When Dave Osh took over as CEO of QNET 10 years ago, the multinational e-commerce company was in seemingly excellent shape: zero debt, $80 million in reserves and solid sales growth. “I expected a walk in the park,” Osh told CEOs gathered for a roundtable at the 2019 Leadership Conference in Dallas.
But in his first quarter as CEO, sales took a nosedive, from $120 million to $100 million. “At my first board meeting, I had to explain, after 10 years of growth, why I was killing this company in my first quarter,” he recalled. “It was a disaster.”
Initially, Osh blamed the markets, the economy— everything other than himself. Then the board had him work with a coach who challenged him to question his view of the failure. “Ultimately, I learned that I was the problem,” Osh said. My leadership didn’t scale with the accelerated pace of growth cycles and the higher complexity that was waiting for me at the next growth level.”
Disruption and the hyper-acceleration of change has shortened cycles in every industry, putting all CEOs under pressure not only to create cultures that are dynamic and nimble enough to evolve quickly, but to be ever more flexible and adaptable themselves. If a company’s products and services are scalable, but the CEO’s leadership ability is not, said Osh, that’s a big problem. “As CEOs, every time we go to the next level, higher complexity awaits us.”
Osh embarked on a personal transformation that led him to make leadership the top strategic agenda of the company. As a result of that effort, the company was able to get back on a growth path, turning a 20 percent decline into consistent 34 percent year-over-year growth from $100 million to $431 million over the following five years. Osh then sought to make that duplicable for other companies, but it wasn’t until 2016 that the pieces fell into place, after he read a study in the Leadership Circle that found leadership effectiveness to be a strong predictor of business performance. “Finally, I had a system to work with,” he said. “For me, that was life-changing.”
Becoming a Better Leader
In discussing the challenges of sustaining growth in a disruptive world, many roundtable participants identified themselves as one of the key problems. Robert Alvarado, CEO of CourtCall, estimated that only about half of his leadership team is aligned with his vision at any one time “and that’s only because I haven’t shared consistently and effectively with them,” he said. “I know the first thing I have to solve is my poor communication.” A year ago, Alvarado began working with a coach to try to address that and subsequently found that part of the problem was the company’s hierarchical structure. “I was the hub, so everything had to come through me to then go back out to the rest of the field. We changed the structure and flattened it out so that all the managers now communicate directly, and then I get reports from them. We had a structural flaw, and we’re working through it, but I wasn’t communicating, and I think that probably happens a lot around this table.”
Matt Shem, EVP at Hill & Wilkinson General Contractors, agreed, noting that business leaders with many tasks to accomplish forget to take the time to communicate and help people newer to the operation get their sea legs. “That’s something I struggle with, for sure—slowing down,” he said. “It’s so easy with so much across your desk just to go, go, go.”
One benefit to moderating the pace is a greater degree of clarity. “You have people with very different paradigms and expectations and understandings and backgrounds” trying to communicate, said Russell Jordan, director of business development at Micropac Industries, which builds electronics for mission-critical applications for satellites and military applications. “Clarity is very powerful.”
One of the biggest challenges is unlearning counterproductive belief systems and behaviors ingrained over decades of experience, Osh noted. And it can be tough to get a CEO to change behavior if those same behaviors got him or her to the corner office, added Steve Myers, a CEO coach in the aerospace and defense industries. “We’ve all become, basically, the victims of our own success, right? Because if it worked for us before, why would we want to change?” The key, he added, is a willingness to change and adapt. “That’s where the breakthrough has to come—in ourselves.”
That inertia can be harder to overcome in some industries than others, said Lee Bond, CEO of Singing River Health System, a two-hospital system on the Mississippi Gulf Coast. “If I had a nickel for every time somebody said, ‘Well, this is the way it’s been done in healthcare. You come from a different industry,’” said Bond, whose experience was in gaming and hospitality before moving into healthcare. “But we’ve proven them wrong. It was kind of a shocker to healthcare people that someone would actually think about healthcare as a business.” One of the changes Bond sought to implement in the hospitals was to call clients “guests” instead of “patients,” he said. “And boy, there was a lot of resistance to that in the beginning.”
Fixing Leadership Down Below
CEOs must focus not only on themselves and potential communication issues within the C-suite, but also identify leadership problems lower down in the organization. “There’s something I’ve called ‘SPD,’ or ‘the solution prevention department’ where every new idea is squashed,” said Jim Bielak, president of ACT Test Panels in Hillsdale, MI, which supplies test panel substrates to the global coatings industry.
Shem noted that language can make all the difference between shutting down new ideas and allowing them to flourish. For example, “yes, but,” can effectively shut down a new idea; however, “yes, and” can get the same message across, but in a way that validates the idea generator, said Shem, who added that Hill & Wilkinson has been working on getting managers to adopt the new language. “It’s something small, but language matters. It’s creating little differences that have really matured quickly.”
Andrew Warrington, president of environmental solutions company United Conveyor, agreed the little differences can go a long way. “There was a question I always used to ask, which I realized was the wrong question: ‘Why don’t we do…’ When you say that, people start to list the reasons why you shouldn’t,” he said. “Now I try to catch myself and say, ‘How can we make this happen?’”
While getting everyone on the same page is critical to success, encouraging dissenting views is equally important for companies seeking to innovate through times of disruption. Myers recalled his experience as director on the board of a biosciences company, where he learned the value of speaking up. “What I know about biosciences you could put on the head of a pin,” he joked, adding that the boardroom was filled with medical experts. “So I started asking questions, and I was sure I was going to get thrown off this board because I had to be an idiot, right? But after a few years of being willing at every board meeting to challenge the status quo, they greatly appreciated anyone willing to challenge their assumptions.” You can’t let groupthink infect the organization, he added. “It’s hard to challenge your boss, hard to challenge your peers, but that’s the only thing that will cause change to occur.”
Building a Winning Culture
To inspire the sort of trust that breeds healthy debate, the CEO often has to fade into the background, said Michael Kotubey, president of Dallas-based construction company TD Industries, who realized that his presence was potentially stifling input from other team members. “I was the vocal guy, I wanted to share my 40-plus years of experience with the team and prevent them from going through what I went through,” he recalled. “As I was coached to withdraw and sit more in the background, it was incredible to watch how the group grew as the trust in the room [grew].” Today, Kotubey takes a lower profile and seeks to prompt rather than control discussion. “So instead of the answer man, now I’m the question man.”
Taking a seat in the background also allows CEOs to observe group dynamics. If one or two voices tend to dominate the discussion, it’s best to nip it in the bud—even if those appear to be your best and brightest, said Warrington. He had to make a tough decision with a team member who was creating a toxic environment. “He was, for sure, the smartest person on the team,” he said. “But it stifled the rest of the team’s creativity and their ability to operate the business.” Ultimately, they had to let the star employee go.
One way to curb that problem is to make sure that leaders are not promoted solely on intellectual or technical skills, said Shem. “You get so far up the ladder, and then you’re kind of exposed because you don’t have the emotional intelligence.” In construction, especially, companies tend to promote based on technical skill, which can mean those who wind up in leadership positions aren’t necessarily good at it. “There may be a bridge between intelligence and ineffective leaders,” he said.
Ultimately, if you have ineffective leaders in the organization, “everybody knows it,” said Myers. “So if you’re the CEO and you’re not doing something about that, that’s a reflection on you. That’s showing your weakness as a leader.”
On the contrary, weak leadership must be dealt with immediately, before problems fester and spread. Kotubey recalled a previous experience with a turnaround, when he inherited a leadership team that was experiencing a lot of infighting. “Egos were in the way and it was always ‘my people,’ not ‘our people,’” he said. “I tried to coach through it. But five years later, every leader had to be replaced. With the same core group beyond leadership, we did double the volume, five times the profit over a six-year period.”
Perhaps the best way to cultivate leadership within the organization is simply by letting people be themselves and by creating opportunities for them to discover those talents, said Levi Burkholder, president of Loader Parts Source. “Give them a challenge and get out of the way.”
Businesses eager to embrace the potential of exponential technologies such as AI, robotics, biotech and nanotech would do well to devote the same level of enthusiasm to exploring the potential of a scientifically validated leadership development framework able to deliver as much as 38 percent of business growth, sums up Osh. “This new leadership framework evolves leaders to a higher level of consciousness that helps companies create a ripple effect in their markets, communities and society,” he says.”This vision is worth fighting. So make Leadership Effectiveness your strategic priority, and you will inspire the next generation leaders.”