100 Things I Wish I Knew Before I Became A CEO

I have been with Jefferies for over 33 years, and I have had the honor of being CEO for the past 23 years. In 1990 when I joined, Jefferies was nearly exclusively a riskless cash equities trading boutique headquartered in Los Angeles with $7 million of annual net earnings. At the time, there were hundreds of competitors that were larger than Jefferies.

Today, Jefferies is the largest independent investment bank (non-bank holding company). We are consistently in the top ten (often upper half) in a full-service array of products and services. We are global with over 40 offices anchored by major hubs in New York, London and Hong Kong. Jefferies employs over 5,300 amazing people and we lead with specialized expertise in every single industry vertical. We actively deploy a $60 billion dollar balance sheet, and the firm has trailing 12 months revenues of $5.3 billion. We are also proud to have one of the most enviable lists of clients and joint venture partners in the industry.

While I have enjoyed a front row seat to all of these accomplishments, they are the result of decades of hard work, ingenuity, tenacity and perseverance by thousands of Jefferies partners, both current and past. I firmly believe that Jefferies today is in the very early stage of building our company. There is so much to do, and we see opportunity to grow and improve in everything we do. I could not be more excited or energized than I am today to continue to be a part of the future of our company.

This got me thinking about my experiences and history as a CEO. When our four children left for college and right after they graduated, I wrote two lists of 100 things I wish I knew way back when I was in their youthful shoes. These were things that I was oblivious to at the time and in hindsight, would have made my college and early career days a little smoother and perhaps would have helped me avoid many of the countless mistakes I have made along the way. Since I have been a public company CEO for the past 23 years, by definition I have a lot of experience. I have been through many complicated market cycles and extreme dislocations, competed against the strongest of competitors for the most desirable of clients and co-workers, helped clients navigate through various capital structures and strategic initiatives, and helped shape Jefferies, its culture, vision and business plan. This far into my journey, I have seen, experienced and dealt with “a lot.”

Since there really is no roadmap or playbook when you become a CEO, especially when you start at the age of 39, I have created this list of 100 things I wish I knew before I became a CEO. This list is not meant to show all the things I have done to help make Jefferies successful. To the contrary, because of my tenure I have literally made every single mistake possible as CEO. This is the list that I wish someone gave me decades ago before I received this incredible opportunity. Knowing this list then would have made me much more effective, allowed me to avoid some incredibly painful episodes, and would have helped me sleep better at night. I doubt I would have had the wisdom to soak all of this in and employ it, but even if just one or two got through, life (and our firm) would have been even better.

I don’t think you need to be a CEO to learn from some of my mistakes. I also don’t think it matters if your company is small, large, private or public. These thoughts aren’t unique to any specific industry or geographic region. A lot of this is good old fashioned “common sense.” Then again, if it was really all so “common,” everyone would do it.

It’s never too late to start helping to build your company!

Best,

Rich

Here are the 100 Things I Wish I Knew Before I Became A CEO:

As you go through your career, you are likely to get more promotions and more bosses. But when you become CEO, you report to everyone in the company – not the reverse.
It is a privilege and a responsibility to be a CEO. The day you forget this is the day you are no longer the CEO. There may be a lag period, but the end is near.
When you are CEO, 99% of the time you do not have to make the decision. Instead, the job is to create a culture of empowerment and consensus building, so the decisions come from the bottom of the organization and work their way up.
When the right decisions are made from the trenches, they become instantly implementable and institutionalized. They usually are a direct result from those closest to the clients knowing what needs to be done so their objectives can best be achieved.
Once in a blue moon, the CEO must make a major decision. These are usually times of great uncertainty. Often this is when it is hard to analyze risk, duress is in the air, and a potentially incredible opportunity could be upon the horizon. Even during these times, input must be solicited broadly, but at the end of the day, the CEO must be willing and able to make this call. CEOs must be right on these big decisions. This can be a lonely time, but this is one of the few times the title and privileges are truly earned.
One of the worst scenarios is when the culture of an organization instills fear of raising bad news or significant problems. If people are afraid that the messenger will be shot, the eventual bullet will hit the CEO, and the entire organization.
It is ok to insist that everyone in the organization who presents a problem, big or small, is requested to also suggest the potential solution. Solutions are always appreciated and often right. Even when they are wrong, it leads the messenger to realize the complexity of the problem and could be the first step to brainstorm what might actually work.
It can be incredibly lonely as a CEO.
It doesn’t have to be incredibly lonely as a CEO.
Having at least one (and hopefully more) true partners in leading an organization can be a remarkable way to build a successful company. Sharing the hard work requires sharing the glory. Ego has no place anywhere in the C-Suite. The benefits from having a true partner(s) vastly outweighs any potential negative. I have been blessed in this regard.
A partner(s) should have complementary skills and a diverse set of abilities and talents to you.
However, there must be perfect alignment on the things that are most important: trust, integrity, motivation, passion, time horizon and work ethic. Like parenthood, there can be many debates behind closed doors, but once the door opens, there can’t be even a millimeter of room for others to separate or divide.
Having a true partnership as well as a wonderfully aligned leadership team helps greatly in the important area of eventual succession. Having broad-based institutional buy-in at the top of the organization on strategy and direction helps in every potential succession scenario.
A transparently informed, fully empowered, highly experienced, super intelligent and truly diverse board is critical to long-term success.
If you cannot be truly open and transparent with the board, either it is the wrong board or the wrong CEO. Either way, this is the CEO’s (and Chair’s) fault. This problem won’t linger.
The time horizon to gauge success must be aligned between the CEO and the board. Both need a keen sense of urgency with an overwhelming priority of what is best for all constituencies over the long term.
A CEO must balance many important constituencies. Each is critical to success, but each have different and often conflicting priorities. Shareholders want value creation through better margins and growing earnings. Employees want ever greater resources to better serve their clients and ample compensation for their efforts. Vendors and counterparties want to sell you their services on terms that are best for them. Bondholders want you to protect their downside at all costs as they don’t share in the upside.
This is quite a puzzle to solve daily, but over the long term, all interests converge. Bondholders won’t be happy if great employees leave. Shareholders will get wiped out if excessive risk is taken. Vendors want a long-term client. Employees want a secure home that will offer a long-term career versus a short-term starburst and fizzle. Openly communicating with all constituencies to constantly remind them of their mutual interests and making important decisions reflective of this reality is critical. This sounds difficult but it isn’t if you get everyone to prioritize the long term while constantly maintaining a keen sense of day-to-day urgency.
If you want to build a durable and successful company, it must be diversified. Diversification can come in the form of clients, partners, employees, products, services, geographies, funding sources and more.
Netting risk is one of the biggest issues facing a CEO. Certain areas of a company can excel at times when others may have challenges. This is normal and expected as you build a diversified company. The people who are riding high on the current wave generally have commensurate expectations to be rewarded but if you don’t treat those who have just fallen off the wave fairly, they may not be willing to get back up on the next wave with you. There is always a next wave and the person on top constantly changes. Getting buy-in from all surfers that there must be a “smoothing” of rewards while always maintaining an entrepreneurial incentive system is one of the hardest and most important challenges for a CEO. Compensation must balance the individual, local team, department, division, and firmwide short-term performance while recognizing the long-term objectives that will ensure everyone’s continued success.
Everyone in the company should be offered the chance to own equity in lieu of cash compensation, but not everyone needs to take it, unless regulatory mandated. If someone doesn’t want equity, it doesn’t mean they aren’t “all in” or “fully committed.” People have different risk tolerances. It is also hard to ask someone to risk losing their compensation AND life’s savings if something goes wrong. This has happened a lot in the finance industry and people’s personal opinions should be respected.
When you pay people in shares, you are paying them in the currency that they often value the least, but conversely is the most expensive form of currency of the company.
Good people act honorably, are great teammates and partners, and can be fully committed to the long-term success of the company if they own zero shares.
Bad people can be conniving, non-transparent and mercenary-like if they own a lot of shares.
Hire only good people.
The CEO and top leaders must own a LOT of stock and be “all in.” This is not a recipe for guaranteed success, but it is highly correlated. This goes with the job and if the CEO isn’t truly excited about this alignment, there is a problem.
Sometimes a CEO can own an incredible amount of equity in the company and still blow the company up. Often this is due to arrogance. Respect equity ownership but blind trust has no place within any organization.
Sometimes in the early stages of building a company when revenues are critical, short-term sacrifices are made for great performers who aren’t high quality humans. CEOs and others can make accommodations and convince themselves that “until critical mass is reached,” the ends of having people who are big producers (but of mediocre character) justify the means. The ends never justify the means, and when the bad apples are eventually thrown out of the basket, the organization ALWAYS improves. It really shouldn’t be a surprise when every remaining member of the team breathes a sigh of relief when the bad apple is tossed and the result is always increased productivity, client service and universal happiness. The sooner the CEO realizes this in their tenure, the better for all.
CEOs must be very careful about what they say. Undue importance can be imparted on frivolous comments that anyone, especially a CEO, is capable of making. People have come up to me and said, “6 years ago you told me X and I have been doing that ever since.” Usually, words are chosen very carefully but we are all capable of saying nonsense. I’m drawn to the time in the movie Talladega Nights that Ricky Bobby told his father Reese that he lived his life based on Reese telling Ricky, “If you ain’t first, you’re last.” Reese explained that he was “high on peyote” when he said that and went on to explain that if someone wasn’t first, they could be “second, third, hell even fourth.” CEOs need to choose their words wisely.
CEOs cannot spend enough time with clients, prospective clients, employees, and new recruits. They must be instantly accessible to shareholders, bondholders, rating agencies, regulators, and anyone else that is critical to long-term success. If in doubt, spend the time with the clients and co-workers, the others will always know how to find you when they need you.
Time spent helping to build your company and serve your clients is much more important and valuable than time spent convincing someone to buy your equity.
The importance of rating agencies cannot be overestimated. If they do not feel safe, none of your other constituencies ever will be. Most people focus on their shareholders, but if their bondholders/lenders are not happy, there can never be long-term value creation for the equity.
The CEO business card is a very scarce asset of an organization. To optimize its tremendous value, listen to all the people in the company. If you are not using the title to help open as many doors as humanly possible with the goal of making everyone’s job easier and more effective, give back the business card.
If you are going to be a CEO, you need to be reachable and accessible. The “hard to get” and “always too busy” nonsense is BS.
Capital structure matters. It is as critical as your culture, product and clients. The best company with a problematic capital structure won’t survive. If you have the right capital structure but your business model needs improvement, you will have the time to modify your products, improve your culture and find new clients.
Never take existing clients for granted. Every day you have to re-earn their trust, respect and confidence.
It is easier to maintain existing clients than gain new ones. There can never be an excuse for losing quality existing clients. It is always our fault.
The best way to get new clients is to solve a big problem for them or satisfy a critical need for them when they are in trouble or deeply in need. That is usually when their existing relationship(s) ignores them or abandons them completely.
Certain clients are not only capable but are also willing to help you change the fundamental perception and direction of your firm. When you add great value to them, they reward you by branding themselves with you and putting it on their shoulders to help you build your company. These relationships should be treasured, and you cannot thank these true partners enough for their loyalty and support.
If you think you are keeping things confidential within the organization, think otherwise. Everyone has one best friend that they trust implicitly so they open up to that person. Generally, it is better to share issues and challenges openly and transparently to enlist the help of all, rather than keep things supersecret. More minds with a diversity of experience and potential solutions often results in the best outcomes.
Sometimes secrets must be kept for the benefit of all. These times are rare. Secrets can never be kept from your top-level partner(s) or your board.
Shareholders and research analysts are incredibly important constituencies that need to fully trust senior management and understand and embrace your strategy.
Shareholders and research analysts have almost never run companies, and while it is vital to understand their opinions and perspectives, exclusively following their direct advice of what needs to be done is often a recipe for a disaster.
Even the most qualified, experienced and informed board of directors cannot have a complete understanding of the intricacies and nuances involved with running your company. They are excellent advisors and sounding boards for the big picture and strategy. Always listen to what they say but for almost every day to day decision, it has to be your call. Obviously for the biggest and most important decisions, you need to let them guide you to help make the best decisions for all stakeholders.
You are never as smart as you think you are when your business is doing great, your stock is up or the publicity is ravingly positive.
You are never as dumb as you feel when your business is doing crappy, your stock is down or the publicity is horrible.
Negative clicks sell and positive stories seem to wallow in obscurity. Try your best not to take it personally.
All that really matters is what your team, clients, shareholders, rating agencies, bondholders, spouse, kid(s), friends, parents and grandparents think.
You know if you are doing a good job or if you are not.
Nobody does a great job all the time.
No matter what anyone tries to tell you, it is personal. And that is ok and as it should be.
The people around you will tell you everything you need to know. Unfortunately, sometimes the way they tell you is incredibly subtle and nuanced and if you aren’t paying keen attention, you can easily miss it. This can happen no matter how hard you try to be accessible and open to criticism. Look for what people “don’t say” as much as what they “do say.”
The people who will say what needs to be said plainly and in a manner in which you can hear and accept are the most valuable. You can never have enough of them around you. Sometimes you owe them an apology.
Living on a high perch will ensure you will lose touch with the reality of what is going on around you. Fighting in the trenches alongside everyone and trying to gain ground every day will keep you informed, motivated, involved, value added, grounded and appreciated. You will also feel like you accomplished something at the end of the day. You will remember how hard it is to compete and win. Never send a co-worker to accomplish an objective that you cannot achieve yourself.
Every email and every call must be returned promptly. It really isn’t that hard for anyone. No excuses.
The job is a sprint and a marathon.
The most important person to increase your odds of long-term success is your spouse or significant other.
Without the right life partner by your side, the down periods are unbearable and the moments of success pale in comparison to what they could be.
The right life partner will keep you humble and keep everything in proper perspective. They will never put up with your BS and keeping you balanced is a huge asset in the office.
The right life partner will be your biggest fan.
Real vacations and disconnected time off are incredibly hard to achieve. It is almost impossible to be fully off the grid. Force yourself to go as far as you can to achieve some real peace. When you do get that rare full peace, it is magical and the ultimate refresher. Don’t beat yourself up too much if you only achieve partial success. All you can do is your best and it is almost impossible to fully unplug unless everything is perfect.
Everything is never perfect.
No matter what fire is blazing, you can and must find a way to exercise every day to keep your mental and physical health.
No matter what you do, it is all but inevitable that you will find yourself in some type of major crisis. Sometimes it is self-inflicted but often it just happens. And yes, bad things do happen to good people.
Success is wonderful, but the crises are what will define you.
When an organization is put through a true crisis, whether deserved or not, the company will never be the same again. Some companies wither and may never again shine the same way. Others will see their team band together and fight through the challenges in a unified, coordinated and highly passionate manner. When they successfully overcome the crisis, the firm will be lifted to a higher level. This is incredibly painful, scary and yet magical.
The ability to successfully survive a crisis depends entirely on your people and culture, transparent and honest real-time communication, proper duration of funding and capital structure, and a complete lack of arrogance or hubris.
Every one of these survival requirements must be firmly ingrained throughout an organization well before even the smallest scent of a crisis begins to develop. You cannot expect any of these to magically appear at the onset of the problem. If regardless of size, you live your life like you are the “perfect size to fail” versus arrogantly believing you are “too big to fail,” the right decisions and actions will always find you.
Even if you are sure that you did nothing wrong to get yourself into a crisis, figure out what you did wrong to get yourself into a crisis.
It is all but assured that a completely different type of crisis will eventually rear its ugly head. That is why (#65) must always be ingrained throughout the organization.
There are very few moments when all is going well and smoothly. When you are in one of those moments, you better enjoy it because they rarely last long.
In the early days, it is the people that you know well that will take the chance to help you begin to build. They join you when it isn’t obvious to do so. You will share a bond with those people that will last a lifetime and it needs to be treasured.
Success begets success and over time it becomes easier to recruit additional A talent, but it requires a lot of effort and taking advantage of market dislocations and competitor circumstances.
New A players cannot be recruited or be successful when they arrive without the support and embracement of the existing team. To achieve this, you always need to appreciate and respect the existing team and only bring in high quality new partners who embrace and are additive to long-term partnership. This is a complicated and nuanced process and is easy to screw up. It requires everyone to trust, share and be self-confident. It is up to leadership to make sure the result will be that the long-term overall pie will be larger and more valuable after new additions.
There is a good and bad to learn from every prior organization that new people have joined from. Everyone needs to be open minded to this reality, but the end result must be to make your culture the best it can be versus trying to replicate others. It is good to have your culture grow, develop and flourish in new directions, but it has to be true to the original foundation and principles. Nothing is static but the core fundamentals that got you to this point can never be compromised.
Bottom performers must be humanely asked to leave, regardless of the market environment. They are good people, and most will go on to have amazing careers. For some reason, the fit is not right, and they will flourish in a different firm, industry or career choice. Perpetuating a bad fit doesn’t help the individual or the rest of the people in the company. Eventually the individual will realize this decision is best for them in the long term, but it is painful and sad when it happens.
Certain people are culture carriers and just can’t help but lift the spirits, productivity, energy level, and success of everyone they touch. You cannot have enough of these people throughout the company, and they come at every single level of seniority. They are contagious and invaluable. When they have a problem, you better listen closely.
Diversity is not a box to be checked. Plain and simple, if you want the very best company, you need the very best people. If you want the very best people, you cannot have them from any subset or two of the population. You need the best from every constituency. This requires constant pro-active effort using non-traditional measures to seek out the right people to get them into the company. It often gets harder to build diversity as you rise up the seniority ladder. The very best companies will get this right and it requires a LOT of help from people throughout the organization. It must be ingrained throughout the organization and led from the top. Merit and achievement are never sacrificed, they are enhanced.
The best Human Resources teams are the ones that are ingrained as partners within the leadership of the businesses. HR is critical to long-term success but should never be a political power center within the organization.
Politics and conniving destroy efficiency, morale, client service, human capital and companies. This usually occurs when there are too many layers containing people who don’t touch clients directly or facilitate the execution and processing of getting the job done. When managers cannot identify for themselves who in their charge is capable and who is not, the cancer spreads. It can be incredibly exhausting and at times frustrating to be “lean, mean and focused,” but it is the best way to ensure long-term success.
You can be too “lean, mean and focused.” The right infrastructure, checks and balances, processes, and support are fundamental to building a successful organization. There is no “back office” as that is a pejorative term that understates the true value and partnership this integral portion of the company delivers. Risk managers are true partners for business leaders who “get it.” If you don’t invest in the best people, technology, and systems, the firm’s trajectory will be limited, or potentially something even worse.
People are human and mistakes happen. You can handle just about anything if the person is honest, transparent and “owns” what they did. If someone lies, abuses power, harasses others or similar, they are out.
You need strategic partners to help build a company, especially when you are the upstart competing against giants. If you try to just do it on your own, it can require a lot of risk which can backfire in times of stress. The trade-off for these partnerships is that you must also fairly share the upside.
Strategic partnerships work best when you know the people well and have had history. Ideally both parties bring different skills, capabilities and competitive advantages. There also must be alignment on duration expectations for success and everyone must share the same fundamental cultural traits and values. Great partnerships are very hard to find and cement, but you don’t need many of them to achieve “game changing success.”
Both sides must make it a priority for the other side to win if the partnership is going to survive the long term.
Larger competitors will denigrate, belittle and badmouth you every chance they get. This means you are doing something really right.
It is particularly fun when larger competitors demean your firm while you increasingly hire their best people.
Sometimes success is due to the missteps and bad choices of your competitors. One efficient way to move up in the rankings and market share is to have competitors disappear. Companies are fragile and success can be fleeting. Sometimes staying alive is winning. The first point in this note should have been: 1. Don’t blow up your company.
Sometimes when your competitors fall, they fall on top of you and you are next. Don’t gloat and always be self-aware. The last dinosaurs were probably enjoying all the easy pickings of food, right until the end.
You can’t build a brand by paying a marketing guru or advertising agency. Your clients and people build your brand and they own it. It takes a very long time to develop a brand and it is one of the most precious assets available. It has been said one thousand times and now one thousand and one: brands are incredibly fragile and can be destroyed instantly by anyone inside the company.
If you are relying on others to give you the satisfaction that comes from being a CEO, it’s not going to work. The gratification has to come from within.
If you think you are irreplaceable, either you are wrong or you are doing a horrible job.
If you think the most important thing about your legacy is your tenure and success as a CEO, you have missed the point of life.
If you are doing the job for the money or status, it’s not going to work.
No matter how accurate the mathematical justification, nor how strong a negotiating posture you take with your board, when you look in the mirror you must acknowledge the cold honest truth: every CEO is overpaid and we are all amongst the most fortunate people on the planet.
If you are helping to build a company that is growing and profitable but doesn’t really have purpose or stand for something important, it will be a hollow and short-lived victory.
You are a fiduciary for your shareholders and other stakeholders, but that is not inconsistent with using the platform for societal good.
If you are filled with an inflated sense of self-importance, spend some time with doctors, nurses, teachers, military personnel, mental and physical health therapists and all the other high-quality humans on this planet giving their all every single day. They work harder for less but fortunately get intrinsic rewards and satisfaction that keeps them in their vital roles.
Contracts are irrelevant. You serve at the pleasure of the board, the people working beside you in the company, the clients, and the shareholders. More than anyone, the CEO needs to earn their position every single day.
Never forget, even for a moment, the privilege and responsibility that comes with others trusting you with their careers and their investment in your company. Positive reinforcement is rarely directed towards any CEO, but every day you are in your seat is because of the implicit support of so many people. Take strength from this and treasure it. This is your thank you.