Ego Free Leadership

by Brandon Black

  They had made this happen in spite of our doubts and lack of technology investment. What was possible if we actually supported them?

  “Is your team excited?” I asked Jay.

  He laughed. “Right now India’s getting no support.” He paused. “In fact, I was in a meeting the other day with the Technology team to brainstorm ways to deal with our system challenges. I wanted it fixed immediately, but one key analyst said he didn’t work on projects related to India. He just didn’t believe in it.”

  I was incensed. “Who was it?” Maybe firing somebody for dissention would show how serious this was.

  “It doesn’t matter who.” Jay thankfully waved me off. “He’s just an example of what I encounter every day.”

  “Don’t they get how important this is?”

  “Absolutely, Brandon. But they also know the company is struggling and their jobs might be in jeopardy. A lot of people assume you have a plan you’re not sharing.”

  I was getting madder by the minute. Over the last year I had gone to each department and explained Encore’s challenge. The high cost-to-collect was keeping us from buying new portfolios. India was the only way to make lasting change. It was the critical element on our path to sustainable growth. Failure in India could mean failure in the United States. Why was this so difficult for people to understand?

  “Other than that IT example,” I tried to ask more calmly, “what does this lack of support look like?”

  “The best way to describe it is that nothing about India is easy,” Jay said. “I spend time fighting with people who believe we are prioritizing India’s needs over theirs. The HR and IT departments can only focus on a limited number of challenges, so the ones in India get de-prioritized. It is death by a thousand cuts.”

  I thanked Jay for his candor. Over the next weeks, I asked similar questions of people all over the company, and heard similar perspectives. I began to see the situation through a new lens. India was causing friction throughout the organization. While I was frustrated by it, I realized even I had been limiting India’s potential based on my beliefs. I had to find a way to turn people’s attitudes around. Without that, I was pessimistic about our ability to navigate forward.

  SHAYNE

  After several years of working to improve Encore’s culture, Brandon remarked to me, “I had no idea it was that bad.” And make no mistake; Encore was barely average in its level of organizational dysfunction. Like many executives, Brandon hadn’t realized how much time and energy were used up by posturing and squabbling. Even when executives are faced with a burning platform and are made aware of the cultural dysfunctions in their organization, they tend to underestimate the negative impact on the real-world results they deliver.

  With the benefit of hindsight, CFO Paul Grinberg reflected on strategic decisions Encore made in 2005. “We spent a heck of a lot of time arguing with each other instead of figuring out how to move the organization forward. Key leaders would tell their teams not to trust the input of other departments. We lost hours of productivity. Then, in the end, we didn’t pursue strategies that were very profitable for our competitors, and we didn’t optimize the ones we did choose.”

  It’s impossible to know if they would have made the “right” decisions had they communicated more effectively. What we do know, however, is that ineffective conversations almost always lead to making the “wrong” ones. When smart people don’t listen to each other, their value cancels each other out.

  These ego dynamics affect an organization’s most important strategies. Brandon believed that the India strategy was a question of life or death for Encore. Yet, despite broad awareness of these stakes, the initiative suffered a “death by a thousand cuts.”

  The cultural dysfunctions, stuck relationships, and disharmony also took a toll on Encore’s financial performance in less obvious ways. While Brandon and his team could quantitatively determine the difference between a dollar collected in India and one collected in the United States, it was harder to assign a value to other missed opportunities.

  At Encore, leaders in pivotal stretch roles weren’t seeking help and receiving feedback. The Strategic Initiatives team was developing crucial business strategies only to have Operations discard their ideas out of hand. The tug of war between Finance and Operations led to a budget with no ownership. The new business ventures struggled due to lack of support. While the combined impact of this dysfunction was difficult to measure, Brandon realized it was significant.

  Our beliefs and actions have a human cost as well. The leadership team in India felt Encore’s lack of commitment, even if they didn’t understand what was going on stateside. “We felt irrelevant for a long time,” Manu explained. “There was no sense of what the future looked like. They gave us low-value accounts, so our collectors couldn’t produce results. People here felt like they were failing, and they left. The U.S. saw our poor collections as proof that India couldn’t work, so they didn’t trust us with better opportunities. The attrition got higher, reconfirming for the Americans that India couldn’t function. They didn’t trust us, and quite frankly, I didn’t trust them.”

  Initially, the net result was that a big, hairy, audacious challenge— opening a call center in India and completely changing the cost structure of the company—didn’t even make a small dent on Encore’s profit and loss statement. If it hadn’t been for the commitment and personal evolution of Manu, Brandon, and others, the cycle would likely have continued until they gave up. As higher-quality accounts were shared more broadly with the Indian workforce, and the Us vs. Them dynamics were addressed, this would change.

  No organization can be completely “ego-free,” and many succeed despite whatever individual and cultural egosystem dysfunctions they exhibit. Encore had many of these same issues in 2004, but favorable industry conditions helped them get away with it in the short term. By 2007, however, if Brandon couldn’t lead his organization to earnestly and energetically work as one to achieve their most important strategies, he feared Encore’s very survival was at stake.

  What are these egosystem tendencies in your organization? How do they disrupt your pivotal operations and most critical strategies? What is the cost to you of underachieving in this way? History indicates that it’s not wise to wait until a burning platform forces you to examine these questions; almost 90 percent of Fortune 500 companies in 1955 were gone by 2014. Doing the work when conditions are favorable builds a foundation for when they are not.

  THE DOLLAR COST OF THE EGOSYSTEM

  Egosystem dynamics (e.g., lack of individual growth and accountability, self-fulfilling prophecies, Us vs. Them dynamics) directly affect operational performance. Needed collaboration doesn’t occur or groups actually undermine each other. The dollar value of these poorer results is defined by what is at stake in a given initiative or organization. The difference to Encore of India succeeding or failing would prove to be $90 million per year.

  Even more than avoiding an unwanted downside, what is the opportunity cost to your organization of departments working against each other or defl ecting responsibility? If you dissolved these energy quagmires, what untapped capacity might you leverage for a new kind of result?

  Little did Brandon suspect that transforming these dynamics would add tens of millions of dollars a year to Encore’s bottom line.

  CHAPTER 4

  STOP PRETENDING YOU’RE NOT VULNERABLE

  The Importance of Emotional Safety

  BRANDON

  Our cantankerous reforecast process confirmed my worst fears. Profitability for the upcoming year—2008—was going to be down significantly unless we made meaningful cost reductions. Encore is a people business, with salaries and benefits being the most significant expense. Sadly, cost reduction meant eliminating people, and we needed to reduce headcount by 10 percent. Given the deep divisions between our corporate teams, and the unhealthy competition between the domestic and Indian operations, getting everybody on the same page was going to be diffic
ult. I was worried about the impact a layoff would have on morale and performance.

  I sat down with the leadership team to outline a process for making the personnel decisions. For me, this wasn’t a numbers exercise. I knew our employees well; many of them had been there for a long time and had made sacrifices for the company. They trusted me, and I felt I was personally letting them down. My team and I had a long talk, and surprisingly, there was no pointing of fingers or posturing. Several executives had been through layoffs at other companies where the process had been cold and calculated, so we decided to create a process focused on empathy. Each individual agreed to do whatever it took to ensure that every affected employee would receive the support he or she needed to make the transition. After the meeting, several executives came up to me individually and thanked me for making the employees our priority.

  Nonetheless, it was a sobering moment for me. We were going to terminate over a hundred people, and I couldn’t help wondering how much my conflict avoidance and our ineffective cross-department collaboration had contributed to the poor performance making this layoff a necessity.

  Despite the team’s good intentions, Paul and I were concerned about a leak. We didn’t have final approval from our board and couldn’t afford to have the workforce find out in advance. We decided that the executive team would be the only individuals informed of the situation. We gave each of them a target and asked them to recommend specific individuals to eliminate. One senior leader, however, didn’t feel close to the people several layers down and felt uncomfortable making decisions without input from his managers. He asked if he could talk to a few of his direct reports in confidence. I thought the request was reasonable and consulted with Paul about expanding the universe of people in the know.

  “Have you lost your mind?” Paul objected. “You know this place. Everybody is scheming to get information through back channels. Just the other day, somebody was in my office telling me the Operations team was snooping around trying to find out our results for the quarter. Involving more people will be a disaster.”

  On one hand, Paul was right: My extended leadership team seemed to have an insatiable appetite for gossip. As the CEO of a public company, I needed to ensure that material information was disseminated to our shareholders in a timely fashion and communicated through proper channels. A reduction of employees warranted public disclosure. On the other hand, how could we make the right decisions about whom to lay off without input from direct managers? This confidentiality issue had come up often, with my team criticizing me for keeping important items secret and reinforcing an in-group/out-group dynamic.

  Whichever decision I made, it would fall on me if it backfired. When I talked with Dana and Shayne about my worries, they both asked similar questions. Why didn’t I think I could trust the broader team? What had caused previous leaks and why did I think it would happen again? Did I worry about specific people, or was it a blanket fear? When I really thought about it, much of the historical gossip at Encore was just different departments jockeying for the upper hand. Many of these leaders were now part of WeLead and were aware of our goal of eliminating silos. I knew they were feeling more invested in the company as a whole. Had they changed enough for me to trust them? Was it arrogant of me to think Paul and I had a gene that others didn’t that allowed us to keep secrets?

  Reviewing the four cultural goals of WeLead pushed me to ask myself another question: How could I expect to build a culture of co-responsibility when I wasn’t willing to involve people in critical decisions?

  One of the cost-reduction recommendations was to eliminate the team focused on acquiring healthcare receivables. What had seemed like a natural transition in 2005 ended up being much more challenging, with returns that didn’t justify continued investment. I needed to tell one of my direct reports, Fritz, that he was being let go. Several times during his tenure at Encore we had talked about his not wanting to let me down. As his division’s financial struggles continued, this outcome had become increasingly more likely. Instead of facing reality, however, I had begun to avoid him.

  Fritz had given me a call a few days prior to my discussion with Paul about including a broader audience to ask if there were any pending decisions about the Healthcare division. On impulse, I told him no. Upon reflection, though, I decided it was time for me to start being transparent with him.

  Fritz and I met for lunch at a local Chinese restaurant. I wanted to connect with him as a person instead of treating him as an issue to check off my list. After a few minutes of small talk, I told him, “When you called me the other day, I lied to you. I wasn’t prepared for the conversation.” I expected him to be angry.

  After a pause, however, he said, “I appreciate you being honest with me. I guess that means you’re shutting our business down?”

  “It does.” It was a relief to have it on the table.

  “I’m not surprised,” he said with a sigh. “OK, let’s talk about what needs to happen. I’ll do whatever it takes to help my folks transition safely.”

  I stared at him. He had just found out he was losing his job, yet he was professional enough to stay focused on our overall goals for the layoff. He expressed his desire to tell his team personally and to unwind the business in a way that lived up to the promises he had made to partners. At the end of the meeting, we shook hands. It was our first authentic conversation in a long time, if not ever.

  The meeting with Fritz settled the issue of inclusivity in my mind. The organization would benefit from having more people involved. The risk of not expanding the universe was too great. We quickly set up an off-site meeting with a broad set of managers to surface questions and develop a timeline for the changes.

  Logistically, the meeting was a challenge because we were planning layoffs at multiple sites: our headquarters in San Diego and our operating sites in Phoenix, Arizona, and Arlington, Texas. While no reductions were planned for our other sites in St. Cloud, Minnesota, and New Delhi, India, we included them as well. To avoid raising suspicions, we sent everyone an invitation to attend a strategy session in early September.

  The fifty or so people in the conference room were in a good mood as I walked in. Normally, I would go around welcoming folks, but not this time. I was nervous about my ability to pull the team together and wanted to get started as soon as possible.

  “This is one of the most important meetings you’ll attend at Encore,” I told them, “but unfortunately, it’s not the kind you were expecting. We’re not here to talk about growth strategies. We’re facing a very challenging situation, and each of you plays a pivotal role in its success. We need to let go of 110 employees, and we’re shutting down our Health-care division.”

  In the quiet of the room, everybody’s eyes shifted to Fritz, seated beside me.

  “Brandon and I have talked,” Fritz told them, “so I knew this was coming. What’s important right now is pulling together to make sure this goes well. It won’t be easy for anyone.”

  I was grateful for Fritz’s words and saw how important they were for everyone. If a guy who was losing his job could focus on taking care of the larger challenge, without blaming the company, so could they.

  “I have never led a team through anything like this,” I said, “and I’m a little overwhelmed by the challenge. I need all of you to help me. There is no way we will succeed unless we work together.

  “Everything is likely to happen in the next week,” I concluded. “Pending approval from the board, we’re going to plan on letting the affected employees know first thing Monday, September 17. Until then, everything needs to be confidential.”

  I looked around the room trying to gauge their reliability. The group looked back at me. How we did this would significantly affect whether we built our culture on a foundation of trust or cynicism. Everybody seemed to appreciate that.

  SHAYNE

  It can be easy to judge the insufficient communication between Fritz and Brandon—of course they should have been talking
—or to reproach Brandon for not giving Dave performance feedback more frequently. The theoretical importance of having authentic, transparent conversations isn’t in question; it’s rather the practical difficulty of doing so when there isn’t emotional safety in the relationship.

  “Safety” can be defined in many ways, like job security, work site safety, or financial well-being. But the critical importance of “emotional safety” is often ignored at great cost. It is the foundation of a healthy and productive organizational culture and allows all other positive cultural attributes to flourish. If people feel supported and respected in a context of trust, they can face any difficulty, including losing their livelihood. If people feel in danger—even if their job is guaranteed for life—they invariably react to protect themselves.

  A lack of emotional safety in a relationship or team comes in many forms: feeling judged, blamed, or disrespected; perceiving that others are dishonest, talking behind our back, or withholding important information; feeling competitive or unsupported. It’s the experience of needing to watch out, that others are a threat to our success or self-image. Feeling unsafe leads to feelings of stress and to reactions of avoidance or aggression.

  Unfortunately, many of today’s organizations actually encourage fear, dysfunction, and misalignment because of how they go about managing performance. The prevailing thinking seems to be that if people are measured and rewarded in competition with each other, they will work harder and produce more. While this may be true for a subset of people, it is not sustainable or inspiring, nor is it true on a team or interdepartmental level. When leaders feel unsafe—about job security, others’ judgments, how trustworthy or transparent management is—they will act to protect themselves first, do their job second, and pursue the organization’s mission last. This isn’t just a problem for lower-level employees; it is true right up through the C-suite.