Key characteristics of successful founders with Rich Hagberg

We're looking at the characteristics of founders, both successful and unsuccessful. We see ourselves in a new way. So I think the research has informed my insights into the experiences that I've had. You got to let the facts win. And if the facts are telling you something that was different than what your original assumption was, it's probably because your assumption was wrong.

I'm Matt Tate, founder of Decimal and fellow entrepreneur. Yes, I'm one of the crazy ones. I've chosen time and time again to hustle my way through that first million. Now I'm scaling to the next 50, so I know firsthand what the messy middle is really like. And I know that entrepreneurs and leaders like us need a destination for empowerment, community, and encouragement. This is our place. This is after the first Million. All right. Welcome to after the First Million. I am, I would say, uniquely excited today for our conversation with Rich Hagberg, which I have to disclaim up front. Rich is my CEO coach. But for those of us listening and for the people who want to hear his story, it's an amazing story of someone who founded a business, grew it extremely successfully, sold the business to Accenture, and has also been what I think is particularly pertinent, has coached hundreds and hundreds of business leaders and CEOs from 1980 through today. So during that time, he's developed not only a lot of knowledge, but also learned a lot about what makes founders successful, what makes them maybe not successful. And this all is going to culminate in a book that will come out later this year, early next year. I'm excited, Rich, to have you on the show. Thank you for coming.

Thank you for having me.

So I like to start with a question. There's an old saying that kind of goes out in order to run a company. And to think that you should start a company, you've got to be just a little bit crazy. When did you know that you were one of the crazy ones?

It was so much part of my DNA. It just sort of happened without my ever having an aha moment. But I can tell you what the seminal event was that sort of set me on this path. I'm a psychologist by training and an entrepreneur by experience. My first job was with a consulting firm that got me out of academia and brought me to the San Francisco Bay Area. It was a very old fashioned company, and this was in 1979. And their job was pretty much focused on assessing executives for senior jobs. And they did that with an interview and an IQ test. But I realized that the reports we were Writing were really based upon the interview and our best guess at how this person could lead. And we were writing these boilerplate reports. I really questioned the validity of them. So I went to my boss and I said, you know, I have an idea for how we can use computer technology to assess these candidates and generate these reports. And he told me, direct quote, young man, not the properly deferential apprentice, so go back to your office and do what I tell you to do. I was gone within two months. You know, I made one more stop before I became a co founder of a company. And that was really because I fit the prototype of founders. I'm extremely independent. I'm a bit of a non conformist. I challenge the status quo. I have a lot of ideas. I have more ideas than I can really deal with. I didn't want to work for somebody who was going to tell me what to do and how to do it. And so, you know, I had this idea and ultimately that idea I used when I founded the company Hagber Consulting Group, that became a product company later in 1984. And it was using computer technology to assess people and to generate reports to help them grow and develop. My father wrote the first programs we used in Basic.

Your first job, it was a lot of IQ tests.

It was evaluating candidates for hiring.

So as you started your consulting firm, which became a product company, what was kind of the evolution of going from evaluating to coaching, which also does involve some evaluating?

I mean, I was a licensed clinical psychologist for 30 years. Now I haven't seen a therapy patient since I left academia. But I used those skills. I saw that people could get insights from the tools that I was developing in the computer technology that really helped them grow. 1986, I had enough 360 data and personality data that I started doing research on best leaders. What were the most effective leaders? How are they different? And the thing we found was that there are essentially three styles of leadership. The visionary evangelists like Jobs and Musk, the relationship builder like John Chambers and Howard Schultz of Starbucks and Jamie Dimon and the manager of execution, you know, like Jack Welch. Organized, orderly, structured. And when we could assess that and other things, it was really helpful to people to know what their style was. A typical founder is high on visionary evangelist, medium on relationship and low on execution. And that's their Achilles heel. But having those kinds of insights gave my clients an idea of what they had to work on, but the limits of what they could do themselves and what they needed to hire and people who complemented them, you know, Using the insights from the assessments to help somebody develop a plan for how to grow as a leader and how to leverage what you're good at and work around what you're not so good at. Now, obviously there's some differences depending upon the industry you come from.

I want to take two steps back, but first I want to define some terms you and I have talked a lot about. A lot of these terms define what a manager of execution is for people that might be uncertain.

A manager of execution is a person who brings system, organization, process to a company. And when a company is scaling, those are the people who help you become more efficient and effective. Founders tend to think of that as bureaucracy, but it's about focus, priorities, goals, project management, et cetera. So think a coo, right?

You take a business or a company or an idea and you grow it to that like $1 million phase. That's when a lot of founders, we have this oh shit moment now I have to build a real company. And that's very different from that phase where you just ex. And a lot of that becomes the manager of execution phase. The other terms that you've thrown out are visionary evangelist.

A visionary evangelist is somebody who is creative by nature, generally, and they have insights because they're externally focused. Also they have insights into the market or into technology and that insight allows them to create a product idea. And they're usually pretty persuasive. Think of Steve Jobs. They're really good at getting people motivated and excited, whether those are investors or early employees, because they're persuasive and charismatic, are usually a little self centered and often not very grounded in terms of what the realities are. And that's where they need the manager of execution. The relationship builder is somebody who really knows how to build a team and connect with people and use their social skills and their emotional intelligence to, you know, know how to essentially work through others effectively and gel a team. They're good because they show they care about people. They're not so good because they don't like conflict and they don't want to be disliked. They typically want to be popular. That gets them in trouble. They don't hold people accountable very well. They don't deal with conflict very effectively.

Well, wouldn't you say that overweighting in any of those three categories is an Achilles heel for whoever is overweighted?

I think the key is that if you recognize that you are a pure visionary evangelist, you need to build at least threshold level skills in at least one of the other things. So if You're a visionary evangelist. Steve Jobs wasn't exactly very good with people. He was good at motivating them, but he also screamed at them and told them they were idiots a lot. He was less like that as he got older, but he also had Tim Cook to help. But in his early days, he was like a pure visionary evangelist and he was a stickler for execution, but he wasn't the person who did it himself. He just had very high standards. So you have to recognize what your strength is and pick one of the other two to work on and get up to at least the threshold level. I'm not a natural manager of execution, but I've worked on those skills for a long time. And you know, I may be barely on the at the mean right now, but it isn't as disastrous as it might have been in 1985.

The subtext of what you're saying is some of us, we come to some of those skills very naturally. But you can also work on building up some of the other skills surrounding the other areas.

That's right. Do people really change? Because I think they're skeptical. My response is generally your basic personality doesn't change much, but you can change your behavior. You can learn to be more focused and disciplined when you have to. We're doing research for our book called Founders Keepers on successful founders versus unsuccessful founders. And we define success as essentially multiple of invested capital. So I worked with a venture capital firm and we identified success was 10x what the investors put in. And what we found was that the successful founders looked like typical founders in many ways, but they'd recognized what they were not good at and they recognized the situations that brought out the worst in them. And they knew what their weaknesses were. They were not in denial about that. And so they made adjustments in their style. I've worked with a number of founders who had previous experiences as founders, and their natural tendencies got them in trouble. And they learned from that. And so we use a personality test, can actually predict the 360. It measures almost 50 elements of personality. And we use machine learning to predict the 360. And when you look at the personality of some of these people, it looks like they would be a disaster in certain areas that are typical of a founder. But when you look at the 360 that they get from their current employees, it's dramatically better. I just started working with somebody right now, and he's a little older than a typical founder, but he learned from his first experience, which was a flame out.

Well, and you and I have talked about it quite heavily where for me one of the things that is helping me today was the fact that I told totally failed in the last company. Running a business, you fail a lot, but those are minor failures. Having a big more epic, life changing failure can provide a good learning experience for those of us that stand up afterwards. And that actually, that actually brings me to the other way. I want to step back because I think one of the things that's really unique about you is I've talked to a lot of coaches, interviewed tons before I ended up meeting you. One of the big differentiating points with you though is you have built, run and sold a company successfully. How do you feel like that experience impacted your coaching and your frameworks for how you think about improvement?

Well, between 1981, in 1991, I was a founder or a co founder, five different companies. The one I ran from 1984 until I sold it in 2006 and one I sold for a small amount of money. The others were flame outs. And I now understand in each case the reason this the strategic error that we made or the error that I made in managing those companies. And so I learned a hell of a lot by looking back on those things. So I mean I look back on all the things that I did wrong and I've learned lessons. I mean I, I think I told you that in 1991 I got my first 360 and I was accused by my subordinates of drive by delegation, which meant that, you know, I just yelled out the window as I drove by general directions of what I wanted and they were forced to read my mind and try to figure out what it is I wanted. And I got frustrated when they didn't deliver what it was I didn't describe very well. Right. And so I learned something about how do you delegate and how do you hold people accountable and how do you need to be super clear about what your expectations are and what success looks like? And I've got lots of, lots of things like that. I mean I can remember a meeting where I shut down with a single comment. I shut down an idea only to be confronted by one of my people. And it was one of those whacks on the side of the head where it was like, oh, I guess because I'm the boss, if I express an opinion in too strong a way, I'm shutting down the chance for us to really dig into that and dialogue about that because I just intimidated everybody. I got probably hundreds of experiences like that where I learned a lesson from what I did wrong. And then I saw in the research, well, what is it that best leaders did and what is it now that successful founders do? And my co author, Teen Zuo company Zuora Z U O R A I've coached him for almost 15 years. And in the book, as we're going through the book and we're looking at the characteristics of founders, both successful and unsuccessful, we see ourselves in a new way or it brings clarity or understanding to why something didn't work very well. So I think the research has informed my insights into the experiences that I've had. You got to let the facts win. And if the facts are telling you something that was different than what your original assumption was, it's probably because your assumption was wrong.

So you mentioned how the facts and the research have informed you on the decisions that you've made in the past. And I assume too that some of the decisions that you've made in the past have impacted the application of those facts and that research to your coaching too. I mean, as you and I know, a lot of your stories, a lot of your anecdotes that you use to coach people come from your own background. You can pull it from other people's background, but you also pull it from your own. And I assume that that's been a helpful way for you to continue to evolve your coaching over what has been 40 plus years of coaching people.

Yeah, I feel like I have experiences all the time where I think about, God, if I'd have known this 25 years ago or if I had only understood this, if I could whisper in my ear some of the things that now have become apparent to me and clear. I think what happens when you have a lot of experience, especially if you keep learning and doing research helps me keep learning, but also I keep learning because my clients I, you know, I've had for the last 15 years probably an average of 40 clients at a time. And they're all over the world and they're in a lot of different industries. And I feel like I'm getting a never ending NBA. But I see how the same skills and different business models and different skill sets impact the success of businesses all over the place. And so what I have now is a level of pattern recognition that I never had before. It's like the dots are all connecting and that's useful. And I think when people get older, they often become rigid, is that the models that they developed early on didn't ever change. One of the meta themes of the book that we're writing is what got you here won't get you there. And the thing that maybe made the company successful when it was small is not what it's going to take when the company hits traction stage or fast growth stage. And all of a sudden the plumbing is breaking and the wiring is exploding and the house is growing faster than your ability to function effectively. So you have to scale your leadership and you have to scale the company. And that requires adaptability. Which brings me to, I think, the most important conclusion of the book. So we used a thing called discriminate analysis to compare the successful founders with the unsuccessful founders. And there are a number of factors, depending on how you split it, five or six factors. But the biggest single factor is adaptability. That's the ability to iterate and learn and change your original idea based on feedback and learn from your mistakes and do post mortems and then pre mortems and challenge the assumption that you had and learn and grow. The founders who are stubborn and who don't listen to input and who don't handle resistance effectively, which is to listen to it because it may be valid and don't have the social skills to get buy in, they fail. What's really interesting is research I did this last week. Both successful founders and unsuccessful are both highly creative. The successful ones are better and better at adapting to feedback and getting buy in and iterating. They both had creative ideas. But when you hit the market and your customers start giving you feedback, you ought to listen. Right?

If you want to keep selling.

Yeah.

So you've coached hundreds and thousands of people, and as you mentioned, you've coached some of the most recognized and biggest names in Silicon Valley. You've coached international companies all over the world, and you've created a data set that probably rivals any other data set when it comes to successful and unsuccessful founders. And it sounds to me like, and this is way oversimplifying it, but if there's one characteristic that defines a successful founder, it's adaptability.

It's adaptability, but there's some close seconds and thirds. The second one is working through others. And that shows up first in the ability to delegate. And so many founders are control freaks, they're micromanagers and they don't let go. It also comes in building teams because you really, what happens is you got to learn to leverage other people and leverage your team. And so you need to be adaptable, you need to delegate, but you need to start working through others and create a cohesive team that's cooperative and supports each other. If you've been on a sports team, you know that when your sports team is winning or your sports team is losing, it's time in the foxhole together and you learn things and you create a connection that really helps you through the tough times. The successful ones do that more effectively than the unsuccessful ones. The other part of working through others is building a connection with your people. If you see them as a means to an end or only as resources. And you treat relationships transactionally rather than really building a connection that ultimately breaks down and it gets in the way. The third thing you got to focus on is scaling systems and processes, because what got you here ain't going to get you there. And particularly when you start to get traction and start really growing, and then particularly in fast growth, it's all about systems and processes, whether they're recruiting processes or whether they're manufacturing processes or whatever it is. And it's all about focus. If you boil it all down, the research on results tells us that prioritization and focus are at the basis of getting results. In the scaling phase, you've really got to bring structure and focus to the organization. And your priorities are going to be different if you're in the seed stage, if you're in the traction stage, if you're in the fast growth stage, or in the continuous growth. And everybody needs to know about those priorities and you need to keep going back to them. The next one is really interesting. It's personal grounding. And that really has a couple of components. Your ability to handle stress and maintain your composure, and your ability to be responsible and considerate and have integrity. I'd say about half of the unsuccessful founders lack the integrity. And that's why we read about, and we start the book Talking about the 30 under 30 who have ended up in jail. We hear about more of them all the time who didn't have a moral compass and they went off the rails. You get tempted all the time to inflate your numbers or exaggerate something, and it's easy to do that. You don't have to be a sociopath to do some of that. There are a lot of times when a leader has to make those choices. So integrity is a big piece of the other one I said is essentially your ability to handle stress and keep your composure. Because only 1 in 10,000 startups ever becomes a unicorn. And the number of failures is far higher than the number of successes. The way we would describe it is a startup is like a killing field. If you're not resilient and you don't have healthy ways of managing stress. And you don't maintain your cool either under pressure or it's when you get frustrated with things going too slowly or people not doing things in what you think is the correct way, it's easy to lose your cool. But. But the big factor that comes in with that, that is influenced by that is judgment. So when we look at people who don't handle stress very well and people who lose emotional control, one of the things that impacts the most is their judgment. You know, never hit the send key when you're angry.

I was going to say, my chief of staff laughs that my first response to a stressful situation is terrible, but my second response is amazing. And so we've learned that I will quietly respond firstly, just in a quiet room with myself, take 15 minutes, and then my second response is great. But if you ask me off the cuff, it has a tendency to be a really bad response.

Yep, me too. Me too. And what's interesting is we can actually predict certain adjectives that would describe both successful and unsuccessful. One of the adjectives that describes a successful founder is reflective. And also that they recognize the situations. This is an item on the personality test. They recognize the situations that bring out the worst in them. And on the 360, they have much higher self awareness. They rate themselves more accurately. So they know what they're good at and they know what they're not good at. And they reflect before responding. That's why, quote, trusting your gut is so dangerous, because frequently your gut instinct is a reactive one. The unsuccessful founders are reactive. They're reactive as hell. They're impulsive and reactive. All founders have a sense of urgency and they're impatient. Almost all we looked at 122 founders from all over the world, they're all impatient. They're all time urgent, they're all feeling the pressure of the fact the money's running out or whatever. But the successful ones are not impulsive.

That sounds like a contradiction and I'd like to unpack that a little bit. How do you balance, Because I'm the definition of impatient. How do you balance being impatient with not being impulsive?

Yeah, impulsive is just reacting to the emotion in the moment. Impatient is recognizing that the fuse is burning or the problem is festering or the opportunity is going to go away. And in a startup you got to move fast. But if you create an environment where everybody is cutting corners and shipping something before it's ready and creating a sense of urgency that creates so much stress that people don't take the time to think things through, then you're creating a problem. So you have to have a sense of urgency. You have to be action oriented for sure, but that action can't be reactive. Founders in general are visionary creatives and they're very, very bad at short term planning, prioritizing. So you have to be able to translate your vision into a set of priorities. What's interesting is they're really high on vision, they're only on the mean, on strategy. And when it comes to short term planning, they're very low. The effective founders, the successful founders, are more strategic. If there's a need to do something quickly, it's always good to go back to what your key strategic priorities are and check in with that. Also check in with your value system because maybe cutting the corner is, isn't the right thing. Yeah. Or distorting or exaggerating seems like a good, good idea in the moment, but not over the long haul.

So you've talked a lot about in your studies and in your coaching, what makes successful. And flip to the other side of that. What makes unsuccessful founders in, in all your coaching and all your studies and research, what were some of the biggest surprises that you've run into?

That's interesting. The first one was how important emotional intelligence is in many, many of the skills that differentiate most effective leaders and how abysmally bad most founders are when it comes to emotional intelligence. We initially thought that the successful founders were better in terms of their social skills than they really were. They're average at best. And yet when we compare them to best leaders, and that's a whole other kind of study that contains people from bigger companies, and it's a more global sample, those people have way better skills in working through others because they have to gain leverage in a bigger company. They have to learn how to manage the relationships in a very complex, increasingly more complex organization. As the company grows, you almost have to become a facilitator of doing. You have to stop being the doer and be a facilitator of doing. And that requires a level of social astuteness, the ability to read people and read the room and understand social dynamics. It really gets spelled out in mergers and acquisitions. One of the products we built at Hagber Consulting Group Inc. Was a culture assessment. And that was why Accenture bought us more than anything, they wanted our culture assessment. It was being used in mergers. What we found was after a merger, it may be logical that employees would support the merger because it was in Their to their benefit to do it. But their fear in their emotional attachment to the old company often trumped their logic. And senior management often just assumed that they were looking at it just the way they were looking at it, which is, well, don't they understand this is to their financial benefit to make this successful? And their lack of emotional intelligence got in the way of their ability to read the resistance and understand what needed to happen in order to integrate the two companies. And I saw it over and over and over again.

Well, I think that's really interesting. And with the remaining time that we have, you've talked a lot about your learnings, and what I find is fascinating is that you're coming out with a book later this year that's going to synthesize a lot of this learning, a lot of the knowledge, a lot of the research that you've been doing for decades. Tell us about the book and tell us why it's going to be impactful.

Well, I've talked about some of it, but first of all, we profile the 10 greatest strengths of founders, the 122 founders, and the 10 greatest weaknesses. I went over that with a founder the other day. This is my first conversation with him, and he said, you know, this is really a relief to me. He says, I've been beating myself up because of what I did and didn't do in my previous company, and now I see that these things that I was beating myself up for are really the natural tendencies of founders, and I'm not going to be good at some of those. I need to be more systematic in hiring people to cover me on those things, and I need to leverage the hell out of the things that I'm naturally good at. I was surprised by that because he saw just the list of the strengths and weaknesses as affirming. He said, oh, yeah, I knew I wasn't uniquely flawed. So that was the first piece. I think the second piece that we talk about is the differentiators and what that says about where things can go wrong. Being stubbornly resistant to people challenging you, being intimidating, being a micromanager, not leading a decision process that let the facts win. You were trying to win the argument. But as a result of trying to win the argument, you didn't surface something that ultimately caused whatever the initiative was to fail. That's where the adaptability comes in. The next thing is how many founders are control freaks and how they disempower their people, but also fail to benefit from the insights, particularly when they start hiring domain experts who know about Things that they don't know about. I mean, you can't wear all the hats all the time. You have to start bringing in people who can help you. How important integrity is. Here's a big aha. I think most leaders have an element of self centeredness or even narcissism in them, but it's, it's sort of normally distributed. I was really surprised by the number of the unsuccessful founders who were self centered and narcissistic. That one just blew us away. So we ended up writing a whole chapter on narcissism. The other thing is how founders hold onto what worked initially and they don't challenge the assumptions about, like, what is a good team in the beginning. Teams are pretty informal and they're kind of like a family. You have to sort of redefine teams and connection and you have to make things a little more structured to just be efficient. And efficiency is not bureaucracy. Founders are rebellious when it comes to boundaries. They don't like boundaries imposed upon them. And so they treat any system and process that they had, they have to follow as a restriction on their creativity and their freedom. I was the last person to adopt time tracking when we were purely a consulting firm because I hated it. I didn't want to feel like I had to do that, but that I, my, my number two person said, rich, if you don't do it, nobody else is going to take it seriously. And that was right.

I tell my kids all the time, do what I say, not what I do. And my team always tells me that doesn't work in a corporate setting. You can have one thing that you can do that with, but everything else, you have to lead by example.

There was a wonderful consultant who once said to me, he said, rich, when you're in a leadership position, everything you do makes a speech. There are no trivial acts and everybody is watching you all the time. Whether you like it or not, you're a role model.

It'd be a lot easier if it wasn't that way all the time. But I agree with you, it totally is. So, Rich, as we wrap up our conversation and you've answered this a million different ways, but I'm interested in as you think of a succinct way to sum everything up. As you've coached, as you've studied people going through the messy middle of building an idea into a real company, what do you think is the most important lesson that you could convey?

That you need to understand your leadership style and your tendencies, and that needs to evolve where it can. But you need to hire people who complement you. And if you're a visionary evangelist, you need to find some relationship builders. But you really need to find a manager of execution. When I sold the company, I'd had a woman work for me who I hired when she was 18 years old, just turned 18. We hired her as a receptionist when we sold the company. She was the CEO, I was the chairman. She is a manager of execution with good relationship skills, but she gets stuff done effectively and so you got to figure out how to balance your weaknesses and you have to keep learning.

I like the keep learning. It's self reflective and keep learning. I really like that. Well Rich, I very much appreciate you taking the time to talk. And for everybody listening, when it comes out, Founders Keepers, why Founders are Built to Fail and what It Takes to Succeed is going to be, by my totally biased opinion, an awesome read. So pick up the book. And Rich, thanks again for taking the time to chat today.

Thank you.

Thanks so much for listening. After the first million is presented by Decimal, to listen to more episodes and find tips to help make running a business easier, visit decimal.com afm Want to join the conversation? Reach out to me on LinkedIn and let's explore the messy middle.