Webcast transcript
Willy Walker: Good afternoon to those of you on the East Coast, and to those on the West Coast, good morning. It's a real pleasure for me to have Dr. Frances Frei with me today. Let me do a brief intro on Frances and then we'll dive into our discussion.
Frances Frei is a Professor of Technology and Operations Management at Harvard Business School. Her research investigates how leaders create the conditions for organizations and individuals to thrive by designing for excellence in strategy, operations, and culture. She regularly advises senior executives embarking on large-scale change initiatives and organizational transformation, including embracing diversity and inclusion as a lever for significantly improving performance.
A global thought leader on leadership and strategy, Dr. Frei is widely recognized for her dynamic teaching style and breakthrough courses optimized for rapid, lasting impact. She developed one of the most popular classes at HBS, which explores business models that reliably delight customers.
In 2017, Dr. Frei was tapped to be Uber's first Senior Vice President of Leadership and Strategy with a mandate to help the company navigate its very public crisis in leadership and culture. In her ongoing work with Uber, she has focused on giving thousands of employees the tools to excel in a context of hyper-growth, strategic change, and an evolution in cultural values.
Dr. Frei is the best-selling author of Uncommon Service: How to Win by Putting Customers at the Core of Your Business. She and her co-author Anne Morriss published their second book, Unleashed: The Unapologetic Leader's Guide to Empowering Everyone Around You, in June 2020.
She holds a Ph.D. in Operations and Information Management from the Wharton School at the University of Pennsylvania, where she also graduated undergrad majoring in mathematics.
So, Frances, welcome and really a true pleasure to have you. If we go back up to your childhood, you were the youngest of six and had a very young mother. What characteristics of the Frances Frei that we know today come from growing up as either the youngest of six or having a young mom?
Frances Frei: Well, the youngest of six is I think a superpower. So, I think there's a book to be written out there by someone titled The Youngest of Six, because it's startling how we get overlooked in a way that is not neglectful and we're free to do anything we want. So, I'll give you an example. I'm the youngest of six, my wife Anne is the youngest of four. When it comes time to do the taxes, we both look at each other: Did you do the taxes? Did you do the taxes? Like the youngest of six and youngest of four aren't the ones, somebody else had to have gone through all the other ones to get there. So, we grow up in a sort of a protected bubble, which allows us to explore, I think, more than any of the other ones.
Willy Walker: So, in reading your history, you applied to 17 colleges, which in today's world isn't a huge number because of the Common App. But back when you and I were applying to college, applying to 17 colleges is an incredible number of colleges. First of all, what was it in your personality that made you apply to 17 schools? And then what was it that took you to Brandeis to begin?
Frances Frei: Well, I wasn't sure I was going to get in in any of them, So I didn't have you know, there weren't like college guidance counselors or things like that. I went to a small public school, so I just applied to lots hoping I'd get into one. Brandeis - I didn't even know anything about the school, but they paid for me to go there. And as someone who came from no means from my family, it was like the easiest decision, even though I didn't know. Now, the school I really wanted to go to was the University of Pennsylvania. So, of all of the others, they were like the backup schools. University of Pennsylvania said, no, and a theme of me is I'm undaunted by a no. And so I went to Brandeis, but then applied to transfer to Penn and learned, at least at the time, it's easier to get in as a transfer.
Willy Walker: So, I'm surprised that you say that Penn was where you really wanted to go, because as you have admitted, you applied to Harvard five different times before Harvard actually took you as a professor at the business school. Where's that tenacity of going back and back come from, other than being number six out of six?
Frances Frei: Well, I think a lot of it is number six. But I will say I just don't have the expectation of a yes. It wasn't my experience growing up. People said yes to me on the first time, very rarely. And I really early on realized that I'm not going to let the decision of a mortal influence my life's trajectory. So anytime I got a yes, it was just a surprise. But usually, I got a no and I just learned to think that this is not now and to come back. And so, I just had a boomerang resilience to come back. It's not that I wasn't disappointed when they said no, but it didn't change my ambition in any way. I'm not fragile to a no.
Willy Walker: Your honesty in having applied to Harvard five times before they finally said yes to you does remind me of a quick anecdote that I want to share with you, given that you were at HBS. But I went to St Lawrence University undergrad and was the only St Lawrence grad in my class at HBS. And as you well know, at the beginning of your first year, everyone sits around in the class of 90 in your section, and you do introductions. The first person to my right says, “Hi, I went to Harvard undergrad, and I worked at Goldman Sachs, and I did this, and I was in the U.S. National rowing team” and you know…
Frances Frei: And a concert pianist…
Willy Walker: It’s one after the next. And I'm sitting here in my level of anxiety about saying that I went to St. Lawrence is only getting greater and greater. And on about the third day of introductions, because we do about ten a day at lunchtime. This gentleman stands up and he goes, “My name is Tim Huckaby.” I think he went to Georgia Tech. He said, “I went to Georgia Tech. I applied to Harvard Business School three times before finally getting in on the fourth try. “And all of a sudden everyone in the room understood that there was some actual other human being who actually had flaws, and they tried something in their life that they had failed at and that they came back after it. And what was so interesting about it, Frances, was from that introduction on, instead of reading their resumes, everyone actually said something about themselves. They said, “I like cooking, I have a dog. I'm from a small town in Indiana,” what have you. And it was such a leadership move by Tim Huckaby, just to be honest with everyone. And so, when I heard you say that you applied to Harvard five times before finally getting accepted, I was like, good on her for being open and straightforward about that.
Frances Frei: I do think that when we are authentic, it gives license for other people to be authentic.
Willy Walker: Very much so. And so, one of your research projects examines how leaders create the context for organizations, individuals to thrive. And one of your classes investigates how organizations build business models that reliably delight customers. Can you summarize for us how companies like eBay, Oracle, and Cleveland Clinic - three companies you've written case studies on have built business models that quote unquote, reliably delight customers.
Frances Frei: Yeah. So, the secret is that they also reliably disappoint customers. So, here's the trick: In order to be great, you have to be bad. Not bad for sport, but bad in the service of great. And so, every sustainably great organization is optimized to be great and optimized to be bad.
I'll give you the simplest example I can of it, which is Steve Jobs when he was creating the MacBook Air. He wanted to create the lightest weight laptop on the market. He cares about excellence more than anyone I ever met. And even he understood if we're going to have the lightest weight laptop on the market, we're going to be best in class at weight. We have to be the worst in class at physical features, because they trade off against each other. He would say “we could be best in class at physical features, but then we're going to be worse in class at weight.” And then he would make a joke “Or we could choose to be average at both, but then we'd have to rename the company Dell.”
But this is for every one of the companies you mentioned. You can clearly see what we are optimized to be great at? What's our lightweight? And what's our physical features? And if you can't articulate it, my guess is you will not have sustainable excellence because somebody is going to come around with initiative to get better at physical features, not understanding the tradeoff. And then you're playing Whack-A-Mole and you become more and more exhausted and more and more mediocre and more and more similar to your competitors.
Willy Walker: So, in the example you used, we're talking about a computer that you can touch, feel, you can pick up. You can really feel it. In the services industry, most people who are listening today are likely in the services industry. You don't have that product to sit there and say, we're going to trade off the lightweight versus the features. How do you do it in the service industry?
Frances Frei: And it is hard. I like to think that products are things you can drop on your foot and services you can't drop on your foot. So, physics or gravity doesn't apply as visibly. But I'll use a health care example. so, I can open up a healthcare organization and I can make this promise to you: I will only let you see world-class physicians. It's all I'm ever going to let you see because I care about you that much. But you're gonna have to wait a while. Or I could say, I care about you so much, I'm going to get you in immediately. Then obviously you're going to be seeing world-class physicians because I can't have them being idle while you're there. Or I could choose to be average at both. So, this tradeoff is being made for companies that are excellent. These tradeoffs are being made. But what I see in health care, tragically, because I think it's the noblest of professions, is that people are going the Dell route. They're trying to be the best at as many things as possible. And they consider that there's nobility in at least trying.
And what we find is that the nobility of effort gets in the way of the nobility of excellence. So even when you can't drop it on your foot, you still have to find out where does physics apply?
Willy Walker: Does that mean treating distinct clients differently? So, I understand the service model that you just said. But at the same time, I don't think that you're also saying that you should lower your customer service. I guess I go to someone like Costco. Costco has a very clear business model of the way that they present their goods and the way that you interact with them. But they're trying to present that to all customers, whether you're the richest customer ever walked into Costco or whether you're someone who is cobbling together enough money to go in and buy what you want to buy. So, I guess it's more the operational service delivery than ...
Frances Frei: I'm not talking about customer segmentation, although that's got its role, but I'm talking about within it. So, Costco is optimized for people who will buy in bulk for a lower price. They're terrible at things that you can hold in your hand.
Willy Walker: Right.
Frances Frei: They're terrible for people who want to spend less than $1,000 every time they go in there, because it's not a quick trip.
Willy Walker: When you said that about holding in your hand, do you know whether Costco has lower pilferage than other retailers because of the size of the things that they have?
Frances Frei: I would assume so as well. What an unintended beautiful thing. But how could you pilfer?
Willy Walker: Exactly, you got your big cart driving out. I mean, maybe you barge to the door with it. But that's interesting. I hadn't thought about that. But to your point, you can't hold anything in Costco in one hand.
Frances Frei: The thing that's, I think, why they have sustainable excellence. This is a smart business model, but they're super like I am sure people have said, let's sell Dom Perignon. I think they're the largest distributor of Dom Perignon in the country. I'm sure somebody said, “Let's have single bottles ready for that special occasion.” And maybe they were even a charismatic person who said that. And the organization is just like, “No, we sell stuff in the cases.”
Willy Walker: Super interesting. So in your book, Uncommon Service: How to Win By Putting Customers At the Core of Your Business, there's not a business on the face of the planet I would think that doesn't sit there and say we're customer centric, we're customer focused, and that they clearly sit around and discuss it and strategize it, but very few actually can execute upon it. From your research, what do companies that actually put the customer at the center of everything they do - actually do?
Frances Frei: Well, they do get this “great” and “bad” thing, which feels like almost anathema to wanting to have excellence. So, they understand, you know, Southwest Airlines is a great service, but it's also horrific in many ways and that one is in service of the others. So, I think they get that right. They also understand the difference between gratuitous service and having a sustainable funding mechanism.
So, when you're in an organization, everybody has great ideas. Oh, the customers would love this, the customers would love that. And you need the other person saying, how are we going to pay for it? Because everybody wants to give away gratuitous service. People want to give away service that's going to be free. But we have to build a reliable funding mechanism into it. So, I'd say it's in order to be great, you have to be bad. You need a reliable funding mechanism and these companies that are customer centric, they just give away stuff too. They think that that's good service. It's not. That's like temporary service, it's not sustainable.
The other thing is that a lot of organizations, when we put customers at the core of it, we think, let's do this on the back of heroic employees. Our employees will go the extra mile. Well, that's a terrible service model from a sustainability perspective. I want the average employee to be able to reliably produce excellence. I don't want to rely on heroic employees, but so many organizations get addicted to the heroic employee, and that actually holds them back.
And then the last part of it is that for me to deliver the absolute best service to you, Willy, I'd want you to participate in the production of it. And that, again, sounds crazy, but people enjoy the salad bar salad a lot more than they enjoy the one that got delivered to their table because they got to pick the ingredients, like allowing people to come in and co-produce it, allowing the customer to co-produce a little bit. It really helps and that freaks out people, you know, but they know all those customers do. So, I find that there are four things that you have to get right in order to genuinely, to your point, have the customer at the center of it. And most of them are counterintuitive.
Willy Walker: Your final point as it relates to the salad bar and preparing it yourself reminds me of a study that was done on lottery tickets and people selecting their lottery numbers. And so, if you gave someone a randomly selected lottery number and then you said, I want to take it back from you, they'll sell it to you at face value. But if you let them pick their lottery number, they want a premium to sell it back to you. And it's such an incredible study on nature and how people want to participate in the process.
Frances Frei: We can create a win-win. Self-service gas stations gave co-production a bad name because it's because I don't get any utility out of it and you're just paying me to do the work. That's not what I'm talking about. In fact, I want to involve you and charge you more for it because it's more valuable for you.
Willy Walker: So, one company that did actually engage the customer and put the customer at the center of everything was Uber. I remember distinctly the first time I used the Uber app and just how engaged and empowered I felt by calling. I mean I've had plenty of cars meet me at airports before with the sign saying “Mr. Walker.” But here I was out on a street corner actually calling the car to come to me. And the way it all worked, I remember that so, so well. But you decided to leave HBS, and you decided to leave HBS with a very significant not only track record as being one of the very best professors at the business school, but also a very senior leadership role in defining curriculum and running various programs, etc. You not only did that, but you left your family in Boston and traveled to California for a year, leaving every Monday and coming back every Friday. What was it about either Travis Kalanick as the founder and CEO of Uber, or I think you visited with 1,500 employees before you accepted the job to leave HBS and go to Uber, which you've got to explain to me how you met 1,500 employees. But what was it about either Travis or Uber that said to you, I'm going to leave all this great stuff and I'm going to go not extend myself, not only professionally, but personally.
Frances Frei: So, I will say I very much like burning buildings. So, it was on the front page of the newspaper, and it was a wreck. Now, when I was asked if I would meet with Travis, I said no, because I read all those newspapers and they made him sound like a dope and I only helped good people win. So, I was like, No, I'm not going to because I think I can help anyone win. So, I have to like, discern. And I was like, No, I read all about it and they were like, just come meet him. So, I went out to meet him and the meeting, which was supposed to be I flew across the country for a meeting like that's how long ago it was. But I met with him and during the two-hour meeting, I changed my flight home five times. It lasted three days. And we talked about everything. I got to ask all the questions, like just every nook and cranny.
And here's what I adored and adore about Travis is that first of all, his last company, before Uber, had eight or 12 people. When I got there, there were 13,000 people at Uber. Like, you're not born knowing how to manage and lead 13,000 people. So, he didn't think he had it all going on. He needed help. He was asking for help. And I just happened to fit the two areas where he needed the most help. I found him very open, very desiring of making it better and knowing that he couldn't do it and he couldn't do it alone. Now, so it was that.
But I also love the audacity and the purpose. So, this was happening at the same time when my mother's eyesight was dwindling. She was driving her last car. She's a fiercely independent woman. And for her to then have to be reliant on children or neighbors, there's nothing worse for her. And then now there is Uber. And so, I find that it's my mother who's a grandmother. Grandmothers around the world, I heard the same story. They didn't have to go backwards to be reliant on their children. They got to the right size of their relationship, and they got to take care of this vital thing through an app. And my mother, who's like, not technological, she knows how to call an Uber, but all of a sudden the technology is easy. So, I would say that the noble purpose, the audacity of doing it and how grim, like I'm in Boston you couldn't wave down a cab on a road. You had to go to a cab stand. And it was like a Saturday Night Live skit of how bad the service was and how uncomfortable it was. And if you'd call a cab, maybe they'd come. Maybe they wouldn't.
Uber was like a revolution and a revelation for everyone. So, I love audacity. I love a noble purpose. And the reason I like a crisis is because I do believe that meaningful change has to happen quickly, and a crisis permits that. Now, I would much prefer people have the sense of urgency without a crisis, but I find that many instances require a crisis to do it.
Willy Walker: What about leaving a job or profession which a) you were dominating, b) while going in front of 90 new students and for an executive ed group is 90 different minds and different questions and all that you obviously were expert at that. To leave that to go into an operating role at a company which you joined HBS in ‘98. So, you've been in academia for a long time. Talk for a moment, going from the theoretical to the practical.
Frances Frei: Yeah, Well, I'll tell you, it surprised me that I did it. I would get called, do you want to be considered for this position, that position? And I always, always openly say the only time I'll ever leave HBS is if I go to prison. And I thought it was the only way I'd do it. And the only reason I would go to prison is if someone bullied one of my children. I'm from New York. I could imagine things getting out of hand. But I wasn't leaving because I was living my best life and it was a sweet spot and it was all working. And then I realized that, and I coach people on how to do things. But then I realized, okay, nobody else knows how to do this. And if I do it and then I open source how to do it, this will be the way to democratize education. And so, I did it as a way to learn and to see how what I knew needed to be adjusted. But then I wanted to show nobody was going to have a worse situation than Uber. And I'm not sure anyone has up until today. And if I could show that that was possible and that was possible quickly and joyously, well then everyone else is going to think that it's possible to fix their scenario. So, I went there because it was so bad and because it was a way for me to democratize access to education and as a way for me to learn. It was a super difficult decision. And we made it as a family. Because to your point, commuting to California every Monday and Friday, in retrospect, was crazy. And I wasn't all that energized on the weekends when I came back. So, I probably could have rethought how I did it, but it was a chance of a lifetime to do it. And we have tried very hard to open source everything we learned on how to do it.
Willy Walker: Two things on that. Well, first of all, when you got to Uber, you put on an Uber t-shirt. And I think people forget how sort of challenged the Uber brand was when you joined them, I think it was ‘17 or was it ‘18?
Frances Frei: June of 2017.
Willy Walker: And at that time, I mean, Uber employees would get into Uber and not say that they actually worked at Uber. It was that bad. And people were sort of like, it's not a great place to be. And you put on that t-shirt to say, I'm going to wear this t-shirt and take pride in this t-shirt until we get this culture right. And first of all, I've heard you talk about that and how you sort of second guessed that like a week in and two weeks in, that it was a going to be a much bigger lift on getting the culture back to where it was and not so sure you really wanted to be in public wearing that Uber t-shirt. But fast forward to 250 days later when you actually took it off. What was it that you either saw from a data standpoint or from a cultural standpoint that said to you sort of to some degree: mission accomplished?
Frances Frei: Everybody was again like wearing loot at the quantity that they used to before. People were admitting that they worked at Uber. People were going out to parties again. The other thing that was happening when I got there is nobody would go to a party because everybody only wanted to talk about how grim it was at Uber. And so, all of that was like a faint memory. And we had gotten so far along that I was obsolete in doing it. I was no longer needed. The culture and all of the people that brought the culture up, they were sustaining it, so it didn't need my propellant.
Willy Walker: And when you first got there, Frances, I listened to you describe the workshop you did with employees to a) identify the existing culture and then, if you will, b) vision the future culture. I think it is very practical, if you will, for people listening to get a sense inside of their organizations. How do you get a pulse on the existing culture, and then how do you vision the future culture?
Frances Frei: Yeah, So for the existing culture, I think particularly if you're in a bad place, what we did is found out which of the cultural values, because this was a company that was driven by its cultural values and that is an anthropologist would observe that the language of the values was used all the time, all the time. But the language, instead of being aspirational and optimistic, was being weaponized in some cases. So, people were using the cultural values as license to behave badly. And what I learned there is that once a cultural value is weaponized, there's no amount of explaining what you meant that's going to bring it back. You just gotta let it go.
So, the first thing was to figure out and just ask people, what is it about the existing manifestation of the culture is getting in the way of your thriving? And do you observe getting in the way of other people thriving? Two open ended questions – Oh my goodness. And we would ask that in small groups, loads of small groups, because one person saying something, you could then build on it with others. We also, if people wanted to submit it via an anonymous survey, they could do it. we did it in every nook and cranny way we could so that we really got a sense of the answer to those two questions. What's getting in the way for you? What's getting in the way for others? Well, getting in the way for you is why we had to redo the cultural values, keep some of them. But change the others?
But then we also asked the optimistic questions. What would it take in addition to the values, like what would make this culture, one that you could contribute to your highest performance, and you think would help others, like what's your aspirational wish list?
And here's the thing. I have found this not just at Uber, but at Uber nobody was shy in saying this, so it's not like we did a magic trick. Like literally we asked everyone in a sincere enough way that they knew we were going to act on it and then we acted on it. So, I would say it's the Uber employees that were there should get all the credit for this. You know, there was some conducting going on, but they are the ones who understood the noble purpose. They wanted to be in a values-driven company, and they understood the harm that was being done.
Willy Walker: I've heard you say that the first four letters of culture are cult. I think about Uber when I think about Adam Neumann at WeWork, which is another company that you worked with. Both were sort of larger-than-life leaders. And I guess my question to you is, do you have any examples of those types of larger-than-life leaders who create this cult that actually can evolve the enterprise from being that type of cult into a sustainable business model?
And when I was thinking about this question, Frances, I was thinking about Steve Jobs when he created Apple. Steve clearly had a cult behind him, but as we all know, Steve was kicked out and then had to come back on his second act after having gotten some real humble pie to come back and take over Apple and reinvigorate Apple with his incredible leadership. And quite honestly, the cult that he's created at Apple, which has endured even with his passing away.
You worked with both of them very closely. What is it about either their leadership capability, but more importantly, can those firms actually transition from this idea and the hypergrowth into sustainable businesses? Because in both instances, neither of them are no longer at the firm?
Frances Frei: Yeah. Well, here's what I would say: two things. One is that particularly in the founding, the founder whatever their superpowers and whatever their Achilles heel usually gets mirrored in the company. So, when I talk about trust and that it requires authenticity, logic, and empathy. Travis had a self-diagnosed and observable to everyone, an “empathy wobble” right, he like just empathy got in the way. Well, that Adam Neumann didn't have an empathy wobble. He had a logic wobble. He was Adam Neumann. And you totally thought he cared about you, but that S-1 that he and his wife ended up writing had no rhyme or reason or logic. So that's a “logic wobble.” So, I would say that they each didn't make it for different reasons. And Travis, I guess, didn't fix the empathy wobble in time. And Adam, I guess, didn't fix the authenticity wobble in time.
But every company that I watch from a founder ends up being a reflection of the founder in the strengths and the weaknesses. Those two just happened to be the high profile. But, you know, founders like Jeff Bezos at Amazon. Amazon is a reflection of Jeff Bezos. Oh my gosh, If Amazon had a pulse, it would work out as much as he does. But it doesn't have to be at the founding. Like, if you look now Microsoft, which had Bill Gates, which was sort of a reflection of him for its blessings and its curses. Now, with Satya Nadella, it's a reflection of him. And so, he's a person where there seems to be very few Achilles heels. It's actually all quite marvelous. And the company is now a reflection of him. So, I think that, whether or not a person should be the one who stays. You know, let's say serial entrepreneurs don't want to stay at a company like I don't have the same romanticism about one person staying with a company for life. I think you should stay for as long as it's appropriate for you to stay. And then you should have the humility to give the baton to someone else.
Willy Walker: So, you talked about logic wobbles and empathy wobbles. When you were at Uber, one of the things you were wildly transparent on was that there was a lack of trust. And during all that work, you created the trust triangle. Can you describe to our listeners what the trust triangle is and those various component parts to it?
Frances Frei: Yeah. The reason we call it the trust triangle is because there's three component parts to trust. So, you are more likely to trust me, for example, if you get a sense of my authenticity, logic, and empathy, and I'll tell you what I mean by those words. If you sense that I'm speaking in a way that it's true, honest, it's representative of my beliefs, then that's necessary for trust. If you think I'm dishonest, if you think I'm saying one thing to you and another thing to someone else, that is, I'm being inauthentic. Nothing else matters. You're not going to trust me. Authenticity is necessary, but not sufficient. It has to be the real me that you sense.
You also have to believe that I have a good, rigorous plan and I have to be transparent enough about the plan so that you can see the rigor in it. And I think that the business model in WeWork, for example, with Adam. Parts of it didn't make sense, and so there wasn't as much transparency on that. Well, a lack of transparency just gets people to not trust you. But, if it's a real me with a rigorous plan and I am inclusive of you, then you're going to trust me. And you believe I'm considering you and all of that magical calculus.
So, every time we're trusted, all three of these things are present, so we all have the capacity to do it. And any time anyone of the people listening, just look back at any time you have not earned the amount of trust you wanted. Take that real situation and ask yourself: did your skeptic doubt your authenticity, your logic, or your empathy? And I would stake anything on the fact that it's one of those three. The reason I can say that is we've done it with hundreds of thousands of people. We've done it with so many people now and so many organizations that I feel super confident that it's going to be one of those three. And the reason you need to know is the prescriptions of an authenticity wobble are very different from a logic wobble than an empathy wobble.
Willy Walker: So, I want to dive into the three of them in a moment. But you've used the term wobble a number of times, and I loved the term wobble in the sense that you're not saying it's a deficit, you're not saying that it's a character flaw, is not an accusatory term. You know, we all are human. We have wobbles here. We're not authentic enough, we're not logical enough, etc.
But my question to you is that when I think about it in the concept of Uber and WeWork, what there really kind of seem to have been is more of a breach on one of these and less of a wobble. And I'm just curious about, you state when you when you were working with WeWork they were about to go public. You mentioned the S-1 that they'd filed. And I think the valuation of WeWork at that time was $40 billion. And then I looked up the market cap today and it's about $1.1 billion. And so, I guess my question would be how can investors, employees, partners identify when that wobble turns into a breach or is going to turn into a breach?
Frances Frei: Yeah. So, I would say that at Uber, the reason you could realize it was a breach is that riders felt great about the consumption of the service at Uber. Riders were disappointed about how they thought Uber was treating drivers, but it wasn't the service model that they were sad about, and they thought that Uber didn't have good empathy for the drivers. They didn't think that regulators thought that Uber didn't have good empathy of them. Investors thought that they didn't. So, empathy was the common problem. And I think that goes from a wobble to a breach when it's everywhere. Now, the good news about that, it's one solve. If we can learn how to overcome an empathy wobble, click, click, click, click, we solve it for all of it. So, I think that's how we knew it was a breach there. It was so omnipresent.
I think it's a different case at WeWork. Look, one way you make sure it's not a breach you bring in trusted, outside, best in class, outside people to help. So, nobody should have believed Adam in what the valuation of the company was because he has a logic wobble. But here's the place where that really fell down. They brought in the best, most prestigious investment banks. I mean, the best. And they brought in more than one. They brought in the best, most prestigious law firms. And they brought in more than one. And they gave it the evaluation. Now that: how do you solve that? I mean, get better partners, but how do you get better partners when, like everyone would have said, these are great partners. So, I actually think that's quite a complicated situation. And I'm not sure how to solve that because paying for that advice is supposed to protect you from one person having crazy thoughts, but instead they amplified it. So that's what I think was going on there. So, the breach, I believe, came when the trusted partners abdicated their responsibility.
Willy Walker: I'm sure the investment banks that worked on that are appreciative that you're not mentioning them by name, even though I know exactly who they are and continue to work with them, by the way. So on to the various components of the trust triangle. One of the ones that you say is without a doubt the one that people fall down on or have more wobbles is on empathy. And one of the things you teed up is technology and the fact that technology undermines empathy.
Talk for a moment about that first meeting you were in at Uber with everyone texting about the meeting and then how you guided people to getting empathy front and center and getting the technology off the table.
Frances Frei: Yeah. So, when I finally came in after meeting with everyone in every context I could and I joined, he asked me to facilitate the senior team while he was there. And then when he left, the board asked me to continue doing that. But even while he was there, he said, do I need to stay? I was like, No, I got it. We'll do this here. So, we're having the meeting. And I was first surprised at how much multitasking was going on because it was super disrespectful to other people around the table. I was just surprised I hadn't seen it in other parts of Uber, by the way. But in this room, it was palpable. And then I found out what they were texting: and they were texting one another about the meeting we were sitting in. If I can use Amy Edmondson, there is no psychological safety. If you say something, somebody's going to be sending a zinger back and forth. And so, it blew my mind and I just said, “This blows my mind. And we collectively are not going to be able to achieve what we collectively want to achieve if we're undermining one another minute to minute and moment to moment.” So, we took a page out of HBS in the classroom, right? Imagine if people could have technology in the classrooms. It would be a terrible thing. So, we just had technology off and away, so everybody would put their technology over on a table. We put a charging station there so that you could do it and you'd be at the table. And then if you needed to go use your technology, you just went and used it over there.
And here's what changed. Everything started going faster. Because you didn't have to revisit when one person was paying attention. You didn't. And there were a lot of relitigating things after the meeting because it wasn't really. But we did all the stuff in the meetings, so we did a whole bunch of things. But, you know, the organization had never achieved so much in so little time because they had all of these incredibly smart people who were now no longer participating in this bad behavior. So it was, for the most part, good people behaving badly. And we just had to change the conditions. There were a few people, we ended up having to separate 20 people in June of 2017, and that was necessary to turn around the culture. But it was only 20 out of 13,000. That, to me, was a total wakeup call. Read Uber, everything has to change. Well, everything but the employees. The employees were awesome. Awesome.
Willy Walker: That's super interesting in the sense and I've heard you talk about this, there's a sense when you've got a company of 13,000 people that it made what I called them breaches, but let's just say wobbles to the degree that Uber had that the organization is doomed. And I think it's so interesting that it was really that there were 20 people who were, if you will, reinforcing the culture that was there and that the moment you made those changes, which were relatively very small. It then opened the avenue. I think a lot of people get caught up in that, “Oh, this company is done.” The culture inside of it or a team for that matter. And I want to talk about coaching in a moment. But a team just, you know, X, Y, Z sports program has been at the bottom of the league forever and ever. And there's no way to kind of change it because everyone is living this defeatist culture. And what you have seen very clearly, and also coach too, is find those people that are holding it back and who are making the old way, stay in place. You move them out and you can really make a change.
Frances Frei: In fact, if you offered me the best team in the league or the worst team in the league, I would take the worst team in the league as long as they realize that they have to change. Because all it takes is the willingness to change and then we know how to do it. We know what the secret memos are. But if I go back to Uber, just here's one illustrative example.
Almost all of the problems the company could be traced back to an interaction somebody was having with their manager. It didn’t matter where you were in the company? Well, there were 3000 managers at the company, so they were either 3000 bad people or there were 3000 people who were never taught how to manage. And it didn't take long to realize, oh, my gosh, these guys graduated from a technical college. They came in as an individual contributor. They got promoted 5 minutes later to a manager. They got promoted 5 minutes after that to a manager of managers, and no one ever taught them how to do it. Of course, it's not working. So, I would say that's not the employee's fault. That's the infrastructure. The organization didn't set them up for success. So, we put in management training and all of those problems went away. So, I look at if a lot of people have the same problem, we’re a secret memo away from fixing it. Now, if Uber had tens of thousands of different problems, I don't think it would have been an easy fix.
Willy Walker: I think about Dara Khosrowshahi, who's now the CEO of Uber. And I've known Dara for a long time. And his personality, in hindsight, looks like the perfect match. But there were a lot of people who were interviewed by the board for the job of being Travis's replacement. I also think Jeff Immelt might actually get mixed there for a while, given the value destruction that Jeff Immelt brought to G.E.. I think any Uber shareholder is probably happy that they dodged that. But you have a quote which I think is fantastic on leadership, and it's this: “Leadership is about empowering other people as a result of your presence and making sure that impact continues into your absence.” Dara would seem to be the perfect person. Why?
Frances Frei: Well because he lives in this way. So, Travis was at the center of everyone's life at Uber. And so, you could do well in his presence. And if something was going wrong, you'd go right to him. Dara - his ego does not require him to be. And I'm not saying it was ego for Travis, it's just how he did it. But Dara, he wants nothing more than you to thrive in his absence. So, he's not going to micromanage, but he's going to give you the tools you need. He's going to let you experiment and let you come back. So, he's like, all set. He's deeply comfortable in his own skin. The search committee on the board, bravo for going through all of those other people who were the who's who of who you would want and being like, No, no, no, no, no. And then aah - this is the person. I don't even know how they found him. I didn't know who he was before meeting him there. And to your point, he's exactly right. So, I give credit to the board for doing the exhaustive search. And they found someone they didn't know. And usually, we hire the best of the people we know. My theory on the world is that the best of the people we don't know are always better than the best of the people we do know. So go make new friends, go find, go learn. And that's exactly what they did. And they got the perfect person for it.
Willy Walker: I talked about coaching for a moment, and I've heard you talk about feedback, and I’m going to put words in your mouth for a moment, but you're not a big fan of sort of the annual critical review process of saying, Hey, Frances, you're falling down on this, and next year you need to do this better and you're much more towards a) making people awesome, and b) giving positive feedback. And I've heard you talk a number of times about the quotient of positive feedback to critical analysis needs to be at a minimum 5 to 1 and potentially even on some studies, up to 10 to 1. Talk a little bit about positive reinforcement, positive feedback, versus critical thinking.
Frances Frei: Yeah. So, I'm in operations management, right? I just look at everything about how much better we can be tomorrow than we are today. One of the greatest accelerants of somebody's performance is to tell them what they're doing right specifically so they can do more of it tomorrow. So, I want to catch you doing things right so that you'll do more of them, because otherwise, at the end of today you'll be like, Oh, on balance, you had a great day. I have no idea what to do more of and what to do less of.
And now some people prefer to focus on the two things that are wrong. What you did wrong, fix those. What we have found, and you can learn this from watching dogs being trained. If there's a well-behaved dog. They get a lot of sincere and specific praise for when they did things right, and that helps them improve at a really steep slope really fast. So now it's not that you don't need some constructive advice, but so much less than people are naturally giving. Like we somehow think that positive reinforcement is weak. Infantilizing when I want to do it, I am ruthlessly competitive. Like I will gnaw off a limb to win. The best thing I have to help my team win over your team is to catch them doing things right specifically so they can do more of it and to do it in public so that everybody else can learn what doing something right is. And they'll do more of it. It's just breathtaking the improvement. So, I got there from the improvement part of it. And when people give an annual constructive review, my heart just crumbles. You have denied the improvement opportunity to another human being. I just don't understand it and it is absolutely suboptimal.
Willy Walker: So that makes me think about the, if you will, exceptions to the rule, because I've heard you state research after research, it all says this is there, you need to do 5 to 1, if not 10 to 1. And then someone comes up with, Yeah, but I've watched a coach who screams at their players all the time and you've said, Yeah, but watch them when the camera's not on them, they're patting them on the rear end, and they're given them a high five. They're doing a lot of positive reinforcement for that one. Hey Charlie or hey Susie, you missed the jump shot at the buzzer and I'm disappointed at you for not doing that. But the one in the business context that I'm just curious whether you have any thoughts on is Ray Dalio and Bridgewater. He not only has written plenty about this, but they're sort of a combative, you know, take everyone apart in the conference room and if you say something that's stupid, everyone lets you know it. How has Bridgewater been successful? Because it seems like they're ratio is the inverse of what you're talking about. They praise each other once and they criticize each other five times.
Frances Frei: Yeah. So, here's what I would say. First of all, do you know any other organizations that are designed like that successfully?
Willy Walker: No.
Frances Frei: Do you think that that organization is going to last beyond him in that same style?
Willy Walker: No.
Frances Frei: So, we could talk about it. But why?
Willy Walker: That's great.
Frances Frei: I would say that Ray Dalio is probably an enormously charismatic man.
Willy Walker: Yeah. So, in your book Unleashed, you talk about leadership and how everyone can lead to make the collective better and stronger. And the leader's job is really to help others do better. And so, as we've talked about this frame of great leaders who got companies going, Travis had 13,000 employees working for him. But at the same time, everything led back to Travis. As you think about sustainable leadership, sustainable breakthrough businesses, it's very clear that the leadership model you're focused on is leaders who actually aren't at the center of everything, but are leaders who have sort of, if you will, disseminated decision making. For those people, like myself, who try and play as active a role in leading Walker & Dunlop as I possibly can. What's the coaching that you would give to someone as it relates to how involved you need to be versus the empowerment of those around you?
Frances Frei: Well, I would start with quality of life. If you're going to be completely involved all day, every day, 24/7, nights, weekends, so that you're always on and the company isn't too dramatically big and you're willing to sacrifice your life on the altar of that - go ahead. But to me, in the scheme of things, that's a hobby business. You haven't prepared it to hand it off to anyone, you haven't prepared the people for your absence. And I'm not saying you Willy. So, I don't find that to be sustainable. I find it's very ego nourishing for people that we are so critically needed.
But if I went and watched you, Willy, because I have read a ton about you now, I am sure you are setting people up for success in your absence. Like I am sure that you let people go and make mistakes on their own so that they can learn from them. I have learned about you. And so, I would be just so surprised if you didn't do it so I can be actively engaged in coaching you, in developing you, but I'm letting you go learn the lessons on your own. You're learning how to make judgments in my absence, not come to me for each of the decisions.
Willy Walker: So, talk about high standards and deep devotion.
Frances Frei: Yeah. So, for most mortal human beings, we know two things. One, people tend to thrive in the presence of high standards, right. So, if I gave you someone who set high standards for you or somebody who had low standards in general, we're going to do better when there's high standards, and there's something for us to reach for. There's another thing that in general, we all know: if you were with someone who is devoted to your success, all things being equal, you're going to do better. So, both of these things in concert are like, this is the dream.
If I have someone who I experience as having high standards and I simultaneously experience as being deeply devoted to my success, that's magic. Like, that's the beautiful place of leadership. For most of us, in our day-to-day practice, if you look at it, we act as if these two things trade off against each other. So, when we are setting high standards to someone, we shield them from our devotion to their success. We're almost like cool, cold and calculated. And then maybe we got some feedback that we're cool and cold and calculated. And so, we're like, Oh my gosh, I'm going to reveal how deeply devoted I am to your success, and I insidiously lower the standards. And then we give ourselves feedback about how disgusted we are with that, and we go back and forth on that off diagonal. Some people for their whole lives go back and forth on that.
But when we go next, we realize that, oh, it's not a tradeoff, it's not bad in the service of great. I can actually do both at the same time. But the prescription, when I have deep devotion only and get to go up to high standards and deep devotion is very different from the prescription, if I have high standards only. So, I have a prescription for great leadership. It depends which quadrant you’re in. Don't give me a generic one. It's going to work 50% of the time and then I'm going to think it's unreliable.
Willy Walker: I was listening to CNBC a couple of weeks ago and Paul Tudor Jones was on, and he was talking about ESG, and he was basically saying he thinks that ESG ought to be rebranded as SGE because the environmental issue is so much of a political hot potato. And it's not really where most corporations are focused as it relates to social issues and governance issues. And so, he's sort of like, let's get the acronym right, because the environment seems to push us off the deep end as far as how politically volatile it is. And we ought to be focusing on the bigger issues of SG and then E.
You on diversity, equity, and inclusion (DEI) have said we ought to swap those in rather than DE&I, it ought to be I&D. Talk about inclusion being necessary for diversity.
Frances Frei: Yeah. So, if I bring a diverse team together, I have the potential to thump everyone else. Like, the more difference I can accumulate, the more surface area I can cover, the more potential I have for excellence and for innovation, and for all of it. Potential. So, diversity has potential, and we fulfill the potential when we are inclusive of the diversity.
So, I have found many organizations today are on a diversity treadmill. They bring in folks who they think are different. They're doing it for the right reasons. They haven't been inclusive of them. They don't last very long. They go out and they're on a diversity treadmill. They're not getting any better at any of the metrics that matter. Cynicism is taking place in the organization. It's terrible for the people they're bringing in, and it's terrible for everyone else. It's a vicious cycle down when we think, let's start with diversity. But I have never found an organization that worked to become inclusive, that didn't have magnificent diversity follow, because when we are known as being an inclusive place, that really celebrates your unique contribution. Word will get out and amazing things will happen. So, I very much believe it should be I&D.
Willy Walker: So, one of the favorite quotes I have from one of your books is: “Whenever strategy is silent, culture fills the space.” Talk about that for a second because it's all good.
Frances Frei: Well, part of it is in response to, oh, one of them eats the other as a snack or something like that. And what? What Anne and I realized is that if we're going to guide discretionary behavior in our absence, there's only two ways people know what will make the decisions we want them to make. One is if the strategy is super clear, Oh, this is in line with the strategy. This isn't. But when the strategy isn't crystal clear on something, it's the culture that guides our discretionary behavior. So, I don't think one is more important than the other. I think there is a sequence to it. Set your strategy. And if your strategy is comprehensive and super clear, you don't have to rely very much on culture. But if I go and ask ten people at your company the strategy and they all give me ten different answers, your culture better be freakin magnificent because that's the thing that's guiding people. So, I do believe everywhere where strategy is silent, that's the work of culture. And so, the culture will be more of a lifeline to the organization, depending on the understanding of the strategy.
I also will say so many organizations have great strategies in the senior suite, like the C-suite can articulate a beautiful strategy, but it doesn't trickle its way down to everyone else in the organization. And that's the same as not having a good strategy. because it's my understanding of the strategy that guides the behavior and when I walk around with senior leaders and talk to people on the front line, they are startled to hear what has happened on the trickledown effect. So, the communication of it is often either the strategy is broken, or the communication of the strategy is broken.
Willy Walker: So finally, your wife and your partner Anne, on two books on starting a business and raising two boys. One of the most romantic things I've ever heard is an interview you did where you say: “I try to earn the right to be married to Anne every day,” and the way you said it, Frances, was so meaningful and real. And I guess one of the questions I have for you is how do you consciously do that?
Frances Frei: Oh, so I have Anne on my shoulder. It's almost like, you know, let's say I've accomplished more than some of my colleagues. It's unfair because I have Anne. So, it's not a fair fight and I have the humility of that. And she is like, get high standards and deep devotion for everyone. She has a noble purpose in the world and understands we are of service. And the best part of me can show up around her, and the best part of me is one that is better tomorrow than I am today and better the next day than I am today. And so, to be worthy of my having such an unfair advantage, it's okay if I make a mistake, but I really prefer it's a new mistake and that I can learn from that and that old mistakes I feel like is not honoring Anne, and particularly if it's something that she's guided me on. So, I feel like I have an unfair advantage in the world. I also, I want to say, had the courage to ask her to marry me. And I had the intelligence to go out and ask for permission from her family first. And they said no. But I stayed there until they said, Oh, okay. It's not like these things last forever. And that was all the yes I needed.
Willy Walker: That brings us full circle to being number six and to being turned down by Harvard five times before you finally got the offer, which I love, and it is a great way to wrap this up. Frances, we are all much better for all of your great work, all of your great teaching. I deeply appreciate you spending an hour talking about all this with me, and I look forward to seeing you next time I'm back at HBS. And thank you so much for taking the time.
Frances Frei: I really appreciate the invitation and the conversation.
Willy Walker: Have a great day, everyone. Thanks for joining us. We'll see you again next week. Thanks, Frances.
