professionals can be more of a broad-based provider?
[0:01:58.7] SK: Perfect. This is a subject which I feel passionately about. Normally, I address it from the point of view of the entrepreneur, of the business owner, and I’m going to start there but I’m delighted by the opportunity to really address professionals and say, “Therefore, what?” How can they change or modify what they do in order to be both more successful and to serve the client better?
Starting off from that client’s perspective, as there’s an old psychological insight which the late Donald Rumsfeld, the secretary of defense popularized, when he said, “There are unknown unknowns” and that is absolutely key in business. You don’t know at any point what is going to happen or what the effect of current events is going to be.
Therefore, you need to be able to adapt, this is much more important today. It’s on steroids because of the pandemic and what is going to happen post-pandemic. People talk about the new normal and that makes me very nervous. If they mean that something new is going to happen, yes, that is true but if they think it’s going to just be ‘normal’, they’re in for a very big surprise.
There are big dislocations that have already taken place in the economy and there are going to be more dislocations, which means that for businesses, there’s going to be existential danger and there’s going to be tremendous opportunity, tremendous entrepreneurial ingenuity will come forward. Businesses have a tremendous need to adapt to the circumstances.
Now, if you’re an advisor and I see this cliché over and over, “We are a trusted advisor to our clients.” Really? Are you really a trusted advisor? I question that, I think very few people are a trusted advisor. Why? Because a lot of professionals are focused upon a single area and so what they are doing is they are pushing the client towards a single solution. That single solution may or may not be the best for the client. The client really needs, especially at a time of dislocation, needs to be presented with a range of opportunities and I argue that because there are unknown unknowns, especially today, there is an even greater need for clients to have broad-based advisors who can show them the opportunities and the dangers and guide them through.
I give a few examples in the article, which I won’t bore the listeners and the viewers with but I’ll just refer to them by their headlines. I’ll tell you about Blockbuster, you know? Blockbuster got into debt. Blockbuster’s gone, those retail stores weren’t enough. We all remember going to Blockbuster and taking out videos and it was a lot of fun but that’s all gone.
You look at, even at Microsoft, lost opportunity to be a competitor to Apple and there are lots of those opportunities and all of that, us who have experience in business can point to many clients who didn’t make the necessary adjustments and are gone. I see the need as being enormous on the part of the business owner to find the necessary advice because none of us knows everything. We need people to guide us.
[0:06:04.2] AD: All right. Sheon, to summarize what you said there, we’re living in a what is now becoming more and more a post-COVID world and we talk about this new normal as you’d mentioned it and recognizing that this idea of new normal assumes any level of normal and in the last year and a half has definitely proven to us that things can change very rapidly and ‘normal’ is probably not something we should necessarily have a continuous expectation around.
What you’re driving it behind that is that because of that, because of an ever-changing consistently increasing level of complexity that exist in our modern business environment today, that is an entrepreneur, as a business owner, when I’m looking for an advisor, I should be looking for a broad-based advisor that has a broad range of expertise, knowledge and understanding because that advisor will be able to better help me identify, as you point to, the unknown unknowns. The things that I don’t know about the things I forgot to even think about because I didn’t know they existed.
Does that summarize the argument?
[0:07:09.7] SK: Exactly.
[0:07:11.4] AD: Knowing that then and if I’m a business owner and I’m looking for a professional, what should I be looking for? What should I be looking for in that professional when I’m looking to hire them?
[0:07:22.2] SK: You should be looking for somebody who had success, who has a broad range of experience, and this is very important, is financially motivated to provide the business owner with a range of choices and therefore, opportunity.
[0:07:47.8] AD: Financially incentivized to provide the business owner a broad range of options or opportunities and outcomes for what they’re trying to achieve, is that –
[0:07:57.7] SK: That is correct. May I elaborate on that please, Alex?
[0:08:01.3] AD: Absolutely, please do.
[0:08:04.0] SK: There are two ways that people, advisors steer companies wrong in this particular respect. The one is out of sheer self-interest. If I am selling a particular service and I am less than a hundred percent borrow, I am going to steer that client towards my services, that’s how I get paid.
Now, even if I am incredibly moral, I am a human being and I will naturally gravitate to what I know and what I do every day. Let me give you a real-world example. Outside of business, if God forbids somebody has an ailment, they never go straight to a surgeon. They always go first to their GP or to a specialist and eventually at some point, they might have a consultation with a surgeon. Why don’t they go to the surgeon immediately? The surgeon is trained, she went to medical school, she knows all the alternatives.
Why? Because a surgeon is naturally going to gravitate towards what she does every day. She cuts, if you go straight to the surgeon, there is a good chance that you are going to be cut. You want to see, when it comes to your health, when it comes to your private life, you know what to do, you find out what your options are.
When it comes to business, business owners often do not employ that same level of sophistication that they naturally employ in their everyday lives. They go to the equivalent of the surgeon and the surgeon whether out of self-interest or just because that’s what they do, they are going to cut. They are going to press the client to take them and pay for theirs services.
[0:10:20.3] AD: In the argument you’re making, I think is a very good one and it’s take morality out of it. Yes, certainly, if people don’t have pure morality, they may drive something for selfish intended need in that of course that happens but if we’re assuming all good actors in the situation that the point that I think is really important behind this is that if I am a surgeon or if I’m an electrician, I know everything about being electrician. When I see a challenge, I think about it with my brain of being an electrician or I think about it with my brain of being a surgeon because that’s what I do day in day out, so I think about it in a certain way.
The argument that I’m hearing you make is that if I’m going to an advisor who is a restructuring and turn around and all they do is restructuring and turn around, when I go and have that conversation with them, they are going to see the challenges that I am presenting to them through the lens of someone who has a restructuring or turn around challenge. Is that a good analogy to tie that back?
[0:11:20.4] SK: That is a perfect analogy. In fact I joined a few months ago, Paladin and many of us are former colleagues from prior lives and one of the underlying theses that Paladin has and we have discussed this as colleagues years ago, is let’s have a broad base of services.
If somebody should have a restructuring, let’s do the restructuring. If I should have an operational tune-up or that’s what we should offer them. If it should be some M&A services, let’s offer it to them or let’s bring in the people who can do that and let’s set it up so that there is a financial incentive to us beyond our morality to do what is best for the client.
Let me just say that in recent years, in the academic sphere, this has become more and more apparent. If you look at Tversky and Kahneman, what they spoke about were how our heuristics, our natural go-to moves are often wrong and how our brains deceive us. We need to be more and more aware of that and to apply it in business, just like we naturally apply it in medicine.
People do not just go to a surgeon when they have an ailment. We are not as sophisticated ironically when it comes to business.
[0:12:57.9] ANNOUNCER: This is Branch Out, A connection builder’s podcast.
[0:13:08.2] AD: Let’s shift the conversation then for a minute now. If I am an established professional then, Sheon, what can I do to ultimately display to my clients that I am a broad-based advisor?
[0:13:22.1] SK: That is very difficult, I have to tell you, for professionals. It’s something that I have thought a great deal about and I’ll share some of my ideas. Anybody comes up with anything better, more power to them. I think the most important thing is importance. What is important to the client? Let me take lawyers just because I work a lot with lawyers and all my sins, I started life as a lawyer.
Lawyers, look at what they put out on their alerts of new developments. They write these alerts for other lawyers, it’s written in ‘legalese’, it’s hedged every which way to Sunday and let me tell every lawyer, very, very few of your clients are reading these alerts.
If you’re writing in other lawyers, that’s fine, but supposedly, you’re writing them for, or also for your clients. They are not reading them, they don’t understand them, they don’t want to power through the legallese and it’s talking about a particular case in Delaware or in the southern bankruptcy district of New York. They don’t care.
All they care about is how does it affect me, the client? What you have to do is if you’re writing, if you’re speaking to a client, don’t speak to them about law, speak to them about what is relevant to the client and this sounds so simple but I’m telling you, the vast majority of lawyers, accountants are not doing this. The ones who are doing it are very successful. If you’re writing, write for them, write in their language. Write about how it will affect them, how it will affect your supply chain not is this a conflict with another jurisdiction? They don’t care about the other jurisdiction.
[0:15:27.9] AD: What I’m hearing from you Sheon that I think is really important is you’re saying that when I am communicating, when I am presenting my knowledge and expertise to the marketplace, I need to be doing so with my client in mind not to demonstrate my own knowledge and expertise but talking about it in the terms and the ways that help us resonate with the challenges that my clients may be facing. Is that the right way to think about it?
[0:15:54.9] SK: That is perfectly expressed and then a couple of years ago, I try to go even beyond those and I started thinking, how can the professional actually get ahead of the client in terms of what is important to the client. The first step I was talking about is talk, communicate, write for the client about what is important for the client. Now, I’m talking about something even more difficult. Get ahead of the client, make the client aware of things that he hasn’t even thought about yet.
This was pre-pandemic. Post-pandemic is a little easier but I created a concept of early signs of change and I wrote about this and suggested that they are signs of change that the client is the only person who can be aware of these changes and the client doesn’t always realize what is before him. I wrote about how professionals can ask questions or discuss things in a way that will lead the client to see what only the client can perceive.
I don’t get any royalties from my articles, so this is – but I would encourage people to look at it. I wrote a few articles on there, to look at that and I’ve actually spoken to a number of professional firms on that to try to help them get ahead of their clients.
[0:17:52.1] AD: First off, we will make sure those are linked in the shownotes for our listeners here, so those will be easy to find and Sheon, take us through just some general thoughts about that. What type of mindsets or what way of thinking should I have when I’m thinking about the right ways to ultimately communicate to my clients?
[0:18:10.2] SK: First of all, it is what I already discussed and that is speak to them in their language and about what concerns them.
[0:18:18.9] AD: I am thinking about them. I’m thinking about their challenges, not my expertise but their challenges.
[0:18:24.4] SK: Right.
[0:18:24.7] AD: What are they facing as a business owner, as an entrepreneur.
[0:18:28.4] SK: Then try to get ahead of them. One of the ways was the science of change and the article will be linked, the things that only the client can be aware of if he is pointed in the right direction. I would say that what I wrote there is still true. It is a little easier today for professionals to do it because there is such business disruption that professionals can look and say, “Well, what’s happening with CFIUS and China, how is that going to affect my client’s business in a way that the client might not yet have even thought about?”
For example, maybe it will affect supply chain. Get out ahead, think about that and be proactive and speak to the client. Don’t speak about CFIUS, don’t speak about the intricacies of CFIUS. Speak about the supply chain and how it may be affected by CFIUS or an acquisition, maybe affected by CFIUS. Again, don’t speak about CFIUS speak about what opportunity this provides to the client or how the client can obviate a potential problem.
Get out ahead, your advantages, you are an accountant, you’re a lawyer, you are aware of changes in the law before the client. Focus on those changes, not in terms of the law but in terms of how it will affect your client’s business and to the extent that you understand the client’s business, it will make you much more effective because you will be able to make the client aware of possibilities, dangers that the client isn’t yet aware of.
[0:20:23.3] AD: Sheon, what I am hearing then is I am looking and I like the term you use, science of change, I am looking for disruptive factors coming into the marketplace that again, your example speaking from an attorney’s perspective, I am looking for potential changes and law and regulation that may have a disruptive change on my client’s industry but for any professional, if you are looking to understand what potential disruptive factors might come in place and then you’re communicating with your clients and asking questions on a broad basis that you’re really saying, “Hey, how is this affected you?” or “Have you seen any changes here?”
You are trying to communicate with them not demonstrating your knowledge, not demonstrating your expertise but really asking the right questions that can uncover potential challenges that they don’t even know exists and kind of going all back to the unknown unknowns, right? You are helping to ask the right questions to get them to think about the unknown unknowns.
[0:21:26.6] SK: That is correct. I’d like to go one step forward, which doesn’t relate to the uncertainty in the marketplace now but it is something which I addressed in early signs of change and that is a fascinating part, which is the psychological. There are psychological changes that take place with entrepreneurs that if the professional is sensitive to that will then say, “This could lead you into certain situations.”
Let me just give you one example. The professional could be the accountant, it could be the lawyer, can be aware that there is a lack of change over in management in the company and that has gone on for many years. The professional can then discuss with his or her client what does that mean? Have you just hit upon the perfect team or have you become complacent? Have you not replaced whom you need to replace and if you’re doing that, is it may be time for you to get out of this business to sell? Maybe you don’t want to sell them whole, there is always opportunities to sell in part. They are a myriad of possibilities now. The psychological aspect is another way for the professional to provide value often before the client is even aware of the issue.
[0:23:08.1] ANNOUNCER: This is Branch Out, bringing you candid conversations with leading middle-market professionals.
[0:23:15.6] AD: All right, so Sheon let’s shift directions a little bit here. If I am a professional looking to advance my career and I am looking for ways to develop the right skillsets and the right knowledge and the ability to connect with my clients to build those relationships and to be a broad-based adviser, what do you recommend that I do? Where do I spend time and how do I advance those skills?
[0:23:37.4] SK: First of all, you have to have expertise. You can’t, as I mentioned before, be a jack of all trades and a master of none. Once that is in place and you are expert and you can demonstrate success both for yourself and your clients, there are a few things that have to be done. You have to be thoughtful about it right through your career. You have to read widely, you have often go beyond what is absolutely comfortable.
Not many people are prepared to do this. They’re much happier where they are comfortable. I am talking about people who want to go beyond and I would say, if people want a motto over here, this is the motto I would provide. You could be a broad-based adviser, it’s moral for your clients and it is fun for you, so read, network, speak to people, be open, listen and I am going to use a word, which is normally not used in the business context because we’re always told, “Be a leader, take charge,” and all of that is important, project confidence, but inwardly, I would say have humility. Realize that you don’t know everything.
There is a Peanuts cartoon from my childhood that I’ve never forgotten about. One of the characters says, “Have you ever considered that you may be wrong?” and constantly re-examine yourself, re-examine your opinions, re-examine your advice and very important, be in an environment, I touched upon this before, where cooperation is rewarded. If you are just going to be rewarded for what you do, that is a disincentive to provide broad-based advice to your client. As I say, it’s moral and it’s fun.
[0:25:49.3] AD: Moral and fun, I love that Sheon. What a great way to wind down our show here. To give a quick summary, I want to kind of go from top to bottom and just recap what we talked about here today. The case is being made that to really service an entrepreneur well, to service a business owner well, you need to be a broad-based advisor. You need to have a broader understanding and that is because we live in a very complex world that is ever-changing.
The way that you can best do that is you can be thinking like a client. You can be thinking in a way of how do I add value to my clients, what challenges are my clients doing not necessarily thinking about demonstrating my own skillsets or my own knowledge and expertise but how do I ask the right questions? How do I pull from my expertise of knowledge and ask my clients the right questions that will as you said, there’s signs of change, there are ways to get my clients thinking about the unknown unknowns, the things that I haven’t even thought about and when I do that, ultimately I’m able to connect better with my client and drive more value and without having to demonstrate or try to prove myself necessarily of my deep technical expertise because I’ve asked a question that made my clients say, “Huh, that’s a good question. I haven’t thought about that. Let’s talk more.”
That ability to create that opportunity is going to drive so much value in the long run. In the way that we accomplish this and the best way to accomplish this is you’ve pointed out reading widely, network, build relationships with other people and speak when you have the opportunity. I think those are all great opportunities to increase your knowledge, increase your awareness and look for opportunities to really just grow your knowledge-base.
Having that mindset, as you referenced the Peanuts cartoon, always having the mindset of “Have you thought about what you don’t know?” and recognizing that the world is a big complex place and there is a lot of unknowns out there and the more that you can be hungry and thirsty to continually learn and continually develop yourself, that’s what’s going to ultimately drive you to being able to be that broad-based advisor and bring knowledge and expertise in ways that others are not necessarily bringing.
Sheon, I love that. I think this is a great conversation today. For our listeners, I want to give a call to action and I think this is a very easy one but also one that many of us don’t do enough. I want to challenge everyone in the next week to find a book. Go read a book that is outside of your normal reading area. Go find something that you can read and start on a book that isn’t necessarily in your direct area of knowledge and expertise.
I’ll give just an example for myself, in the last week I recently read Bill Gates’ book around climate change and it just was something that was interesting to me and it has nothing to do with what I do for work. It’s totally outside the realm of anything that I would ever add value on, advice on or spend any time around but it was interesting and it was something else to open my mind to understand new things and there’s thousands of opportunities out there.
Make sure you go and look for that opportunity, that book to read, something that is outside of your normal area of focus. With all that said, Sheon, how can our listeners get a hold of you? What’s the best way to get in contact?
[0:29:03.8] SK: I’ll give you that information. If people want a – just to help you, I love your call to action Alex, a great book, it’s a lot of work but a great book is Strategy by Sir Lawrence Freedman. That will make your neurons buzz and you will think in ways that you’ve never thought before. Alex, thank you so much, this has been an absolutely delightful conversation. I love the openness, I love the chance to really communicate with you and to share ideas.
A way to reach me is either on LinkedIn, I have an unusual name so you could find me very, very easily, Sheon Karol or you could email me. I’m [email protected]. I’m the easiest person to find on the Internet because nobody else has my name. Alex, again thank you so much.
[0:30:06.1] AD: Awesome, thank you so much Sheon. I really appreciate you coming on here today and I appreciate your contribution to the show and look forward to talking again sometime soon.
[END OF INTERVIEW]
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