Why CEOs Shouldn't Try to be Rock Stars
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This week, leading business publications reported that Parker Conrad, the former CEO of Zenefits, resigned amidst a compliance scandal. Zenefits provides HR software to small and mid-sized companies in exchange for their health insurance business. Zenefits acts as the insurance broker for the company and receives the corresponding commissions. In exchange, Zenefits provides its customer with HR software at no cost. It’s an interesting concept. A small company gets the benefits of a modern HR software system, and the only hitch is that they have to let Zenefits run their open enrollment process, as opposed to their former health insurance broker.
I was interested in this story for a couple of reasons. First, I had looked into Zenefits a few months ago for our company, but I became frustrated by their high-pressure sales tactics, and I could never get firm answers on whether they were properly licensed in our state, and exactly how they would run our open enrollment process. So, naturally, Mr. Conrad’s resignation over compliance issues piqued my curiosity. Secondly, I follow and write about leadership issues, and Mr. Conrad’s plight reminded of me something that has always bothered me. Why is that when some business people finally gain the power and position they have been striving for, they stop acting like grown-ups and start acting like celebrities? Fame is certainly a quixotic drug.
Zenefits has a good business model. Their target market is under-served. There is a need for better HR software, and to get that software into the hands of small businesses who need it most. It’s an exchange that makes both sides better. When I went to find out who our insurance broker was, no one was quite sure. So, making the change wasn’t going to be painful on a personal level; we would be replacing someone that no one knew. I am sure the same holds true for other companies.
The stars are aligning for Zenefits. The real challenge, however, is that selling health insurance is a highly-regulated industry and the rules vary from state to state. Compliance is paramount, and paperwork must be complete and correct. Zenefits does not need a “rock star” CEO. It needs maturity, discipline, and attention to detail. It needs a business professional that is dedicated to his or her craft. For all appearances, it looks like Mr. Conrad’s successor, David Sacks, has that type of mettle. I am hopeful that things will work out for Zenefits.
Mr. Conrad is not alone. Others come to mind. Michael Jeffries was the CEO of Abercrombie & Fitch. Jeffries’ strive for fashion and fame, however, nearly crippled the company. Ask American Apparel how things were when a rock star was in power. Ken Lay was a master promoter and showman, but charisma and charm can not take the place of discipline and restraint.
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Western culture seems obsessed with staying young. Yet, it is experience and wisdom that are needed most in today’s business environment. I am sure Parker Conrad has many strengths and he is probably much more talented than I am. I get it; we don’t know the whole story, but we are still able to learn a bit from what happened. Rather than channeling what we see on TV, we might be better off channelling Warren Buffett. Robert Lenzer once wrote this about Mr. Buffett:
Buffett is a man of character, unequaled in the investment business. He folded his private partnership in 1969 because he didn’t want his investors to be rocked by the bear market he saw coming. Unlike hedge fund biggies and the cowboy traders on Wall Street like Long Term Capital, Buffett would not use leverage of 50 to 1 in hot shot shoot-for-the-sky killings. He has had the self-discipline — call it wisdom — to stay well within the circumference of his abilities…[.]
My wife has a saying when she feels her level of exasperation rising with our children. She says to me, “Someone has to be the adult in the room.” The same principle holds true for CEOs and for mid-level managers. We all need to stop acting like rock stars and start acting like the professionals we strive to be. Someone has to be the adult in the room. That’s exactly the message that was delivered by Mr. Sacks to Zenefits’ employees a few days ago.