Performance Management

Executive Compensation: Pay Them Well, But Not Too Well

January 23, 2020 by Nagesh Belludi Leave a Comment

Our executive compensation system is broken. Surveys show that the average public company CEO compensation is many hundred times that of the average employee. This gaping disparity in pay vis-à-vis the relative value they bring to their organizations is a moral embarrassment to our society, a point that wasn’t lost on the Occupy movement of yesteryear.

The debate over executive pay won’t die away anytime soon. As election year approaches, grandstanding politicians are vying to outdo each other with pledges to implement pubic policies that limit executive compensation, whereas theorists argue that, in a market economy, compensations should be set by supply and demand for executive talent.

Disproportionate executive compensation can demotivate employees The latter position is commonly echoed by company boards and executive compensation consultants—both of whom owe their cushy jobs to the CEOs and their top teams. They assert that leaders need to be provided with personal incentives to attract and motivate them.

Strangely enough, such incentives often demotivate the leaders’ followers. Financial incentives that are directed disproportionately to the leader in isolation often prove downright counterproductive.

Leadership is an outcome of the relationship between leader and follower, and excessively compensated leaders do not engender followership effectively.

This comports with financier J. P. Morgan‘s observations at the start of the twentieth century that the only characteristic common to his failing clients was a tendency to overpay those at the top. As Peter Drucker commented in The Frontiers of Management (1986,)

[J. P. Morgan found] eighty years ago that the only thing the businesses that were clients of J. P. Morgan & Co. and did poorly had in common was that each company’s top executive was paid more than 130 percent of the compensation of the people in the next echelon and these, in turn, more than 130 percent of the compensation of the people in the echelon just below them, and so on down the line. Very high salaries at the top, concluded Morgan—who was hardly contemptuous of big money or an “anticapitalist”—disrupt the team. They make even high-ranking people in the company see their own top management as adversaries rather than as colleagues…. And that quenches any willingness to say “we” and to exert oneself except in one’s own immediate self-interest.

Idea for Impact: Employees’ efforts are devalued markedly under conditions of gross inequality. Pay leaders well (if you pay peanuts, you’ll get monkeys,) but not too well.

A Guide to Your First Management Role // Book Summary of Julie Zhuo’s ‘The Making of a Manager’

December 16, 2019 by Nagesh Belludi Leave a Comment

First-time managers are often unprepared for—even unaware of—the responsibilities and challenges of being a manager. This is particularly true at fledging startups that don’t have bonafide HR departments to guide their novice managers nor can afford management coaches. Besides, it takes a new boss a year or two to learn the basics and become comfortable in his/her new role.

Julie Zhuo, Vice President of Product Design at Facebook When Facebook was small enough and “the entire company could fit into a backyard party,” 25-year old product designer Julie Zhuo was asked to become a manager. Zhuo had started at Facebook as its first intern and then gone full-time. Having no prior managerial experience, she acted how she thought managers were supposed to act and made many mistakes. In due course, she found joy in the role, expanded her skill set, and evolved to become Facebook’s VP of product design.

In The Making of a Manager: What to Do When Everyone Looks to You (2019,) Zhuo has chronicled her experiences from ramping-up into management and getting to know herself better. It’s the book she wishes had been there for the novice manager that she was.

Zhuo offers many hard-earned insights that only time in the trenches can reveal:

Operate from first principles. “Your job, as a manager, is to get better outcomes from a group of people working together.”
Not everyone is cut out for a managerial responsibility. “Being a manager is a highly personal journey, and if you don’t have a good handle on yourself, you won’t have a good handle on how to best support your team.”
Let go of your old “individual contributor” role and make the shift to being the boss. Don’t spend time trying to do the work. Invest your time in coaching, supporting, and developing employees. Don’t run interference between them.
Discover your decision-making proclivities. Map out your strengths and weaknesses. “Great management typically comes from playing to your strengths rather than from fixing your weaknesses.”
Realize that the source of your power as a manager is everything but formal authority. Respect trumps popularity.
Don’t manage everyone in the same way. Learn to appreciate how distinctive each individual is in what he/she wants from work and what animates him/her to work well.
Trust is a critical ingredient in relationships. “Invest time and effort into creating and maintaining trusting relationships where people feel they can share their mistakes, challenges, and fears with you.”

Zhuo offers practical—if basic, but sufficient—advice for setting a vision, assessing the culture, delegating problems, giving feedback, aligning expectations, setting priorities, establishing a network of allies and confidants, hiring cleverly, and other responsibilities of leading a team. She delves into many difficult circumstances she’s encountered, e.g., handling previously-peers-now-employees whom she passed over for a promotion.

Recommendation: The Making of a Manager is an excellent primer for novice managers. It offers an insightful, practical, and relevant playbook for making the transition from being an outstanding individual contributor to becoming a good manager of others.

Complement with Andy Grove‘s High Output Management (1983,) Loren Belker et al.’s The First-Time Manager (2012,) and Michael Watkins’s The First 90 Days (2013.)

Fire Fast—It’s Heartless to Hang on to Bad Employees

August 27, 2019 by Nagesh Belludi Leave a Comment

Firing is About an Underlying Commitment to Retaining Great People

The former General Electric leader Jack Welch earned the moniker “Neutron Jack” for sacking some 100,000 employees in the early years of his tenure as chief executive. Welch defended the dismissals by emphasizing that it would have been far more heartless to keep those employees and lay them off later when they had little chance of reinventing their careers. The dismissals were part of his deliberate efforts to establish a corporate culture that emphasized honest feedback and where only the “A players” got to stay.

Many Fired Employees Feel Surprised That the Axe Didn’t Fall Sooner

Fire Fast---It's Heartless to Hang on to Bad Employees Managers know that ending a bad fit sooner is better than doing it later. Firing a bad employee is often better for both the employee leaving and the employees remaining.

Then again, many managers hesitate because firing is awfully difficult. No one likes to fire people. Looking an employee straight in the eye and telling he’ll no longer have a job is one of the harshest things a manager will ever have to do.

Besides, some managers are so uncomfortable with conflict that they are unwilling to deal directly and honestly with a problem employee, not to mention of confronting the risk of a wrongful termination claim.

If an Employee is Not Working out for You, Fire Fast

By holding on to a bad employee, you are really doing a disservice to the employee. Forcing a person to be something he’s are not, and giving him the same corrective feedback—week after week and quarter after quarter—is neither sustainable nor considerate. Trying to keep the employee in the wrong role prevents his personal and professional evolution.

Give the employee a chance to turn the situation around—people can change.
Try to find him an appropriate role within your company. Recall the old Zen poem,

Faults and delusions
Are not to be got rid of
Just blindly.
Look at the astringent persimmons!
They turn into the sweet dried ones.

However, if the employee is a truly bad fit, reassigning him just shifts the problem to a different part of the company.
If your efforts to remediate a bad employee haven’t worked out, cut your losses and fire him promptly. Help the employee move on to a job or a company where the fit is much better.

Idea for Impact: It is much worse to retain someone who is not suited for his job than it is to fire him. Help him find a new role quickly and land on his feet.

Seven Easy Ways to Motivate Employees and Increase Productivity

January 10, 2018 by Nagesh Belludi Leave a Comment

If you’re a manager, you can become a motivator by inspiring your employees to high performance—and produce beyond the ordinary.

Purpose. Even the mundane can become meaningful in a larger context. Howard Schultz, the founder and CEO of Starbucks once said about providing propose, “People want to be part of something larger than themselves. They want to be part of something they’re really proud of, that they’ll fight for, sacrifice for, that they trust.” Sometimes that’s all people need to get their skates on—because nothing is worse than feeling that they’re are stuck doing a meaningless task.
Autonomy. Empower people to innovate and make decisions. Be clear about performance expectations. Reduce your direct supervision of their work. Don’t micromanage.
Appreciation. Reward your employees’ small as well as big successes. Recognition is easy and need not be expensive and time-consuming.
Involvement. Interact directly with frontline employees, observe their work, solicit their opinions, seek ideas for improvement, and work directly with the frontline to identify and resolve problems. Encourage employees to talk about the “undiscussable,” even if others don’t want to hear it.
Challenge. Put people in situations where they can grow, learn new skills, and gain new knowledge.
Urgency. Disregard command-and-control and, instead, become an expediter and facilitate your employees getting their job done. The pioneering management guru Peter Drucker encouraged managers to frequently ask of employees the one question that can initiate more improvement than any other: “What do I do that wastes your time without contributing to your effectiveness?”
Empathy. Care about your employees’ success and give them hope about their performance. Be sincere. Demonstrate you value differing opinions.

Idea for Impact: The bottom line on motivation is this: People know what motivates them. Ask them. You may not have any idea what they want.

Five Pitfalls of Coaching Success

December 20, 2017 by Nagesh Belludi Leave a Comment

According to Coaching, Mentoring and Managing: Breakthrough Strategies to Solve Performance Problems and Build Winning Teams (1996) by William Hendricks, et al., some managers instinctively do things that thwart their team’s performance.

Examine if you’re guilty of one or more of the following.

Do you tend to speak at your employees, not with them? Your style of instruction could be accompanied by the frequent use of phrases such as “I want” and “you should.”
Do you tend to exaggerate situations or behavior? Your tendency to color an employee’s behavior using qualifiers such as “always,” “never,” and “everyone” could be dragging him down. Generalizations could crush the employee’s sense of self-esteem. If you want to create positive change, instill pride, not shame.
Do you sometimes assume that your employee knows a problem and the solution? It’s possible that the employee may not recognize the problem. Skillfully use lines of questioning that can help the employee drill down into the details and reveal a higher-level issue.
Do you often fail to follow up? If you don’t follow up on directions or performance expectations, you will inevitably find yourself reacting to unpleasant surprises.
Do you not reward improved behavior? If you don’t reward positive changes in behavior, you will not expand behavioral adjustments to permanent performance improvement. Managerial feedback and coaching is all about reinforcing positive behaviors and encouraging corrections to damaging behavior.

A Sense of Urgency

December 18, 2017 by Nagesh Belludi Leave a Comment

The most successful managers I know are highly attentive of their colleagues’ sense of urgency and incessantly adapt to them.

In his excellent Steve Jobs biography, Walter Isaacson evokes Apple CEO (and operations wizard) Tim Cook‘s responsiveness and a sense of urgency:

At a meeting early in his tenure, Cook was told of a problem with one of Apple’s Chinese suppliers. “This is really bad,” he said. “Someone should be in China driving this.” Thirty minutes later he looked at an operations executive sitting at the table and unemotionally asked, “Why are you still here?” The executive stood up, drove directly to the San Francisco airport, and bought a ticket to China. He became one of Cook’s top deputies.

Idea for Impact: Bosses and customers often respond more positively to your focus on creating a sense of urgency before emerging problems erupt in a crisis.

Rewards and Incentives Can Backfire

November 15, 2017 by Nagesh Belludi Leave a Comment

Rewards and Incentives Can Backfire

Rewards and Incentives are Gateways to Behavior-Change

One of the great struggles of life is to get others to do the things they should, but don’t want to—getting your daughter to cleanup her bedroom or do homework in her least favorite subject, convincing your employee to do a task in the manner that your company expects, and so forth.

One tried-and-true technique to get reluctant people to do what they should is to hold back an incentive. For example, parents who want children to eat vegetables at dinner could stipulate that they eat their vegetables (the non-preferred behavior) before they can eat their desserts (the preferred behavior.)

Preferred Behaviors Can Be Used to Reinforce Unpreferred Behaviors

This motivational rule was formally studied by the American psychologist David Premack. The Premack Principle, or the “relativity theory of reinforcement,” makes it easier to do an unpleasant activity by putting a pleasant activity right after it. In this manner, a reinforcer could observe what an individual chooses to do voluntarily and offer that favored task as an incentive to gain compliance or to increase the likelihood of another less-favored behavior occurring.

Grandma's Rule or Premack Principle: Relativity Theory of Reinforcement As expected, although an academic, Premack enjoyed a very successful vocation as a highly paid “productivity expert” dispensing age-old techniques. He traveled around the country and advised thousands of corporate executives to manipulate themselves into becoming more motivated and more productive by organizing their day such that they schedule first anything that’s unpleasant and important and then reward themselves with something they really like doing.

Grandma’s Rule: “Johny, Finish Your Homework Before You Watch TV”

That a high probability behavior could be used to reinforce participation in a low probability behavior is the unassuming “Grandma’s Rule”—arguably the most universally recognized principle in the field of behavior change. Workplaces use the grandma’s rule by offering future “plum” assignments for employees who “pay their dues” by doing “dull and dirty” work in the present.

The grandma’s rule anchors in the fact that people, including children, are willing to do something they don’t really want to do if that’s the only way they can do something that they really want to do. Absent this established reinforcement, people left to their own devices tend to do what they like doing instead of doing things they don’t like doing even though latter are more beneficial.

Preferred Behaviors Can Be Used to Reinforce Unpreferred Behaviors

The Hidden Costs of Rewards and Incentives

Rewards and incentives can guide and modify behavior. The goal of offering rewards for positive reinforcement is to have the unpleasant tasks become less and less unpleasant. Therefore, the true measure of the effectiveness of any reward is how well the preferred behaviors become internalized. For example, offering rewards to children for reading books is not merely to get them to read books inside the classroom, but to internalize the reading behavior with the goal that they read even during the summer when they don’t have to read for school.

Offering rewards for motivating people to do unlikable tasks could sometimes become counterproductive. In what psychologists call “the overjustification effect,” a reward, instead of motivating, could fortify a person’s revulsion for the task. In other words, the reward could reinforce the belief that the task can’t be worth doing for itself.

Rewards Can Backfire

Overjustification effect is controversial because it disputes the general principles of motivational psychology and behavioral reinforcement—especially in the contexts of parenting, education, and the workplace.

Idea for Impact: Locating the pleasure in the future, when the reward will be imparted, could turn the present-moment doing of an unpleasant task into tedium. For example, insisting that your child eat broccoli for being rewarded with dessert could make her hate broccoli even more.

Incentives Matter

September 11, 2017 by Nagesh Belludi 1 Comment

Incentives are Powerful Extrinsic Motivators

Incentives are Powerful Extrinsic Motivators The bedrock premise of economics is that incentives matter. This is a powerful device because it applies to almost everything that humans do.

Changes in incentives—monetary and nonmonetary—can sway human behavior in foreseeable ways.

For instance, if a resource becomes more expensive or scarce, people will be less likely to choose it. Higher prices will reduce the quantity of goods sold. Fewer people visit outdoor recreational areas on chilly and rainy days. Whenever fuel prices soar through the roof over a prolonged period, consumers buy less gasoline—they eliminate less important trips, carpool more, and purchase fuel-efficient cars.

Incentives Shape Behavior

If the payback from a specific choice increases, people are more likely to choose it. Students focus in classes when their professors declare what course material will be on the examinations. Pedestrians are more prone to leaning down and picking up a quarter than they would a penny. Traditional incentive systems for executives give rise to corporate “short-termism”—executives’ annual bonuses are often awarded for achieving targets that are insubstantially linked to long-term value creation.

Incentives shape behavior. The economics of wrongdoing and crime suggest that fines be increased to offset the rewards from lawbreaking—for example, traffic fines for speeding are typically doubled in construction zones. Ryanair, Ireland’s pioneering discount airline, purposefully uses exasperating fees for checked bags, airport check-ins, and printing boarding passes to “reshape passenger behavior” and focus on getting passengers punctually to their destinations with the least overhead costs.

Incentives Can Backfire Even If Launched with the Best of Intentions

Incentives Can Backfire Even If Launched with the Best of Intentions The “incentives matter” framework of economics explains why bad behavior happens whenever the payoff for such behavior is high and the odds of getting caught and reprimanded are low.

People will scheme—even perpetrate fraud—to achieve the incentives they’re offered. If targets are impracticable and employees realize that they can achieve those targets by cheating, then they will cheat.

Incentive structures are partially to blame for the recent Wells Fargo accounts scandal. Even if Wells Fargo established incentive arrangements with the best of intentions, it tied a substantial percentage of employee compensation to immoderate sales targets. This compelled employees to open millions of sham bank accounts and credit cards in customers’ names, infringing on their trust, and costing them millions of dollars in fees for services they did not willingly sign-up for. As this case makes obvious, incentives intended to stimulate people to do their best can sometimes push them to do their worst.

Idea for Impact: A Little Incentive Goes a Long Way

Incentives matter. They influence choices that humans make. Changes in incentives influence their choices. However, designing effective incentives is a painstakingly difficult problem. Do not underestimate or ignore potential undesired results—increase in dishonest behavior, over-focus on one area while overlooking other parts of the business, imprudent risk-taking, deterioration of organizational culture, and diminished intrinsic motivation.

The 7 Hidden Reasons Employees Leave [Book Summary]

August 4, 2017 by Nagesh Belludi Leave a Comment

Employee engagement and retention of top talent is a holy grail of people management—and nearly as hard to pin down.

Employees expect managers to be fair, pay fairly, listen, value opinions, relate, develop, challenge, demonstrate care, advance, and so on. But many employees don’t know when and how to voice their concerns, or negotiate for what they want.

All managers know that engaged employees are happier and more productive. Yet, managers and HR managers cannot simply make employee engagement “happen.”

In The 7 Hidden Reasons Employees Leave, employee-retention expert Leigh Branham discusses how companies can tackle employee disengagement and retain their best and brightest people.

Using a copious amount of facts and figures from interviews and surveys, Branham explores seven reasons for employee disengagement. For each reason, Branham lists signs that managers need to keep their eyes open for, and shows how employers and employees could communicate and understand their mutual needs and desires.

“Some Quit and Leave … Others Quit and Stay”

According to Branham, employee disengagement—and eventual resignation—is not an event; rather, it is a plodding process of bitterness, discontent, and eventual withdrawal that can take weeks, months, or even years until the definite choice to resign happens. He lists the ten most common stimuli that trigger employee disengagement:

Poor management
Lack of career growth and advancement opportunity
Poor communications
Issues with pay and remuneration
Lack of recognition
Poor senior leadership
Lack of training
Excessive workload
Lack of tools and resources
Lack of teamwork

Branham claims to have synthesized some 20,700 employee-exit surveys and has identified four fundamental human needs (compare to Maslow’s hierarchy of needs) that must be met by employers:

Employees need to feel proficient. They want to be matched to a job that aligns with their talents and their desire for a challenge.
Employees need to feel a sense of worth. They want to feel confident that their commitment and their efforts translate into meaningful contributions to their company’s mission. They desire to be recognized and rewarded appropriately.
Employees need to be trusted. They expect their employers to pay attention, and be honest and open in their communications.
Employees need to have hope. They want to be treated fairly, and given opportunities to grow their skills and advance their careers.

Why Employees Start Feeling Disconnected from Their Work

Why employees start feeling disconnected from their work The core of The 7 Hidden Reasons Employees Leave is a “how to” guide to address each of the seven reasons to enable a company to pursue the path to become an “employer of choice.”

Reason #1: The Job or Workplace Was Not as Expected. Many new hires join their companies with a wide range of misconceptions and unrealistic expectations. Some stay and adapt, others disengage and stay, and some others disengage and ultimately leave. Branham advocates creating realistic job descriptions, and open communications between managers and employees on achieving their mutual goals and expectations.

Reason #2: The Mismatch between Job and Person. Companies with strong reputations for selecting the right talent and keeping employees well matched with their jobs have a strong commitment to the continuous upgrading of talent. Managers can assign tasks so that employees can be more engaged through the use of their “motivated abilities.” Managers must keep an eye open opportunities to augment employees’ jobs by delegating tasks they might not have considered before.

Reason #3: Too Little Coaching and Feedback. Branham affirms that most managers do coaching and feedback merely as annual or biannual HR-required discussions that bind ambiguous targets to performance-ranking and pay scale. Managers must lead frequent, informal, on-the-job feedback conversations with employees. Branham identifies four principal themes that managers must address to make their performance management practice seem less controlling and more of a partnership:

“Where are we going as a company?”
“How are we going to get there?”
“How does the manager expect the employee to contribute?”
“How is the employee doing? What is going well? What are the key suggestions for improvement?”

Reason #4: Too Few Growth and Advancement Opportunities. Branham observes that most talented employees cannot pinpoint and articulate, and often underuse their greatest strengths. He encourages companies to provide self-assessment tools and career management training for all employees, enabling them to be the best they possibly can be. Most “employers of choice” have a strong mentoring culture. They communicate that employees must take the initiative in their own career development.

Reason #5: Feeling Devalued and Unrecognized. To Branham, many companies do not have a formal and informal culture of recognition because their managers are themselves too busy with their nominal responsibilities to pay adequate attention to employees’ performance. Or, they can’t discern between average and superior performance. He lists recommendations for competitive base- and variable-pay linked to achieving business goals. He reminds managers that employees are hungry to be listened to, and want their ideas sought and implemented.

How companies can tackle employee disengagement and retain their best and brightest people Reason #6: Stress from Overwork and Work-life Imbalance. Branham observes that the relationships employees form with other employees is a glue that binds people to their workplaces. He encourages fostering social connectedness by assigning cross-functional team projects and organizing group outings.

Reason #7: Loss of Trust and Confidence in Senior Leaders. When senior leaders don’t back up pronouncements such as “people are our most important asset” with their actions, even mid-level managers begin to question the decisions and the actions of senior leaders. The result is a manifest lack of enthusiasm in the workplace, and in the rising complaints and questions about policies and practices. Leaders must set the tone for workplace culture and must back up their words with actions to discourage employee cynicism and disengagement.

Becoming an Engaged Leader is the Embodiment of What Leadership Means

Recommendation: Fast read Leigh Branham’s The 7 Hidden Reasons Employees Leave. This book makes a great reading for managers and leaders who will need to scratch beneath the surface to recognize unhappy employees before it’s too late, and then engage their employees better and retain their top talent.

While many of the book’s themes may appear familiar, The 7 Hidden Reasons discuses many ideas and “engagement practices” in great specificity to help managers and leaders keep their antennae up for signs of bitterness and discontent, and correct before they lose their best and brightest people. This practical tome can also help employees discuss and resolve their needs and desires.

Developing a deep understanding of what causes employees to lose motivation, disengage, and leave cannot be ignored or overlooked. Managers and leaders who can resolve the divergence that employees feel between their personal values and the best interests of their businesses will gain immeasurably by having a highly engaged and productive workforce.

One of the Tests of Leadership is the Ability to Sniff out a Fire Quickly

July 18, 2017 by Nagesh Belludi Leave a Comment

One of the tests of leadership is the ability to recognize a problem before it becomes a disaster

I’ve previously stressed the importance of problem-finding as an intellectual skill. I’ve also highlighted why risk analysis and risk reduction should be one of the primary goals of any intellectual process. In this article, I’ll write about being proactive in identifying problems before they evolve into crises.

How Wells Fargo Failed to Recognize a Problem and Address it before it Became a Bigger Problem

As the Wells Fargo accounts scandal unfolded, it was clear that Wells Fargo’s leadership was well aware of the burgeoning problems early on, but failed to act decisively and nip the problem in the bud.

Given impossible sales quotas to reach, Wells Fargo’s “high pressure sales culture” opened as many as two million bank and credit card accounts on behalf of its customers without their consent. Employees were rebuked or even fired for not meeting aggressive cross-selling targets.

Human nature is such that high-pressure demands can deplete the willpower people need to act morally and resist temptations. And such demanding circumstances encourage people to go into defensive mode, engage in self-interested behaviors, and consider only short term benefits and dangers.

Leadership Lessons from the Wells Fargo Accounts Scandal: “A Stitch in Time Indeed Saves Nine”

Leadership Lessons from the Wells Fargo Accounts Scandal Wells Fargo’s leadership reportedly had data about ethical breaches, but they ignored or misjudged the impact of the problem. Wells Fargo even held a two-day ethics workshop in 2014 unequivocally telling their employees not to do that. As per an internal review, managers knew that 1% of employees had been fired for “sales integrity” violations.

Wells Fargo’s leadership didn’t act quickly and decisively to mitigate the effects of the crisis. Warren Buffett, one of the Wells Fargo’s biggest investors, summarized this leadership inaction at the 2017 Berkshire Hathaway annual meeting:

There were three very significant mistakes, but there was one that was worse than all the others … The main problem was that they didn’t act when they learned about it … at some point if there’s a major problem, the CEO will get wind of it. And at that moment, that’s the key to everything, because the CEO has to act. It was a huge, huge, huge error if they were getting, and I’m sure they were getting, some communications and they ignored them or they just sent them back down to somebody down below.

Leadership: “Only the Paranoid Survive”

Andy Grove (1936–2016,) the illustrious cofounder and CEO of Intel, was a famous worrier. At Intel, the focal point of Grove’s leadership style was worry and skepticism. He believed that business success contains the seeds of its own destruction, and that in order for an organization to have longevity, it needs to continue to worry about the future.

Grove’s principle was immortalized in his famous proclamation, “Success breeds complacency. Complacency breeds failure. Only the paranoid survive.” He eloquently explained his worrisome mantra in his bestselling corporate memoir, Only the Paranoid Survive (1996.) He wrote in the preface:

The things I tend to be paranoid about vary. I worry about products getting screwed up, and I worry about products getting introduced prematurely. I worry about factories not performing well, and I worry about having too many factories. I worry about hiring the right people, and I worry about morale slacking off. And, of course, I worry about competitors. I worry about other people figuring out how to do what we do better or cheaper, and displacing us with our customers.

At Intel, worrying about the future created a culture of triumph that propelled change and innovation. Grove never let Intel rest on its laurels and led the company to break boundaries in microprocessor innovation. During his tenure as CEO from 1987—98, Intel’s stock price rose 32% a year. Grove also said, “A corporation is a living organism; it has to continue to shed its skin. Methods have to change. Focus has to change. Values have to change. The sum total of those changes is transformation.”

Idea for Impact: Learn to Sniff out a Fire Better than Anyone Does

The principal tasks of leadership are (1) identifying the biggest risks and opportunities, and (2) allocating organizational resources. Therefore, one of the tests of leadership is the ability to recognize a problem before it becomes a disaster. If identified and addressed early, nearly any problem can be resolved in a way that is beneficial for everyone involved.

Many leaders tend to be reactionary—they claim, “why fix something that isn’t broken.” Even when they see an impending problem, they may assume that the problem “isn’t that big of a deal” and wish the problem will just go away. Alas, many problems never go away; they only get worse.

To become a good leader, be paranoid—always assume that “there’s no smoke without fire.” If, according to Murphy’s Law, everything that can go wrong will go wrong, the paranoid leader has an advantage.

Whenever you are doing anything, have your eyes on the possibility of potential problems and actively mitigate those risks. Never allow a problem to reach gigantic proportions because you can and must recognize and fix it in its early stages.

As the medieval French philosopher and logician Peter Abelard (1079–1142) wrote, “The beginning of wisdom is found in doubting; by doubting we come to the question, and by seeking we may come upon the truth.”

Performance Management

Wondering what to read next?

Wondering what to read next?

Firing is About an Underlying Commitment to Retaining Great People

Many Fired Employees Feel Surprised That the Axe Didn’t Fall Sooner

If an Employee is Not Working out for You, Fire Fast

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?

Rewards and Incentives are Gateways to Behavior-Change

Preferred Behaviors Can Be Used to Reinforce Unpreferred Behaviors

Grandma’s Rule: “Johny, Finish Your Homework Before You Watch TV”

The Hidden Costs of Rewards and Incentives

Rewards Can Backfire

Wondering what to read next?

Incentives are Powerful Extrinsic Motivators

Incentives Shape Behavior

Incentives Can Backfire Even If Launched with the Best of Intentions

Idea for Impact: A Little Incentive Goes a Long Way

Wondering what to read next?

“Some Quit and Leave … Others Quit and Stay”

Why Employees Start Feeling Disconnected from Their Work

Becoming an Engaged Leader is the Embodiment of What Leadership Means

Wondering what to read next?

How Wells Fargo Failed to Recognize a Problem and Address it before it Became a Bigger Problem

Leadership Lessons from the Wells Fargo Accounts Scandal: “A Stitch in Time Indeed Saves Nine”

Leadership: “Only the Paranoid Survive”

Idea for Impact: Learn to Sniff out a Fire Better than Anyone Does

Wondering what to read next?