Why Emotional Energy Is the Real X-Factor in Scaling a Business (Not Strategy)
The Vault Unlocked
Entrepreneur Lee Benson shares the principles of 'holistic value creation' that allowed him to scale an aerospace company to $100 million wi
Key takeaways
- Lee Benson achieved a 21.6x EBITDA exit for Able Aerospace Services without any outside investors.
- Holistic value creation comprises three pillars: material (cash flow), emotional (energy/resilience), and spiritual (connectedness).
Main topics
- Holistic Value Creation
- Emotional Energy in Leadership
Notable quotes
Emotional energy to me, when it comes to value creation, it's the scarcest commodity on the planet.
Conclusion
True business scaling is achieved by managing the internal emotional s
Transcript preview
Speaker 2 (0:00) 22 % of pre-tax profit every month handed back to every employee proportionate to their income. Not a bonus program, a philosophy. Lee Benson ran that philosophy through a company he took from zero to $100 million in aircraft parts of all things. Zero outside investors sold it for more than double the multiple anyone in that industry gets. But money is the easy value to create. The two Lee spent decades chasing are harder to measure and impossible to fake. Emotional energy and connection. He calls it holistic value creation. In this one, we get into why $166 billion a year gets spent on leadership training that changes nothing. And why Lee thinks the biggest shortage on the planet isn't talent. It's leaders who are capable and moral at the same time. This is The Vault. Let's unlock it. Speaker 3 (1:06) Lee, welcome to the show. Good to be here, Kayvon. Thank you. I'm looking at watching you. For those that can see, we got music behind you. You got like a full stage behind Speaker 1 (1:17) you. Tell us a little bit about that. I do. Music's been part of my life for a really long time. I started playing guitar so young, I don't remember not knowing how to play. Played over a thousand shows in the first half of the 80s in a rock band playing guitar and singing. And I still play music today. So I'm actually sitting in my home music recording studio. It's this really cool 4,000 square foot building where I still have music projects I work on. I'm actually in the middle of writing an instrumental guitar album right now and a lot of fun. Love it. But that's not what Speaker 3 (1:50) we're here for today. For today, I know we were talking about earlier before was... this idea about holistic value creation. Speaker 1 (1:58) Yeah, I built eight different companies from scratch. I'm currently CEO of two businesses. I'm invested in a number of others. I coach about 30 CEOs in my execute mastermind groups. And everything we do is about holistic value creation. It's material, it's emotional, it's spiritual value creation. So material is important. We need cash flow. We need all that profit. We need it to be able to grow. Emotional energy to me, when it comes to value creation, it's the scarcest commodity on the planet. It supercharges everything else we do. I think it's the X factor for leaders. It's literally the X factor for all of us. And then spiritual value creation is about connectedness. And in all of my businesses, I've always really made an intentional point to make sure we had programs where people had the opportunity to really strengthen relationships. And my companies that I personally started from scratch have ranged from 10 employees to about 540. I think it was the biggest one. And these programs worked amazingly well. In fact, the biggest one I sold in 2016 went from zero to $100 million business, sold it. It was in the aviation aftermarket. So imagine repairing, overhauling, manufacturing aircraft parts. to keep aircraft flying. It wasn't for new manufacturing. It was maintenance to keep them mission ready at any point in time. It went from zero to $100 million, very profitable business, and sold it for a 21.6x multiple of EBITDA. And that's because of the way we led that business, the way I led the business. On the majority of the stock, I controlled it. The only employees that had equity were ones that earned it over time. There were no outside investors, never took a dime of anything to grow this thing. Very capital-intensive business. But managing through this holistic value creation lens, which evolved for me over the decades, I would say, helped me create so much more value in terms of the value of the business, but also what it felt like to work there. What it felt like for me. The harder it got, the harder everybody laughed. It was amazing. Speaker 3 (4:06) Wow. All right. Well, the vault unlock is all about this. And I'm excited because I want to actually go behind this and I'm not going to let you get away with the surface level stuff. So I want to start off with you. You said one of the biggest one is the scarce or the X factor that we have is as an entrepreneur or maybe as a CEO or as leader is the emotional side, the emotional energy. What does that mean? How did you find out? Like, where did all that come Speaker 1 (4:34) from? Yeah, think about the days where you feel like you can do anything. And those are the days where your emotional energy is on 10 on a scale from 1 to 10. It's on 9 or 10. Doesn't matter what happens. You'll get through it. You're calmer. You're confident. You're just flying towards this value or this thing that you're trying to create or accomplish. But when it's on 1 or 2, you get a flat tire and it can ruin your week. You're irritated. Speaker 1 (5:00) by just about anything. So whatever we can do to keep our emotional energy, positive emotional energy as high as possible, it does supercharge everything. And I think for leaders, we are creating an environment from which all of our team members are creating value. And if we come in with really low energy, it's infectious. So it lowers the energy of everybody else. And I look at... Like employee engagement to me is about engaged with creating value. And if we want productive engagement, we want them charged and going for it. We want the whole team, myself, everybody going for it. And so that environment we create as leaders and emotional energy is a really big part of that really influences productive energy from every team member inside the business. Speaker 3 (5:48) How, as a leader, how do people create, or how can we create the emotional energy? What are, what are some ways that people can even just tap into a little bit of that emotional energy, but understand where their emotional energy is on the, say the one to 10 scale. And if it is on the, say three, the four, how does someone tap into that or can implement things to keep it up at an eight and nine to 10? Speaker 1 (6:13) Well, I believe, and you can check me on this, that everybody has those days where they're, you know, really high emotional energy. They feel like they can accomplish anything and they have days where it's really low, right? That's, I think that's true. Everybody listening has that if they think about it. So there are a couple of hacks in here. You know, just personally, how well do you nourish yourself? How well do you recover? How well, you know, do you move, you know, in terms of exercise and all that? So if you take care of yourself, I think that hack alone without doing any personal work will elevate you if you haven't been doing it two to three points on a scale from one to 10. Right. So there's a simple hack. Now, I'll stick with personal. I get to the business. What about self-talk? And, you know, somebody said once and it just a long time ago, I heard I made so much sense. Like if you heard somebody talking to one of your kids the way you talk to yourself, what would you do? And most people like, well, I'd be really upset, you know, and they would do other things potentially. And so, well, why are you doing that? Right. So take care of yourself. The easiest hack, maybe it's hard to do. It's hard to eat well because there's somebody tempting good tasting things out there, I guess. But once you get in the groove, it's easy to do. I mean, I've gotten to a place where my diet is literally perfect. And I'm addicted to feeling good. So it's easy for me to do that. It's not even interesting to look at sweets or any processed sugar, any of that. And then the self-talk. When we wake up, what are we thinking about? Where are we going? You know, that self-doubt and I can't believe this. I can't believe that. I really screwed up here. I screwed up. Why are we even saying those things? Why don't we just say, I'm going to create this value today this way. And here's where I'm going over time. And everything I do is in that direction. Wow, I learned a whole bunch over here. I didn't screw up and that was terrible. No, I learned a ton. How can I apply that to go forward? So I think. Self-talk, internal belief structure, like what do you really believe? If we work on those and taking care of ourselves, that elevates emotional energy significantly. And I think any belief about what you think you can accomplish by definition to me is a limiting belief because I don't think any of us have any idea what's possible. We have no idea. And now I go to the company environment. So I've heard you talk about with your guests and having an intentional culture. And I've listened, I think, five of your podcasts now. And if you want to have an intentional culture, what we agreed to do, how things get done, the behaviors, all of that, the belief structure, everything inside the business. Well, let's be intentional about leadership. And let's just say, let's have a set of leadership traits we want. For example, positive energy in good times and especially bad times. It's easy to have good energy when everything's going amazing. But when it's not, where's this productive, positive energy to get through it, come out the other side even better. And then maybe another one, create an energizing environment. So we want to create an environment where every single team member is fully energized and feels empowered to create more and more value over time. So if we just... state a couple of things like that, and maybe up to six different leadership traits to drive the intentional leadership culture you want inside your business. Now, at least we're doing it with intention. And it's an amazing coaching tool because if I see a leader that's down in the dump, something didn't go right. I can look at them and say, well, you know, part of your job is to have this positive, productive energy, especially in bad times. And you're not creating an energizing environment for your team members. And another leadership trait that I love is resiliency. Well, you're not being very resilient. And if everything was perfect all the time, we wouldn't need leaders, right? So let's get our act together. So now as a coaching tool, I've got these leadership traits and very quickly leaders get on board. And I don't know about you, Kayvon, but I... I've never had a day in business where everything was amazing. It's like I look over one spot and it's this beautiful beach and it's amazing. I look behind me, there's a tornado coming up. I look over there, there's just an earthquake that just happened. And I've got this majestic view over here that looks incredible. It's always this mix of all this stuff, right? as leaders is to kind of hold this together and keep this amorphous blob, whatever you have, you want to think about it metaphorically moving in the direction of creating more and more value. And for a business, I know I'm doing the right work when the value of the business is continually increasing responsibly, of course, over time. This is how does that land on you? Speaker 3 (10:52) I, there's a lot there. And, um, I want to go down a couple of things here because we were talking, we kind of moved to some of the leadership traits you were talking about, which I thought was okay, interesting. So then I wanted to ask that question of what would you say are the top traits? Again, you've had a very successful, it sounds like a very successful career, multiple exits. What would be some of the key traits of a leader? I heard you say resilience is one of them, positive mindset. Obviously is another one. But were there any other ones that you know that you're like, these are what makes a great leader? Speaker 1 (11:32) Yeah, there's a few others that I really like. And I think it's important. There's so many definitions of leadership and culture and that kind of stuff that are directionally, I think, right. And there's no one that's perfect. But my definition of leadership is creating value with and through others. We have things we can control and we have an order of magnitude more things that we can influence. And that to me, that's about being a leader. We love working with people. This is amazing. We can influence so much value creation and we have no idea what's possible. So that's my definition of leadership. And then what does a leader do inside an organization? Well, they get results and they foster an environment where every team member is intrinsically motivated and empowered to create more value over time. I think that's what the leader does. We have definition and this is what they do. And then if you want to be super intentional, a little bit more granular, get into the traits. I mentioned the three. I like passion. If you're not passionate about your... Being a leader, one, passionate about the business that you're working in and how that fits into the world and everything, and your function with inside the organization. How can you really be good at anything if you're not passionate about it? I just don't think it's possible to be stellar. You can go through the motions and get okay results. But if you want to really be good, you have to be passionate about it. And then I think execute is an amazing leadership trait. We have to get results. Without results, none of the rest of it matters. Like it just doesn't. So there's a couple more. And I think what's important is that each company comes up with their own set. I'm not a believer in one size fits all. There's so much leadership training out there. And most of it's one size fits all. And I get it. They're trying to scale a company and we can't scale, you know, personalized leadership development, which I disagree with. I think we can. We do that at ETW. And do you know what the number is in terms of how many dollars are spent when you look at, you know, Gartner and others doing the studies on this? Dollars spent on leadership development in the United States last year. Speaker 3 (13:40) I don't. I know the sales training numbers, but I don't know the leadership. But if it's anything like that, I know it's enormous. And then I'll tell you another stat, too, I'm sure that you're going to say. But yeah, what's Speaker 1 (13:52) the Speaker 3 (13:52) dollar amount? $166 billion. Yeah. Wow. Wow. I think. Wow. I just want to hear that again. $166 billion businesses. Small and big businesses are investing into leadership training. spent on Speaker 1 (14:10) leadership development in the United States, and it's north of $300 billion globally. And one of my partners in ETW before he passed, we became partners in 2011. I met him in 2008. It was Jack Welch, the former CEO of General Electric. And when we talked about this, we both agree, of course, he was doing things way bigger scale than I ever did. But 80 % to 90 % of leadership development is completely wasted. The dollars, the dollars. And and that's a pretty big number. So there's a big opportunity here for people to get it right. And there's so many experts out there and they completely miss the boat. And so when I talk, for example, to an H.R. leader at a larger company, you know, could be ten thousand to hundreds of thousands of employees. They say their leadership development programs are amazing. People love them. Well, how do you know we do a survey? And they say they had a good time. And then I always ask as a follow up question, have you followed up? on that leadership development to see how your leaders metrics change. Did their results change? And 100 % of the time we got nothing. No, we don't do that. And what are you doing here? Other than we're building relationships throughout the company, you might know who to talk to about something. We're not doing the kind of leadership development that we should be doing. Does that make sense? That's a lot of wasted dollars. Probably sales training and all that. Right. Speaker 3 (15:28) Most sales training has forgotten the first three. I think it's the first three to six weeks and almost 75 percent of the training that is taught isn't even understood or taken in. And so just same thing. Dollars is being wasted. And we can go down that conversation. But I actually I don't because there's so much here I want to talk about more about like your experience and and what you know what you're bringing to the world. One thing you said earlier, too, that really stuck out for me is you said we do not know, like putting limitations on what we think is or what we think we can do is just not