|Home - Articles by Sterling-Hoffman - Oct 03 Issue
Secrets from the Farm: On Fear, Honor, and Building Companies
By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search
Chasing down what I believed to be a significant business opportunity, I recently visited a farm in Kansas. Yes, a farm – complete with horses, cows, goats, chickens, and a very large farm dog named Josey. The large dog – along with everything else on the farm – are owned by a large man named Peter. Peter is maybe 6'2 , 40-something years old, and has the frame and toughness of an ex-football player. By 'tough', I mean that I once watched him hold an open flame to his arm to detoxify a bee sting.
When he is not tending to farm animals, Peter Leffkowitz is a world-renowned thought leader in an industry that I will avoid identifying at this time. Entrepreneurs and professionals from all over the world fly into Kansas City to go on hayrides with this man and obtain his counsel on how to better manage their companies. I myself have visited Peter's ranch for the same reason on several occasions, but most recently with the intention of securing him as a strategic investor in a new startup. As it turns out, I came away with something far more valuable than financing, and opted to summarize our discussions from that day in this article.
The story I am about to share contains some of the most important business lessons I've ever been privy to, but I will warn readers in advance: the balance of this article will be shockingly devoid of sound business reasoning. It is full of contradictory statements, logical holes, and leaps of faith based in mid-western values. Geoff Moore ('Crossing the Chasm" / 'Inside the Tornado') once told me that he often published untested theories in his books and relied on readers & consulting engagements to experiment and confirm validity of the same. I figured that if the approach was good enough for Geoff Moore, it was good enough for me – because I remain uncertain as to whether it is possible for any CEO to completely embrace the philosophies below and still 'win" in the traditional sense of the word.
Lesson 1: The Dinner Table Litmus Test
Betrayal is usually a terrible thing. I say usually because as it turns out, I owe my relationship with Peter to a former employee who stabbed me in the back several years ago. The employee decided one day to share our customer data and critical intellectual property with a competitor in exchange for a higher base salary and flashy job title.
Which is why my spirits fell when Peter called to notify us that he had been offered a retainer by a local competitor of ours. Sure enough, our former employee had contacted Peter on behalf of his new employer about developing a strategic relationship (only days after he had contacted Peter for the same reason on our firm's behalf).
I should note at this point that Peter had not signed any agreements with our firm whatsoever. Peter and I had never met…we had spoken via conference call only once. Further, the nature of Peter's celebrity status in the industry does not permit him to enter into exclusive relationships. In other words, Peter was free to work with our competitors if he so chose.
"What did you tell him?" we asked, assuming that Peter was simply providing full disclosure and about to inform us out of courtesy that he was now engaged with a competing portfolio company.
"I told him to go to hell."
Suddenly, I was listening much harder.
Pete went on to relay details of his conversation with our ex-employee, growing angrier as he spoke; he seemed in complete disbelief that someone could work for one company, then move to a competitor the next week with no regard for his old team. "This guy has no honor," he spat in disgust.
As a group, we expressed our gratitude, reassuring Peter that we would be loyal to him for years to come. Privately, however, I was stunned. Of course, I was appreciative of Pete's loyalty, but it seemed a ridiculous contradiction. After all, search firms are hired by clients specifically for the purpose of coaxing executives out of direct competitors. And in a former life, Peter had been one of the best in the headhunting business! In fact, I was not actually upset at the fact that our employee had joined a competitor, rather, it was the sleazy way in which he went about it. And in any case, the employee had stolen from and lied to our firm, not to Peter. So all in all, I found Peter's actions quite puzzling.
I questioned Peter about it for the first time as we rode in his truck headed for the ranch. "Pete, you didn't owe us anything….they were offering you money…Why didn't you take it? "
He responded immediately: "Listen to me very carefully Angel, because this is important: Never do business with someone that you would not welcome to your dinner table."
Peter commented that his refusal to work with our ex-employee all those years ago was partially out of loyalty to us, but primarily due to a gut feeling that the person on the other end of the phone that day was simply not worth dealing with. If anything, the turncoat's disloyalty to our firm served more to confirm Peter's original hunch, as opposed to setting off any new alarms. Peter explained that he would never allow a person of such low integrity into his personal or professional domain, no matter how much money was involved.
On one hand, Pete's theory seemed flimsy. That is so naive, I thought. Sometimes, you have to work with low integrity people. If a sales rep will bring $5m in revenue with him, does it matter that he's a jerk? Should I turn away customers that are ready to buy, just because I don't like the customer's ethics? It seemed to me that the goal of business was to make money, not make friends. Many CEO's have confessed to me that some of their biggest mistakes involved hiring executives that fit the culture but lacked competency. ("I really liked the guy…but he just couldn't get the job done.") It was also not lost on me that perhaps the reason Peter could be so discriminating when selecting who to work with was because he was already financially independent.
At the same time, I began to wonder what it would be like if everyone I worked with was the kind of person I'd invite to dinner. One advantage became immediately clear: applying Pete's 'dinner table" law would mean less energy spent on low-value particulars. Those who have experienced the efficiency of a handshake-based business relationship will understand what I'm referring to. In these cases, neither party worries about the wording of an obscure clause in a 50 page contract; it simply goes without saying that each party will act in good faith. Dave Beirne, General Partner at Benchmark Capital, once told me that the people he preferred to do business with were those with whom contracts were unnecessary; with people who intrinsically understood, he said, that 'everyone would be taken care of." (As an aside, I have just such a relationship with an e-commerce / web design firm called 'Principle" – I encourage those of you looking to re-design a website to try them out).
But in the end, as I tried to imagine myself severing all ties with certain people that did not pass the dinner table litmus test, I discovered an internal resistance. I could not imagine myself doing it - an unidentified emotional roadblock stood in the way. A few hours later, I realized what it was.
Lesson 2: The Problem with Fear
One of the first things I noticed after wandering the ranch is that an Australian Cattle dog named Chaka was missing. The last time I had visited Peter, the hyperactive canine had come shooting out of the trees, barking at us as we rode the tractor down the main road towards the entrance to the ranch. But today, Chaka was nowhere to be seen.
Later that day, I remembered to ask about Chaka. "We lost her," said Peter, his voice lowering. "She ran out into the street and got hit by a car." Sorry to hear that, I said. Did she have any puppies? "Yeah…a few…the one we kept died the same way – just ran out into the street and got run over."
As a dog lover, I couldn't help but get annoyed. "Peter, why the hell do you let the dogs roam all over the ranch unprotected? This place is huge! Can't you put up a fence or something to keep them from running out into the road?"
"Angel," he said stubbornly, "You cannot live your life in fear. I'm sure Chaka didn't regret one day of her life, being able to enjoy everything the world had to offer. Who am I to restrict her freedom like that?" (To anyone who is not a dog lover, I realize this story has by now lost all credibility.) He continued: "Fear makes no sense. It makes you focus on all the wrong things, and miss all the good stuff." I fell silent, suddenly less interested in doggie rights as my mind began considering Peter's words in the context of leadership.
My first impulse was to argue. I had heard plenty of 'no fear" soliloquies in the past but had always dismissed them as the simplistic babble of motivational speakers and narcissistic CEO's. As an Executive Recruiter, I am quite aware that 'fear" of failure or 'fear" of loss or 'fear" of just about anything can be a wonderful motivator. Fear of failure has driven many an entrepreneur to work 100 hour weeks and squeeze success out of ventures that seemed destined to fail…fear of missing quarterly targets has driven many Sales executives to make 'just one more call'. So once again, my rational mind initially resisted Peter's simple philosophy.
Slowly, however, as Peter's words sank in, the true danger of operating from a place of fear became apparent. First, I realized that fear too often causes one to think about what could go wrong, instead of what might go right. Entrepreneurs and CEO's are regularly turned away by venture capitalists who are obsessed with either technical or market risk – the common problems that any new venture is likely to face. But does it really take a genius to point out the risk associated with an early stage venture?Andreas Stavropoulos, a Managing Partner of venture firm Draper Fisher Jurvetson, once told me: "Any idiot with an MBA can point out what might go wrong with a business." He argued that the more challenging task was to conceptualize what might happen if the vision actually worked. In other words, if things go right, just how big does this company get? It was hard to disagree.