Require Others to Earn Your Trust – CoolSystems

Posted on December 16, 2004

CEOs must carefully assess the gap between expectations and reality, whether it’s taking a new CEO position or buying a company.  Learn from Tom Oliver at CoolSystems who worked his way through a difficult  situation he walked into. 

Tom Oliver was ready for the ride up the hockey stick in May of 2000.  After selling the last business he helped run, this opportunity arose, and he was excited.  A product that helped people heal faster fit his value set, and CoolSystems looked like it was nearing the end of the struggling startup and R&D phase.

Stepping into a mess

Before agreeing to step in as CEO, Tom had tested the high-tech compression and cooling device (meant to replace ice-pack therapy) on himself and talked at length to the founder and the board.  Fifteen hundred units were on their way in, and the first order of business was selling them.

Tom signed on, and in eight weeks hired 17 staffers and created rollout plans and basic infrastructure. But the 1,500 units didn’t arrive.  A month later, they still hadn’t come.  Four months later, only 300 had arrived, many of which were defective.  CoolSystems was running out of cash.  Tom was in charge, but not yet in control.

Tom laid off nearly all those hired, launched into an emergency funding round, and started a full redesign of the product.  Forget the hockey stick!  How could the current state of the business have been so far off from the expectations he had built on the picture he saw when he signed on?

He trusted what he saw and heard

Tom is an experienced business builder.  Trained as an engineer, his technical skill and experience were a great match for this opportunity.  Having had great experiences in the past, he believed what he saw when he signed on matched reality.  He trusted.

CEOs must trust those with whom we surround ourselves, and rely on them to do their part in leading our organizations forward.  Without trust, we’d have to do it all ourselves, and we wouldn’t grow the enterprise.  Most of the time, we know our business intimately, and carefully hire or groom our executive team.

But it is all very different when we buy businesses, or when we’re hired to run a business that is new to us.  There are plenty of people who are amazingly skilled at telling us what they want us to hear, and making us believe them.  Call them con-artists, salesmen, or smooth talkers.  They are out there, and they are acting in their own interest, not ours.  Also be on the lookout for corporate dreamers who are just too close to their vision to be able to provide an objective assessment of the business.  We can’t afford to trust any of these people from the start.

Earned Trust

The right kind of trust is earned trust.  That means trust earned on our watch, when we can really bear witness to it.  Until that time, we have to be skeptics, accepting little on faith until its proven.  And until the talk is separated from the truth, we have to prepare for almost anything.

The Board at CoolSystems had all the motivation to recruit someone with Tom’s level of acumen and experience.  They knew the founder/entrepreneur didn’t have an executive skill set, and that’s why they were hiring a CEO.  The founder was telling everyone what they wanted to hear, regardless of whether it was real or not.

Both the Board and the founder got lucky.  Tom truly believed in the healing value of the product, ended up investing some of his own money into the company, and guided the company through a grueling redesign and difficult times.  If Tom had walked out, there likely would not be a CoolSystems today.  Tom is glad he stuck it out, and so are the investors, who are today enjoying seeing that once-elusive hockey stick.

The Gap between Expectations and Reality

But the huge gap between expectations and reality was not pleasant for Tom.  The false start wasted time. It meant hiring then firing 17 employees – necessary, but which Tom still regrets – and having to dismiss seven of the eight board members.

When faced with new situations:

1. Be skeptical.  Assume it is much worse than you are told, until you prove otherwise.  Allocate resources of money and time to quickly nail down the facts.
2. Spend a considerable amount of time really getting to know the key players you’ll be working with before you make your decision.  People are everything.
3. Fully understand why the change is needed.  What is the real reason you’re becoming involved?
4. Have plans or contract clauses to deal with all the critical problems that you can think of.  Brainstorm all of them – flush out your worst nightmares and be sure you’re ready for them.
5. Stick to your principles.  If you inherit a less-than-ideal situation, resist the temptation to spend your time assigning blame.  Rather, maintain your integrity and focus your efforts on the changes you need to make for a turnaround.

CEOs in new environments are at high risk of facing out of control situations.  Never mistake being in charge of a company with controlling the company.  To be effective, you must both be in charge and in control.  One without the other is a disaster.

Takeaways:

• When entering new situations as a CEO (buying or joining businesses), be skeptical. Make those around you earn your trust.
• Carefully think through the motivations that the other party might have, drawing conclusions about how that might affect their portrayal of the business’s reality.
• Imagine all the worst case scenarios, and either prove that they will not happen, or build a plan on how to manage them (or how to escape).