Why empowr (Part 6)

Hello everyone,

Together, we've been reading the Why empowr book, written by one of the empowr founders.

Just joining the conversation? You can read the earlier parts here:  
Part 1:   Here
Part 2:   Here
Part 3:  Here
Part 4:  Here
Part 5:  Here

As always, many thanks for your thoughtful comments that you left in the earlier parts.

Each and every comment, each and every word that you leave is being carefully, read and digested by empowr's team and management, the founders and myself. Thank you!

I'll try and post a new part every day when there's not another announcement.

And for the benefit of readers, I promise to do a better job at removing all garbage and unrelated comments, such as "Why does PayPal not work in my country" and "Where's my cash out?" and "More money for me!", which have nothing to do with the topic of this blog post.
 
 

The Magic Ingredient

Let me start by telling you a dirty little secret.

I hate (and I mean really hate) starting new businesses.

Building a team that works well together is a lot harder than it sounds. First, you have to interview tons of people and, after only limited conversation, try to figure out if they have the skills to do the job, skills that you may not even possess yourself.

But, just as important, you need to understand how their values match your own and those of the organization—easier said than done. How will they fit in the culture that you’re trying to build? How will they behave in those inevitable times when the going gets tough? People are often quite different in interviews than they are under pressure. How will they really act when it’s time to set and achieve goals? Will they accept the pressure of big goals and do whatever is humanly possible to accomplish them? Or will they expend most of their time and energy thinking through how—after missing their goals—they will report that the goals were actually unreasonable and that missing them was not their fault?

Once I put together a team, the long process of teaching them the industry’s history begins. Each new member needs to have a working knowledge of what is working and what has been tried but failed, so they can avoid those pitfalls and prevent the company from repeating the same mistakes. Also crucial to the learning curve is the development of a deep understanding as to the reasons why things have failed in the past.

The chemistry between a new team member and the others becomes apparent within weeks. There is very little that can damage the progress of a team or company more than having one or more members who turn out to be a bad fit.

Since all experienced managers come with a different set of experiences and each one followed a different path to arrive at this point in his or her career, they usually have many conflicting beliefs about how to approach problems. It usually takes one, two, or even more years to work through those differences. When you buy a new car, they tell you that it will take a while for the engine parts to wear in and work together optimally. It’s similar with people: as people get used to working with one another, they learn about everyone’s strengths and weaknesses, when to defer to others in a strategic discussion, and when to take the lead.

Along the way, a number of team members will give up and leave or be pushed out as it becomes clear to them and/or others that the conflicts between them are too big to “wear down” comfortably. And so the hiring and interviewing process starts all over again, as does the process of getting everyone on the same page and working well together, once a new person is hired.

And that’s why it can take many years to get a group of highly skilled and experienced team members to work well together and get some big things done. For me, those are not fun years, but, unfortunately, they’re necessary if you want to make magic happen. Steve Jobs says it took him over ten years to achieve that at Pixar, after which the successes started to come one after another, like magic.

Ask the best venture capitalists how they choose businesses to invest in, and they’ll invariably tell you that they invest primarily in the team behind the business, not the ideas in the business. VCs know how incredibly difficult it is to get a team running like clockwork, so they spend a lot of resources searching for teams that have already reached that magical point; the actual business idea or business model comes in at second place in their investment decision-making process.

Once my team reaches that hard-earned magical point, I have a technology guy, a finance gal, an operations manager, a product person, a top marketing person, head of sales, a general counsel, and a ton of other top-notch professionals in whom I have confidence. When anyone in the entire organization has a new idea or project, they know whom they need to speak with to share that new idea or get those things approved.

Besides the management and employees, the organization also needs outside help to succeed. It requires the assistance of vendors, consultants, advisors, and experts in many fields. Similarly, it takes a lot of time and work to establish those relationships and to make them work well, too.

When the entire organization reaches this level of synergy, it’s a really good thing. After a while, everybody knows what to expect from everybody else, and which processes and ideas are fair game and which ones aren’t. As certain ideas are tried and some work and others fail, the entire organization of human resources—those working inside and outside the company—goes through the experiences together. The organization becomes smarter together, learning what works and what doesn’t. It becomes many times more efficient, as everyone benefits from those learnings. They can avoid the mistakes made by others in the organization and also learn from—and add to—the successes. The company vocabulary even changes, with single words or phrases able to communicate a whole strategy that failed or succeeded.

The result is that the success rate for new ideas and projects improves dramatically, and everything can happen much more quickly, as an organization comes alive, similar to how a small child learns to crawl... then walk... then run.

In today’s hyper-competitive business environment, to achieve success in a large and desirable market, you usually need to have an organization that operates at that magical point. It’s quicker and easier to get things done because trust has been built up, and everyone knows all the shorthand terms and unspoken rules. And it’s comfortable, because the team converges on the same ways of seeing the world that confirm your own.

It is precisely at this comfortable point in an organization’s evolution that the trouble begins.
 

The Downside of Comfort

Human nature is to avoid anything that causes discomfort and, from a business perspective, there are few things more painful than failure. This means that teams eventually become resistant to ideas that even slightly resemble other ideas that have failed in the past. On the occasion that new people with new ideas are brought on board, the entire existing team pushes back against any changes the newcomer tries to make to the status quo. Eventually even the most energetic and passionate new hires stop pushing for change or offering new ideas. In order to keep their jobs and fit in, they adapt to the culture of maintaining the status quo, and innovation is stifled even further.

This scenario happens not because people are inherently bad or lazy, but because people are busy. When people have very little spare time, they tend to look for the fastest solutions and gravitate toward the paths that offer the least resistance. As more and more members of a team become dependent on predictable, low-effort solutions to their problems and become opposed to new, untested ideas that may result in failure, the entire team settles into a state of comfortable inertia that slowly cripples the entire business.

Further, this settling-in process leads to people staying in jobs they’ve outgrown or no longer enjoy, simply because they’ve become so comfortable. Upper-level managers lose their passion for the business and stop seeking out new, more efficient ways to do things. Often, this is not because they are bad people or because they are actively corrupt, but because they have gotten used to things being done a certain way by certain people. In this way, the longer leaders stay in power, the more the system begins to become bogged down with a kind of passive or what I call unintentional corruption. This soft corruption and laziness trickles down to middle- and lower-level managers who, in turn, also stop finding new ways to motivate and inspire their subordinates.

After a while, this “go with the flow” attitude spreads to the entire organization—even to the other businesses, vendors, agents, and consultants it works with—and the corporation becomes a slow, cumbersome organism moving in one predictable direction. Or, more often, hardly moving anywhere at all.

The result is that all internally vetted ideas become stuck in a certain company mindset. Curiosity, innovation, and the motivation to buck trends are almost all totally squashed. At some point, the entire company becomes unresponsive or even outright hostile to new ideas that might rock the boat or change the direction of the business. Once this stage is reached, inevitably what happens is that a smaller, hungrier, more nimble and innovative company comes along and kicks the big, lazy company’s ass.

And finally, when the organization has new projects that absolutely must be started, they are given to the people, vendors, and businesses that are most familiar and comfortable to deal with. When this happens in the organizations that are the governments of countries—which are like corporate organizations in many ways—this is exactly where unintentional corruption begins: A government’s leadership team innocently starts to give the new projects and their associated budgets to those outside people and firms who are most comfortable to work with. Over time, the companies not receiving new projects shrink in both size and capability. Soon after, the selected companies become the only ones with the infrastructure and resources needed to get the job done, slowly solidifying themselves as the only choice for future projects.

Without competition, these companies become inefficient and lethargic and, as a result, must charge the government higher prices to get the same job done. Little by little, those countries’ infrastructure, schools, and economies stagnate, as progress slows to an almost complete halt. And wealth and power accumulate in the hands of a smaller and smaller group of people (the people who own those large and lethargic companies).

To fully understand the problem of corruption, how innocently it starts and how difficult it is to remove, imagine one little (or big) kingdom. The King's (or President’s or Prime Minister’s or Chairman’s or insert your favorite ruler title here) wife’s brother's son-in-law gets an exclusive license to import fancy mattresses (mostly used in hotels, since local people are too poor to buy them) and earns a nice living doing so, free from competitors.

Eventually some motivated entrepreneur comes along and says, “You know, if this other person is earning monopoly prices importing fine mattresses, then I'll just manufacture some here domestically.” But that entrepreneur is naive. The exclusive import license wasn’t an accident, as it reflects the ruler's wife's brother's son-in-law's special relationship within the political system. Smart hotel operators will know better than to purchase mattresses from the new competitor, since to do so will bring them regulatory problems. Intelligent bankers will know that the new business will fail and won't lend the entrepreneur money, and, even if it doesn’t fail, lending him capital will bring them regulatory problems, too. Eventually, the new entrepreneur's smart wife will explain to him why his business idea is doomed.

Without opportunity, both people and money stagnate, and the smartest people instead focus their energies on ascending the ladder of corruption. Even if the ruler finally comprehends that, on some level, he's helped create a counterproductively corrupt system, he soon realizes that, if he starts threatening the income streams of the folks he depends on to support the regime, his own base will disappear.

Now apply our little mattress example to hundreds or thousands of other products and services, and you’ll start to understand the web of power, revenue relationships, and dependencies that quickly and permanently form, extracting significant opportunities out of the economy and away from its citizens. Once it gets going, it’s hard to untangle the giant web of corruption.

 

***

 

But I digress. Let’s go back to our big hypothetical company, where our company was about to get its ass kicked. Imagine that the entire group of people at the top of this giant business is walking back to work after lunch and they’re all hit by a bus. (Don’t worry, none of them felt a thing.) Let’s also pretend that nobody within the organization is qualified to replace the dearly departed management team. Suddenly, the shareholders have to find new people to run the business. In comes an entirely new management team who are all excited about their new roles. With them come new ideas and a passion for making the company succeed in fresh, innovative ways.

The new management is so amped about their new jobs that they don’t just passively let new ideas float in; they actively seek them out. As the new bosses take over, their excitement trickles down throughout the entire organization. The other members of the team either rediscover their own passion for their jobs (and the drive to try new ideas that comes with that passion) or they are replaced with new people who have that critical energy. As a result of all this, the giant company becomes more agile and innovative, and it also has the resources to challenge any smaller competitors that try to compete with it.

As many new ideas are tried, some succeed, and that builds momentum and motivation to try even more new ideas. It’s true that human beings don’t like the discomfort associated with failing, but it’s also true that they love the feeling of victory, so, for a while, new ideas are sought out and chased with full vigor—like a drug addict looking for his next fix. Ideas and passion are the seeds of creative destruction and reconstruction.

It turns out that the unfortunate bus incident turned out to be a really good thing for our hypothetical company. Perhaps nothing else but losing the entire management team all at once could have turned this organization around and made it responsive and alive, efficient and able to serve its customers again.
 

The governments of countries are like corporate organizations in many ways.

They are the largest and most powerful organizations in the world, tasked with the serious business of running countries. In an ideal world, democratic elections in countries are less dramatic versions of the bus that hit our hypothetical company’s management team. Elections facilitate what I like to think of as “peaceful revolutions,” when different people with fresh new ideas are promoted to lead the country, replacing the old leaders and their web of relationships—hopefully before too much intentional and unintentional corruption has had time to materialize—so that new approaches to old problems can be formulated and acted on with new passion, vigor and excitement.

The peaceful revolutions that democratic elections bring revitalize governments from the top down. This allows governments to adapt to new world conditions and grow with the country and the people they are responsible for governing. In turn, things move faster within the government. As old, inefficient relationships end, the entire organization—from top politicians all the way down to the lowest level government contractor—can come alive and have an infinitely higher chance of doing a better job taking care of the peoples’ needs in an honest, focused, and efficient way.

It’s this last part—the regular ousting of the old guard and the bringing in of new, passionate, and creative leaders—that I believe is the most vital part of a successful democracy.

It is exactly that concept, more than anything else, that makes democracies work better than any other system in the long run.

Unfortunately, it is this absolutely critical element of the democratic process that has been hurt or even destroyed outright in some democracies, including here, in the United States.