Before diving into this chapter, I will caveat that I am no great leader. I have worked with and around many strong and weak leaders and have been capturing their behavioral patterns for years. If only top athletes wrote about top athletes, the sport sections in the newspapers would be empty. So, here we go.
Many aspects such as fundraising and selling the company’s products and services dominate a CEOs mindshare. These are unavoidable and important, but many others in the company can lead the charge on such aspects. If this is not the case, the company does not have a strong system, which we covered as a necessary growth philosophy, and is too reliant on the CEO, and that doesn’t bode well beyond the short-term. I would argue that the top priority of the company’s top three or four senior executives, particularly the Chief Executive Officer, is to build a Comparative Advantage Culture. Only the CEO can lead this effort. We will talk more about this concept soon.
Bill Campbell, who is considered a “Trillion Dollar Coach” by top Google executives puts it best: “your title makes you a manager; your people make you a leader.” Leadership isn’t defined by what we say about ourselves or our titles; it is characterized by what others say about us. My key question to separate leaders from tactical managers is: Will others follow the person’s example because they respect the person’s dedication, hard work, values, or expertise?
True leadership is a rare trait and is seldom possessed without appropriate experience and training. To optimize organizational effectiveness and curate an environment that fosters sustainable growth, companies need true leaders in senior executive roles, not tactical managers with senior job titles. Leaders set the right example to be followed. Tactical managerial skills should be leveraged in repeatable operational roles.
Say what you will, given their recent existential challenges, about General Electric and other historical stalwarts of their sectors, these companies led their domains for decades and trained leaders who consistently delivered results year over year. Sectors are different in the market problems they solve and their maturity levels, but the organizational problems faced by companies in various sectors are more or less the same. So, newer sectors such as Technology can look at mature industries to learn how they solve organizational scaling problems. The first lesson is around truly internalizing the difference between leadership and tactical managerial skills.
Why Is Leadership Important At Rapid-Growth Companies?
Small- and mid-sized companies evolve very quickly in their early growth phases and the number of employees increase exponentially from 10 or 20 to more than 100 very quickly. Every new employee in such a fast-growth company is looking around for guidance on the daily behaviors to demonstrate and the values that they should uphold. It is imperative that senior executives are strong leaders who can demonstrate a path for every new employee to follow. This is all the more important at smaller companies because culture can evolve with the addition of every new employee.
Conversely, a weak senior executive team allows democracy to take over. A company should never be a democracy. The last thing a fast-growth company needs is for the culture to be defined as an average of the behaviors of all employees. This eventually leads to a senior executive team that has limited influence over the company’s culture, which is memorialized through Core Values.
Strong Leaders Create a Comparative Advantage Culture
Just because a child can count and starts counting stars on a clear night does not mean (s)he will end up with a reasonable estimate of the number of stars in the universe. Yet, we are likely to allow the child to continue to count. Why don’t we tell the child to leave the estimation exercise to scientists that spent their entire careers studying the universe? It’s because we don’t have the heart to tell the child about the complexities of the universe such as distances, gravity, light speed, time, rotation and revolution of objects, etc. As humans, most of us don’t enjoy being honest if it results in hurting someone else’s feelings at a personal level. In corporate environments, the same reservation to handle situations factually is the default state unless organizations build a professional and objective operating culture.
Far too often, corporate cultures allow decision-making based on committee and consensus, and not on objective analyses and topical expertise. It feels easier to vote on hard decisions because the vote-count can be misconstrued as data. This results in expertise, experience, and critical thinking being overshadowed by consensus building and conformity. The latter is important, but not at the expense of the former. Analytical and critical thinking employees will feel sidelined and leave the company over time and the company will be left with a groupthink culture.
Scaling companies should get past their early stage mentality where everyone does everything and organize and operate in a manner that optimizes problem-solving and ideation to drive sustainable growth. I whipped up a term to describe this concept because I couldn’t find any business experts who previously explored this: A Comparative Advantage Culture. This concept is an interim result of effectively implementing all five of the concepts we will cover in the next five chapters in this section. In other words, a strong leadership approach results in a Comparative Advantage Culture.
What is A Comparative Advantage Culture?
Essentially, in a business setting, we should work to limit the amount of backseat driving and size of the peanut gallery. In economics, Comparative Advantage is an age-old idea that the most efficient and effective path is to allow each person to do what that person is best at doing. In a day-to-day business context, a Comparative Advantage Culture delegates decision-making authority to individuals based on objective criteria such as relevant past experience and expertise, time dedicated to actually work on the specific problem at hand, and objective quality of work product.
Conversely, Comparative Advantage Cultures do not delegate decision-making authority based on organizational seniority or job titles. It ensures that each person knows the specific skill that (s)he brings to the table and focuses on that skill, while having clarity on others’ skills and allows them to focus on their skills.
For example, sales is where rubber meets the road at most companies. The onus of revenue is often exclusively placed on the Sales function. Sales representatives’ and sales leaders’ expertise is to execute on sales transactions. Their expertise is not to define the markets that the company should sell into, design the product, develop sales and marketing collateral, or develop analytics around sales and product performance. However, in many small- and mid-sized companies, sales reps and sales leaders spend a large share of their time on such internally-facing topics because it impacts revenue, away from sales prospects. In a Comparative Advantage Culture, sales representatives and sales leaders will internalize that their expertise is the identification and execution of sales opportunities, not product development, market assessment, or data analysis.
CEO’s role and the executive team should be staffed with strong leaders who can effectively build a Comparative Advantage Culture via the five concepts discussed in the remaining chapters in this section.
What Differentiates Such Leaders?
Leaders demonstrate a few traits consistently. We could think of many more, but consider these five traits as table-stakes.
1: Strong leaders understand their strengths and when to follow
No human being can be a trailblazer at everything that they get involved in. Everyone has areas they are passionate about and has behavioral and topical spikes (strengths) and weaknesses. Leaders master their spikes, understand their weaknesses and proactively choose to depend on (follow) others in their areas of weakness. For example, a creative founder CEO who is an expert at the problem solved by the company should know that there are many organizational areas, such as sales, strategy, finance, etc. where (s)he will have to follow in an educated and objective manner, but let other leaders show the path based on their expertise.
Conversely, if a person appears always fully in control in a senior role, it is more likely that the person does not know how and when to follow. Following is just as important a trait of a leader as showing the path for others to follow.
2: Leaders focus on what they bring to the table, not on an elevated position
Leadership isn’t about titles or hierarchy; it is the ability to show others a better path that they choose to follow. Others follow a leader because they believe in the person based on demonstrated traits. A common mistake is to confuse seniority with leadership. But we meet leaders at all levels of a company, and we may meet tactical managers with senior job titles. A leader simply focuses on how they can help the world around them, and their approach, expertise, and passion is so contagious that people around them can’t help but follow them without necessarily being asked to.
On the contrary, tactical managers have to depend on their organizational position to ask their audience to follow. Often, this results in short-term, basic compliance from employees without a cultural cohesion that organizations require.
3: Leaders DEMONSTRATE their commitment; Tactical managers TALK about their commitment
This is an important one. True leadership is a rare trait. Why? How many good leaders can you name? A simple litmus test is to follow the age-old saying “actions speak louder than words”. Making lofty statements that one cannot live by on a day-to-day basis does not evoke trust or confidence among employees, and an organization has to ensure that senior executives can demonstrate their commitment to every idea that they support. Without earning the trust of fellow leaders and employees, senior executives will likely be ineffective.
4: Leaders choose other leaders and take accountability for people they choose
Leaders search for people they can follow in areas where they are weak. They put other leaders in place with the intension of coaching and mentoring them to succeed and put themselves at risk with their personnel choices. This creates a positive ripple effect in an organization where leaders respect each other for their spikes and learn from each other, while supporting each other to succeed.
Tactical managers tend to look for personnel they can manage and stay above. Usually, this results in a downward spiral in organizational skills and collaboration. Combined with many of the other behavioral traits listed, tactical managers tend to put their people between themselves and risk, asking their people to handle the risk.
5: Leaders help solve the problem; Tactical managers oversee problem-solving
Leaders have the ability and desire to roll up their sleeves and do their part to reach the goals of the group. As mentioned above, one of the key differentiators of leaders is their spike. Whether it is necessary or not, leaders often bring their strengths to the table and help their people to get to expected results.
Tactical managers tend to show a behavioral component where they expect their people to solve the problem, while taking oversight responsibilities, which essentially puts their people in leadership roles to solve problems at hand. Even in such situations, true leaders are likely to throw themselves into the fire and learn with their people or follow the topical expert to solve the problem.
In sum, leaders focus on their strengths, accept accountability for failures, put others first, and credit others for success. Conversely, tactical managers tend to focus on coordinating tasks based on structures laid out for them. The latter is necessary in supervisory positions, but not ideal for senior executive roles that employees look up to for behavioral and moral guidance in a company. True leaders need to occupy senior executive roles.