Courage

Everyone knows that an executive’s job is to achieve the outcomes that they have been tasked to achieve. “Say it > Do it, No Excuses” is a common mantra used to describe performance expectations for a senior leader.

As people rise in corporate ranks, what many leaders are sometimes slow to grasp is that their responsibility is also to create the winning conditions for them and their team to succeed.

Too often, I hear the excuses. “I didn’t get the budget and resources needed to be successful”. “The company’s objectives were too aggressive and not realistic”. “Our compensation structures are too low to attract the caliber of talent that we need to compete”. “I could not meet my objectives because XXXXXX didn’t do their job” (For XXXXXXX, you can insert “marketing didn’t generate enough leads for sales to sell”, or “recruiting couldn’t hire developers fast enough” or “development missed key market requirements when they built the product” and the list goes on…)

When an executive fails to create the winning conditions to succeed they are just as responsible for failure as they are when they fail to execute, but what do you do when it is impossible to create the “winning conditions to succeed”?

Case #1

A professional services organization was failing. Its job was to manage the consultants who implemented software. Working conditions had been deteriorating for a couple of years as competition increased and margins tightened. As a result, demands placed on the consultants were greater, compensations and perks had been ratcheted back, training budgets had been decreased and generally it felt like the company culture was under attack. As a result, morale was eroding, attrition had spiked to unacceptable level that was threatening sustainability, and the sales and product organizations were complaining that the consulting team didn’t have the skills to implement the new products that were being developed.

The leaders of the consulting team were viewed as leading a “failing organization”. When summoned to explain the situation, their excuses were accurate. The company imposed on them conditions that had led to the current situation. A few went so far as to say that they had warned against these actions and had predicted the resultant bad outcomes. This is the corporate equivalent of the ship’s mate saying “I saw the iceberg ahead but didn’t do anything to alter course to steer around it”

Although their failure was judged by the bad outcomes, more so, their failure was rooted in not creating the winning conditions that altered the outcomes. Although many had said they saw the actions, analysed the consequences and predicted the bad outcomes, not one ever went to their collective bosses and said “if we do this, I will fail so I would rather be fired now for predicting we are going to fail than be fired later for failing.” No one had the courage of conviction to bet their job.

As people rise the corporate ladder, many do not realize that included with the promotions is the obligation to “bet your job” in order to succeed.

Case # 2

A private equity (PE) company bought a distressed data and analytics company to do a turnaround. While the company primarily sold data and insights to its clients through labour intensive professional services, as part of the turnaround, the PE’s vision was to create a software division to build products to deliver these insights, more consistently and at a lower cost.

An executive was hired to build a “start-up” within the traditional, large, mature, formerly public company. While the traditional company, the private equity firm and the start-up division were aligned in objectives, many critical nuisances and assumptions about the business plan were not aligned. The software division planned to deliver their solutions as “Software-as-a-Service” (SaaS) with recurring revenue which is recognized over time as the service is delivered. While the PE company understood these implications, it is not clear whether the budgeting and revenue forecasting processes of the traditional, formerly public company understood the nuances of terminology and impact on the financial P&L.

The start-up division’s business plan used the terms “sold” and “revenue” which the company assumed meant “GAAP Revenue” with the accompanying cash from the sale. Unfortunately, when the start-up used the term “sold” and “revenue” that they meant “Bookings” and “Annual Recurring Revenue (ARR)”.

As in every new venture, it began full of energy, excitement and enthusiasm as software products were being developed and product-market fit was being assessed. Obviously, revenue was not expected until after initial products were built and sold, so the first half of the year was skewed to front-end expense. As costs accumulated, the company began to understand the plans to generate bookings in the back half of the year which would not generate revenue until the following year as the SaaS was delivered. As a result, there was not the cash or revenue to pay for the expense in that fiscal year. There was a basic disconnect in the start-ups business plan and what the traditional company had budgeted. The expected financial losses and cash burn now anticipated for the year were not viable for the company and most of the hiring in the first half of the year had to be dismantled and people terminated in the second half in order to minimize the losses to a tolerable level that didn’t threated the company’s viability.

Later, when the start-up’s GM was asked, when did you know something was amiss in the disconnect between business plans, he admitted it was early in the year. When asked, why did not he raise the flag then, he said if I had, they would have fired me then. Instead, he tried to accelerate results to save the plan, even in the face of the impossibility of this task. Early the next year, once the final accounting of the disastrous year was done, he was terminated. The dual morale of this story is twofold. Unlike fine wine and good cheese, bad news does not get better with age. Secondly, instead of coming clean early, the GM personally had an awful year. He recruited people in the first six months, only to terminate them shortly thereafter; he spend an intense year under pressure to meet a plan he sensed was impossible; and the outcome of being terminated was the same whether he came clean early or later. “Hope is not a strategy”

Case #3

A large software company that was largely North American centric and specializing in two industry verticals acquired a European-centric software company that specialized in a third industry vertical. They saw an opportunity to increase their revenue by introducing that European company’s software into North America and built their business plan around this premise. Unfortunately, while it is relatively easy to build the sales and marketing capacity to sell a new software products into a new geography, it is a much more complicated task to build the capacity and skills to implement the software for customers.

When the head of their professional service division was given the business plan for the year by the CEO and the Board, he quickly analysed it and realised to be successful, he would have to significantly reduce headcount in Europe where it was not needed while at the same time rapidly build skills and capacity to a significant scale in North America. While on paper, the math worked, in reality, the plan was not feasible.

He told the CEO and the board that he could not deliver the plan as envisioned and presented a revised plan over an extended timeframe that he believed he could commit to. He told the CEO and the Board, they either needed to revise their plan or find someone else who thought they could accomplish the Board’s plan. The Board fired him and hired someone else who tried and failed to accomplish the Board’s plan and was subsequently also fired a year later.

While getting fired is generally not viewed as a winning outcome, in this case it was. Why beat your head against the wall when you know you cannot succeed? Like Star Trek’s Kobayashi Maru scenario, sometimes there are no-win scenarios.

So, back to the original question posed before the cases: What do you do when it is impossible to create the “winning conditions to succeed”?

I believe a leader has two avenues to pursue.

The first avenue is “go with the flow”; do your best, but likely fail and likely have a miserable period of your life while failing; possibly be terminated; or possibly be allowed to keep your employment but in a lower role. Saying “I told you so” later can not be an expected path to avoid termination or other consequences.

The second path is, like Kirk, you have to find a way to defeat the Kobayashi Maru scenario. In that fictional case, Kirk, after twice failing the test, re-wrote the program to insert possible winning conditions so he could pass in an “unwinnable scenario”.

Does this ever work in real life?

In 1995, PeopleSoft acquired Red Pepper software as a kernel upon which to build their ERP and Supply Chain solution for the manufacturing industry. In February 1996, I was hired to join as a Product Manager to launch PeopleSoft Manufacturing in Canada. Upon joining, I spent time understanding the new product, its development roadmap, and fit against the many sub-industries in the manufacturing industry. I then mapped the product plans against the Canadian Manufacturing sector and discovered the early target sub-industries for our new product only covered 4% of Canadian manufacturing GDP. In other words, my total addressable market for 1996, 1997 and maybe longer would be a tiny slice of the total Candian market. The business case to launch PeopleSoft Manufacturing in Canada did not work and I recommended against moving forward. My recommendation also meant that the job I had just been hired to do was no longer required. The result, PeoplSoft Manufacturing was not launched in Canada, I was asked to take on other responsibilities, six months later I was promoted to VP Sales and ten year later, I departed PeopleSoft after completing the integration of PeopleSoft Global Services into Oracle Consulting.

Sometimes, when all other arguments have failed, the act of betting your job and saying I cannot meet the plan, may be the final act that causes the change to the plan. I hope you never have to face this decision, but if you do, will you have the courage to bet your job?