Leading Entrepreneur and Investor Howard Tullman Gives Advice to Association Executives

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If you are located in Chicago, you know Howard Tullman. Or, at least you know of his impact. Howard has been an entrepreneur for 50 years. He’s started great companies and had big exits. He has innovated in education and coached thousands of business people, from startup founders to CEOs of the largest corporations.

He is best known as the CEO who grew 1871 from its modest beginnings. 1871 is the Chicago-based startup incubator in the Merchandise Mart that became the model for startup ecosystems all over the world.

Howard also writes a column in Inc. Magazine, and he doesn’t mince words.

We are lucky to get Howard sharing his insights for association executives. Howard explains what he thinks first principles are for associations in this challenging time. He tells it like it is, and doesn’t give you any easy outs. It’s time to step up to be a leader and Howard gives some good guidance on what that means.

Watch the full video here:

Full Video Transcript

Michael Hoffman: Thank you for spending the time to talk to me today.

Howard Tullman: I got nothing but time. Nothing but time. I’m happy to be here. Every day is like the day before, right? It’s Groundhog Day. Absolutely. And not only is it Groundhog Day, but, you know, I’ve gotten over whatever reluctance there was. I know my wife was a school teacher for a million years, and Sunday nights were tough, you know, Sunday nights where I got to go back to work. Now it’s like, Who even knows what day of the week it is? It’s crazy.

Michael Hoffman: Exactly. So for the few, like the three people who don’t know who you are would you just get a little bit of your background and talk about those things you’ve done, especially those recent things.

Howard Tullman: So I’ve been a serial entrepreneur for about 50 years. You know, I’ve done about a dozen companies right now, I have a portfolio in our venture fund of about 25 companies. So we’re involved in mature companies and new startups just across the board. I’ve been in education for probably 20 or 30 years. I was the president of a couple of different colleges and most recently have also been involved in the whole movement around incubators.

CEO of 1871 for five years, built and opened an incubation and entrepreneurial center at IIT called ahead Kaplan Family Institute for Tech Entrepreneurship and Innovation. So I’ve been involved in change management in innovation in education. I write a weekly column for Inc Magazine for about six years now, and I taught at Kellogg and other places for a few decades. So that’s my background.

Michael Hoffman: Yeah. And I you know, I read your columns, and I actually have your book. I think you can see it in the back there, “You Can’t Win a Race with Your Mouth”. And I would say the themes that I see in your writing is about, one is hard work. and two, is leadership making hard decisions. Maybe. So can you talk about that?

Howard Tullman: Yeah, sure. We reduce it back, you could reduce it. We reduce it down to five Perspiration Principles, which is really the, that was the alternative title to the book. And, as you say, hard work, which is Perspiration, you know, and also Preparation. So two parts. Passion. Very important Perseverance. You’ve got to stick with these things. These are tough times. Tough times don’t necessarily last, tough people do. And lastly principles.

I mean, I think, you know, And we actually made this change in 1871 about a year after I got there. And as part of the intake, as part of deciding whether companies would be successful there and be a part of what was going on. We asked them, you know, how they plan to make a difference with their business. It wasn’t just about making money. It wasn’t just about I want to come someplace so I don’t have to work at home. It was about how are you going to do something and address something bigger than yourself?

And so principles are the fifth of our sort of components in what it takes to be successful as a business. The person is an organization. The other thing that I would tell you in all the years of teaching entrepreneurship and one of the things we did is we started to teach junior high and high school kids as well, these principles of entrepreneurship, But it turned out that they were life skills.

They weren’t just about building a business, you know, telling a simple story, you know, getting people to believe in your vision. All of these kinds of things turned out those were important for those kids, just as much because in that period of time their business was their life. It was, you know, they were making themselves into the person that they hoped they would become. So those were some of the most exciting and stimulating classes we had were watching these kids understand that they had agency and they had the ability to impact their lives going forward instead of sort of feeling like life was happening to them.

Michael Hoffman: Yeah, that’s, that that is really good. And I, you know, as a startup founder myself, I’m living that experience every day. And I think, you know, there’s like, maybe it’s a cliche, But the idea that change is the only thing that you can count on on a certain level, and you know a lot of our clients that we work with our trade and professional associations.

And the trade of professional associations the former CEO of ASAE which is the umbrella group for all the trade and professional associations. John Graham, who passed away recently. I heard him say, once, you know, everything that you walk on, drive in, drive through, sit on, whatever, goes through an association that set the standards for that, brought that industry together and how important a role it is

And these associations have been just be are being disrupted pre-COVID because people used to have to so get to their association in order to meet each other and get together and network and learn. And today you can do all of those things online. And so that’s had to force them to be thinking about change and digital transformation all that.

But the COVID world accelerates all of that and some some major way. And in addition, the revenue of these organizations is often really dependent on in person conference events and learning, which they’ve had to cancel. And so I think the average is about 1/3 of revenue is an average. We know some associations where it’s as high as 62% of total revenue. I’d love for you to talk a little about that. If you’re one of these leaders or you’re part of the leadership team of an association, how do you, how do you think about all this stuff today?

And you know, what are the things that you think they should be they should be really focused on?

Howard Tullman: Well, first of all, 1871 was, literally the entire raison d’etra of 1871 was bringing people together in mass in proximity and creating a town square. So I mean, you talk about somebody who’s front and center in terms of those kinds of issues, certainly all of the co working spaces, all the incubators.

But the change that you’re referring to isn’t limited by the way to associations. It’s true up of every kind of subscription organization, theater groups, congregations, churches. Everybody is discovering that people are less likely to sort of make these long term commitments. So you know there’s gonna be a lot of changes.

But what I would tell you is, I think you have to start this process a lot of these conversations and I have a lot of conversations you’re alluding to are people saying, What can I do? Different or new, you know. And I think first they need to say, How can I do better what my core mission is? And I think that’s where the discussion starts.

I mean, I think you have to say, What’s your new reason to exist today? You know, as if the same is it always was. And as you say, if it’s just networking, just bringing people into proximity, there are a lot of tools LinkedIn a lot of different ways to accomplish some of these purposes. And by the way, I think a lot of these challenges will be the case for schools as well. You know, the content was one of the things that was important. Community was one, connection was one, credentials.

You know, as you said, setting standards, some of these associations. But you need to determine number one: What’s your mission? And has it changed? Now I’ll give you a good example of this is you’re almost old enough to appreciate AAA. So when AAA, when I was growing up, when we were growing up, they had basically two functions. One was they would tow your car. That’s completely gone, because of roadside assistance and two was what were called trip ticks.

Those wonderful things that showed you roadside here was the place where there was the giant ball of thread or something. And you plan your trip and you get in the car and you would do that. Now forget it. Waze, Google Whatever. Okay, So the third thing that they did that nobody understands and the only reason I remain a member of AAA was your membership card also could serve as a bond card, and you could give it to the guy in lieu of your license. That turns out for a business traveler to be astonishingly important when you’re dealing with TSA, because when you go, you show them a sort of a bent up, folded up ticket instead of your license. They look at you like you’re not getting through here any time soon,

So but there, you know they have an enormous shift. They have to figure out what they do with the millions of members before those members say, What real value are they providing? So you have to start with the mission. What is the value? I think then you have to look at your organization. And this goes to all of these issues about rightsizing and resources and fees and stuff.

And the question is, number one. What is the mission? Number two is: Are you equipped today to do that mission? In other words, do you have the people? You have the capital? Do you have the resource is to, to do it? And you also have sufficient scale that it makes business sense or that the economics work out. And then do you have a cost effective channel to reach your members?

A lot of these associations grew up around mailings, and, you know, the question is, does anybody open this stuff anymore? Does anybody even open email anymore? You know, how are you going to reach your members? And then the third thing is, I think every one of these organizations needs to start with a very basic, you know, sort of inquiry, which is, do you have the services your members need today? Whatever the association members are, do they value those services any longer? Where do they think there are a number of alternatives?

And number three is Are they willing to pay for it? It’s really easy to say, Yeah, I value it and I will remain a member until it’s time to write that renewal check. And I think those conversations and a lot of organizations are at a different level now. It used to be the member of the association could write the check or put it on his credit card. Now it’s $3-$4000 $5,000  $10,000 a year. Now that’s a CFO conversation, at least for a while.

So I think I think there’s a window now of 3 to 6 months where these organizations where they should have one set of questions. And then I think if the world returns to some degree of normality, maybe it’ll be a different question going forward. But right now, what I would say is the best thing that association can do really any business can is basically to say What is our real value proposition?

And it could be as you said it could be credentialing. It could be standards. It could be information. It could be credibility. It could be networking, but what is it and by the way it could also be were a lead generation tool. We’re a way of our members getting business. You know, the Better Business Bureau. You know, these kinds of things steers, you know, business and opportunity.

So once you have figured out the core purpose, I think then you have to do a couple other things. I think you have to say, What are the few things? And this was very interesting. You’re seeing a lot of shedding going on, people that thought they needed to keep growing. And we’re pursuing things that were incremental or adjacent. All those are gone. I mean, right now it’s what is the core? How can I go deep with my existing members?

Forget new New Member acquisition. Very costly. It’s how can I retain my membership? What can I do to assure their loyalty? How do I continue to consistently communicate with them on a small scale? And how do I do those few things that are really important well? and how do I build build on that so If your an association executive and you are in year two of a five-year strategic plan do you throw that out and and start over? I mean, as the world is..  

Is every assumption from that plan that you’re in the middle of irrelevant at the moment? I think that for the next 18 months, I think that talk about growth is foolish and every strategic plan ever written has the hockey stick and included in it OK? Nobody is about “We’re gonna hang on there by our fingernails and pray that we keep our existing members” right?

So I think that we’re going to go into a period where we have to be conserving our resources, doing the basics well as well as we possibly can. Keeping and serving our loyal members and getting through this and then two years from now we can talk about growth. I don’t think growth is gonna be as important in most of our lives. I mean, I just think we’re all gonna do a sort of an inventory of how we spent our time. What we’ve been doing, that was really meaningful.

A lot of people are being reintroduced to their family, and it couldn’t be a better thing. I mean, Honest to God and so I think we’re going to see a return to some kinds of things like that. where it’s not gonna be all about chasing the Golden Dream. And then, you know, unfortunately, 30 million unemployed people are gonna have to figure out what they’re going to do.

And a lot of these people are not just employees. A lot of these people were building their own little businesses and had been putting their life’s equity and savings into small businesses, which really drive the economy and and many of those are not coming back. I mean, in the millions.

Michael Hoffman: Wow. Yeah, so it sounds like, you know, every organization needs what do we do right now plan to think about how do we weather this. What’s core? How do we stop doing things that were adjacent? And focus. In our world with these associations, I think one thing that’s happening is these in person events are getting canceled and but the events play an important role. So you know, the events may be where the manufacturers and the retailers meet for the whole industry. We have a client in the toy industry like that, and with other with medical professional associations and things like that. these conferences also really important.  

Howard Tullman:  And also by the way I mean they are. They are essential for new product introductions. They’re essential or a lot off things like that. And by the way, I think you have to break these down into what kinds of associations you know. If it’s ah, it’s a certain kind of association. For example, if it’s an association of theater groups or whatever, I think there’s a way to reach out to the members of certain kinds of associations and say, We’re not having the gala this year. We’re not having this. We’re still going to send you the tickets. We still would like you to make that supporting donation because you weren’t really interested in the chicken and the rubber peas anyway. And if you want us to be around in two years to get back to reality, you have to do that now

I think this is gonna happen with synagogues. I think the High Holidays, who knows, You know, I think all of these kinds of things, So there’s one group that are going to be able to do that with a straight face on, and that’s because there was something greater than simply the event, Now not every organization is gonna be able to pull it off. Other kinds of organizations, they’re gonna have to figure out how to make the delivery of real value something that people believe is a reason to continue to support the organization.

Michael Hoffman: Yeah, one of the things that we’ve noticed is that the move to virtual events is often, you know, the experience that people have with it is what we’re doing right now, you know, is like a Zoom call or something and realizing that, you know eight hour Zoom is not a conference, it’s Ah, it’s, you know, you want to jump out the window.

Howard Tullman:  No, it’s impossible. I’ll tell you what I what I sense is, there’s such a social component that’s missing in our lives that the most important time in a one hour Zoom meeting or conference is the 1st 5 or 10 minutes where people see people that they haven’t seen for months and touch base on a personal basis, completely unrelated to the business purpose of the thing. That’s right. And I think people trying to figure out how do you do that in the context of these conferences.

But the other piece that relates to revenue that were really thinking about in trying to help our our clients with is that the sponsors or the vendors were there to meet people and to show people their wares and to get at leads and to go home with those leads. And when you’re just putting their logo on something and it’s and there’s no interaction built in, it doesn’t deliver that value.

And so I feel like the revenue is could be there because the sponsor still need the leads. They still want to get in front of your people. They still want to do it. But you have to show them that there’s a way to do that, that they could be successful. Yeah, well, I think the answer is that the sponsors are gonna have to develop a new capability, and it’s gonna be a teaching, training and education capability so that when you have a webcast, it’s gonna be showing somebody three or four ways to use the new version.

They’re gonna be much more around training. I said this about the colleges. I think there’s gonna be a huge movement backwards to more vocational sort of focus, you know, in Illinois, for example. And we used to think it was if you went to a ag school, you know, you were like creatin. I mean, you know, you want to be a farmer, think about what’s going on with our food chain, where we’re running out of meat.

And so now, in Illinois, in particular, where you have land grant and ag schools, you know, an AG tech degree or an ag science degree. that’s not gonna be something that people are gonna look down on much longer.

A car mechanic needs a keyboard more than a wrench, you know, because these cars are and by the way, those are both darn good livings which, which are a path to a middle class income that I don’t see an English major, you know, getting any time soon.

Michael Hoffman: You know, You know that what you’re saying about the sponsors vendors being in the training business, that’s really interesting. I think an association could play the role of saying to those sponsors and vendors were gonna carve out time in this event to give you the opportunity to provide this kind of value that you’re gonna pay for, but we don’t want you just to do a commercial that doesn’t provide a lot of value. We want you to take your knowledge of your product or your thing and what it does in the world and really do some training

Howard Tullman:  And by and by the way, one would be training in. By the way, this is part of the model of every event, anyway, where there’s always the, you know, the room with the booths where you know, during, that’s where the drinks were served or whatever, and that’s where everybody goes. So I agree with you completely. The association needs to be the vetting organization, needs to be the editor, but I think so that these aren’t just commercials, and then I think they also need to be the determiner of what is really of value for their members.

You know, if there was an hour about how to effectively use Zoom or these new tools or something like that, or how do you know what’s coming? I think that most members of most associations world find that to be valuable, and they would you know, they would probably also much appreciate the ability to send in their email to get the pdf version of the power point or to connect with these people if they had further questions. So, yeah, it’s gotta be turned into something that is a combination of training, instruction, lead generation. But I think I think they know how to do it. They just done it physically before

Michael Hoffman: Yeah, I think they don’t know the tools yet. They don’t know the things. And what we’re saying is what you said, which is think of first principles. Think of the why first and then let the technology fill that in

Howard Tullman:  This is yeah, this is, you know, this is Simon Sinek, you know, who said for years, You know, what we know, the how we know, the why is really what’s most important. And when you when you reverse the order. So it’s the why is first. Then it’s easy to decide whether you want a dial in or not. You know whether the association’s providing value.

Michael Hoffman: So the last last topic, but I want to talk to you about is, is it the leadership question which is, you know, you’re running this organization, you have you might have 10 employees might have 60 employees, might have 500 employees, and they’re all at home all of a sudden, you know, your offices are closed. People are scared. You may have had to do some layoffs. What should a leader, a leader of people be thinking about right now? And how do you, you know, how do you both, be honest about how you’re rethinking things, maybe, but also keep morale up and and not be, and not scare people or not scared people the wrong way.

Howard Tullman:  Well, look, I think first of all, I think, that you have to be honest about rightsizing the organization. That’s number one. In other words, it’s not gonna do any good to keep everybody on board for a month and a half and then shut the doors. So, you know, I used to say there are no skid marks in startups.

You know, they just go right into the wall. That’s not a formula for success today. So number one is you have to be honest that they’re gonna have to be cuts and good people are no longer going to be there. Maybe we can get them back. Maybe these bogus programs where we will rehire them for eight weeks because the government gave us $5 you know, the whole PPP program.

You know, it doesn’t do much for me. but so number one is honesty about the cuts. Number two is to avoid the salami solution, which is, you know, sort of half delusion and half we’ll just do a bunch of little cuts. That destroys everything. And so you have to make enough cuts so that you can say with a straight face, this will survive. This basic organization will survive and then we can regrow or rebuild.

But first we have to survive on and I think you have to make a real commitment to providing for your people. I’ve been doing a lot, and I admire these companies that are honest enough to say, Here’s a list of the 30 people that we let go. If you have companies that are hiring in this crazy time and some are we’ve got three good marketers. We’ve got four good sales people, and here’s their contact information.

So helping the people as much as you can I think is important too, because they may come back and you may want them to come back. And I don’t know what else really you could do. I mean, you know, leaders can be, you know, I mean, you know, we don’t have any leadership at the top of this country right now, which is beyond debilitating, but I think leaders could still provide a vision.

And again it all goes back to the mission. Either what you’re doing is important and important to your people are it shouldn’t be something you’re doing. And so I think I think that’s still the job I think you have to and most of these companies, you know, that we have in our portfolio, for example.

You know, everybody’s taking pay cuts. You know, people are doing different things to try and signal that they are all part of the sacrifice. But you know one thing I said in an article about three weeks ago, it’s important for your members as well as a piece of advice. It’s easy to fire the lowest level employees, but a) there’s not much bang for the buck and b) it turns out those are, the people most connected to your relationships and your customers. So, you know, I called it throwing out the baby with the bathwater.

You better keep some of the front line troops. You know, you can lose your fourth and fifth strategic vice presidents, but you better not lose the receptionist who knows everybody’s name or the person who is the membership. you know, organizer who has taken care of your membership for years and years.

And, companies haven’t figured that out yet. They really are basically getting rid of people that they think are the least, you know, important. Then they don’t understand really what’s gonna be important as we come back

Because people are not gonna be rushing back, you know, they’re gonna have these three angsts. One is:  Am I going to keep my job? Two is, you know, is there gonna be someone there that cares about me? And three, basically, is the company that I’m about to do business with again gonna be around? and so you’re looking for comfort. You’re looking for some kind of reassurance and consistency, and that’s not the CEO’s job.

That’s not what the CEO does. That’s the people in the trenches who your real customers and your members connect with. And so it’s really important to keep those people around as well that’s a really great point.

Michael Hoffman: So, Howard, thank you so much for taking the time to chat with me today. I think the folks in my world and in our network will really appreciate, you know, you having the vision across all kinds of companies, nonprofits, public sector, universities and how all of that comes together.

Great. Well, I’m happy to do it. And, you know, I hope you stay safe and that you stay inside and honestly, you know, I think we all have to route for our governor. I mean, this is a guy (JB Pritzker) we’ve known, you know, for many, many years, And it’s an impossible job. It’s an impossible job for the mayor (of Chicago) as well. But you know we all have a responsibility ourselves and then a responsibility of the rest of the folks around us. So stay safe.

Michael Hoffman: Thank you Howard.

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