Words Really Matter

For weeks, I have been writing about how the words we use make a difference in our leadership persona and the culture we create. As you can probably tell from my posts, I really believe this stuff.

I have to admit I was stunned and disappointed with the outcome of the United States presidential election. Among a myriad of issues I have with the president-elect, I found his discourse during the campaign particularly troubling. Words matter. I have written several posts about how words can unite and engender collaboration, or they can divide and create organizational finger pointing. The same is true in the political world. We experienced a very divisive campaign, and we can anticipate even more divisiveness going forward.

In parallel, I have also written about how important it is for a leader to speak the truth and have an open and honest discourse with their team. Honesty breeds trust, and great cultures are built on trust. Unfortunately, this was an election built on non-stop untruths and outright lies. Truthfulness just did not matter, and it appears as though many in the electorate believed the lies. The conspiracy theories and untruths amplified and supported a narrative the electorate wanted to believe. A leader’s role should be to help us find the truth and bring forth our better selves, not support and amplify the worst in us. Unfortunately that was not the behavior of our elected leader.

In the absence of unifying discourse and honest communication, I fear we are headed down a very dark path as a nation. My general policy is to avoid any political commentary in my public posts, but to be honest, this election really rattled me. I hope for the best, but I truly fear the worst, so it felt important to pause my typical business-focused posts and acknowledge the anxiety I feel about our future. If you read this far, thank you for indulging me. Words matter.

Mine, mine, mine...

The phrase that got my attention this past week was 'my team.'  It seems innocuous enough, and often is meant as a term of inclusion. The expression may be intended to convey that the leader is a part of the team and shares the credit or responsibility with their teammates. However, that was not the use of ‘my team’ that triggered this post.

The phrase can also be used in a possessive manner. 'This is my team,' where 'my' implies ownership. I am reminded of the seagull in the Disney movie squawking “mine, mine, mine…” Think about what the possesive use conveys about the speaker and how it may be viewed by the members of the team when it is spoken by the leader. It particularly irks me when what I really hear is self aggrandizement, like the leader feels the need to let someone else know that they are in charge - this team is mine, mine, mine. It carries an ego message, like the next thing the person is going to tell us is how many people they manage, as if it is a yardstick on their success.

Alternatively, think about how 'our team' sounds.  'Our' is inclusive, collaborative, a little bit humbling, and truly team oriented.  Even if you are leading, you are still on the team, and commitments and achievements are owned by the team. ‘Our team’ does not separate the leader from the individuals on the team. This subtle difference is particularly apparent when something goes wrong and the leader explains what happened by saying ‘my team’ caused the problem. It sounds as if the leader is distancing themself from the team, pointing to the people working for them, and implying they were at fault. Wouldn’t it be better to say ‘our team’ or ‘we?’ Best of all would be to follow the management lesson that tells us successes belong to the team, but failures belong to the leader. When describing successes, a leader’s words should be 'our team’ or ‘we’ achieved this success,' but when it becomes necessary to discuss a failure, the leader’s responsibility is to own the miss with a clear 'I take responsibility' message. 

In an earlier post, I wrote about banning the word ‘they’ and forcing people to say ‘we.’ The idea is to move from a finger-pointing, blame culture to a shared responsibility, collaborative culture. Referring to ‘our team’ instead of ‘my team’ is a corollary to banning the word ‘they.’ Banning the word ‘my’ can be just as liberating as banning ‘they.’ Try it.

Broken Windows and Paper Cuts

In tech companies we track all sorts of metrics and statistics, and in businesses built on recurring revenue, customer satisfaction and renewal rates garner a lot of attention. When we think about satisfaction, we focus on customer support where we talk about ‘tickets,’ which is the umbrella term for all sorts of customer inquiries. Tickets could be bugs or data problems or just ‘how-to’ inquiries, so we further classify tickets into priorities and responsibilities, and then we start tracking metrics to gauge how effective we are at responding and solving tickets.

Tickets that are the result of a coding error get the most attention. If a client is ‘dead in the water’ it becomes an all-hands effort to figure out the problem and get it fixed ASAP. These are tier-1 problems, and alarm bells go off across the company. Classification schemes vary from company to company, but we all have ways to divide the remaining tickets into successively less urgent categories.  It is said that indigenous people in the north have many words to describe snow, but further south we just call it ‘snow.’ Ticket management is similar, and the practitioners on the front line have an array of words to describe tickets, while customers have a more limited vocabulary and just see a ticket as a problem.

From a metrics and reporting standpoint, the focus is on support items that result in code changes - actual bugs. These are the impactful tickets that can cause big shifts in customer satisfaction, and require personal attention, so it is fair that we focus on them.  However, think about all of the minor support inquiries and tickets that routinely get addressed (or often ignored) without a lot of fanfare.  

There are thousands of support inquiries that fall into the ‘minor’ category. They range all over the place from how-to questions, to minor confusions, to simple settings, etc. The sheer volume can be surprising. Kudos to support teams for handling so many inquiries, but think about the impact these items are having on customer satisfaction. No user wants to contact support. Whatever is causing them to contact support is something that is getting in the way of doing their job. At best it is an annoyance, or at worst a showstopper. The minor inquiries are like thousands of paper cuts. If a user encounters enough ‘paper cuts,’ they will move from being a promoter to a detractor, and customer satisfaction will drain away.

Paper cuts are not necessarily coding errors or bugs. They may be user interface issues where it is not obvious how to accomplish a task, or they may be documentation shortcomings or training issues. The product may work as it was designed, but not the way a user expects it to work, so they get confused or frustrated and they call support. Often, the inquiries are the result of user error.  Whatever the cause, each inquiry is a paper cut and lowers satisfaction by some small amount.

We tend to focus on the big stuff - product bugs and data errors and the like, but once you get the big stuff under control, the paper cuts set the tone for customer perception and satisfaction. On an NPS scale, the difference between someone giving a 7 or 8 (neutral rating), versus a 9 or 10 (promoter rating) is mostly one of tone.  “It's OK, not bad, gets the job done, but it has issues…” = neutral.  “It's great, easy to use, does the job well…” = promoter.  In an urban setting, there is a theory that fixing the broken windows and removing the graffiti enables a neighborhood to build pride, and results in a general reduction in crime. In the tech world, stepping back from a product that basically gets the job done, but has a lot of tickets and minor bugs is like looking at a blighted urban setting. Fixing the broken windows will build customer satisfaction, loyalty, and promoters.

Companies that want to create a culture that is obsessed with customer delight need to focus on eliminating paper cuts and fixing broken windows. Notice I used the term ‘customer delight,’ rather than ‘customer satisfaction.’  Satisfaction equates to neutral (NPS = 7 or 8), but delight signals a promoter (NPS = 9 or 10). We want promoters, and we want them to tell all of their friends and colleagues how great our company and our products are. We want to remove any hesitation or caveats from their message. The key to moving a customer from satisfied to delighted lies in the details of their interactions with the vendor. A necessary component to shift the tone of customer conversations into the language of promoters is to drive down the number of support inquiries, starting with the glaring coding errors, but do not overlook the impact the minor ones are having. Sweat the details.

I Understand...

This week, I continued my theme about how words matter, and how the words we use and the subtle differences in our language can make a big difference in the way people perceive what we are saying. One of my favorites is how a listener responds to what someone is telling them. 

In my past, I had the opportunity to speak with a lot of potential investors and analysts. I was always keenly aware of how they were reacting to the message I was delivering. There I was, trying to convey our unique value proposition, and I was looking for validation from my audience that they were with me. In most cases, our business and our competitive market was new to them, so we started with basics and background info, and built the message to differentiate our approach from that of our competitors. In other words, I was speaking to smart people who did not know much about the world I lived in every day, but they were curious enough to spend some time with me.

The language of the listeners and my reactions started to follow a pattern that made me recognize one of those subtle difference in speech that can change the dynamic of the interaction. Early in the presentation, some listeners would say “I understand,” while others would say “that makes sense.” ‘I understand’ is a confirmation that they heard what was said, without an affirmation of agreement or support. ‘That makes sense’ is an indication that the listener sees the logic of the point.

If we stop there, you would assume I preferred to hear “that makes sense.” In fact, surprise, I generally found it very annoying and condescending. Telling someone that they make sense sounds like the listener is validating the intelligence of the speaker. I knew what I said made sense, otherwise why would I say it? I was not asking for them to validate that I was a rational speaker. Rather, I was looking for confirmation that the message was received and understood so we could engage in further dialog. The statement "that makes sense" came across as judgmental, instead of positive and encouraging.

I preferred interactions that started with ‘I understand’ responses, which typically led to dialog and discussion. ‘I understand’ is an opening for an active listener to begin probing and exploring a topic.  It is step one in a real conversation.

If you translate the impact of a ‘that makes sense’ response to the sales world, consider how a prospect will react to a sales person telling the prospect that they ‘make sense.’ The salesperson is trying to build rapport and probe for opportunity. They are conducting a discovery call with a prospect, and the prospect is explaining their situation and their needs. The prospect wants to know that the salesperson understands and empathizes with their situation. Telling the prospect that they ‘make sense’ is actually pretty offensive. One of the key tools of active listening is called Reflective Listening. The listener responds to a statement by saying back what they heard, in their own words, and asking for confirmation that they got it right: “Let me make sure I understand. I think what you said is xxx, is that correct.” It is a powerful door opener. By contrast, telling someone they make sense is not going to open the same door. It does not convey that the listener is in the conversation. It merely acknowledges the logic of the statement.

Words matter, even when the differences are subtle. Focus on how the listener is going to perceive the words you use. Are you joining them on their side of the table, or are you remaining at arms length on your side? Are you subtly offending them, or are you honestly engaging with them? It just ‘makes sense.’

Back To Basics

High-growth organizations typically run lean and fast. Teams are stretched to get work done ASAP and to reach for the next growth milestone. There is always so much to do that unless we maintain focus and clear priorities, it is easy to get distracted, and when we get distracted, unfortunately we sometimes drop the ball.  

In a fast paced environment, we need to execute four basic tactics to ensure nothing falls through the cracks. The first is to keep a running list of ‘to-dos’ to stay on top of what needs to get done. It seems obvious, and many of us are already in the habit of making our own to-do list. However, in a business setting, most actions require cooperation and mutual commitment, so the to-do list is no longer just a personal list, it becomes a shared list. All of the participants need visibility of the list, and similarly, all of the beneficiaries of the activities on the list need to see where their projects fall.

The second tactic is to set clear priorities. With clear priorities, we can divide the to-do list into critical items versus nice to haves. As new items or interrupts pop up, they can be added to the to-do list and sorted into where they fall based upon our priorities. When everyone understands the priorities and is aligned with them, then if new items push existing items down the list, an aligned team understands why.

That leads me to the third basic tactic - commitments and accountability. I wrote an earlier post about the language of commitments (LOC). The essence of LOC is to ensure that there is a clear agreement, a contract of sorts, regarding who is doing what by when. Based upon the LOC contract, we establish accountability. LOC forces clarity, and teaches us that if you want something to get done, then you have to ask a specific person for a specific action by a specific date, and you need a clear response. It is not a vague cry for help or a soft ‘I will look into it…’ response. A true LOC commitment has to have all three elements: a person making a commitment, for a specific action, by a specific date — no ambiguity. Each element on the to-do list should have an individual owner who has made a commitment to accomplish the item by a date certain. If there are items on the list without owners, nobody should be surprised when the ball is dropped and the item does not get done.  

OK, the last basic tactic is simply to hold ourselves accountable by documenting and publishing the list and the commitments. Insist that meetings end with a recap of what was committed, and after each meeting publish the results to the team. Start the next meeting with the list of commitments from the last meeting, and confirm what was done, what is on-track as planned, and what needs recommitment with a new LOC.

To-do lists and commitments are rarely ‘fire and forget’ activities. Even when there was an LOC exchange and commitments were made, things are rarely that simple. Most commitments rely upon other commitments, and multiple people have to work in concert to fulfill an objective. If something in the chain of commitments goes off track, there can be a cascading impact. Even though we may have agreed to the priorities at the outset, when things change we may need a reset. Publishing and reviewing the list frequently will highlight the soft spots and the issues. Requiring acknowledgement of missed commitments and documenting changes supports a culture of accountability, and practicing these basics every day helps the organization build its execution muscles.

Admittedly, this is all really basic stuff, but in our fast-paced, under-resourced, growth environment, it is easy to run too fast and lose sight of the basics. The result is that the ball gets dropped at the worst possible moment, and we create unnecessary friction, or at worst we disappoint a customer.  Don’t lose sight of the basics.

Be A Foghorn

Information and understanding is not uniform throughout any organization, and the flow of information does not typically follow a smooth or linear path. People at the top of the corporate hierarchy know things that are unknown to people lower in the hierarchy, but the reverse is also true. There are pockets of people ‘in the know’ and pockets of people ‘in the dark.’ Once a business gets beyond a sole proprietorship, perfect knowledge is a thing of the past.

Each layer in the corporate hierarchy exacerbates the problem. A CEO may be in mind-meld with their direct reports, but those leaders may not have the same knowledge sharing with their reports, and so forth down the corporate hierarchy. It is like a game of whisper down the lane—with each step the story changes, and the same is true as information flows up the hierarchy. Front-line workers have a detailed awareness and understanding of what is happening, but as they report their situation up the management chain, the story morphs and gets watered down.

In addition to the challenges introduced by passing information through multiple layers in the organization, it is also true that not every mid-level manager will grasp the nuances underlying the information, and therefore may not be particularly great at communicating it. If you step back and consider this imperfect internal communication channel, it feels an awful lot like a fog. We have limited visibility, and things look and sound just a bit distorted.

The challenge for the CEO and leadership team is to cut through the fog and ensure everyone is on the same page. At a minimum, we have to make sure the team knows what we are trying to accomplish, and is equipped to act appropriately with the information they have. One method is to adopt clear corporate goals and disseminate them throughout the company. We back up the goals with clarity about our values and basic operating tenets, and hope that everyone ‘gets it.’

However, communicating the goals is not a one and done process. I live on an island in a bay, and when the fog rolls in, the foghorn starts to sound. It does not just blow once and assume all of the mariners heard it. Instead, it repeats continuously until the fog clears. Like a foghorn, the CEO and leaders need to continue to blast out the goals and values repeatedly so everyone absorbs them, even in the fog of information flow within the company.

But, it goes deeper than just goals and values. It’s great that everyone knows what the goals are, but not everyone knows why they are the goals and how they all fit together to make a great company. Nature abhors a vacuum, so if the team does not know why we have a goal, they will fill the vacuum with their own ideas. Too often, human nature leads them to create reasons that are not positive. For example—Q:“Why is the CEO so focused on hitting this goal?” A:“The CEO must have a bonus tied to it, and they will make a fortune if we bust our butts and hit the goal.” CEOs and leaders cannot just deliver the goals like tablets from the mountain. They have to go beyond the face of the goal and explain that ‘this is a goal because it will result in XXX, which is important because…’ In other words, it is a critical component of being a corporate leader to also be a teacher and explainer.

A good place to start in the software as a service (SaaS) world, is the collection of well established SaaS metrics. They are clear and meaningful and easy to communicate. Underlying the SaaS metrics is the concept of building corporate value, and rank and file employees all understand building value. Demonstrating how the goals result in improving SaaS metrics creates a foundation for why the goals are the goals, and a scorecard for measuring success. When team members understand the rationale behind the goals, they are better equipped to cut through the fog to achieve them.

Words Matter

If you have been reading my Monday Morning Messages, you know that I focus a lot on the language we use, and the impact it has. Subtle changes in how we say things can make a big difference in how our sentiments are perceived, and how the recipient responds. Similarly, subtle changes in the words we use to label or describe departments and services can create significant attitudinal changes in the way our teams behave.

Think about alternative labels for jobs, and whether a label causes team members to focus more on the company’s needs or the customers’ needs. Consider ‘Account Manager’ versus ‘Customer Success Manager.’ Putting the word ‘customer’ first puts a completely different spin on the role and makes it clear that it is about them. Focusing on ‘success’ highlights the ultimate purpose of the role. The job is not to manage accounts on behalf of the company; it is about ensuring the customers are successful. How about ‘Product Support’ versus ‘Customer Support?’ The latter is about making sure the customer gets what they need, while the former is more inside-out and narrow. Product support sounds like an extension of engineering. In the extreme, if the product is the focus of support, it can lead to answers that sound like ‘the product is working as designed,’ instead of focusing on the challenge that led the customer to contact the vendor in the first place, and how to meet the customer’s needs and actually support them to achieve their goal.

Consider ‘Product Training’ versus ‘Customer Training.’ Product Training is about features and functions, while Customer Training is about ensuring the customer is equipped to do their job successfully. Better yet, consider labeling the function ‘Customer Education.’  Wouldn’t you rather be educated than trained? Creating educated customers sounds way better than simply teaching them how to use our product. How about ‘Expert Services’ versus ‘Customer Services,’ or ‘Product Advisory Board’ versus ‘Customer Advisory Board.’  These may seem like subtle differences, but they can lead to very different behaviors and measures of success.  

If we consciously think about adding the word ‘customer’ to practically every title, it will ultimately shift our thinking and our behavior. Continuously ask what the customer will think when they hear a team member’s title. Will it sound like a bureaucratic company person, or will it sound like a customer advocate? Advocates create lasting relationships that may just lower our churn numbers and increase our upsell potential. If we expand our view of the arc of our relationship with our customers, it causes us to become less transactional and more aligned with their success. When our team members put themselves in the customers’ shoes in every interaction, we learn to act with empathy not with just process. Empathy begets loyalty, and there is no question that with loyal customers our business will thrive. Changing our language is a small step toward changing our culture that can have a lasting impact on our success.

It Is All Connected

We often think of the various functional areas of our business as siloes. Sales is separate from Engineering, which is separate from Customer Success and Finance. We recognize the through thread that connects some of the functions, like sales and marketing, but we still think of them as distinct efforts with independent metrics. When a functional area has ‘issues,’ we consider it their challenge to overcome: Sales missed its bookings target, or engineering had too many bugs, or accounting missed its collections target. The truth is that it is all connected.

One of my favorite business authors, David Marquet, talks about the power of banning the word ‘they’ from our vocabulary. ‘They’ is a divisive word. It separates ‘us’ from ‘them,’ and gives permission to place blame instead of share responsibility. When we banish the word ‘they’ and replace it with ‘we’, our view of metrics and business performance changes radically.

Let’s look at an example where we discover a spike in support tickets being passed to Engineering. The siloed response is that ‘They - Engineering’ need to work harder and increase their solve rate. It is Engineering’s metric, so it is their problem to resolve. Maybe ‘they’ need to assign more resources to drive down the volume.

Think about how the response changes if we say ‘We’ have more support tickets being passed to Engineering. It means every part of the company has to explore how ‘we’ are going to address the issue. We start to ask questions:  Are we seeing more support tickets as a result of recent product enhancements? Did we specify a confusing enhancement? Do we have a coding problem or do we have a QA problem? Do the tickets reflect issues in old code that was never stressed, and is our uptick a result of a change in our implementation methodology? How many of the tickets were ultimately resolved without the need for a code change? Is that a reflection of Support passing things to Engineering that should have been resolved without Engineering’s participation? Do we need more tools to better equip support? Does that take us to a documentation need, or a training need, or perhaps it goes back to a product definition issue that led to a confusing user experience? If we go even further back, does it take us to how we sold the product and what we said it could do? Was our marketing attracting customers with unusual use cases? Did we over-sell?

When we change the ownership of the problem from ‘They - Engineering’ to ‘We,’ all of these leaps and questions naturally evolve. It is no longer Engineering’s metric and responsibility, it is our metric and our challenge to get to the root of it. It becomes a collaborative effort instead of a siloed effort.

A similar example is “‘Sales’ missed its bookings target.” Instead, if we frame the issue as “‘We’ missed our bookings target,” then not only do we look at Sales activities, we go further and look at the product/market fit and our feature set. We look at Marketing and lead quality, and we look at “Customer Success” and our reputation in the market, and, yes, ultimately we look at strategy and addressable market opportunity. When we banish the word ‘they’ and use ‘we’ instead, our perspective on performance changes. It brings us together and forces us to connect the dots and recognize the interconnectedness of the entire business.

It may not feel natural at first, but give it a try. Ban the word ‘they’ from your corporate vocabulary. Invluding when team members discuss customer issues. Instead of addressing customer problems as ‘they’ broke something, try substituting ‘we.’ Instead of ‘they’ broke the system, try ‘we’ broke the system. It may be unnatural, but it forces us to step into the customer’s shoes and recognize that we are responsible for their success, so we are a part of any issues they have. It helps to close the gap between vendor and customer, and it creates customer advocacy internally.

The same we/they thinking translates into the CEO/board dynamic. Board members are separate from daily operations, so it is easy to look at the business and speak of management as ‘they.’ After all, ‘they’ are the ones running the business. However, when board members shift to using ‘we,’ it creates a more collaborative environment. In my early days as a CEO, when there was a problem, my initial instinct was to go to the board thinking it was solely management’s problem. It felt a lot like grade school, going to the principal’s office to confess to our screw up. However, when a board member responded with “what are ‘we’ doing about it,” instead of “what are ‘you’ doing about it,” it was disarming. The tone went from an arms-length posture to a collaborative footing. It is a lesson learned as a CEO that I now practice as a board member. Board members and management have distinct roles to play, but using ‘we’ closes the gap. We are all professionals aiming for the same positive outcomes. ‘We’ can make it a collaboration.

Align The Board Calendar With The Business Cycle

I often hear investors tell CEOs that they do not want board meetings to be too much of a burden - ‘We are only looking for information you are already producing, so just share it with us.’ In my experience, this is a myth. It is true that the information provided to the board should be based upon existing operating analysis and tracking, but the level and form of reporting to run the business is very different from the materials a CEO needs or wants to present to the board. No matter how you cut it, preparing for a board meeting takes work and is a burden on the organization. The good news is that the act of preparing for the board meeting is usually very valuable. It is a moment when the CEO and the management team have to step back from the day to day and actually think about how things are going. It usually brings operations into focus with clarity and heightened awareness. It makes management step out of the tyranny of the urgent and actually look at the arc of the business.

Having said that, preparing for a board meeting does take work and is disruptive. When investors press for frequent (monthly or worse) meetings, the CEO has to ask ‘why?’ Are frequent meetings an efficient use of management time, or is it just an efficient process for busy board members to catch up? There is a better way for management to keep the board informed without the same level of burden imposed by preparing for frequent meetings. Tools like Slack and Teams can offer effective and efficient communication channels to streamline board interactions. A monthly narrative email or message from the CEO accompanied by financial results and metrics from the CFO can be supported by an asynchronous dialog and exchange of questions, comments, and thoughts on Slack - less meetings, more efficient, better communications.

Full-fledged quarterly board meetings are absolutely valuable. However, the CEO and board need to align on the purpose for each meeting. They should view the full year as a business operating system, and consider the themes that occur throughout the year. Typically, meetings occur after the financial close of the quarter, and every meeting will include quarterly performance and forward-looking forecasts. However, in addition to results and projections, each meeting should have a planned theme that follows the business cycle.

We enter the year with operating and financial plans for the new year. The goals and most of the framework for the plans should have been discussed with the board before the end of the prior year, so there should not be any big surprises, but going into the first meeting we now have firm results and a real plan. The theme of the first meeting is to kickoff the year. It is a time for each functional leader to present their plans and goals, and for the board to formally approve the company’s plan and agree on how success will be measured for the year.

The second board meeting follows the end of the first quarter. The plan has had some battle testing, and we can see the trajectory of the business taking shape. The theme for this meeting is the product. Engineering projects take time to complete, so addressing the product early in the year provides the board with a view of what will be completed that can potentially change the business trajectory by the end of the year. A focus on product is also a focus on competitive landscape, strategic direction and product / market fit, which are all important board topics.

The July board meeting is the mid-year mark. We need to assess what is working and what is not, what the outlook is for the second-half and full-year, and whether we need a re-plan. The theme of the meeting is sales and marketing. By mid-year, the marketing programs should have demonstrated effectiveness, and new sales people have had time to onboard, build pipeline, and begin to contribute bookings. For many enterprise products, the sales cycle is approximately six months, so a careful analysis of the pipeline at the mid-year point is a good predictor of sales for the rest of the year. If we do not know a prospect by mid-year, it will be challenging to find and close a new deal by the end of the year with a six month sales cycle. This is the meeting where funnel metrics will tell the story of the remainder of the year.

By October we have even better visibility to the end of the year, so we know how things are likely to turn out. There are two themes for this meeting. The first is the customer base, and the second is a preliminary view of the financial and operational goals for the coming fiscal year. Customer analysis should be an element of every meeting, but this meeting is an opportunity for a more in-depth review of retention and upsell metrics, and the practices, policies, and strategies related to managing the customer base. Focus on why customers stay, how satisfied they are, what drives them to spend more or less, or why they choose to leave. The board needs an understanding of the stability of the ARR going into the new year, which will also validate the product / market fit, and paint a picture of the long-term viability of the business.

The October meeting is also the CEO’s opportunity to test the goals for the coming year, and discuss the contours of the plan: revenue targets, growth rates, profitability, investments, etc. The board and the CEO need to be aligned on the overall framework. If the board is expecting 30% growth, but the CEO is only aiming for 20%, this is the meeting to discuss the disconnect. The non-financial goals, and the financial plan will be built around achieving the agreed outcomes.

There is value in adding one last meeting for the year to review the emerging detailed operating and financial plans. This meeting will take place in December, and the purpose is to see the translation of the October discussion into an actual detailed plan. This is an opportunity for preliminary approval of the plan, or a course correction before the new year starts. Some companies do not bother with this meeting, and leave approval for the early January board meeting. The advantage of having this meeting is it positions the CEO and leadership to kickoff the new year with confidence that the board is fully supportive of the plan. It is also a solid communication step that ensures CEO and board alignment.

Having a full-year board plan puts everyone on the same page, and creates greater efficiency for each meeting. Board members and management know what to expect. The management team is able to prepare for each theme in advance, instead of scrambling to accomodate an agenda that only materializes as the meeting approaches. Adding structure to the full year of board meetings is another tool to create an impactful board and management team collaboration.

Feed Your Board Nutritious Metrics

In an earlier post, I proposed that board members should insist on seeing information presented in the form of trends. I have also advocated that CEOs and management teams need to provide the board with information that puts every element of data into a context that is relevant and understandable by the board. I call this the ‘So What’ test. If you present a fact, put it in the context that explains why it is important, and why we should care about it.

As an example, if marketing reports that there were 20,000 visitors to the corporate website, that is a fact (we hope). If they show it on a trend line over time that shows the number is growing or declining each month, and is a helpful directional indicator. However, it still does not tell us if this is a good result or why we should care about it. In other words, it does not answer the ‘So What’ question.

What was the goal? Why was that the goal? If we did not reach the goal, what are the implications for the business? Why is the number improving or declining? How much are we investing to improve the number? Are we getting a positive ROI on that investment? There are many more questions that all go to the issue of ‘So What,’ but it is clear to see that the fact that we had 20,000 visitors is a hollow statistic. It is like food with empty calories that will not nourish a meaningful understanding of the business.

However, the real ‘So What’ question is ‘why is this number even being reported to the board?’ Too often, in the interest of giving every functional area of the company a voice, CEOs acquiesce to include information from functional leaders that is more like ‘what I did on my summer vacation’ than an important indicator of corporate success. We have all seen these ‘essays’ - “we attended 4 conferences,” “we updated 12 pages on the website,” “we tested 32 new feature points,” etc. These are often feel-good metrics. They may be adjacent to a meaningful measure, and masquerade as a leading indicator, but in reality they are just empty calories.

Take website visits as an example again. For some businesses, this is absolutely an important measure, but for most companies, it is a feel-good metric. Our goal is to drive sales, and in order to do so we have to find and close prospects. We follow a sales cycle that moves prospects through the sales funnel from lead to closed-won, and we identify several clearly defined points along the journey that we can measure. Website visits are at the very top of the funnel, and represent contacts before we even know if the visitor is in our target market. Don’t get me wrong, I am not saying that marketing should stop measuring visits, but many many things can influence website visits. I am saying that as a standalone measure, it is not board-worthy. There is too much noise in the statistic to get a clear signal to communicate to the board. Visits can go up while qualified leads go down. It just means the bait we are using attracted the wrong kind of fish. The reverse can also be true - visits go down, but qualified leads go up - we may have done a better job crafting a more targeted message. A change in traffic may be driven by external factors that are not related to our actions at all. There is just too much noise.

If we are looking for leading indicators of bookings to report to the board, a better path is to work our way backwards up the funnel through each of the defined earlier sales stages that lead to closed-won. This is where we have actual indicators of interest and intent - classic BANT (budget, authority, need, timeline). Focus on conversion rates from one stage to the next (volume), and the pace of movement from one stage to the next (velocity) which will provide a much more valuable insight into future sales outcomes. As a board member, it is a feel-good moment to know that people are visiting the website, but the data that delivers real ‘nutrition’ is the information that is much closer to actual sales and the trends that represent a pattern of progress.

I have focused on marketing and sales as my example, but feel-good metrics abound throughout board books. Examples like the number of hours worked in engineering, when what we care about is feature output. Customer success meetings held, when what we care about is measures of upsell and avoidance of churn, not the number of meetings. If a manager is reporting a statistic or data point, the CEO needs to apply the ‘So What’ question to ensure it is presented in a meaningful context, but they also need to test if it really has meaning and value, or if it is just a feel-good measure that takes up space and does not advance board knowledge.

Board members have limited time, and are often distracted by their own businesses, or other companies where they participate on the board. I refer to the phenomenon of “Board Amnesia” in earlier posts. It is the common occurrence where, from one meeting to the next, board members tend to forget a substantial portion of what was discussed and decided. The CEO has to make the most of the time the company gets from board members, and not burden them with junk calories and hollow data. Crafting a concise business analysis with meaningful metrics and measures, coupled with solid “So What” analysis is an art form, and one that CEOs have to master if they want to nurture an effective board.

Go Looking For Trouble

Board members and CEOs need to keep our eyes open at all times. Some problems happen in a flash, and nobody could have seen them coming. More often, trouble is brewing beneath the surface for a long time, but it is overlooked until it boils over at a critical moment.

Andy Grove of Intel said “Business success contains the seeds of its own destruction. Success breeds complacency. Complacency breeds failure. Only the paranoid survive.” He wanted everyone at Intel to run a little scared and keep looking for the seeds of failure. One of the leading sales training courses teaches enterprise sales people to go ‘looking for trouble.’ An enterprise sale is made to a broad constituency of buyers. If you only focus on the buyers that are positive about what you are selling, you will miss the ones that are going to torpedo your deal. You have to keep vigilant and go looking for trouble. Seek out the person that attends meetings but never says anything. Make sure their silence is not full of objections. Assume somebody does not like your solution, so go find out who and win them over. To quote Joseph Heller “Just because you're paranoid doesn't mean they aren't after you.”

Like the enterprise salesperson, the CEO has to go looking for trouble. I recently wrote about how CEOs face an ‘Optimism Dilemma.’ They need to be the visionary cheerleader, but they also have to stay on the credible side of being overly optimistic. Another layer of the optimism challenge is that looking for trouble requires a healthy level of skepticism. The challenge is to probe and question without being demoralizing to the team. You have to go looking for the bad while projecting the good.

As organizations become larger and deeper, real information is mostly known by the staff on the front line. It tends to be filtered and polished as it gets passed up the corporate ladder. By the time it reaches the CEO, it is a processed food. Processed foods taste good, but are not necessarily good for you. A steady diet of processed information may make the CEO happy, but it is not going to give them the nutrients they need to succeed. CEOs have to go looking for the raw materials, the whole-grains of information to stay on top of what is underlying the corporate results.

For board members, the problem is even more acute. The CEO and CFO typically act as our conduits to what is going on in the company, and they manage the spigot that controls the information flow. CEOs have a natural tendency to want to feed a positive message to the board, so they are often creating their own version of processed food. The difference is that as board members, our ability to dig deep under the covers is much more limited. The healthy separation of roles between the board and the operators makes it inappropriate to just bulldog our way into the business to seek raw information.

As board members, our best tool is to invest our effort to work with the CEO to agree on truly meaningful measures and focus on proven leading indicators (KPIs). Once we know what to look for, we need to watch the trends like a hawk. Trouble typically brews over time, but there are always telltale signs in the KPIs and trends. Small variances can be easily overlooked, but can blossom into wide gaps down the road. Like a rocket headed to the moon, small variances in trajectory at the start will lead to a wide miss the further out the ship travels.

Board members want to believe in the team, but we also need to be looking for trouble. It may be a small miss on bookings, or deals that keep sliding into future quarters, or projects that don’t quite finish on time, or small overages in expense categories, or small declines in NPS scores, or unusually high employee turnover, or any number of small but important variances. In isolation, a small miss here or there may not be a red flag. Businesses are made up of humans, and not everything goes as planned, but trends rarely lie. Minor variations will either work themselves out, or they will start to accumulate over time and manifest as a trend. Spotting the trends that are accumulating, and shining a bright light on the issues can avoid big trouble down the road.

When management delivers performance results to the board, I always ask to see the trends, and not just point-in-time results. My favorite catch-line is “so what?” When presented with a singular fact or result, I want management to answer the ‘so what’ question. How does the fact compare to plan? How does it compare to the trend? Why does it matter to the business? What are the implications of the result? ‘So what’ requires context, and context enables a board member to spot trouble.

‘Only the paranoid survive’ needs to be a guiding principle for CEOs and board members. We all need to go looking for trouble before it finds us. Best case, you will not find any, but if you do spot something, you may be able to address the issue before it flares up into a real problem.

Is Your Board a Competitive Weapon?

I was always a believer in a bright, bold line that separates operational management from the role of the board. As a CEO, I felt that my job was to run the company, and the board’s role was to provide strategic guidance and counsel. If the board did not approve of the way I ran the company, they could remove me. I resisted was the board trying to “help” me by diving into operations.

After multiple CEO positions, and multiple boards, I have mellowed a bit, and developed a more nuanced perspective on the board and CEO relationship. I still believe in a line of demarcation, but it has faded and become fuzzy. After some pretty bad board experiences, I started to study the dynamics of the relationship between the board and the CEO, and how to leverage the board as a weapon. I had a pretty good idea of what did not work, so my goal was to figure out what would work.

One of the first things I realized was that board composition is a huge determinant of building a successful relationship. In venture and private equity backed companies, the board is typically stacked with investors. There is a power dynamic as a result of the CEO working ‘for’ the board, but in a healthy relationship, the parties collaborate and the CEO works ‘with’ the board. Defining what it means to work together is a critical element of building a healthy relationship. For some investors, the model is “it’s our money, so we get to tell you what to do.” There are very successful investors for which this is exactly the formula. They have a playbook, and if they invest, then they call all the shots. There are CEOs for whom this is just fine. There are other investors that believe in ‘bet the jockey’ and look to the CEO to chart a successful path. There are CEOs that relish this autonomy. However, if there is a mismatch of investor type and CEO type, things never go well, so figuring out that dynamic is critical for a positive board/CEO relationship.

Being able to spot a good investment does not necessarily make someone a good board member. However, institutional investors have the benefit of seeing multiple similar businesses. They have been to the movie before, and their pattern recognition tells them how it will turn out. An effective institutional investor will translate their pattern recognition into constructive input for the CEO and allow for the possibility that the CEO may also have experiences and see alternative patterns. This is where a collaborative relationship is vital.

The CEO is much closer to the business than the board, and they typically have a much more nuanced perspective. It is incumbent upon the CEO to effectively communicate the salient facts and background to the board, so they can be informed and helpful. For board members, it is vital that they listen and understand the nuances before jumping in with superficial opinions. The rule should be ‘Ask then tell’ not ‘Tell then ask.’ Listen to what is really going on, ask what the management team is already doing about it. Consider the ideas that have already been tried. Then, and only then, if you still have something to add, tell management your opinion. Too often, I have seen board members hear a few facts and immediately start to pontificate about what management needs to do. All too often, it is exactly what management is already doing, and the exchange is insulting to management’s professionalism. Viewing the board dynamic as a collaborative relationship, and recognizing that the CEO and the board members are all professionals with a common goal to drive for success is critical for a positive relationship.

An effective board can become a competitive weapon. It makes the company better. But, board composition needs to be carefully curated to ensure the right collection of expertise and personalities and relationships. VC and PE investors have a responsibility to keep an eye on their money, but that does not mean they are automatically the most valuable board members. Investment documents grant board seats without much thought as to who will actually fill the seat and whether they will become a weapon for the company or a distraction. It is more of an investor policy matter - if we invest, we get a seat. This is a wrong-minded approach. Investors should put people on the board with the skills and the obligation to add value regardless of whether they are investor partners or just smart people.

Creating a board that is a competitive weapon requires an honest assessment of corporate needs. Some companies need help with internal operations, while others need help with entering markets, or engineering a financial path. Board members with specific expertise can turbocharge the business. They can be helpful to guide executives, or share experiences, or open doors that will help the company mature. Figure out what the company needs, and then go find the best person to bring that skill to the board.

The most important thing for a board member to realize is that their role is not passive. A board meeting should not be management putting on a show with board members in the audience. For the board to be a weapon, they have to join the fight and actually contribute. Investor board members need to have self-awareness to differentiate when they are just watching versus when they are contributing. If they are just watching, then they should become observers and relinquish the seat to someone who will actually get in the game and help.

Non-executive, independent board members play an important role. When curating the composition of a board, the independents can be the most valuable elements of building a competitive weapon. Choose wisely, and know precisely what role an independent will play. Clearly articulate and discuss what the CEO and other board members are expecting of the independents.

Lastly, keep in mind that companies mature and evolve, and the contribution the company needs from the board will change over time. Set board terms, and be thoughtful about extending a board member’s term of service - even for investor board seats. The CEO should be able to have a conversation about the current investor participant, and the opportunity to request a new member. It may be awkward, but so is failure or mediocre performance. Force the board to be the competitive weapon the company deserves.

The Optimism Dilemma

The role of CEO requires a mix of vision, leadership, enthusiasm, inspiration and passion. A big part of the job is to serve as the corporate cheerleader. However, when things are not quite right, members of the team become acutely aware of the vibe coming from the CEO. Like dogs that can detect fear, team members have a sixth sense about what is really going on in a company. They pick up on queues like closed doors, unidentified visitors (“suits”), hushed conversations, unusual absences, etc. On the positive side, team members pick up on confidence, joy, openness, and any number of other traits that convey a calming sense to the organization.

CEOs and executives are often surprised by the efficiency of the corporate grapevine and rumor-mill. We often fool ourselves into believing that nobody will notice when something is not quite right. Certainly in the tech world that I am familiar with, and I am sure it is true in every other environment, employees are quite smart and astute, and nothing gets by them.

As the head cheerleader, CEOs often feel obligated to be upbeat - to put a positive spin on whatever is happening. Team members have a natural disproportionate bias to over react to bad news, so if a CEO delivers a negative message, the way it lands will get amplified by this bias, much more than the impact of a positive message. In the HR world, the corollary is that a manager needs to provide at least four positive messages to offset the impact of one negative message. Similarly, CEOs often go overboard in the positive direction to counterbalance the negativity bias.

The problem is that team members are smart and they see through the BS. You cannot fool them. Over optimism is immediately understood to mean something is wrong. You really cannot spin missed bookings, or churned customers, or staff reductions, or strategic pivots, and expect the team will buy it. The result is a loss of credibility for the CEO. As goes credibility, so goes trust, and trust is very hard to regain. Once the team flips the bit from trust to doubt, it is hard to flip it back.

This balancing act creates the ‘Optimism Dilemma.’ In challenging times, how does a CEO balance optimism and cheerleading with reality? How do you keep the team engaged and moving forward when things seem to be going backwards? It comes down to the CEO’s track record for truth and candor.

Trust is like a bank account. You cannot spend what you do not have, and if you have not built up a balance of trust in your account, there is no quick fix. From day one, a CEO has to be honest and truthful with the team, and present a believable reality. Everyone expects the CEO to be optimistic and see the future vision with a positive outlook. They need to see that the CEO believes in the business, but they also understand that not everything goes as planned, so candor is vital. It is the role of the CEO to put the bad news in a believable context. Explain what it means, what the company is doing about it, and how it effects the future. You can be a cheerleader while still delivering an honest appraisal of results. When things are not ideal, the team needs to hear the CEO say “we screwed this up, but we got that right, and things will be OK.” The cheerleader role is important, but it has to be authentic.

The same Optimism Dilemma exists between the CEO and the board of directors. In a healthy board environment, we are all in this together. The board wants to see the CEO and the company succeed, and they are there to help. A good board can handle bad news, but they want to know that the CEO is on top of things. They can handle the miss if it comes with a believable plan to make things better. However, boards are very discerning and have a fantastic BS meter, so over optimism with the board undermines trust in the CEO. On the other hand, if the CEO projects doom and gloom or uncertainty, just like the employees, the board will run with the negativity. The best course for the CEO is to maintain a healthy dialog with the board so there are no surprises and there is a constant flow of grounded facts and information flowing between the CEO and the board. Transparency and confidence win the day.

The bottom line is that establishing a track record of honesty and candor, balanced with CEO optimism will keep a CEO out of the ‘optimism dilemma’ with all of their constituents.

Snake Skin

As snakes grow they periodically shed their skin to make room for their larger bodies. In many ways, businesses go through a similar, natural process as they grow and mature. The team that led the business up to a certain point may not be the ideal team to foster growth to the next stage of business.

Early stage entrepreneur leaders possess drive and skills to get things going. They are the center of the universe for their company, and they can keep all of the facets of the business and every nuance in their head. As the company grows, more people join the team, and up to a point, a loose structure and minimal written plans and policies can work just fine. However, the level of complexity and the number of people involved soon requires more formality and structure. The business needs governance in addition to vision. Formal procedures and policies make the business predictable and scalable.

The leaders that surround the CEO in the early days may not have the skills or recognize the importance of introducing structure into the business. Key members of the early team tend to wear several hats and perform a range of roles. They thrive on multi-faceted challenges and their ability to make a difference. However, as the company grows, it hires specialists to lead each function, and the original team members’ roles either narrow or becomes redundant. The most important job for the CEO is to ensure that the right people are in the right seats to enable the company to reach its fullest potential. The struggle for the CEO is that the early leaders are colleagues and often friends, so loyalty and friendship are in conflict with the needs of the business. Some of the people that were instrumental to getting the company to where it is, are exactly the people that will keep it from getting to where it needs to go. It is never easy to make these changes, but it is often required for the ‘snake’ to shed some skin so the company can grow. The CEO’s challenge is to keep the entrepreneurial spirit alive while also laying the foundation for a scalable business.

The hardest transition of all is to change the CEO.  It is a rare founder-CEO that can manage a growing business through all stages of growth. There are notable exceptions - Bill Gates, Jeff Bezos, Larry Ellison, and Elon Musk - to name a few billionaires. However, more often the skills that enabled the founder-CEO to succeed in the early days will not be adequate or the same skills needed for subsequent stages of the business. Some individuals are self aware enough to recognize the need to hire an experienced replacement. Some require a bit of a push from the board. A telling question for an entrepreneur is “do you want to be rich or king?” You may need to give up the role of king for the business to thrive and make you wealthy. Maybe it’s time for the snake to shed its skin.

Board Amnesia

In a prior MMM I wrote about the CEO’s responsibility to craft and focus the story for each board meeting. I advocate sending a board update well in advance of the meeting to provide each board member with information about what happened in the last reporting period (quarterly or monthly). The update is not forward looking or aspirational. Like the old TV show saying, it is “just the facts, nothing but the facts.”

VC- and PE- board representatives are typically engaged with several companies in various businesses and at various stages. It is not unusual for a board member to serve on five or six or more boards. From one quarter to the next, a lot happens in every company on their roster, and it is a challenge to keep it all in focus. When a quarter ends, all of the board meetings tend to be compressed into a short window, so individuals with multiple board seats have a flurry of meetings all in a row.

As the CEO, you are 100% focused on your company, and you live and breath it every day. Your mind is packed with all of the nuances of your market, your competitors, your opportunities, your personnel, and your company’s performance. Not so much for a board member serving on a half-dozen boards.

During the board meeting, everyone is focused on your company (hopefully). Typically there are questions raised and requests for follow up information, and there are actions agreed upon. In the moment, these are all clear and well understood. Then the meeting ends, and the board members are on to the next company and the next board meeting, and the memory starts to fade.

This pattern leads to ‘Board Amnesia.’ It is the understandable affliction where board members forget the details and the decisions made from one board meeting to the next. CEOs are often surprised when a board member asks the same question meeting after meeting, or doesn’t remember directing the CEO to take some action or investigate some outcome. As CEOs we find we have to re-litigate decisions that we thought we put to bed at a prior meeting. Board Amnesia is real, and it wastes a ton of our precious board meeting time.

A CEO has to recognize this condition and take action to overcome it. It is not that hard to do, but it does require focus. The starting place is to summarize the actions and requests made during the board meeting, and send them to the board immediately following the meeting along with whatever slides were presented during the meeting. Some CEOs add apendix slides that may not have beed used during the meeting, but provide support for topics discussed during the meeting. That is not a terrible practice, but it requires you to tell the board members why the slides are there and what to make of them. Be as specific as possible when summarizing the meeting, and clearly identify the items the board agreed to, or where action was requested. You are building the memory book for board members with this follow up, so pay attention to carrying your board narrative forward into the summary.

For quarterly meetings, it will be a long 90 days before you get totally focused board time again. Most companies have some form of interim update process. Maybe it is a monthly finance call, or a six week business update, or something less formal. My advice is to make it formal and follow a rigid cadence. You are not just updating the board on results, you are also striving to avoid Board Amnesia, so include update information about the checklist of decisions made during the last meeting. Your purpose is to keep bringing your company to top of mind so they do not forget what is going on.

Between board meetings, it is up to the CEO to remain engaged with board members. Regular, scheduled 1:1 calls are ideal. Too many CEOs only reach out when they need something or have a problem. Think about how you manage the people that work for you with regular meetings and discussions. As CEO you also need to manage your board. Continuous engagement is your second tool to stave off Board Amnesia.

Lastly, we come back to the board update that goes out in advance of the meeting. If you have kept the board involved throughout the reporting period (quarter), this ought to be a routine aggregation of what went on during the quarter and why it is important. In other words “NO SURPRISES.” However, keep in mind that you may still be dealing with Board Amnesia, so use this last opportunity to remind everyone of important conclusions from prior meetings and the narrative that led to those decisions.

As a CEO, manage up as well as down. Recognize that Board Amnesia is a common affliction for busy board members. When you communicate with board members, you are not just picking up where you last left off, you also have to reiterate the journey that led to your current actions and results so that your narrative strengthens and refreshes the board’s memory. Help put an end to Board Amnesia!