It’s two months later, and the Toyota Rosegarden /Toyota Brookdale kerfuffle ended up being a blessing in disguise. News of SparkLight’s platform bug and Brookdale’s price poaching escapade rippled through the auto dealer community. It had the perverse effect of elevating brand awareness. Auto dealer GMs across the San Francisco Bay Area wanted to learn more, so they opened their doors. The idea of an instant price quote product, to address the lead response problem, became a subject of interest. Of course, there were tough questions about platform security and reliability, but the “Brookdale bug” (its internal name) had become a call to action with the engineering group, and steps had been taken to ensure it would never happen again. Now, eighteen dealers are live on the platform. And the owner of seven of those stores, Fess Fieldstone, just invested $1 million in SparkLight. This second seed investment is structured as a convertible note, as before, but this time the terms are better. The money was wired to the bank last Friday.
Five people are gathered around you as you stand in front of a whiteboard, hung on the only free wall in the apartment. You look around and see Joe standing to your left with the three engineers — Bill, Farook and your most recent addition, Sanjay. Vijaya is on your right. The apartment is now full — cramped, actually. You ask if there’s complete agreement, and everyone nods. Five company values are scrawled on the whiteboard. You glance at the nearby flip chart stand, with ten pages of scribbled notes thrown over the back of the stand — the detritus of a contentious debate.
You feel confident that these five value statements capture the essentials. They’re short (2–3 words each) and pithy. One honors the customer; another emphasizes product quality, and three others address rights and obligations of “citizenship” in SparkLight Digital.
This completes the “north star” project you gave yourself a month ago. It was time, you decided, to formalize a statement of mission, vision, and values. Mission was finalized a week ago: “To bring efficient transparency to communications between car owners and car dealers, so buying and servicing a car is simpler and mutually beneficial.” The mission links to the vision: “To become the leading next-generation auto dealer CRM platform in North America and Europe, which will power multi-device, multi-channel communications that support fast, transparent transactions between consumers and dealers.” A bit unwieldy, but they get the point across.
Of course, these two statements are wildly aspirational. All you have built so far is a bolt-on price quote platform for eighteen auto dealers in one region of the country. But you had to start somewhere.
Despite the frenzy of tasks on your mind — getting a desk of your own (you and Joe still share the Home Depot door-turned-desk), finding office space for the growing company, implementing a payroll system, securing a temp CFO, onboarding seven new dealers, dealing with new integration permutations, and hiring for nine open positions — you give yourself one brief moment to feel happy.
. . .
Each position in your company has distinct financial value. Value is based on relative business leverage. Knowledge workers have more; routine-task workers have less. If you work at a mid-stage tech startup — say $8M in revenue run rate — the lowest level individual contributor employee might make $40,000, and own just a fractional-percent speck of equity. Meanwhile, the CEO might make $400,000 in total cash compensation and own 15% of the company. Each person’s economic value is a function of the competencies required for the role and the cost of these competencies in a competitive talent market, given scarcity and degree of leverage. As a result, compensation varies a lot. And as you grow, the gap from lowest paid to highest continuously widens.
But great leaders recognize that this variation in financial value — both necessary and appropriate — does not correspond to any variation in human value. In fact, great leaders use words, actions, and symbols to reinforce the notion that all employees are equal in the most fundamental ways — in the privileges of shared membership, in shared human dignity, and in expected adherence to shared values. Furthermore, great leaders share power — pushing it down to the lowest possible level.
As CEO, you have many roles. But one of the most significant is that of role model. Through your daily decisions and actions, you demonstrate who gets ahead, and why. You reveal what efforts and outcomes get rewarded. You show what skills merit proactive development. You demonstrate what behaviors are tolerated. You show whether you respect universal human dignity. Monkey see monkey do: for good or ill, you are the most important role model in your company. Employees will follow your lead.
Want to be a good role model? You become one by attending to the following:
- Evangelism of cultural values
- Evangelism of mission, vision, and strategy
- Development of supervisors into leaders
- Consistency of “say” and “do”
- Exhibitions of personal accountability
Evangelism of cultural values
Through a reflective and employee-involved process, you have crystallized and memorialized five (or so) value statements that define your aspirational culture. As CEO, you now must embrace the role of evangelist. It is on you to bring these values to life through things said and things done. You challenge executives to lead by example. You drop in on functional group meetings, encouraging debate about the practical meaning of one or more of the values. At all-hands meetings, you give out awards to people who have exemplified them. You meet directly with each group of newly hired employees, and describe what it means — and what it takes — to work here. You explain each of the values and provide examples of values in action emphasizing that every member of the “club” is expected to live by them day by day. By these acts, you evangelize the values and shape your culture. It’s never too early to begin.
Evangelism of mission, vision, and strategy
As CEO, you inspire employees when you point them towards a compelling mission and vision. Then, once you have clarified mission and vision, you must connect today’s priorities to them. You do this by articulating the strategic imperatives that are most important now. You link those imperatives to the key projects that are underway in the company. By so doing, employees gain an understanding of how today’s labors link to the mission and the vision.
Early in a company’s lifecycle, mission, vision, and strategy are malleable. Belief bends towards truth as you scale and validate product/market fit. Be straightforward with your employees about this. “This is our mission; this is our strategy, these are our priorities now. They may change, and if they do, I’ll tell you. But for now, your job is to act as if these are written in stone.”
Development of supervisors into leaders
It is said that all politics are local. Similarly, an employee’s direct supervisor has an outsized impact on that employee’s passion, effectiveness, and perception of the company. Bad supervisors kill motivation. Managers, directors and vice presidents are all supervisors. That does not mean they are leaders. To be a leader requires that you project directional, executional, and moral voice in such a way that you engender followership. More often than not, this is best done when a leader gives up power and hands it to a follower, with boundaries and support.
A leader coaches and develops the people who work for her. She assigns responsibility and delegates authority to them and shares accountability with them. Each employee’s task-relevant maturity level is different; a leader’s coaching approach varies accordingly. A leader builds leverage by infusing the work groups she leads with deep mutual trust and self-sufficiency, developing each person uniquely and demanding a collaborative orientation from all.
As chief role model, a good CEO brings words, deeds, and structure to the task of leadership development. There is significant power in regular one-on-one coaching between CEO and VP, VP and director, and director and manager. But the most crucial ongoing course in the leadership development curriculum, one that begins when there are just five desks in the company office and continues through all the stages of company growth, is “CEO observation.”
Consistency of “say” and “do”
Your words of evangelism and acts of leader development are essential, but they are not enough. The totality of your actions will speak louder than words. Do you talk the talk about values but fail to walk the walk? Are you the biggest offender of the values you espouse? Do you fail to live by the principles of leadership you proclaim?
Every action you take, every decision you make will be compared to your proclamations. Inconsistencies will be noted. Employees want desperately to work for people they can trust — but are wise enough to be skeptics. Nothing saps leadership of its force more than a chasm between “say” and “do.”
Leaders who care about consistency between words and actions will go to great pains to ensure it. When your company is early stage, consistent group feedback helps you maintain alignment between what you say and what you do. You are in constant touch with everyone; the feedback loop is real-time. But as you scale, there is higher risk that your words and deeds will begin to diverge: a diversity of issues lure towards expedient solutions; the balancing of egos edges you away from brutal honesty; the desire not to rock the boat tempts you to sweep things under the carpet.
To counter this slide, you must tune in to the voice of the employee. Regularly walk around the office and pop in on small groups to chat. Find out what’s going on. Make calls to remote employees, and ask them about their work. Encourage any employee at any level to speak up about inconsistencies between values and actions. You must take fast action on claims of harassment, no matter how low the victim’s position or how high that of the accused. Celebrate the unsung heroes in your organization through awards and recognition, and celebrate shared membership in the “club” through bonding moments — such as a beer bash, where you’re the one serving drinks.
At scale, when more formal methods may be required, you might charter a group of individual contributor employees to report regularly on the variance between stated values and real behavior in the company. Send out an employee survey a few times a year, checking on perceived adherence to values and perceived consistency of priorities with mission, vision, and strategy. If your cultural values espouse continuous personal development, post open positions inside the company before going outside to hire.
And avoid management debt. Ben Horowitz introduced the concept of management debt — similar to technical debt. In technical debt, sloppy code that was hacked together to get the next release out the door builds up over time, creating a long-term drag on the platform’s efficiency, flexibility, and reliability. Like technical debt, management debt is the accumulation of expedient decisions that erode your stated values. For example, a key employee in a critical workgroup wants to leave your company for a competitor. You ignore your carefully designed, principles-based compensation guidelines, substantially overpaying him to stay, despite introducing a noticeable compensation inequity into the workgroup. Or you engage in title inflation to appease an employee. Or you make promises about future advancement that you don’t intend to keep. That’s management debt. It’s a moral failure. Don’t do it.
Exhibitions of personal accountability
Coach Bear Bryant, the long-winning coach of the University of Alabama Crimson Tide, once said, “If anything goes bad, I did it. If anything goes semi-good, we did it. And if anything goes really good, then you did it. That’s all it takes to get people to win football games for you.”
Take the blame when things go bad. First and foremost, it’s the right mindset for a leader to have — for indeed, the CEO shares ultimate accountability for every action that occurs inside the company. But because it requires humility and courage, such actions often increase followership. When John F. Kennedy announced to the nation the failure of the Bay of Pigs invasion, he took full personal responsibility. Shortly after that, his poll numbers soared.
The day may even come when it becomes necessary to acknowledge a genuine personal failure. If you recognize that you have fallen significantly short of stated values in your particular actions or inaction, then it may be necessary for you to stand in front of the entire company and say so. Such acts must be exceedingly rare, but when sincere they are powerful. No one expects leaders to be perfect. We respect leaders who openly acknowledge their mistakes and try to learn from them.
. . .
It’s a beautiful Spring day, so Joe asks to take a walk outside with you. “We need to talk,” he says. He’s concerned about Bill. Farook and Bill have been on board for three months now; Sanjay for three weeks. With four additional new engineers soon to join the small band, Joe believes it’s super important for existing engineers to model the right behavior — especially with regards to work ethic. But Bill isn’t pulling his weight. He arrives late most days, and he leaves early. He seems haggard and distracted. He’s capable enough — his code is tight. In the daily scrum, he makes useful contributions. He’s productive hour by hour. But he’s just not putting in enough hours, and as a result, he’s about a third less productive than Farook. Farook has taken notice, and he’s complained about it. And Sanjay seems like he’s trying to figure out whether sixty hours a week is expected, or forty is just fine. Lately, he’s been trending towards forty.
Joe is confused. He was clear with Bill before hiring him, and Bill seemed to get it. We are an early stage startup, and work ethic expectations are high. Every engineer needs to commit to sixty hours a week minimum. But Bill’s not even close.
You probe further — how recently has Joe discussed his concerns with Bill? Apparently, Joe tried to broach the subject a couple of weeks ago, but Bill was testy, and so he backed down. You coach Joe. Accountability is a shared relationship. Joe can’t allow this kind of behavior to slip by unaddressed. Group norms are at stake. Joe needs to get Bill to acknowledge the problem, then get him to alter his behavior. If Bill can’t change, he must leave. Joe walks back into the apartment to talk with Bill.
An hour later, Joe reappears with a furrow in his brow. Your second walk with him ensues.
“Just took a walk with Bill. I told him he isn’t putting in the hours, simple as that. Good work; not enough of it. He started by promising to do more at home, but I said I needed all hands on deck in the office at this stage of our company. Our first engineers have to set a visible example for the new ones. He finally broke down — literally. He started sobbing. It totally caught me off guard. Turns out his wife has stage three non-Hodgkins lymphoma,” Joe says. “She’s been going through chemo and needs lots of home support. She’s super tired and can’t do anything on her own. That’s why he’s been coming in late and leaving early.”
Sweat beads on Joe’s face and his shirt drips at the arms. He’s been walking a lot today. What to do? You’re both stumped. On the one hand, the business is a tender green shoot; a single wrong step could stomp it out of existence. The product roadmap is long and impacted. There’s a ton to be done. Four of the nine open positions are for more engineers. As your engineering group comes together, every new engineer will quickly surmise the output expectations of the current group. To have one of the first three engineers in our company punch a nine to five clock without retribution makes it more likely that every new engineer will think nine to five is perfectly OK.
But. Bill does have his hands full. It must be hard for him and his wife — you can’t imagine the physical and emotional burden. You wouldn’t wish it on your worst enemy. You and Joe stand together in silent reflection. Finally, Joe proposes a solution. It’s a good one.
Joe calls Bill right away, and makes his case. Thirty minutes later, Joe, Bill, Farook, and Sanjay are standing in the small kitchen. Bill speaks up. “I want to explain to you why I’ve been cutting back on my hours. Six weeks ago we found out my wife has cancer. She needs my help. That’s why I’ve been coming in late and leaving early. I can keep up at my current pace, but I can’t do more. Not now. Once we’re out of the woods, I can make up for lost time. Sorry — I know how critical our deliverables are right now. I realized that you guys need to know why I haven’t been pulling my weight.”
Farook and Sanjay glance at each other. Sanjay looks at the floor, then looks right at Bill. “I will take it,” he says. “I’ll pick up the slack. As many months as you need. Consider it done.”
