Accounting and Consulting

Robert J. Herbold

By Mike Cottrill

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Robert J. Herbold had been at Microsoft Corp. for less than two weeks when Bill Gates called a meeting with his senior executives for a review of Microsoft Word. Herbold — now a retired Microsoft executive vice president and chief operating officer — went into that meeting interested to hear what Gates had to say about Word, which, at that time, had gained huge ground over a six-month span to pull even with its main competitor, Word Perfect. But instead of highlighting the achievement, Herbold received 65 slides for the presentation and all but one had the title “lowlights.” The point was clear: Gates was not going to let success stop Microsoft from being even more successful. Today, Herbold is the managing director of consulting firm The Herbold Group LLC and author of “Seduced by Success: How the Best Companies Survive the 9 Traps of Winning.” Smart Business spoke with Herbold about why it’s so tricky to stay successful and how building consensus kills creativity.

Don’t seek consensus on creativity. You have to charge individuals with generating innovation, not groups of people. When someone comes up with a bright idea, if it becomes exposed to a complicated process where there are a lot of teams involved, your chances of coming up with something distinctive are greatly reduced.

What happens with organizations when they get more complicated is that everyone senses that they’re supposed to have input in all these decisions. That leads to you going to work in the morning and seeing that your calendar is full of meetings. That’s the kiss of death.

A good place to start is to make sure the troops understand that so-and-so is responsible for this design and, yes, we expect that individual to seek input, but that one person is going to use their judgment in getting things done.

You need to form two piles of decisions. One pile gets made by people who are accountable for that particular area, and the other pile can benefit from group input and consensus — things where you are refining a process.

When you are trying to generate creativity, the last thing in the world you need is a team — they just chip away at the distinctiveness of an idea, and innovation is all about distinctiveness. So, you explain to the organization how uncompetitive it can be if you slow everything down to make sure everybody is involved with everything.

Stay simple, stay successful. The big challenge is trying to harness people from making things complicated. When I started at Microsoft, we could hardly close the books at the end of the quarter, it was so messy.

We ended up reducing the size of our IT organization because people just hire and hire because they think they deserve it. That happens not just at Microsoft, that’s a human trait. As organizations meet with success, they think, ‘Oh, I have to have some of this, some of that,’ and they open up more projects than you can imagine.

The primary challenge during growth periods is to keep it simple, keep it like it was when it was a small company. You need to look at the organization and say, ‘What are the processes that we use that aren’t going to give us competitive advantage but we need to do efficiently?’

Those things need to be done with simplicity, accountability, leanness and discipline. Those are typically the way you report your finances, the hiring and evaluations process, moving superstars along and making sure you’re dealing with poor performers. The simpler you can do those and the more disciplined you can do those, the better off you’re going to be.

Don’t let success make you stagnant. You have to create a culture that avoids the loss of sense of urgency and avoids being protective of what you’re doing currently.

Look at a company like Kodak. Over the last decade, they have been frozen in their tracks, and they missed the digital revolution because they were so protective of film. They even produced a digital camera that used film, which demonstrated how protective they were of their expertise. The thing was the laughing stock of Wall Street — who would buy a digital camera that uses film?

That demonstrates how dangerous it is to be successful — how you can be so protective of the thing that got you there, and you believe will serve you well in the future. Success can destroy an organization’s ability to understand the need for change. It destroys the motivation to creatively attack the status quo.

You have to constantly face reality and tackle your vulnerability. You need to dwell on the issue of where are your weaknesses, what are the bright ideas in your industry or other industries that could apply here, and force yourself to constantly think of the ways improvement can be made. ... You constantly tell an organization that it’s all about the future; it’s not about past success.

Review your challenges with objectivity. Be objective in regard to what you see as positive and what you see as the challenges to the future — and don’t be so anxious to say things right away because you better be right when you say something.

I always admired [former IBM CEO] Lou Gerstner, the way he entered IBM. The press was after him constantly for his strategy, and he’d constantly say he didn’t have a strategy. During the first two months, he focused on talking to customers, going out and understanding what was going on.

Then he emerged with a very objective assessment of their problems, their advantages and what they needed to do. It appeared the place was going to go bankrupt, but he came out with this strategy from that assessment.

A leader needs to make an assessment, then take a position and be open with the gang and say, ‘I’m here to constantly listen and modify.’ You need a plan at all times, and it needs to be flexible and updated all the time.

HOW TO REACH: The Herbold Group LLC, (425) 453-9796 or www.herboldgroup.com