Leading in a Chaotic World

David shares his decision-making framework that will help agency principals make better decisions during chaotic times like these.

Links

“Leading in a Chaotic World” article by David C. Baker on Punctuation.com

Transcript

Blair Enns: David, I'm interviewing you today on a post that you wrote, which I think was a summary of a speech you gave recently, is it?

David Baker: Yes. It was in Madrid. Yes. It resonated with people a lot more. I'm always surprised when anything I do resonates, but this one really resonated. I was like, "Oh, okay, there's something here."

Blair: The title of the talk in the post and this episode is Leading in a Chaotic World. What do you mean by chaotic world? What's so chaotic? What's going on?

David: Yes, nothing, right? Everything's good. When I was thinking about this, I was comparing it to March of 2020, so a little over four years ago. It feels to me like leading now is more difficult than leading then. Maybe that's just my memory. Back then, we knew we were in crisis. You had to do something, and you were a little nervous about what you should do, but here, things are not quite that 911 level, they're just a mess, they're just unsettled. Of course, these will hit you in different ways, depending on what kind of firm you're running, but AI, obviously, has been very disruptive even if you haven't made any decisions about what you're going to do with it.

I keep thinking about the fact that 25 years ago, there was this promise that, all right, once all marketing becomes digital, our jobs will be so much easier because we'll know exactly what works, and we can keep making adjustments.

Blair: Yes, full attribution. How's that going?

David: Yes. It's like nothing's clear. Everything is foggier, right? Competitors from everywhere, in-house, above, below, procurement, which makes my blood boil, thanks to you, never even thought about procurement until you started peppering me with this.

Blair: Sharing my nightmares.

David: Work from home, for the people who didn't have remote employees before the pandemic, how are we going to train them, manage them, promote them, pay them fairly? Salary and title inflation. Then it's like wars and elections.

Blair: You just skipped over that one, title and salary inflation. Dates are so blurry now, post-pandemic, blurrier for me than even before. They were quite blurry then too. There was a point where it's like inflation was taking off. We may have talked about it just in passing on an episode or two, where some salaries had taken a 25% and 30% bump in a bunch of businesses. Then there was the big tech layoff in the beginning, and that's reversed. I think there's a lot of business owners looking at their staff and looking at, "Oh, I overpromoted, overpaid." That's something that we don't talk about much.

David: We don't. Yes, probably should. Then just even the confusion around titles. People are given titles and there are certain expectations with it, and you don't really know what an associate creative director or account manager-- there's no common language about what that means anymore.

Blair: What does the director of reception services do?

David: Answer the phone? I don't know. Then political economic, like in the US, we've got an election coming up and there's just a sense of unsettledness eating all of us. That's by sort of a chaotic world and it can just freeze us, right?

Blair: I can see why the talk went over well. It's timely. You've got an eight part framework. It's really good. I don't mean to sound so surprised when I say that. I can see how this went over well, because it's one thing to say, yes, it's a chaotic world, we got to be better leaders. It's a great framework of really getting into eating the elephant one bite at a time, these eight different dimensions.

Let's go through this. The first one is Know Thyself. Just unpack that one a little bit because it does speak to the fact that as leaders, we may share a lot of common symptoms and frustrations. A lot of our challenges are unique to the unique way in which we ourselves are dysfunctional souls.

David: We, the proverbial, we. Speak for yourself. Yes. There are some common traits of leaders because you have to be willing to accept risk and that brings certain things in your personality. Other than that, there are so many different ways people lead and you can see these show up. If I'm not aware of how I as a leader am going to struggle uniquely in making decisions, then I've just really lost the game from the very beginning.

For instance, if I am reluctant to have difficult conversations with somebody, or if I really am drawn to the settled status quo or whatever that is, I think of this as developing an immune system for certain ideas. Certain ideas that would otherwise get through our defenses get stopped because we automatically resist certain kinds of ideas and so we just have to be aware of that, right?

You may be somebody who makes decisions really quickly and you're not even aware of all of the mess you're leaving behind you. You might be somebody on the opposite end of that spectrum that just struggles to make decisions and everybody around you is saying, "Come on, come on, come on, make it. We know what you're going to decide, just do it." We just need to be aware. That's the first step here.

This whole idea of a framework, I picture somebody with a good heart that wants to lead well and they're just not sure where to go. The framework idea is, okay, just step by step, let's think about this. First thing, what are your tendencies? Let's just make ourselves aware of those so that we can overcome them a little bit.

Blair: Yes, and if you want an inventory of your weaknesses, make an inventory of your strengths and then look at the flip side of them. Our strengths become our weaknesses because we go to them too often. If your team is anxious that you don't make decisions quickly, you might be framing that as, "I'm patient, I'm thoughtful, I'm discerning." Okay. That's number one is start by knowing yourself. Then number two is this question of hey, let's take stock of who's serving who here? Are we serving the business or is the business serving us? You've got a great quote from Michael Gerber, author of The E-Myth.

David: Yes. I've changed the wording here because I used to say this differently and I got in trouble; make sure the business is your-- and then I used a word that I guess I shouldn't have. It's really about without too much thinking, just chasing growth and then waking up one day and realizing, "Oh my goodness, look at this monster that I created."

When you were envisioning starting a firm-- and here I'm speaking specifically to principals obviously, when you envision starting this firm, you didn't dream at night and get all excited about tough choices and managing people and solving a new business challenge and dealing with procurement. No, you had all kinds of other dreams, but you were really good at what you did, and naturally, you attracted work because of that. You attracted so much work that you decided, "Oh, I need some help here," but you were still very central to all of this. You became sort of a bottleneck and you're past this transition, but it took a while for you to recognize that your role needed to change.

All of a sudden, though, you wake up one day and you realize, "Man, it's like this business is in charge. It's telling me what to do every day instead of me telling it what to do every day." You can very quickly lose sight of the fact that this business needs to exist for you. That is not a selfish concept, but we make these decisions, and a lot of them related to growth, and growth requires certain changes. People who adapt their leadership style adapt to those changes without thinking so much about what that means because these changes don't come quickly. You add one person to a 20-person firm and your role almost changes imperceptibly.

If you don't pay attention to that as it happens, five years later, you discover, "Oh, my gosh, everything I do, I hate." What's the whole purpose here? I'm just asking people to slow down, decide if this business is serving them because if it isn't, then you need to make some big changes. If it is, that's fine. We do change as humans, and we end up being much better leaders than we think we would be because we've learned on the fly. Still, you got to ask yourself, "Who's in charge here? Is this business ordering me around or am I ordering this business around?"

Blair: Yes, I want to weep at that question. I think there are times I'm extrapolating from my own personal experience where we feel like the business is serving us, and then we think, "Oh, well, it needs me to step in and do a little bit more for a short period of time." Then you wake up one day and go, "How did this happen? How did I get back here?"

Third in your framework is Embrace Your Proper Role. This is a pretty meaty one. You talk about the two things that you must give up so that you can focus on the four or five things that you should do. I love these things that you have to give up. What are they?

David: The image is a baton in a relay race. You have to let it go. You have to give the baton to somebody else. That's the first step, but then whoever takes it needs to run with it very competently. In that same spirit, there are some things that your now mature firm needs of you. Even in spite of your best intentions, you'll never be able to do those things unless you get rid of other things.

The first two things you've got to get rid of is knowing anything about specific projects. If you just give yourself a little test there, you run into a client at a coffee shop or something and they say, Hey, by the way, Joan, what's the status of such and such? You should never be able to answer that question. That's the first thing you give up.

Second thing you give up is any direct responsibility for any clients. If I sat down and asked every one of your clients, "Hey, who's your day to day go-to person?" Nobody should give me your name. Those are the first two things you've got to give up.

If you do that, that frees you up to do the things that only you can do for the business. Nobody else can do these things. Now, if you've got a partner, this makes it easier because you can split these up and cover them together. These are in order and there's four for sure. Then maybe a fifth one, if you've got the time.

The first one that you must do for the firm is oversee the financial performance of it and make big corrections when they come. Your firm's financial performance should never be a surprise. I'm not talking about you being deep in QuickBooks, but I mean you know exactly what's happening and the trends and all of that.

Blair: Right. I imagine there's some people listening, they're trained as a designer, they started a design firm that grew and they're thinking, oh, financial performance, that's not really my thing. That's why I have a CFO or a finance person. Your point is, yes, you can and should have a finance person to take care of all the nitty gritty details, but that person should be reporting the key metrics to you. You should have your finger on the financial pulse of the firm at all times. You cannot delegate that.

David: Yes, exactly. If you see the history of how this goes bad, CFOs who are not equity partners will almost always make decisions differently with your money than you would make. People who haven't kept their thumb on this and who step in a little too late are shocked at what happened. It's like, "Really? We used all our line of credit? How long has this happened?" Or, "You gave terms to this or we didn't adjust the bonuses here?" Somebody else can do all the mechanics, but you've got to be making those decisions, whether you're good at it or not.

Blair: That's overseeing the financial performance and you have ensuring a new business pipeline.

David: Yes. Again, you have to do it yourself, although I think you probably ought to be intimately involved. We've talked about that. If you can solve this, then you can solve everything else. If you don't solve the new business problem, then nothing else really matters. This is the second thing, new business.

Third is managing up to six people. That's the max, four or five is even better. There's some people who can manage more than that, but if I talked with every one of your team members and said, "Hey, who do you directly report to?" There shouldn't be more than six of them. That's typically the financial person we talked about, maybe it's new business, client management, strategy and research, something else. That's the third-- and these are the people who are running the rest of the firm. This is the middle layer. It assumes a certain size, obviously.

Fourth, innovating the future, which is particularly important right now. If you're doing content, you better be innovating the future, given the role of AI and so on. Usually, these four things are going to keep you busy. You don't have time for anything else. If you do have more time, maybe you can do some strategy for clients. One thing that's common with all these first four things is there's nothing billable in here. You're doing other stuff.

Blair: That's a good test. If you, the owner, are billing time and it's yourself that's having a utilization target, then you're failing on this front.

David: Yes, or you're a really small firm.

Blair: Yes. The third step of the framework is embrace your proper role, two things you've got to let go of so that you can embrace the four things that you should be doing. I love how hesitating you were, how halting you were in saying, yes, if you have time, maybe you can do strategy for clients because that could so quickly lead to doing more than just strategy.

David: Yes. Depending on the firm, right? That's the tension because the principals listening to this came through the design or the programming or whatever the marketing door. They're essentially pushing away everything that made them successful in the first place. Now they're taking on the mantle of a leader, hopefully willingly.

Blair: The hardest thing to do. Your fourth step in the framework is about trade-offs really. Accept that decisions are sloppy. I really like how you've laid this out. Think of your decisions as sliders. Do you want to talk about that?

David: Yes, I think this is true. I'll say it with a little bit of hesitation, but I think the main reason we wait too long to make decisions is because we are waiting for more clarity. Especially if this is an important decision, we don't want to make the wrong ones are looking for more and more clarity. When you're thinking that way, you're thinking of a decision as a switch that's either on or off. All decisions aren't like that. Most decisions are sliders where you're just moving in a certain direction trying to get it in the right place, but it's never perfect. There's no detente in there. There's no place where it settles into something and requires more force to push it one way or the other. No, it's just a pure slider.

You're balancing different things in each case. You're thinking about, all right, what's best for this individual, but really what's best for the whole team? What's best for the whole team might make the individual that I'm thinking about here upset. Maybe that's something that I need to do, right? Short-term survival versus long-term thriving.

If you aim on the long-term thriving, then you may not even be around to be there, but if you're always thinking short-term without the long-term, that's not good either, right? Holding firm to scope or just trying to keep the client when you don't have enough new business. There's just so many sliders here that you're thinking about. The main theme here is make a decision and then correct it. Don't wait until you have complete clarity because you'll have waited too long. It's a little bit like, when are you ready to have kids? Oh, I don't think there's ever a time.

Blair: Yes, somebody said kids make adults. Adults don't make kids, so you're not ready. Reminds me of Jeff Bezos I read recently. I think it was Bezos who said, "You should make a decision when you have about 70% of the information."

David: Oh, yes. I've never seen a number, but that sounds about right. I guess he's been a little successful, so maybe we can listen to that more than me, right?

Blair: Accept that your decisions are sloppy. See them as sliders going in certain directions. Number five, recognize early onset indifference. If we haven't already done an episode on this, I think we probably could. Each of these steps in the framework is a deep topic, but I wrote a note here, a whole new episode on this one, but do you want to walk us through early onset indifference?

David: If we're looking for why you're struggling to make a decision, it could be because you feel like you need more information, more clarity, and I think that's probably the main reason, but it also could be because you're just not engaged anymore. It's really important to see that in yourself. I think of that as the penultimate step. Penultimate means the next to last, because what comes right after early onset indifference, if you don't correct it, is disaster.

If this is true, then figure out, is there something about your business that's creating this indifference? It could be something in your personal life that has nothing to do with the business. Whatever it is, acknowledge it, talk about it with people, and solve it pretty quickly, because this is like your car is starting to veer off the road, and if you don't get it back on the road pretty quickly, the longer you wait, the worse this is. Recognize early onset indifference because this is what's going to make it even more difficult for you to make critical decisions. Here, distinguish between lack of clarity, indifference, lack of engagement, fix that.

Now, there's moderate lack of engagement. That's what happens every Monday morning. I'm not talking about that. I'm talking about the deeper stuff, where you just can't find yourself being motivated for the things that the business really needs from you, like those four or five things we talked about a few minutes ago.

Blair: Yes, this one really resonates with me, probably why I wanted to go deeper into it. I know we don't have the time here. There are times when I'm quite indifferent to the business, but that's usually just burnout. It's because I have not managed my calendar, like the year well. I know I'm a sprinter, and I need to place strategic recovery sessions, weeks, sometimes a month long, somewhere in the calendar. If I find myself thinking, "Well, I don't need this rest," I work through that vacation or something, I pay the price later. That's dealing with sporadic indifference as a result of burnout.

There is a deeper level of indifference, where the owner of the business just falls out of love with the business. If that's not a sign that something's wrong, there isn't going to be a better one.

David: Yes, and I'm not sure you could hide that either. I think everybody around you is going to sense that, and their actions, they're going to be keyed off of that. Why in the world, as a key employee, would you be deeply engaged if the owner is not deeply engaged? This spreads like wildfire.

Blair: They've mentally checked out, yes. Leading in a Chaotic World, eight-part framework, number six, quit blaming outside factors. I love this. I wrote victim or player, which is somebody's framework of like, are you taking responsibility for your own life or do yourself bobbing in an ocean, being tossed hither and yon?

David: I got mad when I was talking about this one in front of the crowd because I'm so tired of hearing this. The kinds of things I hear are, we have a cashflow problem when really it's just constant shitty profit that you're not willing to face or you're just not paying yourself what you should, and you know it, but you frame it as now I'm really investing in the business. It's like, well, you've been investing in the business from the very beginning and look where it's gotten you or your own crazy workload, which is really just your inability to learn to adapt to what the business really needs from you and being a control freak.

You can see this in the way people talk. I guess you could have almost seen some of this in the way I was talking at the beginning here saying that all these things are creating this really difficult world. Employees aren't like they used to. It's like, well, there's some truth to that, but the enemy is within. You have total agency as an owner. You can make all these choices. There's freedom everywhere you're doing these kinds of things. It's just not going to be helpful to blame everybody on the outside.

I wrote an article about the scarcity mindset where everybody is against me, I can't believe this industry, my clients keep doing this, procurement, yada yada. Some of those things are true, but just accepting it as somehow not something you can change is not helpful at all. That's part of this is quit blaming outside factors. If your business fails, there will be outside mitigating factors, but it'll be your fault.

Blair: Yes. It's a basic tenet of design thinking that there is no reason for anything. There are only ever reasons, multiple reasons. When our business fails, we go to the excuse and say, it failed because of reason and it's usually external reason, but if you look at how species go extinct, it's a combination of, it's called the press pulse theory, pressure, constant pressure, and then a pulse. We blame the pulse, the external thing that happened to us. We don't take stock of our role in the ongoing pressure that the business was feeling because of the things that we were doing or not doing.

David: That pressure is pretty easy to measure when you look at and understand your financials too.

Blair: Yes. Great point. Number seven, remind yourself why you're doing this. Why are we doing this?

David: Yes. There's two reasons.

Blair: I love your reasons. I love the first one. We need to talk about this. What's the first reason we are business owners, David?

David: Money. I say that without any embarrassment at all. I want you to be rich. You should want to be rich. I don't care what you do with the money. Maybe you give most of it away. I don't care. You need to want to be rich. If this business isn't making you a lot of money, then something's wrong with it. Maybe it'll take a year or two to fix, but by God, you better fix it. That's the first reason you're doing this. Remind yourself why you're in business. It's money and it's impact probably in that order.

If you're a little bit less of a capitalist than just change the order, impact and money, but impact doesn't happen much in this world without money. Money alone is going to feel very empty. This is really what I wrote about in the fifth book, take your expertise so that you can have more money and have more impact. Those two things are so beautiful. They're so beautiful. The money keeps you engaged and the impact is a validation that you're really changing people's lives. It's a fair exchange, a lot of money for a lot of impact.

If you're not making money in the business regularly, there can be periods of time where you've got no profit at all, that's fine, but if you're not regularly making money, then something's wrong. You got to fix it. I feel like all of us probably-- we may not have written it down, but we all had these options about what we could be when we grew up. If this business isn't working for you, then go back to your list and pick something else. It's not a big deal anymore. You're not locked into a career for 40 years like your parents were. Just pick something else if it isn't working. If you're not making money and having impact, then something's wrong.

Blair: I love how those are twin goals. You can't isolate one and say it's just about one. They have to work hand in hand. You have to pursue both. I also like that you put money at the top of the list because I think it's a bit of a shock to some people. You notice the people who talk about living their why and higher mission and purpose, and I use all that language too, but the reality is that I never really talk about-- the reality is that is the luxury of the people who have figured out at least the basics of the money part, at least the profitability, at least the financial validation.

If you can't do that, then you don't get to live your why through your business. You do have to pursue money, and if you're in denial of that, it's time to look in the mirror, I think. Number eight, embrace your unique role.

David: Yes, because there's some things that nobody else can do at the firm. I don't mean those lists of four or five things in that earlier point, but I'm thinking like, nobody can conduct those courageous conversations like you can.

Blair: Can you just dwell on that for just a second because I think that is profound and vital. In your journey as a leader, the skill that you develop that maybe that you did not seek to develop, and if you haven't developed it, maybe you should be working a little bit harder on it, is the ability to have those courageous conversations. There are numerous books with the word conversations in the title, vital, courageous, and a whole bunch of others that are escaping me right now on the subject. It is the skill of leadership, the ability to have the courageous conversation.

David: Right. The skill of leadership is not to be correct all the time. The skill of leadership is to have those courageous conversations before for sure that you're correct. There's a big difference there, yes.

Another one is to make the decisions that the team will not or cannot make for itself. When I think about how the leaders of the US at the moment where I live, the leaders should be making decisions that are not in every individual's best interest, but they should be making the tough decisions that we as a group of voters really wouldn't decide on ourselves because we aren't big enough. We're not willing to be the sort of leaders that does what's in the best interest of the country rather than pandering to every single person.

As a leader in your firm, you are making the decisions for the whole team that they would not make for themselves if they voted or they cannot because they can't see the bigger picture. There's just some things that you as a leader, you bring a uniqueness to this role that you have to embrace. At the end of the day, after you make some of these decisions or have these courageous conversations, you may be sitting there and you may be talking with your life partner, but for the most part, it's a lonely thing. Just accept that.

Leadership is not something people go into because it's glorious. In fact, the people that go into leadership because it's glorious are the wrong leaders. The best leaders are the reluctant leaders who are placed in a leadership role, it's difficult, they embrace it, they don't love all the parts of it, but they say, "This is what I'm called to do, and it's what the business needs of me."

I recognize that I'm in the middle of that hate sandwich we talked about earlier, but there will be a time when hopefully, the decisions that I'm making will be the right ones. If they aren't, then I'll just fix it. That's just what leadership is.

Blair: The topic is Leading in a Chaotic World. The eight-part framework; know yourself, who is serving who here, embrace your proper role, accept that decisions are sloppy, recognize early onset indifference, quit blaming outside factors, remind yourself why you're doing this, embrace your unique role. This was great, David. Thank you very much.

David: Yes, thanks, Blair.