Healthy Conflict Makes for Better Companies

Steve Cody, veteran public relations and strategic communications strategist and founder of Peppercomm, shares the story of a dramatic “business divorce” with his longtime partner that nearly destroyed the company they built together. Just as a major acquisition was about to close, a last-minute disagreement over the future of the firm blew everything apart. The fallout compelled Cody to rebuild the company from the ground up with a smaller team and a renewed sense of vulnerability. In the process, he learned the importance of inviting dissent and creating a culture where disagreement is safe and constructive. What began as a devastating split ultimately became the catalyst for success and a different model of business leadership. 

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Transcript

Michael Lee : [00:00:00] When we disagree is a show about arguments, how we have them, why we have them, and their impact on our relationships and ourselves. How does a toilet work or how does concrete work? Because I'm so familiar with these things, I might mistakenly think that I understand them, and I really, and I sincerely mean this, I really don't.

This false confidence is the illusion of explanatory depth discovered by cognitive scientists, Rosen, BL and Kyle. We think we understand and understand systems we interact with far better than we really do. This illusion makes us overconfident and disagreements about complicated issues. Certain we grasp what we barely comprehend.

The illusion of explanatory depth makes political debates really futile. People who can't explain how government or the economy actually work, have strong opinions about what's going on or how to fix it. Shallow familiarity feels like deep knowledge [00:01:00] in personal conflicts. This illusion creates false certainty.

You think you understand why your partner behaves in certain ways until asked to explain the actual psychology. You're sure you know what would fix your family problems, but can't articulate the current system's actual mechanisms. We operate on surface understanding while believing we see depth. Our solutions to complex problems are often simplistic because we truly don't understand them.

Workplaces run on explanatory illusions all the time. Everyone thinks they understand what other departments do until they actually have to cover for them. Teams adopt new technologies without understanding how existing systems really work. And understanding this illusion can hopefully inject some humility before arguing strongly about something.

Try explaining it in detail. You'll often discover what your understanding is actually shallower than you thought. In disagreements asking, can you explain how something actually works? Reveals whether [00:02:00] anyone really understands what they're debating in the first place. Sometimes the best resolution is admitting mutual ignorance and learning together.

I'm Michael Lee, professor of Communication and Director of the Civility Initiative at the College of Charleston. Our guest today on When We Disagree is Steve Cody. Steve is the founder and CEO of Pepper com, which is a strategic communications firm, and Steve is also a long suffering Mets and Jets fan.

Steve, tell us an argument story. 

Steve Cody : Thank you first off, Mike, for enabling and allowing me to be a guest. I'm a big fan of your podcast. I find it absolutely riveting. Your listeners will not hear what I have to say. Very riveting at all. What I wanted to discuss with you, Mike, is the huge.

Interruption and interregnum that beset me and my firm 18 years after our founding. So I'm a refugee from publicly traded holding companies in the advertising, marketing and PR world. Got fed up with that and along with a guy who was my junior [00:03:00] at a division of a holding company, we started pepper com named in honor of my late Black Lab Pepper in September of 1995.

Over the years we went up, we went down, we grew to become a very powerful, mid-sized firm, and we were receiving one acquisition offer after another. And we took every meeting and we always agreed if we didn't. Both agree that to, to pursue the opportunity we wouldn't. Fast forward to 20 16 20 17 Japan's largest advertising marketing agency a firm called Dentsu approached us.

Long story short, they made us an amazing offer and I thought it was everything that we would need in terms of providing a platform to really scale the business. We also. Gave a phantom stock to six or seven of our top executives, they were psyched. I had already signed the paperwork and one morning my co-founder came barreling into my office and said, I don't wanna do this.

I don't wanna do this. And I said, ed, come on. We all [00:04:00] agreed what? He said, the investment banker guy say if we turn ourselves into a digital shop. The multiples that Dentsu is offering, we'll get three or four higher multiples if we turn ourselves into a digital firm. I said, I don't want to be a digital firm.

We are a strategic communications PR focused firm. That's what we're known for. That's what we're great at. I don't want to change. Long story short, he said I do. So we had a pull away from literally one minute to midnight with Densu. Senior executives were crushed. They were all looking forward to this opportunity, and all of a sudden my erstwhile business partner and I are at odds.

He wants to build a digital firm, and he starts hiring people with and without my knowledge, who allegedly had digital capabilities brought them in. He brought a top digital guy in. We held a town hall meeting to introduce him. We had offices at that point in time in London, in San Francisco. First thing the guy says is, if you guys are public relations pros I suggest you learn digital because if you don't, you're either gonna become a Walmart [00:05:00] greeter or a Starbucks barista.

And that went over like a leg balloon and not content with that. They started it. Forcing, literally forcing our account leads to sell in digital. And we had great relationships with great clients and they said, look, we have Razorfish, we have Leo Burnett, we love them. We love pepper com for what you do in pr, stop selling us.

So the breaking point came when this digital director that he, my ex partner hired, went out to San Francisco and called on our then largest client without our knowledge, without the client's knowledge. Client called us up and said, if this guy ever shows up again. I'm firing you on the spot. That culminated in a tremendous shouting match in which the, my partner said, it's you or me.

You buy me out or I buy you out. And I said, okay, why don't you buy me out? Three months later, he comes into my office and he said my doctor advises me that this would not be good for my health if I were to buy you out. So why don't you buy me out? So another three months go by and I raised the [00:06:00] money, yada yada.

Every time we had a verbal agreement, he kept on front loading it. He wanted more and more money, more and more money. And I said, I'm not going to give you the earth, the moon, the stars, and the sun. It's just not worth my while or your while. So we agreed to literally separate the agency in two those who believed digital was the future, went with him and he created a whole new brand and a whole new firm.

Those who believed in what I was doing and what Pepper was doing, stayed with me. So acrimonious as hell divisive as hell. We got through it now. I thought I would have to put pepper com into chapter 11. I thought I would have to declare personal bankruptcy and I came close to doing both. Of the seven senior executives, five came along with me.

So the core of pepper com, remained intact. We lost very few clients, very few people, and we rebounded. And I could fast forward to why this ended up being the single best thing that ever happened to me. Professionally. 

Michael Lee : Yeah. Let's pause on that and make sure that I [00:07:00] understand all the details, because there's a lot going on here and I'm both in a corporate sense and in a financial sense illiterate.

So I wanna play some catch up here. It sounds, at least as far as I can understand it, it sounds like this is a classic movie divorce in the sense of it's so acrimonious that you had to split everything in two, sometimes with a chainsaw to take that to the couch. Do I have that right? 

Steve Cody : You do.

And there was a personal side to it as well, Mike. I could argue that within, within the first 15 years or so, we were arguably best friends, confidants, et cetera. So there was a personal element as well. 

Michael Lee : Yeah. And on that same subject of divorce, sometimes the easiest question to ask is the hardest question to answer, especially if you're as close to the action as you and your business partner were, which is what happened.

Steve Cody : Yeah. He became in his own mind smarter than the guys on Wall Street. I wouldn't liken him to the Wolf of Wall Street, but he certainly saw himself as the smartest guy in the room financially, 

Michael Lee : Uhhuh 

Steve Cody : and we're both marketing guys. So he thought he knew what [00:08:00] was best from a financial standpoint and he thought he knew where the.

Market was headed in terms of PR becoming a declining discipline and digital becoming the new, superstar, if you will service offering. And it turned out to be just the opposite. If you fast forward to 2025, 

Michael Lee : and there's a distinction here between the content of what is being said, the content of the proposal, but also the tone and the speed with which these actions are being taken.

In other words, it seems like there is an agreement in place. There are many steps towards finalizing that agreement and then. At the 11th hour. Yeah. There is a shift to the 

Steve Cody : show. Yeah, I would liken it. Yeah. I would liken it to, cruising along the Garden State Parkway in my beloved New Jersey at 75 miles an hour and suddenly jamming on the break to zero and, Hey what just happened?

Why are we taking this exit? 

Michael Lee : And that kind of impetuousness or rashness would happen always at the 11th hour. Which makes it difficult. It really to separate the impetuousness from the content. Maybe digital is a good idea. Who knows? 

Steve Cody : Exactly right. It was [00:09:00] totally out of the blue, out of left field.

You choose your expression. 

Michael Lee : Sure. 

Steve Cody : And I was deflated, but our senior executive team were just they were in a funk for weeks because they were all looking forward to new opportunities, obviously cashing out with the options that we had given them. So the entire company just came to a standstill.

Michael Lee : I'm sure that you felt some relief to put words in your mouth when this was all finally over, but it had to be immensely painful. You mentioned a second ago that this was the best thing that ever happened to you. A. Tell us a little bit about that, but B, how long did it take you to really accept that this was good?

Steve Cody : A long time and I, to be honest, I still have PTSD. I'll still have, a wake up in a cold sweat. So it was incredibly acrimonious incredibly divisive. This guy that I thought was, among my top friends became my public enemy, number one, and vice versa. And rebuilding pepper com and investing with my wife's support.

Millions of dollars in my own [00:10:00] money to keep the business afloat. Reaching out to senior executives in my field who were consultants and who could help me figure out how do I keep this boat afloat? How do I keep my people motivated? How do I hang on to clients? So I surrounded myself with a circle of three or four top financial strategy.

Marketing advisors who really were my dream team, so I could not have done it alone. Mike and I also had five senior executives who came along with me and believed in me and Pepper Con. And without that, I, God knows where I would be, where I would be right now. Somewhere in Charleston Harbor.

Perhaps. 

Michael Lee : Did it hurt your trust in people? 

Steve Cody : Not in people generally, it but it was like, it was like, your wife or your girlfriend or your significant other 

Suddenly just turning on a dime and, stabbing you in the back. So it, it hurt. It hurt and it still hurts to discuss it to a degree, Mike.

Yeah, it really does. Yeah. 

Michael Lee : Yeah. It seems at [00:11:00] least if I was you, I would feel like I was in married to a stranger territory. What has been going on that I haven't been seeing all of this time that has led to this moment? 

Steve Cody : Yeah it's a great point. I often second guess myself how could I have been this oblivious?

How could I not know? He was charting a totally separate course, one big learning lesson was. In the first couple of years, we would always commit to writing, in writing what our strategy for the coming year would be. And as we grew more and more successful and more and more complacent in his role and my role, I was Mr.

Outside. He was Mr. Inside, that we no longer put things in writing. So I assumed that we were on the same page when in fact we were a book or two or a library apart from each other. 

Michael Lee : Are there generalizable lessons here for you, or do you think this case is. A black swan event. 

Steve Cody : I don't think it was a black I think based on all of my readings about what's going on in business, I think and the rise now of co-CEOs that I'm seeing in business and industry, which I see as a double-edged [00:12:00] sword to be sure, because you've got two personalities and two points of view.

And if you're not fully aligned and if you're not constantly checking in with each other to make sure, hey, whatever your name is, Tom, Dick, Harry, Jane Doe, whatever. A, B and C are still where we're focused, right? And D is our aspiration. This is who we are. This is our path where we want to go, and here's the game plan to get there.

We still in alignment on that. I stopped doing that with him, not consciously, but subconsciously, and ditto on his end. He just decided he was going to become this incredible. Financially astute dude who recognized a growth industry and was going to create or recreate pepper com in his view of what we should become.

Michael Lee : If I'm understanding you correctly, it sounded like you, at least in a defacto sense, had a co CEO kind of a role as co-founders. 

Steve Cody : Absolutely. Yeah. We we, day one, we sat down in his apartment. He agreed to name it after [00:13:00] my dog. And I said, look I don't like math, I don't like finance, I don't like accounting.

Why don't you get us set up as a business? I'll go out and bring in clients. And that's the way those roles, continued. And so I, I. It, for better or worse, often, many times worse. I was pepper com to the outside world, whereas within pepper com, if you were looking for a raise, a bonus or whatever.

Ed would be the guy that you would go to and plead your case with. And Ed would be the guy who would come to me and say, I think we need to upgrade in terms of space. I think we need to expand here. He and I both had visions for global, so we opened up offices overseas, et cetera. But he was the numbers guy.

I was the image and reputation guy. He was the numbers guy. 

Michael Lee : You had a classic restaurant in front of the house, back of the house split. 

Steve Cody : Correct. 

Michael Lee : What did you learn if I can follow up on this, what can did you learn about conflict disagreement, management, and here I'd like to distinguish between kind of proactive strategies, [00:14:00] norm settings, so that you and I don't necessarily get into a disagreement.

Or if we do, there's some guardrails around. Arguments we make introduction of evidence, how we save the relationship, how we care for each other, and then of course, reactive strategies for what to do if somebody pulls the pin on the grenade. So 

Steve Cody : yeah I think it's a great question, Mike, and I think it's, what I came away from almost immediately with my senior management team that stayed with me is to be much more open to listening to their points of view much more open to sharing what I thought needed to be done and how it needed to be done, and making sure we had a consensus. I wanted to make sure we, and there were six or seven of us, the senior executives, we were all on the same page and in lockstep, and we knew what a huge.

Mountain we had to climb in terms of rebuilding trust first and foremost with the employees who the survivors, if you will who stayed with us and why they should continue staying with us because I was very concerned about a brain drain and if the brains left, the clients would [00:15:00] leave as well.

It was critically important for me to sharpen my listening skills and to become far more open to, Hey Steve, that makes no sense whatsoever. I wouldn't do that. We, and I can't tell you, Mike, how many times two or three of my senior execs would come in and say, Steve, you're setting the wrong tone.

You're not, you didn't say the right things in that most recent town hall meeting. Here's what we think you should do differently. And Mike, I cannot tell you how open I was to change. Not that I was completely shut down before, but I thought I knew what to do. I knew what to say. I knew how to say it.

And all of that had to be recalibrated. And recalibrated for the good. I might add, 

Michael Lee : Was that openness or your move towards openness, a result of your experience? 

Steve Cody : A absolutely. I think the word I would use is vulnerability, 

Michael Lee : vulnerability. I, 

Steve Cody : I I I was not at all. I, I was, I was bake basically the emperor who was, with no clothes.

All of a sudden I was this, I went from being this superstar in the industry to somebody who was [00:16:00] trying to keep together, a, an airplane that's lost three of its four engines, if you will. I'm not Mr. Wonderful anymore. I am Mr. Showing vulnerability and embracing vulnerability and just saying, I have no idea what to do.

I really need your advice here. That became my mantra. 

Michael Lee : And was that a result of the breakup or the experience with Ed? Because if I'm hearing you correctly, it didn't sound like from my outside vantage point, it didn't sound like the divorce was because of your failure to listen. 

Steve Cody : No, but I was oblivious to what he was up to and what he was thinking.

For some reason, I was not paying attention. He wasn't communicating with me, so I didn't know, but I didn't know enough to ask either. I assumed. And we all know what happens when you assume. I 

Michael Lee : follow you. I follow you. So then how do you encourage, I'm working directly under you.

What are you doing to encourage me to give you constructive criticism? 

Steve Cody : I'm [00:17:00] asking you to come into me physically, virtually, otherwise, and let me know your thoughts. I love it if you could come in and say, have you ever thought about doing it this way? Or, how come we don't do this? Or, looking back at that staff meeting we just had, why did you say X after you had said y.

So I really encourage, I, open door policy is a whatever, aphorism, euphemism. But I made sure the door was. Always open. And I made sure all of the junior employees knew that as well. I wanted to hear from them. I wanted them 'cause they are the lifeblood of the business just as much the mid as the mid-level and the senior executive.

So I made it very clear to everyone. Please let me know what you're thinking. 

Michael Lee : Welcoming thoughts, but also welcoming in a way, disagreement. And it's one thing, as you say, it's one thing to adopt the aphorism. It's one thing to have an open door policy. And that's another thing to actually have people think that they can walk through that open door and tell me what time it's, 

Steve Cody : yeah I've, I've had countless clients that I've worked for, I've had countless bosses before I started my own business [00:18:00] who basically had the, my way or the highway attitude, and I always rebelled against that and found that very unmotivating if you will.

So it, I've never been a my way or the highway guy, but much more so post-divorce. Very open to new ideas, very open to people who have said, why don't we try this? Let's do this, let's do that. And if I thought it made sense, if I didn't think it made sense financially, strategically, et cetera, I would say, love the idea, keep it coming, but we're not going to do that because of X, Y, and Z.

So I would have sound financial or strategic reasons why I didn't want to pursue someone's idea, but I wanted more of those ideas. 

Michael Lee : Where are you at in terms of the divorce? Does it still sting? Are you move past it?

Steve Cody : I I'm well past it, Mike, and there are the occasional, nightmares that still happen every six, nine months or whatever. It had a very happy ending because with my support. Group and they're not a support group, strategic managers who are now running the business on a day-to-day basis. [00:19:00] But we rebuilt to the point where we were red hot again, and I had so many offers coming in and I thought it was a great time to turn over the reins to this next generation who had stayed with me and were totally loyal to me.

And I just, I, we just had a tremendous deal with a global public relations firm. That treated us beautifully, continued to treat us beautifully. I made financially more money than I ever dreamed I would make, and I'm now working part-time for my former firm Pepper com, as well as the global firm that acquired us.

So it's, in terms of Shakespeare's all as well, that ends well best possible outcome from a tragic, tru, truly tragic event. In terms of both the personal side of it, the emotional side of it. There, there were people, all the collateral damage that senior executives, were feeling the entire organization went through hell, to be honest with you.

Michael Lee : As we close, I'm interested in hearing your kind of 10,000 foot view of [00:20:00] this, because I could make a lot of meaning from the story that you've told, but I'm curious as to how you would distill it. What's top of mind for you? What are the most salient lessons, specifically in terms of encouraging healthy conflict?

Really listening, actively listening to other people to understand their points of view and balancing vulnerability and leadership. 

Steve Cody : Yeah. I'm actually meeting with two people on Friday who have just started their own consulting business and they asked me to kick the tires of their business plan.

So I am going to say to them what my answer to you would be, and that is make sure. You are over communicating with each other. Make sure that you not only have a business plan, but that whatever the time period is, every three months, six months, nine months, make sure that you are on track with that business plan.

Make sure you're, if you need to update one or two of those objectives, goals, strategies that you do in terms of being open to disagreement, that's going to happen. You're going to have a time when you completely disagree. [00:21:00] One of you will let the other person down, that's going to happen as well.

So be open to failing in each other's eyes. Be open to forgiven forgiveness with each other and and in terms of responsibilities, it can get very, it we're in a creative. Field I am in, they're in a creative field. When you have two people who think they're highly creative, that can cause all sorts of other conflicts.

Luckily with my erstwhile partner, he deferred to me on the creativity part. I defer to him on the financial and business part. The people I'm meeting with on Friday are both creatives, so that makes it even more complicated in terms of. Dividing and conquering and making sure that the whole is greater than the sum of its parts.

So again, it's just, it's over communicating. It's showing vulnerability, it's admitting mistakes, admitting that you, the two of you and your new firm will make mistakes and what are you learning from each failure? That's what I've really embraced since the my business divorce Mike.

And that is. Okay, what did I learn from that [00:22:00] major failure that I just had? What did I just learn from this? What did I learn from that? I'm actually trying to write a co-author, another book I've done two of them so far, but Learn lesson lessons, learned from Failure and my, my co-author is a comedian, so he's gonna be talking to entertainers.

I'm gonna be talking to business leaders and what are those lessons learned? And we're gonna try to inject a little humor. Because hey, you only go around once and you've got to smile and you've got to laugh. No matter how dark or dreary the day is or how bad the setback may be, you have to find an outlet.

And for me, self-deprecating humor is my outlet. 

Michael Lee : Yeah, I heard Stephen Colbert say once that in the face of tragedy, the grieving really have, but two options. One, to let it consume you, and two, to laugh at it and find the absurd humor in it. As we close I'm reflecting on the lessons that you're gonna give these folks on Friday about their business plan and you kicking the tires.

About being open to disagreement about failing each other perhaps, but being open to criticism about disagreement and I, it struck [00:23:00] me that I wouldn't change very many of those if I was giving the same advice to two friends or to two people who are married or to any other kind of partnership. 

Steve Cody : Yeah, it's, that's what it is.

It really is a marriage. And especially if you're starting a business together it's akin to a marriage and there has to be an understanding. There has to be an agreement, there have to be rules, there have to be swim lanes. There, there have to be all sorts of understandings, and there has to be a whole lot of empathy and vulnerability.

Michael Lee : Steve Cody, thank you so much for being on when we disagree, 

Steve Cody : Mike. My pleasure. Come back. I would come back any day of the week and I would disagree with you. It. 

Michael Lee : When we Disagree is recorded at the College of Charleston with creator and host Michael Lee. Recording and sound engineering by Jesse k and Lance Laidlaw.

Reach out to us at When We [00:24:00] disagree@gmail.com.