I am surprised at how late in life I learned the lessons about what it means to “create value” in a business that make up the first half of our book. Ideas about profit and ownership are key questions of political economy that ought to matter to us as citizens, nevermind as employees and managers of for-profit companies. So I do wish someone had explained the following to me much earlier: A company’s value to its owners comes only in small part from its near-term profits. The larger part is due to the company’s ability to credibly promise profits over an indefinitely long future horizon. Even if you expect to hold a company’s stock for a limited time, you’re still betting that someone else will believe in its long-term future at the point in time when you sell the stock, someone who believes in the future strongly enough to buy the stock from you.
As part of my series about “authors who are making an important social impact”, I had the pleasure of interviewing Nathan Kracklauer.
Nathan Kracklauer is Chief Research Officer at Abilitie, a leadership development company. Nathan has facilitated leadership seminars at leading companies and at executive education programs at IMD Business School. Born in Falls Church, Virginia, Nathan now lives in Karlsruhe, Germany, with his wife and two daughters.
Thank you so much for joining us in this interview series! Before we dive into the main focus of our interview, our readers would love to “get to know you” a bit better. Can you tell us a bit about your childhood backstory?
My father worked for a US federal agency, and his work took us back and forth between foreign assignments and stints in Washington, DC about every three years. I lived in Munich, Germany, twice, and in Helsinki, Finland, before my parents retired to a small German town called Weimar. It lay in what had just ceased being “East Germany,” and was really still another country. After high school, I returned to the US to go to college at UT Austin.
The pinball journey of my childhood was enormously enriching, but it may also be telling that it is a life that I have consciously not chosen for my own children. One of the things you take away from it, for better and worse, is the ability to look at any given issue from (at least) two different vantage points, and be aware of the insights and blind spots in both. Not that that in any way means you get to the absolute truth of things. But it trains the mental muscles you need to switch back and forth between perspectives.
Coincidentally, my co-author Bjorn’s experience is sort of a mirror image of mine: He’s a German who came to the US at a relatively young age, which also trained his perception-switching capabilities. That perception-switching is deeply embedded in the way we look at business and leadership, and how we teach them in the 12-Week MBA. We believe that the ultimate challenge of managing in business is to look at a company and see a collection of resources to be optimized and a web of relationships to be nurtured at one and the same time.
When you were younger, was there a book that you read that inspired you to take action or changed your life? Can you share a story about that?
As an avid reader, I almost want to say that any book that doesn’t change your life either failed as a book or landed in your hands at the wrong time. However, I recently read a childhood favorite to my own daughter, and it struck me that the series is all about leadership, at least as I have come to understand it. The series is The Chronicles of Prydain, by Lloyd Alexander, and it’s popular enough to still be in print. The narrative arc takes an orphaned boy of unknown parentage, Taran, from his fantasies of heroism and his longing to discover a noble lineage, to, five books later, reluctantly, and at great personal cost, assuming the high kingship of a land of fractious clans, out of a sheer sense of duty. Taran achieves what he originally desired when — and because — he no longer desired it. It’s actually a heart-breaking ending.
It has been said that our mistakes can be our greatest teachers. Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
This is a really fun question for us because of the learning methodology at the heart of our 12-Week MBA. In our business, it’s called “experiential learning,” which is the fancy way of saying “learning by doing.” Which is the gentle way to say “learning from mistakes.” We believe deeply in mistake-making as the path to wisdom.
Candidly, though, the mistakes I’ve made that have led to lasting learning outcomes have been those whose memory smarts. Maybe the mistakes we laugh about are the ones that don’t burn themselves into our neural pathways? And maybe laughter is what dispels the initial discomfort and helps us move on? In any case, the mistakes I remember as though they happened yesterday are the ones where I failed another person, and all those mistakes give me are sadness and regret — action-guiding regret, yes, but regret.
Can you describe how you aim to make a significant social impact with your book?
The world has no shortage of challenges and opportunities that can’t be solved by individuals. They have to be solved by organizations: people pooling their talents and resources to create a whole that is many times more than the sum of the parts. Some of that coordination takes management. We need managers. In fact, there are far more management positions than there are people with elite MBA credentials to fill them. And these positions ought to be filled by people with a greater diversity of backgrounds than those with the time and means to go through a graduate-school curriculum.
The simple truth, though, is that because there aren’t enough opportunities to acquire management skills, the world is plagued with bad bosses. We’ve all had them. I once worked as a runner for lawyer who responded to my job application at 4am on a Saturday morning, who had his paralegal in tears every day, and who took me to ogle a high school girls’ basketball team practice, before going to the bank to take $10,000 out of the ATM… A lot of weird stuff happened in just three days, after which he said I could stay, but he himself didn’t recommend it. I didn’t stay.
The world has too many bad bosses because a) lots of people get promoted without any training, and they make terrible mistakes even with the best of wills (it happened to yours truly), and b) many people who could do the job well hesitate, leaving the field open to those who really ought not to sit in any drivers’ seat.
The impact of bad bosses is profound: on the organizations they work in, on their customers, on the employees, and on the families of those employees who welcome home an emotionally degraded bread-winner every evening. If our book and our program a) support people in management with the will to do better, but who just don’t know how, and b) give confidence to those who are hesitating about whether they want to climb that first rung of the corporate ladder, then we feel we’ll have made a real difference in this world.
Can you share with us the most interesting story that you shared in your book?
One of the real-world case studies the book draws on is the rise and fall of GE, and with it, the rise and fall of Jack Welch’s reputation as a leader. It’s a huge story that illuminates all the book’s topics, but I can’t really do it justice in a couple of paragraphs. Smaller in scope and interesting — to me at any rate! — was my own experience as a wet-behind-the-ears manager, wrestling with giving feedback; it’s the story I used to frame our chapter about feedback.
In my first management role, I led a team of instructional designers and writers. Thanks to tracked-changes, it’s a visual and visceral experience when your work gets torn to shreds by your manager. That’s what I did to my team. I eventually got feedback from my boss that I was demoralizing them, especially the least experienced members.
I deeply resented that feedback. Wasn’t I constantly telling Simon and Veronica what a great job they were doing? After a day or two of constructing my own little Fort Defensiveness, I decided to think things through from my employees’ perspective. And the first thing I realized is that I had to make my praise as specific as my constructive feedback. “Great job!” may give you a five-minute sugar-high, but it tells you nothing about what to do the next time around.
That was a useful insight, but in the weeks that followed, applying it didn’t have all the results I had hoped for. The harder I praised, the worse engagement seemed to get. And that’s when it dawned on me: The very fact that I was trying so hard undermined the message I was trying to send. Trying too hard never works, does it? Praising just didn’t come naturally to me, even when it was completely merited. It came across as inauthentic. What I realized was that I needed to tell the people I worked with what kind of feedback to expect from me. “I’m great at giving constructive feedback. I’m lousy at delivering praise. It’s a personal flaw that I’m working hard to overcome.” Just setting the expectation and being candid about my own limits worked wonders.
The broader insight for me was to change my mental model of management. I had unconsciously thought of management being about discovering the user manuals for your team members. The more useful mental model I found was to turn that around: Give your team your user manual.
What was the “aha moment” or series of events that made you decide to bring your message to the greater world? Can you share a story about that?
This book is the result of a two-decade partnership between Bjorn, myself, and between both of us and many different collaborators. One of the book’s central themes is that a sustainable business has to rest on a foundation of trust. It takes a lot of trust to underwrite a two-decade partnership, so our book illustrates the importance of trust in both its content and in the fact of its existence.
The full story of the decision to write the book also tells a lot about the nature of trust. One thing we don’t hit sufficiently hard in the book is that trust is lost not only through dramatic acts of betrayal. We ourselves experienced that trust erodes all too gently sometimes, due to benign neglect or inattention amidst the flurry of the everyday.
In our early years, Bjorn and I had argued heatedly about every last detail of our business. But our constant arguments eventually left both of us exhausted. We settled into a less conflict-prone, financially convenient, mutually respectful, but basically arms-length relationship.
In the midst of that convenient, quiet, but cool collaboration, we experienced the sort of minor misunderstanding that doesn’t even register when you’re working together passionately every day, but that stands out like a sore thumb when you touch base only once a month. It forced both of us to ask: Do I still trust this person? And the true sign that trust is irreparably gone is that you don’t even bother trying to clear things up. In our case, the trust was still there, and we were able to use the misunderstanding to reconnect more fully, and from there, to dive back into a working relationship that involves more creative friction.
The idea to write the book came much later, but I would still date its origin to that moment of renewal. The way we handled that situation gave us the confidence that we were mature enough to dare to write a thoughtful book on what it means to manage and lead, and to dare to write it together. We eventually realized that our two-decade experiences designing and delivering leadership development in a wide range of global corporations and our own experiences running two companies — including our many mishaps — gave us a unique perspective on what it takes to succeed as a manager.
Without sharing specific names, can you tell us a story about a particular individual who was impacted or helped by your cause?
We’re especially proud to have served veterans after completing their service. In the military, they may have developed great management and leadership skills that are equally relevant in a business, but in the private sector, the goals and success metrics are, of course, very different. I’m thinking now of one gentleman in particular who transitioned into consulting thanks in part to the knowledge and confidence he gained in our program, particularly with respect to business acumen and value creation.
Are there three things the community/society/politicians can do to help you address the root of the problem you are trying to solve?
The root problem we see expresses itself in two ways: Organizations struggle to identify, develop, and retain competent leaders with business acumen. Individuals struggle to find learning opportunities that support them at key inflection points in their career. We think this is a case of market failure. What we believe is that our program is a way for individuals to signal their passion, their tenacity, and their ability to grow to their current employers, creating a win-win on both sides. For individuals, it’s a much lower financial and opportunity cost than the traditional MBA. For employers, it means keeping invaluable company and industry expertise within the company, expertise that costs an enormous amount of time to build up, and that you definitely don’t want to lose to your competitor!
However, our offer is just one small solution in a wider societal problem. Learning — especially now, when technology and society evolve so fast — needs to be a lifelong endeavor, and we are still saddled with assumptions about education that come from the industrial, even pre-industrial age. Rethinking when, how, and what we learn is a mission of sociopolitical scale, and not easily solved.
Just as an example: 14 out of 16 German Federal States have legally mandated paid “educational leave.” The details vary, but roughly, as an employee you have a right to two weeks of paid time off every two years if you role in a licensed educational program. It’s a great start. The devil’s in the details, though. Apparently, it’s a vastly underutilized benefit, for many reasons, including that employees don’t know about it, don’t know how to apply for it, or are afraid that applying for it will get them blacklisted with their employers. And of course, the fewer people use it, the more anyone who does stands out for potential blacklisting. So the political decision to grant this benefit has to be complemented with a wider cultural shift that makes using the benefit socially acceptable.
The solution to the underlying problem of incorporating lifelong learning into the way we organize work breaks down to many more than three things, unfortunately.
How do you define “Leadership”? Can you explain what you mean or give an example?
No chapter in our book was as hard for us to write as our chapter on leadership! The two of us authors had decades worth of divergent personal experiences and philosophical influences we had to reconcile. But we also, coincidentally, had shared common ground from before our collaboration.
For one, thanks to our respective and complicated ties to Germany, we both shudder at the word “leader,” which in German is Führer. We know, deep in our bones, that it’s possible to take lionization of leaders and leadership waaaaaaay too far. After two decades in the “leadership development” business, I still hesitate every time I write that word, and always ask myself “Could I use the word ‘manager’ here instead?” That forces you to think long and hard about what a “leader” is that a “manager” is not. I doubt that many other English-speaking writers on leadership have subjected the concept to as ruthless a level of scrutiny as we have. We certainly think it gets thrown around all too casually in business and politics.
Second, we independently had the formative experience of living in student cooperative housing in college. It’s hard to think of an environment that more desperately needs something called leadership over and above management than an intentional community.
The result is that our take on leadership is a bit unique in our field, though we won’t call it “homegrown.” We start with a problem. What we know from our personal experiences as well as from behavioral economics is that the world is full of so-called social dilemmas. Take the (non-fictional) example from our book. A daycare wants to organize a bake sale to fund an outing from which all children will benefit. Nobody has the authority to make it happen. Lots of people would happily volunteer if they knew for certain that they wouldn’t be stuck doing it alone. For the bake sale to get off the ground, somebody has to go first, and say “I’m in. Who’s with me?” And a couple of other people have to jump in soon after, to validate that the first person isn’t just some weirdo. That first person is a leader, and the first followers are leaders, too.
Social dilemmas are situations like the bake sale: By cooperating, everyone could gain something they could not gain individually, but individuals might gain their share of the collective good produced by others’ cooperation while withholding their own. I think we’ve all been in bake sale type situations, if only on group projects in school.
Social dilemmas occur in businesses, too, within teams and between teams. Think of departmental scrambling for budgets: Everyone inflates their needs by 20% because everyone knows everyone else is doing it, too.
In business, social dilemmas can often be overcome through incentives, carrots and sticks: Doling out carrots and sticks is part of management. But it doesn’t always work, and it’s often very expensive. Companies in which there are people who are willing to go first and say “I’m in, who’s with me?” can gain a competitive advantage over those relying on incentives alone.
We believe that going first in a social dilemma is the essence of leadership. Of course, your claim that “I’m in, who’s with me?” has to be credible, and from the need to establish credibility flow many of the traditionally promoted leadership skills: You have to be trusted, you have to walk the walk, you have to be persuasive, you have to show that you truly believe in the common goals and the collective benefits. But until you understand the underlying problem — barriers to collective action in social dilemmas — we don’t think you can be truly effective as a leader over and above your formal role as a manager.
What are your “5 things I wish someone told me when I first started” and why? Please share a story or example for each.
I’m in mid-life now, when many of life’s big decisions have been made, irrevocably. Strangely, that’s liberated me to second-guess a lot of assumptions I made unreflectively, now that it’s too late. I’m going to list only three “things,” because two of them have “mirror images,” and although I know which thing I chose in life, I will never know if I chose wisely.
For example, one of my college professors, the late Paul Woodruff, told me something once when I asked for advice on a particular life decision. He said (paraphrasing) “In my observation, the people most content with their lives have rarely been those who single-mindedly pursued a goal, but instead are those who have been open to the opportunities the world has presented them.” I still love that advice, and it’s certainly been how I’ve led my life: taking opportunities, not single-mindedly pursuing goals. But as another college professor, Robert Kane, might put it: discovering your values is a matter of experimentation, and some experiments last your whole life. I’ll never really know if single-minded pursuit of, say, rockstardom, might have been the way to go.
Similarly, take networking: I readily believe now that networking is all-important to developing your career. I could say “I wish someone had told me earlier that networking is important,” and if I had known (and believed!) that earlier, no doubt I would now be in a different place, possibly more “successful” on someone’s metrics. But not my own! My life is characterized by the fact that some key people have honored me with long and deep friendships, dating back to nearly every one of my life’s twists and turns. Those relationships are not just part of who I am, but in a sense who I am, period. It might have been “useful” if someone had advised me to “network more” earlier. I also hope that if someone had done so, another wise sage would have complemented that advice with “nurture your friendships.” I know that there are people for whom networking and maintaining friendships are one and the same thing. But if you’re like me, an introvert, with a full-time job and a family, you know that there are limits to your time, your attention, and your emotional capacity, and you have to make choices. I might have made a different one, but then I wouldn’t have become the person answering this question.
Finally, though, I am surprised at how late in life I learned the lessons about what it means to “create value” in a business that make up the first half of our book. Ideas about profit and ownership are key questions of political economy that ought to matter to us as citizens, nevermind as employees and managers of for-profit companies. So I do wish someone had explained the following to me much earlier: A company’s value to its owners comes only in small part from its near-term profits. The larger part is due to the company’s ability to credibly promise profits over an indefinitely long future horizon. Even if you expect to hold a company’s stock for a limited time, you’re still betting that someone else will believe in its long-term future at the point in time when you sell the stock, someone who believes in the future strongly enough to buy the stock from you.
If a company’s value resides in more in the long-term future than in the next few quarters, then its ability to continuously meet the needs of all its stakeholders, not just shareholders, has to be assured: it has to keep delighting customers and it has to keep long-term mutually beneficial relations with its suppliers, including its employees. And there has to be, you know, a long-term future to project, which means there have to be both physical and socioeconomic environments in which people can survive and thrive indefinitely.
I don’t think those are lessons that have sunk in deeply, even among those who believe deeply in “maximizing shareholder value” as the one sole purpose of a company.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
Well, since I’m on a roll with Lloyd Alexander and his Chronicles of Prydain series: In one of the books, there is a pair of nuggets of wisdom that resonated through my whole life. At one point, one of the hero’s friends consoles him after a choice went completely awry: “Count the thought, not the deed.” Then later, in another episode, the hero realizes that he did a good thing but for all the wrong reasons. The same friend consoles him with “It’s the deed that counts, not the thought.”
You just can’t help agreeing with both sentiments, as mutually contradictory as they are. The deeper truth within both is the call to always judge each other in the most charitable light. Moral judgments about our motivations for action was a running theme through all of my — admittedly limited — academic career, and it’s a theme that also comes up in a couple places in our book.
Is there a person in the world, or in the US with whom you would like to have a private breakfast or lunch with, and why? He or she might just see this, especially if we tag them. 🙂
In that case, I’m going to reach for the stars: There is an astronomer and historian of stereoscopy I’d like to meet who is perhaps better known as the guitarist of Queen: Brian May. He became a personal hero when I was a teenage musician, of course. But from what I know about his personal biography, including his wide range of interests and the challenges he’s wrestled with, he’s just someone I would love to have tea with and thank for all the inspiration.
How can our readers further follow your work online?
We publish thoughts about management, leadership, learning, and a host of other topics on our company’s blog on www.abilitie.com, and we expect to do so more frequently now that our book is out. Readers can also follow us on LinkedIn here.
This was very meaningful, thank you so much. We wish you only continued success on your great work!
Social Impact Authors: How & Why Author Nathan Kracklauer Is Helping To Change Our World was originally published in Authority Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.