Home Automation Podcast Episode #191: An Industry Q&A With Jeff Costello
In this weeks home automation show of Automation Unplugged, Jeff Costello, Vice President of Sales at Nortek Control shares the importance of feedback and how to successfully grow partnerships.
This week's home automation podcast features our host Ron Callis interviewing Jeff Costello. Recorded live on Wednesday, October 20th, 2021, at 12:30 p.m. EST.
About Jeff Costello
Jeff Costello is a recognized sales leader focused on driving revenue through resellers, strategic partnerships, and direct sales. With over 25 years of CI industry experience, he has led worldwide sales teams, supported partners in over 100 different countries, and participated in numerous company acquisitions. When not working, Jeff can be found in the Dallas/Fort-Worth area with his wife, Trina, and their dogs, Bentley and Bo. Jeff is also the author of Surfing with the Bishop, a funny novel about working in the technology industry.
- The 2021 Fall Azione Conference in Nashville
- The recent acquisition of Nortek Control
- The importance of feedback and how to successfully grow partnerships
- Jeff's novel, Surfing With the Bishop
- The latest issue with shipping delays and product shortages
Ron: Hello. Ron Callis is here with another episode of Automation Unplugged. Today is Wednesday, October 20th. It is a few minutes after 12:30 p.m. Eastern Time. Appreciate all of you joining us live or in the replay. Thank you for doing that. I am going to check with my various platforms and see if technology looks like it's behaving. Today's show features Jeff Costello, VP of sales at Nortek Control, and Jeff and I have known each other for many years. Jeff is an industry veteran like myself, and Jeff is going to tell us a few of his war stories today. Jeff's done some pretty fun stuff. I always enjoy a conversation with Jeff, and I am confident that everyone tuning in will also learn a lot and probably get a chuckle or two. I never failed to have a good laugh when I was talking to Mr. Costello. Let's go ahead and bring him in and let me see if I can get all of my technology to behave, and we'll get started. Jeff, how are you, sir?
Jeff: Doing well, Ron. How are you doing? I am good.
Ron: Where are you coming to us from?
Jeff: I am in lovely Carlsbad, California. I picked an office to do this call from that did not have a solid white wall. This is the best background I could find.
Ron: I'm actually going to compliment you. That wall looks pretty interesting. This is like a wall in maybe your conference room.
Jeff: This is one of many conference rooms, huddle spaces that we have set up throughout here. Most of them have solid white walls, but I found one that had a better background just for you. I was going to do this in my home office, and I was going to have a nice setup and have and have my bookshelf in the back room with a lot of the best books that made me look smart. Of course, I take the ones I really read.
Ron: That's my trick. I just put lots of books behind me, and then people assume maybe I read them.
Jeff: Yeah. I put the ones that I didn't read on the shelf, and I take the ones that I actually read and move them aside. And I had all that set up and then, damn, we got acquired. And so now I'm spending a lot of time out here in Carlsbad. I was out here two weeks ago, and now I'm out here again this week, and I'll be out here a lot more on a regular basis. That's why we're doing it out here.
Ron: I'm going to share with our viewing audience. Our listeners on the podcast will have to check out the landing page on the One Firefly site for the show, or they'll have to go over to Facebook. But I'm going to share with our viewing audience an image. Describe to our listeners what is on the screen.
Jeff: This is you and I. It was at an Azione conference, and we were on a team-building event. I think when they do these team-building events, about half the teams immediately run to the bar and don't even try, and about half really try to win. You and I were the leaders on our team and tried to win. Of all the people that tried, I believe we came in last place. We were not terribly effective. I think you and I have talked before about this. I blame Joe DeMarco, he was on our team.
Ron: He's there in the background. Actually, you see Joe's head. I think he's looking up at a street sign or something.
Jeff: He just was a negative distraction the whole time. Clearly, we were much worse for having him on our team.
Ron: He was a bad influence. It was not good. Just joking, Joe, we love you, but we are wearing our facemasks. We were out there trying to be safe. I think we were maybe the only people in the city of Nashville wearing a face mask, right? And there we are on Broadway in the middle of the day, in the middle of the week, and every soundstage and every bar, every restaurant was packed.
Jeff: Yeah, it was standing room only in the middle of the street on a weekday, 3:00 in the afternoon. I mean, it was crazy how packed that city was.
Ron: Yeah, it was. It was unique. It was a lot of fun, though I agree with you. That was an Azione, what, a couple of weeks ago. I think that's officially the only industry event I've been to in-person in the year 2021.
Jeff: That is the first one that I went to since ISC West at the end of July, where I think we sent 21 people to ISC West and seven of us came back and tested positive for COVID after the event, and I was vaccinated, and I still tested positive for COVID. When I came back, I ended up getting sick, and I'm fine, obviously, but it was crazy. I ended up missing the ProSource event the week after that, we were all excited to go, and I think three of us were going to that event that all were in quarantine mode and couldn't go. So we sent three other people to the event. And I think my understanding is they had a great time. I missed that one. The Azione one was the first one I actually got to go to, and we had a lot of fun at that event, a lot of late nights, and Nashville's good time.
Ron: I haven't heard any stories of people getting sick, have you? It doesn't mean it didn't happen. That just means I didn't hear the stories of people getting sick of people picking up COVID from the event. Have you?
Jeff: Oh my god, it was. ISC West was a superspreader event. Azione, I didn't hear anybody getting sick either from that event. Now, if there was a super spreader event, that would have been it because we were all there, and we were all together. Well, I wasn't going to get it. I've got two Pfizer shots and Delta antibodies right now coursing through my veins. I feel invincible right now. For the time being, I'm good to go.
Ron: Well, there's a lot of things I want to talk to you about Jeff, and I know our audience wants to get to it. One of them. I'm just going to give the tease. You wrote a novel, and it's a lot of fun, and I want to talk to you not only about the book but how you actually came about writing the book and that whole process. Yes, folks, you can buy that book on Amazon. I'll share the link. It is called Surfing with the Bishop by Jeff Costello, but before we go there, Jeff, tell us you've had a long, storied career. You've told me some stories, including a Shark Tank Shark, right? Give us maybe a little bit of your backstory, your origin story. Take us where you take us.
Jeff: I graduated college in the mid-80s, and yes, I did go to college, and yes, I did graduate. For those of you that have had barroom conversations with me and would question my level of education, I did, in fact, graduate from college, and in my first job out of school, I got a sales job, and I was cold calling on nursing homes and hospitals, trying to sell cleaning chemicals. I quickly decided that was not what I wanted to do. That's not that was not a fun gig. I ended up just stumbling into the technology field. I had a buddy that got a job. I grew up in St. Louis, and I and I were living in Springfield, Missouri, at the time where I went to school, and I grew up in, or I had a buddy that got a job in Dallas. I just basically quit my job, came down, slept on his couch, and said, "I'll just figure things out in Dallas. There's a lot more opportunity." I ended up getting with an accessory company.
We did a lot of Mac and Amiga accessories and learned a lot of experience, we've. We actually filed paperwork to go public and then ended up the bottom fell out from the market for us because we were so tied to Macintosh peripherals back when John Sculley was running that company, and it just went in the tank. We couldn't go public. We ended up scuttling the whole thing and had a boss that told me that one time, "Yeah, I've been through a lot of experiences, and I've gotten rich and every one of them. Some of them, I got rich in money, and some I got rich and experience." I said, "Well, that one was an experience for me. It wasn't a money one." Here I am with all these great skill sets and everything unemployed. I ended up getting into the software industry in 1994 consumer software, and I took over a territory in Dallas that was doing $4 million a year in 1994. By 1998 we were doing $200 million. I had 10 people working for me, and a lot of it was just the rocket ship nature of that industry, consumer software, and a lot of it was through acquisition. One of those acquisitions was we did get bought by the learning company, and I did work for Kevin O'Leary, Mr. Wonderful on Shark Tank.
Ron: I have a question. He presents a certain demeanor on TV. He's not always the nicest guy. I want to give him credit. I want to say he's always brutally honest. I'm thinking back to the days when I used to watch America's Got Talent. Simon Cowell would be rudely honest?
Ron: Paula Abdul or the other people would like to try to soften the blow on Shark Tank, which we watch a lot of in our house. That whole crew, my 12-year-old son, loves that show. We know who Kevin O'Leary is. Is he that way in real life?
Jeff: He was 25 years ago. I mean, that's exactly what he was like. It's not an act of how he was on TV. The way he's brutal to you if there's something that that you're presenting and you're off track with your numbers, your assumptions, or something like that, it could be brutal. He's one of the best guys in the world to celebrate with when things are going bad and one of the most uncomfortable meetings you'll ever have if things are not going well and it's your fault, and you're in a meeting. And for us, back in that day, we were acquiring companies every quarter, and you would make acquisitions every quarter.
Part of it was to get the asterisk and your earnings so you could post these pristine earnings that were net of acquisition-related charges. We always used to joke that if you buy a company every quarter, you create a magic bucket, and that bucket as you can throw all the sins of the past in there and say it was related to the acquisition. Get it off the books, and here's what my books look like. And it's fantastic. Every company did it. It wasn't just us. Every company was doing it, and so we were on this bandwagon of buying it. In the end, because you're buying companies, everything gets murky on the financials. Our company did a really good job of convincing Wall Street that this is an industry that's doing this. And so the real thing you need to gauge the health of how successful we are is not the poll numbers we post or the profit numbers or our public statements, the real numbers. We just look at market share data. If we're holding or gaining market share, that tells you how strong we are because every projection was, the market's going to keep going up.
"I remember when I bought my first 40-megabyte hard drive for my first computer. 40 megs, right? People are laughing like I have an image on my computer that's 40 megs."
Ron: Now, just to clarify, some of our listeners may not know what software you're talking about. I want to share that in my youth, I used to go to computer shows with my dad, and I was a strong part of my youth. The Coliseum is there in Hampton, Virginia, and there would be just all the hardware people selling the motherboards and the memory chips. I remember when I bought my first 40-megabyte hard drive for my first computer. 40 megs, right? People are laughing like I have an image on my computer that's 40 megs. Yeah, but there would be walls of software in boxes that were saran-wrapped or plastic wrap. Is that software you're referring to?
Jeff: Yeah, and a lot of it is stuff you've probably heard of. We did Oregon Trail. We did Reader Rabbit. We did Where in the world is Carmen San Diego? We did Chessmaster. We did Printmaster. We did Print Shop. We were at one point we did we. We were part of Mattel, we did all the Barbie and Hot Wheels stuff and all the Mattel licenses. At one point we were like 20 percent of the consumer software industry back in 1999. Which is actually about the same size Microsoft was in terms of consumer software. So it was huge. It was between us and Microsoft were 40 percent of the industry. It was absolutely huge. One of my favorite stories is we had back in '95, I think. The team that did chess master basically said, "Hey, we want to put fake personalities" because it's all an engine, but you don't want to play an engine, you want to play a person. Anybody on the sales team that wanted to be in the game could be in the game. You just had to sign a release. I basically said, "I want to be in the game." They took a picture of me and you had to choose my occupation and I had a buyer back in my nursing home days that her husband was a chicken sexer, which that's a real occupation where basically in Arkansas, where basically he could somehow or another candle the eggs and be able to tell you if the with 96 percent accuracy or something if that was going to be a male or female. That determined what they did with the eggs. Males are more likely to get eaten out, type of thing. I said, "I want my name to be Clyde, and I want to be a chicken sexer from Arkansas.
That's what I want my profession to be." I said, "I want to be the easiest guy in the game to be." And they said, Great, we can do all that, but you can't be the easiest guy in the game to beat because one of our programmers just left us before the project was done, and he already signed his release. We're going to piss him off by making him the easiest guy in the game to beat. So I was the second easiest guy in the game to be Clyde, the chicken sex from Arkansas. There is a picture of me.
Ron: And that made it into the game?
Jeff: Yeah. I think it's Chess Master 4000 or Chess Master 3000 goes back. It's a long, long, long time ago. We're talking 26 years ago that we were in there. But yeah, so that was fun times. That's what our company did. Obviously, I love working for Kevin, it turned out to be really good for me. When we talk about the book later, we'll talk about how much and we talk about nice. Later, we'll talk about how much.
Ron: Does he show up or some characteristics of Kevin. Does he show up?
Jeff: On a public forum, I'll read that. I read the disclaimer that everything in this book is fictional and any resemblance to real characters or events is purely coincidental. But over a beer, maybe I'll show you where some of these stories came from. A lot of things that really happened to me, but they're fictionalized accounts in the book, but there's no actual real person in this book. It's all fictionalized. Everybody thinks that, Oh, this character is you and this character is this person. That's not the case. There are parts of me and parts of people I know and all of them. It is an acquisition thing and usually, in acquisitions, you wonder, is this going to be good for me? Is it going to be bad or do you never really know? And I honestly thought the when the learning company bought us from Kevin O'Leary bought us. I thought it was going to be terrible for me because they bought a lot of companies as they were acquiring things and they had a reputation.
They were a streamlined, efficient, culture-driven company. You fit in their culture and they were aggressive and you got in there and they would buy companies and they would just immediately dispose of 90 percent of the existing sales team and roll a couple of their All-Stars under their team and then go forward. I just assume since I was a director, I was going to end up getting let go because they had directors and I talked to my boss, who was the SVP of sales, and I said, Hey, am I? This is going to be bad for me, right? Am I going to get let go? He said, "Now they're going to do something far worse than that to you. They're going to give you more responsibility. Kevin ended up making me a VP in the organization and one of the regional VP's. And ultimately, I ended up growing too. I think by 2002, I think I was the VP that ran everything. It turned out to be phenomenal for me. On the flip side of it, ultimately when you see Kevin talking about on the show when they say Kevin O'Leary built a software company that he sold for 3.2-3.6 six billion dollars or whatever, we sold it to Mattel.
When we sold it to Mattel, the feeling was that you had this company that could do all these great toys and you had this company that had all this great intelligence software. And then you have this other company called Leapfrog that was starting to really emerge and have success with learning toys. On paper, it looks good to say, intelligent software with intelligent toys put those together. But it just it was a terrible acquisition. Didn't work out very well for me personally. It didn't work out for Mattel. They just completely blew the acquisition. They didn't do any of the stuff that was on paper what, what the promise of it was. It's kind of funny because you think this acquisition is going to be terrible for me, it runs out great. And then the next one, this is going to be great for me, and it turns out terrible. You just don't know. It's kind of like an NFL draft, right? Everybody wants to celebrate the day the draft happens. You got eight new people on your team you have no idea if they're any good or not for a year or two or three? Right. Everybody thinks that when an acquisition happens, you rather they get you immediately know this is going to be super positive or super negative, and you just don't know till you go through it. How many acquisitions have you been a part of companies? My company's been acquired nine times that I've worked for. I've been part of nine and I will tell you there's been at least, I think, like 15 times where we've made, where I work for a company where we have made a major acquisition, where we bought them and brought the Met, which can be equally disruptive. Right. Usually, you're in a lot better position to make decisions about how things go off at your company that buys them and you're in good standing with your company. But there are a lot of times where that was equally disruptive, where we would reorg in January to consolidate who we bought in November, and then we would reorder again in March because we bought somebody in February. It was crazy how fast that industry was going.
Ron: That sounds very chaotic. How have you managed? How have you envisioned running and managing your career over all these years, Jeff? Knowing that sometimes those acquisitions work out, and sometimes they don't. Sometimes it's good for you. Sometimes it isn't right. What's your outlook like? How do you view it like the decisions you've made and where to go?
Jeff: When you've been through it, you just get a little bit more focus. When you get acquired, for those of you that are out there listening that have never been acquired before or the first thing that you worry about when you get acquired is that that the new people that are coming in are going to make decisions before they fully appreciate the value you bring to the organization. Because here they are, they're coming in and they and they're probably going to make some decisions and changes. These people don't realize how important I am or what I do. That's the first fear you have. And I will tell you, my experience is that has usually been very unfounded because the people that pay tens or hundreds of millions of dollars to buy something or billions of dollars at some point paid a lot of money for it. And they paid up. They paid a lot of money, not just for the products and the technology. They usually paid a lot of money to get the team and the people as well. And they're usually not going to come in and make really stupid decisions like that. Once you get past that fear, then it's usually a lot easier to just navigate through. I'll tell my people all the time, as you know, when you go through an acquisition or when you know your company is about to be acquired, which is the case in the book that I wrote, everybody in the company knows that their companies for sale because the owners have made it clear they're selling it. Just keep your nose down, keep doing your job and treat this job like you're going to have it a year from now because you probably will, and you'll be damn glad you did.
If you get off track and you're not focused on what you're doing, you end up living with the inaction that you did for 60 or 90 days while you were just sitting around wondering what was going to happen. Well, my experience has been pretty positive with most of the acquisitions I've been up of that I've been a part of when we got acquired by companies that usually work out pretty well.
Ron: In terms of Nortek, how long have you been there? What's your area of responsibility?
Jeff: Seven years this last October, I am the VP of Sales, one of three VP of Sales. We have a VP that runs access. We have a VP that runs security and I'm the VP that runs the control business. There is a little crossover between the security person and myself, and I have a lot of responsibility for security, and he has some responsibility for the AV products as well, but that's the easiest way to explain it. I have worldwide responsibilities. I have an international team. I have a pro audio-video team that sells our AV distribution products into the pro-market and our firm and pro products into that market in the musical instrument market. That's the teams that I run.
Ron: News broke in September that Nortek was being acquired and then when did the news break that Nice was the acquirer? How's it going so far?
Jeff: I think it was like October 4th or something like that. Some of it was the first week of October. So far, so good. I think we all knew Melrose was not a permanent home. They're on their website right next to the Melrose logo and says, Buy, improve, sell. That's what they do. They buy things. They improve them, they sell them. They made it real clear from day one that it's not going to be a permanent home. Nice is the permanent home and there are a lot of places we could have gone and some of them would have been problematic, maybe for our customers or even for a lot of our team here where maybe there would have been a lot of redundancies if competitors bought us and stuff like that. As a company, we're pretty happy with Nice being the one that acquires us, and I think it's a good fit. Overall, we did not have very much redundancy in products at all. They have an access business, but it's really high-end commercial security kind of access stuff. Ours is not at the same level. Theirs is our access business. They have a control platform called For Borrow. It overlaps maybe a smidge with Elan. They do 85 percent of their revenues outside of North America. We do over 90 percent of our revenues in North America. We are really a big infrastructure for them. Were there U.S. infrastructure, but overall, I mean, it's a really good story for us. We're now a global company. We've got about 3000 employees. We're right at a billion dollars a year in revenue. We've got factories in 16 different countries. We've got R&D facilities. I think Nice calls them centers for excellence. But let's say their R&D facilities, we've got 14 different ones in multiple countries, including the one I'm sitting in here. They are the obvious place since U.S. and Canada and Italy, but also in Russia, China, Germany, South Africa, Brazil, and a few other places. We are really a big corporate customer. A big international customer from places all over the world. We do business now in over 100 different countries.
Overall, I think it's going to be pretty exciting. I like everything that the people have said. My bosses, I report to the CEO, Eduardo Amalfi, who was the COO of Nice and is moving here to Carlsbad to run our company. Our former COO Chris LaRocca was really here for 18 months and really, he was just here to kind of finalize and get the deal across the finish line. Now he's moving on. Nice has installed the new CEO and I've got to meet with him a lot in the last three weeks. So far, so good. I'm pretty excited about the story.
Ron: What happens on this trip? You flew out to California for these meetings and you're going to be there for planning meetings. If you lift the hood or we get a peek behind the curtain, what kind of happens two weeks in? What type of things? I guess what you obviously can publicly share, but what type of things are you guys working on?
Jeff: Well, I think a lot of it is just completely bringing people up to speed on your businesses and what you know, what drives the business, what happens, how things work. You know what your go-to-market strategy is. Being brutally honest about, here are the things we are doing incredibly well. Here are the things we're not doing so well as a team. Here are the actions we've taken to try and rectify that. Just be brutally honest. And I think I think that's what anybody wants you. You just put yourself. It's really simple. You just put yourself in a situation and say, If I were him, what would I want the guy that runs this channel to walk in and share with me? Not all good stuff. You just come in and be brutally honest on where you are with everything. But the main thing we're doing now is we're really working on building a plan, a three-year plan. Essentially, they want to know where we want to be three years from now. What reasonable goals? What do we need from a resource standpoint?
What does the end result look like? Let's work backwards. That's a very common thing that most companies out there do. They work on three-year plans, but it has a lot more meaning in the sense that the prior company that owned us wasn't going on us for three years. There wasn't a lot of talk about what happens in 2022. It was really more about just what happens in 2021. Now we're talking about what it looks like for 2022, 2023, 2024. Where do we need to make investments? What's your ask? What have you wanted to do in the past that you haven't been able to do because you've been told now make a case for those types of things? Really exciting conversations that we're having and I'm looking forward to.
Ron: It sounds exciting to be looking forward again three to five years into the future and start inventing your future. And I imagine that's a lot of fun to get. Your team rallied around that and your dealers rallied around that.
Jeff: It is. That's what our dealers want to hear. I'm hoping that I get to go to IAC in Barcelona this year. I hope it happens, but I usually stand up in front of the group. You do all these presentations all year long. But then first thing you do is when you get ready to go to IAC you go back and look at last year's press presentation. It's like just out of curiosity. What the hell that I say to these guys last year? How do you pull it out and you want to look and everything because you have all our international partners and there we're talking through and then I say the same thing every year to them, which is basically that from our standpoint, part of our value proposition is that we really want to focus on people, products and programs? It's real simple. I make a commitment to our customers, whether it's a CEDIApresentation or whether it's at ISC where I'll just make a commitment on stage that basically a year from today, I'm going to stand on the stage and I'm going to promise you we're going to be better in all three of these areas.
"Because of the investments that we make, we're going to do things with our people to make them better service you between now and next year."
Here's what we did in the last year to make ourselves better. You have a better lineup of products sell from us a year from today than you do now. It's pretty damn good now. But because of the investments that we make, we're going to do things with our people to make them better service you between now and next year. Whether it's we restructure, we had more resources, whatever it is that we're always focused on or we do better training. Whatever it is, we're going to make sure that we do that on that. From a program standpoint, we talk about all the things we're doing programmatically to make them better, whether it's a lot we help them with on social, whether it's city-based landing pages that we've done for Elan and that really helped with SEO for our accounts a lot. Or whether it's just our Builder Channel program, which has been something we created, four years ago, we kind of started, we didn't have a builder program and we were just pretty much relying on going through our dealers and letting them handle it. We built a team to do that and put Bret Jacob a long-standing Elan person in there to run it. He's done a phenomenal job and we've been winning awards on that program and it really has something that helps our customers.
To just be able to stand up in front of them and tell them that's what we do to we're going to just constantly try and make things better. It is always good that we want to do that. There are times when you work for companies where you can honestly look in the mirror and say, "We've done nothing to make things better for our customer in the past year." We have the same products we had a year ago. There's been no updates. We've done nothing better from. We may have laid off some people, we've done nothing better on the programs to help them. I can't stand up here and say this, and I can honestly say that in my seven years at this company that basically we could get on stage at these meetings every year and point out, here's what we're doing well, and here's what we've done to help you and make things better. What I find a lot of times in this industry, coming from a different industry. When I first got here, there was a lot. I was here for the tail end of the core brands blow up where I came in when a lot of hard work that had been done to fix the mistakes that were done was already done. I came in just in time to take credit for all of it. I didn't take credit. They gave it to me. They handed me credit for the fix. This stuff was done three months before I got here. But great, I'll take it and it was kind of funny. I had a common line that I heard.
Everybody that worked for me heard me say it like a hundred times, and it got to a point where I'd be one meeting after another. I would say that I would sit in meetings and people would roast us. They would just barbecue us on how bad we were messing up and had messed up. And a lot of it was old news. They didn't realize some of the stuff they were complaining about already been fixed. And I used to say, "You're right. We do a lot of things wrong, and the number one thing we do wrong is not telling our customers what we do right, and we're going to fix that now." And then I would just go through the laundry list of all the things that we had done to address that. Then basically go through the list of things that then that were on the next list, we used to call it page two it. We understand this is an issue that was not the priority to fix it out of the gate. Here's what's on the next list that's going to be out. That just made customers feel a lot better that day. They didn't realize that you had done it. I think most companies, yeah, we have everybody in this industry. I see a lot of complementary companies to ours and competitors of ours, and people just work really hard in this industry.
They really do. Every year it seems that every company has made great strides in all the areas that I just mentioned, right? I think as a company, a lot of times we just don't take credit for that with our customers. If you walk into a meeting and you get at it immediately, it's about two things that are wrong and never once does anything come up about all the things that you do. Obviously, you want to get those fixed and addressed and everything, but at some point need to remind them of all the things that you've done for them to be a better partner. We try and do that as a company, we really do. I think honestly, I think that's more my job to do than my team's job. Whenever I'm at events, I will always take it. When we even we have dealer council events. We run our dealer council for a while a bit different than that basically it is a little bit more freeform. We want really candid feedback. It can get really rough there. We're not going to walk in and say, "Here's why you should be excited by everything we're doing. Now go solve this." We're going to walk in and we're going to get it's going to be a lot more conversational and get feedback and it can turn negative sometimes on. You need to do this and you're not doing this. We've been asking for this for two years and don't have it and all that stuff, right? We do that and I think it is. But I do always point out that every dealer council meeting, we have the price for me to listen to you, tell us everything we need to do that we need to fix and we need to work on for the next eight hours is for you to listen to me for a half-hour to tell you everything we've done for you last year.
We start with that just about everything we did to make your life better and be a better partner. Let's walk through all of that. Now let's get into all the stuff that where we fell short, we to get better and what you want us to see, where you want us to see a year, three years down the road.
Ron: I've just finished reading Patrick Lindsay on his book, The Five Dysfunctions of a Team, and I'm actually getting read a book club that with my executive leadership team. In the pyramid of the five dysfunctions that foundation is trust, right? And if trust exists, then healthy conflict and discussion can exist because now you trust each other and to be open and honest. That's what I'm hearing and what you just described as you trust your dealers and your dealers trust you in order to have that open and honest discussion.
Jeff: Yeah. Well, it's not open and honest if it's one-sided, right? If all I'm going to do is tell them how wonderful we are, that's not open. And if all I'm going to do is listen to the negative and we're not going to have a conversation about what we've done right. It's also not open and honest. So it needs to be open and honest. It has to be a two-way conversation.
Ron: Well, I speak for everyone that is listening or watching live here, we want your meetings there in California to be very productive, but I want to jump subjects here. Speaking of books, I mentioned a book that I just finished reading. We have your book. There you go, you got the hard cover. I thought you'd get a kick out of this. I pulled it up, so I'm going to share it on the screen. Share here. There it is on Amazon, folks Surfing with the Bishop. Alright. Tell us about this book! Where did the inspiration for you becoming an author? Jeff Costello, where did this come from?
Jeff: Well, there's a great, great quote from the author, Toni Morrison, that says "If the book you want to read hasn't been written, then you must write it." And I really feel that this is the book that I wanted to read, and it just had never been written. How many times for the last 30 years we've had so many? I've been part of so many fun events and I just love. I just love going to battle with my team trying to hit a quarter. I love it. I'm trying to go into battle with my team, trying to win big deals. I love the customer dinners and the customer interactions, and I love all the events that we do and we would always joke with somebody should write a book about this. This is hilarious, all the stuff that we're doing. I found it fascinating. I wanted to do that. Actually part of it too is is that I just hate all the common tropes that are out there on how salespeople, business people, but specifically salespeople are treated. I mean, even lawyers get heroes, right?
But salespeople are salespeople and every form of media, whether it's books, TVs, the dirty word, they are, well, they've perceived as either affable morons like the people from the office or Herb Tarling from Karen in Cincinnati or something like that. They're intelligent but incredibly dishonest and devious. That seems to be the two things you have to fall into one of those buckets. If you've got a smart salesperson, he has to be very devious and dishonest. That's how we're going to write in here. That has not been my experience at all. It's also a very common trope that business people are portrayed very negatively in books that if you go to an office every day and you work with a lot of other people and you collaborate that you know when you sit in a cubicle for four hours a day that you have a mundane existence and that you've made poor choices in life and that you hate your life. That's not been my experience either, because I've always loved the people that I've interacted with and who we've worked with.
From that standpoint, that's what I wanted to do. I tell people that I wanted to write a book that was set against the backdrop of a set running a sales organization that is that for a company that is imminently for sale, they're trying to hit a quarter. At the same time, they're trying to win a big deal, but they know the companies for sale when to wrap all those things into one story. And I wanted to write it against the backdrop of that and that with the same type of passion and detail that Tom Clancy would describe the inner workings of a submarine because I think it's just as fascinating. I do. That was my take is there's no there's nobody in my mind that I've never read anything that did a good job of portraying me or what I do for a living or my interactions with customers. And you see him all the time at these conferences were at the way we interact. Nobody would know that that is how salespeople and cut end and their dealers interact. It's always portrayed as something completely different because that's what a normal writer does. That's what's in their mind of how you would sell. Something has to come in. It has to be confrontational. It's not a partnership or any of that stuff. And I thought it would be fascinating to do that and to put a lot of my crazy stories that have happened in the last 20 years of my life, 25 years of my life in here. I thought it'd be really interesting. I'm a big part of the culture of any organization I've ever run has been humor. We laugh a lot. I thought it'd be fun to load that up with humor and show people that's exactly what it's like when that's how we all interact. We make fun of everything, no matter what. That's what I tried to do, and I'm getting really good feedback from friends that have read it. I think everybody in the industry, I knew they would like it. I mean, everybody that I know that I've worked with, that does what I've done for years. I knew that they would like it.
But what's interesting is I'm getting people that 80-year-old women that are reading it, that are friends of the family that are telling me how much they like it. I didn't know anything about technology or running a sales organ or any of that stuff, and they still find it interesting and funny. That was the impetus to do it.
Ron: Well, what was it like? What was your process of writing? Because I'd like to think and I heard this from you, so I'm not stealing it from you. I'm giving you credit, but I've heard you say, I think everyone has a book in them. Something to that effect?
Jeff: Yeah, absolutely. Online, I'm using somebody else's joke here, but I would credit it if I knew who said it, but there's a line that everybody's got at least one novel in them, and thank God, most of them stay there. I had at least one novel in me and I wrote it, but I do love to write, I really do. I love to try and be humorous and insightful. I had thought somebody did another interview on my book and I basically said that deep down, I'm a storyteller. I like to communicate through stories. Always do. I'm always trying to communicate my point through a story, and that usually does. Sometimes those stories are insightful. Sometimes they're humorous, sometimes or both. I'm hoping that you know that the book came out both. That's really what I'm trying to do. That's what I really wanted to accomplish. Because there really is a lot of business lessons that are in this book as well. It really is interesting, but a lot of them are wrapped in humor. I'll just give you an example of what I was going to ask for that.
Ron: Give us one example.
Jeff: There's a chapter in the book called that I've used for years. It's called the chapter one of the titles of the chapter. I think the third chapter of the book is called Rule Number One. And I've often joked that that, you know, I have, you know that that I've often used rule number one with my team, and this came back from more than 20 years ago. Basically, it started when somebody came to me, a new employee, and said, What's your expense report policy? I said, I only have one rule about expense reports. I apologize if I offended anybody with language here, but the rule is that I don't need your help to look like an asshole. I've got that covered. If you make me look like an asshole by putting an expense report in that, I have to then go explain why you rented a Jaguar or why you flew first class and then eat or something. It's not going to be good. I'm going to make your life hell on every other expense report and I've never had. That's how I've done it. I've never had an issue with anybody, and I tell most people that right. I've got a lot of friends through the years that are the type of people that that will will look at every line on the expense report calculate mileage for all their salespeople. How much did they drive? Look at every hotel that they stayed a courtyard for 129 bucks and there's a La Quinta that's five miles away for 119. Why don't they stay there? Some people manage that way. I never would. I think if you've got, I just never had the time to do that. I was busy doing other stuff. But, flash forward 20 years and I just read Reed Hastings book No Rules Rules. He wrote a book called No Rules Rules, and he has a chapter or a whole chapter in there on expense reports. They tried so many different ways at Netflix to come up with different expense reports policies. And every time you did one, there's an exception. Now you have to do this document with the exception. Well, what about this and what about this? Or what if you're OK? Well, you have to. You can't fly business class to Europe because it's too expensive, but you can. If you have a meeting that day and you're not spending the night and they're doing all these different things. Finally, they just chucked it all and they have the expense report at Netflix now is one line, and it is, "Do what's in the best interest of the company." Which effectively is if you think about it is a more professional way of saying my rule number one, but my rule number wants the same damn thing, which is basically and I was doing it 25 years ago, which is, don't make me look like an asshole when you submit it and we're good. That was basically an insult. I like to think that I was way ahead of Reed Hastings. He's probably a little bit better business person than I am. I think he might have. He might have a few more skins on the wall than me, but I was way ahead of him on the whole expense report policy by at least 20 years.
Ron: Do you think you've got another book in you?
Jeff: Ah, I think I do, I really do. I think that I don't know when I mean, I'm promoting this one now. The funny thing is I think I've already modeled out what the next book might be. I don't think it would be a novel. I think it would just be I like to write stuff that'll make people laugh. If I write some essays on life and my thoughts on various subjects from parenthood, marriage to business lessons to stuff I think I've got some stuff that is funny to me and I will and I'll write it in at some point, I'll probably write it and I'll share it. If it makes the right people laugh, then I'll go to a broader audience. If it doesn't make the right people laugh, then I'll probably just scuttle it.
Ron: Well, speaking of writing, and I'm sharing on the screen now for our audio listeners, your website, which is right? jeffreybcostello.com. Tell us about this site because I've been reading some of this content and it's funny and it's educational.
Jeff: If you're going to promote a book, you really need to have an author website. Everything says that you absolutely need to do that so you look legitimate. The other thing they said is that that in all the research I did, the videos you watch on how to promote a book real? Honestly, they said you'd be surprised, but just basically telling everybody, "Hey, I wrote, a book doesn't work very well to get people to buy it. What actually works is if you is, if you just start sprinkling out content that people might find enjoyable, and then if they like that content, they're more inclined to want to buy your book. That was the impetus for me writing this thing, and there's a phrase on there that I picked.
I explained the phrase in the welcome section, but I call these things trifling amusements on business and life, and I love the phrase trifling amusements. I read it in a book called "How to Live or a Life of Montaigne" about Miguel Montaigne, a French philosopher that was the first modern man in the 16th century. He was just the first guy to actually write his feelings on things and everything and very well known as a renaissance kind of philosopher guy, French renaissance philosopher. I lifted that phrase from that, and it's called trifling amusement. Some business in life and I read a ton. I read a lot of books and I read business books and novels. And when I find something that I find interesting, I like to. I like to basically share it, share the fact of what I read in a book and then apply it to my business career. So the one you have up there right now is called the missing bullets. I'll just give a brief overview. I think it's pretty interesting. But when I got this side of the story out of a book by Jordan Ellenberg called "How Not to Be Wrong." I strongly recommend that book. He's a mathematician, and he just talks about how so many of the numbers you see on TV and so much of the methodology about everything that people use math for is completely wrong, and they draw the wrong conclusions about things. I find it really fascinating. I think he's got the quote in there. I can't read it, but it's something of the fact I've read it basically like dividing numbers. Dividing one number into another is computational, knowing what number to divide and another one is mathematics. Right? He tells his story in the book about Abraham Wall, who was this genius mathematician who grew up in the in and Romania. I think it was. He ended up fleeing Europe in the 30s because of the Nazis. He was Jewish, but he was a genius mathematician, and they stuck him in the statistical research group, which was in Manhattan. He was in an office right next to the other smart guys in Manhattan that were working on the Manhattan Project. They put all the smart people in Manhattan in this one building, and he was part of it. They ran everything by this group, the statistical research group, and they ran by him.
Basically, the bombers that were coming back from bombing runs were getting just shot up really bad, and they wanted to add some additional armor to the bombs or to the bombers. They basically did all this analysis and they said the planes are getting shot in the fuselage. This is where we want to add all the extra armor and they send it back to him to verify the analysis on where they should put the armor and everything because more armor means a loss of speed and more fuel. You have to be judicious in how you do that. And he basically told them they're all wrong and they were like shocked. He asked a very good qualifying question, which is you are looking in the book at the bullet holes from the planes. A return from battle, where are the holes and the ones that did return? All of a sudden it was like, you realize that's a really big business lesson for me there, that a lot of times you give people a bunch of data, they think they have all the data and oftentimes they don't realize that they don't have all the data that they need. You have to ask yourself a question. Even though I've got all of this data, what do I not know that I need to know? From a business lesson standpoint, as a sales leader, my experience has been the number one thing that a lot of times you don't realize that you need to know is how the people you're dealing with are being compensated. How does a conflict work?
It's a common question. I'll ask people, business owners, how do you copy your salespeople? How are they paid? It's shocking. Sometimes some of the answers you get are probably pretty common in this industry how people are paid, but not always common , and what they get paid on and how they get paid. Once you know that, you can then better understand how they make decisions.
Ron: Jeff, what's common for compensation, and what's your opinion of how it should be done?
"If if you've given the person the ability to negotiate, if they have the ability to negotiate or to choose higher-margin products that are more expensive versus lower margin or whatever you can, you can then pay on margin. But if you're setting the price in the mix, then there's no sense paying them on margin. You should pay more top-line because they don't have the ability, then it's just an extra calculation. The cleaner you make it, the easier."
Jeff: Well, it depends. I think that the majority of our customers are probably going to be paying on or on the margin they create, which actually rewards the right behavior. But I've got my own opinion, my own opinions are depending on, that you pay a margin. If if you've given the person the ability to negotiate, if they have the ability to negotiate or to choose higher-margin products that are more expensive versus lower margin or whatever you can, you can then pay on margin. But if you're setting the price in the mix, then there's no sense paying them on margin. You should pay more top-line because they don't have the ability, then it's just an extra calculation. The cleaner you make it, the easier. That's always been my position. Our team doesn't really have the ability to negotiate. We set pricing and directors have certain parameters for certain things. We just pay on our net sales. We're not paying on gross margin on our team because they don't have the ability to negotiate. But if they had the ability to negotiate individual pricing on what do you think this controller's work and how much we you give me for this subwoofer or something like that, then then I think we'd have to pay them on margin.
Otherwise, you just see ASPs plummet, right? Just to get the quick, easy sell. Part of that story was that we actually used that information at the Apple stores. I did a ton of business with Apple back when their stores were really taking off. I found it fascinating how they pay their salespeople. I asked my merchant how your salespeople paid, and he and I would have thought it was on revenue, or I would have thought it was on margin, or I would have thought it was on accessories, saw their extended warranty sold and it was on none of that. He basically said, "We basically only pay on a customer satisfaction survey." We send our customer satisfaction survey when everybody buys something. Ten is good. Nine, OK. Eight is you're fired. I said, "Really, you don't pay on my sales?" He says, "We have people lined up around the block to buy Apple products. We don't need them to sell anything. We just need to make sure whoever walks in that store has the best possible experience." When we were training on the products of ours, they were carrying a competitive line. We had a PC emulator, SKU. We actually really used that data to talk about that because we actually had a better margin that was part of what got the merchant to bring us in. But we weren't going to go out to the sales team and tell them, you can make a better margin because that probably would've alienated them.
They would have thought that's why the merchant brought that in. Right. We went out and said the merchant brought this in because we're higher reviewed and we're a better product. By the way, we think we undercut their employee purchase price of our competitor by 50 percent said the same thing. By the way, the merchant made us do that because he wants you to use that product. That's the stuff that we just absolutely destroyed our competition. It was all really because of how we frame things up because we asked one question that was the right question to ask, which is, by the way, how is everybody compensated? How are they getting compensated? I need to know that because that's going to affect how I train them on what's important. Those are the kind of things I share in these trifling amusements. I've got a lot to share. The fact is they're usually one or two-minute reads. I'm not going to bore you to death when I do it.
Ron: We've linked to it in the show notes or into the Facebook comment stream will also link to this content on the landing page for the show. I do have just a high level and I'm mindful of time and your time, Jeff. I know you need to go meet with the CEO here. Just a few minutes. And I appreciate you spending time with the audience and myself. We're certainly honored our integrators, your integrators out there in the marketplace are they're a little stressed right now. They're having tremendous demand, which is actually the good part of this. Yes, equation. They're in demand, your products are in demand. They are in demand, but they are having shortages when perceived shortages with labor and the ability to get jobs done. They're having shortages in the availability of products. Those two items appear to me. They don't seem like they're going to be easing up in the next few days or maybe even the next few months. High level, you know lots of folks and you're always out there experiencing and interacting with your dealers and with the industry and maybe some high-level thoughts or ideas kind of a softball pitch. What do you think they should be thinking about to just kind of be OK and maybe not have so much anxiety or concern or stress that I know many other people that I talked to every day are carrying?
Jeff: Well, yeah, I think that you have to oftentimes you have to be careful when you ask when you want somebody to talk you off the ledge because they're oftentimes going to just tell you to scoot over and make room for them. You are right, you are right that we're not magically going to get into 2022, and supply chain is going to be all of a sudden great. For us, I tell people this when I share this, if there are dealers on the call listening, you have to understand some of the stuff that we have to go through. And I'm sure all the other vendors down the call are going through the same thing. But we own the product the moment it leaves the factory. We used to have 30 days of product on the water at any point in time. We now have 110 days of product on the water. We had to buy for this year. For 2021, we had to buy 14 and a half months of inventory to do 12 months of revenue. That takes a bit of a hit on your PNL. And it's not just us, it's every vendor out there is doing the same thing. Anybody that that has product that comes in from overseas, they have a lot more product on the water than they had in the past, and they own that product the moment it leaves the factory. They are buying more than 12 months of inventory this year to support the business. I don't know that that's going to get better any time soon. If you believe what you read about the chip and component shortages, that is hopefully going to be easing up and get better. But in terms of getting the port situation fixed and getting enough truck drivers and everything else that happens, I think we're still going to be dealing with this for a while. But the one thing I will say, Ron, come off the ledge, come on and have a beer with me. No reason to jump yet. The one thing I will say that that has me very bullish on all of it is just all the data you see on new housing starts that everything points to. The fact that 2022 is going to be a good year for the next five years is going to continue to be good. There's a lot of challenges. It's taking longer to build a house. If you do business with production homes, it's dead. There's a lot of them have just pushed us, pushed our business to the side, a lot of them that had wrapped their head around the fact that we need to bring in a need to have a standard in the home and bring people that they now have just said that's one less thing for me to worry about. Push out. We'll go back to you, go sell it to somebody after the house closes. There are some challenges on some things, but overall, we all play around that field of new housing starts. If the new housing starts, metrics are still looking good, then there's just very fertile ground for us to go have strong business. From that standpoint, for the next five years, all the data you look at shows it's going to continue to be phenomenal and new housing starts and that makes me feel better. I believe in that, that this will sort itself out at some point, at some point it has to get back to where it doesn't take 120 days to get products from Taiwan or something like that. At some point things are going to get back closer to normal at some point. I don't think it'll be the first half of next year, but I don't know when.
"This is actually a personal hobby of mine. My listeners know this, which is cryptocurrency and bitcoin, and today, October 20th is an all-time high for bitcoin."
Ron: Jeff, total curveball and it's OK if you know about this or don't know about this, but this is actually a personal hobby of mine. My listeners know this, which is cryptocurrency and bitcoin, and today, October 20th is an all-time high for bitcoin. OK. In the annals of Bitcoin, Bitcoin since its inception, I want to say I'd probably get this wrong, maybe in 2009 or 2010. It's happened today. It actually happened earlier today. Any forecast on what this bitcoin stuff or NFT stuff or cryptocurrency stuff? You've been in tech for a long time. And it seems from my observation that things seem to be changing out there and we don't know exactly what it is and exactly what it means.
Jeff: Yeah, I do have I do have some strong opinions on cryptocurrency. I think my strong opinion is you shouldn't listen to me on cryptocurrencies. That's my very strong opinion.
Ron: I think that's sound advice. But at least I've captured on the show for history today was the all-time high. It's kind of fun.
Jeff: There you go.
Ron: Jeff has been a pleasure having you on the show, my friend. Thank you so much for doing this for those that are watching or listening and want to follow you directly or learn more about you or learn more about Nortek. Where do you want to send them?
Jeff: Just go to the website jeffreybcostello.com and you can sign up there to attempt to access to get the content for me. Or you can access my LinkedIn profile. Facebook. Twitter.
Ron: Got it. Jeff, it's been a pleasure having you on the show, sir. Thank you. Appreciate around. All right, folks. There you have it, show 191 with the one and only Jeff Costello, Vice President of Sales of Nortek Control. He runs their integration or the CI space globally. Certainly a lot of weight and responsibility on his shoulders. It was interesting. I haven't been asking too many manufacturers about that kind of the last topic. They're relating to shortages in electronics or silicon shortages and, you know, supply shortages. There's clearly a lot of stress stuff integrators your stress. Just imagine what your friendly manufacturer, your sales team and the marketing team , and everybody that's responsible and held accountable to produce. Imagine the stress and the pressure that they're under. There's probably enough to go around, so maybe expect honesty and transparency from them, but maybe give them a little bit of a break every now and then because they're getting beat up pretty hard out there folks.
I hope you have a great rest of your week. I will be back with you next week for another show. We've got a great lineup of guests booked out into December at this point. I think maybe we are not live on LinkedIn, so we got to figure that out and it seems to be on-again , off-again with the connection into LinkedIn. We'll work on that. We will take this show and we will upload it to LinkedIn. At least it is there. As always, if you have not already done so. Love you to actually subscribe to the podcast, go to your Apple Podcasts or whatever your preferred venue to consume audio is. If you feel so compelled, leave us a review that would certainly help the show get out to a wider audience. On that note, I'm going to wish you all adieu and have a great rest of your week, and I'll see you next time. Thanks, everyone.
As a recognized sales leader focused on driving revenue through resellers, strategic partnerships, and direct sales, Jeff Costello has over 25 years of CI industry experience. He has led worldwide sales teams, supported partners in over 100 different countries, and participated in numerous company acquisitions. Currently, Jeff is Vice President of Sales for Nortek Control. Jeff is also the author of Surfing with the Bishop, a funny novel about working in the technology industry.
Ron Callis is the CEO of One Firefly, LLC, a digital marketing agency based out of South Florida and creator of Automation Unplugged. Founded in 2007, One Firefly has quickly become the leading marketing firm specializing in integrated technology and security. The One Firefly team works hard to create innovative solutions to help Integrators boost their online presence, such as the elite website solution Mercury Pro.
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