Keeping Control of the Top Team

Posted on January 23, 2009

Lead executives should stay loyal to the company, not create fiefdoms of their own. Here’s how one CEO dealt with an empire-builder on his own top team.

Positive and optimistic are traits I see over and over again as I’ve met with hundreds of chief executives.  This certainly was the case as I met with this very successful CEO.

I donned a hair net and beard net as he gave me a personal tour of the 52,000-square-foot factory that’s been featured on The Food Network, and that today churns out nearly 125,000 handmade items each day.  As we walked to our restaurant, it emerged that this story stems from the same optimism that is so prevalent in chief executives:  The optimistic belief that executives who aren’t performing well and require “babysitting” might still be worth keeping.

Most chief executives will recognize this story from his or her own past.  The executive in question started as a consultant, then converted to an employee.  I’ll refer to him by the title he requested, and in fact insisted upon – “Chief Lightening Catcher.”  His real function was to lead the sales department, but he didn’t want the mundane title of VP Sales.  He asserted that he would need broader authority to really push sales ahead.  As he was about to be hired, he presented a 40-page employment contract to the CEO, who carefully—and with the help of a lawyer—modified and signed it.

Executives like the Lightening Catcher are masters at setting the hook.  In his time working for the firm as a consultant, he had already showed some signs of greatness, kicking open a few doors, and creating a mystique about what he did and how he did it.  I’ve had a “mystique builder” working for me, and it was amazing how effective they can be at tapping into the optimism we business leaders have.

The CEO’s sales had been rocketing upward (as they are today), and he was hungry for some strong bandwidth on the team so he could concentrate on finance and internal operations.  After all, this is a real manufacturing operation, making real products with machines and people—there is great complexity.

I start to worry when an executive has an over sized need to be special.  Sure, I can understand that there is a need for employment contracts in some situations, but a special 40-pager?  The need for such a special title strikes me as odd, too.  Ideally, I prefer executives who are more focused on moving the company forward than making sure that everybody treats them as special.  As a Californian, I respect diversity and the benefits of people leading their lives in non-typical ways.  Why can’t someone work really odd hours, blending their job with their personal life?  Why can’t someone want a distinctive title?  Each on its own might be just fine—but when what’s driving it all is the need to feel special, look out.  Arguably, some of the best salespeople love to be in the limelight, love to save the day.  But more than likely, they are not top executive material.

The years 2001 and 2002 rolled by quickly, and the Chief Lightening Catcher wove himself into the fabric at the firm.  He completely dominated the sales area, then began systematically pushing the CEO out of “his area.”

The CEO’s partner handles the creative side and product development, and was even further from customers.  Rather than complete transparency, the Lightening Catcher’s role became the black box from which sales would emerge, and which only he could navigate.  He made it clear to the CEO that the sales team was loyal to him, and that they stayed only because of the special presence of the Chief Lightening Catcher himself.

Lack of transparency and the creation of fiefdoms (or silos) is another red flag.  Teams should be loyal to the company, and should be interfacing with people in other departments almost as comfortably as their own.  Executives should be working to reduce barriers within the company, not to erect them.  That’s not to say that there aren’t lines of authority, or that anyone, even a chief executive, should be allowed to meddle in a department.  But there should be few if any secrets.

Even though the Lightening Catcher always had big new opportunities “about to break wide open,” sales growth flattened out.  From 2004 to 2006, sales didn’t look anything like the end of the 90s.  But he did a great job of spinning his lackluster performance each time it came up, and increasingly was the center of company drama.  The sales slump was always someone else’s fault.  If only the Lightening Catcher had more control, he could have made great strides forward.  Increasingly, he was behaving with the authority and rights of an owner, as though he were partners with the founders.

The CEO kept his peer group apprised of the Lightening Catcher situation, and they had just one overriding response:  Fire him.  As the CEO started to think seriously about that, the Lightening Catcher found a suitor for the company that would bring badly needed cash into the fold.  Real talks and due diligence unfolded.  This was an exciting opportunity for the CEO and his partner, and the Chief Lightening Catcher led the project and made sure that he appeared indispensable.

But in December of 2006, the Friday before Christmas (the CEO knew the exact day from memory), the deal fell through.  He later learned that it fell through because the other side wasn’t comfortable with the Lightening Catcher.

It was a big setback, but it was also a call to action.  The CEO reached out to his most trusted adviser and instructed him to have three lunches to develop an opinion about the Lightening Catcher’s future at the firm.  One lunch with the CEO, one lunch with his partner, and one with the Lightening Catcher.  At the end of the week, the CEO got the adviser’s opinion:  Fire the Lightening Catcher.

The CEO began the planning.  He had his legal counsel review the 40-page contract to be sure he gave the Lightening Catcher no grounds to file suit.  He created a communications plan for the day of the dismissal to keep the other employees calm and to communicate with customers that might be upset or have deals in process.  He also created an accounts plan to save any customers that might decide to walk.  A week before D-Day, he got his top HR person involved to help coordinate the minute-by-minute details.

On May 3, 2007, at 3p.m. the deed was done.  The CEO has this exact moment etched in his mind.

Most of his careful preparation was in vain.

No one even thought of quitting.  They were glad the Lightening Catcher was gone. The sales team had felt micromanaged, and was relieved.

The phone did not ring off the hook.  In fact, it hardly rang at all.  Turns out he wasn’t doing all so much.  When the CEO began reaching out to the customers, he learned of problematic behaviors and a conflict of interest that was bothersome to customers.  Several customers had stayed with the firm despite the Lightening Catcher, only because the product was so outstanding.  They were delighted that the Lightening Catcher would catching bolts in some other sky.

There was no lawsuit.  This preparation, well advised, was worthwhile.  The big surprise was the collective sigh of relief throughout the organization.  No more drama.  No contentiousness.  Everybody could just focus on their work without all the negativity that had crept in.  Three months after the departure, with his creative juices un-impinged by the Lightening Catcher’s presence, the founder came up with an innovative new product that has become 23% of total sales and their hottest product.  In five months, with the CEO and his sales team reenergized, they brought in a huge mass merchant, which now represents 25% of total sales.  Although it’s hard to measure, the return to a healthy culture made a real difference in sales, profits, innovation, and in the work environment.

The CEO says, “I think we delayed our growth by at least two years because we brought the Lightening Catcher on board.  In hindsight, it all seems so obvious, but it was really difficult to get clarity on the situation at the time.”

It is difficult.  I have personally kept a charlatan on my management team for years too long.  And it cost me big.  But never again for me, and this CEO has sworn a similar oath.

If you look today, this firm is none the worse for wear.  They’re having a banner year, and in December 2009, his biggest problem was how to keep up with the demand.  Even without the oh-so-important Lightening Catcher.

Key Takeaways:

1. Stay alert to top team members that seem overly focused on themselves and what they want.  Great team members play for the team.
2. If you, as chief executive, start to feel unwelcome anywhere in your company, as though you are on someone else’s turf, make changes quickly.  This is not an open door for micromanaging.
3. Getting tangible results earns credibility and the right to play for another year. Despite fluff and spin and excuses, if the results aren’t there, maybe it’s time to try someone else.
4. Beware of creating dependencies (perceived or real) on any employee.  In smaller companies this is harder to avoid, but the responsibility falls on the CEO to stay effective and involved in such areas.