Zen & the Art of Being CEO

When I am new to a role, my natural instinct is to exert my will on the thing to conquer it. My nostrils flare. I start barking at the people around me.

Innocent children are often mowed down.

It turns out that this is exactly the wrong way to try to learn. This ego-driven chain of events is actually based in my insecurity at not knowing what I am doing. In actuality, humility is the order of the day. When faced with a stiff challenge into the unknown, the human instinct is to get wrapped up in ourselves rather than letting go of the self.

At no time is all of this more relevant than when a relatively young executive takes over as CEO for the first time. Facing such a daunting task calls for selflessness rather than ego. I am particularly speaking in the context of first-time search fund CEOs, as that is the bulk of my recent experience and where most of my current time is spent. But the same lessons apply to any first-time CEO, or in fact, to anyone facing a new leadership position of any kind.

In his famous book Good to Great, Jim Collins started with a data set of 1,435 good companies. He looked at the performance of those companies over 40 years to identify which of them at least tripled the performance of the stock market over a 15-year time horizon without the benefit of industry trends. He came up with 11 companies that qualified as great, performing on average 6.9x better than the market over a 15-year time horizon.

He studied this set of 11 companies intensively to uncover the common elements that unlocked such outlier performance. He came up with factors like building great teams (“getting the wrong people off the bus and the right people on the bus”), identifying a single unifying strategic vision (a “hedgehog” focus), and establishing a repeatable business process built around a central metric for success (a “flywheel”).

The part of the book I found the most interesting, and the part I think is particularly important for first-time CEOs in the search fund ecosystem to internalize, is what he found about the leadership characteristics of the CEOs of these 11 good-to-great companies: These CEOs were largely anonymous.

“There is a direct relationship between the absence of celebrity and the presence of good-to-great results. Why? First, when you have a celebrity, the company turns into ‘the one genius with 1,000 helpers.’ It creates a sense that the whole thing is really about the CEO. At a deeper level, we found that for leaders to make something great, their ambition has to be for the greatness of the work and the company, rather than for themselves. That doesn’t mean that they don’t have an ego. It means that at each decision point—at each of the critical junctures when Choice A would favor their ego and Choice B would favor the company and the work—time and again the good-to-great leaders pick Choice B. Celebrity CEOs, at those same decision points, are more likely to favor self and ego over company and work,”

Collins told Fast Company.

For the first-time CEO, these questions of ego, charisma, leadership style, motivation, communication, and effectiveness are all front and center. Many of the search fund CEOs I have mentored truly feel like they are drinking from a fire hose when they hit the ground. My intent here is not to provide a comprehensive guide to becoming a great CEO or to building a great company. That certainly can’t be done in a single blog post. My intent is merely to point out that as you take the reins of a new company, or as you continue to build value in the company you’ve been running for a while, there is one counterintuitive approach that I believe is essential, one critical point of emphasis to which you should return again and again.

Building a great company has nothing to do with your ego.

Leading through fear and intimidation does not work (another point made by Collins). The better the job you are doing as CEO, the more anonymous you will become. Of course, you have a personal stake, financially and career-wise, in the outcome of the company you lead. But if you focus on your own stake, your chances of success will plummet.

I want to posit a different model that defines the most successful CEOs: the humble servant. Successful CEOs are servants to their employees, customers, and investors. Even to the communities in which their companies operate.

Yes, it is ultimately on you to build a great management team and to ensure there is a repeatable process by which non-productive employees are let go and great employees are recruited and retained. And it’s on you to work with that great management team to arrive at a single unifying vision and a repeatable business strategy to get you there. But the less your ego is involved, the better. And every time you have the opportunity to beat your own chest, you would be best served by choosing the company over your ego. Great CEOs, in my experience, are fundamentally selfless in their approach to managing their businesses. They take themselves out of the equation and focus on results.

I have found myself making search fund investments in places like Guatemala, the Dominican Republic, Brazil, and Mexico. In retrospect, one of the things I like about investing in search funds in developing countries is that the CEOs of those companies generally see their mission in a much broader context than the leaders of average domestic search fund acquisitions. These CEOs take great pride in creating hundreds of good factory jobs in Guatemala, building doors for instance, or hundreds of call center jobs in the Dominican Republic. Their companies are bringing economic prosperity to people who would otherwise be impoverished. All of these CEOs went to top U.S. business schools and could have stayed in America to work. But they choose to return home to help build up the economies of their countries.

Sure, these companies face all the same issues around building management teams and driving strategic focus. But I always feel like the stakes are just that much higher for these CEOs because it isn’t just about their personal success – it’s about the lives of their employees or, in the case of our Brazilian medical school test prep company, the lives of our customers--students hoping to make it into medical school no matter how humble their background.

Of course, the same can be true of domestic CEOs and companies. You don’t have to live in a country with mass poverty to see a broader purpose in what you are doing, to operate as a humble servant to your employees and customers. One of my CEOs provides software to behavioral health clinics to increase the effectiveness of treatment for their mostly poor mental health patients. Another CEO works with major food companies in the central valley of California, recycling their packaging and organic waste. They each have a broader, selfless purpose to their leadership that permeates how they conduct themselves as leaders.

None of this is to say that as a CEO, you should not be charismatic or aggressive or use every ounce of your training and knowledge. It’s a way to think about the end to which all those resources are put. I’m suggesting that the more you can think about the bigger picture of your team, your employees, your customers, and your community (and not yourself), the greater the chance that you will build a great, successful company. In the end, you’ll create greater wealth and a better track record of success for yourself along the way as a bi-product of this approach but only by putting others first.

The paradox of Zen and the art of being a CEO is that the less you think about yourself, the more personal success you will achieve. As Jim Collins pointed out, the truly great CEOs are generally anonymous. That doesn’t mean there wasn’t a shit-ton of hard work to be done in building greatness. But it was done completely without ego.