Chapter 4. Leadership 101

A leader leads by example, not by force.

—Sun Tzu

Why does a book on scalability have a chapter on leadership? The answer is pretty simple: If you can’t lead or fail to make the right leadership decisions, you won’t scale your solutions in time to meet customer demand. In our experience as executives, consultants, and advisors, leadership failures are the most common reasons for a failure to scale. All too often companies get caught in the trap of focusing solely on product functionality, without realizing what is necessary to achieve appropriate uptime and response time under increasing user demands. Then, as the first really big rush of demand comes, the product begins to slow down and finally fails. Don’t believe us? No story is more emblematic of this common type of failure than the story of Friendster.

Jonathan Abrams founded Friendster in 2002. He had previously founded a somewhat successful company in 1998 called Hotlinks. Abrams initially envisioned Friendster as a site focused on a new and better way to “date”—connecting friends of friends with one another. Having preceded Facebook in its inception, Friendster ultimately became one of the first successful examples of a non-work-oriented social networking site. Users had profile pages and could create links to other profile pages, invite other friends to join, create testimonials about each other, and so on. The product was so successful that it reached 1 million users within the first 4 months of launch—truly impressive growth!

The engineers at Friendster were insanely focused on an interesting problem within computer science that they called the “friend-graph” (the “f-graph,” for short). View any person’s page, and the f-graph would show how you were connected to that person with initially up to four degrees of separation, and then ultimately with unlimited degrees of separation. A user could visit Kevin Bacon’s page and see exactly how many friend relationships separated him from the actor—six friends would be six degrees of separation. But the f-graph proved computationally complex, especially when the four degrees of separation limitation was lifted, and response times started to increase significantly as the servers tried to calculate relationships with each view of a page. Soon, Friendster started to have response time and availability issues that impacted the willingness of users to use its product.¹

1. Michael Fisher, Martin Abbott, and Kalle Lyytinen. The Power of Customer Misbehavior. London: Palgrave Macmillan, 2013.

Friendster didn’t correct its failures soon enough. When the company proved intent upon solving and delivering the business functionality of the f-graph rather than correcting the issues resulting from not designing a scalable solution, users flocked to alternative solutions. The result? In 2009, a Malaysian company acquired Friendster for $26.4 million. Facebook—a company founded nearly a year later than Friendster—had an initial public offering and, when this second edition was being written, had a market capitalization exceeding $170 billion.

Friendster ceded the battlefield to Facebook by not creating a compelling vision that pulled the organization to do the right thing for its customers in creating a highly scalable and available solution. Leaders missed or failed to address the issues of scale, and they allowed engineers to focus on solutions that the market was not demanding (Facebook doesn’t have an equivalent of the f-graph more than 10 years later). Would Friendster have beaten Facebook had it properly focused on scalability and made the right leadership decisions (as Facebook obviously has) early in its product development life cycle? Maybe. Maybe not. But it certainly would have lived to fight another day, and probably would have gone on to have a much larger valuation and play a much larger part in social networking within the United States.

Leadership applies to more than just an individual’s direct reports or organization. You can lead your peers, people in other organizations, and even your management. Project managers, for instance, can “lead” a project team without being the person responsible for writing the reviews of the members of that team. Role models within an organization are leaders as well. As we will see, leadership is about what you do and how you influence the behaviors of those people around you, for better or worse.

Leadership is very different from management, however, and not everyone is good at both endeavors. That said, everyone can get better at both with practice and focus. Both leadership and management are also necessary to varying degrees in the accomplishment of most objectives. Consider the general goal of ensuring that your product, platform, or system can scale to meet incredible increases in end-user demand. You will obviously want to establish a vision that meets or exceeds that goal but that also recognizes the real-world budgetary constraints that we all face. In addition, you will want to make sure that every dollar you spend creates shareholder value (accretive) rather than destroys it (dilutive). In the business world, it’s not enough to be within budget—you need to ensure that you are not spending your precious funds significantly ahead of near-term demand, because idle equipment and unreleased code mean dilution of shareholder value.

Some of the parameters of the leadership function represent attributes that the person “has.” Potentially, the person may have been born with them, such as good looks and an outgoing personality. It’s unlikely, without significant time spent under a surgeon’s scalpel, that you will dramatically change the way you look, so we usually discount spending much time or thought on the matter. Likewise, if you are of modest intelligence, it’s unlikely that you will ever be as good at immediately solving difficult problems on the spot as someone who is a super-genius. Neither of these relative deficiencies indicates that you can’t be an effective leader; rather, each simply means that you are at a comparative disadvantage in a single element of the leadership equation.

Some of the leadership function parameters may be products of a person’s upbringing or environmental issues—for example, charm, charisma, personality, and presence. These characteristics and attributes can and should be addressed, but they are difficult and tend to need constant attention to make significant and lasting change. For instance, a person whose personality makes her prone to disruptive temper tantrums probably needs to find ways to hold her temper in check. A person who is incapable of displaying anger toward failure probably needs to at least learn to “act” upset from time to time, as the power of showing displeasure in a generally happy person has a huge benefit within an organization. For instance, at some point you’ve probably said something like, “I don’t think I’ve ever seen John mad like that,” and more than likely this behavior made an impression that lasted for quite some time and helped influence your actions.

Some parameters of leadership have to do with what you can create through either innovation or perseverance. Are you innovative enough to create a compelling vision, or can you persevere to make enough attempts to create a compelling vision (assuming that you are consulting with someone to try it out on that person)? Innovation here speaks to the ability to come up with a vision on the fly, whereas perseverance to continue trying will take longer but can yield exactly the same result.

Other parameters of leadership relate to how you are perceived by others. Are you perceived to be a giver or a taker? Are you selfish or selfless? Are you perceived to be a very ethical person or morally bankrupt? Two important points arise here: the issue of perception and the effect of that perception on the team you are leading.

Everyone has probably heard the statement “Perception is reality,” and you have more than likely also heard the statement “Leaders are under a microscope.” When you’re a leader, everyone is watching you all of the time, and they will see you in your weakest moment and form an opinion of you based on that. Get used to it. That situation may not be fair, but it’s the way things work. If someone sees you accept free tickets to the Super Bowl from a vendor, he is very likely to jump to the conclusion that you are morally bankrupt or, at the very least, have questionable ethics. Why, after all, would you accept tickets from a vendor who is obviously trying to influence you to purchase the company’s products? Someone is inevitably going to catch you doing something at a low point in your day, and that something might not even be “bad” but simply taken out of context. The only thing you can do is be aware of this reality, and attempt as best you can to limit the number of “low points” that you have in any given day.

As to the effect of perception, we think the answer is pretty clear. Returning to the example of the Super Bowl tickets, the perception that you are willing to allow vendors to influence your decisions will undoubtedly have a negative impact on your ability to influence behaviors. Every vendor-related discussion you have with your team will likely be tainted going forward. After a meeting in which you indicate you want to include the vendor who supplied the Super Bowl tickets in some discussion, just imagine the team’s comments when you depart! You may have desired the inclusion of that vendor for all the right reasons, but that point just doesn’t matter. Your prior behavior caused significant damage to your ability to lead the team to the right answers.

The point of describing leadership as an equation is to drive home the message that although you may not be able to change some things, you can definitely work on many other things to become a better leader. More importantly, there is no maximum boundary to the equation! You can work your whole life to become a better leader and reap the benefits along the way. Make life your leadership lab, and become a lifelong student. By being a better leader, you will get more out of your organization, and your organization will make decisions consistent with your vision and mission. The result is greater scalability, more benefit with less work (or rework), and happier shareholders.

2. Justin Kruger and David Dunning. “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments.” Journal of Personality and Social Psychology 1999;77(6):1121–1134. doi:10.1037/0022-3514.77.6.1121. PMID 10626367; David Dunning, Kerri Johnson, Joyce Ehrlinger, and Justin Kruger. “Why People Fail to Recognize Their Own Incompetence.” Current Directions in Psychological Science 2003;12(3):83–87.

Few people are formally trained in how to be leaders. Most, however, have seen so many poor leaders get promoted for all the wrong reasons that they emulate the very behaviors they despise. Think we have it wrong? How many times in your career have you found yourself saying, “I will never do what he did just now if I have his job”? Now think through whether anyone in your organization is saying that about you. The answer is almost definitely “yes.” That situation has happened to us in the past, it will likely continue to happen to us over time, and we can almost guarantee that it is happening to you.

But that’s not the end of it. You can lead entirely the wrong way and still be successful, which encourages you to (mistakenly) associate that success with your leadership approach. Sometimes success happens by chance; your team just happens to accomplish the right things despite your wrong-headed approach. Sometimes success happens because you get great performance out of individuals for a short period of time by treating them poorly, but over the long term your behaviors result in high turnover and an inability to attract and retain the best people whom you need to accomplish your mission.

At the end of the day, to reap the scalability benefits that great leadership can offer, you need to measure where you are today. In their book Resonant Leadership, Richard Boyatzis and Annie McKee identify the three components necessary for change in individuals as mindfulness, hope, and compassion.³ Mindfulness here is knowledge of oneself, including feelings and capabilities, whereas hope and compassion help to generate the vision and drivers for change. Unfortunately, as the Dunning–Kruger effect would argue, you probably aren’t the best person to evaluate where you are today. All of us have a tendency to inflate certain self-perceived strengths and potentially even misdiagnose weaknesses.

3. Richard Boyatzis and Annie McKee. Resonant Leadership. Cambridge, MA: Harvard Business School Press, 2005.

Elite military units strip a potential leader down to absolutely nothing and force him to know his limits. They deprive the person of sleep and food and force the person to live in harsh climates, with the goal of getting the person to truly understand his strengths, weaknesses, and limitations. You likely don’t have time to go through such a process, nor do the demands of your job likely require that you have that level of self-awareness. Your best option is a good review by your boss, your peers, and—most importantly—your subordinates. This approach is often referred to as a 360-degree review process.

Ouch! An employee review sounds like a painful process, doesn’t it? But if you want to know what you can do to get better at influencing the behavior of your team, what better place to go than to your team to ask that question? Your boss will have some insights, as will your peers. Nevertheless, the only people who can tell you definitively how you can improve their performance and results are the people whom you are trying to influence. Moreover, if you want good information, the process must be anonymous. People’s input tends to be sanitized if they believe that there is the potential that you will get upset at them or potentially hold their comments against them. Finally, if you are really willing to go this far (and you should), you need to act on the information. Sitting down with your team and saying, “Thanks for the input; here’s what I have heard on how I can improve,” will go a long way toward creating respect. Adding the very necessary step of saying, “And here is how I am going to take action to improve myself,” will go even further.

Of course, a self-evaluation that does not result in a plan for improvement is a waste of both your time and the time of your organization and management. If leadership is a journey, the review process described should help set your starting point. Now you need a personal destination and a plan (or route) to get there. Some books suggest that you rely upon and build your strengths; others suggest that you eliminate or mitigate your weaknesses. We think that your plan should include both a reliance on and strengthening of your strengths and a mitigation of your weaknesses. Few people fail in their objectives because of their strengths, and few people win as a result of their weaknesses. We must reduce the dilutive aspects of our leadership by minimizing our weaknesses and increase our accretive aspects by multiplying and building upon our strengths.

Having discussed a model for leadership, along with the need to be mindful of your strengths and weaknesses, we will now look at several characteristics shared by some of the greatest leaders with whom we’ve had the pleasure of working. These characteristics include setting the example, leading without ego, driving hard to accomplish the mission while being mindful and compassionate about the needs of the organization, timely decision making, team empowerment, and shareholder alignment.

Most people would agree that employees with an optimal work environment or culture produce much more than employees at a company with a less than desirable work environment or culture. Producing more with a similar number of employees is an element of scale, as the company producing more at a comparable cost structure is inherently more “scalable.” Terrible cultures can rob employees of productivity; in such toxic environments, employees gather around the water cooler and gossip about the recent misdeeds of the boss or complain about how the boss abuses her position.

Evaluate the cultural norms that you expect of your team and determine once again whether you are behaving consistently with these cultural norms. Do you expect your organization to rise above the temptations of vendors? If so, you had best not take any tickets to a Super Bowl or any other event. Do you expect your organization to react quickly to events and resolve them quickly? If so, you should display that same behavior. If a person is up all night working on a problem for the betterment of the organization and the company, do you still expect that individual to be at work the next day? If so, you had better pull a few all-nighters yourself.

It’s not enough to say that you wouldn’t have your team do anything you haven’t done. When it comes to behaviors, you should show your team that you aren’t asking them to do anything that you don’t do now! People who are perceived to be great leaders don’t abuse their position, and they don’t assume that their progression to their position allows them certain luxuries not afforded to the rest of the organization. You likely already get paid more—that’s your compensation.

Having your administrative assistant get your car washed or pick your kids up from school might seem to be an appropriate job-related perk to you, but to the rest of the company it might appear to be an abuse of your position. You may not care about such perceptions, but they destroy your credibility with your team and impact the result of the leadership equation. This destruction of the leadership equation causes employees to waste time discussing perceived abuses and may even make them think it’s acceptable to abuse their positions in similar fashion, which wastes time and money and reduces organizational scale. If such benefits are voted on by the board of directors or approved by management as part of your compensation package, you should request that they be paid for separately and should not rely on company employees to perform the functions.

The key here is that everyone can increase the value of his or her leadership score by “leading from the front.” Act and behave ethically and do not take advantage of your position of authority. Behave exactly as you expect your organization to behave. If you abide by these rules, you will likely notice that your employees emulate your behaviors and that their individual output increases, thereby increasing overall scale of the organization.

CTOs who need to talk about being the “smartest person in the room” and CEOs who say, “I’m right more often than I’m wrong,” simply have no place in a high-performing team. Put bluntly, they are working as hard as they can to destroy the team by making such statements. Focusing on an individual rather than the team, regardless of who that individual is, is the antithesis of scale; scale is about growing cost-effectively, and a focus on the one rather than the many is clearly a focus on constraints rather than scale. Such statements alienate the rest of a team and very often push the very highest-performing individuals—those actually getting stuff done—out of the team and out of the company. These self-aggrandizing actions and statements run counter to building the best team and over time will serve to destroy shareholder value.

The best leaders give of themselves selflessly in an ethical pursuit of creating shareholder value. The right way to approach your job as a leader and a manager is to figure out how to get the most out of your team so as to maximize shareholder wealth. You are really a critical portion of that long-term wealth creation cycle only if your actions evolve around being a leader of the team rather than an individual. Take some time to evaluate yourself and your statements through the course of a week. Identify how many times you reference yourself or your accomplishments during your daily discussions. If you find that you are doing it often, step back and redirect your thoughts and your statements to things that are more team oriented than self-oriented.

It is not easy to make this type of change. Too many people around us appear to be rewarded for being egoists and narcissists, and it is easy to reach the conclusion that humility is a character trait embodied by the unsuccessful business person. To counter this perception, all you need to do is reflect on your career and identify the boss to whom you had the greatest loyalty and for whom you would do nearly anything; that boss most likely put the shareholders first and always emphasized the team. Be the type of person who thinks first about how to create shareholder value rather than personal value, and you will succeed!

Effective leaders and managers get the mission accomplished; great leaders and managers do so by creating a culture and environment in which people feel appreciated and respected and wherein performance-related feedback is honest and timely. The difference here is that the latter leader—the one who creates a long-term nurturing and caring environment—is leading for the future and will enjoy the benefits of greater retention, loyalty, and long-term performance. Caring about people means giving thought to the careers and interests of your employees; it means giving timely feedback on performance and, in so doing, recognizing that even stellar employees need feedback regarding infrequent poor performance (how else can they improve). Great leaders ensure that those persons who create the most value are compensated most aggressively, and they ensure that people get the time off that they deserve for performance above and beyond the call of duty for their individual positions.

Caring about people does not mean creating a sense of entitlement or lifetime employment within the organization. We will discuss this point more in the management chapter. Caring also does not mean setting easy goals, as in so doing you would not be accomplishing your mission of creating shareholder value.

It is very easy to identify “Mission First” leaders because they are the ones who are getting the job done even in the face of adversity. It is not so easy to identify “Mission First, People Always” leaders because it takes a long time to test whether the individual leader has created a culture that inspires people and makes high-performance individuals want to follow the person from job to job because he or she is a caring individual. The easiest “People Always” test to apply for a seasoned leader is to find out how many direct reports have followed that manager consistently from position to position within successful organizations. “Mission First, Me Always” leaders find that their direct reports will seldom work for them in more than one or two organizations or companies, whereas “Mission First, People Always” leaders seldom have problems in getting their direct reports to follow them through their careers.

“Mission First, Me Always” leaders climb a ladder with rungs made of their employees, stepping on them as they climb to the top. “Mission First, People Always” leaders build ladders that all of the stellar performers can climb.

Why did we add “morally correct” in this point? Few things destroy shareholder value or scale more quickly than issues with your personal ethics. We asserted earlier that leaders are always under a microscope and that you will undoubtedly be caught or seen doing things you wish you hadn’t done. Our hope is that those behaviors are nodding off at your desk because you’ve been working too hard or running out to your car to perform a personal errand during work hours because you worked too late at night to perform it. Ideally, such behaviors will not include things like accepting tickets for major sporting events for the reasons we’ve previously indicated. We also hope that they don’t include allowing others within your team to do the same.

One of our favorite quotes goes something like “What you allow, you teach, and what you teach becomes your standard.” Here, allow refers to either yourself or others. Nowhere does that ring more true than with ethical violations, large and small. We’re not sure how corruption at companies like Tyco or Enron ultimately starts. Nor are we certain how a Ponzi scheme as large as Bernard Madoff’s criminal activity, which destroyed billions of dollars of wealth, can possibly continue for so many years. We do know, however, that they could have been stopped long before the problems grew to legendary size. We also know that each of these events destroyed the size and scale of the companies in question, along with a great deal of shareholder value.

We don’t believe that people start out plotting billion-dollar Ponzi schemes, and we don’t believe that people start off by misstating tens or hundreds of millions of dollars of revenue or embezzling tens of millions of dollars from a company. We’re fairly certain that this behavior starts small and slowly progresses. People get closer and closer to a line they shouldn’t cross, and then they take smaller and smaller steps into the abyss of moral bankruptcy until it is just too late to do anything.

Our answer is to never start. Don’t take company pens, don’t take favors from vendors who wish to sway your decisions, and don’t use the company plane for personal business unless it is authorized by the board of directors as part of your compensation package. Few things will destroy your internal credibility and, in turn, your ability to influence an organization as thoroughly as the perception of impropriety. There is no way you can align lying, cheating, or stealing with the creation of shareholder wealth.

The leadership aspects of empowerment come from the boost that individuals, teams, leaders, and managers get out of the feeling and associated pride of ownership. Individuals who believe they are empowered to make decisions and own a process in general are more productive than those who believe they are merely following orders. Mechanically, the leader truly practicing empowerment multiplies his or her organization’s throughput, as he or she is no longer the bottleneck for all activities.

When empowerment happens in statement only, such as when a leader continues to review all decisions for a certain project or initiative that has been given to an empowered team, the effects are disastrous. The leader may indicate that he is empowering people, but in actuality he is constraining the organizational throughput by creating a chokepoint of activity. The teams immediately see through this ruse; rather than owning the solution, they feel as though they are merely consultants to the process. Worse yet, they may feel absolutely no ownership and as a result neither experience the gratification that comes with owning a solution or division nor feel the obligation to ensure that the solution is implemented properly or the division run well. The net result is that morale, throughput, and trust are destroyed.

This is not to say that in empowering individuals and teams, the leader is no longer responsible for the results. Although a leader may distribute ownership, that individual can never abdicate the responsibility to achieve results for shareholders. When delegating and empowering teams, one should be clear as to what the team is empowered to do. The trick is to give the team or individual enough room to maneuver, learn, and create value, while still providing a safety net and opportunities to learn. For instance, a small corporation is likely to limit budgetary decisions for managers to no more than several thousand dollars, whereas a division chief of a Fortune 500 company may have latitude within the budget up a few million dollars. These limitations should not come as a surprise in the empowerment discussions, as most boards of directors require that they approve large capital expenditures.

As we discuss concepts like vision, mission, and goals, a test that you should apply is this simple question: “How does this create and maximize shareholder wealth?” You should be able to answer this question in relatively simple terms; later in this chapter, we will discuss what we call the “causal roadmap” and its impact on individuals within nearly any job. Moreover, you should find ways to ask the shareholder-wealth-creation question in other aspects of your job. Why would you ever do anything in your job that doesn’t somehow help create shareholder wealth or keep natural forces like growth and the resulting instability of your systems from destroying it? Why would you ever hire a person who isn’t committed to creating shareholder wealth? Why would you ever assign a task not related to the creation of shareholder wealth?

4. B. M. Bass. “Two Decades of Research and Development in Transformational Leadership.” European Journal of Work and Organizational Psychology 1999;8(1):9–32.

Transformational leadership simply scales better. Rather than focusing on transactions with individuals, it focuses on the team. Rather than emphasizing oneself, it discusses the greater good. What might otherwise become a discussion with a single individual now becomes a discussion about what the team should aspire to be and accomplish. Whereas transactional leaders focus on the completion of individual tasks and goals, transformational leaders concentrate on presenting a compelling vision that pulls individuals to the right results even when the leader isn’t present. In addition, transformational leadership has been shown to reduce affective conflict (the bad role-based conflict described earlier in this book) and increase value-creating cognitive conflict.⁵

5. Marty Abbott. “Mitigating a Conflict Paradox: The Struggle between Tenure and Charisma in Venture Backed Teams.” http://digitalcase.case.edu:9000/fedora/get/ksl:weaedm382/weaedm382.pdf.

Vision is the description of a destination for a company, an organization, or an initiative. It is a vivid description of the ideal future—the desired state or outcome in a clearly defined, measurable, and easily committed to memory package. Ideally, the vision will prove inspirational to the team and can stand alone as a beacon of where to go and what to do in the absence of further leadership or management. It should be measurable and testable, meaning that there is an easy way to determine whether you are actually at that point when you get there. It should also incorporate some portion of your beliefs so that it has meaning to the organization.

The U.S. Declaration of Independence is an example of vision, though a majority of the document describes the vision in terms of the things we do not want to be. Much of this document focuses on actions taken by the British king, which were not desirable in the idealized future. Although such an approach can certainly be inspirational and effective in motivating organizations, it takes too much time to define an end state based on what the end state is not. For this reason, we suggest that vision be brief and that it define the desired end state.

The beginning of the Preamble to the U.S. Constitution is another example of a vision statement: “We the People of the United States, in Order to form a more perfect Union.” Although this passage certainly describes an ideal future, it is difficult to determine whether you can really “know” that you are there when you reach that future. What exactly is a “perfect union”? How do you test “perfection”? Perfection certainly would create value—who wouldn’t want to live in and contribute to a “perfect union”? The Preamble gets high marks for inspiration, memorizability, and value creation, but relatively low marks for measurability. It’s hard to describe how vivid it is, because it is difficult to determine how you would know you are truly there at the end state. Finally, the Preamble hints at certain beliefs but does not explicitly incorporate them.

Perhaps the easiest way to envision a vision statement is to view it within the context of giving someone directions. One of the things you are likely to do when giving directions is to provide criteria by which to determine whether the journey to the destination was a success. Assume that a couple is asking us to give them directions to a department store where they can find nearly anything they need at a reasonable price for their new apartment. We decide that the best place to send them is the local Walmart store. Let’s further assume that the people we are directing have never been to a Walmart store (maybe they are space aliens or perhaps they just emerged from a religious cult’s underground bomb shelter).

One of the first things we are likely to do in this case is give these rather strange people an indication of how they will know they have been successful in their journey. Perhaps we might say something like “The best place for you to go is Walmart, because it has the lowest prices within the 10 miles surrounding this area and I know you don’t want to travel far. The local Walmart is a big white building with blue trim and huge letters on the top that spell out WALMART. The address is 111 Sam Walton Street. The parking lot is huge, and within the parking lot you will find several other stores such as a McDonald’s restaurant and a gas station. Across the street you will see two more gas stations and a strip mall.” Such a description is not only vivid, but also outlines a set of tests that will indicate to our travelers exactly when they have arrived at their destination.

We’ve accomplished everything we wanted to do in creating our vision statement. We gave our travelers an inspiration—“lowest prices within the 10 miles surrounding this area” is inspiring because it meets their needs of goods being inexpensive and the location not being too distant. We’ve provided a vivid description of the ideal state—arriving at Walmart and giving the travelers an indication of what the site will look like when they arrive there. In summary, we’ve given our travelers a set of tests to validate that their initiative was successful, in the form of the vivid description and the beliefs implicitly identified in the need for low prices. The vision is easily committed to memory. The couple can look at the street address and determine for certain that they’ve definitely arrived at the appropriate location.

We suggest that you research other statements of vision and use the rules we have identified before creating your own. Apply these rules or tests and figure out which ones work for you. As a reminder, a vision statement should meet the following criteria:

• Vivid description of an ideal future

• Important to value creation

• Measurable

• Inspirational

• Incorporate elements of your beliefs

• Mostly static, but modifiable as the need presents itself

• Easily remembered

Let’s return to our analysis of the Preamble of the U.S. Constitution to see if we can find a mission statement. The passage “establish Justice, ensure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America” appears to us to be the mission statement of the Preamble. The entire remainder of the quoted passage serves to implicitly establish an existing state. By their need to “establish” these things, the founding fathers are indicating that they do not exist today. The purpose of the United States is also explicitly called out in the establishment of these things. These actions also serve to identify the creation of the vision: a “perfect Union.” Testability, however, is weak and suffers from the subjective analysis necessary to test any of the points. Has the United States ensured domestic tranquility after more than 200 years of existence? We still suffer from domestic strife along the boundaries of race, belief structure, and sex. The country has certainly spent a lot of money on defense and in general has probably performed well relative to other nations, but have we truly met the initial goals? What about general welfare? Does the rising cost of health care somehow play into that definition? By now, you’ve probably gotten the point.

Now, we return to the directions that we were giving our rather strange travelers who have never seen a Walmart. After providing the vision statement describing where the couple need to go, and consistent with our definition of a mission statement, we need to give them general directions or an approach for how to get there. We need to indicate the present state, a sense of purpose, and a general direction. The mission statement could then simply be “To get to Walmart from here, drive mostly southwest roughly 7 miles.”

That’s it; we’ve accomplished everything within a single sentence. We’ve given the travelers purpose by stating “To get to Walmart.” We’ve given them an indication of the current position in the form of “from here,” and we’ve given them a general direction to the vision, “drive mostly southwest roughly 7 miles.” The whole mission is testable, as the couple can clearly see where they are (although most mission statements should be a bit more descriptive), they already know how to understand their destination, and they have a direction and limit to determine when they are out of bounds.

As a review, a mission statement should meet the following criteria:

• Be descriptive of the present state and actions.

• Incorporate a sense of purpose.

• Be measurable.

• Include a general direction or path toward the vision.

Now you might state, “But that doesn’t really get them to where they need to go!” You are correct, and that’s a perfect segue into a discussion of goals.

SMART goals are

• Specific

• Measurable

• Attainable (but aggressive)

• Realistic

• Timely (or contain a component of time)

Going back to the Constitution, we can look at many of the amendments as goals that Congress desired to achieve en route to its vision. As an example, consider the abolition of slavery in the 13th Amendment. This amendment was obviously meant as a goal on the path to the equality promised within the vision of a perfect union and the mission of securing the blessings of liberty. The text of this amendment is as follows:

Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime where of the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.

Section 2. Congress shall have the power to enforce this article by appropriate legislation.

The 13th Amendment is specific in terms of “who,” “what,” and “where,” and it implies a “when.” Congress (“who”) has the power to enforce the article, and everyone (another “who”) is subject to the article’s rule. The “where” is the United States, and the “what” is slavery or any involuntary servitude except as punishment for crimes.

The amendment is measurable in its effect, because the presence of slavery is binary: Either it exists or it does not. The result is attainable, as slavery is abolished, although from time to time strange pockets of people practicing enslavement of others pop up and are handled by law enforcement personnel. The goal is realistic and it was time bounded as the amendment took immediate effect.

Returning now to our example of guiding our friends to their Walmart destination, how might we provide the couple with goals? Recall that goals don’t tell someone how to do something, but rather indicate whether that person is on track. In our example, we defined a vision or ideal end state for our travelers, which was the local Walmart store. We also gave them a mission, or a general direction to get there: “To get to Walmart from here, drive mostly southwest roughly 7 miles.” Now we need to give them goals to ensure that they keep on track in their journey to the final destination.

We might give this couple two goals: one identifying the end state or vision and an interim goal to help them on their way. The first goal might look like this: “Regardless of your path, you should be in the center of town as identified by the only traffic light within 10 minutes of leaving here. That is roughly halfway to Walmart.” This goal is specific, describing where the travelers should be. It is measurable in that they can easily tell that they have achieved it. It is both attainable and realistic because if we expect the couple’s car to move at an average speed of 30 miles per hour and travel a distance of 7 miles, they should be able to travel a mile every 2 minutes and anything over 10 minutes (5 miles) would put them somewhere other than where they should be. The inclusion of a 10-minute time interval means that our goal is time bounded.

The last goal we give our bargain-hunting friends will deal with the end vision itself. It is also a simple goal, as we’ve already described the location: “You should arrive at the Walmart located at 111 Sam Walton Street in no more than 20 minutes.” Our statement is specific, measurable, achievable, realistic, and time bounded. Bingo!

Have we given the travelers everything they need to be successful? Are we missing anything? You are probably wondering why we haven’t given them turn-by-turn directions. What do you think the reason is? Okay, we won’t make you wait. You might recall our definition of leadership versus management, where leadership is a “pulling” activity and management is a “pushing” activity. Explaining or defining a path to a goal or vision is a management activity, and we’ll discuss that in the next chapter.

Now that we’ve done so, let’s see how we can put these things to use in the development of a vision, mission, and set of goals for a company from the authors’ work history. Quigo was a privately held advertising technology company founded in 2000 in Israel by Yaron Galai and Oded Itzhak. By 2005, the company had completed a round of financing led by Highland Capital Partners and Steamboat Ventures and had moved its operations to New York City. The company’s first product was technology that enabled it to analyze pages of content and suggest words that would be appropriate to “buy” on auction-based advertising networks such as Google’s AdWords/AdSense and Yahoo’s search advertising platforms. This technology, known colloquially as search engine marketing (SEM), was offered by Quigo as a service under the name FeedPoint to companies wishing to buy search and contextual advertising.

By 2005, Quigo’s founders and a relatively newly hired CEO, Mike Yavonditte, decided to leverage aspects of FeedPoint’s technology to offer a competitively differentiated contextual advertising product similar to Google’s AdSense. Unlike AdSense, Quigo’s product (known as AdSonar) would have a constrained set of keywords, whereas Google’s list of keywords was nearly limitless. Keywords are the words that a customer “buys” so that its advertisement shows up when a search term uses that keyword or a page is determined (through contextual and semantic analysis) to be relevant to that keyword. Further, the AdSonar product would allow individual pages to be purchased, and the product would be presented under the publisher’s brand rather than Quigo’s brand. The idea driving this “white label” product was that it would allow publishers to extract the maximum value for their own brand, rather than Quigo’s brand. The theory behind the idea was that advertisers would pay more for the keyword “football” on ESPN than they would on a site catering to weather information. As such, publishers like ESPN should make more money off of their premium branded sites and content than they would through another, non-white-label product.

When AdSonar launched, the theory seemed to hold true. Advertisers appeared to be willing to spend more on premium and vertically focused sites than they were on keywords within competing products. Unfortunately, Quigo’s product was not initially designed to meet the onrush of demand from those publishers adopting AdSonar. The site would stall or become unavailable and in so doing would sometimes cause publisher sites not to render pages. Publishers complained that if something were not done soon, they would go back to their prior solutions.

The authors joined the company in the summer of 2005 and were welcomed with a new product that was crumbling beneath ever-increasing demand. What was even scarier than the fact that customers were threatening to quit is that the largest customers in the pipeline hadn’t even launched yet! It was clear that the platform needed both to be more highly available and to scale to meet demand that would exceed 10 times the current volume of traffic—all within a year. To explain to the team, the board, and the remainder of the company executives what we (jointly) needed to accomplish, we needed to create a vision around our initiative. Recall our points about vision statements:

• Vivid description of an ideal future

• Important to shareholder value creation

• Measurable

• Inspirational

• Incorporate elements of your beliefs

• Mostly static, but modifiable as the need presents itself

• Easily remembered

We decided on something like the following vision for the product’s availability and scalability (we’ve modified this slightly from the original):

AdSonar will all achieve 99.95% availability as measured by impact to expected publisher/partner revenue. We will never have a customer-impacting event from an inability to scale on time.

We then focused on creating a mission for the team around availability and scalability. Recall that an effective mission has the following components:

• Is descriptive of the present state and actions

• Incorporates a sense of purpose

• Is measurable

• Includes a general direction or path toward the vision

Our mission, as it related to scale and availability (our biggest roadblocks to success) became something like this:

To move from a crisis of availability to our vision of a highly available and scalable solution within two quarters by evolving to a fault-tolerant implementation.

The mission was measurable (it referenced our vision and therefore the 99.95% availability), had a component of time to achieve it (two quarters), and explained roughly how we would achieve it (implementing fault-tolerant designs—something we discuss in Chapter 21, Creating Fault-Isolative Architectural Structures).

Now we needed to set goals along the route to our mission. Recall that goals should be

• Specific

• Measurable

• Attainable (but aggressive)

• Realistic

• Timely (or contain a component of time)

Unfortunately, the operational processes at Quigo didn’t afford us a great deal of data on the sources and causes of outages. Goal 1, then, was to create a goal for the head of operations to implement daily service meetings and robust incident and problem management to resolve these issues within 30 days. We didn’t specify exactly how to do this—just that we needed to understand the impact of incidents (e.g., duration, revenue) and the root causes of the incidents. All of the SMART attributes were achieved.

The data that we did have available indicated that network components and email services were the primary source (problems) of many of the undesirable incidents. The systems were built “on the cheap,” but not in a good way. Many network devices were singletons; thus, when they failed, they would bring the entire product down. Goal 2, then, was to make all critical network servers redundant within 60 days, which allowed for sufficient hardware lead times within a small company. Because we didn’t have a great deal of information on the services failures, we also set a goal to identify the top five sources of incidents within a period of 30 days and to develop a plan to fix each.

A fair amount of information also pointed to time-to-respond as a major contributor to downtime. Specifically, for any problem, no one would know there was an issue until a customer complained. Often, for problems happening overnight, this would mean several hours of impact before any action would be taken. Clearly we needed better monitoring, in the form of monitoring from a third-party service that tested not only our servers but also our customer’s ability to connect to those services through Internet public transport services. The goal, then, was to reduce time-to-know for all failures of advertising services transaction availability before a customer called and to implement such a capability within 30 days.

Lastly, we wanted an overarching goal that generally helped show the path to success. While the company had not previously tracked availability consistently and absolutely did not do so by customer impact, we believed that Quigo needed to implement monthly increasing goals on the path to 99.95%. We didn’t know where Quigo stood, but we knew that for the benefit of its customers, its business, and its shareholders, the company needed to get there within 6 months. As such, we set the first month’s goal at 99.90%, the second month’s goal at 99.91%, the third month’s goal at 99.92%, the fourth month’s goal at 99.93%, and so on.

It would be ridiculous (and completely untrue) if we ended the Quigo story with “And that’s all we had to do to turn the company around and sell it for a tidy profit to the shareholders.” In fact, a lot of heavy lifting was required on the part of a lot of people to ultimately make Quigo a success. We’ll cover some of that heavy lifting in the process and technology sections of this book. For now, we emphasize that this initial setting of vision, mission, and goals was absolutely critical to the company’s ultimate success.

Let’s take a look at how we might create this causal roadmap to success for some different skill sets and teams within a company:

Operations teams (sometimes called network operations teams or applications operations teams) are responsible for helping to ensure that solutions or services are available, thereby keeping the company from experiencing lost opportunity (downtime that might mean a reduction in revenue or the loss of customers). Ensuring that services are “always on” contributes to shareholder value by supporting the ongoing delivery of revenues, which in turn maximizes profits. Increasing profits increases the price that shareholders should be willing to pay per share and, therefore, increases shareholder value.

Quality assurance professionals help reduce lost opportunities associated with the deployment of a product and the cost of developing that product. By ensuring that the product meets the needs of customers (including scalability needs), these professionals help ensure happier and more productive customers. This, in turn, engenders greater usage of the product and higher customer retention. Happier customers also refer more sales from other customers. Furthermore, because QA professionals are focused on testing solutions, software engineers are freed up to spend more time on engineering (rather than testing) solutions. As QA professionals tend to come at a discount to engineers, the total cost per unit developed goes down. Lower costs of production mean greater profits; happier customers mean more purchases and higher revenues. The two net out to bigger profit margins and happier shareholders.

Although we’ve painted some of the picture here of how the causal roadmap works in general, it is (and should be) a little more complicated than just blurting out a paragraph describing how an organization impacts the company’s profitability. One-on-one discussions should take place between a leader and each member of the team about this relationship. We do not mean that a CEO should talk to each of the 5,231 people in the company, but rather that a manager of individual contributors should speak to each and every one of his or her employees. The director, in turn, should speak to each of his or her managers, the VP to each of his or her directors, and so on. Each conversation should be personal and tailored to the individual. The underlying reasons for engaging in the discussion will not change, but the message should be tailored to exactly what that individual does.

Furthermore, people need to be reminded of what they do and how it affects the maximization of shareholder wealth. This isn’t a one-time conversation. It’s also not really focused on delivering performance feedback (although you can certainly work that in), but rather on ensuring that the person has purpose and meaning within his or her job. The impact on retention from such reminders is meaningful, and it can potentially help employees produce more. A happy employee, after all, is a productive employee—and a productive employee is producing more to help you scale more!

Leadership can impact the scalability of your team and your company in many ways. Poor leadership puts limits on the growth and output of your company and your team. Great leadership, in contrast, serves as an accelerator for growth, allowing organizations to grow in total size and in output per individual. By becoming a better leader, you can increase the capabilities and capacity of your organization and your company.

Successful leaders are characterized by certain behaviors, including leading by example, leaving your ego at the door, leading selflessly, and accomplishing the mission while taking care of your team. Leaders who focus on the greater good (transformational leadership), rather than engaging in transactions with their employees, generally get better results. For all these reasons, you should always be thinking of how to lead ethically and recognize that everything you do should be aligned with shareholder value.

The components of vision, mission, and goals all play into the leader’s role, and the SMART acronym can be used to advantage in the creation of scalability goals. Finally, the causal roadmap to success emphasizes helping your organization to tie everything that it does back to what is important to the company: the maximization of shareholder value.

• Leaders, whether born or made, can get better; in fact, the pursuit of getting better should be a lifelong goal.

• Leadership can be viewed as a function consisting of personal characteristics, skills, experiences, actions, and approaches. Increasing any aspect increases your leadership “quotient.”

• The first step in getting better as a leader is to know where you stand. To do so, get a 360-degree review from your employees, your peers, and your manager.

• Lead as you would have people follow—abide by the culture you wish to create.

• There is no place for ego when leading teams—so check your ego at the door.

• Leadership should be a selfless endeavor.

• Mission First, People Always. Get the job done on time, but ensure you are doing it while taking care of your people.

• Always be morally straight. What you allow, you teach, and what you teach becomes your standard.

• Align everything you do with shareholder value. Don’t do things that don’t create shareholder value.

• Transformational leaders focus on the team overall, not on individuals. Don’t engage in leadership transactions with individuals (quid pro quo), but rather focus the team on collaboration and team outcomes.

• Vision is a vivid description of an ideal future. It includes the following components:

Vivid description of an ideal future

Important to shareholder value creation

Measurable

Inspirational

Incorporate elements of your beliefs

Mostly static, but modifiable as the need presents itself

Easily remembered

• Mission is the general path or actions that will get you to your vision. It includes the following components:

Descriptive of the present state and actions

A sense of purpose

Measurable

General direction or path toward the vision

• Goals are the guideposts to your vision and are consistent with the path of your mission. SMART goals are

Specific

Measurable

Attainable (but aggressive)

Realistic

Timely (or contain a component of time)

• The causal roadmap to success will help you frame your vision, mission, and goals, and will help employees understand how they contribute to those goals and aid in the creation of shareholder value.