Jason Wenk, CEO and Founder of FormulaFolios, joins the podcast to discuss recruiting, Wagemark, values, and more. FormulaFolios has grown from #944 on the Inc. 5000 in 2015 to #10 in 2018 and Jason shares his learnings from this hyper-growth experience.

 

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Transcripts:

Adam Robinson:	Welcome to The Best Team Wins podcast, where we feature entrepreneurs and business leaders whose exceptional approach to the people side of their business has led to incredible results. My name is Adam Robinson and for the next 25 minutes, I’ll be your host as we explore, how to build your business through better hiring.
	Today on the program, Jason Wenk is the founder and CEO of FormulaFolio Investments. He has a business, he started in 2011, they have 72 employees and growing like crazy, doing all kinds of cool stuff in this world we call Fintech. We are here today to learn from him about the people side of his business. Jason, thank you so much for being here on the show.
Jason Wenk:	My absolute pleasure, Adam. Thanks for letting me share a little wisdom of this.
Adam Robinson:	We are here to focus on the people side of your business. Before we do that, let’s set the stage for our listeners. Give us 30 seconds on FormulaFolio and what you do.
Jason Wenk:	Sure, so as you alluded to, we’re a financial technology company. We very specifically partner with independent financial advisors, and we help them with two very specific problems. One is we help them find new ideal clients and then we empower them with technology so they can serve their clients better and more efficiently. Essentially allowing them to take care of more people better with less work.
Adam Robinson:	All of those sound like good things if you’re a financial advisor. It’s great-
Jason Wenk:	And it’s good for the client [inaudible 00:01:41]. We wanna help the [inaudible 00:01:44], and better advisors means better experience for their clients.
Adam Robinson:	If listeners want to learn more, what’s the best way for them to do that?
Jason Wenk:	Yeah, so we’re pretty active bloggers, and so if someone wants to learn more just go to formulafolios.com, so that’s just  F O R M F O L I O S dot com, and I just encourage people to take a peek at our blog and they can learn a lot more about what we do.
Adam Robinson:	Fantastic. Alright, let’s jump right in. So you are now seven years into the venture, you’re growing like crazy, fintech is top billing in the growth world right now, it’s really the headlines of the financial pages everywhere. It’s gotta be pretty fun to be in the seat right now. How are you managing this growth from the people side of the business? It’s just such a tight market right now. Take us through … What does your world look like now from a recruiting and hiring standpoint?
Jason Wenk:	Yeah, so we intend to recruit from a couple of different areas. It’s interesting, one of the things that has been really effective for us is we have operations in Grand Rapids, Michigan, which is a Midwestern community, that’s where our company was founded and sort of our core operations team is located. We also then have … We started kind of as a creative outpost in Southern California. It’s now where all of our product and engineering happens.
	And so you’re 100% right, we’re not a peer technology company, we’re not a peer finance company, we have to kind of have both elements well-served. And so it’s super important to have a desirable place to work. We’ve done a lot of things that make us … We feel pretty desirable. And so we’ve had a pretty good success, especially the last year, of just really attracting fantastic, incredibly talented people.
Adam Robinson:	Often this show’s guests are founders, CEOs, of service providers, technology providers, or of companies that work with owner operator networks, like franchise brands. Financial advisors … It strikes me that you’re selling a product, basically you’re selling a product to entrepreneurs who are running financial advisory firm. Is that a fair statement to make?
Jason Wenk:	Yeah, 100%.
Adam Robinson:	So when you’re selling software products to entrepreneurs, speaking as one, I can tell you I’m not the best person to sell software to even … I know I need it, but I also think I wanna do it differently than all your other customers, what does that do in the mix of staffing, right? You’re building a tech product but you also have to service entrepreneurs who are, let’s admit it, pretty needy when it comes to questions and things that they buy. How are you managing that? That is a tough mix of staff to have. Technologists and high touch … Can I say babysitters? That’s probably not the right word, but it could be pretty accurate.
Jason Wenk:	Yeah, so we call that team our Business Development Team, which is, yeah, probably a fancy way of saying that we have a lot of egos to manage and a lot of different needs to meet, but we really divide our teams, into, at its core, really two teams. What’d I call the Operational Team and then the Product Team. So the technology side and a lot of the things from a marketing and branding perspective, all those things on the product development side don’t have a lot of interaction with our advisors, which is our customer, it’s really the operations side which is all the people that work in trading, and billing, and account opening, and all of those areas. And it’s very different skillsets. If anyone’s hired a creative, that’s a totally different sort of type of hire and person to manage that someone who’s maybe a phenomenal customer service employee.
	And so we have to be able to do both. We have to have innovative, incredibly talented engineers, developers, designers, marketers, that’s what allows us to grow the company. But then it’s not lost on us that if the customers have a poor experience because they can’t get great service from people then we don’t have much leg. So it’s definitely a happy balance, but it’s also really rewarding when you get it right.
Adam Robinson:	Let’s go back to 2011 when you launched the business. As I understand it, had some existing technology, or at least the kernel or thought behind what became the system that you’ve got now. What was the people side of the business like in 2011, and how has that evolved as the business has scaled?
Jason Wenk:	Sure, yeah. It was … obviously we were much smaller, I mean we’re still not huge today but I think our acceleration has been a lot the last two, three years. In the beginning, probably like a lot of startups, I begged two friends that were working at my first company to agree to work for free in exchange for some equity in this new venture that we had no idea if it would actually work. And so the three of us, we all worked for free for three years, basically, on top of capital that I contributed. So that was the sort of core founding team. Our first couple employees was … We really had three employees. We had one person in sales, one person in service, one person in sort of, I would call it the bookkeeping HR keeping the office from burning down role. And so yeah. Super lean team, everyone wearing a lot of hats, working hard, we had a big vision of what could happen.
	And we were bootstrapped. We weren’t out there seeking angel investments or venture. We built it slow, very deliberate, very under the radar. And so in those first years we went from, again, three employees and three founders, to eventually it became … we passed 10, then 15, then 20. It wasn’t until about 2014, about three years in, when we really started to accelerate the growth of the business and kind of figure things out. And from that point we’ve basically doubled our employee count and we’ll probably do that again this year.
Adam Robinson:	Let’s move more to some of the tactics you employ to keep the people that you want to keep. What’s your philosophy or approach to rewards and recognition? What systems do you have in place, and what should your team members expect approach-wise?
Jason Wenk:	Yeah, so there’s a few things that we do. I’m probably not the only person in the country that was inspired by Gravity Payments, so when I heard about what they had done I thought, hey, if I ever have an opportunity as a company, I wanna be known as a company that takes really good care of everybody. So inequity is something I just don’t stand for. And while we’re not quite as ambitious maybe as Gravity was, we did institute a company-wide minimum wage. We are a wage mark certified company, for those that don’t know just means our highest paid person can’t make more than eight times our lowest paid person. These are the things that they intentionally embody, that idea of doing good. And if someone doesn’t buy into it, so right at the very beginning if someone’s going, “I wanna make millions of dollars, I don’t care about everyone else here,” they’re not a good fit.
	So we want people that they look at the collective rewards that we all can earn. Now we do some other things to be very specific to people who went above and beyond, but we’re a big believer in we can only be as strong as our weakest link. And so we wanna make sure that one of the best ways we can reward great, talented people, is give them other great talented people to work with. And one of the best ways we can do that is by having a compensation environment that makes it difficult to have less than stellar employees.
	Beyond that, we’re very generous with things. We’re an investment firm, partially, so we have an extremely competitive profit sharing plan. We really try to promote sort of the financial wellness for our employees. We’re probably rare, at least in the HR sort of consultants we’ve brought in to kind of test what we’re doing, but we pay 100% of all healthcare costs for our employees, and it’s not a skimpy plan. We’re very generous there. Very flexible about telecommuting and kind of the way that we support those who maybe have long commutes, or they have family situations where it’s difficult. There’s a lot of things that, from a rewards perspective … It’s not about bonuses, is probably a better way to put it.
	We pay people what we think they should be paid, and to the extent that if they’re great I wouldn’t want them to ever even have another offer that they would consider. So ironically we do that while mainlining a profitable, fast-growing business. And I think it’s because we don’t have to ask people to go above and beyond for us because it’s very apparent in the way that we treat people and that we run the company that that’s how we operate. It seems great for talent acquisition, but it’s also just the right thing to do.
Adam Robinson:	Well, what’s interesting about what you said, that the research shows that most pay, right? Pay, just pure, most pay as a factor in retention, is something like ninth on the list of what people value. The things that you mentioned, help me live the life I want to live with flexibility and a pay structure that gives me that freedom, pay stability is third, most pay is ninth. And the philosophy you [inaudible 00:11:21] is just spot on supported by all the research in employee retention. And so you’re doing all the right things.
	You mentioned Gravity Payments, that’s a very famous example of Dan Price, the founder, who set a 70k minimum wage in their business. Pretty radical. And touched off all kinds of conversation about minimum wage, and value, and things like that. Give me your two cents on the 70k minimum wage. It sounds like you’ve done some thinking about this. Not necessarily for Gravity, but programs like that, do they value people equally or undervalue top performers to the extent that they leave? That’s the argument. I’d love your two cents on that.
Jason Wenk:	Yeah, I think it’s challenging if someone tries to make that pivot if they already have a relatively large organization. Because that’s going to get people really kind of ruffled up. I think if you’re starting a company and you’re relatively small, maybe you have 25 or less employees, as you grow if that was the culture that you set in place as you grow it’s not disruptive because you’re hiring people into an environment that they know how it’s going to work. I think it can be challenging, and I saw what happened with Gravity. There were some people who, it did, it made them very upset and they left.
	But what happens is in the end, you sort of flush out the people who maybe don’t share what you really stand for. For us, we’re not in Seattle like Gravity is, so our Michigan office, much lower cost of living, it’s, I think, actually like the third or fourth most affordable housing market in the country. So there are a lot of things that are there. And for transparency, our minimum in Michigan is 45,000. Our minimum in California is 65,000. And so those aren’t absurdly high numbers, especially the California number, I mean depending on what part of California you live in that will barely pay for living. But it is interesting that it’s common, for example in Grand Rapids, for a recent college grad to maybe start at 30,000. In California, in some of those designer type roles, maybe someone would work for 40 or 45, and still have to live at home, or with a bunch of roommates.
	So what we’re trying to create is essentially, when someone comes in at an entry level type position, they’re not going to have a lot of financial hardship. They might not necessarily be wealthy, but they won’t have a lot of hardship. When we hire people in higher positions it’s also important that they understand that the only way they can earn more money, right? So if someone’s at our cap, they’re at the 8X multiplier, the entire company has to do well. And so it will. It does somewhat limit the people who are going to apply. If someone has the mindset … we’ve had an employee like this in the past. Where he came in, wanted to be a senior executive, and wanted to make a million dollars of income for himself a year. And it became very apparent that that’s not the cultural fit for us.
	As the founder and CEO I’m very transparent about my pay to our employees, and I think that what happens is we have people who are … they’re eager to follow. And then those who will take our senior leadership roles, they’re also, they’re buying into this ethos of what we stand for. And then there’s other ways that we can reward people. So stock options and things like that are ways that people can participate on a larger scale. But if it’s just this general base pay, to me those who seek really high base pay and really high bonuses, and they think in terms of micro decisions, one year or thereabouts type decisions, doesn’t fit into our culture at all.
	So our approach doesn’t mean it’s the right approach for everybody. And we’re obviously almost an entirely white collar type of business, so we don’t have to manage the dynamics of people who maybe are in manufacturing or things like that. So yeah, totally different world, not gonna say that our approach fits for everyone, but it’s worked really well for us, largely because we did this early. And I think it works best if you do it early if it’s something you’re interested in.
Adam Robinson:	Very well said. As we wind down the discussion here, what’s the greatest lesson learned so far over your career, being in the CEO seat, the founder seat, about the people side of startups or fast growing early stage companies?
Jason Wenk:	Yeah, and I think that it’s, again … certain things are cliché. There’s these things that we know, and even when you’re at young founder in your first years of maybe your first startup, that you’ve read and you’ve heard and you believe it to be true, but until you’ve experienced it it doesn’t really have … you don’t really appreciate the meaning. So I would say that firing quickly, doing it the right way, but firing quickly is important. You’re absolutely going to hire some of the wrong people, and so you have to make sure that you replace them earlier is better than later. In fact, I would say as a general rule as soon as you start to lose sleep over should you or shouldn’t you let someone go, it means you probably already should have let them go. And so that also then means that you have to focus really heavily on hiring great people.
	A common mistake I see, especially because we work with financial advisors that are their own small businesses, we see them do this all the time. We try to coach them otherwise, but … Is they hire the cheapest person they can get rather than the best fit. And sometimes it doesn’t mean you have to spend a lot to get the best person, but just hiring based on the lowest cost to fill a roll is … it’s like playing Russian Roulette. You just never know what you’re going to get. But I’d say more often than not you’re not going to be happy. So spending the time it takes to get great people upfront will pay huge dividends in the end. I know when I very first started and it was really a one person business, that first big kind of grown-up hire, where it was a true manager, it completely changed my life. I was holding myself back by not giving up control to other people that were talented and could actually do a better job.
	So making those first hires be really skilled and talented is so important. And then if you make a mistake, don’t lament on your mistake, fix it. And that means that treating people really well when they leave is actually always a good thing. So those would be my little lessons if I could’ve … Actually, I knew those things 10 years ago, I wish I would’ve been able to implement them. But until you make the mistakes it’s hard to know how important it is.
Adam Robinson:	Ladies and gentlemen, that is the final word. You have been learning from Jason Wenk, founder and CEO of FormulaFolio Investments. Jason, thank you so much for being with us on the program today.
Jason Wenk:	My pleasure. It’s bene awesome. Thanks, Adam.
Adam Robinson:	And that is a wrap for this week’s episode of The Best Team Wins podcast where we’re featuring entrepreneurs whose exceptional approach to the people side of their business has led to incredible results. My name is Adam Robinson, author of the book The Best Team Wins, which you can find online at www.thebestteamwins.com. Thanks for tuning in, and we will see you here next week.