On the Tech Trail: Walks with Strategic Leaders

1. The Storm Shows Your Mastery - Mike Zani & Kirk Arnold

June 02, 2020 MassTLC & Matter Season 1 Episode 1
On the Tech Trail: Walks with Strategic Leaders
1. The Storm Shows Your Mastery - Mike Zani & Kirk Arnold
Show Notes Transcript

A conversation with Mike Zani, CEO of The Predictive Index & Kirk Arnold, Executive in Residence at General Catalyst. On the Tech Trail takes you inside the minds of remarkable tech leaders in Boston and beyond. You'll get to know them, better understand their journeys, and to gain insights from their strategic decision-making to help you along your own journey. Brought to you by MassTLC & Matter.

Getting started at The Predictive Index (3:20)

How to Scale the Company (5:58)

How Coronavirus Impacted Us (8:05)

Helping our Alumni land softly (11:30)

Helping is the new selling and retention is the new growth (15:39)

Showing What You’re Made of (16:40)

Tom Hopcroft (00:00):

Hi, thanks for joining us. As we take a journey on the tech trail, I'm STLC CEO, Tom Hopcroft, and this podcast series takes you inside the minds of remarkable leaders to better understand their journeys and to gain insights from their strategic decision making to help us along our journeys. In today's episode, we are on the tech trail with Mike Zani and Kirk Arnold.

Kirk Arnold (00:28):

Mike, how are you today,

Mike Zani (00:30):

Kirk? I'm great. Thanks for taking some time to ask a few questions about business.

Kirk Arnold (00:35):

Thanks for joining us. This is a first in a series. We're very excited to be talking to some of the really outstanding leaders in our tech community, both about how they think about leadership. And we want to hear about your journey getting there and also in these times how to navigate great growth curves and then choppy water. So why don't we start by having you share a little bit about how you came to the work of leading technology companies? Cause I know you have an interesting story to tell,

Mike Zani (01:02):

well, my business partner and good friend, Daniel muskies, and I, we met in grad school and we did something called a search fund, which to simplify it, buying used companies with other people's money. And as two snot-nosed kids at 32 and 34, we bought a company in suburban Detroit, Michigan, and we knew enough to get the strategy, right. We knew enough to know what to pay for the business. And we had a network so we could raise the money to do it, but we really didn't know how to manage all the people. And we got tripped up on the people issues. And we actually ran into the predictive index in 2006 and amazingly eight years later, we were able to buy the predictive index from the founding family, because we were passionate about this product that we thought helped us turn around companies and from a talent perspective. And we started knocking on their door in 2009 and in 2014, or we're actually able to buy a 60 year old technology company and sort of refound it.

Kirk Arnold (02:06):

So that's a really unique experience, the combination of the history and legacy of a company with a vision that you and Daniel shared about creating this innovative tech company. Can you tell us for those first couple of years, how did you think about the leadership challenges and, and the strategy that was going to get you from point a to point B?

Mike Zani (02:27):

Well, Daniel and I have now purchased and sort of, sort of taken over for companies. We've each done three, two of them together, and two of them we did independently. And in each instance you sort of take over the culture of the previous founder or manager operator. They might've had the right team for their strategy, but when you come in with a decidedly different strategy, you inherit this team and you're like, this is not the team I need, or we need to pull off what we're trying to do. There's usually this really first year where you are getting into a company and trying to discover what you have in terms of team and players and trying to craft a new strategy and a new vision.

Kirk Arnold (03:09):

And how long did it take you to navigate the team, building aspect of it and be able to get down to the work of how do we position this company for growth?

Mike Zani (03:19):

Well, with predictive index specifically, there were 34 people when we acquired the company in 2014 and they were running a family run business where they weren't investing much, they were paying out all of the excess cash in a distribution to the family. They were in a very risk averse stance, and didn't really want to rock the boat, so to speak. And when we came in, we had been dreaming about acquiring this company for six or seven years. So we had all of this pent up ideas of things that we wanted to do with it. So things happened really quickly and we started hiring new people and recoding and repositioning individuals in our organization. And, you know, really taking no sacred cow approach to this sort of 60 year old business.

Kirk Arnold (04:08):

Did you ever get to a place in that journey where you thought, Oh my goodness, maybe we'll break this company. What do we, what do we do?

Mike Zani (04:15):

Yeah, those are the times that Daniel and I go into one of each other's offices and hug each other and be like, wow, this isn't working and change management is always so difficult because it uncovers the me issues. And you know, sometimes it's worse for people and you really have to be human about that change because it's impacting their lives. It's impacting their career, it's impacting their, their plan on their future.

Kirk Arnold (04:42):

Then we'll, we'll probably touch on that in a little bit. It's such a, such a powerful statement. You and I share a commitment to Jim Collins, the author and business leader who talks about first to the team and then what, and clearly you have lived that, but you get the team in place and you start on the strategy. And within a couple of years you take this amazing company called the predictive index and it becomes a 60 year old hot growth tech company. So what was the next big move you made? Tell us a little bit about how you went from strategy to execution and started to accelerate your growth. What were the key factors on your strategy?

Mike Zani (05:18):

Well, when you look from the outside, in, at a company, there's this tremendous gap in your knowledge, you don't know where the skeletons are. You don't exactly know about the competition. So it was about three years in. We realized this was by far the best company we had ever been involved with great business model, great product. It had a very healthy distribution channel and we realized there is a lot here. So we started thinking about taking all of the cashflows and pouring it back into the business. We took a company that was growing at seven, 8% historically and turned it into a 35% grower, but we realized there was even a bigger idea there. And that's when we started thinking about potentially taking on some growth capital.

Kirk Arnold (06:05):

So that's an amazing pivot. How did your leadership posture and strategy and style have to change as you then transition to become an aggressive growth player in the SAS marketplace with this amazing heritage?

Mike Zani (06:21):

I think we found a partner in general catalyst that fit our attitude and style. We didn't have to become different people the next morning that's because we sweat the details on trying to pick the right capital partner. And I think that's a mistake, a lot of entrepreneurs and founders get that they get the wrong financial or capital partner to support them. And they feel they have to be someone they're not, which, you know, I really feel for them because that's a, I've been in that position and it's, it's really tough to navigate and manage.

Kirk Arnold (06:51):

You have to kind of lead as you do from who you are and that genuine leadership style does come through. But you have a different team now than you did three years ago, right? You put together a world class team as you scale. How does your management style change and how do you adapt as you bring in more senior leaders and more of them,

Mike Zani (07:07):

Daniel and I are always looking for our replacement. If we find great people who can do what we were doing, then we get to do bigger and cooler things. And we've sort of assembled an amazing group. And some who've been with us at previous companies and that we've brought with us and some that we identified and either tried to groom, or they had the natural gifts and Daniel and I, when we get in the room now to hug each other and cry, we realized that our team's better than we are. And how lucky are we?

Kirk Arnold (07:36):

That is the dream, right? That is the dream. So you're a growth company with some experience going through both the great markets and challenging markets and three months ago, or however you count it, the economy and the world hits this extraordinary time with the coronavirus. Tell us a little bit about how you as a leader thought about this and kind of began to get clarity around what it is you were going to kind of do to chart these waters on behalf of the company, how you, as a team, we're going to get through this.

Mike Zani (08:05):

The coronavirus caught us in a very aggressive posture, you know, so 2020, we were 200 people and we were going to scale to 300, you know, adding a hundred people, adding 33% to your total head count is a lot of big changes. You know, 30% of our revenue comes from in-person training. We knew this was going to hit us really hard. So I think it was easier for us to say this is going to impact us. And we should really do something about it quickly, Daniel. And I took our, our pay to zero in early March and we pushed off every discretionary spend, but it still meant that we had to do a reduction of force. And we ended up doing a 59% reduction. So the plan said 300 and the reality said 150 in terms of people. And I mean just profoundly different company today than we were two and a three months ago, but it presented such a unique opportunity to reimagine or Instructure or design roles.

Kirk Arnold (09:03):

I do full disclosure, have a unique view of how you all have navigated this as a member of your board and investor. And I have to tell ya, I think you, you all have done such an amazing job and Mike, you and I both been through some version of this before I founded a company in 2000, and then we hit needless to say some economic and social challenges in the 2000, 2001 period, and had to do a similar action. And I had employees talk about the culture and how do we protect the culture through this transition? And, you know, the message was we have to have a company to have a culture, but what have you done as a leader to think about culture in this transition? Because it's hard on the people who leave. It's hard on the leadership. How do you think about it?

Mike Zani (09:46):

We've been huge proponents of having a talent strategy that is married to your overall strategy. We really call it the third leg of the stool first being strategy. Second, being your financial plan and third that so many people tragically don't pay attention to is this talent strategy. So some people wave at it. They're like, Oh, I've got a talent strategy. And really what they just have is boxes in Excel that says, they're going to hire X, many people in this quarter. They don't really have a talent strategy. And when the going gets tough, when they go to lean on that leg of the stool, it's not really there. So I think that it was the strength of our culture, you know, for the last 18 months, which enabled us to get through this, this tough period. So I think it's the heavy lift and the hard work you do in advance that you get to count on.

Kirk Arnold (10:37):

Yeah, my dad is impelling style. And one of the things I've noted, that's very unique here in terms of how you handle it. I think several leaders in town have followed your lead is you've been a very public advocate for these folks who had to leave the company on LinkedIn on platforms to say, Hey, these are great people. And we had to let them go, not hide from that reality in the public arena and say they should be hired and I'm out there advocating for them. And I've not really seen that before.

Mike Zani (11:04):

It really became sort of a, a rallying cry for, you know, the entire team to really try and help these individuals. It's. I mean, the old Axiom it's so much easier to find a job when you have a job. So all of us have been approached by someone who doesn't have a job and said, Oh, could you make an introduction for me and to do an introduction, right? Takes time and energy. And it's an ask of someone in your network that maybe you don't know as well as you should to make that ask. And when everyone in the company is setting it out as a mission that we want, our 59, you know, alumni who just were hugely impacted, you know, through no fault of their own, you want them to land softly and find a new place or bring them back. If we can.

Mike Zani (11:46):

I use as an example, this guy on LinkedIn absolutely flame me. And he had reason to, he was recently laid off and he goes, I heard you laid off 59 people, and you said it through no fault of your own. He's like, that is bullsh**. And I'm like, wow, I don't even know this guy. Why is he punching me in the face? And normally I would have punched back cause, um, I'm pretty aggressive. But you know, I was in this mental space where I had just let go of 59 people. And I was trying to think about helping them find jobs. So I looked at this guy's LinkedIn profile and he had a banking background and I was like, you know, with the cares act and PPP banks are flooded. You have the skills you should apply to a bank at least temporarily to help them work through all these loan applications.

Mike Zani (12:34):

And this guy was just punching me in the face, verbally on LinkedIn. And he's like, Hey Mike, thanks a lot. That's a really good idea. I'm, I'm sorry for my comments. And I was like, wow, what a turnaround and this poor guy, his employer treated him poorly. He just wanted a little bit of love. You know, he wanted a little bit, somebody care about him. So ironically, I have a new friend on LinkedIn, which if I wasn't, if I wasn't in that spot, if my team didn't put me in a situation to be open to this person's attack, I would have just attacked back, which isn't me on my best day and maybe be on my usual day. So I think letting yourself go there and try to be you. And your best day is thing that I'm going to try and remember most.

Kirk Arnold (13:22):

So Mike, incredible comments about culture and about the how to do some of these difficult things in a turbulent time, in a way that retains your commitment and to that culture. And to that opportunity ahead. So let's talk about what's ahead, because you mentioned in your comments that as you looked at the decisions you needed to make through this transition, that you thought there's opportunities here, as well as challenges, how do you think about both the company and your customers and how you serve those customers to allow them all to prosper and be standing on the other side of this?

Mike Zani (13:59):

We, we certainly backed way off from a sales stance. Most of our cuts, um, that, you know, the sales and marketing team took 80% reduction in force as opposed to 25%. So we knew that the sales stance for the future was going to be very different. And we wanted to focus on retention. We wanted to focus on helping our current clients really navigate through this more of a helping and consulting position, as opposed to, you know, buy our stuff. Now, I think that lands squarely in the face of what everyone's going through. You can't displace 30 million people in a four to five week period, which is a bigger displacement than we had in world war two. And, and not think that we're going to have to do some repairing.

Kirk Arnold (14:47):

Do you think it will impact your product strategies, positioning, et cetera, or do you think it's just, how do you gradually go back into the market with a slightly adjusted, but similar strategy? What do you think at this point?

Mike Zani (15:01):

I do think our products need to be more flexible. When you think just in Q1, we had a very different go to market strategy. Then we did two months later. So I think you need to build product suite that is flexible enough to handle massive changes in your go to market strategy. For us, it was going from a, an aggressive sales and marketing stance to that of more of retention and consulting and helping, which hopefully we get to turn back on a sales stance in the future. We'll see,

Kirk Arnold (15:35):

I was in a meeting the other day and I heard someone say very reflective of your comments, helping is the new selling and retention is the new growth. So this concept of really embracing and supporting customers and holding onto them and serving them and accommodating them right, as much as we can is a powerful message. So as you look back on this journey and you look forward as a leader, I heard this concept of, of your genuine nature is a powerful tool, but what are the leadership qualities that you think have been the reason you said in the exceptional leadership role that you're in today with the reputation you have, Mike, which is tremendous?

Mike Zani (16:16):

Well, Kirk, thank you. I don't know if I live up to those words, but you know, I think we surround ourselves with a great team. I used to be a sailor in previous lives and, um, I became a student of sailing lore and there's this old prayer from sir Francis Drake, that one of the lines is where the storms will show your mastery. So it's really been a rallying cry for me and for our team that when things are really stormy, like they are now, like that's when you really get to show what you're made out of.

Kirk Arnold (16:46):

That's pretty cool. Thanks, Mike. This was great.

Mike Zani (16:48):

Thank you, Kirk. It's it's always such a pleasure to talk to you. You are an inspirational leader and such a thoughtful person

Kirk Arnold (16:55):

right back at you, my friend,

Tom Hopcroft (16:57):

thanks for joining us today on the tech trail, we hope you've picked up some new insights to help you on your journey. Please tweet your key takeaways with hashtag #techtrail and be sure to subscribe, to get the latest episodes special. Thanks to our production partner matter. We'll be taking our next journey with Muhammad Ali and Sophie. Vanderbroek. I look forward to seeing you out there on the tech trail.