Why AI Won’t Fix a Broken Company

0:00 This is Beyond Confidence with your host, Divya Parikh. Do you want to live a more fulfilling life? Do you want to live your legacy and achieve your personal, professional, and financial goals? Well, coming up on Divya Parikh's Beyond Confidence, you will hear real stories of leaders, entrepreneurs, and achievers who have stepped into discomfort, shattered their status quo, and are living the life they want. You will learn how relationships are the key to achieving your aspirations and financial goals. Moving your career or business forward does not have to happen at the expense of your personal or family life, or vice versa. Learn more at www.diviapark.com, and you can connect with Divya at contact at divyapark.com. This is Beyond Confidence, and now here's your host, Divya Park.

0:46 Good morning. It's Tuesday, and of course I'm thrilled to be here with you all. And just want to share thank you, thank you, thank you for those who have got our books, especially the most recent one, the AI Agency, because AI is here to stay. And not only that, AI is also coming for the corner office. It was first we were talking just about the layoffs, but now we are finding that a lot of CEOs are being booted out of companies. So if you're looking to stay at the front edge of AI, and you're ready to keep your soul, then this book is for you. So thank you to those who have picked our books and left us a review. Thank you, thank you, thank you.

1:36 And without further ado, let's bring in our guest, Malcolm Hergen. Thank you. Thanks. Really, really appreciate to be invited to the show. And yeah, welcome to all the listeners. Welcome. Thank you for that. So let me ask you this. Do you recall a moment from your youth or from any part of your life that left a very positive mark on you? That left a very positive mark on me. That is a very good question. I think what I always liked was when I was able to provide an environment where people could thrive. So An area that really still in my mind is when, you know, somebody left my team to join another company. And five years later, he called me up and said, look, I enjoyed working in that environment so much that I want to come back. I want to come back to the team, to the environment.

2:46 And he said he believed that I was part of creating that environment where they could really do a fantastic job and enjoy time while doing a good job. Yeah, and that's powerful. And here's the thing. So many times we do hear, like if you look at different studies, that so many people leave their jobs because of their bosses. And to hear that somebody wants to come back to the company because of you, how rewarding that is. So tell us your journey into the corporate management. So, yeah. Originally, I started my journey as a techie. I studied microelectronics and wanted to become an inventor, a developer of great things. And then during university studies, I worked for a small software and hardware development company that was around the corner and was able to finance my studies. And Finally, I stayed for 12 years in that company. We grew from, I think, initially when I joined, we were 12 people only.

4:01 And then when I left after 12 years, it was a 150, 160 people company. So I learned a lot. And this was my start moving away from just tech. to seeing other business functions, and I moved then into sales, marketing, and operational leadership. So after those 12 years, I've seen a number of bigger and smaller companies. I've worked in companies as big as Oracle, massive company, but also for mid-sized tech companies in the range between, I would say, one and a half and 6,000 people. And I learned a lot during that journey. But what I've also seen is that most companies are struggling with the same things, you know, basic principles and also with an organizational structure that is not really supportive of the great people that they are working with. So this is really now becoming my passion, really to work on helping companies to build better organizations where people can really thrive and have fun on the way. I'm really passionate about that.

5:26 So you brought up a good point that most organizations keep on doing wrong things that are similar across different industries. So can you shed some light as to what are some of those things? Yeah, a classical one is An organization that is built like a machine, the classical matrix or siloed organization where you have a global sales function, a global marketing, a global customer success, a global product development arm. And they have different KPIs. And instead of working together towards a shared vision, they're working against each other. They're blaming each other because they need to fulfill on their KPIs and KPI tracking becomes more important than really serving customers. And I think this is becoming even more relevant when you look at the recent development of AI, right? So I see a lot of companies under pressure implementing AI into their organizations and they are signing up for big AI contracts, but since the organization is not right and people are not really working together, they cannot figure it out themselves.

6:52 So typically what I see is very minimal improvements with AI. And if you just imagine for a moment you would have a company that is more working like an organism instead of a machine, So you would really treat this as, oh, we have great people. Now we are adding greater tools. So we should be able to build something amazing and to be really an amazing company. But instead, if you're just looking at, oh, I can save cost by implementing AI and I still keep this kind of structure that is not really a people-centric structure, where you don't trust anyone, you know, the benefits of AI will be minimal.

7:46 You're absolutely spot on about that because if you're not fixing the foundation, no matter, let's just kind of take an example of a house. If you don't fix the foundation and no matter how strong of pillars, stainless steel pillars or anything that you're using, something happens, if the house is shifting or settling, things will go south. It will break. So the band-aid philosophy doesn't work. And most of the companies are definitely going there like, you know, oh, in the rush of being AI native, in the rush of being AI first. They're not looking at where to implement, how to implement. So you talked about something very powerful you said about working like an organism so going from silos to being that collaborative collective what is the path to that.

8:48 So the number one in my view is having a shared vision so if you just have a vision that is marketing speech and doesn't doesn't inspire anyone it's worthless Plus also an inspiring vision makes it easier for people if you distribute decision making and give ownership to the people. It's hard if you are not clear, you know, how to decide. But if you have a vision that brings the people together, you know, this organism, then they can decide for themselves what's the best way to have our vision fulfilled. But therefore you need a guiding kind of a north star that is strong enough that you can move from this very stiff classical organization style to a more organism-like organization where people can make their own decisions, can drive things on their own and have an idea where where to go right so in this process you cannot just simply say okay i i remove my old organization style and and throw a new one at them But you have to unite the people with a shared

10:21 vision that people want to follow and that they are inspired by. Because they're all working towards the same common goal. There's a shared goal and it's not about that they're competing against themselves. It's more like, okay, let's say our target goal is to reach 20% increase in revenue. then it doesn't matter how many leads you're bringing in, if you're talking about sales and marketing, or how many closings you're having, how many customers you're retaining. What is your go-to-market strategy? What you're doing is you're pulling all the elements together to work towards that shared goal. In your experience, do you know of any actual existing companies that have achieved successfully?

11:11 Well, there are internationally... a number of companies that have been really radical in how they think organization. So one is a US-based company. They are the largest tomato processor in the world. They're called the Morningstar Company. They've been founded in, I think, the late 70s of last century, right? And their founder had... the idea or the concept to have absolutely no middle management. So what he did was he implemented a structure where all teams are self-organizing. So they make the decisions. There's no approval workflows. There's no overhead and no control in a classical way, right? There are measures. So accountability doesn't move away, right? But the people in those teams, they are accountable for the results. And, you know, I personally, you know, I was fascinated when reading more into that, they have been an absolute, so when they started, everybody was thinking, this doesn't work, right?

12:36 But reality is, Until today, they are the most successful company in their space. And other companies followed that, like a Chinese company called Heia. They have been in financial trouble, not doing well, so they brought in a new CEO. And this CEO restructured from a metrics organization towards a self-organizing team structure. where there's almost no middle management. And as a result, they did a fantastic turnaround, right? They are highly profitable now. And they took over the home appliance business of GE Home Appliance, General Electric. I mean, this is really proof that, you know, if you're building companies more around people than around processes and hierarchy and control, that the results will show up. And one thing I also, you mentioned revenue, right? I think most companies look at revenue as a goal. I believe revenue is an outcome of great people working towards a shared goal. It's not a goal itself, right? If you, like Amazon, if you're vision is to provide the best customer experience in the

14:08 world right that is a goal and that goal will help you to grow and revenue will be an outcome and profit will be an outcome but it's not the goal in itself. Absolutely because unfortunately with the stock market in the u.s a lot of companies are thinking short terms that how did they perform every quarter And the reports are coming out. And that seems to be the driver. But as you mentioned, that if we look for more towards a goal that addresses the causality, like, you know, for example, if you're not getting good customer service, people are going to be moving away from your company. So if you address that satisfaction and bring meaning to the employees, you are going to have increase in revenue as a side product. So we've talked about that as an example of what is wrong or what is not aligned in the companies. Now, talking about the alignment, so many companies, whether it's operations or even anything else, people keep on setting meetings. I keep on hearing from my clients over and over again that their biggest energy drain are the meetings. What are your thoughts on that?

15:33 Yeah, 100%. And same happened to me. In my last corporate job, I was spending probably on an average week, 25 hours minimum in alignment and reporting meetings, right? And I felt so useless, right? Because all the time I spent in those meetings and those meetings weren't really driving anything new not solving any customer issue not providing anything towards customers they were more collecting KPIs right to report them upwards and then aligning on things that were not aligned but it was not working meetings towards something we want to build so that was really really frustrating if if i feel myself i'm i'm very busy but i feel like i'm not really contributing much to to the success of the company right because it's it's just reporting so for me this is really tough and and this is an element of as you mentioned if you're spending all your time in meetings If they would be productive

17:05 and you would be sitting together to brainstorm on how to solve a problem, great. But if it's just to meet, to align and to report, it's frustrating. Yeah, absolutely. So what are some successful workarounds there? What it needs is a lot of courage because it needs to break the mechanism of communication command control and fear-based leadership. So it really needs leaders to step up. And I haven't been always great at that, right? So it took a lot for me to say, no, less KPI calls and more, we go to a place, an offsite meeting for two days, We take our challenges, put them on the table, and we will not leave the room until we have an idea how to solve them collectively as a team. Because we all have different views. Nobody, not me, not any other manager, not any portion of the team would have the full view, the full picture, and nobody could develop a solution on their own. So really getting together putting everything on the table, sorting it out, running a workshop on, you know, how could we do

18:37 things differently and how could we solve together the most challenging issues that we have. And then go away with a clear commitment, an idea how to solve that and a clear commitment of the team to do this together. I think that is the biggest change you could have. Absolutely. And one thing that you mentioned, and I've seen that with several of my clients, also that if you're going off-site, you're not being interrupted by your routine, whether it is Slack messages, emails, or Teams, whatever tool that you're using. And also there is that outcome That you're looking forward to, that we are not getting out till we get this resolved. So you're not just kind of pushing it off to the next meeting, next meeting, next meeting, because that continuity can create that dependency. So you talk about KPIs and outcomes and outputs. Tell us, how do you differentiate between them?

19:50 Well, outputs are. You always mention that, you know, there is a focus on outcomes rather than output and KPIs. Yeah, 100%. So KPIs are good for measuring if what you're doing is bringing the results that you're expecting. So I think the right KPIs can be very, very helpful to understand are we on the right track. The difference between outputs and outcomes are outputs are how busy you are. Let's say your job is creating marketing materials, right? So if you are creating 200 pieces of content, you would have a very high output. If nobody's reading them or interested in that output, it doesn't matter because, you know, you've created output. Now, if you're more outcome-based, you could create five pieces of content, but they are real game changers, right?

21:01 You spend a lot of effort researching stuff and you come up with something really meaningful and helpful, right? So on the one side, you could have very high output with a very low outcome because it's not the right thing you're doing, or you could do the right thing, be thorough about that, and produce a high outcome where customers or prospects say, look, this is really great. and we trust you, and we want to work with you. So this is really the difference. Output is being busy and producing a lot of something, and outcome is you're getting closer to your shared goal.

21:54 Absolutely, and that goes back again to the heart of those meetings where you're reporting, oh, yeah, I did this, did this, did this, because the focus is on those KPIs, KPIs that don't matter. So... As you're talking, what you're having organizations go towards is taking that shift, that rather than just focusing on busy KPIs and busy outputs, start with the outcomes. And that goes back to what you mentioned earlier. Rather than talking about the revenue, talk about we are going to be the best customer service. Yeah, or whatever else your original vision was. If you're producing video conferencing software, it might be we are bringing people together as if they would be sitting together in a room or whatever your vision, original vision is, right?

22:55 But a vision is, revenue is not a vision. Yes, absolutely. And So tying everything together, what we are saying over here, if I'm hearing you correctly, is that if companies were to focus on the outcome, that are purpose-driven, which are anchored in the experience they're providing to the customers, then everything else falls into place. Yes, strongly believe in that. And on top, I think that would make implementing... AI much easier.

23:38 Absolutely. So now you talk about the leadership operations. We have touched on a few things. What are some of the other things that companies can put into place so that it brings in accountability along with engagement and success? Yeah, so I start with In my book, I start with the original vision and take a look at, you know, the people. So an internal view, what people do we need? How do they work best together? And, you know, look also beyond the hard skills of, oh, there's somebody with 20 years experience in this area. But what are the personality traits of that person? of that individual, right? Are they more analytical or are they more creative? You know, what type of person do I have and in which role would they flourish the most? Then I also take a closer look and this is, I think, fascinating. You would think that most companies understand their ideal customer profile very, very well. Now, from my experience, that is not the case.

25:00 So an ideal customer is not the customer you wish for, but it's the customer that has the most benefit out of your product or service, right? They love it. So they are your ideal customer. And what I see a lot is, oh, we need a better ideal customer profile, more data is collected. And Data is only one portion, right? You can build up avatars on the basis of that. But if you're not talking to your customers, right? How do you know your assumptions are right? So what I see a lot is that you have huge data sets on customers and prospects. And millions are spent on analyzing that.

25:53 But there's no time and money to talk to your customers. Which is kind of funny, but an absolute reality that I'm seeing. Yeah. And one would think that it's a simple thing that people would know that when you talk to them, understanding them, what are their pain points? What are their dreams? What are their fears? What are some of the hurdles that they have faced before with the other brands? What are the desires? What do they want? And that goes back to the heart of what you said, that it's about making the customer happy, who's most happy with your product, because a happy customer will share. Yeah, 100%.

26:51 And sometimes it's also how are they using our product or service? our assumption might be totally wrong, right? If I'm selling you something, you might be, you know, you might like the product or service, but maybe, you know, the way you consume is totally different from my original assumption. So I better learn on why you feel this is of value to you. Absolutely. So now we've talked about our customer experience. Coming back to you are a huge proponent for investing in people.

27:37 And I'm totally 100% behind that because when you invest in people, they definitely rise up to the challenge. Now that said, there can be issues in hiring. So what are some of your experiences and hiring the right. Talent so one is they have to love what they are doing right if if people just come for the money and and don't enjoy the role then it's it's a difficult thing i also think if if you're just looking at past experience and not at not spend a great deal of time on finding out what their talents are.

28:28 So are they good at communicating or are they better in analyzing numbers, right? Then really finding that out, understanding your candidates and then putting them in the right role. I remember I've made a mistake in the past where I, you know, I was looking... for a sales manager, right? And that person was a very bright person. He understood our solutions immediately in the first conversation. So I was fascinated, right? He could tell me immediately the ins and outs of our solutions. He had done his research. He was ambitious and a very talented and bright guy. But What I overlooked is he was not a people person. So having him in a customer-facing role was absolutely the wrong thing to do. People didn't want to to work with him.

29:41 He was much better in understanding things quickly, so I should have hired him for an internal role, but not for a customer-facing one. And this is something I figured out later on, and... you know, there was big regret because he didn't feel comfortable in his role because he was not successful. And, you know, my expectations on him were, were tough because he couldn't, he just couldn't become successful in what he was supposed to do.

30:23 Then how did you deal with that situation? So we had a long conversation and, and, I remember that meeting vividly. It was locally. We were sitting in a room and he felt uncomfortable because he knew he was not delivering what was expected. But he was expecting me to blame him and to criticize him. And I said, look, what I realized is, so things are obviously not going the way we both want. And what I see is you have big talents in this area, but you're not that talented in the other area. And there's no value, you know, there's not higher value in one or the other.

31:18 But I think you're completely in. The wrong role. And I know you've been in similar roles before, but my personal view is you don't enjoy it, you're fighting hard, and you'll never be a superstar in your role. And it took a bit for him to take that on. And so we have been discussing that for about an hour, and then we agreed to meet again after a week, because he needed time to think again, right? Exactly. after a week we agreed to sit together again and he said i think you're right um this isn't ideal for me and would you have he was scared to lose his job right he could accept that this role wasn't ideal for him but he had family and and you know was afraid to um to lose his income so i said look why don't we try something out um We can definitely meet your talents in another area. What about switching roles and try that out for six months and see whether you feel like this is more like what you want to do. I'm more than happy to invest in you, right, if you are okay with it

32:48 and if you are up for it. And, you know, we tried that out. He was really happy in his new role. and he was an excellent contributor to the company. Yeah, so what I'm hearing, Hergen, is that you didn't shred him to pieces. You didn't come back with blaming him in the name of critical or constructive. You know, we talk about critical feedback or constructive criticism. What you did was you opened up the space, a safe space where he could play, where he could be successful. And you normalized that it was okay for him to be not a superstar in the role he was because his aptitude was not there. But at the same token, you opened up another venue for him and he shone like a star. So that tells us something like that when you're invested in your employees, they'll invest back in you.

33:57 Yeah, and you know, there is a lot of conversation about hiring A players, right? Yeah. So the question is, what are A players? To me, an A player is somebody who is passionate about something, right? And then you give that person the role where you can live that passion. So it's not specific people, but it's the matching of a role with a person that has got the talents and passion inside that area. And what I like to do is when I have interviews, I ask people, let's say I... I remember I wanted to hire somebody managing a marketing team. And I wanted to understand, you know, what they are passionate about inside marketing, right?

35:09 What kind of books they read about marketing the last two, three years. What, you know, what other marketers they are following, what inspires them, what trends they're seeing. And I sometimes find it shocking if you have somebody who studied marketing 25 years ago and hasn't read a single book about marketing and doesn't know any marketing development, right? Then I don't understand. My question becomes immediately, why are you in marketing if you if you're not interested in it. And let's be honest, right? If your knowledge is 25 years old, right?

36:04 We're looking at a time where, you know, the internet was young. There was no real social media. So if that is your background, and you're not even interested enough to read a single book on your profession, then I doubt that you're passionate about it. Absolutely. That's a very, very powerful point. So if you were to summarize a few things that companies do that either makes them go up or down, what would those be?

36:45 Yeah, number one, a clear vision, an awesome star. Yeah. spend a great amount of detail in defining the job roles and finding the right people so if really somebody who's talented in understanding their characteristics of people understand your customers that is also really key and build an organization where people can can work together and thrive that is more built like an organism and not so much like a machine that those would be my strongest points i would. Say absolutely so tell us how can people connect with you where can they find you name of your book your website.

37:35 Yeah sure sure so i'll um i'm most present on linkedin so um they can find me uh probably under the link My website and the website of the book is theleadership-os.com. There you'll find information about me. You can contact me. And there's also a section you can just leave your email address and download a great set of templates for analyzing where am I with my company? You know, how do I score? on being ready for AI or for modern 21st century company style. So you can download them on the website as well.

38:21 Well, fantastic. Thank you for sharing that. And thank you for sharing your profound insights and knowledge. Anything else you'd like to share? Well, I would like to thank you for, for the time and, um, the opportunity to be on your show and to connect with your listeners because this is really a great conversation and you know as i said in the beginning i'm passionate about building better companies and i like what you're doing with your show in really educating people and how to run better businesses so really thank you and i enjoyed the conversation a lot.

39:05 Absolutely My pleasure. So thank you, listeners, for being part of our show, because without you, the show would not be possible. Please reach out to us like you always do, and I love that. And let us know, how can we serve and support you to live the best life you can? And thank you, on Attack Genius. Be well and take care. Until next time. Thank you for being part of Beyond Confidence with your host Divya Park. We hope you have learned more about how to start living the life you want. Each week on Beyond Confidence, you hear stories of real people who have experienced growth by overcoming their fears and building meaningful relationships. During Beyond Confidence, Divya Park shares what happened to her when she stepped out of her comfort zone to work directly with people across the globe. She not only coaches people how to form heart connections, but also transform relationships to mutually beneficial partnerships as they strive to live the life they want. If you are ready to live the life you want and leverage your strengths, learn more at www.diviapark.com.

40:08 And you can connect with Divya at contact at divyapark.com. We look forward to you joining us next week.