CEO Interview: Colin Doherty, Fuze

Fuze CEO Colin Doherty

Fuze CEO Colin Doherty

Colin Doherty is the new CEO of Fuze, a global, cloud-based unified communications platform. He is an experienced CEO, so it was interesting to hear his perspectives on how to approach a new CEO role and why understanding the company’s situation is key. He also had great advice about having the nerve to make changes sooner rather than later, focusing on all areas of the business rather than just your strengths, and why thinking you need all the answers as a CEO is a non-starter.

How did you get into technology?

Colin: I got a general business and marketing degree and then moved to London where I started working in the technology sector. What attracted me to tech is that it’s constantly changing. I didn’t want to stay in one place and become a doctor or lawyer or something that had a fixed pattern or set of drivers that didn’t change. Tech was what interested me.

When was the first time you thought “hey, maybe I can be CEO of something?”

Colin: I remember working in a very large organization. There were several challenges and problems, but no one was stepping up. The big picture didn’t make any sense to me. No one was saying, “let’s focus on these three things that we’re good at.” At that point I moved in a direction towards making decisions on the bigger picture as opposed to staying in a certain silo. That was the late 80s, four or five years after I was in London. That was the first move towards general management as opposed to a specific functional role.

When did you get your first opportunity to serve as CEO?

Colin: My first opportunity arose about 14 years ago. After working for Nortel for many years as the GM of a large business unit I moved to be CEO of a company called Mangrove Systems, which was a start-up in the carrier network space. There were three or four VCs on the board. It was a really good experience of getting out of a big company into a small company and looking at how decisions impact burn, R&D, direction, market, sales growth, focus, and things of that nature. Working with a VC board first-hand was a pretty interesting experience as well.

Were you a sales-oriented executive or did you have a more general operational background before taking the CEO role?

Colin: I started in product and moved to sales and on to general business management. The only function I didn’t come up through was R&D. I’ve been around tech my entire career and I understand it, but I’ve never been a software programmer or developer. It was more the business model, finance, sales, go-to-market, channel, financial model, M&A, partnering, etc. I try to focus a lot of my time on areas that are not my preference. I spend a lot of time looking at the R&D model, because that’s not where I came from. I would view that as tougher homework for me. It’s important to drag yourself to those areas as opposed to focusing on the things you like doing.

From the day you first started as a CEO to now, how has your management philosophy or approach changed?

Colin: I think when you start those roles you feel a tremendous amount of pressure to know everything and have all the right answers. As you evolve in these roles you realize that’s not necessarily true, and that’s why you have a team that’s working with you. I don’t believe that people work for me. I view that I work with them. I find that’s a better approach and pattern.

When you take a new job in any role, if you are honest with yourself, there’s a certain amount of insecurity that comes with that. Can you do the job? Are you going to be effective? Are people going to view that you are capable of taking the role on? That can drive some behaviors that maybe aren’t as balanced as you’d like in the early days. When you start to learn that you don’t need all the answers but you need to find the right answer as the team, that’s when you start to hit your stride as the leader of the organization in many ways.

Do you remember any particular event or problem where you had a success as CEO and you thought “hey, I feel comfortable now, I think I can do this job?”

Colin: One of the early challenges in one company was that the revenue was pretty good and the margin was great, but we had a bit of a cost problem. We had too many people, and I began to wonder if everyone is hugely effective. We ended up looking at the organization and the next 24 months and asked, “do we have the right people for that journey?” Or, had we had the right people for the prior 36 months? We had some legacy scale that didn’t make sense.

The nervousness was making a move and changing that out. We did it, and we didn’t miss a beat. There was more energy in the organization because of that. That was one of those moments where you realize okay, sometimes you have to make a change before you think you need to, as opposed to waiting for it to be obvious. That was a motivational thing. We realized that was a reasonably good call. We can make a difference here and move forward.

Do you do anything to teach your team – new executives in particular – how to work with you?

Colin: Yes, the thing I’ve always said to people I work with or who report in to me is: “Tell me what you really think, don’t tell me what you think I want to hear.” If you think something’s broken or we should be heading in a different direction, or we’re doing something that looks obtuse or odd, let’s talk about it. Let’s understand what both parties think here, and if we’ve got energy in the same direction.

When you come into an organization, as you know, you don’t necessarily have all the institutional knowledge that everybody else has. I try to listen an awful lot and draw conclusions instead of impose thoughts on a model that I don’t understand initially. I try to encourage an open dialogue, if you have a better idea than me, great, let’s do that. I don’t have a monopoly on good ideas. I’ve got a few. If you can exercise the broader machine as fast as possible, that’s always a good thing. It’s about transparency. You’ve got to have people feel comfortable sharing ideas and perspective on where the business should move and why.

There are a couple of different philosophies when you take over as CEO. You’ve had that experience several times, so I’m curious how you think about it. Some spend a lot of time listening before they make any changes because, as you say, they lack institutional knowledge and don’t know where all the bodies are buried, etc. Others come in and start making changes immediately, because they were hired to change the way the organization is run. How do you balance those two competing ideas?

Colin: Good question. I think every business is pretty different. That’s why I find these roles fascinating, because it’s not always the same situation you inherit. Fuze is a massive, high-growth company in the tremendously attractive UCaaS (Unified Communications as a Service) space in the cloud. As you go back and look at the business models of every company, I think there are four things that are generally consistent. One is the R&D model: What’s sustaining the company? What’s innovative? How does that market work? Is it agile or waterfall? What’s the quality of the organization? That’s a huge chunk of the revenue percentage. You may be spending 18 to 25 percent on R&D. That’s a big inspection point.

Second, then you’ve got the sales/marketing/go-to-market model. What does that look like? How large is it? Is it channel? Is it direct? Is it third party? Is it distribution? Is it reseller? Is it software license? Is it a SaaS model?

The third piece is the organization, the talent, and the culture of the company. How many people do you have? Where are they? How balanced is it? What’s the experience set?

The fourth thing is what market are you in? Where do you play? Who do you compete against? What does success look like, and is the view going to be worth the climb when you get there?

These are the four consistent things that exist in any company. What I call the “heat map” is different depending on where that company is. It may be that you have a go-to-market problem in one company. It may be that you have a decent product but the market is not great in another company. That’s when you start to figure out where the pressure points are and what to focus on first in order to get the biggest change in result.

Did you inherit a team at Fuze or did Fuzeyou bring in your own people?

Colin: It was done for me. Steve Kokinos, who is now the executive chairman, had been the founder and CEO since 2006. He is a really, really talented guy who started a lot of companies and has been very successful. He is a big product evangelist on UCaaS cloud. The board along with Steve hired a new CFO, a new legal counsel, a new chief people officer, and a new worldwide service delivery executive. I was hired at the end of that chain about six weeks ago. I’ve inherited a good team and good model. The board is very experienced. The question now is how do we tune the operational model and scale this company for a public offering.

That’s great. Most of the time the CEO is brought in because someone thinks there’s a mess to clean up. Sounds like you got a good one this time. 

Colin: Exactly. Sometimes these can be billed as turnarounds. I’ve done a couple of those. This is not a turnaround. This is a growth/scale opportunity in the truest sense. The market for Fuze is probably $40 billion total addressable market. It’s hard to pin down, but there are 400 million enterprise handsets out there in PBX land in businesses that need to be turned over. That’s a huge opportunity for us.

Speaking of the market, what trends do you see that other CEOs need to be aware of in communications? 

Colin: I think the workforce has changed dramatically. If you go back 10-15 years ago everyone was punching dial pads and seven-digit dial-in codes and sitting on conference calls. There are 2.5 billion millennials in the workforce today. They never talk to anybody. They never pick the phone up. They’ll text, chat, Snapchat, Instagram. They’ll do anything but pick the phone up. So the communications message to CEOs is, your workforce has changed dramatically. Nobody has a desk phone with a four-digit extension that anyone can remember anymore. That’s the UCaaS cloud market we’re after at Fuze where people want to connect on messaging, video, audio bridges, group chat, mobile apps, desktop apps. It’s a very different world. People want to communicate in a more mobile and casual way than punching a PBX and putting in a four-digit extension code. CEOs have to be aware of the mobile, millennial nature of the workforce. It’s a 24×7 world, and making people as effective as they can be through technology is a huge asset to any business.

It’s certainly an exciting market you are in. What else do you want to share about Fuze?

Colin: As I join the company I think there is a huge move of depreciation of 15- to 20-year-old PBX systems being retired for more cloud communications like Fuze. It’s the conversion of these systems to cloud communications and methods of communications such as video and collaboration. With Fuze we can retire five to seven apps in a common enterprise and clarify the IT way forward. We make a complicated situation very simple and very usable. It’s a huge value there. The company grew 90 percent on bookings growth last year and signed about 449 new customers. We now have about 1,500 customers in 38 countries globally, and 90 percent of those have international operations. It’s a great model and huge opportunity ahead of us. Our challenge is prioritization and focus as opposed to widening the lens. There are so many things we can do but a few things we really need to execute on. It’s a really exciting market.

|11 Apr 2017

CEO Interview: Kevin Hrusovsky, Quanterix

Kevin Hrusovsky is Executive Chairman and CEO of Quanterix, a company that’s digitizing biomarker analysis to advance the science of precision health. He has more than 25 years of experience in the life science space, mostly as a CEO. He discussed with me how he got his first CEO job, including how his dual engineering/MBA education prepared him for the role (read on for what Kevin says his MBA program did NOT prepare him for). He also explained how he gathers input from across his organization and the importance of having a greater purpose as a company.

Kevin Hrusovsky

Kevin Hrusovsky, CEO, Quanterix

Most people had a plan when they went to college. What did you think your career was going to look like?

Kevin: I always felt that I would try to use an engineering degree to get into technology businesses. I also planned to get an MBA so that I could play a more influential role in managing high-tech businesses. What’s interesting is that I was a mechanical engineer but I ended up joining DuPont, a chemistry company. I was somewhat out of my element. It’s telling that as I got into it, I realized how much I didn’t know. I felt that all my time was a lot of learning about chemistry, which wasn’t what I was trained to do.

Do you remember a moment when you first thought of the CEO role and your interest in pursuing it?

Kevin: I spent nine years at DuPont. When I started out in the engineering program, it was a rotational program. I would spend two years at one location and then move to a new location. There were circumstances that put me in different positions every six months. I found that very intriguing, because I was learning so many different things so quickly. Even in my second two-year assignment, I had four different positions because they needed help in certain areas. I was learning more and more about probably less and less.

A plant manager at my first site went into running businesses at DuPont headquarters and invited me to move from the engineering program to a product management position. That was my first time to be on the commercial side. I had just gotten my MBA. It was interesting to learn how the actual business ran as opposed to the science and chemistry part of it. That was when I could see my career evolve into a broader business management responsibility.

That’s pretty common to get an engineering/MBA degree combination. Looking back, do you think that’s the right combination for somebody who wants to move into the CEO role at some point?

Kevin: Yes, with engineering you never know everything there is to learn. It teaches you how to learn. That’s what I concluded more than anything. I think engineering is a great way to become technically oriented and plus learn how to learn. The executive MBA exposed me to a lot of other people and companies. It was a great way to get introduced to a broader position and what the possibilities were.

Did you take any courses that were particularly valuable, that maybe you didn’t think were that useful at the time?

Kevin: In the executive MBA, you do work in the job you are in. I enjoyed marketing and strategy due to my product management role. I remember even bringing in some of the teachers from my MBA to help teach my team some of the critical things about strategy and marketing. I would say that as time went on, finance ended up being an area that I really appreciated and probably didn’t appreciate as much at the time. Learning about finance was very important. What they didn’t teach me in my MBA, interestingly, was much about team building or interpersonal relationships or building culture. To me the most important aspect to growing disruptively is forming strong teams.

What was your first chance at the CEO job and how did you get the role?

Kevin: I got my first CEO position in 1996 with Zymark Corporation. Having spent so much time at DuPont, I learned so much about leadership and how to inspire and motivate teams. From there I want to FMC Pharmaceuticals, where I was GM in a very autonomous business unit. I had all functions reporting to me, so I acted somewhat as a CEO inside of a company. A former employee at FMC recommended me for the Zymark CEO job.

Kevin Hrusovsky, Quanterix_Logo_RGB_ColorA lot of CEOs get surprised by things that are going on in their organizations. How do you keep touch with what’s happening on the ground at your company? 

Kevin: I would say three things here: One is that I try to surround myself with people who care about people. If you do that chances are you are going to learn a lot from people who are willing to share. If not then you are asking for a major issue of not learning some critical information that is relevant. Second, I try to conduct a lot of employee meetings to provide perspective on what’s working and what isn’t working. We create dialogue during the meeting but also after the meeting by sending out letters asking those who participated questions about how the meeting went and what questions they might still have, etc. Third, I also do everything I can to reach out to customers directly, either with our sales people or calling them directly. Many times I learn things from the customers about what’s important and what isn’t. That is a vitally important component to the types of businesses I run that are growing, disruptive technologies. I keep those lines of communication flowing fluidly and at a high cadence.

You are in the medicine/health area. What do CEOs in other industries need to pay attention to these days?

Kevin: I would say that having a greater purpose is paramount. I think businesses moving forward need to give back more than they take or they won’t be sustainable. The next generation is very focused on sustaining the globe. You need to be bringing some benefit to society. Honing in on what inspires a greater purpose in your business is going to be necessary for pulling in some of the best talent in the world. No matter what sector you are in that’s very important. Also, there’s a revolution of digital technology that’s been going on for the past 25 years that is transforming at a very rapid pace in every sector of business. You need to be very honed in on whether or not digital technologies can play a role in helping you manage your business better or further enhancing your products that you sell.

Any other advice for CEOs?

Kevin: Having the willingness to bring people into the business who are more capable than you and to learn from them is also vitally important. I’ve been blessed to work with a team of people who are incredibly capable. Many have worked with me throughout my career. Anything you can do to make sure you recognize and attract the best talent in the world, it’ll lead to the best businesses in the world. Most of the focus that I put on any business is the people and what can we do to further inspire them as well as our customers and board members. I have a belief that you have to inspire and measure to a level of 10: Do you think your employees are highly motivated and inspired to a level of 10? Do you have customers who feel that you are bringing so much value to them that they are inspired to be working with you to a level of 10? Do you have investors who understand what you are doing and believe enough in where you are going that they are inspired to a level of 10? All three of those groups should be at a 10, and anything you can do to bring them together is a key piece of our formula. Each year we run summits and invite employees, investors, and customers as a way to further inspire each of those groups together. It’s a way to make them feel united, motivated, and inspired.

|28 Mar 2017

CEO Interview: Kon Leong, ZL Technologies

Kon Leong, CEO, ZL Technologies

Kon Leong, CEO, ZL Technologies

Kon Leong is the founder and CEO of ZL Technologies, the leader in unified information governance and analytics for the large enterprise. During our interview, he pulled no punches about the role of the CEO and how you should prepare for it. 

When you finished your schooling what did you think you were going to be? 

Kon: I mistook my education as the thing that should provide vocational direction. In undergrad I studied sales and IT. Also while in college I started several of my own businesses. Instead of doing what gave me the biggest satisfaction in my career choices, which was starting businesses, I did the lemming thing and followed the group. I went to Wharton, got my MBA in finance, and then went to the hot space, which was investment banking. I then gravitated towards the hottest of the hot, which was M&A and especially hostile takeovers. I spent about 10 years on Wall Street to my eternal regret. I could have invested those 10 years in Silicon Valley and high tech.

What caused you to make the change? When did you decide the banking world wasn’t for you?

Kon: I returned to my state of insanity and said I want to do what I love as opposed to what makes me the most money. Which of course rather perplexed my wife: It involved almost a 90 percent whack in compensation. As I mentioned, I should have gone straight to high tech. That was my original love.

Did you found a tech company first? How did you get in?

Kon: This is my third company. I’ve done a bit of a serial thing. I started a bank when I was a full-time student in college. For me forming a company is like falling off a log. Back in college my first one was a variety store/tobacconist. The third was a delicatessen open 24 hours. Forming companies isn’t a big deal; It’s more about how you pick your battles.

Did you take anything out of investment banking role that helped you?

Kon: Yes, focus on the cash, cash, cash and not so much on the GAAP results. That one is very, very important. That of course requires a very strong understanding of accounting. For all those who want to get a Masters/MBA, I suggest focusing on accounting and finance. It’s a building block: That’s how you read the blood-flow of a biz. If you don’t have that stethoscope, then you are in over your head.

Anything else you’d suggest for training for a CEO?

Kon: Yes! Ask yourself: “Do I really want to be a CEO?” If you think that’s really sexy, try to be parent to a teenager. That will give you a taste of being a manager. Parenting a teenager is similar to being a CEO because it provides you with perspective into dealing with irrational situations and gives you a glimpse of the patience required to succeed.

I see you’ve also been a serial entrepreneur {to Joel}. You and I know everyone is taken up with the sexiness of being a manager. But very few understand the responsibilities that go with it. The babysitting. The handholding. The nurturing. They just look at it like, “Hey, I can be a drill sergeant and bark orders!”

Yes, they have a fundamental misunderstanding of what the role of the leader is and can be in an organization. 

Kon: Yes, and that takes a bit of time to sink in. A lot of people who have been teenage parents get it. The younger folks don’t, so I still have to teach them.

ZL Tech Kon LeongHow do you drive that cultural aspect through your organization?

Kon: I have a simple metric in terms of measuring managers: If you think you can be a good manager, then deliver me this. No surprises. That task is more challenging than many realize.

It’s much more difficult to deliver predictable performance. Sometimes you get lucky, but predictable performance is the ideal.

Kon: I say to good sales people: Deliver no surprises. It’s not about win or loss. It’s no surprises.

Let’s say you have a few minutes to tell a new employee what you do as CEO. What do you say?

Kon: I try to bring the best out of the folks involved. In that process I try to map two circles. One circle being: “What are you really good at naturally?” The second is: “What do you love doing?” Hopefully there is an intersection. My job is to bring out that intersection.

How do you get feedback as to what’s going on in your organization? Do you have primary sources or methods for that?

Kon: Usually one-on-ones but that is logistically gated by the number of hours in the day. I tend not to have more than six or seven sources of touch points or data. Hopefully, from there it cascades downward so there is a tributary of data going up and down.

How many employees do you have and are most centrally located?

Kon: We have 110. Most are in California except for ones who need to be remote (such as international sales). We started a branch office in Hyderabad, India for support and QA. Core R&D is still in our headquarters. I haven’t seen it work well for R&D to be dissipated.

Do you do anything to make sure your various teams are working collaboratively with no silos?

Kon: The silo part is always inevitable. How you de-silo is a constant effort. As an organization gets larger, the tendency to form siloes is even greater. It’s a constant battle. If you are not constantly battling silos, something is wrong and they are forming without your knowledge.

Do you spend a lot of time talking about your mission and vision?

Kon: Yes, although sometimes it’s hard to see the true impact. It’s a bit of a non sequitur. I struggled with that for some time until I had a bit of support from something I read in the public domain about two months ago. Someone asked Peter Thiel, who obviously is known for investing in big plays, this question: “How do you know when you invest that this is a game changer?” What he said resonated with me: “That’s when the company finds it very hard to articulate what they are doing.” Which is counterintuitive, but it absolutely resonated. When it’s a true game changer, it’s like explaining cell phone service to a cave man.

Are there any trends you are seeing in your industry that you think CEOs would be interested in or relevant to them?

Kon: Yes. In terms of our vision, we talk about it but no one’s gotten their arms or head around it. The biggest asset of any organization is data and information. While many understand the value of data today, action remains to be seen. Being able to truly manage data for risk and mine analytics is what I consider the second coming of IT. The last six decades were spent in mastering systems data/structured data (dollars, zip codes). The next generation will master unstructured info/messy textual data/Word/PowerPoint. That’s the stuff that humans produce. If you can control that end you’ve basically gotten the key to the human dynamics in your organization.

When we articulate specific, detailed use cases and stakeholders recognize the potential impact of our technology, they almost always respond by perking up and saying, “You can do that?”

Major corporations are already paying the price for litigators, regulators, and more. We argue, that if they’re already spending the money, then why don’t they leverage an overlay of analytics? When that happens, the stuff corporations can answer is mind-boggling. We’re essentially able to provide a rewind button like in the sports field and in a crisis you just press the button and all the information gets collated, analyzed and delivered to your desk in a few hours. This technology becomes essential in the event of a crisis.

Take a CEO for example. He could be interested in what’s happening with the human dynamics. Let’s say he did a big acquisition and spent billions. Quite often it fails and the CEO is in the hot seat. Most of the time the finger points to post-merger integration. You could map all the human dynamics and map the hot spots. Figure out all the communications happenings with some spots lighting up and some dark spots. Failure is happening in the dark spots. You can fix it before it becomes an issue. What’s it worth to the CEO?

The impact of this technology goes all the way down to the lower level managers. In an interesting case one organization’s managers wanted to identify “TSTPs” (Same Ten People). The idea is that the same 10 people are doing all the work in any given department. It seems to boil down to that in many organizations. It’s not very difficult to identify them. Each organization is so different, but it’s very simple: Track communications patterns. People who are doers will have a certain pattern. They are the go-to people. If you analyze their communications, these people light up like Christmas trees. Some of them may not even have the proper titles. In that case, you better be rejiggering your organization.

Are there any roles or training you recommend for a prospective CEO?

Kon: I very, very highly recommend, in fact exhort, all budding entrepreneurs to take on mentors who have been serial entrepreneurs. It is so much easier to have the pothole explained than having to go over them.

|07 Mar 2017

CEO Interview: Shawn Jenkins, Benefitfocus, Part 2

In this second part of our conversation, Shawn Jenkins of Benefitfocus discusses how he overcame some hard times in leading a growing business, what surprised him most about becoming a public company CEO, and some advice for CEOs regarding benefits. 

Benefitfocus CEO Shawn Jenkins

Benefitfocus CEO Shawn Jenkins

You started Benefitfocus in 2000. I also started a company in 2000, so I know that was a rocky road. You were 18 months in when September 11 hit. How did that transpire for Benefitfocus?

Shawn: It was a difficult time. We started a dot-com in June of 2000, which was three months after the NASDAQ crashed – post the dot-com bubble burst. And there was no venture capital. Also, we started in Charleston, which at the time wasn’t known as a tech center, although now it is very special and has a lot of innovation around technology going on. Then came 9/11 and the recession that followed. It was a difficult environment, but it made our company much better. We raised very little capital but became profitable quickly. We had to create products that people actually bought and paid for. It instilled in us a sense of thrift and discipline and that we’re going to do it against all odds. This is still a big part of our DNA. It’s a very healthy approach as we reach new milestones and create new opportunities for our customers and ourselves.

Were there any near death experiences along the way that you had to manage through?

Shawn: The first few years on the job were extremely stressful, especially managing cash flow. But we’ve never missed payroll for 16 years now. Although there were some days leading up to payroll that were pretty tight. Around Christmas we were getting ready to make our first payroll in 2001 but we didn’t have the money leading up to the end of the year. We were able to make a few sales and had a small investment come in from a friend and family round that covered almost to the penny that first payroll. It taught me that perseverance and having these friendships and relationships is critical. Business takes a good deal of faith. If you keep moving forward, those things tend to work out and make you better and stronger in the long haul.

You made a transition that not many people get to go through, from founder to private company CEO to public company CEO. What have you found that surprised you? 

Shawn: I’ve really enjoyed it. Becoming a public company has a layer of cost and complexity. But as a software business we’re building a large platform to manage all benefits in the U.S. and eventually globally. We felt that becoming a public company was good for our associates, especially for compensation and the ability to pay people in stock. It also gives us the ability for larger and larger customers to see the company emerge. The plan worked well. We went public in 2013 and had an extremely successfully IPO. I’ve enjoyed the additional people I’ve gotten to meet and the ability to scale to deploy capital and build our business.

The surprising thing for me is that our original values and culture is every bit as alive today as when we were smaller, even though we are different and bigger, with more than 1,450 employees. My ability to talk about culture and invest in values and fan that flame of creativity is better as we’ve grown, because we’re attracting more people. It’s legitimized the ideas we’ve had. People said it would be the opposite: That going public would harm the culture. It’s like raising a teenager: You would not want to stop them from growing. You want to let the company be all it can be. It’s been fun.

Your area of benefits is of interest to our audience. Do you have any advice for CEOs in other industries about how to think about benefits over the next few years?

Shawn: It’s an extremely exciting opportunity in front of us as a corporation. It might be the first time in human history where we as a society have created a social contract between an employer and an employee. When something bad happens and you cannot work, your employer will have prepaid or funded benefits. That’s your safety net. That safety net has come under question or speculation. About 30% of compensation is spent on benefits. U.S. employers spend $1.6 trillion on benefits. This is a huge investment, and it’s been frustrating for all. I would say to the American CEO: Spend time learning about great innovations happening inside benefits. Look at what can be done with data, analytics, and technology through a company like Benefitfocus. For example, you can get great benefits into an employee’s pocket via mobile technology. Unlock your bragging powers: You are providing all these great programs and a whole host of new ones coming that are flexible and personalized. Getting the right benefits to employees and their families is a huge opportunity for CEOs. Spending more time understanding it and leveraging the benefit of benefits will be terrific for attracting and retaining the right type of people to be successful.

Anything else you’d like to add?

Shawn: I’d encourage other CEOs to think about how their company can be used as a platform for good. One example: In Charleston, our local state medical university is building a new children’s hospital to replace one built in the 80s. My family and company were able to get substantially involved in that. We are also involved in programs in the community for youth, healthcare, and the environment. CEOs have a really wonderful opportunity in the next decade to use their platforms (both personal and corporate) to unlock this social good. Historically that might have been called philanthropy or corporate giving, but now it’s more about time and attention and talking about how we use our business and our careers to help people. That has a tremendous positive economic impact for the company. You can do it for the right reason and also to make your company more attractive to people, which will be economically good for everyone.

|07 Feb 2017

CEO Interview: Shawn Jenkins, Benefitfocus, Part 1

Shawn Jenkins runs Benefitfocus, a leading provider of cloud-based benefits management software. In this two-part interview, he spoke with me about his journey as a CEO. In this part, he discusses how he became a CEO via a nontraditional route and developed his approach to the job. In part two, he explains how he persevered to take Benefitfocus public in 2013. He also has some insight for CEOs into the current quagmire of benefits.

Benefitfocus CEO Shawn Jenkins

Benefitfocus CEO Shawn Jenkins

What did you think you wanted to be when you finished school?

Shawn: I always knew growing up that I wanted to have my own business, and then I wanted to be able to fly my own airplane. I loved airplanes. I actually graduated with an aviation set of certificates and became a commercial pilot and flight instructor. I had some business schooling as well. I didn’t know what type of business I wanted to run but I did not want to be a pilot for a career. I simply love to fly. I felt like if I did well in business that I could pursue aviation on a personal level.

How did you get your formative business experience?

Shawn: Like many business folks I went through a series of trial and error. For my first job out of college I went to work for a nonprofit organization. It was a mission group that sent medical teams into third world countries. We’d organize doctors, nurses and supplies and set up temporary clinics. I was able to coordinate teams and do a good bit of travel myself. For four or five years I really learned a lot about people and fundraising, motivation, service and servant leadership. I watched firsthand how successful people like physicians and business people could use their careers for good to help people in difficult situations around the world. That early experience, although not traditional business, formed in my mind a view of what a business could be and how it could be used for a platform for good. This includes building great products and great wealth creation for all associates and providing for their families. Even more, it’s how businesses can have a social mission.

That was a very nontraditional route to being a CEO. What advice do you have for people who take that route?

Shawn: The advice I give people now out of school is if you can take even six months or a year, go and serve people. It gives you a good grounding of how the world really works and what opportunities are out there to not only use our careers for personal advancement but also to help other people.

As I wrapped up my job at the nonprofit organization, I still had the idea of wanting to have a business. I went through a series of self-taught sales trainings, and I purposely set aside two years to look for sales jobs. I wanted to figure out how to sell by immersing myself in a sales role. I also knew it would help me find out how to hire people who could sell if I had a business someday.

So you developed a functional expertise in sales?

Shawn: Yes, and in the process I discovered my business passion, which is software development and design. I met my partner Mason Holland, and we eventually started Benefitfocus through that work. Success is a combination of learning and getting experience but then also meeting the right people. Forming the right friendships and early business partnerships is critical. I certainly wouldn’t be where I am today without them.

Were there one or two who were particularly influential in your business thinking?

Shawn: The nonprofit I worked for really shaped how I think about creating cultures. At Benefitfocus we put a lot of focus on culture and values. We publish books on it and have a whole series on training. My early experience in helping people be successful as well as this idea of servant leadership really was profound. It stuck with me through software engineering and sales and through my journey of starting companies and growing businesses. That was very fundamental and remains a key part of what our company has become.

You’ve mentioned the idea of servant leadership. New CEOs are often surprised that they don’t have quite as much power as they anticipated. I often say you can only fire people once and it usually doesn’t solve the problem you have. How do you explain that to CEOs?

Shawn: I often quote Zig Ziglar: “You will get all you want in life, if you help enough other people get what they want.” As a CEO we’re in the business of helping people get what they want. At Benefitfocus we have a great culture and are attracting a lot of talented people on a national scale. We’re saying, “Come be part of a team where you can be successful. You can use our company as a platform for good and to achieve your own personal goals.” We say to our software designers and engineers: create great products that make our customers successful. Help them achieve their goals and in so doing, we help more people become successful, then our company becomes wildly successful. Ultimately that helps me be a successful CEO.

Check back next week for part two of this interview!

|31 Jan 2017

Top 10 2016 CEO Blog Posts

Of all The American CEO blog posts I published in 2016, here are the most viewed. Clearly, people like to hear from real CEOs, so three of my CEO Q&As made it to the top 10. The other articles focus on a variety of advice and information for CEOs, from the need for leadership training to how to identify a fake expert to the importance of branding as highlighted by the Presidential campaign.

Interestingly, my most viewed post of all time is the “5 Responsibilities of a CEO: Own the Vision” article. The job of the CEO continues to be a mystery to some, which means my work is still not done.

Here are the top 10 CEO blog posts in order of views:

professional development CEO blog1. We Need Better Leaders: Own Your Professional Development: In this article I list the reasons why the need for leadership training is greater than ever. While it may be true that the only real way to learn the CEO job is via experience, there’s no excuse for going in unprepared.

 

2. CEO Interview: Jim Whitehurst, Red Hat, Part 1: I began a series of CEO interviews this year and was lucky enough to talk to Jim. He is one of the few CEOs I’ve spoken with who has given serious thought to a CEO methodology. His insights about going from managing a staff of 80,000 as COO of Delta to 2,000 when he began as CEO of Red Hat are fascinating.

3. CEO Interview: Ray Bixler, SkillSurvey: Ray discussed how he handles several common challenges facing CEOs, including the isolation and balancing internal and external constituencies. He also explained how he has changed his management approach as SkillSurvey (cloud-based reference checking technology) has grown revenue and added employees.

4. CEO Interview Series: Fred Goff, Jobcase: Fred described how he went from working in the investment community to starting his own data-intensive company (a sort of LinkedIn for people without college degrees). He also offers advice on employment trends that CEOs should look out for and manage to, including rapid turnover: “Focus on retention-hiring, not filling seats!”

team building

5. Team Building Core to CEO Success: I’ve always thought we shortchange our students by grading them almost solely on individual performance. Then, when they become leaders in the workforce (granted largely due to individual effort), they are judged almost exclusively on their ability to build and influence teams. This is one reason why leadership training is so important (see #1 above).

6. The Expert Conundrum or How to Spot a Blowhard: CEOs need a dose of humility and practicality to get things done. They have to rely on experts. Judging those experts is sometimes difficult, but in this article I present a test that will ferret out the fakes.

Donald Trump brand promise7. Brand Promise, or Why Trump & Sanders Are on Fire: I published this back in March. Looking at the voters as consumers, I knew that the candidate with the strongest brand had a good chance to win. Trump had a big advantage in this area, as the results showed.

8. Leadership Development’s Most Underused Tool: They say that those who cannot do, teach. Really it’s the opposite: Those who seek to “do” must teach. It’s the best way to internalize and really learn something, plus it’s a great way to hone critical communication skills.

9. First-Time CEOs Not Prepared Says CEO Study: Earlier this year The River Group conducted one of the most in-depth studies of first-time CEOs that I have seen. Their results are extremely insightful, with practical guidance that all CEOs should follow. One of the most interesting findings to me is that the CEOs they interviewed felt much more prepared on day one than they did six months later.

frugal not cheap10. Teach Your Team to Be Frugal Not Cheap: It’s easy to be cheap by instituting a blanket moratorium on spending. It’s more difficult to be frugal, but it is better for the organization in the long run. Read my article to understand the difference.

|21 Dec 2016

How to Prevent Budget Tyranny

This column on how to balance the budget with the business was originally published on Entrepreneur.com on July 13, 2016. It is especially relevant now as people prepare their 2017 budgets.

budgetHow do you turn smart, well-intentioned employees into by-the-book automatons? By forcing them to make decisions based solely on the budget. Unfortunately, in some organizations the budget is the only tangible guidance that employees have. When the budget becomes the business bible, it will guide every decision, inhibiting your flexibility and competitiveness.

Here are four ways to align the budget with business objectives. This will help employees become more adaptable in a dynamic environment, exploit opportunities as they arise, and ultimately make the best choices for the business.

1. Give executives and leaders the final say on the budget

Empower your operating executives or leaders to have the last word on budget development and compliance, not the CFO. Your staff must consider any significant spending decision by whether it advances the goals of the department or division and the company as a whole, not just how it compares to a plan. Budgets are static, but business changes on a daily basis. A document written months before can’t possibly predict all the pitfalls and opportunities that will arise.

2. Instill the company vision and goals

Of course, decentralizing power over the budget is not enough. Employees have to know what you are trying to achieve before they can make good decisions. In the absence of other guiding principles (or a vision/mission they don’t understand), the budget will still guide every business decision. Ensure that employees fully grasp the company’s and their department’s overall strategic objectives as well as how their individual job contributes to achieving them.

3. Regularly measure the performance of every group

You get what you measure. If the only consistent feedback your managers receive is whether or not they are meeting their budget, they will manage to it and not the business. Instead, work with your direct reports to create metrics that reflect performance specific to their areas and support company goals. Then, consistently measure them on these metrics to cultivate a culture of high performance.

4. Constantly push on the budget

Ask these two questions of your managers regularly: “What would you do if you had significantly more money to spend?” and “What would you do if you had significantly less money to spend?” These two questions force managers to consider the cost/benefit tradeoffs necessary to dynamically adapt to an ever-changing business climate.

At the beginning of any given year, you may not know what resources will be available six months later, especially if you are a fast-growth company. I have seen managers suddenly receive a windfall and spend it poorly, because they had no plan. I have also seen managers forced to get by on significantly less, yet deliver close to the same productivity.

At the end of the day the company that delivers the most productivity for a given unit of capital will be the most successful. The CEO must constantly force the organization to make spending decisions in this business context instead of based on numbers in a spreadsheet. Cheaper and better is often possible, but only if better is clearly defined.

|06 Dec 2016

CEO Interview: Tom Galvin, Razberi

Dallas-based Razberi makes video surveillance appliances for corporations, public infrastructure, and school systems that want to deploy a high quality networked security system on or near their various locations. I had the pleasure of speaking with CEO Tom Galvin about his transition from an engineer to a CEO, how his role has evolved as the company has grown, and what security issues CEOs need to be worried about (that they aren’t already).

Razberi CEO Tom Galvin

Tom Galvin, Razberi CEO

I see you have a degree in electrical engineering from Iowa State. What prompted you to go back and get your MBA?

Tom: I was inspired by my father. I told him that I was going to enroll in grad school to get a master’s degree in engineering. He said, “That’s fine, but you should consider getting an MBA to round out your education. You can learn more about engineering in your job.” In hindsight that was the best advice I ever received. I went into business school not knowing how to read a balance sheet or really anything about finance. It was a great education for me to get that business degree.

When did you realize you might want to be a CEO someday?

Tom: Honestly as a young engineer I never really aspired to be a CEO. My first job as an engineer was at Boeing. Being a young engineer in such a large company, the CEO position seemed a long, long way from me. What I did aspire to was starting a tech company, and I always had an interest in being an entrepreneur. Becoming a CEO at some point was really just a result of founding a company.

RazberiWhen did you start Razberi?

I’m a late bloomer in terms of being an entrepreneur. I continued to work in management positions, managing engineering and product development in large companies. I never really found the right opportunity to start a company. Then I ended up taking a leap as an entrepreneur and founding Razberi five years ago in 2011 in my 40s. It’s been a great experience, and I’ve never looked back.

How has your approach to management changed and your role as CEO evolved since you started the business?

That’s a great question. This has been very interesting to me. We started with limited resources. Out of necessity, all the founding employees of our business wore multiple hats and had multiple responsibilities, including myself. It was a very hands-on job for me. As a founding CEO in the early days the focus is on getting a company established and surviving.

As the resources in the company increased through fundraising and revenue growth, it has allowed me to bring on a strong management team. My role has become more strategic and in a good way. Now I spend more time looking at where the company needs to be six months from now, a year from now.

And the other role that’s changed for me quite a bit as a first-time CEO is learning how to manage a board of directors and investors. How to keep everybody aligned as we move in a strategic direction. That’s a new element that I didn’t have to worry about before. It’s been a real growth opportunity for me.

What resources have you used to try to improve yourself in the CEO job? As you said, with the technical jobs it’s often pretty easy to know how to get better. How have you found that in the CEO role?

Good question. I think a pivotal moment in the company was the decision we made 18 months ago to raise capital so that we could have the resources to grow faster. In that process I approached someone I had worked with in the past who became my mentor. His name is Ken Boyda, and he is a former retired officer of General Electric. I worked in his organization at one time and approached him because I didn’t know how to raise capital. Ken, to his credit, took me aside and introduced me to some venture capital firms, and guided me in that process. The net result is we had our First Series A capital raise in late 2014 from Live Oak Venture Partners. As part of that process, I asked Ken to join a new board of directors that we formed, and he has served as our Chairman of the Board ever since. I talk to Ken several times a week. He’s been a great mentor to me as I’ve evolved my role as a CEO.

Is there a corporate culture that you’ve tried to push at Razberi consciously or has it developed over the years?

I think it’s a little bit of both. I’ve tried to emulate a culture and attitude in the company. We are very customer focused. We work hard. We have a high level of integrity in how we do business. I think that is reflected in the employees that we’ve been able to hire as we’ve grown. That culture really permeates everyone we work with as well. We have customers that are very loyal to our business.

I was very fortunate in the founding employees I recruited to the business. They walked away from good jobs to take a risk with Razberi. All those founding employees are still here. They emulate the culture. As we bring on new employees the culture instills in them in the right way. We have a very positive culture, with very low turnover. It’s a tribute to the employees that we’ve hired.

How do you find out what’s happening on the ground in your company? What’s your source of operational information? 

I stay in touch with our company leaders daily. In addition, we have several structured operating rhythms to gauge our progress at Razberi. Our weekly operations meeting is used to review customer orders, customer calls, and weekly production. Our monthly sales review includes a report-out of monthly goals and customer engagements from each sales leader. Our weekly leadership meeting reviews our progress toward quarterly goals in each functional area of the company.

In addition to the structured reviews, one of my favorite activities is “management by walking around.” I get some of my best information about the business just by walking around our facility and visiting with employees. It’s amazing to me how casual and unplanned meetings in the coffee room can be so productive. We had a new employee start this week in our assembly operation. I walked back to introduce myself and the employee said, “Oh you must be the Tom everyone is talking about. They said you would come over and ask me questions about what I’m doing.”

What do you tell that new employee?

A few things are important to me. I want that new employee to understand the importance of his or her role in the company. We are at a size where every employee has a significant impact on our company. I always want to empower them to speak up when they see a better way of doing things. 

Is there anything you are seeing in your business or industry that’s a trend that may be enlightening to other CEOs?

Security and protection of people and assets is important to every CEO, but one area that many may not be aware of as much is the vulnerability of the physical devices connected to their corporate networks. As more Internet of Things devices are deployed, whether it’s your security cameras or other devices that are Internet enabled, often times they aren’t properly protected when they are installed. They are vulnerable to tampering or hacking.

The massive distributed denial of service (DDoS) attack a little over a week ago caused outages of major websites such as Amazon and Twitter. Hackers hijacked an estimated 100,000 devices, including network security cameras, into a “botnet” for the attack. These devices were left “open” on the internet, but even cameras on private networks are vulnerable to attack. 

In The Wall Street Journal a month ago there was an article about a major cyber security breach hosted by what the reporter called “an army” of network cameras that were intended for video surveillance and security. Hackers had gotten into these cameras and hosted a denial of service attack on a corporate network. This is a real problem in our industry.

As security systems have evolved from analog devices to internet-enabled devices, the challenge is that security systems have become IT systems. However, the channels of delivery for security systems are different from IT. When you have a security problem in your business, you don’t call an IT guy. You call a security company.

Part of Razberi’s value proposition is simplifying the installation of network systems for these traditional security dealers, with automated cybersecurity protections built into our product.

How do you describe that innovation or differentiation you’ve brought to the market?

Our product is a network appliance that manages systems of network cameras that are used for video surveillance and security. We combine the switch, server, storage and intelligence along with health monitoring and cybersecurity features all in one box and scale up as customers need them. Plus, we deploy all this at the edge of the network, on the customer’s premises or near it, so all that bandwidth from the video footage doesn’t have to traverse the corporate network all the time. This is a huge savings not only in terms of bandwidth but also costs. Security professionals can easily deploy our appliances. Razberi offers the highest quality video surveillance and security at the best economic cost.

How do you gauge your success so far?

What is exciting for our employees is the fact that we created something in our industry that didn’t exist before. It’s a new product category. Being in that position allowed us to attract talent and investment when we needed it. The U.S. government, Fortune 500 companies, and some of the most recognizable public venues in the country use our product to support their video surveillance systems. We further validated what we were doing about three months ago when one of the largest network camera manufacturers in the world signed a deal to license our technology. That confirmed the whole concept and product that we developed. It’s an exciting time for us!

|01 Nov 2016

CEO Interview: Jim Whitehurst, Red Hat, Part 2

This is part two of my interview with Jim Whitehurst, president and CEO of Red Hat, the world’s leading provider of open source enterprise IT products and services. In this post Jim discusses his approach to management at Red Hat as well as the book he published in 2015 with Harvard Business Review Press entitled “The Open Organization: Igniting Passion and Performance.” In the book he shows how open principles of management – based on transparency, participation, and community – can help organizations navigate and succeed in a fast-paced connected era.

Jim Whitehurst, CEO, Red Hat

Jim Whitehurst, CEO, Red Hat

If I were a new employee starting at Red Hat tomorrow, how would I figure out where I fit?

Jim: Red Hat is very much a bottom-up organization. With that, we have a lot of ambiguity, and need people who can self-start. Typically, people join Red Hat because they’re passionate about open source software and the benefit it provides versus closed source software. My role is to create context for people to do their best work. As a new associate (e.g., Red Hatter), you need to be comfortable with ambiguity. Nobody is going to tell you exactly what to do. They’ll give you a general idea of what they want accomplished, and you have the freedom to figure it out from there.

Some people don’t like that and have real trouble with it. That’s what we really try to impress on people when they come in. It sounds fun and everyone thinks they want autonomy. However, autonomy also means you need to use your own judgment and logic to ultimately decide how you are going to accomplish work. Some love it and some don’t. We do our best to attract people who thrive in that open, freewheeling type of culture. 

Do you set up some guideposts for the organization on a quarterly or yearly basis?  

Jim: Once every four years, we update “the house.” That doesn’t mean we update our overall strategic direction every four years, but rather it’s a good time to take a fresh look at “the house,” see if there’s anything we’re missing or need to tweak.

Also, every year we have a set of relatively consumable goals (customer, market, people) that we communicate during quarterly meetings. It’s not financial but more a set of macro KPIs (key performance indicators), such as the Net Promoter Score for customers. We don’t want to make it too prescriptive. We focus on outcomes so people can decide how they get there. It goes back to the concept of creating context for people to do their best work rather than tell people what to do and monitor them doing it.

You are one of the few CEOs I know who has actually written a methodology around doing the job. Who were your influences in learning and thinking about the job of CEO?  

Jim: The odd part about Red Hat is that it is so different from most organizations. The open source movement grew out of a self-participating, not-for-profit kind of thing. There are great books out there on leadership and management, but they didn’t quite apply to Red Hat. When I went on my own journey about how to manage a more creative place, there are several books that were very impactful to me. Gary Hamel’s “The Future of Management” does a good job articulating that managing uneducated people doing rote tasks in a static environment is a very different skill set than managing educated people who have to apply initiative and creativity in a fast-moving environment. Simon Sinek’s Start with Why” was also an influence for me. A newer book – “Team of Teams” by General Stanley McChrystal – is a phenomenal book on how to think about building a more creative, bottom-up networked organization in a hierarchical system. 

Red Hat bookWhat caused you to write a book? Having done that myself, I know it’s no easy task.

Jim: As I mentioned, in his book “The Future of Management”, Gary Hamel nailed the problem: The traditional management bureaucracy was built to measure and monitor rote tasks. That’s not what exists now. I reached out to Gary and said, “You’ve absolutely nailed the problem, but how do we solve it?” He said, “I wrote the book, but I haven’t seen the solutions yet. Red Hat seems like it’s far along. Why don’t you write a book on it?”

It had nothing to do with what I’ve accomplished or done. It’s all about what I’ve learned at Red Hat. I went to Harvard Business School, became a partner at BCG, and ran Delta Air Lines, which is a very large traditional company. I thought I knew a lot about how to lead and manage. I get to Red Hat and initially thought it was chaos. I wondered if they brought me in to clean the place up and bring in some adult supervision! I quickly realized that it’s not chaos. It’s a very different culture and way to manage and lead. It’s about coordinating people’s behavior to get results. There is very much an assumption that people join because they want to and not because they have to. We show the importance of mission as well as the importance of individual interactions vs. lines and boxes. I wanted to share what I found so effective at running an organization with creative people in a fast-moving environment.

In talking to other CEOs, they were complaining that their change management efforts were failing; they were not growing fast enough; their people were disenchanted with the work, millennials all wanted to be CEOs, etc. It’s not a problem with people wanting to change or millennials. The problem is management structures designed for factory workers 150 years ago. There is a different way to coordinate, and at Red Hat we’re doing it at a reasonable scale. The book is much more an articulation of mistakes I made and things I’ve learned at Red Hat. I felt the story needed to be told about how Red Hat has developed a management system out of the principles of open source. And show others that they too could adopt the same model, and become an open organization. 

Do employees read the book and call you on your own words? I know mine do.

Jim: Yes, absolutely. There are people who have read the book and keep us in check when they think we’re not living up to our values. There are also those who have joined the company after reading it. I like to say the book is Red Hat on our best day. While we’re not perfect, we’re constantly striving to be better and be the best open organization we can be. 

Anything you are seeing with your view into the markets that you think other CEOs would be interesting in knowing?  

Jim: The context for leadership is changing. All of the systems and everything we learned in business school was to manage in a different context. It was much more about prescribing what people needed to do and holding them accountable for doing it. We are moving to a world where if it’s easy to prescribe, it’s easy to program. If you can automate it, that job is going away. The jobs that remain are where people have to apply initiative and creativity in fast-moving environment. They have to move from telling people what to do and monitoring, to creating context for people to do their best work.

There’s an analogy I heard from General Stanley McChrystal that applies: Gardeners don’t grow anything. Plants grow. The gardener just creates the best condition they can for them to grow. What would you advise if a 20-something came to you and said they want to be a CEO? What is the right preparation?

Jim: In the end it comes back to do what you love to do, and the right things will happen. Many people choose a job or make a move in their career, because they believe it’s the right next stepping stone. This should take a back set to doing what you love to do with people you enjoy being with. If you do that, you will be seen and will rise to the top. The worst thing is doing something because you think it’s the right next step.

|18 Oct 2016

CEO Interview: Jim Whitehurst, Red Hat, Part 1

It was quite an honor to speak with Jim Whitehurst recently about his role as president and CEO of Red Hat, the world’s leading provider of open source enterprise IT products and services. He is an avid advocate for open software as a catalyst for business innovation and, since joining Red Hat in January 2008, he has more than quadrupled the company’s revenue. In this part one of our two-part interview, I asked him about his journey to the CEO chair and when he first felt like he was getting the hang of the job. 

Jim Whitehurst, CEO, Red Hat

Jim Whitehurst, CEO, Red Hat

When you got through with college, what did you think you wanted to be?  

Jim: I thought I was going to do something in technology, but it never crossed my mind that I’d be a CEO or go down that path. I just did what I like to do and it worked out this way.

How did you get started at Delta?  

Jim: I got waylaid in consulting and ultimately became a partner at The Boston Consulting Group (BCG). My largest client was Delta Air Lines, and at noon on 9/11, the CEO called me and said I need you to be our treasurer.

When I joined I thought I would be doing more finance-related stuff. But, over time, I was given more and more responsibility. Ultimately I became chief operating officer (COO), with the vast majority of Delta employees reporting to me, including sales, marketing, and operations.

When was the first time you thought, hey maybe I should think about a CEO job?

Jim: It started at Delta. I was very much a staff-ish person, running the network covering strategy and planning. The CEO called me in one day and said, “I talked to the board and we want you to become the COO. I’d like you to drive a turnaround plan and run it day to day.”

So I went from having a team of 150 people to having 80,000 people reporting to me. That’s when I first recognized that maybe a bigger role made sense for me. Perhaps, I could actually be a principal and lead.

The River Group published a study of first-time CEOs earlier this year where they asked, on a scale of 1 to 10, how qualified CEOs thought they were for the job on day one. The average answer was 7.2. Six months later, the CEOs said 3.5. How would you answer that question going in to your job as CEO of Red Hat?

When I took the job at Delta as COO, I probably would have started pretty low and gotten lower. When I got to Red Hat, it was less than 2,000 people vs. Delta at 80,000. I came in with sense of “okay, I know how to run an organization.” However, six months later, I realized I was more like a two when I started!

Red Hat Main Lobby, image courtesy of Red Hat

Red Hat Main Lobby, image courtesy of Red Hat

Many people think, “Well I ran this company with X billion in revenue and X number of employees, so running a smaller shop must be easier.” How would you explain to a new CEO that it’s not always the case?

Jim: It’s not true in a couple of regards. Once you’re number one and in the chair, it’s just different. One of the things I’ve found is there is a different skill set required for companies at a different stage. Quick story: During my first month at Red Hat, we were preparing for a board meeting at the end of the month. I looked around at my team and asked, “Who writes the board decks?” Everyone looked at each other and finally someone said, “That would be you.” At the time we had about 1,500 people. I came from Delta where I had a whole strategic planning department who wrote the decks.

There’s a big difference between running a 1,500-person company (Red Hat is now getting closer to 10,000, and it’s still very different) vs. 80,000 at Delta. A lot of people think, “Well if I can run big, I can run small.” The irony is people who run small don’t necessarily think they can run big. There’s a difference between being a player, being a player-coach and being a coach. Most people understand that. The same is true in business.

Being a leader AND a doer is important in a small company. As you grow though, the ability to stop doing vs. orchestrating is important. Working through that transition has been fascinating for me. There are some people, such as Michael Dell, who have been able to do it from startup all the way through.

I think that’s where a lot of companies get into trouble. Small company people can’t run big, because they can’t let go. They can’t stop doing. Most big company people couldn’t run a small company, because they can’t actually do.

Do you remember the first time at Red Hat where you did something that made you feel like you were getting the hang of the CEO job?

My first year we created a strategy document in a bottom-up process, involving a lot of people. We developed a framework that looks very much like a house, although we never thought about it being a house when we were designing it. This felt like a relatively normal thing to do, something I’d done a hundred times at BCG.

Within months, people were calling it “the house.” You could feel disparate people being dramatically more aligned. It became something we could rally around. It wasn’t just a strategy but more an articulation of strategy. Our engagement scores improved.

That’s when I felt like I finally added some real value and understood what role I could play in making the organization more successful.

|11 Oct 2016

CEO Interview Series: Fred Goff, Jobcase

I recently had a chance to interview Fred Goff, CEO of Jobcase, one of Boston’s fastest growing tech companies with more than 50 million registered members and 100 web properties. Their mission is to connect the world’s workforce to empower them in their vocational, professional, and volunteering pursuits.

Fred founded Jobcase on the premise that LinkedIn had effectively abandoned workers without college degrees. I was interested in this as well as his approach to the CEO role.

Fred Goff

Fred Goff, CEO, Jobcase

Did you want to be a CEO when you were growing up?

Fred: What I really wanted to be was a fighter pilot and an astronaut. I thought about being the first person to land the space shuttle on the moon, which was how we thought we would get to Mars years ago. I was accepted by several academies, but health issues got in the way. I scrambled and got into Carnegie Mellon. This turned out to be good luck, because I’m able today to talk about this unbelievable educational institution that’s in my background.

Once I lost the vision of a fighter pilot, I wanted to be President of the United States. My early decisions were really predicated on that, including my decision to get a master’s degree in public policy. I thought my career on Wall Street would give me the right experience and accelerate wealth generation, so that I could be an honest public servant. Somewhere along the line I realized that I couldn’t be the Daddy I wanted to be and keep pursuing public service.

You made the change from the investment community to becoming a CEO. How did that come about?

Fred: I was running $1 billion in proprietary capital for BankBoston Robertson Stephens. I became a big believer in the power of technology to transform industries. However, I felt like I didn’t have the skill set to help lead that. I went back to MIT and ended up forming a machine-learning based hedge fund company, where I carried a CEO role. But it wasn’t until we transformed to Jobcase that the CEO role really was traditional. In Asset management, you can run $1 billion with only a dozen people or so, so the kind of organizational challenges normally associated with a CEO title don’t really apply. Jobcase is on a whole different scale of organizational complexity.  

That said, I never took stock in the CEO title. I did have a bit of an entrepreneurial bug, and I always aspired to leadership roles but I was never one to think of ‘ceo’ in particular as anything special – and still don’t.

Did you found Jobcase?

Fred: Yes. We have a different origin story: The machine-learning based hedge fund I started ran into 2008 like so many asset management companies did. A few weeks before Lehman went bust we went to cash, so we were fortunate to not be one of the blow-up scenarios that went bust. Instead, we forked the company and put the rights to the asset management investment vehicle on the side. We refocused the team that we used to construct portfolios of securities. Instead of predicting markets, we can predict consumer behavior. From there we grew and evolved into the labor market.

JobcaseWhat was the vision for Jobcase?

Fred: It’s rewarding to spend days getting the right content to the right people about their work life. The biggest factor that really launched us and created the vision for Jobcase was our data. It suggested that LinkedIn had abdicated those with an education below a traditional college degree. We thought we knew what was happening in that part of the labor market. It was woefully underserved. People have been thrust into being their own kind of agents. They receive no training in how to manage their own career and work life. We had the vision to open up access, so that everyone’s work life profile is available, and they build connections among people when they have relevant needs. For instance, how do I get a job at Walmart? How do I get promoted at Target? How do I move from being a warehouse clerk to a nurse?

Whatever these questions are, someone has the answer, and people can get advice about how to follow that path from the real experts – other Jobcasers who have already traveled that road. The real magic is the community of people who help people, with tremendous empathy. It is instructive and inspiring for people to help them keep going. We now have 60 million members. It is so much fun when you measure success by who has been helped today.

It reminds me of that Kevin Kline movie Dave about the guy who runs the job service but is asked to be a stand-in for the president.

Fred: Yes, Kevin Kline and Sigourney Weaver! He has that great statement in there about knowing a thing or two about getting people jobs. Not only do I know the movie, but it’s also in the decks that I present to my team.

How many employees does Jobcase have now?

Fred: We’re up to 95 now, almost all software engineers and data scientists and data analysts. The complexity of the platform we need to connect and empower people requires extremely advanced skill sets to build and maintain. We are also affiliated with MIT’s Computer Science and Artificial Intelligence Lab. We are part of an evolution of Big Data impacting Corporate America.

I think that HR in corporate America is in the third year of seven-year turnover where big data insights and proficiency begins to drive its activities. When I was a proprietary trader back in the 90s, I hired a physicist to work on our derivatives desk, and people wondered what I was doing. Twenty years later a guy with my background in economics couldn’t get a job on the derivatives desk – they all require those physicist type math skills. So Big Data moved from transforming Finance to Marketing and now HR in corporate America.

Today there are great entrepreneurs like Aneel Bhusri who started Workday and a few others who are really moving forward on how big data can inform Human Capital practices. Most of the really cool companies that truly do have proficiency in big data are focused on how they can use it to unlock value for companies. At Jobcase we’re focused on how we can take the big data insights and give them back to the individual person so they can help themselves. That’s a big differentiating factor.

What advice would you give to a new CEO?

Fred: Get the people and culture right. Ensure clarity of mission and metrics of success are known to everyone. Ensure links of any individual’s success metrics are linked to the overall organization’s success metrics. Make sure your people have the resources they need to succeed. Be authentic. And think of the role more like a Conductor of an Orchestra than some old-fashioned “boss” model.

For me, being authentic includes trying to create a culture that includes the golden rule, full transparency, consistently triaging the most important things to work on, data-centric and meritocracy. This works for our business because change is so frequent and unpredictable. But perhaps other businesses or other people embrace different aspects that allow them to be authentic in their leadership.

But you must realize – It all comes down to people. So many of us go through business training focusing on marketing and finance classes, and then we get a few years under our belt and realize that the people part – organizational behavior classes – was the only thing that mattered!

You gather a lot of data on your customers and the country as a whole: Is there anything you see going on or trends that fellow CEOs would want to know?

Fred:  A couple things. First, a strategic observation: this is an unbelievably fragile, shallow economy. Government economists say we’re at full employment, but labor participation rates are low. Underemployment is still near double digits. We have pockets of 25 percent unemployment. Worse, we have dumbed down the definition of full employment. The stats out of the Fed say that 47 percent of American households don’t have enough money to cover a $400 unexpected expense. Does that sound like a ‘full employment’ environment?

We see this fragility reflected every day in the Jobcase community. Even folks who are employed are nervous. When you look at the Presidential election, Sanders and Trump are outlier candidates by traditional standards. People in a full-employment economy don’t vote for outliers – they vote safety and status quo. So the signals for fragility in our economy are ample. So I have two messages for CEOs: 1) You better have your plan for when the economy turns. If it does it’s going to be a lot quicker and deeper than what’s expected.

2) A more tactical observation from the human capital space on your hiring: Focus on retention-hiring, not filling seats!

So often people are asking the wrong question. They are worried about getting hires in the door, but the big issue is keeping people employed. McKinsey found that it costs $2,500 to turn over hourly labor. And the best way to do this is to focus time on cultural fits. This is best done at the local level. Brands may be national but talent brands are local. A McDonalds in NYC is very different from one on the Ohio Turnpike. Surface local talent culture to raise retention and drop attrition.

And when you have your staff, don’t be cheap on compensation. Retention risk is underappreciated. My experience is there are two kinds of managers: At the end of every pay cycle, one manager says this person is doing a great job, how much can we give to him? The second type of manager says this person is doing a great job, what’s the minimum we need to pay them to keep them from leaving. Be the former not the latter.   Your staff will then be 100% focused on their job, rather than 20% focused on getting a different job and looking around. As a CEO, it’s not just the right thing to do; its also in your own interest to try to compensate your team as much as you possibly can!

|27 Sep 2016

Business Metric Creation in Action

I recently published an article on Inc.com about “The 5 Characteristics of an Effective Business Metric.” This is important, because there is only one way to encourage a high level of performance in your organization and accurately judge whether or not you are achieving it: You need to consistently measure progress on corporate, departmental, and individual goals using relevant metrics.

CEO Skills business metricYou can read about the five criteria in the article (easily measurable, predictive of future business performance, etc.). I also included an example from sales of what I think is a good business metric. But how do you get there? I suggest working with new managers right away to develop three to five metrics that will reveal whether or not they are doing a good job. Here’s a conversation I had with a product management executive to come up with those metrics.

I had not worked with this individual before (he works for an early-stage software company), so I asked him to think about the key responsibilities of his job. He told me that his top priority is to deliver an exceptional product. I agreed. But then I asked, “How would we know if it was an exceptional product?”

He said he thought an exceptional product would be easy and quick to implement. I suggested that it would also have a high conversion rate from demo to purchase. In addition, we agreed that the better the product, the fewer support calls the company would receive, and the higher the renewal rate would be.

Then we set metrics for each of these areas. In short order we progressed from a high-level corporate or departmental goal to specific, measurable, individual goals that highlighted the fundamentals for this area of the business. 

Not every business metric will have all five characteristics, but you should strive for as many as possible. The point is to measure the right things in pursuit of success.

|13 Sep 2016

Teach Your Team to Be Frugal Not Cheap

frugal not cheap

Frugal Photo Credit: investmentzen via Compfight

I was sitting in a board meeting recently and heard a phrase that always makes my skin crawl: Someone said they had instituted a “hiring freeze” in their area of the business. This is a common tactic to get a handle on costs. After all, in many businesses personnel costs represent two-thirds or more of the operating expenses. If you want to control costs, you obviously have to monitor hiring.

The problem is this strikes me as the easy way out. This particular executive manages a services business, where people are the product. You would never hear a product executive say, “Don’t bring any great new products to sell, we already have enough.” But that is effectively what this executive is doing.

The issue is that great people are hard to find, and you must run a continuous process to find them. When you find great people, you need to be able to hire them. You can’t stop and start hiring, and then hope that stars are available on your timeframe.

The executive works for a large organization that turns over hundreds of people every year. Now I am not saying they should just keep adding people regardless of the financial impact. Instead, they need to take a proactive approach to managing the workforce. This starts by rating the performance of every employee each quarter, so you understand who is providing the most and least value.

As business conditions change, you must actively manage the cost of the workforce to ensure maximum value. Sometimes that will mean bringing in potential stars because they are available, while letting go of the bottom performers. Top performers by definition will provide far more value than they cost. As a result, this activity will allow the organization to grow and employ more people than the organization could otherwise support.

As I was thinking about how to explain this, I realized how easy it is to be cheap. Being cheap just means not spending money. While this can have short-term positive effects on the bottom line, it is not a formula for success.

What you want is for people in your business to be frugal. The goal is to spend money wisely, in support of what the organization is trying to achieve. This requires much more training and thought but will lead to greater long-term success.

As CEO you will have to coach people to be frugal, because the easy thing is for them to be cheap. Don’t let it happen.

|25 Aug 2016

Team Building Core to CEO Success

We are doing a disservice to our future leaders: We grade them in school almost exclusively on their individual efforts, and then in the workplace we judge them almost exclusively on their ability to build and influence teams. The skills in the two areas couldn’t be more different. A huge factor in CEO success is how quickly he or she can create a highly functioning team. While hiring great people is a necessary step, it doesn’t ensure that the team will perform well. 

team buildingIn his book “The Five Dysfunctions of a Team: A Leadership Fable,” Patrick Lencioni presents a model for building a successful team. What kills teams? According to Lencioni, the five dysfunctions are:

  1. Absence of Trust: The fear of being vulnerable with team members prevents the building of trust within the team.
  2. Fear of Conflict: The desire to preserve artificial harmony stifles the occurrence of productive ideological conflict.
  3. Lack of Commitment: The lack of clarity or buy-in prevents team members from making decisions they will stick to.
  4. Avoidance of Accountability: The need to avoid interpersonal discomfort prevents team members from holding one another accountable.
  5. Inattention to Results: The pursuit of individual goals and personal status erodes the focus on collective success.

The quality of the CEO makes a huge difference here. Those who understand and adhere to the five responsibilities of the CEO are in a better position to manage healthy executive teams. The building blocks for this are the concepts of credibility, competence, and caringthat are the foundation for leadership.

Regarding the first two dysfunctions, the CEO can build trust among teams and facilitate healthy debate with the right leadership style, approach, and abilities. For example, humility and openness to feedback in a CEO helps establish the trust and credibility needed to lead – and this behavior is contagious. Executives – and employees at all levels – pay close attention to actions such as how the CEO spends his time, who reports to him, and how he balances resources across the company.

The last three dysfunctions are within the purview of the CEO as well. This is where the “deliver performance” responsibility of the chief executive comes into play. The CEO sets the bar for performance in the organization. Only he can create a culture of accountability. This entails setting a compelling mission and vision. Then, the CEO should help executives create metrics that are important and relevant to the business. Each quarter the CEO and executive team should establish goals for the company, each department, and each individual employee.

The cornerstone of all this is consistent measurement. Holding all executives and employees accountable for achieving their goals will instill a commitment to high performance. The CEO should constantly drive and refine the operational metrics as well as verify performance.

I think companies should spend more time training their employees about how to succeed not only as team members, but also in developing and managing teams. I encourage you to read Lencioni’s work in this area. Also consult my book and this blog for more about recruiting and retaining talent.

 

|12 Aug 2016

Transparency Primacy for CEOs

Technology reporter Rolfe Winkler recently published an article in The Wall Street Journal titled “When Startups Fail, Silicon Valley’s Millennial CEOs Like to Share Feelings.” He examines the penchant for younger CEOs to bear their souls in lengthy blog posts discussing everything that went wrong in their startups. While this might fall under the category of “too much information,” their willingness to be transparent is laudable. Here’s why CEOs should build transparency into the company’s operations on day one.

Transparency helps employees be emotionally engaged and committed to the business. Venture capitalist Brad Feld has a benchmark for CEO transparency: You should share the information you give to your board with all employees. He says, “If you can’t be open with your company about the information you report to your board, how can you actually be transparent?”

I think it’s important to share your board slides and other important information with employees. After all, many start-up employees have stock options at least and deserve to know how the business is doing. Transparency makes them feel more like a trusted part of the team. It also allows you to reiterate your vision, mission, and goals. While I would not share salary information or other sensitive details, I do think employees need to know the negatives as well as the positives.

Some CEOs are afraid that sharing any negative information will demotivate employees or cause them to quit. In reality, CEOs who are too optimistic quickly lose credibility. Employees start to see through the sunshine and roses and realize one of two things: 1) Either their CEO is not being straight with them or 2) Their CEO is too positive and cannot face reality or manage it effectively.

As I wrote for CUInsight.com, transparency is a two-way street. For it to work effectively, relevant information has to flow both from the CEO and to the CEO. When this happens, you get a feedback loop:

  1. Traditional top-down transparency helps employees see into the core of the business and
  2. Bottom-up transparency gives the CEO a clear view of day-to-day operations and the insight of his team.

These two types of transparency reinforce and supplement each other. When both sides understand the reality of the other, the result is a more cohesive, aligned company. This is what Khorus is helping CEOs do.

If you instill transparency in from the beginning, then critical moments are not nearly as jarring for employees. Startups are hard and most will fail. If you are clear with people about that in the beginning, it is much easier when trouble comes. Too many CEOs tell employees everything is going great until the 11th hour. Then employees are shocked when they find out the company is running out of money. Being consistent from the beginning is key to avoiding these “oh sh*t” moments.

|26 Jul 2016

The Expert Conundrum or How to Spot a Blowhard

Expert

Expert

What is one of the biggest differences between the CEO role and other jobs in a company? It’s the responsibility to make decisions about a huge breadth of issues. If you have spent your whole prior career working in sales, then you have likely acquired enough knowledge to make informed decisions in that area. However, CEOs must make decisions across the whole spectrum of business issues. As a result, they often confront problems where they have little background or expertise. Here’s how to handle it.

Step 1: Admit You Don’t Know Everything

In this situation it is important that a CEO be self-aware enough to recognize that he or she is not the expert. I think most recognize their limited knowledge. However, some CEOs feel they always have to be the smartest person in the room. They fear losing the respect of their team by admitting they don’t know the answer. This is a big mistake that can backfire. Employees will inevitably uncover their deficiencies and lose confidence in their leadership.

Step 2: Seek Advice from Experts

CEOs who are aware of and open about their limitations must seek input from experts. The question then becomes how to effectively determine whether someone is actually an expert. As CEO there will be no shortage of people who will approach you to give advice. Many will be easy to dismiss as people who simply have an over-inflated opinion of their own knowledge. However, there will be another group that is not so easy to dismiss. Since you as CEO don’t have expertise in the area under discussion, you might be fooled by anyone knowledgeable and sophisticated enough to pass a basic BS test. You need a way to directly evaluate their advice.

Step 3: Administer the Test

One of the things I have observed through the years is that the true experts have the same self-awareness that I find in good CEOs. These experts know what they know and just as importantly know what they don’t know. One way to test for this is to ask the “expert” questions in areas where you have strong knowledge and then evaluate their answers. The true experts will either not answer or preface their answer with a disclaimer about it not being their area of expertise. The fake experts will pontificate on any area with the same level of confidence.

If they don’t know what they don’t know, it is hard for them to be trusted advisors. Once you see this behavior, you can write them off. So next time you are confronted by an expert offering assistance, ask them questions in areas where you have special expertise and listen to what they say. You might learn all you need to know.

|12 Jul 2016

We Need Better Leaders: Own Your Professional Development

“You could go to class to go to be an NFL quarterback, you could have Peyton Manning or Tom Brady teach you lessons. But when you walk onto the field you’ll still be completely unprepared no matter how much schooling you’ve had because it’s dynamic and the time you have to make decisions [sic] much much shorter than you think.” Ben Horowitz

Ben Horowitz said this in answer to a Business Insider question about the hardest part of being a CEO. Though I don’t have 300-pound linemen squaring up against me every day, I understand his point. I think this sentiment echoes what many people think about the value of leadership training and advice. While it may be true that on-the-job experience is the only way to really learn to be a CEO, it’s also true that preparation can help you tremendously at every level in your career.

I would venture to say the need for leadership training is greater than ever, and that people need to take responsibility for their own professional development earlier in their careers. We cannot afford for them not to in today’s business climate. Here’s why.

There are more opportunities than ever before to assume a leadership role in business. Writing for SmartBlog on Leadership about why we are so obsessed with leadership these days, Naphtali Hoff said, “The ladder is now a stepstool.” Consider these phenomena:

– Most CEOs are first-time CEOs: The chief executive role is so unique that few are prepared for it.

– Increasing numbers of knowledge workers: According to The Wall Street Journal, the number of knowledge workers has more than doubled over the past three decades, and the trend shows no signs of slowing down. The consensus is that we are creating newer types of knowledge jobs – defined as people doing “nonroutine cognitive work” in professional, managerial or technical fields – faster than automation is replacing us. This creates a higher need for leaders who understand and can adapt to a rapid pace of change as well as know how to motivate this type of worker.

– Flatter hierarchies: Management systems such as Zappo’s holacracy are eliminating managers altogether, enabling those with specialized knowledge and natural leadership skills to step up regardless of experience or tenure.

– The rise of distributed leaders: An article in Harvard Business Review about strategy execution highlights the importance of “distributed leaders,” who are a natural outgrowth of the knowledge economy and flatter organizational structures. The authors write that “execution lives and dies” with this group, which “includes not only middle managers who run critical businesses and functions but also technical and domain experts who occupy key spots in the informal networks that get things done.”

– Growing numbers of remote teams: Leadership skills are critical to helping groups collaborate well across organizational and geographic boundaries, in support of group and company objectives.

– Advent of the cloud: Technologies such as cloud computing have made the barriers to starting a business much lower, creating more new executives/leaders than ever, if only in title.

Whether they become leaders by title or natural selection, the people who are steering our businesses today need more basic training in leadership skills. It is more important than ever for them to take control of their professional development. That goes for you as well, whether you are an entry-level employee or a seasoned CEO. To that end, I penned an article for Inc. recently about 10 ways to take control of your leadership development and keep learning. From reading and writing more to teaching what you know to taking professional training courses, these are things you can incorporate into your regular routine if not daily, then at least monthly or quarterly.

|29 Jun 2016

Leadership Development’s Most Underused Tool

What is one of the most underutilized tools in leadership development? Teaching, writes Ana Maria Sencovici of The River Group: “For leaders who are deliberately practicing their leadership skills, teaching is the surest way of internalizing and applying those skills.”

I wholeheartedly agree. There is nothing like teaching to help you master a subject. Many think it’s simply a one-way endeavor, with the teacher imparting knowledge and the students receiving all the benefit. The truth is that teaching rewards the instructor as much as the students.

I’ve been teaching nearly my entire career, starting with my four-year stint as an instructor at the Naval Nuclear Power School. Teaching continuously improves my communication and leadership skills. It makes me think through the material in a new way, expanding my knowledge of the subject matter. It also helps me develop new and better relationships with all kinds of people. There is always more to learn and new perspectives to consider. My students often teach me more than I teach them.

As I wrote about recently, Kevin Spacey discovered this when he began instructing other actors. The act of teaching reminded him of lessons that he needed to reapply to his own craft. This reinforcement led him to vow never to be “out of touch” again.

Sencovici breaks down the value of teaching this way: “In order to teach something, leaders must extract new information, then process that information against existing mental models and previous experiences, and finally apply it in some successful manner. They must do this enough times, in enough circumstances, to gain the comfort to share it with others.”

The key is repetition. It’s one thing to sit in a classroom for a few hours or days learning about leadership. This one and done approach does not cut it. The best way to internalize the material, besides applying the lessons in a business context, is to teach it to others.

If you are in charge of leadership development, make sure you set up plenty of opportunities for employees to impart their knowledge to others. If you are working on your leadership skills, take advantage of every opportunity (and create some of your own) to teach. In her article, Sencovici lists a few ideas for teaching opportunities, including:

 Create informal chances for people to be able to easily create their own lunch-and-learns.

 Start a social or video channel where people can create their tutorials.

 Have a way of publicly identifying and encouraging experts in particular leadership skills whom others can go to for advice.

 In smaller settings, have leadership team members teach something they’re good at to the rest of the team.

These are easy to set up and yield untold benefits for all involved, at every level. Sencovici rightly concludes that setting up and taking advantage of these opportunities could be the highest return on your leadership development time and resources.

Image credit: 380903 Tools Wallpapers

|09 Jun 2016

First-Time CEOs Not Prepared Says CEO Study

First-time CEOs revealed huge challenges in taking on the role according to a new CEO study by The River Group. Here is a particularly telling finding:

On a scale of 1 to 10, walking into the company on your first day as CEO, how prepared did you feel you were to be the CEO?

Answer: 7.2

Six months later, reflecting back to that first day, how prepared would you say you were, on the same 1 to 10 scale?  

Answer: 3.5

First-time CEOs studyThese results are based on in-depth conversations with 75 first-time CEOs on everything from preparedness to biggest surprises to the best and worst parts of the job. The results were not surprising to The River Group researchers or to me. I have focused my efforts over the last few years on the premise that most first-time CEOs are not ready for the role.

Based on the interviews – with chief executives on five continents with an average of 8,000 employees and $8 billion in revenue – here are 10 key takeaways and recommendations for first-time CEOs, which I agree with:

  1. Know from the start that you are not “the CEO.” Your job is to serve as CEO. Humility goes a long way.

The CEO role is not about power or being the smartest person in the room. It’s about channeling the experience and skills of others in the right ways and providing the proper resources.

  1. On day one your people will expect a message. Be prepared. Deliver. It will be your first impression to those who matter.

Owning the vision is one of the top five core responsibilities of the CEO.

  1. Recognize that you are no longer “you” in the eyes of others. Accept it. Manage it.

The CEO study highlights an interesting phenomenon here. As soon as you become CEO, people will begin to treat you differently. You will be seen as “complete” in the eyes of others; someone who has all the skills and answers. Don’t fall into this trap. The reality is much different.

  1. Engage your Board members individually. Develop a strong working relationship with your Chairman or Lead Director. Establish yourself as the CEO.

The CEO interviewees cited board management as one of their biggest surprises. One way chief executives can help is the CEO scorecard I recommend, giving each board member a way to objectively evaluate CEO performance and provide valuable feedback.

  1. Stay balanced. Your mental, emotional and physical health will be challenged by the job.

On a scale of 1 to 10, respondents judged their overall health prior to or after serving as CEO, on average, as an 8.2. During, the average dropped to 5.7, a decrease of 30 percent.

  1. Form or join a CEO forum. This should consist of no more than 10 to 15 CEOs with no one else in the room. It should be a confidential and “safe” environment to discuss issues of consequence and gain insight and advice.

“Lonely” was one word the researchers said came up frequently during the interviews with CEOs. Fellows CEOs will understand what you are going through and provide objective advice.

  1. Receiving constructive criticism and unvarnished feedback is very rare. But it is very necessary to the most powerful leader in the company.

The average score on a scale of 1 to 10 for quality of feedback the CEOs received was a 4.2. The score rose to 8.6 for those who had engaged a coach/trusted advisor, an increase of more than 100 percent. Also solicit objective feedback from subordinates. Consult “The 2R Manager” by Peter Friedes. Also, Dr. Tasha Eurich has an “Organizational Leadership Assessment” on her “Bankable Leadership” Web site that could be useful. 

  1. You will not know what you do not know until you spend time in the role. Accelerate your learning and avoid pitfalls by engaging those who are, or have been, successful CEOs.

Be open to learning. Mentors and coaches will share expertise, knowledge, and impartial feedback that you might not receive on the job.

  1. A highly functional and aligned leadership “team” at the top is critical to success. The failure to address underperforming or corrosive individuals quickly and decisively is pointed to as one of the most critical mistakes made by new CEOs. As hard as it may be, the consensus is to take action swiftly.

As I wrote in Entrepreneur recently, the fastest path to mediocrity in a company is to allow poor performers to remain and pretend that it doesn’t matter. 

  1. Engage. Engage. Engage. Be visible. Be approachable. From the bottom of the organization up—stay as connected as possible. Stay consistent. Communicate openly, honestly, broadly, transparently and at least three times more often than you think necessary.

“The myth of control” was a major finding, according to the authors of the CEO study. Those who believe a CEO is in complete control of the company don’t know much about being a CEO. In fact, lack of influence is a huge challenge for CEOs.

Engaging others, leading with a clear vision, and providing the proper resources are keys to having more influence. Another is to ensure that you are focusing on the strategic responsibilities of the job and not wasting time putting out the tactical fires of each day. In addition, having a management system is a way to ensure everyone is on the same page.

For more on how to tackle the role, for first-time CEOs or experienced ones, here are various ways to read or listen to my book “The CEO Tightrope.”

  1. Condensed eBook: http://www.khorus.com/the-ceo-tight-rope-abstract
  2. A free version of the audio book (with SoundCloud app): https://soundcloud.com/khorussoftware/the-ceo-tightrope-sections-1-4/s-DXoS3 
  3. Audible version from Amazon ($2.99): http://www.amazon.com/CEO-Tightrope-Master-Balancing-Successful/dp/B0118AAR58/ref=tmm_aud_swatch_0?_encoding=UTF8&qid=1462311095&sr=8-1
  4. Hardcover via Amazon: http://www.amazon.com/The-CEO-Tightrope-Balancing-Successful/dp/1626341060
  5. Kindle version ($7.99): http://www.amazon.com/CEO-Tightrope-Master-Balancing-Successful/dp/1626341060
|10 May 2016

In Praise of the Lazy CEO

A few years ago I wrote an article for Texas CEO Magazine extolling the virtues of “The Lazy CEO.” The concept may seem counterintuitive, but it is an important one: Chief executives must understand their unique responsibilities and focus on them. Those who take a scattershot approach to the role – focusing more on tactics by micromanaging and putting out the fires of the day – are largely ineffective. This is also the premise of Jim Schleckser’s new book debuting today titled “Great CEOs Are Lazy: How Exceptional CEOs Do More in Less Time.”

Lazy CEOJim is CEO and managing partner of the Inc. CEO Project, a coaching and peer advisory organization for CEOs. He is also a friend and mentor who has helped me in my businesses. Here’s how he describes his book:

“The truth is that great CEOs know a secret when it comes to time management. Rather than spending a little time on a lot of things, the best CEOs spend most of their time eliminating the single biggest constraint to the growth of their business. Depending on the challenge, they may play one of five different roles – the Learner, Architect, Coach, Engineer or Player – that together form the archetype for great leadership. This insight isn’t just some theory either; it’s derived directly from working with thousands of CEOs running high growth companies.” 

These roles or “hats” that every CEO should wear on a daily, weekly, monthly or quarterly basis dovetail nicely with my five overall responsibilities of a CEO: own the vision, build the culture, provide the proper resources, make good decisions, and deliver performance. CEOs need to set their employees up for success and then get out of the way (i.e., “get busy being lazy” as Jim says). Those who stray too far from these duties end up not only neglecting the strategic parts of their job but also undermining their people.

Buy Jim’s book today and read more about him and the lazy CEO at http://www.jimschleckser.com/.

See also my six hats of the CEO series and discover which, according to Jim, are the highest value roles (I added the sixth hat: the priest role, which entails maintaining company morale). Jim’s work on these roles influenced me as I wrote my own book for CEOs.

He also did a great series of short videos about the roles of the CEO: https://www.youtube.com/playlist?list=PLCCwm8haVgcr4Luq5_17BxIjp53srOcSQ

|11 Apr 2016

Teaching and Learning Kevin Spacey Style

Teaching is an honorable and worthwhile pursuit for any professional, including CEOs, and learning should be a life-long endeavor. Kevin Spacey embodies both in a recent interview in Harvard Business Review. He discussed his decade-long tenure as director of the Old Vic theater in London and what he learned from it.

Kevin Spacey teaching

Kevin Spacey image courtesy of IMDB

Why would an Oscar-winning actor pause his career to take on this job? He said he wanted to try something different, and it’s clear that he took this role seriously.

He showed the humility needed by CEOs and leaders at all stages by being open to learning new leadership skills. In the interview, he even references Jim Collins’ book “Good to Great” (one of my favorite leadership books) about the importance of taking succession planning seriously as a CEO. One of the best answers he gave, in my opinion, was about teaching and what he learns from it:

“You often work with young actors. What do you teach them?”

Spacey: “It’s incredible to help young people find their own self-esteem and voice and learn collaborative skills. But it’s funny: When you tell them something that’s been passed down to you, some lesson you learned a long time ago, often, in the act of saying it, you think, “Oh, my God. I needed to hear that. It’s really important, and I haven’t been doing it myself.” I recently did a master class with 20 emerging actors over two days, about three and a half hours each day, and there must have been at least a dozen times that happened. I look at these young people and see myself. I know what they’re going through. I understand their desire and ambition and all the questions they have. No matter what happens in my life, no matter what success I achieve, I don’t want to ever be out of touch with that.”

This reminds me of the value I receive from teaching leadership skills to current and aspiring CEOs . I often say that you never really master a subject until you’ve had to explain it to a group of people. I frequently learn more from my students than they do from me. Teaching is also a great way to improve your communication skills and develop relationships with all types of people, including your employees.

Take the time to teach as often as you can. After all, spending time as a coach is one of the highest value roles of a CEO.

|29 Mar 2016

Brand Promise, or Why Trump & Sanders Are on Fire

Super Tuesday is finally upon us, giving us the best indication yet of how each presidential candidate’s brand promise translates into actual votes. Like many, I have been following the presidential election process with some interest. As a long-time entrepreneur, I think it is a fascinating study of the market for American voters. I have read many attempts to explain the surprising rise of both Donald Trump and Bernie Sanders. The standard answer is some form of “the people are angry and want an ‘outsider.’” However, this opinion is from people who spend all of their time inside the political bubble and view the world as insiders versus outsiders. I don’t believe the vast majority of voters see the world that way.

The Presidential election is like any other market, and American voters (customers) make decisions no differently than they do in other markets. Today’s voters are bombarded with multimedia attempts to attract their attention and money. Marketers know how hard it is to penetrate the noise and get the attention of their target consumer. The ability of a brand to communicate a simple promise that people value is critical to success.

As any marketer will tell you, however, this is very hard work. For only the second time in forty years, there is no sitting president or vice president in the mix. Because of this, all of the candidates – perhaps other than Secretary Clinton – must create their presidential brand promise from scratch.

Donald Trump brand promise

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So how have the presidential candidates done in creating their brands? It is clear that some have been more successful than others. While I am no fan of Donald Trump, he has a huge advantage in this area having spent his entire adult life marketing his personal brand. Many people immediately associate his name with “winning.” Of course, as in any other market, Trump doesn’t have to win all the customers. A consistent plurality of the Republican customers will gain him the party’s nomination. Then he simply has to beat one other brand to win the presidency.

Among the other Republican candidates, are there any clear brands? Rubio, Cruz, Kasich and Carson have struggled here. Maybe Carson is the nice guy candidate, but the market for that brand is fairly small.

The brand promise concept offers a pointer for these candidates on how to attack Trump. The only attack that will be effective is one that dilutes his brand promise. This is why it is so important to Trump that people believe his business success and net worth, and why he probably won’t make his tax returns public. Anything that suggests he is not really the winner he claims to be will hurt him deeply. Almost any other issue will only be a flesh wound.

Bernie Sanders brand promise

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On the Democratic side, when I think of Bernie Sanders I immediately associate him with helping the poor. Whether I agree with his plans or not, I know the brand promise and can make a decision accordingly. As for the other candidates in the race, things are murkier. Secretary Clinton, while well-known by the general public, has not established a clear brand promise. Is she trying to recreate the “success” of her husband’s presidency, be the first woman president, or capitalize on her long history of political activism? Simple is better when it comes to marketing.

For entrepreneurs, establishing a brand promise from scratch is really difficult, but if done well the potential payout is huge. Focus on consistently driving the message home in everything you do. If you aren’t sick of hearing it, you probably haven’t talked about it enough. The Donald has pounded his message home and may win the biggest market in America. Of course, it doesn’t hurt when you arrive on your personal 757!

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|01 Mar 2016

CEO Interview with SkillSurvey’s Ray Bixler

CEO interview

Ray Bixler, CEO, SkillSurvey

I recently spoke with Ray Bixler, CEO of cloud-based reference checking technology firm SkillSurvey, about the challenges and responsibilities of the CEO role. He had some interesting things to say about some of the most common challenges of CEOs, including the isolation of the job and the difficulties of transitioning from being a specialist in one area (in his case, sales) to the generalist approach required of a CEO.

What is SkillSurvey? “Our company provides a better way for companies to gather feedback from job references of candidates. Reference checking has been a source of frustration for years and even decades. Most of the time it is done via phone. Most likely, the only information retrieved about a candidate is verifying dates of employment. At the end of the day, everyone agrees that if you were able to gather better feedback, you could make more informed hiring decisions. Our solution helps over 1,400 companies gather better information from those references.”

As someone with a sales background, what would you tell someone trying to transition from sales to a CEO position? “Much of it was natural for me, because selling is a big part of the CEO’s job. SkillSurvey was still in the early-stage growth mode when I came on board in 2006. As a VC-backed company, there was a lot of pressure to get results. My sales background helped me guide the company to growth (and still does). I needed to be able to persuade our employees, investors, prospects, and others that our vision and strategy was right and that we were making the right decisions to move the company forward. Especially at a start-up, everyone is selling early on, so you have to make sure they know how to do it to the best of their abilities. That’s a big part of the CEO’s job, especially when a company is in high-growth mode.”

What surprised you the most about the CEO role? “It can be lonely at the top. As the CEO you often have to be the one to pull the trigger and make decisions. Then you have the responsibility to make sure that all of the parties involved understand the decision and support it. Everyone should agree with or at least support your decision so the company can grow.”

How do you handle that lonely position/isolation and find people to help you out? “I’m a member of a CEO forum group in Boston with about eight or 10 other people. We have quarterly meetings, and each one of us is required to present a member challenge that is usually pretty intimate. This is valuable, because the issues we discuss are often some of the hardest to get feedback on as a CEO. I always greatly look forward to the meetings and get one or two pieces of advice that help me with the decisions I need to make. I also have advisors that I rely on, which is valuable in a different way. When you are with other CEOs, it’s similar to being with other baseball players and getting advice on your swing. When you receive advice from former CEOs who are now consultants, it’s like getting advice from a coach. They have a whole different perspective.”

When I talk to CEOs, they say talent is always #1 or #2. What do you think? “Talent is always at the forefront. The smaller the company, the more talent matters: In a company of 10, making a bad hiring decision can take the company sideways or backwards.”

What have been your management influences? “I remember some leaders telling me to make sure you have an agenda for every meeting you hold, even one-on-ones. I follow that advice to this day. Also, I value transparency. I worked for some people who didn’t share as much as they could about the business or the reasoning behind certain decisions. This was demotivating for the staff. I find that sharing as much information as possible, such as finances, indicates to the employee population that we respect them and we’re all in this together.”

How do you think about balancing internal vs. external constituencies? “They are clearly in most cases interwoven. You should look inward at your employees in a way where you treat them with respect. You need to give them the opportunity to grow professionally and feel motivated. In the end, they are the ones that should help set the direction of the company. From an outside perspective, you should ask clients and advisory boards for their opinions and advice. It’s good to hear their opinions and let them offer an opinion on what they think the company should do. It’s important to hear all sides.”

What do you continue to struggle with as a CEO? “As CEOs, there are so many opportunities in front of us that it’s really difficult to recognize which ones are ultimately the ones we should pursue. It always comes back to something that has made us at SkillSurvey extremely successful and that’s focus. Some leaders think they should go as broad as possible with their product portfolios. In the end, it’s actually not a bad thing to be really, really good at one thing and to execute on that one thing. Doing too much leads to failure more often than doing one thing really, really well. I have to go back every year and make sure I push myself to remember that. While we have opportunities in front of us, we must make sure that we don’t bite off more than we can chew.”

What has changed about your approach as you’ve grown employees and revenue? “I allow others to lead more. I am delegating more responsibility to the people on my team. Also, since I moved from sales to the CEO role, I have to make sure I don’t spend too much time in a sales role. I have to be the one looking outside, reading about what’s going on with the economy or the market, seeing what’s shifting around, and paying attention to that while the company is doing the day-to-day work.” 

If a new college graduate came to you and said they want to be CEO, what would you tell them is the best preparation? “This is timely because my nephew asked me the same question last week. My first piece of advice is: work really hard. Show up to work first, leave last, picking up experiences along the way. Take as many responsibilities as you can.”

Related Articles:

How CEOs Can Prevent the Scourge of Isolation

Why Do So Many Bright Business People Fail So Impressively As CEO?

|16 Feb 2016

Obama and Syria: A Lesson in CEO Credibility

CEO credibility

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Former U.S. Defense Secretary Robert Gates recently released his book “A Passion for Leadership,” and it has a great lesson in CEO credibility. In it he discusses the situation in Syria. President Obama stated in 2012 that the use of chemical weapons would be a “red line” that Syrian President Assad could not cross without provoking military intervention from the United States. Gates says that it was a “serious mistake” when President Obama failed to follow up on this after Assad used chemical weapons against civilians in Syria in 2013. He believes that this action caused a loss of credibility for the U.S. around the world.

While CEOs don’t have to make the life and death decisions the President does, the same principle is at play. The challenge with credibility is that you don’t get many chances to recover. Most people will give you one mulligan, but that is about it.

The most common mistake I see from CEOs is being consistently overly optimistic in their projections. Every time they miss a forecast, they lose credibility. When they lose credibility, they also lose influence with the organization. Without influence, a CEO can’t drive the direction of the organization.

Here are some questions to ask yourself about your CEO credibility (From “The CEO Tightrope”):

  1. Is there any discoverable fact about you personally that would cause your team to question your credibility?
  2. Have others ever exaggerated your accomplishments? How did you respond?
  3. Has there ever been a time, in your communications as CEO, when you shaded the facts in order to provide a more positive spin on performance?
  4. Is the message you communicate to your stakeholders ever different from the message you send to your closest team members?
  5. Have employees ever heard you skirt the truth with external stakeholders or customers?

Related Articles:

The Three Qualities a CEO Must Have to Succeed

How Leaders Can Find Their Mojo

 

|02 Feb 2016

Responsibilities of a CEO? Here Are the Core 5

What are the responsibilities of a CEO? I get asked this question a lot, and it’s consistently one of the top search engine terms that leads people to this blog. It’s no wonder that people are curious: The CEO role is different from any other in business. Unless someone has been specifically groomed for the role, it is unlikely that they understand what the various CEO duties are.

Chief executives fulfill many roles, but there are five responsibilities of a CEO. These are the core areas where CEOs should spend the majority of their time. If not, they are not likely to succeed in the job. Here are the five:

Own the Vision: The CEO is responsible for the organization’s strategic direction. While others can help create it, only the CEO can ensure that it is indelibly etched in the minds of every employee, customer, and shareholder. After all, it’s difficult to make progress if you don’t know where you are going. Everything the CEO does must support this vision. Too many CEOs allow the vision to be a slogan on a piece of paper rather than a guiding light.

Provide the Proper Resources: One of the main ways a CEO adds value to an organization is his high-level understanding of all aspects of the business. He is uniquely positioned to make decisions that often no one else can make. This is particularly true when it comes to balancing resources – especially capital and people – across the organization. Skillfully allocating capital and staff across disparate groups and initiatives enables the CEO to best prepare the company for success.

Build the Culture: Culture is important, and CEOs who take it seriously are more likely to have engaged employees who perform at their best. CEOs need to manage for the culture they want in their organizations. One way to build their own culture is to ensure that a set of clear values is applied consistently across every department. Constant vigilance is key here: CEOs should also regularly measure culture to ensure the organization is on track.

Make Good Decisions: This one may seem obvious, but CEOs are often surprised at the breadth of decisions that come their way. They can’t be experts in everything. Knowing which decisions to make and which to leave to subordinates is a skill. In addition, similar to providing the proper resources, the CEO is often the only person in the company in a position to make decisions that impact multiple departments. Building an organization that makes good decisions at every level is critical for success.

Deliver Performance: Everyone knows the CEO is ultimately held accountable for the organization’s performance. He or she must take an active role in driving that performance. The CEO sets the standard and must ensure that people are held accountable for performance. This means helping each department set the right metrics and goals and then consistently measuring them. Instilling a culture of high performance is crucial to delivering it.

This was just a short summary of my list of CEO duties. For a more in-depth look at each one, see the following articles in my “5 Responsibilities of a CEO” series:

Own the Vision

Provide the Proper Resources

Build the Culture

Make Good Decisions

Deliver Performance

 

 

 

|20 Jan 2016

Top 10 Blog Posts of 2015

As the classic Frank Sinatra song goes, “It was a very good year.” Khorus continues to grow and become an essential CEO management tool for many companies. I strive to educate both current and prospective CEOs on how to do the job better. This blog focused on that topic again this year of course – along with everything from the state of venture capital, to CEO leadership as informed by presidential politics, to Google as an outlier in business. Here is the countdown of my most popular blog posts of 2015. 

top 10 blog posts

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10. Is Donald Trump a Leader? In this post I apply my three Cs model of CEO leadership to Trump. Does he measure up? The answer may surprise you.

9. Beacon CEO Flies New Airline Service: For this podcast and Q&A, I had the opportunity to speak with Wade Eyerly, CEO of private subscription airline service Beacon. He had some very interesting insights on the airline industry and the role of the CEO, especially about building a good culture.

8. Chasing Unicorns: The Beginning of the End: This article is my lamentation about the glut of money and focus being paid to so-called unicorns. The consequences will be less capital for everyone down the road.

7. 12 Ways CEOs Build Learning into Their Daily Routines: CEOs who say they have no time for professional development are not doing their jobs correctly. This post provides 12 practical suggestions for building self-improvement into your work routine.

6. Under Armour CEO on Decision-Making: Kevin Plank gave the best quote of the entire Austin Technology Council CEO Summit last May. It helped me summarize my thinking about decision-making in a very clear and concise manner.

5. What a Sociologist Taught Me about the MBA’s Limits: This article takes applied physics to a new level. I’ve always thought that MBA programs are lacking, especially for prospective CEOs. An article in Physics World brought home to me why that is.

4. The Top 15 Essential CEO Skills: I believe there are 15 skills that are fundamental for CEOs to master. This article summarizes all of them, which are outlined in detail in 15 Khorus blog posts starting withAttracting People.”

3. Org Charts Essential to Good Decision Making: No matter what your organizational structure, an up-to-date org chart is critical for letting people know exactly who should be making which decisions. I believe in this so strongly that we built an interactive org chart feature in Khorus.

2. Why You Can’t Run Your Company Like Google: Just because all the cool kids are doing it…Or, why Google should not be your business role model.

And my most popular blog post of 2015 was…drum roll please….

1. Why Are VCs Biased Against Me? I’ve had more than 100 meetings with VCs during my career and raised money exactly once. What gives?

|05 Jan 2016

U.S. Startups Languishing According to New Study

startups declining

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There is a disturbing trend in the U.S. regarding startups and the rate of new business formation. More businesses are dying each year than are being started according to the new study “Where Has All The Skewness Gone? The Decline In High-Growth (Young) Firms In The U.S.” The authors – economists Ryan Decker of the Federal Reserve, Ron Jarmin and Javier Miranda of the Census Bureau, and John Haltiwanger of the University of Maryland – found that “Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms.”

This is a terrible sign for the economy and may reflect a general uneasiness with the current economic climate. As the study points out, a relatively few number of startups are responsible for a significant amount of the new job creation. Using Census data, the researchers discovered that “In 1999, for example, the top 10% of startups grew almost one-third faster than median for all startups. By 2007, that ability to pull away had almost disappeared.”

As to the causes, the authors don’t reach definitive conclusions. One thing is for certain: The worse people feel about the economy, the less likely they are to start new businesses. Quitting a job to start a business is one of the biggest decisions any person can make, with many factors going into the decision. Most people who strike out on their own have special expertise that is particularly valuable in the market. When the economy is strong and the risk is low, the most talented are more likely to go for it.

As I wrote earlier this year, one issue is the current focus on chasing unicorns rather than other investments that may yield solid – though less potentially exciting – exits. With a glut of money going to unicorns, investors will realize that they cannot make as much ROI as they thought. This will make it increasingly more difficult to raise money, perpetuating the downward cycle of startup creation.

For whatever reason there aren’t as many “high-growth firms” being formed. You rarely hear this talked about in the national political conversation, but it should be.

Here are two articles that provide more details about this new research:

http://blogs.wsj.com/economics/2015/12/08/what-happened-to-the-breakout-startup/

http://www.businessinsider.com/fewer-us-startups-is-bad-news-for-economy-2015-12

 

 

|16 Dec 2015

How to Be President of the U.S. (POTUS)

Commentators often claim that being President of the U.S. is totally different from being a CEO, because “you can’t just order everyone around.” This comment is usually made by someone who has never worked anywhere near a CEO, or they would realize that CEOs can’t order people around and be successful. While there are certainly differences between being POTUS and CEO of a major company, it is much more similar than not. Fortune 500 CEOs deal with many of the same issues as the President, because they both are in charge of large organizations and must balance many competing interests.

One of the first things I teach CEOs is what I call the Decision Nexus. To move the organization forward, CEOs must try to balance the often-competing interests of the following three very different stakeholders: employees, shareholders and customers. A good decision takes into account the needs of all three groups. A similar nexus can be used to explain how a President should think about his or her job.

Decision Nexus How to Be President

The Decision Nexus

Employees

Just like any large organization, the federal government has hundreds of thousands of employees. Most Presidents spend little time thinking about the average government worker or trying to make changes to improve performance at an individual level (not to mention at a departmental or organizational level). While they often spend much time on making various appointments, the criteria Presidents use have more to do with political payback than how well each appointee can do the job. An experienced CEO in the role of President would know how important it is to get the right people in the right seats to accomplish his or her key objectives.

Shareholders

The shareholders for the President are obviously the American people. Some Presidents seem to forget that they are the President of everyone, not just the people who voted for them. Communicating clearly and authentically with shareholders is key to having a productive relationship, whether in business or in the White House. Addressing legitimate concerns of shareholders instead of ignoring them is a vital role for any leader.

Customers

Finally, who are the customers of the President? Think about what customers provide a business: By buying products and services they provide the resources for the business to pay employees and invest in projects. In the case of the President, Congress is the entity that provides the resources by constitution.

I would suggest the President should treat Congress as the “customers” they are. It doesn’t mean he would do anything against his principles; merely that he would try to market and sell his ideas to Congress. He would discover where there was agreement and produce product to meet the need, forming whatever coalition necessary to sell the deal.

What can the President provide Congress in return? Significantly, he provides the ability to get anything done. As we have seen, it is very hard to accomplish anything if the President is truly against it.

This is a far different approach than most recent Presidents have taken. An experienced executive would understand that to accomplish anything, he must balance the interests of employees, shareholders, and customers. Nothing I have written is partisan in any way, but simply the best way to be an effective executive.

For more on how to balance these three constituencies, see the “Employees vs. Customers vs. Shareholders” chapter of my book “The CEO Tightrope: How to Master the Balancing Act of a Successful CEO.”

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|02 Dec 2015

Managing the Giant Flywheel of Business

John Allison, former CEO of BB&T, once told me that he thought CEOs should be evaluated not only on the performance of the company while they are CEO but also for several years after they leave. There is a momentum effect in every business. Things going well tend to keep going well. If everything falls apart as soon as the old CEO steps out the door, it is a clear sign that things were not as good as they may have appeared. New CEOs need to understand what phase of the business they are walking into and that changes they make may not yield results for months or even years.

I have often equated revenue in a business to a giant heavy flywheel. When you start a business you want to give the wheel a big shove and get it going really fast. Unfortunately for most companies, no matter how hard you try it is very difficult to get the flywheel moving. You feel like every day you lean on it as hard as you can and it barely moves. With persistent and competence the flywheel starts moving and getting business becomes easier and easier. This can take years, but every new sale confirms the momentum and things start going in your direction. Customers start seeking you out. Employees want to work for you. Investors will want to invest, just as you may be proving you don’t need any more money. If you are really fortunate to have the right product in the right market, crazy things can happen.

I remember as CEO of NetQoS we got into this tornado phase in 2005. We were selling a physical server that did network management and had to be installed in the customer’s network. Every customer always wanted to do a proof of concept before they would buy to be sure it would work in their “unique” environment. Network engineers are famous for thinking their network is special and wanted us to prove our device would work. So one day my Sales VP walks into my office with a purchase order and a big grin on his face. At the time we were growing from about $10 million in revenue the previous year to over $20 million that year, so seeing a P.O. was not a rare occurrence. I glanced at it and saw it was for about $25,000 dollars, the cheapest product we sold. I looked at him and asked what was so special about it. He said this customer – North Dakota Telecom – called yesterday and wanted us to do a proof of concept. He told them he wasn’t sending a sales guy to North Dakota to talk to one customer about a $25K deal. And today they sent us a P.O. It was a significant moment for us.

When you get in that phase of the business it is easy to think that you are brilliant. The truth is this was the result of all the work we had done previously pushing on the flywheel. As CEO I could have gone on vacation for a year and orders would have kept rolling in to the business.

It is important to recognize this flywheel concept as a CEO. Significantly changing the revenue path of a business is very hard work. If things are growing this works in your favor, as the trend will likely continue, but if revenue is falling then reversing that is just as hard. Too many CEOs take over and think they will be able to reverse a company’s fortunes in a quarter or two. My experience tells me that even the best CEOs need six to eight quarters to make a significant difference in the speed and direction of the flywheel.

Almost all of the things a CEO does, such as setting the strategy or bringing in the right people, take time to show results. Don’t fall into the trap of promising quick changes. Fighting the flywheel is hard!

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|10 Nov 2015

Is Donald Trump a Leader?

I am constantly observing leaders to better understand how my three Cs model of credibility, competence and caring applies. Many people I know are shocked by the ability of Donald Trump to gather a large number of followers. They are offended by some of his comments and don’t understand how he could be leading the polls. An important point of leadership is understanding that you must look at it from the follower’s perspective. My model says that to gain followers you must appear to them as credible, competent, and caring. Let’s apply each of one of these to The Donald and see if we can learn something about leadership.

Credibility: Do people believe Trump is honest?

Credibility is the idea that people believe that you believe what you are saying to be true. You may have to read that last sentence twice. I did not say that you have to say things that are true. Clearly Trump has said things that most people would say are not true, but that is not the standard. With his willingness to say whatever comes to mind without a filter, he meets this standard for his followers. Am I saying that a leader can go around stating a bunch of crazy things as long as he appears to believe them? Well normally no, because that would violate the second standard in the model: competence.

Competence: Do people believe Trump can get something done?

People want their leaders to be competent at what they are doing. Getting all your facts wrong will cause people to doubt your competency. In this case, however, his followers are not looking for someone who is competent across every situation a president might encounter. What they are specifically looking for is a president who can get things done. No one can deny that Trump has successfully pulled off many land developments. It doesn’t hurt that he is flying around in a plane with his name on it. Compared to many of the politicians in the field – who can point to little more than having been elected to office to show their competency – he has a huge advantage.

Caring: Do people believe Trump cares about their issues?

Finally, we come to the caring question. How can a billionaire be perceived as caring? By talking about the issue that his followers care the most about, that’s how. Trump’s campaign was launched around the idea of discussing illegal immigration. For most of the politicians in the race, immigration is a difficult topic with many nuances. For Trump it is a hammer he uses to cudgel them on their own credibility and competence shortcomings. One of his favorite retorts is: “Why haven’t you done something to solve the problem?” I bet if you surveyed his followers, the majority would list illegal immigration as their number one issue.

To get elected and govern effectively, a president must capture a majority of the country as followers. The same is true of CEOs. While not everyone in a company must follow, to be effective you need a strong majority of followers across the entire employee base. The problem for Trump of course is how he can expand his followers and capture a majority of the people. This is the area where his previous comments will likely come back to haunt him. It is hard to see how he establishes the three Cs with voters who are less interested in the immigration issue and more focused on other issues. Making crazy statements may get you quick publicity, but over time it will erode your credibility and competence whether you are trying to lead a country or an organization.

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|06 Oct 2015

Lessons from GOP Presidential Race Disruptors

Presidential RacePhoto credits: Carly Fiorina and Donald Trump images by Michael Vadon. Ben Carson image by Gage Skidmore. All licensed under CC BY-SA 4.0 via Wikimedia Commons

I find the presidential race very interesting for what it can teach business leaders. The election is after all a market, with every candidate trying to sell himself or herself to the American people. Like every market, the presidential race has experienced significant changes over time. For example, the advent of television and the Internet forever changed the ways candidates sell their product to the country.

I think the current Republican primary is highlighting another potential transformation: The phenomenon of several non-politicians – the GOP outsiders – mounting significant runs for president is a classic disruptive change.

Reminiscent of large companies suddenly attacked by startups, the politicians in the Republican field have been “disrupted” by the likes of Donald Trump, Ben Carson, and Carly Fiorina. Similar to what happens in business, the established politicians are reacting by emphasizing their deeply formed policy positions and how the disruptors in the presidential race aren’t “serious.” In these comments, I can hear the echoes of CEOs such as Blackberry’s who claimed the iPhone was a toy compared to their professional products.

What the disrupted companies always miss is that they are no longer competing against the current incumbents. Customers are choosing a new product based on a previously unimportant dimension. Until the iPhone appeared, most customers bought mobile phones based on the ability to make calls and do email. Blackberry dominated with their phone, because it offered the best platform for doing email. Suddenly, with the introduction of the iPhone, email – though still important – was not the deciding factor.

In this presidential race the deciding factor is not a candidate’s legislative resume or even his or her judgment (see Donald Trump et al.). Disruptive products are often not nearly as “good” along many dimensions as existing products. But they often have one feature that people cling to as most critical. Currently, people in the polls are clinging to the idea that the non-politicians are more likely to go do something when in office.

The existing politicians in the presidential race are still trying to compete against the incumbents using the tactics that have always worked against other politicians. They need to forget about how their policies are more deeply considered than the new entrants and release a new “product” that convinces people they can get something done.

The lesson for CEOs is to constantly be on the look out for changes in your market. Are customers starting to make decisions along a different dimension? It’s critical to watch for startups that are getting traction. I am often surprised by how many bigger company CEOs know nothing about the startups in their space. Just because a company is small today doesn’t mean they aren’t going to be a major competitor tomorrow. Remember, every company started as just an idea. Don’t confuse current revenue with future results.

|22 Sep 2015

Just Do It: What Great Athletes & CEOs Have in Common

Rafael Nadal lessons for CEO

Photo of Rafael Nadal courtesy of Flickr user Ian Gampon

I watched an incredible U.S. Open tennis match this past weekend, which I think provided a demonstrable lesson for CEOs. Even if you aren’t a tennis fan, you can appreciate the uniqueness of the match. Rafael Nadal, the heavy favorite, was ahead two sets to none and a service break in the third set of the match. Nadal’s record after winning the first two sets in a Grand Slam tournament was 151-0! Never had anyone come back against him from two sets down.

That was true until Saturday when an incredibly talented but inconsistent Italian named Fabio Fognini turned in a performance for the ages. As Nadal admitted after the match, he played fine. Nadal didn’t lose the match as much as Fognini won it with an amazing array of shots under intense pressure. He didn’t allow the situation to overwhelm him, going for and making four consecutive winners in the key game. It would have been easier to just try and play it safe by hitting the ball in the court and hoping Nadal missed. Of course the odds of Nadal just missing and giving away the match were small (151-0).

Fabio Fognini lessons for CEOs

Fabio Fognini; Photo Credit: Bummel 1968 via Compfight cc

If you haven’t heard of Fognini, it is no surprise. A 28-year-old who is currently ranked 32 in the world, he has been generally considered an under-achiever during his career. Having played over 40 years of competitive tennis, I can tell you that learning how to perform consistently under pressure is the key to competitive tennis. Tennis shots have to be timed with incredible precision, and any slight variation due to nerves can make a good player look really bad.

You are probably wondering what this has to do with being a CEO. Well I’m glad you asked. In my experience CEOs struggle the most not with figuring out what to do but actually being able to do it under the intense responsibility of the CEO position. I often ask CEOs who have taken my class what they think I would do if I were CEO of their company. I used to be surprised by how often they quickly cite three or four things they believe I would do immediately if I took over. Of course then I follow up with: If you know what to do then why the heck haven’t you already done it? The ability to force yourself to do what should be done no matter the emotional pressures is a trait of both great athletes and great CEOs.

|08 Sep 2015

A Zirtual Outsourcing of Financial Responsibility

Zirtual burn rate

Photo Credit: purpleslog via Compfight cc

By now you have probably heard about Zirtual, the on-demand virtual assistant startup that closed up shop in the wee hours of August 10 and left 400 employees jobless overnight. A few days later, Zirtual founder and CEO Maren Kate revealed to Fortune that the company simply ran out of money. She said “the numbers were just completely f***ed.” In a blog post for Medium, she wrote, “‘burn’ is what happened to Zirtual.” What is even more telling is that she did not have a full-time CFO on staff and outsourced finances to a “Silicon Valley CFO firm.”

I often talk to first-time CEOs who have a very cavalier attitude about certain parts of their business. For instance, technologists think everything outside of product related stuff is easy. Or, those with a sales background will focus on sales and ignore everything else. The idea that you should outsource functions of your business that aren’t “core” is a thought you will hear from time to time.

I have never been a fan of this idea, but of course it depends upon how you define “core.” Before totally outsourcing a function, I would make sure that poor performance in that area couldn’t sink the ship. The number one reason startups fail is because they run out of money. Therefore, I would want someone on the team focused on predicting cash. That is a critical role, and outsourcing the entire finance function is a quick way for a CEO to lose touch with this key part of the business.

In the early stages, I would encourage the CEO to personally build the financial models so that they understand every lever related to cash. Almost every business should be predicting cash flow out as far as possible as part of their normal operations. It is not easy, but it is a lot better than sending a message on Monday morning that everyone is fired.

For those CEOs who think they can get away with focusing on just a few parts of the business, I’ll reiterate what I wrote in my book “The CEO Tightrope: How to Master the Balancing Act of a Successful CEO.” As CEO you are responsible for the whole enterprise: The buck stops with you. The challenge all CEOs face is to build and grow a world-class company. You must be strong in every area of the business – not experts, but well informed – and fulfill the responsibilities that only you can perform. The CEO is responsible for making sure that every group is delivering at the highest possible level. Each company is only as strong as its weakest link. Understanding how to balance performance across all departments requires a CEO with broad experience, big-picture vision, and an understanding of what the job requires.

|18 Aug 2015

Why Google Can’t Run Its Business Like Google

Alphabet Google

Logo of Google’s new holding company Alphabet

Late last month I posted an article on this blog titled “Why You Can’t Run Your Company Like Google.” In it I discussed how most companies cannot afford to move beyond their core businesses and go after so many unconventional projects as Google does. Lo and behold, it seems that even Google cannot continue to act as Google. This week the company announced a new corporate structure where it is separating its core businesses from its “moonshot” projects, such as driverless cars and smart contact lenses.

The reason? According to Larry Page in his letter announcing the restructuring, “Our company is operating well today, but we think we can make it cleaner and more accountable.” They are separating the financials of Google from the collection of companies it is calling “Alphabet.” Said Page: “This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main internet products contained in Alphabet instead.”

This move will make it much easier for employees to understand and align to the very different mission of the core business compared to the other moonshot projects. Defining success is critical for every CEO, and with the mishmash of businesses it was unclear what success was for the old Google. Now the existing advertising and search engine business can focus on what it does best, while the moonshots can be run as they should be: as high-risk, high-reward startups. As a CEO, it is important to review your mission annually and make sure success is clear for every employee.

 

|14 Aug 2015

Greed Is Good? For-Profits vs. Nonprofits

What is the difference between nonprofits and for-profit enterprises? If you listen to the popular media, for-profits are greedy, nasty organizations that succeed by taking advantage of poorly informed customers. Nonprofits on the other hand do noble work that provides value to society instead of making profits for greedy capitalists. While I am sure you could find examples to illustrate both ends of the spectrum, my experience serving on the boards of both for-profits and nonprofits is that there are more similarities than differences. However, the impact of competition and efficiency does a lot more good for consumers than people realize.

Amazon for-profits

Logo Credit: Amazon

For example, let’s say Amazon wanted to become a nonprofit. Would consumers benefit more? A simple question should illustrate the point. Taking the past three years (2012–2014) into account, if Amazon were to lower its prices so it made zero profit, how much could it reduce consumer prices? If you suspect a trick question, you are right. Amazon would actually have to raise its prices to break even. The fact that Amazon can raise money from the capital markets allows it to operate at a loss. This would be impossible if the company were a nonprofit. This statement about Amazon from Matthew Yglesias, writing in Slate, captures the concept:

“That’s because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way. And the competitive pressure of needing to square off against Amazon cuts profit margins at other companies, thus benefiting people who don’t even buy anything from Amazon.”

Walmart for-profits

Photo Credit: JeepersMedia via Compfight cc

Of course, maybe Amazon is just different from most companies. What if we looked at that most hated of American companies, Walmart? Over the same period, how much could Walmart lower its prices if it wanted to operate as a nonprofit? The answer is roughly three percent. In other words, an item that sells for one dollar would drop all the way to 97 cents. This would be hardly noticeable to most consumers. It is interesting to note that for every dollar Walmart collects on a transaction, three cents goes to Walmart as profits, and I estimate that between 20 and 30 cents goes to the government in the form of sales taxes, employment taxes, property taxes, etc. You could say that Walmart is a barely profitable organization being run for the benefit of the government!

Because Walmart and Amazon can fund themselves in the public markets, they have been able to scale to a size that provides tremendous efficiencies. It is commonly accepted that new businesses will lose money in their first few years in order to gain the scale necessary to break even. Because nonprofits by definition can’t produce a financial return for investors, most can’t raise enough capital to scale and are constantly trying to raise money to just keep the lights on.

My point with these two examples is to show the incredible effects of competition and efficiency in the marketplace as a force for good. While most entrepreneurs start their businesses hoping to make a profit for themselves, the market forces them to do that in the most efficient way possible. The unseen force of competition does more than anything else to benefit consumers.

|04 Aug 2015

Why You Can’t Run Your Company Like Google

Google's Eric, Larry and Sergey in a self-driving car; January 20, 2011

Google’s Eric, Larry and Sergey
in a self-driving car; January 20, 2011

I think we all know that Google is an outlier in business, but we can’t help comparing ourselves to them. They’re like the popular kid in high school who has looks and money and seemingly everything going for them. But the same lessons we learned then apply now: Stick to your own unique strengths and learn the value of delayed gratification. If you try to be too much like the cool kid, you’ll probably end up looking silly and ultimately fail. And, as is often the case, they aren’t the best role model.

The problem is not that Google built a successful search and advertising business. It’s not that the company basically has this printing press that throws off billions and billions of dollars in cash. It’s not that the company is trying to keep growing, as every business does. No, it’s their approach to growth that is the problem in my opinion. As Chairman Erick Schmidt told Business Insider:

“Most companies ultimately fail because they do one thing very well but they don’t think of the next thing, they don’t broaden their mission, they don’t challenge themselves, they don’t continually build on that platform in one way or another. They become incrementalists. And Google is very committed to not doing that. We understand the technological change is essentially revolutionary, not evolutionary.”

What this means is that Google is trying to catch lightning in a bottle again: They are desperate to create the next billion-dollar business. However, history is not in their favor. Few companies have ever come up with a billion-dollar idea twice in a field unrelated to their initial success. Just look at the turnover on the Fortune 500 list: More than half the companies that were listed in the Fortune 500 in 1995 were not on the list in 2007.

Their quest is causing Google to act in unusual ways. The company is certainly making good on Schmidt’s promise not to be incrementalists with its “moonshot projects” such as self-driving cars and smart contact lenses. Yet it remains to be seen if any of their futuristic projects will really be a driving force for growth or simply an entertaining distraction from the company’s core business.

Their use of “objectives and key results” (OKRs) is laudable, but having too many goals that are just pipe dreams is no way to run most businesses. In other companies, employees would not last long if they did not achieve more than 30 percent of their goals. In addition, many employees at Google do not have real job descriptions but are simply trying to come up with a brilliant idea.

I’m all for job flexibility and a healthy R&D practice, but most companies cannot afford to behave like Google. Many of us are just trying to make payroll. We need to have predictable cash flow. Excess revenue is put towards growing the business in a responsible way. We cannot go around chasing unicorns.

So no, you cannot and should not run your business like Google. Sure, their excess cash is a problem we’d all like to have, and I hope Google does come up with the next billion-dollar idea. In the meantime, the rest of us must continue to live in the real world.

|21 Jul 2015

Chasing Unicorns: The Beginning of the End

There is a constant theme in the business world: Some enterprising individual uncovers a new way to make money and makes a fortune. Other people look at what they are doing and say, “That doesn’t look so hard, I can do that too!” If they are early enough maybe they make some money as well, but over time we end up with too many copycats and too much money chasing too few returns. Greed is a powerful motivator, but as more money pours into an idea, it becomes harder and harder to make money. There is an inevitable collapse in prices that causes the later entrants to suffer a major loss.

I think we are seeing this phenomena occur in the venture funding industry as everyone has become enamored with the idea of chasing unicorns (companies who have a valuation over $1 billion). Everyone wants to invest in the company that will be the next unicorn.

Photo Credit: Jim Linwood via Compfight cc

Photo Credit: Jim Linwood via Compfight cc

Before Cowboy Ventures founder Aileen Lee coined the term “unicorn” in a November 2013 TechCrunch blog post, venture capitalist Mike Maples, Jr. was talking about “thunder lizards.” Mike is a smart guy who analyzed the returns from VC investments over many years. He found that in each year there was often one company that achieved exceptional returns compared to all the other companies that raised their initial funding in the same year. Often the results were so skewed that the one high performer was worth more than all the other companies combined! Also, the second best performer produced huge returns compared to everyone below them.

Being a smart investor, Mike recognized that finding the one thunder lizard each year should be the obsession of a VC. All of this makes perfect sense…at least until it doesn’t. There are a couple of underlying assumptions under this analysis that are beginning to be proven false. The biggest is that building a huge company means investors get tremendous returns. This was true in the past when the total venture funding raised by a company before going public was relatively small. If you build a company worth $2 billion, whether you raised $30 or $50 million doesn’t really matter much. The investor is going to be happy with the returns.

As the amount of money available to startups has increased, both because of larger VC funds as well as the entry of more late stage sources (private equity, sovereign wealth, pension funds, etc.), a billion dollar exit does not necessarily guarantee investor happiness. In the extreme case of Uber, which has already raised almost $6 billion, any exit short of probably $20 to $30 billion could leave early investors without a good return. No longer does being the top gross performer in your year guarantee a great return.

I think many in the startup community are losing sight of the goal. Venture investors want a great return for the large risk they take. They understand that many of their investments are going to be total failures, but some will be huge winners. Historically, a great return was defined as a 10X exit. Having a 10X exit should be the goal of the exercise, not hitting some random number of a billion dollars just because it sounds cool.

As entrepreneurs and investors are focusing on unicorns, they are failing to consider this changing landscape. My suspicion is that sometime within the next couple of years, limited partners may begin to realize that they don’t have as many winners as they thought they did. When that happens it will be really hard for many firms to raise another fund. My advice for entrepreneurs is to raise money now if you can, because it may not be available at nearly the same levels in just a few years.

Related article: Something is rotting under Silicon Valley (Fortune)

Featured Photo Credit: ell brown via Compfight cc

|07 Jul 2015

How to Engineer Employee Alignment

What’s the top challenge of CEOs? Employee alignment, according to many I speak with all over the country. Making sure each employee understands the company’s strategic objectives and is continually working towards them is critical. However, many CEOs believe they can run their organizations via verbal communications, with an e-mail thrown in every once in awhile for good measure. The truth is that even companies with as few as 50 people struggle to get on the same page, making it imperative that CEOs take a systems approach to employee alignment.

Consider the inefficiency of trying to verbally communicate the corporate objectives in a 50-person company. It’s possible for CEOs to personally meet with each employee, but it would be time-consuming. Even a companywide meeting once a quarter or once a year, while more efficient and certainly worthwhile, is not enough. To make it stick, CEOs also have to ensure that each employee understands how his or her daily work supports those objectives.

This takes extensive work on the part of the executive team and managers to help employees create goals that match up to the department and company goals. Many times this is also done verbally. Any written goals often end up on static documents that everyone revisits maybe once a quarter or even once a year. If employees and managers discuss progress towards their goals, it’s often infrequently during meetings. It’s common for no one to think about the goals again until the next weekly, monthly or quarterly meeting or even the yearly performance review.

Next, think about employees and departments who need to work together to help the company achieve its goals. The numbers escalate dramatically if most of those 50 employees need to communicate their key objectives and projects directly to each other. If every person had to meet with every other employee in a 50-person company, it would require 1,225 meetings!

Then think about how often things change and need to be communicated to the relevant parties. While everyone may not need to directly interact, the idea that an organization of any significant size can be run by simple verbal direction and communication is a fiction. This type of problem calls for a system of record that reflects the objectives of each team member and can be updated frequently.

I have found that a system using quarterly cascading goals as a foundation can align employees and formalize each person’s contribution to the whole. Simply breaking down the intent of the CEO to each employee – and putting that information in a formal system of record that everyone can see – is a valuable exercise that ensures employee alignment from the top to the bottom of the organization.

But the system needs to go further (and this is what I have done with Khorus) by continually reemphasizing the goals with employees and providing a way to communicate updates. Each week, employees should be asked to disclose how likely they are to meet each goal during the quarter and what their perceptions are of the quality towards that work so far. This is important, because employees may feel that a goal can be completed during the quarter – such as a software build – but they may also believe the quality will not be up to par. One Khorus CEO customer calls this the “canary in a coal mine” effect.

Instead of eliciting backwards-looking progress reports, these questions ensure that the CEO and managers receive predictive data about where goals stand and which ones may be in danger of not being completed on time and/or at a high quality. With this companywide forecasting, the CEO and his team can take action in time to make a difference – not at the end of the quarter or year when it’s too late.

In addition, keeping weekly tabs on likelihood and quality helps reinforce the goals with employees. Because they are regularly asked for their feedback and opinions, employees stay engaged with their work and feel empowered to take creative initiative. This lends purpose and motivation to each working day. Also, when all company, department, and individual goals are aligned and visible in the platform, it becomes easy to spot dependencies and redundancies between groups. This visibility boosts trust and collaboration.

Aligning every employee and his or her role with the corporate direction is a critical role for the CEO and the only way to deliver consistent performance. CEOs cannot simply rule by decree. Those who take a more systematic approach will be in a better position to more actively manage the company and achieve their objectives.

This article is based on one I published on The CEO Magazine web site last year.

|16 Jun 2015

Under Armour CEO on Decision-Making

CEO Decision-making

Kevin Plank, Under Armour CEO, interviewed by WP Engine CEO Heather Brunner during the event; Photo credit: Austin Technology Council

I attended the Austin Technology Council CEO Summit last week and heard Kevin Plank, the founder and CEO of Under Armour, give the best quote of the entire event: 

“As a leader, I don’t believe in right decisions or wrong decisions. It’s about being decisive.” 

He captured a thought about CEO decision-making I’ve had before but couldn’t express succinctly. People often ask me about my worst decisions as CEO, but I’ve never felt like I had a good answer. I can’t really pinpoint what my best decisions have been either. The point is that I don’t view events as discrete decisions but a continuous process of decisions. While certainly in hindsight some things didn’t turn out well, that doesn’t necessarily mean those were bad decisions.

Also, a good outcome doesn’t necessarily mean it was the best decision possible. As a CEO you must be decisive but also constantly reflective and willing to change course when presented with new facts. No decision is final. This is one of the odd balancing acts that CEOs must perform. It can make you crazy. You have to make quick decisions, but you also have to be open to the fact that any of those decisions could be wrong and should be changed. The people who course correct the fastest in their decision-making process are the ones who have most success in the CEO role.

Overall, the event was a success with more than 165 local executives in attendance. One regret I had, which was shared by many of my fellow CEOs in attendance, was that there were not more young CEOs there. I personally invited several from the Austin region to attend, but too many think they don’t have time for events like this. They missed out on all the incredible experience and connections gathered in that room.

As I mentioned in my last post – 12 Ways CEOs Build Learning into Their Daily Routines – those who make time for events like this are often the most successful, because they have learned what their responsibilities are and how to balance them. In addition, they have an attitude of being open to learning and growing. Those who believe they don’t have the time for personal development are not doing their jobs properly. This brings all this back to CEO decision-making: It’s a process that can be learned and honed, but only if CEOs take the time to do it.

 

|03 Jun 2015

The Top 15 Essential CEO Skills

What are the CEO skills needed for success on the job? Once CEOs understand the five responsibilities of the role and the six ways they should spend their time, I think there are 15 key skills they should cultivate. Why these 15? They help CEOs set their organizations up for success with systems, processes and resources; manage and lead well; and continuously learn/keep up with trends to help predict where the organization is going and what it will need in the future. Some CEOs will naturally be better at these than others, but all can be learned and perfected with the right attitude and zest for knowledge.

Here are the 15 CEO skills in no particular order. The links go to full articles and videos about each one on the Khorus blog, where I published a whole series about this topic.

  1. Attracting Employees: One of the most important uses of a CEO’s time is focusing on recruiting and hiring top talent. Too often, organizations treat hiring as a tactical fire drill rather than a critical part of the strategic plan. CEOs need to own this process.
  2. Retaining Employees: Too many organizations neglect employees once they are hired. CEOs should focus on the “A” (or top) players and ensure that they feel empowered to do their best work in support of a compelling purpose.
  3. Employee Development: This is an important part of retaining employees. The best workers want to be part of something special. CEOs need to set a clear vision and show employees how their contributions can support it. In addition, they should implement systems and processes to develop employee talent.
  4. Communication: Communication is essential for any CEO, but many think they can get away with addressing the employees just a few times a year. CEOs need to regularly communicate information that is timely, relevant, and tailored to each audience. This includes being transparent about both positive and negative developments.
  5. Leadership: CEOs must act through people, and leadership is effectively influencing people to achieve desired outcomes. There are three tools CEOs must use in concert to achieve influence: credibility, competence and caring.
  6. Sales Knowledge: The best CEOs are great sales people. They use the art of persuasion to build a company and obtain the best resources, create and establish a brand, and also acquire and manage customers.
  7. Operational Knowledge: It’s critical that CEOs understand internal operations and build systems that allow them to scale the company as it grows. As Jim Schleckser of the Inc. CEO Project says, failure to have more mature systems and processes will inhibit the company’s growth.
  8. Financial Knowledge: Don’t abdicate this skill set to the finance person. CEOs must understand the financials to dynamically make adjustments and prepare for the future.
  9. Regulation and Governance Knowledge: CEOs need to be aware of how laws and regulations may impact their businesses. They should seek outside sources of information rather than just relying on their legal counsel.
  10. Market and Customer Knowledge: CEOs cannot effectively lead if they don’t understand their product, customers, and competition. Failure to do this adequately can negatively impact credibility and competence.
  11. Tying Strategy to Execution: Coming up with a master plan is not enough. To succeed, CEOs must show employees how their day-to-day work contributes to that long-term plan, help them set smart goals, and measure their progress consistently.
  12. Attention to Detail: CEOs must balance between big picture strategy and the urge to micromanage every detail. Savvy CEOs focus on the details that matter.
  13. Anticipate Organizational Needs: One of the CEO’s key responsibilities is to provide the proper resources. The best CEOs look out six months to one year ahead to fulfill those needs before they became major weaknesses.
  14. Emotional Intelligence: Former Campbell Soup CEO Douglas Conant said what derails most CEOs is the “soft stuff.” This includes the ability to empathize with others and understand their needs.
  15. Build the Culture: Culture is how things get done in an organization. CEOs can and should actively manage for the culture they want.

Did I miss any critical CEO skills?

|21 Apr 2015

Why Are VCs Biased Against Me?

In my 20-year career as a CEO, I have had more than 100 venture capital meetings but have only been successful raising money once.

I started my first business in 1990, before venture capital was a common way to fund new companies. For the next ten years, I ran businesses that I funded out of my own back pocket. Since the money was my own, every loss was personal. Nothing teaches you the hard knocks of business quite like finding out a customer’s $13,000 check is bad—after you have shipped them the product. Nevertheless, I enjoyed the control that came from using my own money.

My first exposure to the venture community occurred at the end of the Internet bubble, in the late 1990s. I was living in Austin and would wake up each Monday to read the tech section in the local paper. At the time, it was filled with news of companies that had raised millions of dollars, often with business plans that seemed almost ridiculous. To someone who had been funding his own companies for nearly a decade, the spending habits of many of these startups were crazy. They often appeared to have no real plan to make money, but they could spend it like drunken sailors.

While I still liked the control that came with self-funding, the opportunity to raise enough money to do a business “right” began to appeal to me. If VCs were pouring money into the operations I read about in the paper, surely I had a chance at getting some. Soon, I was putting together a business plan around a technical idea developed by my wife. The very first venture capital firm we approached loved the idea and wanted to fund. We then approached the biggest VC firm in Austin to try and get a competitive process going, but we never got an offer. No problem: My first VC pitch had been a success, and we had $11 million in the bank. This VC thing was easy.

Since then, I have had literally over 100 VC meetings and have never raised another dollar.

Why has it been so difficult? Are VCs biased against me? Were they all right to turn me away? Should I have taken the hint from repeated refusals and given up? My own experience suggests otherwise.

The exceptional team we put together following that first VC investment delivered a great run, taking the company from zero to $50 million in revenue in eight years (the same amount of time it took Microsoft to get to $50 million). We had thirty-one consecutive quarters of double-digit year-over-year growth. Things were going great, and we were beginning to think of an IPO when the mortgage crisis hit.

The week Lehman Brothers collapsed, we could tell from our data that the world had changed. Continuing to deliver double-digit growth was going to be impossible without some significant changes. I immediately went to the board with an idea. While we would survive the downturn with only minor cutbacks, other companies wouldn’t be so lucky. In particular, there was a public company in France that I thought would make a perfect complement to ours. Because of the downturn, their stock was at a very low value, and we could acquire the company for roughly one time annual revenue. This was a great opportunity to double the size of our company and be ready for an IPO when the market returned. All we needed to do was raise the cash necessary to do the transaction. With our track record of growth and profitability, raising money should be easy, right?

Unfortunately not. I reached out to and participated in conversations with forty-six different growth-equity firms. Many of these had already expressed interest in our company. At the end of all these conversations, we couldn’t find a single one to fund the combination deal. Thirty-one consecutive quarters of growth didn’t matter; when we needed the money, we couldn’t raise it.

Nine months later, in late 2009, we sold the company for nearly four times revenue and a tenfold return for our single investor. I had been handing these firms at minimum a triple, and likely a home run, if we had reached the public markets, but I couldn’t find a taker.

Okay, so maybe the explanation is simply that in 2008, it felt like the world was ending. Surely in more normal times raising money would be easy.

After the acquisition was completed, I got a call from a local VC about stepping into the CEO role at a struggling company. While I didn’t take the job — because I felt that the company was beyond saving — I thought that the technology might have some value.

A few months later, when the company went into bankruptcy, one of the founders approached me about buying the intellectual property and starting over. The previous investors had put $20 million into developing the technology, so the opportunity to buy the assets for $50,000 was quite interesting. We needed to move fast to keep the core team of developers from finding other jobs, so I quickly wrote a check for the assets and personally funded the first million to get going. I then started talking to VCs about providing additional funding.

While it was easy to start conversations, no one was willing to step up and write a check. It seemed easy to me: $20 million in prior investment combined with my winning record in a similar space seemed like a very fundable deal. But after six months of banging my head against the VC wall, I realized I had to try a new tack.

I reached out to my network of business associates and high-net-worth individuals and was able to put together a $6 million round that allowed us to finish product development and reach the market. Soon after we got to market, NetApp approached us with an offer we couldn’t refuse. Investors received seven times their money after having been in the deal for a mere eighteen months.

So, two swings at the plate and two home runs . . . surely the VCs would now beat a path to my door, right? Several VCs who had passed on the previous opportunity even reached out to ask if I might do another deal. It seemed that this time I wouldn’t have to worry about raising money. So I started my current venture, Khorus.

Rather than immediately trying to raise money, I made sure my idea would work first. I personally invested the first $2 million to develop the product and acquire the initial customers. Once I was confident we were on the right path, I again tried to reach out to the VC community for funding. To my surprise, I once again found that whatever the VCs I talked to were looking for, I didn’t have. I heard various reasons through the grapevine: It was different from what I had done in the past. It would be hard to sell. They didn’t see the value. And so on.

Were these VCs biased against me for some reason? I could have concluded that VCs didn’t bet on me because they don’t like balding middle-aged white guys with Southern accents. But I knew the more likely explanation: the VCs chose not to invest because they simply didn’t believe they would make a sufficient return.

I often see entrepreneurs complaining about various biases in the VC community, and pointing to them as the reason they can’t get funding. Of course VCs have biases. We all have biases that come to bear in our decision-making. VCs are trying to make as much money as they can for their investors, and they do this by trying to identify patterns that worked in the past and that might work in the future. Many VCs are not particularly good at doing this, as evidenced by the average returns of funds over the last ten years. But their decision not to fund your company probably isn’t for any other reason than that they don’t think it will make them money.

Don’t let that stop you. It certainly hasn’t stopped me. I have found some individuals who believe I will make them money with Khorus, and I am convinced there is another nine- or ten-figure opportunity here. In time, we will see whether that turns out to be true—or whether the VCs got this one right.

|25 Mar 2015

Austin CEOs Have Class! (starting in April)

Calling all CEOs in the Austin area: I am ramping up for my annual CEO class sponsored by the Rice Alliance Austin Chapter, Austin Technology Incubator, and the Austin Technology Council. This invitation-only event starts April 3 and lasts for eight weeks. The series, now in its fifth year, is designed for CEOs of successful, growing businesses with more than 25 employees who are looking for the tools to maximize value and increase company performance. This is not a startup class but a chance to learn from and network with other accomplished CEOs. This year, we are focusing on building a world-class company.

CEOs: The CEO TightropeEach session will be held over lunch (provided) and last an hour and a half with lecture and discussion mixed together. CEOs will have the opportunity to try out the first class before registering for the entire series. During the first session, everyone will receive a signed copy of my book The CEO Tightrope (the agenda of the class closely follows the book).

The class size will be limited. Here are the details plus some insights from a few CEOs who have taken the course and benefitted from it. Contact me if you are interested in more information or want to sign up!

Building a World Class Company: A CEO’s Guide to Improving Performance 

Date: April 3, 2015

Time: 11:30 AM – 1:00 PM

Registration Fee: $995 (Participants may attend the first class for free!)

Agenda:
Session 1. Intro session, The Job of a CEO (April 3)

Session 2. Own the Vision (April 10)

Session 3. Right People on the Bus (April 17)

Session 4. Providing the Right Resources (April 24)

Session 5. Build the Culture (May 1)

Session 6. Make Good Decisions (May 8)

Session 7. Deliver Performance (May 15)

Session 8. Stories from the Journey and How to Improve as CEO (May 22)

Here is what some of the CEOs who have attended this seminar had to say about it:

Denver Fredenberg, CEO of Hyperware: “Joel Trammell’s CEO Seminar is a must, especially for any first-time CEO’s. You will learn what to expect as a CEO and the ins and outs of building a powerful team through Joel’s real life experience and candid feedback. You will also hear from and network with some of the more successful executive leaders in Austin. I pull from this experience with every challenge I face….especially the ones I never expected. Go do this!”

Chuck Gordon, CEO of SpareFoot: “CEO Summer Camp was a great experience because it gives you a chance to step back from your day-to-day and think strategically with the help of Joel Trammell. I learned tactics that I now put into action every day.”

Melanie Kalemba, former CEO of Movero Technology: “The Rice CEO seminar was not only insightful and thought provoking on leadership styles and successful business constructs it afforded a unique opportunity to interact with my peers across a variety of companies. I learned lessons I still refer to today in managing people and the culture of an organization.”

Chad Neely, CEO of Wenzel Spine: “The CEO summer camp is an excellent opportunity to learn from other CEO’s experiences and meet and share experiences with other CEO’s in Austin.”

 

|10 Mar 2015

The Dangers of Shunning Bureaucracy at All Costs

About a year ago Zappos decided to become a “holacracy,” getting rid of job titles and managers in favor of self-organizing around the work to be done. The jury is still out on whether this reorganization will be effective, but one thing is certain: The movement away from command and control management is growing. The danger is going too far in one direction, where any sort of bureaucracy is avoided.

I frequently see young entrepreneurs start new companies to escape the bureaucracy of corporate America. While this can be strong motivation, it can also lead to a management approach that says all process and structure is bad. For example, many extremely talented and smart engineers I talk to view their companies as overly bureaucratic. They feel hampered by too many meetings and processes. They believe the management structure is too rigid for them to accomplish anything of significance. As a result, some decide to take an idea they’ve had and start their own companies, convinced that they will manage them much better than their former employer.

The problem is that many entrepreneurs do not know how to run a company. They believe that knowing what NOT to do is the same as knowing WHAT to do. They avoid the processes and systems that plagued them at their old jobs. They eschew hierarchies for flat organizations.

This lack of bureaucracy is not an issue at first. Initially, employees will feel empowered, because they are given wide autonomy to perform their jobs. Jim Schleckser, CEO and managing partner of the Inc. CEO Project, says that early-stage companies often make up for the lack of processes and systems with talent.

However, when all process is eliminated or avoided, it becomes very difficult for the business to scale and grow. Employees eventually become discouraged, because the chaos of the workplace overwhelms their ability to get things done. Every task takes longer than it should, and employees never feel certain about their work or performance. Also, it is impossible to establish meaningful metrics, because everyone does things differently. Employees may try to invent their own processes, but find it difficult without management support.

Founders in these types of companies may become micro-managers, believing they have to fully understand every issue to make a decision. Unfortunately, most of these decisions are in areas where they have absolutely no experience or expertise. This inhibits the company’s progress and decreases employee morale even more. This is partly why so many young entrepreneurs are replaced as CEO.

What is the right approach then? Flatter hierarchies can work if the founder/CEO understands his or her role. The CEO job is a unique one that takes just as much knowledge, skill, and preparation as other disciplines. Entrepreneurs who know the responsibilities of the role will understand where to spend their time and how to be most effective. In addition, entrepreneurs should look for a partner who can make up for their lack of skills and knowledge – typically a business partner if they are technical or vice versa.

Another factor is the necessity of procedures and systems for growth. Schleckser advices companies to make investments in key systems early on to gain efficiencies and deliver on the company’s value proposition. This gives organizations true competitive advantages, while failure to have more mature systems and processes inhibits growth.

No matter what the organizational structure is, employees will not be motivated unless they understand their individual roles and how they contribute to the organization’s higher purpose. It is essential for entrepreneurs to establish a vision and then communicate it clearly and compellingly to all constituents. This includes how the organization is going to achieve this vision.

In addition, establishing a system of record is critical to helping employees understand how they can support the company in their day-to-day work. Each company should have a set of four to six corporate objectives every quarter. Leaders should then work with employees to create individual goals that map to these corporate objectives. A formal, written system where goals can be tracked and measured regularly – and that is shared by everyone from the CEO on down – is a good way to ensure that everyone is on the same page and working in harmony.

I am rooting for Zappos to thrive under its holacracy, but more importantly, it’s critical for every leader to understand the fundamentals of how to manage a company and motivate employees. This requires some “bureaucracy,” which CEOs need to embrace.

Related Article:

Do We Need Hierarchy? Forbes

|28 Jan 2015

How to transition from founder to CEO

Evolving from founder to CEO

I firmly believe that a company founder can become a great CEO with the right knowledge and skills. This is the topic of my upcoming presentation at SXSW on Friday, March 13: http://schedule.sxsw.com/2015/events/event_IAP37234

The transition from founder to CEO typically starts at 20 to 30 people and by 50 employees there is a distinct full-time CEO role. Prior to 20 employees, the founder’s job is more like a product manager who is developing an initial product and trying to generate some revenue. A full-time CEO role starts when there is a complete organization with all the major functions in place.

Here are the details for both my session in March and my proposed session for SXSW Las Vegas (The last day to vote is tomorrow: http://panelpicker.sxsw.com/vote/44283).

Evolving From Founder to Great CEO

Must founding CEOs eventually be replaced by a professional CEO for companies to reach their full potential? This is the conventional wisdom in the startup community. The idea is that the qualities that lead someone to be an entrepreneur are not conducive to the corner office. But if this is true, how do we explain Bill Gates, Steve Jobs and Mark Zuckerberg – all founders who became CEOs and led their companies to greatness? I believe that the CEO role can be learned, and that in most cases the founding entrepreneur is the best person to lead the company to greatness. While many startups fail, the CEO should not be the cause if they learn the key responsibilities of this critical role. This two hour long workshop will provide a methodology for the CEO job that any entrepreneur can adopt.

Questions I will answer:

– When does a full-time CEO role begin vs. a founder trying to get a start-up off the ground?

– How can you make the transition into an effective CEO?

– What are the responsibilities of a CEO?

– What qualities does a CEO need to possess to succeed?

– What systems and processes does a full-time CEO need to run a company?

Of course, I give a lot of advice on how to become an effective CEO in my book “The CEO Tightrope.”

 

 

 

|22 Jan 2015

Screw the Valley?! A Tour of America’s New Tech Startup Culture

Screw the Valley: A Coast-to-Coast Tour of America’s New Tech Startup CultureHow’s this for a provocative book title? “Screw the Valley: A Coast-to-Coast Tour of America’s New Tech Startup Culture.” Author Tim Sprinkle will be in Austin this month to explain why Silicon Valley is not the only place to start a tech company anymore. I’ll be hosting the discussion with him, which will focus on how and why Austin’s local culture is conducive to tech industry innovation. Sponsored by Texas CEO Magazine, the event will take place on Thursday, January 29 from 7:30 – 9:30 a.m. at The Austin Club. To register, visit http://texasceomagazine.com/events/screw-valley/

Here’s a bit more about Tim’s book from Amazon:

“The most exciting high-tech startups are escaping the expensive and inbred environment of Silicon Valley. Welcome to the future.

Entrepreneurs know they must embrace innovation to excel—starting with where they locate their new venture. Fortunately, budding companies seeking fertile ground have more options today than ever before. Screw the Valley calls on today’s entrepreneurs and aspiring business owners to forget California and explore other options across the country—cities that offer more room to breathe, easier access to funding and talented workers, fewer heads to butt, and less money down the drain.

Timothy Sprinkle visits seven areas that offer a superior landscape for tech startups:

Detroit
New York City
Las Vegas
Austin
Kansas City
Raleigh-Durham
Boulder

Sprinkle gives readers a window into the startup potential in each city, detailing which industries are thriving where, and highlighting the unique appeal and character of each location.”

 

 

 

|13 Jan 2015

Org Charts Essential to Good Decision Making

When I was CEO of NetQoS, some of my executive team members would kid me about carrying around an org chart with me wherever I went. I had managed to fit more than 250 employees on a double-sided piece of 11×17 paper that I personally updated with each new hire. Maybe it seems eccentric, but I had learned that a clear, continuously updated org chart is a surprisingly effective tool for fostering great decision making—the fuel on which every organization runs.

One of the core responsibilities of the CEO is to make good decisions. It is critical that he not only makes good decisions personally, but also that he teaches the rest of the company how to make them. When I look back at the bad decisions made in my organizations, most of the time I can trace the problem to one thing: The wrong person drove the decision.

Wrong Role = Wrong Decisions

In an organizational context, the person who should make a given decision is the one who has positional responsibility for the full scope of the question. A clear org chart (with written job responsibilities) provides an easy way for employees to know exactly which role should be responsible for the decision.

For example, imagine a company considering what standard price to charge for its software offering. While pricing is certainly a component of marketing, I would expect sales and finance to also have a strong interest in the price. Because this issue crosses multiple departments, we must move up the org chart to find the person all these various groups report to: This is the appropriate decision maker. This person should referee any disagreement and make the ultimate call.

Ramifications of Bad Decisions

Problems arise when issues don’t reach the appropriate level, which often happens because the organizational structure isn’t clear. A person who doesn’t have the positional responsibility might make the decision, and employees, not wanting to escalate the issue, may go along even though they disagree.

This causes several problems. First, the decision is a poor one, because the person making the determination doesn’t understand the broader issue. Second, the employees who disagree with the decision feel slighted, and if it happens consistently, they will often disengage. Third, it often takes months for the leader to understand that someone made a bad decision and to see the damage it caused.

However, just providing the org chart doesn’t always lead to the right behavior. You also have to empower people to rapidly escalate decisions to the appropriate spot on the org chart. This is one of the hardest things to teach managers and even executives.

Teach Staff to Escalate Decisions Appropriately

Too many people have heard that they should never bring a problem to their boss without a solution. While this makes some sense for issues within their span of responsibility, it doesn’t apply to broader issues that affect multiple groups. For this reason, teaching every employee to quickly escalate issues outside their span of control is critical, especially in fast-growing organizations. It also helps to have feedback systems in place where employees can communicate issues, anonymously if they wish.

Finally, good decision making depends on the level of credibility and competence you build among employees. Lack of trust can result in decisions either not being made at all or made by the wrong person. This is why major changes (reorgs, acquisitions, layoffs, etc.) cause organizations to almost stop: proper decision making becomes impossible until the appropriate level of trust in leadership is built up.

Keep It Current

Have you trained your organization on how to make quality decisions and who should make them? If not, get started on creating a clear and accessible org chart and explaining when and why it’s okay to escalate decisions to the right person. And keep it current. Don’t let the org chart become just another outdated document that no one bothers to view.

|06 Jan 2015

Top 10 Most Popular CEO Posts of 2014

Out of all the blog articles I published in 2014, here are the top 10 most viewed, grouped by subject. In the first one on “Been There Done That” hiring, I discussed how important it is to approach hiring as a two-way street: Don’t just look for candidates who have done the job before. Always take into consideration the candidate’s goals as well as your own. Someone who doesn’t have the experience but is super talented and eager to learn may be a better prospect than a mediocre candidate who has “been there done that.”

The next four are part of a series I did on company boards (especially private ones), which is a topic people have differing opinions about: What is their role? Who should be on the board? How do you go about choosing board members? Finally, what information should CEOs present to boards?

There is one article from my long-running “CEO Fail” series (How many ways can CEOs fail? I have yet to find a limit…). This one cautions the CEO against having a “best friend” among the executive team, because it can alienate the others. It can also give this special friend influence beyond his or her role.

khorus-2In “CEOs need a system,” I announced the launch of my company Khorus earlier this year and why I think CEOs need their own management software, just as sales, HR, software development, marketing, and every other function has.

The article on “Monolithic insanity” is a review of recent literature supporting the drawbacks of cubicles – a topic I write about often.

"Jack Ma 2008" by World Economic Forum - Copyright World Economic Forum (www.weforum.org)/Photo by Natalie BehringUploaded to Wikipedia (cc-by-sa-3.0,2.5,2.0,1.0; GFDL)from Flickr Jack Ma (cc-by-sa-2.0). Licensed under CC BY-SA 3.0 via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Jack_Ma_2008.jpg#mediaviewer/File:Jack_Ma_2008.jpg

“Jack Ma 2008” Copyright World Economic Forum. Photo by Natalie Behring. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Published around the time of Alibaba’s historic IPO, the article about Jack Ma discusses his management approach and if CEOs should prioritize different constituencies at each stage of a company.

Finally, the merger of Austin-based companies Mass Relevant and Spredfast represented a good example of CEOs setting aside their egos to do what was right for both organizations.

Here’s the full list. Enjoy and let me know your feedback!

– Are you guilty of “Been There Done That” hiring?

– The three roles of private company boards

– What is the right composition for a board of directors?

– Proceed with caution when choosing private company board members

– Want help from your board? Present the right information

– CEO Fail: The “My Favorite Child” CEO

– CEOs need a system

– “Monolithic insanity” & other notes on office spaces

– Is Jack Ma’s priority of customers, employees then shareholders correct?

– Setting aside CEO egos can make 1 + 1 = 3

|18 Dec 2014

Essential CEO Best Practices: Top Skills & Knowledge

I’ve been revealing my top 15 “CEO Best Practices” on the Khorus blog. These are the critical skills and knowledge that I believe, based on my experience as a CEO for the past 25+ years, that CEOs need to effectively lead organizations. Chief executives need to be generalists, not specialists, with a working knowledge of every issue and function. This is especially true for those areas where they need to take the lead, such as recruiting (note my first three are about people). Here are the 10 I’ve discussed so far:

1. Attract People

2. Retain People

3. Grow People

4. Communication Skills

5. Leadership Skills

6. Sales Skills

7. Financial Knowledge

8. Operational Knowledge

9. Regulation/Governance

10. Market and Customer Knowledge

I’ll disclose the last five CEO best practices over the next few weeks (any guesses?). In the meantime, here is the video of me discussing #10: Market and Customer Knowledge. It is crucial for CEOs – and really everyone in the organization – to take the time to understand the company’s products, customers, and competition (CEOs who don’t quickly lose credibility with their employees and the market). This requires getting out of the office and meeting with customers and others who can add to your knowledge of the market. Learning about and even engaging with competitors is important for every CEO, not necessarily for taking business away from other companies but for making the pie bigger for all and representing your industry’s interests.

|10 Dec 2014

Metrics Can Improve Performance – Even in Government!

Mitch Daniels used metrics to improve services in Indiana; Photo By Ray Taylor (Own work) [CC0], via Wikimedia Commons

Mitch Daniels, By Ray Taylor (Own work) [CC0], via Wikimedia Commons

Many people have heard of Mitch Daniels, former two-term governor of Indiana and now president of Purdue University. Republicans were pushing him to run for president for a while, primarily because of the “miracle” he wrought in his state. He turned a $600 million budget deficit into a multibillion-dollar budget surplus, cut property taxes, and improved services across the state. You may not agree with all of his tactics, and Indiana is still a struggling state in many ways, but the improvement in performance cannot be denied.

His leadership helped transform agencies such as the Department of Corrections, the Department of Child Services, and the Department of Motor Vehicles from the worst performers in the country (compared with other states) to national award winners. In interviews and a book, “Keeping the Republic,” Governor Daniels describes how he and his team instituted a management by measurement approach. This included creating performance metrics for every agency aligned with the most important goals, such as reducing the number of child deaths or vehicular deaths, or increasing the number of jobs in the state. He linked budgets to improvement on metrics: If agencies dramatically improved their metrics, they were asked to reduce their costs by a smaller percentage; pay and promotions were linked to job performance metrics; and so on.

In fact, Governor Daniels had on his desk a dashboard of twenty-five key metrics updated weekly, and that dashboard was posted on the government’s website for all citizens to see.

Here’s an example of the difference the metrics and dashboard made in terms of real-time oversight. In his book “Leadocracy,” Earl Goode – Governor Daniels’ chief of staff and former president of GTE Information Services, which merged into the new company Verizon in 2000 – told this story: “One of our cabinet members was recruited to a much larger state than ours…He was back for a visit a couple of months later, and I asked him how it was going. ‘One thing is really different,’ he said. ‘When I did something in my agency you guys knew about it within twenty-four hours. Now, it might be three years before they know what I’ve done.’”

CEOs need to create a culture in which goals and metrics are linked to business success and progress is consistently measured. The entire organization must know that the CEO will constantly hold everyone to a high standard. Like Daniels’ dashboard, the metrics should be visible to everyone who can impact those metrics. This lets employees in every department understand how they as a group are being measured and to understand the key drivers of success for other departments. It also puts even more pressure on leaders to respond when performance falls off and the metrics start to slip.

 

 

|02 Dec 2014

What books do CEOs read?

What are the favorite books of CEOs such as Bill Gates, Mark Zuckerberg, Tony Hsieh, Elon Musk, Meg Whitman, and more? CEO.com recently compiled a list, shown in this infographic. As you can see, these CEOs read not just business books, but everything from fiction to history to biography.

CEOs must constantly evolve. One of my favorite parts of the job is adapting to new challenges and situations every day. CEOs who do this well are great learners. They have a voracious appetite for knowledge. While it can be challenging to keep learning on the job, CEOs must make time for it. They need to keep one step ahead and be innovative in their approaches to new products, services, hiring practices, sales, marketing, and every other facet of business.

This may explain why these CEOs read more than business books, beyond personal preference. As Albert Einstein said: “Imagination is more important than knowledge. For knowledge is limited to all we now know and understand, while imagination embraces the entire world, and all there ever will be to know and understand.”

Favorite books of CEOs - CEO.com

Books That Big-Name CEOs Can’t Stop Reading – CEO.com

|19 Nov 2014

How CEOs can keep up with regulation (VIDEO)

I’ve developed a set of 15 CEO skills that I believe are crucial to success, which I’ve been revealing on the Khorus blog. I’m up to #9: Regulation and Governance. CEOs must stay up to date on how regulation is changing in their industries. In this short video, I describe how I’ve kept up with it in my companies. We’ll be featuring the rest of the series in the coming weeks on Khorus.com, with snippets on this blog as well. Also visit and subscribe to my new YouTube channel here: https://www.youtube.com/user/TheAmericanCEO

 

|12 Nov 2014

CEO Fail: The Cult Leader and Mr. Mayhem

Last week Entrepreneur published my latest article, about “How CEOs Can Maintain Their Edge.” In it I discussed how easy it is for CEOs to lose their effectiveness if they are not open to new ideas and information, and do not have a clear strategic direction. I mentioned two specific CEO failure modes that have lessons for all executives: The Cult Leader CEO and the Mr. Mayhem CEO. Here is more detail about each one.

Cult Leader CEO

CEO fail: Cult leader

Photo Credit: SantaRosa OLD SKOOL via Compfight cc

Cult leaders have a great advantage when it comes to instilling a vision in their followers. Unlike CEOs, they have no need to consider adjusting their vision or strategy, because they’ve surrounded themselves with people who believe in the absolute righteousness of it. Cult leaders have developed such an intense level of belief in their vision among their followers that no cult member questions any of their decisions, regardless of how bizarre, dangerous, or even fatal they may be (See Jim Jones, Davis Koresh, etc.).

Similarly, the Cult Leader CEO communicates a vision so compelling that his employees follow it fervently. This can be a positive thing, but this type of CEO convinces them that questioning the vision is like questioning the king – not permissible. Anyone who expresses doubt is branded as traitor.

Cult Leader CEOs can and have lead companies to success. The problem arises when their basic beliefs must be challenged due to market conditions, competitors, etc. Then they often fail in dramatic fashion, because no one in the organization has ever considered any other possibilities. Employees are frozen, because they have been trained to never question the vision or strategy, even when the company desperately needs to adapt.

As a CEO you can’t be so dogmatic. One of my favorite statistics is that more than half the companies that were listed in the Fortune 500 in 1995 were not on the list in 2007. After a mere twelve years, half the list had turned over. No CEO can ever be confident that his strategic vision today is permanent.

CEO fail: BlackBerryIn the article, I mention Research in Motion (RIM) as an example of this Cult Leader CEO failure mode. RIM, better known as the maker of the BlackBerry smartphone (and now called BlackBerry), had an unfailing and unhealthy belief in its own prowess. The company certainly had much to be proud of, growing from $300 million in 2003 to almost $20 billion in revenue by 2011. But the faith placed in the two CEOs, Mike Lazaridis and Jim Balsillie, proved to be unhealthy. A quick Internet search will reveal many “great” quotes from each that illustrate how completely they missed the threat posed by the iPhone and other smartphone platforms.

For example, in February 2007 Balsillie said this about the iPhone: “It’s kind of one more entrant into an already very busy space with lots of choice for consumers . . . But in terms of a sort of a sea-change for BlackBerry, I would think that’s overstating it.” Unfortunately, for Balsillie and RIM, it was not an overstatement.

Mr. Mayhem CEO

CEO fail: Mr. MayhemUnlike the Cult Leader CEO, fickleness is the norm with Mr. Mayhem. I based this failure mode on the character Dean Winters plays in that series of funny Allstate Insurance commercials you may have seen, which show how “Mayhem” can turn any situation into a disaster. The purpose is to convince people of the need for insurance. Unfortunately, if you work for a Mr. Mayhem CEO, you can’t buy insurance that will solve the problem.

Mr. Mayhem CEOs create chaos in their organizations by continuously starting new projects and redirecting resources, to the detriment of all. Unable to settle on a focus or direction for any length of time, they cannot effectively lead an organization. Their dynamism and adaptability can be a positive, but the constant change and stress means that employees cannot produce meaningful results. Mr. Mayhem CEOs usually fail before achieving any sort of notoriety.

Some CEOs cause this chaos without realizing it by merely thinking out loud and having their thoughts translated into action by eager-to-please employees. CEOs must be careful to distinguish between directions and musings, as Scott Abel, CEO of Spiceworks, advised in my Forbes.com CEO series article about “What Surprised You Most About The CEO Role?

How can CEOs avoid these extremes and maintain their edge? Seek out competitors, customers, and new executives to provide the information, ideas, and perspective needed to stay fresh: http://www.entrepreneur.com/article/238842

This article was excerpted in part from “The CEO Tightrope: How to Master the Balancing Act of a Successful CEO

|06 Nov 2014

What mindset do the best leaders share?

Leadership styles vary, but the best leaders share a specific mental approach. This is what Gap International discovered when they interviewed 500 executives, according to an article in Entrepreneur. The results reveal that high performance leaders focus on the big picture and their employees to ensure everyone is engaged, motivated, and prepared. They have a “get it done” attitude, are positive, and have a zest for learning.

This is partly why I believe anyone can prepare to be a good CEO. The right attitude goes a long way. This infographic showing the results of the Gap International survey is a great snapshot of what CEOs and other leaders should strive for:

Best leaders share similar attitudes

|31 Oct 2014

An Air Force general’s guide to leadership

Here are some excellent insights for CEOs and other leaders from Brig. Gen. John E. Michel, the Commanding General, NATO Air Training Command-Afghanistan and Commander, 438th Air Expeditionary Wing, Kabul, Afghanistan. His four principles apply to leadership in general, not just complex undertakings:

Principle 1: Craft your vision in pencil, not ink.

Principle 2: Believe no job is too small or insignificant for anyone, especially you.

Principle 3: Remember that leaders should be generalists, not specialists.

Principle 4: Recognize that every interaction is an opportunity to equip, engage, empower, and inspire those around you.

Here’s an excerpt of his article. Read the entire piece at Harvard Business Review: http://blogs.hbr.org/2014/10/a-military-leaders-approach-to-dealing-with-complexity/

A Military Leader’s Approach to Dealing with Complexity

“The most effective leaders I’ve known or studied all share a common trait: they were unwilling to settle for the existing state of affairs. They believed with all their heart that what we focus on can become reality.

In my quarter-century of military service, I’ve been afforded the rare privilege of leading in a broad array of environments: commanding a 500-person special operations expeditionary air refueling group in the Middle East after 9/11; guiding a 7,000-person military community through a dramatic mission transformation in North Dakota; and leading men and women from 14 NATO nations in building a sustainable, independent Afghan Air Force in an active war zone—something that had never previously been attempted.

I know how daunting it can be to lead dedicated professionals to undertake complex endeavors, and I’ve lived the reality of trying to bring positive change to large, bureaucratic organizations. Here are four principles I’ve learned that can help you enhance your leadership while concurrently bringing out the best in those around you.”

|23 Oct 2014

Is Jack Ma’s Priority of Customers, Employees Then Shareholders Correct?

"Jack Ma 2008" by World Economic Forum - Copyright World Economic Forum (www.weforum.org)/Photo by Natalie BehringUploaded to Wikipedia (cc-by-sa-3.0,2.5,2.0,1.0; GFDL)from Flickr Jack Ma (cc-by-sa-2.0). Licensed under Creative Commons Attribution-Share Alike 3.0-2.5-2.0-1.0 via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Jack_Ma_2008.jpg#mediaviewer/File:Jack_Ma_2008.jpg

“Jack Ma 2008” Copyright World Economic Forum (www.weforum.org). Licensed under Creative Commons Attribution-Share Alike 3.0-2.5-2.0-1.0 via Wikimedia Commons

“Customers first, employees second, and shareholders third,” wrote CEO Jack Ma in a letter to investors in advance of Alibaba’s record-breaking $25 billion IPO.

He explained his reasoning behind this during an interview at the AllThingsD (now Re/code) conference in 2012: “If the customer is happy, the business is happy, and the shareholders are happy.”

Is this the right prioritization? I think it depends on the stage of the company. Having a balance is key, but companies naturally focus on different groups at different stages.

Early Stage: Employees First

When a company is first formed, there are often no customers to worry about. Employee concerns tend to take precedence in the CEO’s mind, because he knows everyone well, and they can all fit in a small room. He’s trying to build a team and has no operational redundancy, so it seems critical to keep every employee happy and productive. The only thought CEOs give to shareholders is whether they have provided enough money to make payroll.

If the CEO is smart, he or she has created a product based on an analysis of what potential customers want, so the initial offering is designed to fill unmet needs. Belief in the product is the extent of consideration for the customer.

Growth Stage: Customers First

Over time, if the company is successful it will reach a growth phase during where it adds customers rapidly. With this new attention from customers, many companies will begin to focus strongly on them. Variations of the slogans “the customer is always right” or “the answer is always yes” will become common, and stories about employees going out of their way to meet the needs of customers are celebrated.

However, if the balance goes too far in this direction, CEOs end up with issues of employee burnout and low profitability (poor shareholder return), as no expense is spared to treat customers well. In addition, some companies allow their largest customers to have undue influence on their product development process at the expense of including features and services that may serve a larger market need.

Showing Results: Shareholders First

Finally, as the company achieves more economic success, the shareholders will begin to press for plans and actions that deliver a return on their investment. Even in companies that are bootstrapped, the founders will eventually need to recognize returns from their efforts.

For companies that make it to the public markets, the pressure for shareholder return often becomes all consuming and very short-term focused. If you spend time within most public companies, you’ll get the sense that decisions are made based almost solely on their impact on earnings in the current quarter and year. Customers and employees are sacrificed at the altar of making the quarterly number.

Although this shareholder-focused approach will initially show financial results as the emphasis moves away from customers and employees, the business will begin to erode. A few quarters of good performance turns into a death spiral of dissatisfied customers and unmotivated employees.

Achieving Balance

I consider the balance of these three constituencies so important that I devoted an entire chapter to it in my book “The CEO Tightrope: How to Master the Balancing Act of a Successful CEO.” It’s critical for the CEO to understand the natural pressures that exist in organizations as they mature and to balance these pressures in the company’s decision-making process. Everyone in the company should consider the interests of all three constituencies when making decisions. It will be interesting to see if Ma’s prioritization of the customer and employees over shareholders shifts as Alibaba deals with the pressures of the market.

How are you balancing customers, employees and shareholders?

  1. Have you made a decision in the past six months designed to keep either employees or customers happy, even though you doubted the long-term wisdom of it?
  2. What stories or proof of success do you share at meetings? Is there a particular focus on either customer service stories or on financials?
  3. Do you neglect training for employees because you can’t calculate the return on the expense? Do you try to keep your salary expense as low as possible?
|02 Oct 2014

Strategy is not dead but only the beginning

Writing in Forbes, Rick Smith asks, “Is Strategy Dead? 7 Reasons The Answer May Be Yes.” He makes some excellent points, but in my opinion strategy is not dead but only the starting point for a company – not the final product. In other words, planning is great, but the plan does not win the battle. What does win is executing the plan well and being able to adapt it in near real-time as conditions change.

I have seen many leaders who think their job is finished once they have developed a plan. On the contrary, I believe leaders earn their keep by how well they deliver results as the plan is implemented. Carrying out the plan requires just as much rigor as developing the strategy in the first place. Having a system to assist in the execution can make a huge difference between success and failure.

That’s why I think this quote from Smith’s piece is so insightful:

“In the end, your company’s strategy is nothing more than the collective actions of all of your employees, and these actions are being guided less by strategies thoughtfully crafted within wood paneled conference rooms, and more by speed, unpredictability and sweeping change occurring on a dynamically evolving battlefield.”

Being able to regularly capture those actions and employees’ perceptions of how well they are tracking toward their individual goals – which should support a clear set of corporate goals – is indispensable to trying to adapt to quickly changing conditions.

Photo Credit: Amanda M Hatfield via Compfight cc

|24 Sep 2014

Should there be a CEO school?

“We had never thought of it as a profession.” This is how faculty members at INSEAD (a graduate business school with campuses in Europe, Asia, and Abu Dhabi) reacted when they encountered the question: “Is it time for a CEO school to train leaders for the top job?” This mindset illustrates what is wrong with current thinking about the CEO role. Not taking it seriously as a profession like any other in business negatively impacts professionals and organizations across the globe.

As I’ve written about extensively, most people are not prepared for the chief executive job no matter how successful they’ve been in other roles. This lack of preparation results in dysfunctional organizations that ultimately experience low performance and high CEO turnover.

To answer the question, the INSEAD faculty members interviewed CEOs worldwide about the job and the need to codify a set of standards for it. They found agreement that the job is very situational, so having a standard qualifying exam is not ideal. However, as I have been saying, there are “essential traits and competencies fundamental to CEO success” no matter what the geography, industry or type of organization. The professors rightly conclude that business schools do not do enough to identify these traits and develop these competencies in future CEOs.

So it should come as no surprise that my answer to the question of whether a CEO school is needed is an unqualified “yes.” CEOs CAN learn the job, and it’s absolutely essential to success. One of my long-term goals is to open a school where CEOs can learn the basics of the job – which are unique in business – and prepare to hit the ground running from day one.

I agree with the INSEAD authors that “Development of future CEOs requires a competency-focused cross functional approach.” This includes instruction in skills essential to every CEO, such as developing vision, selecting talent, enabling performance, making decisions, managing in crisis, communicating well with all constituencies, and cultivating a discipline of life-long learning.

The authors conclude by urging business schools to do more to ensure they are addressing the needs of future CEOs. That is all well and good, but I also say we need schools that focus solely on the CEO position. I’ve outlined the foundation for my future CEO school in my new book “The CEO Tightrope: How to Master the Balancing Act of a Successful CEO.”

Read the entire article here: http://knowledge.insead.edu/leadership-management/can-you-learn-to-be-a-ceo-3570

Photo Credit: avrene via Compfight cc

|18 Sep 2014

Where There’s No Margin for Toxic Leadership

Good reminder from Robert Sher that CEOs need to do what is best for the organization and not let weak executives continue to serve.

|27 May 2014

Addressing a new CEO assignment with why, what and where

This article originally appeared on CommPRO.biz

Every new leader faces the immediate challenge of how best to communicate his or her vision to the organization. Employees are anxious when there is a change at the top, so it is important to begin the communication process as quickly as possible. Unfortunately, new CEOs will likely not have had time to develop a fully formed strategy, so they must be careful to only communicate what they know to be true. Too many leaders let their enthusiasm overwhelm them and come out of the gate promising huge changes and major victories. Experienced CEOs know that change is hard and avoid promising results at this early stage. Initial communications should focus on three fundamental areas:

  • Why the CEO believes in the opportunity
  • What the CEO perceives to be the organization’s strengths
  • Where the CEO will focus on improvements


Why the leader believes in the opportunity 

The new CEO took the position because he sees an opportunity. It is essential to explain to the employees why the leader is excited about the company and why this is personally important to him. At this stage the new CEO may not have a complete vision for the organizations, but he can communicate why he took on the challenge. This personal connection to the mission is important for everyone to understand, as it will shape the vision and values of the company moving forward.

What the leader perceives to be the organization’s strengths

The second item the CEO should communicate is what is right about the organization. Every company has certain advantages in the market and areas of superiority versus the competition. The new CEO will do well to identify these key advantages. This performs two functions. First, it lets employees know that their company is not a total failure. Usually a CEO is replaced after a long string of losses. It is easy for morale to go downhill quickly. The new CEO has to stop the downward slide and remind people that they are not losers just because the entity has struggled. Finding a positive point to rally around is critical in these situations to buy time until people can see the results of the new management efforts. 

Where the leader will focus on improvements

Finally, employees want to know what is going to change. People realize that if the team has been losing in the market, that it would be foolish to keep doing the same thing and hoping for different results. Letting the employees know that the new CEO has a plan to improve the organization is important, along with a timeframe for action. Details will help. For example, the CEO could say: “I believe the biggest challenge we face as a company is that we have lost touch with our customers. I intend to spend much of my time over the next 90 days meeting with customers. At that point we will align the organization to provide a superior customer experience.” Being specific as to area and timeframe will give employees as much certainty as possible without committing to anything that the new CEO can’t deliver. 

Following the simple path of why, what and where should help any new CEO with the challenges of a new assignment.

|22 May 2014

What is the right composition for a board of directors?

The relationship between the CEO and the board of directors is unique in the business world. The idea of reporting to a committee of people instead of to a single individual makes managing this relationship much more challenging, particularly for new CEOs with little experience working with boards. The composition of the board will have a big impact on the relationship as well. 

The trend over the last twenty years has been to diversify the composition of boards and to include more functional expertise. I have always thought that the job of the board should be to select and monitor the CEO in his or her efforts to represent shareholders’ interests, not to become involved in running various areas of the company. It is impossible for a group that meets once a quarter to have the same understanding of the business as the people who are working in it every day. For this reason, I like to see boards that are primarily composed of people with CEO experience. As this blog is all about, the CEO job has many unique aspects that people without that experience will not appreciate.

If you have a board with mostly subject matter experts – for example CFOs or CIOs or CSOs – the board can quickly morph into a “super executive” team. People will naturally gravitate to their area of expertise and the board can become an operating entity. This is dangerous and undermines the credibility of the CEO.

The problem can be exacerbated if you have weak executives in any key positions. If you need a board member to help cover for one of your executives, it is a clear sign that you have the wrong executive in place. 

If you are running a private company, spending time to get the right board members in place is a valuable use of your time. Even in public companies, the CEO will likely have some influence. Aim high. Most people are flattered that you would consider them for a board position, and while they may not always accept the position, they will often have recommendations for others who would be a good fit.

In addition, I think it is a good idea to have board terms expire every year or two and require unanimous approval to renew then. Sometimes, board members remain long past their useful time just because there is no easy mechanism to replace them.

The right board can be a powerful multiplier of your efforts as CEO. Take the time to select people who have the knowledge, connections and experience that will make you a much better CEO.

Photo Credit: Incase. via Compfight cc

|20 May 2014

What are the responsibilities of a CEO?

I’ve covered this topic in depth on this blog, but if you want to read a quick summary check out my latest article for Entrepreneur: The 5 Core Responsibilities of a CEO

As I mention in the article, it’s difficult to do the job well if you aren’t clear on what you are supposed to be doing in the first place. Knowing these five responsibilities helps focus your time and prevents you from being distracted by tactical issues. It’s also important for anyone who works in business to understand what the responsibilities of a chief executive are. This not only helps them better support their CEO but also judge whether or not he or she is doing a good job. In addition, they can better evaluate future opportunities depending on how well the CEO is performing.

For more information, check out my series on the five responsibilities of a CEO:

5 Responsibilities of a CEO: Own the Vision

5 Responsibilities of a CEO: Provide the Proper Resources

5 Responsibilities of a CEO: Build the Culture

5 Responsibilities of a CEO: Make Good Decisions

5 Responsibilities of a CEO: Deliver Performance

|15 May 2014

Are You Guilty of “Been There Done That” Hiring?

I am often consulted to help companies fill key positions. Whenever someone wants to fill a position, the natural reaction is to write up a list of things you want that person to do and then try to find someone who has done all of that. While I understand the appeal of finding a proven commodity, this “been there done that” approach to hiring often leads to less than optimal results.

The problem with this approach is that it fails to consider that hiring someone requires a dual sales process. Not only do you have to be convinced that a particular candidate is the right choice, but the candidate also has to believe that the job you are offering makes good career sense for them. This is where the “been there done that” approach runs into a big issue. The top performers – the ones you really need to give your business a competitive advantage – typically won’t want to do the same job they have already done. These “A” players are looking for their next step up the career ladder. They are looking for new challenges and bigger opportunities. If you focus your screening criteria around a been there done that approach, you will weed out many potential superstars while interviewing mostly mediocre candidates.

To attract the top performers, you need to set the experience bar one level below what you expect them to do in the job but set the talent bar one level higher. For example, when hiring for a VP position, I would always rather hire a super talented individual with director-level experience than a less talented individual with VP experience. You may not always have a VP position available for superstars, however. In general, the people you want aren’t willing to make a lateral move without some sort of disruptive event. Examples of disruptive events are bankruptcies, acquisitions or CEO departures. This is often a time when you can convince a good performer to make a move. Otherwise, you should reach down to find a rising star that can blossom with a new opportunity. 

|13 May 2014

“I love Khorus, yes I do.”

Thanks to Dan Graham, CEO of Austin’s BuildASign.com, for writing this article on his blog about his deployment of Khorus and the potential he sees in it to align his employees around their quarterly goals. They were using Google docs for goals management but, as he says in the post: “…as far as instant and company-wide visibility into any employee’s cascading goals and tracking progress goes – Khorus wins.” BuildASign is our biggest customer so far, and we can’t wait to hear how Dan and his team progress with the software!

|09 May 2014

Why CEOs suck and how to suck less

It’s part of my mission every day to address this topic via this blog, my upcoming book, my company Khorus, and in many other ways. It is also the title of my proposed session at SXSW Las Vegas, which is summarized below. Voting for which sessions will be held during the conference ends tomorrow, May 9, so please consider voting for mine here: 

http://panelpicker.sxsw.com/vote/28398 (quick registration required)

And if you have questions for me, specific topics you’d like me to address, or advice about why CEOs suck and how they can suck less, please let me know!

Why CEOs Suck and How to Suck Less

The CEO job is the most important but least prepared for role in business. People get there in different ways: They may have been a superstar in marketing, sales, engineering or whatever business function they came from. Or they may have just had a great idea and started a company. Regardless, few are ready for the unique responsibilities, challenges, and stresses of the role. As a result, most chief executives simply do not know what to do and react in ways that are negative for the organization and themselves: They end up paralyzed by fear and indecision, or wallowing in tactical issues, or taking a hands-off approach after they’ve pronounced some grand strategy.  This is alarming in a country where the majority of CEOs are new to the role. The bottom line: Most CEOs suck. But there are ways to suck less.

This presentation will address:

  • What are the top three challenges facing CEOs?
  • What are the top five responsibilities of a CEO?
  • What is the one question every CEO needs to answer?
  • How can I ensure that employees are aligned on our strategy and executing against it?
  • How can I better prepare for the CEO position? 
|08 May 2014

Are you better at relating to employees or setting performance targets?

Most leaders tend to be better at either building relationships with employees or setting strong performance requirements for them, but the best CEOs and managers do both equally well. This is the focus of my latest article for Forbes – The Critical Balance CEOs and Managers Must Strike To Get Results – where I provide several ways to evaluate and improve your skills in both areas.

For some CEOs building relationships comes naturally. They have no problem engaging personally with employees at all levels of the organization. Employees like the attention they receive from these personable CEOs and return the affection. Their desire for relatedness is fulfilled, and they get a status bump every time the CEO delivers kind words of praise. There’s nothing wrong with this, but there is a problem when the relationship impacts running the business.

At the other extreme is the hard-charging CEO who sets stringent performance requirements but doesn’t show any interest in employees. As I described inCEO Fail: The Attila the Hun CEO,” this type of CEO doesn’t engender any sort of loyalty. While he may think he’s driving top performance, employees will not put forth their best effort for him. Many will soon leave for better work environments.

Read the full post for how to achieve balance between relating and requiring and let me know what you think: http://www.forbes.com/sites/joeltrammell/2014/05/06/the-critical-balance-ceos-and-managers-must-strike-to-get-results/

 

|06 May 2014

CEO business strategy advice falls short on the “how”

Business literature is full of advice for CEOs and leaders on what to do, but sometimes falls short on the how. Case in point is this article published by SmartBlog on Leadership titled “What’s the plan?” The author, S. Chris Edmonds, tackles the important topic of how to create a corporate strategy as well as ensure all employees understand it and can link it to their individual goals. He presents a five-step process for developing, communicating, and reinforcing a strategic plan. The first few steps give advice for crafting the strategy, which is fine, but where I believe his article – and strategic plans for that matter – falls short is in what he calls the “Work” and “Assess” phases.

In the “Work” step, Edmonds says you’ll spend the majority of your time “working the plan.” What does this entail? He states that you should “…craft relevant performance dashboards that help communicate progress on strategies and goals with a quick glance. You’ll communicate, educate, and promote your strategies and goals. You’ll then align plans, decisions, and actions, daily.”

This is all well and good but not a trivial undertaking. Create dashboards? Align everything daily? How is a busy CEO supposed to do this, especially in larger organizations?

The last step is “Assess,” where you’ll “assess the progress on and effectiveness of your strategies and goals.” At least quarterly, he says, “gather data with key players and refine targets as needed.”

Again, this is an important step, but how can a CEO gather data from hundreds or thousands of employees and make sense of it?

This challenge is why CEOs need a system. I created Khorus software specifically to help CEOs better instill their strategies across the organization and align employees to those strategies. Instead of waiting to find out where the company stands at the end of the quarter or getting anecdotal input, CEOs can see on demand, cascading goal performance for the entire organization, departments and individual employees, and how they each link to the corporate goals.

It’s about time someone gave CEOs and other organizational leaders the “how” amidst all the punditry about the “what.” My aim with Khorus is to provide that.

 

|01 May 2014

Toyota’s move to Texas a good decision

A core role of the CEO is to ensure that the company has the proper resources to be successful. Most commonly people think of capital and people as the two primary resources needed. Related to the people side but sometimes missed by CEOs is their role in providing the best possible work environment to drive performance. I was reminded of this when reading the recent announcement by Toyota that they are consolidating multiple North American offices into a single headquarters in Plano (Dallas area), Texas.

While technology has made distributed organizations easier to operate, I am still a big believer in the value of having a single location where people come to interact with their fellow employees. Business is all about people and the complex relations between them. The best functioning organizations have leadership teams who are closely aligned and function effortlessly. That positive behavior takes significant face time to develop. I bet that Toyota’s move will pay off down the road with a better functioning North American operation. 

Related article:

It’s Not About Incentives: Toyota’s Texas Move Is A Corporate-Culture Gambit (Forbes)

|30 Apr 2014

CEO Fail: The Attila the Hun CEO

By Peter d'Aprix (http://www.galleryhistoricalfigures.com) [CC-BY-SA-3.0], via Wikimedia Commons

By Peter d’Aprix (http://www.galleryhistoricalfigures.com) [CC-BY-SA-3.0], via Wikimedia Commons

Attila the Hun as CEO is the character often portrayed in movies and the press as the prototypical chief executive. While I won’t argue that this type of CEO doesn’t exist, I will say he is probably less common than the public perception. One reason is that after his behavior becomes known, it becomes hard for him to attract competent employees. 

For Attila nothing is ever good enough. He requires exceptional performance at all times while treating employees like minions. This focus on outcomes without building up any personal relationships convinces employees that he really doesn’t care. They perceive threats at every turn—to their status, certainty, relatedness, and fairness.

Attila never earns the trust required to have real influence in the organization. While he may feel that he’s driving the ship, he is not building employee buy in and is often getting far less than their best effort. The top performers will often flee, knowing they will be treated better in another environment. 

Are you an Attila the Hun CEO?

  1. How do you let your employees know that you care about their success as much as your own?
  2. Do employees discuss personal problems with you?
  3. How many employees would follow you if you were to leave to become CEO of a different company? 
|29 Apr 2014

“The CEO Tightrope” Is Real

The-CEO-Tightrope-Is-RealHere’s a sneak peek of the book jacket proof for my book coming out in September. The CEO Tightrope has been years in the making, so it’s gratifying to see it finally becoming a reality! The back cover gives you a summary of what the book is all about, but in a nutshell it is a practical guide for current and aspiring CEOs based on my years of trial and error. My goal was always to become a CEO, so I started my own companies to become one at a young age. I’ve been disappointed at the lack of CEO resources ever since, so this book is my way of contributing to the literature and sharing what I’ve learned. More to come.

|24 Apr 2014

The Coach’s Dilemma

Photo Credit: Thomas Leuthard via Compfight cc

Photo Credit: Thomas Leuthard via Compfight cc

I can still remember the first time I volunteered to help coach a little league baseball team, which was 30 years ago while I was in college. The kids were around 13 years old and were learning the finer points of the game. Not surprisingly, I became attached to some of the players, not because they were necessarily good players but because they were good kids. It is only natural when you are a leader to like the people who follow your lead. That is fine when you are coaching a little league baseball team but can cause issues when you are CEO.

If you believe like I do that people are by far the most important asset in a business, you probably spend a lot of time coaching your employees. A good CEO must be able to separate his or her positive personal feelings for an employee from their evaluation of how well the person plays their position. I often visit with CEOs who know they need to make a major change in their business but think they can do it with their existing team. Making key additions to an executive team is often a very effective way of initiating change. In my businesses I have made it a habit of adding a new executive every one to two years, sometimes replacing a weaker player and sometimes augmenting the team.

One role of the CEO is to provide the best possible human resources to the company, giving everyone the best chance for victory. Don’t allow your personal affection for your team limit their chance to win.

|22 Apr 2014

Predicting the future is useless without the courage to act

One of my favorite sayings about the technology business is that it is very easy to predict the future….the problem is getting the timing right! For example, everyone knew electric cars were an inevitable innovation that would attract customers, but many companies went broke trying to sell an electric car before Tesla got it right. Now if you know something is inevitable, you should prepare for the event. The challenge of course is that you can never be quite sure of the timing. 

Because of this uncertainty about timing, I have seen many CEOs not take action until it is too late. I often see a similar problem when dealing with people issues. I remember a board meeting I once attended where the discussion turned to executive talent. One board member made the point that it was clear the CEO needed to upgrade his team in a couple of key areas. He knew the growth the company was expecting in these areas would overwhelm the abilities of the current executives. The problem was it was unclear whether the issues would arise in the next year or a couple of years out. The CEO defended not doing anything immediately by saying the organization is going through a lot of change and making a change now would be risky. 

Of course changes at the executive level are always risky. On the other hand, the CEO agreed that it was inevitable the executives would fail at some point. It hit me at that moment that a key skill for any CEO is not just the ability to see the future but more importantly, the courage to act on the future they see. Once you are convinced of the future, the faster you act to prepare for it the better for everyone.

|15 Apr 2014

Bad hire? Blame the CEO

How much does a bad hire cost companies? It’s more than just money according to this infographic by Mindflash. Hiring the wrong person also causes lost time, productivity, and morale. The infographic also provides some suggestions for improving the hiring process. While these are important, one of the keys to hiring great people is to have a great recruiting process. This starts with the CEO, who in my mind should serve as the Chief Recruiting Officer.

CEOs should own recruiting and treat it as a core piece of the company’s strategic plan, not a tactical fire drill. Hiring right doesn’t mean taking your time, however. If your process is set up correctly, you should be able to hire someone within two weeks – that’s resume in hand to offer letter. Superstars won’t wait around for a company that drags its feet.

Also see a slide show version of this infographic at FastCompany.com.

Mindflash_1.24.12-01-2

|10 Apr 2014

What’s missing from the Mozilla CEO debacle commentary

I have read numerous posts and comments related to the “resignation” of the Mozilla CEO Brendan Eich. I feel compelled to comment on the situation as it raises an interesting issue that most of the commentators have not addressed: The relationship of a CEO to his employees. Since caring is one of the three Cs necessary for leadership, it is important for your employees to feel that you would put the interests of the company and the employees ahead of your own personal interests. I suspect based upon the stories I have read that a significant number of employees felt that the CEO’s views, defended in a recent interview, made it impossible for them to believe in him. While I would have hoped that people would value tolerance of opposing views more highly, I don’t doubt their reaction was genuine.

No one has a right to the CEO position, and if a CEO loses the confidence of a significant portion of their team it is right for them to move on. Often the reason the team loses confidence is more emotional than rationale, but whatever the reason it doesn’t have to be fair. To quote from the final scene between the great Vulcan philosopher Spock and Captain Kirk in Star Trek II: The Wrath of Khan, “…the needs of the many outweigh…the needs of the few…or the one.” 

I believe the reason the team lost faith doesn’t really matter. I hope the people supporting the employees in this case would be as understanding if the shoe were on the other foot politically. It would not be hard to imagine a CEO who wrote a check to and actively supported a pro-abortion group losing the confidence of a significant group of his or her employees. My guess is that in this case the press and others might rush to defend the CEO.

But in my view the reason employees lose confidence is irrelevant to the decision. CEOs lose the confidence of their people all the time for far less controversial things than gay rights or abortion issues. Imagine a CEO who travels by private plane on the company dollar while employees are scrutinized over every dollar on an expense report. It is impossible to lead if people don’t believe you care.

Just so people don’t feel that I am taking sides on the issue of gay marriage, my own position is probably more out of the mainstream that what either side in this dispute represents. My extensive study of the Constitution can’t find anything in the document that mentions who consenting adults CAN or CAN’T marry. I disagree with both sides. I hope this radical view doesn’t get me booted from my next CEO gig.

 

|08 Apr 2014

Setting aside CEO egos can make 1 + 1 = 3

I have spent much of my career running businesses in the startup phase of their lives. In my mind, the startup phase continues until you are confident that the business can survive any normal risk scenario. The definition of normal risk could be debated, but most CEOs know the feeling when they make the transition to a sustainable business that can continue without outside resources. What this means to me is that investors will get at least some return on their investment.

I have always felt that the best startup CEOs are able to de-risk the chance of striking out (bankruptcy) while maintaining the potential upside. It is easy to swing for the fences if you don’t care if you strike out. Often, I have seen opportunities for companies to de-risk their situation by combining with another company that has complementary offerings. Getting to scale where you can leverage your investments as quickly as possible is critical for small companies.

Unfortunately, most CEOs are so proud of their baby that they cannot imagine another one being as pretty as theirs. For this reason, it is well known in the investment community that similar size private-to-private transactions are very difficult to do even though they are often the most valuable deals for the investors. For it to happen, it takes two CEOs who are both willing to put the success of their company ahead of their own, since inevitably one will have to move aside.

Yesterday I read a perfect example of this when two Austin companies, Mass Relevance and Spredfast, announced their merger. I know both of these firms and their CEOs. Both companies were having great success in the market. They didn’t need to make a move. They made a move because two great CEOs saw that one plus one could equal three and didn’t let their egos get in the way. Look out, I predict that the combination will be a huge win for everyone involved. Disclaimer: I have no position in either company, unfortunately.

|03 Apr 2014

Command’s Place Among Leadership and Management

Leadership and management are covered so often in the popular business press – frequently positioned as opposing forces – that you would assume no other element is involved in running organizations. However, one essential concept receives little attention, especially in the context of the CEO role: Command. Now in my view both leadership (influencing people to take action) and management (organizing the resources necessary to take action) are very important for managers to understand. Managers who exhibit really good leadership and management skills will likely have tremendous success in their careers. But if they don’t understand and master the concept of command, they may not last in a CEO role.

The military uses the word command to describe the position of having responsibility for a given unit or asset. While civilians may equate command with the ability to give orders, most experienced officers understand that the first word related to command is responsibility. The person in command has the ultimate responsibility for the all the people and resources of the unit. In a CEO role, you have total responsibility for the performance of the organization, though limited control.

Photo Credit: petersandbach via Compfight cc

Photo Credit: petersandbach via Compfight cc

This dichotomy inherent in the CEO role is one reason that it is often hard to judge how someone will respond when they are put into a command position. I have seen people who exhibited great leadership and management skills in other positions struggle with the responsibility of command. Sometimes the weight of the position makes it hard for them to make a decision, or they are unable to handle the stress of having final accountability for the organization. There are many people who are great as part of a staff but just don’t have the right makeup to be successful as the top executive. 

When a previously highly successful executive fails in their first chance at the CEO role, it is often because the charge of command was something they just couldn’t handle. Being the CEO of any company is a great responsibility. The CEOs who can embrace the responsibility without letting it over power them are the ones who can achieve great success.

|01 Apr 2014

The tenuousness of CEO tenure

Recent research on U.S. CEO tenure varies anywhere from 5 to 8 years, but one thing is certain: CEOs have less time than ever to prove their merit. Part of the reason is market dynamism and the rapid changes taking place in businesses today. A CEO who was a perfect fit when he was hired may not be the right person to steer the company just a few years later.

CEO Strategic FitTwo recent blog posts in Harvard Business Review discuss the need to examine the CEO’s fit over time. In When It’s Time for the CEO to Go, Manfred F. R. Kets de Vries says CEOs tell him that about seven years is the right tenure for optimal effectiveness. He outlines three phases that CEOs go through during their tenure – entry, consolidation and decline. To maximize performance, CEOs need to understand what phase they are in at any given time. This also lets them know when it is time to step down.

In Assess Your CEO’s Strategic Fit Over Time, Marc Effron and Miriam Ort cite research about executives showing that “poor fit leads to poor performance.” They recommend assessing the CEO’s fit on strategy and change, two dimensions upon which the chief executive has distinct influence.

Both articles make a great case for why the board of directors must constantly examine how well the current CEO is addressing the strategic challenges of the organization and make changes as needed. As I’ve outlined before, the most important role of a board, especially in private companies, is to hire and fire the CEO. The board’s role is especially critical when CEOs refuse to acknowledge that their performance is subpar and that their unique set of skills and experiences no longer fit the company’s needs. Board members should study the research about strategic fit over time. 

How can you keep things fresh as a CEO? Being open-minded, recognizing when market changes demand action, and seeking outside counsel are good ways. When I was CEO of NetQoS, another action I took was bringing in a new executive every 12 to 18 months. In a growing company, this is often a brand new role. I think by refreshing the executive team – and thereby bringing in new points of view and experience – CEOs can expand their productive window.

|27 Mar 2014

The Top 10 CEO Failure Modes

The 10 Most Common Ways That CEOs Fail In Epic Fashion

Regular readers of my blog know that I have an ongoing series about how CEOs fail. From the Cheerleader CEO (the worst, in my opinion) to the Master Strategist, I’ve taken my top 10 and summarized them in my latest article for Forbes. Check it out for a short synopsis of the 10: 

  • The Cheerleader CEO
  • The “My Favorite Child” CEO (aka the “BFF” CEO)
  • The Drop-In Carpet Bomber CEO
  • The Saint CEO
  • The Budget Tyrant CEO
  • The Budget Blower CEO
  • The CIA CEO
  • The Super VP CEO
  • The Total Control CEO
  • The Master Strategist CEO



If you want to read an in-depth explanation about these and several others, check out all the CEO failure modes on this blog. Since there seem to be innumerable ways CEOs can fail, I’ll continue posting new ones on the blog periodically.

Photo Credit: Nickogibson via Compfight cc

|25 Mar 2014

Software startup’s aim is to teach CEOs how to be CEOs

Austin American-Statesman article about Khorus

Thanks to Lori Hawkins of the Austin American-Statesman for writing this article about Khorus and our business management system for CEOs. Thanks also to our customer Scott Tynes, CEO of Consero Global, for interviewing with Lori for the piece and outlining his reasons for choosing Khorus. He sees it not just as a management system for himself as CEO, but also as a tool for fostering teamwork among his distributed employee base of 250. Check it out!

|24 Mar 2014

GM CEO Mary Barra Demonstrates Mastery of the Three Cs

GM CEO Mary Barra Photo Credit: © General Motors

GM CEO Mary Barra Photo Credit: © General Motors

Earlier this week I spoke to Entrepreneur writer Geoff Weiss for an article about how GM CEO Mary Barra is handling their vehicle recalls. I believe that so far she has shown mastery of the most powerful tools CEOs have to achieve top performance: credibility, competence, and caring (I call them the three Cs). As I say in the article, the video message she published on the GM web site showed that she cares about the vehicle issues, that she is accepting responsibility for them, and that she is taking steps to fix the problem as well as ensure that it never happens again. Time will tell if she truly has the competency to lead GM, but I think she’s off to a good start. Check out the article for my full comments.

In addition, here are a few more articles that share additional insight into how Barra is handling this issue:

GM’s Barra Saying Sorry Seeks to Limit Fallout From Recall (BloombergBusinessweek)

Honeymoon interrupted for GM’s Mary Barra (The Washington Post)

Barra Could Do More To Meet New GM Need For Transparency (Forbes)

Video: GM CEO Barra says ‘something went wrong’ (USA Today)

|20 Mar 2014

CEO Fail: The Grandparent CEO

Grandparents have the best job in the world: They get to enjoy the kids when they want but don’t usually have to deal with issues like discipline. If they spoil the grandkids a little and let them get away with something, well that is part of the fun. This works great for grandparents but not so well for CEOs.

One of the key roles of the CEO is to set the bar for the quality of work allowable in any organization. If the CEO lets people get away with not meeting their deliverables, it will reflect on his or her credibility. Setting up good metrics is a key step. The harder part is consistently holding everyone to the high standards required to be a successful company.

Are you a Grandparent CEO?

  1. Do you allow people in your organization to miss deliverables without any repercussions?
  2. Would people in your organization feel like you hold some groups to higher standards than other groups?
  3. Do you cheer every victory – no matter how small? See also: CEO Cheerleader Fail: Drawbacks of the Eternal Optimist
|18 Mar 2014

Why “I don’t know” is a viable – even desirable – answer for CEOs

‘I don’t know’: Why admitting you don’t have all the answers is perfectly okay

I was planning to write a post on the use of “I don’t know” by CEOs, but Jason Freedman (co-founder of 42Floors) beat me to the punch with this article published on TheNextWeb.com. I have found in general that CEOs who use the phrase often are typically much better performers than those who never use the phrase. Jason spells out the reasons in this excellent post.

Also see this piece on the drawbacks of know-it-all leaders written by Hugh Arnold, adjunct professor and former dean at the University of Toronto’s Rotman School of Management (published this week by Canada’s national newspaper, The Globe and Mail). In a nutshell, Hugh asserts that leaders who convey that they have all the answers are essentially saying to their employees:

  • “I’m smarter than all of you.”
  • “Even though you may have deep knowledge and expertise, I don’t need to waste my precious time seeking out your ideas.”
  • “I don’t need your help.”
  • “All I really need from you is to put your heads down and do what I tell you.”
  • “I don’t know” is looking like a pretty good alternative, especially if you are dealing with knowledge workers, wouldn’t you say?



Photo Credit: ryanmilani via Compfight cc

|13 Mar 2014

How to avoid being a weak executive

Striking a Balance Between Yes Man and Doubting Thomas

In my latest article for Entrepreneur Magazine, I discuss what good CEOs are looking for in their executives and how to avoid being a weak one. This includes not acting like a “Debbie Downer.”

|12 Mar 2014

CEO Class Starts April 4

RiceATC-Logo-Color

Building a World Class Company: A CEO’s Guide to Improving Performance 

Starting April 4, I am teaching my CEO class again in conjunction with the Rice Alliance Austin Chapter and the Austin Technology Council. The class is designed for CEOs with more than 20 employees who are seeking ways to grow via the right tools, people and processes. Much of the agenda focuses on the 5 responsibilities of the CEO that I’ve outlined in this blog. The content is not geared towards startups, but successful CEOs who want to improve their skills and network with peers.

Here’s a look at the agenda: 

Session 1. Intro session: The Job of a CEO (April 4)

Session 2. Own the Vision (April 11)

Session 3. Right People on the Bus (April 18)

Session 4. Providing the Right Resources (April 25)

Session 5. Build the Culture (May 2)

Session 6. Make Good Decisions (May 9)

Session 7. Deliver Performance (May 16)

Session 8. Stories from the Journey (May 23)

Session 9. How to Improve as CEO (May 30) 

Class size is limited to 20 CEOs and is by invitation only. If you fit the criteria, contact me for more information.

|11 Mar 2014

Five management lessons from Ben Horowitz

Excellent article based on the new book by Ben Horowitz. Here are two related interviews with him:

A Q&A With Ben Horowitz On His New Book, “The Hard Thing About Hard Things” (TechCrunch)

The consigliere of Silicon Valley (Washington Post)

|05 Mar 2014

DILBERT tackles goals management

DILBERT © 2007 Scott Adams. Used By permission of UNIVERSAL UCLICK. All rights reserved.

DILBERT © 2007 Scott Adams. Used By permission of UNIVERSAL UCLICK. All rights reserved.

I thought this DILBERT cartoon was appropriate to share after the launch of my new company Khorus a few weeks ago. Maybe back in 2007 (when this cartoon was published) it would have been a monumental task to collect and make sense of weekly employee input on their goals. The Khorus business management system is doing exactly that. We’re not just collecting the data for data’s sake, but analyzing the information and creating real-time reports and alerts for the CEO and division/department heads about how the company is tracking towards its goals. The system helps align employees to the corporate goals by helping them better understand how their individual contributions are supporting each one. 

One of the ways Khorus is different is our focus on likelihood and quality of goals versus simple goal status or completion. Likelihood captures each employee’s confidence in goal attainment. It’s a much better metric than status or project completion percentage, which does not reflect the inherent risk in the portion of work that is not complete. The natural inclination of most managers will be to ask: “Where are you on the goal?” The typical reply – “Oh, I’m about 80% done” – doesn’t tell you much. The employee may not know how to get the last 20% done. Or, they could only be 20% done but know exactly how to achieve the last 80%. 

Requiring employees to report on likelihood of goal completion each week makes them much more focused and holds them accountable. It also helps expose any business performance issues quickly. Over time, employees become better predictors of their work schedule.

In addition to likelihood, Khorus captures quality of deliverable as a core business performance metric. The emphasis shifts from simply getting things done to getting the right things done at a high quality. This focus on quality drives a culture of continuous improvement for long-term success.

So yes, it’s possible to know what’s really happening in your organization! And you’ll have more to base recognition programs on than superficial measures!

|04 Mar 2014

Sales should not be the only focus of an ops meeting

It’s always bothered me that many people seem to think the only purpose of an operations meeting is to talk about the sales forecast (and I’ve spent a lot of time in them for various companies). As a CEO, I think it is critically important that all areas of the business be in balance and receive an appropriate amount of attention. While the sales function is clearly important, it should not receive 90% of the attention as it often does.

Why do most companies spend so much time talking about the sales forecast? I realized that it is often the only future-oriented data that is collected. Every other department wants to talk mostly about what they have done, not what they are going to do. If future plans are discussed, they are typically tactical in nature and don’t relate to how they will impact the business. This focus on the past and tactics provides little value to a CEO.

One of the key roles of the CEO is to look as far into the future as possible to steer around any potential icebergs. That can happen only if he or she is receiving predictive data. It is crucial that every department help the CEO by looking at their activities from a forward-looking perspective, just like a sales forecast, and constantly be comparing actual performance to forecast performance. This way they drive continuous improvement in their ability to predict the future and help the CEO steer successfully towards their destination. The CEO bears some responsibility for this as well and should clearly communicate what kind of information he expects to receive, ideally tied to how departments are achieving the corporate goals.

Photo Credit: lumaxart via Compfight cc

|27 Feb 2014

What’s the one question every CEO needs to answer?

How likely is my company to meet its corporate goals?” 

Ironically, it’s one question that vexes CEOs, because they cannot get the information they need to answer it. While no CEO has a crystal ball, success depends upon having some way to predict how the company is tracking towards its corporate goals. Most of the data a CEO receives is backwards-looking, tactical information that doesn’t help them look towards the future. The answer is to have a process that lets them systematically collect the right type of information from across the organization. For more on this, read the article I just published for Forbes: http://www.forbes.com/sites/joeltrammell/2014/02/25/the-one-question-every-ceo-needs-to-answer

Photo Credit: Marco Bellucci via Compfight cc

|25 Feb 2014

My First Job: A blast that taught me some customer fundamentals

Everyone remembers his or her first job. Mine was working at a fireworks stand in Ruston, Louisiana. The first time I met the owner of the stand was when he drove into my neighbor’s driveway in a brand new Porsche. To a teenage boy in a small town, this was quite impressive. When I asked him what he did for he living, he told me he was an elementary school physical education teacher. While I was young, I already understood that PE teachers didn’t often drive around in Porsches. I realized his side business of selling fireworks must be pretty lucrative. That was enough for me to ask for a job.

The fireworks “stand” was an old 40-foot trailer like you might see being pulled down the highway. Customers entered from the middle and all the fireworks and prices were listed on a big display board in the trailer. One evening a gentleman walked in and begin ordering numerous items. As he named an item, the owner of the stand wrote down the price on a brown paper bag, and I retrieved the fireworks from the shelves behind the counter.

DiscountAs the customer was about half way through his order, he commented that he should get a discount for ordering so much. I was a little surprised when the owner readily agreed to a discount. He had always told me not to discount the price since we were the only stand in the area and if people came in they rarely left over price.

We didn’t have any sort of calculator so I watched as the owner, in front of the customer, tallied up the prices on the bag and came to a total. He said the total is $44 but since you bought so much I will give you a 10% discount and call it $40. The customer seemed quite happy that he had negotiated a good deal and took the fireworks and walked out the door.

Once the customer was at his car I turned to the owner and said, “You didn’t do the math right on that one.”

He said, “What do you mean?”

I said, “You added one extra $4 dollar item more than the man purchased.”

A wry grin came across the owner’s face as he said, “I have been doing that for 20 years and you are the first person who ever caught me.”

Now some people might say he cheated the customer, but I don’t agree since the customer paid the same price as everyone else. Now the owner could have just told the man that he didn’t give discounts, but that might have caused the customer to buy less or even leave. In the end both sides were happy with the transaction, and that is what was important. I would never intentionally try to mislead a customer, but I would look for ways to make everyone happy in a transaction. How people feel about a transaction is often much more important than the objective facts.

This reminds me of a story my brother told me about going to a car salesman friend of his to buy a car. He asked his buddy to tell him what kind of car he needed. The salesman responded, “I would go broke selling people the car they need, what do you want?” In business it is most important to figure out what the customer wants!

Photo Credit: kyeniz via Compfight cc

Related article:

My First Job: What Unloading Beer Taught Me About Leadership (LinkedIn)

|20 Feb 2014

Answering the “Exit Strategy” Question

Excellent post by my friend and former colleague Gordon Daugherty

|19 Feb 2014

CEOs need a system

I’ve had some success in my career as a CEO, which led me to think about what I could do to help out fellow CEOs as well as aspiring ones. This blog is part of that effort, as is the CEO course I teach every year and the book I’m publishing this fall. As I often say, the CEO role is the most unique but least prepared for job in business. CEOs rarely get the training they need unless they’ve been specifically groomed for the post. Even then, I don’t know of a good methodology or system that exists for CEOs.

I mean, HR people have a system (e.g., Workday), sales people have a system (e.g., Salesforce.com), marketing people have a system (e.g., Eloqua, Marketo), etc. But CEOs have what? Calendaring, e-mail, spreadsheets? This lack of a formal system is one reason I think many CEOs are not doing as well as they hoped. They cannot align the day-to-day activities and priorities of their people to the corporate goals, especially as they grow. In fact, many CEOs feel powerless due to lack of influence, lack of timely information to address problems, and lack of employee engagement. Can a system fix all that?

I think so, which is why I started my new company Khorus that we are officially launching today. Khorus is a business management system we developed specifically for CEOs to run their companies. It’s a cloud-based software product based on a system I created and used in my previous companies. The product uses a cascading goals framework, but this is no ordinary goals system.

KhorusTPSMatrixIt’s a way to align every employee to the corporate goals and reinforce them on a weekly basis: Every week, employees provide their input on the quality and likelihood of achieving their goals in the quarter. Instead of backwards-looking, tactical information from different departments, CEOs for the first time get a normalized, relevant view into what’s driving – or inhibiting – the business. This way, they can see issues developing and act on them before it’s too late. In essence, the system helps answer the one question that I think CEOs agonize about most: “How likely is my company to meet its corporate goals?”

Check out the press release for more information.

Here’s a quick product tour:

I’m interested in your feedback about this, both in theory and execution. If you are a CEO – or even a VP or director of a large department – and want to know more about Khorus, feel free to reach out to me directly.

|18 Feb 2014

Will an aluminum Ford F-150 make Alan Mulally the CEO of the decade?

Commercialization: Aluminum Body on Ford’s F150

2015 Ford F-150 Reveal

2015 Ford F-150 Reveal; Photo Credit: Ford

I follow the new car and truck market quite closely. It is a very competitive worldwide market that must balance form and function. I have been a big fan of the work that Alan Mulally has done at Ford, but this latest move is a whole other level. Switching from steel to aluminum for a vehicle that is not only your best seller but also the best-selling vehicle in America is a huge gamble. It is the type of move that companies don’t usually make unless they feel they are on death’s door and have no other option. The “safe” play from one perspective would be to stay with steel, and if you wanted to try aluminum do it in a low-volume, higher-end model. The fact that Mulally could make this move shows a leader who has the confidence of his team and is providing real leadership. My guess is that it will be a homerun for Ford and in my mind cement Mulally as CEO of the decade.

|13 Feb 2014

Why CEOs have power but lack influence

Entrepreneur.com just published an article I wrote titled “How Leaders Can Find Their Mojo.” Whether they admit it or not, many chief executives feel powerless in their organizations. Oh sure, they have power: They can hire and fire, acquire companies, reorganize whole divisions, change the company strategy, etc. But once an organization gets beyond 20 or 30 people, CEOs start to lose the ability to influence the day-to-day activities and priorities of their people. Chief executives who don’t have a formal system to align employees to the corporate strategy and goals risk consequences such as employee disengagement, inefficiency, and poor performance, no matter how many organizational changes they make. In the article, I cover the top three challenges that cause CEOs to feel powerless and what they can do about it. Check it out here: http://www.entrepreneur.com/article/231430

|12 Feb 2014

How to set corporate goals in 2014

Effective goals management leads to execution that supports corporate strategy

Effective goals management leads to execution that supports corporate strategy

I’ve done a couple of Webinars recently to show CEOs and other executives how to set goals for their organizations. This is one of the keys to success in any company. The bigger your organization gets, the more disconnected your employees will become from the big picture strategy if you don’t do something formally to link them together. Cascading goals are a way to do that, but only if every employee understands how their day-to-day contributions tie to the corporate goals, and you have a way to continually and consistently monitor, measure, and hold everyone accountable.

In these Webinars, I share the goals management system I’ve used in the past. This has morphed into a software system for CEOs in my new company Khorus. Here’s a quick outline of what you’ll learn:

  • The top 3 CEO challenges
  • Why quarterly goals are necessary
  • The 5 steps needed for execution to happen
  • How to set corporate, department, and individual goals
  • How to choose the proper measures
  • How to review goals and give feedback
  • Goal setting and execution timeline
  • Do’s and don’ts

If you are an ExecSense subscriber, find my Webinar here: “Best Practices for Establishing 2014 Goals for Your Management Team

Another version is available on YouTube here: “Get to High Performance: The CEO’s Art of Setting Goals

To learn more about Khorus, sign up at http://khorus.com/get-started

 

 

|11 Feb 2014

Employee engagement counts

Officevibe has created this infographic about employee engagement based on a bunch of stats that support what I’ve been saying on this blog for a while: Employee engagement is low in general across U.S. companies, money is not a chief motivator if you pay market value, people leave bosses not companies, engaged employees perform better, etc. For CEOs, ensuring that your employees are engaged should be one of your top priorities. One way to do this is to own the vision and make sure that everyone in the company – from entry-level to executives – understands the corporate goals and how their day-to-day activities contribute to those goals.

10 Shocking Stats About Employee Engagement

Infographic crafted by Officevibe, the corporate team building and employee engagement platform.

|06 Feb 2014

The three roles of private company boards

In my last post, I wrote about some red flags when choosing board members for early stage companies. Understanding the function of private company boards will help CEOs select the right members as well as help those board members to offer the right value. Here are the three roles that I think board members serve in private companies:

  1. Hire and fire CEOs (and this includes succession planning just in case): Who should captain the ship is the most important decision in the whole company, and the board is responsible for acting collectively to make those decisions. Most CEOs are members of the board, which complicates matters. As a board member, I am a big believer that I support the CEO until they are not the CEO. In other words, even if I am not sure the existing CEO is the best choice, I do not in any way undermine their authority. If I reach a point where I believe they need to go, then I must discuss the issue with the board as well as directly with the CEO (however unpleasant that may be). Don’t hide behind the rest of the board. If a board member believes the CEO should go but the rest of the board does not, then it is probably time for that board member to resign. Either way, the CEO is the CEO until they are not, and he or she should be treated with the appropriate level of respect.
  2. Approve major decisions that impact the company: A typical list would include things like corporate strategy, fundraising, acquisitions, the annual budget, and the hiring and firing of executive positions. I view this as an approval process. The CEO brings these issues to the board with his recommendation, and the board ratifies the direction. If the board does not approve, then the CEO should take the feedback and come back with a new proposal. I do not believe the board should be creating strategy or forcing other direction on the company.
  3. Act as a strategic consultant to the CEO: A good board spends 95 percent of their time doing this. Just like any good consultant, they spend a lot more time trying to ask the right questions rather than showing how smart they are by dictating answers. The CEO should feel comfortable calling board members anytime he wants to discuss an issue, without being worried that they will suddenly jump in and decree an answer. The good board member understands that the more he or she can do to build up the CEO, the more value the company’s stock will have in the long run. It is always best if the board can make the current CEO successful rather than think they can bring in some rock star CEO who will run the company much better. For small companies, it is almost impossible to attract good CEOs. Typically the reason the CEO is being replaced is that things are not going well, and there is limited runway on the current funding. No proven CEO is going to step into a situation like that. Boards should focus on making their existing CEO as strong as possible, because replacing a CEO is a failure of the board.

Running private companies is tough enough without having to deal with a poorly functioning board. Because it is such a critical decision, make sure you spend time up front vetting any potential board members. Where possible, I believe that board positions should be one-year appointments and only be renewed with the unanimous approval of the entire board. This way board members who aren’t helpful can easily be removed without a big fight. Best of luck with your board relations!

|04 Feb 2014

Proceed with caution when choosing private company board members

I have had some interesting conversations over the last few weeks that made me realize many people view the role of private company boards far differently than I do. This may be because many of the board members in these companies don’t have significant board experience. Often they have brought money to the table but don’t have the right experience to provide value to the entrepreneur. Or in some cases, people take board seats because they still want to run a company but aren’t willing to commit the time and reputation risk of being the CEO. Both of these cases are terrible for the entrepreneur and can lead to the company’s failure.

Because of this, entrepreneurs must be very selective about who they allow on the board. You should put at least as much research into selecting a board member as you do when hiring an executive team member. The first step is to check with every CEO you can of companies where the individual has been a board member. Hopefully, you can find out how the board member behaved not only when things were going poorly, but also when things went well.

If the individual you are considering has never been on a board, then it will be necessary to spend some time discussing his or her view of the board role. It is easy for an investor who puts up a significant amount of money to feel like he or she should have a right to determine specifically how that money is spent and how the company is run. This never turns out well.

Any good CEO understands that running a company – even when focused on it 24 hours a day – is a very difficult task. When board members believe they can spend a few hours each week thinking about a company and then dictate what should be done, they are deluding themselves. I have more than 20 years of successful CEO experience, and I would never feel comfortable making key company decisions based upon my limited view of the company as a board member.

So how should a board member approach a board position at an early stage company? In my next post, I’ll share three main roles for the board.

Photo Credit: huskyte77 via Compfight cc

Related article:

To Board or Not to Board: That is the question for early stage companies

|29 Jan 2014

How to Tell If Someone Is a Real CEO

This article is based on an article I published on Entrepreneur.com on January 20, 2017 titled “You’re a Real CEO When Your Company Is Bigger Than Your Title.” 

Real CEO

Real CEO or Glorified Product Manager?

Are most CEOs just pretenders? Management consultant Steve Tobak certainly thinks so. In his article last fall  — Why Most CEOs Are Frauds —  he laments the trend of so many people giving themselves the title of “CEO.” He wrote: “I’m being a bit facetious, but you know what I’m talking about. A position that used to be reserved for a real corporate officer with an executive team, a board of directors, an organization to run and mega responsibility has been hijacked by every freelancer and wantrepreneur on Earth.”

This begs the question: When is a CEO a “real” CEO? Here are some specifics.

I believe the CEO job starts when the organization reaches about 20 employees. Prior to 20 employees, the job resembles more of a product management role. CEOs at this stage are trying to develop a viable product and generate some revenue. The real CEO position begins when there is a complete organization with all the major functions in place. This transition typically starts at 20 to 30 people and by 50 people there is a distinct full-time CEO role.

At this point, the CEO must stop acting in an individual capacity so much – pitching in where needed to write code, make a sale, develop copy, etc. – and start being the leader of the entire organization. This entails five key CEO responsibilities: creating and owning a vision, making decisions that impact multiple functions, providing the resources needed across the organization, building a culture, and delivering performance.

Do Founder CEOs Need to Be Replaced?

Some believe that, in order to scale the company, founding CEOs will need to be replaced at some point with a “professional” CEO. I do not necessarily believe this is true. While different stages of a company require different skills, founders can make the leap and are often the best people to grow the company.

An entrepreneur who has the skills to be an effective CEO at 50 to 100 people can certainly adapt and remain as CEO. Many founding CEOs have led their companies to the Fortune 500. Just ask Mark Zuckerberg, Larry Ellison, Bill Gates, or Jeff Bezos.

Can Early-Stage CEOs Make the Critical Transition?

The single biggest factor that determines whether or not a given founder can be a permanent CEO is whether they can make the all-important transition from being a specialist to a generalist. Too many CEOs revert to their comfort zones — the specific areas where they excelled as an individual contributor — and ignore other parts of the business. They fail to take a balanced approach across the whole business.

The two most common backgrounds for early stage CEOs are sales or technology. Those who cannot make it as a CEO are the ones who spend too much time in those areas or others, taking on a “Super VP” role in their organizations. For instance, they spend all their time in sales trying to land the big deal, and don’t care as much about the other areas of the business.

If a CEO spends the majority of their time as a Super VP, they risk undermining their executives while failing to evolve and tackle the unique challenges of the CEO role itself. Jim Schleckser, author of “Great CEOs Are Lazy,” says CEOs must find a way to get out of this Super VP or “player” mode. They need to bring in systems as well as talent to execute the same things they would do as individual contributors.

It’s a Real Job

As Tobak said in his article: “Chief executive officer is not a dumb title. It’s a real job. A real career. A real profession. And it takes vast experience, knowledge and hard work to achieve what used to be the pinnacle of the corporate world.”

However you got the title or if you aspire to have it, being a real CEO is not something to be taken lightly. Understanding the CEO role’s unique responsibilities is paramount. Another key to success is to never stop learning. Some of the best CEOs are those who constantly increase their knowledge and skills in service to their organizations.

|25 Apr 2017

Entrepreneur Incarnate: Join us on March 21

As someone who is skeptical of business academia, it’s surprising to me that the best definition of entrepreneurship I have heard comes from a Harvard Business School professor. But Howard Stevenson defined entrepreneurship perfectly as “the pursuit of opportunity beyond resources currently controlled.” To me, this captures the constant struggle entrepreneurs face to create their vision without knowing exactly where they are going to obtain the resources.

Entrepreneur Alan GrahamI have met thousands of struggling entrepreneurs over my career. The numbers tell us that most will fail to realize their vision, but they persevere anyway. Only a few will have real success, which to me is measured not by riches but by bringing their vision to life. I can think of no better example of a great entrepreneur than Alan Graham, founder of Austin-based Mobile Loaves & Fishes.

Alan’s vision was to create a way to reintegrate homeless individuals into a community. Until I visited with Alan, I had no understanding of the real problem causing homelessness. I, like many, just assumed that it is driven by deep personal problems leading to substance abuse and the inability or unwillingness to hold a job. As a Christian I wanted to help but didn’t know exactly how. Would money or lodging solve the problem? Weren’t there charities and governmental programs to help these people?

Entrepreneur Alan Graham bookAfter spending thirty minutes being educated by Alan, I understood the real problem. Alan has just released his book, “Welcome Homeless,” which will help more people understand what he taught me. I would encourage everyone to get the book to learn about the true drivers of homelessness and how a great entrepreneur built his vision.

If you are in the Austin area, I am having a reception for Alan at my office on Tuesday, March 21. We would love to have you but have limited space. If you are interested in registering or would like more information, e-mail [email protected].

|15 Mar 2017

Annual Austin CEO Class Starts March 31

CEO Class

CEO class sponsored by the Rice Alliance Austin Chapter and the Austin Technology Council

If you’ve got time for lunch, you’ve got time for this CEO class! Calling all Austin-based CEOs of companies with more than 20 employees, who believe it’s important to improve your skills: Consider joining us for this eight-week educational workshop on building a world-class company. The 2017 CEO class will begin March 31 in Austin and run every Friday during lunch from 11:30 a.m.-1:00 p.m. through May 19. 

Now in its seventh year, this series is designed for the CEO of a successful, growing business who is looking for the tools to maximize value and increase company performance. This is not a startup CEO class but a chance to learn from and network with other accomplished CEOs. Local CEOs who have taken the seminar in past years include Denver Fredenberg of Hyperware, Chuck Gordon of SpareFoot, Melanie Kalemba, former CEO of Movero Technology, and Chad Neely of Wenzel Spine.

This is my sixth year leading the course, and the sessions will be based on the main responsibilities of the CEO role as I outlined in my book, “The CEO Tightrope.” It’s very interactive with lecture and discussion mixed together.

Event Agenda:

Session 1. Intro Session, The Job of a CEO, and Introduction to Khorus  (March 31)

Session 2. Own the Vision  (April 7)

Session 3. Right People on the Bus  (April 14)

Session 4. Providing the Right Resources  (April 21)

Session 5. Build the Culture  (April 28)

Session 6. Make Good Decisions  (May 5)

Session 7. Deliver Performance  (May 12)

Session 8. Stories from the Journey and How to Improve as CEO  (May 19)

ATCSponsored by the Rice Alliance Austin Chapter and the Austin Technology Council, the CEO class is invitation-only and the size will be limited. Each session will include a provided lunch. You will have the opportunity to try out the first class before registering for the entire series. During the first session you will receive a signed copy of “The CEO Tightrope.”

Event Start Date: March 31, 2017

Event Time: 11:30 a.m. to 1:00 a.m.

Location: Vinson & Elkins Conference Facility, 2801 Via Fortuna, Suite 100, Austin, TX

Registration Fee: $995

If you are interested in registering or have questions, e-mail [email protected].

|21 Feb 2017

CEO Scorecard for Grading Performance

This article was originally published under the title “How to Solicit Valuable Feedback From Your Board” on Entrepreneur.com on August 12, 2016. A version of the CEO Scorecard image was first published in my book “The CEO Tightrope.”

One of the drawbacks of being a CEO is that you don’t have an immediate boss who will give you regular feedback on your performance. This is why your board can be helpful. The right board can be a powerful multiplier of your efforts. Their knowledge, connections and experience can help you improve your organization’s performance.

However, many board members need help providing feedback. Their initial inclination may be to focus on financial performance only.

The trend of opting for board members with diverse functional backgrounds often means that few actually have experience as a CEO. They may not understand how the CEO’s job differs from the other executives in the organization.

For these reasons, it’s up to you to establish a relationship with your board that encourages them to provide appropriate and useful feedback. Here are two ways to do just that.

Provide Your Board with the Right Information

Most of what the board members know about your company is what you tell them in the board meetings. It’s very important to think about what you present and how you present it.

Unfortunately, I have been in far too many board meetings that sound like infomercials. The CEO showcases every department in the best possible light and never mentions any problems. This is pointless if you actually want help from your board.

What the board needs to know is how you as the CEO run the business – not day-to-day specifics about each department. Work with your staff to identify a few key metrics that reflect how each department is doing. Break down the information to a general business level, and stay away from the intricate details.

For example, discuss your overall sales process and how the key metrics at each stage are doing. Board members should have experience with sales processes across many industries and can add value. Talking about a specific deal, unless you are asking a board member for help closing it for some reason, is a waste of time and will often lead down a rabbit hole.

Ask for Specific Advice

Here are two methods for gathering feedback from your board.

First, after each board meeting, try to give your board members a homework assignment. Ask them to identify three things you are doing well and three things you or the company can improve.

After gathering their feedback, you should spend some time addressing those issues during the next board meeting, and repeat the process. Closing the loop on this feedback, and taking action on the items will dramatically strengthen your relationship with the board. It can help you improve your performance as well as the company’s.

Second, once a year ask each board member to complete a CEO scorecard, grading you on your performance. The form I like to use focuses on the five responsibilities of the CEO.

CEO Scorecard

CEO Scorecard

 

 

 

 

 

 

 

 

 

Request each board member to provide a simple grade – between A and F – for your performance in each area of responsibility. You should also rate yourself in each area.

Comparing how the board rates you to your own ratings can raise issues for reflection. Once the scorecards are complete, you should have a session with the board or a subset of the board, and discuss the grades.

It can be tricky to obtain input from your board. Your leadership in this area will go a long way toward building a healthy relationship that will benefit everyone.

 

|18 Jan 2017