[David] Listeners, we have Jim Brown back with us. He is the author of the Imperfect CEO, the founder of Org Health. A firm that’s dedicated to helping leaders build healthy and life-giving organizational cultures. I love that mission. I love that statement. That’s what I’m about. And it’s just so much fun to have Jim back. We’ll put in his full background and all the information about him, as well as links to his books. But Jim, I want to get started right away because it’s good to have you back. Appreciate you.
[Jim] So good to be with you, David. We’ve had some great conversations and it’s fun to just keep going with it.
[David] Well, let’s there’s really the reason I wanted to have you back is I received a lot of positive feedback on our first interview. And I go, man, if the listeners liked it that much, let’s have you back. The last time we had you here, we had you we talked about imperfect leadership. Why is it great leaders alone are not enough to build a healthy organization? That’s what we talked about. Now we’re going to get into something more exciting. I think that’s, well, we’re going to go a little more in depth than that. So, you know, why do you think there is a leadership crisis? It’s not just in mortgage lending. It certainly is mortgage lending, but we w why why is that?
[Jim] I think a big reason for this, David, is that the whole world has changed and leadership has to change too. Too many of us are trying to lead like we led 10 years ago, 20 years ago, because things seem to work. but as I said, the world’s changed and it’s not working as reliably as it did. It’s a crisis.
[David] Well, we’ve seen but certainly in the mortgages, we’ve seen years of disruption with interest rates, AI technology, consolidation. You know, what separates, in your opinion, organizations that emerge stronger from those changes than than those that just merely survive?
[Jim] Well, I’m a I’m a deep believer in the power of having a healthy organization. And let’s just get be clear.
[David] I know we both share that. Yeah.
[Jim] What does that really mean? It means we’ve got people connecting. It they don’t just show up for work, put their head down and do the job. No, they actually show up for work, and that can be in person or remotely now. And they engage with each other so that there’s a level of collaboration that means each person’s effort is being supported by and multiplied by other people’s effort. It’s like the sum is greater than the just the parts coming together, right? The whole is greater than the sum of the parts. so the truth is when we have a healthy organization, it can adapt faster. And we are in times of rapid change. So the big separating factor, I believe, is that the healthy organizations will adapt faster in these changing times.
[David] That it is so true, but a lot of people would probably agree with that statement or kind of go, Yeah, it makes sense, but how do we do that? the how is so much involved in this and that’s what a lot of the consulting you do I do some of the same consulting. We both are big strong believers in the six working geniuses. That’s one of the ways you can help start finding all about getting joy that talks the six working geniuses. And people get probably tired of us talking about that on this podcast, but I believe in it so much we can’t talk about it enough. There’s two things within the six working geniuses that he lists out. There’s two that give you life, there’s two that you can do okay. And there’s two that are your working frustration. And that’s and if we get people out of what they are not wired to do, which get the working frustration, get them into their working genius, it gives them joy in life. And I think so much of people, but when you look at that, is this getting more critical now than ever before, given these changes? And I’d love to see how you’re leading organizations in the how.
[Jim] Yeah. I think it’s more critical now again because the world is changing and more and more any organization that wants to keep growing and moving forward is needing to find new people. Gen Z is the new generation that’s coming into the workforce and Gen Z is not like Gen X and is not like the baby boomers.
[David] No, I just think we’ve ever had before. It’s so true.
[Jim] These people, it’s not that you know, sometimes they get accused of being entitled and not not working hard. I don’t think that’s fair. I think that what we have to understand is that Gen Z is much more determined to make sure that the work they’re doing is meaningful in the world in their eyes. And if we are not helping them see how the work the company does matters and how the piece they play matters, we’re not serving them, we’re not leading them well. we need to do that. If they’re not seeing it, they’re not going to engage to the level that is needed. And if we as leaders think, that’s their fault, that’s their problem, then that’s gonna be a conflict.
[David] I heard it, I like why I heard one of my preacher friends say, says, if the cat doesn’t like the way I’m petting the cat, let the cat turn around. you know, no, don’t don’t pet against the grain. But in a workforce, it’s not quite as simple as that. I mean, we can’t ask people to change to our style. We have to realize we have a new workforce, to which you have really aptly pointed out. And in that group, they need to be petted, to be taken care of, loved, nurtured in a way a lot like other groups have. And it’s not like that’s and I think those organizations that can adapt that really get it. You and I were talking about this. You made a strong statement. It’s not that in your experience that leaders don’t care. They fail because they misdiagnose the problem. And that is such a great statement. What do you mean by that? If you could share that with our listeners.
[Jim] Well, first let’s just acknowledge that most leaders are actually great problem solvers. They are, that’s that’s part of their wiring, yeah.
[David] Yeah. They didn’t get to where they’re at or yeah.
[Jim] Here’s the difficulty. If leaders are working at solving the wrong problem, it’s diverting energy, it’s not improving the situation, and the people who see what the real problem is are feeling like the leader doesn’t get it. So somehow we need to help the leaders figure out what’s really happening in this organization. So let’s just build on the example I used with Gen Z. I’ve had lots of leaders complain to me, and to be honest, David, I’ve even experienced this myself with Gen Z employees, that they don’t have the same consciousness about time and deadlines and you know, we start at nine. The office opens at eight thirty, that’s when we should be there. Some of these people we hire out of college, they’re twenty two years old and they’ve never had a job yet in their lives and rather than rather than complaining and saying, I shouldn’t have to be parenting these people who should have learned about working when they were 16, we have to just acknowledge that this is our new reality.
[David] Yeah, that’s a great point, Jim.
[Jim] So the problem isn’t these people won’t start work on time. The problem is nobody’s trained them to understand why that matters. And are we going to solve that problem or are we going to just punish them for not starting on time?
[David] Yeah, and which means when we punish them, they’re gonna leave because they’re gonna be frustrated and they’re gonna go over to a company that does figure this out. And I think you’re really raising that, and I think that’s just really acute. I mean, we always see the mortgage industry as a lagger because we’re slow to adopt technology, slow to this, slow to that. We’re we are a lagger. Anyone who’s in this industry, we’re not the innovative, most innovative group of people. And that’s why I think this is showing up a little later for us. But the new generation, there are some companies out there that are learning how to figure out. Figuring this out and are attracting and retaining these younger people. And I think that’s really something that is admirable about. You know, you talk about four hidden organizational risks that every leadership should be watching out for. Talk about those four. Scalability, execution, growth, and people. I love what you talk about there. So run through these with us.
[Jim] Well, let let’s take them one at a time. Scalability. The risk is that if we actually bring in more business, we’re not going to have the capacity to handle more. So the problem is what happens if more clients come? and we can’t handle it. That’s the scalability risk. People often say, well, what’s the difference between that and growth risk? The third one on the list. And it’s kind of like the opposite. It’s like scalability risk is what happens if they come? Growth risk is what happens if they don’t come. What happens if we are building capacity, but we haven’t figured out how to address the real market and to attract the real market? in the middle is execution risk, and that is what happens if we as leaders have not built the systems and the structures and the culture that make it possible for people to do the work that we’ve asked them to do. And sadly say that at the core of that, David, is it’s usually because the leaders themselves, unknowingly, almost always, are saying and doing things that contradict what they’re telling everyone else to do. The example I’ve shared in some other conversations is that. You know, the CEO announces we have to tighten our belt. Everybody has to find ways to cut costs. It’s essential. And then three weeks later, six people get on a flight, and the CEO is sitting in business class and they have opted to economy because they’re trying to save costs. they walk they walk by the CEO and they say, Well, apparently saving money isn’t really that important because he’s not doing
[David] Yep, that’s that’s it’s a people watch what we do more than what we say.
[Jim] Right. Execution won’t happen if we don’t have people seeing that we are being consistent through the whole organization. And then finally, people risk is that we can’t get the people that we need and we can’t keep the people that we need. And too many companies are having like revolving doors. And you’ve probably heard myself, what I’ve heard myself, which is people agree to come to an interview and then don’t even come. Like I I they don’t even show up. It’s like it’s some terrible number, like only thirty percent of people who are booked interviews even show up for the interview. It’s difficult to find the right people unless we’ve got a truly healthy organization because I believe you can
turn that on its nose, and you can actually build a company that is so the people like working there so much, they become ambassadors, and it ends up that there’s talent magnetism drawing people to your company. Yeah.
[David] Yeah. That is great. Talent magnetism. I like that. And what are we doing? Let’s thinking of those as four that you just you just ran through. Again, what the scalability, execution, growth of people, which of those risks most often are recognized too late? And what are some early warning signs that we could look at in those?
[Jim] Yeah. Well let’s start by saying it could be any of them because they’re actually hidden risks. if it was screaming at us, then we’d do something about it. You use the term laggard, sometimes attributed to the mortgage industry. These are lagging risks. We don’t have scalability risk shouting at us. We don’t feel that until we are needing to be at double capacity and we are not able. Now we can’t scale. We don’t have growth risk until we’ve spent a whole bunch of money on capacity that isn’t being used and we are not attracting the people we need. Now we’re in financial burden. You see, the issue, David, is that as leaders of companies, we have created good systems and structures to analyze our financial risks, our cyber risks now, our exposure risks, our marketing risks. But we almost no one has systems and structures to analyze organizational risks, like the four that we just have been talking about. So the issue is we need to develop an ability to examine how are we how do we fare on being ready to scale, on being ready to execute, on being ready to grow, and being ready to attract and retain the people that we gonna we’re gonna need.
[David] Yeah, we are again, the topic of AI is showing up everywhere. Everyone’s talking about it. Why do you believe that organizational health may become even a greater competitive advantage in the years ahead in light of AI?
[Jim] I’m a bit alarmed at what we’re seeing these last six to twelve months where company after company is announcing layoffs because of AI. They’re saying with the efficiencies of AI, we’re gonna be reducing our workforce by twenty six hundred people. Can we first acknowledge that the other 17,000 people in the company now are fearing for their job and wondering if they’re the next wave to be eliminated? So we have just, as leaders, we have just created a level of unhealth that is scary. The rest of our people no longer believe that it’s safe to work here. The best people are starting to look for jobs elsewhere.
[David] Yeah. And the wrong people we don’t want to leave are often are out get caught up in that. And you wonder why you’re having the exodus out the back door of your building.
[Jim] Right. So why does AI or why does organizational health matter all the more with AI? Huh. Because it’s the way that we can create a better rapport between leadership and everyone in the rank and file, and a better level of understanding about how they are valued and why they are likely going to be staying, because we we’re never going to replace all people with AI. Let’s just acknowledge that.
[David] Yeah. Yeah. I agree.
[Jim] There are functions that can be done more efficiently with AI. Let’s find them and do that. But let’s remember that people bring judgment. People bring skills and character qualities that can’t be built into AI. Not close now, and I don’t think ever, ultimately. So our mindset needs to be. How do we maximize the value in our company with the people we have? And maybe we do have to reduce the workforce, but let’s do that in a more humane way so that everyone else that stays, believes that they’re there for the long haul and you’re on their side, not trying to figure out how to get rid of them.
[David] Your job is next in this AI wave that’s coming. I I think one guy that I heard on a podcast, I wish I would have written down his name, but you know how we list podcasts for driving and doing other things, we don’t have the chance to note it. But the wisdom that came out of that, he said that what he did in his organization is he started providing AI training ahead of the layoff to be able to take those employees and redeploy them in other areas. In other words, he equipped the ones that were gonna get way laid off before they knew they were gonna get laid off. And then they got them ready so they could redeploy them inside of the organization, other places. Which was Yeah.
[Jim] I love that. Don’t you love that?
[David] I mean, just the intentionality of doing what we should do as employees. They said, Well, it’s all about business, not about all aspects about the can’t I mean us caring about employees. Well, I think what you talk about, if you if you don’t care about your employees and you don’t demonstrate that, like you were talking about the guy, the CEO or one of the senior executives living in walk flying in first class or business class, and everyone else is back in the coach class squeezed in there. Messaging, we’ve got to make sure it’s consistent. And when we have an organization that telegraphs and demonstrates this kind of behavior where we show that we care about people is the ones that are gonna do so much better.
[Jim] Let me give you a fun example that I learned about. IKEA. They in 2021 they started doing the research development to create an AI tool to handle customer service calls. Meanwhile, simultaneously, they started working with the 8,500 employees they had doing customer service and equipping them, first telling them we are building this tool so that we can reduce the number of simple inquiries that you will be responsible to handle. Let those be done automatically. The calls that you do take, we want to help you be even more effective to do that. But bigger than that, we want to help you take it further with these people. So they started training them, not on just how do you tell them the answer about something they wanted to buy. They were trained about well, have you considered what colors will work best in your home? And they’ve got some skills now to help them make an informed decision. Have you planned how you’re going to arrange your furniture? Would you like to talk about what we can do to help you with that? In 2023, they had fully implemented this AI system and they determined that over three years they saved $13 million. But rather than getting rid of eighty five hundred people, those people were redeployed and they opened up a new line of business that they have valued at $1.3 billion.
[David] Wow. I love those stories. Those yeah.
[Jim] The fact that just what you said earlier, the leader wasn’t asking how do I cut costs. The leader was asking, how do I work with the people we already have and help them bring greater value to this company? They’re gonna enjoy that more and it’s gonna be better for all of us.
[David] That’s such a good point. These are inspirational stories. And I challenge everyone listening to this. And if you’re not the boss, forward this on to your boss so that people can hear this and realize that there are things you can do. In your book, the imperfect CEO, the imperfect board member, and you’ve got so much on that. Let’s talk a little bit about as organizations grow. Now, not all mortgage companies, very few mortgage companies have a true board of directors per se. But they have some type of oversight. They have advisors that are there. How can they add the greatest value? Where do they sometimes unintentionally get in the way? People that are here, you and I are in there trying to help companies, but how do we get in the way and how can we advise and be a better resource to these organizations?
[Jim] Such a important issue. Do you know most of us? If we are invited into that role, we want to help management succeed. We care about the company, we care about them. But unwittingly, the way we help them doesn’t feel very helpful. See, as people serving on boards, whether they’re advisory or true governing boards, we have to not try to do the thinking of management for management. We have to try to help management. Think better and bigger. So we’re asking big questions about what and why we’re doing the things we’re doing. But most of us are so experienced at trying to solve problems, we dive down into the how. And that is where it crosses the line. The moment we start talking about how, unwittingly, we’re saying, management, we know how you should do this. And we’re the board, so you better do it this way. That doesn’t feel like helpful. That feels like you don’t trust us, you don’t think we’re able to figure this out, whatever. It unintentionally is devaluing management, which then creates a resistance by managers, and we’re getting this between the board and management rather than we’re wrapping our arms around each other, each bringing a different contribution to the leadership function.
[David] Right. It’s so important. There’s I’m thinking of a company that I was a part of one time and we it was this dysfunctional. I hated, I actually hated working there. The pay was great. Stick around for the money, but it was sucking the life out of me because instead of respecting and honoring the differences that are there. We made fun of people. We attacked them. And I sadly to survive, I got caught up in that culture for a period of time. I swear that’s why I’m doing what I’m doing now is because I want to help organizations out of that. If you could sit quietly with one executive team in one executive team meeting, what would you be listening for to determine whether or not an organization is truly healthy?
[Jim] This I don’t mean to be cryptic here. I would be listening for what they’re not talking about. I would be especially curious, what are they not saying that everyone already knows? As in
[David] Isn’t another way to say that is what are they saying behind the backs of everyone out there that they’re not saying in the meetings?
[Jim] Yeah. Yeah. When that happens, we’re not getting leadership, we’re getting reaction. And the people that are most responsible, like the CEO of the company, they’re not getting the information to understand what the big problems are. That comes back to our very first question or second question, David. They mix misdiagnose the problem because they’re not actually getting the real and the full information. So yes, I’m going to be asking, what is not being said and why? Why isn’t it? Sometimes it’s because it’s not safe, as in yeah.
[David] Mm-hmm. Or you don’t feel safe. Yep.
[Jim] So people people have learned that when they bring hard questions or bad news, they get beat up, so they just stop bringing it. Yeah.
[David] Bring it, yeah. Wonderful celebrated examples of that, that with tragic consequences that happens. I mean it’s that’s so true. What’s one conversation every leadership team should have in the next 30 days that could drastically improve their organization’s future?
[Jim] Question that I would encourage board chairs to ask and CEOs to ask is: what’s making it harder for us to succeed today than it should be? What’s making it harder for us to succeed today than it should be? That can open up a lot of different issues. Like if you think about the mortgage industry, what would you suggest? it’s gonna be on the tip of the tongues of the leaders these days, in response to that. what what are you hearing?
[David] Well, I think it is, you know, cost is a big one is people are trying to figure out how to reduce costs and you know, some that are trying to figure out an AI strategy and others are literally trying to figure out whether or not they should stay in business or merge. We’re having massive mergers going on. some of the conversations that are going in the boardrooms or the executive rooms or at least in the minds of the owners out there this these days.
[Jim] So let’s dig into some of that. Let’s talk about the merger especially. I don’t see very many mergers. I see acquisitions, but not mergers, if you can make it the distinction that a merger is that in a sense two equals come together and they become greater together. Most of the combining that happens is that someone’s got more power and ends up with more authority and everybody else has to do it the way that they want them to do it. Yeah. I hope that people who are listening right now are reminding or remembering what we’ve already talked about. That when we tell people to do it this way because we’re the boss, we’re not building a healthy organization. We’re gonna in most cases create a resistance. Like our human nature now is to resist authority telling us what and how to do our job. So thinking that bringing another group in is going to make our business suddenly better is deceiving ourselves because the human the human challenges are huge. And if we don’t already have capacity to deal with that, we’re gonna find people walking, everybody complaining, morale of the whole organization going down. That it’s potentially very dangerous.
[David] Right. Yeah, I totally agree, there’s always a winner and loser in a quote unquote equal merger. You don’t need two CFOs. You don’t need two heads of credit. You don’t need two of whatever senior executives. Already senior team members are gonna be there’s something’s gonna be happening there in some way, Diamond and no, no we could have you know, you talk about I worked for one company. In fact the company that bought one of our mortgage companies that I was a partner in, it had two co they had co presidents. And talk about a cluster, it was a Yes, you can’t have two head. Two headed monsters, it just doesn’t work. Unless they uniquely bring someone like us in to help you or myself to bring in and figure out how do we complement, how do what do you what do we what problems do we take on, what problems do you take on, that type of thing. Let’s talk about your book. Jim, it’s been so good to have you back on here. And you’ve got one book already published. You got another one coming out and being published this fall. Let’s talk about both of them. Encourage the listeners to pick these up and read them.
[Jim] So the imperfect CEO really comes at how do leaders lead a company well. The imperfect board member is specifically aiming at how do leaders govern a company well. And both of those need to come together to create the best outcomes. It’s easy to be kind of stepping on each other’s toes, still wanting the best, but not being clear about and in what part do we play? It like in sports. Imagine a hockey team where somebody’s always in front of the goalie trying to protect the net. Well, the goalie can’t see, so the goalie can’t do their job. It’s not helping. It’s actually in the way. Same thing’s happening in leadership all the time. Let’s get out of each other’s way. Let’s get more clear about what is the part that we play and how do we do that in a way that brings the best value out of people because of the culture that we are building in our company. A culture that doesn’t just ask how do we cut costs, even though, as you said, costs are a big challenge these days. Rather, how do we get maximum value out of the people that have chosen to work here?
[David] Yeah. And that you’ve chosen to have inside your there are people that just don’t fit. I mean there’s there comes a point and that’s an important conversation to have. And then but it’s how you have that conversation that could have a profound effect because those that exit I mean, I’m thinking of a couple of companies where I’ve had to fire some people and get rid of them. And they said, I wish I could have been fired like this from my last two jobs. I might have grown. I see, I get it. I see what that’s happened. You actually gave me tools now where I can improve and move forward. And that came back into my organization. They go, Man, I mean, I hope I never get fired here, but if I do, I hope I get fired of you because you actually you help people see what they need to do. You give them a map as you have to offload them on off the out of the company. You give them a roadmap if they so choose to improve. Improve themselves. I think there’s so many things. Your first book, The Imperfect CEO, is outstanding. You gave me a copy. I’m really looking forward to getting a copy of The Imperfect Board Member because they say, Well, we’re not big enough to have a board member. Well, if you own a company, you play two roles. You’re the CEO and you’re running it, but then at the same time, you almost have to remove yourself and be a board member viewing it. And I think those that can run their businesses in that almost duplicity of thinking, I’m a business operator. I’ll run the business. Then on weekends I need to get outside or evenings I get out and I act as a board member. I mean there’s some really good principles that you put forward in that book. That’s coming out this fall. Tell us a little bit about that.
[Jim] September 29th is the release date, and it’s the 20th anniversary edition. The book, original book, came out 20 years ago. A big reason that it’s such a great new book is that I’ve been able to use 20 years of building my network, and I’ve had amazing CEOs and chairs of companies from around the world contribute their feedback as I was writing this book, this new version. There were there were some chapters, David, that I probably wrote 10 versions before I was able to get the reviewers to totally say, you’ve nailed it. That’s exactly what I can support. So I’m excited that it’s a much richer book because of the broader community that I’ve been able to engage in the creation of the book.
[David] Well you’ve done such a great job. Again, a shout out to Dave Hopper, CEO and and chairman. I think he’s more chairman, chairman at Leader One. And so, David, thank you again for making this wonderful introduction to Jim Brown. Jim, thank you so much for coming on the podcast. You become a dear friend and someone I respect. We share a passion to do this together. I love how we complement each other and how we go about it. So I’m for anyone listening to this, I encourage you to have a conversation with Jim and learn more about how he approaches organizational health. He is really good at it. Thank you, Jim, for being here, friend.
[Jim] Thanks, David. So good to be with you.