Jeremy Weisz 13:09
What are some keys to? We’re looking at some of these, you have some amazing companies on here. What would you say when I think about it, I’m like, you can’t be easy to win business with these companies, a lot of competition. What are some keys to winning the business of some of these bigger companies? I mean, looking back now, like you have this huge track record, but then you had one or two clients. Right? So what have you found the keys to winning business from these?
Tom Shepansky 16:47
Well, if you go back to that whiteboard on month one, we stayed true to those values, like you can’t compromise. We said no to categories we weren’t excited about or didn’t believe in, we politely said no thanks to brands we didn’t think aligned with our values, and we wouldn’t be excited and motivated to work on. So I think the power of being selective in a kind, respectful way, and knowing that there’s enough business for everybody out there. And I think, I too, am inspired by, you know, the brands that we align with, and I think staying true to those values. And then when we wanted to go for something, you go for it 150%. You don’t pitch six things, hoping that you get one, you pitch one or two, hoping you get both, right, like I think, not to say we’ve got a better pitch when right, but my hunch is we do because we put our foot forward on fewer things that we really, really believe in. And we say no to some things to some big brands that we look at their history of Marketing and Communications and we go, they haven’t done much good work, do you think we’re gonna be able to change that? You know what, the answer is usually no. Now, there’s lots of brands that have been built on more functional, I won’t say pedestrian, but more functional, less creative marketing, communication, and that’s okay. Like, you look at the famous, you know, Mac campaign. I’m a Mac, I’m a PC, which is a brilliant idea. But you look at those two brands, both incredibly successful brands, built one more emotion driven design driven, one more functional driven, but an incredible brand. Nonetheless, there’s no question which brand Rethink would have lined up with right and we had actually the first, I remember the first Mac AirPort, because we bought these blueberry laptops with me, right? And I’m a little older, I think anyway, but they had these, they came up with the blueberry laptops, and I remember printing from the first AirPort, we were so excited. Again, this is 1999 right.
Jeremy Weisz 17:34
What were some of your favorite campaigns, you mentioned Mac versus PC, it could be one of your campaigns or just one that you’ve admired. Like throughout the years.
Tom Shepansky 19:24
Yeah, I mean, I think I love what Apple has done over the years with Chai did in the days, I mean, they always held them up in in such high regard. And so I would say Apple, I mean widen and the work over the years with Nike again, just so standout, so brave, and they stood, and I’d say the commonality between those big brands is so much of it was emotion driven Uh, it’s asked me to pick one of our own is like saying, do I love my daughter more than my son? It’s really hard, right? So, but there are some, I know, when we opened Toronto, some of the early work on Molson Canadian, to sort of reinforce that brand as a, you know, a proud Canadian iconic brand, really, won the hearts of Canadians, especially going into the Olympics when that was aligned. Yeah, I mean, IKEA has historically done, we were so excited and still continue to be so proud to be their partner. But I mean, IKEA lamp and some of the other iconic IKEA commercial standout for me, in terms of great work. So yeah, and yeah, and I would say just, what we always tried to do Jeremy was have a bar where most of our clients are above average, just hitting, we always said we got to hit at least the double will shoot for homeruns, I should be using hockey analogies not baseball as a good as a good Canadian boy, but maybe a hat trick not just to sync.
Jeremy Weisz 21:16
You’re speaking my language either way. What about culture? We talked a little bit before we hit record about culture and the conditions that you can create to foster creativity.
Tom Shepansky 21:31
Yeah. Well, I think leadership always, culture always starts at the top with leadership and the example that we set. I think, a consciousness around, you know, the way we treat people, I give you an example of respecting people’s time. And, you know, early on, we said, you, if you’re around for 10 years, you get a 10 week sabbatical, at that point, we said, you’ve committed to us for a period of time, we’re gonna make a commitment to you. And the reason we did that is because as founders, we were eight and a half years in, I wouldn’t say burning out, but we really needed a break. So we said, what we give to ourselves, we should give to everybody else, right? So prior to COVID, this was four or five, six years before COVID, we came up with working out of office wooing, right so we came up, we had a whole like, this is before remote work. And we said, you know, we trust you enough that you can woo and you can pick a whoo day. Now whoo day doesn’t mean that you’re playing with your kid in the park, a whoo day means you may be doing some parental things, but you’re working. And there were some rules that you had to follow, right? You had to be available on your phone, you had to respond to your email, you would lose your WOO privileges, if you didn’t follow those things. So I think…
Jeremy Weisz 22:55
What are some of the WOO rules?
Tom Shepansky 22:58
There were those right, you had to be responsive, he had to be available, you couldn’t just slack off and not be plugged in. Right. So you couldn’t go off the grid and not be on your mobile. So and then there were only so many whoo days in a month, like he couldn’t take 10 in a month you had selected and, and you also had to be respectful. If you were picking a wound and a week that maybe didn’t make sense for one day, some would say, come on, you just can’t. We can’t do it this week, right. So there had to be an openness around that. So but the one thing I would say too, is that as an independent company, we can start sharing profits, and we do at seven and a half percent margin. So we built a profit sharing plan early on, and it continues to this day, that starts to share across the board to staff and partners starting at seven and a half, it tears up every two and a half points from seven and a half to 10 to 12 and a half to 15 and above. And it gets more generous as we make more money, we share more money, right? So for us, it was always about sharing the riches sharing the pie. And that’s different. And I guess it takes just being in the place where you saw all the partners make all the money but as a key staff member, you got 100 bucks and a pat on the back at the holiday party and it’s like hang on a minute, I knew I’m in charge of a big piece of revenue, I know kind of money we’re making. And so I think it’s that spirit of sharing, and just really having gratitude and thanks I think culture starts with do you have gratitude? Do you have appreciation? And then I will say cultures always tested when you got to lay people off, going into COVID. We had to lay people off. He still can have respect. Yeah, obviously you can have a respectful culture, we have to manage our business. 08, 09 going into that period, we laid off a third of our staff, because we saw revenue evaporate almost overnight. So, we’ve parted ways respectfully with other partners. And I think, you know what, we parted ways with a partner about two and a half years ago, Jeremy, and it was hard for them. They were really upset. They went away, lawyers were talking it was anyway, we ended, we thought we were in a good place. So I will share hockey star. I was at the hockey rink about a year ago, and I bumped into him. And I went over and I gave him a big hug. And I said, how are you doing? He said, I’ve never been happier. Thank you. Why? Well, we knew he was sort of frustrated in his role. He’s really good, really talented guy. He was frustrated in his role. He was contributing but he was disruptive and he didn’t really wasn’t prepared to sort of address some of those things. So you know what we amicably parted? And then I think he realized upon reflection, he contributed, he helped drive business, but you get to a point sometimes where maybe you got to move on, and maybe sometimes moving on is the best thing for you. So I think, even you’re probably tested most when you’re parting ways, or ending relationships that sometimes have to end, you just have to be kind, you got to open your heart, you have to be, you got to pay a fair amount for whatever settlement, you reach, right, so anyway, that’s the way we approach culture and the last thing, and then you got to actually ask people how they’re doing right, so we have a twice a year. It’s called culture check. And, you know the first question is, Jeremy, how are you doing? Are you happier at Rethink? Are you doing the best work of your career? Are you getting mentorship? Are you getting good feedback? Are we leaning into diversity, equity and inclusion the way most firms need to be these, like, we’re asking the questions that matter, in order to make sure that and I could tell you, Montreal creative department doesn’t seem as like when we get it, we can slice and dice it participation rates over, I think it’s well over 90%. So we get anecdotal feedback. And there’s always some people who aren’t happy, and you hope they’re not using culture check to express their dissatisfaction. But we’re asking people, and we’re asking for feedback, and then we’re doing things about it.
Jeremy Weisz 27:43
Talk about the profit sharing piece. So let’s say someone’s listening, and they’re like, Tom, that sounds great. I don’t know where to start. How did you figure it out? And how did you come to what made sense for your business?
Tom Shepansky 27:56
You know what, through our whole journey, I’d say we made a lot of it up, you talk to lots of other business leaders, and you get good ideas. And then it’s funny, I’ll use my musical journey as a, as a bit of a parallel, you kind of got to make it your own right, like he listened to the original recording and go, well, our band could never do what the Heartbreakers did with Tom Petty but we could take free falling and kind of make it our own and not make it at all like it because it would be disastrous, because we can’t even hit that high note he hits so. So with profit sharing, we talked to lots of other entrepreneurs about how to do it. And then we said well, like with a lot of people. And I will say especially creative people, like just keep it simple. Like they don’t want to have some formula that they have to figure out. So we have a staggered sort of percentage that grows as our profit grows, we came up with we said, well, and it was real simple with our CFO at the time. I said, well, what’s sort of the bare minimum for working capital and keeping money in the business? He said, well, it’s not 10 it’s probably between five and 10. So I said seven and a half. He goes, yeah, about there. I said, okay, why don’t we start profit sharing and seven up, I’m not joking, it was almost that simple. And then with my other two founders, lots of collaboration and you know what, I’ll tell you as creative guys and design thinkers, they would always be able to see things really in a simple, clear way so that we could describe it and communicate it. And we created a way to share with staff a way to share with partners and a simple pool model that built over time. So and then, we had some discretion at the end of each year, we would have discretionary amounts. So if we saw someone on who was just going over and above, and maybe in that particular year, Jeremy was underpaid at the band, they might have been, we may say, hey, let’s give a little bit extra there. So and you do have as leaders that discretionary ability to really thank and reward the people that look like they need it. So that was, and I would say, we took a very intuitive approach to it, as opposed to analytical formula driven one plus one plus four equals six, we built pools, we had ways of ranking, we had feedback from people that we saw it. And that’s how we did it.
Jeremy Weisz 30:45
Do you do that, like at the end of every year, or what’s the kind of the timeframe?
Tom Shepansky 30:50
Yeah, and we do it every year. But what we do, we’re a private organization, we share and report on an ongoing basis throughout the year, certainly at a partner level, there’s monthly quarterly updates on, we got a pretty good dashboard on revenue, staffing, mix, profitability, our run rate with projections to the end of the year. So we kind of know, like, I can tell you right now, we’re calendar fiscal, by now into October, we have a pretty good sense as to where 2023 is going to end. So we already are looking at was that mean, in terms of how the pools are built, and I think you start the communication early, hey, we had great profitability here for these reasons, we’re going to be a bit behind. And the beauty of being private is, we don’t have to inflate earnings this year, because we’ve invested as opening New York with Canadian dollars is not cheap. Right, so as we invest, you know, the “built it, they will come” philosophy, you’ve got to have money to invest in those initiatives, our global ambition and leaning into that, and some of the investment that’s taken has costed us money too, so. So yeah, I’d say we have a sense right now. But we’re tracking through the year we communicate through the year, staff kind of know where things are at, certainly the partner group knows where they’re at. And as the founders, as you said, off the top, we govern as trustees, we’ve got a fiduciary responsibility as the trustees of the partnership. And that will be for a period of time, we’re working on how that transition works over time, we called it a more perpetual partnership model with the desire to have this thing go on from generation to generation is our hope and our dream.
Jeremy Weisz 32:51
I have two questions on this Tom, which is, I know some people are on the great game of business philosophy, where they do open-book and they share everything. And that’s really helped the team ever in from a team help with profitability, right? Because if they’re getting the bottom line, so I’m curious on one hand, governing this way and having this profit sharing, how has it helped people think creatively about profitability in the bottom line? So I’ll start there with that question.
Tom Shepansky 33:27
Yeah, I would say if I was to describe our sharing, and this would be all staff, we share enough, but not too much, right? If that makes sense. Like we share enough so that people have a sense as to where things are at and why they’re where they’re at. With the partner group. It goes deeper, where that leadership group can also influence the outcomes that we’re trying to achieve. I think that the important thing for us and I know, before we went live, you and I talked a bit about our book that we wrote on the journey that we went on, we always said, we looked at our business through the lens of people, product, and profit. And we always said in that order, you know, hire great people do great work and make money. So in our world, the sort of profit metrics and how we manage that, with the partner team, we ask how the people are doing, we look at the work and make sure it’s great. And then in addition to those two things, it’s like, okay, profit is important. We need the money to pay competitive salaries and to have profit sharing that’s a reward for people’s time and talent. So, yeah, so I’d say we’ve gone deeper and deeper and now at the size we’re at we used to be 50 100 people, now we’re north of 400, you have to distribute that responsibility, because you just otherwise, it’s impossible to drive the behaviors you need department by department, office by office client by client to be able to get the outcome. So we’re working. And in fact, one of the challenges this fiscal, and probably over the next couple with our leadership team and our CFO, or just having better visibility as we can drill down into different teams in different offices in terms of where they’re at, and how they’re performing. And having dashboards that are really clear, and people are inherently competitive, like when there’s a dashboard, you don’t want your group to be at the low end of the scale, they just don’t. Right. And there’s been some reasons for people being lower and higher, but we’ll share more of that. And I’d say that’s in development right now, for sure.
Jeremy Weisz 36:04
I’m always curious, because, when people participate in that bottom line, I’m wondering if you got any specific, actually suggestions? Like, they know that Tom, we don’t need the Taco Tuesdays, it’s just, you know, that’s just overhead. We don’t need like people are start thinking of it as their business. Do you get any of those suggestions? You find because of this, how you’ve arranged the culture?
Tom Shepansky 36:34
Yeah, I think we always, I think had, we were always in B and C buildings, not fancy office. So our offices, were often a reflection of how we looked at some of those overhead elements. And we said from the beginning, and I think we’ve continued to this data invest in people, not in the trappings that you can get trapped into. So yeah, and I would say, we listened. I mean, if people, if people didn’t see value in certain things that we did, we’d stop doing them. But I’ll give you an example of one tradition that just stuck because we celebrate Valentine’s Day of all things, right, you know, we do we play hearts. So we have every office stops for most of the day. And we get these little sort of cucumber square sandwiches. We have our hearts tournament, and we crowned the queen of hearts on Valentine’s Day, right? So and then, of course, we have a secret Valentine Creative Contest, where you pick someone’s name, and then you have to get to know that person, and you have to deliver a secret amount, and then we have a competition on what’s the best secret Valentine. So that and do you think the leadership sort of created that? No, it was staff. So I think we said, hey, let’s have arts tournament, and then they turned it into a creative assignment, a creative. So I’ll bet it’s been going on for 15-18 years, right? So there are those traditions that they naturally emerge out of the culture and you can’t force it, you can’t try to make it happen. But when it happens, you certainly invest in keep it going. Right. So you ordered better sandwiches, that’s for sure. So.
Jeremy Weisz 38:38
You hit on a piece about succession. And you’re the trustee. Talk about how you’ve, you have this unique perspective and structure with succession.
Tom Shepansky 38:55
Well, yeah, and that we could have spent a whole hour on that, but I’ll try to be fairly tight. What we looked at is, if we decided, and we did that we weren’t going to sell, then we had to really no pun intended rethink our succession plan, to create a structure to allow us to step back in a way that would allow other leaders to emerge and a new structure to be created. So I’ll give you the sort of short stories, what we did is we had an incorporated company that the founders were the majority shareholders in, we did a valuation and a freeze, we converted, really that entity to a limited partnership. And then a general partner and a trust sits above that limited partnership. So today, the founders who are and were the majority shareholders are the trustees and the general partner we’re not active in the business Jeremy so we govern, we get updates, you know, monthly we have a quarterly board meeting. And to answer the question that some people, what was with your shares what happen. So what we did is upon that valuation, we’ve taken the risk. And again, if we founded it, we believe in what we founded, we believe in the future, and we’re compensated over time, and that valuation will be delivered over time. But we maintain the control of the partnership as trustees and general partners. So we’ve created a structure that gives us the control, but not a big stick, it’s like we give the operation, the leadership team room to operate, I’d say, we’ve got, you know, one of the best teams on the planet, today, we’ve replaced ourselves, I’d say, with smarter people, like that would be the key is, be brave enough to replace yourself with as if not more talented people than you and give them room and give them the space to do the great things that you had the space to do. So we’ve really tried to do that. And I would say, some of our best growth has come with us in a Trustee Chair, our best creative recognition bar none has been with us out of I always joke a little bit, the best work of our career is when we weren’t doing the work, but we were governing the work, but that is not okay. It’s not what success should look like that you’ve left, you’ve created the conditions that the team that’s come in after you. And we were many times rank best agency in Canada. Well, this team, we’ve won adage creative agency of the year since we’ve been governing. So again, we created the foundation for the business to continue to grow and build on the foundation that we build. And my hope will be, as a North American, I’ll call myself a settler on these lands, I look at the indigenous communities and their lands around seven generations of decisions we make today will make so they can live on through seven generations, we have so much to learn from the indigenous communities in terms of how they think and how they look at the world. I view our partnership model as a sustainable model, a model that continue in perpetuity, that will be replaced as trustees one day, and we’ll pass the baton, and the leadership will step out of their role as leadership into a trustee role. And we’ll keep rolling. And time will tell, but we worked really hard. And we’re working on sort of governance structure right now. I finished my directors course. So I’m an accredited director. So I’ve got some governance knowledge, but now I’ve got some additional governance education to help us really set up the right kind of structure for us as well?
Jeremy Weisz 43:08
At what point in the business term did you start to put those pieces in place?
Tom Shepansky 43:15
Well, long before I’d say it was probably seven years ago, we started on this path. I turned 60 last stretch and 61 yesterday. So, you know, in our mid to late 50s, we were starting to think about like, okay, hang on a minute, and let’s be honest, the ad business is a younger person’s business. I mean, I was still and I loved what I did, I’d spent 35-plus years doing it. So at some point, there’s lots of things I want to do in my life. And we were all prepared, we were fortunate the three of us were prepared to step back at the same time, and create a structure and plan we hired a really good amazing consultant Natalie Michael, who’s a dear friend, and Natalie sat with Christina and I, and we formulated sort of what we called sort of our next chapter, and really started to think creatively about succession in a different way. And then we committed to it like we didn’t, because it’s so classic that founders you look at, we talked a bit about baseball players and hockey players, how many athletes declare, hey, I’m going to retire. Good one. It’s the same thing as leaders? It’s like we say we’re gonna retire and then hang on a minute not yet. Hang on, no, another year, I’m just gonna go one more idea. We just need to get to that product launch and all of a sudden, and then you know what happens? Great people who are in the wings wanting to lead that they just leave they go, you know what, that person’s never gonna step down. There’s not gonna be room for me to lead. So we created that that structure and environment and then we just did it, we just took a leap. for faith and yeah, and it’s been awesome. And it’s a bit. I feel as a trustee a bit like I’ve got. Do you have kids by the way? I don’t know if you’ve got kids. Yeah, so I feel like a parent some days in a really good way. But these aren’t toddlers these are by but it’s next generation and it’s a lot like they’re not blood but this is like a family business right? And I’d say independent private companies can think and act like family visit but I said in Ivanka when I said family business without the family baggage, right? So with respect, right, so.
Jeremy Weisz 45:42
I love for you to talk about, first of all, I have one last question. I want to just encourage people to check out rethinkideas.com to learn more, I’d love for you to hold up the book for a second and talk about the book. But like, tell me a little bit of your favorite books that you have learned from and business or whatever, if you’re holding up Rethink The Business of Creativity talk about that?
Tom Shepansky 46:06
Yeah, well, first of all, it’s got the three founders names on it, you had Morgan Tierney on the podcast, Morgan, she rewrote the whole book. So this was a joint collaborative, we actually weren’t gonna put our names on it. But the team said, come on. Like these were your initial ideas and, and principles and values that you set for the company. So we agreed to but like everything we did at Rethink, it was a joint effort. And Morgan was amazing. So, the idea behind the book was really to share and inspire or sort of open source to. And I always say, these are some of the tips and tricks a bit like what I’ve talked about earlier, and making music your own. Some of these, Ian learned peer review at Pasadena art school. And he brought that into the previous agency was that we brought it to Rethink, but we kept making it better. So, steal an idea, make it a bit better and make it your own. Right. So I think we just said let’s share in an open source way, sort of our journey and lessons learned along the way. In terms of my books, I’ve got an eclectic sort of mix. I love Malcolm Gladwell. I think he’s just so prolific. And he Outliers just looked at things, we, we identified a little bit of an outlier being a West Coast, sort of West Coast company, with not maybe in the center of commerce or the ad business, but we came at it from a very different point of view. And just different books, I’ve been intrigued with Jeremy these days, sort of capitalism. And the founder of Whole Foods wrote Conscious Capitalism. There’s actually someone wrote a book called Rethink Capitalism. I’m reading a book called Saving Capitalism. I did a talk last week on not It’s my bad name, but capitalism 2.0. And I think the evolution of capitalism has to be talked about has to be thought about, I don’t think, what I would say is in the last 20 years, capitalism is rewarded fewer and the middle class in North America isn’t doing that well, right. So how are we setting up systems and ways of working that lift more people? And I know what we tried to do, and everyone’s got to do what they do. It’s hard to have that point of view, without what we did at Rethink, but well, we did it. Rethink is trying it. And we maintain the business privately, so that we can redistribute the profit to people who work for us and live in those cities and communities. And they can buy homes, and they can pay for mortgages, and they put kids through school, like that’s what we’re able to do as opposed to shipping the money off to a multinational. So and then books on the I mean, if you grew up in the ad business, you read David Ogilvy, right? Ogilvy on Advertising, so, Adam Morgan, the All Around Challenger Brands and what he did. So yeah, I sort of have it and I love you know, rock and roll biographies, like the book about Tom Petty Keith Richards book was I thought, terrific Bruce Springsteen, I mean, I love, and you dip into it actually a book this just over here on my desk is Rick Rubin’s book, Rick Rubin, the record producer, A Creative Way of Being like as I’ve leaned into my next chapter as a musician now, I’m leaning into this creativity because I was the business guy and a creative business, this creativity that has always been there, and that I’m tapping into so I’m actually, I’m on a board and the CEO of that company, I gave him that book. And this is a wealth management company and said, Here’s for the inner artist in you. It’s like, okay, but we all have that. And I think tapping into that and being inspired by different sources is, so I love to read and I enjoy. I make Rick Rubin and Mark actually, Rick Rubin and Malcolm Gladwell have a great podcast they do together speaking of podcasts, so yeah.
Jeremy Weisz 50:29
I’ve seen some. Yeah, Rick Rubin has been on a few they’re really good. But, Tom, I want to be the first one to thank you. Thank you for sharing your journey and your stories. And I want to encourage everyone to check out rethinkideas.com to learn more and check out more episodes of the podcast. So thanks, Tom. And thanks, everyone.
Tom Shepansky 50:49
Thank you. Thanks, Jeremy. I enjoyed it.
