The Forced Evolution of a CEO

This topic has come up a lot lately. It’s when a CEO suddenly realizes their own company is in trouble. The awareness slowly grows, and it’s easy to overlook or ignore at first, until the CEO realizes the company has now spun out of control. The CEO may have an idea that something is wrong, but doesn’t want to face what’s necessary to fix the company because the correction will be painful somehow. In the CEO’s defense, it’s sometimes hard to know a problem is brewing until a chain reaction occurs. It’s like steering a ship off course. At first it doesn’t look like much, but over time it can be a massive distance. You may even know it’s off course initially and think, well, there is plenty of time to correct, only to wait too long.

Part of all this is human nature. People who suspect heart problems don’t want to see a cardiologist because they are worried about the possible news and don’t want the prospect of heart surgery, so they risk sudden death. Some then drop dead when the problem may have been easier to resolve than they thought. The same holds true for cancer, or even car maintenance. I was talking to a doctor friend who was telling me about a patient who knew something was terribly wrong but decided to put it off until he was too sick to work. By the time he came in for a heart checkup it was too late. The doctor said the patient had to know they were in trouble for a very long time, and had they spoken up when it first came up, it would have been an easy solution with medication alone.

The other side of the coin is never letting these problems happen in the first place. So, how do you keep these problems from ever starting? How do CEOs know when something they think is small is actually something that will be big if they don’t do something about it? How do CEOs get in such massive trouble? What can you do to keep it from happening?

It always begins in the same place, early in the company’s history when they are very small with a few people who are working together to grow their business organically. They typically don’t give the future of the organization a lot of thought, because there is so much to do right in front of them here and now. Hiring that person today trumps looking for that perfect candidate, for example. They make important foundational decisions that seem like a good idea at the time. They do it without any growth experience or any knowledge about where these core foundational decisions will lead. It’s the Dunning-Kruger Effect in action. How can you take criteria into consideration if you don’t know the criteria exists in the first place? How can you weigh criteria when you have no idea how it will impact your business in two years?

The founding CEOs generally know what HR does, or other roles such as a COO, or a CMO, but they don’t have the experience to know the difference between a good HR Director, COO, or CMO, and a bad one. They only know what sounds like a good one, or what looks good on a resume, and they build an org chart accordingly.

I see it personally when I talk to a recruiter about a CEO role they are trying to fill and they call me and rattle off what they are seeking. I was on the hiring committee for one organization and I was appalled by the recruiter because all of their criteria was like something out of a casting call for a movie and had little to do with finding that exact right fit.

Many starting CEOs don’t have a reference point to model that lays a foundation of how top talent should be evaluated. Compounding the problem is a reluctance to pay for the best people because, after all, how would you know the difference? Isn’t it prudent to save money? In hindsight, they rarely calculate the real cost of a marginal hire over the life of their role in the company. These hires could be very hardworking, but lack the necessary skills for the role, and it’s only in retrospect that you see what they cost the company. Some create real disasters yet heading in that direction was incremental, so nobody noticed. It’s like a catastrophic part that fails over time.

These companies don’t just sit still, often the errors are masked because they are growing. That growth reinforces bad beliefs, because after all, isn’t growth by itself evidence that they are doing things right? Growth can sometimes be a masking indicator of true net progress. For example, you could ignore all preventative maintenance on your car and save money. You think you’re ahead until your engine seizes because it has never had an oil change. I knew of one car owner who’d never change or check the oil on his car, and traded it at around 30,000 miles.

Some companies fail to put basic operational systems in place that improve accountability and overall management efficiency. I understand the common point of view of the CEO as I made the same mistakes myself in my early years. You fear too much bureaucracy in your own company and thus go easy on the process development. The fact that important systems are often missing entirely goes unnoticed because the people in senior roles don’t have the experience to know what should be in place by now. They assume it’s how all companies work. Consequently, there is no HR strategy, in fact no HRIS (Human Resource Information System) of any kind. They unknowingly think they can continue without an HRIS system because it’s just another expense. They can’t see the indirect operational gains because they don’t have a great reference point to begin with, and thus don’t know the difference between a company operating with an HRIS and one without.

Flipping back to the other side of the coin, the founder CEO typically doesn’t think any of this process or experience is necessary and continues to just add people without a lot of thought to skill level and reporting lines. They assume bad hires will sort themselves out. They guess what they need and don’t think about roles, training people up, and where they will move at a future date in the organization. They assume they are hiring good people, but have no reference point either way. There are no hiring standards and who is hired is left up to someone who may have no idea where the company is going or even what to look for outside of binary skills listed on a resume. To some hiring managers, it’s simply, skill multiplied by years, equals quality. No, it doesn't!

We get a lot of people who read what I write on Quora and think, wow, that’s the answer, it’s all I need! Done! It’s a bit like saying, to make a cake, add flour, eggs, butter, milk, done. At no point is measuring, skill, and verification a part of the equation. We do our best to explain that to our readers and potential clients since it does seem so simple. They later get mad when the cake doesn’t come out right. They forget that building a successful company requires experience in building an organization and skills in that area that are already documented.

I’m convinced that Microsoft would never have gone far without Jon Shirley as their COO. As Greg Whitten put it, he was the adult in the room. Jon did a remarkable thing by building a company at an astonishing rate while never falling apart along the way. They had some scary moments, but it was an amazing feat. Bill Gates had the presence of mind to hire a great COO and listen to him.

If you’re stuck or in a crisis, talk to a lot of people. Talk to us as a part of the mix. Hire those with experience fixing the problems you’re having, and above all listen to their advice.