People and Culture… To Succeed You Need Both
Over the last several weeks, we had a wide-ranging conversation with Mats Lederhausen. He is the Founder and CEO of the investment platform BE-CAUSE LLC based in Chicago. The organization invests in companies born with a purpose bigger than their products. From 2000-2006, he was lead director and Chairman of Chipotle where he was instrumental in leading what became one of the most successful restaurant IPOs in history. He has also previously held leadership roles with Boston Consulting, McDonald’s Corporation, and McDonald’s Ventures.
Our conversation focused on two main topics: People and Culture. Below are edited highlights from our discussion.
Mats, how do you build an attractive, sustainable culture?
Obviously, it starts with the recruiting process. If we don’t hire the values we want, it is impossible to create the culture we aspire. That is obvious. As we know, we hire attitudes and train for skills. Too many organizations are overly fixated on what people know vs who they are. My general belief is that you can teach the right attitudes almost anything.
What are the key elements you look for in anyone you hire?
Character – Are they good people? What values do they possess, particularly around leading others? Are they in a growth mindset and are they treating people the same way regardless of who’s watching? Are their values consistently displayed?
Intellectual Curiosity – I don’t look for smart people necessarily. But I look for curious people. Individuals that want to learn…that love to learn. You look for growth in their development. A person who has “stood still” is not a great sign. I have always said that we are not just a company or an industry for hungry customers, we are also a place for hungry people. They have to have an appetite for life, learning, and growth.
Work Ethic/Passion – Ambition, drive, intensity. It cannot be overstated. Some people just want more. Their desire for success just runs deeper. Some people just care more than others.
Past Performance – Are they achievers? Did they achieve early and often in life? Do they respond quickly to requests? Do they come to the discussion prepared? Are they on top of follow up? Details matter and are traces of how much they want it. Winning requires attitude. Look for people who like to prevail and for whom being on a winning team is really important.
Describe your thoughts around hiring?
Hire slow and fire fast – We will make mistakes. When things don’t feel right it is likely you made a mistake. You missed something in the recruiting process, admit it. Don’t procrastinate. Trust your instinct. The longer you wait, the more costly and painful the departure. You also look bad for the rest of the organization. Who are you to tolerate this hire? What were you thinking?
Use assessment tools – and other forms of testing as one data point to your overall assessment.
Speed of process – don’t make it too cumbersome. Make sure process is moving along without stops. Make sure the candidate is aware of the next step. Diligence, discipline, and thoughtfulness is a smart hiring strategy but slow is not. You will lose candidates.
Utilize multiple people in the interview process – people catch different things. Never hire someone who anyone has any negative thoughts on. It’s not worth it. Everyone must be positive about a hire. Otherwise, move on. Don’t talk anyone else or yourself into hiring someone.
Never change time for interviews – You immediately lose credibility as a company. If you say a time and a place, stick to it.
Reject people on purpose – Don’t feel bad or “wasteful” when you interview people that are not ultimately hired. Strive to find the best fit for your organization and the candidate, even if it’s not your company. Earning a reputation as an employer who runs a tough but fair interview process only helps strengthen your brand.
References – This is perhaps the most difficult and important part of hiring. Try to find people representing a 360 lens of a person. People they led, people they worked for, and peers they worked with. And not names they gave you. Dig into their past places and find people. The best recruiters are like CSI on a crime scene, e.g., hiring forensics. Trace the background and find out who they really are. Beyond background checks, Google and LinkedIn can work wonders. Don’t complete the reference without asking: “Would you hire this person again?” If there is any hesitation, often noticed in the seconds it takes before you hear an answer, I’d strongly consider not hiring the person.
How do you feel about the philosophy of only hiring A players?
There are basically two “attitudes” you can have to this area. One is what I would call the “talent theory.” The A player mentality. This has a huge following and is centered around the belief that the objective of a company is to attract only the best. The other theory is one of a more abundant world view of talent which believes that most people can be truly great, and the job of a company is to enable greatness. I subscribe more to the latter one. Obviously, there are truths in both theories. Clearly every company should try to hire the best, smartest, and most talented people they can. But if that’s your HR strategy then you are not going to scale. You are going to fail. Unless you build a culture and systems that “elevate” performance you won’t be successful.
In other words, your performance is basically what your people do in relation to what you invest in. Since strategies, tactics, ideas, and IP are all the result of people, performance is also a result of people. However, your culture (values, norms, systems) is what determines if your people are better inside the organization than they are outside. GREAT companies elevate performance. BAD companies dilute it.
One great classic article about the difference in approach is the New Yorker article by Malcolm Gladwell called the “Talent Myth.” One common mistake companies make, particularly corporations (small companies that believe that in order to become big you have to act big), is that they write their values on a piece of paper and proclaim that this is their culture. Culture is not what is written. Culture is what is experienced, felt, and lived. And the two are rarely the same. In fact, if you want to fail, the best thing you can do is to communicate one culture and be yet another. It confuses people, produces distrust, and causes spiritual fatigue. It’s a recipe for disaster. That being said, it is important that the leadership of a company declare what kind of culture they want, commit to certain critical features (values) of that culture, and invest, display, monitor, and communicate these values consistently and passionately.
As a leader, how do you make “culture” come alive in an organization?
Feedback. This may be the most underappreciated and underleveraged tool in corporate America. It is a well-documented and well researched fact that we can’t learn, grow, or improve without feedback. That’s why every athlete has a coach, why football players watch thousands of hours of tape, and why musicians record. I can go on. But what do we do in America? At best, annual performance reviews that sometimes don’t happen, are rarely well documented, and never really go deep enough. We can do so much better.
Obviously, there are tons of tools and systems that will enable this. But it is inherently cultural. It starts with hiring curious people who want to learn. And it manifests itself in everything we do culturally. We have to make it part of our distinct style to want to learn, to not take things personally, to always want to be better, and to embrace feedback, even when it hurts. It is never about who we are, but rather what we do and how we can do it better.
Every meeting, every day should be about a “plus/delta” approach to life. What is good, and what can be better. If you are not changing something, you are not growing. Change is growth. The day you notice that people around you aren’t talking about change you should start to worry. Andy Grove of Intel wrote a whole book about it: Only the Paranoid Survive.
There are tons of books and articles you can find about having difficult conversations. I don’t think there is a perfect way to do this other than to commit to it, and like with everything else, do it often and do it well. Two things you have to do if you are serious about it. One is that the CEO has to lead by doing. He/she needs to do this all the time. Second is that you need to measure and make sure it gets done. You should “dipstick” and occasionally test field level reviews so that they are authentic and get done. Finally, feedback should not be done only in annual appraisals. Every meeting should have feedback. If you wait until an annual time it is too much pressure and it won’t get done effectively. The annual review should be a summary of the year past and the expectations forward.
What are your insights relative to annual reviews?
Most companies actually don’t do a very good job of communicating with employees around what and how to improve. The main reason is that few people are fired because they didn’t hold a performance review. They should be. But somehow most organizations take the allocation of financial capital MUCH more seriously than the allocation of human capital. This isn’t that complicated. Take this as seriously as anything else critical in your organization and your objectives. If someone stole from you, they would be fired. If someone didn’t give feedback to people working for them, they should be too. Make it an absolutely essential part of being. That’s it. No exceptions.
There are three other reasons for why these important conversations aren’t happening. First, the conversation isn’t scheduled or doesn’t happen. Second, it is scheduled, and it does take place, but nothing meaningful about performance or opportunity is discussed. It’s mainly about communicating your next year’s salary and bonus. Third, it does happen, but messages get diluted both by our own discomfort in delivering tough messages and in the recipient’s willingness to embrace change. Therefore, we think we have communicated well, but in reality, we haven’t. Since this is the most important thing we do as leaders, I have tried to perfect my own “methodology” for how to conduct these conversations. It isn’t perfect, but it has worked well for me. Here is what I do.
1. Keep it simple. Communication works better if we communicate fewer things.
2. Stick to your commitment. Nothing communicates more than what you do and how you do it. Don’t be late. Don’t reschedule. Set aside ample time (at least 2 hours preferably 3). Do it in a quiet place. Don’t take calls. Don’t look at your phone. Don’t walk away. Be present and focused.
3. Make sure it is a conversation. Preparation is important for both parties, but avoid long PowerPoint presentations. Rather focus on distinct data points that reference what you are trying convey (either good or bad). It is harder to argue with data and facts. Having access to relevant data can sometimes be critical. 360 reviews could also be of great value to enforce leadership deficiencies, but avoid lengthy 60-page questionnaires. If doing a 360, do a 10 question version! Simplicity Rules.
4. Stay on each topic. Don’t wander around. For example, when you talk about what’s good, stay on what’s good. Don’t “but” the conversation. Celebrate what is truly good and “complete” that part of the conversation, and perhaps even take a break before you start the next phase.
5. Follow up. The most important aspect of this entire dialogue is to ask the participant to send you a full, detailed summary of all points discussed in your meeting within 24 hours. Your job is then to make sure that the written version is exactly what you had in mind. If there are significant deviations, you need to immediately schedule another meeting. However, if there are only minor discrepancies, a call or email may suffice. Your objective is to have 100% alignment on what was discussed, and actions decided upon. This document is also the foundation for your next dialogue.
You talked in the past about Insularity? Can you explain?
It is impossible to get feedback unless you acquire perspectives from outside of yourself. Some people in the organization must be externally curious as well as internally. There are things going on outside that can be helpful as you shape your own feedback system. If you want to get better, you have to spend time with the best, and not all the best people are inside. So, part of your time must be allocated to learning, meeting with interesting people, and exploring new ideas. Focus is also important, so be disciplined about it. However, please pay attention to whose job it is to find ideas outside of the organization. Which books are being read, which blogs followed, and whose main job is it to keep track of the most important lessons from outside. Many big companies die because they fail to renew themselves.
Founder & CEO of BE-CAUSE LLC and Cresset Advisory Board Member
Mats Lederhausen is the founder and CEO of the investment platform BE-CAUSE LLC based in Chicago. BE-CAUSE invests in companies born with a purpose bigger than their products. Find his newsletter here sharing thoughts, articles, and conversations that keep him inspired to elevate our future. Please sign up to receive them weekly here. Mats is a pioneer in purpose-driven investing. He is also a founding general partner of Cue Ball, a Boston based evergreen Venture Capital firm where he primarily focuses on consumer and lifestyle brands.
Mats started his career at the Boston Consulting Group before becoming an owner-operator of more than 170 McDonald’s restaurants in Sweden. In 1999 he was asked to serve as Global Head of Strategy at McDonald’s where he co-architected the corporation’s turnaround. Mats is a World Economic Forum Global Leader of Tomorrow and served for nearly a decade as Chairman of the non-profit Business for Social Responsibility. Mats currently serves on many boards he is invested and engaged in as well as continuing to serve on the global board of Ronald McDonald House Charities. Mats holds a MSc from the Stockholm School of Economics in his native Stockholm Sweden. Mats resides in Chicago with his wife Dr Jessica Lederhausen, their 4 grown children and grandchildren.