02 Oct Angel Investor Criteria – Interview with David Dotlich
Listen To The Episode Here
David Dotlich is the founder and chairman of Pivot, one of the world’s largest providers of customized executive learning for senior leaders of Fortune 500 companies. David is also the author of several books including Why CEOs Fail, Transitions at the Top, and Head, Heart & Guts. On this episode, David discusses some of the key factors that make a good leader, as well as why introducing new leaders into a company culture rarely works unsupervised.
Angel Investor Criteria – Interview with David Dotlich
Welcome to The Successful Pitch podcast. Today I’m honored to have David Dotlich, who is an author of Transitions at the Top, and he’s the founder and chairman of Pivot, one of the world’s largest providers of customized executive learning for senior leaders of Fortune 500 companies. He’s the former executive VP of Honeywell and the former founder president of Oliver Wyman, a delta executive learning center.
He has written many other bestselling books besides Transitions at the Top. They all have a theme about leadership. We’re going to do a deep dive into that. As if that’s not enough, David’s also an angel investor. David, welcome to the show.
Thanks, John. I’m glad to be here.
I always like to ask my guest, how did you get involved in leadership? In your particular case, what was your first, the idea to write a book about this and how did you decide you’re going to teach people to become leaders?
I started out taking people across Africa. Believe it or not, leading tours and guides, driving from Johannesburg to London for four months across Africa. I was a head of the group and of buddy of mine were running the company. We found the stress of travelling across Africa was not nearly as difficult as the stress of living together. Fifteen people for four months.
In that experience, I learned that it’s really all about leadership, that getting people to work together and work as a team requires leading, leading effectively. From there, I went back to school and then joined a big company. In every situation, I could see there was really leadership that made the difference.
Even in company performance, when I look at how well a company performs, usually it can be attributed to effective leadership. I’m always amaze John, that analyst don’t have much of a clue of how you analyze and understand and evaluate what’s good leadership inside a company today. But to me, it’s leadership that makes the difference.
How do you define what a good leader is? Do you have any tips for that?
Obviously you’ve got to have the willingness of people to follow you. Without any followership or willingness to follow, you’re probably not leading. To me, a good leader is one who can get the followers thinking that they’re doing it themselves. That idea was first talked about by Eisenhower who said, “The mark of a good leader is that at the end of the day, people say, ‘We did it ourselves.'”
Not only is it followership, but it’s actually people thinking they’re doing it. Obviously it’s towards the goal, achieving your goal. In the study of leadership, there are many ways to do it. There is no one way to be a leader, there’s a lot of ways to do it.
You’ve worked with companies like Nike and Johnson & Johnson and PG&E, these huge companies that, you coached them on how to be better leaders and become smarter with their strategy. Have you noticed a consistency across all these different industries?
Yeah, I think there’s a real effort to find, for each company, what kind of leaders they have, given where the business, they think the business is going, what kind of leadership or leaders they will need. Frankly, in all of those companies you mentioned, the definition of what is good leadership keeps shifting and changing.
If you think about the diversity or you think about being more global, or you think about working in a matrix, these were things that weren’t important 20 or 30 years ago that are now top of mind in these companies. Thinking about what is good leadership, and you can do this in your own company no matter how big or small. What do we got and what do we need? To me, that’s what talent strategy today is all about.
I love that. What do we got and what do we need, we’re going to tweet that out. That’s great. Analyzing what are your current assets and what do we need to get to this goal, right?
Exactly, from a talent standpoint and from a people standpoint. I’m an entrepreneur. I’ve started and sold two big companies. I’ve learned that you have to be very honest with yourself about the talent that you have, and then be even more honest about what do you think you need to get where you want to go. The hard part is taking the steps necessary to get there, whether it’s feedback, coaching, confronting people, firing them, all those things, take guts.
That’s what it takes.
One of the things that all the investors that I talk to tell me is it’s so important who is on the team, even more that the idea. In other words, we invest in the jockey, not the horse. I’m guessing you have some thoughts on that as well.
Definitely agree with that. When somebody shows me a business plan, the first question I ask them and myself is, “Am I willing to invest in this person?” Did they really get it in terms of how important talent and people really are, or do they think it’s all about the product or the technology?
Let’s say we have some listeners, which I’m sure we do today, that want to recruit the best people for their team, whether it’s a CTO or just salespeople, what is it that you think makes somebody tell a compelling story that makes top talent want to work for that particular leader versus another option they probably have if they’re on top?
I think it’s about fit. A lot of times, there are many talented people out there that may not fit the culture you’re trying to create. It’s very important to ask yourself, what kind of culture do I want and am I striving to build? Then, how do I find the right people to fit that culture? Some cultures can be very autocratic and hierarchical and very successful. Some cultures can be very supportive and team oriented.
One of the things we’ve learned is that there’s not necessarily one way to be successful in business today. There’s a lot of different ways to do it. I think if you’re an entrepreneur, you’ve got to ask yourself, what is the culture I’m trying to create, and then how do I find the right people that will fit that culture? Obviously, they have to be talented around skills and have an ability to contribute that’s exemplary.
If you’re someone that doesn’t like structure and doesn’t like hierarchy and that’s the culture of the company, whether it’s big or small, you’re going to be miserable, right?
You are. You’re going to be miserable.
If you’re somebody who really likes being able to throw out ideas and brainstorm and not have to be judge if you come up with something that doesn’t necessarily fly, that it’s a safe place to share your ideas without being judged, and fear of being thrown under the bus by your coworkers, then that’s a whole different kind of culture that attracts a different kind of person, I would assume.
Absolutely. It’s definitely true. In working with entrepreneurs, one of the things that I see a lot, is that entrepreneurs who really feel the stress of the business and end up being very directive. They like to make decisions, they feel the pressure of needing to perform, and so they take charge.
Yet what they say is that they want people to take responsibility for the business. They want people who held accountability. They want people who they don’t have to tell what to do. But then they end up telling them anyway. That’s what I mean about being very honest with yourself, about what kind of culture you’re trying to build, and then finding people that fit that culture. Don’t fool yourself.
l like what you just said there, David. This whole concept of, if you get stressed out as a leader and you’re realizing you’re under pressure to hit certain goals or whatever the pressure is, and then instead of trusting your team to be proactive and help you solve it, you start dictating instead of delegating.
Exactly. I say John, having been an entrepreneur for 20 years, that is the hardest thing to do, is to carry the responsibility for the PNL personally but yet be willing to empower and delegate and trust others.
We have another little tweet there, “Delegate, don’t dictate.”
Exactly. That’s right.
And the alliteration that you gave us, thank you for that. Let’s talk about Transitions at the Top. This is your 12th book? Is that right?
Congratulations. You’re certainly prolific. What made you want to write this one, and who is this written for?
I work with a lot of companies, John. What we see is a very common pattern, which is, “We’ve got to change as a company. Let’s go hire person A because that’s exactly the kind of person that we need to change the company.” Companies do this all the time. They go out to decide and say, “We need to be more entrepreneurial. Let’s go higher in entrepreneur.” Then they bring that person in.
Systematically, the culture begins to extinguish the very thing that they wanted to go higher and change the company for. This is something that happens over and over and over. We need to hire somebody who’s going to change us and then we end up changing them.
We were asking the question, “Why do so many of these particularly large companies hire very expensive people to come in and join companies, and then after six months or a year, they depart?” Sometimes it’s really expensive, and often it’s a sense of failure on the part of the company and the person that they hired to join. That’s what the book is all about.
I think a classic example of that is when Michael Eisner was running Disney and hires Mike Ovitz.
That didn’t work out.
That’s the textbook case. Ovitz was probably example A. Nike did the same thing. Many companies bring in external CEOs feeling that they need change and the CEO will make it happen, but then the culture takes over. What we found in doing the research on the book is that there are a few myths that people operate under.
One is, once we’ve hired this person, our job is done. All we have to do is get them to say yes. Another myth is, this person is really, we’re paying them a lot of money, he’s been successful in a lot of places, she really knows what she’s doing so she’ll be successful here, so we don’t have to worry about it. Or the third one is, why do we really need to help them? If they need help, they’ll ask for it.
What ends up happening, particularly when you bring somebody in, and this can be true on small companies as well, is that period of adjustment, that sink or swim time, is pretty critical and can be pretty expensive.
Let’s address each of those because I love it so much. This concept that you’re going to hire somebody to bring and change and then you try to make them change to fit your culture then nothing’s going to change. It’s almost like dating somebody and marrying them and say, “Now that you’re married, you have to change who you are even though the thing that I was attracted to in you, I don’t want you to do that anymore.”
That doesn’t lead to a successful life. This myth about, just because you’ve been successful on the past means you’re going to be successful in this situation. It’s almost like those warnings they give you when you invest in a mutual fund, right?
Previous success doesn’t mean future.
Or we’re paying this person a lot of money, so he should know what to do.
And that they’re so smart, they don’t need any help. This whole onboarding process, I believe you’re probably a real expert on that from this learning center, aren’t you?
Yeah, we are, because a lot of times you got to get a conversation started about, not the person, but who are we. What is this person forcing us to think differently about and do differently? I was working with a big company in Europe that really wanted to hire a head of human resources to come in and bring together all the human resource functions in the business, which were highly decentralized.
Large company, male executive committee, they went out and hire the female head of human resources to come in. She began in a very systematic way to bring all the functions together. Lo and behold, within three months, each of the business units were saying, “Wait a minute, we have our own human resources. Why is she trying to pull this all together?” On and on and on.
Pretty soon, the issue became her, not the strategy. This is pretty much how usually the script runs, is that the person that is brought in from the outside, after a while, ends up getting blamed for trying to make change.
Wow, it’s the very thing we hire you to do, we don’t like what you’re doing, and therefore you’re not a fit.
Yeah, and we thought we wanted it, but now that you’re doing it, we realize that’s not exactly what we want at all. Anyway, the book is about what can companies do to help people in this process of change. Some of it is having the right conversations.
Some of it is the senior leader or the CEO really getting involved in this process of understanding how people are transitioning in and out. It’s asking them how they’re doing. It’s having team conversations about the very issues that sometimes are most difficult to talk about. That’s what the book is all about.
I love it. Most people are afraid of change, aren’t they? Certainly, if somebody new comes in, they’re afraid they’re going to lose their job. Then they’re afraid, the excuse that nobody wants to hear is, “We’ve always done it this way, so why do we need to fix it if it’s not broken?” How do you help people with that?
I don’t think people are afraid of change, actually. I do think people really do like to learn. By and large, people embrace change if they understand the context and what it’s all about and what we’re trying to accomplish.
You really have to work to make change successful. You can’t just assume that people understand, particularly if you think about it. But in my experience, people don’t like change done to them, but they’re really open to change. They really are.
There you go. That’s a great distinction. I’m open to change but don’t try to change who I am, is that what you’re saying?
Yeah, or I’m open to change but include me in the change. I have my own ideas and thoughts as well. Everybody I need and almost every single company wants to make the company better. They want to do a good job. This is what drives us as people. Harnessing that energy is what leadership is all about.
You are the founder and chairman of Pivot, which recently sold to Korn Ferry. You have first hand experience about how you stay running your company. A lot of the founders fear that, “If investors come in, they’re going to want to replace me after I grow the company to a certain dollar amount because maybe they think I don’t have the skills to take it to the next level.” Do you have any tips for how do you stay running the company that you started and sold?
It’s a different skillset John, entirely. The skillset you need to build and drive a company and take responsibility for it end to end. You breathe, sleep your company all the time because you feel that emotional responsibility for it. It’s different than the skillset that you need to survive inside a big system. The first time I sold a company, I didn’t know that. I thought my job was to protect my baby, to make sure they didn’t carve it up, to tell them where they were wrong and how they needed to improve.
I thought my job was to really change the big system because we knew everything and we were doing everything right in our little company. When they bought it, I refused to drink any Kool Aid, anything that look like the Kool Aid. I wanted to change the big system. You know how that’s how that story ended.
You’re like David and Goliath a little bit there, right?
Yeah, exactly. This is what I mean by the skillset. The idea of working successfully in a large system requires a different set of skills. Getting along, negotiation, the long view, understanding where you have to compromise, working well with others, sharing responsibility for the business with others, all those things.
Let’s talk about that a little bit, because to me that’s what a really good leader does, is they don’t need to take all the credit all the time. Whether that’s a startup and attracting the right team. Don’t you think that if you have someone that’s willing to share the credit and acknowledge your contribution, that that’s how you create loyalty?
I do. I think you’re absolutely right. I think people suss out when a leader is really sincerely willing to share credit or just looking like they want to. Because our motives are pretty transparent to other people. You have to ask yourself, do I genuinely want others to get the credit or do I think it’s all about me? If you don’t answer that question honestly, then people will know. It’s really, you think it’s really all about you.
Right. Now, since you’ve done this twice successful and have written so many books on this, you’ve now become an angel investor yourself. Do you invest strictly by yourself or are you a part of an angel group?
Pretty much by myself. I’ve been asked to join a couple of angel groups but I’m pretty much going it on my own at the moment.
What kinds of things do you look for when you hear a pitch from someone?
I’m really interested in a lot of things. Obviously I think having a solid business plan and being realistic about the prospects of the business are baseline. Having a realistic understanding of the competition in the market and the funding requirements is all baseline. I really look at, does the person have their ego under control?
Have they really managed themselves in such a way that they can handle the challenges that are going to come from growing a business? Do they really have a pretty good level of emotional intelligence that can work to attract people and grow the business and work well with others? Do they have a pretty good understanding of the fact that it really is about talent, not necessarily about product? Is it more than just lip service? Typically I invest, as I said, more in leadership than almost anything else.
Let’s do a deep dive into emotional intelligence, this EQ factor that not only makes you want to fit that particular culture but also attracts the right people. Can you give us your definition of emotional intelligence, and how have you developed such strong EQ yourself?
The assumption that I have good EQ is something I challenge myself on a lot. Because I have, like all of us, everybody has impulses. Sometimes it just feels good to speak out and say something, even though it doesn’t move the ball down the field. Self-regulation, I think is very important, a very important part of emotional intelligence. I can sit in a meeting and get bored and then all of a sudden I decide I’ll just throw something in a middle of the meeting to stir it up and make it more interesting and exciting for me. That is an emotional intelligence.
This self-regulation and impulse control is really important. I work with with CEOs a lot and I used to have a teenager. He’s now 20. It’s all about impulse control. This ability to manage your impulses in situations where you want to just act out is what is a big component of emotional intelligence. Self-regulation.
Then this ability to read other people and understand what it is that they want and need. Not necessarily in a sales way of trying to just sell them so that you can meet their needs no matter what. It’s this capacity to intuit what is important to other people and be willing to focus and understand it and deal with it or address it is a big part of emotional intelligence. The studies on emotional intelligence have been very clear that if you want to develop it in your children or yourself, delayed gratification is really key.
This ability to not act immediately but to think about the long term. What are we trying to do or what are we trying to build? I think that’s true in a business or in a team, is thinking about what’s the bigger picture, the longer term, the delayed gratification. That’s a big part of emotional intelligence as well.
There’s really three elements: Impulse control, empathy, and delayed gratification.
Okay, got it.
If we go back to the research on emotional intelligence, it’s knowing yourself. Knowing your own motivation and being honest about what that’s all about, not deluding yourself.
And maybe not making decisions when you’re stressed out or tired or jet lagged or hungry or any that stuff, right?
It’s like, I need to take care of myself so that I can have some self-regulation. This delayed gratification stuff. We will get a reward when we do our homework, or we will get rewarded when we hit a certain sales goal if you’re leading a company, right?
Yeah. Or I want my way now, or I want this done instantly, whatever. Some of that, in times of crisis is important. But in general, it’s really managing yourself to think about what is the long term as well the short term.
Are you geographically agnostic or do you only like to invest in companies and founders that are near where you live?
I’m geographically agnostic. I live on both coasts so it doesn’t really matter to me because I’m all over the place.
How long do you typically know someone and what kind of due diligence do you, as an individual, put your founders through before you invest?
Typically three months, six months. I really like to get to know people and I like to be involved personally as well in the business, as an adviser.
You typically contribute more than just your money. It’s your contacts, your strategy, your insights. Because when you get leadership right, the growth takes off. That’s the big real takeaway.
I’m a good leader, but so what? It’s like, that’s everything because that’s the talent, that’s the team and when you have a motivated team that’s in sync … There’s such a huge cost of turnover, isn’t there, David?
Absolutely. It’s just like the turnover customer. It’s so much easier to keep the customer than find a new one. The same thing is true of people. If you can really develop and keep your people and grow them, that’s the ideal state.
I would also say John, I think one of the hardest things about leadership too is dealing with performers who are averaged and well-intentioned and really willing to work hard but yet you know getting into the next level is going to require a different level of talent. Sometimes that’s very hard for leaders to phase into.
Let’s talk about that, because I have a lot of clients that have that very same challenge, specifically with salespeople not hitting their numbers. “They’re trying and I really like them. They’ve been successful in the past but they’re not consistent. I don’t know what to do to fix it.” Do you have any advice for that?
I think you got to step back and ask yourself, what’s going on here? Is it the context? Sometimes salespeople have a bad year for a lot of good reasons. Is it the person? Sometimes people are really functioning beyond their level of capability, that’s true. You have to honestly say this person’s capability to grow to another level of performance, we’re not going to get there. Honestly, that’s the big part of what you have to address.
The other thing is you have to ask yourself, “Is it me as the leader? What am I doing to create the environment where this person is not performing?” Ask yourself that. I think you have to step back and think about it realistically. My default is to try to develop and grow the person. Is there something I can do to help this person grow? Is there an experience or is there a coach, a program, a challenge I can give them? Is there feedback? All these things can help grow a person and help them develop.
But at the end of the day, you have to cut your losses too. As an entrepreneur, you learn that. If I’m thinking about the good of the business and I’ve tried everything else, I got to cut my losses. In my experience, it’s often been not soon enough. I’ve often waited too long to take that step.
That’s great advice. Normally, I ask my guest to recommend books for the listeners. Besides obviously, Transitions at the Top, you have 11 other books, so I’m not going to even ask you to recommend anybody else’s books. Can you pick one or two of your other books besides Transitions at the Top that we could put in the show notes, that you can recommend to our listeners about running a small business and getting funded?
Yeah, there’s one book that is sold, probably the best seller of all the books I’ve written. It’s called Why CEOs Fail. What this book discusses are the dark side of our personality. All of us, we have a dark side of our personality. Things we’re not proud of that we do when we’re stressed out or when we’re overworked or tired. It might come out in terms of being impatient or being melodramatic or sometimes being detail-focused.
This book describes these things and talks about what you can do as a leader, to manage your, what we call your derailers or your shadow side. The point is, when you know you get to be the CEO, you’re shadow casts a wide dark space over everybody. I used to work for the CEO of a company and we would ask his secretary, “What’s the weather report today?” She’d say, “It’s sunny. It’s raining. It’s cloudy.”
Because we knew, as the CEO, he was sometimes what we call his derailers would just take over. Why CEOs Fail talks about what you can do to manage those parts of your personality that can affect your business and your performance of your whole company, and what you can do about it.
That’s great. I would ask you, is there one particular thing, is it rest and is it a lot of these emotional intelligence that we talked about earlier as one of the ways to deal with it?
I think it’s asking people and staying open to the feedback that they give you.
In other words, what do you do that makes it challenging for other people to perform? One of the things I often tell my clients is get them together and ask them, “What are two or three things I can do to be a better leader?” and then leave the room.
Let them work on it for 20 minutes and then come back and start a conversation about what are you doing that keeps them from being as productive as they need to be and how could you be more effective? Sometimes you get information you don’t normally have and you find out what’s in your shadow side.
It all goes to that culture you’re talking about, which is creating a safe space to let people do that.
Exactly. That’s exactly right. What I tell CEOs is the higher you go, your jokes get funnier, your insights get brighter, your ideas get smarter. It just happens magically. Overcoming that, you got to give people permission to tell you, “Here’s what I really think.”
Great. That’s a great one. Why CEO’s Fail in addition to Transitions at the Top. What’s the other one you want to share?
The other one I would say is the book called Head, Heart and Guts.
What this means is as a leader, you’ve got to be smart. You got to have a strategy and a good sense of direction. You’ve got to have heart, which is what we’ve talked about, this emotional intelligence or this ability to connect with people and read them and relate to them and empathize. Then you have to have the guts to take the tough calls, to act with integrity, unyielding integrity sometimes. That takes guts. You have to have all three. If you think John, about the leaders you know, usually you can say they’re one of those three. They lead primarily with one of those three. Good leadership is having all three.
The guts to say no to bad clients, even though you might need the money. That’s the a tough decision in addition to letting go of somebody who’s not working out.
Yeah, or the guts to let somebody go who’s really performing but doesn’t live the values that you’re trying to create in your business.
Right, because then that sends a message to everybody else which is you can be a jerk if you bring in the numbers and that totally changes the culture.
Or the guts to not take business that doesn’t fit your strategy.
There you go. We don’t that, that’s not our specialty. You’ll just be miserable if you take the wrong client even if the money is good.
We need the revenue, let’s do it, but it’s not going to take us where we want to go as a company.
The long term vision, I love it. David, this has been great. How can people follow you? What is your Twitter handle and all that good stuff?
It’s just @daviddotlich. I’m on Twitter.
That’s easy. Obviously you have a great LinkedIn profile and they can find you that way. It’s been a pleasure having you on the show. I love your insights about what makes a good leader, emotional intelligence, and most of all, what you look for when you listen to a pitch is how much does a person focus on talent instead of the product. Thanks again.
Thank you John. It’s been fun. Take care.
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