The Most Important (and Annoying) Business Skill

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You have to know the numbers. 

 

It’s always the people who say “now, wait just a minute.”

You probably know them… they are the numbers people.  They take the arm waving, visionary ideas…hit the pause button…and ask the quantitative question.

It might be financial:  How can we justify those kinds of margins?

It might be operational:  How can you assume we can produce that many widgets with only our bare hands?

It might be organizational:  What number of sales people are required to meet those projections?

But the question is placed.  And, if it’s not, you want it to be.  The numbers are important for a reason…they form the most testable type of hypothesis.

A season of advice…

This is the time of year where I inevitably get the chance to talk to younger people starting out their careers.  They might be finishing up college and looking for a job, or just referred my way for ideas and guidance.  If that gives you a shiver, then let me put you at ease:  My advice is simple.

It’s this:

Use your early career to learn the numbers.  Learn how the basic financial statements work, and how things like margins and asset turns determine the performance of a firm.  Learn to model them.  Get smart on the quantitative drivers of markets. Understand how to represent a product’s quality and positioning in terms of market share and margin.  Know the numbers.

I give this advice for one reason:  The strongest executives I know, whether they are sales oriented, ops oriented, or otherwise, understand finance and quantitative drivers of business.  They understand that the numbers show progress.  And, unfortunately, it can be tough to get training on the numbers later in one’s career.  A lot of executive fake it, of course, but people who know can see it.

Learn the numbers early so that you can go through the rest of your career without the fear of being found out.

But, if you take my advice…

Knowing the numbers will saddle you with one annoying habit.  It’s the “wait just a minute” habit that I started this post with.

You will, in some circumstances, become the “annoying” presence who always attempts to ground the conversation in quantitative reasoning.

The New York Times recently published an article about how much more creative the accounting in public companies has become.  As companies insist on more and more non-GAAP representations of their operations, the need for people to know the difference heightens.

But, when you know the difference, it can make for some uncomfortable discussions with your less quantitatively grounded brethren.  One of my favorite examples, albeit a sad one in historical context, is when Enron CEO Jeff Skilling famously called an analyst an “asshole” for questioning accounting standards.  The annoying “asshole” was, in retrospect, exactly right.

More than sales, more than marketing, more than anything else, know the numbers.

Okay, then know sales. Sales is important next.

As always, I’d love your thoughts on this one.

 

Can You Scare People Into Elite Performance?

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The answer: You can’t be scared and elite at the same time.

 

This one might roll off the tongues of elite athletes, entrepreneurs, soldiers, and performers of all types. I will do my best to sum up.

During a recent walk with my wife, Lindsay, in the foothills of the Blue Ridge Mountains, we had a good discussion of what really holds people back from being great performers.  As we walked and talked, the topic of fear came up. You know fear.  Everybody does on some level.  Even for the most narcissistic among us, there is the subtle fear of being found out.  But for the rest of us, there is normal fear and anxiety that come with actually wanting to perform well.

My wife, whose history as a swimmer has put her in league with some of the most elite of her sport and whose current passion as a coach gives her constant concern with what can help her swimmers perform better, summed up some of her swimmers’ performance as being highly correlated with their fear of disappointing their parents.

In other words, they didn’t perform well because they wanted to–they performed well because they were scared of the consequences of not performing well.  To paraphrase our joint reaction to that, let me just put it in a single quote:

“Fear may be a great motivator for performance, but it will never be the great motivator for elite performance.”

That’s what we concluded, and in the midst of a long walk, the applicability of this insight from a sport with highly objective measurements–the clock doesn’t lie–to the world of business rang true.

I once advised a CEO who admitted to me that his go-to move was to induce fear.  Create fear, hold people’s feet to the fire, and they perform.  Oh, and if they don’t, then fire them outright and find someone who will.  It’s quite a philosophy.  It’s one that I absolutely see the merit of, but only so far as one is trying to go from bad to good.  In other words, a turnaround situation can be led via fear, but not a situation that is focused on extending and defending an elite franchise. Ultimately this CEO found great success in the turnaround, but not in the extension of success.

Why?

Because fear is a constraining motivation. In the immortal words of Peter from the movie Office Space:

“That will make someone work just hard enough not to get fired.”

And it does. Because when we are scared, we only focus on what it takes to get out of our fear zone.  That means we go fast enough and try hard enough to placate our parents or our boss.

Yes, placate. As in, just do what’s required.  We never get into the mode of doing what may be possible.

This may seem obvious in the world of 12-year-old swimmers trying not to bear the wrath of overzealous (let’s just say it, jerk) parents, but it applies to the workplace you work in (or lead) today.  If you only know how to instill fear in people, then they will only try to work until that fear is mitigated.

If you try to instill possibilities in people, then some of them will answer the call.  They will seek what is possible. They will become elite, and elite organizations can only be elite if at least some of their people are performing at an elite level.

Not everybody can be elite, but every person with the potential to be elite can be held back by a leader who only knows how to wield the constraining force of fear.

I’ve had the opportunity to work alongside truly elite athletes, and have been exposed to Olympians of many flavors thanks to marrying well.  I’ll characterize those elite performers in a few ways:

Some have seemed absolutely oblivious to their greatness.  I get the sense that Andrew Luck of the Indianapolis Colts has this quality.  They just do and things work well.  They answer the call because, well, it’s the thing to do.

Some have gathered their eliteness from the genuine joy of competition, from a combination of pure talent and a positive mindset. I always thought of 12-time Olympic medalist Jenny Thompson as this sort.  They answer the call because winning is fun, by golly.

Some are simply professionals.  They focus on every play as though others depend on them at all times.  I was fortunate to play alongside many men who had this kind of quality.  A few who come to mind are 13-year NFL veteran linebacker Chris Draft, longtime NFL linebacker Kailee Wong, and offensive lineman and coach Chris Dalman of the San Francisco 49ers.  They answer the call because it reflects a commitment to being great.

What you’ll notice is that I name no one who was elite by being scared.  I saw elites motivated by joy, commitment, even anger…

…But not fear.

In short, I’ll put it this way: You can’t be scared and elite at the same time.  

Elite performance results from confidence and the reflected belief of unconstrained possibility.

I’d love to know your thoughts on this one…

Your Customer Has a Voice. Are You Listening?

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Why hanging out with customers should be on everyone’s job spec

 

When was the last time you visited a customer?  If you’re in sales, it doesn’t count; that goes with the territory. I mean visited them purely to find out what’s on their mind. When running workshops, I often ask this question, and you’d be amazed how few people can honestly say they have looked a customer in the eye in the last 12 months. Taking time to learn about your customers first hand, face to face is a small investment that can yield big benefits.

Let me explain. It doesn’t matter how much you spend on market research—nothing can replace the real experience. It’s like the difference between reading a traveler’s guide to a country and actually visiting that country. I am by no means suggesting that market research doesn’t play a role because it does, but being able to visualize customers when you are making decisions that affect them can be very powerful.

In addition, seeing the environment in which your product or service is being used can identify issues or opportunities that might otherwise be missed. You may see that your customer has “MacGyvered” your product for a different purpose, or that the casing on your product has become so worn, the branding has disappeared. Issues like these may not be picked up in traditional market research.

Including a diverse mix of employees in customer visits is also important. Functional expertise, for example, can lead to different perspectives on the same situation. R&D, finance, HR, and even legal can all bring valuable insights from customer interactions.

Customers are usually more than happy to participate. Who doesn’t like to talk about themselves?  It’s like free therapy.

So what’s stopping you?

Real Talent Never Dies

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In the death of an icon, we can see how real talent lives on.

 

Today is one of those days that kind of creeps up on you.  It starts just like any other day, and then includes the loss of an iconic figure.

Incomparable pop star Prince has died.

To call Prince iconic is perhaps not generous enough.  After all, the guy actually changed his name to an icon for a while.

That’s beside the point.  And, yes, I’m hoping to make a point here…

It’s this:  Real talent never dies.

Prince’s exceptional talents brought joy to millions of people over decades.  He pushed the boundaries of pop music; and he did so with an impressive style.  His talent was, to put it mildly, transcendent.

And that’s the thing.  Prince’s talents are still with us.  They have just been passed on to innumerable talented performers who are to this day riffing on the style and substance of Prince’s repertoire.

I think that if we look at performers in the world–whether it be in music, theater, or business–the really talented ones…the ones with a capital ‘T’ in their talent, contribute to a body of thought, action, and art that transcends their short stay on the earth.

Think about Mozart…

…or Beethoven…

…or Bach…

…or Shakespeare…

…or Poe…

…or Picasso…

…or for that matter Rockefeller, Ford, Morgan, and maybe even Jobs.

They are gone and here at the same time. Each has left pieces that have been picked up and appreciated by others.  They have left behind techniques, styles, and visions–crumbs of talent that lead others to a higher plane.

So did Prince.

Real talent never dies.  It leaves the world better off.  It brings others to a higher plane.  Perhaps we should all aspire to such things, but some of us actually get there.

So long, Prince.  I guess this is what it really sounds like when doves cry.

When The Spin Stops

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Reality bites.  It bites a lot harder when you avoid it through spin and hyperbole. 

 

The Wall Street Journal reported this week that Theranos CEO and majority owner Elizabeth Holmes is under threat of major government sanction including a personal multi-year ban from the lab testing industry.

Holmes, a darling of the “unicorn” hype machine and a manufactured pop culture executive with outstanding political connections, has given every indication over the past 6 months that she is dedicated to a culture of spin to keep her venture going.

One need only look at the preceding and succeeding headlines of the piling on media tempest to see the realities of a spin machine undergoing a slow-motion train wreck.

First, the hype focuses on Holmes herself–she has an interesting story, and she makes for good press: College dropout, new technology, black turtleneck, mysterious company.

“This Woman Invented a Way to Run 30 Lab Tests on Only One Drop of Blood” – February 18, 2014

“This CEO Is Out For Blood” – June 12, 2014

Then, there is an expose’ about how the company’s technology might not actually work.

“Hot Startup Theranos Has Struggled With Its Blood-Test Technology” – October 16, 2015

That is followed by the righteous indignation of the company and its founder.

“Elizabeth Holmes Slams Theranos Critics” – October 21, 2015

But then people start to get wise.

“The Cautionary Tale of Theranos: Beware Runaway Stories” – November 15, 2015

And individuals start to question the overall honesty of the enterprise and its founders.

“How Theranos Misled Me” – December 17, 2015

“Could Theranos Go From Unicorn to Unicorpse?” January 28, 2016

“Theranos Sounded Too Good To Be True And It is” – February 2, 2016

“Study of Theranos Medical Tests Finds Irregular Results” – March 28, 2016

“Theranos wasn’t forthcoming” – April 14, 2016

Finally, as was published this week, regulatory authorities come into the picture, and in the case of Theranos, it wasn’t pretty.  In a tersely worded letter, Centers for Medicare and Medicaid Services (CMS) officials basically told Theranos and Holmes that they are about to get the death penalty.

You can’t spin your way out of that one.  That’s when the spin stops.

So who cares about this?

Well, you should.  You probably work with people who aren’t exactly forthcoming about things that really matter.  You know them–they’re the ones who lead organizations by expounding on ethics but whose honesty and integrity are known to have more holes than Swiss cheese by those who have worked with them.

Those types have the cardinal virtue of likability, which ropes people in with narrative and story and can actually hold quite a portion of the world in thrall.  But narrative can’t overcome a lack of substance forever, and that is what the Theranos story shows.

The Theranos case also illustrates something more general.  Theranos is a high-profile, high-growth, “disruption”-oriented company.  Such companies come with a healthy dose of optimism because they are founded on the principle of swimming upstream.

But…there is a boundary in strategic thought that defines the difference between optimism and spin.  It’s the boundary between honesty and dishonesty and is usually defined by a few markers.

First is personality vs. performance – if you find that the focus of a business strategy is on the charisma and glibness of the organization’s leaders vs. actually confronting performance issues, you probably have a spin problem. A charismatic leader is a great thing, but it can’t be the only thing.

Second is story vs. strategy – if you find that the focus is constantly on getting your story straight vs. actually addressing the merits of the strategy, you probably have a spin problem. This includes an overweening focus on what not to show others (management, boards, investors, the press).  The more you have to artfully conceal–especially from fellow insiders–the more you are probably in the spin zone.

Finally is attacking vs. listening – If you find that your leaders, or the leaders you’ve hired, resort to the classic ad hominem approach when criticized, then you probably have a spin problem.  Somebody questions the numbers and suddenly becomes a “jerk.”  Somebody else brings up an issue with the logic of a strategy and is discredited as “academic.” Yet another person calls into question the sustainability of a company and simply isn’t around at the next meeting. They are attacked, whereas a sound culture listens and responds.  Elizabeth Holmes, in the case above, decided that it would be a good strategy to attack a two-time Pulitzer Prize winning journalist at the Wall Street Journal as publishing baseless trip.  There’s a certain arrogance in that.

These markers all form the boundary between basic optimism (a good thing) and basic spin (a bad thing). They all demarcate boundaries between healthy and sick cultures.

If you look at the Theranos case, you can see failure on all three markers.

What happens when you look at your own culture?  What about your own leadership style?  What side of the boundary are you on?

What happens to you when the spin stops?

It’s All Moneyball…

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The search for value is the key to strategy.

 

Michael Lewis’s Moneyball never did provide the answer to the question of where value is in our own lives, but it certainly inspired us to look.

Remember Moneyball?

It was a book by Michael Lewis… a guy who has made a career out of taking mundane subjects (like bond trading, high frequency stock trading, left tackles, and baseball scouting) and making them imminently interesting by melding fantastic stories around the topics.  You may have recently seen one of his works come to the big screen in The Big Short.

Moneyball was Lewis’ take on the search for value and the need to avoid “conventional” wisdom…especially when one faces constraints that conventional thinkers do not.  the story was simple: The Oakland A’s were an anomaly.  They won more games than they were supposed to when their payroll was factored in.  That’s right… dollars in, wins out was considered to be the metric.  Why?  Because all scouts were assumed to be looking at the same components of talent: a traditional view of the “tools” that ballplayers had been evaluated on for years.

Only something happened…someone, somewhere realized that the value of a ballplayers in terms of the game itself wasn’t necessarily correlated with the old school way of looking at things.  Turns out that players who were unorthodox when measured by traditional metrics but really effective at doing things that got them on base more often were actually undervalued by those who scouted and paid ballplayers.

In other words, a key trait was undervalued in the market, and a team like the Oakland A’s that would focus on that trait could find valuable ballplayers with a lower pricetag.  That translated to wins for fewer dollars.

This insight is brilliant for anyone in business: When everybody else is paying for traits, it’s good to try to pay for results.

This is true for my friends who pay up for educational pedigrees that don’t translate to results.

It’s also true for my friends who go after market trends because they are “hot.”  Anytime there is a clear stampede to something, ask yourself why. Is there value left in the equation?

In a world of hype and conventional wisdom, have the patience to seek value.

What do you think?

Skill, Will, and…Micromanagement?

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Nowhere in the job description are the words “watch their every move.” 

Recently, I had the privilege of leading a classroom of MBA students through a discussion on influencing and team building.  During the discussion I dusted off the old “skill-will” matrix.

You know?  The skill will matrix?  It’s the one that lets you consider the people you lead by their level of skill and their level of will, and to lead or manage them accordingly.  It looks like this:

SkillWill1

It’s a useful tool at a superficial level.  It can certainly help leaders, especially leaders struggling to establish a leadership style, to handle diverse teams.

It’s kind of a Kenny Rogers “The Gambler” approach to leadership:  Know when to guide ’em, know when to excite ’em…

It brought to mind an interesting reality:  “Micromanage” isn’t on the matrix.

A lot of bad leaders (and good leaders in bad times) need to learn this.

Sure, people with a combination of low skill and low will need more direction.  They also might need to be redeployed against different work; and that’s the rub…If you are micromanaging, one of you is redundant.

Micromanagement is neither inspiring nor sustainable.

So What?  

This one is straightforward.  Two sides of the coin deserve discussion:

If you as leader find yourself having to micromanage, you are probably either deploying talent inefficiently (i.e., against problems that are beyond the talent), or you are insecure.

Figure out which it is and fix it.

If you as a follower find yourself being micromanaged, you are either under-delivering, or you need to insist on a heart to heart with your leader.

In either event, it isn’t a sustainable proposition; so why start it in the first place?

Use the matrix, know when to delegate and when to direct.  But, know when too much is too much.

What do you think?