Father/Mother Knows Best?

USA Today had an interesting article today about how founder-led companies perform better than their non-founder-led counterparts, with a 15-year stock price appreciation of 970% vs. the S&P 500 average of 222%.  That’s pretty powerful data.

The general reasons cited in the article include

founders having deep industry knowledge…having a powerful presence in the company…having a huge financial stake in the success of the business…not looking for the next job so can take a long-term perspective…being street fighters early on

I think all those are true to some extent.  And it’s certainly true, as one of the CEOs interviewed for the article said, that it’s not because founders are smarter or harder working.  But to add to the dialog, I think there are two other big reasons founders may be more successful at generating long-term returns for their companies.  One is much more tactical than the other.

1. Founders have a deep, emotional connection to the business.  For many of us, and certainly for the 15-year-plus variety mentioned in the article, a founder’s company represents his or her life’s work.  Whether or not your name is on the door like Michael Dell, as a founder, your personal reputation and in many cases (perhaps in an unhealthy way), your sense of self worth is tied to the success of the business.  I’m not suggesting that “hired” CEOs don’t also care about their reputations, but there is something different about the view you have of a business when you started it.

2. Founders have longer tenures.  The article didn’t say, but my guess is that for the 15 years analyzed, the average tenure of the founder-led companies was 15 years…and the average for the S&P 500 was something like 5 years.  And while 5 years may seem like a long time in this day and age of job hopping, it’s not so long in the scheme of running and building an enterprise.  It takes years to learn an industry, years to build relationships with people, and years to influence a culture.  Companies that trade out CEOs every few years are by definition going to have less solid and consistent strategies and cultures than those who have more stability at the top, and that must influence long-term value as much as anything else.

I’m sure there are other reasons as well…comment away if you have some to add!

Starbucks, Starbucks, Everywhere, Part II

In 2004, I blogged about Starbucks’ implausible Forbidden City location (post includes picture) in the heart of one of China’s most prominent national monuments.

Today, under pressure from the Chinese government, Starbucks announced that they’re closing the location, reflecting “Chinese sensitivity about cultural symbols and unease over an influx of foreign pop culture,” according to a very short blurb about this in today’s Wall Street Journal.

It must be indescribably different to live in a society that’s so tightly controlled.

Calling for the Boss’s Head

Maybe it’s just a heightened sense of awareness on my part, but I feel like our culture has really turned up the time-to-fire-the-boss-o-meter to a new level of late.  What is going on that has caused the media and vocal people among us feel this thirst for public lynchings over a single incident?  The list isn’t small — just in recent weeks or months, you have Rumsfeld, Dunn (HP), Gonzales, Imus, Wolfowitz, and even last week, Snyder (Vonage).  And I’m sure there are a dozen others, both corporate and political, that I’m not dredging up mentally here on a Sunday night.

Now I’m all for accountability, believe me, but sometimes it doesn’t help an organization for someone to resign at the top over a single incident.  Jarvis says it best when he says that he would have fired Imus a long time ago because he’s boring and because he’s always been a racist, not because of a few choice words last week.  Should chronic poor performers be dismissed regardless of level?  Absolutely.  Should a leader be forced to step down just to make a point?  I’m much less certain.  In some ways, to carry Jarvis’s theme forward, that kind of dismissal is just a sign to me of lackadaisical oversight along the way, finally coming to a head.

I’m no psychologist, but my guess is that in many cases, a flash dismissal of another otherwise competent leader can pretty bad and traumatic for the underlying organization (be it a company or country).  Consider the alternative — an honest apology, some kind of retribution, and a clear and conspicuous post-mortem — that leaves the ship with its captain and sends the message to the troops that honest mistakes are tolerated as long as they’re not repeated and amends are made.

This in no way is meant to defend the actions of any specifics of the above list.  For many of them, their actions may have prompted an unrecoverable crisis of confidence.  But for my part, I’d rather see regular accountability and transparency, not just at the peaks and troughs.

It’s a Little Weird When Your Best Customer Experience of the Week is with the Government

Mariquita has been doing a lot of personal admin lately for us.  This week had a little surprise in it.

Verizon continues to be one of the most awful, painful vendors in the history of the universe.
At least their phone network is solid, since any interaction with the people at the company is so bad.  We came to the conclusion this week that they actually do some things which aren’t just the usual bad customer service or outrageous pricing — they have some policies in place that are literally designed to systematically rip off their customers.  The one we ran into was (after 45 minutes on and off hold, of course) that the data plans for Treos are prepaid for a month, but when you go to cancel your data plan, they tell you they HAVE TO cancel it the day you call, even if you have days or weeks left on your plan, and they CAN’T issue a refund for unused days.  But if you complain loudly enough, a supervisor can keep your service active through the end of your pre-pay, or can issue you a refund.  So in fact, they are telling their customer service reps to lie to their customers in the hope that their customers don’t push back so they can keep your money while not delivering your service.

She had a similarly bad experience dealing with our insurance company about car insurance.  State Farm just has a ridiculous set of procedures in place around changing car insurance that cause their customers to jump through hoops several times over for no apparent reason at all.  There have been several stupid things, but this week was needing to take a brand new car to get inspected before insuring it within three days of buying it.  But we had to take it to a specific mechanic on the “approved list” to get it inspected.  That place required an appointment (which meant two trips).  It couldn’t be done at the dealer.  Then the actual inspection lasted about 30 seconds.  Maybe they were just making sure there was an actual car, not a pretend car.  Harry Potter, beware.

And then came the surprise — Mariquita’s trip to the DMV to trade in our old license plates.  She was in and out in under 5 minutes with a prompt, efficient, friendly person handling the transaction with a smile.  Wonders never cease.

It doesn’t take a lot to be great at customer service, just the right mindset and culture.  It’s amazing that Albany (or at least a small pocket therein) seems to have figured that out before some of the biggest companies around.

The Same, But Different

Mariquita and I spent several hours on the dueling laptops this evening.  It turned out, we were both working on OD things (Organization Development).

Mariquita’s project, for her Masters’ Program at Amercan U — was writing a lengthy paper on data collection and feedback as a major function of OD, as applied to a specific case of a startup going through growing pains (not Return Path…a case given by the teacher).  Her main comment — “they’ve got problems, man.”

I was working on an overhaul of Return Path’s management structure and what I call M/O/S (management operating system), based on the results of this year’s 360 Review process.  My main comment — “we’ve got problems, man.”  Well, not exactly in the same way, but we certainly have some major things to think through and change about the way we operate if we want to get the business to the next level.  The main topics were around preparing our organization — in terms of attitude, development, structure, and culture — to be 4x larger than it is today within a few years.

Interesting comparison.  Both valid uses of OD, totally different applications.

Book short:  Myers-Briggs Redux

Instinct:  Tapping Your Entrepreneurial DNA to Achieve Your Business Goals, by Tom Harrison of Omnicom, is an ok book, although I wouldn’t rush out to buy it tomorrow.  The author talks about five broad aspects of our personalities that influence how we operate in a business setting:  Openness to Experience, Conscientiousness, Extroversion, Agreeableness, and Neuroticism.  These traits are remarkably similar to those in the popular Myers-Briggs Type Indicator that so many executives have taken over the years.

It’s not just that you want to be high, high, high, high, and low in the Big 5.  Harrison asserts that successful entrepreneurs need a balance of openness and conscientiousness in order to be receptive to new ideas, but be able finish what you start; a balance of extroversion and agreeableness so that you have enough energy but also have the ability to work with others; and not too much neuroticism, as you have to be able to take risks.

The book not only talks about how to spot these factors, but how to work around them if you don’t have them (that part is particularly useful, but he doesn’t do it for all five factors).  He also talks about the entrepreneurial addiction to success, and creating the all-important Servant CEO culture, which I certainly agree with and wrote about early on in this blog in my “Who’s The Boss?” posting.

Harrison does have a great section on how “Nice Guys” can and should be winners; how being nice and having guts aren’t mutually exclusive, and he gives a well-written Twelve Rules for expressing the Nice Guy gene:

– Don’t walk on other people, but don’t let them walk on you

– Respect the big idea in everyone

– Own everything

– Never let ’em see you sweat Keep it simple

– Never think in terms of “So what have you done for me today?”

– More is less

– Live your word consistently

– Don’t lie:  fix what’s causing you to think you need to lie

– Never forget to thank, congratulate, or acknowledge people for their efforts

– Keep your door and your heart open

– Never stand in the way of balance

The most annoying part of the book is that Harrison keeps making references to a handful of genetic studies about twins to prove on and off that traits are inherited and that inherited traits can be expressed in different ways.  These references are mildly interesting, but they detract from the substance of the book.

Overall, the book has some interesting points in it, but it’s too much like Jim Collins’ Good to Great and Built to Last, only without the depth of business research and case studies.  Plus, Harrison does the one thing I find most irritating in business books — he is clearly an expert in one thing (business), but he unnecessarily pretends to be an expert in another thing (genetics) in order to make his point.

Six Candles:  You Can’t Tell What The Living Room Looks Like From the Front Porch

Today, Return Path is six years old.  I thought I’d celebrate the occasion by reflecting back on how different our business is now than we thought it would be at the beginning.

When we started Return Path, we were sure Email Change of Address (ECOA) was going to be a $100mm business.  It still may be someday, but it’s not now.  If you had told me when we started the company that we’d execute on ECOA but also be market leaders in email delivery assurance (which didn’t exist at the time), email list management and list rental (a huge market by the time we started), and email-based market research (which only barely existed at the time), I would have said "no way!"

But that’s where we are today, and we’re quite proud of it.  There aren’t more than a dozen people left in the company from the original, original team that set out to build a new type of product called Email Change of Address back in 1999/2000, although lots of our alumni are out there and remember the early days.

Running a startup is all about flexibility.  Unless you are that 1 in 100 entrepreneur whose original idea turns out to be exactly the wonderful, high-growth, high-margin business that you thought it was going to be on the back of that cocktail napkin, you need to be nimble and be able to shift as you spot new opportunities.  I’m happy that our team and culture thrive on that level of flexibility.

As one of my previous managers once said, you can’t tell what the living room looks like from the front porch.  You have to walk up to the front door, unlock it, and go inside and wander around before you get a real read on it, not to mention figure out if you want to have a seat.

Happy Birthday, Return Path!

Everyone’s a Direct Marketer, Part II

(If you missed the first post in this series, it’s here.)

So, all companies are now direct marketers — their web sites and email lists make it so, they can’t effectively reach their fragmented audience without it, and consumer permission demands it.  Why is this new to some companies and not others, and what lessons can companies who are new at it learn from traditional direct marketers?

First, the quick answer — it’s new because it’s being driven by the new technologies the Internet has brought us in the past 10 years.  Those technologies have opened up the possibility for 1:1 communication between any company and its customers that was previously unaffordable to many industries with low price point products.  You never received a telemarketing call for a movie, because making the call costs $3, and all you’ll spend on the movie is $10.  P&G never sent you a glossy direct mail piece for toothpaste, because they’d spend $1 at a small chance you’ll buy their $2.25 product.  But the cost of a banner ad or a given keyword or an incremental email is so low (virtually zero in some cases), that everyone can afford a direct presence today.

What lessons can companies who are new at it learn from traditional direct marketers?  There are many, but four things stand out to me that good DMers do well that are different from the skills inherent in traditional marketing/advertising:

1. Take the creative process seriously.  Just because you can dash off an important email to your staff in 30 seconds doesn’t mean your marketing people should do the same to your customers.  Put your email campaigns or templates through a rigorous development and approval process, just as you would a newspaper ad or radio spot.  There’s just no excuse for typos, bad grammar, or sloppy graphics in email or on a web site.

2.  Use live testing and feedback loops.  It’s hard to test two versions of a TV commecial without incurrent significant extra cost.  It’s impossible to test 20.  But with today’s software, you can test 10 versions of your home page, or 100 versions of your email campaign, almost instantly, and refine your message on the fly to maximize response.

3. Make transparency part of your corporate culture.  Just as you can have a 1:1 relationship with your customers, your customers expect a 1:1 relationship back.  If they want to know what data you store on them, tell them.  If they want you to stop emailing/calling/mailing them, stop.  If they want to know more about your products or policies, let them in.  Think about marketing more as a dialog with your customers, and less as you messaging them.

4. Merge content with advertising.  Old-school advertisers didn’t have to worry about this one, because their ads were always surrounded by other people’s content (TV, newspaper, radio, magazines).  But in direct marketing, your message is sometimes the only message around.  Make it interesting.  Make it entertaining.  I always think the prototypical example of this as the old J. Peterman catalog, which was trying to sell clothing and accessories by creating stories and mystique around each product.  But there are tons of other examples as well, especially around email newsletters.

Next up in the series:  What does this mean for the way companies will be structured or operate in the future?

Book Short: Beyond 10,000 Hours

In Outliers: The Story of Success, by Malcolm Gladwell (post, buy), we are taught, among other things, that it takes 10,000 hours of practice to become an expert at something, as well as a dash of luck and timing, as opposed to huge amounts of innate and unique talent.  In Talent is Overrated, by Geoff Colvin, this theory comes to life, with a very clear differentiating point – it’s not just logging the 10,000 hours, it’s HOW the hours are spent.

Colvin’s main point is that the hours need to be spent in what he calls “deliberate practice.”  The elements of deliberate practice are best explained with his example of Jerry Rice, although you can apply these to any discipline:

• He spent very little time playing football (e.g., most of his practice was building specific skills, not playing the game)
• He designed his practice to work on specific needs
• While supported by others, he did much of the work on his own (e.g., it can be repeated a lot, and there are built-in feedback loops)
• It wasn’t fun
• He defied the conventional limits of age

If you’re the kind of person who cares deeply about your own performance, let alone the performance of people around you, it doesn’t take long to be completely riveted by Colvin’s points.  They ring true, and his examples are great and cross a lot of disciplines (though not a ton about business in particular).  I wasn’t 50% done with the book before I had made my list of three key things that I need to Deliberately Practice.

There are some other great aspects to the book as well — including a section on Making Organizations Innovative, from creating a culture of innovation to allowing people the freedom to think, to a section on where passion and drive come from, but hopefully this post conveys the gist of it all.  Want to be a better CEO?  Or a better anything?  This is a good place to start the process.

Thanks to Greg Sands for sending me this excellent book.  I’m going to work it into my rotation for Return Path anniversary presents.

The Advantage: Why Organizational Health Trumps Everything Else In Business is Patrick Lencioni’s newest book.  Unlike most or all of his other books (see the end of this post for the listing), this one is not a fable, although his writing style remains very quick and accessible.

I liked this book a lot.  First, the beginning section is a bit of a recap of his Five Dysfunctions of a Team which I think was his best book.  And the ending section is a recap of his Death by Meeting, another really good one.  The middle sections of the book are just a great reminder of the basic building blocks of creating and communicating strategy and values – about driving alignment.

But the premise, as the subtitle indicates, is that maintaining organizational health is the most important thing you can do as a leader.  I tell our team at Return Path  all the time that our culture is a competitive advantage in many ways, some quantifiable, and others a little less tangible.

A telling point in the book is when Lencioni is relaying a conversation he had with the CEO of a client company who does run a healthy organization – he asked, “Why in the world don’t your competitors do any of this?” And the client responded, “You know, I honestly believe they think it’s beneath them.” Lencioni goes on to say, “In spite of its undeniable power, so many leaders struggle to embrace organizational health because they quietly believe they are too sophisticated, too busy, or too analytical to bother with it.”  And there you have it.  More examples of why “the soft stuff” is mission critical.

Lencioni’s “Recipe for Organizational Health” (the outline of the book):

–          Build a Cohesive Leadership Team

–          Create Clarity

–          Overcommunicate Clarity

–          Reinforce Clarity

And his recipe for creating a tight set of “mission/vision/values” (the middle of the book):

1. Why do we exist?

2. How do we behave?

3. What do we do?

4. How will we succeed?

5. What is most important, right now?

6. Who must do what?

While there are lots of other good frameworks for doing all of this, Lencioni’s models and books are great, simple reminders of one of the CEO’s most important leadership functions.  We’re recrafting our own mission and values statements at the moment at Return Path, and we’re doing it using this 6-Question framework instead of the classic “Mission/Vision/Values” framework popularized a few years back by Harvard Business Review.

The full book series roundup as far as OnlyOnce has gotten so far is:

• The Three Signs of a Miserable Job (post, book)
• The Five Temptations of a CEO (post, book)
• The Four Obsessions of an Extraordinary Executive (post, book)
• Death by Meeting (post, book)
• The Five Dysfunctions of a Team (post, book, Field Guide)
• Silos, Politics and Turf Wars (post, book)
• Getting Naked (post, book)
• The Advantage (book)

The Value of Ownership

We believe in ownership at Return Path.  One of our 13 core values, as I noted in my prior post, which kicks off a series of 13 posts, is:

We are all owners in the business and think of our employment at the company as a two-way street

We give stock options to every employee, and we regularly give additional grants to employees as well, as their initial grants vest, as they get promoted into more senior roles, and as they earn them through outstanding performance.  But beyond giving those grants out, we regularly remind people that they are part owners of the business, and we encourage them to act that way.  Among other mechanisms for this is an award we allow employees to give out to one another (through a regular mechanism we have for this, which I’ve written about in the past here), the Think Like an Owner award.

One great example of how this value appears in the workplace is that, more often than not, our people think about how to invest money rather than how to spend it.  I wish this happened 100% of the time, and we’re working towards that, but for the most part, people here don’t talk about things like “budget,” “headcount,” and “spend” the way they do at other companies.

Another example is around the “two-way street” concept written into the value statement.  We trust our employees to make every effort to do right by the company, and we make every effort to right by employees in return.  Among other things, we don’t have a formal vacation policy. People are encouraged to take as much vacation as they can, at least 3-4 weeks per year.  We track the days just to make sure people are in fact taking time off, but we don’t have a limit, and we also don’t let people accumulate compensation if they don’t take the time off.  We decided at some point – we don’t count how many hours people work, why should we count the hours they don’t?  We trust that people will get their jobs done, and if they don’t, they will suffer other consequences.  The result of this policy is that people are basically taking the same amount of vacation time they took before, maybe slightly more, but they are liberated from fretting over their time if they want or need extra days or half days here or there.

Two other examples are things we started more recently.  One is called OTB Day, which stands for “On The Business.”  Having a full day set aside each month that is meeting-free and travel-free is a way of carving time out for people to take a step back from their day-to-day jobs of working IN the business so every single employee can spend a relatively distraction-free day being thoughtful about working ON the business and figuring out how we can reinvent and reimagine things as opposed to just doing them.  The other is the concept of a Hack-a-thon.  A lot has been written about this topic on lots of other blogs, but fundamentally, this is about trusting that our whole employee population (these are open to everyone, not just engineers) can figure out how to spend two days’ time wisely working on “outside” projects.

The dividends just keep accumulating as we get larger and as the culture of ownership becomes more and more ingrained.  How owner-like do your employees feel about your company?