It Starts With You: Evolving Your Leadership as Your Company Grows

Full Transcript

Sachin Dhanani: That failure, that is the sort of thing that you’re worried about the most, but that’s the biggest and the greatest opportunity we have as leaders, because, as any entrepreneur will say, it’s from our failures that we’ve grown.

Darius Teter: There are thousands of books, podcasts, and courses out there on how to be a better leader. But the best classroom is your company.

Sachin Dhanani: And if you’re going to build better leaders in your organization, you have to have the ability to make learnings from the mistakes that I make or they make, or whoever makes. And I think this is the key ingredient that we’re going to take forward in any organization.

Darius Teter: Welcome to the second season of Grit & Growth from Stanford Seed, the show where Africa and South Asia’s intrepid entrepreneurs share their trials and triumphs, with insights from Stanford faculty on how to tackle challenges and grow your business.

In episode 12, we explored the universal problem of how you run a good interview process, find great people, and retain them. Then we took a step back in episode 13, and we looked at the importance of HR strategy as a necessary element of your growth strategy.

Today, we’re going to dive into the role of you, the leader, in establishing culture in the workplace, but also how your role needs to change as your company grows. We’ve covered a lot on our HR journey so far, thanks to our guide, Claudia Salvischiani. But for all her experience, Claudia didn’t actually set out to work in HR.

Claudia Salvischiani: Actually, I must confess, it was just by chance that I landed in human resources. I studied political science. Actually, I was dreaming about working in UN and Africa and wherever and save the world. And then there was a crisis and it was very difficult to get into this organization. And my father said, “You know what? You need to start working in a company.” And so I just started working in HR.

But I had a very, very good boss. My first boss was extremely important for me. And, actually, I think that the first boss that you have determines a lot of your career and your thinking and your mindset. I developed a lot of passion for this area thanks to him.

Darius Teter: At its core, human resources is about how you get the most out of your people. That‘s also a great definition for leadership. In theory, the two subjects should have a lot of overlap, but they’re rarely thought about together. We wanted to explore that space. Can thoughtful HR systems make you a better leader? To find out, we talked to one.

Sachin Dhanani: My name’s Sachin Dhanani, and I’m a co-founder of a company called Danco Capital.

Darius Teter: Sachin was featured in our last episode, where we focused on how strategic HR helped him scale his company, Danco Capital, from just four people to 240. But to understand how Sachin’s leadership style changed over time, let’s start with how he became a leader in the first place.

Sachin Dhanani: I was born and brought up in Kenya until the age of 11, and then moved out to the UK and actually trained as an accountant. So I worked at PwC for about eight or nine years, and soon after working there, I wanted to be my own boss, really. I wanted to be an entrepreneur, and that was something that came from a family background, I’d say. My dad, my uncles, they all run their own businesses in Kenya.

Darius Teter: PwC, by the way, is PricewaterhouseCoopers, one of the largest accounting and consulting firms in the world.

Sachin Dhanani: It was quite a difficult time, actually, because I thought I was coming home, but I didn’t really feel at home. I didn’t really feel like I was Kenyan, nor was I fitting into the expat lifestyle here.

That was a hard part of my life in terms of really digging deep and understanding who you are. So being part of a corporate, like PwC, you identify with that identity. It’s easy, in a sense. You can sell yourself through the back of the big brand that you have.

At the same time here, you’re figuring out who you really are and whether you can actually have the stomach for, A, not having a job, but, B, also a lot of people looking at you and thinking you’ve not done what you’ve come here to do.

Darius Teter: It’s in the midst of this identity crisis that Danco was born, although things didn’t start out quite as Sachin planned.

Sachin Dhanani: It was an overnight decision where I flew to India. I had no idea about any sort of manufacturing. I’m an accountant. I went there, did some research, went to Germany, went to India, went to China, and then found some machinery and bought it and brought it back to Kenya.

So that was in 2014, and in 2015 we were up and running. But unfortunately we didn’t actually have an order. The government changed hands and we sat there with machinery that we’d bought to make these poles, but without any revenue or any incoming revenue or any foresight of revenue.

Darius Teter: So, Sachin, I could give you a whole long lecture about the risk profile of this business idea of yours, but I’m sure you don’t need it. But I’m also struck by the fact that you’re a bit of a gambler.

Sachin Dhanani: Really?

Darius Teter: Yeah! Let’s pack up my family and move to Kenya. Let’s do this. Let’s do that. Okay, let’s try this out.

Sachin Dhanani: Okay. Well, I am probably a gambler. I just didn’t know it then.

Darius Teter: If you listened to our last episode, you know that the gamble worked out for Danco, but there are a couple of things I find interesting about Sachin’s story. The first is how quickly things change. In 2014, Sachin’s having a crisis of confidence.

By 2020 he’s in charge of hundreds of people. It’s no wonder that he wasn’t fully developed as a leader and why the company felt so disorganized.

Sachin Dhanani: We had no org chart, we had no real job descriptions per se. So we knew what people were doing loosely. So someone in production was in production and they were doing a lot of the production work.

But at times they would also get involved with logistics, let’s say. And then I would be doing a lot of the sales and because my background’s in finance, I would look after all the finance. And my co-founder is much more engineering-based, and so he would be looking after some of that as well.

So when it came to things that were sort of in between, it would be, who’s got the time or who’s done it in the past? And let’s just do it. And so what would be the advantage is that we had lots of people doing different things, but the disadvantage was that there was no real focus. And, equally, there could be things that fall between the cracks.

Darius Teter: Something else that strikes me about Sachin’s story is how leadership means different things at different stages of your company’s evolution.

Sachin was a gambler when he started Danco. He needed to be independent, to trust his gut in order to have a business that he could grow. But those aren’t necessarily the same qualities you want in someone who is responsible for 240 employees. That’s why, on the advice of his coach, Grit & Growth’s own Laurie Fuller, he went looking for help.

Sachin Dhanani: We were very fortunate to meet Claudia. In our first call, she just mentioned, she said, “What is your objective?” I said, “Look, I’m really open to whatever you throw at me. But what I’m really looking for is, we’ve gone through this process, but I still feel there’s something missing. And we had to realize that we can’t do everything. We can’t be the people that are making the sales and actually making sure that everything is customer-focused and servicing this customer properly. And if we wanted to meet the five-year plan, we really needed to make sure that the strategy met the organizational structure, or the organizational structure met the strategy.”

Claudia Salvischiani: Normally CEOs come with, “I have this problem. Please solve this problem. You’re a problem solver, so solve this problem.” And Sachin was like, “Listen, I am not sure I have the right management team. I think we have leadership issues. And we are being very successful. We’re going to grow. I’m not sure we are ready.” This was core intuition: I need processes and support, otherwise I’m not going to be able to deliver the strategy. This is actually one of the best starting points that you can have.

Darius Teter: Ironically, Sachin’s issues aren’t what Claudia gets called about the most. That would be staff engagement.

Claudia Salvischiani: What I very often experience is companies come to me and say, “We have an engagement problem. Can you help us resolve this engagement problem?”

Darius Teter: What do you mean by engagement problem?

Claudia Salvischiani: “I don’t see people involved. I don’t see people engaged. I don’t see people that they fully identify with the business. So can you solve it?”

Typically, when they speak of ownership, they say, “Oh, is that to follow up?” They don’t own what they’re doing. They should own it from A to Z and take care of everything. And I always have to follow up and ask and control and then say, “You have to do it by next week.” And I would like to have people who just own their thing and they just go and they just do.

Darius Teter: So the evidence is lack of accountability, which translates into under-performance, a need to bird-dog, and micromanage, and come in all the time, and check and check and check.

Claudia Salvischiani: The first thing that I always think is — exactly, these points are the results of leadership. So how are you leading your people? People behave in the way re being managed. I’m absolutely convinced about this.

So if people are behaving like this, it is because the leaders are not supporting or providing the people with information. For instance, there is no communication about what the strategy is, where the company is going, the goals, so where do we stand with the goals? There is no meeting, no situations where people get information.

So leaders want to think that they’re not responsible for actually what’s going on in the organization. So they get consultants. “Help me resolve this as if you were outside.” Some companies, even in Africa, told me, “Talk to the management team and the rest of the organization and make sure it’s resolved.” And I always push, “No, I’m going to start working with you. We start with you. Then with the management team and then we go on. Because it starts with you.” And it always starts with the CEO.

Darius Teter: Motivation: it’s probably the most fundamental leadership responsibility of all. It doesn’t matter what the goal is. If you can’t convince people to work towards that goal, then you aren’t leading anybody. How then does the CEO create engagement? For Claudia, it starts with improved communication.

Claudia Salvischiani: I read once a definition of leadership: Leaders are the ones who are — I mean, it’s not really exactly like this, but — they are making sense for the people. But that’s why, when people come and say, “Oh, I have problem of engagement, people are not engaged yet,” [I ask] “Did you tell them what your plan is? Did you tell them where you’re going? Did you tell them how they can contribute? Are you sitting down with them and discussing it? That will follow because they will feel part of what you’re doing.”

Darius Teter: So say a bit more about this practice of communication as one of the keys to better staff engagement. What does it look like?

Claudia Salvischiani: Okay, very often, when I work on this topic with the people, I ask, what is your meeting structure? I think that with meetings, we can influence tremendously the culture in a company.

How many meetings? What kind of meetings? And how interactive the meetings are? This can have a really transformative impact on how people feel within our organization. And I actually develop with a company a new meeting structure, designing the meetings with them. So you ask in every meeting, what is your contribution to this? So you force the people. It depends on the kind of culture you want, but you force the people to play an active role in every situation where they are.

Darius Teter: This whole thing about how meetings are run, I think, is super-important, because meetings suck up a ton of time.

Claudia Salvischiani: Absolutely.

Darius Teter: And if people come away from meetings unsatisfied, that just creates an enormous amount of resentment in the culture. One place I worked before, we had this practice where, if you wanted to call a meeting, if you didn’t circulate an agenda and at least say, this is what we hope to achieve from this meeting, then the rule was, nobody had to show up. And that was really powerful. It’s like, hey, respect my time. Tell me what we’re going to get done, and then I’ll come.

Sachin Dhanani: Every year, we’ll have a strategy meeting with about 15 key people within the organization. Although you, as a leader, you know where you want to go, but I think it’s important for them to feel as if they contributed to that strategy.

And when they do that, then the buy-in is so much greater. So, therefore, then everything else becomes much easier. I’ve just found that process something that really has helped create a better culture and a better buy-in.

And actually, also improving the strategic thinking of the people within the teams because I think a lot of people have just come into the role that they do: “I’m an accountant and I just do what I do. And I don’t necessarily understand how my role fits into the overall company goals or the company structure.”

Darius Teter: Another way to ensure that your team understands and is committed to your organizational strategy is through your goal-setting process. So one of the things that we do here is when we do our annual performance goals, I always ask them to link what they’re doing with at least one of the six …

We have six pillars in our strategy. I like the exercise of having people think about, okay, I may not contribute to all six of the strategic pillars, but I’m contributing to these two. And when I write my performance goals, I’m going to explain how these things I’m going to do this year contribute to some of these pillars. I think that’s a really valuable exercise.

Claudia Salvischiani: Yes, to force the people, let’s say, to at least think whether they can give a contribution to the goals, regardless of which function they are. This is cross-functional thinking. And you’re thinking in terms of the company, you’re not thinking in terms of your role and your function. I think it’s very important.

Darius Teter: Leaders also have a responsibility to establish the culture of the organization. And make no mistake: every company has a culture, whether it’s intentional or not.

Some companies get the first step right. They have an inspiring list of values on their website. But it’s a lot harder to actually live those values. How does your business manifest innovation or curiosity?

Okay, Sachin, I’m going to stop you right there. Name the values.

Sachin Dhanani: Name the values. Okay. So innovation is the first value. Trust and honesty. That’s one of the biggest values that we have. Learning, continuous learning, is another value. Teamwork is a big value, accountability, and —

Darius Teter: Okay. These are great.  But did you have those written down? I mean, these were your values. And you were living those values and you found, presumably you hired people that at least instinctually, you felt shared those values. But were they written down? When I walked into Danco on the factory wall, I would see integrity, accountability, honesty.

Sachin Dhanani: No, you wouldn’t see them.

Darius Teter: I wouldn’t see any of that.

Sachin Dhanani: It’s not something that we even thought about having. 

Claudia Salvischiani: Okay. A topic that is very often neglected and not considered is culture. So they say, I want this and this and this and this and these values and open communication … 

But there is basically no link between day-to-day and values. So they have these values, but they haven’t thought about how to implement those values in what they do every day.

So typically, “We have an open culture. Everybody can say whatever they think.” And then the CEO  has a very dominant personality, very knowledgeable and very strong. So actually there is never anybody … This is a company I was supporting. No one is ever challenging the CEO. And then they say, “Open culture and conflict management is a strength of ours.”

Darius Teter: Culture is often defined as a set of shared values in the workplace. HR processes like goal setting are a way to translate these values into a set of expected behaviors.

Claudia Salvischiani: You have to connect the values with some practices in the company. So let me make an example. How do you do goal setting? You want to be a team-oriented organization, open dialogue, big discussions. And then the goal-setting process is totally top-down. The CEO decides, you execute.

So are we really living the culture? If this is a culture, then you need to design a goal-setting process. That allows dialogue, there is top-down and bottom-up. You have some circles and so on.

Or performance management feedback process. “I want dialogue and everybody can say whatever he wants or she wants.” And then you’re very judgmental in performance management or in feedback. “You’re not good at this. You’re not good at this. You’re not good at this. Either you do this, otherwise you’re going to leave the organization.” This is not dialogue. So, for instance, do we allow feedback in both directions? Do you allow that your people tell you also what they think about your managerial style and so on?

So what I normally do when I work with the company is, “Tell me, first of all, your business strategy, tell me your values.” And then I design the processes based on this.

Darius Teter: In fact, there are many HR processes that you can design to reinforce your values. Let’s talk about feedback, because I think this is one of the hardest things for managers and leaders to do.

Claudia Salvischiani: It’s important to speak about how you achieve the results. So the goals and the jobs and the KPIs [key performance indicators] are more about what you are delivering, so to say. But I think it’s also important because you want a certain culture, that you speak about the behaviors.

So the first step is, which are the behaviors that you consider very important in this company, based on the values? And give regular feedback on this.

Darius Teter: So give me some examples.

Claudia Salvischiani: If I say, for instance, one of the important values is innovation. “We are a very innovative company. We want to be a very innovative company and so on.” So what typically you have to foster in an organization, curious mind, critical mind. You allow people to challenge. Otherwise you’re not going to have innovation.

So you could define certain behaviors, the person is curious, is always eager to learn. Open to criticism, is challenging situations. So you list 2, 3, 4 by value, let’s say. And then you give feedback to the people about this.

And also here, it’s not only one-way, it’s two-ways. So the manager says, “This is the way I perceive you, in situations.” The person can say, “Yeah, but I see myself in this way and this way,” and this is the discussion. This is very difficult. This is the most difficult part to learn for organizations, because you must be very open. You must be able to handle the conflict, let’s say, because there is never a 100 percent overlap between perception of the manager and perception of the person.

Darius Teter: So you’ve established your culture. And you’ve reinforced it with your performance feedback system. But what about your own role as a leader?

Claudia Salvischiani: When companies scale, they need to rethink the role of the CEO. And the CEO or the founder needs to think about: How is my role going to change? Am I willing to change? Yes or no? And what do I need to change? Because typically, the CEO was doing everything, as you were saying. And when you scale, you have to let go. If the CEO doesn’t change the behavior, the company’s not going to change the culture. The company’s not going to be able to scale.

Darius Teter: Change is hard, especially for entrepreneurs. Even as Danco scaled, Sachin resisted delegating key functions to his employees.

Sachin Dhanani: I had this feeling that I’m the best salesperson here. And I don’t want to give this up. And it’s this controlling leader. Like, no, I don’t think anyone else can do it. And I had, at that time in 2019, probably about eight or nine sales people reporting straight to me. And it took a little bit of coaching as well as some sort of realization from my part that I need to delegate this. I need to be able to give this away and I didn’t want to.

Darius Teter: Your unwillingness to give up a function that you really liked and that you thought you were really good at, that’s super-important, not creating enabling conditions for your new manager to succeed.

So maybe, subconsciously or unconsciously, actually undermining the very positions that you created in your org chart. Recall who Sachin needed to be, to start Danco. He had to have independence, self-belief, a do-it-all mentality. That’s entirely different from what he needed five years in.

Claudia Salvischiani: CEOs don’t let go because they’re comfortable in the operational work. So they are saying other people cannot do it, but they feel insecure in going to a space that is totally unknown. If you change your role, you go into an unknown space. It’s like saying, what am I going to do now? I mean, I was doing this until yesterday. Now I have to do something else. What am I going to do the whole day?

Darius Teter: You had this great quote: The CEO needs to stop doing stuff and making products and start enabling others to succeed.

Claudia Salvischiani: Yes. I think the focus needs to shift. And this is the big chunk about the CEO. The CEO was taking care of the products of the business, of the customers, of the business model in the whole start-up phase, because you have to demonstrate whether your model will work and you will be successful.

If you’re scaling, it means that your model works. So now you have to shift your focus and take care of the organization. What kind of environment do I want to create? What kind of people do I want to have? How am I going to lead the people and how do I grow this organization? So it’s really a focus shift and it’s a big shift.

Darius Teter: There are tools that can help with that shift. Sachin wanted to ensure that his employees could take over, without risking the business.

When you brought in Claudia, what was it that you wanted her to help you with?

Sachin Dhanani: Yeah, so we were in early 2020, just before COVID. And we’d just set up a management team. We’d gone through this transition of job descriptions. And it was like, well, how do we now look at performance and how do we assess performance, particularly for the sales team and then for the general management team as well?

So we’d created this environment, but how do we then go forward? And we’re not necessarily able to delegate to the management team as much as I’d like to. And in particular, I can’t see whether the performance is happening apart from the KPIs that we’d set.

And she was very, very good at understanding where we were and taking a concept, which is the objectives and key results, so OKR process, and really then explaining it to me and [my partner] Suraj. And then saying, “This is why I think it’s important and we can sort of tailor it into whichever framework you want to use within your company.”

Darius Teter: Objectives and key results, also known as OKRs, are a useful tool for managing team and business functions. A leader sets concrete goals or objectives that can be tracked by measurable criteria.

At its core, OKRs are a way that managers and employees can be on the same page about their targets, their methods, and their expected results. And it was this approach that allowed Sachin to start letting go.

Sachin Dhanani: The statement I made earlier that leaders, we feel like we can’t delegate, or we can’t necessarily let go of what’s important to us, so meeting the strategy or the goals of the company is probably our job and that’s the way we’d look at it. So we don’t really want to give it away. We don’t want to devolve it.

But if you set up the right process, and you set up the right environment and you can measure it and you can see it, then you feel much more comfortable to delegate this. And this was the key ingredient for OKR from a leader’s perspective.

Darius Teter: It gives you the confidence to know whether or not the business is running well despite the fact that you’ve delegated so much of your own responsibilities. It gives you this oversight.

I mean, there’s two things about delegation for a founder that are really hard or, well, there’s obviously more than two, but one of the key ones is accepting the fact that the people you delegate to may not do things exactly the same way you would do them.

And so an OKR system allows you to say, “Well, they may not have done it the same way I did it, but by God, we hit our targets. Whatever they’re doing differently is working. So maybe I am a micromanager and I need to let go.”

The other risk is of course that they fail. Not only are they not doing it the way you would do it, but they’re not getting the results that you think you would’ve gotten. But if you know why, and you can spot it early, you can take remedial actions. How can I help you? How can I help you to succeed?

Sachin Dhanani: That failure, that is the thing that you’re worried about the most, but that’s the biggest and the greatest opportunity we have as leaders because, when we know that as leaders we have failed, it’s been our best teaching and our best learning. And actually we come out much stronger.

And as any entrepreneur will say, it’s from our failures that we’ve grown and we’ve moved forward. And I think if we keep that in mind, when we are talking to people that we are managing or we’re delegating to, and we say, “Okay, well, they’ve failed, but this is the opportunity,” they’re actually very, very — at this moment in time — they’re open to learning. And if they’re open to learning, this is where we can build the strength and build their base and build their ability to move forward.

And if you’re going to build better leaders in your organization, you have to have the ability to make learnings from the mistakes that I make or they make, or whoever makes. And I think this is a key ingredient that we’re going to take forward in any organization.

Darius Teter: I really love that. And I hadn’t thought of it that way, that as a founder, you learn from your mistakes. But it’s actually amazing to me how many bosses don’t create an environment where their managers feel like they can learn from their mistakes.

Sachin Dhanani: Delegation: it’s an artwork. I mean, it’s a form of leadership … it’s a muscle. I‘d say it’s a muscle that we really need to exercise and we need to learn. And we need to learn ourselves as well. And what’s important is that the person that we’re delegating to is not going to do it in the same way that we are. But if we can measure how they do it, then it enables us to build confidence. And I think that’s key.

Darius Teter: This ability to grow, from an accountant with a dream to a leader of hundreds, is something that brings Sachin great fulfillment, even beyond his role at Danco.

Sachin Dhanani: And I think finally in this journey that I’ve gone through in the last, in particular, in the last five years, is really understanding myself. And I think this was one of the key areas of my growth, saying, “Who am I and what am I really good at? What am I really not very good at?”

So if you met me before, I’m an extrovert in many ways, but I didn’t understand myself. I didn’t understand who I was. And I realized about four years ago that I had this fear of failure. And that’s why I didn’t set goals. And I didn’t set goals because if you don’t set a goal, then you don’t necessarily fail. You just say, “Well, I met a target. It was just in my head.”

So that one ability to say, “Well, you know what, if you’re afraid of failing, then let’s work on it.” So for me, that journey has been together with the growth of the company. So I think I’m very proud of understanding myself better. And that’s a journey that I really feel will be never-ending in many ways.

Darius Teter: Leadership is sometimes considered an innate skill. It comes from inside, but no entrepreneur is born a perfect leader. And, in fact, leadership is fluid. Moments of crisis necessitate a different approach than moments of growth. The skills you need to start a business are often a far cry from the skills you need to run one.

As they build their companies, founders must learn and relearn what constitutes good leadership. Whether it’s through staff engagement and communication or feedback systems or OKRs, the management tools that fall under the human resources umbrella offer scaffolding that can guide a leader’s growth. That can be immeasurably valuable to an organization and to the leaders themselves.

I hope over these past three episodes we’ve been able to expand your definition of human resources. We started with how to find and keep great people. Then we asked how HR strategy supports your growth strategy by aligning the organization, the people, and the culture.

And today, we focus on how leaders need to change as their companies grow. So as we conclude this three-part series on human resources, I want to end with the person who’s guided us along the way.

Claudia Salvischiani: Okay. You cannot ask me, why did you choose HR? Because you asked me at the beginning, how did you land in HR? And I said, just by chance.

But a possible question is, why did you stay in HR? Because actually I’ve been working almost 30 years now in HR. I deeply and strongly believe in the value of this function. HR connects strategy and people, strategy and organization, culture and people. I love this idea of looking at organizations in a different way. This is why I believe HR is so valuable in an organization — because it looks at connections that other people don’t necessarily always look at.

Darius Teter: I want to thank Sachin Dhanani and Claudia Salvischiani for three episodes worth of wisdom. I also want to thank our teammate, Laurie Fuller, who’s moving on from her producer role at Grit & Growth. Laurie has been on board with the show since we launched, but she’s also an incredible business coach, helping entrepreneurs around the world like Sachin to thrive. Her vision has been integral to the show. And while we’re sad to see her go, we’re excited for all the entrepreneurs out there that she will guide.

This has been Grit & Growth with the Stanford Graduate School of Business, and I’m your host, Darius Teter. If you like this episode, leave us a review on your podcast app. It really helps us to share the stories of these incredible entrepreneurs with as many people as possible. To learn how Stanford Graduate School of Business is partnering with entrepreneurs in Africa and Asia, head over to the Stanford Seed website at seed.stanford.edu/podcast. Grit & Growth is a podcast by Stanford Seed. Erika Amoako-Agyei and VeAnne Virgin researched and developed content for this episode. Kendra Gladych is our production coordinator and our executive producer is Tiffany Steeves, with writing and production from Andrew Ganem and sound design and mixing by Alex Bennett at Lower Street Media. Thanks for joining us. We’ll see you next time.