Trust Culture or Prove It Culture

Companies are made up of functional teams that work together to achieve results. To meet a customer’s needs, we generally have to collaborate across departmental lines, and ask for help. Everybody is busy, so when a professional in one group asks for help from a professional in another group, the two individuals do not always see the need in the same way. Usually the debate is about the priority of the request and whether it warrants changing priorities just because someone in another team asked for help. How your teams react in these situations depends on whether you have a ‘Prove It’ culture or a ‘Trust’ culture.

In a ‘Prove It’ culture, the request for help is met with questions and skepticism. “Do you really need my help?” “It can’t be that important.” “The customer doesn’t really need this, do they?” “Can’t you do it yourself?” Whatever form the push-back takes, the essence of the discussion is ‘prove it.’ Prove that I should change my priorities to do what you are asking of me. In text or messaging oriented companies, the Slack or Teams debate can go back and forth in a doom-spiral for many iterations. It may be a stalling tactic for the individual being asked to help, but more often it is a text-based inquisition in support of ‘prove it.’ The internal debate often consumes more time and resources than it would take to just comply with the request. The teams are behaving with inward focus instead of customer focus, and while the teams are debating, the customer is not getting what they need and becoming increasingly disgruntled.

By contrast, in a ’Trust’ culture we trust the professionalism of our teammates, and we believe that they have the best interests of our customers and our company at heart. We also believe that they know what they are doing, and when they ask for help, we should trust their judgement.  A trust culture avoids the whole back and forth ‘prove it’ cycle. Trust has to be earned, but when we start with a trust bias, we short-circuit the debate. If it later turns out that the request was misguided, then we can treat that as a withdrawal from the trust bank, and next time we may ask a few more prove it questions until trust is restored.

How do we get from prove it to trust? Trust is earned through repeated actions over time, but it starts with a willingness to believe in the judgement of others. It requires both parties to act with professionalism to engender trust. In earlier posts, I wrote about banning the word ‘they’ so that no one could introduce a divide between teams. It banishes the finger-pointing “they screwed up,” and replaces it with inclusive language — “we have a problem to solve.” A trust culture is a manifestation of banning the word ‘they.’  A trust culture is a ‘we/us’ culture, while a 'prove it’ culture is a ‘they’ culture. To avoid ‘prove it’ mentality, everyone needs to shift their emphasis to ‘how to’ instead of ‘why not.’ “How can I comply with this request” instead of “why I should not agree to this request.” I am a firm believer that when we focus on how we can help each other, instead of how we can make our colleagues jump through hoops to prove their requests are valid, good things happen. If we get our culture right, everything else will fall into place.

Best v. Great Planning

Businesses typically run on a fiscal year cycle. In many ways it is a rinse and repeat process where certain managerial activities occur on a routine basis, which is often referred to as the corporate operating system. Creating the annual plan typically takes place in the fourth quarter of the year, and is one of the most interesting and engaging processes of the corporate operating system.

For more mature companies, it is primarily a budgeting process. For others, it is more of a strategic planning process. It typically requires a balance of aspirational thinking and practicality. In a growth environment, aspirational goals can be inspiring, or they can open a chasm between what the rank and file believes is possible and what leadership ‘hopes’ to achieve. The backdrop for all plans is the goal to preserve and increase shareholder value.

I heard a group of CEOs speaking about their annual planning process, and one CEO described a guiding principle they adopted early in the company’s history that caught my attention. Each year, as a part of their planning process, they decide on three things that they have to be the best in the world at doing, and three things they have to be great at doing, but not necessarily the best in the world. Everything else gets a much lower priority. By identifying the focus areas and differentiating ‘best’ and ‘great,’ the entire company understands what is important, and what they should prioritize. It sharpens their competitive message and positioning, and it focuses their product direction and engineering. I have heard variations on this theme, including narrowing the analysis all the way down to just one thing for which we want to be the best in the world. However, I like the idea of picking two or three elements to be best-in-the-world and two or three elements to be on par with the top competitors.

In a complex, multi-faceted market, it is impossible to be the best at everything. We speak about competitive differentiators, or unique value propositions as ways to position the business in the competitive landscape without trying to be all things to all buyers. However, it is easy to get caught up in trying to cover all of the competitors’ salient points. Chasing the competitors is like striving to be average, instead of trying to stand out. Choosing to be the world’s best at something requires creativity and boldness. It demands a deep understanding of the market, and the ability to step back and create something truly unique, not just a one-up approach to the way a competitor achieves the same outcome.

The second part of the process is to select three things for which you do not need to be the best, but you still need to be great. It forces you to recognize what you need just to remain in the top echelon of your market. I think of it as the ‘cover’ component of the plan. It is basically the three things you need to do to neutralize the competitors. If your competitor has selected some feature or offering to be the best in the world, how can you neutralize them by being great at a similar offering while not pouring all of your resources into being better than them. You want to take the wind out of their sails in the most economically efficient manner. To apply an electric vehicle analogy, suppose one manufacturer decides they want to be the best in the world at battery life and distance on a charge. Your company decides to make the most luxurious interior and design in the world. In order to remain competitive, your luxury offering still has to get great mileage, but it does not have to deliver the longest distance to stay in the game. Best in the world at luxury features + good mileage becomes your plan.

When thinking about the 3:3 items, keep in mind that they may not be features or external offerings. In my last company, when I shared this planning model, one member of our team focused on being the best at internal processes, specifically cross-team communication. He suggested that If we become really exceptional at communicating both internally and externally, it would have a dramatic impact on satisfaction and loyalty for customers and teammates, and significantly increase our efficiency. Some companies focus on being the best in the world at logistics (Walmart) or procurement (also Walmart), or supply chain (Dell). These are all internal ‘bests’ rather than external products or features or services.

Whatever you decide to be the 'best in the world,’ versus ‘just great,’ the exercise will focus the organization and create alignment on priorities. It will spur a healthy discussion and debate, and will bring clarity to the entire planning process.

To Build Loyalty, Make Friends

I receive a daily short email inspiration from Simon Sinek. One from the past came to mind this week:

“To drive sales, make a pitch.

To build loyalty, make a friend.”

We can generalize this message to every area of our business, and in particular to customer relationships. In a recurring revenue business, retention of customers is key. Keeping a customer starts with meeting their needs, but we should not lose sight of the imperative to build a lasting customer relationship and make a friend. Markets tend to act like communities, where the participants know each other and seek input and counsel from each other. As vendors, we need promoters in the community, and we need them to tell their friends that our company is the best thing that ever happened to them. That starts with us committing to their success and building friendships with our customers.

A true customer advocate knows that customers are more than just a recurring revenue line item on a financial report. A customer advocate knows that customers talk with each other and share their opinions. Bad service has a ripple effect like dropping a pebble in a lake. The ripples fan out and will touch many more people than the original individual with the service issue. The whole concept behind the Net Promoter Score (NPS) is a recognition that customers can be advocates, detractors, or neutral, but only the advocates and the detractors count. That is because only these two groups create ripples in your market.

If we stick with the friend theme, we know that making a customer our friend will help to create a sense of trust. A friend believes that you have their best interest at heart, and the bond of friendship engenders trust. It also creates some space when things don’t go exactly as planned, because our friends trust that they can rely upon us to make things right. 

At the end of the day, we are still a vendor and they are our customers. They pay us to get things right, but even in a transactional relationship, we can still work to build friendships. As friends, we can get beyond transactional activities and earn trust. It is particularly important in a recurring revenue relationship for the customer to know that we have a  long-term commitment to their success. When A recurring revenue relationship feels like it is based on a series of transactions, there is no bond. Each transaction becomes make or break — a ‘pitch’ instead of a friendship. The result is a relationship that bounces up and down based on the outcome of each transaction. We see this in customers being enthusiastic references one week and unwilling to help the next. When we think about our interactions as a way to build a relationship, we create lasting loyalty, and we convert a series of pitches, into  a trusted friendship.

Communicating with customers needs to be bidirectional, personal, frequent, candid, open, consistent, wide-ranging, and honest. It has to have an analog component to go with the digital (voice to go with the text, email, questionnaires, etc.). To build friendships, the analog components (video chats and in-person meetings) are more important than any digital ‘pitches.’  It is hard (nearly impossible) to make friends without actually talking.  

Goldilocks Optimism

I read an article about “toxic optimism” that focused on the bad things that can happen when you are overly optimistic. It got me thinking about a Goldilocks effect. In the fairy tale, Goldilocks tried the three bowls of porridge in the bears’ house and announced that the first one was ‘too hot,’ the second one was ‘too cold,’ and the third one was ‘just right.’  She tested the extremes and found her acceptable center. When I read about toxic optimism, what struck me was that optimism and pessimism are on a continuous spectrum. One can be too optimistic or too pessimistic, and each can be toxic. We need to find the balance which is ‘just right.’  

Toxic optimism causes us to overlook the flaws and the dark spots. It leads us to assume everything is going fine, and we let down our guard. We suppress our paranoia and stop looking for the bad things that could bite us. In sales, toxic optimism leads us to be so sure we are going to win a deal that we miss warning signals and are totally surprised when the prospect says they “went a different way.” In product or professional services, it leads us to assume everything will work on time and as specified. It can cause us to project optimistic delivery dates or over-state product capabilities that turn out to be wrong and result in unhappy customers.  In a board setting, it can cause a board to overlook brewing trouble that ultimately diminishes value creation.

Toxic pessimism is just as bad or worse than toxic optimism. This is the Eeyore effect - everything is horrible so why bother trying to find the good. Aside from it just being depressing, toxic pessimism can cause us to give up and not reach for the brass ring of success. When all you hear is ‘it can’t be done,’ you lose the will to go for it. A toxic pessimist is bad for everyone around them. They become a culture vampire sucking the life out of an organization.

If we fly too close to toxic optimism we are likely to crash, and similarly, if we fly too close to toxic pessimism we are also headed for a crash. We need to find our Goldilocks zone. In an entrepreneurial environment, where we are trying to conquer the world, the Goldilocks zone is generally not in the middle. In a growing, hard-charging environment we invariably lean further in the direction of optimism than pessimism. We can’t afford to be in the boring middle if we want to drive enthusiasm and the conviction that we can do anything we put our minds to. However, we need to preserve a dose of reality and paranoia in order to make sure we execute efficiently and avoid adverse surprises. 

If we are overly invested in our optimistic view, we become defensive about our optimism, and shut out the voices of reality and paranoia. Toxic optimism in one person can bring out toxic pessimism in another as they try to break through the optimistic defensiveness in order to balance the scale and push for reality. Andy Grove of Intel famously said “only the paranoid survive,” and Joseph Heller (Catch22) added “Just because you're paranoid doesn't mean they aren't after you” (also attributed to Kurt Cobain). This translates into the need to be on our guard and always plan for the full range of contingencies - good and bad, while maintaining confidence and optimism about what we are doing and what we can accomplish. The challenge for leaders is to find the Goldilocks zone where there is optimism without toxicity and just enough pessimism to keep everyone on their toes.

The burden to get this right falls squarely on the shoulders of the CEO. There will always be counterbalancing voices in the executive ranks, and the CEO needs to sift through the opinions and set the tone for the organization. When the CEO tips too far in either direction the impact on the organization is exaggerated. The rank and file take their cue from the CEO, and equally so, the board of directors rely upon the CEO for insight. Boards tend to be pretty discerning, but their ability to dig into the depths of an organizatom are limited. As board members, we generally trust the controls and the veracity of the information provided. When a CEO is operating with toxic optimism, it can lead to filtering the reality presented to the board. Warning signs and negative flags are masked, and the board is presented a picture that, in the extreme, is materially misleading.

As board members, we need to avoid being swept up in the vortex of toxic optimism. Our motto has to be trust but verify. Without becoming Eeyore, we need to make sure we are data-driven, and maintain a healthy level of paranoia. If things appear too good to be true, they probably are not as presented. If the company is consistently missing its goals, we may be dealing with a CEO suffering from toxic optimism. Warning bells should be going off to dig deeper into the planning processes. We need to discern if toxic optimism is ‘bullying’ the company into setting aspirational but unrealistic targets. Boards need to listen for the contrarian voices that may be buried in the executive team or the rank and file, but we also need to avoid undermining the CEO. It is a balance that is built on trust, but when the warning bells go off, we need to practice ‘trust but verify’ behaviors.

Words Really Matter

For weeks, I have been writing about how the words we use make a difference in our leadership persona and the culture we create. As you can probably tell from my posts, I really believe this stuff.

I have to admit I was stunned and disappointed with the outcome of the United States presidential election. Among a myriad of issues I have with the president-elect, I found his discourse during the campaign particularly troubling. Words matter. I have written several posts about how words can unite and engender collaboration, or they can divide and create organizational finger pointing. The same is true in the political world. We experienced a very divisive campaign, and we can anticipate even more divisiveness going forward.

In parallel, I have also written about how important it is for a leader to speak the truth and have an open and honest discourse with their team. Honesty breeds trust, and great cultures are built on trust. Unfortunately, this was an election built on non-stop untruths and outright lies. Truthfulness just did not matter, and it appears as though many in the electorate believed the lies. The conspiracy theories and untruths amplified and supported a narrative the electorate wanted to believe. A leader’s role should be to help us find the truth and bring forth our better selves, not support and amplify the worst in us. Unfortunately that was not the behavior of our elected leader.

In the absence of unifying discourse and honest communication, I fear we are headed down a very dark path as a nation. My general policy is to avoid any political commentary in my public posts, but to be honest, this election really rattled me. I hope for the best, but I truly fear the worst, so it felt important to pause my typical business-focused posts and acknowledge the anxiety I feel about our future. If you read this far, thank you for indulging me. Words matter.

Mine, mine, mine...

The phrase that got my attention this past week was 'my team.'  It seems innocuous enough, and often is meant as a term of inclusion. The expression may be intended to convey that the leader is a part of the team and shares the credit or responsibility with their teammates. However, that was not the use of ‘my team’ that triggered this post.

The phrase can also be used in a possessive manner. 'This is my team,' where 'my' implies ownership. I am reminded of the seagull in the Disney movie squawking “mine, mine, mine…” Think about what the possesive use conveys about the speaker and how it may be viewed by the members of the team when it is spoken by the leader. It particularly irks me when what I really hear is self aggrandizement, like the leader feels the need to let someone else know that they are in charge - this team is mine, mine, mine. It carries an ego message, like the next thing the person is going to tell us is how many people they manage, as if it is a yardstick on their success.

Alternatively, think about how 'our team' sounds.  'Our' is inclusive, collaborative, a little bit humbling, and truly team oriented.  Even if you are leading, you are still on the team, and commitments and achievements are owned by the team. ‘Our team’ does not separate the leader from the individuals on the team. This subtle difference is particularly apparent when something goes wrong and the leader explains what happened by saying ‘my team’ caused the problem. It sounds as if the leader is distancing themself from the team, pointing to the people working for them, and implying they were at fault. Wouldn’t it be better to say ‘our team’ or ‘we?’ Best of all would be to follow the management lesson that tells us successes belong to the team, but failures belong to the leader. When describing successes, a leader’s words should be 'our team’ or ‘we’ achieved this success,' but when it becomes necessary to discuss a failure, the leader’s responsibility is to own the miss with a clear 'I take responsibility' message. 

In an earlier post, I wrote about banning the word ‘they’ and forcing people to say ‘we.’ The idea is to move from a finger-pointing, blame culture to a shared responsibility, collaborative culture. Referring to ‘our team’ instead of ‘my team’ is a corollary to banning the word ‘they.’ Banning the word ‘my’ can be just as liberating as banning ‘they.’ Try it.

Broken Windows and Paper Cuts

In tech companies we track all sorts of metrics and statistics, and in businesses built on recurring revenue, customer satisfaction and renewal rates garner a lot of attention. When we think about satisfaction, we focus on customer support where we talk about ‘tickets,’ which is the umbrella term for all sorts of customer inquiries. Tickets could be bugs or data problems or just ‘how-to’ inquiries, so we further classify tickets into priorities and responsibilities, and then we start tracking metrics to gauge how effective we are at responding and solving tickets.

Tickets that are the result of a coding error get the most attention. If a client is ‘dead in the water’ it becomes an all-hands effort to figure out the problem and get it fixed ASAP. These are tier-1 problems, and alarm bells go off across the company. Classification schemes vary from company to company, but we all have ways to divide the remaining tickets into successively less urgent categories.  It is said that indigenous people in the north have many words to describe snow, but further south we just call it ‘snow.’ Ticket management is similar, and the practitioners on the front line have an array of words to describe tickets, while customers have a more limited vocabulary and just see a ticket as a problem.

From a metrics and reporting standpoint, the focus is on support items that result in code changes - actual bugs. These are the impactful tickets that can cause big shifts in customer satisfaction, and require personal attention, so it is fair that we focus on them.  However, think about all of the minor support inquiries and tickets that routinely get addressed (or often ignored) without a lot of fanfare.  

There are thousands of support inquiries that fall into the ‘minor’ category. They range all over the place from how-to questions, to minor confusions, to simple settings, etc. The sheer volume can be surprising. Kudos to support teams for handling so many inquiries, but think about the impact these items are having on customer satisfaction. No user wants to contact support. Whatever is causing them to contact support is something that is getting in the way of doing their job. At best it is an annoyance, or at worst a showstopper. The minor inquiries are like thousands of paper cuts. If a user encounters enough ‘paper cuts,’ they will move from being a promoter to a detractor, and customer satisfaction will drain away.

Paper cuts are not necessarily coding errors or bugs. They may be user interface issues where it is not obvious how to accomplish a task, or they may be documentation shortcomings or training issues. The product may work as it was designed, but not the way a user expects it to work, so they get confused or frustrated and they call support. Often, the inquiries are the result of user error.  Whatever the cause, each inquiry is a paper cut and lowers satisfaction by some small amount.

We tend to focus on the big stuff - product bugs and data errors and the like, but once you get the big stuff under control, the paper cuts set the tone for customer perception and satisfaction. On an NPS scale, the difference between someone giving a 7 or 8 (neutral rating), versus a 9 or 10 (promoter rating) is mostly one of tone.  “It's OK, not bad, gets the job done, but it has issues…” = neutral.  “It's great, easy to use, does the job well…” = promoter.  In an urban setting, there is a theory that fixing the broken windows and removing the graffiti enables a neighborhood to build pride, and results in a general reduction in crime. In the tech world, stepping back from a product that basically gets the job done, but has a lot of tickets and minor bugs is like looking at a blighted urban setting. Fixing the broken windows will build customer satisfaction, loyalty, and promoters.

Companies that want to create a culture that is obsessed with customer delight need to focus on eliminating paper cuts and fixing broken windows. Notice I used the term ‘customer delight,’ rather than ‘customer satisfaction.’  Satisfaction equates to neutral (NPS = 7 or 8), but delight signals a promoter (NPS = 9 or 10). We want promoters, and we want them to tell all of their friends and colleagues how great our company and our products are. We want to remove any hesitation or caveats from their message. The key to moving a customer from satisfied to delighted lies in the details of their interactions with the vendor. A necessary component to shift the tone of customer conversations into the language of promoters is to drive down the number of support inquiries, starting with the glaring coding errors, but do not overlook the impact the minor ones are having. Sweat the details.

I Understand...

This week, I continued my theme about how words matter, and how the words we use and the subtle differences in our language can make a big difference in the way people perceive what we are saying. One of my favorites is how a listener responds to what someone is telling them. 

In my past, I had the opportunity to speak with a lot of potential investors and analysts. I was always keenly aware of how they were reacting to the message I was delivering. There I was, trying to convey our unique value proposition, and I was looking for validation from my audience that they were with me. In most cases, our business and our competitive market was new to them, so we started with basics and background info, and built the message to differentiate our approach from that of our competitors. In other words, I was speaking to smart people who did not know much about the world I lived in every day, but they were curious enough to spend some time with me.

The language of the listeners and my reactions started to follow a pattern that made me recognize one of those subtle difference in speech that can change the dynamic of the interaction. Early in the presentation, some listeners would say “I understand,” while others would say “that makes sense.” ‘I understand’ is a confirmation that they heard what was said, without an affirmation of agreement or support. ‘That makes sense’ is an indication that the listener sees the logic of the point.

If we stop there, you would assume I preferred to hear “that makes sense.” In fact, surprise, I generally found it very annoying and condescending. Telling someone that they make sense sounds like the listener is validating the intelligence of the speaker. I knew what I said made sense, otherwise why would I say it? I was not asking for them to validate that I was a rational speaker. Rather, I was looking for confirmation that the message was received and understood so we could engage in further dialog. The statement "that makes sense" came across as judgmental, instead of positive and encouraging.

I preferred interactions that started with ‘I understand’ responses, which typically led to dialog and discussion. ‘I understand’ is an opening for an active listener to begin probing and exploring a topic.  It is step one in a real conversation.

If you translate the impact of a ‘that makes sense’ response to the sales world, consider how a prospect will react to a sales person telling the prospect that they ‘make sense.’ The salesperson is trying to build rapport and probe for opportunity. They are conducting a discovery call with a prospect, and the prospect is explaining their situation and their needs. The prospect wants to know that the salesperson understands and empathizes with their situation. Telling the prospect that they ‘make sense’ is actually pretty offensive. One of the key tools of active listening is called Reflective Listening. The listener responds to a statement by saying back what they heard, in their own words, and asking for confirmation that they got it right: “Let me make sure I understand. I think what you said is xxx, is that correct.” It is a powerful door opener. By contrast, telling someone they make sense is not going to open the same door. It does not convey that the listener is in the conversation. It merely acknowledges the logic of the statement.

Words matter, even when the differences are subtle. Focus on how the listener is going to perceive the words you use. Are you joining them on their side of the table, or are you remaining at arms length on your side? Are you subtly offending them, or are you honestly engaging with them? It just ‘makes sense.’

Back To Basics

High-growth organizations typically run lean and fast. Teams are stretched to get work done ASAP and to reach for the next growth milestone. There is always so much to do that unless we maintain focus and clear priorities, it is easy to get distracted, and when we get distracted, unfortunately we sometimes drop the ball.  

In a fast paced environment, we need to execute four basic tactics to ensure nothing falls through the cracks. The first is to keep a running list of ‘to-dos’ to stay on top of what needs to get done. It seems obvious, and many of us are already in the habit of making our own to-do list. However, in a business setting, most actions require cooperation and mutual commitment, so the to-do list is no longer just a personal list, it becomes a shared list. All of the participants need visibility of the list, and similarly, all of the beneficiaries of the activities on the list need to see where their projects fall.

The second tactic is to set clear priorities. With clear priorities, we can divide the to-do list into critical items versus nice to haves. As new items or interrupts pop up, they can be added to the to-do list and sorted into where they fall based upon our priorities. When everyone understands the priorities and is aligned with them, then if new items push existing items down the list, an aligned team understands why.

That leads me to the third basic tactic - commitments and accountability. I wrote an earlier post about the language of commitments (LOC). The essence of LOC is to ensure that there is a clear agreement, a contract of sorts, regarding who is doing what by when. Based upon the LOC contract, we establish accountability. LOC forces clarity, and teaches us that if you want something to get done, then you have to ask a specific person for a specific action by a specific date, and you need a clear response. It is not a vague cry for help or a soft ‘I will look into it…’ response. A true LOC commitment has to have all three elements: a person making a commitment, for a specific action, by a specific date — no ambiguity. Each element on the to-do list should have an individual owner who has made a commitment to accomplish the item by a date certain. If there are items on the list without owners, nobody should be surprised when the ball is dropped and the item does not get done.  

OK, the last basic tactic is simply to hold ourselves accountable by documenting and publishing the list and the commitments. Insist that meetings end with a recap of what was committed, and after each meeting publish the results to the team. Start the next meeting with the list of commitments from the last meeting, and confirm what was done, what is on-track as planned, and what needs recommitment with a new LOC.

To-do lists and commitments are rarely ‘fire and forget’ activities. Even when there was an LOC exchange and commitments were made, things are rarely that simple. Most commitments rely upon other commitments, and multiple people have to work in concert to fulfill an objective. If something in the chain of commitments goes off track, there can be a cascading impact. Even though we may have agreed to the priorities at the outset, when things change we may need a reset. Publishing and reviewing the list frequently will highlight the soft spots and the issues. Requiring acknowledgement of missed commitments and documenting changes supports a culture of accountability, and practicing these basics every day helps the organization build its execution muscles.

Admittedly, this is all really basic stuff, but in our fast-paced, under-resourced, growth environment, it is easy to run too fast and lose sight of the basics. The result is that the ball gets dropped at the worst possible moment, and we create unnecessary friction, or at worst we disappoint a customer.  Don’t lose sight of the basics.

Be A Foghorn

Information and understanding is not uniform throughout any organization, and the flow of information does not typically follow a smooth or linear path. People at the top of the corporate hierarchy know things that are unknown to people lower in the hierarchy, but the reverse is also true. There are pockets of people ‘in the know’ and pockets of people ‘in the dark.’ Once a business gets beyond a sole proprietorship, perfect knowledge is a thing of the past.

Each layer in the corporate hierarchy exacerbates the problem. A CEO may be in mind-meld with their direct reports, but those leaders may not have the same knowledge sharing with their reports, and so forth down the corporate hierarchy. It is like a game of whisper down the lane—with each step the story changes, and the same is true as information flows up the hierarchy. Front-line workers have a detailed awareness and understanding of what is happening, but as they report their situation up the management chain, the story morphs and gets watered down.

In addition to the challenges introduced by passing information through multiple layers in the organization, it is also true that not every mid-level manager will grasp the nuances underlying the information, and therefore may not be particularly great at communicating it. If you step back and consider this imperfect internal communication channel, it feels an awful lot like a fog. We have limited visibility, and things look and sound just a bit distorted.

The challenge for the CEO and leadership team is to cut through the fog and ensure everyone is on the same page. At a minimum, we have to make sure the team knows what we are trying to accomplish, and is equipped to act appropriately with the information they have. One method is to adopt clear corporate goals and disseminate them throughout the company. We back up the goals with clarity about our values and basic operating tenets, and hope that everyone ‘gets it.’

However, communicating the goals is not a one and done process. I live on an island in a bay, and when the fog rolls in, the foghorn starts to sound. It does not just blow once and assume all of the mariners heard it. Instead, it repeats continuously until the fog clears. Like a foghorn, the CEO and leaders need to continue to blast out the goals and values repeatedly so everyone absorbs them, even in the fog of information flow within the company.

But, it goes deeper than just goals and values. It’s great that everyone knows what the goals are, but not everyone knows why they are the goals and how they all fit together to make a great company. Nature abhors a vacuum, so if the team does not know why we have a goal, they will fill the vacuum with their own ideas. Too often, human nature leads them to create reasons that are not positive. For example—Q:“Why is the CEO so focused on hitting this goal?” A:“The CEO must have a bonus tied to it, and they will make a fortune if we bust our butts and hit the goal.” CEOs and leaders cannot just deliver the goals like tablets from the mountain. They have to go beyond the face of the goal and explain that ‘this is a goal because it will result in XXX, which is important because…’ In other words, it is a critical component of being a corporate leader to also be a teacher and explainer.

A good place to start in the software as a service (SaaS) world, is the collection of well established SaaS metrics. They are clear and meaningful and easy to communicate. Underlying the SaaS metrics is the concept of building corporate value, and rank and file employees all understand building value. Demonstrating how the goals result in improving SaaS metrics creates a foundation for why the goals are the goals, and a scorecard for measuring success. When team members understand the rationale behind the goals, they are better equipped to cut through the fog to achieve them.

Words Matter

If you have been reading my Monday Morning Messages, you know that I focus a lot on the language we use, and the impact it has. Subtle changes in how we say things can make a big difference in how our sentiments are perceived, and how the recipient responds. Similarly, subtle changes in the words we use to label or describe departments and services can create significant attitudinal changes in the way our teams behave.

Think about alternative labels for jobs, and whether a label causes team members to focus more on the company’s needs or the customers’ needs. Consider ‘Account Manager’ versus ‘Customer Success Manager.’ Putting the word ‘customer’ first puts a completely different spin on the role and makes it clear that it is about them. Focusing on ‘success’ highlights the ultimate purpose of the role. The job is not to manage accounts on behalf of the company; it is about ensuring the customers are successful. How about ‘Product Support’ versus ‘Customer Support?’ The latter is about making sure the customer gets what they need, while the former is more inside-out and narrow. Product support sounds like an extension of engineering. In the extreme, if the product is the focus of support, it can lead to answers that sound like ‘the product is working as designed,’ instead of focusing on the challenge that led the customer to contact the vendor in the first place, and how to meet the customer’s needs and actually support them to achieve their goal.

Consider ‘Product Training’ versus ‘Customer Training.’ Product Training is about features and functions, while Customer Training is about ensuring the customer is equipped to do their job successfully. Better yet, consider labeling the function ‘Customer Education.’  Wouldn’t you rather be educated than trained? Creating educated customers sounds way better than simply teaching them how to use our product. How about ‘Expert Services’ versus ‘Customer Services,’ or ‘Product Advisory Board’ versus ‘Customer Advisory Board.’  These may seem like subtle differences, but they can lead to very different behaviors and measures of success.  

If we consciously think about adding the word ‘customer’ to practically every title, it will ultimately shift our thinking and our behavior. Continuously ask what the customer will think when they hear a team member’s title. Will it sound like a bureaucratic company person, or will it sound like a customer advocate? Advocates create lasting relationships that may just lower our churn numbers and increase our upsell potential. If we expand our view of the arc of our relationship with our customers, it causes us to become less transactional and more aligned with their success. When our team members put themselves in the customers’ shoes in every interaction, we learn to act with empathy not with just process. Empathy begets loyalty, and there is no question that with loyal customers our business will thrive. Changing our language is a small step toward changing our culture that can have a lasting impact on our success.

It Is All Connected

We often think of the various functional areas of our business as siloes. Sales is separate from Engineering, which is separate from Customer Success and Finance. We recognize the through thread that connects some of the functions, like sales and marketing, but we still think of them as distinct efforts with independent metrics. When a functional area has ‘issues,’ we consider it their challenge to overcome: Sales missed its bookings target, or engineering had too many bugs, or accounting missed its collections target. The truth is that it is all connected.

One of my favorite business authors, David Marquet, talks about the power of banning the word ‘they’ from our vocabulary. ‘They’ is a divisive word. It separates ‘us’ from ‘them,’ and gives permission to place blame instead of share responsibility. When we banish the word ‘they’ and replace it with ‘we’, our view of metrics and business performance changes radically.

Let’s look at an example where we discover a spike in support tickets being passed to Engineering. The siloed response is that ‘They - Engineering’ need to work harder and increase their solve rate. It is Engineering’s metric, so it is their problem to resolve. Maybe ‘they’ need to assign more resources to drive down the volume.

Think about how the response changes if we say ‘We’ have more support tickets being passed to Engineering. It means every part of the company has to explore how ‘we’ are going to address the issue. We start to ask questions:  Are we seeing more support tickets as a result of recent product enhancements? Did we specify a confusing enhancement? Do we have a coding problem or do we have a QA problem? Do the tickets reflect issues in old code that was never stressed, and is our uptick a result of a change in our implementation methodology? How many of the tickets were ultimately resolved without the need for a code change? Is that a reflection of Support passing things to Engineering that should have been resolved without Engineering’s participation? Do we need more tools to better equip support? Does that take us to a documentation need, or a training need, or perhaps it goes back to a product definition issue that led to a confusing user experience? If we go even further back, does it take us to how we sold the product and what we said it could do? Was our marketing attracting customers with unusual use cases? Did we over-sell?

When we change the ownership of the problem from ‘They - Engineering’ to ‘We,’ all of these leaps and questions naturally evolve. It is no longer Engineering’s metric and responsibility, it is our metric and our challenge to get to the root of it. It becomes a collaborative effort instead of a siloed effort.

A similar example is “‘Sales’ missed its bookings target.” Instead, if we frame the issue as “‘We’ missed our bookings target,” then not only do we look at Sales activities, we go further and look at the product/market fit and our feature set. We look at Marketing and lead quality, and we look at “Customer Success” and our reputation in the market, and, yes, ultimately we look at strategy and addressable market opportunity. When we banish the word ‘they’ and use ‘we’ instead, our perspective on performance changes. It brings us together and forces us to connect the dots and recognize the interconnectedness of the entire business.

It may not feel natural at first, but give it a try. Ban the word ‘they’ from your corporate vocabulary. Invluding when team members discuss customer issues. Instead of addressing customer problems as ‘they’ broke something, try substituting ‘we.’ Instead of ‘they’ broke the system, try ‘we’ broke the system. It may be unnatural, but it forces us to step into the customer’s shoes and recognize that we are responsible for their success, so we are a part of any issues they have. It helps to close the gap between vendor and customer, and it creates customer advocacy internally.

The same we/they thinking translates into the CEO/board dynamic. Board members are separate from daily operations, so it is easy to look at the business and speak of management as ‘they.’ After all, ‘they’ are the ones running the business. However, when board members shift to using ‘we,’ it creates a more collaborative environment. In my early days as a CEO, when there was a problem, my initial instinct was to go to the board thinking it was solely management’s problem. It felt a lot like grade school, going to the principal’s office to confess to our screw up. However, when a board member responded with “what are ‘we’ doing about it,” instead of “what are ‘you’ doing about it,” it was disarming. The tone went from an arms-length posture to a collaborative footing. It is a lesson learned as a CEO that I now practice as a board member. Board members and management have distinct roles to play, but using ‘we’ closes the gap. We are all professionals aiming for the same positive outcomes. ‘We’ can make it a collaboration.

Align The Board Calendar With The Business Cycle

I often hear investors tell CEOs that they do not want board meetings to be too much of a burden - ‘We are only looking for information you are already producing, so just share it with us.’ In my experience, this is a myth. It is true that the information provided to the board should be based upon existing operating analysis and tracking, but the level and form of reporting to run the business is very different from the materials a CEO needs or wants to present to the board. No matter how you cut it, preparing for a board meeting takes work and is a burden on the organization. The good news is that the act of preparing for the board meeting is usually very valuable. It is a moment when the CEO and the management team have to step back from the day to day and actually think about how things are going. It usually brings operations into focus with clarity and heightened awareness. It makes management step out of the tyranny of the urgent and actually look at the arc of the business.

Having said that, preparing for a board meeting does take work and is disruptive. When investors press for frequent (monthly or worse) meetings, the CEO has to ask ‘why?’ Are frequent meetings an efficient use of management time, or is it just an efficient process for busy board members to catch up? There is a better way for management to keep the board informed without the same level of burden imposed by preparing for frequent meetings. Tools like Slack and Teams can offer effective and efficient communication channels to streamline board interactions. A monthly narrative email or message from the CEO accompanied by financial results and metrics from the CFO can be supported by an asynchronous dialog and exchange of questions, comments, and thoughts on Slack - less meetings, more efficient, better communications.

Full-fledged quarterly board meetings are absolutely valuable. However, the CEO and board need to align on the purpose for each meeting. They should view the full year as a business operating system, and consider the themes that occur throughout the year. Typically, meetings occur after the financial close of the quarter, and every meeting will include quarterly performance and forward-looking forecasts. However, in addition to results and projections, each meeting should have a planned theme that follows the business cycle.

We enter the year with operating and financial plans for the new year. The goals and most of the framework for the plans should have been discussed with the board before the end of the prior year, so there should not be any big surprises, but going into the first meeting we now have firm results and a real plan. The theme of the first meeting is to kickoff the year. It is a time for each functional leader to present their plans and goals, and for the board to formally approve the company’s plan and agree on how success will be measured for the year.

The second board meeting follows the end of the first quarter. The plan has had some battle testing, and we can see the trajectory of the business taking shape. The theme for this meeting is the product. Engineering projects take time to complete, so addressing the product early in the year provides the board with a view of what will be completed that can potentially change the business trajectory by the end of the year. A focus on product is also a focus on competitive landscape, strategic direction and product / market fit, which are all important board topics.

The July board meeting is the mid-year mark. We need to assess what is working and what is not, what the outlook is for the second-half and full-year, and whether we need a re-plan. The theme of the meeting is sales and marketing. By mid-year, the marketing programs should have demonstrated effectiveness, and new sales people have had time to onboard, build pipeline, and begin to contribute bookings. For many enterprise products, the sales cycle is approximately six months, so a careful analysis of the pipeline at the mid-year point is a good predictor of sales for the rest of the year. If we do not know a prospect by mid-year, it will be challenging to find and close a new deal by the end of the year with a six month sales cycle. This is the meeting where funnel metrics will tell the story of the remainder of the year.

By October we have even better visibility to the end of the year, so we know how things are likely to turn out. There are two themes for this meeting. The first is the customer base, and the second is a preliminary view of the financial and operational goals for the coming fiscal year. Customer analysis should be an element of every meeting, but this meeting is an opportunity for a more in-depth review of retention and upsell metrics, and the practices, policies, and strategies related to managing the customer base. Focus on why customers stay, how satisfied they are, what drives them to spend more or less, or why they choose to leave. The board needs an understanding of the stability of the ARR going into the new year, which will also validate the product / market fit, and paint a picture of the long-term viability of the business.

The October meeting is also the CEO’s opportunity to test the goals for the coming year, and discuss the contours of the plan: revenue targets, growth rates, profitability, investments, etc. The board and the CEO need to be aligned on the overall framework. If the board is expecting 30% growth, but the CEO is only aiming for 20%, this is the meeting to discuss the disconnect. The non-financial goals, and the financial plan will be built around achieving the agreed outcomes.

There is value in adding one last meeting for the year to review the emerging detailed operating and financial plans. This meeting will take place in December, and the purpose is to see the translation of the October discussion into an actual detailed plan. This is an opportunity for preliminary approval of the plan, or a course correction before the new year starts. Some companies do not bother with this meeting, and leave approval for the early January board meeting. The advantage of having this meeting is it positions the CEO and leadership to kickoff the new year with confidence that the board is fully supportive of the plan. It is also a solid communication step that ensures CEO and board alignment.

Having a full-year board plan puts everyone on the same page, and creates greater efficiency for each meeting. Board members and management know what to expect. The management team is able to prepare for each theme in advance, instead of scrambling to accomodate an agenda that only materializes as the meeting approaches. Adding structure to the full year of board meetings is another tool to create an impactful board and management team collaboration.

Feed Your Board Nutritious Metrics

In an earlier post, I proposed that board members should insist on seeing information presented in the form of trends. I have also advocated that CEOs and management teams need to provide the board with information that puts every element of data into a context that is relevant and understandable by the board. I call this the ‘So What’ test. If you present a fact, put it in the context that explains why it is important, and why we should care about it.

As an example, if marketing reports that there were 20,000 visitors to the corporate website, that is a fact (we hope). If they show it on a trend line over time that shows the number is growing or declining each month, and is a helpful directional indicator. However, it still does not tell us if this is a good result or why we should care about it. In other words, it does not answer the ‘So What’ question.

What was the goal? Why was that the goal? If we did not reach the goal, what are the implications for the business? Why is the number improving or declining? How much are we investing to improve the number? Are we getting a positive ROI on that investment? There are many more questions that all go to the issue of ‘So What,’ but it is clear to see that the fact that we had 20,000 visitors is a hollow statistic. It is like food with empty calories that will not nourish a meaningful understanding of the business.

However, the real ‘So What’ question is ‘why is this number even being reported to the board?’ Too often, in the interest of giving every functional area of the company a voice, CEOs acquiesce to include information from functional leaders that is more like ‘what I did on my summer vacation’ than an important indicator of corporate success. We have all seen these ‘essays’ - “we attended 4 conferences,” “we updated 12 pages on the website,” “we tested 32 new feature points,” etc. These are often feel-good metrics. They may be adjacent to a meaningful measure, and masquerade as a leading indicator, but in reality they are just empty calories.

Take website visits as an example again. For some businesses, this is absolutely an important measure, but for most companies, it is a feel-good metric. Our goal is to drive sales, and in order to do so we have to find and close prospects. We follow a sales cycle that moves prospects through the sales funnel from lead to closed-won, and we identify several clearly defined points along the journey that we can measure. Website visits are at the very top of the funnel, and represent contacts before we even know if the visitor is in our target market. Don’t get me wrong, I am not saying that marketing should stop measuring visits, but many many things can influence website visits. I am saying that as a standalone measure, it is not board-worthy. There is too much noise in the statistic to get a clear signal to communicate to the board. Visits can go up while qualified leads go down. It just means the bait we are using attracted the wrong kind of fish. The reverse can also be true - visits go down, but qualified leads go up - we may have done a better job crafting a more targeted message. A change in traffic may be driven by external factors that are not related to our actions at all. There is just too much noise.

If we are looking for leading indicators of bookings to report to the board, a better path is to work our way backwards up the funnel through each of the defined earlier sales stages that lead to closed-won. This is where we have actual indicators of interest and intent - classic BANT (budget, authority, need, timeline). Focus on conversion rates from one stage to the next (volume), and the pace of movement from one stage to the next (velocity) which will provide a much more valuable insight into future sales outcomes. As a board member, it is a feel-good moment to know that people are visiting the website, but the data that delivers real ‘nutrition’ is the information that is much closer to actual sales and the trends that represent a pattern of progress.

I have focused on marketing and sales as my example, but feel-good metrics abound throughout board books. Examples like the number of hours worked in engineering, when what we care about is feature output. Customer success meetings held, when what we care about is measures of upsell and avoidance of churn, not the number of meetings. If a manager is reporting a statistic or data point, the CEO needs to apply the ‘So What’ question to ensure it is presented in a meaningful context, but they also need to test if it really has meaning and value, or if it is just a feel-good measure that takes up space and does not advance board knowledge.

Board members have limited time, and are often distracted by their own businesses, or other companies where they participate on the board. I refer to the phenomenon of “Board Amnesia” in earlier posts. It is the common occurrence where, from one meeting to the next, board members tend to forget a substantial portion of what was discussed and decided. The CEO has to make the most of the time the company gets from board members, and not burden them with junk calories and hollow data. Crafting a concise business analysis with meaningful metrics and measures, coupled with solid “So What” analysis is an art form, and one that CEOs have to master if they want to nurture an effective board.

Go Looking For Trouble

Board members and CEOs need to keep our eyes open at all times. Some problems happen in a flash, and nobody could have seen them coming. More often, trouble is brewing beneath the surface for a long time, but it is overlooked until it boils over at a critical moment.

Andy Grove of Intel said “Business success contains the seeds of its own destruction. Success breeds complacency. Complacency breeds failure. Only the paranoid survive.” He wanted everyone at Intel to run a little scared and keep looking for the seeds of failure. One of the leading sales training courses teaches enterprise sales people to go ‘looking for trouble.’ An enterprise sale is made to a broad constituency of buyers. If you only focus on the buyers that are positive about what you are selling, you will miss the ones that are going to torpedo your deal. You have to keep vigilant and go looking for trouble. Seek out the person that attends meetings but never says anything. Make sure their silence is not full of objections. Assume somebody does not like your solution, so go find out who and win them over. To quote Joseph Heller “Just because you're paranoid doesn't mean they aren't after you.”

Like the enterprise salesperson, the CEO has to go looking for trouble. I recently wrote about how CEOs face an ‘Optimism Dilemma.’ They need to be the visionary cheerleader, but they also have to stay on the credible side of being overly optimistic. Another layer of the optimism challenge is that looking for trouble requires a healthy level of skepticism. The challenge is to probe and question without being demoralizing to the team. You have to go looking for the bad while projecting the good.

As organizations become larger and deeper, real information is mostly known by the staff on the front line. It tends to be filtered and polished as it gets passed up the corporate ladder. By the time it reaches the CEO, it is a processed food. Processed foods taste good, but are not necessarily good for you. A steady diet of processed information may make the CEO happy, but it is not going to give them the nutrients they need to succeed. CEOs have to go looking for the raw materials, the whole-grains of information to stay on top of what is underlying the corporate results.

For board members, the problem is even more acute. The CEO and CFO typically act as our conduits to what is going on in the company, and they manage the spigot that controls the information flow. CEOs have a natural tendency to want to feed a positive message to the board, so they are often creating their own version of processed food. The difference is that as board members, our ability to dig deep under the covers is much more limited. The healthy separation of roles between the board and the operators makes it inappropriate to just bulldog our way into the business to seek raw information.

As board members, our best tool is to invest our effort to work with the CEO to agree on truly meaningful measures and focus on proven leading indicators (KPIs). Once we know what to look for, we need to watch the trends like a hawk. Trouble typically brews over time, but there are always telltale signs in the KPIs and trends. Small variances can be easily overlooked, but can blossom into wide gaps down the road. Like a rocket headed to the moon, small variances in trajectory at the start will lead to a wide miss the further out the ship travels.

Board members want to believe in the team, but we also need to be looking for trouble. It may be a small miss on bookings, or deals that keep sliding into future quarters, or projects that don’t quite finish on time, or small overages in expense categories, or small declines in NPS scores, or unusually high employee turnover, or any number of small but important variances. In isolation, a small miss here or there may not be a red flag. Businesses are made up of humans, and not everything goes as planned, but trends rarely lie. Minor variations will either work themselves out, or they will start to accumulate over time and manifest as a trend. Spotting the trends that are accumulating, and shining a bright light on the issues can avoid big trouble down the road.

When management delivers performance results to the board, I always ask to see the trends, and not just point-in-time results. My favorite catch-line is “so what?” When presented with a singular fact or result, I want management to answer the ‘so what’ question. How does the fact compare to plan? How does it compare to the trend? Why does it matter to the business? What are the implications of the result? ‘So what’ requires context, and context enables a board member to spot trouble.

‘Only the paranoid survive’ needs to be a guiding principle for CEOs and board members. We all need to go looking for trouble before it finds us. Best case, you will not find any, but if you do spot something, you may be able to address the issue before it flares up into a real problem.