Why Great Leaders Focus on the Details

[MUSIC] Deals not just another payroll platform, it's when your team might actually enjoy. HR, IT, and payroll together finally. Built in-house, built for peace of mind. Visit d-e-l.com/hbrpodcast. [MUSIC] I'm Ellison Beard. And I'm Adi Ignatius, and this is the HR IDA cast. [MUSIC] Adi, if I asked you the top three things that a CEO or senior leader needs to do to be successful, what would you say? Three things. Okay, so one has to be to be able to communicate a vision. Another has to be the ability to execute on strategy. And then I guess a third would be to have the empathy to connect with staff to be able to hire and retain top talent. Yeah, I think I would say something along the same lines, setting the direction, making the most important decisions, and hiring good people to do the rest. Because we know delegation is a big part of being a leader and you can't micromanage. But today's guest, Scott Cook, the co-founder and former CEO of Intuit, who is now at the executive committee chair, offers a bit of a counterpoint. He says that in a lot of organizations, success actually depends on senior executives caring not just about what is being worked on, but also on how it's getting done. And he argues that you do have to dig into the weeds of execution, pretty routinely to make sure that everyone's following the same process. And he has examples from not just Intuit, but several other companies in different industries. It reminds me there's not just one way to run a company effectively. And this sort of top down approach has obviously served a lot of companies well. But something it has to give, right? So I assume at the end of the day, this is a prioritization question. Yeah, it's a balance, right? Between the big picture and the nitty-gritty and Cook and his co-author, Nathan Noria, they have a playbook for how to find that balance. They wrote the HBR article, "The Surprising Success of Hands on Leaders." And in today's episode, Scott will outline those best practices. Here's my conversation with Scott Cook. [MUSIC] So there is this prevailing view that the job of the CEO at a business of size, mid to large size, is to focus on vision and strategy and building a great team, and then to trust that team to do the execution. So why is that wrong or at least not entirely right? I think it's well-founded in that what you want to avoid is where the CEO of a larger organization falls prey to micro-managing, to going in and actually making a bunch of the decisions for people up and down. And also there's a limited amount of time that you have as a leader. And yet there's vastly more calls on your time than you'll ever be able to satisfy. So I think the intent of that was to help leaders, senior leaders, focus on what's most important. It's just I think we need to take a slightly broader view about what's most important. Because strategy alone, without the ability of the organization to execute well, means the strategy will fail. So it's crucial to build the strength of a company to actually execute well, to have the systems and processes by which people can do their work exceptionally well. And if that's essential for success, then that's essential for the CEO. Was that your experience when you were leading into it even as it grew into a very large organization that you had to be in the details on those systems and processes? I'd say my experience is one where I oscillated a lot between actual micro-managing and lifting up to higher levels of strategy, not always in a productive way. This has really come from my study and self-reflection, both on my experience, and on the experiences of other companies. I guess it's a little bit of a hobby, interest or research interest, finding companies that should never have succeeded, but became hugely successful. And when that happens, it's not an accident. There's something that explains it. And what I found that explains it is this ability of CEOs to be watchmakers, to be building the systems by which their companies work, by which the people at all levels work. So what are those examples? What companies have you studied where the leaders have managed to blend this big picture thinking with hands-on leadership? One of the canonical stories is the story of a loom maker in the rural parts of Japan. And they decided, rather late in the late '30s, to go into a new business, the auto business. And that company was Toyota. And from that start, and of course, the '40s were not the best time in Japan. It's really starting in the '50s. By the '90s, in 40 years, they became the world's pre-annoted auto maker, making cars at a cost in quality that no one else could match. How did they do that? General Motors had a plant in the East Bay, just about a 30-minute drive from here. And the plant was the worst in General Motors. The car quality was the lowest. The costs were the highest. The union grievance rate, the absenteeism rate were the worst. The plant was so bad that GM shut it down. A little while later, Toyota came by and said, "We'd like to reopen your plant." But let us run it. So GM said, "Yes, but GM said you have to hire back the same union and the same union workers." So they trained them in the Toyota way and reopened the plant within a year of opening. The plant using the same workers and the same factory building the same kind of cars was the highest quality plant in General Motors. The lowest cost plant in General Motors, with the lowest union grievance rate and the lowest absenteeism rate. In other words, it went from worst to best. And this is one of those rare scientific experiments in business. It's a single variable experiment. You kept all the variables the same, but one, you took out GM management approach. You inserted Toyota management approach. And that took the plant with the same workers from worst to best. That's an example of a power of process. And that shift happened because of leadership from the top. Oh, absolutely. This was very much a collaboration in the early years between a plant manager and the president of the company and CEO of the company, who collaborated on building dramatically different systems. For example, a conventional auto plant, the only person who can stop the line is the plant manager. And for the plant, the assembly line worker can pull a cord and that calls a supervisor over and the team leader within a minute can stop the whole line. It does seem though that once you've set up these processes and systems and cultures, the senior leaders could step back and be less hands on. Is that the ultimate goal? Well, two thoughts on that. One, I think one of the tests of a culture and a system that you put in place as a leader is what happens when you're not in the room. And if the right things are happening, or more when you're not in the room, that means you're building the system well. So the goal is that people don't need you there to be making the decisions. At the same time, no systems ever perfect. Every system can be made better. Processes can be constantly improved. Several of the leaders in the article go out of the way to say it's the leaders role to constantly be reinforcing, constantly teaching the methods of success. Because you hire new people, you hire new leaders. So the role, the leader is very active to stay close to the work, not to make the decisions for the people, but to be seeing how they work and reinforcing the methods they should be using so that they can make those decisions. Some of your examples include founders like the founder of Toyota, whose name is Toyota with the D and Jeff Bezos, the founder of Amazon. Does a founder have an easier time doing that than a CEO that has either risen through the ranks in a company or been brought into a company? Of the four companies that we studied for the article, two, either were run by the founder or the descendants of the founder, because it was a family run business, namely Toyota, and the first is Amazon. Two, however, were essentially managed during the periods we studied by hired guns. And in both cases, the leaders have that same impact on the culture and work systems, because it's where they choose to focus. It's where they spend time. And when it produces success, they spend more time, or they get the right to continue to spend time there. Saying, "Hey, I'm a hired manager. Thus I can't improve the systems by which we work." That's of course, baloney. Of course, you can figure out what it takes to help make the work go better and help your people be more productive. That is part of your role. You and your co-authored Nithin Noria, the former dean of HBS, identified five ways in which CEOs can be hands-on without micromanaging. And I want to just walk through them one by one. So let's start. with this idea of obsessing over customer value. That does feel pretty high level. But how does a leader take it down to the ranks in a hands-on way that is more effective? A key pattern that I see in this aspect of the company's behaviors is they do not delegate the selection and definition and precision of how they measure what's important to the customer. This is something that they manage at the CEO level. So Jeff Bezos used to get involved, okay, how are we going to measure how fast a package arrives? What's the start? What's the stop? What's our data source? He would personally get involved on how those metrics are designed and executed because he knows that once you have the right metric in place and you focus people on it, people will be manic to achieve and drive that metric up and if it's the wrong metric, then they're driving in the wrong direction. Yeah, notably that's not sort of profit margin. Right. Well, first of all, to make sure that you have key metrics set on what the customer cares about and the customers don't care about your profits. They care about what's in it for them. So it's not that they exclude financial metrics. It's just they have a focus before that on what's most important to the customer. In Amazon's case, it was things like speed of delivery and reliability of delivery, lowest price and vast selection. In Toyota's case, it's the quality of the car, the defect rate in the automobile. In Relics's case, which I think is most instructive, they're in a wide variety of information and data businesses bought by companies for insurance companies, law firms, etc. And so they'll have a different metric of success of what the customer cares about. It's different from insurance than it is from law firms. But Eric Einstein, the CEO spends an immense amount of focus first and foremost on, okay, how does the customer for your product or service measure value? Okay. And how do we know? Now, how do we measure value? So that we're measuring it the same way they do. And now, how does our value delivered compared to that of competitors? And how do we know? So he has a set of questions he goes through that he talks you through in order. These are the questions in this order. And they're all about refining and focusing the team and knowing exactly the way to measure customer value. And it also evolves over time. He said, for the legal work we used to evaluate the time it would take to do a search to find a law article or a reference. But that's actually not the end goal. The end goal is, is it the right reference and how do you get it in your legal argument? So we're now measuring that as opposed to measuring just the time to find things. Yeah, I think that's an important note. You can't just set it and forget it. And forget it. You have to stay hands on to know that those metrics are still relevant given you're changing portfolio of products and services and consumers changing preferences. Changing preferences exactly. But these companies are manic about getting that to find upfront and the CEO being personally involved in that. So the second principle is that CEOs architect the way work gets done. And that's a very careful verb selection is architect different than dictate. Not necessarily. Dictation can be needed at times. But you have to know what to dictate. The architect verb is to imply that you design how work gets done very carefully. And then to implement it, you may well dictate parts of it. But if you're dictating something that's truly a superior method, then that can work out just fine. So this is not to say that the CEO never dictates things. So when Jeff Bezos rolled out the concept that we're not going to use PowerPoint anymore, no slides in our internal meetings and decision making. He had dictated. And when he said we're going to rearrange how we construct software to be in a high services mode with clean APIs between the services, that was dictated. There was no ifs, ands, or buts. The issues before you dictate you have to be able to figure out often through experiments what's the better way to work. And then from those experiments, you then conclude the better process and then dictate that. Well, that brings us neatly to our third principle, which is experiment. And that's what all good organizations do at every level. So how does that become a more hands-on activity for the CEO to make sure that the company is choosing the right experiments and then gleaning good insights from them? Most companies do not natively have a good experiment system. The ability to groom up sets of test customers easily, rapidly, to be able to construct a test group and a control group, to be able to administer the test just to the test group while holding the control group. The ability to get the right data to read the behavior of people in the test, usually that's either not available, difficult, requires negotiation. In the top companies, this is virtually automatic. Jeff Bezos invested in a team that worked for years just to build systems to make it drop dead easy and fast for individual teams to run tests. The CEOs has to put in the systems that makes testing easy and high volume, otherwise you can't expect people to do it. So that's one. In the second is, in the decision-making process, the CEOs have to set the culture that we're going to test before making big decisions whenever possible. Sometimes in an emergency, it may not be possible. But boy, I find increasingly across our company, decisions can be tested. And so you can make decisions based on scientific evidence, rather than make decisions on somebody's gut feel or analysis. And then the CEO has to expect that. If people are coming forward with a decision, he'd say, okay, he or she should ask, well, what experiment did you run and what were the results that you're basing your decision on? So that's the hands-on piece of it, not involving oneself in every experiment, but ensuring that the process has been followed. At Toyota, even the senior level executives' decisions are typically done via experiment. So two of the Harvard Business School researchers that I worked with who were studying Toyota told that they were in one of Toyota's plants and they were running two experiments on the production line opposite each other, testing the same concept of different interventions. One was the solution proposed by a team leader. The other was the solution proposed by the plant manager. In a US plant, plant manager would have made their decision their own way and dictated it, but not Toyota. And in fact, that example, that story we talked about earlier, where Toyota opened up a plant together with General Motors, a re-opened a GM plant here in the Bay Area, called the new United Motor Manufacturing Inc. was the name of this joint venture of Toyota and GM. That was an experiment run by the CEO of Toyota. To see, could you build cars outside of Japan with non-Japanese workers, which they had never done? So the same process of run the experiment to make the decision also is powerful when done by the CEO. Yeah, and your example of the plant manager and team leader is interesting because it shows how while we're talking about CEO level decisions and behavior, for the most part, it can filter down to lower level leaders. They can sort of follow these same principles within their own teams. Yes, the principles we're talking about are practices used by leaders at all levels. The fourth principle is that they teach the toolkit of their organizations. You mentioned teaching and modeling before. So is this an exercise in leading by example on the ground or getting involved in how training and development works? It's certain leading by example. And we talked about the example of the plant manager also running experiments on their own ideas. But it's also participating in team meetings and working when you work with teams, when teams are making decisions to be inspecting the methods they use. And then if they're not always using the best methods, then teaching the method they should use. The temptation for a senior leader when they see a team maybe not using the best methods is to go in and make the decision for the team. Now that's micromanaging. Now you've removed from the team the responsibility and the team has learned, well, we haven't learned how to make the decision, but Louis, the boss will make the decision. That's not creating a culture where your people are trained to do this better every day. That's why these leaders in these companies use their time with teams to stay close, to see not to make the decisions on behalf of their people, but to teach the methods that their people can use to make the decision and to reinforce. And then finally, these highly effective hands-on leaders focus on continuous improvement. So what are some of the ways that they do that? I found it. inspiring to listen to the CEO of Relics, Eric Inström. Because continuous improvement has been talked about for a long time. But to bring it in to the work every week, is constantly in his work with teams, asking teams that everything we do should be better, faster, cheaper. This year, next year, and every year. There's no respite from it. And that's not just like in manufacturing or something. He said, every group in the company, every department, the finance department has to be better, faster, cheaper. The marketing department, the HR department, and we hold everyone accountable to better, faster, cheaper every year. Setting that expectation takes constant reminder, because everyone has the excuses why costs have to go up. Oh, I need more of this. Competition's doing that. Inflation, but these companies have the opposite belief that everything we do, we can get better, faster, and cheaper. And the CEO has to hold that bar, has to inspect for it, has to insist on it, because it does not happen naturally. So that's that constant drum beat from the most senior people was what I found so distinctive. And holding every group, feet to the fire to continue to do it. And then they build the expectation, and they know they can. They built the muscle. They said, well, we've done that before, we can keep doing it. And that must have to be combined with some cheerleading, you know, some celebration of wins, so that you're not burning people out. There was a particular process that two of the companies used that I found enlightening when they have their company-wide leader meetings, where you fly in all your execs, you know, two, three, four hundred people. It's tempting in many companies to have lots of speeches from top execs. You know, everyone wants to hear the CEO. But in fact, in these companies, they say the majority of the time when they bring all their people together, is spent not listening to the CEO, but listening to team leaders and other execs who talk about a story of applying the processes to a problem area and creating a success. And so that's a way of celebrating people's successes. The CEOs in each case pick which teams are going to present. And they know it's a special honor to be chosen to present. But they're not celebrated in a party way. They're celebrated by telling their story of how the methods they used to make the success happen. And it's sharing those hows. This is back to what the leader is doing is inculcating, imbuing a set of hows into the organization. And this is their way of reminding and role modeling goes. And these are like 10, 11, 12-minute presentations, one after another for hours. And that forms the largest part of their management meetings. And that drives home the point that every leader can teach the toolkit. Every leader can reinforce continuous improvement. Every leader can show how they experiment in an effective way. When you are a very senior leader, how do you know when you're spending the right amount of time on this kind of hands-on leadership versus that big picture, vision and strategy thinking? That's a tough question for which I don't think there's a good answer. At least there's not an answer I've seen yet. It's something you have to feel out. I think part of leadership is to look to what needs your attention now. Strategy done right doesn't need to be re-done very often. The best strategies are durable and that you can work at them for years. So I think one danger sign is if you're constantly getting pulled back into corporate strategy, there's probably something wrong with your process or your definition of strategy. So that'd be one thing I'd highlight. But I think it's a tough, this is why leaders get paid the big boxes in part of the thousand things you have to work on, which is most important now is quite a judgment call. Yeah. So there's an argument for the CEO or a C-suite leader being more hands-on in some areas of the organization, those that maybe are struggling or the biggest growth opportunities while being more hands-off in others. I think that's inherent with the role. I think the key point that from Nittance and my work is the place that often gets short-shrift is the attention given to how people at the working and middle levels do their work and improving the way they can do their work so they can do more and better work. One of the CEOs, Larry Culp, the longtime CEO of Daenerer, now the CEO of GE Aerospace. He has the reflection that among the demands on your time there will be many external demands, conferences you can go, speaking engagements, and he said the more time you spend there, the less time you're spending with your people helping them with the hows that they do their work, helping your people build the systems and processes to make your company great. Still there is a balance though because a big part of the CEO's job is dealing with external shareholders, investors, and also getting a feel for what's going on in the industry and in the outside world, especially giving all the political and economic uncertainty and technological disruption we're going through. So that is still a balance they have to figure out, right? Certainly they need to pay attention to investors and pay attention to customers. I'm not sure CEO's as a group spend enough time with customers. If you really want to understand what's happening, spend time with customers. Don't go to industry conferences. Don't spend time with the press. HBR notwithstanding. HBR is learning. I think the siren song of spending time to conferences with the press and others distract some CEOs from the most important work, which is delighting their customers. Building an organization whose house are so good they can continually improve how they delight customers. That will help you see what new technologies or products and services will benefit them. You'll see industry trends happen with the people who matter most, your customers. What about the balance of focus on middle management versus the front lines? The front lines are closest to the customers. So when you're trying to be a hands-on leader, are you spending the most time there? Because you also talked about the importance of that mid-level. I think the surprise to me in studying these best performing companies was that the architecting the work of people didn't stop at any particular level coming down. It went all the way to the front line. So in Jeff Bezos specified that we're going to drop slides and we're going to make decisions using written narrative documents, that's the work done by workers, white collar workers at Amazon in their first year. A change to how they did their work. Similarly when taught to specify the role of the line worker, those are your brand new workers on the assembly line. So I think it's the work at all levels that you are orchestrating as a leader. Because there's a lot more people at those lower levels. And the work really matters and their work is what touches the customer. When I talk to my company, I say the customer cares about two groups of people more than any other. They care about the engineers who craft the product they use. And they care about the customer success people who help a customer in need. They really don't care about me. I don't touch their life the way these other two groups do. So if that's what the customer cares most about, then it's crucial that you orchestrate work so those two groups of people can do great work and delight customers. Well, thank you so much. I really enjoyed this conversation. Lots of great advice for, as you say, leaders at all levels. Allison, thanks. It's a treat to spend time with you. That Scott Cook found her of Intuit and co-author of the HBR article, "The Surprising Success of Hands-On Leaders." Next week, Audis speaks with Zach Brown, the CEO of McLaren. If you found this episode helpful, share it with a colleague and be sure to subscribe and rate IDA Cast in Apple Podcasts, Spotify or wherever you listen. If you want to help leaders move the world forward, please consider subscribing to Harvard Business Review. You'll get access to the HBR mobile app, the weekly exclusive insider newsletter, and unlimited access to HBR online. Just head to hpr.org/subscribe. Thanks to our team, Senior Producer Mary Do, Audio Product Manager Ian Fox, and Senior Production Specialist Rob Eckhart. And thanks to you for listening to the HBR IDA Cast. We'll be back with a new episode on Tuesday. I'm Allison Beard.