Leadership, Innovation and Startups: A Manifesto for Employee Engagement

Photo credit: NASA Goddard Photo and Video, VisualHunt.com CC

Leading a startup is one of the most challenging things I’ve ever done. Although I’ve done it eight times, starting a business doesn’t get easier with experience. Yes, it gets less scary. But it is always harder because markets, technology and knowledge all evolve faster than individuals can learn or adapt. Teams become increasingly important as innovation accelerates every aspect of our lives.

For the past two years, I’ve been building and leading an amazing team of experts in sales, marketing and artificial intelligence. Our innovation is LeadCrunch: an entirely new approach for B2B sales. I like to think about our innovation as “Moneyball for lead generation” but these principles apply to almost anything that requires creative problem solving. Here are some of the lessons we learned entering a $30 billion market and our manifesto to create a thriving business.

Great leaders get teams to transform visions into reality by accomplishing things they would never be able to do alone.

From past experience, I learned that startup failures come from poor leadership. There are two flavors of leadership failure: 1) selecting the wrong team with insufficient skills or capabilities, and 2) making poor decisions.

Conversely, I see that all successful startups evolve cultural phenomena that foster innovation and momentum. Their success seems “inevitable” because of lucky breaks. The reality is these teams have attitudes, behaviors and decision-making skills that minimize business risks while maximizing their ability solve vexing problems for customers. They overcome barriers to creative problem solving faster and better than their competitors. This is the essence of their competitive advantage over industry incumbents.

Leadership is about knowing how each team member influences the probability of success then leveraging strengths to compensate for weaknesses.

Unlike the leadership of the corporations we seek to displace, entrepreneurs are entirely responsible for the culture of the organizations we start. For example, the CEO of Dun & Bradstreet, Bob Carrigan, got his job about the same time we started our Englue. He’s about my age and seems like a really smart, likable guy from his LinkedIn profile. Bob’s a salesman who inherited more than a 150 years of company history after rising through a series of successively larger management roles at big, public companies. On Day 1 at D&B, he had a repeatable business model supported by tens of thousands of customers, investors and employees. Bob did not build his team, company or product line from scratch. And there was plenty of D&B company culture long before he arrived. Bob is probably a great executive— but he is not an entrepreneur. Startups are very different from companies like D&B.

Entrepreneurs start with nothing. No team. No product. No customers. No capital. No culture. I had nothing but an idea and a really good co-founder on my Day 1. Our first (and only important) innovation was creating “The Team That Will Do Everything.” Therefore, I must accept that any failure is the result of my bad leadership while every success is the result of building a great team.

We started building our “innovation team” by identifying eight barriers that seem to kill creative problem solving (sic innovation).

  • Demanding perfection: Nothing is “good enough” so that development cycles never end. Voltaire famously said: “Le mieux est l’ennemi du bien.” Meaning that “The better is the enemy of the good.” The implication is seeking perfection is quixotic and thus good things are never completed.
“Good enough” is precisely the performance boundary that every organization should optimize for.

This is a relative measure that ensures that a solution serves its purpose.

  • Negativity: Nothing kills motivation more than managers who do not engender a sense that their teams can accomplish goals. This is a corollary to the desire for perfection — only it manifests as people who reject every new idea. Thus, people stop having new ideas and become disengaged.
Cynics don’t build empires.
  • Devil’s Advocacy: This is a good medicine for testing theories but can also become toxic when people use it to control decisions. It is often a political device. Again, it is something that managers must be aware of and allow its use only when it is sincere and appropriate.
The Devil is never your friend. That’s why he’s the Devil.
  • Pollyanna: (or the “culture of yes”). Not every personality type is comfortable sharing ideas verbally (e.g., “introverts”). Their silence does not mean “yes.” Often managers fail to appreciate the ways introverts agree or disagree.
Managers who are “cheerleading” with positivity can often take a team “off the cliff” by failing to recognize legitimate dissent from those who are less communicative.
  • Group Think: The collective agreement of people who want to “get along to go along.” Often this stems from our cognitive bias to belong to social groups — even at the cost of forgoing individual thinking.
If everyone thinks it’s a good idea, then it certainly is not.
  • Ambiguous Roles: People don’t know their purpose for being in an organization.
  • Structural Complexity: One of the greatest weaknesses of large organizations is they are so rife with processes, procedures and layers of management that people’s cognitive capacity is spent on structural activities rather than work. Symptoms of too much complexity include meetings that last more than 30 minutes or occupy more time than work and multiple reporting paths for an individual. Sadly, it’s normal for people think it’s normal to spend more than 30 minutes in a meeting.
The most potent weapon in a startup’s arsenal is attacking the slothfulness of a highly organized incumbent with execution too fast and precise to survive management approval.
  • Lack of Diversity: Homogenous teams grossly underperform teams with diversity. Diversity is strength.

All of these factors stem from bad leadership. It is the common cause of all barriers to innovation.

In the long-run, no organization can survive bad management. The first casualty will always be innovation because employees stop caring about solving problems.

The hallmark of great leadership is creating an atmosphere where employees actively engage in solving problems — that is, they are passionate about overcoming obstacles. They innovate because they want to. As my friend and founder of Alumnify, AJ Agrawal observes:

“…[innovative employees] are missionaries who want to change the world because they believe in something, not mercenaries who do a job because they get a paycheck.”

Yet, this behavior is rare. Gallup’s chairman and CEO, Jim Clifton, has studied employee engagement since 2000. His research clearly shows that employee engagement is both scarce and hard to develop:

“The problem is, employee engagement in America isn’t budging. Of the country’s roughly 100 million full-time employees, an alarming 70 million (70%) are either not engaged at work or are actively disengaged. That number has remained stagnant since Gallup began tracking the U.S. working population’s engagement levels in 2000. Talk about a lost decade.”

Thus, employee engagement is the killer feature of a startup. It is the secret sauce of the entrepreneur because it is something big companies can’t easily reproduce. In fact, the law of large numbers ensures that all (but the most exceptional) industry incumbents will have an average, disengaged employee. Don’t believe me? Call customer service at Time-Warner, United Airlines or just about any other Fortune 500 company.

We believe the best way to create good problem solving skills driven by exceedingly high employment engagement is through a leadership framework that incorporates four cultural pillars:

1. A culture of motivation as described by psychologist Daniel Pink. This rests upon scientific observations that highly motivated teams have members that feel a sense of autonomy (freedom to choose how they achieve goals), mastery (a desire to be the best at their skill) and purposefulness (doing something important).

2. Business model innovation. The process of adding novelty to questions and activities to expand the realm of possibilities a team considers to solve a problem. Getting to “good enough” requires that evaluations of truly diverse ideation sessions use what Daniel Kahneman describes as System 1 (intuitive) and System 2 (methodical) thinking. Both are important as they play different roles. Intuitive drives quick decisions while methodical allows for deeper reflection.

3. Awareness (of self and others). By reflecting upon oneself and others, we can gain an appreciation and control over how the limits of our rationality and cognitive biases affect our ability to effectively lead. Bounded rationality restricts our cognitive capacity to evaluate a single-digit set of considerations at a given point in time. In other words, our rationality is not infinite — it is finite to a limited set of considerations that cannot possibly represent all factors of decision-making and problem solving. Moreover, our cognition is biased by irrational considerations — known as cognitive biases. These range from arriving at different conclusions when the same information is presented differently (framing effect) to the failure of see our own incompetence (Dunning-Kruger effect).

The process of leading a creative, problem-solving organization is a journey of self-discovery.

As Jeff Gordon, former president and CEO of OpenTable, president of PayPal and SVP of eBay said:

The most important discovery I made in this process was that growing with the business required the rapid acquisition of entirely new skills. The best analogy I have is a sports one: I started as a player and quickly had to become a coach, and then a general manager, before becoming something like a league commissioner.

4. Building the right team with diversity. Studies show that diversity drives innovation. There are two types of diversity: Intrinsic diversity are attributes we are born with (such as race). Acquired diversity are attributes we gain through life experience (such as surviving cancer). Combing people with both types of diversity is called “2-D” and they consistently outperform teams that are more homogenous.

“By correlating diversity in leadership with market outcomes as reported by respondents, we learned that companies with 2-D diversity out-innovate and out-perform others. Employees at these companies are 45% likelier to report that their firm’s market share grew over the previous year and 70% likelier to report that the firm captured a new market.” — Sylvia Ann Hewlett, Melinda Marshall, and Laura Sherbin. “How Diversity Can Drive Innovation” Harvard Business Review, December 2013.