The CEO Project Podcast

In this episode of The Lazy CEO podcast, host Jim Schleckser discusses organizational design for mid to large-sized companies. He emphasizes that there is no perfect structure and that the key question is what inefficiencies or problems one is willing to tolerate in a particular structure. Reorganizing too frequently can be detrimental to organizational performance, as it disrupts stability and takes time for teams to readjust and perform. Jim suggests using reorganization as an occasional tool when the current structure no longer delivers value or desired results.

He explains that structure should follow strategy, meaning the organization's structure should align with its strategic goals. Different strategies, such as cost focus, customer intimacy, or innovation, require different organizational structures. The organizational design should elevate critical processes that drive competitive advantage while less important processes can be minimized. The importance of roles should be based on their relevance to the company's success. Jim advises considering talent-driven approaches and ensuring that high-potential employees have room to develop and take on important positions. Middle management is crucial for organizations with around 50 to 400 employees to coordinate work and facilitate progress.

Jim also discusses the impact of reorganization on social networks, power dynamics, and influence within an organization. Reorganization can disrupt these relationships, affecting leaders' effectiveness and performance. He advises being cautious about reorganizing and emphasizes that no structure is perfect, but occasional changes can provide different forms of optimization and improved outcomes.

For more about Organizational Design, listen to the complete podcast wherever you get your podcasts.

These high inflationary complicated environments are a bit unprecedented. There are many people that, in their entire working career, have never seen interest rates over low single digits and never seen more than a couple of points of inflation. And so, 3% raises look pretty good, but that's all changed.

It's common for the people we work with to see 5-7% average raises. Some are even a bit higher because they're behind the market because we've got a few people pressing the point in a constrained labor environment to try bringing people on board. To the extent people have been talking about minimum wage, the new $7.75 an hour is $15 or $17 an hour. It is tough to get anybody to do manual labor and entry-level job for less than $15. That is still a tough number to live on. So is a lot of upward pressure on many costs, making it difficult for us to deliver our business results as we go forward.

As we go through turbulent times, many organizations are what I would call fragile. In other words, when subjected to change, stress levels increase immediately. Not to get too material science geeky, but they have a relatively low high modus, meaning it's stiff like we press on it and create stress immediately. Low modus would be something that we press on it, and it's got a little squishiness in it, right? It's got some give in it. Those are kind of the elements of organizational resilience. The definition is they can easily adapt to changing circumstances without stress, easily adapt to changing circumstances. Look at your organization as to whether that induces stress into your people and your structure in your organization.

Resilient organizations have sort of four key characteristics. One is they are robust, meaning they're not always maxed out. They've got buffers built into the organization, both economic and people buffers so that when there's a problem, we've got some ability to absorb that change with money, people, whatever, as we try to do it.

As we try to deliver results, we're always trying to optimize. Still, I'm advocating in this environment that you want to back off that just a bit to create a buffer to create robustness in your organization, which is an ability to handle change you may not have anticipated. Are we maxed out, running on fumes, pounding it out every day, getting every ounce of everything we can out of every process, person, and dollar? Then you are highly vulnerable to changes. We got some buffer built into the organization to deal with stuff. That's probably where you want to be.

Redundancy is interesting—another one. We talk about single points of failure, and this is the opposite of that, which is to have some redundancy built into your systems. It is too expensive to have a completely parallel organization, like redundant up and down the organization. And so, you may want to think about where are the critical points of failure. Building redundancy into that particular area improves your organization's resilience to change.

Resourcefulness is the nature of people, their ability to find answers that don't currently exist or maybe piece together what you do happen to have to come up with an answer.

The last one is what they call rapidity. Do your people run to the fire, or do they run away from the fire? So houses on fire, do you grab a hose and run in? Those are the people we want in a difficult situation, or do they step back or run away? And so, the willingness to take action in the face of complications and difficulty is a key factor.

For more revenue or cost moves to make in an inflationary environment, listen to this full episode of The Lazy CEO Podcast.

A discussion about the history of wine in Napa, between Jim Schleckser, CEO of The CEO Project and host of The Lazy CEO Podcast, and Mark Gudgel, author and wine expert.

Jim:

For those of you that know me, and maybe some of you do, some of you don't, but I have an alter ego, and my alter ego is my involvement in wine. Several years ago, I decided to get kind of into wine beyond the drinking part, but the studying part, and, if anybody has ever done this, it's got phenomenal history and agriculture and geology and, and chemistry and all of this comes together in wine across thousands of years including, wars, death, taxation and just crazy what intersects with wine. So when offered the opportunity to talk to somebody who is working on a book in the wine space, and particularly for a very, very critical moment in history, I jumped at the opportunity to talk to him. So I have today with me, Mark Gudgel.

So let's start with what got you interested in wine in the first place.

Mark:

Back when we were dating, my wife and I would drink wine. We had gone to a train concert while we were dating right after we got engaged, and Train came out with a wine they sold at Target called Drops of Jupiter, and it cost $12. And occasionally, I would splurge on that, but it cost twice as much as the wine I was used to drinking. So it was a splurge.

Jim:

That's funny. Well, even now, 90% of all wine that's drunk is below $20 a bottle. So, I get asked, is it good wine? For ten bucks a bottle. It's not a bad bottle of wine. It's all relative.

Mark:

A lot of times, people will ask me what's good wine. And I tell them every time - whatever you like, as long as you can afford it. I like Petrus, but I can't afford it. Not good wine for me. But if you like Sutter Home White Zinfandel, enjoy the heck out of it, and know that I'm jealous of you because I don't enjoy that bottle, and it costs about four bucks. So I wish I did.

Jim:

Sutter Home White Zen is known as the gateway drug to all wine drinkers. I think we all started on Sutter Home White Zindel, and hopefully, our tastes evolved over time.

Mark:

That's so true. I reviewed Sutter Home for the American Winery Guide years ago. My editor called me; you're giving Sutter Home four stars out of five. I said this is one of the most important wineries in the world. How do people get from Bush Light to Cabernet Sauvignon? You know, not without rungs in the ladder.

Jim:

Let's go to geography for a minute. Let's go back to the beginning of Napa; what group of people really got Napa started?

Mark:

You've got this beautiful riparian space that carves its way in between these two small but beautiful mountain ranges, and everything grows there. And wildlife and game, and fish were abundant; it was an idyllic space. And the Spanish are attempting to make their way up the coast. The Mexicans become independent, but Mexico is this immense sprawling empire, and there just aren't that many Mexicans. And so they can't keep a grip on it. So, they attempt to build outposts and send expeditions up the coast and to hold onto their land.

This is when California, as we call it today, was part of Mexico. So, they wind up engaging in a strategy, and there are whole books about this where they issue massive, what they call Ranchos to people. Huge swaths of land are usually measured in leagues anywhere. Usually, they're somewhere between six and 12,000 acres. The largest was about 80,000 acres. That one was issued to General Vijo late in the process. But they're issuing big chunks of land to people, partly to encourage them to live there and partly to get some development going, and it works. For the longest time, it was a no man's land, he named that town Sevastopol when he built it. So, you've got these pioneers, if you like to call them that. And then you've got folks really establishing the wine trade and building.

For more on the history of Napa Valley and wine, listen to The Lazy CEO Podcast.

Today we're going to talk about stock. As you know that there is common stock and preferred stock, but we are going to dig deep into preferred stock because it is a less understood instrument. It's particularly important for entrepreneurs because this is an investment vehicle used by private equity firms. So if you are ever considering either a partial sale, maybe bring in some cash or cash for growth, or maybe even a total sale.

You need to understand the ins and outs of private equity because this is the way that the private equity firms use to gain control to gain preference to kind of get to the front of the line. Sometimes that can have tragically bad consequences for you as an entrepreneur. This is also relevant for anybody who's sort of in an early-stage company because preferred equity is used all the time in the early stage. It can have odd and complicated outcomes if you are not careful. You may not have a choice, but at least you know what you're signing up for.

Common Stock

If I buy common stock, I have a little piece of a company; I get a vote. We're in a season where we're all getting our request for voting for annual meetings - you get to vote for your board of directors who represent your interests in the company and so forth. And if there are dividends, meaning the company does well then you get a share of those dividends, right? Provided, of course, that the company does well. Some of these companies hesitate to drop their dividend rate because it can hurt their share price. But, you are at risk on your dividend.

Preferred Stock

We don't play any funny games with preferred stock. When you bring in your friends and family, your first round of money, your first half a million or million, and you got Uncle Bob and, your neighbor and a few other people coming in, normally you are selling them common stock when you do that. So that was common stock, and there was no preference, but preference is a thing, particularly if you get to slightly bigger numbers or involve professional money.

This would be venture capitalists or private equity groups. The first sort of fundamental thing that you get with preferred is that you are in front of the line in terms of getting paid out. So, you're preferred. When there are dividends, you get first. If the dividends are enough to pay everybody something, then all is good. If the dividends are not enough to pay, everybody preferred gets paid, common doesn't get paid.

There have been situations where preferred got their money and common got nothing. And that happens all the time in the case of dividends. And normally there is a dividend rate on preferred shares. Not always, but many times there are, particularly if you're a cash flow positive business, they might say, we're going to put the preferred shares in, and we're going to get an 8% dividend rate or 7% dividend rate. It won't look like bank debt. It will be more expensive than bank debt, but it is different than debt because you don't have all the covenants and you don't have to talk to the bank, but it does come with some other things you need to talk about. But dividends are one thing. And usually, that's in cash on an annual basis.

Cumulative Preferred Stock

You want to grow the business; we want you to have the cash to grow the business to make this thing more valuable for all of us. And so they'll do what's called cumulative preferred stock or pick and pick is called payment and kind. And what that means is there are two ways - A, don't pay me my 8% dividend; just throw it on top of the pile whenever there's a transaction. You owe me what I put in plus my 8% for whatever number of years you didn't pay me. So my 1 million turns into $1.2 million because you owe me some interest that you've never paid me, and I was okay with that, but I'll get paid when we sell the company. Or B - payment inkind or pick, when people talk about picking the interest, you may have heard that phrase before. That means putting it at the end, right? Payout at the end. The other way it's done is they go, look, we'll pick it, and you can pay me in more shares. But the idea of compounding interest and the impact on their value versus your value, particularly if you don't sell quickly, like, let's say 3, 4, 5 years, you're going be shocked at how much you owe your preferred shareholders when the time comes.

Non-cumulative Preferred Stock

There is also a bit rarer preferred, which is non-cumulative. Non-cumulative means if we can't pay you for one year of your dividend, then it just goes away, and we don't owe it to you. The other thing you get is in the case of preference, when there's a distribution of assets, meaning we sold the company or we got a big payout or something, debt goes first, but then second is the preferred shareholders, and then third are the common shareholders in terms of who gets paid.

Cumulative Participating Preferred

It accumulates interest if there is any; most of the time, they do what they call participating preferred; when you're not going to flow any cash, there aren't going to be any dividends. So there's no ongoing payment to them. So they are going to get it all on the backside. So it's going to be juicy for us if we do that. And what that means is they participate in the up. Not only do they all get all of their cash off the table, but they also participate in the upside that has been created while you use their cash participating preferred.

For examples of preferred stock and more from Jim on this topic, listen to the complete episode of The Lazy CEO Project.

We've got another phenomenal guest today, Ian Altman. As a business growth expert and bestselling author, Ian is recognized as one of the top 30 global gurus on sales. And his same side selling academy is ranked in the top five globally for sales development programs.

Everybody's running a business, and when I talk about the secrets of a great business, a great margin is one of them. Ian has identified some areas that are what he calls margin vampires. Ian shared with us what he sees as the biggest margin vampire we should think about as CEOs and leaders.

Margin Vampires

the biggest margin vampire is that oftentimes as organizations, we believe that our client hasn't made a decision because of price. And our sellers often lead with price, and they don't even realize it. So they'll ask somebody in a competitive environment, well, you're working with so-and-so, well, what are you paying now? Maybe I can save you money. And we've just made it so the client has been taught that the most essential part of the conversation is the price when it isn't. So it ends up being we're a victim of our undoing. We caused the problem by how we package what we do, as opposed to if we think about it as a C E O; when's the last time you made a really important decision based on price?

It's almost a selection process when you lead with price. If you sell to them because you were 5% less than somebody else, guess what? Six months from now, they're going to switch away from you. Why? Because somebody else gave up 5% of the margin, and now you're at a race to the bottom, and as Seth Godin says, unfortunately, you might win.

Instead, we want to say that when people are looking for this type of solution, they're usually looking for a partner who operates at one of three levels—our industry's shaped like a pyramid. The base level is what we call the effective level. The next level up is enhanced. And the pinnacle is the engaging level. As long as you fit into one of those models while you can be successful at the highest level, you're dealing with an organization that's tailoring what they deliver to what you need. They measure the results and outcomes, ensuring you're moving market share. So which level are you looking for? And now the client says, I want that top level. Now what I've just done is if my marketing, my sales, and my messaging is aligned around presenting those three levels, then I will attract the people who want that engaged level. And those people generally don't care that much about price. You can't be 300 times what other people are; those selling results are 20% higher than their competitors.

The Finish Line

When I ask people, so what's the finish line? It's the sale, the contract, and getting paid. But when you're the customer, what do you care about? It's just the results. And then people say, well, I think it's delivery on our end. It's not delivery. If you deliver everything you said you would deliver and the client doesn't get the results they're looking for; they wouldn't blame you, would they? Of course, they will. Absolutely. So we need, we need to be focused on results. And when we do that, we get that pivot where people say the price doesn't matter. If you had two vendors, one asking you about the results and the other asking who needs to sign off on this, which vendor would you rather deal with?

The one who's talking about results. Would you pay more for that one? How much more? How much less would you have to pay for it to be a good deal? So if you paid 20% less and didn't get the results, that would be a good deal. No, the answer is it doesn't matter what you pay. It wasn't a good deal if you didn't get the desired results. If we flip that around and say, how do we have that same conversation with our clients? How do we make sure our messaging from a marketing standpoint says, if you don't get results, we're not happy?

What does that tell your client? Our results are more critical than their sale. And what's the net effect? You'll get more sales. They see value in getting better results.

To listen to the entire conversation between Jim Schlecker and Ian Altman as they export the power of selling results, listen to the full podcast wherever you get your podcast.

Jim Schlecker, CEO of The CEO Project and host of The Lazy CEO Podcast has a conversation with Dr. David Burkus.

David:

I help leaders and teams do their best work ever. I think two things fundamentally. One is that work is central to our lives. Even if we had universal basic income and everybody was being paid, most people would still want to do something and make some contribution to the world. So work is central to our lives. And that work is teamwork. Your experience of work, whether or not you're engaged or motivated, whether or not you actually want to put your whole effort into something is shaped less so by broad company culture and more by the teams that you're on. And for a CEO, this is your job. Whether you are the CEO or a middle manager, no matter what team you lead, you are responsible for the culture of that team. That's what I focus on, is teaching teams and teaching team leaders how to have a culture that actually unlocks high performance, unlocks motivation, allows them to be more innovative et cetera.

Jim:

Let's talk about culture and culture management. Your comment is culture is experienced locally. And so how do we as leaders of scaled organizations deal with the fact that culture is experienced locally, not globally, feels like we don't have the levers of control on that one. So how, how do you help people with that?

David:

So what do you do to scale culture? You teach leaders at all levels what a great team culture looks like, and you make them responsible for the one on their team. I look at it as sort of concentric circles. What do we as an organization want to be about? What are our values, mission, vision, et cetera? And then you have to teach every leader at every level to do the same thing in a smaller circle. Inside that larger circle, you run into problems when you let leaders do something that's against the corporate-wide values, the company-wide values, and culture, but as long as it's inside of it, every team is going to have a stronger culture that is still a little bit different from other teams inside the organization. Culture is everybody's job. It's not just that senior leader job and you teach them specifically. There are decades of research on corporate culture and effective culture, et cetera. But when you dive down into team culture, it is easier to focus on. It becomes a little bit easier to teach every team leader what they're responsible for.

Jim:

I'm a CEO. What are the factors that make a great team culture that I should be thinking about and

teaching?

David:

I boil it down to three factors, which I call common understanding, psychological safety, and pro-social purpose.

Psychological Safety

What we're not talking about is a place where you'll never confront a dissenting opinion. We're actually talking about the opposite. We're talking about an environment where people feel safe to state their dissenting opinions, and where there's a climate of mutual trust and respect. When you have a high level of trust and respect, you can have task-focused conflict. You can have people speaking up when they disagree. And you get a team that's more willing to admit their failures. And I think that's probably the biggest element of psychological safety that has nothing to do with safe spaces and that sort of thing. I mean, by the way, there's no such thing as safe spaces. There are only safe people. But that's a whole other monologue. You learn from failure because you cultivate a team where people trust everyone else on the team is not going to leverage their mistakes and their screw-ups to try and step over that person into a promotion. Instead, we acknowledge we had a learning moment here. We failed. Failures happen from time to time. And as long as you're not grossly incompetent in failing all the time, as long as this isn't a performance issue, then the failure's really just a learning moment. Let's talk about it and let's learn from it.

Common Understanding

Common understanding is how well we have clarity of roles, clarity of responsibilities, how well we have dependability, and we can trust that other people on the team are going to do what they say they do, but also how well we understand the other teammates. How well we have clarity of their person, their personality differences, and their work preferences.

You get so much frustration on a team just because people are fighting for people to follow their favorite process. You look at a tool as simple as email. It's been around for 50 years, and no one can agree on how long an email is supposed to be used, how many main points, and what the rules for replying are. And you're not going to convince everyone to treat this tool the same, but you can understand the different preferences on your team, and you can understand who keeps a different calendar. And so they send late-night emails and you don't feel threatened by that, et cetera. You get a lot more collaboration because when you understand the preferences of your team, you know how to speak to that person better, and you know how and what to expect from them.

Pro Social Purpose

Pro-social purpose is essentially meaning and impact. It's whether we feel like we're making a contribution to work that benefits others. We're motivated to do work because we know it will benefit others because it has this sort of pro-social element to it. And so I think the big question leaders need to answer, and this is why it's also important at a team level, is who's benefiting from the work that we not why do we do what we do, but who is served by the work that we're doing? And that varies by every single team. There are customers and stakeholders for a whole organization, but some teams serve the people who serve the customer.

For more ideas about effective leaders and teams, listen to the entire conversation on this episode of The Lazy CEO Podcast - Helping Leaders and Teams Do Their Best Work.

Thank You to Our Guest

One of the world's leading business thinkers, Dr. David Burkus' forward-thinking ideas and bestselling books are helping leaders and teams do their best work ever. He is the bestselling author of four books about business and leadership. His books have won multiple awards and have been translated into dozens of languages. Since 2017, Burkus has been ranked multiple times as one of the world's top business thought leaders. His insights on leadership and teamwork have been featured in the Wall Street Journal, Harvard Business Review, USAToday, Fast Company, the Financial Times, Bloomberg BusinessWeek, CNN, the BBC, NPR, and CBS This Morning. A former business school professor, Burkus now works with leaders from organizations across all industries, including PepsiCo, Fidelity, Adobe, and NASA.

Today we have an amazing human being and an incredible leader. We have Kim (KC) she'll tell you what that means. Later Kim, who's a retired Air Force colonel, served in the Air Force for more than 24 years as a fighter pilot and a senior military leader, she's flown more than a hundred combat missions protecting troops on the ground both in both Iraq and Afghanistan. As a senior military leader, Kim has led hundreds of airmen at home and abroad in deployed locations around the world. Most recently, Kim served as a director of the Center of Character and Leadership Development at the Air Force Academy. Kim is now Managing Director of Victory Strategies, where she's the leadership coach and keynote speaker. She's also the author of Flying in the Face of Fear, Lessons on Leading with Courage.

Jim:

You've been everywhere. You've done everything that the Air Force had to offer. Why did you leave? You don't have to have to, right? So why did you say it was time to hang it up?

Kim:

I tried to leave three times, so I figured the third time was a charm. But one of my final jobs in the Air Force before I moved to the Air Force Academy, I was a group commander responsible for about a thousand people throughout Central America, South America the Caribbean, a lot of travel, a lot of time away from home. I absolutely loved connecting with my team, getting out and meeting them and walking around, getting to know them. But my husband was also an active duty Air Force officer at the time. He was responsible for the entire base down in Tucson. We also have two boys who happened to be now 10 and 14, but at the time were one and five. And it was a lot.

We came to realize that our priorities were changing, the pressures were changing, the stress levels were changing, and we decided it was time to do something different where we were a little bit more in control of our schedules. I attempted to retire then and the Air Force asked if I would stay and become an instructor at the Air Force Academy. Which to me, coming back was home for me. That's where I started my career. And so, coming back there was a great opportunity to help influence the next generation of leaders. Then my husband and I retired at the same time, same ceremony, but it was really a family decision more than anything. And resetting our priorities and our boundaries as well.

My passion and my purpose were really initially flying A10, supporting our troops on the ground. That changed over time as I got to lead teams. But then my passion and purpose, changed and I was able to put all my effort and energy and passion into leading the next generation of our airmen, of our leaders of our aviators. And that to me had value, and I was able to find my new way.

Jim:

We help people get better as leaders. Just for a minute, we must touch on the A10 though, it's too cool an aircraft not to talk about for a minute or two before we dive into the other stuff. So why A10s and what was your view on it?

Kim: I realized early on during my days at pilot training, I knew I wanted to be a fighter pilot.I knew from the fifth grade on I was going to be a fighter pilot. I didn't know what airplane I wanted to fly. And then I got to pilot training, and I realized that I really enjoyed low-level flying. It was just fun. It was exciting. It was exciting to fly really close to another airplane. And then I started talking to other pilots about what they liked about their missions. There was something unique. They were so passionate about supporting our troops on the ground, knowing that what they did every day made a difference and helping someone get home safely to their families. That is a mission I can get on board with. And that was my choice to go fly the A10.

Jim:

For those of you that don't know the A10, it's low-level. It's basically a gigantic cannon with wings, and it's designed to support the troops by clearing the way for them and suppressing other opposing forces. It is one of the most feared aircraft in the arsenal of the United States of America by any opposing force. But you didn't make it home one time.

Kim:

It happened on April 7th, 2003. So we're almost at the 20-year anniversary. That's part of the reason that I love the A10, why I'm passionate about the A10 was that it helped get me home safely. And I happened to be over Bagdad providing support to our troops on the ground when my airplane was hit with a surface tear missile. I remember that moment; it was such a loud boom and bright red-orange flash as this fireball envelops my aircraft. And then it just dumped over, and I could see Bagdad below. And I think it was just instinct. I pulled back on my control stick and absolutely nothing happened.

It was not responding to any of my control inputs. And I remember thinking, I do not want to eject. I mean, that's the last thing I want to do is eject over Baghdad. And I really fell back on my training and all the preparation that I had done quickly trying to figure out what was going on in my aircraft. And I've got lights flashing everywhere. I've got a master caution panel that's lit up like a Christmas tree. I mean, it was slightly overwhelming, but I had to focus on what was most important. And that is, how do I get this airplane under control? I quickly realized that it has lost all hydraulics. They dumped out when the missile hit the airplane. And so at this point, I know I either eject or I try to get the airplane in our backup emergency system. And thankfully I flipped that switch. The airplane worked exactly as advertised, and I was able to slowly pull the aircraft and, and get away from Baghdad. And that was for me, the first moment I felt like I was going to make it out of there alive.

I flew the airplane back for an hour. I was able to get it on the ground which was obviously a huge feeling of relief. And let's say there was a lot of adrenaline in that moment. And the next day, instead of being tasked with a normal mission, I was tasked with combat search and rescue alert, which is another mission we fly, where if an aviator is shot down, then we go and do everything we can to rescue them. Normally when we're on alert, we sleep, we rest, you know, it's, it's downtime because this, this doesn't happen often, but this was April 8th, the alarm sounded, it wasn't a drill. An A10 pilot had been shot down right in Baghdad, right. Where I had escaped my own shootdown. And for me, it was just that those guys were there for me the day before. I was going to do the same for this pilot. We raced out to the Jets, we were start gathering information, and we make an immediate takeoff. I just didn't have time to think about it. It was just, how do we get there as quickly as we can? And thankfully, he was very lucky he got picked up by friendly ground troops. So we only made it about 30 minutes into Iraq. But wow, you know, it was the whole idea that that's what we do for teammates.

Unfortunately, that airplane never flew again. I was able to land it, but it was so badly damaged that they assessed that they couldn't repair it in the location that it was. So they decided that maintenance took every piece and part that they could out of it. But they also cut a piece of the back tail section for me that had the tail number on it. And it's been with me for 20 years. It's hung in every Air Force office I've had. But I recently retired and it held a place actually back behind me here. And this Smithsonian is doing a new exhibit on modern military aviation. They asked if I had anything, and I thought, what better way Yeah. To share the story than that tail flash. So I delivered it on Tuesday to the Smithsonian in Washington DC It will be there in a new exhibit. And now the story and the lessons learned, which are most important to me, can be told to the next generation.

Jim:

So let's move over to leadership. You move from sort of being an individual contributor in the form of a pilot to leading people. And now you've transitioned to teaching people how to lead people. So let's just roll all the way back and if you had to characterize your leadership approach, what would be the elements of your leadership approach, the teachable elements of your leadership approach?

Kim:

Well, I think part of the reason that I wrote my new book, I was trying to capture all of these experiences and lessons. And what I realized for me is that over the course of my career, I have experienced fear. I have experienced being nervous or stressed about flying airplanes, and about leading teams. And to me, all it came down to was those feelings, those things are normal. They happen. It is all about what you do in the moment. It is about leading with courage. And so for me, this whole idea of courageous leadership and leading with courage and how can you make those hard decisions? How can you make decisions when you don't have perfect information? How can you have the tough conversations that none of us like to have, but are essential and necessary? How do you hold yourself and other people accountable? How do you admit mistakes when it's really uncomfortable to do so? You know, how do you get out and connect with your team? It all comes down to me having the courage to do that, to do the hard things, to make those connections, and to build an environment of trust. So the short answer is, it's all about leading with courage.

For lessons from Kim, and to learn what her call signal KC stands for, listen to the complete podcast on leading with courage.

Organizational capacity is the capability of the people in your business to get stuff done. In this episode of The Lazy CEO Podcast, Jim, Schleckser, host and CEO of The CEO Project, talk about Organizational Capacity.

Basically, if you have a pile of work, size of X, you have X capability to get that work done. The raw capacity to execute and the capability to execute are really two things. We will get into each of these in a little bit. One is just how many people you have in the company. More people means more work, mostly, although not always. The second is the capability of the people in your organization to take on work, their ability to do stuff for you and not get their heads all stressed out and crazy. So the capability to people is really important as well. So first, let's talk about is just as you're growing your business, people do go through a cycle of growth emotions.

There are two researchers by the name of Kelly and Connor that came up with what's called this emotional cycle of change model. When you begin a change and, and growth is change, as you are growing your business, things are changing. How much work I have to do, the scope of my job, my title, and the way we do things are changing all the time. So the first stage that Kelly and Connor thought people went through, is uninformed optimism.

Over time, as we begin to make the change, we begin to go down into the valley of despair. And the first stage of the valley of despair is uninformed, or informed pessimism. In other words, I've now begun to see this and it's ugly and it's messy and it's confusing and it's stressful and this is not working. That's informed pessimism because I've now gathered enough data to know it's not going to work. They can possibly check out mentally. They're no longer engaged, they're no longer participating, and they're no longer giving their best effort. And checking out privately then can lead to checking out publicly. And this is where your turnover happens. In other words, during informed pessimism is when people check out your organization, that's when your turnover happens. So you have to be really attentive to this and be giving people signals that things are going to work out. Then they move to what they call hopeful realism. We thought it was going to be perfect before when we were in uninformed optimism. We are now hopeful, hopeful realism, it's going to be okay. It's better than it was, it's not perfect, but that's okay. And then stage four informed optimism.

It turned out it's as about as good as we thought it was going to be awesome. And then completion. So that cycle, everybody goes through and, a related rule called Cantor's Law, another researcher that says everything can look like a failure in the middle. As you're going through change, realize that in the middle, no matter how successful it is in the future, it looks like a failure in the middle.

Country Club vs Stress City

Two triangles basically stacked on top of each other. When you have more organizational capacity to execute than you do work, I call that country club. We're kind of chill, we're hanging out, and we have stuff to do, but plenty of time to have coffee and talk about the football pool. Now, to the other side, which is we've got more work to do than we do have the organizational capacity to execute. That's stress city. And as leaders, we're always wiggling around that middle line. Sometimes we're in country clubs, sometimes we're in stress city. And actually, I have to say most organizations are always in stress city. The only question is how close do they get to the line?

Do we have the right amount of capacity, people, and talent versus the amount of work we've got. And the signals you'll hear are stress and work-life balance. Now you have to be careful who you're listening to because of that standard distribution. There will people be people that always chirp on that issue. Doesn't matter how much work there is, there will be others that never say a word.

Buy, Build, or Borrow

Let's say you've diagnosed your organization. We've got more work than we can handle. And you'll probably know when this exists. You have a couple of options. Buy or build or borrow. Those are your options. Borrow, I'll just talk about it quickly. That's finding a third-party staffing company that can help you or a partner that can help you. But fundamentally we've got to build or buy. I'm going to hire somebody in the organization to increase my organizational capacity. When you do this, you want to tick two boxes. One is particularly when you're growing, one is you need the person in the job, right as defined. So that's an increased organization, organizational capacity just because there's a human in position. But more than that, you need to hire ahead of your curve.

If you're a growing organization, you're 20 million or 40 million or a hundred million or 200 million and you're underway to double that number. If I hire somebody that is just competent to do the job, no more just able to do the job, but fully competent as I double, they are going to go to incompetency potentially unless they develop, which I'll talk about in a minute. And so ideally you hire somebody who's over your current capability, over your current size. If you're 40, they've done it at a hundred. If you're a hundred, they've done it at 200. They already know what it looks like where you are going.

For more about organizational capacity, listen to the full episode of The Lazy CEO Podcast.

Resources mentioned in this episode:

• Jim Schleckser on LinkedIn
• The CEO Project
• Great Ceos Are Lazy: How Exceptional Ceos Do More in Less Time by Jim Schleckser

Sponsor for this episode…

This episode is brought to you by The CEO Project. The CEO Project is a business advisory group that brings high-caliber, accomplished CEOs together. Our team of skilled advisors is comprised of current and former CEOs who have run both public and private sector companies across multiple industries. With our experience and expertise, we guide hundreds of high-performing CEOs through a disciplined approach that resolves constraints and improves critical decisions. The CEO Project has helped high-performing, large enterprise CEOs with annual revenues ranging from $20M to over $2 billion to drive growth and achieve optimal outcomes. If you are an experienced CEO looking to grow your company, visit www.theCEOProject.com.

In this episode of The Lazy CEO Podcast, Jim Schleckser, host and CEO of The CEO Project, interviews Karin Hurt, CEO of Let's Grow Leaders about innovation and conflict in the workplace.

Jim Schleckser:

Welcome Karin, share with us a little bit about your work with Verizon as well as what you do now with Let's Grow Leaders.

Karin Hurt:

I learned so many things from Verizon and, in Courageous Cultures, we talk about having the need for clarity, real clarity in your culture, clarity about where you're headed, clarity around setting clear expectations all the way through, and curiosity showing up and being curious and innovative. I would say at Verizon, I learned all about the clarity thing. I learned a lot through the experimentation of leading large teams in times of uncertainty. I led a 2200-person sales team at the moment that AT&T gets exclusive rights to the iPhone, and I got this sales team that has nothing to sell.

How do you keep people motivated during a time like that? How do you get results? How do you pivot and look for bright starts and bring a large team along with you? I also learned about what not to do. You can learn as much about leadership from following a bad boss as a good boss. And although I had a number of great bosses, I also had some doozies. I really paid a lot of attention to what is the impact that negative toxic leadership is having. What is the impact on results? What is the impact on relationships? What is the impact on growing future leaders? Overall fantastic experience learned so much from so many mentors and I also learned a little bit about what not to do too.

Jim Schleckser:

You talk about innovation coming from what I would consider a very high rule-density environment. Talk us through your model on innovation.

Karin Hurt:

You need to start where you aren't if you're looking for innovation. You can have high clarity, what you're calling rule dense environment. And when you have that, it's more difficult for people to innovate. But if you've got people, everyone is innovating and they don't know what they're innovating towards, then you will lack the right kind of innovation. You may have a lot of ideas, but you may not have the kind of ideas that you can use. And so we talk about, you need to be very clear about two things, 1) that you really want innovation, that you want people's ideas and 2) you are clear about where you're headed strategically so that people can get it. And then you need to show up curious. And after you've had that clarity, then that's when you're teaching people how to think critically, position their ideas, look around corners, and all of those innovative things. And if you have one without the other, you're going to have a challenge. We take people through a process where you begin with clarity, and then we teach them how to, "own the ugly", look at things differently from different perspectives, show their ideas, and give away to pitch your ideas in very, very practical ways.

Jim Schleckser:

One of the things you talk about is the roles that people fulfill in this ecosystem - micro innovators, problem solvers, and customer advocates. Help me understand how those three roles work together.

Karin Hurt:

Micro innovators, one of the things that we talk about is there are a lot of great strategies but how do you create something that's going to completely change the game? And that's innovation with a capital I. Where we really focus is how do you get micro innovations, people coming to work every single day saying, how can we do this step differently? Do we really need this meeting? Is there an alternative way to get there? In our research, 67% said their manager operates around the notion of this is the way we've always done it. That's not encouraging micro innovation versus the leader who comes and asks a courageous question and said, what is one way we could change this process to be more impactful for our clients?

Then when we talk about customer advocates, that's really empowering the people at the front. How do I advocate for the customer and their needs? And how can I innovate on behalf of the customer? Our favorite definition of culture is from Seth Godin. People like us do things like this. You're helping to amplify the voice of your customer.

Problem solvers, that's equipping people with practical tools and techniques to solve problems. And there's just not a lot of training out there for problem-solving. We'll find that when we're doing discovery for our leadership development programs. And there's a huge appetite for that.

Jim Schleckser:

Interesting. You know there's another whole camp in this sort of innovation space. They call them weak signals. It's funny how you identified, customer advocates and problem solvers. Those would be the kind of people that would pick up weak signals - little things that aren't quite right. And, then they talk about catalyzing. There's a guy named Mintzberg who talks about catalyzing them into something bigger because that little weak signal if we blow on the spark, we can turn into a fire.

Karin Hurt:

It's interesting because we are neck deep in our next research for our book - World Workplace Conflict and Collaboration Survey. And one of the things that we are finding is there is an exact bell curve of people who are saying, Hey, you know what? There is less conflict than we had before. And some say, on the other extreme, there is way more conflict than we've had before. And as we peel underneath, this has so much to do with innovation because the people who are saying there's less conflict, are not talking to people very much, they are working from home in their own bubbles. And if you have that happening, there may be less conflict negative, but you are not also having the good kind of conflict where, hey, I have an idea and you have an idea and let's really talk about what's going to be best for our customer in this scenario. And, and having those constructive conversations.

In our research so far, what's coming as the impact of conflict? 64% are saying more stress, 34% are saying more turnover. And 31% are saying less productivity. So that's the bad kind of conflict, right? If you have conflicts, that's creating that level of stress. And that's what people, a lot of people think of when they think of conflict, right? What they're talking about there is primarily interpersonal conflict, right? And when we ask people why- I left my toxic environment. So, they just ran away from the conflict. The reason we think this work is so important is particularly now, in an uncertain environment where everything is so turbulent and rapidly changing, you have to have all that innovation. And you are not going to do that if you are running away from important conversations. So, we talk about four areas starting with connection.

For more of Jim and Karin's conversation and to learn the 4 C's of conflict management, listen to the full episode of The Lazy CEO Podcast.

Jim Schleckser, CEO of The CEO Project and host of The Lazy CEO Podcast, sits down with a fun guest, a hall-of-fame speaker who has had multiple bestselling books, Jay Bearer.

Jim Schleckser:

What are the five things that we need to be smart about in engaging with marketing to ask the right questions as CEOs?

Jay Baer:

I think partially because it's obviously the fastest growing and all around us now, and so transformative, we tend to think that digital is good just because it's digital. As a CEO, I would question that assumption. So often the coin of the realm in digital is reach and awareness, and how many people saw your thing, or, and, and I guess my retort to that is to what end, right? Those are vanity metrics.

We can't sell exposure, not at scale. And, so typically, what we try to advise CEOs to do is to say, okay, what desired action are we trying to create here? Is it net new customers? Is it an increase in customer purchase frequency? Is it average customer value on an annualized basis? Is it customer retention? Start with what we're trying to incentivize from a behavior standpoint and then, and then build upwards from there. Create a series of digital and many non-digital scenarios that allow that to happen. But the reality is that most digital strategists don't do that. They start with the caboose, not the engine. Then they try to gerrymander their way to the appropriate solution. And that's why so much digital strategy is inherently flawed.

I've seen too many PowerPoint presentations from the marketing team about clicks and eyeballs, but how many dollars did this generate? And this is a great irony, from a CEO standpoint. Digital is so much more measurable incrementally than outdoor or print or television or radio. It's by far the easiest to understand the trajectory of success or lack thereof that you're experiencing. Yet, the crazy part is so many people don't take advantage of that.

And obviously, it makes testing a lot easier as well, which as somebody who came up in the direct mail business, that's the holy grail.

Jim Schleckser:

What are the three metrics that you care about and why?

Jay Baer:

Depends on the project, depends on what kind of consumer behavior you're trying to incentivize. Ultimately it should helicopter back to whatever business success metric you're looking at. Could be sales, could be churn rate, could be new employee applications if you're trying to fix a staffing problem with digital.

So when I ask that question of my marketers or my digital marketers, the good one will say, what's your business problem? And how are you going to measure, how are you going to know we're successful against that business problem? And then that's my metric right there. They are not going to tell you, you're going to tell them.

Jim Schleckser:

I saw you do a piece a while ago on and maybe you could talk about this on the customer journey and provide information at the point of need.

Jay Baer:

The reality is that we all come from an era where personal time and one-to-one or small group communication in person you know, over, over a video call et cetera, has been held up for many, many years, especially in B2B as the goal. So, if we can provide enough information to get them interested, we'll make sure a BDR or somebody qualifies this lead, and then we'll give them to a salesperson and then we'll have a sales conversation and eventually, they'll become customers that, that's sort of the historical process and it still works. But now what we find, especially amongst younger buyers millennials, and Gen Z, about half of them actually prefer a completely seller-free experience. They're like, just give me the stuff and I'll figure out what to buy and whether to buy it and which options to select.

The exercise that I talk about a lot on stage is this. Grab a piece of paper and a pen, and I want you to write down the 25 questions that your customers have most often about your business, your products or services pre-purchase. Every CEO can do it. That's what they think about. Now, take a look at that list. How many of those questions can be answered by a prospect on your website within two clicks? And it's usually about four.

We're making people work too hard to get the information they need. What if your customers could never talk to anybody at your company? What if you didn't have an email address? What if you didn't have a phone? What if you didn't have a chatbot? Could you still sell stuff? And if the answer is no, you should probably rethink that.

Jim Schleckser:

Let's talk about Word of Mouth as a strategy.

Jay Baer:

Word of mouth has been a customer acquisition strategy since the first caveman sold an arrowhead to another caveman. But only 1% of businesses have a defined and documented word-of-mouth strategy. We just take it for granted. Throughout modern business history, we've sold ourselves a lie. And the lie is that competency will create conversations and that if you just run a good business, people will naturally tell other people about you. That seems to make sense on paper, but it doesn't hold water in terms of actual human behavior. For you to introduce the topic of a business, a product, or a service to your friends and colleagues, something unexpected must happen. We don't talk about good; we talk about different, and this is why you almost never see three-star reviews.

All your reviews are five-star or one-star. And so word of mouth works the same way. In my book, Talk Triggers, that's what we call it, it's an operational choice that you make in your business that is designed to create conversations. And it's not your core product or service, it's something else that you do differently, then people say, I didn't think that was going to happen. And that becomes the story that they tell their friends and colleagues. You have to give people a story. And it literally is a strategic execution of a playbook to create word of mouth. Most people just say it'll take care of itself and it will not.

For more of Jim and Jay's conversation, examples of Talk Triggers, and how to create business growth through customer experience, listen to this episode of The Lazy CEO Podcast.