10 Entrepreneur Leadership Lessons from My 25-Year Software Career
July 25, 2012
If you asked most CEOs, they’d probably feel lucky to name one truly exceptional business mentor who has influenced (or continues to influence) their entrepreneur leadership styles and business philosophies. So maybe I should consider myself exceptionally fortunate. In my 25-year software career, I’ve had at least three.
Mike Fields, who I first met at Applied Data Research and later followed to Oracle, taught me how to work with people, imparting knowledge that continues to help me motivate and mange them to this day. Former Oracle president Ray Lane, who is largely credited with the company’s incredible revenue growth in the 1990s, taught me to take a more operational approach to business. Larry Ellison, the legendary (and polarizing) co-founder and CEO of Oracle, taught me to think outside of the box and, when it’s necessary, how to be a contrarian.
In a lot of ways, I’m now an amalgam of those three mentors, with a dash of my own personal entrepreneur leadership style mixed in. I’ve learned from experience, from success (and mistakes), and from watching other senior leaders manage their teams. In the end, it’s cumulatively led to me developing 10 specific business philosophies and entrepreneur leadership lessons that I’ve shared below. Buckle up, it’s a long read – but well worth it.
Change is the Only Constant You’ll Face: 3 Secrets to Successful Business Change Management
Change is inevitable in business and you need to build your business model around it. Hire people who are comfortable in a world of change. Great businesses are able to grow in good times and bad, largely because they’re prepared for the unpredictable.
Indulge me for a moment while I share a quick story about my time at Oracle in the late 1990s. Back then, I was the Executive Vice President of Oracle North America, and the company was on a bit of a tear. In December of 1998, the company announced that its profits were up a record 46 percent in its second quarter, while its revenues from its two businesses — database and applications — had reached an all-time high of $8 billion.
Needless to say, things were good at Oracle. The company was growing in an increasingly competitive market, all while maintaining incredible profitability and its position as one of the top — if not the top — technology companies in the world. With that in mind, what our executive team decided to do in 1999 might surprise you.
We restructured the business entirely.
There was nothing particularly wrong with Oracle. The company was obviously performing well. But we thought the company could do even better if we could somehow improve its historical operating margins. It took some in-depth strategizing and a few fairly drastic changes, but the plan worked. Within a year, Oracle increased its margins by 11 points and the company now expects margins that are nearly double what they were in 1998.
Those are pretty incredible margins for a company that didn’t — and still does not — have a monopoly. Ultimately, the cash generated from those margin increases allowed Oracle to execute its aggressive acquisition strategy (beginning with PeopleSoft) and the business now rakes in more than $37 billion in revenue annually. Not bad for a company that, 14 years ago, had no real motivation to change.
Therein lies the lesson that expansion-stage CEOs and founders can take away from this blog post. In business, change is the only constant you’ll face. And if you don’t handle business change management effectively — in good times and in bad — it can sink any momentum you’ve created.
Ultimately, you need to build your business model around change and prepare for it at every turn. You need to hire people who are comfortable in a world of change and you must adapt when opportunities for positive change (like the one we recognized at Oracle) present themselves. If you don’t, then you will be forced to change when the company’s performance is on a downturn.
If you’re struggling or your market is down, change management is especially critical because growing companies are not afforded the time to weather the storm of down markets or decreased demand. Offensive change when the company is doing well is a whole lot easier to manage than defensive change. I know because I was on both sides of the equation during my time at Oracle.
I’m not suggesting that you overhaul your business entirely — change your mission, vision, and values — or abandon your product strategy with every minor bump in the road. I am suggesting, however, that the best companies — the ones that experience exceptional long-term success — are able to quickly recognize the need to change and make the tweaks necessary to help their business continue its growth trajectory.
So, what does successful change management require? Here are three tips I’ve learned throughout my career:
- Top down support from the CEO level down to the senior executives below the CEO is what ultimately drives successful change. When the changes are major, you need to create a burning platform scenario that will encourage a sense of urgency.
- Clear, consistent, and transparent communication by all executives is critical to explain why the change is necessary. Throughout the change process, it’s important to regularly and clearly communicate the reasons for change and reinforce that message to your team so they understand why you’re taking the hill in front of you.
- Quickly identify the senior team members who don’t buy in and encourage and support them to leave the company if they refuse to embrace change. This means you may lose some very good people who helped you get to where you are, but those people won’t be as valuable going forward if they aren’t willing to help you get to where you need to be.
At the end of the day, business is a little bit like the growth rings on a tree. Every year, something changes — it could be your product, your top competitors, your customers’ preferences, or any number of things. The best companies adapt to those changes, reinvent themselves when change requires it, and find a way to grow in good times and bad.
So, is your company capable of handling business change management? Do you have people in place who will thrive in a world of change, or will they fold when the stakes are at their highest?
People Are Your Only Sustainable Strategic Advantage
Regardless of how great your products and ideas are, your people ultimately build, sell, and support them. The world’s best companies are able to continuously recruit and retain outstanding people and cultivate employee loyalty.
Throughout my career as a software executive and venture capitalist, I’ve worked with some exceptional entrepreneurs and companies that have developed truly groundbreaking products. Some of those companies’ products have changed markets entirely (see: Oracle), while others have ignited paradigm shifts that ultimately altered the way their customers viewed and used technology.
But for almost all of those companies, it wasn’t exceptional products or services — regardless of how technologically advanced or groundbreaking they were — that ultimately set them apart from their competitors in the long-term. In fact, their technology was never really a sustainable strategic advantage at all.
Let me explain.
If you look at the best businesses out there (companies like GE, Apple, and — sorry for the subjectivity — Oracle), they got to be the great companies they are by executing brilliant product, sales, marketing, and growth strategies. And while those companies wouldn’t have thrived without great products, they also wouldn’t have gotten to where they are today without the most important asset a company can have: truly exceptional people.
To use a sports analogy, the great NFL teams in history have all had playbooks filled with offensive and defensive formations and plays. But those plays didn’t make the teams great. Instead, it was the talented players who executed those plays that made their team better than the other guys’. That happens every day in business. Every company has its own strategies in finance, product development, marketing, sales and service, but it is the execution of those strategies by the people in the company that determine whether the business will be successful.
That’s true in business, as well. After all, as customer needs and market conditions change throughout the process of a company’s evolution, it’s up to people to help build, market, sell, and support the products or services that meet those new market needs. Additionally, as a business scales, great people contribute new ideas, listen to customers, prospects, and partners, and deliver critical insight or feedback that propels a company forward. Put together, those capabilities are what create relevant, real-time competitive advantages, and, in the end, those advantages collectively fuel scalability and long-term viability.
So, what should your business be doing to create that sustainable strategic advantage? Here are some tips that will help you recruit, retain, and motivate an exceptional team:
- Don’t just recruit skill sets. It’s also important to identify people who align with your company’s vision and values.
- Instead of interviewing candidates individually, have them meet with a panel of managers. If one person on that panel gives a thumbs down, then the candidate is out. Consensus decision-making is always better, especially at the expansion stage.
- Ask candidates who make it past the first interview to come back to deliver a presentation to the aforementioned panel. This is not just for sales people. Finance, product development, marketing, and customer service candidates should also be asked to do this.
- Implement a 30/60/90 day review process for all new hires. If the team has any doubts about the new hire at those increments, take care of your mistake then rather than six months or a year later. Remember the rule of recruiting: Hire slowly and fire fast.
Ultimately, scalability is all about execution, and it’s people who drive that execution.
If your corporate culture is as exceptional as the product you sell (assuming it’s exceptional), then you’ll go far. If, on the other hand, your team is incapable of executing the strategies that drive scalability, or you’re unable to retain the top talent who helped your company scale in the first place, then it won’t matter how great your product is. Failure — or, at the very least, mediocrity — is an inevitability.
Listen Up! If You’re Not Tuning in to Employee and Customer Feedback Then You’re Not a Leader
“The key to success is to get out into the store and listen to what the associates have to say. It’s terribly important for everyone to get involved. Our best ideas come from clerks and stockboys.” – Sam Walton
I’m about to give you an incredibly elementary human anatomy lesson: the majority of us have two ears and one mouth. In most forms of communication, the former are responsible for digesting the sounds we hear and sending them to our brain for interpretation. The latter is the mechanism we use to express our response. Yes, I know, I’m giving some groundbreaking medical insight here.
Unfortunately, too many expansion-stage managers and executives seem to forget that they have those two oblong appendages on the sides of their head. They talk far more than they listen (if they listen at all), viewing employee and customer feedback as nothing more than an unnecessary nuisance.
Well, I’ve got some news for those “leaders.” If you’re not using your ears, then you’re not leading at all. In fact, you’re a leader by title only.
While I realize I might sound like a bit of a curmudgeon for bemoaning the fact that nobody listens anymore, it’s nevertheless an issue that needs to be broached whenever business leadership is discussed. Being frank, I firmly believe the art of listening — and it truly is an art form — is quickly becoming a relic.
Today, most executives and senior leaders are too distracted — either by their own voices or the peripheral noise around them — to truly hear and absorb the kinds of critical employee and customer feedback that could help them better shape and direct their businesses. As a result, those leaders often miss out on the invaluable insight that their ground soldiers could provide, and instead they disenfranchise those people by making them feel somewhat insignificant.
As you can imagine, that can make leading and inspiring people a fairly difficult proposition.
The world’s best leaders recognize the need to shut their traps and open their ears every now and then. They understand that listening to employees, customers, prospects, competitors, and market influencers is every bit as critical to leadership as giving inspirational, “rah-rah” speeches. They grasp that, as Woodrow Wilson once said, the ear of the leader must ring with the voices of his or her people.
But effective listening isn’t as simple as sitting down at an entry-level employee’s desk and asking them how their day is going. To be a great listener, you need to make sure you do also do the following:
- Stop doing what you’re doing and simply concentrate on the individual who is talking. It’s impossible to multitask and listen.
- Turn your phone off (or put it on silent) and place it in your bag, not your pocket, where you’ll be tempted to look at it if it buzzes.
- Turn away from your computer or close your laptop if you’re having a discussion in-person or on the phone.
- Ask clarification questions to make sure you truly understand the person you’re talking to, or try restating the issue or question and confirming with the person that you have it right.
- When you ask questions, only ask open-ended questions.
- Do not interrupt. Ever. Let the person you’re talking with finish his or her thought before offering your response.
- Avoid jumping to conclusions, and don’t try to complete someone’s sentences for them.
In the end, the positive byproducts of listening are numerous. By opening your ears you’ll be able to gauge the things that are most important to your team and your customers, which will make explaining why the company is doing what it’s doing a much simpler and honest task.
So, make listening part of your daily rhythm and be sure to create an environment and schedule where you have time — without any distractions — to really listen to and understand what’s happening on your ground floor. Ultimately, that will do more to foster true leadership than any amount of the usual noise that comes out of so-called leaders’ mouths.
The Truth Hurts: Why the Customer is NOT Always Right
That statement may be contrary to everything you’ve heard or been told, but it’s true. Just because a customer wants, needs, or expects something doesn’t mean you should deliver it. Doing so might ultimately take your business in a direction it shouldn’t be going.
In an August article for the Harvard Business Review, Brent Adamson, Matthew Dixon, and Nicholas Toman — all of whom work for CEB, a global leadership consultancy — presented a somewhat contrarian counterpoint to a very cliché argument. The customer is not always right, they wrote. And beyond that, if your B2B technology company is operating under the misconception that it must pivot for every unique customer need (also known as solution selling), then it’s in more trouble than you might know.
The reason is simple, the HBR article’s writers suggested: While solution selling — the process of tweaking and selling products for every customer’s unique and often complex issues — is good for customers, it’s not always the right methodology for the business. In fact, it can be a horribly inefficient and downright distracting way to run an expansion-stage B2B technology company.
Does that mean your customers aren’t important? No. Does it mean that, as a leader, you need to make decisions that are mutually beneficial to your customers and your business? Absolutely.
Unfortunately, too many leaders at the startup and expansion stages aren’t willing or able to strike that balance. Instead, they choose to do anything and everything to make — and keep — their customers happy, including:
- Bending over backwards to develop some complex code for one customer’s specific need.
- Dedicating precious human and capital resources to manage customers whose needs don’t really align with the product’s core features.
- Spending an inordinate amount of time on a product “bug” that isn’t really a bug at all, but rather a feature that one customer doesn’t like.
- Providing services the customer wants that are not core to the company’s strategy and direction, an approach you might know as AFAB, or “anything for a buck”.
That list could go on, but you get the point. Adhering to the “the customer is always right” philosophy, your business can easily lose focus on what really matters. In other words, who are the customers who really align with your ideal market segment and what are their needs? Those are the customers, quite frankly, who you need to worry about pleasing. And if you execute a customer segmentation initiative effectively, those customers’ pain points or problems should be relatively similar, negating the need to tailor your solution to every imaginable customer need.
My point is this: Just because a customer wants, needs, or expects something, does not mean you need to deliver it, or that delivering it is the best thing for your business. Remember, the customer is not always right, even if they’re repetitively screaming that adage into your ear.
As a leader, you need to make decisions that best apply your company’s capital, intellectual energy, and product capabilities. That will result in an efficient use of your time and money, and allow your company to stay on course when so many other businesses are trying to be everything to everyone.
So, what do you do if a customer requests something that isn’t one of your core product features, or would require your product development team to drop everything to address it? You say, “no,” and you explain to them why you can’t or won’t deliver it. If they don’t understand or continue to demand those things, then you should consider doing something else that might seem a bit radical: Fire them.
Yes, you read that right. That’s not to say that you should be totally inflexible and unwilling to adapt to small customer tweaks or issues. That’s just part of doing business. However, I think that the best business leaders look at their customer base every year to see if there are customers who should be pruned.
These are the customers that cost you more than the revenue they bring in, typically because they are obscenely needy and distracting, or they simply no longer align with your product’s core competencies. Frankly, if you can’t do what those customers want and they can’t accept your decision after you’ve explained it to them, then all you will have is a bunch of unhappy customers. And in today’s world, what business really needs that?
The Importance of Saying “No” in Business (and Explaining Why Not)
For a lot of startups and early-stage companies, this isn’t an easy philosophy to adopt. As young companies try to grow, the temptation is to say yes to everything in the interest of signing up new customers, keeping existing customers, and making employees happy. Doing that, however, can distract your business from its true mission and run it off course. The truth is that most people will understand “no” if you can easily answer, “Why not?”
In my last post, I wrote about why the customer is, contrary to popular belief, NOT always right. Yes, your customers’ opinions are valuable and their needs are certainly important. But just because a customer wants or expects something, doesn’t mean you have no choice but to deliver it. To put it more plainly, saying no in business — to customers, employees, vendors, colleagues, etc. — is not only acceptable, it can even be an action that saves your business.
In fact, as Tony Schwartz wrote in a post for the Harvard Business Review earlier this year, “no” should be the new “yes” for busy executives who don’t often have time to be everything to everyone, or to be everywhere at once. As Schwartz wisely put it:
Prioritizing requires reflection, reflection takes time, and many of the executives I meet are so busy racing just to keep up they don’t believe they have time to stop and think about much of anything. Too often — and masochistically — they default to ‘yes.’ Saying yes to requests feels safer, avoids conflict, and takes less time than pausing to decide whether or not the request is truly important.
But it also prevents entrepreneurs from being the leaders they need to be.
The reason is simple. Whether it’s how you sell, what you build, or which customers you engage, it’s very tough for young companies to get anything done if their only response to requests and queries is “yes.” Doing that often sends a business in 10 different directions when it only has the time, energy, and resources to go in one. Ultimately, that creates distractions that can keep a company — and its CEO — from focusing on the few things that really matter.
Of course, that doesn’t mean you should all of a sudden start saying no to everything, either.
As a matter of fact, I would argue that saying no in business must always be supplemented with an honest and fair explanation. No, that doesn’t mean you need to write multi-paragraph e-mails justifying your stance, or stand up in front of your team and give a speech every time you have to deny one of their suggestions or requests.
It does mean, however, that you should at the very least convey to the person you’re saying no to why you made your decision. In order to successfully say no to a prospect, customer, partner, or employee, you must:
- First make sure you have taken time to truly understand what they have are asking for. This means making sure you have asked good questions and listened closely to their responses. Otherwise, they will feel like you have not given them due process and just jumped to “NO.”
- Clearly and patiently explain why you can’t meet their request in business — not emotional — terms. For instance, you might offer up explanations that sound like, “Your functionality needs are not in line with our development roadmap in the next 12 months.” Or, “We treat all of our partners (or employees) fairly, so we can’t make this exception just for you.”
- Relate to your customer, prospect, partner, or employee’s business sense. In other words, you might say something like: “Surely you have customers asking you for things that don’t make sense for your business, so I hope you understand my decision.”
- Ask them for their understanding and support going forward. Doing so will allow you — and the person you’re talking to — to close out the issue and move on.
Being able to explain the why behind your decision typically encourages people — whether they’re your customers, employees, or vendors — to accept and understand that decision, and, maybe more importantly, buy into it.
Let me give you a quick example from my own career to better illustrate this point.
When I ran Oracle North America, one of my primary goals was to make my people more productive every day. To do that, I would focus on the top three things that really mattered, and ignored the rest. Everything else, in my opinion, would either take care of itself, or it wouldn’t matter in the grand scheme of things.
At the end of the day, that meant that I was saying “no” to a lot of my team’s requests, ideas, and suggestions, which could have easily driven a stake through the organization and created the kind of dissent that fractures good companies. However, because I tried to explain every no with a reasonable why, my team seemed to embrace my decisions more often than not.
In the end, that made saying no in business a pretty simple activity. By not being a “yes man,” I was able to keep my team — and myself, for that matter — focused on the things that mattered most to Oracle. The result was a significant boon to the corporation’s top and bottom lines, and much stronger individual and team productivity.
It is also important to know that as an executive you are a are leading by example and teaching your team it is OK to say “NO” and that there is a proper way to do so. You will be able to scale your business far more effectively when the entire team understands and is capable of practicing this discipline.
To sum things up, I’ll borrow a great line from a Forbes.com article by Sean Rosensteel: “Never say yes just because you feel bad or awkward about saying no.” And never say no if you’re simply going to follow it up with awkward silence.
Are You Prepared to Pivot? Why Modern Corporate Strategies Must Be Transitional
In a previous post in this series, I talked about why change is really the only constant your business will encounter. I shared a story about my time at Oracle, when we shifted the company’s corporate strategies and restructured the business entirely, despite Oracle being a market leader and a wildly profitable company at the time.
The reason for that change (and change in business in general) was simple: the world around us was evolving. And if our business didn’t evolve with – or at the very least anticipate – that change, we risked missing out on some wildly lucrative growth opportunities. For some less stable companies, the implications of failing to change are often much more serious. Fail to adapt and you might become a corporate dinosaur, buried by competitors and forgotten by customers.
Which leads me to the topic of this post. Your corporate strategies should never be etched in stone, or even written in permanent marker. Instead, they should be transitional, malleable, and flexible. They should be responsive to current and future market needs, and adjustable to specific moments in time.
Some businesses are able to embrace that philosophy rather easily (Apple, Google, and Amazon come to mind), while others fail miserably to transition their corporate strategies (Research in Motion and Borders are two obvious examples and HP may be the next one).
The businesses whose corporate strategies skew more toward the former are constantly aware of where their strategies stand and they make adjustments — in some circumstances in real-time. As legendary leadership and business transformation expert John Kotter told the Harvard Business Review in a recent webinar, that is how every modern business must operate. The reason? In Kotter’s words:
“Increasingly, the opportunities or hazards that would have previously popped up every five or 10 years, are coming at you all the time, and windows of opportunity are not creaking open and staying open for three or four years. They can open and close unbelievably fast. Furthermore, bullets come out of directions that aren’t just right in front of you where you can easily see them. They come at you from every direction, all of the time. So, if you’re going to pay attention to big strategic questions, you’ve got to be paying attention to them, to some degree, all of the time.”
I couldn’t agree more.
When you create a strategy, the hope is obviously that it’s the correct one for that moment in time. But because things always change (product lines, customer needs, market conditions, competitive landscapes, etc.), strategies need to change with them.
As Kotter alludes to above, I think companies need to look at their corporate strategies at least annually, but if there’s a big change in your market or your organization then you need to evaluate those strategies immediately. After all, those changes – whether they’re big or small – could have an enormous impact on your sales, marketing, product, and operational strategies.
Now, in the process of evaluating where your strategies stand, you might not change anything. But the lesson here is to at the very least assess the situation. If everything is fine, don’t overreact and change just for the sake of changing. For those who remember the mid-80s, we should have all learned that lesson from Coca-Cola’s “New Coke” fiasco.
On the other hand, if something isn’t working, then you need to stop banging your head against the wall and transition your strategy. Yes, it can be difficult to admit you were wrong about something, but there’s very little room for massaging executive egos in today’s business world.
Ultimately, the lesson here is that corporate strategies should be written in pencil, and revisited as often as market, customer, or technological changes require. Otherwise, your business will likely absorb a painful barrage of the metaphorical bullets that Keller referenced in his HBR webinar. And very few expansion-stage businesses are built to survive that kind of trauma.
Want to Drive Efficient Growth? Focus on the 3 Things that Matter Most
If I haven’t made it blatantly obvious throughout this leadership lessons series, I’m a big fan of strategy, focus, and execution.
Companies that win – whether they’re small startups, expansion-stage businesses, or enormous corporations – are the ones that out-execute their competition. They adapt to change, transition their strategies to adjust to market evolutions, and, maybe above all else, open their ears to their customers’ and prospects voices.
But they do all that with incredible focus.
They don’t try to be everything to everyone, and they don’t try to respond to every single bullet that’s fired in their direction. Instead, they focus on the three things that really matter and ignore everything else.
Far too many businesses fail to create that kind of focus. They try to build the best product, assemble the best sales team, produce the best marketing messaging, foster the best corporate culture, and implement the best customer service support – all at the same time.
Ultimately, that lack of focus impacts their ability to execute. So, in the process of trying to build the best product, those companies might not be spending the appropriate amount of time on competitive messaging. Or, while building an outbound prospecting team that can bring in new business, maybe those companies aren’t paying enough attention to current customer retention.
The bottom line is that you can’t do everything well, and you can’t do everything at once.
Whether you’re running a team of 10 or 10,000, you have to look at the three things (product issues, customer pains, new business opportunities, competitive attacks, etc.) that will have the biggest impact on your business. Outside of those three things, nothing else should matter.
Now, I know that can be an incredible difficult thing to do for expansion-stage businesses that have dozens of important issues on their plate. And, inevitably, there will be a million things that pop up every year that seem important.
The question CEOs and business leaders need to address, however, is whether those things are really that important. If they aren’t addressed, could they threaten the company’s health or long-term viability? If you don’t fix a particular problem now, will it crush the business or impede its ability to grow efficiently? If you don’t respond to a customer request or a fix every product bug, will you see a mass customer exodus?
If the answer is “no” to those questions, then the issue that you think is critically important probably isn’t. If you focus on the few things that matter, believe it or not it’s okay for a few plates to drop.
So, while the analogy I’m about to use might sound like a bit of a stretch, it’s true: Running your business should be like adding clothes to your wardrobe. If a new piece of clothing comes in, then something in your closet should probably go out. Likewise, if an issue comes up in your business that seems truly important, feel free to add it to your list. But as you do that, you need to eliminate another issue from it.
The biggest mistake most early-stage businesses make is trying to do too much.
If you focus on the three things that matter most, however, you will be at far less risk of making that mistake. Furthermore, that sense of focus will trickle down throughout your organization and impact everyone who works for you. Making your team align their objectives and focus on the three things that matter most to the business will create alignment and eliminate distractions. Together, that will improve your team’s efficiency and allow the company to respond more quickly to opportunities and/or roadblocks, and improve your velocity.
Of course, as I’ve already written in this series, change management isn’t easy. So how can you make sure that everyone buys in to the “three most important things” philosophy? I’d suggest giving these ideas a shot:
- Take the three things on your list and translate them into specific employee goals and objectives
- Implement frequent reviews and management meetings to analyze where the company and specific employees stand relative to those goals
- Establish and encourage SMART goal setting to ensure that everyone maintains focus as they address their objectives
That system will create accountability and it will allow your focus to become the fabric of the company. People will either learn to embrace and support that philosophy, or they will go elsewhere. And honestly, the latter will only help your business, even if it might seem difficult to replace those employees in the short-term.
Most great employees don’t want to be distracted. They want to do things that help propel the business forward as efficiently as possible. If you can put a system in place that encourages – and maybe even rewards – stronger focus on the few things that matter most, it will lead to fewer wasted resources and, more importantly, even greater momentum.
Additionally, by reducing the number of issues that are put on your team’s plate and teaching them that it is okay to not do and be everything, they will actually feel better about their roles and be empowered to do what is most important for the business. All good stuff!
The Decision Maker’s Mark: Why Being a Leader Means Not Being a Waffler
It may seem like an overly simple philosophy, but the number of executives and senior managers who are afraid to make decisions might surprise you. Nothing can paralyze a business more than a leader who is tentative or hesitant about making decisions, regardless of how difficult or scary they might seem.
In an article for Bloomberg Businessweek last September, Dalip Raheja shared a story about the recent United/Continental merger that perfectly illustrated the potential perils of poor leadership decision making.
When the two airlines decided to join forces, one of the decisions the companies’ executives faced was which brand or type of coffee to serve their customers. They went through typical supply chain sourcing protocols, executed numerous taste tests, and ultimately selected a vendor based on an incredible amount of information.
But that process — and the decision that resulted from it — took two years to make. Yes. Two years.
As Raheja writes in his piece, our instinct might be to commend United/Continental for caring so deeply about its customers and their needs. But if United/Continental is spending that much time deciding which coffee to serve its customers, how long is it taking the company’s executives to make decisions that will have a far greater impact on the future of the business?
Simply put: whether you are a major airline or a software company, there is no way that any decision should take you two years to make.
As a leader, it’s your job to make decisions as quickly as is reasonably possible. No, that doesn’t mean you rush for the sake of speed. But nothing can paralyze an organization quicker than having a leader who can’t — or won’t — make decisions. That kind of waffling impacts every part of your organization and it trickles down to your people.
When I was at Oracle, I ran a 2,000-person organization. As a result, I made leadership decisions daily that impacted every stakeholder in the company. And these weren’t easy decisions (like which type of coffee to serve our customers). They involved things like organizational restructuring, compensation, headcount, and corporate strategy. These decisions were not only critical to shareholders, customers, partners, and employees — after you made them you had to be able to explain yourself to those constituencies. Complicating things further, those different groups often had competing agendas and objectives that were not always aligned.
In order to go through a consistent process in making those tough leadership decisions (not to mention be able to sleep at night), I developed a hierarchical decision tree. It allowed me to be consistent in my approach to making complex and difficult decisions, and it provided a framework to explain those decisions to different constituencies. With that decision tree I would always ask myself four questions:
- Is this the right decision for the company’s shareholders or stakeholders?
- Is this the right decision for our customers?
- Is this the right decision for our partners?
- Is this the right decision for the employee(s)?
In my career, I often faced decisions that might be right for a customer, partner, or an employee, but not right for the company’s shareholders/stakeholders. Or maybe it was the right decision for the company’s shareholders, but not for its customers, employees, and partners. Whatever the case, I needed to make sure that I could answer “yes” to all four of those questions before moving forward with a decision. If I couldn’t, then I needed to be sure there was a good reason we were neglecting the best interests of one (or many) of those constituencies.
Of course, it’s not enough to simply run through that list and call yourself a good decision maker. Running through that list with a true sense of urgency and making decisions based on facts makes you a good decision maker. And good decision makers are typically good leaders.
Going back to the United/Continental example, I’m sure that the airline made the right decision for its customers, stakeholders, partners, and employees. But it took way too long for the company to get to that point. At the expansion-stage, companies can’t afford to spend two years doing any one thing, let alone making a critical decision about the future of the business.
The leadership lesson here is that the best leaders are able to find a balance between being thorough and being urgent.
If you can make 10 decisions in the time that your competitors make one, you’ll be at a huge advantage. Even if a handful of those decisions don’t work out in your favor, learn from them, adjust and move on.
At the end of the day, your team is expecting you to lead the way. And you can’t do that with your head in the sand. By leading the way you will also teach your team how to make decisions, and as the business scales you won’t lose your velocity and ability to move forward together as a company.
Learning from Groupon: Building a Sustainable Business is a Marathon, Not a Sprint
A little more than two years ago, Groupon was the apple of the startup community’s eye. It had turned down a $6 billion acquisition offer from Google and was headed for a remarkable IPO. Today, no one really knows what Groupon’s future holds. But it doesn’t look good.
Since its IPO in November of 2011 (the largest by a U.S. Internet company since Google raised $1.7 billion in 2004), the company’s stock has plummeted. After debuting at $20, Groupon’s stock can now be had for less than $6 a share. Adding insult to injury, Groupon’s market cap is now almost $2.5 billion less than Google’s original offer.
Now, to be fair, Groupon’s current stock price of around $5.38 is more than double what it was in November when it hit rock bottom. But I’m guessing that nice gain doesn’t quite make up for the billions that investors have watched fly out the window in the last year.
Where Did Groupon Go So Wrong?
When it comes to entrepreneur leadership lessons, the company’s management team — including its much-maligned former CEO, Andrew Mason — forgot that building a sustainable business is a marathon, not a sprint.
Ultimately, that led to a series of bad decisions, many of which Fast Company’s Noah Fleming does a great job of highlighting in a post from last October. But the business’s most damning mistake was its disproportionate focus on new customer acquisition, often at the expense of customer retention.
Groupon was obsessed with growing as fast and as big as it possibly could, which resulted in high churn and, as Slate’s Farhad Manjoo points out, a business model that is just about anything but profitable.
Yes, new customer acquisition is critical to taking a business from the startup phase and growing it into a big, publicly traded corporation. But that big corporation you become will simply be a house of cards if you’ve failed to pair short-term growth initiatives with long-term strategic vision.
Oh, and you certainly can’t mistreat, abuse, or ignore your existing customers to the point that very few of them hang around beyond their first use with your product or service. Doing that simply leads (in a best case scenario) to treading water.
Why You Should Care About Groupon’s Demise
Groupon isn’t the only technology company that’s experienced incredible short-term success, only to flame out as it scales. The number of companies on that list is far too long to share here.
But here is the lesson that entrepreneurs and CEOs can learn from Groupon: resist the temptation to chase short-term success at the expense of long-term sustainability.
I recognize that in the startup and expansion-stage world, it almost always seems like there are new monthly quotas to hit or quarterly objectives to achieve. But at the end of those months or quarters, where does short-term success get you? Ultimately, there is always going to be another month, quarter, or year. And if you haven’t spent any time focusing on your long-term health while you’ve executed short-term growth initiatives, you will eventually run face first into a brick wall.
Just ask Groupon, Andrew Mason, and anyone that’s invested in the daily deals business.
Reputation & Integrity: Don’t Compromise Either One for a Shorter Path to Success
Your reputation is the only thing you can take with you throughout your career, and maintaining business integrity allows you to cultivate that reputation. Far too many people are willing to sacrifice their integrity for a quick dose of success. Cheating your integrity, however, will almost always bite you in the end.
Barry Bonds. Bernie Madoff. Lance Armstrong. Ben Johnson.
When you read those names, what comes to mind first? I’m guessing it’s not that they were all once at the very top of their professions. Instead, it’s probably that they’re all frauds. Cheaters. Scam artists.
As a result, their legacy won’t be that they were one of the greatest baseball players (Bonds), investors (Madoff), cyclists (Armstrong), or sprinters (Johnson) of all time, or that they were genuinely good human beings and leaders who deserve our admiration. It will be one of shame and distrust. And that’s largely because they chose to sacrifice their integrity and reputation for short-term success.
As an entrepreneur and a leader, it is absolutely critical that you never make the same decision.
The truth is that there is no real shortcut to success in life or business. It requires a lot of hard work, dedication, and transparency. If you’re unwilling to commit to those things, you may as well throw in the towel now.
In that way, this is the perfect closing post for a series about entrepreneurial leadership lessons. Great leadership requires a lot of skills and capabilities. But above and beyond anything else, it requires integrity.
As the gentlemen listed above have discovered, that is a truism for life.
At the end of the day, your reputation is the only thing that you can take with you throughout your career. It is what defines you as a person and a business leader, and being unwilling to sacrifice your integrity for short-term gains will allow you to maintain that reputation.
What Happens When Ditching Your Integrity Catches Up to You?
Unfortunately, there have been far too many business leaders who have ignored that advice lately, and their decisions have led to some very sad endings.
Take the story of the Iowa hedge fund CEO who, a little less than a year ago, attempted suicide after it was discovered that $200 million in customer funds were missing and the firm was collapsing. Yes, times have been tough for folks in the financial industry for several years now, and I could certainly understand this man’s strife if circumstances out of his control had led to his downfall.
But according to reports, greed was the real reason his life unraveled, not unpredictable market fluctuations. And the same could be said for many other CEOs and business leaders recently who have been exposed for fraudulent business practices.
Those “leaders” profited significantly in the short-term when they made the decision to ditch their integrity, but they certainly paid the price for doing so in the long-term.
The Easy Way Isn’t Always the Best Way
Of course, not every leader who lacks scruples gets caught. In fact, many executives often get away with bad decisions that put their reputations at stake.
But what is the real upside of doing that? Yes, maybe you get a quick payoff. Or maybe it speeds up your company’s growth. But deep down, you will always have a black cloud hanging over your head. And you’ll probably always be paranoid that someone will discover you’re not the person you claim to be.
The lesson here is that the shortest and easiest path isn’t always the best one to take. If you want to keep yourself out of trouble, it’s critical that you identify a good decision making framework that aligns with your moral fabric, and use it to guide every business choice you make.
It is important to note that reputation and integrity are not just about how you do business with customers, but also how you work with partners, employees, and peers. Setting expectations with each of those constituencies and then meeting or exceeding them is critical. In other words, the old saying, “Say what you mean and do what you say,” is foundational to great leadership.
Being a good leader means being honest and transparent, not just saying what people want to hear.
Let me close by giving you an example from my own career.
I once gave a customer some dates for a product release that were later than their expectations. Naturally, the customer got upset and began yelling. Now, I could have softened the news by fudging the numbers and telling the customer what he wanted to hear. Instead, I looked at him and said, “Would you rather have me lie to you about the dates and not deliver, or be honest so you can plan appropriately?”
He calmed down immediately. And while he still wasn’t happy with the news, he respected my transparency and our relationship was stronger because of it.
Bad news is never easy to deliver, and tough decisions aren’t always easy to make. But as a leader, it is your responsibility to make the tough decisions, and to make and execute them with integrity. I have always been a competitive person and I will do whatever it takes to win — as long as it is morally and ethically correct.
Remember, your reputation comes from your integrity, and that reputation will follow you throughout your career and life. The choice of deciding what you want that reputation to be is all yours.
This post concludes my series sharing the business philosophies and entrepreneur leadership lessons I’ve learned from my 25-year career in software. Click here to go to the top of the page and the table of contents to review the topics I’ve covered previously. I hope you find these helpful to your own business experiences, and that you will share your own comments and stories below.