Welcome to WileyBiz! · Trim size: 6in x 9in Britton ftoc.tex V2 - 03/23/2015 1:36 P.M. Page viii viii CONTENTS Chapter 8 Free Agency 97 Chapter 9 Lifehacking 115 Chapter 10 The Field

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MARKETING • SALES • LEADERSHIP

ENTREPRENEURSHIP • PERSONAL DEVELOPMENT

YOUTHNATIO

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Contents

Foreword: By Antonio Lucio ix

Acknowledgments xiii

Disclosures xvii

How to Connect with Me and Learn more aboutYouthNation xix

Introduction: Forever Young xxi

Chapter 1 From Status Symbol toStatus Update 1

Chapter 2 From Things to Thrills 13

Chapter 3 The Rise of ElectronicDance Music 35

Chapter 4 Access over Ownership 45

Chapter 5 The Communal Table 55

Chapter 6 The Peer-to-Peer Economy 67

Chapter 7 The Power of the Crowd 81

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viii CONTENTS

Chapter 8 Free Agency 97

Chapter 9 Lifehacking 115

Chapter 10 The Field Guide to Lifehackers 131

Let’s Pivot to Brand Building 146

Chapter 11 TV, the NFL, and the End ofDemographics 149

Chapter 12 Going Viral: Decoded 157

Chapter 13 Big Data 101 173

Chapter 14 People Are Brands 183

Chapter 15 Brands Are People 213

Chapter 16 A Story Worth Sharing 223

Epilogue 249

Endnotes 259

Index 267

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Foreword

The most important leadership characteristic to thrive in thisever-changing world is resilience. Resilience is the ability tofall, pick ourselves up from the floor quickly, learn, and con-tinue with our journey. Behind resilience there is an inherentpositive outlook on life based on unwavering faith in our pur-pose, our abilities, and the capability of the teams around us.

—Antonio Lucio

A s global chief marketing and communications officerat Visa, I have been at the center of YouthNation’s

massive disruption to business and culture. Despite thefact that Visa, a brand of enormous scale, processes over96 billion transactions in 200 countries during the pastyear, in many ways we are now forced to think and actlike a nimble startup to ensure our long-term vitality.

I was deeply honored when Matt asked me towrite the foreword for his first book. Matt has been animportant thought partner and a key driver of change inour global organization. His electric passion for driving

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x FOREWORD

cultural change through social media and his deep knowl-edge of youth were key elements in Visa’s marketingevolution.

The drivers of change below are not specific to thepayments industry but have implications for businesses ofall types in every corner around the world.

1. The over 2 billion smartphone users1 around theworld have forever changed the way our worldcommunicates and consumers transact.

2. The over 3 billion Internet users around the worldnow have real-time access to data, tools, and contenton a 24-hour news cycle, forever impacting the wayswe reach and influence them.

3. The pace of innovation in the marketplace hasspawned a wave of millennial-inspired startups,which have reimagined our industry.

For Visa, as for all businesses today, the way in which wemanage change will determine whether we will be futureleaders in our industry, or another case study of a companythat has been left in the dust.

I believe that digital natives will rule the world.Whether you are a global organization with thousandsof employees like Visa or a local, family-owned business,your ability to understand the principals of YouthNationis now mission critical. There is simply no way you canreplace the experience of being hardwired in the newreality we live in, as today’s youth are.

It is imperative, therefore, for business leaderstoday to empower YouthNation to directly drive change

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Foreword xi

within our organizations. Only by tearing down wallsand challenging legacy systems can we truly disruptourselves before we become disrupted into obsolescence.At Visa, we are working hard to deploy the principles ofYouthNation in our brand, our products, and all of ourmarketing efforts—principles which you will learn aboutin this timely book:

1. Put consumers at the center. No longer can werely on talking at consumers, but rather, we needto engage them in a conversation. We need tofully understand the needs of our various consumersegments and interact with them in ways that addvalue to their lives.

2. Embrace social-at-the core. We must design ourcommunications with shareability in mind at everytouch point. We want the consumer to feel a sense ofownership in our brand so advocacy must be earnedand authentic.

3. Everything is marketing. Whether its the wayconsumers interact with our products, the way weactivate global events like the World Cup or theOlympics, or the way we interact with our greatmerchant and banking partners, they are all reflec-tions of Visa and must be consistent and continuallydeliver excellence.

I am excited to be part of this book because even as theCMO of a Fortune 500 organization, my challenges arenot unique. Anyone who is looking to navigate their way

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xii FOREWORD

to success through today’s white water of change mustmeet the demands of disruption with the principles ofYouthNation.

These are indeed challenging times, but theseare also times of enormous opportunity. I am hopefuland optimistic that the impact of YouthNation on oureconomic and cultural landscape will bring about greatinnovation, impact, and ultimately advancement forAmerica, and for the rest of the world.

Antonio Lucio is Global Chief Marketing and Communica-tions Officer at Visa Inc. In this role, he oversees Visa’s globalbranding, corporate relations, and marketing activities.Prior to joining Visa as CMO in December 2007, Lucio wasthe chief innovation and health and wellness officer for Pep-siCo Inc. and, prior to that, was the senior vice president andchief marketing officer at Pepsi Cola International Bever-ages. Lucio has more than 25 years of global marketing andbrand management experience earned at some of the world’smost successful consumer packaged goods companies includ-ing Kraft General Foods, RJR Foods International, andProcter & Gamble.

Consistently recognized as one of the most activeCMOs on social media, you can connect with him on Twitter@ajlucio5 and LinkedIn.

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How to Connect with Me andLearn more about YouthNation

I encourage you to reach out and connect withme to divefurther into the topics discussed in this book. Below are

the best ways to do so:

Twitter: This is the best way to reach me directly for oneon one dialogue; response times may vary.My handleis @MattyB, or visit https://twitter.com/mattyb

Facebook: Follow this page as new topics related to thebook will be updated often. Feel free to join the dis-cussion and get involved. https://www.facebook.com/youthnation

Instagram: Follow this page for daily inspiration and newfindings: http://instagram.com/youthnation

I hope you enjoy this book as much as I enjoyed writ-ing it!

Matt Britton - @MattyB

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Introduction: Forever Young

YouthNation (Yooth-nay-shun)1. (noun): A highly influential group of over 80 millionAmerican citizens born between 1982 and 1998. They arecurrently aged between 18 and 34 and nearly all of themcannot remember a time when the Internet did not exist.2. (verb): A movement of influential individuals who pos-sess disruptive power over cultural, business, and politicalissues in the United States.

Youth is not just a state of mind; it’s the state of the art.

Y outhNation is a new phenomenon. When Americaitself was young, there was no youth culture to speak

of. There was no place set aside for young people todiscuss and share things that were of particular interestto them. In most cases, young people were never reallytogether as a group, and as a result, had no opportunityto form a culture that was unique to them. Historically,children were at home, sequestered away from other kidstheir own age, and by the time they were 10 years old

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xxii INTRODUCTION

were expected to take their place in the adult world ofwork. At the beginning of America, people weren’t youngfor very long.

In those days, the information about the world thatyoung people received came only from adults. When theyhad problems or concerns, they shared it with their elders.It wasn’t until very recently from a historical perspectivethat young people were able to spend enough time witheach other, separated and apart from the worldview ofadults, to find the opportunity to be youthful. Even ado-lescence itself is largely a twentieth-century phenomenon.

As the middle class expanded, kids began spendinglonger and longer periods of time in classrooms, groupedby age, outside of the influence of adults. With grow-ing middle-class family budgets, and a burgeoning indus-trial economy, kids suddenly had consumer power and anidentity unto themselves. As a consequence, a youth cul-ture began to emerge, and with it a specific language anda shared appreciation for the music, literature, movies,fashion, places, ideals, and activities that spoke directly toyouth, because it came directly from youth.

Suddenly, youth culture had a voice and soughtout channels of communication to express that voice.Through college radio stations, self-published magazinesand newsletters, grassroots movements, or homebrewcomputer clubs, America’s youth found a way to com-municate with one another, and began to establish theirfootprint on the culture of the adult world. But even asrecently as the sixties and seventies, our nation’s youthremained a fringe culture with crude tools and few

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resources. It was, at most, a reaction against mainstreamculture that lived on the outside looking in.

Today, far from a fringe or counterculture, ournation’s youth have become the driving force behindAmerican innovation, growth, and competitive advantageglobally. As a result of our technological revolution, weare now living in a YouthNation, and all the old bets areoff. The power and influence of YouthNation stands todramatically shift every business, consumer, politician,nation, city, town, and village around the world.

This epic shift is disrupting just about everything thatwe took for granted about the old economy:

• The importance of a college education

• The vision of the American dream

• What success actually means

• What and how we buy

• What and how we sell

• What brands must do to embrace this new nationaland global ethos and compete

YouthNation has broken free from the hold that bigmedia and big advertising have had on culture, and com-pletely transformed the approach that brands must take inorder to appeal to today’s target market. The ripple effectfrom this monumental sea of change has and will continueto completely transform the way we work, play, and live,and is demanding and encouraging us all to be, in manyways, forever young if we want to compete.

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xxiv INTRODUCTION

So let’s be clear. For brands today, the old marketingmodels are over. The status quo is dead. Today’s rapidlyshifting marketplace requires businesses to be agile,connected, authentic, artful, meaningful, immersive, andsocially responsible. In other words, today, businesseshave to embody the ideals of YouthNation, regardless ofage or size, in order to succeed.

In YouthNation’s hyper-socialized, Instagram fanat-ical, experience-obsessed marketplace, youth is no longeran age, or even a demographic, but the primary catalyst ofbusiness and culture. Fortunately, thanks to technologyand the progressive ideals that social media has engen-dered, youth has become a commodity that is available toeveryone; all we have to do is figure out how to tap thesenew and rapidly evolving resources in our businesses, aswell as in our lives.

So how do you harness the enormous power oftoday’s youth-driven economy, where everything ischanging at the pace of a teenager’s attention span, andfuture-fit your business for long-term success?

This is the book that will give you all the toolsand understanding that you will need to understandthe nuances of YouthNation and harness the enormouspower of the perpetual youth economy.

As the founder and CEO of MRY (formerly knownas Mr Youth), an NYC-based creative and technologyagency which has specialized for well over a decadein marketing to youth for such brand titans as Visa,Johnson & Johnson, and Microsoft, I’ve learned alot about how YouthNation thinks, works, plays, andspends. Since I was a freshman at Boston University

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Introduction xxv

two decades ago handing out nightclub flyers on thecorner of Kenmore Square, I’ve made a career out ofeffectively engaging YouthNation on behalf of brands,and leveraging technology in order to keep pace withthe counterculture that has now become the mainstreamculture itself.

From Big Data 101, which explains how to useNew-Gen psychographics to market effectively in a postdemographic world, to how to tell a brand story worthsharing that builds engagement and evangelism to tipsfor cocreating immersive and engaging experiences thatbuild viral followings and loyal brand communities,YouthNation will offer businesses large and small anindispensible map to navigate the radically changedlandscape of the present and the future marketplace.

So let’s get started, and right away, because in Youth-Nation, everything happens in real time, and in the blinkof a Snapchat.

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CHAPTER

1From Status Symbol

to Status Update


The notion of the status symbol goes back as far as humanhistory. In ancient China, once a man reached 20, he waspermitted to wear a cap. This was celebrated with a cere-mony calledGuanli, or Ceremony of theCap. As each newdynasty took hold, the caste system of the cap evolved,developing ever more specific rules and privileges associ-ated with each style. What your cap looked like, and whatshape or color it was, said very important things aboutyou. For example, in the Han Dynasty a “lowly person”had to be content wearing only a headband, whereas theelite could get really decadent and wear a headband witha matching hat.

Since its early beginnings with the highly nuancedChinese cap trend, the notion of the status symbol reallytook off, taking hold all over the globe in an ever wideningarray of objects and styles, all designed to tell a story aboutthe importance of the owner. In America today, Maybachvehicles, Christian Louboutin shoes, Hublot watches, andreal estate in glamorous places like the Hamptons orMal-ibu are the de rigeur status symbols of opulence and poweramong the super wealthy.

America’s youth has had a love/hate relationship withstatus symbols. For one, the glittering objects of the afflu-ent elite have been by and large out of reach for them. Inearlier generations, young people were motivated to workhard and long to reach the pointwhere status symbols suchas a beautiful homeor a nice carwere attainable. As the gapbetween aspirational youth and the affluent mainstreamwidened, however, the nation’s youth rejected the statusquoandturnedtoanti–status symbols toexpressadifferentkind of importance within their own cultural sphere.

3


4 YOUTHNATION

Along with this shift away from traditional statussymbols, came a new set of values to support this newanti-status iconography. In the sixties, for example,ripped jeans, flag t-shirts, and long hair became counter-culture status symbols. Along with these symbols camea lifestyle and world vision centered on experiences thatwere not about luxury but about the pure enjoymentof life in its simplest and purest form. Be-ins, happen-ings, and protests, became the status alternatives for ayouth culture in revolt against a system that had shutthem out entirely, and that stood for materialism overexistentialism. For young America in those days, povertybecame chic, and wealth became tacky. And so a schismgrew up between the mainstream and the counterculturewith regard to visions of what status really meant, whatwas truly important and valuable in life, and how thatwas expressed.

Mainstream StatusSymbols in the Sixties

Counterculture StatusSymbols in the Sixties

• Lincoln Continental

• Travel aboard a PanAm jet clipper

• Color TV

• A royal title

• A suburbanbungalow

• The peace sign

• The Afro

• Levi’s

• Psychedelic drugs

• Tie-dyed t-shirts

• Communes


From Status Symbol to Status Update 5

The Hip-Hop Invasion and the ReimaginedStatus Symbol

Young America’s feelings about mainstream status sym-bols changed dramatically in the nineties. Suddenly, tra-ditional status symbols of luxury and affluence becamemore accessible to youth culture. The accessibility of lux-ury opened up enormous windows of opportunities forbrands and entertainers alike. The emergence of hip-hopculture combined with a booming economy toward theend of the twentieth century brought status symbols toyoung people in a whole new way. An infinite and innova-tive variety of status symbols, which were accessible andavailable everywhere from suburban malls to urban streetcorners across the U.S., led a hip-hop renaissance, alongwith a world vision that supported this new emphasis onaccessible affluence for youth.

Hip-hop status symbol highlights

Through pervasive lyrics, from the likes of Noto-rious B.I.G., Jay-Z, Kanye West, Mase, Nas, andothers, the new importance of status symbols toyoung America came through loud and clear. Thisnew youth narrative, which stressed affordableopulence, helped usher in a wave of accessible luxury


6 YOUTHNATION

goods creating status symbols in every section ofthe economy. Here are some of the more notableexamples:

• One of the first status symbols that emergedfrom hip-hop’s early influence was from RunDMC in 1986 by way of their hit song “MyAdidas.” These early rap pioneers received amultimillion dollar endorsement deal as Adidas’three-striped sneakers tread the streets fromQueens to Long Beach, California, in heavyrotation.

• In 1994 Snoop Dogg donned some TommyHilfiger gear on Saturday Night Live, and salesreportedly jumped by over $90 million thatyear. Prior to the SNL endorsement, TommyHilfiger was largely an elitist fashion brandrelatively unknown in inner cities and hip-hopculture.

• Leading into 2001 at least 10 Rap and R&Bsongs by artists including Jennifer Lopez hadmentioned Cadillac’s Escalade brand in theirsong lyrics. During the MTV video awards thatyear, Ludacris drove an Escalade right ontothe stage. His hit song that year “SouthernHospitality” included the lyrics: “Cadillacgrills, Cadillac mills, Cadillac fills.” SuddenlyCadillac, which had an average consumer age of62, had its Escalade SUV on back order in the



dealerships of major cities where a whole newgeneration was lining up to be a reimaginedCadillac owner.

• In 2003 after Justin Timberlake wore a VonDutch trucker hat to the Grammy after parties,stars like Britney Spears and Ashton Kutcherquickly followed suit. The Von Dutch hadbeen in fringe existence for five years beforethis fortuitous set of events. After its celebritypatronage, it became a status symbol at subur-ban malls in white upper-middle class enclavesacross America, selling out of stores at pricesexceeding $100.

Through hats, cars, and sneakers, America’s hip-hopand pop culture icons of the new millennium becamecore drivers of discretionary spending among America’syouth. Logos meant more than ever before and played anincreasingly important role in showcasing social status,wealth, and style, the very same way that wearing hatsdid in ancient China.

Logos from companies like GAP, Abercrombie &Fitch, and FUBU were brazenly branded across out-erwear and considered high fashion simply because oftheir label. By the mid-00s, hip-hop would go on toreach arguably its cultural peak as whimsical lyrics aboutGulfstream private jets, Cristal champagne, and Jacobthe Jeweler bling were commonplace in songs on CaseyKasem’s top 40 lists.


8 YOUTHNATION

Status Symbols Disrupted

While much has been written about the effect of the 2008financial collapse on American culture, its impact onpop culture and music has largely been understated. Infact a strong argument can be made that the experienceof parental stress and deflated 401(k) accounts madeYouthNation rethink the importance of the materialstatus symbols that had become so important in definingtheir identity in the nineties.

The logos once proudly emblazoned across theirchests, YouthNation realized, were nothing more thanmanufactured corporate symbols of a crumbling andsometimes corrupt empire. Somehow, having mom ordad splurge on a $200 pair of Air Yeezys when they weretrying to piece together the monthly mortgage paymentjust didn’t seem as cool anymore.

The foundational belief that home prices and stockvalues would always rise, and every generation woulddo better than the one before it, came crashing downwith every word out of Maria Bartiromo’s mouth onthose scary fall 2008 mornings on CNBC. Despite thecontinued popularity of a select group of hip-hop artistswho became bona fide crossover stars into mainstreampop (Jay-Z, Kanye West, Lil’ Wayne), 2008 created apalpable shift within popular music as the once dominantgenre of hip-hop gradually lost its hold on YouthNation’simagination.

A new measure of importance and a new definitionof status emerged out of the social media trend that wasbeginning to entrance our culture. Shiny new stuff started



to lose its glimmer, and in its place came a new form ofstatus, based not on material items, but on experiences.

YouthNation’s guide to creatinga status symbol

Though status symbols may differ widely in form,shape, and design, there are a few key elements thatall status symbols have in common. Here are thecritical components that go into the creation of anybreakout status symbol to guide you in the creationof your own luxury offerings:

1. Cost: Inmodern society, few things play a biggerrole in establishing something as a status sym-bol than the amount of money it takes to acquireit. The ownership of certain things that come atgreat cost—a mansion, a luxury vehicle, a yacht,or vacation home—signifies economic class and,in some cases, power. In fact, the purchase ofsome items, such as a private jet, can propel youinto an even higher social class, in this case the“jet set” which travels the world from the pri-vacy of their own aircraft. Note: If you want tosee YouthNation’s take on the “jet set” follow“RichKidsOfInstagram” on Instagram (but don’tprocrastinate on that for too long).

Some high-cost status symbols even seemto defy the basic principles of economics and areknown as Veblen goods. The price of Veblen


10 YOUTHNATION

goods will always remain high, regardless of lowdemand, and in fact, lowering their cost wouldmake them less desirable to those few with themoney to burn.

2. Exclusivity: The more difficult something is toobtain, the more desirable it becomes as a statussymbol. This is true for both goods such as theVeblen goods that defy economic principles,as well as certain services and memberships.The American Express Centurion Card, forexample, is an invitation-only card made avail-able exclusively to those who meet a set ofeligibility criteria. The same applies for highlycoveted nightlife establishments such as NewYork City’s Provocateur which is widely knownfor only catering to the uber rich, super cool,or beautiful. For Provocateur and others likeit, it’s who can’t get in which maintains its levelof exclusivity.

3. Identity: Status symbols express importantqualities about the identity of their owner.Ownership of expensive items and membershipto exclusive clubs and services immediately markone as wealthy, powerful, or both. But eveneveryday items can be imbued with powerfulsymbolism, especially in today’s tech-obsessedculture. Early adopters of Google Glass, forexample, were immediately identified as tech



elites. Owners of Mac computers are associatedwith creativity more often than their PC-usingcounterparts.

4. Cultural significance: Perhaps the most criticalaspect of a status symbol is that it reflects thesocial and cultural dynamics of its time andplace. For example, the tie-dyed t-shirt heldlittle meaning before becoming popular in thelate 1960s and early 1970s as a symbol of thecounterculture movements taking place acrossthe country. In the 1980s, a cordless phone sig-nified wealth and early adoption of technologyin America, but in 2015 it has become difficultto imagine using anything but a smartphone.Every status symbol is a product of its own timeand place in our cultural history.

5. Celebrity endorsement: There is a reasonwhy brands throw down millions of dollarsfor celebrities to endorse their products—itworks. However, as we saw with the hip-hopmovement, even when unpaid, the simple asso-ciation of a product with a celebrity or culturallysignificant figure can cause it to go flying offof the shelves or lot. There was a 45 percentincrease in consumer interest for OMEGA’sSeamaster collection after it appeared on JamesBond in the 2013 film, Skyfall. While a fictionalcelebrity, James Bond represents an aspirational


12 YOUTHNATION

lifestyle that has historically held great appealfor men, and OMEGA capitalized on thisassociation to drive sales.

The marketing around Dr. Dre’s Beats by Drebrand has always relied on celebrities wearing andusing the product. From Lady Gaga to Pharrellto legendary producer Dre himself, who better torecommend a pair of headphones than your favoritemusician? When Apple acquired Beats for $3 billionin 2014, they were buying more than just a productbut also the all-important aura of “cool” that hasresulted from Beat’s savvy marketing and celebrityendorsements.

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Contents

Foreword Neil Rackham ix

Acknowledgments xiii

Introduction xv

PART I The Sales Hiring Formula 1

Chapter 1 Uncovering the Characteristics of a SuccessfulSalesperson 3

Chapter 2 Five Traits Great Salespeople Have and How toInterview for Them 11Coachability 12Curiosity 16Prior Success 19Intelligence 20Work Ethic 21

Chapter 3 Finding Top-Performing Salespeople 25Build a Recruiting Agency within Your Company 26Find Quality Passive Sales Candidates on LinkedIn 28Find Quality Passive Sales Candidates through YourTeam: The “Forced Referral” 33

Understand the Sales Talent Pool in Your Area 33

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Chapter 4 The Ideal First Sales Hire 37

PART II The Sales Training Formula 45

Chapter 5 Setting Up a Predictable Sales TrainingProgram 47Defining the Three Elements of the Sales Methodology:The Buyer Journey, Sales Process, and QualifyingMatrix 50

Create a Training Curriculum around the SalesMethodology 53

Adding Predictability to the Sales Training Formula 54Constant Iteration on the Sales Process 57

Chapter 6 Manufacturing Helpful Salespeople YourBuyers Trust 59Train Your Salespeople to Experience the Day-to-DayJob of Potential Customers 60

Enable Your Salespeople to Build Their PersonalBrand with Potential Customers Using SocialMedia 62

PART III The Sales Management Formula 67

Chapter 7 Metrics-Driven Sales Coaching 69Implementing a Coaching Culture throughout theOrganization 71

Creating the Coaching Plan Together with theSalesperson 72

Examples of Metrics-Driven Skill Diagnosis andCoaching Plans 74

“Peeling Back the Onion” 79Measure the Coaching Success 80

vi Contents

3GFTOC 01/15/2015 13:42:27 Page vii

Chapter 8 Motivation through Sales Compensation Plansand Contests 83Criteria to Evaluate a New Commission Plan 88Involve the Sales Team in Compensation Plan Design 89Promotion Tiers: Removing the Subjectivity fromPromotions and Compensation Adjustments 90

Using Sales Contests to Motivate the Team 93The Best Contest I Ever Ran 95

Chapter 9 Developing Sales Leaders—Advantages of a“Promote from Within” Culture 97Prerequisites for Leadership Consideration 102From the Classroom to the Real World 103Common Potholes from New Sales Managers 104

PART IV The Demand Generation Formula 109

Chapter 10 Flip the Demand Generation Formula—GetBuyers to Find You 111How Can Your Business Rank at the Top of Google? 113This Does Not Happen Overnight 115Create a Content Production Process 116Complement Content Production with Social MediaParticipation 121

Long-Tail Theory 123

Chapter 11 Converting Inbound Interest into Revenue 127Marketing’s Role in Converting Interest into Revenue 128Sales’ Role in Converting Interest into Revenue 137

Chapter 12 Aligning Sales and Marketing—The SMarketingSLA 149The Marketing Service Level Agreement (SLA) 151The Sales Service Level Agreement (SLA) 154

Contents vii

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PART V Technology and Experimentation 161

Chapter 13 Technology to Sell Better, Faster 163Accelerate Lead Sourcing with Technology 165Accelerate Sales Prospecting with Technology 167Accelerate Lead Engagement with Technology 170Automated Reporting with Technology 171

Chapter 14 Running Successful Sales Experiments 175Generating Ideas for Experiments 176Best Practices of Experiment Execution 178

Chapter 15 HubSpot’s Most Successful Sales Experiments 183The HubSpot Value Added Reseller (VAR) Program 183GPCT 186

Chapter 16 Conclusion: Where Do We Go from Here? 191

Index 195

viii Contents

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Foreword

Sales doesn’t get any exemption from the curse of living in interestingtimes. Everyone recognizes that today we face unprecedented challenges:the consequences of the Internet and e-commerce, the increasing powerand sophistication of purchasing, the effects of globalization. There’s noshortage of “interesting” challenges confronting sales organizations, salesmanagers, and their salespeople.

Now stir another nasty difficulty into the mix. Sales is suddenly in thestrategic spotlight. Boardrooms across the world are looking more closelyat sales strategy than ever before. What’s driving this new interest? Thereare several reasons, but two factors stand out above the others. The first isthe huge increase in competition. Today no niche is safe. There’s an oft-quoted figure that the average company today has twice as manycompetitors as it had five years ago. Nobody knows how true this is,but many experts—myself included—believe it to be so. Assuming thefigure is valid, that’s another way to say that, statistically, the averagecompany’s market share has been cut in half. The second factor is theprecariousness of the strategy that most companies have relied on tocounter the effects of hypercompetition. Ask the average company to tellyou its primary strategy for success in a competitive world. I did just thatrecently at a meeting of corporate strategists. More than 70 percentresponded that their strategy was “innovation.” And, in response to myfollow-up question, “Is it working?” more than half said that it was not.

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Now I don’t want to knock innovation. It’s a fine strategy if youcan pull it off, and every company is forced to continuously innovateor risk going out of business. It’s just that the knee-jerk response tocompetition has been to innovate, and, as many organizations havefound, innovation has its downside. For one thing, it’s a very hardstrategy to sustain. Even Apple, the poster child of strategic innova-tion, may not be able to pull it off for much longer. But there’s anotherless recognized downside, and that’s the diminishing window ofopportunity. The whole idea of innovation is that it gives you acompetitive breathing space—a period when you have somethingunique and special that puts you ahead of competitors. In the good olddays, a decent innovation could look forward to a year or two ofadvantage in the marketplace before the competition could catch up.Not so today: you’re lucky if you have a couple of months at the most.As a result, many companies are questioning their reliance on inno-vation as a growth strategy.

It’s for this reason that an increasing number of leading companieshave a new mantra—organic growth. As Jeffrey Immelt of GEdescribes it, organic growth is “using our sales and marketing assetsto take the best business from competitors.” There’s little doubt thatorganic growth is a sound strategy. The trick is how to pull it off. Theprerequisite is having an excellent sales force that is capable of out-selling the competition. Few companies have any understanding ofhow to create, train, manage, and grow such a sales force.

Fortunately, there’s now no shortage of good advice. The last fewyears have seen a blossoming of really excellent sales books on subjectsranging from recruiting and training to compensation and sales man-agement. The pieces of the jigsaw are becoming better defined all thetime. Yet, to my mind, there’s still something missing. However wellwe might understand each individual piece of the puzzle, we getnowhere unless we can assemble them into a coherent whole.

It’s here that Mark Roberge and The Sales Acceleration Formulacome in. Mark is an MIT-trained engineer who joined a three-person

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start-up called HubSpot. Let me spend a moment relishing Mark’s lackof qualification for the job, which was to build “scalable, predictablerevenue growth” or, in other words, sales. First, he knew absolutelynothing about sales and selling. Perhaps that’s not such a cripplingdisadvantage, as it freed him from many of the superstitions, mal-practices, and bad habits that weigh down many long-time salesleaders. But, for sure, if HubSpot had been a larger company, itwould have thought twice before offering him a sales job, let aloneputting him in charge of sales.

Mark’s second disadvantage was his engineering background. Thereare not many people who can go from writing code one day to growinga sales organization the next. There’s a deep mutual prejudice betweenengineering and sales. The engineer’s stereotype of sales is that selling isthe irrational art of manipulating people into buying things they don’tneed using unethical techniques that border on lying, cheating, andstealing. It’s for this reason that some engineers, who I think wouldmake outstanding salespeople, would rather starve than take up a salescareer. Equally, sales has its prejudices about engineers. Too often, theyview engineers as unimaginative, insensitive creatures from anotherplanet. According to this stereotype, engineers are oblivious to peopleand they take a perverse delight in sabotaging the sales effort. Iremember, years ago in Motorola, how salespeople called engineers“the truth-blurters” and did everything possible to keep them awayfrom their customers.

These are dangerous stereotypes and unfortunately their remnantspersist even today. The reality is that sales has been forced to grow up inrecent years. You cannot succeed in today’s B2B sales world unless youembody many of the disciplines that are part of good engineeringtraining: numeracy, logic, and analytical ability, for example. If everthere was a good case study of why these traditional engineeringmethods are crucial to growing a sales organization, you’ll find ithere in this book. Mark brought with him to HubSpot the engineer’sway of thinking. He analyzed the success factors, set up logical processes,

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and incorporated measurement and analytics. Throughout the book,what comes through to me is a smart thinker, using his trainingto pinpoint crucial issues, to think about them in a fresh way, and tocome up with workable solutions to problems where others might havegiven up.

The result has been a sales organization that within seven yearsgrew from the proverbial three-person-in-a-garage operation into asuccessful $100 million company. The how-to-do-it journey thatMark Roberge describes here is unique in several respects. First, it is anoutstanding example not only of how to identify the key pieces of thejigsaw (he has four that are particularly crucial for success) but also ofhow to assemble the pieces into a coherent and effective whole.Second, as we’ve already seen, it’s the best case I know of how athoughtful, analytical approach pays off in terms of sales growth.Third, his story covers the whole spectrum of sales growth. It beginswith the issues of a typical start-up, such as how to hire your firstsalesperson, and continues all the way through to the very different setof issues that a $100 million company faces. This is soup-to-nuts with avengeance and it makes for fascinating reading. Whether your salesforce is a tiny one-person start-up or a sophisticated 500-personoperation, you’ll find much in these pages that is relevant, useful,and thoughtful.

Neil Rackham

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Introduction

“Scalable, predictable revenue growth.”I jotted these four words down on a notepad. It was 11 p.m. on a

Thursday night. I had just signed the paperwork to join a three-personmarketing software start-up called HubSpot. I had met the cofound-ers, Dharmesh Shah and Brian Halligan, while we were studentstogether at MIT. They were smart guys with a big mission: helpcompanies transform their marketing from outbound to inbound.

My job was to build the sales team.I was up late that night thinking about the road ahead and the

mission I had chosen to accept.“Scalable, predictable revenue growth.”That’s what I had to engineer.Seven years later, HubSpot crossed the $100M run-rate revenue

mark. During my tenure as SVP of global sales and services, I led thecompany to the acquisition of its first 10,000 customers across over60 countries. I had a team of over 450 employees across the sales,services, account management, and support organizations. Few salesleaders have completed this journey end-to-end. In my case, Icompleted it without any prior experience building a sales team.As a matter of fact, I had never even worked in sales. I am an MITgraduate. I am an engineer by training. I started my career writingcode. Somehow, I found myself in the sales leader seat. Throughout

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the journey, I challenged many conventional notions of sales man-agement by utilizing the metrics-driven, process-oriented lensthrough which I’d been trained to see the world.

When people heard about my journey, they became intrigued.They were curious as to how an engineering methodology hadsuccessfully scaled a sales team. Their curiosity translated to thousandsof phone calls from sales executives and business owners. It led tohundreds of speaking engagements. Eventually, it led to this book.That was not my intent. I was simply trying to provide for my familyand contribute to the mission that Brian and Dharmesh had set out toachieve. All that said, I am happy to share my stories of scaling theteam. I hope it helps many of you do the same.

I picked up the notepad again and continued writing:

1. “Hire the same successful salesperson every time.” (The Sales HiringFormula)

2. “Train every salesperson in the same way.” (The Sales TrainingFormula)

3. “Hold our salespeople accountable to the same sales process.” (TheSales Management Formula)

4. “Provide our salespeople with the same quality and quantity ofleads every month.” (The Demand Generation Formula)

These four components represented my formula for sales acceler-ation. If I could execute on these four elements, I believed I wouldachieve my mission of “scalable, predictable revenue growth.” Foreach of these components, I devised a repeatable process, leaned intometrics, and ran calculations, making each of these tactics formulaic innature. In this book, I refer to these predictable frameworks as theSales Hiring Formula, the Sales Training Formula, the Sales Manage-ment Formula, and the Demand Generation Formula. These formu-lae reflect the majority of my journey and make up the majority ofthis book. To clarify, these formulae are not algebraic in nature (e.g.,

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“X + Y = Z”). I wish that scaling sales was that simple! Instead, byusing the word “formulae,” I’m referring to the collection of repeat-able processes, metrics, and calculations I used to complete my missionof generating predictable scale.

In Part I, I outline the Sales Hiring Formula. You will learnhow to leverage metrics to predictably hire the same successfulsalesperson profile every time. You will learn that there is no universalmold for “the ideal sales hire.” The ideal sales hire depends on thecompany’s buyer context. A top performer at one company may fail atanother. However, the process to engineer the ideal hiring formula isthe same for every company. Devising this formula early on in acompany’s development is critical to ensuring that the team hires onlysalespeople who have the highest probability of becoming top per-formers. As a practical example, I share the traits that were consistentacross HubSpot’s top sales performers, explain how I came to thisconclusion, and describe how I consistently evaluated candidates oneach trait.

In Part II, I outline the Sales Training Formula. You will learnwhy the “ride-along” training strategy, in which a new hire shadows atop performer for a month, is dangerous. I outline how to bring scaleto your sales training efforts by defining the three foundationalelements: the buyer journey, the sales process, and the qualifyingmatrix. I outline how to bring predictability to the training programusing exams and certifications. I also provide a blueprint on how tomanufacture helpful salespeople with whom your prospects willactually want to interact. In today’s buyer-empowered marketplace,a sales team known for its customer-focused qualities will outperformits more inwardly focused competitors.

In Part III, I outline the Sales Management Formula. I wish Icould retitle all of my sales managers, calling them “sales coaches”instead. In my opinion, effective sales coaching is the biggest driver ofsales productivity. All sales managers should maximize the time theyinvest in coaching. A common pitfall for new sales managers is the

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tendency to overwhelm their salespeople, especially new hires, withan endless list of feedback on current sales processes. My most effectivesales managers avoided this trap of feedback bombardment. Instead,they perpetually identified the one skill that, if improved, would leadto the most substantial improvement in each salesperson’s perform-ance. They then customized coaching plans to hone in on thedevelopment of those particular skills. I encouraged HubSpot salesmanagers to use metrics to diagnose each salesperson’s most deficientskill area. I call this sales management approach “Metrics-Driven SalesCoaching” and have keynoted on the topic at many events. I’ll explainhow to set up a culture of metrics-driven sales coaching, diagnose skilldeficiencies through metrics, and motivate desired behaviors throughcontests and compensation structures.

In Part IV, I outline the Demand Generation Formula. TheInternet has completely transformed the way buyers research productsand services. Today’s buyers are empowered to find the products theywant, when they want them, with near-perfect information onthe competitive landscape. Buyers may conduct a simple search inGoogle. Buyers may engage in a social media discussion. The buyer isin control. At HubSpot, we recognized this shift and completelyreinvented the Demand Generation Formula to accommodate it. InPart IV, I illustrate how HubSpot built a modern Demand GenerationFormula that aligns with today’s buyer behavior and generated over50,000 new inbound leads per month. You will also learn how wetook a quantified approach toward aligning sales and marketing, usingour Sales and Marketing Service Level Agreement.

In Part V, I discuss technology and experimentation. Over the pastfew decades, the business world has experienced so many advance-ments in the way Finance manages its budget, HR manages its people,IT manages its data, and sales executives manage forecasting. How-ever, how has technology helped the frontline salesperson? It hasn’t.Salespeople have largely been ignored by decades of technologicaladvancements. In fact, in some cases, technologies used to run sales

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teams actually slow salespeople down. At HubSpot, we worked hardto equip our salespeople with technology to help them sell better,faster. This technology enabled better buying experiences for ourcustomers by providing our salespeople with a view into their buyers’context and interests. Our salespeople were able to engage buyers inthe most helpful way at the most helpful time. This same technologystreamlined the processes salespeople followed every day, eliminatingunnecessary administrative work and maximizing selling time.

In Part V, you will also learn the importance of experimentationthroughout the sales scaling journey. Through a cadence of theorydevelopment, test execution, reflection, and iteration, I used theresults of these experiments to constantly evolve our sales process.I will share the best practices behind experimentation by offeringspecific examples of some of our most successful work.

Business owners, sales executives, and investors are all looking toturn their brilliant ideas into the next $100 million revenue business.Often, the biggest challenge they face is the task of scaling sales. Theycrave a blueprint for success, but fail to find it. Why? Sales hastraditionally been referred to as an “art form,” rather than a science.You can’t major in “sales” in college. Many people question whethersales can even be taught. Executives and entrepreneurs are often leftfeeling helpless and hopeless.

The Sales Acceleration Formula completely alters this paradigm. Intoday’s digital world, in which every action is logged and masses ofdata sit at our fingertips, building a sales team no longer needs to be anart form. There is a process. Sales can be predictable.

A formula does exist.

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PART

I The Sales HiringFormula

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1Uncovering theCharacteristicsof a SuccessfulSalesperson

World-class sales hiring is the most important driver of sales success.

When you are scaling a sales team, the to-do list is endless. Hiring,training, coaching, pipeline reviews, forecasting, enterprise deal sup-port, leadership development, and cross-functional communicationare all part of the day-to-day. Dozens of urgent “fires” are blazingaround you at all times. Unfortunately, you have only enough waterto put out a select few. Choosing the right fires to extinguish mightdictate your ultimate success . . . or failure.

This certainly described my situation in 2007 when I joinedHubSpot, a marketing software start-up in Cambridge, Massachusetts.I was the fourth person to join the company and the first sales hire. Inmy first month, I acquired 23 new customers for the business. Clearly,we had identified a need in the market. We were on to something big.It was time to accelerate sales. It was time to scale.

The to-do list required to scale the sales team consumed my mind.I had a vision for what world-class execution would look like across

3

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each component of the scaling process. Unfortunately, like any start-up, funds and resources were limited. A world-class effort across allcomponents would have meant a 150-hour workweek. I had theenergy for about 80 hours per week, tops. Corners needed to be cut, atleast temporarily. If I could be world-class in only one discipline,which should I choose? Which fire should I extinguish first?

The first bet was made: I would attempt to build a world-class saleshiring program.

To this day, I’m glad I prioritized sales hiring excellence. Even if Iwas world-class at sales training, managing, coaching, and forecasting,it would not be enough to offset a team of mediocre salespeople. Onthe other hand, a team of top performers will find a way to win underany circumstances.

Unfortunately, the behaviors I observe in company executives areoften not aligned with this strategy. These executives pour their dailyenergy into closing a big account or running an inspirational staffmeeting or coaching an underperforming salesperson through a skilldeficiency. Sadly, when it comes to recruiting and interviewing fortheir own sales team, they simply wing it. They fail to invest in the

strategies that will predictably yield ateam of top performers. Closing thatnext big customer in order to makethe quarter helps win the battle. Findinga top salesperson, one who will bring inhundreds of big customers for years tocome, helps win the war.

So what does a world-class sales hiring program look like? Whatformula will help me identify whether I am sitting across the tablefrom an A+ candidate?

Over the years, I have hired hundreds of salespeople for theHubSpot sales team. I have advised many companies on their ownhiring process. After reflecting on these efforts, I found some very badnews.

“World-class saleshiring is the mostimportant driver of salessuccess.”

4 The Sales Hiring Formula

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The ideal sales hiring formula is different for every company.I am merely speaking from experience. Some of my earliest hires

had been top performers in their most recent positions. I recruitedthem aggressively—lunches, dinners, the full court press. I showedthem why I thought we would be the next big company in Boston. Ieven convinced a few of them to join. These were the top dogs out ofhundreds of salespeople! What could possibly go wrong?

Needless to say, some of them did not evolve into our topperformers. What happened? Why didn’t my plan work?

I realized that every salesperson has her unique strengths. Some aregreat consultative sellers. Some crush their sales activity goals. Somedeliver exceptional presentations. Some are amazing networkers.Some just know how to make their customers feel like family.

Similarly, each company has its own unique sales context. Somefirms sell to marketers. Some target IT professionals. Some salesprocesses are transactional, while others are complex and muchmore relationship-dependent.

When the unique strengths of the salesperson align with thecompany’s sales context, it is a beautiful thing. When they do not,it becomes an uphill battle.

Unfortunately, some of myfirst hires wound up in the latter bucket.For example, some of my earliest hires were high-activity sales-

people that knew how to bang the phones day in and day out. Theycame from companies with highly transactional sales processes. Theyoperated in well-understood markets with well-established valuepropositions. The sales contexts in which they had operated hadbeen perfect for their high-activity strong suit. Unfortunately, that wasnot HubSpot’s sales context in 2007. Here is what a typical HubSpotsales call sounded like in our first year:

[Sam Salesperson] “Hi, Pete, this is Sam from HubSpot. I noticed yourequested more information on our website. What questions didyou have?”

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[Prospect Pete] “I did? Sorry, I do not remember that. What isHubSpot?”

[Sam Salesperson] “We are an inbound marketing softwarecompany.”

[Prospect Pete] “What is inbound marketing?”[Sam Salesperson] “Inbound marketing allows you to attract visitors to

your website and turn those visitors into qualified sales leads for yourcompany.”

[Prospect Pete] “Hmmm. How does that work?”And so on . . .

This was an evangelistic sale with a not-yet-obvious value prop-osition and a not-yet-established company brand. It required tremen-dous education in the market. Unfortunately, high-activitysalespeople coming from an established company with a no-brainervalue proposition were not equipped with the skills to succeed in ourcontext, even if they had been the top dog in their last role.

I realized that the characteristics of a top-performing salespersonwould be unique to our business. I needed to figure out what kind ofsalesperson would be ideal for our company. I needed to engineer theideal sales hiring formula. Fortunately, this engineering process isapplicable to any company.

The ideal sales hiring formula is different for every company . . . but theprocess to engineer the formula is the same.

Here is the process I used.

Step 1: Establish a Theory of the Ideal Sales Characteristics

First, I listed the characteristics I thought would correlate with salessuccess. For each characteristic, I documented a clear definition. Whatdid I mean by “intelligence”? What did it mean to be “aggressive”? Myintention was to score each candidate on a scale of 1 to 10 for each


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characteristic. Therefore I needed to define what a score of “1” versusa score of “5” versus a score of “10” represented for each characteristic.For each candidate, I summarized the results on an Interview Scorecard.

Step 2: Define an Evaluation Strategy for Each Characteristic

Once I defined the characteristics I waslooking for, I needed a plan to evaluatecandidates on each characteristic. Whatbehavioral questions could I ask? WouldI use role plays? Should there be anexercise for the candidate prior to theinterview? How could I leverage refer-ence checks?

Step 3: Score Candidates against the Ideal Sales Characteristics

Back in the early days of HubSpot, I simply filled out the InterviewScorecard after each interview. The process was not overly sophisti-cated. I used Microsoft Excel. (We were a start-up— I needed to be“hacky.”) The key to the process was discipline, not sophisticatedtechnology. I documented my findings and learnings as I went, andused them to constantly tweak my approach.

Step 4: Learn and Iterate on the Model while Engineering the SalesHiring Formula

A few months in, I had a handful of salespeople on board. Many weredoing great. A few were progressing more slowly than others. Byremaining disciplined to the process described in Step 3, I was in an

“The ideal sales hiringformula is different forevery company . . . butthe process to engineer

the formula is thesame.”


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optimal position to learn from these first hires and begin to understandour ideal hiring criteria. I was ready to engineer my company’s saleshiring formula. I simply went back to the Interview Scorecards for thetop performers and asked myself the following questions:

■ Which characteristics do these top performers have in common? Arethese characteristics predictors of success here at HubSpot? Once Iidentified them, I increased the weight of these characteristics.

■ Which characteristics do not seem to matter? Which character-istics do not predict success? I needed to decrease the weight ofthese characteristics or eliminate them altogether.

■ What am I missing? I had to think beyond the scorecard andreflect on these top performers. Was there another consistent,meaningful characteristic to be found among them? If so, I had toadd the characteristic to the Interview Scorecard and start ratingcandidates on it.

I repeated the same process for the salespeople who were pro-gressing more slowly. I adjusted the Interview Scorecard. The saleshiring formula was taking shape.

As you can see, you do not need to be hiring dozens and dozens ofsalespeople for this process to be valuable. Reflecting on as few as twoor three sales hires can be compelling. That said, if you are trulycommitted to the $100 million journey, it will take more than two orthree great sales hires to get there. Investing in efforts to engineer thesales hiring formula early in the journey will reap significant returns asscale accelerates.

Once you start hiring lots of salespeople quickly, things getinteresting. This was my favorite part.

After about a year of hiring, I had accumulated enough data pointsto run a formal regression analysis, correlating the hiring characteristicswith post-hire sales success. As a result, much of the subjectivity couldbe eliminated from the sales hiring formula. Data is your friend, andstatistics do not lie.


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Figure 1.1 shows the results of thefirst model.

Upon first seeing these results, I madean interesting observation: the character-istics that are traditionally associated withsalespeople, such as aggression and strongobjection handling ability, had the worstcorrelation with success.

What was happening here?In my opinion, the Internet’s rise in

prominence has caused a shift in power from the salesperson to thebuyer. My findings were a statistical representation of that phenome-non. With this shift in power, buyers will no longer tolerate beingstrong-armed into a purchase. They will respond to salespeople whoare helpful, smart, and respectful of their needs.

Figure 1.1 Correlation of Sales Characteristics toHubSpotSales Success (Results of the First Regression Analysis).

“Statistics suggestsalespeople who are

intelligent and helpful,rather than aggressiveand high-pressure, aremost successful withtoday’s empowered

buyer.”


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Statistics suggest salespeople who are intelligent and helpful, rather thanaggressive and high-pressure, are most successful with today’s empowered buyer.

We were well on our way to developing the ideal hiring formula,customized to our sales context. Every 6 to 12 months, the team reranthe regression analysis. This continual analysis allowed us to accountfor the new data we were collecting as our team expanded. It alsoenabled us to account for potential shifts in the buyer context causedby product evolution, shifts in buyer preferences, and changes to thecompetitive landscape. In the next chapter, I will illustrate the hiringformula that resulted after many years of iteration.

Having the ideal hiring formula not only gave me great comfort aswe scaled the team, but also served as an exceptional blueprint forfuture hiring managers. As opposed to driving in the dark, new hiringmanagers instantly understood exactly which characteristics to lookfor and how to evaluate each of these traits.

To Recap

■ World-class sales hiring is the biggest driver of sales success.■ The ideal sales hiring formula is different for every company, but

the process to engineer the formula is the same.■ Statistics suggest salespeople who are intelligent and helpful, rather

than aggressive and high-pressure, are most successful with today’sempowered buyer.




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CONTENTS

Foreword Frances Hesselbein viiIntroduction Joan Snyder Kuhl xiiiAbout Peter F. Drucker xix

WHY SELF-ASSESSMENT? 1Peter F. Drucker

QUESTION 1 WHAT IS OUR MISSION? 7Peter F. Drucker with JimCollins, Kelly Goldsmith, MarshallGoldsmith, and MichaelRadparvar

QUESTION 2 WHO IS OUR CUSTOMER? 19Peter F. Drucker with PhilipKotler, Raghu Krishnamoorthy,and Luke Owings

QUESTION 3 WHAT DOES THECUSTOMER VALUE? 35Peter F. Drucker with JimKouzes, Kass Lazerow, MikeLazerow, and Nadira Hira

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vi Contents

QUESTION 4 WHAT ARE OURRESULTS? 47Peter F. Drucker with JudithRodin, Bernard Banks, andAdam Braun

QUESTION 5 WHAT IS OUR PLAN? 61Peter F. Drucker with V. KasturiRangan, Juana Bordas, andCaroline Ghosn

TRANSFORMATIONALLEADERSHIP 81Frances Hesselbein with LaurenMaillian Bias

THE SELF-ASSESSMENTPROCESS 89Peter F. Drucker

SUGGESTED QUESTIONSTO EXPLORE 91

Notes 101Definition of Terms 105Additional Resources 107About the Contributors 109About the Frances Hesselbein Leadership Institute 117Acknowledgments 120

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FOREWORD

In 2000, Fred Andrews wrote in The New York Times of thePeter F. Drucker Foundation for Nonprofit Management—nowTheFrancesHesselbein Leadership Institute: “With little

money, the Institute is a pool of management wisdom for all whochoose to dip their cup.” Today, we celebrate the Institute’s 25thanniversary. Our work has not deviated far from our work in 1990,or 2000: we continue to publish the most contemporary writingon leadership and management; we provide relevant leadershipresources, advice and inspiration; we introduce cross-sector part-nerships that provide opportunities for learning and growth; andwe support student-leaders and professionals around the globe.

I’m encouraged by the “Bright Future” message of leadersacross the sectors who are using The Five Questions—who arereaching into their organization and out to their customersand community, reaffirming their values, and reexamining theirmission.

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viii Foreword

Since we first published The Five Questions, I’ve met many“fellow travelers”—working professionals, high-level executives,cadets, faculty, students—who tell us that the inspiration andleadership resources we offer, rooted in the leadership work ofPeter F. Drucker, has allowed them to embody more fully ourTo Serve Is To Live leadership philosophy, as well as share ourmission-focused, values-based leadership model with others intheir wider community. These leaders have realized that simplequestions are sometimes the hardest to answer. Peter Drucker’squestions are profound, and answering them requires us to makestark and honest self-assessments.

If Peter were with you and your organization today, we believehe would ask the same five questions he developed when our jour-ney of self-assessment began with him:1

1. What is our mission?2. Who is our customer?3. What does the customer value?4. What are our results?5. What is our plan?

Complex and compelling—these questions are essential andrelevant. They can be applied to any organization today. Thisbook is designed for organizational, strategic self-assessment, notfor program assessment or for an individual performance review.It starts with the fundamental question, “What is our mission?” Itaddresses the question of the organization’s reason for being—itspurpose—not the how. The mission inspires; it is what you wantyour organization to be remembered for. The questions thenguide you through the process of assessing how well you are doing,

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Foreword ix

ending with a measurable, results-focused strategic plan to furtherthe mission and to achieve the organization’s goals, guided bythe vision.

The ultimate beneficiaries of this very simple process arethe people or customers touched by your organization and byothers, like you, who have made the courageous decision tolook within yourselves and your organization, identify strengthsand challenges, embrace change, foster innovation, accept andrespond to customer feedback, look beyond the organization fortrends and opportunities, encourage planned abandonment, anddemand measurable results. Some organizations of the past restedon good deeds alone. Organizations of the future are relevant andsustainable with measurable results.

This self-assessment model is flexible and adaptable. Walkthis tool into any boardroom or CEO’s office. Use it in anysector—public, private, or social. It does not matter whetherthe organization is a Fortune 500 multinational or a smallentrepreneurial start-up, a large national government agencyor one that serves your local town or regional heartland, or abillion-dollar nonprofit foundation or a $100,000 homeless shel-ter. What matters is commitment to the mission, commitmentto the customer, commitment to the future, and commitmentto innovation. Self-discovery is an introspective and courageousjourney that gives organizations and leaders the energy andcourage to grow.

In this enhanced edition of the indispensable tool, we haveconsidered the context of our times, the advent of the B Cor-poration, which allows organizations to account for the commit-ments they are making to their customers, their employees, the

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x Foreword

environment, and the community at large, the impact we are see-ing from the Millennial generation—a generation for whom ToServe Is To Live is not a foreign language.We have convened emerg-ing and experienced leaders of the future who offer us new insightto these powerful five questions.

We are deeply grateful for the generous gift of our respectedand admired contributors:

• Col. Bernard Banks, who explores the importance of exam-ining an organization’s results through the prism of organiza-tional and personal values.

• Lauren Maillian Bias, who describes the interdependence ofpersonal success and professional success.

• Juana Bordas, who considers how best to measure the effec-tiveness of an organization’s planning process and how thosewho want to start their own ventures can apply the lessonsshe learned from successfully starting up Colorado’s largestHispanic-serving organization.

• Adam Braun, who explores the nature of achieving one’s goalsand how the finish line to living the perfect life does not exist.

• Jim Collins, who describes how an organization’s strategyreflects the fundamental tension between continuity andchange and how organizations excellent at adapting to changeknow what should not change.

• Caroline Ghosn, who states that themost important thing youcan do as a leader is to articulate a vision and that translatingthe vision into action requires a clear plan—something tangi-ble that people can make their own.

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Foreword xi

• Marshall and Kelly Goldsmith, who explore the personalapplication of the question, “What is our mission?” andhave found through their research that creating an effectivepersonal mission requires taking into account both happinessand meaning.

• Nadira Hira, who suggests that more than ever before, com-panies today have access to a constant stream of feedback inthe form of social media but that too few know how to use iteffectively.

• Philip Kotler, who implores us to better understand who ourkey customers are and plan to please them instead of trying toplease everyone in an unfocused way.

• Jim Kouzes, who suggests that everything exemplary leadersdo is about creating value for their customers.

• Raghu Krishnamoorthy, who explains how General Electricconstantly reimagines and reinvents itself to respond toshifting customer needs and to remain relevant in today’sfast-changing global markets.

• Joan Snyder Kuhl, who describes who the Millennials are,what they want and how Drucker’s enduring wisdom is asrelevant to them today as it was for their predecessors.

• Mike and Kass Lazerow, who announce the arrival of the cus-tomer revolution—a radical shift of power from companiesto their connected customers—and how companies, and thepeople who lead them, can and must jump onboard.

• Luke Owings, who cautions readers not to ignore theneeds of supporting customers and explains how the ability

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to recognize their needs and motivations can propel theorganization’s mission forward.

• Michael Radparvar, who tells the story about the origins ofthe popular Holstee manifesto and how this manifesto trans-formed into the company’s own mission statement.

• V. Kasturi Rangan, who describes what makes a good plan andthe importance of monitoring plan execution and closing thefeedback loop for the next planning cycle.

• Judith Rodin, who asserts that no plan can be consideredcomplete—or satisfactory—until it produces measurableoutcomes and incorporates mechanisms that allow midcoursecorrections based on results.

Their thoughtful perspectives will inspire you, and we knowyou will be as appreciative of their generous gifts of wisdom, expe-rience, and intellectual energy as we are.The original The Five MostImportant Questions emerged from the wisdom of Drucker. Weonce again share Drucker’s wisdom, this time enriched with thethoughts of new great leaders. We are deeply grateful to you, ourreaders and supporters, fellow travelers on the journey to organi-zational self-discovery.

FRANCES HESSELBEIN

Founding President, President and CEOFrances Hesselbein Leadership Institute

New York City

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INTRODUCTION

CREATINGENDURING WISDOM

FOR TODAY’SLEADERS

Peter F. Drucker often asked those he worked with a sim-ple question: “What do you want to be remembered for?”At the Frances Hesselbein Leadership Institute, we unan-

imously agree that it’s vitally important that we play a role ininspiring the next generation of leaders. In 2009, the HesselbeinInstitute partnered with the University of Pittsburgh to launchthe Hesselbein Global Academy for Student Leadership and CivicEngagement, which has already convened 300 talented studentsfrom every continent and exposed them to Peter F. Drucker’s andFrances Hesselbein’s work.

Today’s youngest generation—known as the Millennialsor Generation Y, born between 1980 and 2000—are not onlythe largest generation yet but also the most educated and mostdiverse. The reach of technology and ease of global travel have

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magnified the creativity of their dreams in many ways. The digitaland social media movement from traditional cable to Facebookand Twitter put them in touch with the rest of the world wherethey can wear, consume, and interact with global brands andcauses in new and unprecedented ways. They developed networksof friends who were not neighbors or in their gym class but fromfaraway parts of the world. They may never meet these friendsface to face, yet the connections are highly influential upon theirlives. They have developed a global sensibility, which is why Ioften refer to Millennials as the first global generation.

The young leaders we meet are driven, generous, and globallyminded self-starters. They see the world differently, with a relent-lessly positive attitude. At the same time, they are facing recordunemployment and underemployment, and they feel very misun-derstood in the workplace and media.

What we have learned is that Millennials are craving guidance,simple tools, and mentors to help them focus, achieve their poten-tial, and pursue their dreams of making a difference in the world.Which brings us to this book. Is Drucker’s management philoso-phy still relevant to today’s young talent and tenured leadership?Yes! Can it make a difference? We’ve seen it happen. It’s hard tobelieve that words written in the mid-twentieth century might stillbe applicable to today’s business challenges and opportunities, butwe provide examples throughout the book to prove just that.

Drucker says that “self-assessment is the first action requiredof leadership,” so it makes sense that the five questions tool isread by young talent who are on the path to one day leading

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organizations, and re-read by experienced leaders in diversesectors. This basic framework has served leaders in every sectorfor decades and is the perfect companion for Millennials andmanagement today. Our contributors shine a light on severalexamples of how the self-assessment process can serve any purposeand stimulate progress.

The war for global talent is in full swing. Executives andorganizations in every sector are looking for strategies to amplifythe productivity of their younger workforce and grow their skillstoward sustainable leadership. Our hope in launching this newedition is to build awareness and cultivate a new community ofDrucker fans who will communicate using this basic languageof The Five Questions. This can also be a foundational tool fornew-manager and leadership-development programs. Drucker’sthought leadership can serve as a universal, collaborative platformfor developing ideas and strategic plans within a multigenerationteam in any environment and sector. Just the act of reflecting onDrucker’s influential insights can promote the kind of dialoguethat will bring your team closer together and bridge the commoncommunication gap between the different generations.

Millennials are committed to the success of the social sector,and we have found college students are volunteering all over theglobe. In one of my national research studies of college students,70.0 percent of freshmen and 79.1 percent of juniors and seniorsreported volunteering while in college.1 The Millennial genera-tion will continue to seek opportunities to connect the mission ofnonprofit organizations to for-profit partners. Great leaders “think

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xvi Introduction

of the needs and the opportunities of the organization,” Druckerwrote, “before they think of their own needs and opportunities.”

As a mentor to undergraduate and master of businessadministration (MBA) students, I’ve observed a dramatic shiftin their expectations and anxieties regarding postcollege careeropportunities. The financial crisis led many companies to changetheir workforce dramatically, which deflated the sense of securitymost employees associate with the larger companies. MBAgraduates today are becoming more selective in their postgraduatepursuits and setting their sights on new ventures that allowthem more responsibility and where they perceive they will gaina deeper understanding of the enterprise. Business schools areencouraging the swelling interest in start-ups through businessplan competitions and new media and venture-related courses.

More Millennials are starting businesses than any previousgeneration, fleeing cubicles in corporate America to launchtheir passion projects. According to Bloomberg, 8 out of 10entrepreneurs who start businesses fail within the first 18 months.In many cases, failure is because of lack of focus in the businessstrategy, along with a lack of funding. To garner investment andsupport from others, you must demonstrate core knowledge andlaser focus for your business. What better way to build yourbusiness than to use the five questions self-assessment tool as yourfoundation?

Frances Hesselbein is a descendant of the second president ofthe United States, John Adams, who said, “If your actions inspireothers to dreammore, learnmore, domore, and becomemore, you

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are a leader.”We are in deep gratitude to the leaders who connectedtheir insights to Drucker’s enduring wisdom throughout this bookto inspire and unleash the potential of the Millennial generation!

JOAN SNYDER KUHL

Founder, Why Millennials MatterMember, Board of Governors

Frances Hesselbein Leadership InstituteNew York City

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ABOUT PETER F. DRUCKER

Peter F. Drucker (1909–2005)—widely considered theworld’s foremost pioneer of management theory—was awriter, teacher, and consultant specializing in strategy and

policy for businesses and social sector organizations. Drucker’scareer as a writer, consultant, and teacher spanned nearly 75 years,and he worked with a wide variety of organizations, includingProcter & Gamble, General Electric, IBM, Girl Scouts of theUSA, the Red Cross, and others. His groundbreaking workturned modern management theory into a serious discipline. Hehas influenced or created nearly every facet of its application,including decentralization, privatization, empowerment, andunderstanding of the knowledge worker. He authored 39 booksand numerous scholarly and popular articles. He was an editorialcolumnist for the Wall Street Journal and a frequent contributorto the Harvard Business Review and other periodicals.

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xx About Peter F. Drucker

Drucker was born in 1909 in Vienna and was educated thereand in England. He earned his doctorate in public and interna-tional law while working as a newspaper reporter in Frankfurt,Germany. He then worked as an economist for an internationalbank in London. Drucker moved to London in 1933 to escapeHitler’s Germany and took a job as a securities analyst for an insur-ance firm. Four years later, he married Doris Schmitz, and thecouple departed for the United States in 1937.

Drucker landed a part-time teaching position at SarahLawrence College in New York in 1939. He joined the facultyof Bennington College in Vermont as professor of politics andphilosophy in 1942 and the next year put his academic career onhold to spend two years studying the management structure ofGeneral Motors. This experience led to his book Concept of theCorporation, an immediate best seller in the United States andJapan, which validated the notion that great companies couldstand among humankind’s noblest inventions. For more than 20years, he was professor of management at the graduate businessschool of New York University. He was awarded the PresidentialCitation, the university’s highest honor.

Drucker moved to California in 1971, where he was instru-mental in the development of the country’s first executive masterof business administration program for working professionals atClaremont Graduate University (then known as Claremont Grad-uate School). The university’s management school was named thePeter F. Drucker Graduate School of Management in his honor in1987. He taught his last class at the school in the spring of 2002.

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About Peter F. Drucker xxi

His courses consistently attracted the largest number of studentsof any class the university offered.

As a consultant, Drucker specialized in strategy and policy forgovernments, businesses, and nonprofit organizations. His specialfocus was on the organization and work of top management. Heworked with some of the world’s largest businesses and with smalland entrepreneurial companies. In his later years, Drucker workedextensively with nonprofit organizations, including universities,hospitals, and churches. He served as a consultant to a numberof agencies of the U.S. government and with the governments ofCanada, Japan, Mexico, and other nations throughout the world.

Drucker has been hailed in the United States and abroad as theseminal thinker, writer, and lecturer on the contemporary orga-nization. Drucker’s work has had a major influence on modernorganizations and their management for more than 60 years. Val-ued for keen insight and the ability to convey his ideas in popularlanguage, Drucker often set the agenda in management thinking.Central to his philosophy is the view that people are an organiza-tion’s most valuable resource and that a manager’s job is to prepareand free people to perform. In 1997, he was featured on the coverof Forbes magazine under the headline “Still the Youngest Mind,”and Businessweek has called him “the most enduring managementthinker of our time.”

On June 21, 2002, Drucker, author of The Effective Executiveand Management Challenges for the 21st Century, received thePresidential Medal of Freedom—the nation’s highest civilianhonor—from President George W. Bush.

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xxii About Peter F. Drucker

Drucker received honorary doctorates from numerous uni-versities around the world, including universities in the UnitedStates, Belgium, Czechoslovakia, Great Britain, Japan, Spain,and Switzerland. He was the founding chairman of the PeterF. Drucker Foundation for Nonprofit Management, now theFrances Hesselbein Leadership Institute. He passed away onNovember 11, 2005, at age 95.

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QUESTION 1

WHYSELF-ASSESSMENT?

Peter F. Drucker

The ninety million volunteers who work for nonprofitinstitutions—America’s largest employer—exemplifythe American commitment to responsible citizenship in

the community. Indeed, nonprofit organizations are central to thequality of life in America and are its most distinguishing feature.

Forty years ago management was a very bad word in nonprofitorganizations. Management meant business, and the one thing anonprofit was not was a business. Today, nonprofits understandthat they need management all the more because they have noconventional bottom line. Now they need to learn how to usemanagement so they can concentrate on their mission. Yet, thereare few tools available that address the distinct characteristics andcentral needs of the many nonprofit organizations in America.

1


2 Peter Drucker’s Five Most Important Questions

Although I don’t know a single for-profit business that is aswell managed as a few of the nonprofits, the great majority ofthe nonprofits can be graded a “C” at best. Not for lack of effort;most of them work very hard. But for lack of focus, and for lack oftool competence. I predict that this will change, however, and we atthe Drucker Foundation [now the Frances Hesselbein LeadershipInstitute] hope to make our greatest impact in these areas of focusand tool competence.

For years, most nonprofits felt that good intentions were bythemselves enough. But today, we know that because we don’thave a bottom line, we have to manage better than for-profit busi-ness. We have to have discipline rooted in our mission. We haveto manage our limited resources of people and money for maxi-mum effectiveness. Andwe have to think through very clearly whatresults are for our organization.1

THE FIVE MOST IMPORTANTQUESTIONS

The self-assessment process is a method for assessing what you aredoing, why you are doing it, and what you must do to improvean organization’s performance. It asks the five essential questions:What is our mission? Who is our customer? What does the customervalue? What are our results? and What is our plan? Self-assessmentleads to action and lacks meaning without it. To meet growingneeds and succeed in a turbulent and exacting environment, socialsector organizations must focus on mission, demonstrate account-ability, and achieve results.2


Why Self-Assessment? 3

The self-assessment tool forces an organization to focus on itsmission. About eight out of ten nonprofits in the country are smallorganizations whose leaders find it very hard to say no when some-one comes to them with a good cause. I advised some close friendsof mine, working with a local council of churches, that half thethings they are doing they shouldn’t be doing—not because they’reunimportant but because they’re not needed. I told them, “Otherpeople can do those activities and do them well. Maybe a few yearsago it was a good idea for you to help get this farmers’ marketstarted because those Vietnamese farmers in your area needed aplace to sell their produce; but it’s going well now, and you don’thave to run it anymore. It’s time for organized abandonment.”3

You cannot arrive at the right definition of results without sig-nificant input from your customers—and please do not get into adebate over that term. In business, a customer is someone youmustsatisfy. If you don’t, you have no results. And pretty soon you haveno business. In a nonprofit organization, whether you call the cus-tomer a student, patient, member, participant, volunteer, donor,or anything else, the focus must be on what these individuals andgroups value—on satisfying their needs, wants, and aspirations.

The danger is in acting on what you believe satisfies the cus-tomer. You will inevitably make wrong assumptions. Leadershipshould not even try to guess at the answers; it should always goto customers in a systematic quest for those answers. And so, inthe self-assessment process, you will have a three-way conversa-tion with your board, staff, and customers and include each ofthese perspectives in your discussions and decisions.4



PLANNING IS NOT AN EVENT

When you follow the self-assessment process through to its com-pletion, you will have formulated a plan. Planning is frequentlymisunderstood as making future decisions, but decisions exist onlyin the present. You must have overarching goals that add up to avision for the future, but the immediate question that faces theorganization is not what to do tomorrow. The question is, Whatmust we do today to achieve results? Planning is not an event. Itis the continuous process of strengthening what works and aban-doning what does not, of making risk-taking decisions with thegreatest knowledge of their potential effect, of setting objectives,appraising performance and results through systematic feedback,and making ongoing adjustments as conditions change.5

ENCOURAGE CONSTRUCTIVEDISSENT

All the first-rate decision makers I’ve observed had a very sim-ple rule: If you have quick consensus on an important matter,don’t make the decision. Acclamation means nobody has done thehomework. The organization’s decisions are important and risky,and they should be controversial. There is a very old saying—itgoes all the way to Aristotle and later became an axiom of the earlyChristian Church: In essentials unity, in action freedom, and in allthings trust. Trust requires that dissent come out in the open.6

Nonprofit institutions need a healthy atmosphere for dissent ifthey wish to foster innovation and commitment. Nonprofits must


Why Self-Assessment? 5

encourage honest and constructive disagreement precisely becauseeverybody is committed to a good cause: Your opinion versus minecan easily be taken as your good faith versus mine.Without properencouragement, people have a tendency to avoid such difficult, butvital, discussions or turn them into underground feuds.

Another reason to encourage dissent is that any organizationneeds its nonconformist. This is not the kind of person who says,“There is a right way and a wrong way—and our way.” Rather, heor she asks, “What is the right way for the future?” and is ready tochange. Finally, open discussion uncovers what the objections are.With genuine participation, a decision doesn’t need to be sold.Suggestions can be incorporated, objections addressed, and thedecision itself becomes a commitment to action.7

CREATING TOMORROW’S SOCIETYOF CITIZENS

Your commitment to self-assessment is a commitment to devel-oping yourself and your organization as a leader. You will expandyour vision by listening to your customers, by encouraging con-structive dissent, by looking at the sweeping transformation tak-ing place in society. You have vital judgments ahead: whether tochange the mission, whether to abandon programs that have out-lived their usefulness and concentrate resources elsewhere, howto match opportunities with your competence and commitment,how you will build community and change lives. Self-assessment isthe first action requirement of leadership: the constant resharpen-ing, constant refocusing, never being really satisfied. And the time



to do this is when you are successful. If you wait until things startto go down, then it’s very difficult.

We are creating tomorrow’s society of citizens through thesocial sector, through your nonprofit organization. And in thatsociety, everybody is a leader, everybody is responsible, everybodyacts. Therefore, mission and leadership are not just things toread about, to listen to; they are things to do something about.Self-assessment can and should convert good intentions andknowledge into effective action—not next year but tomorrowmorning.8

QUESTION 1

WHAT IS OURMISSION?

Peter F. Drucker

• What is the current mission?• What are our challenges?• What are our opportunities?• Does the mission need to be revisited?

Each social sector institution exists to make a distinctive differencein the lives of individuals and in society. Making this differenceis the mission—the organization’s purpose and very reason forbeing. Each of more than one million nonprofit organizations inthe United States may have a very different mission, but changinglives is always the starting point and ending point. A missioncannot be impersonal; it has to have deep meaning, be something

7


you believe in—something you know is right. A fundamentalresponsibility of leadership is to make sure that everybody knowsthe mission, understands it, lives it.

Many years ago, I sat down with the administrators of a majorhospital to think through the mission of the emergency room. Asdo most hospital administrators, they began by saying, “Our mis-sion is health care.” And that’s the wrong definition. The hospitaldoes not take care of health; the hospital takes care of illness. Ittook us a long time to come up with the very simple and (mostpeople thought) too-obvious statement that the emergency roomwas there to give assurance to the afflicted. To do that well, you hadto know what really went on. And, to the surprise of the physi-cians and nurses, the function of a good emergency room in theircommunity was to tell eight out of ten people there was nothingwrong that a good night’s sleep wouldn’t fix. “You’ve been shakenup. Or the baby has the flu. All right, it’s got convulsions, but thereis nothing seriously wrong with the child.”The doctors and nursesgave assurance.

We worked it out, but it sounded awfully obvious. Yet trans-lating the mission into action meant that everybody who camein was seen by a qualified person in less than a minute. The firstobjective was to see everybody, almost immediately—because thatis the only way to give assurance.

IT SHOULD FIT ON A T-SHIRT

The effective mission statement is short and sharply focused. Itshould fit on a T-shirt. The mission says why you do what you

What Is Our Mission? 9

do, not the means by which you do it. The mission is broad, eveneternal, yet directs you to do the right things now and into thefuture so that everyone in the organization can say, “What I amdoing contributes to the goal.” So it must be clear, and it mustinspire. Every board member, volunteer, and staff person shouldbe able to see the mission and say, “Yes. This is something I wantto be remembered for.”

To have an effective mission, you have to work out an exact-ing match of your opportunities, competence, and commitment.Every good mission statement reflects all three. You look first atthe outside environment. The organization that starts from theinside and then tries to find places to put its resources is going tofritter itself away. Above all, it will focus on yesterday. Demograph-ics change. Needs change. You must search out the accomplishedfacts—things that have already happened—that present challengesand opportunities for the organization. Leadership has no choicebut to anticipate the future and attempt to mold it, bearing inmind that whoever is content to rise with the tide will also fallwith it. It is not given tomortals to do any of these things well, but,lacking divine guidance, you must still assess where your opportu-nity lies.

Look at the state of the art, at changing conditions, at com-petition, the funding environment, at gaps to be filled. The hos-pital isn’t going to sell shoes, and it’s not going into educationon a big scale. It’s going to take care of the sick. But the specificaim may change. Things that are of primary importance now maybecome secondary or totally irrelevant very soon.With the limitedresources you have—and I don’t just mean people and money but


also competence—where can you dig in and make a difference?Where can you set a new standard of performance? What reallyinspires your commitment?

MAKE PRINCIPLED DECISIONS

One cautionary note: Never subordinate the mission in order to getmoney. If there are opportunities that threaten the integrity of theorganization, you must say no. Otherwise, you sell your soul. I satin on a discussion at a museum that had been offered a donationof important art on conditions that no self-respecting museumcould possibly accept. Yet a few board members said, “Let’s takethe donation.We can change the conditions down the road.” “No,that’s unconscionable!” others responded, and the board foughtover the issue. They finally agreed they would lose too much bycompromising basic principles to please a donor. The board for-feited some very nice pieces of sculpture, but core values had tocome first.

KEEP THINKING IT THROUGH

Keep the central question What is our mission? in front of youthroughout the self-assessment process. Step by step you will ana-lyze challenges and opportunities, identify your customers, learnwhat they value, and define your results.When it is time to developthe plan, you will take all that you have learned and revisit themission to affirm or change it.


As you begin, consider this wonderful sentence from a sermonof that great poet and religious philosopher of the seventeenth cen-tury, John Donne: “Never start with tomorrow to reach eternity.Eternity is not being reached by small steps.” We start with thelong range and then feed back and say, “What do we do today?”The ultimate test is not the beauty of the mission statement. Theultimate test is your performance.1

WHAT IS OUR MISSION?

Jim Collins

What is our mission? Such a simple question—but it goes rightto the heart of the fundamental tension in any great institution:the dynamic interplay between continuity and change. Every trulygreat organization demonstrates the characteristic of preserve thecore, yet stimulate progress. On the one hand, it is guided by aset of core values and fundamental purpose—a core mission thatchanges little or not at all over time; and, on the other hand, itstimulates progress: change, improvement, innovation, renewal.The core mission remains fixed while operating practices, culturalnorms, strategies, tactics, processes, structures, and methods con-tinually change in response to changing realities. Indeed, the greatparadox of change is that the organizations that best adapt to achanging world first and foremost know what should not change;they have a fixed anchor of guiding principles around which theycan more easily change everything else. They know the differencebetween what is truly sacred and what is not, between what should


never change and what should be always open for change, between“what we stand for” and “how we do things.”

The best universities understand, for example, that the ideal offreedom of inquiry must remain intact as a guiding precept whilethe operating practice of tenure goes through inevitable changeand revision. The most enduring churches understand that thecore ideology of the religion must remain fixed while the specificpractices and venues of worship change in response to the realitiesof younger generations. Mission as Drucker thought of it providesthe glue that holds an organization together as it expands, decen-tralizes, globalizes, and attains diversity.Think of it as analogous tothe principles of Judaism that held the Jewish people together forcenturies without a homeland, even as they scattered throughoutthe diaspora. Or think of the truths held to be self-evident in theU.S. Declaration of Independence, or the enduring ideals of thescientific community that bond scientists from every nationalitytogether with the common aim of advancing knowledge.

Your core mission provides guidance, not just about what todo but also equally about what not to do. Social sector leaders pridethemselves on doing good for the world, but to be of maximumservice requires a ferocious focus on doing good only if it fits yourmission. To do the most good requires saying no to pressures tostray and the discipline to stop doing what does not fit. WhenFrances Hesselbein led the Girl Scouts of the USA, she poundedout a simplemantra: “We are here for only one reason: to help a girlreach her highest potential.” She steadfastly steered the Girl Scoutsinto those activities—and only those activities—that could make aunique and significant contribution of value to its members.When


a charity organization sought to collaborate with the Girl Scouts,envisioning an army of smiling girls going door to door to canvassfor the greater good, Hesselbein commended the desire to make adifference but gave a polite and firm no. Just because something isa once-in-a-lifetime opportunity—even a once-in-a-lifetime fund-ing opportunity—is merely a fact, not necessarily a reason to act.If a great opportunity does not fit your mission, then the answermust be “Thank you, but no.”

The question of mission has become, if anything, even moreimportant as our world becomes increasingly disruptive and tur-bulent. No matter how much the world changes, people still havea fundamental need to belong to something they can feel proudof. They have a fundamental need for guiding values and sense ofpurpose that gives their life and work meaning. They have a fun-damental need for connection to other people, sharing with themthe common bond of beliefs and aspirations. They have a desper-ate need for a guiding philosophy, a beacon on the hill to keepin sight during dark and disruptive times. More than any time inthe past, people will demand operating autonomy—freedom plusresponsibility—and will simultaneously demand that the organi-zations of which they are a part stand for something.

WHAT IS YOUR MISSION?Dr. Marshall Goldsmith and Dr. Kelly Goldsmith

Although much has been written about the organizational appli-cation of the great question, “What is our mission?” less has beenwritten about the personal application.


I (Marshall) had the opportunity to ask Peter F. Drucker hisown question. I asked, “Peter, you have spent a lot of your life help-ing organizations determine their mission. What is your mission?”

He replied, “My mission is to help people and organizationsachieve their goals.” He then laughed and said, “Assuming thatthey are not immoral or unethical.”

Recently, we completed a large study on the relationship ofhappiness and meaning with both organizational and personal sat-isfaction with life. What did we learn? In determining a personalmission, you need to make sure that you take into account bothhappiness and meaning.

By happiness we are referring to your personal enjoyment ofthe process itself, not just the results. In other words, at the highend of the scale, you love what you are doing.

By meaning we are referring to the value that you attribute tothe results of your work. At the high end of the scale, you deeplybelieve that the outcome of what you are doing is important.

When we asked people to define what happiness and meaningmeant to them, we learned that each of us has our own definitionand that our personal definition is what matters to us. No one cantell you what makes you happy, and no one can tell you what ismeaningful for you. These answers have to come from your heart.

What did our research show? The only way to have highdegrees of satisfaction with life at work and at home was toengage in activities that simultaneously produced happiness andmeaning.

Participants who reported spending large amounts of time onamusing activities that were fun, but not meaningful, experienceda shallowness in life.Theywere not highly satisfied with life at work


or at home. Although we were not surprised about this finding atwork, we were a little surprised to see nearly identical results athome. This indicates that an overpreoccupation with amusementmay do more harm than good.

Participants who reported spending large amounts of timeon meaningful activities that did not produce enjoyment felt likemartyrs. Although they believed that what they were doing wasimportant, they were not happy with their lives, either at work orat home.

The only group of respondents in our study who reported con-sistently high levels of satisfaction with life at work and at homewere people who reported that they were spending large amountsof their time on activities that provided simultaneously high levelsof happiness and meaning.

Drucker was a wonderful case study of this point. He loved hiswork and had no interest in retiring. His work made him happy.He also knew that his workmattered. His work gave himmeaning.In life, this is the best that we can do.

What are the implications for you?

1. Establish a clear personal mission for yourself. Drucker alwayssaid that our mission should be short and clear and that itshould “fit on a T-shirt.”

2. Make sure that the results you achieve when you succeed inachieving your mission are important to you. Look to yourheart. Do what really matters to you.

3. Make sure that the process of achieving your mission is a pro-cess that you love. Life is short. Unless your goal is to be amartyr, do what makes you happy.


4. Another great piece of advice from Drucker is for you to ana-lyze how you spend your time. Maximize the amount of timethat you are experiencing simultaneous happiness and mean-ing. To the degree possible, eliminate activities that don’t passthis test.

The great question, “What is your mission?” is criticallyimportant for organizational success. It may be even moreimportant for personal success!

MILLENNIAL TAKEAWAY

Michael Radparvar

It was spring 2009 when my brother Dave approached Fabianand me, suggesting that we take some time to put into words areminder of what things exactly were most important to us. Ourcompany, Holstee, was just three weeks old, we had millions ofthings on our plate, and coincidentally we were in the midst of theworst recession of our generation. Still, we all sensed that puttingthis into writing would help us on our journey. Despite the manythings we each had to do for the fledgling company, neither of usquestioned his proposal.

To begin, we agreed that whatever we wrote would be animportant message to our future selves, coming from a time whenour thinking was clear. We also agreed that this would be our bestopportunity to define success in nonfinancial terms. We coveredtopics such as love, food, travel, relationships, and our hopes and


dreams. Once we had these most important things charted out,we put them on paper. And for good measure, we decided to putthem in a place we knew wouldn’t get lost: on the About page ofour website, where we called it our manifesto (see Figure 1.1).

Figure 1.1 The Holstee Manifesto


Over the coming months and years, this manifesto took acompletely unexpected journey. It grew to become one of themost actively shared images across the Web—and around theworld—and it eventually took the form of a letterpress printfor better offline sharing as well. In essence, this manifesto alsobecame our company’s mission statement. The Washington Postreferred to it as the “Just Do It” for a new generation. At the coreof it all, Holstee’s reason to exist—since day one—would simplybe to help each of us remember what is important. That to us isthe most important thing of all.



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CONTENTS

Introduction: From Four Principles to Five Bests 1

SECTION ONEBEST SELF 11

1 THE SELF-REFLECTIVE, BALANCED LEADER 15

2 THE HUMBLE, SELF-CONFIDENT LEADER 33

SECTION TWOBEST TEAM 49

3 TURNING AROUND A TEAM 55

4 CREATING A BEST TEAM FROM SCRATCH 73

SECTION THREEBEST PARTNER 91

5 SUPPLIERS AS BEST PARTNERS: A HOLISTICRELATIONSHIP

97

6 BUILDING BEST-PARTNER CUSTOMERRELATIONSHIPS

113

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SECTION FOURBEST INVESTMENT 131

7 MAKING A BEST INVESTMENT IN TALENT 135

8 THE PROOF POINT: SHAREHOLDER VALUE 151

SECTION FIVEBEST CITIZEN 167

9 VALUES IN ACTION 171

10 LIVING THE LEGACY AND LEAVING A GLOBALFOOTPRINT

185

Acknowledgments 201About the Author 205Index 207

viii Contents

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INTRODUCT ION: FROM FOURPR INC IPLES TO F IVE BESTS

Over the past four years, since the publication of my previousbook, From Values to Action: The Four Principles of Values-Based

Leadership, I have spoken to more than 500 groups across theUnited States, Latin America, Europe, and Asia. With everyaudience—whether business, government, spiritual, or academic—I encountered a strong desire to learn more about values-basedleadership, which is founded on four principles:

1. Self-Reflection: The ability to identify and reflect on whatyou stand for, what your values are, and what matters most.

2. Balance: The ability to see situations from multiple perspec-tives, including differing viewpoints, to gain a holisticunderstanding.

3. True Self-Confidence: Acceptance of yourself, recognizingyour strengths and skill mastery, as well as your weaknesses,while focusing on continuous improvement.

4. Genuine Humility: Never forgetting who you are, appreciat-ing the unique value of each person in the organization, andtreating everyone with respect.

The more people grasped these principles, the more theywanted to know how, in practical terms, to apply them in theirdaily lives. From CEOs to first-time managers to students, peoplewant to know what they need to do to make a difference in their

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organizations and beyond. They came to realize that leadershipdoes not have anything to do with titles and organizational charts.Rather, it has everything to do with the ability to influence others byrelating authentically to every individual with whom they come incontact.

People at every level and with any job title, from the newestteam members to the CEO, can and should become values-basedleaders. Whether someone is the CEO of a company that employs100,000 people or an entry-level person who just graduated fromcollege, values-based leadership begins with one’s ability to under-stand one’s self. Self-knowledge and self-awareness must come first,before someone is able to relate to and influence others in positiveand meaningful ways.

For many, becoming more self-aware requires a significantchange in mindset. To illustrate, I use the analogy of wanting tobecome healthier. When people read a compelling book or hearan expert speak on the importance of a healthy lifestyle, they set agoal for themselves to lose weight or start an exercise program. Thisinstantly raises some very practical questions: Where do I start andwhat do I do? Does being healthy mean I have to exercise exces-sively or that I can never eat another chocolate bar for the rest ofmy life? What lasting changes do I need to adopt that will help mereach my goal of being healthier?

Similarly, when people commit to becoming values-based lead-ers, they want to know exactly what they can do to catalyze change,drive results, and make things happen. People want to understandwhat it means to lead and influence others, and to do the rightthing as defined by their personal values, as well as the mission,vision, and values of their organization. They want to know whereto start and what to do, knowing that this is not a fad or a quick fix(like a crash diet), but rather a fundamental change in philosophy,attitude, and behavior (like adopting a healthy lifestyle).

Fortunately, values-based leaders have an invaluable tool at theready: self-reflection, which is the core principle of values-based

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leadership. Whenever I address a group, the questions I’m askedmost frequently relate to self-reflection and, specifically, how topractice it. People from college students to CEOs want to becomemore self-reflective in their daily lives. They know intuitively that bygaining greater self-knowledge, they will be better able to leadthemselves first, which will then enable them to be more effectivein leading others.

As will be discussed further in this book, the benefits of self-reflection are realized through regular (ideally daily) practice,using questions such as: What did I say I would do today? What amI proud of, and not proud of? How did I lead others and follow others? If Ihad today to do over again, what would I change? If I am fortunate to havetomorrow, given what I’ve learned today, how will I act? Self-reflectionmay be practiced at the end of the day, or be incorporated into anypersonal time for introspection, such as taking a walk, going for ajog, or sitting quietly for 15 or 20 minutes. Having practiced self-reflection for all of my adult life, including as CEO of BaxterInternational, a global health-care company with 50,000 teammembers (I prefer this term over employees), I can attest to thepositive results of engaging in this discipline.

Other commonly asked questions include: How do I develop abalanced perspective? How do I become truly self-confident? How can I gaintrue self-confidence without being perceived as arrogant or selfish? What doesgenuine humility really mean? If I am genuinely humble, will I run the riskof not being noticed or being passed over? Do I need both true self-confidenceand genuine humility?

Because of these questions and more, I decided to write thisbook as a how-to on values-based leadership. In addition, many ofmy students at Northwestern University’s Kellogg School of Man-agement have askedme to take the values-based leadership journeyto the next level. Since I always listen to my Kellogg students, therewas really no alternative for me but to do so!

My first book, From Values to Action, stemmed directly from myvalues-based leadership classes at Kellogg, where I have taught for


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10 years. In 2004, I steppeddown frommy role as chairmanandCEOof Baxter International, where I had worked for 22 years, includingthe last six as CEO. At that time, I was asked by Don Jacobs, DeanEmeritus of Kellogg, to teach at the graduate school. I was surprisedby his request, since I’m not an academic with a PhD, but hereminded me (half joking, half serious) of my promise that I woulddo anything formy graduate school almamater.Of course, I said yes.

Being a former chief financial officer and having majored infinance at Kellogg, I first considered teaching finance classes.However, based on my 35 years of business experience, I realizedI could add more value to the students by teaching leadership.Since then I have taught values-based leadership, which hasbecome one of the most popular classes at Kellogg, because ofthe keen interest in the topic and a host of talented leaders who, asguest lecturers, share insights from their careers with my students.

One of those students, Samir Gokhale, audio taped all of myvalues-based leadership lectures and transcribed them in order toconvince me to write my first book. His efforts jumpstarted mywriting of From Values to Action and my speaking about values-basedleadership, both of which have been beneficial to my teaching(a virtuous cycle, indeed). In my opinion, you can’t truly under-stand a topic until you have listened intently to others’ questionsand explained concepts clearly.

Today, I am responding to the questions I receive as part of myspeeches and presentations to audiences of every type and descrip-tion. Over the past four years (and counting) of giving more thaneight talks per month, I have met countless people who want tounderstand how to put the principles of values-based leadership intopractice. They are CEOs and other C-level corporate officers,executive managers, middle managers, entry-level individuals, andstudents. My audiences have included multinational companiessuch as Google, Aon, McDonald’s, Raytheon, AT&T, Target Corpo-ration, Abbott Laboratories, CareerBuilder, and Hospira; univer-sities, including Northwestern, University of Chicago, University of

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Notre Dame, University of California, University of Minnesota,and Lawrence University (my undergraduate alma mater);consulting and financial services firms, such as McKinsey &Co., Booz & Company, Accenture, JPMorgan Chase, Bank ofMontreal, Ernst & Young, KPMG, Deloitte, Spencer Stuart, andHuron Consulting; smaller startup companies in industries suchas software, manufacturing, hospitality, and health care; associ-ations for chief financial officers, chief marketing officers, seniorhuman resources officers, and chief information officers; spiritualleaders, including priests, ministers, and rabbis; and philan-thropic and religious/spiritual institutions of all sizes. I alsohad the opportunity to deliver a TEDx talk on values-basedleadership at the United Nations in New York City.

Conceptually, values-based leadership is founded on the fourprinciples of self-reflection, balance, true self-confidence, andgenuine humility. On a personal level, these principles becomethe basis of intentional actions and deep commitments that enableeach person at every level of an organization to bring his or her bestself to work. At an organizational level, these four principles, whenapplied, enable the creation of a values-based organization.

In these pages, I give both explanations and concrete exam-ples, drawing from my own experiences, and my interactions withleaders at every level. I include interviews with 10 values-basedleaders from diverse organizations, ranging from small to large,private to public, for-profit to not-for-profit, and domestic to global.This book lays out a pathway from understanding the four princi-ples to putting them into practice in what I believe are five key areasthat define what it means to be a values-based leader and build aworld-class organization. They are:

1. Best Self: You actualize who you are meant to become withfuller self-knowledge and a deeper understanding that inorder to positively influence and lead people, you first needto relate to them.


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2. Best Team: All team members understand and appreciatewhat they’re doing, why they’re doing it, and how that fitswith and fulfills the goals and objectives of the organization.

3. Best Partner: The organization and its vendors and suppliersforge a partnership in order to enhance the customer expe-rience. Eachparty understands what the organization is tryingto do and why, as it provides products and/or services.

4. Best Investment: Everyone in the organization focuses ongenerating a return for the owners (whether stockholders,debt holders, a foundation, or other stakeholders) throughpositive and meaningful actions that support the mission,vision, and values of the organization. As a best investment,an enterprise also commits to developing its greatest asset—the talented teammembers at every level of the organization.The “hard numbers” of best investment are also the proofpoints that values-based leadership truly does elevate per-formance over the long term.

5. Best Citizen: From the C-suite to the most junior levels of theorganization, everyone is focused not only on success, butalso significance, through social responsibility and making adifference in the world, beyond the organization and itspeople. Beyond philanthropy for charity’s sake, best citizen-ship embraces a broader purpose in what we think of associal responsibility.

Each of these bests connects to the others in a holistic structurethat elevates the organization, its people, and its purpose. Thisbook mirrors the structure with five interconnected sections,building on the firm foundation of the four principles of values-based leadership.

In SectionOne, we begin with the individual and becoming yourbest self as you practice self-reflection to identify your values andcommit to act in accordance with them. In this section, we also lookat how self-reflection is a valuable tool for developing a balanced

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perspective, making decisions aligned with one’s values, and focus-ing on what is most important. Two additional components of beingyour best self are achieving true self-confidence and genuine humil-ity, which are extremely complementary. Working in tandem, thesetwoprinciples allowyou toacknowledgewhat youknowandwhat youdon’t, and to value each person with whom you interact.

In Section Two, we broaden our scope from the individual tothe collective, with the best team. In the values-based organiza-tion, every team member is able to link what he or she does to theoverall goals and objectives of the organization. They know thatwhat they do truly matters, and so they commit to doing their best.Developing a best team will be examined in two different con-texts: first, turning around a dysfunctional environment and,second, in a fast-paced startup where roles and responsibilitiesare demanding and fluid.

In Section Three, we widen our perspective outside the orga-nization to become a best partner with suppliers and vendors inorder to enhance the customer experience and create value for all.An organization that is a best partner moves beyond financialtransactions with customers, and focuses on making customersatisfaction a priority. Within the organization, every departmentand team—including those that are removed from direct customerinterface—are able to link what they do with creating a meaningfulcustomer experience.

Section Four examines what it means to be a best investment,with returns that are measured inmore thanmonetary terms. Beinga best investment applies to all organizations—large and small,public and private, corporations and nonprofits—with accountabil-ity to stakeholders who want to see evidence that organizationalvalues are being put into action in pursuit of a meaningful return.This section will address the steward leader, who uses self-reflectionto examine how team members are motivated and rewarded. Inaddition, discussion will address teammembers who need to know iftheir organization fits their values—and what they can do about it.


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The book culminates in Section Five with becoming a bestcitizen. Part of the mission of both the values-based leader and thevalues-based organization is to set a standard as a best citizen,making a difference in the local community and in the world. Thissection will address social responsibility to further the priorities andinitiatives that are truly meaningful to the organization and its teammembers. When an organization is a best citizen, it also encouragespeople to be their best selves, while developing best teams and bestpartners, and becoming a best investment—the ultimate win/win.It is a powerful legacy that is both highly personal and yet extendsbeyond the efforts or ego of any one person.

* * *

The need and desire to become the best through values-basedleadership have never been stronger or more critical. Organiza-tions today—large or small, public or private—are confronted withethical issues, which may result from changes in regulations oruncertainty around where the legal, moral, and ethnical bounda-ries lie. Large, global organizations face the challenges of operatingwithin a varied tapestry of multiple markets, regions, and countrieswith unique legal systems and regulations. Even smaller organiza-tions focused on a single market or region must navigate acompetitive landscape marked by gray areas that are open tointerpretation. Within these complexities, and given the seriousconsequences of making an error in judgment, values-based lead-ership is the only way to operate.When a problem arises, it is crucialthat individuals at all levels of the organization adopt a values-basedleadership approach. That means they are committed to doing theright thing at all times—and doing the best they can do.

Values-based leadership is more than just a defensive playbookfor how to respond when a dilemma, problem, or crisis arises. It is away of thinking, acting, and operating at every level of the organiza-tion. We cannot merely look at the world and complain about a lackof leadership in general or values-based leadership in particular. We

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must be change agents within our organizations, communities, andsociety at large. The values we embrace must be visible to others byour actions, decisions, andhowwe interact with and treat others. As Ihave seen in my own life and career, and in those of many othersI have worked with, individuals and organizations can be bothfinancially successful and also a force for good.

One of those examples is Andrew Youn, co-founder of OneAcre Fund. After graduating from Kellogg with an MBA, Andrewdecided to devote himself and his hard-earned knowledge toaddressing the problem of hunger in East Africa. By teachingand promoting best practices in agriculture, One Acre Fund hasimproved the health and raised the hopes of more than 200,000farm families, touching more than one million people in Kenyaand Rwanda, as well as Burundi and Tanzania. Its goal is topositively impact more than 20 million children by 2025. To saluteand support Andrew in his commitment to be his best, I will donatemy proceeds from this book (as I do with From Values to Action) toOne Acre Fund (www.oneacrefund.org).

Guided by self-reflection, informed by a balance of perspec-tives, and defined by both true self-confidence and genuine humil-ity, values-based leaders at every level make a difference in theirorganizations. Their values become the basis of their actions andinteractions, as they become their best selves. This starts themovement forward in a deliberate process, from best self to bestteam, best partner, best investment, and best citizen. It is bothrevolutionary and evolutionary—and it starts with anyone whodesires to become a values-based leader.


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SECT ION ONE

BEST SELF

A fundamental objective of values-based leadership is answering the question:How do I become my best self?

People at every level and with any job title can and should becomevalues-based leaders—those who lead with principles and live byexample. Through their actions, words, and support, values-basedleaders utilize the four principles of self-reflection, balance andperspective, true self-confidence, and genuine humility to guidetheir own actions first. With greater self-awareness and self-knowl-edge, they bring their best selves to work—and motivate and inspireothers to do the same.

Leadership is not determined by the number of directreports or followers you have. You can be a team of one, leadingonly yourself, and still become a values-based leader by focusingon becoming your best. In fact, for many of us who have reachedthe C-suite, that’s precisely where our values-based leadershipbegan. From your cubicle at the entry level of a company, orworking out of your living room as a freelancer, you can put theprinciples of values-based leadership into action to become yourbest self, every day.

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If you are a middle manager or senior executive, leading ateam of 50 or 50,000, grounding your leadership in your best selfis equally important. It’s a dangerous trap to think that havingmade it to a certain level—even to the C-suite—your focus shouldlook only outward: on developing the organization’s goals, achiev-ing targets, and managing others to do their best.

No one is beyond becoming their best self. At this point inmy life, I have been CFO, president, CEO, and chairman of a$12 billion global health-care company, with a combined tenureof 11 years at the top of Baxter International. Currently, I’m anexecutive partner with Madison Dearborn Partners, a Chicago-based private-equity firm, and despite the success I’ve been luckyto have, I remain just as committed to being my best self as I didwhen I was starting out in one of those cubicles as a junioranalyst, decades ago. As a clinical professor of managementand strategy at Northwestern University’s Kellogg School ofManagement, and a frequent speaker for groups of students,new hires, middle managers, and executive leaders, I stress theimportance of being your best self as the foundation to values-based leadership.

Your best self is not about perfection (an impossible and,therefore, futile goal). It is about becoming consistently disciplinedand focused, making sure you challenge yourself to truly be yourbest self—instead of becoming complacent, convinced that youhave arrived. Nomatter how good you are, you can always be better.Being your best self is a lifelong commitment.

Becoming your best self will not occur automatically, nor is ita sudden conversion because some emotionally intelligent lightswitch has been flipped. It is a process, one that will transformyou over time and impact every person with whom you come incontact.

Most people have an innate sense of right and wrong and a setof personal values, even if they don’t think about them in aconcrete way. Most of us strive to be good people, but we’re

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human; we have good days and bad days. There are times when wesay things to people that we regret a moment later. We askourselves: Why did I say that? Why did I treat someone like that? Whydid I lose my temper with that person?Why did I feel the need to be the know-it-all, instead of valuing others’ opinions? Why did I act in ways that areinconsistent with my values?

The answer is that, in those moments, we were not our bestselves. This realization may cause us some embarrassment anddiscomfort, but the purpose is not to feel shame or beat ourselvesup. We simply recommit to the journey of becoming better. Evenpeople whom I greatly admire—spiritual leaders, philanthropists,and executive leaders who truly put others first—admit that theyare not their best selves every day. When we acknowledge that we’vemissed the mark, we’re just being honest with ourselves. Then wecan recommit to the process of being our best selves, to the best ofour ability, every day.

In this section, “Your Best Self,” we explore how to use the fourprinciples of values-based leadership to become your best self(which is the foundation for the other bests in the book—bestteam, best partner, best investment, and best citizen). In Chapter 1,we start with the most important principle of values-based leader-ship: self-reflection. This fundamental principle enhances yourself-awareness and self-knowledge, and allows you to gain insightinto your decisions, actions, and interactions with others. Self-reflection leads to the second principle of values-based leadership:balance and perspective. I define this second principle as beingopen to input and diverse opinions from others, and doing so in away that improves decision-making. From there, in the secondchapter, we move to the principles of true self-confidence andgenuine humility, which are complementary—not contradictory.With true self-confidence, we ground our best self in the knowledgeof our skills and accomplishments; we know what we know. But wealso acknowledge what we don’t know, and the benefit of workingwith others who are strong in areas in which we are weak.We reflect

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on our strengths and weaknesses, and understand what we canbecome and not become. Genuine humility reminds us of the valueof every person, the importance of showing respect to everyone,and never forgetting where we came from.

The four principles of values-based leadership are the road andthe guardrails, leading us toward the goal of becoming our best.Like all journeys, it has a clear beginning: becoming your best self.


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CHAPTER 1

THE SELF-REFLECTIVE,BALANCED LEADER

Self-reflection is the most important tool in the values-basedleadership toolbox. It is the intentional practice of stepping

back, filtering out noise and distractions, and looking inward togain clarity on what matters most to you, personally and profes-sionally. By being self-reflective, you think deeply about issues soyou can make choices that are aligned with your values. You alsogain a fuller awareness of the impact of your decisions. Self-reflection also provides you with an opportunity to know yourselfbetter, assess your strengths and weaknesses, and understandwhere you excel and what areas you need to develop.

Without self-reflection it is impossible to become a values-basedleader. Unless you pause to reflect on your priorities and whatmatters most, you can easily become overwhelmed by the sheernumberof itemsonyour to-do list and fail todistinguishbetween realproductivity and pointless activity. Self-reflection can be a potentantidote to the all-too-common experiences of worry, fear, anxiety,pressure, and stress, all of which can undermine your intention to beyour best self.

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Yet even people who understand the concept of self-reflectionstruggle with how to put it into practice. In the four years since thepublication of my first book, From Values to Action, I have givenmorethan 500 talks to diverse audiences, ranging from students to seniorleaders in business, government, academia, and the not-for-profitsector, and the dialogue and questions regarding values-basedleadership frequently center on the importance of self-reflection.In this chapter, we will start with the foundation of how self-reflection can guide you to become your best self, in every interac-tion and facing any challenge, every day.

THE IMPORTANCE OF SELF-REFLECTION

Self-reflection is the gateway to self-awareness and self-knowledge.Themore you understand yourself, the better you are able to relateto other people. Relating to them allows you to influence them,which is how leadership happens. Values-based leadership movesfrom the inside out, rooted in the knowledge of what you stand forand what matters most—personally and professionally. All of uslead multifaceted lives, with decisions that impact others, includingspouses, partners, and children, as well as colleagues, friends, andteam members. The choices we make impact our quality of life.

Self-reflection provides an instant window to what is criticallyimportant to you—today, in this moment of your life. You’ll makesome compromises; everyone does. But you can’t really know whatyou’re giving up and the impact of these trade-offs unless you stopto reflect. Otherwise, you will move from activity to activity, fromone crisis to another, without a sense of direction or purpose.When you are overwhelmed by everything life is throwing at you,you can’t possibly expect to be your best self. That’s where self-reflection comes in, helping you prioritize and get back on track.

Often when I talk to people, from students to CEOs, I fre-quently hear that they are surprised by the consequences of theirchoices—even things that seem obvious, such as a job requiring


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extremely long hours or frequent travel. All they know is that theyfeel out of balance and they aren’t living in a way that is consistentwith their best selves. The negative aspects of work can quicklybecome exhausting, even putting a strain on personal relationshipsand family life. When people suffering from such problems wakeup to how stressed and unhappy they are, the source of theirtrouble often comes as a surprise. The root cause in these situationsis typically a lack of self-reflection.

Onabusiness trip to theWestCoast, I ran intoa former student ofmine from Northwestern’s Kellogg School of Management at LosAngeles International Airport. When “Joe” reintroduced himself, hereminded me that he had been in my class six years earlier. Iremembered him as a very bright individual who had really graspedthe principles of values-based leadership as we had discussed them inclass. However, when I asked how he was doing, he replied, “Hon-estly, not verywell. I’mreally surprised atwhat’s happened inmy life.”

Joe toldmehe’d gottenmarried andhad two children, a son anda daughter. Because of his job with an investment bank, which paidhim a lot ofmoney, he traveled 90 percent of the time. As a result, hespent very little timewithhis wife and family, andwhenhewas home,he was exhausted. While Joe was doing very well at the investmentbank, and there were aspects of the job he really loved, he wasn’tengaged in areas of his life that were important to him, especially hisfamily. In short, he’d lost sight of what he said was crucial to him.

Although I was sympathetic to his situation, I couldn’t figureout why he was surprised. It appeared Joe had decided that thisprofessional opportunity and its high salary would be good for him,his career, and his family finances, but he did not self-reflect on thejob’s broader impact. Self-awareness could have improved hisdecision-making process, but without it, he was surprised by howstressed and unhappy he had become.

Fortunately, self-reflection is a skill that can be picked up at anytime. First, Joe needed to look at things honestly. While he wasearning a great salary and bonus, if he analyzed what he was being

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paid for the actual time he dedicated to his job—accounting for the80-, 90-, and 100-hour weeks with the pressure of extensive traveland grueling deadlines—he was actually being paid at the rate of amore junior person working a 40-hour week. (When I tell mystudents this, their faces drop in astonishment, with the realizationthat this could happen to me.)

In our conversation, I never made a recommendation aboutwhat Joe should do, or a value judgment about what should bemostimportant to him. He needed to decide that for himself, which hecould only do by taking the time (as little as 15minutes a day of self-reflection) to identify his priorities. If he decided that his careerwas most important to him at that point in his life, then he neededto be willing to sacrifice time spent on his relationships. That is nota “wrong” or “bad” choice, provided that it is his conscious decision,with a full understanding of the implications. Self-reflection couldeven help him to identify solutions such as how to spend the littlefree time he has for the most positive impact and reward.

I asked Joe, “Do you remember how we talked about theimportance of self-reflection in class?”

“Ofcourse,” Joe replied. “I used to love those assignments,wherewe had to write a one-page, double-spaced self-reflection every weekon our values, goals, and priorities. I guess I got away from doing it.”

In the whirl of moving to New York City, being a strongperformer (the first guy in the office each morning and the lastone to leave at night) and highly regarded at his firm, Joe let self-reflection slip. He stopped asking himself what was most importantin his life, what his priorities were, and whether he was comfortablemaking compromises. Again, I wasn’t telling Joe to quit his job atthe investment bank, nor do I want to imply that people shouldn’ttake demanding jobs. I believed that by returning to his habit ofself-reflection Joe would find the answers within and would likelyseek out someone to be a sounding board. Similarly, each of us isfaced with choices, and what we choose should align with becomingour best selves.


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SELF-REFLECTION AND THE BUSINESSORIENTATION OF LEADERSHIP

Students will sometimes say tome, “Harry, for a guy who was a mathmajor, studied accounting, became a CPA, and was a CFO, yousound awfully soft and qualitative with this self-reflection stuff.Where are the hard-core analytics and business results that leader-ship demands?”

I tell them that self-reflection is based on an analyticalapproach that results from three equations (or questions) thatprove that values-based leadership begins with self-reflection: First,if I am not self-reflective, how can I know myself? Second, if I don’tknow myself, how can I lead myself? Third, if I can’t lead myself,how can I possibly lead other people?

Self-reflection is also valuable as a leadership tool, which I haveexperienced inmy career andhave found to be truewith otherCEOs,who I have the privilege to know. Mark R. Neaman, president andCEOofNorthShoreUniversityHealthSystem(seeChapter 6), is a self-reflective leader. One of the ways Mark uses self-reflection is toincrease his self-awareness of how he relates to others, so he canexhibit his best self as a leader. “When you’re a leader, people look toyou, trying to anticipate what you’ll do or say. Through self-reflection,you increase your awareness of how you are communicating withothers. Do you show passion and compassion? Are you hard drivingand thinkingbig thoughts, but never losing yourhumility because youknow you can’t accomplish those big dreams all by yourself?” Marksaid. “You can’t become delusional about how important you are.”

Self-reflection as a leadership tool encourages out-of-the-boxthinking. Jai Shekhawat is CEO and founder of Fieldglass, whichmakes the world’s most widely used cloud-computing platform forthe procurement of contract labor and services. Reflecting on howhe picked his first teammembers (see Chapter 4), Jai chose peoplewith unusual backgrounds to oversee the building and selling ofthe product. By self-reflecting on what mattered most to him, and


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therefore to his company, Jai identified his top criteria as passionfor the business and capability of delivering what was expected.These two characteristics were more important than having aparticular job title or work experience.

Jai obviously had the right team to build the company. Field-glass was sold in 2014 to SAP of Germany for a reported $1 billion.Even before that market validation, however, Jai knew he’d madegood choices for his core team because of the close alignmentamong the key players, right from the start.

As important as it is to take time by yourself to be self-reflective,it is only half the story. It is equally important to obtain input andfeedback from others to make sure you are being realistic andhonest with yourself. As my wife, Julie, is fond of telling me, “Harry,left to your own devices, you could convince yourself of anything.”No wonder that, after 35 years of marriage, when she asks me if Iwant her opinion, the answer is always yes. Whether your personaladvisor is your spouse or partner, good friend, sibling, mentor, orsomeone else, make sure you are tapping outside perspectives. Theviewpoint of another person can help you see clearly whethersomething supports your best self or if it’s out of sync with who youare and who you say you want to be.

ELIMINATING WORRY, FEAR, ANXIETY,PRESSURE, AND STRESS

There are five words that immediately get everyone’s attention invirtually every audience I address: worry, fear, anxiety, pressure,and stress. They are a common experience, and yet most people donot admit to facing them. Self-reflection, though, is the way to shedsome light on what you’re really feeling, and how to minimize theimpact of these negative emotions on your life, so that you can geton with the business of being your best self.

First, you need to acknowledge that worry, fear, anxiety, pres-sure, and stress are unproductive and unhealthy—just ask your


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doctor about the impact of stress on your body. Second, throughself-reflection you can see that these negative emotions occur mostfrequently when problems arise, things aren’t going well, or whenthere’s a crisis. Suddenly, you’re in over your head. Why? Becauseat some previous point in time, when the first hints surfaced thatmaybe this situation, decision, or choice is not going the way I thought itwould, you weren’t practicing self-reflection. If you had, you prob-ably would have noticed things going south, or at least you wouldhave been aware of that possibility. Then you could have decided inadvance what corrective course of action you’d take when a situa-tion arose or a problem escalated. Even if the situation you findyourself faced with was unforeseeable or beyond your control, self-reflection can ground you in how to respond as your best self.

Here’s how: Being your best self allows you to live in reality,instead of dwelling in the extremes of believing the good times willlast forever, or that difficult episodes will never get better. Self-reflection will keep you on an even keel, by reminding you that noone’s life follows the upward slope of a straight line. For all of us,life is a “sine wave” of ups and downs that, we hope, will have anoverall upward slope. Self-reflection keeps us grounded in themoment, whether in the midst of highs or lows.

Let’s say that life is good right now, personally and profession-ally. You’ve got no complaints. That is just fantastic and truly areason to celebrate—and you should. At the same time, remem-bering life’s sine wave pattern, you know that things are not alwaysgoing to go well. At some future point in time, there will be adisappointment, upset, or negative event. It’s not that you want todouse your happiness today with negativity and worries abouttomorrow—by all means enjoy the good times—but being yourbest self means that you are a realist, preparing yourself in advancefor when, not if, the downturn happens.

Being self-reflective means that when you’re at the top of thatsine curve, you already know what you’ll do when things don’t go sowell. You will be alert and prepared for those initial signs of


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disappointment or upset, and you’ll act on them quickly, withoutgetting sidetracked, being surprised, or losing precious energy toworry, fear, anxiety, pressure, or stress. Without self-reflection, youhave chosen to wait until a crisis hits to figure out what you’re goingto do, and by then it’s often too late. It’s hard to see clearly whenyou’re in the middle of a storm.

With self-reflection I am always prepared to act in the midst of aproblem, challenge, or crisis. I will do two things: I will do the rightthing, and I will do the best I can. These two seemingly simple, buthighly powerful statements have significantly reduced the worry,fear, anxiety, pressure, and stress in my life. No matter what hap-pens—and in senior leadership positions, I have faced my share ofcrises—I know I will do the right thing and I will do the best I can.

This same thinking allows you, as your best self, to manage thegood times and balance the bad times in your organization. Let’s saythat you’re the CEO of a company that has posted strong earnings,quarter after quarter. Perhaps this has occurred for several quartersin a row, and with each successful quarter, the bar gets higher. It’sonly amatter of timebefore there is a disappointment, and quarterlyearnings, while not bad, are less than investors’ expectations.Through self-reflection, you will be prepared for how to respondwell in advance of that occurrence: You will do the right thing, andyou will do the best you can.

You can plan for anticipated difficulties and the unknown bytraining yourself to keep things in perspective. Disappointmentswill occur; that’s part of life. The two fundamental commitments—to do the right thing, and to do the best you can—will keep yougrounded in reality, no matter what occurs.

While you are being your best self, you may find that somepeople on your team or other colleagues have a tendency to getworked up in the midst of a problem or crisis—and they may wantyou to do the same. In fact, if they can’t get you all wound up andworried, they think they haven’t done their job. During my time atBaxter, after 15 or 20 consecutive quarters of increased earnings,


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we faced a difficult quarter and, as a result, we were not going tomake our projected targets. For example, let’s say we had projectedquarterly earnings of $1 a share and it looked like we were onlygoing to make $0.90. Such an earnings miss means we would needto tell the Street, and that bad news can cause a lot of worry, fear,anxiety, pressure, and stress. However, by being self-reflective andkeeping things in perspective, I remained disciplined and was ableto avoid being overwhelmed by negative emotions. One of mycolleagues, who got really wound up over the news, said to me,“Harry, don’t you realize how serious this is?”

I replied: “Let me see: We will have 550 phone lines to London,Tokyo, and throughout the United States with analysts—buy sideand sell side—and large shareholders on a conference call with us,at which time we’ll have to give them disappointing news about notmaking our projections, and that will have a negative impact on ourstock price. Am I close?”

Of course I got it, but we didn’t have time to waste on beingworried and upset. We needed to devote all our time and energy onunderstanding what happened, why it happened, and what wecould do to minimize the chances of it happening again. Being ourbest selves in that moment meant keeping our commitment todoing the right thing and the best we could do.

CENTERING YOUR BEST SELF

Centeredness is where your best self resides. One of the traps thatwill throw you out of centeredness is to believe that, when upsetshappen, life is unfair. The problem is one of perception: Someonebelieves that life is inherently supposed to be fair. Believe me, I’mno pessimist (in fact, most people who knowme would describe meas a strong optimist); my optimism, though, is grounded in realismand the realization I’ve gained through years of self-reflection thatlife looks like a normal distribution (i.e., a bell curve). Themiddle iswhen things are going okay; to the right are the better-than-normal


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events (and to the far right the ones that are fantastically wonder-ful), and to the left are the worse-than-normal events (and to the farleft the ones that are tragically so). You, like me, are going to haveyour share of experiences that fall to the right and left.

Self-reflection and your commitment to being your best selfallow you to remain centered, which will increase your resilience incoping with challenging situations and your resourcefulness infinding a solution. You may even be able to minimize the occur-rences of some negative events, reducing the incidence of good/bad from the 50/50 of our hypothetical bell curve to 80/20, but I’venever met anyone who didn’t go through pain and disappoint-ments at least 20 percent of the time.

By being self-reflective, you will be disciplined enough to calmlyrealize challenges are not exceptions. Failures, deaths, accidents,job losses, and other disappointments are all part of the humanexperience. Rather than getting mired in the question “Why did thishappen to me?” you choose to focus on what can be done tomake thebest of the situation. Interestingly enough, by being proactive, youwill be more prepared and less surprised, and better able to reducethe impact of negative events.

BEST SELF IN THE REAL WORLD

Occasionally, someone will say to me, “This sounds great, Harry,but how does it work in the real world. I’ve got a team of people whoreport to me, and I’ve got people above me. How can I staycentered as my best self, when I’m caught in the middle of peoplewho are worried, fearful, anxious, pressured, and stressed becauseof what’s happening?”

Even when we’re being our best selves and staying centered, wedo have to deal with the emotions and reactions of others. Let’s takethese two groups separately. First, there are the peoplewho report toyou (whom we address in more depth in Section Two, “The BestTeam”). When an issue or crisis arises, your team members may


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become flustered and upset because they don’t fully understandwhat’s happening, or because they are anxious over what mighthappen—and so the pressure mounts.

No matter how centered you feel, the anxiety and worry amongyour team, if left unattended, will escalate into a real problem—evento the point of undermining their ability to respond to the situation.By being your best self and a values-based leader, you can use yourown personal example to influence your team. You may need toassure them that they are up to the task in front of them, or remindthem of how successfully they’ve handled problems in the past. Asyourbest self, youwillmodel for otherswhat itmeans (and looks like)to step back, take a breath, and put the current challenge intoperspective. Through your reflective, calm, and thoughtfulmanner,you will help others adopt a similar demeanor and attitude.

LEADING UP

At this point, you’ve gotten your personal act together by beingyour best self, and you’ve calmed your team by modeling self-reflective behavior for them. But you’re still not out of the fire. Youstill have to deal with the boss.

Let’s assume that your boss is not self-reflective and does notbring his/her best self to work every day. Instead, this is one ofthose infamous, out-of-control, the-world-is-coming-to-an-end typesof bosses with whomwe’ve all had to deal. This person is not just off-center or lacking self-reflection, but rather a Tasmanian devil!Dealing with this situation requires you to take your best self toanother level and lead up to manage your boss.

Leading up means using your ability to influence and motivateyour boss by your example. You cannot do this without a daily doseof self-reflection on the problems or challenges at hand, the variousscenarios and solutions on the table, the personalities involved,your boss’s response, and the general state of the atmosphere. Asyour best self, you are equipped with fine-tuned discernment and


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emotional intelligence to navigate what will probably be somestormy seas with submerged obstacles!

In my talks, I give a simplified example to show how this can bedone. As a strategy is devised and rolled out, your boss says he wantsto head east (the hypothetical equivalent of whatever strategicdecision is being made at the time). In your opinion, the organi-zation should really be headed west. How you handle this situation,and whether you can influence your boss to reach a better solution,will have an enormous impact on how successful you will be as aleader. It’s not just what you do, but how you do it.

Perhaps your boss has a big ego and a tremendous need to beright. Since your commitment, as your best self and a values-basedleader, is to do the right thing, you’re willing to park your ego at thedoor. First, you take the time to talk to enough experts to make surethat west really is the optimal direction, and that you’re not lettingyour own ego get in the way. If the consensus is that west is best, thenyou have to present this information in such a way that you influencethe boss into reaching the same conclusion—maybe even allowingthe boss to think it was his idea. So you might say, “Would it makesense to go west first so that we can do such-and-such?”

Acting as your best self, your objective is not to prove your bosswrong, but to present a better solution. Without having your egoinvested in it, your boss can pick up the idea and run with it as if itwere his own.

Now, let’s say that your boss doesn’t want to hear about west. Heis convinced that the only way to go is east. Your self-reflection willhelp you determine whether this really is a big deal, or if it’ssuboptimal but in the end will probably work out okay. If it’s thelatter, then you might decide to get on board the boss’s eastboundtrain and figure out how to reach the objectives from there, whiledoing the right thing and the best you can do.

But let’s say that your boss’s plan of going east will result in amajor problem or setback, and that west really is substantially better(e.g., less risky, significantly more cost-effective or efficient, etc.). If


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so, it may be time to shoot a so-called silver bullet. With self-reflectionand being your best self, you will be able to do this because youunderstand your own motivation. You’re not looking for kudos orrewards, to make your boss look foolish or to take his job. You careabout the team and the organization, and want the strategy to besuccessful.

Therefore, with true self-confidence (which we discuss inChapter 2), in an open and transparent way, you let your bossknow that there is a significant difference between going east andgoing west, and that it makes sense to sit down with the boss thenext level up and discuss the situation.

PAUSE FOR REFLECTION

When you are operating as your best self, you have the calmness,centeredness, and clarity to see through the fog. This can onlyhappen if you take the time for daily self-reflection. Personally, Ifind it best to write downmy thoughts in a journal, otherwise it feelstoo much like just daydreaming. By putting your self-reflection inwriting, you also establish a record of your priorities and whatyou’ve committed to do.

For me, self-reflection is an activity that’s best done at the endof the day, when things calm down from my different jobs andactivities (including teaching, speaking, serving on boards ofdirectors, and working in private equity—plus being a husbandand father of five). At night, when the children are in bed and I’vegotten through my calls and emails, it’s time for me to find a quietplace, such as on my back porch or sitting in my favorite chair. Forother people, self-reflection is a morning exercise. They centerthemselves while jogging or walking the dog (jotting down notes ontheir thoughts afterwards). Others take a 20-minute break duringthe day and, instead of picking up the phone and calling threemore people, they take a walk around the block or the complex.The optimal time and routine will be up to you to discover.


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My self-reflection involves a list of questions I ask myself to assessmy day and determine whether I’ve been my best self. For example,did I act in a self-reflectivemanner, or did I allowmyself to get caughtup in the emotions and urgency of the day? Did I do what I said Iwould do, or did I fall short of my own expectations? What did I dowell?Where could I have done better?What could I do now to betterprepare myself for the next day? How did I treat people? How did Ilead people, and how did I follow people? Am I proud of myinteractions? Did I keep myself centered, or was I out of control?

As I engage in honest self-reflection, I ask myself what I woulddo differently if I had the day to live over again. I know I’mawork inprogress, and I have the ability to get better. Given what I’velearned today, how can I operate better in all dimensions of mylife, personally and professionally? The more self-reflective Ibecome, the better equipped I am to be my best self, every day.

BALANCE AND PERSPECTIVE

One of the benefits of becoming self-reflective is gaining balanceand greater perspective in your life. As a principle of values-basedleadership in action, balance refers to your ability to see a bigger,fuller picture andmake decisions accordingly. You don’t just rely onwhat you think or what you know; you purposefully extend yourperspective by engaging others. Self-reflection is the tool that allowsyou to achieve balance most effectively, by allowing you to see whenand where you need more input and from which people.

When people are not self-reflective, they also tend to be in ahurry. They’re consumed by worry, fear, anxiety, pressure, andstress, and so they think that the only way to counter these negativefeelings is bymoving quickly. They don’t take the time to self-reflect(their first mistake) and they surely don’t invest in gathering theinput and opinions of others (their second mistake). To them, thatwould be wasting time, but this viewpoint often leads to a fatalmistake.


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When people make quick decisions based on strong opinionsand emotions, they usually fail to acknowledge that there are manydifferent perspectives. If understood, other insights could have anenormous impact on anyone’s ability to make the best decisions(not just fast ones) and to motivate a team that may have differentviews on a topic. In my classes and talks, I sometimes encounterimmediate negative reactions to this point: “Harry, don’t you wantme to have a strong opinion and be decisive? Don’t you want me toact in an authoritative way as I lead my team? Don’t I need todemonstrate that I am, in fact, a decisive leader?” My response isthat, in my opinion, it’s best to develop strongly held views after youhave taken the time to truly understand all sides of the issue. (As Itell people, I have opinions, not answers, and these allow me to keepa balanced perspective.)

I also get pushback from people who say, “I’ve got a lot to do. Idon’t have time to hear the opinions of everyone on my team. Ihave to get an answer to my boss quickly.” This argument is basedon the narrow perspective that this is a binary choice: Get theteam’s opinions or make a decision quickly. To me, there is nochoice involved. As I like to say, if the question is whether to seekthe opinions of people who can add value or to make a decisionquickly, the answer is yes.

At every level of the organization, being your best self meansyou value balance and perspective in your decision making (whichwe will revisit in the dynamic of a best team). That doesn’t mean youwill drag out the process, engage in paralysis by analysis, or procras-tinate by chasing after the trivial and tangential. If the decision youhave to make can be better, stronger, or more assured by reachingout to a colleague or team member whose input you can gatherquickly, then being your best self demands that you do both.

Another aspect of balance is to recognize that you don’t have allthe answers. No matter how much experience you have or howhigh up you are in the organization, there are others (and oftenthey are junior people) who have valuable perspectives and


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experiences. One example is social media, which many organiza-tions are still trying to get a handle on pairing with their traditionalmarketing and communications strategies. If you’re the chiefmarketing officer, you may be a best-in-class expert in the tradi-tional channels, but when it comes to employing social media, theperson with more knowledge may be a 20-something. When itcomes to very fast-moving technology, someone with only one totwo years in the organization may actually be more knowledgeablethan a more senior person. (Personally, I am the first to admit thatmy 12-year-old son, Daniel, is far more adept at electronics than Iam, and if it weren’t for him, my DVD player would blink 12:00.)

Being your best self means you acknowledge the critical impor-tance of gathering diverse opinions and viewpoints from people ofdifferent ages, backgrounds, ethnicities, cultures, and genders.Furthermore, being your best self as a values-based leader meansyou are committed to motivating and elevating your team. Balanceand perspective also enable you and your team to gain a broaderunderstanding that enhances your contribution—or, as I like tosay, you can see the trees and the forest, rather than getting caughtup in the root system!

A BALANCED INDIVIDUAL

When you act with balance, others will perceive you to be a balancedindividual—a true sign of someone being his or her best self.Consider the example of one executive vice president at a companywhere I was asked to give a presentation. As we discussed theimportance of balance in all aspects of life, this executive, whomwe’ll callMaryEllen, said that shebelieved that exercisewas key toherhealth andwas something shedefinitely needed todo. “I am trying toexercise more,” she said, “but I just don’t have the time to do it.”

I asked Mary Ellen if she put exercise on her calendar with thesame regularity and commitment as her nine o’clock meeting andher noon client lunch. “If it’s not on your calendar,” I told her, “you


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won’t do it. You’ll tell yourself that you’ll wait until everything else isdone. But guess what? You’ll never get everything else done.”

At this point, Mary Ellen’s colleague, we’ll call him Ron, pipedup that he had a similar problem. Ron’s job required him to travelextensively and very often the fitness centers at his hotels closed atnine in the evening. I explained that I travel about 50 percent ofthe time, and very often I don’t get to my hotel until after teno’clock at night, which is why I try to avoid staying in hotels thatdon’t have 24-hour fitness centers.

Thepoint to this story is simple: If you say something is importantto you—if it is key to balance andbeing your best self—then youhaveto make it a priority. Otherwise, you will not come across as dis-ciplined, focused, consistent, and credible—to yourself or others.Saying you don’t have the time for something really means it’s not ahigh enoughpriority for you tomake time. (As I discuss in FromValuesto Action, we all have 168 hours per week. The only question is howwespend that time.) With self-reflection and balance, you can makechoices for yourself that enable you to become your best self ineverything you do.

SELF-REFLECTION AND BALANCE—COMPLEMENTARY TOOLS IN THE

LEADERSHIP TOOLBOX

Your pursuit of balance and perspective is accomplished mosteffectively through self-reflection. How else are you going to seewhat you need and whom you need to engage? As you reflect onwhat is being asked of you—the options you are weighing, thedecisions you need to make—you will identify those experts whocan provide valuable perspective and input.

This is a powerful benefit of self-reflection. While self-reflectionremains highly important for heightening your self-awareness, pro-viding you with feedback on your actions, and letting you knowwhether you are being your best self, this foundational principle is


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really an all-purpose tool. Self-reflection isn’t limited to talking toyourself like a hermit in a cave. Inner dialogue, while meaningful, isnot the only dimension of self-reflection.

Being your best self means you utilize self-reflection to enhanceyour engagement in community with others, which improves yourbalance and broadens your perspective. Purposefully seeking outfeedback from others keeps you grounded in reality instead ofslipping into a kind of dream world of unexamined perception.

YOUR BEST SELF, EVERY DAY

At every level, leadership starts with you. While living and workingin the real world puts you in contact with others, you cannot movetoo quickly into the communal and organizational before you’vedone sufficient work on the personal. At a fundamental level, yourbest self—the core of the concentric circles of bests that radiatefrom you through the organization and into society—determineswhat you stand for, what matters most, how you will act, and howyou will treat others. People need to take the time to define whatbest self means to them. Once they have a clear picture, they canself-reflect each day to determine if they lived and demonstrated it.Becoming one’s best self starts with self-reflection. By being honestwith yourself, you will know how well you are keeping your word,honoring your values, and living in accordance with your priorities.You will limit or even eliminate unpleasant surprises, and carry outyour twin commitments of doing the right thing and doing the bestyou can do. Self-reflection will help you achieve balance and abroader perspective. Others will perceive you as being focused,disciplined, consistent, and credible in everything you undertake,professionally and personally. In short, you will be well on your wayto being your best self, every day.




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Contents

Foreword by Jeffrey Bewkes, Chairman and CEO, Time Warner xv

Preface: A Book About a Topic Nobody Wants to Talk About xvii

Chapter 1 What’s in It for Me? Your Personal Guided Book Tour 1

PART I What: The Facts and Facets of Failure 11

Chapter 2 The Other F Word: “Failure” Is Such a Loaded Word 13

Chapter 3 The Gravity of Failure and Failure’s Gravity 21

Chapter 4 Defining Failure: Mistakes and UnwelcomeOutcomes That Matter 27

Chapter 5 Fear and Memory: Failure’s Force Multipliers 37

PART II When and Where: How Failure Appears atDifferent Organizational Phases 47

Chapter 6 Start-Ups: Launching Your Venture in theLand of Failure 49Your Role: Passionate Convincer

Chapter 7 Keep-Ups: Surviving and Thriving After YouMeet Payroll 67Your Role: Confident Juggler

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Chapter 8 Grown-Ups: Dodging the Oxymoron of“Big Company Agility” 81Your Role: Trusted Colleague

PART III How: Using the Failure Value Cycleto Advance Your Organization 97

Chapter 9 The Failure Value Cycle: Seven Stages Where You CanLeverage or Flunk Failure 99

Chapter 10 Stage One—Respect: Acknowledge theGravity of Failure 103Your Role: Straight Talker

Chapter 11 Stage Two—Rehearse: It’s Not Just About Fire Drills 121Your Role: Tenacious Coach

Chapter 12 Stage Three—Recognize: Pick Up the Signalsof Failure Earlier 131Your Role: Watchful Monitor

Chapter 13 Stage Four—React: Deal with It! 143Your Role: Team Captain

Chapter 14 Stage Five—Reflect: Turn Failure from a Regretto a Resource 153Your Role: Inquisitive Student

Chapter 15 Stage Six—Rebound: Retake the Initiative 165Your Role: Field General

Chapter 16 Stage Seven—Remember: Embed Failure Savvyin Your Culture 173Your Role: Proud Storyteller

Chapter 17 The Failure Value Report Card: A Practical Toolto Help You Put Failure to Work 183

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PART IV Now: Put the Other F Word to Work 193

Chapter 18 Creating the Failure-Savvy Organization 195

Chapter 19 Escape the Gravity of Failure: Leadingthe Fallible Organization 209

Afterword by China Gorman, CEO, Great Place to Work Institute 213

Appendix—Our Classrooms: Putting Failure to Work in Creating Value 215

Acknowledgments 225

About the Authors 227

Notes 229

Index 249

Presenting The Other “F”Word Keynote 259

Contents xiii

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Preface: A BookAbout a TopicNobody Wantsto Talk About

Everybody wants to talk about success. But nobody wants to talk aboutfailure. Whether you’re an executive, an entrepreneur, or a member of ateam in your organization, you’d probably like to improve your odds forsuccess—and are willing to take steps to do that. Plus, you don’t want to fail.

In your quest, you can become a more charismatic, inspiring, andeffective leader. You can concentrate on creating disruptive innovationsthat transform your organization or industry. You can develop your skillsas a thinker, a listener, a communicator, or a practitioner of your particularjob skills.

These are each valuable paths to success. But you are likely sitting on topof a largely untapped and misunderstood strategic resource that can help youget there faster. That resource is failure.

.

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Failure is one resource you and your organization create virtually everyday. It’s the result of the mistakes you and your colleagues make, theunfortunate results of good faith efforts by hard-working teams, the superi-ority of your competition or adversaries, or even the bad luck events thatupset your organizations’ best-laid plans.

Whatever its causes, failure is today’s lesson for tomorrow. It contains thesecrets that can show you what you still need to know, how you need tochange your strategy and, handled wisely, can help you build and maintainan organizational culture that pursues excellence while accommodatingfallibility.

Failure isn’t just an unfortunate event. It’s an everyday reality leaders andteams must address. Managed correctly, it can be a vital resource forresiliency in your career and company. But fear of failure limits mostorganizations’ willingness to take risks, innovate, expand creativity, andfully engage their workforce—thus compromising their chances for success.

We’ve seen this issue from many different angles. As executives,consultants, speakers, board members, and teachers, both of us have spentdecades helping businesses, nonprofits, and government organizationsdevelop strategies, drive innovation, accelerate growth, and strengthenculture. We advise senior management teams at major global enterprisesand startup ventures around the world. And we anchor executive educationprograms, leadership seminars, and keynote conferences on five continents.

We’re also fortunate enough to teach leadership, innovation, andentrepreneurship at two of the finest universities in the world, the Universityof California Berkeley and Princeton. In fact, this book’s title comes from apioneering course called “The Other F Word,” which we created atBerkeley’s Haas School of Business to help MBA students figure outhow to use failure to their advantage.

Why Did We Write This Book?

First, because our audiences, clients, and students asked us to. When we givetalks on this topic the most frequent questions we receive are “How can weaddress this in my company, where failure is not an accepted topic ofdiscussion?” and “What advice can you give me to help get started?” Wesuspect that, like so many others, you and your organization share this

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interest. You want ideas and suggestions to improve your odds of success.We will show you how to address failure in a more meaningful, productiveway, so you can liberate it from the confines of whispered conversations.Failure benefits no one when it is the unmentioned elephant in theconference room.

Failure is a huge topic that impacts every aspect of business. As executivesand advisors, we encounter failure in virtually every major organizationalfunction and level—from the C-suite to the factory floor and from frontlinesales teams to back-office support managers. In our work as consultants,we’ve tackled it firsthand at organizations in different phases in the businesslife cycle, from early-stage startups to well-established global enterprises. Inall these settings, despite their many differences and shared commitment tosuccess, the other F word looms large as a leadership and operationalchallenge.

We see the other F word in our classrooms, too. In our executiveeducation programs, managers from across the organizational landscape andaround the world offer candid examples of their struggles in pursuing theirenterprises’ innovation imperative while accommodating the fear of failurein their organizational culture.

Finally, we have not seen another book that offers truly practicalsuggestions for how savvy leaders can turn failure from a regrettable realityinto a resource for resiliency. Numerous books and articles exist aboutfailure, from the “I struggled, I persevered, I succeeded” personal memoirs tothe “fail fast, fail often” cheerleading of Silicon Valley, and even spiritualand psychological self-help manuals. This book is not one of those. We willoffer you specific ideas on what you can do with failure to improve yourodds of success.

After all, that’s really what we’re each looking for, isn’t it?

Our Failure Bona Fides

Everybody’s an expert at failing. We all do it all the time. So, what credentialsdo we bring to writing a book about the other F word?

Fortunately, in addition to our university and teaching roles, we eachstart from the perspective of several successes we’ve enjoyed thus far. John hasadvised CEOs and senior management teams since his college years. He

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co-founded a widely read national newspaper for health-care executives,was a key staffer for then-governor Bill Clinton, helped launch the U.S.Department of Education, and practiced law at a prestigious internationalfirm. Mark co-founded and built a substantial new business unit for Sony,has held leadership roles in startups and global enterprises alike, and ledonline-payments company WebOrder from its early stages through growthand acquisition (now part of Google).

But aside from the fact that we’ve thought, researched, and taught aboutthe other F word, perhaps our most important qualification is that we, likeyou, have experienced failure directly.

A sampling? John here: I almost got kicked out of Harvard. I advised oneof my first clients, CBS, not to buy a then-fledgling company called MCI(which later went on to reshape the modern telecom industry). I didn’t makepartner at that law firm (a blessing in disguise), launched a business that nevermade money, and sold my 100 shares of Walmart stock in 1981 for $40/shareto help pay for a cross-country road trip with my wife (those shares would beworth close to $1M today—but that trip was great).

Mark’s turn: I sold my company WebOrder as the stock market hit all-time highs (good for my investors) and then learned more than I wantedabout restricted stock as the market plunged (not so good for me). While atSony I led several new business initiatives that never made it to market. Anumber of the startups I advised have failed, and as an angel investor I ownmore than a few worthless stock certificates.

So we know the other F word firsthand. We also both come by thistopic honestly through the work of our fathers. Mark’s dad, Stanley, was aprominent psychologist, an early pioneer studying the importance of self-esteem in shaping classroom behavior and expectations. In fact, 40 years agohe noted just how strong the link between self-esteem and fear of failure canbe. John’s father dealt with failure through a different lens, but in a no lesshuman way. He was a minister, and helped his congregations understandhuman fallibility, even while striving to live better lives.

But ours is not a book about self-esteem or sin; the first is too difficult toget a handle on, and the second too judgmental to help much. In fact, wethink most people’s fear of failure is already far too closely linked with theirfear of shame, blame, and guilt. And none of that is very helpful to our task athand—helping you address and leverage the power of failure to driveinnovation, engagement, and success in your organization.

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We wrote this book with the humility and authenticity our experienceshave offered us, and encourage you to read it through the lens of some ofyour own. Welcome to the conversation.∗ Now, let’s put failure to work.

John Danner Mark Coopersmith

∗To do just that, we invite you to share your comments, suggestions, andexperiences with us on our website: www.theotherfwordbook.com.

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http://www.theotherfwordbook.com

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1What’s in It for Me?

Your Personal GuidedBook Tour

This book will make you a better leader by helping you tap into a phenomenalresource all around you. You may not always be aware of it, and chances areyou’re not utilizing it very well right now. But the good news is you’ve alreadypaid for it, and you and your organization continue to add to it every day inmany ways. It’s failure, the other F word. Although no one likes to fail, trulysuccessful leaders know how to turn a bad experience from a regret into aresource. They put failure to work, driving innovation, strengthening genuinecollaboration, and accelerating growth in their organizations.

We teach about innovation, leadership, strategy, and entrepreneurship.Our executive, graduate, and undergraduate students at University ofCalifornia Berkeley and Princeton come from backgrounds ranging frombusiness to engineering and healthcare to energy. In all our classes, we stressthat entrepreneurs, innovators, product designers, and leaders of change

1

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initiatives need to answer the one key question on the minds of theirpotential customers, users, and colleagues: WIIFM? That’s short for: What’sIn It For Me? Translate what you are trying to do into terms your audiencecan understand and benefits they can appreciate.

We’re holding ourselves to that same standard. So to begin, we’vecreated a personal crib sheet for you on the key points we’d like you to thinkabout . . .

1. Failure matters. Why? Because we spend much, if not most, of our livescreating it, dealing with it, and trying to learn from it.

2. Failure’s like gravity. It’s everywhere—a fact of life for every organiza-tion at every organizational phase, from startup to growing business andestablished enterprise.

3. Failure is too often a taboo topic. That’s why we call it the other F word.If you can’t talk about it, you can’t manage it, or learn from it. Take itout of the shadows.

4. You’ve already paid for it, so use it. As a leader or team member, youcan convert failure from a repeated regret to a strategic resource thatcan help you drive innovation, better engage your colleagues’ realcapabilities, and accelerate growth.

5. Fear of failure is failure’s force multiplier. It distorts the likelihood offailure and exaggerates its consequences. It is one of your most importantchallenges in getting your organization to go where you want it to go.

6. While we suggest a more open and practical direct relationship withfailure, that doesn’t mean tolerating it as an excuse for incompetence,negligence, or indifference.

7. How you deal with failures of your team members is the acid test ofwhether you trust them, and vice versa. And trust is essential to addressthe biggest failure in most organizations: Employees are not meaning-fully engaged in their work or mission.

8. If you’re serious about innovation or entrepreneurship, be prepared forthe failure that often comes with the experiments and risks associatedwith those objectives. Use it to understand what you don’t know orhaven’t yet delivered.

9. Our seven-stage Failure Value Cycle framework can help your orga-nization to better understand and harness failure as a value-add resource:1. Respect the power and likelihood of failure2. Rehearse for your most significant failure scenarios to develop

better, faster reflexes3. Recognize its signs sooner

2 The Other “F” Word

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4. React to failure situations more appropriately in the moment5. Reflect deeply and honestly on their underlying causes so you can

craft better strategies going forward6. Rebound confidently, based on the lessons learned7. Remember the insights you gained, to strengthen your culture’s

ability to leverage future failures10. Failure is today’s lesson for tomorrow. Put it to work to help you accelerate

innovation, intensify employee engagement, and drive growth. Youand your organization are fallible. Admitting that reality and leverag-ing the failures you create builds the trust you need to create thoseresults.

Now that you know where we’re headed, let’s tell you four places wewon’t take you. First, we won’t waste your time exploring the usual clichésabout the other F word, like to err is human and learn from your mistakes. Whilewe know how difficult it can be to put that understanding into action, ours isnot a personal psychology book or self-help manual.

Second, we’re not going to take out our pom-poms to join the fail fast,fail often cheerleading chorus from Silicon Valley. We think you’ve alreadyheard that enough, too.

Third, this is not another one of those “I struggled, I persevered, Isucceeded” heroic personal memoirs. Great, inspiring stuff, but we’ll leavethat genre to others.

Fourth, although we are teachers, this is not an academic book per se.We hope it will be used in classrooms worldwide, but it is not written as atextbook. Our tone is informal and straightforward. We want to engage in aconversation, not a lecture. We invite you to share your experience andperspectives with us on our book website: www.theotherfwordbook.com.

FIND YOURSELF HERE

We’ve written this book with a practical agenda in mind: to challenge you tothink about failure differently, manage it more effectively, and leverage itmore creatively in your organization. We’ll offer you specific, straightfor-ward suggestions for how to do that, with examples drawn from our ownextensive research and experience as well as insights from effective leaders

What’s in It for Me? 3

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we’ve interviewed across different organizational settings and professions,both domestically and internationally.

You’ll learn how to deal more effectively with the reality and inevita-bility of failure. We’ll offer you a practical, seven-stage framework, theFailure Value Cycle, which you can use to apply these lessons in yourorganization, starting tomorrow. Along the way, we provide practicalexercises for you and your team to better understand key issues and putthese insights to work.

There are more specific ways you can benefit from our book, dependingon your particular responsibilities and interests. We trust you can find themyourself after scanning the following dozen profiles, whether you run a largeestablished organization or a small to medium-sized business, are starting anew venture, or are simply curious about our topic:

■ If you’re in charge of your organization, you’ll benefit frominsights of successful peers who are leading or have led global Fortune100 enterprises, high-potential startups, thriving mid-size businesses,important government organizations, and highly respected nonprofits,to name a few. They’ll share lessons learned and suggestions for how youcan more effectively address the fear of failure as well as leverage thepower of the other F word to drive innovation and growth.

In our Failure Value Cycle, you’ll learn specific steps you can take tobring out the best in the people you are leading. You should see thepayoff in greater candor among your colleagues as you consider thechoices ahead of you and their risks. You should witness increasedevidence of creativity across your organization as your workers get morecomfortable with a less-punitive culture that embraces excellence whileaccommodating good-faith experimentation.

■ If you’re in marketing or sales, you deal with the other F wordevery day, unless you are converting and closing 100 percent of yourtarget prospects (in which case, you should be writing a book). Amarketing campaign or sales call that doesn’t yield what you’d hopedfor, while unfortunate, also indicates what you don’t know, or haven’tyet shown, to convince your potential customers you’re the answer totheir needs.

Our book can help you be more effective on your next foray intothe marketplace. Since you deal most directly with your competitionand see firsthand new trends in the market, your insights are essential tothe success of your firm. Imagine how much more your cash register


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would ring if you could improve your yield by just a few percentagepoints.

■ If you manage the technology/IT side of your organization, youunderstand the accelerating and disruptive pace of change. Offensively,these changes can unleash opportunities for new, creative products andservices, redefine how you leverage ideas and resources, and even redesigncore business processes. Defensively, they pose brand-tarnishing risks likenetwork security breaches, getting outflanked by more nimble competi-tors and startups, and being hampered by legacy systems and outdatedtechnology.

Stay tuned. Our Failure Value Cycle can help you align youragenda with the most important priorities of your clients, even if theydon’t know the difference between the Zachman Stack and a short stackof pancakes. Applied rigorously to your own domain, it can comple-ment your existing tools to anticipate, identify, and preempt potentialfailures-in-waiting, whether occasioned by malevolent hackers from theoutside or inadequately examined failure scenarios inside.

■ If youwork in finance, you’re concerned with how your organizationmanages its resources to get the best results from its investments andspending. You’re also keenly aware of the disparity between the strategicobjectives and commitments your CEO has established and the limitedresources you have to allocate. We can’t promise you a silver bullet, butwe can offer you silver buckshot to help hit your targets.

We’ll show you how to extract unexpected value from yourorganization’s “garden mulch pile,” the accumulated residue from pastproduct, technology, or market failures. We’ll provide examples ofhow others have increased their ROSI (return on sunk investments),whether in the form of reconfiguring product offerings or reposition-ing solutions for entirely new markets. We can help you get moremileage out of your investments in innovation and operationalimprovement by facilitating an environment in which potentialfailures get flagged more rapidly, and better ideas for future actionsget discussed and critiqued more openly. You know better than mosthow relatively small improvements in your working capital or netportfolio returns can cascade into dramatic positive results for yourorganization.

■ If you’re involved with strategic planning, you’re in the business ofrecommending and making bets about the future. While leadership isfundamentally assertion in the face of uncertainty, your role is to advisethe heads of your organization about which direction and mix of actionsoffer the best prospect for success. You must constantly balance the


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possibility for the results you want with the probability of the risks youwill encounter.

Our book will not replace your traditional arsenal (e.g., scenarioplanning, Monte Carlo analyses, SWOT charts, BHAGs [big, hairy,audacious goals], affinity diagrams, etc.), but we’ll help you improve therange of possibilities you are considering and the value of their vettingby your colleagues. Simply stated, if your organizational culture doesnot tolerate failure, you are never likely to hear what your fellowworkers really think, whether the issue is where the organization shouldbe headed, ideas for new products and marketing initiatives, or what thereal chances are for implementing a particular strategic agenda.

■ If you’re an operations executive, you know what it’s like to try toconvert lofty strategy into practical results. What’s in this book for you asa head-down, roll-up-your-sleeves leader?

We’ll show you how overemphasis on operational improvement inthe vein of Six Sigma and total quality management (TQM) programscan inadvertently jeopardize real strategic performance improvement,especially when it comes to reinforcing a culture of innovation. This isexactly what happened at 3M, one of the best-run, most highlyrespected organizations around. We’ll help you change the conversationyou have with your direct reports so you’re better able to identifyfailures faster and embed best practices in applying the lessons learned.

■ If you’re a key talent or HR executive, you’re already attuned to thecultural strengths and weaknesses of your organization. You know in yourgut whether your company’s office environment is closer to a Dilbertcartoon1 or one of Fortune’s Best Companies to Work For. And you arekeenly aware of the difficulty of both continually invigorating yourworkforce while improving their skills and finding the next generationof talent to drive your organization’s future success. We’re not going tosolve your comp design or succession planning problems, but we can helpyou strengthen your fundamental workplace culture.

Fear of failure greatly compromises an organization’s ability toinspire, retain, reward, recognize, and replace great talent. We willshow you examples of how others have successfully confronted thisissue and how to best change the conversation and culture in yourorganization.

■ If you’re an entrepreneur, you already know failure is your constantcompanion as you try to keep your investors’ support, motivate yourteam, gain a toehold in a competitive market, and, above all, convincecustomers you have something they need. We’ve been there. We knowwhat it’s like to bootstrap a venture, convince your friends and family it’s


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worth supporting with their patience and money, and go aboutconverting a dream into a bona fide business.

We can help improve your odds of success by balancing yourtenacity and love for your product, strategy, and vision with the open-minded curiosity to be alert to the wisdom contained in the setbacks youand your team will undoubtedly encounter. We share the experiences ofother entrepreneurs who have struck the right balance between confi-dent leadership and wise insight in launching successful businesses.Consider them honorary members of your startup team.

■ If you’re running a small or medium-sized enterprise, this booklets you compare notes with others facing similar agendas. We under-stand how lonely and isolated your job can be and have reached out toleading players in the SME arena to elicit ideas on how to best addressthe challenge of failure as you build and grow your organization. We’llshare examples of how they’ve done it and suggest other possibilities youmight want to experiment with. Our Failure Value Cycle isn’t just forthe big guys; you can start using it today in your business.

■ If you’re a board member or advisor, you’re already attuned tothinking independently about opportunities, risks, and failures; how toprepare for them; and how to respond. How have other organizationsaddressed these failure-related issues? What examples, frameworks, orfailure-savvy practices have helped? What questions should you ask ofleaders and teams? We’ll offer specific suggestions of how othercompanies and leaders have tackled the other F word to improve theirperformance—examples that can strengthen your role as well.

■ If you’re a student or still early in your career and aspiring toleadership roles, prepare for a guided expedition across a fascinatinglandscape of organizations, cultures, functions, and settings in whichfailure appears and is addressed by men and women in the kinds ofpositions you see in your future. As you read about their experiences,ask yourself how you might do things differently. What other strate-gies or techniques could you use in the situation at hand? After all, weare all experts at creating failures, but it’s much harder to expertlyleverage the underlying value failures create. So try your own hand.Take a look at how we approach the other F word in our classes in theAppendix. We welcome your vicarious involvement, and you don’teven have to pay tuition to Berkeley or Princeton to sit in. (Grading ispass/fail, of course.)

■ Finally, if you’re just curious about the phenomenon of failure incontemporary organizations, we welcome you on our tour of thisfascinating frontier. It can be uncomfortable and unfamiliar terrain,


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but it can also offer unexpected resources and insights that may changehow you think, how you live, and how you lead.

However, if you’re the kind of executive who firmly believes fear is thebest motivator of performance, please buy another book. The good news foryou is you’re not alone. Many organizations and the people working therelive in an atmosphere of fear; if it’s not overt then it’s just below the surface. Ifthat’s your style, good luck. But if your first instinct when failure happens isto look for someone to blame, you might think of this book as a mirror: bewilling to see your own fingerprints on the situation. And welcome to thefamily of the fallible.

OUR ROLES IN THIS BOOK

We will be wearing three hats during our time together. First, we will be yourscouts, exploring the frontier of failure and pointing out valuable insightsbased on our research, teaching, and professional experience as well as theinsights of others. Second, we’ll be your challengers, inviting you to rethinkyour assumptions about the other F word. Third, we’ll be your coaches,helping you identify a range of specific, practical actions you can take as aleader in your organization to make it more failure-savvy and successful. Notall of these suggestions will fit every style of leadership, culture, or organiza-tion; but we offer them as possibilities worth experimenting with on yourjourney to becoming a more failure-savvy leader. Think of them as a playbookof options, some offensive, some defensive; some plays work best with a lessexperienced team, while others are best left to seasoned veterans.

As professors, we’ve read lots of research studies and books aboutleadership, strategy, innovation, and growth. Many of those books, includingclassic bestsellers, rightfully urge their readers to think big and lead boldly.Jim Collins understandably wants more companies to escape mediocrity ontheir climb from “good to great,”2 and a few do just that, at least temporarily.Clayton Christensen lays out a comparably daunting challenge in his twoclassics, The Innovator’s Dilemma3 and its companion,The Innovator’s Solution.4

Christensen throws down the gauntlet of disruptive innovation, those withfar-reaching strategic impacts capable of creating and defining entire newindustries or business platforms.


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Venture capitalists also shoot for the stars. They can do very well if as fewas 1 in 10 of their portfolio investments hits the big time, earning a hugemultiple on their money. Those big wins can outweigh the underperform-ance of the other nine, including some otherwise fine businesses as well asoutright losers.

Of course, it would be wonderful if every startup venture couldbecome the next IPO darling of Silicon Valley, New York, Chicago, Paris,São Paulo, Hong Kong, Mumbai, or wherever you are; every enterprisecould go from good to great; every leader could pursue and attain excellence;and every major company could re-innovate itself. These moon-shotobjectives are inspiring and admirable, but they don’t reflect everyday realityfor most executives and organizations.

What most executives need now is help dealing with and improving theon-the-ground reality they face every day. We understand most of you maynot have all the “right people on your bus,” and your company may not needor be able to dramatically innovate, but you still have high expectations forthe future and your role in shaping it.

We wrote this book with that in mind. We don’t assume you areBatman or Wonder Woman, even though you might covet their super-powers. We don’t presume your business has had a rocket trajectory likeFacebook or Google, or that your organization is awash with cash likeApple. And we doubt your workforce is God’s gift to exceptional talent,extraordinary commitment, and brilliant judgment. We wrote this bookfor you to read where you are now, with the team you have, in thebusiness you’re leading today and tomorrow. We encourage you to shootfor the stars, but our focus is preparing you to lead better while you’re onthe ground.

We’ve organized the book into four main parts, each addressing a majordimension of the other F word and the issues it poses:

■ Part I. What: The Facts and Facets of Failure■ Part II. When and Where: How Failure Appears at Different Organi-

zational Phases■ Part III. How: Using the Failure Value Cycle to Advance Your

Organization■ Part IV. Now: Put the Other F Word to Work


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Each chapter includes specific tools you can start using immediately, andcloses with a handful of WIIFM takeaways.

The frameworks, tools, and resources you find in these pages will helpyou truly set yourself and your organization up for failure—the right way. Ifwe aren’t offering you new ways to think about failure and how to use it toadvance your leadership agenda, please stop reading and accept our apologiesfor spending your hard-earned money. In that case, we will have failed you.


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PART

I What

The Facts and Facets of Failure

Failure’s like gravity. A pervasive, albeit occasionally inconvenient, fact oflife—and one we absolutely depend upon. We ignore it at our peril because,like gravity, the other F word has the potential to simultaneously ground,elevate, and accelerate our efforts to drive innovation and growth. If we arewise enough to pay attention.

In this section, we orient you to the issues and facts surrounding theother F word, including the baggage the word “failure” itself evokes. Mostnew businesses, acquisitions, products, major IT projects, new hires—the listgoes on—fail either totally or significantly. It’s a fact of life we need torecognize and respect before we can harness its potential.

We define failure as “mistakes and unwelcome outcomes that matter.”This encompasses both unexpected outside events that happen to us andthose failures created or even invited by us, as in results from intentionalexperiments.

Failure is also a quintessentially personal, painful, and emotional expe-rience, which is why it can be so hard to address. Its memory lingers anddeepens our fear of failure going forward. In fact, both the memory and fear

11

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of failure distort our ability to realistically confront and manage it rationally.Fear of failure is one of the biggest challenges you face as a leader trying toaccelerate growth and ignite more innovation in your organization, whetherit’s a startup venture, a growing business, a major company, or an establishedfirm in distress.


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2The Other F Word

“Failure” Is Such aLoaded Word

FAILURE

Stand back from that word a bit.Think about it.What experiences or memories does it bring to your mind?How does it make you feel?

Chances are the word “failure” triggers all sorts of negative connotations foryou, and maybe a few positive ones. It’s a very powerful word—often loadedwith intense emotions, strong memories, and conflicting interpretations.Most of us don’t like to talk about it, admit when it happens, or spend muchtime in its company.

13

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Take a look at this (partial) list of synonyms and examples of failure1:

■ Bankruptcy■ Breakdown■ Collapse■ Defeat■ Catastrophe■ Mistake■ Loss■ Misstep■ Crash and burn■ Bomb■ Botch■ Bungle■ Bust■ Zero■ Downfall■ Fiasco■ Flop

■ Bad move■ Implosion■ Lemon■ Loser■ Mess■ Disaster■ Screw-up■ Stalemate■ Turkey■ Washout■ Wreck■ False step■ Faux pas■ Flash in the pan■ Lead balloon■ Sinking ship

From bankruptcy to sinking ship, there’s not an upbeat word or phrase inthe whole bunch! No wonder “failure” has become a linguistic pariah inmany organizations; it’s either not discussed or it’s disguised with euphe-misms, but that doesn’t fool anyone. People know failure when they create itor see it.

As authors, we struggle with the other F word ourselves. When we werecirculating our proposal for this book, one publisher reflexively turned usdown because they thought having the word “failure” in the subtitle wouldguarantee low sales. (By buying this book, you’ve helped us show the failurein their logic, so thank you.)

Because for all its baggage, we think most of us are fascinated andperplexed by failure. We know it’s part of our everyday lives and we evenunderstand it has lessons to offer us. But we still don’t like it. We wouldn’task failure out for a date or invite it over for dinner.

We get that. That’s why we’re offering you this new perspective.Our focus is not on the myriad reasons why failure happens, butrather what you as a leader can do about it before, when, and after itoccurs.


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FROM VERB TO VERDICT: HOW FAILING BECOMES FAILURE

Nobody wants to fail. Ever. It hurts. It’s embarrassing. It’s lonely. Organi-zations, too, hate failure. They penalize it, rationalize it, ignore it, and sometry to cover it up altogether. One of the major problems with the otherF word is that too often we shift instantly from describing a situation as afailure to describing the individuals involved as failures. And that tendencymakes it especially difficult for people to think clearly and talk honestly aboutfailure in the first place.

David Kelley, a co-founder of IDEO, the global design consultancyfirm, doesn’t even use the term “failure” anymore. When we caught up withhim at the TED conference recently, he explained that after servingcolleagues and clients over the years, he thinks “failure” is itself a failedword. The real issue, he suggests, is “fear of being judged.” In other words,it’s not failure itself that is the problem, but rather the judgment applied tothose involved that poses the real challenge.

We also spoke with executive coach Peter L. West, who has workedwith hundreds of executives, helping them improve their personal andprofessional effectiveness. West notes this tendency to jump from calling asituation a failure to describing an individual as one is all too common. Heobserved that in their eagerness to distance themselves from a “failure,”executive teams sometimes behave like the proverbial mob hunting for thevillage ogre, pitchforks in one hand and torches in the other. They want tofixblame on someone or some group; and usually punish the unfortunateindividuals by firing them or exiling them to some lowly post where theirfailures (and successes) will never matter. Not coincidentally, by assigningblame they often avoid the harder work of looking at their own contribu-tions to the failure in question.

Peter also notes that in many organizations if you fail once, you areforever marked internally. Imagine wearing a scarlet F on your back for therest of your career. One senior executive we spoke with shared with us hisexperiences after being fired as CEO of a publicly traded company. Theexecutive recruiters who had previously hounded him with enticing offerssuddenly wouldn’t return his calls. After decades of success and increasingresponsibility he found that this one very public failure had tainted hisreputation and impacted his career.

The Other F Word 15

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No wonder people are so worried about the other F word and soreluctant to acknowledge their roles or talk about failures at all.

Let’s offload some of that fear and the baggage that goes with it.This is a book about success, about harnessing the power of failure tobetter lead your organization. It’s not about wallowing in failure orcelebrating it.

We wish we had a better word for it, but “failure” at least has the virtueof directness. So let’s begin this expedition into the frontier of failure,baggage and all.

We warned you we were teachers. We’ll start with a quick quiz: a simple10-question 10-minute survey of your own attitudes about failure and howyou deal with it as an executive, team member, or entrepreneur.

Exercise: Assess Your Failure Leadership Profile

1. What is the strategic position of your business now?□ In imminent danger of closing□ In peril on several fronts□ Not particularly vulnerable□ Relatively strong□ Powerfully dominant

2. If you had to choose between better executing your “today”business versus experimenting to find your “tomorrow” business,how would you allocate your resources between those twoagendas?□ 100:0 Execute today’s business:Experiment to find tomorrow’s□ 75:25□ 50:50□ 25:75□ 10:90

3. How do you view the relationship between innovation and failure?(Select all statements you agree with.)□ Failure is an absolute prerequisite for innovation□ If we want/need innovation, we have to accept the possibility

of failures along the way□ It is possible to manage or control failure in our quest for

innovation□ Failure is not required to innovate


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4. Thinking back honestly on how you initially deal with failure inyour organization, how would you describe your actions? (selectall statements you agree with)□ I want to find who is responsible and hold them accountable□ I tend to avoid dealing with it unless it’s serious□ I try to not make a public display of the situation inside my

organization if at all avoidable□ I try to uncover the underlying reasons for the failure so we can

learn something positive from it□ Other: __________________________________

5. Do you think most people in your organization would agree withyour answer(s) to Question 4? (pick one)□ Absolutely yes□ Probably yes□ Possibly yes□ Probably not□ Definitely not□ Not at all sure

6. On a scale of 1 to 10 (1= not important at all; 10=most impor-tant), how important do you see fear of failure as a challenge for yourleadership? (circle one)Not Important Most Important1-----2-----3-----4------5------6------7------8------9------10

7. How would you characterize your fundamental message aboutfailure in your organization? (select one)□ “Failure is not an option.”□ “Fail once, you’re okay; fail twice, you should probably look

for another job.”□ “Failure is okay as long as we learn something valuable from it.”□ “To err is human. We have a forgiving culture here, provided

you acted competently and in good faith.”□ “Fail often, fail fast. It’s the only way we’re going to get where

we need to go.”□ Other:

“_____________________________________________.”8. Are there examples in your organization of people who have been

promoted or otherwise positively recognized, either because of, or inspite of, a significant failure and how they managed it? (select one)□ Nobody□ One person

(continued )

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(continued )□ A couple people□ Several people□ Many people

9. On a scale of 1 to 10 (1= very dissatisfied; 10= very satisfied), howsatisfied are you with the level of innovation, creativity, andinitiative in your organization?Very Dissatisfied Very Satisfied1------2-----3-----4------5------6------7------8------9-----10

10. To the extent you are dissatisfied with this level, why do you thinkyour organization is not stepping up to the level of innovation,creativity, and initiative you would like to see? (Weight eachpossible factor so your total percentage equals 100.)□ ____% Fear of losing their jobs if things don’t turn out well□ ____% Fear of losing credibility if things don’t turn out well□ ____% Uncertaintyaboutwhatneeds tobedonewhere andwhen□ ____% No apparent reward or recognition for success□ ____% No training or resources to support these activities□ ____% No apparent management emphasis on this agenda□ ____% Other: ____________________________________□ 100% TOTAL

Please put your pencil down. This concludes your test. (We putthat in for old times’ sake.)

While this is clearly not a scientific survey, we are not aware of anywidely used instruments that focus directly on these failure-relevant issues,including the benchmark Multifactor Leadership Questionnaire (MLQ).You obviously don’t need to share your answers with anybody, but we hopeit gives you some clues about your own leadership approach to the otherF word in various contexts.

Let’s take a look at what your answers might suggest:Q1. Strategic Position—If you checked the “imminent danger” box, youmight have bought this book a little late. If you picked “powerfullydominant,” we’d like to know more about the secret to your businesssuccess. Assuming you didn’t check either of those, your answer shouldsuggest the degree to which your business needs new thinking, strategy,positioning, and maybe a new team—and how soon.


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Q2. Today:TomorrowBalance—Presumably this reflects your answer toQuestion 1, and is an indication of the degree to which you are comfortablewith the status quo and current direction of your business. Regardless of howcomfortable you may be, we suggest a little humility about your presentcircumstances could stand you in good stead going forward. Think aboutwhat kinds of questions or assumptions are involved in your current businessmodel and strategy. Consider what new customers or markets might makesense for you to target. Reflect on what your competitors are doingdifferently or what new startups are appearing in your traditional space.Any or all of those will probably suggest issues worth examining and thenpotential solutions worth testing.

Q3. Relationship Between Innovation and Failure—Your answer(s)here may give you some insight into your overall approach to the other Fword in your organization. It’s your default position, perhaps subject tochange once you’ve finished this book.

Q4. Your Initial Failure Response—This question checks your consist-ency. If you answered it fundamentally differently than the philosophy youselected in Question 3, you might be perceived as disingenuous or evenhypocritical by your colleagues. At the very least, a misalignment betweenthe two answers might suggest a need for some further thinking about howyour actions match your understanding. Don’t feel bad about it. Most of usreact poorly in the heat of the moment when failure occurs; and we’ve allbeen guilty of perhaps making things worse in the process.

Q5. Alignment with Your Team—This is a potential Dilbert situation. Ifyour organization sees things fundamentally differently than you do, or isconfused about how you are likely to deal with failure, chances are goodyour colleagues feel they are on uneasy ground. They are less likely to takerisks, express their real opinions, volunteer their best ideas, or align closelywith your fundamental agenda if they are uncertain how you will deal withfailures along the way.

Q6. Fear of Failure—This one’s tough to get a handle on, preciselybecause your employees are highly unlikely to acknowledge their fear toyou. Instead of taking a shot in the dark, consider this question as aninvitation for you to be creative in trying to ascertain the real culture in yourorganization. To the degree fear of failure is prevalent, you are unlikely to see

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much creative innovation from your people, and you may be on your way toa complacent culture rather than a highly competitive one. Conversely, ifthere’s no real fear of failure, you may have created an environment whererecklessness reigns.

Q7. Your Fundamental Failure Message—There’s no right answer here,and you may have come up with your own short phrase that better capturesyour approach. Again, you might find it instructive to see the degree to whichthe message you think you are communicating is in fact being received withsome fidelity by your organization.

Q8. Examples versus Scapegoats—This is a highly symbolic matter.Your team will be intensely curious about these situations, and is likely tovividly remember how you handled them. After all, it’s easy for them to putthemselves in the position of the individuals involved in a significant failurecircumstance.

Q9. Level of Innovation, Creativity, and Initiative—This one speaks foritself. Think of it as your own call to action if you scored from 1 through 3.And if you scored in the 8-to-10 range, you might ask yourself how yourtoughest competitor or your best employees might answer the same question.

Q10. Your Possible Agenda—There’s no shortage of things you can do asa leader to reduce the fear of failure in your organization and encouragegreater initiative. That’s what this book is all about.

∗ ∗ ∗

With these initial insights in hand, let’s take a deeper look into the nature andterritory of failure.




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Welcome to WileyBiz! · Trim size: 6in x 9in Britton ftoc.tex V2 - 03/23/2015 1:36 P.M. Page viii viii CONTENTS Chapter 8 Free Agency 97 Chapter 9 Lifehacking 115 Chapter 10 The Field