It’s lonely at the top.
CEOs face an immense struggle: they have sole responsibility for their company’s fate and must make life or death decisions about it every day. They may need to fire their best friends or lay off an entire factory, all the while accepting full responsibility and keeping their eye on the future.
The book, The Hard Thing About Hard Things by Ben Horowitz shares more about the lessons Ben Horowitz learned in the course of founding a company, being its CEO and then selling it for $1.6 billion.
Everyone who founds a company or runs one as the CEO has dreams. Usually these dreams revolve around building something beautiful and world-changing while having fun and making a lot of money.
Unfortunately, no company progresses smoothly along this path, as crises are an inevitable part of building a business; there are simply too many variables and things to go wrong for smooth sailing.
For example, every company is somewhat at the mercy of “macro” issues like financial crises and collapses which can scare away investors, as well as smaller “micro” issues such as making a wrong hiring decision or having your best customer go bankrupt.
This is where all CEOs meet The Struggle, which occurs when dreams of success meet reality.
The Struggle is an inevitable part of being in charge of a company, and it consists of the stress and the impossible decisions that come with the territory. The stress and weight of The Struggle will probably affect the CEO’s entire life, from her mental and physical well-being to her career choices and social relationships.
All this makes The Struggle extremely draining, but it is also where greatness arises. Ultimately, the CEO is responsible for negotiating the challenges the company faces, and thus it is she who will get credit for the company’s successes or be fired for its failures.
As you know, all CEOs must face The Struggle. Happily, there are a few strategies that can help you deal with it.
First of all, even though as the CEO the burden of The Struggle will fall more heavily on you than anyone else, try not to bear the weight alone. Instead, involve as many people as possible when you face a crisis.
An example of how this helps was seen in the way the author’s software company, Opsware, dealt with the crisis caused by the dot-com crash. As the CEO, the author assembled the entire company in an offsite meeting, and told them honestly and directly that unless they could completely overhaul their product, they would go out of business.
He said that they could still make it work, but everyone who was thinking about quitting should do so now. This meant that the people who remained were so focused and determined to ship the new product that the company managed to survive and thrive, raising its share price from $0.35 to $7.
A second thing to keep in mind when dealing with The Struggle is that when it seems you’re trapped on all sides and the end is near, you need to get creative.
For example, during the dot-com boom, the author’s company Loudcloud was $2 million behind its ambitious revenue target of $75 million. This made investors reluctant to fund the company further. The author felt trapped, so he got creative and did something completely unexpected: he took the company public, raising the funds required to save the company that way.
Third, be aware that dealing with your own psychology is the hardest challenge any CEO can face: you will feel lonely and face personal psychological problems during The Struggle.
To overcome this challenge, you must learn from racecar drivers, who concentrate on the road ahead and not on the potential hazards and track walls. You too must keep your focus on the solutions ahead of you, not the problems around you.
No one likes giving bad news. But when you’re the CEO and your company is dealing with challenges, discussing them with your workforce openly and directly is crucial for success.
Bad news spreads very quickly anyway, so there’s no sense in trying to contain it. On the contrary, secrecy can be very damaging because it makes the bad news unexpected when it surfaces. Such surprises can quickly erode trust among your employees and even demoralize them if they feel they could’ve fixed the problems had they known about them.
Instead of keeping quiet, the CEO should preemptively head off the bad news by divulging it as soon as possible. This stops any gossiping and hearsay, allowing the organization to focus on remedying the situation, and the sooner the whole organization starts to deal with the problem, the sooner it can be fixed.
For example, imagine a company in crisis due to a major technological shift in the market. What should the CEO do? If she hides the issue from her staff and tries to understand this new technology, its costs and implications by herself, it will take a long time. In a crisis, this is time you don’t have to spare.
However, if she talks to her staff, they can explore this new technology very quickly: engineers can look at the technical issues, accountants can calculate the costs and so forth.
So why are many CEOs reluctant to share bad news? In fact, they suffer from the positivity delusion – the idea that their employees can’t handle the truth but need to be coddled with only positive news.
But in fact, employees tend to deal with bad news better than the CEO, because the CEO is always to blame for any crises, making them that much more devastating.
It’s simple really: by divulging any problems as soon as possible you help put those problems in the hands of people who can solve them as quickly as possible.
One of the tasks every CEO dreads is having to lay people off. However, it is inevitable you’ll face this task, and how you handle it will have a great impact on the company.
First of all, when layoffs are needed, it’s important to be fast. As soon as the decision has been made, action must be taken – delaying layoffs that everyone knows are coming is like letting a wound fester.
If you don’t announce the layoffs immediately, word will inevitably leak to the employees anyway, and they will naturally wonder whether their jobs are on the list. They will ask their managers, who will have to lie if you’ve insisted on secrecy – thus damaging trust. Alternatively, if you haven’t even told the managers, they will seem uninformed in front of their employees.
Second, it’s also important to be fair to outgoing employees, giving them decent severance packages and good references. This not only helps the morale of those who stay but also makes future recruiting easier, it is also simply the right thing to do.
When it comes to justifying the layoffs, CEOs must be clear that they are necessary because the company failed the employees.
Admitting this failure has two main benefits:
First, an admission of failure helps solidify trust, in this case between the remaining employees and the CEO.
Second, everyone must understand that the company failed and must now find its way forward and move on.
How does this work in practice?
If, for example, you need to lay off people due to the company not reaching its goals, don’t justify this by saying that the company is correcting its underperformance.
Instead explain that unfortunately, because the company failed to hit its targets, some outstanding talent has to be laid off.
When a company hits hard times, it is not only the workforce who may be laid off. Sometimes, CEOs must also fire executives, which is a much more difficult and serious task than firing anyone else because there is more at stake for the company both financially and culturally.
So how should you fire an executive?
First, understand that as the CEO, you are responsible for hiring the wrong person in the first place, and must explain this to the board.
Figure out why you made this hiring mistake and how it can be avoided in the future. You can, for example, perform a root cause analysis for the mistake and then share the results with the board. This will increase trust between you and the board members.
Second, you must prepare thoroughly for the conversation with the executive in question, including thinking about the kind of language you will use and about formulating the severance package. Remember, this should not be a discussion about performance – it’s an ending.
Whatever you do, don’t humiliate the person in question. As the famous CEO Bill Campbell said, “You cannot let him keep his job, but you absolutely can let him keep his respect.”
Treating the outgoing executive fairly and respectfully like this will help the morale and performance of the executive team, which in turn helps ensure smooth operations even after this team member has left.
Think about it: if you publicly berate the outgoing executive, those who stay on will also fear they’ll get thrashed, decreasing their motivation.
The main thing in any executive termination is to maintain a sense of continuity in the business despite the departure. This means that as the CEO you have to do whatever it takes to keep the affected part of the business running normally, even if you need to act as a temporary replacement for the departed executive.
Check out my related post: What is a strategic leader?