While it is easy to believe many CEOs and top executives have reached their levels of success by making all the right decisions, starting and growing a successful business is not something that can be achieved by following a business textbook.
“Had I known then what I know now”
is a surprisingly common phrase among some of today’s most successful leaders.
Entrepreneurs know that business success transcends the theoretical; it is truly an exercise in perseverance, commitment and humility.
As a serial entrepreneur and president of The CEO Roundtable, I am no exception to this rule. In fact, my biggest mistake cost me more than a million dollars. But, after years of trial and error in business, I have discovered many of life’s lessons are best learned from experience, and business mistakes that bring an enterprise to the brink and back again can be valuable equity for future growth.
In fact, those same mistakes can become even more valuable when they are shared among peers.
So how can big mistakes equate to company equity in the long run?
Let me explain:
More than 20 years ago, a company I started—Hound Dog Products—began to take off. As president, I felt it was time for me to take a step back from the day-to-day operations and concentrate on the next phase of the company.
Using the conventional business wisdom I had gleaned during the course of my career, I hired a number two, a business manager, and trusted him to continue successfully running the business.
I have known for a while that it is great people that make businesses a success, and at the time, I thought I had hired a strong candidate. But I made one crucial misstep in this new hire: I trusted without verifying.
In business, there is sometimes a tendency to shy away from explicit performance expectations because the conversation may be tense and difficult, particularly with senior-level hires.
There is a tendency to think that things will be just fine: you made a good hire, and now you need to simply trust them. What I soon learned about my new hire is that trust requires two things: character and capability. My new hire had the character, but he was sorely lacking capability.
By “trusting” my new employee, I let things go, and did not hold my new general manager accountable for the first few months of his employment. Productivity and sales fell and expenses went through the roof, while the company lost a bundle and suffered decreased morale among workers, which also stifled customer service.
Luckily, we survived and overcame our mistakes. I was able to get things back on track by releasing the underperforming leader and hiring new talent—specialists in areas like sales and marketing and operations, rather than a general manager—and making expectations mean something again.
We were able to build on that foundation and double the size of the company before selling it to our largest competitor.
Regardless of the outcome, the mistake still happened. I like to think that any mistake eventually can become equity in a company, as long as leaders can learn from their missteps. Certainly, if you never make a million-dollar mistake again, your company is better off—and other companies can be better off as well.
Sharing expertise
Ideally, all CEOs don’t have to be in the “equity”-making business. I made a mistake that cost me a million dollars, but I am now eager to take down that cost for other companies.
By working together and sharing knowledge and experience. without judgment or ulterior motives, CEOs can avoid making million-dollar mistakes, while still learning important lessons.
This is why peer-sharing practices are increasingly popular in today’s business leadership model, and the reason why organizations like The CEO Roundtable exist.
One of my fellow CEOs once told me, “Never proceed with unspoken expectations. Make the expectations of what success looks like clear.” I wish I had had that advice when I was about to make the most costly mistake of my career.
That is the value of a peer-sharing network: being surrounded by fellow business people who can realize value from the insights I have learned and profit from the equity I have built in making my own mistakes.
Among these most important lessons are:
1. Trust but verify. Trust is important, but ensuring that employees are meeting expectations will keep your annual operating plan in motion.
2. No unspoken expectations. Make sure employees are clear what expectations they are accountable for now, a month from now, even five years from now. Create clear markers that are measureable, so there is no room for confusion down the road.
3. If someone is afraid of accountability, then do not hire them. If an employee is all character and no capability, they won’t meet expectations, and neither will your company.
4. Ban the words “try” and “how” from your office. Holding employees accountable for the “how” will allow CEOs to work on the “where” and the “why.” And if someone is “trying” to do something, the burden is still on the CEO’s back. If employees commit to a goal and hold themselves accountable, then you can eliminate the words “how” and “try” all together.
5. You don’t have to go it alone. Understand that while it is lonely at the top, there are hundreds of others who have walked in your shoes and made the mistakes you are about to make. A quality peer-sharing experience is a valuable asset for any leader that will yield tangible lessons for future success.
Through peer sharing, these mistakes and successes are shared every month with other business leaders in a confidential environment. How profitable can your business become if you have 200 years of business experience to dwell on at any given time?
The answer is exponential, and each of our members drives down the cost-per-use of any individual business’ mistakes.
Had I known then what I know now about peer sharing, I certainly wouldn’t have had to learn the hard way. That is truly a million-dollar lesson.
