We learned a different way to lead and to support each other as we all elevated the company to unexpected levels of performance.
SHAYNE
My name is Shayne Hughes and I’m the president of Learning as Leadership. I’ve been an executive coach for twenty-five years, partnering with leaders to bring about culture change within their organizations. I am grateful to Brandon for sharing his story because it allows us to explore a subject I care deeply about.
The politics, power struggles, and dysfunctional behavior Brandon faced in 2005 are nearly ubiquitous in organizations of all sizes. Blaming, avoiding conflict, overcontrolling, assuming ill intent—sometimes these behaviors are so constant we stop noticing. They are the air we breathe. Stress and conflict undermine employee satisfaction and engagement. In fact, a September 2015 Gallup Poll measured nationwide employee engagement levels at 31 percent—and that’s a peak for the past five years! Even more troubling, almost 20 percent of employees are actively disengaged.
It’s all the more aggravating that the solutions to this quagmire seem so obvious. Ask any group of employees to describe an ideal team or organizational culture, and they will tell you: supportive, transparent, authentic, collaborative, trusting. But inquire about their current company’s culture, and the list usually looks very different: competitive, political, territorial, untrusting, conflict averse.
If we all know the characteristics of a healthy team and organizational culture, why do egos and rivalries keep coming back? Are there ways to eliminate them? My company’s founders, my colleagues, and I are passionate about exposing the destructive effects of the ego—and releasing the boundless human energy and outcomes that are possible when we shed these unnecessary tendencies.
Dysfunction is so entrenched because it occurs automatically, whenever a person experiences stress or fear. Although unproductive reactions seem like personality traits, they are, in fact, learned, very predictable— and completely changeable. In understanding how anxiety about your value, competence, and well-being can hijack your behavior, you will discover the time-tested strategies that Encore employed to forge a healthy, creative, and high-performing organization.
Note, however, that we don’t present any silver bullets in Ego Free Leadership. That’s what Brandon initially wanted when he became Encore’s CEO, and his efforts to hold his team accountable to more functional behaviors went in vain. Like most smart, self-aware, and highly successful executives, Brandon underestimated how his own ego-driven dysfunctions created a team and organizational culture that virtually guaranteed broader dysfunction.
Are you willing to look at this for yourself?
In the coming pages, Brandon will share his journey. You’ll understand his fears and his team’s challenges, and you’ll watch him break through his limitations as a leader. He’ll take the risk of revealing what we all think and feel but usually don’t admit—sometimes, not even to ourselves. He’ll take you on a wild ride, and together, he and I will help you understand the connection between individual leadership obstructions, cultural dysfunction, and business results.
Encore Capital collects distressed consumer debt. It isn’t a glamorous job, but if no one does it, America’s financial system grinds to a halt. How it is done, however, makes an invaluable difference in the lives of both consumers and employees. Encore’s management team embraced that opportunity despite external skepticism about their motives. They created a culture in which imperfection, empathy, and growth were valued. They sought to heal rifts across departments, cultures, and genders. They encouraged people to care about the plight of their consumers.
In the process, they discovered that the upside business value of decreasing ego within an organization is not incremental, but exponential. It’s the difference between 300 percent growth and bankruptcy.
CHAPTER 1
THAT VOICE IN YOUR HEAD DOES MORE DAMAGE THAN YOU REALIZE
Our Preoccupation with Self-Worth
BRANDON
I stepped into the blazing August 2005 sunshine of New York City. The temperature was 95 degrees and the humidity hit me like a wave. I was headed to the biggest meeting of my career and had decided to clear my head by walking the ten blocks from my hotel. After a dozen paces, however, I was soaked in sweat.
My boss, Carl Gregory, was retiring as the CEO of Encore Capital Group, and the board of directors had agreed to make me his successor. I was fortunate to achieve a lot of success early in my career: I was managing thousands of people by the time I was twenty-seven, had helped Encore avoid bankruptcy, and was on the Nasdaq stage when we took the company public in 2003. Now, at thirty-seven, I was poised to be its leader. I was on my way to finalize the terms of my agreement with Nelson Peltz, a member of the board and Encore’s largest shareholder. I had worked at Encore for five years, and Nelson and I had a good relationship. He had a reputation for being a ruthless negotiator, though, and several board members offered to advise me on how to handle the meeting. Instead, I did my own homework, even hiring a compensation consultant to benchmark my proposal. My request was fair and well deserved. I was confident I would prevail.
I arrived a few minutes before our scheduled start time of 2:30 pm, which gave me time to wipe the sweat off my face. We were meeting in a restaurant partially owned by Nelson. It was between the lunch and dinner service, and when we sat down, we were the only two people in the place. I laid out my rationale in fine detail.
“Well done, Brandon,” Nelson said when I finished. “But this is a zero-sum game. Every dollar I pay you is a dollar that doesn’t go to the shareholders. As the largest shareholder, I don’t like that.”
“I understand,” I replied, ”but a dollar means a lot more to me than it does to you.”
“No,” he said flatly, “a dollar is a dollar.”
I couldn’t believe his response. I made my arguments again, this time with added emphasis on the salary benchmarking, which was clearly impartial. He didn’t budge and told me that his offer was final. Time to walk out or fold. I stood up, looked at the door—and then shook his hand. Nelson knew all along that there was no way I was going to walk away from this opportunity. He had all the leverage. Never take a knife to a gunfight.
I prided myself on my ability to convince others. I had often been the young executive having to overcome perceptions that I wasn’t up to the challenge. Winning this negotiation was my chance to prove I could roll with the big guys. I couldn’t believe how poorly it went. I got the job, but it still felt like I belonged at the kids’ table.
The air outside was stifling, the heat and humidity mixing with my anger and embarrassment. I felt naive and inexperienced. I was supposed to meet another board member, Alex, for a drink. He had offered to help me negotiate with Nelson, but I refused. As I walked, I racked my brain for any plausible excuse to cancel.
The room at Smith and Wollensky’s was crowded. Alex was at the bar and he waved me over. He raised his glass and toasted my success. I should have been thrilled. Instead, it felt like I had blown my first big opportunity. Should I have held out for more money? If I couldn’t advocate for myself, was I really up to this job? I tried to shove my doubts away on the flight home to San Diego. Dana, my wife of just a few weeks, met me at the airport. We went through the details of the meeting, and she was relieved I hadn’t tested Nelson’s resolve.
Over the weekend we talked about how I planned on handling the challenges facing Encore. It was a period of unprecedented change on all fronts.
Our core business was under tremendous pressure. While the financial crisis of 2008 was still three years away, our industry had begun its own recession. Encore Capital acquires unpaid consumer debts, mainly credit cards, from banks and other large financial institutions. The company becomes the de facto creditor, and we work to collect money from those consumers who regain their ability to pay. On average, 80 percent of the consumer accounts we acquire pay us nothing. The other 20 percent pay us approximately sixty-six cents on the doll
ar. The critical variables that determine our profitability are the purchase price for portfolios of unpaid debt, the total dollars we collect, and the operating costs required to generate those collections. Between December 2004 and January 2005, the prices for portfolios increased by almost 100 percent, making new investments largely unprofitable. Prior years of very profitable investments had given us a small window of time to adjust our operating model. It was up to me to figure out how to adapt.
We hadn’t anticipated such a dramatic shift and had no contingency plans. So, during the first eight months of 2005, we reacted by launching a variety of strategic initiatives designed to offset the price increases and diversify our revenue. Sort of like throwing spaghetti against the wall. We acquired the largest portfolio of unpaid receivables in the company’s history, along with an operating site of 200 people; hired an experienced management team to create a new business vertical focused on a different asset class; acquired a company outside our core business; and opened our first international site in India. Bold moves for a company our size. The big question was whether my newly formed executive team had the leadership and business skills to make the moves pay off.
During the prior five years, as COO, I had worked closely with Carl and the company’s CFO, Barry Barkley. It took time to build our leadership rapport, but the three of us found a solid working rhythm. I learned invaluable lessons from both of them. Now that era was ending.
Barry had retired in June, and Carl was stepping away in October. The new CFO, Paul Grinberg, had a world of experience and was one of the smartest people I’d ever met. But the two of us approached problems very differently. He came up with all the reasons why initiatives wouldn’t work, while I could only see the finish line. I couldn’t figure him out. Weren’t we supposed to identify ways to grow the company? Why was he always so negative? If we were going to navigate our way through these challenging times, our relationship had to work, but we weren’t clicking.
Paul wasn’t the only new member on the leadership team. We had hired an Operations executive to replace me and added two leaders to oversee our new business ventures. All three were experienced, but new to our industry. I saw early on that they were struggling, but I needed to concentrate on my transition. They’d have to figure it out on their own.
As I talked this over with Dana, she was concerned that I wasn’t being honest with myself. She thought I was overcommitted and wasn’t organized enough to take care of all my new responsibilities. I told her I was perfectly capable of handling everything—and suggested she “focus on herself” instead.
“Now you’re dismissing my feelings,” she told me straight up.
From the beginning of our relationship, Dana refused to put up with my bullshit. Given that both of us were previously married, she insisted that we meet with a therapist to ensure we built a strong foundation for our relationship. She was always pushing me to be more authentic with her and with my six-year-old son, Trevor. I trusted her advice when it came to our family, but I was a different person at work.
“It’ll be fine,” I said, hoping to end the conversation. “I just need time to focus and work with the team. We’ll get there.”
“Really? I’ve heard that before. I think you should get some help.”
I nodded but didn’t respond. The job would be a challenge, but I was confident. I needed to learn more about managing balance sheets and dealing with shareholders, analysts, and regulators. But my leadership capabilities were strong. I’d been successful so far, right? Besides, my team needed to see I was in control and had the answers.
I was glad to get back in the office on Monday to focus on our key initiatives. Late morning, I had a meeting with Paul to talk about our acquisition.
“We’ll close on time,” he said, “but I don’t know how we’ll fit culturally. It can be hard for founders to take direction. Getting their management team to operate with our rigor is going to be difficult. When I tried to talk to them about metrics, they kept telling me not to worry, that they knew their business.”
“Do I need to fly there?” I asked.
“I’d say ‘yes,’ but there are too many issues here.”
“What are you talking about?”
“It seems like all I do is listen to people complain about project delays and who’s to blame for missed projections. The new guy, Dave, doesn’t understand our business. I was babysitting while you were gone the last couple of weeks.”
“OK, I can fix that.”
“While you’re at it, can you deal with the Technology team? They keep fighting with Operations about why critical software enhancements are more than sixty days behind schedule. When we get in a room, IT blames Operations for constantly changing the scope of the project, while the Ops guys see the IT team as rigid and incompetent.” He sighed. “I’ve got five more examples like that.”
Paul could be a glass-half-empty guy, but this time I sensed real frustration. When I had tried to address similar concerns with the executive team several weeks prior, I got polite pushback and silence. Apparently, they still hadn’t gotten the message. We were in a tough spot, and this team didn’t seem to have the skills or maturity to understand the magnitude of the problem. Maybe Dana was right; they did need help. I asked Paul if he had any ideas.
“I’ve got a solution, but it’s unorthodox,” he said. “The focus is on identifying unproductive leadership behaviors and involves several week-long training sessions over a year. The organization is called Learning as Leadership, and the seminars are held in Sausalito, California. Instead of them coming here, we go to them.”
I looked at him incredulously.
“It would be our team mixed with leaders from around the country,” he continued hurriedly. “We get the benefit of their experience. I’ve done it before. It’s amazing.”
Where is this guy coming from? I wanted some quick help, not a multi-week distraction. Paul was so enthusiastic, though, that I didn’t know how to politely turn him down. We asked two of Learning as Leadership’s (LaL’s) partners, Shayne Hughes and Lara Nuer, to meet with us in October, the same month I would formally become CEO. I would play along so Paul would feel like I was being a good “partner.”
Shayne and Lara spent the first half of their visit meeting one-onone with my team to get a sense of our overall challenges. When I finally stepped into the conference room to be debriefed, I was prepared for them to be arrogant, self-absorbed, and overeducated. But they neither looked nor acted like consultants I had met before. My misgivings quickly began to fade once the discussion began.
Both seemed keenly interested in understanding my challenges. Lara asked penetrating questions: “What are your developmental areas as an incoming CEO? What is the impact of your team’s dysfunctions on your business performance? What do you envision would be possible if you and your team could talk openly and constructively about difficult topics?” Several leaders on my team seemed incapable of “looking in the mirror,” and Lara’s questions were good ones for them to address.
Shayne and Lara explained how the LaL process explores the formative experiences we’ve had growing up, shaping our view of the world. In particular, the process investigates how our “ego” triggers counterproductive leadership behaviors that impede performance. That certainly rang true when I looked at my team—“childish” was how I thought of some of their behavior.
While they had thoughtful answers to my questions, I still couldn’t get over the time commitment and format. “It sounds like one big networking event where we commiserate and waste time on other people’s problems. Why would we ever do that?” Let’s see how they respond to that.
“You told us not five minutes ago about an executive on your team who won’t acknowledge his limitations during performance reviews,” Shayne responded. “You think if we come down here and make him come clean in front of the team, he’s going to respond productively? In a larger group, while interacting with leaders from different industries with simil
ar problems, he’ll have the anonymity to be honest with himself. His coach will challenge him offline. Then, when he’s ready, we’ll talk as a team. You won’t waste time, you’ll save time.”
“I get it,” I told him. “I was just testing you.”
Shayne opened his mouth, closed it, and shook his head.
I needed to buy some time to reflect on the meeting. What started out as a courtesy discussion had turned into something for me to seriously consider.
“Let me talk with Paul and think about it over the weekend,” I told them. “We’ll get back to you.”
I knew Paul was in favor, so that was the easy part. As much as I found the travel and the comingling with others to be odd at best, Shayne and Lara’s logic was compelling. But could I really commit the team to the travel and time out of the office? I kept coming back to one indisputable point: I needed a leadership development solution. Nothing else we looked at seemed promising, and LaL had a seminar starting in November. I decided to give them a shot.
At our next executive staff meeting, I told my team that we would all be attending a five-day leadership seminar up in the San Francisco Bay Area. I reinforced the messages I took away from Shayne and Lara and let the team know that Paul had attended their program previously. When I finished, I looked around the room, expecting uniform acceptance, perhaps even a round of applause.
“Why didn’t we talk about this as a group?” asked one executive.
“Who decided it was mandatory?” lamented another.
“Are you kidding me?” I snapped after several more complaints. “Many of you are new to the company and are in the largest roles of your career. We’re investing a lot of money so that you can be your best. Discussion closed.”
I wasn’t back in my office twenty minutes before one of my vice presidents knocked on the door, raising more questions about LaL. I cut him off. “How about you just worry about getting your job done?” If you did that, I thought, we wouldn’t need to spend money on development.
Ego Free Leadership Page 2