It’s fairly rare in a startup or scaleup that you, as a CEO or CXO (Chief [fill in the function] Officer) of any kind, will have significant one-on-one time with other members of the executive suite; instead, you’re most likely to spend time with the team in executive meetings, at offsites, or during all-company events. So, when you do get that one-on-one time it’s important to make sure that it’s not only productive, but that it builds a stronger relationship between you and the other person.

As a CEO I learned that the best way to help people grow and develop, and to further develop a better understanding of each other, is to engage with them in a mix of work and non-work settings.  By that I mean, working together on some aspect of their part of the business. Since each role and each person performing that role are different, there aren’t any hard and fast rules, but I thought I would create a series of posts that provide some ideas on things I’ve done to develop a better relationship, better team, and better company for each CXO in a company. 

I also have a whole series of posts related to each function on the executive team — CFO, CMO, CTO, etc.  So each post is part of two series.  This is the inaugural for both, and it’s quite fitting as Q4 is, for most companies, budgeting and planning season.  So today’s topic is How I engage with the CFO.

When I get the chance to spend time with my CFO I’ve found that we both get the most value working on several “problems” together. For example, we do Mental Math together where we look at key metrics and test them, improve them, or decide to scrap them. We are always attuned to key metrics and from time to time, we project them forward in our minds. What will happen to a key metric if our business scales 10-fold or if it declines 10-fold, for example. 

We are constantly checking to see that our financial and operating results mesh with our mental math.  When looking at our cash balance, we’ll look back at the last financial statement’s cash number and mentally work our way to the current statement: operating profits or losses, big swings in AR or AP, CapEx, and other “below the line” items. Do they add up?  Can we explain what we’re seeing in plain English to other leaders or directors?  The same thing applies to operating metrics — the size of our database, our headcount, our sales commission rate, and so on.

I’ve found that by working on the mental math that we actually come to understand the dynamics of the business far better than merely looking at the numbers or comparing the numbers. The mental math approach forces both you and the CFO to engage with the results, question them, and anticipate how slight changes can impact the company going forward. And once you get to that point, you have the ability to creatively think about how you want to go forward.  Here’s a simple example from the early days of Return Path.  One day, my long-time business partner and CFO Jack and I were doing mental math around how many clients each of our Customer Success team members was handling.  We had an instinct that it wasn’t enough — and we did a quick “how many of those reps would we need if we were doing $100mm in revenue” check and blanched at the number we came up with.  That led to a major series of investments in automation and support systems for our CS team.

Another way that the CFO and I work together is in a game called “spotting the number that seems off.” In any spreadsheet or financial analysis there is bound to be something that doesn’t seem quite right and for some uncanny reason, I am really good at finding the off number. I’m sure this has driven CFOs crazy over my career, but for whatever reason I have some kind of weird knack for looking at a wall of numbers and finding the one that’s wrong.  It’s some combination of instincts about the business, math skills, and looking at numbers with fresh eyes. It’s not an indictment on the CFO’s results and it’s not a “gotcha” moment but it’s part of the partnership I have with my CFO that improves the quality of our work and quantitative reasoning. My hunch is that looking at something with fresh eyes, as opposed to being the person who produces the numbers in the first place, makes it easier to spot something that’s not quite right. Kind of like an editor working with you on an article or book—they always seem to pick up and point out something that you didn’t see even though you spent hours creating it and hours more reading and re-reading something.

A third way to work with the CFO is to create stories with numbers. The best CFOs are the ones who are also good communicators — but that only partly means they are good at public speaking.  Being able to tell a story with numbers and visuals is an incredibly important skill that not all CFOs possess.  Whether the communication piece is an email to leaders, a slide at an all-hands meeting, or a Board call, partnering with a CFO on identifying the top three points to be made and coming up with the relevant set of data to back the number up — and then making sure the visual display of that information is also easy to read and intellectually honest, can be the difference between helping others make good decisions or bad ones.

Of course, a CFO could create stories on their own but like much of storytelling (like screenwriters for movies, plays, or sitcoms, for example), the creative storytelling usually happens with a team. In presenting financial data to others so that it makes an impact, so that it motivates them to take an action or change a behavior, a team approach is best and the CEO-CFO team can be much more effective than either one of them alone.

You won’t have a lot of time to spend 1:1 with any given CXO on your team, including the CFO, but you can make the time you spend together work to your favor in developing a stronger relationship between you and the CFO, and help you build a stronger company that can scale quickly. Without a deep understanding and strong relationship with others on your leadership team, your decision-making, speed, and risk-taking can suffer. Make sure every minute you spend with the CFO is productive. That’s why working on things together like mental math, spotting the off number, and storytelling, can be powerful ways to help you build a better company. 

(Also posted to the Bolster Blog).

Book Short (and great concept): Moments of Truth

TouchPoints:  Creating Powerdul Leadership Connections in the Smallest of Moments, by Douglas Conant, former CEO of Campbell’s Soup Corporation, and Mette Norgaard (book, kindle), is a very good nugget of an idea wrapped in lots of other good, though only loosely connected management advice around self awareness and communication — something I’m increasingly finding in business books these days.

It’s a very short book. I read it on the Kindle, so I don’t know how many pages it is or the size of the font, but it was only 2900 kindles (or whatever you call a unit on the device) and only took a few Metro North train rides to finish.  It’s probably worth a read just to get your head around the core concept a bit more, though it’s far from a great business book.

I won’t spend a lot of time on the book itself, but the concept echoes something I’ve been referring to a while here at Return Path as “Moments of Truth.”  Moments of Truth are very short interactions between you and an employee that are high impact and, once you get the hang of them, low effort.  At least, they’re low effort relative to long form meetings.

Here are a few thoughts about Moments of Truth:

• They are critical opportunities to get things both very right and very wrong with an employee
• They are more powerful than meets the eye – both for what they are and because they get amplified as employees mention them to other employees
• They can come to you (people popping into your office and the like), you can seek them out (management by walking around), and you can institutionalize them (for example, one of the things I do is call every employee on their Return Path anniversary to congratulate them on the milestone)
• They are no different than any other kind of interaction you have, just a lot shorter and therefore can be more intense (and numerous)
• Their use cases are as broad as any management interaction — coaching, positive or negative feedback, input, support, etc.

What can you as a manager or leader do to perfect your handling of Moments of Truth?

First, learn how to spot them when they come to you, and think about a typical employee’s day/week/month/year to think about when you can find opportunities to seek them out.  Their first day on the job.  When they get a promotion.  When they get a great performance review, or new stock options.  Maybe when they get a poor performance review or denied a promotion they were seeking.

Second, learn to appreciate them and leave space for them.  If you have zero free minutes in every single day, you not only won’t have time to create or seek out Moments of Truth, you’ll be rushed or blow them off when they come to you.

Finally, like everything else, you have to develop a formula for handling them and then practice that formula.  The book does talk about a formula of “head, heart, hand” (e.g., being logical, authentic, and competent) that’s not bad.  Although I’d never thought about it systematically before writing this post, I have a few different kinds of Moments of Truth, and each one has its own rhythm to it, and its own regular ending.

But regardless of how you handle them, once you think about your day through this lens, you’ll start seeing them all over the place.  Recognize their power, and dive in!

Why CEOs Shouldn’t Mess with Engineers

I went to the Vasa Royal Warship Museum in Stockholm the other day, which was amazing – it had a breathtakingly massive 17^th century wooden warship, which had been submerged for over 300 years, nearly intact as its centerpiece.  It’s worth a visit if you’re ever there.

The sad story of its sinking seems to have several potential causes, but one is noteworthy both in terms of engineering and leadership.  The ship set sail in 1628 as the pride of the Swedish navy during a war with Poland.  It was the pride of King Gustavus Adolphus II, who took a keen personal interest in it.  But the ship sank literally minutes after setting sail.

How could that be?  While the king was quick to blame the architect and shipbuilder, later forensics proved both to be mostly blameless.

Likely cause #1:  after the ship was designed and construction was under way, the King overruled the engineers and added much heavier cannons on the upper armament deck.  The ship became top-heavy and much less stable as a result, and while the engineers tried to compensate with more ballast below, it wasn’t enough.

Likely cause #2:  the King cut short the captain’s usual stability testing routines because he wanted to get the ship sailing towards the enemy sooner.

Let’s translate these two causes of failure into Internet-speak.  #1:  In the middle of product development, CEO rewrites the specs (no doubt verbally), overruling the product managers and the engineers, and forces mid-stream changes in code architecture.  #2:  In order to get to market sooner, the CEO orders short-cuts on QA.  I’m sure you’ll agree the results here aren’t likely to be pretty.

So product-oriented leaders everywhere…remember the tale of Gustavus Adolphus and the Vasa Royal Warship and mind the meddling with the engineers!

Productive Eavesdropping

We’re in the midst of some pretty extensive renovations of our offices in New York at the moment.  For better or for worse, we’re doing this work without moving out.  We’ve basically crammed everyone into the back half of the office right now while the contractors are working on the front half.  When that’s done, we’ll all move into the newly-refinished front so they can do the same in the back.

One of the interesting side effects of this project is that I’m sharing my office with Anita Absey, our head of sales.  It’s the first time I’ve shared an office in quite a while, at least since the first year of the company’s life when we all sat in one big room together.  So the two of us are getting in a lot more time together than we usually do.  As much as we try to block out the sound coming from across the room, I’m sure there’s been plenty of inadvertent eavesdropping in both directions.

For my part, I’ve enjoyed it.  I have much more of a window into what Anita works on than I usually get.  I’m more in the flow of what’s happening with the sales organization.  I’m seeing what a strong manager she is, and I’ve picked up at least a couple of tips from her around her leadership style.  And we’ve had a lot of quick back-and-forth between things.  When we sat down to have our weekly check-in last week, it was half its normal length since we had already covered much of the topics in the daily flow of conversation.

I wonder if there’s a way to accomplish the same thing with others on my team…or with everyone on my team…without rearranging the office!

As for Anita, well, I suspect I’ll hear from her as to whether or not the arrangement is working for her shortly after I press “publish” on this post!

Managing in a Downturn

I spoke at a NextNY event last night along with several others, including fellow entrepreneur David Kidder from Clickable and angel investor Roger Enhrenberg about this fine topic (Roger wrote a great post on it here) and thought I’d share a few of the key points made by all of us for anyone trying to figure out what to do tactically now that Sequoia has told us to be afraid, very afraid.

Hope is Not a Strategy:  Your business is not immune. It will do what everyone else’s will. Struggle to hit its numbers. Struggle to collect bills. Lose customers. There is no reason to hope you’ll be different.

Get Into the Jet Stream:  Develop your core revenue streams — and make sure they’re really your revenue, not just skimming tertiary revenue out of the ecosystem.  Investors will look to see how sustainable your model is with more scrutiny than ever.

It’s a Long Road to Recovery:  I don’t care what people say. There is no true “v-shaped” bounceback from a true downturn. Plan for a long (4-8 quarter) time to return to normalcy.

Budget Early and Often:  Things change rapidly in this kind of environment. Make sure you reforecast, especially cash flows and cash, monthly when you close the books.

Don’t Stop Thinking About Tomorrow:  If you have a real business, you need to be it for the long haul. Keep pursuing opportunities. Keep investing in the future. Don’t pare back your vision and ambitions. Just make more conservative investments, insist on shorter payback windows, and adjust expectations about timeframes.

Leadership Counts:  Your people are nervous. They’re concerned about their own bank accounts. Their jobs. Be even more present, more transparent, and more communicative. And set the right tone on expenses with your own decisions. The troops need to know that you care about them — and that the big boss has a steady hand on the wheel.

Help Me, Help You, Part II

Thanks to the nearly 100 readers who responded to my reader survey this past week.  While I’m not sure it’s a truly statistically significant base of OnlyOnce’s audience (I’ll have to ask my friends over at Authentic Response), I’ll treat it like it is.  Here’s what I learned.  First, the general results:

• Satisfaction levels are good – 46% are regular readers and love it, 48% read occasionally and think it’s ok, and only 6% gave it an “eh – wouldn’t miss it if it went away”
• Entrepreneurship is the most popular topic, with 86% interest, and Leadership/Management is a close second at 82%.  Online/Email Marketing came in at 61% and Book Reviews at 43%.  Current Affairs and Travel (which I almost never use) were 31% and 25%, respectively
• 72% of people feel frequency at 1-2 posts a week is on target.  Only 4.5% want fewer posts, and 24% (those kind souls) want it more often
• Most people other than Return Path staff found the site through a link on another blog rather than search

Next, the open-ended comments were interesting.  A summary snapshot:

• Positive comments were generally about tone and candid approach, succinct posts, and topics.  One nice person noted his/her favorite thing was “the author” (thank you Mom/Dad/Grandma/Mariquita/Michael)
• Constructive comments varied.  Some good ones are noted below:
• “assumes a level of knowledge not everyone has”
• “too heralding of the VC view of the world”
• “too much focus on email/marketing,” “too local/American” (that’s who I am, though)
• “ I would like to see more about what it takes to be a CEO in day to day operations. what skills do you find you need, what obstacles do you come across, issues with driving a company.”
• “A little too much PRish in regards to Return Path”
• “It seems like everything you write about is too positive. Or at least a negative story with a happy ending. Nothing about what sucks to run a company. I run one and a lot of it does suck.”
• “Not enough personal stuff — who is the author?” (see the About Me link on the blog)
  
• “The word vigilante is bandied around way too much by the author”
• And of course someone noted as constructive feedback that I haven’t yet mentioned my mother’s name (sorry, Mom/Joyce!).  And one person suggested I shave.  Thanks, really.

Finally, the demographics of my audience:

• 3 % are under 24, 45% are 25-34, 41% are 35-49, 11% are over 49
• 80% male and 20% female (surprising)
• Company data wasn’t so interesting, or I phrased the question poorly – but one takeaway is that about 1/2 of readers seem to be “in the industry” generally speaking, with lots of Return Path staff subscribing as well as lots of other entrepreneurs and a handful of VCs
• Level/title was more interesting – nearly half the audience is SVP-level or above at their company

Thanks again, everyone, and I’ll take note of this feedback for future postings!

Book Short:  Virtuous Cycle

Danny Meyer’s Setting the Table: The Transforming Power of Hospitality in Business is a fun read if you’re a New Yorker who eats out a lot; a good read for entrepreneurs around scaling leadership skills as the business grows; and a great read for anyone who runs a serious customer service-oriented organization.  I’ve eaten at all of his restaurants multiple times over the years except for the new ones at MOMA (perhaps a few too many times at the Shake Shack), and while I like some more than others (perhaps the Shake Shack a bit too much), they all do have great hospitality as a common theme.

While there are a lot of good lessons in the book, Meyer talks about something he calls the Virtuous Cycle of Enlightened Hospitality that matches the general hierarchy of constituents or stakeholders in a business that I refer to at Return Path:   employees, customers, community, suppliers, investors.  His general point is that if you have happy employees, they make for happy customers, and returns for investors will follow.  While the specifics may or not be true of all businesses, I bet the first and last item are — especially for service-oriented businesses in any industry.  I wish we had a better handle on the Community aspect at Return Path, but we at least do an OK job at it, especially given the geographic diversity within the company.

(Note this was one of Fred’s favorite parts of the book as well from his review — nice to see a professional investor in agreement!)

Book Short:  Crazy Eights

In honor of Return Path being in the midst of its eighth year, I recently read a pair of books with 8 in the title (ok, I would have read them anyway, but that made for a convenient criterion when selecting out of my very large “to read” pile).

Ram Charan’s latest, Know-How:  The 8 Skills That Separate People People Who Perform From Those Who Don’t, was pretty good and classic Charan.  Quick, easy to skim and still get the main points.  The book lost a little credibility with me when Charan lionized Verizon (perhaps he uses a different carrier himself) and Bob Nardelli (the book was published before Nardelli’s high profile dismissal), but makes good points nonetheless.  Some of the 8 Skills he talks about are what you’d expect on the soft side of leadership — building the team, understanding the social system, judging people — but his best examples were particularly actionable around positioning, goal setting, and setting priorities.  The book reminded me much more of Execution and much less of Confronting Reality (which is a good thing).

For years I’ve felt like the last person around to still not have read The 7 Habits of Highly Effective People, so I thought I’d skip straight to the punchline and read Stephen Covey’s newer book, The 8th Habit:  From Effectiveness to Greatness.  Fortunately, as I’d hoped, the new book summarizes the prior book several times over, so if you haven’t read the first, you could certainly just start with this one.  The book also comes with a DVD of 16 short films, some of which are great — both inspirational and poignant.  Unlike most business books, the 8th Habit is NOT skimmable.  It almost has too much material in it and could probably be read multiple times or at least in smaller pieces.  The actual 8th habit Covey talks about is what he calls Find Your Voice and Help Others Find Their Voices and is a great encapsulation of what leading a knowledge worker business is all about.  But the book is much deeper and richer than that in its many models and frameworks and examples/tie-ins to business and goes beyond the “touchy feely” into hard-nosed topics around execution and strategy.

Now I’m looking for the DVD of the first season of Eight is Enough!

Collaboration is Hard, Part I

Every year when we do 360 reviews, a whole bunch of people at all levels in the organization have “collaboration” identified as a development item.  I’ve been thinking a lot about this topic lately and will do a two-part post on this.  So, first things first…what is collaboration and why is it so important?

Let’s start with the definition of collaboration from our friends at Wikipedia:

Collaboration is a process defined by the recursive interaction of knowledge and mutual learning between two or more people who are working together, in an intellectual endeavor, toward a common goal which is typically creative in nature. Collaboration does not necessarily require leadership and can even bring better results through decentralization and egalitarianism.

What does that mean in a business setting?  It means partnering with a colleague (either inside or outside of the company) on a project, and through the partnering, sharing knowledge that produces a better outcome than either party could produce on his or her own.  Interestingly, the last sentence of the definition implies that collaboration can happen across levels in an organization but is generally more effective when the parties who are collaborating are on somewhat equal footing.

Why is collaboration important?  There are probably a zillion reasons.  Let me take a stab at what I think are three important ones:

1. It’s not about hard assets any more. In a knowledge economy/company, sharing information and learnings is critical.  And that’s what’s at the heart of the collaborative process.  Each person in the organization does a different job; even those who are in the same role have different experiences with their role and different interactions both internally and externally as a result.  A collaborative process that by definition involves learning drives the organization forward and to a better place.  An example…if you have a deep working knowledge of your product, and your counterpart in marketing has a deep working knowledge of public relations, collaborating on a PR strategy to launch the product’s latest feature means that you will learn more about public relations and your colleague will learn more about your product.  In the end, you both get smarter, and the collective intellect of your organization grows — so your company gains incremental advantage over the competition as a result.
2. No man is an island. Most functions and business units are in some way interdependent.  Think back to the example of product and PR above.  Both parties learn through collaboration and make things better for the future.  Here’s the rub, though — the collaboration in that example is the only way to produce the right outcome.  So the prior point illustrates offense, but this one illustrates defense.  Failure to collaborate in this simple case would lead to a misguided PR launch strategy for the new product feature.  Either product would dictate the release strategy and text — missing some important subtleties about what reporters will/won’t pick up or without thinking through how different constituencies will react to the messaging — or PR would dictate the release strategy and timing — missing important but subtle points of competitive differentiation in the product features or botching a market-specific window for the announcement.
3. Leverage is king. If the first point illustrates offense (collaboration moves the organization forward) and the second one illustrates defense (failure to collaborate suboptimizes the quality of results), this one illustrates productivity (perhaps a subset of offense).  Collaboration gives leverage, which in turn gives productivity.   Let’s not pick on our poor product and PR people this time, though.  Let’s think about one of the most difficult things to do, which is to hire good people.  As I wrote a few years ago in The Hiring Challenge, the three things to do when hiring (which are all hard) are defining the job properly, finding the time to do it right, and remembering that the process doesn’t stop on the person’s first day on the job.  So where does collaboration come in?  Once your company is big enough to have a good HR person or team, the collaborative approach to having them help you with recruiting is the best option.  Sure, you can “throw it over the wall” to HR — give them a job title and location and comp range and see what happens.  And you will get some candidates, some of which might be ok.  Or you can forget about HR and try to do it yourself and not have time to get it right.  Or you can collaborate, bring HR into the discussion about the need for the position, the skills required, and the fit with your organization, even write a job description with HR and discuss which companies or types of companies you want to see on candidates’ resumes — and voila!  HR can go off and do 10x the work at 10x the quality.  For a little more up-front effort than the “throw it over the wall” approach, you leveraged yourself tremendously through what can be a very time consuming process.

Although my examples are by nature from my own industry for the past 12+ years, it’s hard to think of too many organizations or industries where collaboration isn’t critical to success.  Even in companies like investment banks or strategy consulting firms, which traditionally are very hierarchical, command-and-control organizations filled with brilliant individual contributors, the most successful companies (think Goldman Sachs, McKinsey) are the ones that seem to foster more collaboration than others in the development of their people and the development of shared intellectual capital that helps drive the organization forward and ahead of its competition.

In Part II, I’ll answer the title question here…why is collaboration hard?  Stay tuned!

Book Short: How, Now

Every once in a while, I read a book that has me jump up and down saying “Yes! That’s so right!” How: Why How We Do Anything Means Everything in Business (and in Life), by Dov Seidman, was one of those books.  But beyond just agreeing with the things Seidman says, the book had some really valuable examples and two killer frameworks, one around culture, and one around leadership.

It’s a book about the way the world we now live in — a world of transparency and hyper-connectedness — is no longer about WHAT you do, but HOW you do it. It’s about how you can have a great brand and great advertising, but if your customers find out via a blog and YouTube clip that you run a low quality sweatshop in Malaysia, you are toast. It’s about you can…not outwork the competition, not outsmart the competition, but how you can out-behave the competition.

The book, which talks about principles like mutual gain, and thriving on the collaborative, reminds me a lot of a basic tenet of negotiation I learned years ago at the Harvard Program on Negotiation about finding a “third way” beyond a “me vs. you” negotiation by expanding the pie so both parties get more out of a deal.

Here are a few snippets from the book to inspire a purchase:

– How encouraging doctors to say “I’m sorry” radically reduces lawsuits

– How “micro-inequities” can subtly leech productivity from an organization

– How the majority of workers expect from their workplaces: equity, achievement, camaraderie

– How companies whose employees understand and embrace their mission, goals, and values see a 29% greater return than companies whose employees don’t

– How reputation is the new competitive advantage

– How people will do the right thing because in self-governing cultures, not doing the right thing no longer betrays just the company; it betrays individuals’ own values

– How increasing self-governance means moving values to the center of your efforts and making it clear — in how you reward, celebrate, communicate, and pursue — that those values form the guiding spirit of the enterprise

What type of organization do you run? One based on Anarchy & Lawlessness, one based on Blind Obedience, one based on Informed Acquiescence, or one of Values-Based Self-Governance? (Hint, it’s most likely the third category.) Read the book to find out more.

Book Short:  On The Same Page

Being on the same page with your team, or your whole company for that matter, is a key to success in business.  The Four Obsessions of an Extraordinary Executive, by Patrick Lencioni, espouses this notion and boils down the role of the CEO to four points:

1. Build and maintain a cohesive leadership team
2. Create organizational clarity
3. Overcommunicate organizational clarity
4. Reinforce organizational clarity through human systems

Those four points sound as boring as bread, but the book is anything but.  The book’s style is easy and breezy — business fiction.  One of the most poignant moments for me was when the book’s “other CEO” (the one that doesn’t “get it”) reflects that he “didn’t go into business to referee executive team meetings and delivery employee orientation…he loved strategy and competition.”  Being a CEO is a dynamic job that changes tremendously as the organization grows.  This book is a great handbook for anyone transitioning out of the startup phase, or for anyone managing a larger organization.

I haven’t read the author’s other books (this is one in a series), but I will soon!