Leading Through Rough Times: An Interview with Novell's Eric Schmidt

     I would like to share my thoughts and personal reflections based on the interview with Eric Schmidt that has been presented in “Leading through rough times: An interview with Novell’s Eric Schmidt.” Although the interviewer posed only 8 questions, there were a number of pertinent ideas and perspectives projected in the responses. The most important perspective into leadership is that the way a leader responds and reacts in rough times often provides the truest test of his/her leadership. This is clearly proven when Eric Schmidt, the highly respected CTO at Sun Microsystems, who surprised the business world by accepting an offer to become the beleaguered company's third CEO as well as its chairman. Here’s what he learned about facing adversity, and taught us when you enter a downturn, as he said, we have to fight the instinct to be overly cautious.

     Schmidt shared his experience in facing the challenges involved in Novell that was struggling with a slowdown in demand, in bringing a once proud company back to life and then leading it through yet another tough stretch. Schmidt taught us on how to lead through rough times by doing a turnaround in a company’s management. There were times when he had to do a big layoff, get rid of 80% of the executives, and be honest by announcing the shortfall. In order to bring Novell back to life requires the kind of tough and fast action, like stopping the bleeding and stabilizing the patient. He had to cut cost drastically, laid-off more than 1,000 employees, replaced most of the executive management team, and reduced seven layers of management to four. He had to take those painful steps, but they were necessary to save the company. Then the company launched an aggressive PR campaign, announced new products or product upgrades every month. Besides those tactical moves, he also repositioned the company strategically and refocused on the core networking strengths. The biggest challenge for him was to retain the company’s key talent – the ones he called as “smart people” – and kept them motivated.

     Schmidt identified the engineers as the most creative and the smart people, the ones who control the company’s future. He met and talked with each of them, understood their intellectual and technological needs and what their concerns were. Then they told him about their experiences and their frustrations, they were demoralized; no one had listened to them for a long time, and they basically decided to lie low and keep their mouths shut. As a result, lots of great ideas were being lost. Schmidt found that Novell had a “dysfunctional culture”; a sick culture in which he called is as the “culture of fear”. It is a common condition in companies going through rough times, people are always worried about getting laid off, and so they suppress their feelings. Instead of complaining to their bosses, whom they fear might fire them, they complain vociferously to their peers. This situation created a kind of pervasive bellyaching, a corporate cynicism. People would sit in a room, listening to someone talk and nodding in agreement, but then as they left the room, the actually disagree with what they heard.

     Schmidt also taught us on how to overcome a culture of fear by encouraging people to say what was really on their minds. As a leader, we should try to get people to open up and to give voice to the ideas they’d buried inside themselves. We have to give people freedom to pursue their passions, keep them focused and inspired. We must show them that we understand what the cultural problems are and that we are committed to fixing them. For him, most of them will be honest if we give them the opportunity to discuss their concerns. We should offer opportunities not only to motivate people and get them excited about new products or directions but also to address cultural issues on a broad scale. Schmidt reminded us that the cultural issues have been extremely difficult to eradicate because the cultural problems are like cancer, and they keep coming back.

     Schmidt kept the smart people from leaving through his management styles by repeating the same message 20 times, training the trainers, getting in front of people, cheering them on, and also sometimes includes counteroffers. According to Schmidt, the best way to manage smart people is to let them self-organize so they can operate both inside and outside the management hierarchy. Keeping people motivated can be done through recognition, at which we recognize individual accomplishment. We have to change our reward systems to make sure people stayed focused on our key objectives. Make sure they knew that the objectives had to be clearly communicated down the line. We also need to make them feel that they are part of the solution. Most of the companies make the mistake of putting their most creative people in places where their contributions are limited or where they’re resented by others. If the people get frustrated and need to blow off steam, we should invite them to talk to us directly – no go-betweens. To win the heart and minds of our key employees, we have to communicate directly and physically with them. As mentioned by Fryer (2001, p. 189), “eighty percent of winning is just showing up.” In order to keep the organization buoyant through the ups and downs, we must take our cash position very, very seriously – as if the cash were our personal money.

     As mentioned by Schmidt, it’s easy to sit on the outside and criticize the one who’s making the decisions. Taking harsh criticism is part of any top executive’s job. No wonder the allowances increased when we’re at the higher position! For Schmidt, real leadership involves taking the heat and staying focused on the way to achieve the desired outcome. People trust leaders who have toughed it out through crises more than those who’ve had easy sailing. Gone through crises will make us a more credible leaders and still fighting for the organization. What we need to do is to keep things in perspective – flying and doing a difficult maneuver called “circle to land”. According to Schmidt, as long as we pay attention to the important things, we’ll survive. Hopefully…..

Reference

Fryer, B. (2001). Leading through rough times: An interview with Novell’s Eric Schmidt. Harvard Business Review on What Makes a Leader. Boston, MA: Harvard Business School Publishing.