Executive leverage

A common piece of career advice is that as you get more senior, you need to be less in the details. This is because you your breadth is increasing, so your depth needs to decrease to approximately maintain the surface area you cover. I think there are sufficient counter-examples to suggest this may not be great advice, and good reasons to believe those counter-examples are on to something.

The standard advice

The ‘standard model’ of management advice includes things like ‘delegate more’ and ‘don’t get stuck in the details, you need to see the whole picture’. It’s also a fairly common failure mode for rising executives to be ineffective at broadening their scope in a new role. When I worked in consulting, over just a few years and a handful of projects with large listed companies, I saw multiple examples of a new or rising executive wanting to be very involved in the details. In every case our partners were quick to have a private conversation with them about how this would be detrimental to their ability to operate effectively as a senior executive.

The counterexamples

• Steve Jobs (Apple) – famously in the details about product design, management, and day to day company operations

• Bill Gates (Microsoft) – the famous BillG Review demonstrates how in the details Bill Gates was despite the breadth he had to cover

• Jeff Bezos (Amazon) – one of Amazon’s Leadership Principles is Dive Deep and goes on to say “Leaders operate at all levels, stay connected to the details”. The Everything Store has many more examples

• Mark Zuckerberg (META) – the founder and CEO has said that CEOs and management teams should be involved in as many decisions as they are able to be

• Jensen Huang (NVIDIA) – has 80 direct reports, focuses on aggressively minimizing the number of layers in the company and is heavily involved across the board

• Elon Musk (Tesla) – there are many examples for his companies. One notable example: he is reported to have personally met/interviewed the first 3000 SpaceX employees

What drives this?

From a first order perspective, many of the examples above seem wasteful. CEOs are, above all, time constrained. Anyone who has spent time in a large company knows that time and focus are stronger constraints than capital. The degree to which time is a constraint rises as you move up the org chart. So how is it that our most capable leaders, acutely aware of this fact, choose to spend their time critiquing office expenditures, or reading and responding to a public inbox, or interviewing the 2900th employee who happens to be joining your people operations team? I see one major reason: leveraging your time through signalling.

Assume your most constrained resource is time. What should you do to maximize it. The obvious answer is to use it efficiently. We should assume that anyone that has risen to the heights of an executive role at a major company is already doing this well. The less-obvious-but-highly-effective answer is to gain leverage on your time. How can you spend an hour of your time on something and gain many more company hours of focus on that thing? One way is standard setting. By visibly spending your time on something small, you send a strong signal to the organization that you care about it. Does Elon believe that interviewing the 2900th employee is individually rationale / value maximizing? I don’t think so. But does Elon believe that by interviewing the 2900th employee he is improving the hiring practices of the whole firm, in a semi-permanent way, by signalling that this is something important enough for him to spend time on? I think the answer is yes. Similarly, there is an old story about Jeff Bezos visiting an Amazon office, seeing that the staff had installed wall-mounted TVs to view company metrics. He proceeds to rip the TV off the wall and yell about frugality. Again, in isolation that story seems ridiculous, especially given the money was already spent. But as a signal, it was strong enough that 10-20 years later, I am thinking about it. Imagine the impact it had internally.

Conclusion

Once you think of executive focus on these terms, many more anecdotes make sense. Sam Walton personally visited stores all the time to check in on inventory management and experience customer service firsthand. Jack Ma stayed up late in the early days of Alibaba to respond to customer service emails. Howard Schultz personally tasted coffee in many stores. Tadashi Yanai, the CEO of Uniqlo, visits stores and comments on layouts, positioning, and even the placement of mannequins. Individually, none of these actions make sense under the standard advice. Each company employees hundreds of employees who could do each of these things. Often thousands. The CEO could simply receive a detailed daily report on all of them. But by spending their time on these things, often very visibly, they send a signal that leverages the time they’ve spent in a way that would not be true if someone three layers down the org chart were to do the same thing. Through this lens, something irrational over the short term (i.e., this week) becomes obviously rational and hugely positive sum over the medium-to-long term (i.e., years).