How I Pick Leaders to Invest In

Manage your mind so you can climb into theirs

Welcome back to The Workaround. I’m Bob 👋

You’re in good company with over 11,000 fellow entrepreneurs and innovators who follow my stories from a career in tech startups and corporate innovation.

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My friend James (right) and I proved there’s no better way to get to know someone than through sharing a rigorous hike!

I’m not sure if there’s a tougher job than investing other people’s money into public stocks.

The expectation is that you’ll beat the market—you know, the place where millions of brilliant, similarly-motivated people and their finely trained algorithms all compete to do the same thing. The job is to do this every year, and do it without cheating. The best search for nuggets of uncommon understanding of how the world works.

I’ve come to get to know a small community of such investors who play this game. It’s called Coburn Ventures, and the members of this group gather periodically to trade tips. Their biggest secret is hiding in plain sight: They are really good at assessing the CEOs who run these companies.

One way they improve this skill is by speaking with non-investor types who also rely on assessing leaders for a living. People like executive recruiters, pro sports psychologists, and startup founders—like me!

Recently, I sat down to speak with two ringleaders of the group, Pip Coburn and Brynne Thompson. I shared some of the things I’ve learned about picking leaders for my companies. Feel free to check out our conversation here, then return to read on below for a more thorough how-to.

Whether you're trying to beat the market, picking a new head of sales, or deciding to work for a new manager, these are some proven ways to better assess the potential of people to lead us through the storms ahead.

Leadership is Change Management is Self-Management

To start, I try to quickly assess a leader’s Character and Capabilities.

Capabilities represent whether or not they can actually do the job. Assuming you’re looking at a seasoned leader, this is something you can find in their education, resume, and in pretty basic questions about the roles and situations they have found themselves in. Have they done the job you need them to do before? Are you sure they weren’t previously promoted to the highest level of incompetence? Confirm this first and move forward.

Character is the “quality” of a person. Do you like them and their values? Do they pass the No Asshole test? This can be easily gauged through a combination of face-to-face conversations and very probing backchannel reference checks.

If your prospective leader passes these tests, the real work begins. And it’s all about assessing whether or not they can lead a team through change.

Many people can manage processes and people, and these are critical jobs to be done. But leaders exist to captain a ship in stormy waters. And in case you haven’t noticed, business today is something like hang ten surfing in a tsunami…

We need leaders who can see around corners and play 4-D chess. They must not only see the future, they must create it. And they’ve got to make sure a big team of worried employees isn’t running around with their hair on fire.

Just Don’t Do This

This leader we need—a true leader, not just a person with a title—is open to anything, lacks fear, and is comfortable enough in their own skin to admit they have no clue about how he world works.

In other words, they’ve got their ego in check.

Forming an ego—an independent sense of self—is a key to growing up past puberty and into our first jobs. The ambition that often accompanies a strong ego frequently drives people to strive for leadership opportunities in the first place. However, a healthy, mature leader eventually realizes that the ego that got them there can tip them from confidence into cockiness.

Usually, it takes getting our asses kicked, starting in our mid-30s, for this lesson to hit home. We all run into walls eventually. What happens next is where the strong and weak start to split…

Lesser leaders don’t accept the lessons offered in failure, nor do they seek new information in making decisions. Both would threaten their precious sense of self.

A vivid public market example is the recent fall of Nike’s CEO, John Donahoe. He was hired after a career in management consulting and stints at eBay and ServiceNow, a software company.

He managed to avoid any experience in traditional consumer product brands, yet came into the Nike role swinging. He over-relied on his well-worn tool of cost-cutting to the detriment of innovation, and he destroyed relationships with wholesalers that were critical to the business. He attempted to blame the work-from-home policy for losses.

And he lacked experience communicating with his organization around tough topics. A friend of mine at Nike told me how Donahoe spent 50 minutes of an hourlong all-hands call saying how great everything was going, then finally dropping the news of a second round of layoffs. With his mic still hot, he added, “Funny, I’ve only had to do layoffs three times in my career.” Two of those happened in his first few years at Nike.

Meanwhile, Donahoe continued to add zeros to his personal bank account. According to Wikipedia, when making these layoffs, he enjoyed a salary and bonuses in the top 0.1% of the top 1% of all CEOs in the United States.

With record losses and the stock price falling to new lows, the Board finally just did it: Donahoe was fired—for the first time in his career—and a 20-year company veteran was picked to replace him.

Internal Over External

Donahoe vividly shows us the kind of leader we want to avoid. They don’t listen, flex their power, blame others, and seek extrinsic goals such as pay and status. The commonality here is an Externally-focused view. Again, this is typical of someone who fails to look inside themselves because their ego is weak and their skin is thin.

The leaders we need don’t rush into broad changes in areas they know little about. They spend time understanding the business and its people. They build a leadership team and trust them to own their piece of the business. They are mainly motivated by intrinsic goals such as learning, challenges, and team accomplishments. And they accept responsibility for everything that goes wrong, including acts of nature. When layoffs are required, they communicate with care and share the pain.

This type of leader is Internally-focused. They know how to manage themselves before leading others.

Unfortunately, depending on the personality test or ego development model used, only around 15% of human beings ever reach this plane of Internal focus. So you’ve got work to do to find them. Keep reading…

Start with Mindset and Setting

The first step is to pick the setting. It should go without saying that you must be physically present together for such an important task. But get out of the office, too. Go spend a few hours together. Get meals and take long walks together. Escape the distractions and inhumanity of a typical office building to loosen up and get real.

Next, ensure you’re prepared with the right mindset going in. To begin, you want a completely positive regard for the other person. Let go of your own nerves, pre-existing biases, and self-consciousness. No matter what, you’re going to have a wonderful conversation, and the right decision will happen without a list of boxes to check and worries to work through. Your open, positive thinking about the other person will bring out their true self in return. By letting your guard down, they will do the same.

At the same time, you must go into the meeting with a “Default No” mentality. This is where I’ve made the most mistakes hiring senior leaders in my companies. I loved the character and capabilities of the candidate, and I was desperate to fill this job, so I went in with a Default Yes…and overlooked issues hiding in plain sight. Then I proceeded to hit my head against a wall for a year or more in trying to manage them.

Default No is a wonderful balance with Positive Regard. It’s an acknowledgement that only 15% of candidates pass the Internal Focus test. And it’s another habit of great leaders: Hope for the best but plan for the worst.

Go Deep ASAP

Once you sit down for the meal or turn left on the hiking path, you’ve got to lead with deep questions as soon as is socially comfortable. I like breaking the seal real quick with something like: “What made you who you are?”

That’s not typically included in interview prep guides. Some other zingers I like are:

• What’s a recent leadership decision you made? Why did you have to make that decision?

• What’s the biggest career risk you took? What prompted you to take this risk?

• How do your team’s or company’s values represent your personal values?

• When were these values recently tested in your job? In your personal life?

A funny thing happens when you throw a deep curveball question into a discussion. You’ll see the other person try to maintain their “interview face.” Their minds will race, and their eyes will rapidly move for a few seconds as they attempt to come up with a well-worn, socially acceptable answer. Then, finally, you’ll see their face and shoulders relax. They may even sigh in a form of defeat. They break character, and the next words out of their mouth are complete honesty. Their answers are the best test of whether they are the kind of leader who gets it.

This kind of conversation goes a lot better when you share similar deep answers in return. I often will lead with answering my own question or admitting my own screw ups. Admitting your foibles first opens up the other person. In asking about managing people, for example, a favorite starting point of mine is:

“I’ve learned most about leading teams through my screw ups…what’s something you learned about leading teams through a mistake you made?”

The leaders I’ve selected, as well as my long-time friends (with considerable overlap between these two groups), refer to these as “Bob Questions.” This makes me want to ask such questions even more…

A deep, personal discussion like this not only unearths whether the candidate is one of the few you need—it also signals who you are and the relationship you want with them. You’re the hiring manager or investor, so you can be selfish.

Chances are, your values and personality are already ingrained in the company's DNA. If you like to go deep, you should only hire people willing to go there. If they don’t like it, then they will (or should) opt out of the process. If you don’t like Bob Questions, you won’t like working with me!

But, as you might have guessed, you have to be comfortable being yourself to make it all work…

Seeing Your Self

I honestly feel bad for John Donahue and so many other leaders who very publicly hit the limits of their abilities. We all make mistakes, and many of us learn from them. I was fortunate to make my biggest mistakes earlier in my career, in positions that were far from the limelight. You’ve got to drop to your knees before rising to the higher plane.

Everything I have written above stems from extensive practice with my personal decisions having a significant impact on the success or failure of my projects, teams, and startups. Putting your butt on the line, living with the outcome of your decisions, and learning from mistakes all compounds over time into wisdom.

Wisdom increases the odds of success in a chaotic world.

And the biggest wisdom of all is in seeing through your bullshit. The more honestly you see yourself, the more accurately you’ll see others.

So, in that spirit, this model works for me, for now, and it might work for you. But you’ll have to figure it all out for yourself.

If you like my writing, feel free to click the ❤️ or 🔄 button on this post so more people can discover it on Substack 🙏

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How we might work together…

• A2 Influence is our content development agency, helping some of the biggest brands and retailers create and distribute authentic content at scale.

• Fleet is our holding company for services businesses. We invest in leaders ready to start their own companies (we also do some M&A). If this might be you, hit my Office Hours link.

• Revelin is our consulting practice that helps with revenue alignment, growth management, and other RevOps functions. CEO Jess Shuman is standing by to share a no-cost assessment of your business.

• Feel free to schedule a chat during my Office Hours to discuss questions, feedback, networking, or any other topic. Seriously, any topic! You can also reach me on LinkedIn or by email.

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BONUS: Cool Content of the Week

A little something I found meaningful. You might agree…

Coburn Ventures Podcast

Above, I mentioned my discussion with Pip Coburn and Brynne Thompson for an episode of their Coburn Ventures Podcast. If you build or invest in businesses, you’ll love their discussions.

I’ve had the pleasure of personally knowing almost every guest they’ve hosted, and they are truly fascinating people. You should also get to know them. Here are a few recent episodes to give you a feel for their greatness:

Executive coach and recruiter Lisa Baird shares inside tips on how to assess senior leaders.

Check out the series of “Stock Picking Disasters” in which Pip tells the stories of big mistakes that ended up serving him well in the long run.

Morris Pickens is a sports psychologist who works with some of the top pro golfers on the planet. His tips for the golf game ladder up nicely to whatever mental game you play.

Anything with Rudy or Irwin.

If you enjoy their work, try adding a friendly comment on their Spotify page. And tell ‘em Bob sent you!