Ego Free Leadership

by Brandon Black

  Even the Boss Feels Powerless

  BRANDON

  In late August 2009, George Lund and I were having dinner with some of Encore’s outside advisers on the terrace at Mr. A’s in downtown San Diego. We were taking in the views of Coronado and the aircraft carrier USS Midway and watching planes land at Lindbergh Field when my phone rang. It was my general counsel. He asked me to take the call, so I excused myself and stepped away from the table.

  “A judge in Ohio has ruled our collection affidavit insufficient and ordered it to be amended immediately,” he told me. “We need to change the document prior to putting it back into production.”

  “Sounds simple. Let’s get it in place,” I interrupted him mid-sentence, wanting to get back to my dinner guests. “Thanks for the call.”

  “I don’t think you understand, Brandon. It may sound simple, but it’s not. We have to immediately recall all the affidavits being used around the country and re-create our entire process. We can’t produce or use another affidavit until it’s completed.”

  Debt collection is a fairly simple business from a process perspective. We have three ways to contact people: make a phone call, send a letter, and initiate litigation. The advent of smartphones made our calls increasingly less effective because our customers could easily ignore them. If a consumer also failed to respond to our letters, our sole remaining option was legal action. It’s an expensive last resort, so we used it only when we believed an individual had the ability to pay but was just ignoring us. Our outside law firms relied on affidavits—legal documents that established the fundamental facts of our relationship with the customer and our right to pursue collection. It was an essential piece of the process. Without it, obtaining remedies from the court would be extremely difficult.

  “That seems drastic. It’s just changing some paperwork. Can’t we appeal?”

  “No. Even though the changes are only procedural, we can’t knowingly file another affidavit until it’s fixed.”

  I sighed. “OK, shut down the presses. I’ll call a meeting first thing tomorrow. We’ll scope out the problem and figure out a plan.”

  On my ride home, I called Paul. Addressing this problem would require a wholesale redistribution of resources. Our legal and project management teams would need to immediately redesign the process and create business requirements. All software development projects had to be stopped so programmers could focus on making these changes. Added to that, there were dozens of law firms who collected on our behalf that needed to be briefed. While the new system would take some time to implement, these meetings needed to happen in the next few days to ensure that no affidavits remained in production.

  The next morning, as I briefed the entire leadership team, the conversation naturally focused on identifying solutions and the need for quick, coordinated action. I listened to them, marveling at how different this discussion was from past crises. There was no griping or resistance, and not even a hint of trying to figure out who was to blame. We had a problem to solve, and all our collective energy drove it to conclusion.

  I was delighted by the result. It took just ninety days to completely reengineer the process and train our law firms. This quick action kept the company from missing any financial targets.

  The affidavit crisis behind us, we headed into 2010 with significant momentum. Our performance was robust, with most financial metrics increasing 25 percent year over year. We continued to see reduced competition and an abundant flow of new portfolio purchases at very attractive pricing levels. Morale was high, the stock price continued to rise, and the contributions from India were meaningfully driving down our costs.

  Only the regulatory and legislative pressures emerging from the 2008 recession tempered my enthusiasm. The general public increasingly believed that corporate greed was responsible for the economic downturn and that certain industries should be held accountable. There was particular animosity toward all financial institutions, not just banks. If you lent money or provided services to those companies, you were in the hot seat. I empathized with the anger about the meltdown and the need for targeted regulation. At the same time, I worried that the government, feeling pressured to take action, would push impractical measures.

  In January I met with a good friend of mine, Greg Koch, who is the cofounder and CEO of Stone Brewing Co. He and I were in the same YPO chapter, a group that brought together disparate business owners and CEOs. Greg was known for his consumer advocate leanings and was helping me prepare a presentation about Encore for our YPO Forum. I wanted the Forum’s advice on navigating through the forthcoming regulatory challenges.

  “There’s so much negative emotion right now,” I told Greg. “The facts are getting lost or distorted. The word ‘debt’ has such a negative connotation.”

  “Why don’t you do something about it?” asked Greg.

  “I’d love to find a way to distance ourselves from these perceptions, but I haven’t been able to cut through the noise.”

  “Why don’t you create the kind of company that customers will want to do business with rather than avoid? Who says there can’t be a model debt collection company?”

  “How many beers have you had today? We’re building a great company for our employees and shareholders, but we collect debt! We’re not making beer or selling organic food. Our customers can’t choose us, and there’s definitely nothing exciting about our service.”

  “I understand, Brandon, but you said people often owe several different companies. So they do have a choice about whom they pay. That could be the place of emphasis for you. Think outside the box. Stop being so negative!”

  I sat back, staring at him intently. Although many people think poorly of debt collection, I felt at peace with our work and how we conducted ourselves. We were an inglorious necessity. If no mechanism were in place to guarantee that people paid back the money they borrowed, credit would either be too expensive or nonexistent. Our current financial system simply wouldn’t work. Years earlier, I had committed myself to connecting each employee to the essential service we provide society. I believed that without reservation.

  On the other hand, I also had concluded it was impossible to have an inspiring mission that would resonate with Encore’s employees and consumers. It would be so much easier to build a great company if we cured cancer, developed new technologies, or even just brewed bold craft beer. Instead, we were in a notorious industry doing a job few people wanted to do. Easy for Greg to say I should think outside the box.

  SHAYNE

  Brandon and his team had seemingly reached the pinnacle of organizational transformation. The performance results, the effective crisis management, the empowered workforce—Encore was firing on all cylinders. But his conversation with Greg Koch resurfaced a nagging dissatisfaction. No matter how great a corporate culture they created, Encore was still stuck doing the dirty work of society. There seemed no way out of this trap.

  Such feelings of ambivalence existed more broadly in Encore. During our first WeLead program at Encore in 2007, a senior leader asked in frustration, “How can I have an inspiring ‘at the source’ goal when I sue people for a living?”

  Many of us hold a common assumption that certain companies clearly have a meaningful mission and others do not. Many leaders working in industries without redeeming social values feel ambivalent and find themselves just doing their job for the paycheck or because they have no other options.

  Brandon had resolved this in his mind. He didn’t see himself as evil for leading a debt collection firm—but he had resigned himself to working in an industry where few people connected emotionally with its societal value. This is in part because he felt trapped by the larger system in which Encore operated. In our complex, diverse society, it is easy to feel like a tiny cog in a big machine. If we litter occasionally, what’s the big deal? Our one vote doesn’t really matter, does it? This feeling of insignificance often affects how we view our role in larger problems. What can any one of us really d
o about homelessness, income inequality, or climate change? Author and organizational development pioneer Peter Senge often asks the question “How is it that we collectively create outcomes none of us want?”

  This was the case in Encore’s industry. Who, in fact, could affect the debt collection system? Consumers? Caught in a cycle of debt, they undoubtedly felt voiceless. Encore’s employees? The call center employees contacting consumers often saw themselves merely as worker bees. They had limited, if any, influence. Their bosses in middle management believed the executive team held the power. Moving up, the executive team felt like the CEO called the shots. If anyone could make change happen, it was Brandon.

  And yet Brandon, CEO of one of the largest companies in his industry, felt he had little influence over how the industry operated, was perceived, or fit into the larger financial system. He had to answer to the board and deliver results for the shareholders. If he stopped performing, his position would quickly become precarious.

  So, is it the chairman of the board who has the power to make things different? He or she can only give guidance and hold management accountable. The shareholders—whom management often fears displeasing or letting down—typically feel like outsiders. They can complain, but they don’t really have a say in how the company is run or impacts society. An individual legislator can’t pass laws on his or her own, and anyway, regulators are overextended enforcing the existing set of laws.

  This is not to say that we all have the same amount of influence; rather, this highlights our ubiquitous feeling of powerlessness in broader problems. Most of us believe that someone else higher up in the chain could do something, but not us.

  Amy certainly didn’t think she could influence Encore’s unconscious attitudes toward women. But when she took the risk to share her experience, she discovered she had far more power and influence than she realized. She didn’t do this alone—her coach supported her, Brandon listened to her, and outside resources guided her—but it could never have happened without her.

  Within Encore, Brandon and Amy had the authority to make change. Brandon had no such clout in the broader industry, however— or did he? Could awareness of his own egosystem help him access possibilities that usually remain hidden?

  Taking Responsibility for My Part, No Matter What

  BRANDON

  On our quarterly earnings calls with analysts and shareholders, we would discuss our financial performance, provide context for our results, and answer questions. It was our practice to never offer any guidance or speculation. Once a year, however, we held Encore’s Investor Day, where we offered our thoughts on trends and future possibilities. The meeting was usually held in New York City in early June, and every shareholder was invited, along with analysts and bankers. It was an important event, and we spent a great deal of time preparing for it.

  Several weeks before the 2010 meeting, a report was released by a coalition of nonprofit organizations that provided services to lower-income residents in New York. They took issue with the business model of companies like Encore and accused the industry of systematically trying to collect from individuals with no ability to pay. After a quick review, I dismissed the report and its authors. Their findings were inconsistent with our processes and accused us of using practices that made no financial sense. The last thing we wanted was to initiate collection activity if a customer couldn’t pay. Besides harming our reputation, it wouldn’t be profitable. I knew we wouldn’t win the moral argument, but I figured the report would go away as quickly as it arrived.

  Wrong again. The report gained traction in the media, and I grew outraged that these local nonprofits were getting national attention without having to defend their accusations. Newspaper after newspaper picked up the story without checking to see if the claims were accurate. Internally, our Decision Science team took the initiative to investigate the report’s conclusions. Their analysis showed the statistical methodology used was flawed and they began writing a white paper outlining the findings.

  Despite that, I was still furious. “Can you believe they had the gall to take public shots at our industry without having the decency to call us first?” I vented to Dana that night. “We’re finalizing a report that discredits their methodology. They picked a fight with the wrong company.”

  “Are you really surprised they didn’t contact you directly?” she asked me. “Would you have actually taken the time to talk with them if they had?”

  “With reports like this, they wouldn’t deserve my time.”

  “Are you sure they don’t have a point? Maybe these people care deeply about their cause and just want to be heard. For all we know, they’ve already tried and you ignored them. In any case, I doubt they’re 100 percent wrong.”

  Dana’s disagreement caused me to stop and consider my reaction. She had been volunteering at a few nonprofits and had enrolled in a master’s degree program for nonprofit leadership at the University of San Diego. Her challenging response helped highlight for me that I was pinched, plain and simple. Putting aside my angry mind chatter about how inaccurate the report’s accusations were, I identified how my ego was taking it personally. I had interpreted the report as a public attack on my character. I was Satan preying on the weak and poor—at its most basic, a bad person. Understanding this deflated my emotion, and I reluctantly reconsidered Dana’s perspective. I didn’t know if she was right, but the last thing I wanted was to openly discredit these organizations. They didn’t need additional reasons to rally against our industry. The white paper would stay within Encore.

  I refocused my energy on preparing for our Investor Day on June 9. If any analysts or shareholders asked questions at the meeting, I’d set the record straight. The negative news reports had stopped, so I figured the issue was finally behind us. Then, on the morning of June 8, my general counsel pulled me aside. He had received a call that the authors of the report were planning on attending our meeting.

  “Should we get extra security for the ballroom?” he asked. “They’re only entitled to attend if they are Encore shareholders. If so, we have to let them in. If not, we can kick them out.”

  My anger about the report was long gone. Dana had helped me see I might’ve been overreacting. I still didn’t agree with the conclusions, but if they came, they would find a welcome audience. “Honestly,” I said, “I don’t think they’ll actually show.”

  The meeting was scheduled to start at 8:30 am in the upstairs ballroom of Le Parker Méridien on West 57th Street. The elevator banks of the hotel overlook Central Park. The view is spectacular, and it gave me plenty of inspiration for the day. Encore was doing phenomenally well, and I couldn’t wait to tell our story. I went to the ballroom thirty minutes early to greet people as they arrived, but the room was already 90 percent full with our shareholders, board of directors, analysts, and bankers.

  I walked around the room, somewhat anxiously, and just before George Lund called the meeting to order, unfamiliar faces arrived at the sign-in desk. They showed up after all!

  My general counsel asked if I still wanted to let them in.

  “Of course.” I nodded.

  They registered and looked for available seats. The only open spots were directly in front of the podium. Normally you put a friendly face up front to give the speaker positive reinforcement. Not today.

  I thought back to my conversation with Greg Koch. Was there a way for us to create a better company by seeking these individuals’ input?

  George, Paul, and I each went through our parts of the presentation and then opened up the floor to questions. It’s an interesting dance between people who run public companies and analysts who give advice to the public about whether to buy or sell a company’s stock. The analysts ask questions and then examine your tone and every word of your response, hoping to glean something that signaled whether the stock was likely to go up or down. As an executive, you attempt to answer their questions while only revealing what’s been disclosed previously. I was pretty good at i
t by this point.

  I was about to close the meeting after twenty minutes of Q&A when one of the individuals from the nonprofits raised her hand. She introduced herself and her colleagues and their affiliation to the recently drafted report. She reiterated many of the predatory practices outlined in the report, declaring several times that we targeted the poor and underprivileged. I believe she actually said, “You are awful people and should be ashamed of what you do for a living.”

  After what felt like five minutes, she concluded, “Are you prepared to admit your involvement in these terrible practices and change them immediately?”

  To my surprise, I was neither mad nor embarrassed. I was thinking instead how frustrating it must be to have to come to a public forum and shout at somebody just to be heard. She was obviously a bright woman who was convinced I was leading a company doing something very wrong. I knew that most of what she said wasn’t true. So where was her anger coming from?

  “Thank you,” I said. “While I completely disagree with the substance of your allegations, I would like to meet with you to understand your perspective and to see if we can open the lines of communication.”

  I reached into my pocket and handed her a business card. She and her colleagues each gave me theirs, and I promised to be in contact within a week. I adjourned the meeting.

  After they left, many people came up to tell me how pissed they were at the group and how well I handled the situation.

  “Who do they think they are?” asked several participants.

  “What gives them the right to come in here and accuse you of anything?” said others. “Why would anybody view them credibly?”

  Those who reacted most negatively thought my business card gesture was a brilliant ruse to get them out of the room. Almost everybody assumed I wouldn’t call and that there would be no meeting. Except for my management team—they knew I was serious and most volunteered to attend.