How To Make The Tough Calls: CEOs Share Their Secrets

Watchfire Technologies CEO Steve Harriott spent a harrowing 21 months chasing a $30 million deal.

Formidable tools like cheap computing power and Big Data promised to ease the guesswork in business decisions. That’s true for myriad tactical maneuvers. Should the “Buy” button on a company’s website be green or red? Test, measure, move on.

But for CEOs navigating a wrenching global economy running at web speed, the really hard calls—what markets to attack, which deals to chase, when to raise capital—might be harder than ever.

Even oracles whiff. When Warren Buffett orchestrated a $36 billion megamerger between H.J. Heinz and Kraft Foods in 2015, he could taste the synergies. Buffett’s Berkshire Hathaway amassed 27 percent of Kraft Heinz stock, even as more consumers were junking processed foods. The bet curdled in February when Kraft Heinz wrote down $15 billion worth of intangible assets, erasing $16 billion in market value. So much for sober analysis and sound judgement.

“There is so much change going on, owners aren’t on solid ground,” says Joni Fedders, president of Aileron, a Dayton, Ohio-based boot camp for middle-market growth companies, who has worked with hundreds of CEOs on their decision-making skills. “We talk about this all day long because it’s at the core of most people’s lives.”

Most people have trouble making clearly considered choices. In his award-winning Thinking, Fast and Slow, Princeton University psychologist Daniel Kahneman merrily exposed our most common cognitive biases, while Wikipedia catalogs a humbling 200 of them (including, of course, the tendency to think we are less biased than others). The hardest decisions also tend to have long-range consequences that are tough to quantify—and you’ll only experience the outcome of the path you chose. In the end, you may never truly know if you made the right call.

To recap: Increasing uncertainty, biological handicap, low measureability. If Buffett can miss, how can mortal CEOs hope to compete?

We sought decision-making inspiration from battle-tested execs willing to relive their toughest calls. Our advice: When in doubt, trust the process—and make the call.

One executive shares her tips on how to make a tough call in six steps.

Go West, Young Man?

In late 2013, Andrew Geant, founder and CEO of Wyzant, was riding high. His Chicago-based online tutoring and coaching service company had just raised $21 million from the VC firm Accel Partners. To hit his backers’ aggressive growth targets, Geant needed a new marketing chief. “The rewards were massive,” says Geant, 35. “If we could accelerate our growth, we saw a path to 10X-ing the business.”

The problem: All the best candidates were in San Francisco and feared Windy City winters. Months passed, pressure mounted. What if he hired the wrong person? What if the team couldn’t coalesce from two locations? Finally, Geant made the hard call, opening a new West Coast office with a $5 million personnel and marketing budget.

Shutting it down 18 months later—and laying off 18 people—would be much harder.
The cracks formed within a few months. The new team’s Silicon Valley swagger irritated their Midwestern colleagues. Cultures clashed, productivity suffered—and cash burned. Based on his projections, Geant recalls, he’d have to raise more money in just a couple of years: “We couldn’t rationalize it.”

But Geant couldn’t just pack it in, either: “These were good people, whom I had sold on the opportunity.” Revenue, meanwhile, was growing 40 percent a year—not a moon shot, but still impressive. Would shuttering a new office harm the company’s reputation? Would the core crew in Chicago get nervous and bail?

Geant leaned on his team. His co-founder, Mike Weishuhn, a computer-science major and dear college pal, reminded him it was the CEO’s job to make the tough calls and think long-term. Geant’s five-person advisory board (including bankers, VCs and a vice president of product at Groupon) also chipped in, as did his confidants at YPO, a leadership organization for CEOs under age 45.

Breaking the news in San Francisco was draining, but Geant also took pains to justify his decision back home—even sharing proprietary financial data to support his argument. “The numbers help people calibrate, but that’s uncomfortable,” he admits. Many projects had to be scrapped, and there were gaping holes in the operation—the entire performance-marketing team, for example, was gone. At least the talent pool in Chicago had expanded over those 18 months; Wzyant’s rebuild, for the most part, could be locally sourced.

Looking back, Geant says the challenge was not just knowing the right decision, “but needing to muster the courage to make it in a swift, decisive, complete fashion.”

Five years later, it looks like the right call. Now with 70 employees, $60 million in revenue and some black ink, Wyzant is investing in longer-term projects, such as selling tutoring services directly to universities aiming to boost student performance and shrink dropout rates. The San Francisco “experiment,” as Geant calls it, also forced the company to revisit core values like “enjoy the journey” and “always be learning.” Those words mean a lot more since the crisis, he concedes, but having them already in place fortified morale.

All in all, “[the team] appreciated having a CEO who was willing to make a tough call and be transparent about the reasoning behind it,” says Geant. “In some ways, it was galvanizing.”

Pull the Plug?

Watchfire Technologies, a family-owned sign-maker in Danville, Illinois, has made everything from sports video displays to large commercial billboards—60,000 around the globe—since 1932. Steve Harriott had been at the helm for six years when, in mid-2016, his job took on a whole new light.

Word had leaked that Fremont Street Experience, a Las Vegas entertainment company, was looking to upgrade the giant digital canopy shielding its downtown pedestrian mall. Harriett’s engineers started roughing out possible designs.

When Fremont issued a formal request for proposal a year later, Harriott’s industry was ablaze about the $30 million project. Most new jobs attracted five bids; Fremont’s pulled in 50. For Watchfire, which generates $150 million in annual sales, it was a huge opportunity—and perhaps an even bigger risk. “A one-time, $30 million job is great,” says Harriott, 50.

“But it can really break a company.”