SOME LESSONS LEARNED FROM SOME GREAT COMPANIES

I recently had the honour of delivering the address at the 20th annual “IT Old Timers” lunch in Sydney, Australia.

It was suggested by the organisers that one of the topics I should cover in my speech was what I had learned from some of the great companies that I had worked for in my 40+ year career in the IT industry.

In preparing my presentation it became very clear to me that we really needed to think about redefining the definition of what actually constituted a great company to include some measure of longevity, as most of these so-called great companies that I had worked for had long ago faded into oblivion.

Companies where I worked, that had led the IT industry during their heyday, included Digital Equipment (DEC), Data General, Wang (where I was a VAR) and Sun Microsystems who were all bright shooting stars that eventually had dramatic flameouts, and which either completely disappeared into the pages of IT history or were absorbed into larger companies who then also managed to build their own demise. One such example is Digital Equipment which was absorbed by Compaq which was then absorbed by Hewlett Packard.

Author: StenSoft; CC BY-SA 3.0 license; via Wikimedia Commons

Nevertheless, they all taught me lessons that have stayed with me, and all of them had an impact on my belief systems and my management style. Here are just three of the key ones:

Never turn your back on your competition no matter how big your lead … I learned this lesson early in my career at International Harvester which, while not being an IT company, was where I started my IT career. IH dominated the global farm equipment and heavy truck market for decades and who, despite the very visible arrival of Japanese competitors, chose to disregard the seriousness of their competitive intent. These Japanese competitors arrived in the market with better technology, better products and better pricing yet IH believed that the IH dealer network and customers would remain loyal under any and all circumstances. They didn’t, and IH didn’t survive. The same was true with DEC who could not accept that PCs were a serious threat that would cannibalise the market position held by minicomputers. Ken Olsen, DEC founder and CEO, was famously quoted as saying “There is no reason for any individual to have a computer in his home”.

Author: B.Borys; CC BY-SA 2.0 DE license; via Wikimedia Commons

President and CEO of Remington Products Victor Kiam (1926-2001) summed it up well when he said “In business, the competition will bite you if you keep running, but if you stand still, they will swallow you.”

Complex organisational structures ultimately confuse everyone … I learned very early on in my career to dislike complex organisational structures particularly matrix organisations (see “Stupid management ideas” posted August 29, 2011). Giving people multiple upward reporting lines tends to confuse responsibilities and loyalties, adds to administrative overheads, and slows down decision making. DEC added unnecessary complexity internally with its profusion of product lines, and also managed to confuse its market with differing and sometimes competing but similar products from each of them. For example, a university could basically buy the same products from the Laboratory, Education or Commercial groups sometimes at different prices, depending on which part of the company wanted the business the most at that time, or even just depending on the whim of the salesmen. I am always nervous when I see any company overcomplicate its organisational structure, which is sadly something I have been seeing happening increasingly in SAP, one of my few surviving employers.

Author: Chery (own work); via Wikimedia Commons

As the father of lateral thinking Edward de Bono said “Dealing with complexity is an inefficient and unnecessary waste of time, attention and mental energy. There is never any justification for things being complex when they could be simple.”

You don’t have to be big or complex to become bureaucratic … One of the reasons that I left DEC in 1984, was that I had become disillusioned with the bureaucracy. When I had joined DEC in 1977 it was a fast moving, dynamic organisation with little internal political intrigue. As the organisation grew, and the matrix flourished and spread it became more political and more siloed, hence becoming slower and more cumbersome. When I then joined Data General it was about one quarter the size of DEC with revenues of less than $1B, and had not yet managed to fall in love with the madness of a matrix organisation. Sadly, DG didn’t need a matrix to slow it down, as Edson de Castro, founder and CEO, made every decision from his office in Westborough, Massachusetts. For example, a country CEO could not take a decision to offer even a 10% discount on a major competitive sale, most often against an incumbent DEC, without direct approval from the DG Global CEO. We could spend weeks waiting for an approval from de Castro, which made the prospective customer doubt whether we were even serious about winning their business, and regularly lost us the deal.

Author: Nina Paley; permission: http://mimiandeunice.com/about/; CC BY-SA 3.0 license; via Wikimedia Commons

Brazilian politician Jaime Lerner summed it up well when he said “Bureaucracy is like a fungus that contaminates everything.”

What I realised, while going through this exercise of reviewing my past to prepare my speech to the IT old-timers, is that every company that we work for has the opportunity to teach us important lessons while we are there, and that for me, even with a few wrong steps in my career, it was all worthwhile. I have also come to understand that my 45 years, so far, in the IT industry have been much more defined by the people that I worked with than by whatever company or its products we were fascinated with at the time. (see “My son is in typewriters” posted July 8, 2010).

Great companies come and go and great products come and go, but ultimately having great people is the only true sustainable competitive advantage.

A POINT OF REFERENCE

I am quite often named as a referee for old colleagues who are looking to change their roles. I generally have no issue with doing this, but I have been surprised that on some occasions I have had no prior knowledge that they have given my name as a referee until I actually get a call from the reference checker. This does put me in a difficult situation, as I therefore have no understanding of what the intended role entails, and sometimes even no understanding of what the sourcing company actually does, meaning that I first need a lengthy conversation to try and understand whether there may be any fit at all. In most situations such as this I try and politely decline, suggesting that I should first speak to the applicant, despite the fact that I know that this will most likely add some negative element to them being considered for the role.

via Wikimedia Commons

I am also faced with the situation quite often when I am asked to be a referee for someone, and then agreeing to do so, of not being asked by the applicant as to what I would actually be prepared to say about them. I had this situation very recently when I was asked to act as a referee for a sales manager who had worked for me some 10 years earlier and who had become a CEO during the past decade. I received the referee request by email, replied in the positive by email, and then heard nothing until I received a phone call from the PA of one of the recruiting board members to establish a time that I would be free to have a conversation about the applicant’s suitability. It was not until this call with the board member took place that I realised that the vacancy they were trying to fill was for the role of CEO for a mid-sized global business. As I had no idea whatsoever about the applicant’s ability to fill a CEO role, having only worked with him as a country sales manager, I had to politely decline to act as a referee.

From the applicant’s viewpoint, for a referee to be suitably supportive it is critical that the applicant does not only get agreement to getting the referee to act on their behalf, but it is also critical to get agreement that the referee is prepared to support their application for a particular role in a specific company. It is also most important to find out what the proposed referee intends to say about them both from a positive and negative viewpoint, as even the most average reference check will definitely want to get an understanding of both sides of someone’s skill set.

Author: Steindy; CC BY-SA 3.0, 2.5, 2.0, 1.0 license; via Wikimedia Commons

I have also found that from the recruiting side, the people who do the reference checks will quite often use the reference checking process not so much to verify the applicant’s view of career realities, but more as a way to justify their personal selection for the role, thus accentuating the positive and tending to diminish any negative elements that come out of the reference check discussions. I had this happen a few years ago with one company who went on the search for a global CEO. One candidate in particular excited some of the board members, and the decision was taken to progress to the next stage with this applicant through broad-based reference checking with four referees provided by the candidate and two that came from personal board member contacts. The resulting reference check discussions resulted in four positive responses, one negative response and one seriously damning response. What was also interesting is that the worst response came from a referee actually provided by the candidate, as did also one of the more negative responses. At our board review I was surprised to find that the board members who favoured this particular candidate actually tried to justify their selection by suggesting that the negative responses were the result of politics rather than pinpointing actual deficiencies in the candidate.

The other board members insisted on further reference checking which ultimately unearthed serious discrepancies in the candidate’s view of reality compared to the views of those that had worked with him.

I am also disappointed that I am often faced with a fairly standard and predictable set of text book questions that I get asked by reference checkers, such as:
– Are they a team player or better on their own ?
– What are their 3 strongest qualities ?
– What are their 3 greatest weaknesses ?
– What areas should they develop ?
– Why did they leave ?
– Would you rehire them ?

Author: Jonathan Steffen; via Wikimedia Commons

I must admit that for any senior management roles I prefer questions like:
– What did they do that drove you crazy ?
– What was their greatest success ?
– Did they leave a legacy ?
– Did they create and build talented people ?
– Did they change anything ?
– How far could they have gone in the company ?
– Did they act as a mentor to younger people ?
– How well did they protect the status quo ?
– Having been their boss in the past could you work for them ? What would they need to change ?
– Who did they not get on with ?
– How big a network did they build internally and externally ?

Author: Mamunjoy; CC BY 3.0 license; via Wikimedia Commons

Reference checking is a critical part of any executive selection process and I believe that most companies do it badly. I also believe that if they do this half-heartedly they do so at their own peril.

The best response that I have heard from a referee when doing a reference check on a potential candidate’s management strength was “Is there a category below inadequate ?”.

A RISING TIDE LIFTS ALL MANAGEMENT BOATS

“If at first you don’t succeed, blame the fat nincompoop with bad breath who just got promoted over you.”

The phrase “A rising tide lifts all boats” is most commonly attributed to President John F Kennedy, who used it in a speech in 1963 to counter criticism that a dam project that he was inaugurating was just being done as payback for political favours. However, Ted Sorensen, Kennedy’s speechwriter, revealed in his memoirs “A life at the edge of history” that he had actually plagiarised the phrase from the New England Chamber of Commerce who had it as a slogan.

Author: White House Press Office; via Wikimedia Commons

It is a phrase that I have liked for a long time, less for its use in an economics discussion of free market policies but more in relation to how fast-growth industries have a way of lifting people well above their true competence levels, simply because demand far outstrips the availability of truly capable people.

This phrase resurfaced in my mind in the last few weeks as I started working on a speech that I have been invited to give at the 20th IT “old-timers” lunch which is held annually in Sydney Australia, the criteria for attendance being that you can show that you had worked with paper tape and/or punched cards during your career. This does mean that the lunch event increasingly resembles an outing from an old people’s home, as widespread use of the “Holerith cards” started to decline rapidly in the 1970s, meaning that those who worked with them commercially in the then called field of “Data processing” can now qualify for free bus travel in most countries. Those who can show that they worked seriously with paper tape as a commercial input medium, and who live in a Commonwealth country, will by now be starting to wonder about their ability to hold out long enough to get a congratulatory birthday telegram from Her Majesty the Queen.

Author: Cromemco; CC BY-SA 3.0 license; via Wikimedia Commons

I have realised that the idea of spending time with a large group of the aged is somewhat terrifying for me, as it is not something that features largely in my current life. My working with Hi Tech start-ups, my lecturing and my speeches tend all to be with younger groups of people, including my involvement with UBB (Bordeaux Rugby Club) which has given me some friends in their late twenties and early thirties who are only now starting to have children, whilst my chronological peers and I are all well into grand-children with some being even further along in the creation of multiple levels of generations.

However, having to spend a meal and an afternoon discussing prostates, joint pain and hip replacement with some old friends and colleagues is not what is really bothering me, as these are topics in which I am well versed. My dilemma is that I have been asked to discuss some of the great companies that I have worked for, and some of the great people that I have met during my 45 years in the Data Processing/IT/Hi-Tech industry (A rose by any other name …), and to make this speech light and amusing.

The first problem is that most of the “great companies” that I worked for have long gone to Tech-heaven having at some point dropped too short and too rigid an anchor chain to actually catch the rising tide, and thus were drowned instead. Davy Jones’ Locker is littered with the remains of great IT companies. The second problem I face is that for every outstanding individual that I have met, and there are many, or one that was there to give me a hand up when I needed it (and I know that there will be at least one in attendance at the lunch), or someone who I feel actually made a significant contribution to our industry, I keep coming up with many more people who at best were pretty average, but who rose to giddy heights as the industry exploded and struggled to be able to meet the demand for people at every level.

I know that this view now fits with my growing reputation as a “grumpy old man” but I just can’t get the idea out of my mind that a rising tide in a fast-growing industry actually does lift all the boats, but that if the industry had been more mature, many of the boats would have instead just run aground.

Author: Ben Salter; CC BY 2.0 license; via Wikimedia Commons

I guess that in my speech I could run through a list of some of the famous people that I have met over the last 45 years, but that just comes across as name-dropping, and as I said to President Obama just last week, I really hate name-droppers.

I also can’t really go on about some of the bosses that I have had over the years, as some of them may actually be there and they wouldn’t find it amusing, even though I have written about some of them in previous blog pieces. At least I am safe in the knowledge that even if they have read my blog, they probably would not have seen themselves reflected in my less than flattering descriptions. I guess my only real option is to be pleasant and ramble on for my allotted time about how privileged we all were to have been there when it all really began. At least this is the truth.

I am sure that the IT industry is not the only one that has this problem, as I have met incredibly senior but unimpressive executives in industries as diverse as Oil and Gas, Advertising and Airlines, being just a few examples of industries which had their spurts of growth at some stage in recent history. Even today, we have seen what happened when we allowed very average people to control the banking sector, and thus the global economy, whose only competence appears to have been the ability to live by the maxim “Greed is good”.

It seems to be a fact that when an industry is going through rapid growth, those who look good, who work on being highly visible, who can manage upwards, who can show that they fit in well with their superiors and who are seen as being able to protect the status quo are the ones who most often get promoted, rather than the game-changers, who tend to appear threatening to those above them.

The situation that this creates is best described in this old Irish saying “Nodding the head does not row the boat.”

via Wikimedia Commons

MOST CEOS ARE NOT MANAGED WELL ENOUGH BY THEIR BOARDS

I have served on quite a large number of different boards for companies of all sizes, in different countries and cultures, and believe that generally boards do not manage their CEOs well enough.

Author: Areyn; CC BY-SA 3.0 license; via Wikimedia Commons

This is particularly true for skills other than the non-financial skills needed in the role.

The Business Schools, as well as management consultants are continually telling us that there are critical “soft skills” that every CEO needs today to be able to succeed in our ever-changing, globally competitive environment, such as driving innovation, building talent, growing customer care, monitoring employee satisfaction, building strategic growth and ecosystem development. However, it has been my experience that it is very rare for a CEO to be tested on anything other than financial metrics, if he is measured at all.

The belief seems to be that as long as a CEO is delivering against his revenue, profit and share price metrics he must be doing a good job, and should just be allowed to get on with it.

Author: Peter L Salmon; CC BY-SA 3.0 license; via Wikimedia Commons

I see this as a very short term strategy that may suit start-up or PE/VC driven companies that have a well-defined exit strategy, but does not make sense in companies that are trying to build a sustainable long term business future.

In all my CEO roles, whether the role was national, regional or global, I was only ever measured on my financial performance, and while I have no doubt that the boards I worked for expected me to do more than that, it always seemed to be easier for them to just measure and reward me on the numbers. I have seen very little difference in some of the boards that I have served on since my retirement from full time corporate executive roles, and attempts that I have made to change this at board level have often been met with some resistance, and in a number of cases my change attempts have even been put down to the fact that I spent the last three years of my full-time working career as a global head of HR, the implication being that this had somehow softened me from being a hard-nosed business person to a touch-feely one.

Author: ThisIsRobsLife; CC BY-SA 3.0 license; via Wikimedia Commons

The reality is that my 45 year career has strengthened my belief in the fact that there are two key business elements which are mandatory and which are critical for sustainable success, and that need to be measured in any CEO by his board …

1. The numbers are a given … once the financials have been fought through, agreed, accepted, allocated and signed off, they are a blood commitment to be delivered, and “woe betide those who miss.” The budget that the business has been built on cannot be a moving target. I served on one board where, about 6 months into the year, the CEO started presenting the budgeted revenue numbers as being billing numbers instead, thereby effectively giving himself a 10%+ drop in the company revenue target, without any equivalent cut in the expense lines, changing the year from a planned success to a less than break-even. Nice try, but totally unacceptable.

2. Building the future for all the stakeholders is a non-negotiable goal … This is as true for our shareholders, as it is for our customers by delivering the needed customer service and support, as it is for our employees through building an environment where people can succeed, as it is for our partners who have built their business, and who rely on their business success on our making it easy for them to do business with us, and on ensuring that we “share the spoils” equitably.

I believe that these two business elements are inseparable, and that boards that do not goal and who do not evaluate their CEO (and entire executive team) on both elements are not fulfilling their role. Even worse, I have come across many situations where the CEO was not evaluated at all, beyond having to present and defend the financial performance at the monthly or quarterly board meetings. Although I believe that formal performance reviews do not work well for general staff members, they are better than doing nothing. The same holds true for the CEO, and there should at the least be a formal review process put in place for the CEO. A better process I believe is for the Chairman to meet regularly with the CEO, say monthly, not only to ensure that they are working together in a way that benefits all the stakeholders and that there are no surprises at the board meetings (from either side), but also to manage and guide the performance of the CEO, in the same way that an executive would manage the performance of one of his team members.

One of the critical roles of any board is to mentor and guide the CEO and the executive team in all elements of the business, which means that the board needs to be comprised of people who are capable of doing this through a wide set of experiences, skills and knowledge and these need to be more than just how to evaluate the numbers. I feel that it is important that board members are allocated some key executive mentoring and coaching responsibilities over and above their normal board fiduciary responsibilities, and that if these skills are not available in the board it does call into question the whole board member selection processes.

American VC Fred Wilson was right when he said “Board meetings should not be for the benefit of the board. They should be for the benefit of the CEO and the senior team.”

Author: Joi Ito; CC BY 2.0 license; via Wikimedia Commons