If there’s one secret to achieving scalable success, it’s this: an organization’s leaders must be able to make high-quality team-based decisions – consistently and repeatedly. Why is this so much easier said than done, even for a team full of top performers? See the surprising answer and what to do about it.
Yesterday, Ford announced that it had effectively fired Mark Fields, its President and Chief Executive Officer.
And while a lot of the media’s focus has rightly been on both the impressive background of Jim Hackett (Fields’ successor) and industry-shifting overarching trends in the motor industry, the underpinning reason for the dramatic change at the top was buried a few paragraphs into Executive Chairman Bill Ford’s accompanying statement:
“We need to speed up our decision making…”
Just eight words – but eight powerful words that precisely summarize the existential threat to every growing company: Can an iconic business remain nimble and innovative in the face of growth and scale, or will it atrophy and become increasingly, lumberingly irrelevant.
Amazon CEO Jeff Bezos is (rightly) preoccupied with the same fear – of what he calls becoming a ‘Day 2’ company. As he explained in a recent letter to shareholders: “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1,” he wrote.
Will Ford “speed up its decision-making”? Will Amazon avoid becoming a ‘Day 2’ company?
In both cases – and indeed, for every highly successful company, beating the odds of a decline to irrelevance lies in undertaking one very specific, but rarely achieved transformation: Moving from ‘Heroic Leadership’ to something much more mundane, less headline-grabbing, but ultimately much, much more scalable: ‘High-Quality Team-Based Decision-making’ (HQTBDM).
Alan Mulally, Fields’ storied predecessor at Ford, was the exemplar of an Heroic Leader (and was exactly what Ford needed at the time). Not a soul on the planet would deny that Jeff Bezos is an Heroic Leader (and was exactly what Amazon needed for a long, long time).
But as Jack Welch intuited at GE, as Warren Buffett has known for, well, forever at Berkshire Hathaway, and as even Steve Jobs came to understand at Apple, there comes a point when the role of the Heroic Leader needs to transform: specifically, to cease being a decision-making bottleneck, and instead become an inspirational rallying point and great PR generator, while underneath, the heavy lifting moves into the engine room of HQTBDM – the whole senior management team, united, aligned and making, well, High-Quality, Team-Based Decisions.
How do you know when you’ve reached the point when the shift needs to happen from Heroic Leadership to HQTBDM?
Simple: When the complexities of scale overwhelm the ability of any one person, however much a superhero they are, to keep making (and executing) great decisions. Put bluntly, if you’ve had a run of outstanding, jaw-dropping success, then for reasons unclear to you, decisions either go badly awry or just don’t get implemented, you need to shift to HQTBDM – pronto. Even if you’re the President of the United States.
Wells Fargo just announced that it’s clawing back a total of $75m from the two execs involved in the recent ‘phony accounts’ scandal (John Stumpf, ex-CEO, and former retail bank leader Carrie Tolstedt).
To recap briefly: In 2016 once-storied banking group Wells Fargo was fined $185m for allegedly opening more than 2 million ‘zombie’ accounts in clients’ names (without their permission), ostensibly to meet aggressive internal sales targets. The company fired 5,300 people, ended the related sales goal compensation program and has since then been mired in congressional hearings, regulatory investigations and class-action lawsuits. Ms. Tolstedt ‘retired’ in September of 2016, and Stumpf finally stepped down in October after weeks of fighting to remain in his post.
How does a company with a story like Wells Fargo’s (in business for 165 years and one of the most iconic brands in all of American history) get itself into a situation like this? Sadly, all too easily. Just mix these three ingredients, light the blue touch paper and stand back:
Step 1. Banish bad news.
Wells Fargo’s own internal report into the scandal said of Ms. Tolstedt (she of the aggressive sales goals that led to the alleged fraud on the customers) that she was “insular and defensive,” and didn’t like “to be challenged or hear negative information.”
This is something I see over and over again: a senior executive builds a culture of ‘bring me no bad news’, and then, because their direct reports do as they’re told, the executive magically assumes that because they aren’t hearing any bad news, that means there isn’t any.
In reality, there is exactly the same amount of bad news as before – it’s just that now, people are doing as they’re told and not telling anyone. So what happens? All that bad news gets brushed under the carpet, over and over and over again, until eventually the carpet is no longer big enough to cover up all the crud and it starts to seep out ’round the edges.
Step 2. Disguise the fact that you’ve banished bad news.
It’s one thing for the person at the top of the company to play fast and loose with reality like this – but the truth is, CEOs of massive, multinational, publicly-held organizations are typically under too much of a spotlight to get away with it for long. In most cases, the disinfectant of public scrutiny does its job and the CEO is left blinking uncomfortably at a bank of klieg lights (take a look at recent reporting on the CEO of Uber, Travis Kalanick for a worked example).
What’s much more insidious – and difficult to spot – is when the CEO is the one providing ground cover for others to invoke the ‘no-bad-news’ magical realism mantra. The Wells Fargo internal report said of Mr. Stumpf (the CEO), “Stumpf…was too late and too slow to call for inspection of or critical challenge to the basic business model.” Indeed, in 2015, when key board members asked Mr. Stumpf to remove Ms. Tolstedt, he refused, calling her “the best banker in America.”
Remember Enron? One of the reasons it took so long for outside organizations to realize what CFO Andrew Fastow was up to was because of the cover provided him by CEO Jeffrey Skilling – who was in turn given leeway and cover by founder and Chairman Ken Lay.
Step 3. Don’t allow effective oversight.
Wells Fargo’s board should have been the first to see what was going on under their watch. As far back as 2002, the board’s own Audit and Examination Committee was receiving quarterly reports of suspicious sales activity and employee misconduct, yet it did nothing. In fact, almost unbelievably, the board said in its own report that it didn’t know that 5,300 employees had been fired over the alleged fraudulent sales practices until federal regulators announced the $185m fine in September 2016.
3 LESSONS FOR THE REST OF US
Sadly, while this might all seem like “big-company problems”, the reality is I see similar self-harming in small- and medium-sized organizations all the time: businesses brought low (often entirely destroyed) by a ‘bring me no bad news’ culture. It’s just that those stories don’t make national headlines. Here are three tips to ensure it never happens to you:
1. Treat data as data.
Information isn’t ‘good’ or ‘bad’ – it just is what it is. Don’t label it – just get it and use it appropriately.
2. Reverse the mantra.
In our business, we have a strict rule: Bring me bad news early, and good news late. In other words, if you see something that might be negative, tell me right away so we can effectively deal with it. Similarly, if you believe you see a bit of good news ahead (like a big sale), be absolutely sure of your facts before sharing.
3. Get some oversight.
As CEO – even if it’s of a small business – you have a lot of judgment calls to make. Sometimes those are easy, sometimes they’re hard, and most often they’re somewhere in between. Do yourself a favor – if you haven’t already done so, get a small group around you (two or three people is fine) of individuals you trust. Meet with them monthly, share your business challenges openly and honestly, and encourage them to be just as honest in return.
Each person in your organization generates anywhere from 20 – 50 individual actions per day. Multiply that by the size of your workforce, and you can almost see the enormous cloud of activity that’s taking place.
Knowing these actions are producing results for your organization is one thing, but knowing whether these are the right results is something else entirely. How can you, as a leader, be sure this action cloud is moving your organization toward fulfilling its goals each day? That’s precisely what this exclusive new eBook will show you.
One of the keys to becoming a better leader is developing self-awareness. For most of us, it’s our blind spots that hold us back, not the things we already know we need to improve on.
To help you identify yours, we’re sharing the checklist we use to look for our own blind spots and those of leaders we coach. Once completed, you’ll have a clear picture of which tasks, people and things to develop further and which to discourage in your day-to-day leadership.
In the 1990s a British anthropologist, Robin Dunbar, postulated something that many business leaders had viscerally intuited: once a group grows larger than around 150 people, social constructs dilute to the point where dysfunctions begin to occur.
Several businesses have used this so-called ‘Dunbar Number‘ as a limit for the size of individual operating units. Gore-Tex, for example, constructed company buildings with room for only 150 people.
The Dunbar Number is something we see companies bumping up against all the time – in fact, it’s one of the major contributing factors to pushing a business into Whitewater. Broaching the Dunbar Number amplifies silo-ization, contributes to the breakdown of cross-functionality and dilutes alignment – three of the clearest symptoms that you’ve left Fun and have indeed fallen into Whitewater.
Here’s the kicker: Unlike in the field of anthropology (Professor Dunbar’s area of study), an organization’s Dunbar Number isn’t so easily narrowed to 150. A virtual company’s Dunbar Number, for example, will be much lower (it can be as low as 20 people) than say, a manufacturing company (where 150 is typically pretty accurate). A highly Synergistic business will have a higher Dunbar number than say, an Operator-dominant company.
So how can you tell you’re reaching your Dunbar number, and what should you do about it when you do? Here’s my personal Predictable Success finger-in-the-air test: The first time you see someone walking down the corridor and you can’t remember their name, you’ve entered the Dunbar Zone…and the first time you see someone and can’t recall even hiring them – you’ve hit your number.
What should you do? Obviously not everyone can simply go find another office building, like Gore-Tex, so here are some other tools you can use:
1. Amp up the communication.
Start water cooler sessions, increase the frequency of all-company meetings, start an internal company blog – anything to force non-siloed interactions.
In order to lead your organization to scalable, sustainable success, it’s vital that you and your executive team address issues head on. However, these conversations can be difficult – even toxic – if approached the wrong way.
By introducing the concept of being Ruthlessly Constructive and using this checklist to apply it, you’ll have a proven framework for tackling even the toughest of challenges. Share it with your team today.
There’s a wealth of resources available on getting the most out of teamwork. Some are useful tools, but most of them miss a vital ingredient.
You can teach a team all the tricks and tips on working together effectively, but until they understand their natural leadership style and those of the team, you’ll be pushing a rock uphill.
Why Team Styles Matter
Each of us have a natural leadership style, Visionary, Operator, Processor and some of us have developed a fourth learned style, the Synergist. Each of these styles have their own characteristics, preferences and communication styles.
Some of these combinations work well together for specific purposes, while others can have the explosiveness of mixing hydrogen and water. Here’s how to make sure you’ve got the right styles mix for your needs.
Brainstorming – Visionary and Synergist
Both of these styles have a focus on the medium to long term and a preference to stay away from the details. This combination will get you the most creative (sometimes whacky) ideas. They’re comfortable with a blank sheet of paper and, unlike the Operator and Processor, will be less distracted by what’s happening “outside the room.”
Not all ideas will be implementable, and that’s where you switch up the mix.
Action Planning – Operator and Processor
The Operator’s and Processor’s focus on ‘what will work in the real world’ along with their preference toward the short term make this pair the best to stress-test and translate the ideas from a brainstorming session into an implementable action plan.
It’s best to keep the Visionary out of the discussions at this stage for fear of moving back toward the impractical but exciting.
Implementation – Visionary and Operator
Once the action plan is in place, bring back the Visionary and give the Processor a break. The V/O combo has a ‘get it done’ mentality which will maximize your chance of success. A strong action plan is needed to keep this combo on track, and expect that there will be a few shortcuts taken. But you can rest assured they will do all they can to make it happen. It just may not be pretty.
Maintenance and Autopsy – Processor and Synergist
Finally the Processor and Synergist are the best group to put together to help turn the action plan and implementation into a repeatable, scalable process. Let the Visionary and Operator get a head start on implementation and then bring this duo in behind the scenes to monitor progress, evaluate success and conduct the postmortem.
Two Combinations to avoid
There are two combinations to use sparingly (or not at all) due to their diametrically opposed worldviews: the Visionary & Processor and the Operator & Synergist.
Visionaries have a tendency to think Processors are too pessimistic, risk-averse and skeptical. Processors see Visionaries as too often hyperbolic and not grounded in reality.
Similarly Operators view Synergists as too ‘touchy-feely’ and not focused on getting things done. Synergists view Operators as ruthless mercenaries who will do anything to get ahead.
So – be warned – use these combinations sparingly.
With nearly 20 years in the technology and security sector, Brian Arellanes has experienced his share of change. But it’s the change he chose to make to his successful firm ITSourceTek after attending a Predictable Success workshop that’s most remarkable of all.
After implementing a restructure he knew would cost revenue in the short term, his firm achieved a 12% increase in gross profitability and an 823% increase in EBITDA.
In this interview, Brian shares just how this critical transformation took place.
Ways You Can Listen:
(Running time is approximately 21 minutes.)
Stream & Listen
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A Closer Look at ITSourceTek’s Challenge:
As founder and CEO of ITSourceTek, Inc., Brian and his firm have worked closely with organizations ranging from Fortune 25 banks to some of the top names in healthcare, retail, technology and government.
While fulfilling the strict cybersecurity needs of these entities, ITSourceTek found itself mirroring the divide that was happening within the tech industry. This meant that in addition to a successful legacy IT business, it now had a fast-growing security business.
Each segment had its own strengths and challenges. But it wasn’t until Brian attended a Predictable Success workshop that he saw the framework that would transform his business forever. Hear how he took these principles and tools and used them to achieve not only phenomenal increases in profitability, but scalable and sustainable success.
It’s right about now that those great new growth initiatives you and your executive team were so enthusiastic about smash into the mundane reality of implementation. What you do next will be crucial in determining whether they’ll ultimately thrive or get tossed aside.
This toolkit will show you how to harness the power of the Commitment Curve. Not only will it keep growth initiatives from derailing, it will also lead to higher-quality results. Download your copy now and share it with your executive team!