My intuition about him was confirmed when I made my first trip as CEO to the West Coast. Bruce organized a dinner with nearly every key player in tech and venture capital in attendance—exactly the sort of people with whom Nasdaq needed to connect in order to position itself as the marketplace of the up-and-coming tech world. The listings business is all about connections. Indeed, the reason I’d parted ways with the former EVP was because he spent too much time sitting in his office: He was a conference room pilot, not a relationship builder. In contrast, it was clear that the organizer of that dinner was more connected than most.
The next evening, after a marathon series of meetings, I cajoled Bruce into taking me to a track meet at Stanford to watch my favorite sport. As we sat in the stands, he turned to me with a serious expression and said, “Bob, as you’re making this EVP decision, there’s something you should know.”
My heart sank; I’d been almost ready to break with tradition and offer him the job—was he going to give me a reason to reconsider?
“I’m gay,” he said.
I breathed a sigh of relief. “Bruce, the only thing I care about is that you do a great job!”
Given the climate of the time, I guess he felt it was important to be up front about it. He didn’t have to, but I appreciated his transparency. This was 2003, and even in the short time that has elapsed since then, things have changed a great deal in the culture of corporate America—for the better.
Bruce’s strengths were clearly compatible with the job he wanted, so I invited him to leapfrog the SVP title and take the EVP job. While I generally do believe in the value of “spending time in the seat,” extraordinary times call for extraordinary measures. He was the right person to take over that role, despite not having the ideal management experience. Moreover, his appointment reinforced the culture change I wanted to communicate to Nasdaq: Don’t cling to tradition. This is an era of change. I myself hadn’t risen through executive ranks the conventional way, and I wasn’t going to let tradition trump talent. Bruce would end up owning that key role for the next decade.
Little by little, I was filling the crucial seats on the organizational bus. If the bus analogy sounds familiar, it may be because it’s borrowed from Jim Collins’s best seller Good to Great. Success in transitioning companies from moderately successful to world-class, Collins argues, begins with getting the right people on the bus. I was particularly fond of that image because, as readers of Good to Great may remember, Collins’s metaphor was inspired, at least partially, by Tom Wolfe’s The Electric Kool-Aid Acid Test, the classic book describing the exploits of Ken Kesey and the Merry Pranksters in the late fifties and sixties. Kesey had loved to employ the phrase “You’re either on the bus or off the bus” in his leadership of that countercultural tribe. The driver of Kesey’s bus was in fact none other than Neal Cassady, the hero of Jack Kerouac’s On the Road. There was something irresistible about a metaphor that connected my role as driver of the Nasdaq bus to the great Beat poets I’d loved in school—though I hoped I was a safer driver than Cassady!
Poetic associations aside, Collins’s advice was sound. His research suggested that leaders are best advised to “begin with ‘who,’ rather than ‘what.’”3 A rock-solid team, he discovered, seemed to be the key first step in any good-to-great transition. The marketplace will shift, strategies will change, but a great team can respond to it all. I had a sense of the type of company I wanted to build, but I knew that inevitably there would be unexpected twists and turns (and bumps) in the road ahead, and exciting new destinations to aim for as well. Having the right people on board would allow Nasdaq to adapt to all those challenges and respond to the opportunities effectively.
People first. To drive the point home, I actually had a couple thousand little toy buses made up and handed out to the Nasdaq staff along with copies of Good to Great. The not-so-subtle hint: The wheels of change were turning.
New People for a New Culture
Anytime a company culture dramatically changes, the filtering system for talent will inevitably be affected. To use an evolutionary term, the selection pressures in the organization will be reset, and this shift will reverberate throughout the corporate ecosystem. Often, the people who are right for the new culture are not individuals who thrived under the previous regime. Change the culture, and inevitably, people with skill sets more apropos to the next context suddenly stand out.
Good performers can become great performers when the conditions are right. Over and over again I saw B players become A players when the game changed. My experience is that people want to achieve, to contribute, to help the organization thrive. If you clearly define the mission, remove the bureaucracy and organizational inertia, provide clarity about what is needed in each role, and put in place a good reward and incentive structure, you’ll be amazed at how people step up. As the environment shifts, the people come into focus. When we began to make organizational changes at Nasdaq, I immediately noticed that there were certain people whose eyes would light up, who would walk down the hall with a new bounce in their step, who would work a little harder and go the extra mile. They felt uplifted by what was occurring.
Nasdaq’s culture was shaped by its history. The company had long been a nonprofit, in the cultural mode of its parent organization, NASD, which is a regulator. People worked there for the good salary, regular working hours, stability, predictable workflow, and good benefits. There is nothing inherently wrong with a culture like that—if the culture fits the mission. But my mandate and mission were different. I wanted Nasdaq to fully embrace the competitive, for-profit world, to be a leader and an innovator in the financial industry. I wanted it to grow, expand, and become the premier equities exchange in the world. To do that, we were going to have to slim down and become much leaner and faster, more nimble and more competitive. We needed a change of mind-set and skill set. It would be disruptive, no doubt, and some would embrace that change wholeheartedly and thrive in that new culture, while others would find it unpleasant. It was up to me, in those first days, to send a clear message about the nature of that change.
I made it clear from the start that Nasdaq’s new direction wouldn’t be right for everyone. My message was straightforward: “This place is changing. It’s going from a nonprofit environment to one that has a faster pace, higher stakes, higher pressure, and greater potential rewards. We’re building a performance-driven meritocracy. The energy, the expectations, and the culture will all change. If this new culture doesn’t appeal to you, I suggest that you self-select and move on now because eventually that mismatch is going to become clear. Please find another place that is a better fit.” It was Nasdaq’s great sorting.
In the first year, we cut around a quarter of our staff. Some of that was due to the need to slim down and reduce costs. Some of it was a result of closing unprofitable lines of business. But much of it was driven by the specific cultural change I was focused on. There were plenty of people on staff who liked the old culture—nine-to-five, process-centric, few surprises. Nasdaq, as a human ecosystem, had to function at a higher frequency if it was going to thrive in the fast-moving, rapidly changing ecosystem of global financial markets. The right people for the culture I was determined to create were not necessarily just smart people. It wasn’t just about IQ—though I obviously wanted to work with intelligent, capable men and women. IQ is just table stakes; it gets you in the game. Motivation, drive, flexibility, and emotional intelligence are also important attributes that contribute to a company’s success. “Bandwidth,” for lack of a better word, is another. By that I mean the capacity to fruitfully focus one’s attention on multiple areas. That’s a critical talent for successful organizational leadership, where a lot comes at you thick and fast. Many people struggle with bandwidth issues, and this can also be true for higher IQ types, who sometimes prefer very specialized domains of expertise. Of course, in certain occupations, like programming, a narrowly focused approach is an enormous value-add, but when it comes to
management, bandwidth matters.
When You Have Good People, Listen to Them
Knowing who to bring on board, who to promote, and who to let go is critical in any turnaround. But a people-first strategy means much more than hiring and firing. Any CEO can swing the ax; that doesn’t take much talent. Building great companies requires interacting with your team members in a highly productive way, one that encourages creativity, autonomy, focus, and discipline.
In corporate America, we pay well for smart managers. But if you’re going to pay for talent and high IQ, be sure to use it. Seek input and honest feedback from your team. And get them involved in your decision-making processes.
One of the ways I sought input for critical decisions was by running a series of head-to-head debates among my executive team. Authentic debate isn’t always easy to manage, but it’s necessary if you’re going to hear what you need to hear in the decision-making process. No issue is black-and-white, and each perspective contains relevant truths. Debate helps to illuminate the inevitable trade-offs and help you make smart and well-informed choices. I liked to mix up our debates by assigning counterintuitive roles. If the topic of the day was, for example, “Nasdaq Japan: Should we keep it or close it?” I might even assign the pro-Japan executive to take the anti-Japan position. It made for some spirited contests. People knew better than to make a weak argument for a position they didn’t support; it was clear they were being judged on the quality of their reasoning, not just the content. I firmly believe that most positions stem from rational presumptions, at least from the perspective of the person holding them. Rather than simply dismissing a position we don’t agree with, it is valuable to make the effort to understand its underlying rationale, even if we eventually choose another path.
Of course, it’s important to not let debate descend into a free-for-all. You don’t want shouting in the halls. A culture of argument is distracting. Our debates had structure and rules. They took place in our conference room, and each had an audience of about a dozen additional executives. People argued with passion. At the end, if necessary, I’d give a thumbs-up or thumbs-down to the decision at hand, but often, by that stage, the right answer had become clear to everyone. Occasionally, however, I had to make an executive decision that went against the prevailing winds. After all, the point of the debate wasn’t to enact a perfectly democratic ideal. It was to achieve better clarity on all of the issues involved so everyone understood the reasons for proposed changes, and my decision-making was both transparent and much better informed.
This approach was especially critical during my first hundred days as CEO. Nasdaq in 2003 was awash in dead-end projects. The firm had exercised little discipline in this area—it had a process for saying yes to new initiatives, but no processes for tracking their effectiveness or pulling the plug if needed. Certainly, no one had been planning for a downturn in the market when many of them were approved. As often happens in such situations, constituencies within the firm had arisen that protected, or at least were advocates for, many of these projects. I was aware of more than one person who had made a career managing his or her little section of the company without regard to whether that project was critical to Nasdaq’s overarching mission, or even profitable. Pruning the project list was a high priority. Still, I didn’t want to lose good projects just because I was committed to closing underperforming ones. I wanted to safeguard against overzealousness on my part. The transparent, objective debate style was my chosen method.
I could have handled this in a much quieter fashion. For example, both sides could have created presentations or memos and then submitted them to me for a ruling, and it would have all been done simply and soundlessly. But that method bypasses important aspects of human nature and discounts the reality that people want to be heard. Debate creates energy around a topic. And whether a project lived or died, everyone could be satisfied that a case for its continuation had been well made. That helped to get a deeper level of buy-in from the executive team and ensure that in the aftermath of any decision, we were all rowing together in the same direction.
Input from my team was not limited to these staged debates. In fact, I made sure to communicate to everyone that I wanted them to be honest with me, even when the news was bad. It’s natural for people to want to give the CEO the good news, but that’s not very helpful. In fact, it can be downright toxic, as was demonstrated all too clearly during the downfall of General Electric, which was helped along by an internal “success theater,” as some inside the company called it—the practice of always emphasizing the positive elements of the business and the most optimistic narratives. Enabled by executives throughout the organization, the GE culture became dangerously disconnected from the reality of the business, and it served to keep management from addressing its decline.4 People won’t tell you what you need to hear unless you ask for it, and most important, reward it. Leaders have to counteract people’s natural inclination to make reality seem rosier than it is.
It’s not enough to hope people will be honest with you. Sometimes you have to create explicit avenues for feedback. It was common for me to open a meeting with “Tell me the problems” or “Give me the bad news.” And I didn’t want the honesty to be limited to top management. We also instituted regular “town halls” and would invite questions from the general staff for a live Q&A. That gave people a chance to ask anything, and it was a chance for me to interact with our staff in a group setting. Even then, the tougher questions tended to arrive through email.
I also had regular employee lunches. Seven people would join me for a meal, each time from a different area of the organization. I would solicit their feedback, asking “What are we doing well?” and “What are we doing poorly?” And they could ask me anything they wanted. Usually, I found it took about a half hour of conversation before they would get comfortable enough to open up, ask honest questions, and give direct feedback. I found those lunches invaluable and tried to do one a week.
There were several key moments when I had reason to be grateful for one of my team knowing more than I did about a given area of the business. The controversy over MarketSite, Nasdaq’s iconic piece of real estate right in the center of Times Square, was a case in point.
For many people, MarketSite is Nasdaq’s public face. It is a cylindrical office and event space located in the heart of Manhattan. With its wraparound digital display featuring market news and highlights that appears in the background of practically any event filmed in Times Square, it is natural that many see it as Nasdaq’s epicenter. CNBC currently films two of its shows—Squawk Box and Fast Money—in the main room. Companies celebrate IPOs there, transmitting the opening-bell excitement from the main studio space to Bloomberg, Fox Business, and CNBC. Bloomberg conducts interviews using the MarketSite studio. Companies advertise on the cylindrical tower. Over the years, it’s become a major media center and a symbol of American economic vitality.
Early in my tenure, I made a visit to MarketSite. No doubt it had to do with my fiscally oriented perspective at that time, but what I saw was not an iconic expression of Nasdaq’s global brand. I saw a gaping money pit. The space had its own photography staff on retainer costing a cool quarter million a year. It had fresh flowers costing us $1,000 a week. It had lavish catering for every event and a round-the-clock party atmosphere. I told John Jacobs, who had recently taken over the Chief Marketing Officer role, that it was a waste of money.
“Close it down.”
“Are you telling me to close it,” he inquired, “or are you asking for options?”
“You can get me options,” I conceded, “but my inclination is to close it.” I was imagining the significant amount of money we could save, envisioning all the employees and projects we might be able to keep without that extra cash burn. I just didn’t see how this side party, as nice as it might be from a branding perspective, was going to survive a clear-eyed fiscal audit. At this point, fiscal discipline was first and foremost in my mind. Still, I re
minded myself that I’d given John this role because he knew things I didn’t, so I was willing to hear him out.
Some of the questions surrounding MarketSite were related to the role of the listings business within Nasdaq. It’s the public-facing business, what most people associate with the brand of the company. It’s profitable, but it’s not a growth engine. At that time, Nasdaq’s core business was transaction-processing—and that business was failing. Without turning that around, nothing else was going to work. I came from that technology and transaction world and was hyperfocused on getting that business into shape. I knew it was easy for the CEO of Nasdaq (or NYSE, for that matter) to get caught up in the ceremonial glow of leading a national stock market, to fly above the trees, enjoy the limelight, and leave the details to others. But that was not what I was hired to do. Indeed, part of my concern about MarketSite stemmed simply from the urgent need to not get distracted by the shimmer and glow of noncore activities.
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