NPS or Not So Much

It seems as though every company is crazed about surveying after every customer interaction. If you call a support line, you can expect a satisfaction survey. If you stay in a hotel, or rent a car, or buy something online, you will invariably receive a survey. For large-scale brands and high-volume suppliers, some of this may make sense, but what about the small-volume suppliers?

The concept of Net Promoter Score (NPS) was the result of insightful research conducted years ago and published in the Harvard Business Review in December 2003 “The One Number You Need to Grow” by Frederick F. Reichheld. The idea was that consumers will either be promoters, detractors, or neutral. Neutrals do not influence the market, but promoters are good for business because they tell their friends how great your products or services are, and they advocate for your business. Detractors are bad for business because they complain about your products or services to anyone that will listen. NPS is a single number to gauge the offset between the people praising your business and those trashing your business. NPS is a high-level measure, that is influenced by numerous actions and interactions. A simple analogy is the ‘Check Engine’ light in a car. The car is constantly monitoring hundreds of things and checking for optimal operating conditions. It doesn’t display all of this information or constantly show us the nuances of engine performance. Instead, we get one indicator — the “Check Engine” light. That one light masks a ton of complexity that is supported by numerous diagnostics. If it comes on, we know we need to take action. Similarly, the NPS score is a single indicator for a raft of underlying information. Clearly, you want more promoters than detractors, so NPS has become our “Check Engine” light for the business.

Unfortunately, over the years, everyone has learned to game the NPS process. We have all heard providers tell us we will receive a survey, and anything other than a 10 will be a failure. They ask if there is anything they can do to ensure a perfect score, and they beseech us to say we are promoters. That is not how it is supposed to work. There is nothing spontaneous about being told what to say. On the consumer side, we recognize the NPS question, and we know how to use our response to inflict pain. We know that giving a score of 8 is a passive/aggressive response, and a 0 is the loudest form of insult. We also know that a 10 is golden, and sometimes we just want to be nice, even though we have no intention of promoting the service. We have become informed consumers and we are wise to our vendors’ attempts to finesse a measure of satisfaction out of us.

I mentioned the difference between a large-sample vendor and a small-sample vendor because in small samples the result is not all that meaningful. Consumers are often trying to send a message with their answer, knowing that in order to be heard they will have to be extreme. I was involved with a survey where after the results were gathered, I personally called a number of the respondents to discuss their answers. What I learned was that even if a respondent gave a low score, during my 1:1 discussion it became clear that they were using their survey response to get our attention. In reality they were very committed and wanted to succeed with our offering, but they gave a low score to keep us on our toes.  One client, who gave a neutral score, opened our call by saying that they were telling all of their colleagues how happy they were and how much they were looking forward to continuing to work with us. They said it was the “most important thing they would do in their program this year.” Their score did not line up with their clear intent to be a promoter. NPS in small samples can give very misleading results because just a couple of promoters or detractors can change the entire character of the calculation. Individuals with strong emotions (usually negative), can skew the score dramatically. Even cultural biases can creep into the result in a small sample. Some cultures display more polar emotions than others, or are more subdued in their evaluations. The same level of service may receive different results across cohorts just because of cultural bias. Big samples tend to homogenize these variations.

When a company applies an NPS methodology to determine customer satisfaction, it is important to know what you are getting.  Consider your sample size, and cultural biases. In addition to thinking about the promoters and detractors, consider the message being sent by the neutrals. These are the customers who are not moved to promote or detract. They are passive spokespeople, but they are still meaningful contributors to understanding customer satisfaction. If everyone gave you an 8 (all neutrals), your NPS would be 0. But, considered on a 1 - 10 scale, the message overall would be fairly positive (80% satisfaction).

In a small sample, it is also important to check the numeric result against the overall sentiment. Does the number change dramatically if you eliminate the few extreme answers in each direction. In particular, look at the 1’s and 0’s. These are often emotional responses, and in a small sample they can have an outsized impact. If possible, go beyond the quantitative score and actually speak with the outliers to get a qualitative understanding of their responses.

NPS is a tool, but despite the title of the HBR article, it is not the only number you should monitor. If you are a small-sample company, and do not have thousands of respondents, treat the NPS score with a healthy dose of skepticism, and dig deeper into the metrics and responses to get a true gauge of satisfaction.

Complicator or Simplifier

I recently reviewed several corporate overview presentations and pitch decks, and I have come to believe there are two types of CEOs: Complicators and Simplifiers. Complicators attempt to dazzle us with their brilliance by making everything seem so complicated that they are the only ones that can understand it, and we are fortunate to have them. Then there are the Simplifiers who can take a complex topic and make it so clear anyone can grasp it. Simplifiers are among the most important people in our companies, and having a Simplifier as the CEO is gold.

Simon Sinek recently wrote that “Visionaries aren't the only ones who have big ideas. Visionaries are the ones who can clearly communicate their big ideas to others.” These are the Simplifiers. I used to work with a VP of Engineering who had a PhD on his staff. The PhD had invented a wildly complex data management algorithm, but he had a very difficult time explaining it. The VP was the only person who understood what the PhD was saying and could interpret it for others to act upon. It is no surprise that the VP was the person in the leadership role and the PhD was relegated to a staff position (which he was happy with).

Simplifiers are great communicators, and great communicators make great leaders. They know how to read their audience and understand how to gauge the depth of the discussion so that everyone can grasp the content. I teach a seminar on Active Listening, and one of the concepts for a presenter is to “swim with a snorkel, not a scuba tank.” The goal is not to dive so deep that they ‘drown’ the audience — come up for air every now and then, and make sure the audience is still with you.

Great marketers tend to be Simplifiers. Think about how they can create a memorable tagline that captures the depth and breadth of a business in a simple message. Defining a company’s unique value proposition is an exercise in simplifying all of the things a company does into the one thing that really matters. Great marketing is not throwing everything against the wall and hoping something sticks, or as a colleague used to say “spray and pray marketing.” Great marketing is simplifying the message into something the target audience will recognize and appreciate.

Complicators, on the other hand, feel the need to highlight every detail, and point out every nuance. There is very little black and white for a Complicator, only myriad shades of gray. In meetings, the Complicator typically takes the role of SPITR —Smartest Person In The Room. They are the ones that ask the esoteric questions that have little relevance to the real world. In the classic Monty Python movie, when asked the speed of a swallow in flight, the SPITR responds by asking if it is an African swallow or a European swallow. The typical reaction from others is ‘who cares?’

When the CEO is a Complicator, things often go south.  Most board members have a limited amount of time to devote to the inner details of the business. They need the CEO to be clear and concise, and help them focus on the right topics without being distracted or dragged down any rabbit holes. Complicators tend to confuse their audience with a blizzard of details that obfuscate the important kernels of information. When presented with a possible direction by a board member, a Complicator CEO will make it clear that the suggestion is too simplistic, and respond with all of the nuances, alternatives, and potential pitfalls. They dive deep, and their audience drowns. Typically, the result is to shut down the discussion or table the topic, rather than reach a conclusion.

All of this is not to say that deep thought and analysis are bad. Critical thinking and exploring alternatives is necessary and important. Being a Simplifier does not mean there is a lack of depth of understanding, quite the contrary. Do not confuse a Simplifier with being superficial. Simplifying combines understanding with the skill to craft a concise, clear, and simple message. There is a famous line attributed to a lot of people (the actual origin is probably Blais Pascal, and it was in French): “I made this letter so long only because I didn’t have the time to make it shorter” It captures the essence of the skill. It takes hard work to Simplify and get it right. The Complicator is the one that writes the longer note, because they lack the skill or the desire to Simplify. Simplifiers take the time to polish their message into a gem — they are the great communicators.

Molehill person or Bulldozer

In life and business, we often run into people that have a unique talent for starting the day with a small problem [aka a molehill], and manage to build it into an insurmountable problem [aka a mountain] by the end of the day. These molehill people turn every challenge into a big deal. We have all experienced this behavior. When asked to perform some task, a molehill person will tell you how hard it will be, and how much work it will take. They will identify all of the pitfalls and issues as they build the molehill into a mountain. They will ask questions with obvious answers, as if they are just trying to avoid any possible ambiguity and therefore risk. They will speak in hyperbole as they describe every flaw or issue with the request.

Not to play amateur psychologist, but there is a lot to unpack in this behavior. Part of it is risk avoidance. A molehill person is putting you on notice that ‘there be dragons’ if they go down this path, so it will not be their fault if they fail. Part of it is self-aggrandizement. If they can make the task seem huge, and they accomplish it, won’t they be grand. The problem is that molehill people tend to stand in the way of progress and innovation. They slow things down. Like Eeyore in the Winnie The Pooh stories, they bring negativity into an organization. They deflate the enthusiasm of positive thinkers. Like a vampire, they suck the life out of good ideas.

By contrast, we have also all met the ‘bulldozer.’ The opposite of a molehill person, the bulldozer does not see any impediments and just pushes forward regardless of the destruction they leave in their wake. Once a bulldozer gets an idea or decides to achieve an objective, do not get in their way because they will run right over you. Sometimes, you have to applaud their ingenuity finding solutions, but often the achievement is diminished by the toll the process takes.

Molehill people and bulldozers are two extremes. We want to find the thoughtful people that are somewhere in the middle. We need people that can understand a request and successfully execute to achieve the goal, or recognize a bad idea and save us from a costly mistake. The challenge is how to identify who is who.

This is really the dilemma we have with delegation. A leader or manager has to decide what they can delegate and to whom. Delegate to a molehill person, and you will soon conclude it was easier to do it yourself and save the frustration of the molehill being turned into a mountain. Delegate to a bulldozer and they may charge off in the wrong direction and you will not get the result you intended. Delegation is an act of trust, and trust needs to be nurtured and earned.

The fundamental starting point is clear communication. The leader has to clearly define the task, and the parameters for success. Scope, time, and resources need to be articulated. Measures of success need to be understood. When delegating a task, a manager should practice a form of reverse active-listening. Ask the recipient to say back what they heard the task to be, in their own words — ‘tell me what you heard me say.’ In the early stages of building trust, the manager should also ask how the recipient intends to approach the problem - what is their plan. These simple steps will quickly highlight if the recipient is a molehill person or a bulldozer, or a thoughtful contributor in the middle.

David Marquet has articulated a progression of trust and delegation that lays out the path for managers to build a positive relationship with their team. The progression to build trust is:

• Tell me what you see

• Tell me what you recommend

• Tell me what you intend to do

• Tell me what you did

Mastering delegation is a force multiplier, but it is critical to avoid the molehill / bulldozer ends of the spectrum. Carefully cultivate trust and build a framework for increasing levels of delegation to recipients that can effectively execute. Creating a trusted team that can execute efficiently is a management super power we all need to develop.

Take A Step Back

In a dynamic business, the CEO and the management team need to stay on top of key performance indicators and metrics. We often obsess about them. One of my favorite old, old, old books is ‘The Great Game of Business’ by Jack Stack. He was a young manager who was assigned to a failing manufacturing facility ostensibly to shut it down. Instead, he decided to save it by leading the entire team to focus on improving the P&L and metrics inch by inch. Everybody owned a number, and they all knew how the numbers fit together and what success looked like. They met every week to review progress and recommit to achieving their numbers.

The same shared understanding of how the business operating system works is critical in every business. Each department or business function has a specific role to play, but they are all connected to the same drive shaft. Each area of the business is like a piston revving the engine, and we need all of the pistons firing in coordination with each other.

I have always been an advocate of a monthly meeting that includes a broad swath of cross-functional leaders to review the metrics for every area of the company. Taking a lesson from Jack Stack, I believe it helps all of the attendees to gain a perspective on the total business, and it creates a culture of accountability. It forces individuals to avoid the pitfall of having tunnel vision and focusing so much attention on their own metrics that they do not see the forest for the trees.

Here is a three-step formula to manage a monthly meeting that will be efficient and meaningful. First, direct each presenter to deliver their content at least 24 hours in advance of the meeting. It is helpful to have one person gather up the materials from all of the presenters and distribute it in advance as a briefing book. Limit each presenter’s content to only what they can fit on a single slide with no fonts less than 10 point. Insist that their content has sufficient context (historical performance, trends, goals, etc) to make it evident why it is important enough to be presented. In other words, it must pass the “so what?” test. Guide presenters to use a consistent format from one meeting to the next so team members can become familiar with the layout and content.

The second step is to conduct the meeting efficiently. These meetings can go on forever if you let them. My approach is to strictly limit each presenter to two or three minutes (we actually used a stop watch). Since the materials were delivered in advance, the presenter can assume we all read them, and there is no need to read the slides to us. Instruct presenters to only tell us what matters and why. Tell us what they see in the metrics they are presenting, and what needs to happen next. Do not allow any interruptions during the three minute presentations. I like to go through all of the presentations before there are any questions or discussion. Often, something said by one presenter will become clear in the context of what is said by another presenter. Also, if we stop for questions and discussion after each presenter, invariably we run out of time and have to rush through the later presenter. After the initial run-through of all of the slides, it is time for questions and discussion. We still need to be efficient, so I suggest proceeding one slide at a time. Ask for comments and questions specifically related to the topics on the slide, instead of a free for all.  Keep it moving. Lastly, time permitting, it is good to have a summary moment. A trick I learned from a fellow CEO is to (almost) randomly pick a participant and ask them to summarize what we heard during the meeting. Ask them to give us their view of the state of the business and the hot spots identified in the meeting. It can be a bit intimidating, so everyone needs to know the question is coming to make sure they are not caught off guard. Choosing someone other than the CEO to summarize helps to avoid the CEO becoming the only voice in the room, and it is a good way to gauge the tenor of the team.

The last step is to designate a periodic meeting to step back from the trees and talk about how the forest looks. The team should still produce and deliver the same content in advance, but for one meeting skip all of the presentations and just hold an open discussion of how we think the overall business is doing. It forces the team to look at the company as a whole, and creates a sort of ‘zen headspace’ moment. By doing so, we collectively expand our lens and look across the business, rather than just focusing on narrow aspects and daily urgencies. Individual metrics are great, but sometimes we fly into the target because we miss the big picture. Formalizing an opportunity to step back creates perspective.

There is no standing still in a growth business. If we do the same level of performance tomorrow as we did today, our growth business will not be successful, so it is important that we stay on top of all the metrics. It is equally important to occasionally step back and make sure we all see the same trajectory and picture.

Once The Deal Is Done

Last post, I wrote about the need to go broad and deep during an enterprise sales cycle. Lots of people get involved in an enterprise purchase, and a seller needs to ferret them all out and work the room, or risk some unknown actor vetoing the deal.

Once the deal is done, and it moves into implementation and ultimately when the platform is launched, the list of characters changes, but the need to discover and manage the new collection of actors is just as important.  Post-sale, we meet the front line participants, and we get to know who can sign-off on the implementation, but that doesn’t mean we know all of the influencers that will determine the success or failure of the launch.

The worst message is when our contact tells us that some other group or person has decided to cancel our contract. It typically means we did not have a complete picture of what was driving all of the players, and we did not make our case broadly enough. Equally disturbing is when our primary contact goes silent and we don't know who else to contact in order to determine what is going on. We need to know everyone.

Typically, once a new platform is licensed, the customer’s implementation team includes individuals that were not part of the selection process, and individuals that really wanted to buy a different product. The budget maker (see my prior post) had a vision for what the solution would deliver, but their vision and the reality of what the product can actually do are not always aligned. Maybe they were over-sold, or maybe they just filled in blanks by imagining how the product worked without validating its capabilities. In any event, the implementation team is now tasked with attempting to fulfill the vision.

The vendor needs to have a meaningful handoff from the seller to the implementation team, and it is equally important to manage the account to ensure that there is a similar structured interaction between the buyer/visionary and the customer team that will implement and manage the solution. It is up to the vendor to be the glue to force communication among all parties, and resolve challenges and conflicts. In a recurring revenue business, the value of a sale is typically realized in the years following sale, so the vendor needs to make sure the solution sticks, to avoid dreaded churn.

The best approach to manage this situation is to create an account plan that spans a full year (or longer) from the date of purchase. When the deal is signed, all of the parties are engaged and happy, so this is the ideal moment to document the goals and expectations, and gather commitments for ongoing engagement. The plan will clearly identify what to expect and when.

In every complex enterprise implementation, something is going to go bump in the night. There will be product limitations and tensions will arise. People will get pulled in different directions, commitments will be missed, and tempers will flare. The full team needs to be prepared so that everyone knows what to expect. There is a grocery chain in Connecticut called Stew Leonards, and in front of every store there is a carved granite block that says “Rule #1 — The customer is always right. Rule #2 — If the customer is ever wrong, reread Rule #1” When things go off the rails during implementation, the vendor will always take the blame, regardless of who was actually at fault —Rule #1. However, a proper account plan will help to mitigate blame and provide communication paths to defuse volatile situations.

An account plan has several elements. The first is a set of goals and measurements of success. We need to be clear about what everyone expects. Next is the timeline of what will take place when. This is more than the project plan for implementation and rollout, although that is a critical element. The plan should include a communication cadence, and a schedule of account reviews and meetings to take place throughout the year. There is always a hierarchy game afoot in an enterprise account relationship. Doers talk with doers, managers talk with managers, and executives talk with executives. Understanding the hierarchy dynamics is important, and the senior members of the vendor team need to own their responsibility to build rapport with their customer counterparts. An executive to executive relationship can be critical to defusing problems that occur lower in the hierarchy. The account plan needs to recognize this dynamic and the right people need to be scheduled to attend the right meetings.

I suggest weekly or monthly account meetings with the front-line teams, quarterly meetings with senior managers, and semi-annual meetings with executives. It is important to agree to the meetings up front and get them on everyone’s calendar right at the start of the project — particularly the executives. While the execs are still engaged, you can get them to commit to reconnect six and twelve months later, and you can lock the meetings onto their busy schedules. Best practice is to designate the first executive briefing to focus on the client’s satisfaction, wins, challenges, wants and desires. The second meeting, approximately 4-6 months later, should be more focused on the vendor’s roadmap to demonstrate that the vendor listened to the needs and wants and desires, and responded with product growth. The second meeting is the vendor’s showcase, and is intended to earn the license renewal.

In addition to defining the players and the schedule of activities and meetings, the account plan needs to identify responsibilities. The best tool is a Responsibility Assignment Matrix or RACI chart. RACI stands for: Responsible, Accountable, Consulted, Informed. Every major task or milestone will have a collection of people associated with it, and a RACI chart clearly defines their roles. A task is assigned to the Responsible person or persons to get it done, and they actually do the work. The Accountable person is typically in a leadership role, and there is only one person per task. They oversee the Responsible person(s), and they are accountable to the organization for the project. There may be many people who are Consulted and asked for input, and there may be many people that are Informed of decisions and progress. [for a thorough discussion see https://www.forbes.com/advisor/business/raci-chart/ ]

Most teams focus on identifying the Responsible and Accountable people. I suggest that the most important people to identify in the account plan are who should be Informed, and who can add value if Consulted. Clearly identify the executives and senior managers that need to be kept in the loop and informed, and document a routine communication plan that they accept at the start of the project. When the entire team knows and agrees to a communication schedule, there is a permission structure for publishing achievements and missed commitments so there are no surprises. Too often, when there is no routine communication to the upper levels of management, if a problem arises it is the first they hear of it, and the vendor is thrown way under the bus. An account plan can avoid this catastrophic outcome by defining the flow and frequency of project information.

Identifying the individuals that should be Consulted is important because their knowledge may help guide the project to success. Ignore them at your peril because they are usually vocal in the form of “if anyone had asked me, I would have told them that was the wrong direction…” These are the folks with institutional knowledge, and usually they have considerable informal influence. The account plan needs to rope them into the mix.

The bottom line is that post-sale success takes a village. The key is to create a comprehensive plan for the account and diligently build buy-in from all of the members of the village. Use the plan to formalize commitments from senior managers and executives to remain involved. Document a communication calendar and cadence in the plan to avoid surprises. An account plan incorporates the implementation project schedule, but must go way beyond the initial projects and extend throughout the year and beyond to ensure ultimate customer success and contract renewal.

Go Broad and Deep

A typical enterprise sale involves approximately 12 - 16 people on the buying side. There is the leader that identifies the need, the people tasked with finding potential solutions, the collection of individuals that will be impacted by the selection, the IT team that has to validate the acceptability of the solution and its security profile, and then the procurement, legal, and finance teams, and ultimately an individual or committee makes the purchase decision. Enterprise sales people know that they need to coordinate and manage all of these influencers. They have to tease out and handle any objections in order to win the hearts and minds of the whole team. 

Great sales people bank the influencers and invest in the detractors. Instead of focusing solely on the buyers that are supportive and willing to engage with the seller, a skilled seller has ‘good’ paranoia, and goes looking for trouble. They know that a deal can be torpedoed by any number of people, so they are constantly looking for the soft spots and the potential veto votes. Instead of donning their ‘happy ears’ and only hearing support, great sellers avoid flying into the target by managing all of the buying influences until the deal is inked. They know they have to go broad and deep to manage the panoply of actors, even the ones that may only have a minor say in the deal.

Years ago, I attended a sales lecture that described “budget makers” and “budget takers.” Sorry, I don’t recall who deserves credit for the concepts. The idea is that there are people on the buyer side that are given a budget and seek to find a solution to a pre-approved and known problem. These are the budget takers. Then there are individuals who have vision and see a problem or opportunity and create the budget to solve it. These are the budget makers. As a seller, you want to find the budget makers because they have the ability to get a deal done, and they appreciate the value of buying a solution. They tend to be less risk averse, and they are willing to champion a purchase decision. Unfortunately, they do not always know how their organization buys things, and they may overlook steps that will trip up a deal, so as a seller, you cannot solely rely upon the budget maker, but you definitely want them in your camp, and you want to engage them to assist you to discover all of the other influencers. In some instances, you will need to teach them how their own organization purchases things. You do not want to fall victim to the trap when a budget maker says “I will make the decision alone.” It is never a true statement.

The other type of buyer is the budget taker. Somebody else decided there is a business need, and approved a process to go find a solution. They handed the challenge to a budget taker, and said go find a vendor. Budget takers tend to be very risk averse. They may not fully grasp the value of solving the need, or the potential impact to the business, but they know they have a budget and they do not want to make any mistakes. Budget takers ask everyone they can think of what features they want in the solution, and they make lists of ‘requirements.’  They research all of the vendors and demand detailed presentations, demos, proofs of concept, trials, and anything else they can think of to cover themselves and avoid being blamed for a purchasing mistake. Budget takers will suck up seller’s time like a vampire, and they are typically the creators of RFPs.

A Request for Proposal (RFP) sounds like a great idea. Create a list of everything you need and ask vendors to tell you how their solution achieves your goals. Great in theory, horrible in practice. In their zeal to avoid risk and not be blamed for a bad purchase, budget takers pollute RFPs with ‘requirements’ for every feature they can dream up. Wild future scenarios and corner cases that will never occur make their way into RFPs. The result is a list of items the company probably does not need and will never implement, and no vendor can fully satisfy. The immediate real need is lost in the volume of superfluous possible future needs. Vendors will twist themselves into pretzels to answer positively to every feature on the list, but in the end, no vendor will have a perfect score. The budget taker now has ‘cover.’ No matter what solution they select, they can say “it is not a perfect fit for our RFP, but it meets many of our needs.” An RFP provides job security and insurance for the budget taker in the event of a failed purchase because the budget taker can remind everyone that they clearly said it was “not a perfect fit.”

An alternative flaw in the RFP process is when the fix is in for a single vendor. A buyer falls in love with a vendor, but knows that their organization requires an RFP to make a substantial purchase, so they game the system to get what they want. They already know which vendor they want, so they allow the vendor to co-author the RFP. All of the requirements magically line up with the chosen vendor’s offering. Other vendors stumble and stretch to provide positive answers, but the chosen vendor will clearly stand out. As a seller, there is nothing sweeter than finding a buyer who is willing to let you author the RFP. We have all seen RFPs that clearly have a competitor’s fingerprints all over them. It rarely ends well if you were not the co-author.

Knowing that there can be bias in the process, some organizations rely upon a neutral procurement team to manage the purchase. In the worst application, procurement teams have so little trust in their business groups that they prohibit vendors from directly interacting with business users once an RFP process begins. They effectively remove institutional knowledge of the business need in order to avoid purchaser bias. Once we end up in procurement we are not only dealing with a risk averse budget taker, we are also dealing with a team that is not directly involved in the business need, and is typically motivated just to get the best ‘deal.’ In many situations, driving for the best deal either means forcing bad economics onto the best solution, or forcing the company to buy an inferior solution because it is cheaper or the vendor is more desperate. In their neutral assessment of vendors, procurement teams treat vendors as if they are fungible, and rarely acknowledge the nuances and soft items of relationships, service mindset, vendor team competency, vendor reputation, etc. For complex business solutions, the outcomes are often less that ideal.

From the seller’s perspective, understanding the purchasing landscape and getting to know all of the players is hard work, but successful sales people earn the big bucks because they do it well. They know who are the budget makers and who are the budget takers. They focus on objection handling and seek out every participant to ferret out the potential vetos. They know that if they are not defining the dialog and telling their story directly to every influencer, then someone else is, and that someone may not have their best interest in mind. Great sellers also recognize when they need help. Sometimes there is a hierarchy game - execs will only talk with execs, managers with managers, techies with techies, etc. A great seller knows that it is imperative to build relationships at all levels and in all corners of the buying organization, so they bring their full team to the dance. They lead the process like a conductor leads an orchestra.  

Here is my baseline rule of thumb for selling to an enterprise: we need to know at least four people in different roles on the front-line, and deep connections with people in at least three levels of the hierarchy (doers, managers, execs).  We also must have strong contacts with the IT team, and the procurement person. Once a buyer declares that we are the vendor of choice, we need to quickly establish a positive rapport with a specific named person in legal, and ensure that the buyer’s executive contact remains in the loop in case legal becomes too aggressive.

Going broad and deep to truly know the buying organization requires skills and perseverance, but it pays off with more predictable sales outcomes.

What Drives Our Company?

“What kind of company are we?” The answers range from: a) sales driven, b) customer driven, c) employee driven, d) technology driven, e) investor driven, or f) all of the above.

The person asking the question typically thinks the answer is anything but their role in the company. It is a matter of “you are not paying enough attention to my area of the business, so we must be driven by some other area.” Think about the various options as points on a radar chart (or spider web chart). How far each point sticks out is a measure of how focused we are on that driver. If we are technology driven, then that point would dominate the chart and the other points would be much smaller.

Some personality tests measure an individual’s dominant behavior across different types of personality, and then draw a radar chart like I described above. What is interesting is when the test also compares how an individual will react normally versus how they will react in stressful situations. Under stress, individuals shift their behavior toward something that is more natural to them, or where they feel they have strength. An engineer may be collaborative under normal circumstances, but under stress they might spike toward individual problem solving relying upon technical solutions rather than interpersonal solutions.

The same thing occurs in company behavior. There is typical behavior during normal circumstances, but behaviors shift under stress. ’What kind of company are we?’ is often voiced during challenging situations, and the answer reflects how we react to the stress. What are our priorities when we have to make hard choices. When resources are stretched and need to be rationed or reduced, or when there is a conflict between departments and we have to choose the goals of one over the other? What drives the decision?

When pressed by a stressful situation, we have to decide to spike in the direction of one of the business drivers. Are we driven by a sales culture and more apt to make decisions driven by sales priorities, or are we going to focus on existing customers, even at the expense of the next big deal? Are we driven by customer satisfaction, or revenue growth. Are we going to make decisions based on what is best for our employees, or will the bottom line win out and we will favor investors over employees. What about technology debt versus innovation? Do we pour resources into building the next new thing, or do we focus on existing customers and devote our tech staff to fixing bugs and correcting usability? The answers ‘a’ through ‘e’ are not all mutually inconsistent. In fact, they are often mutually dependent and linked together or balanced. If we have strong values and a solid business culture, it will guide our response. In a given situation, we may need to be fluid in our response. Episodes of stress may shift our behavior temporarily, but on balance we will return to our values and core.

However, fundamental or strategic changes in the business may cause us to completely rethink what drives us. One example is when our investors decide it is time to move toward a sale of the business. We may shift from investing in the future, to eliminating anything that will not create a positive return within the timeframe of the exit. While it may not be the best thing in the long-term for the business, it may increase the immediate value for the shareholders. In other words, we need to spike in the direction of an investor driven company, perhaps at the expense of being balanced.

I am an advocate of ‘f—all of the above.’ It acknowledges that the various parts of the company are like an orchestra with each instrument playing an important part. On some occasions, one section will take the lead, and on other occasions a different part will take the lead. When we focus on building a new product, we may become primarily technology driven to stave off competitors. If we are facing churn and customer dissatisfaction, we may shift our focus to become more customer driven. While ‘all of the above’ should be the dominant behavior, we need to recognize that at any given moment, we may have to spike in the direction that moves the company forward the most. The important thing is to live by our core values and ensure that we maintain the character of our culture.

The Resource, Skills, Product Equation

The sentiment floating around a lot of companies is that they are under-staffed and short on resources. In a growth environment, it is often true. Just look at the number of open positions a company is actively trying to fill, and you may instantly agree that they are short on resources. But what about after they fill the jobs? Does the sentiment change? Rarely.

Think about the relationship between resources, skills, and product. It is not just about having warm bodies in seats. The second element of the equation is ‘skills.’ New hires may have experience elsewhere, but most new hires are lacking the skills to immediately become productive in a new environment. Throwing a new employee into the fray and hoping for the best is inefficient, usually ineffective, and sets a negative tone from the start of the employee’s tenure that often leads to frustration and disillusionment with their new job. Progressive companies recognize this fact, and implement rigorous onboarding programs. These companies enjoy much faster contribution from new hires, and typically benefit from improved employee retention.

Years ago, my company was acquired by a hyper-growth company that was adding tons of employees every month. To meet the need, they built a training facility and established a comprehensive onboarding program. Managers knew that when an applicant accepted an offer, they would start their career with weeks of training and onboarding. Managers and peers were an integral part of the program, so while the new-hire was learning the company, they were also developing working relationships with their new teammates, but they were not permitted to jump into their new job until the program was completed. It was a huge investment for the company, but the return was even bigger - a well trained, loyal workforce.

The need for training does not stop with onboarding. There also needs to be an ongoing program of continuous improvement in professionalism and skills for the existing staff. Training is not a one-and-done process. Employees want to continue to learn and grow and advance their skills, and employee retention is often predicated on creating a learning environment. Just as we plan for vacations and paid time off, employers should plan for professional development and education, and recognize that some part of every year needs to be set aside for skills development. It is far more cost-effective to ‘grow’ your employees than it is to replace them.

From the company’s perspective, the greater the skills, knowledge and experience of the team, the more efficient they become. This circles back to resources because the more efficient the team, the fewer resources it takes to get the job done. Skills and resources are directly related. Instead of just throwing bodies at a problem, investing in skills and training is a cost effective path to addressing at least some of the resource challenge. 

However, even in an environment where all of the open positions have been filled, and there is an onboarding and ongoing training program, so everyone is at the peak of their skills, there may still be a cry for resources. This is where we need to look at the business more critically. What is it about our business that requires so many resources?

Product is the third leg of the triangle. Product in this case refers to the broad sense of the term which is your company’s offering - services, widgets, applications, whatever. A lot of the drain on resources is a result of having to use people to “putty” over product limits and shortcomings. It is typical in the early days of a product maturity curve to require more ‘people putty.’ However, as the offering matures, the need should diminish. Studying the resource intensive aspects of an offering will provide a roadmap for product management to guide a portion of the product development investment to improve the efficiency of product delivery. 

Start by imagining the ideal view of human resources required for the optimal business model and customer experience. Every step away from this magical ideal that requires people to get the job done is an opportunity to evaluate resource efficiency at the product level. Just like investing to improve the skills of your team, investing to improve the resource demands of your product will improve the bottom line. There is a pretty straight line from product to resources, and designing our offerings to minimize the resources required to deliver success is an important element of defining our product investments. The more our people have the skills and knowledge, the more efficient they are, and the fewer people it takes to achieve our goals. Equally so, the closer our product comes to our ideal vision of efficiency, the fewer people it takes to deliver our product, and the more efficient we become, so once again fewer resources required.

What is striking is how simple some of the dialog is about having too few resources, but how deep the real analysis has to go in order to optimize the interplay between resources, skills and product in order to make priority decisions about where to invest. It is easy for every area of the company that feels under-resourced to jump to the conclusion to hire more people on their team. But, at a macro level, that is rarely the best way to balance the skills-resources-product equation. Great companies understand how to collaborate across departmental lines to go past the simple ‘give me people’ stage and truly figure out what is best for the business. Sometimes, instead of hiring a few more consultants to implement your product, it makes more sense to dedicate a couple of engineers for a sprint or two to actually make the product easier to implement. Invest in the product and reduce the need for more consultants, or better yet, make it so easy the customers can do it themselves without requiring any consultants.

To solve the resources puzzle, work all of the elements of the people, skills, and product equation. Your bottom line will thank you.

Passion Drives Advocacy

I have been thinking about customer advocacy and employee advocacy lately. The two topics are closely related, and they each contribute their own unique benefits to a growing business. Customer advocacy is a public expression of customer satisfaction. It can be in the form of a sales reference or a posted review, or a case study, or even just a ‘thumbs up’ recognition. Many pundits write about how traditional marketing and sales processes are dead. Buyers tune out all of the usual approaches. However, one avenue that is still a powerful influencer in a purchase decision is peer recommendations.

On the front-end of the buying process, shoppers rely upon many non-vendor sources to whittle down the list of potential solutions, and they have more tools than ever to find and evaluate possible vendors. It is estimated that at least 70% of the buying process today is independent research conducted by the buyer before they ever signal to a sales person that they are in the market. Peer reviews and recommendations are among the most powerful influences. In the consumer space, we search for the top 10 products or hotels or restaurants, and we rarely go much deeper. Business shoppers are doing the same thing in their research phase. They look at analyst reports and peer review sites like G-2. The vendors in the top quadrant get the most attention and receive much more mindshare during the research phase than the also-rans. On the back-end of the buyers journey, enterprise sellers know that they will have to produce references, and the strength or absence of the references will make or break their deal. Even after the buyer has gone all the way through their evaluation and selected their preferred solution, they still want to speak to a reference, and a negative message from a peer will outweigh all of their research.

Acknowledging this situation, progressive companies have established customer advocacy programs. Advocacy goes way beyond customer satisfaction. The objective is to drive a public expression of delight. These companies devote significant energy and investment to systematically encourage customers to tell the market how happy they are with the vendor’s products or services. During a shopper’s research phase, the vendor’s objective is to do everything possible to make sure the shopper discovers the customer advocates and forms a positive opinion of the vendor before they entertain a sales call. Most advocacy teams span the entire customer advocacy relationship, and also ensure a pool of ready reference customers to assist in any phase of the sales cycle.

However, just because you establish an advocacy team, it does not ensure you will have advocates. It still takes a village to delight a customer, so the entire company has to accept the mandate to drive customer success, delight, and ultimately advocacy. There needs to be measurable company-wide metrics that keep the focus on advocacy: Top ranking on G-2, number of referenceable accounts, case studies published, positive posts, etc. The key takeaway about creating an advocacy team is the recognition that it is not enough to just delight your customers, you need an institutionalized formal mechanism to engage with customers and convince them to be vocal advocates. Remember that the Net Promoter Score (NPS) is predicated on measuring the percentage of ‘promotors’ versus ‘detractors.’ Advocacy takes it one step further, and drives closet promotors to step up to the megaphone and sing their praise for your business.

The second type of advocacy great companies benefit from is employee advocacy. This is an internal objective to have key influential employees share their satisfaction and commitment with others in the company. Employee advocates are ambassadors that boost morale and assist with recruiting and onboarding new hires. Advocates are spokespeople and influencers, and they reinforce the strategies and vision of the company. What got my attention this week was the virtuous feedback loop between employee and customer advocacy.  Simply put, happy customers make happy employees, and happy employees make happy customers.  So, what keeps advocacy going?

Advocacy requires passion and vision — clear vision for product and place in the market, and passion about delivering value and winning the competitive battle. Also, to motivate employee advocates to speak up, a clear vision about the team and passion for improving professionalism and the commitment to excellence. Passion causes people to become emotionally invested in success. I saw a quote from Simon Sinek that captured this sentiment: “When people are financially invested, they want a return. When people are emotionally invested, they want to contribute.” We see the financial side in customers when they become unhappy and demand a discount, and we see it in employees when work becomes just a 9:00 to 5:00 paycheck. The emotional investment becomes evident when customers act as references even when they have outstanding issues, and when employees work tirelessly to promote the company and make customers happy, without an expectation of reward. 

Emotional commitment is a beautiful thing, and the goal is to drive passion into the outward expression of that commitment through advocacy programs.

The Gray Zone

Back in the early days of COVID, there was a lot of criticism of the scientific community for not having specific and precise answers, and for changing their guidance. Way, way back in my past, I was a biochemist, and at some point I learned about viruses. I don’t remember much from my science days, but what I do recall is that viruses are pretty bizarre alien things with a clear and singular goal to replicate, adapt, and survive. In other words, they are not static and often unpredictable. Many people were expecting black and white answers about the COVID virus, but the scientists were living in an unpredictable world of gray.

I found a business lesson in all of this regarding black and white versus gray decision making. A lot of things in business are pretty cut and dry, and can be reduced to procedures and rules and black and white decision making. However, customers, competitors, and markets are constantly changing and evolving, not unlike a virus, so there really isn’t that much about a business that stays black and white for long.  This leads to the gray zone that requires judgement and thought. As a CEO we spend our days in the gray zone. Anything that is black and white has probably been dealt with long before the CEO gets involved, so a CEO has to be comfortable operating in the gray zone.

The same comfort with gray needs to exist for the leadership team, and in varying degrees for everyone in the organization. That realization means we all have to be comfortable with some amount of gray. So what does that look like?  We can’t operate without any defined processes, policies and rules, and we can’t create rules for every eventuality, so while there is some black and white, what can we do about the gray?  

When dealing with gray, a necessary ingredient to add to the mix is judgement. Every team member needs to have judgement that they can apply to a situation to recognize when black and white really turns out to be gray. Empowerment is the tool to unleash judgement. The more we can grow our muscles for dealing with gray at all levels of the company, the more everyone will be empowered to apply judgement, and we can be confident that we will end up with the right result.  

David Marquet developed an intent-based hierarchy that describes how we grow empowerment. At the lowest rung, an employee faced with a gray decision tells their manager the facts and asks the manager to tell them what to do — command and control. One step up the ladder, the employee states the facts and their recommendation, and the manager still gives the order, but there has been a discussion about why and how the decision was made. One step up, the employee tells the manager what they intend to do, and the manager approves the action or teaches the employee how to look at the problem differently.  Lastly, the employee acts and tells the manager what they have done — true empowerment. Each step is built upon trust and understanding, and a belief that the employee’s judgement warrants empowerment.  

Empowerment is not delegation. When a manager assigns some part of their responsibilities to an employee, that is delegation — a top down grant. Empowerment is bottom up, and based on an employee having the space to build knowledge, skills and the self-confidence to take charge. A manager can deny someone the right to act, but they can’t give someone empowerment — it is earned and developed and built on trust.

Many teams are quick to escalate issues up the management chain, which is an indicator of a lack of empowerment. It shows that when there is not a black or white answer, individuals lack the knowledge, skills and self-confidence to act. It also indicates that management has not created a permission structure that empowers individuals to confidently apply judgement when they are in the gray zone. Escalation wastes time and resources. As a problem is pushed up the hierarchy, more and more people get involved, there are more meetings and discussions, while the clock just keeps ticking. In a hard-charging growth environment, escalation is like throwing sand in the gears. Everything just slows down. In my last post, I wrote about ‘Trust’ cultures versus ‘Prove It’ cultures. Escalation is a symptom of a Prove It culture. If I do not trust you to have good judgement and make good decisions, then I challenge your right to do so. As peers, when I challenge your authority, the natural outcome is an escalation to a higher authority. When we are operating in the gray zone, there may not be just one ‘correct’ answer or approach, so we can expect different team members to come to different conclusions. Trust and empowerment enables a team member to respect the judgement their peer applied to make a decision, and together they can move forward.

In the gray zone, mistakes do happen. When we do not have perfect information, we will not make perfect decisions. When we empower people to apply judgement in the gray zone, we have to accept that they may make different decisions than we might have, and they may make mistakes, or the outcomes may be sub-optimal. There will be situations or areas where management is not comfortable with junior people making mistakes, so it is important to create clear black and white boundaries with no ambiguity — guardrails. As the captain of a nuclear submarine, David Marquet withheld the right to make any decisions that put lives at risk. In business it is less dramatic. We set spending limits, or constraints on public communication, or limits on signing binding long-term contracts. Clarity about when a team member has permission to apply judgement is critical for team members to build the self-confidence to move forward. They have to know the scope of their autonomy, and be confident that management has their back in the event their judgement does not lead to an optimal outcome.

The more we build a team that understands that not everything in business can be black and white, the more we become comfortable in the gray zone. Building a trust culture and empowering team members to apply judgement to deal with gray instead of escalating will tap the brilliance of everyone, not just higher level managers. As a result, it will improve execution and efficiency. May the gray be with you.

Trust Culture or Prove It Culture

Companies are made up of functional teams that work together to achieve results. To meet a customer’s needs, we generally have to collaborate across departmental lines, and ask for help. Everybody is busy, so when a professional in one group asks for help from a professional in another group, the two individuals do not always see the need in the same way. Usually the debate is about the priority of the request and whether it warrants changing priorities just because someone in another team asked for help. How your teams react in these situations depends on whether you have a ‘Prove It’ culture or a ‘Trust’ culture.

In a ‘Prove It’ culture, the request for help is met with questions and skepticism. “Do you really need my help?” “It can’t be that important.” “The customer doesn’t really need this, do they?” “Can’t you do it yourself?” Whatever form the push-back takes, the essence of the discussion is ‘prove it.’ Prove that I should change my priorities to do what you are asking of me. In text or messaging oriented companies, the Slack or Teams debate can go back and forth in a doom-spiral for many iterations. It may be a stalling tactic for the individual being asked to help, but more often it is a text-based inquisition in support of ‘prove it.’ The internal debate often consumes more time and resources than it would take to just comply with the request. The teams are behaving with inward focus instead of customer focus, and while the teams are debating, the customer is not getting what they need and becoming increasingly disgruntled.

By contrast, in a ’Trust’ culture we trust the professionalism of our teammates, and we believe that they have the best interests of our customers and our company at heart. We also believe that they know what they are doing, and when they ask for help, we should trust their judgement.  A trust culture avoids the whole back and forth ‘prove it’ cycle. Trust has to be earned, but when we start with a trust bias, we short-circuit the debate. If it later turns out that the request was misguided, then we can treat that as a withdrawal from the trust bank, and next time we may ask a few more prove it questions until trust is restored.

How do we get from prove it to trust? Trust is earned through repeated actions over time, but it starts with a willingness to believe in the judgement of others. It requires both parties to act with professionalism to engender trust. In earlier posts, I wrote about banning the word ‘they’ so that no one could introduce a divide between teams. It banishes the finger-pointing “they screwed up,” and replaces it with inclusive language — “we have a problem to solve.” A trust culture is a manifestation of banning the word ‘they.’  A trust culture is a ‘we/us’ culture, while a 'prove it’ culture is a ‘they’ culture. To avoid ‘prove it’ mentality, everyone needs to shift their emphasis to ‘how to’ instead of ‘why not.’ “How can I comply with this request” instead of “why I should not agree to this request.” I am a firm believer that when we focus on how we can help each other, instead of how we can make our colleagues jump through hoops to prove their requests are valid, good things happen. If we get our culture right, everything else will fall into place.

Best v. Great Planning

Businesses typically run on a fiscal year cycle. In many ways it is a rinse and repeat process where certain managerial activities occur on a routine basis, which is often referred to as the corporate operating system. Creating the annual plan typically takes place in the fourth quarter of the year, and is one of the most interesting and engaging processes of the corporate operating system.

For more mature companies, it is primarily a budgeting process. For others, it is more of a strategic planning process. It typically requires a balance of aspirational thinking and practicality. In a growth environment, aspirational goals can be inspiring, or they can open a chasm between what the rank and file believes is possible and what leadership ‘hopes’ to achieve. The backdrop for all plans is the goal to preserve and increase shareholder value.

I heard a group of CEOs speaking about their annual planning process, and one CEO described a guiding principle they adopted early in the company’s history that caught my attention. Each year, as a part of their planning process, they decide on three things that they have to be the best in the world at doing, and three things they have to be great at doing, but not necessarily the best in the world. Everything else gets a much lower priority. By identifying the focus areas and differentiating ‘best’ and ‘great,’ the entire company understands what is important, and what they should prioritize. It sharpens their competitive message and positioning, and it focuses their product direction and engineering. I have heard variations on this theme, including narrowing the analysis all the way down to just one thing for which we want to be the best in the world. However, I like the idea of picking two or three elements to be best-in-the-world and two or three elements to be on par with the top competitors.

In a complex, multi-faceted market, it is impossible to be the best at everything. We speak about competitive differentiators, or unique value propositions as ways to position the business in the competitive landscape without trying to be all things to all buyers. However, it is easy to get caught up in trying to cover all of the competitors’ salient points. Chasing the competitors is like striving to be average, instead of trying to stand out. Choosing to be the world’s best at something requires creativity and boldness. It demands a deep understanding of the market, and the ability to step back and create something truly unique, not just a one-up approach to the way a competitor achieves the same outcome.

The second part of the process is to select three things for which you do not need to be the best, but you still need to be great. It forces you to recognize what you need just to remain in the top echelon of your market. I think of it as the ‘cover’ component of the plan. It is basically the three things you need to do to neutralize the competitors. If your competitor has selected some feature or offering to be the best in the world, how can you neutralize them by being great at a similar offering while not pouring all of your resources into being better than them. You want to take the wind out of their sails in the most economically efficient manner. To apply an electric vehicle analogy, suppose one manufacturer decides they want to be the best in the world at battery life and distance on a charge. Your company decides to make the most luxurious interior and design in the world. In order to remain competitive, your luxury offering still has to get great mileage, but it does not have to deliver the longest distance to stay in the game. Best in the world at luxury features + good mileage becomes your plan.

When thinking about the 3:3 items, keep in mind that they may not be features or external offerings. In my last company, when I shared this planning model, one member of our team focused on being the best at internal processes, specifically cross-team communication. He suggested that If we become really exceptional at communicating both internally and externally, it would have a dramatic impact on satisfaction and loyalty for customers and teammates, and significantly increase our efficiency. Some companies focus on being the best in the world at logistics (Walmart) or procurement (also Walmart), or supply chain (Dell). These are all internal ‘bests’ rather than external products or features or services.

Whatever you decide to be the 'best in the world,’ versus ‘just great,’ the exercise will focus the organization and create alignment on priorities. It will spur a healthy discussion and debate, and will bring clarity to the entire planning process.

To Build Loyalty, Make Friends

I receive a daily short email inspiration from Simon Sinek. One from the past came to mind this week:

“To drive sales, make a pitch.

To build loyalty, make a friend.”

We can generalize this message to every area of our business, and in particular to customer relationships. In a recurring revenue business, retention of customers is key. Keeping a customer starts with meeting their needs, but we should not lose sight of the imperative to build a lasting customer relationship and make a friend. Markets tend to act like communities, where the participants know each other and seek input and counsel from each other. As vendors, we need promoters in the community, and we need them to tell their friends that our company is the best thing that ever happened to them. That starts with us committing to their success and building friendships with our customers.

A true customer advocate knows that customers are more than just a recurring revenue line item on a financial report. A customer advocate knows that customers talk with each other and share their opinions. Bad service has a ripple effect like dropping a pebble in a lake. The ripples fan out and will touch many more people than the original individual with the service issue. The whole concept behind the Net Promoter Score (NPS) is a recognition that customers can be advocates, detractors, or neutral, but only the advocates and the detractors count. That is because only these two groups create ripples in your market.

If we stick with the friend theme, we know that making a customer our friend will help to create a sense of trust. A friend believes that you have their best interest at heart, and the bond of friendship engenders trust. It also creates some space when things don’t go exactly as planned, because our friends trust that they can rely upon us to make things right. 

At the end of the day, we are still a vendor and they are our customers. They pay us to get things right, but even in a transactional relationship, we can still work to build friendships. As friends, we can get beyond transactional activities and earn trust. It is particularly important in a recurring revenue relationship for the customer to know that we have a  long-term commitment to their success. When A recurring revenue relationship feels like it is based on a series of transactions, there is no bond. Each transaction becomes make or break — a ‘pitch’ instead of a friendship. The result is a relationship that bounces up and down based on the outcome of each transaction. We see this in customers being enthusiastic references one week and unwilling to help the next. When we think about our interactions as a way to build a relationship, we create lasting loyalty, and we convert a series of pitches, into  a trusted friendship.

Communicating with customers needs to be bidirectional, personal, frequent, candid, open, consistent, wide-ranging, and honest. It has to have an analog component to go with the digital (voice to go with the text, email, questionnaires, etc.). To build friendships, the analog components (video chats and in-person meetings) are more important than any digital ‘pitches.’  It is hard (nearly impossible) to make friends without actually talking.  

Goldilocks Optimism

I read an article about “toxic optimism” that focused on the bad things that can happen when you are overly optimistic. It got me thinking about a Goldilocks effect. In the fairy tale, Goldilocks tried the three bowls of porridge in the bears’ house and announced that the first one was ‘too hot,’ the second one was ‘too cold,’ and the third one was ‘just right.’  She tested the extremes and found her acceptable center. When I read about toxic optimism, what struck me was that optimism and pessimism are on a continuous spectrum. One can be too optimistic or too pessimistic, and each can be toxic. We need to find the balance which is ‘just right.’  

Toxic optimism causes us to overlook the flaws and the dark spots. It leads us to assume everything is going fine, and we let down our guard. We suppress our paranoia and stop looking for the bad things that could bite us. In sales, toxic optimism leads us to be so sure we are going to win a deal that we miss warning signals and are totally surprised when the prospect says they “went a different way.” In product or professional services, it leads us to assume everything will work on time and as specified. It can cause us to project optimistic delivery dates or over-state product capabilities that turn out to be wrong and result in unhappy customers.  In a board setting, it can cause a board to overlook brewing trouble that ultimately diminishes value creation.

Toxic pessimism is just as bad or worse than toxic optimism. This is the Eeyore effect - everything is horrible so why bother trying to find the good. Aside from it just being depressing, toxic pessimism can cause us to give up and not reach for the brass ring of success. When all you hear is ‘it can’t be done,’ you lose the will to go for it. A toxic pessimist is bad for everyone around them. They become a culture vampire sucking the life out of an organization.

If we fly too close to toxic optimism we are likely to crash, and similarly, if we fly too close to toxic pessimism we are also headed for a crash. We need to find our Goldilocks zone. In an entrepreneurial environment, where we are trying to conquer the world, the Goldilocks zone is generally not in the middle. In a growing, hard-charging environment we invariably lean further in the direction of optimism than pessimism. We can’t afford to be in the boring middle if we want to drive enthusiasm and the conviction that we can do anything we put our minds to. However, we need to preserve a dose of reality and paranoia in order to make sure we execute efficiently and avoid adverse surprises. 

If we are overly invested in our optimistic view, we become defensive about our optimism, and shut out the voices of reality and paranoia. Toxic optimism in one person can bring out toxic pessimism in another as they try to break through the optimistic defensiveness in order to balance the scale and push for reality. Andy Grove of Intel famously said “only the paranoid survive,” and Joseph Heller (Catch22) added “Just because you're paranoid doesn't mean they aren't after you” (also attributed to Kurt Cobain). This translates into the need to be on our guard and always plan for the full range of contingencies - good and bad, while maintaining confidence and optimism about what we are doing and what we can accomplish. The challenge for leaders is to find the Goldilocks zone where there is optimism without toxicity and just enough pessimism to keep everyone on their toes.

The burden to get this right falls squarely on the shoulders of the CEO. There will always be counterbalancing voices in the executive ranks, and the CEO needs to sift through the opinions and set the tone for the organization. When the CEO tips too far in either direction the impact on the organization is exaggerated. The rank and file take their cue from the CEO, and equally so, the board of directors rely upon the CEO for insight. Boards tend to be pretty discerning, but their ability to dig into the depths of an organizatom are limited. As board members, we generally trust the controls and the veracity of the information provided. When a CEO is operating with toxic optimism, it can lead to filtering the reality presented to the board. Warning signs and negative flags are masked, and the board is presented a picture that, in the extreme, is materially misleading.

As board members, we need to avoid being swept up in the vortex of toxic optimism. Our motto has to be trust but verify. Without becoming Eeyore, we need to make sure we are data-driven, and maintain a healthy level of paranoia. If things appear too good to be true, they probably are not as presented. If the company is consistently missing its goals, we may be dealing with a CEO suffering from toxic optimism. Warning bells should be going off to dig deeper into the planning processes. We need to discern if toxic optimism is ‘bullying’ the company into setting aspirational but unrealistic targets. Boards need to listen for the contrarian voices that may be buried in the executive team or the rank and file, but we also need to avoid undermining the CEO. It is a balance that is built on trust, but when the warning bells go off, we need to practice ‘trust but verify’ behaviors.

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.