Reformers [Episode 4]: Laurie Ann Goldman, Spanx
The former Spanx CEO shares her thoughts on the power of a hero product, the qualities to look for in a board member, and the non-negotiable capabilities every job candidate must possess
For our fourth episode of Reformers: The gritty details behind the world’s greatest bootstrap successes, we are incredibly excited to share our interview with Laurie Ann Goldman, the Former CEO at Spanx (and former CEO at Avon). Laurie Ann joined Spanx as CEO in 2002 when the company was just 5 employees. After taking the helm, Laurie Ann spent 12 years as CEO, scaling the business domestically and internationally to hundreds of millions in revenue without raising any outside capital. Below are some of Laurie Ann’s key insights and lessons learned that she shared during the interview, which can be implemented in your own business. You can listen to the full interview here:
Think big, start small, and scale fast
Upon joining Spanx as CEO after spending a decade at Coca Cola, Laurie Ann brought a mentality to the company that she has taken with her to every job:
“When you’re a small company, you have to think big, start small, and scale fast. You have to think of yourself down the road as a much bigger company because you’ll be making decisions along the way that lead you to that outcome.”
Laurie Ann highlighted a couple of specific examples of Spanx executing upon this mentality. In one instance, when Spanx decided early on that it wanted to be an international brand, they began registering trademarks in a number of countries as their initial step. In another case, Laurie Ann asked Ernst & Young — much to the accounting firm’s surprise — to do an audit when the company was just three years old, simply to get into habit of acting like a big company. Both of these examples illustrate Laurie Ann’s core belief that thinking big from the beginning is really important, so long as you pair it with simple initial steps to start you on the path to achieving those big aspirations.
Intra-preneurship vs. Entrepreneurship
Being an intra-preneur (an entrepreneurial person within a large corporation) and an entrepreneur both have their pros and cons. As an intra-preneur, you have lots of resources, but also lots of bureaucracy due to the size of the organization. As an entrepreneur, the exact opposite is true: you have few resources, but the ability to move quickly and make rapid decisions. From her experiences, Laurie Ann believes that:
“Every big company wants to be a little company, and every little company wants to be a big company. Big companies want to be more nimble. And little companies want to have more scale.”
Money is (usually) not the challenge
When Laurie Ann joined Spanx, the company had five employees and was just launching its second product (fishnets). While they did not explicitly set out to bootstrap the business forever, Laurie Ann’s core principle was to create products that would sell efficiently and be able to fund the business. Though it’s challenging to scale any business, Laurie Ann does not believe that access to capital is the primary challenge. Rather, creating a great product that people love is the ultimate challenge. Once you solve that challenge, Laurie Ann believes that many other issues solve themselves.
“When you create something great that people love, they’ll tell other people about it. That organic growth will mean a lot to the business. Additionally, if you’ve been disciplined about your product margins, this organic growth can lead to an upward spiral.”
Certainly, there are times where having more working capital would make things easier — e.g. when you have to make some big bets on inventory for holiday season planning — however, Laurie Ann feels that a lack of capital can often be used as a scapegoat excuse for other issues within businesses.
Screen for A-Players in the interview process
When hiring, Laurie Ann takes a page from the book “How to Hire A-Players”, analyzing the capabilities of a given candidate across three different buckets: (1) those that are easy to coach (e.g. presentation skills); (2) those that are difficult-but-doable to coach (e.g. strategic thinking); and (3) those that are not coachable (e.g. EQ and IQ).
Candidates who lack the capabilities of the third bucket (EQ and IQ) tend to lack self-awareness; these are the candidates to avoid hiring.
In order to screen candidates for EQ and IQ, Laurie Ann conducts behavioral interviews for candidates as she believes that past and current behavior tend to translate into future behavior. When interviewing a candidate, she looks for behaviors indicating good judgement and quick learning, as well as more subtle things such as consistent eye contact and the way in which a candidate reacts to jokes, unanticipated comments, or even unexpected events. (Fun side note: Laure Ann recalls a story from her past when she was being interviewed for a board position. A very senior search executive came into the meeting, threw his bag on the table, and knocked a coffee all over her clothing. In retrospect, she believes this was a test to see what her natural reaction would be to this type of situation. Spoiler: she got the board position.)
One of Laurie Ann’s favorite methods for learning more about a given candidate’s past behavior is by asking them to “Tell me about a relationship that didn’t go very well.” She finds this prompt to be effective as it shines a light on how well this person collaborates, takes accountability, and self-reflects (or how a candidate strikes out on one or more of those capabilities).
Write a business plan
When a new CEO steps in to lead a business, you would expect their first key initiative to be something big, splashy, and dramatic. However, when Laurie Ann arrived at Spanx as CEO, her first key initiative was quite the opposite: writing a business plan. According to Laurie Ann,
“You don’t have a strategy unless it’s on paper.”
While it’s currently in vogue to belittle business plans as MBA nonsense (disclosure: I have an MBA), Laurie Ann believes that it’s important to explicitly outline your best guess as to what is going to happen with your business. One of her biggest takeaways from Coca Cola is that long-term success is derived from a simple progression of steps: have a vision, make a plan, execute that plan, then rinse and repeat. Of course there are always things that will surprise you and require you to rethink your initial plan, but if you don’t have a direction from the outset, then you can’t go as fast or react as well to change.
If you measure it, it will get better
It’s important to implement OKRs (or equivalent measurements) as early as possible. Laurie Ann has seen time and again throughout her career that anything you measure will improve. Even if it’s a simple measuring mechanism:
If a behavior is being explicitly tracked, then the results will follow.
For example, if you want to set a goal of waking up earlier, a simple way to achieve this goal is to write down what time you wake up each day. As you see your wakeup times spelled out, you will begin to guide yourself toward earlier and earlier wakeup times. The same holds true for measuring behaviors within companies, such as in sales (quotas), customer success (tickets), or other teams.
Lifelong learning through challenges
After ending a very successful 12-year tenure as CEO at Spanx, Laurie Ann could have called it a career and retired from day-to-day operating. However, she decided to jump back into the arena as the new CEO at Avon. Curious as to why she decided to take on this new role, I asked Laurie Ann to elaborate a bit more on her motivations and I found her response to be inspiring:
“I’m a lifelong learner and really think of myself as a student in so many ways. I was on the board of Avon when they asked me to lead the company, and it became my first effort to do a turnaround. It was about challenging myself and putting myself in a bit of discomfort.”
Laurie Ann’s prior two leadership roles were both centered on growth. At Coca Cola, it was about growing the company’s licensing business. At Spanx, it was about expanding the company’s product lines, distribution, and availability in more markets. At Avon, the CEO role was centered on the opposite: turning around a sub-optimal performer. Interestingly, Laurie Ann believes that the basic skillsets for running a growth company and managing a turnaround are the same: you need to establish a vision, a brand, and a strategic plan for getting from your current reality to a dream destination in the future. Perhaps the only difference in leading a turnaround is far more focus on near-term cash flows and constant cost-saving mechanisms.
Don’t underestimate the power of a hero product
When Laurie Ann joined Avon, the company had enormously diversified its product offerings and offered thousands of SKUs. Reflecting back on her time at Spanx, Laurie Ann had learned how powerful a hero product could be and how much value could be created by riding those winners (over an even longer period of time than you thought possible) to new heights and levels. When it comes to a company’s product offerings:
“Diversification can be di-worse-ification.”
For example, take Avon’s product offerings in lip gloss. Before Laurie Ann arrived, the way Avon was operating was to produce 12 different colors of lip gloss for various skin tones, consumer preferences, etc. However, when Laurie Ann arrived she analyzed the data and realized that 3 of the 12 SKUs were far-and-away the best sellers. Laurie Ann posed a question to the team: “Could we have not figured out that those 3 SKUs were the heroes before we launched all 12?” From then on, Laurie Ann had the team focus on SKU productivity, riding their winning SKUs, and paying attention to their product set over time. She knew how powerful it could be to maximize margins and revenues from a hero product while looking for new winners to launch in the future.
Focus on internal, not on the competition
As the leader of a business, founders always have to look at the competitive landscape, but they should not over-index on it.
“If you’re following, then somebody else is leading. By the time you catch up, they’ll have already gone to a new place.”
Laurie Ann has seen that when leaders obsess over competition, performance generally doesn’t work out very well. Therefore, she maintains the mantra: Leapfrog, not follow. (Side note: Laurie Ann believes that, as a board member, focusing on competition could make more sense when you are in an industry that has one very large competitor, such as Coke vs. Pepsi.)
What CEOs should look for in a board member
Laurie Ann has served on the board at companies such as Avon, Joe & The Juice, ClubCorp, Francesca’s, and GUESS. Reflecting on her experiences of what has worked well and what has worked poorly for companies, she shared what she believes are the most important characteristics one should look for in a board member.
- They should ask wise questions that make people think.
- They should give confidence to the CEO that they’re headed in the right direction.
- They should make sure the CEO does not feel like they are in a silo — that there are others they can speak with about any topic, no matter how difficult.
- They should have enough pattern recognition to see around corners and enough experience to translate learnings between companies. On this particular point, Laurie Ann finds that there are common themes between companies, even if they operate in entirely different industries. As an example, she briefly discussed her board work for a movie studio and for a food & beverage company:
“Whether you’re producing a movie, a cup of coffee, or providing pest control, the product quality must come before the transaction or else the transactions will dry up. Likewise, brand should come ahead of margin or there will be no margin to be had.
- Perhaps most importantly, a CEO must have the right level of trust with people on the board, and the CEO should know for certain that the board member is really there to help the CEO and the company, and that the board member is not there for other self-interested reasons.