Published in the San Diego Union-Tribune, March 15, 2021
There is enormous power in the word “no.”
Meet Carol Tome, the CEO of United Parcel Service. In a recent extensive interview in the Wall Street Journal, Tome talks about saying “no” to their unprofitable contracts and customers.
On the face of that, you might think that is obvious, but the shipping business has always held as sacred the idea of scale. Scale should create efficiencies. Tome was the CFO at Home Depot before becoming the head of UPS, and she is a classic number cruncher, according to the WSJ article by Paul Ziobro. Her logic is brilliantly simple. She is focusing on profit in an effort to create a “better, not bigger” company.
Tome is a powerful, smart CEO, and she will excel. She says, “the current environment, with too much demand for limited capacity, means UPS needs to be paid adequately for its services.” That concept should not strike you as revolutionary, yet learning how to say “no,” in many ways runs counter to our natural behavior and desire to be liked. That is why my granddaughter sits on my lap during lunch and then asks if I can lend her $50. She is 2 1/2. They learn quickly. Darling, not a chance.
It never hurts to ask what is common wisdom, but I have begun thinking that idea might be incorrect. When you make an ask with a low possibility of success, you reinforce a negative response, rather than let it sit unspoken. Once you hear “no,” it is hard to un-hear it. Relationships are not lottery tickets, and you very seldom get a random win by simply lobbing one in on your way out the door. In the specific, I am inclined to lean into precision target bombing, as opposed to spray and pray. I want as few “nos” as possible. The goal is to accumulate “yeses.”
By the same token, use your “ask” judiciously, because if you acquire too many “nos,” it’s like fouls in basketball. They take you out of the game and you have to go sit on the bench. It is a give and get matrix.
Let’s turn to executive compensation. Everybody says they want stock, that they are playing for the long game, but it turns out that cash money seems to work just as well, if not better.
John Kepler, assistant professor of accounting at Stanford Business School, recently authored a paper on the “cost benefits of different incentive schemes.”
The conventional wisdom of course has always pointed toward stock options as the rational way to align management with shareholders, but Kepler and two other professors, Wayne Guay, Wharton, and David Tsui, USC, together came to a slightly different conclusion.
Namely, they found that bonus plans (money) had a more significant impact on “better cooperation across management teams because they hold executives collectively responsible.” Relatively immediate gratification had more power to change behavior and meet goals than a grant of stock options, vesting over time.
I coach two CEOs, and in each case, I have argued for a “phantom stock” plan that is tied to profit goals. That is a fancy method of saying, show them the money. If the company is profitable, and they participated in that success, then pay up. The nuance here is the difference between the sales team — which rewards the individual with its “eat what you kill,” motto — and the research and development team, which values teamwork to reach long-term goals. The puzzle is complicated, and at the end of the study, Kepler simply folds his cards and says, “there is no one-size-fits-all solution.” If that’s the best answer from the study, I want my money back.
Finally, a word of advice on bridges. Don’t burn them. I recently found myself sent to the sidelines at a company. I was of the opinion that the ruling on the field was incorrect, that I had been treated badly, but I was polite and went to the locker room. Then, surprisingly a few games later, it turns out, as it always does, the team that tossed me, needed a favor, needed me because I knew a guy who knew a guy who knew a guy who knew the guy they needed to know. OK, you tell me, what would you do?
Rule No. 659
The Bridge over the River Kwai.