Trust is Directly Correlated to Individual and Team Performance
Manage episode 260081334 series 2661367
What role does trust play, within your company, when it comes to your individual and team performance?
Well, it turns out a lot.
As Joel Peterson — Chairman of JetBlue, Consulting Stanford Professor, Author, and Founder of Peterson Partners which is part Private Equity and Venture Capital firm with over $1 billion under management– puts it: “Trust is the most powerful operating system you can have. A lot of people think of it as this fuzzy feel-good thing; I like somebody, therefore, I trust them. In the book I wrote The Ten Laws of Trust, the fundamental thesis was that you can factor analyze trust, and if a leader will follow these laws, they can actually build a high trust culture. A high trust culture is really a more powerful one because it can deliver on promises. A high trust leader can delegate more easily because the people under him or her are able to predict what they are going to do. People who are low trust, everybody is afraid of them and they’re afraid to make decisions. They’re unable to really empower others.”
In the absence of a high trust culture, what’s possible for the company gets negatively impacted as trust is the foundation upon which relationships are built. In its most basic form, companies are made up of people working together and the quality of the interactions is correlated to the degree of trust.
Also, Joel not only has pioneered and led some of the most forward-thinking companies but has also financed them. As a 2X author, Joel is uniquely positioned to understand what fundamentally successful companies do and has gracefully shared these operating principles in his latest book: Entrepreneurial Leadership: The Art of Launching New Ventures, Inspiring Others and Running Stuff?
Tune in to the full episode to learn about:
- The importance of trust in organizations
- How to restore trust
- The correlation between trust and integrity, and how that impacts performance
- What is an entrepreneurial leader
- The difference between entrepreneurs and entrepreneurial leaders
- The framework for being an entrepreneurial leader
- How to spearhead your company culture amidst a crisis
Connect with Joel Peterson:
- Book: The 10 Laws of Trust: Building the Bonds that Make a Business Great
- Book: Entrepreneurial Leadership: The Art of Launching New Ventures, Inspiring Others and Running Stuff
Joel Peterson’s Story:
Joel Peterson is the chairman of JetBlue Airways and the founding partner of Peterson Partners, a Salt Lake City-based investment management firm.
Joel has a long history of successful growth capital investments in a variety of industries. He currently teaches Entrepreneurial Management at Stanford’s Graduate School of Business, is the Chairman of the Board of Overseers at the Hoover Institution at Stanford as well as the Chairman of the Board at JetBlue Airways, and serves as a Director of Franklin Covey. He served formerly as Managing Partner of Trammell Crow Company. He holds an MBA from Harvard Business School. Joel is the author of The 10 Laws of Trust: Building the Bonds that Make a Business Great and Entrepreneurial Leadership: The Art of Launching New Ventures, Inspiring Others and Running Stuff.
* * *
Joel Peterson: I think a lot of people confuse honesty. They think integrity just means honesty, and they see it as a virtue. I think of it more like structural integrity. There’s no gap between what I say and what I do. People can rely on my promises. They can predict my responses. This is the way to empower your team, to have them know that what you’ll say and do are the same.
Tanya: That’s Joel Peterson, Chairman of JetBlue, consulting professor of Stanford, author and founder of Peterson Partners, which is part private equity and part venture capital firm, with over a billion dollars under management. Joel has not only pioneered and led some of the most forward-thinking companies, but he’s also financed them. As a two-time author, Joel is uniquely positioned to understand what fundamentally successful companies do and has graciously shared these operating principles in his book, Entrepreneurial Leadership: The Art of Launching New Ventures, Inspiring Others and Running Stuff.
Okay, great. Joel, you have had a fascinating career to say the least. I mean, how you navigated where you are is just spectacular. Can you share just a little bit about that journey and what you do.
Joel Peterson: Well, I’d love to be able to take credit for having navigated this journey, but really what happens is you’re in the rapids and you just navigate your way around the rocks and you end up where you end up. Very briefly, I was born in the Midwest, born in Iowa, grew up in Michigan. I was really quite enterprising as a youth, but not entrepreneurial necessarily by nature. I was enterprising out of necessity. My father was a college professor and there were five kids in our family and we really didn’t have much money.
When I was 11 years old, I started my first business and then I’ve worked as a dishwasher for 75 cents an hour, had a lawnmowing business, newspaper routes. I’ve been a biochem lab assistant, a French teacher. I’ve [cleaned] sugar beets. I’ve just done all these kinds of fascinating – I mention that only to say that I think I’ve learned as much from doing that as I did at Harvard Business School. They were really valuable experiences. That’s really the path, and I don’t think you can plan it. You just drive forward, and if you do a good job and you keep hustling and persevering over the tough times, good things tend to happen.
Tanya: Yeah. Well, certainly, being on the ground at 11 you said, your first job.
Joel Peterson: Yeah, well, it’s funny because my dad grew up on a farm and he thought that I should learn how to work and support myself. He lent me a hoe and a little plot of land and I grew vegetables. Then I hired my little brother, who was six years old at the time, we had a red Radio Flyer wagon and he would take these fresh vegetables around the neighborhood and sell them. We made a profit.
Tanya: He must have been quite the seller. I’m sure his sales were record high.
Joel Peterson: He was fantastic. A cute little six year old bringing you fresh vegetables around, that was great marketing. I had no idea how [00:04:39] that was in marketing but it really worked well.
Tanya: Yeah, I can imagine. How did you venture into the world of venture capital, private equity and now the chairman of JetBlue, and also a consulting professor at Stanford, an author?
Joel Peterson: It was, again, by an indirect route. I started out right out of Harvard Business School; I went to work for a fellow by the name of Trammell Crow, who was quite a well-known real estate developer. Still, even at that time he only had 163 people working for him, so it was a small company. My first assignment was to go to the French Riviera to build buildings, so that was a pretty exciting assignment. I ended up figuring out some financings and escaped some others and so they decided that I was good at finance. They brought me back to be the treasurer of the company. By back, I mean back to Dallas, Texas. Then the CFO left after about six months and I was the most senior financial executive, so I became the chief financial officer of this big real estate company when I was, maybe, 29 or 30 years old, something like that. I was there for about 18 years in total.
Tanya: How did you make the leap in really creating your own private equity and venture capital firm?
Joel Peterson: Well, I got fired and sued. There’s a little bit longer story there. For 15 years I was with Crow, I was the chief financial officer, and then I became the CEO of Trammell Crow Residential, which at the time was the largest residential developer in the United States. Then I decided to leave the company. I moved to the west coast and I was going to do something else. About that time, the company started to run into trouble. Several of the partners left and everything, and I was unanimously asked to come back. I flew out from San Francisco to Dallas, Texas every Sunday night at midnight, took the redeye and worked there all week and then flew back for the weekends. I did that for two and a half years. I ended up, effectively working a turnaround and developing a fee business that was profitable.
Then I resisted doing what they call a roll-up, which was, basically, the three most senior of us would roll up the junior partners’ equities to our own accounts at, kind of, the bottom of the market. I just didn’t want to do that; I didn’t think it was right. I didn’t think it was ethical and I didn’t want to make money that way. Anyway, long story short, I was fired and sued in county court, state court, and federal court. I was a couple of years in litigation. Then, eventually, really had to start over. I was probably in my early 40s at that point in time, and I had to figure out what am I good at, what do I like, what’s my network, and reboot myself, which turned out to have been the best thing that ever happened to me.
Tanya: What was that journey like?
Joel Peterson: It was stressful at the time. I really felt like I’d made the right decision, but that didn’t make it easy. It was challenging, to say the least! I spent 13 days in video-taped deposition and 5 days on the witness stand. It was a challenge, but as I look back on my life, I think I’m as proud of that as any other thing that’s ever happened to me. You take a stand. I was just reading a biography by Churchill, where he said that all of the bad things that happened to him in his life, largely when he was in, what he called, the wilderness, turned out to have been the very best things for him. That many of what he thought were the best things turned out to have been the worst for him. I really recognized the truth in that. At the moment, I thought, this is the worst thing that could ever happen to a young executive. I was really on the rise. I was at the top of the real estate industry and I thought, this is a terrible thing. As I’ve looked back on it, I thought, this was actually the very best turning point in my life.
Tanya: You know that’s very interesting. How did you pick yourself back up, and is it at that point that you created your PE firm?
Joel Peterson: Yeah. Well, I had started to buy companies a little bit while I was still with Crow, so I owned a couple of companies. One day, somebody said, “Hey, you’re in the private equity business” because I was making these – I didn’t even know the term. I was just buying companies and investing in people and coaching CEOs or whatever. Stanford came to me – I was on the Advisory Board at the business school, and they came to me and said, “We lost the guy who’s teaching real estate. Would you mind teaching it for a year?” I thought, well that’ll be fun and interesting, and so I did that; that was 28 years ago. One thing led to another and I’ve ended up teaching several different courses. At the time, I started investing, in some cases, I was backing former students. In other cases, people they knew. Pretty soon, I just ended up with a portfolio of companies and a network and one thing led to another.
Tanya: Serendipitously, you really created your venture capital arm, your PE firm. How did you land as a chairman of JetBlue?
Joel Peterson: That’s another interesting story. One of my former students worked for George Soros. Soros was one of the early investors in JetBlue and they realized that in their business plan, they had, kind of, a bet-the-company development ahead of them, which was to build out a terminal at JFK. They looked around the Board and realized they were all private equity and venture investors; nobody had ever built a building. My former student said, “I had a real estate professor who actually ran a big real estate company, maybe we could get him to join the Board.” I made an investment, joined the Board. I got the building built, on time, on budget and then ended up becoming chairman of the company. For the last 12 years, I’ve been chairman.
Tanya: What has that experience been like?
Joel Peterson: It’s been fantastic. It’s really been fun to learn a new industry, to see new competencies, to have a new management team, to build a culture, to learn from others. It’s just really been fun. I think that’s one of the greatest things about this career. When people ask me, how do I mimic your career, I don’t really have an answer. I just say, really work hard at whatever opportunity comes your way and new things will happen. That’s really what’s happened to me. I’ve ended up learning more about the airline business and making a whole new series of friends.
Tanya: In terms of the airline business now, and not just the airline business, but just service businesses, travel businesses, anything that’s event-based, face to face, in-person businesses, are having tremendous difficulty with what’s happening globally right now, just the coronavirus epidemic. What are your thoughts on how some of these businesses are really going to weather the disruption, both socially and economically, as we pass through this epidemic?
Joel Peterson: Yeah, so it’s very serious. There’s no way to survive it without help. These are capital intensive businesses that really depend on travelers and people just aren’t traveling. The government will have to step in and basically make accommodations to save the industry. It’s not that anybody in management has done a bad job. In fact, managements of the airlines have been quite successful; they’ve done a really good job. I told people not to worry about it. If you just keep doing – make sure everybody is safe. Keep your culture together. If everybody is doing a good job and is honest and transparent, these things tend to come back, so I’m really not worried about it, other than we’re just all generally worried about getting through this. I think a lot of good things happen from crises too.
Tanya: Oh, absolutely! In some of the toughest economic situations that we’ve had, amazing companies were born. Speaking about entrepreneurial events, you wrote an incredible book called Entrepreneurial Leadership: The Art of Launching New Ventures, Inspiring Others and Running Stuff, which I thought was so good. Anybody that’s listening, I highly recommend that they go check it out. What was the inspiration behind writing it? Why now, or what was the catalyst?
Joel Peterson: I think a lot of it was just spending time with all of these young entrepreneurs at Stanford, which is full of entrepreneurial young people. Then I think the triggering event for me was my wife going on a hike in the mountains and getting lost and having to spend the night alone on the mountain. Realizing that she knew about cell phones, she knew about wearing down jackets, she knew about hiking with others, she knew about having a compass, she knew about staying on the trails, she knew everything. We teach entrepreneurs all these do’s and don’ts and yet many entrepreneurial ventures fail.
I thought maybe there’s a way to get really practical in a book that gives people a recipe, a cookbook, a to-do list, checklist, things to think about, a map. That really is the metaphor that I use. I want to give would-be entrepreneurial leaders, and I’ve expanded that term to mean more than just people who want to be entrepreneurs, people who want to have an entrepreneurial approach to leadership, give them maps that they can refer to. That’s really what provoked it.
Tanya: You said your wife was on a mountain and had to sleep on the top of a mountain for a whole night, how did that happen?
Joel Peterson: We were going to take a trip as a family to all hike around Mont Blanc, and she wanted to get into shape. She was 65 years old at the time, and she was worried that she wouldn’t be able to keep up, so she was sneaking out and doing these hikes on her own. One Saturday she slipped out and did this hike, and she fortunately dropped a pin at the top of the mountain and then I didn’t hear from her. It was starting to get dark and so I called around my kids and one of them said, “Yeah, I haven’t seen her and I don’t know where she is.” She did drop this pin so one of my sons in law drove up to Trail Head and, sure enough, her car was parked all alone in the parking lot. We ended up calling search and rescue. They flew the mountain. They ended up getting the helicopters with the flare technology, heat-sensing stuff. They ended up sending up the cadaver dogs and by early that morning, she wandered into camp with a shattered wrist and all beat up and cold.
Tanya: Oh, no!
Joel Peterson: Yeah, she ended up in surgery a day or so later. Had a titanium plate put in her wrist and seven titanium screws and then three days later, she was on the mountain in Europe, so it all turned out well. I just thought, here’s a person who knows all the rules. Just like our young entrepreneurs and our great students at Stanford, they know the rules, they’re smart people but they run into events on the mountain they didn’t expect. She didn’t expect to get lost on the trail. She didn’t expect dusk to come. Same thing happens to entrepreneurs. What I wanted to do is say, let me give you a set of maps, compasses, rules, checklists. Things that will help you in moments of crises that you can rely on and think about and have a better way of getting down off the mountain.
Tanya: When you say, ‘entrepreneurial leader’ and you say that you’ve expanded that term to not just refer to entrepreneurs, what exactly does it mean to be an entrepreneurial leader? How does that actually show up?
Joel Peterson: I really thought a lot about that. Entrepreneurs are not necessarily entrepreneurial leaders. There are many entrepreneurs who just light fires but they can’t really keep them burning. I wanted to distinguish – I wanted to make the case that entrepreneurial leaders can exist in large organizations, they can exist in not for profits, they can run families, they could do all kinds of things. Really, I try to say, entrepreneurial leaders create durable change. They manage innovation. They lead teams to summits they’d not otherwise achieve. They really, typically, have some skills of the entrepreneur only. They have some skills of people who are presiders, who are able to maintain the status quo of institutions. They have some political skills: people who legislate, make compromises, manage power. They have some skills of managers who, typically, are really good at managing complexity. Then administrators who, principally, deal with policy. The entrepreneurial leader is really the agglomeration of all of these.
I try to think about it in terms of the five-tool players. I don’t know if you know about baseball at all, but there’s what they call the five-tool player who can run, throw, field, hit for power, and hit for average. The five-tool player is the unique player that every baseball scout is looking for. I think the entrepreneurial leader is what every corporate scout should be looking for because they have elements of all of these things that are needed through the lifecycles of an industry. Problems are complex, I think even more so in today’s information-dense society, where employees are volunteers. How do you knit together all these things? I think you need an entrepreneurial leader, not just a politician, not just a presider, not just an entrepreneur. That was the idea of defining this new term.
A funny story, Tanya, I started out call it Running Stuff. Harper Collins came back to me and said, well, we market-tested the name and it attracted joggers!
Tanya: Oh, my God that’s so funny!
Joel Peterson: I loved that name, I just thought that’s just so great. How do you run stuff in this world? In any event, it’s now called Entrepreneurial Leadership. The running stuff made it into the subtitle, as you notice.
Tanya: As you’re talking, I’m thinking, is an entrepreneurial leader like a unicorn in start-ups, like a billion-plus valuation, or are you seeing more of these true entrepreneurial leaders.
Joel Peterson: I see them across industry. I see some people – a couple of the examples I use are of early stage entrepreneurial leaders, but a couple are Alan Mulally, who ran Boeing and Ford, huge companies, and he was quite entrepreneurial. Stan McChrystal, the four-star general who ran joint special operations command, where he had to knit together the navy seals, the force recon marines and army rangers into a unified force. He had to be quite entrepreneurial in a set of circumstances you wouldn’t think there was any room for entrepreneurial activity. He had to innovate, he had to manage, he had to think about policy, he had to think second and third order effects, he had to think about the future, and knit all these things together in complexity, into something that is durable, that would last. Pure entrepreneurs are, typically, really good at lighting a fire, getting something
new started, but often it’s unable to – the flame goes out.
Tanya: I’ve actually seen a lot of people like that. Some people know their place in the world, they love to start things and they know the correct hand-off point. If you have that awareness, amazing, otherwise it goes against you.
In your book, you talk about trust as being foundational. Why is that and what happens in the absence of trust in a team or in an organization?
Joel Peterson: Well, trust I think is the most powerful operating system you can have. A lot of people think of it as this fuzzy feel good thing; I like somebody therefore I trust them. I did write a book before this one called The Ten Laws of Trust, where the fundamental thesis was that there are – you factor analyze trust, and if a leader will follow these laws, they can actually build a high trust culture. High trust culture is really a more powerful one because it can deliver on promises. A high trust leader can delegate more easily because the people under him or her are able to predict what they are going to do. People who are low trust, everybody is afraid of them and they’re afraid to make decisions. They’re unable to really empower others.
I think a high trust organization tends to, again, be more flexible, more innovative, a happier place to work. I actually make building trust the number one thing that an entrepreneur needs. If you think, you’ve been an entrepreneur, so you know, suppliers have to trust you, creditors have to trust you, investors have to trust you, your employees have to trust you. It really becomes, kind of, the operating system for getting a business started, and I think a lot of people forget that as organizations grow and become hierarchical.
Tanya: Yes, and actually we’re often brought into executive teams, and even Boards, to restore trust and that is not a lot of teams – at least that we’ve seen, not to say that they don’t exist – but there’s not a lot of teams that operate with that principle as the foundation of their team. It might start off like that but then something happens, an event occurs, and trust is broken. Have you thought about how to restore trust?
Joel Peterson: Yeah, it’s interesting, when I first published this book, it was by AMA, American Management Association, who was bought by Harper Collins. Harper Collins looked at all the titles they bought and they said, “This one is actually an interesting one but we will have to have you increase the content by about 30%.” I said, well I haven’t thought much about it, how do you do that? They said, “Well, think about the questions that people bring up when they read the book.” I said, well, there really are two of them. One is people want to know how I know the trust level in my organization currently. People tend not to tell leaders when trust levels are low. They say, how do we figure that out?
The second one was how do you overcome betrayal, which is really the question you’re asking. How do you overcome that? I thought a lot about that and said, fundamentally, betrayal is not delivering on promises. If you tell me you’re going to do something and then don’t do it, that’s a form of betrayal. Now, it maybe because you didn’t understand what we were talking about, it maybe because there was an intervening variable, and the answer to that kind of betrayal is to fix it immediately. To clarify it, to have an understanding for you and me to have a conversation so we can move on again with trust. I think a lot of organizations don’t fix immediate betrayals, disappointments. People just go quiet and they don’t have the automatic feedback and transparency. The number one thing, with these kinds of minor betrayals, which are broken promises, failed delivery dates, failed on time efforts, is to just talk about, fix it. Figure out what happened and move on.
There’s the other kind of betrayal, which typically comes from lying, cheating, stealing, being sneaky, lacking transparency whatever. My answer to that is get out of business with that person asap, but the second step to that is to forgive; not to relive it. To start living in the future not in the past, and that is really hard. People who go back to the burning ship and keep reliving it actually have a hard time moving on. The two kinds of betrayal and that’s how I would say to deal with them.
Tanya: That’s great. What do you think is behind people not addressing those minor betrayals, like you said? What’s getting in the way of people recognizing the importance of addressing them? It’s like a little bit, a little bit, a little bit, and eventually it becomes a lot and it’s unworkable.
Joel Peterson: Well, I think a lot of it is people don’t know how to give and receive feedback, and they don’t like any level of conflict. People feel like they have to sugarcoat everything and they just don’t have this honest way of talking. I think that’s a norm you have to establish early on. I think if you wait too long that’s a hard norm to establish, after there have been these minor betrayals. I have an entrepreneur who comes to class, pretty much every quarter, and she says that the problem that she had was that her approach to employees is I love you, I love you, I love you, get out of here! She just wouldn’t take on the – she just wanted to give positive feedback until she just couldn’t stand anymore and then it was fire them and move on. I think a lot of people behave that way.
Tanya: Can you think of an example where there was a minor betrayal, that something wasn’t delivered on time, an effective way that you addressed it, or somebody in your circle.
Joel Peterson: I think one of the best ways to think about that is when you have blown it. To actually have a feedback session where you are the object of the criticism. I remember having deal meetings and calling the team together afterwards and saying something like, I think I blew it in that I was continuing to sell and to push on this after the sale was already made. What do you guys think? They would say, yeah, you did, kind of, do that, I think I did whatever, and so it becomes a fun thing. If you can start out by critiquing yourself and saying here’s what I think I did, here’s what I’m going to do to improve on it, what do you think? Then you’ve initiated a feedback loop; a way for people to talk about stuff like that.
Tanya: That’s interesting, and it gives people permission to speak openly.
Joel Peterson: Absolutely and it’s okay. Alan Mulally, who I mentioned a little bit ago, he said when he first went to Ford, he had this checklist, the green, yellow, red thing, and he said every report was green. Everything was green. Finally one day, somebody reported a red and he just stopped the meeting and applauded. To say, this is great; somebody is saying something is not going right. Pretty soon, people started reporting red and yellow, and they were having more complete discussions. That way, you can address it. If there’s no communication and people hide it and they’re afraid, you can’t address it and the betrayals keep going.
Tanya: Yeah, absolutely. What we’ve seen is if you don’t address the little things, the things that you think don’t matter, the things that you think is going to be disruptive to business, then that very thing becomes a disruption.
Joel Peterson: Absolutely!
Tanya: In the book, you speak about integrity as also being of high importance. How is integrity connected to trust and how do you define integrity?
Joel Peterson: Well, I think if absent integrity, you don’t trust. If you think somebody doesn’t have integrity, you’re not going to trust them, so it is foundational. I think a lot of people confuse as honesty; they think integrity just means honesty and they see it as a virtue. I think of it more like structural integrity. There’s no gap between what I say and what I do. People can rely on my promises. They can predict my responses. This is the way to empower your team, to have them know what you’ll say and do are the same because you have such integrity between what you say and do. You’re consistent. Getting that kind of integrity is the essence of building trust.
Tanya: A super strong, undeniable correlation between trust and integrity. I actually just got that for myself this year. That in the absence of integrity, trust is not possible, even small things. Yeah, I never got that before, and when I did, it’s brilliant. In terms of really thinking about your operating system and this is something you write about in the book, which I thought was really interesting and genius, you said that there’s a need to rewrite your operating system. What do you mean by operating system, and what did you have to do in order to really elevate yourself as a leader, like rewire your neural networks?
Joel Peterson: Yes, it’s funny. Everybody knows what an operating system is today because we all work with computers. We know that that’s the foundation for how it receives information, processes, and gives it back to us, so we each have a way that we go about understanding the world and reacting to the world. If we can get feedback on how effective our operating system is, we can then start to think about adjusting it. In my own case, I realized that I was failing in certain things because I had a tendency – I really have three tendencies that were getting in my way. One was that I tended to see myself at the center of the universe, and I think it was maybe because I was the oldest of five children. My parents thought I was great, and I just had this positive feedback. In any event, I just felt I was at the center of the universe.
The second thing was I felt like I had to react emotionally to things. That’s how I feel. I can’t react any other way because that’s how I feel. The emotions really became a center. Then the third thing that was – that I found that I was doing was I was blaming others. In other words, if a project didn’t get done on time, it was somebody else’s fault. I always did what I was supposed to do. I was very dutiful, and so that had to be somebody else’s fault.
I came up with mantras to address these, and the three for me were – for the first one is it’s not about me. It’s about the mission, and I’m not the center of the universe. The second one was I am not my emotions. My emotions aren’t requiring me to – I can determine how I’m going to respond to a stimulus. Then the third one, rather than blame others was just to tell myself this calming phrase I have all I need. Somehow or another that just calmed me down, and I stopped blaming. I started just giving credit to others, absorbing blame, and just not being on that treadmill.
I think it probably took me a couple of years, but over time I had to say them less and less to myself. My natural reaction was not emotional, not egocentric, not blaming others. I really had developed a new way of seeing the world. I think that’s a really powerful way to establishing trust with others. Once they know they can trust you to be that stable, everything else can start to develop, but it’s foundational.
Tanya: What did this rewiring of your operating system do? What did it allow you to do better?
Joel Peterson: It allowed me to be a more effective leader. People respected me. I always say don’t solve for being liked. I think a lot of people want to be loved more than anything, and they’ll end up not being respected and then not being loved. If they start out solving for respect, being predictable, having integrity, doing all these things, that eventually they really will be loved. It turned out that people started to turn to me when times were tough. I ended up doing a lot of kinds of turnarounds, a lot of coaching, a lot of board work, a lot of teaching because people found those true. I had reworked my operating system enough that they actually were true.
Tanya: As you are talking about this, integrity as a virtue as opposed to a practice, do you ever think that somebody ever reaches the peak of integrity like they’ve made it?
Joel Peterson: Probably not. I think you get to a point where it’s more reliable, but I think, ultimately, we’re pretty – we avoid pain. We seek pleasure. We look for easy ways out. I mean, I think our natural instincts are for the path of least resistance, so I think you have to keep coaching yourself. You have to keep working at it and thinking about it. It starts out with thinking about what am I really solving for? There’s something really powerful about being a lavish communicator, and that means communicating bad news as well as good news. It means communicating more than less. It means communicating directly. It means listening as well as talking.
I think a lot of people think communications being this one-way announcement kind of communication. As your leaders, we speak from the corner office ex cathedra, and I don’t think that works. Communications are two-way. You listen. You adjust. I think if you keep doing that, you don’t lose integrity with your audience.
Tanya: In terms of entrepreneurs, you’ve invested in a number of different entrepreneurial ventures and have been – either come across some of your students at Stanford, lots of entrepreneurs coming out of Stanford. What are some of the patterns if any that you’ve been able to recognize that really give birth to some of the effective leaders?
Joel Peterson: I think it starts with a clear understanding of meeting a need, which is kind of this market test. Some people are attuned to the market, and I just think if you think about what is the problem that people – the greatest salespeople are problem solvers. They listen. I think the greatest entrepreneurs recognize a need in the marketplace, and they design a product or service that provides for meeting that need in a way that’s more valuable to the customer than it costs them to achieve it. That’s the fundamental equation, and I just find that some people are just really attuned to that. They have this real sense of cost benefit and of customers, so I think that’s the beginning. That’s the beginning of entrepreneurial activity.
The next thing, though, is that you really do have to be clear about what it is you’re trying to achieve. In other words, what I ask my students is to imagine winning. What would winning look like? Describe it. Flush it out. Is it in terms of financial win? Is it in terms of market shares? Is it terms of innovation? Really define winning in a clear way.
The third thing that the more successful ones do is they attract others. They are able to source great people effectively, sift through resumes, interview, discern who’s the best fit. They onboard them effectively. They coach. They give feedback. They promote. They demote and they fire. They make sure that they have the best team on the field.
Then there’s a whole series of things that I describe in the book, which are really the execution steps. They really know the maps for doing the eight or ten things that every entrepreneur runs into in building a business. I think there are better and worse ways to do those, and so I try to help people. In fact, that’s really what my classes are about is try to help people with the skills that they need to deal with the problems they’re sure to face.
Tanya: What is one of the toughest problems that you have to – that you’ve had to solve in your professional career?
Joel Peterson: I think the toughest ones for me come typically around people in organization. I think the hardest thing is how do you organize people? How do you get reporting relationships right? A lot of organizations, they’re cross-marketing. They have a national market, and they have a local market. They have products types, and they have services. Getting the organization to hit on all cylinders is really hard. I think turnarounds are hard because everything’s in crisis. It does tend to simplify things, but the emotions that come with and the uncertainty that comes with turnarounds – which we’re going to see a lot of with the coronavirus.
Tanya: Yeah, we will.
Joel Peterson: A lot of businesses are going to face just that.
Tanya: Speaking of that, what is your typical approach to dealing with the turnaround? I’m sure emotions run high. There’s really tough decisions that you have to make, huge uncertainty. How do you approach that systematically in a most effective way?
Joel Peterson: Yeah, so I have a number of rules. Again, this is a book of maps, and the first thing I say is that you got to confront reality. I think a lot of people deny that they need to turnaround before it’s really serious. Great managers, great entrepreneurial leaders are doing minor turnarounds every month. They’re adjusting. They’re tweaking. They don’t let things get to the crisis state. I think the first thing is you confront reality.
The second thing is you have to bring the team into the tent. You got to then focus on the core. Most businesses as they grow develop hobbies and pilots and things that are really not essential to the business. You’ve got to say what is – what must we do to survive? Then focus on that. Then I think they have to set metrics around that. They have to really understand the numbers that are going to allow them to succeed or fail.
In every case that I’ve worked on, they have to extend the runway, and that always means cash. It means that you delay outgo and you increase in-flows. You give yourself more time. It takes more time than you think, so you need to not dither. You have to take swift actions. You make changes sooner than later. Then, finally, I think one of the important things that a lot of people forget is to think about the recovery, to anticipate success, anticipate growth. Think about the opportunities that come from it and not to fear. There’s so many good things can come out of these challenges that I think fear is really your enemy, so I think if you do those things the odds are pretty high that you’ll emerge a stronger company and a better team than you entered.
Tanya: Do you have an example of a specific turnaround that you were involved in and how you actually lead it through?
Joel Peterson: The one at Crow I was really involved in. We were losing money regularly, and I basically said we’ve got to do three things in order. The first thing we have to do is become shipshape. I developed a set of metrics, five metrics that said this is what it means to be shipshape. We had 92 divisions, and then I just said, okay, so far 14 of you are shipshape. I just set the metric, and every week I reported back on who was becoming shipshape.
The second thing is we need to become profitable, and that meant in the current term. A lot of our businesses were losing money currently but making – creating value over time, and I said, no, we’ve got to be profitable in the current. Then once we’re shipshape, in other words our balance sheet is fixed, profitable, in other words our income statement is fixed, we’re going to become well run, and well run means we have a great strategy. We have a great team, etc. We ended up selling Trammell Crow Company to Coldwell Banker, and I think a lot of the value that – and the whole reason Coldwell Banker was interested in buying Crow really related to the work that was done during that period of time.
Tanya: How do you manage the culture during a turnaround? Obviously, the culture is at the foundation. It’s the context upon which people operate. If there’s a culture of fear, uncertainty, you don’t know if you’re going to have your job. You don’t know if you’re going to have your business unit in a month’s time. How do you manage that?
Joel Peterson: Yeah, that’s a great question. I think that’s the right focus. I think we’re involved in that right now at JetBlue. You have to say what do we care about? We care about the safety of our customers, and we care about the wellbeing of our crew members. That’s really what we’re solving for, and so we keep talking about it. We keep checking the temperature of people.
We just do everything we can to manage that so that it’s not just about the finances in the moment. No yelling. No throwing things. No demonstrations of exacerbation. You can feel all those things, but people magnify them in times of stress.
Tanya: Yeah, and there was actually – on Twitter, I’ve been veraciously reading everything that I can over the last week, as have many other people. There is a dialogue around businesses that are going to really stand for their people in tough times, even if that means taking a hit from a share price or from a profitability price, versus some of the businesses that opt to let people go because they just have too much expenses for what’s coming in. That dialogue, no question, impacts culture. How do you manage that? What if you really do care about your employees, but you really just have an incredible overhead with very little revenue coming in when everybody’s parked at home? How would you navigate that as a leader?
Joel Peterson: It’s a balancing act. Neither of the extremes is right. At JetBlue, I know the board is taking big cuts in their compensation, lead the way. Certain people are taking early retirement. Others are furloughing, self-furloughing and so if you can ever get the idea that we’re all in this together. There’s no preferred class. We’re all doing our utmost to protect this brand, this company that means so much to us and each other as members of the community. It goes a long way.
Tanya: Okay, so I read this, a father of seven. Is that right?
Joel Peterson: Yeah, I always kid with the students. If they think I don’t know anything about management, just think about that for a minute.
Tanya: Yeah, I can’t even – you must have a super wife.
Joel Peterson: I do, yeah.
Tanya: Wow! What has been your biggest lesson as a father?
Joel Peterson: I would say it is to be a cheerleader and not a policeman. People respond to coaching, to positive reinforcement, to praise, to love. I think love is the most powerful force in the universe. My view is just love your kids to death. Sometimes that means correcting them and helping them, but I think it’s really very powerful. They sense it. They may not feel it in the moment. I realize that some of my teenagers took a vacation from that feeling for a while, but they always come back.
Tanya: That’s interesting. My father just said that. He said that to me. I have three kids under 3, well, 3½, 2½, and 2½.
Joel Peterson: Oh, wow! You are [45:42]
Tanya: Yeah, it’s a lot right now, and I do feel like a policeman a lot of the times. This one’s banging on the wall. That one’s throwing stuff on the floor. That one’s putting stuff in the toilet. It’s like ahh!
Joel Peterson: It gets better.
Tanya: Yeah, that’s what my father said. He’s like, “You know what? This is a rough period. Then they’re going to want to hang out with you. Then they’re going to leave you, and then they’ll come back eventually.”
Joel Peterson: Yeah, exactly. He’s got the drill.
Tanya: Yeah, so is there anything, Joel, that we haven’t talked about that you think is important to talk about?
Joel Peterson: Oh, gosh, I think one of the main lessons that I always give – I like you do a bunch of coaching. I think, this idea that leaders can be developed, they’re not to the manner born, the idea that there are skills and maps and principles and laws, as it were. Now, some of these are easier for some, of course, than they are for others, and many of us have limitations when we get so far in it. The idea that there is a kit of tools, there’s a way to approach things that works better than our natural instincts. I think that’s a hopeful message.
Tanya: You talk about it in your book so brilliantly, Entrepreneurial Leadership. Where could people get a copy of this incredible book?
Joel Peterson: It is released on April 21. It’s on Amazon, I know, and there’s an audible version that’ll be available the same day. Then if anybody wants to follow me, there’s a joelcpeterson.com account and also a Twitter. I’m @JoelCPeterson. Some people follow that and can keep a – the best social media I found for me at least is LinkedIn. I have maybe 400,000 or more followers on LinkedIn.
Tanya: Wonderful! Joel, this has been an absolute pleasure. First of all, you are a gift to society, really. It’s been a real joy sharing this time with you. Thank you.
Joel Peterson: Thank you, Tanya, and good luck with those little ones.
Tanya: Thank you. I need it.
Announcement: Unmessable is recorded in the heart of New York City, and a special thanks to all the team involved in producing the show. Visit tanyaprive.com/unmessable to find a transcript of this episode, and be sure to subscribe to our newsletter.