To the Break-even Point & Beyond: A new leader’s tactic for ramping-up
October 16, 2019
In SaaS businesses, operating results are earned every single day; and good businesses are made, not found. Writing here about building organizations, learning from the experience, and appreciating the ride.
We all want to prove our worth. We aspire to demonstrate competence, deliver value, and be recognized for our contributions to group goals. And this feeling is particularly acute for leaders during their early days in new roles with new organizations. From the moment they are introduced, new senior leaders are scrutinized by their management teams, by clients, by board members, and by many other stakeholders. Under these microscopes and carrying the weight of such expectations, executives are understandably eager to establish credibility and secure early wins.
In this environment, it’s also unsurprising that questions arise around the appropriate pace of leaders’ ramp-up time. Michael D. Watkins does an amazing job of tackling this complex issue in his book “The First 90 Days.” One of the useful concepts presented in that book is a leader’s “break-even point,” which is illustrated below:
Source: “The First 90 Days: Proven Strategies for Getting Up to Speed Smarter and Faster,” Michael D. Watkins, Harvard Business Review Press
Watkins points out that, although the timing to reach the break-even point can vary based on numerous factors, the goal is the same for virtually all leaders: “to get there as quickly and effectively as possible.”
But rushing things exposes risks and traps that can lead to what Watkins calls “vicious cycles of transitions.” These cycles are characterized by an interconnected set of (a) inadequate learning by an executive, (b) ineffective relationship building, (c) lack of supportive alliances, (d) bad decisions, (e) lost credibility, and (f) organizational resistance. In sum, these cycles can kill any new leader’s plans for success. “The First 90 Days” combats these vicious cycles with a broad range of practical strategies for managing transitions with purpose and precision; and I recommend this book to anyone contemplating any new leadership challenge.
This post targets one aspect of this broad topic. It introduces a specific discipline that we’ve found to be consistently helpful in small-scale businesses in not only avoiding these vicious cycles, but also in accelerating leaders’ journey to the break-even point and beyond. It’s an astonishingly straightforward concept with impressive outcomes; but it can be challenging to execute in a leader’s busy days in a new role: The discipline is LISTENING TO PEOPLE. It is unquestionably simple; but the devil is in the details. Below is a quick explanation of the process, along with some tips and observations about why it works.
This approach centers around harnessing the power and value that comes from 1-on-1 interactions between people. It relies on a leader authentically engaging in individual conversations with every member of a team. As I wrote about here, it also demands that the leader clearly demonstrates his / her willingness to hear even inconvenient truths, and to create a safe environment for people to share their candid views. Note: while this practice would likely be infeasible beyond a certain scale, we’ve used it effectively in teams as large as 100. At the highest level, the process entails three key steps:
Ask, Listen, Learn (and Record): First, schedule 1-on-1 sessions with each person in the company. Forty-five minutes is a reasonable length, but these sessions are often quite engaging and can last longer. It’s advisable to schedule these as tightly as possible following a leader’s start-date, but not so densely that they become rushed, impersonal, or a burden to be endured. We’ve learned that it’s a good idea to schedule the meetings in a random sequence, in order to allay any potential fears among the team of prioritizing any one person over another. The conversations themselves will center around a small set of questions asked by the new leader (more on those in a moment) and on the team members’ responses to these questions. These absolutely can and should be organic, authentic conversations; but it’s important to cover each of the questions. Along with listening actively and intently, the new leader’s responsibility is to record the feedback as exhaustively as possible.
Why it works: Generally speaking, this is just the right thing to do. This practice also clearly conveys with actions (not just words) that a leader doesn’t think she knows it all (hint: no one does). Such an effort helps leaders to avoid the pitfall that Watkins calls “coming in with the ‘the’ answer.” It’s also an incredibly effective way of shortening one’s learning curve. It would be extremely difficult to collect in any other way such a diverse set of complex, highly nuanced, deeply informed perspectives about the business. And we’ve found that team members are amazingly thoughtful, introspective, forthright, and generous in their responses when engaged in this manner.
Distill, Analyze, and Share: Once conversations are completed, the session notes should be anonymized, and put into spreadsheets, but otherwise left unedited. This allows for responses to be bucketed into categories, and for the leader to step back and holistically view the complete responses, distill the feedback, and identify trends or patterns within it. We like to share this artifact with the leadership team, in order that they can see the unedited, but categorized and anonymized, feedback. Note: this can be a real moment of learning for the leadership team members, as many will never have received this kind of feedback previously.
Why it works: The feedback from the 1-on-1’s arrives in serial, concentrated conversations and can be quite overwhelming. Sorting it into categories and response-types allows for sense-making and for the macro-takeaways to emerge. It is also an effective guard against selection bias, which leaders can fall prey to if their introduction to the business is dominated by a few senior managers. This step also allows for a translation of qualitative information into quantitative metrics (e.g. 35% of people consider X item to be a priority, 42% of people believe the business is performing in Y manner, 72% of people are concerned about topic Z). All of this this will be helpful later as a leader looks to establish her case for implementing change in the organization.
Present, Discuss, and Diagnose: The next step is for the new leader to present the findings back to the business. This tends to take the form of a brief presentation with slides as visual aids. It should avoid focusing on any individual quotes or single points of feedback, instead capturing the main trends and takeaways from the data. We like to start by having the new executive share with the leadership team. We’ll later share with the entire team, but its primary purpose at this moment is simply to inform and foster substantive discussion among the company’s senior managers. Those discussions, in turn, will help inform a hypothetical diagnosis of the business. That diagnosis is not yet definitive or final. Rather, it is a starting point — a hypothesis — around which in-depth quantitative research, detailed planning sessions, and draft strategic plans can be based.
Why It Works: This step tends to elevate the discussion. The feedback itself can unleash an emotional response even among the company’s senior leaders; and this step allows the new leader to position the feedback as a catalyst for valuable learning rather than any kind of indictment of past practices. It also allows the new leader to exhibit a surprisingly informed understanding of the business after only a few short weeks on the job. This, in turn, is a great way for the leader to establish credibility and demonstrate competence. Lastly, the diagnosis helps to translate an eclectic array of inputs into a clear, concise, actionable form. But it does so on a tentative basis and without final judgement or conviction, which still invites input, augmentations, and even dissent from an ever-widening circle of team members.
An important remaining item still to cover is: what are the actual interview questions? Although these certainly deserve flexibility and can vary by business, we’ve had success with a few intentionally open-ended and precisely worded questions. These have been revised over time, and each is included for specific reasons. Those questions and related commentary are below:
What business are we in? As I wrote about here, this question can be deceptively difficult to answer. It also often gently forces valuable discussions about things like your company’s business model, core competence, value proposition, required investments, talent needs…and misalignment or gaps across all of the above. It’s common for there to be a range of responses to this, with those gaps offering a great opportunity to work toward future alignment.
How is the business doing? Again, this question often elicits diverse responses. Those responses sometimes reveal wide-ranging opinions among the team. They can also uncover inconsistencies between general perceptions people hold versus the story told by financials or other metrics. Without fail, this question sheds light on how information has been shared in the past: has it been a transparent culture, one that shields people from bad news, one that focuses exclusively on one view of the business while ignoring others? All of this is useful learning for a new leader.
What is the real strength of the business? Again, so much to be learned from this question. Sometimes responses are overwhelmingly consistent (e.g. “Our strength is customer support.”). In other cases, responses are all over the map. In one case, members of virtually every functional area believed with conviction that their department was the lone strength of the business (needless to say, unity was NOT the strength of that business). In still other situations, a bit of probing can reveal that responses prove to be based more on accepted myths than on factual reality. This and more can be deduced from this simple question.
If you were me, what one thing would you focus on? We’ve learned that this is a much better way for a new leader to ask about an organization’s “weaknesses.” No one wants to “rat out” a perceived problem area to the new boss; but people are generally eager to direct a new executive where best to focus his attention. This becomes about problem-solving and resource allocation rather than finger-pointing and blame.
What do you hope never changes about the business? A new leader can be unnerving for any organization. This question offers a safe space for people to voice their concerns about a new leader’s priorities, without pre-judgement or negativity. It also provides an awesome guide-map for a new leader regarding landmines to avoid. Knowing what is critically important to people, allows leaders to easily navigate around the unnecessary pitfalls and build intentional bridges over the ones that simply need to be crossed.
What would make this job / opportunity a home run for you? This question is obviously a stark departure from the others. But it is a critically important one in this process. It ties the well-being of each member of the team to the broader health of the business in a highly personal way. This is just good leadership. Understanding and paying attention to people’s love language at work or their ambitions for the future is incredibly powerful. And it is so darn easy to do — just ask people; and they will share.
Getting up to speed quickly and intelligently is a critical, recurring skill for all new leaders. It is our hope at Lock 8 that this framework will assist leaders on this high-stakes, high-reward, highly-complex journey to the break-even point and beyond.