Posted: July 05, 2013
Time for a cattle prod—or an encouraging word?
Know the difference between bad luck and poor performanceBy Todd Ordal
“If y’all just go out there and execute, everything will be fine!” my CEO said to me many years ago, after I pointed out that our business model was losing relevance. The fact that he was a big-hat, no-cattle kind of leader was apparent long before he started with the “y’alls” and “all y’alls.” I’ve been wrong many times, but this wasn’t one of them.
A CEO I know recently reported to his board that his company would miss quarterly and annual targets. His business model depends on consumer preferences and, frankly, in the world he’s in, you win some and you lose many.
Luckily, this was a seasoned board of directors that didn’t throw a temper tantrum or treat this as an execution problem. The problem, if you want to call it that, was that he must anticipate consumer preferences. He did so effectively in the past and will do so in the future. However, as he builds his product depth and channels to gain more predictability, he still needs a few blockbusters to hit his projections.
Having served on numerous boards and been in executive roles, I’ve observed many investors and board members come unglued at missed projections, sometimes justifiably so. However, there are misses, and then there are misses. Poor execution, sloppy work and repeated, similar mistakes (that is, behavioral problems) should receive a kick in the rear. If you do this as an executive, you’d better put on your thick skin and take your licks.
This CEO, however, was executing well and producing new products that his board members agreed had potential to be winners. When delays outside of his control occurred and the company didn’t receive a new product as anticipated, he clearly and promptly communicated this to his board members. They could have verbally abused him and left him demoralized. They didn’t. Instead, they asked him, “What’s next?”
A friend just took a board seat on a well-funded start-up in Silicon Valley. One board member was a well-known investor who hit it big by investing in a technology company — let’s call it RagsToRiches Inc.
The board member previously invested in a company founded by the RagsToRiches founder/CEO and lost his entire investment. He recognized, however, that what failed wasn’t the founder’s ability to execute but a high-risk, high-reward business model. When the founder came back with another idea, the investor bit and it was a rags-to-riches story.
Sometimes missed results are merely bad luck, and sometimes they’re poor performance. It’s good to know the difference before you open your mouth. Using a cattle prod when a word of encouragement is required can produce disastrous results.
Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info, 303-527-0417 or firstname.lastname@example.org