In employees we trust Featured

8:00pm EDT April 25, 2008

As president and CEO of FirstRain Inc., Penny Herscher has access to plenty of information. But she can’t use that information as well as her 140 employees on the front lines do, providing research applications for FirstRain’s clients — investment professionals and corporate executives.

“The further you get up the management ladder, the less real information you have,” she says. “You’re dealing with meta-data, not real data. So I’m a big believer in getting information into the employees’ hands and then trusting them to make good decisions.”

Smart Business spoke with Herscher about how to build trust with your employees so that you’re comfortable allowing them to make decisions.

Q. How involved should a CEO be in the company’s day-to-day operations?

It depends on the type of leader that you are. Some leaders are very operational. They recruit strategists to work for them. Then there are other leaders who are strategists who recruit operational people. I’m definitely in the latter category.

I work on four things: strategy, culture, customers and our investors. I’m not very involved in the day-to-day schedule planning or resource planning of the company. I’ll review it with the senior members of my staff, but I don’t roll up my sleeves and develop product plans.

Q. How do you set those priorities?

I’ve been a CEO for 11 years now. Early on, it was a struggle to figure out what my job was because, as CEO, you can work on anything at any point in time.

During the first four to five years of being a CEO, I thought about where I was effective, where I was helpful. It developed over time as I looked at what I naturally gravitate to, what I was good at and what my team wanted me to work on.

I’m not necessarily as good at some of the operational things. So I’ve learned to hire people who are complementary to me.

Q. How do you build a complementary management team?

It’s important to value diversity right upfront when you’re building a team. The easy part is doing the breakdown of what skills you need to hire — the technical skills, finance skills or sales skills.

Then there’s a challenge for any leader to consciously look for diversity in the team. By diversity, I mean not just the traditional — gender and race — but also thinking styles and decision-making styles.

Q. What is the benefit of a diverse team?

If you get a very diverse group of people in the room with open communication and trust, you can make complex decisions very quickly because many different viewpoints get brought in to the decision-making process. You’re able to look all around a problem or all around a decision.

Then if you have a high degree of trust, everybody puts their opinions on the table. You can consider all the opinions and make a decision.

I like to build a team that is very diverse, where the personalities are different, and sometimes, it’s a little challenging to get the team to gel if they’re all very different. But if you put the effort into building the culture so the team trusts each other and not tolerating politics in any way, then you get the benefits of the diversity.

Q. What are the keys to leading a diverse team and organization?

One is building an open culture with open communication. Another is hiring great people. I have a lot of focus on the quality of management — the quality of my team and the quality of the people who work for my team.

As a result, I build a culture that has open communication and a very high level of trust, two-way trust. I need to trust my employees, and my employees need to trust me.

Q. How do you develop an open culture and two-way trust?

Tell employees the truth, and tell them what they need to know. Trust them to use that information responsibly.

I tell employees, ‘I’m going to tell you the truth, but you need to demonstrate to me that you will use that information responsibly. And if I ever learn that you don’t use the information responsibly, I’ll stop talking.’

It creates a two-way bond of trust. I also believe that reasonable individuals given the same information will make the same decision. It’s very important to give the employees as much information as possible that is pertinent to their jobs.

Q. How do you attract quality employees?

Quality employees attract other quality employees. It starts as you develop the vision for the company and start putting the strategy in place.

It starts with being vigilant about the quality of the first 10 people you hire. Then, as you hire great people, remember A players hire A players, and B players hire B and C players.

HOW TO REACH: FirstRain Inc., (650) 356-9040 or