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.

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.