Those instincts were correct, but the suggestion to close it down, I eventually realized, was not. In my zeal to reenergize Nasdaq’s core transaction business, I didn’t appreciate how critical MarketSite was to the listings business, how much it meant to our companies, and how much, by extension, it meant to the Nasdaq brand. This was brought home to me in my first conversations with CEOs of Nasdaq-listed companies. In those calls, I wanted to tell them about how we were revamping the transactions business to be best in breed and upgrading Nasdaq’s service and technology. They wanted to talk about ringing the opening bell in Times Square. They would talk about bringing their mother and father to the ceremony and how great it was. Moments like that were symbolically meaningful to our customers. Business is not all boardrooms and budgets, customers and clients, products and services. It’s also that feeling of having a moment in the spotlight to celebrate the culmination of years and years of hard work. MarketSite, I realized, was far more important than the bottom line might indicate.
In the end, we didn’t shut down MarketSite. Instead, it was revamped and transformed into a leaner operation, without so many high-priced trappings and perks, but with all the drama and emotion that made it so popular with Nasdaq-listed companies. While the decorations were toned down, MarketSite retained its status as a place to gather and celebrate the achievements of our listed companies (and in February 2018 Nasdaq would announce its intention to make the building its headquarters). We also began to rent out this unique space to others for high-profile events—another way to limit its fiscal impact. This new version of MarketSite could still uplift our brand and provide a powerful publicity boost for our public companies with less drag on our bottom line. That was a decision I didn’t expect to make, but my team helped me see the wisdom of keeping it. There is no point in having great people around you unless you trust them to come up with good solutions, even ones that surprise you. Sometimes the right people are the ones who tell you what you don’t already know.
Don’t Double Down on a Bad Hire
Early one morning, a few months after I started as CEO, I burst into Chris Concannon’s office.
“I can’t take it anymore,” I declared.
“What are you talking about?” Chris asked, surprised by my dramatic entrance. He was starting to appreciate that I tended to be straight, even blunt if necessary, and was not inclined to beat around the bush.
“We have to let him go. We can’t keep going like this.”
Now Chris knew exactly what I was talking about. One of the two outside hires that I had made when I started at Nasdaq had turned out to be a mistake. His résumé looked great, and he came with stellar references, but it had quickly become clear that it was not going to be a successful placement. Despite being likable, even charming, with an impressive background, he was failing to grasp the intricacies of the job. Everyone knew it. Several months into my tenure, I had to acknowledge that I’d been wrong to hire him and figure out what to do.
“Look, I can imagine it’s difficult to let him go, given that you just hired him. It looks bad,” Chris acknowledged. “If you’d like, I can work with him, help him out, cover for him where necessary.”
“Not a chance. That’s not going to work. Covering for him is not a realistic plan.” I appreciated Chris’s willingness to help, but I was not going to compromise our team so I could save face. “That’s not how I work,” I explained. “There is no getting around it. We’ve got to pull the Band-Aid off.”
Needless to say, this was not an easy move to make. I’ve heard Athletic Directors or General Managers of sports teams say that it’s much harder to fire a coach they hired than one their predecessor hired. The same principle applies in business. That reticence may be human nature, but it’s very important not to let your ego get in the way of doing what needs to be done. Be prepared to admit you were wrong. Face the reality that you will make mistakes, and don’t compound them by avoiding them.
I made the move quickly and didn’t let the poor choice linger. My advice to leaders in a similar situation is: Don’t defend yourself when it comes to incorrect hires or other faulty personnel decisions. Don’t pretend that you should be above such errors. If you made a wrong choice, make the switch.
On the positive side, letting him go was a popular decision in the company. It communicated that I didn’t just have “my people” to whom I would be loyal regardless of performance. This wasn’t going to be a regime of subtle cronyism; it was a genuine meritocracy. Performance matters—and people know who’s not pulling their weight. While this was far from a personal highlight in my career, in retrospect it was actually one of the most important things I did in those early days to win support.
At the end of our conversation that morning, Chris asked, “What are we going to do about his job?”
I looked at him and smiled. “You’re going to take it.”
And he did. Chris became EVP of Transaction Services, a job that he performed with distinction for the next six years.
People are the lifeblood of any successful business, whether it’s an established organization like Nasdaq undergoing a turnaround or a fast-growing startup like so many of the companies that choose to list with us. Listen to entrepreneurs talk about building their businesses and you’ll often hear them praise the team they worked with, the joy of getting up every day and creating something with a group of smart, passionate people all focused on one mission. Nasdaq wasn’t a startup, but in the transition we were going through, we were definitely starting a new phase of its existence. By the time my first year as CEO concluded, our head count was dramatically down, but the bus was brimming with talent, expertise, and enthusiasm. We were ready to put it in gear.
LEADERSHIP LESSONS
• People First. You can’t predict the future, but what you can do is ensure that you have the best people in place so that when the world changes around them, they can adapt, respond, and step up.
• Transparency Builds Trust. If you tell people what you are about, right from day one, it builds trust in your leadership even when you are making tough decisions.
• Promote Before You Recruit. If you’ve been doing your job as a leader, you should be developing most of the talent you need in-house. Look carefully at your existing people before hiring from outside the company.
• Encourage Healthy Debate. It’s necessary if you’re going to hear what you need to hear in the decision-making process and take into account all the important perspectives.
• Seek Honest Feedback. Leaders need to counteract people’s natural inclination to make reality seem rosy by seeking out and incentivizing honest feedback and creating explicit avenues for its delivery.
Chapter Three
Triage
Nasdaq Faces Eroding Share, End of Boom
Wall Street Journal, December 24, 2003
“Unbeknownst to all but a handful of insiders and industry players, Nasdaq is fighting for its life… Will Nasdaq survive as a thriving market for tech stocks? It’s under assault from all sides.”1
Thus began a splashy Businessweek cover story from August 2003, titled “Nasdaq: The Fight of Its Life.” The story was hard-hitting but not incorrect. Nasdaq’s situation was dire. We needed to act right away. But more important, we needed to act on the right things, and as Nasdaq’s new CEO, it was up to me to figure out what those were.
Why do some CEOs succeed and others fail? After all, most people who make it to the corner office are talented, smart, and experienced. That’s why they were hired. Generally, they work incredibly hard. But I’m convinced that one key factor that distinguishes those who thrive at the top from those who only struggle and strive is how they leverage their time. They work on the right things—those that will give them the greatest advantage. “Give me a long enough lever… and I’ll move the world,” said the ancient Greek mathematician Archimedes. Great executives feel the same way about their business. They are constantly seeking ways to increase their leverage—
to have maximum impact without maximum expenditure of time or resources.
A common trait of those who fail, I believe, is that they end up working on the wrong things. Time is finite but the CEO’s to-do list is infinite, and every item may seem highly relevant at any given moment. Prioritizing the endless tasks is part of the great challenge of leadership at any stage in the growth of a business. During a turnaround, it becomes particularly critical. For a master-of-the-universe CEO type who naturally wants to do everything—and do everything perfectly—this can be a difficult reality to accept. People sometimes think the key to success is doing your job well, but for a leader it is equally important to know what you’re not going to do well and what you’re not going to do at all. It’s all too easy to spend time working on things that don’t provide high enough leverage to really impact the business. Don’t get pulled off course by the seemingly endless priorities and time-wasting task lists. Believe me, you can fix all kinds of problems in a big organization, win plenty of battles, and still lose the war.
I knew I couldn’t fix every problem at once. It was time for triage. In the midst of a turnaround, an organizational leader must be prepared to function like an emergency medic in a disaster zone—making quick decisions about which projects, business lines, and initiatives deserve further investment of energy and resources, and which do not. To ensure I was using my own time to maximum advantage, I would need to take stock of our numerous problems, understand the various business lines, figure out which most urgently needed care, and look for the most efficient ways to cut costs and increase revenue.
Bob vs. the Blob
Before I took the helm, I had requested that the existing Nasdaq leadership put together a daily accounting of profit and loss. I always want to be able to demonstrate the economic benefit or cost of every major activity. The report was on my desk on day one. I was pleased with the team’s responsiveness, and I wondered if the systems in place were better than I had initially thought. Then I found out we had fifty people working on it. This was clearly an example of an unsustainable business model. Over time, we would develop robust financial planning and analysis systems for internal cost accounting and, more important, a company culture that kept a closer eye on such matters.
What the report told me was that Nasdaq was losing $250,000 every single day. What it didn’t tell me was why—which specific business lines or projects were draining our resources. In other words, our cost structure wasn’t clear—there was a great big blob of corporate spending that was not being clearly allocated to the appropriate areas of the organization.
Every business has a blob. To some extent it’s legitimate—corporate overheads and resources that are used by every department. For example, IT resources, HR resources, or lawyers’ time—even the CEO’s time. What tends to happen is that because the departments don’t have robust tracking systems to know what percentage of these general resources they are actually using, these costs don’t get allocated. Sometimes they get allocated by formula, divided up by number of employees or by percentage of revenue. That’s better than not allocating at all, but it’s rough justice and doesn’t really help give you an accurate picture of how the organization’s resources are being used. It also doesn’t promote accountability throughout the organization. Big companies get into trouble this way, because everyone thinks their project has high profit margins, even while the organization as a whole may be bleeding out.
You can never completely eliminate the blob, but if you can minimize it, you will take a big step toward fiscal clarity and fiscal discipline. When you accurately allocate costs to the place they’re being consumed, you promote accountability among the leaders of various business lines and projects. For example, let’s say an organization is spending $50 million on data centers. You divide that cost up among the business lines that are making use of that resource, and one of them suddenly finds a big chunk of that $50 million flowing through its particular Profit and Loss Statement. The P&L of that business line doesn’t look so good anymore, and that leader has a new incentive to think creatively about using resources. He probably never voted for those data centers, but he’s getting billed for them. And so he now has a reason to try to reduce that cost. “Hey, why don’t we put everything in the cloud?” he suggests. When people are forced to take ownership of the actual costs associated with their projects, it starts critical new conversations. Seemingly fixed costs might be revisited. As Nasdaq’s then CFO David Warren used to say, “All fixed costs are variable over time.”
In the leader’s quest for leverage, tackling the blob is essential. Until you can clearly see where the money is going, you won’t know how to best focus your time and attention. You can’t have a functional organization without cost clarity. And the way you get to clarity is by focusing in on those areas where allocating expenses proves to be difficult. When David began presenting the report to the executive team, I requested that he skip straight to the problem areas. “I don’t need to start on page one. I don’t need the whole story. Start with the friction points. In what areas have you had trouble allocating expenses?”
Although I think of myself as a fairly positive person, as a leader I consider it my job to focus on what’s not working. It’s always a balancing act. Optimism is essential if you’re to take risks and succeed; indeed, it’s probably true that the only people who really accomplish things are the optimists. But that optimism must be tempered by a disciplined and critical perspective. Just as Marines are trained to run toward gunfire, overriding the fundamental human instinct for self-preservation, leaders need to run toward problems and not avoid them. Face reality relentlessly. Override the natural propensity to turn away from trouble or procrastinate. Unlike a fine wine, most problems do not improve with age. Shine the light into areas of vagueness, confusion, or conflict, knowing that there is leverage to be found in creating clarity, alignment, and resolution.
When I asked David to show me the problems, he didn’t hesitate. He quickly flipped halfway into his binder. As we allocated expenses, turning vagueness into granularity, our fiscal situation began to get clear. Some of his findings were information I’d anticipated; others were surprises. The meeting went quickly, and I made the final decisions where needed. I think the executive team was a bit surprised how fast things got resolved. The message sent was subtle but crystal clear: We’re not going to waste time in turf battles. We’re not going to spend precious hours arguing over details that sap our energy and reduce our focus. We have an enormous challenge ahead of us. We need to be decisive and move fast.
A Leader’s Instinct
How does a leader make decisions, especially big and consequential ones, under pressure? There are many factors, but it often comes down to instinct. By instinct, I don’t just mean a shoot-from-the-hip reaction or a mysterious intuition. Instinct, as I see it, is the accumulated result of a lifetime of learning that empowers your ability to assess and respond to a situation. Your life experiences, your education, your business acumen, your successes and your failures, your breakthroughs and your missteps—all of it comes together as an internal compass that calibrates to the issue at hand. You find out what you really know in those moments.
Instinct is more than just knowledge. I’m a runner, and I have a wealth of knowledge about my favorite sport, track. When my daughter was racing, I thought I could come up with a data-based training plan for her, a formula for success drawn from the experts in the field. But then I took her to a great coach, Frank Gagliano. I watched, each day, as he would talk to Katie before her workout, and then choose exactly the best training session for her on that particular day. While sometimes his suggestion was straight out of the training manual, at other times it was clear he was pivoting and innovating in real time. It was obvious that his ability to tailor her training regimen far exceeded my own. While he and I had access to the same technical knowledge, he had something I didn’t have in that field: instinct. In the virtuous overlap between trustworthy instinc
t and learned knowledge, effective leadership is born.
In business, I trusted my hard-earned instincts, but I also was a great believer in using all the data available. There were rare times when I had to make an on-the-spot call, but wherever possible I liked to allow time to let the decisions crystallize. The data needed time to settle and integrate with my instinctual algorithms so that eventually a clear direction or decision would emerge. Indeed, I was decisive, but not always in the moment. Often I’d try to sleep on an important issue, letting the information I’d gathered soak through the layers of my mental processes, knowing I would wake up with more clarity. Another of my favorite strategies in the early years was to go for a run—as my feet pounded the pavement, my mind cleared, focused on nothing but the miles ahead. But afterward, in the shower or eating a meal, deeper insight would come. The ability to work with your instinct—knowing when to trust it, when to act quickly, when to take more time, when to seek input or data—is one of the hallmarks of successful leadership. There’s no perfect formula for developing this other than time and experience.
During my first summer at Nasdaq, there was no shortage of consequential decisions to be made. We spent an enormous amount of time cutting programs, projects, and expenses. I shuttled back and forth between Chris’s and David’s offices, as we questioned everything. Some projects were failing; others were flailing. Even many initiatives that showed promise just didn’t make sense at that moment, given Nasdaq’s financial priorities. It was hard work, and I spent significant time each morning combing through financial reports. But in other respects, it was simple. We needed to cut costs and there were plenty of worthy candidates for the ax.
Here are some of the questions one should ask when evaluating business lines, projects, and initiatives in the midst of a turnaround:
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