to our customers?
As a leader, you're the one who tells your team why the organization exists. In Selling with Noble Purpose, I said, “If you treat your customers like a number, they'll return the favor.” Now, we'll take it a step further. If you treat your employees like a line item, they'll pay you back in kind. They'll regard you, their jobs, your customers, and your entire organization as expendable resources, something they dispose of the moment something better comes along. Instead of emotional engagement, you'll be left with a transactional relationship, which will permeate every aspect of your organization, including your relationship with customers.
The internal conversation becomes the external conversation. When your story is exclusively focused on financial metrics, you drive towards mediocrity. It's counterintuitive. It's also true. Internal financial metrics do not create a competitive differentiation. A story about profit, revenue, and share price will never jump-start innovation, improve customer service, or inspire employee loyalty.
Purpose Drives Profit, Not the Other Way Around
To illustrate how powerful purpose can be, let's look at a side-by-side comparison. While Sal Iannuzzi and other show me the money leaders were telling their teams that increasing shareholder value was their primary goal, Mike Gianoni, CEO of Blackbaud, was telling his team a different story.
Blackbaud is in the tech space, they're a cloud company. They're a firm based in Charleston, South Carolina, that serves the philanthropic community. They describe themselves this way: “Blackbaud combines software and service to help organizations achieve their missions.” Their clients include the Salvation Army, The Red Cross, and thousands of smaller nonprofits. Blackbaud works in over 60 countries to support more than 30,000 customers.
When Mike Gianoni took over as President and CEO in January of 2014, Blackbaud was the market leader. But their stock price was declining, and their earnings were flat. They were seeing early indications that clients were frustrated with lack of updates to their products. Contracts that were once secure were going out for bids. Recurring revenue was dropping.
Many CEOs would have jumped in to rally their team around increasing revenue. Instead, Gianoni chose a different focus. Despite the stock market pressure every CEO feels, Gianoni didn't lead with numbers; instead, he started talking about Blackbaud's clients. Not just who the clients were, but also what they did, and the impact they were having on their constituents and communities.
Gianoni describes the way Blackbaud had traditionally run their staff “All Hands” meetings, “When I first started with the company, for the most part, leaders would stand on the stage, and in a one-hour meeting they would spend 45 minutes on the financials.”
Blackbaud's previous leadership had focused on the money story, not the meaning story. Gianoni flipped it. He says, “Now I only spend five minutes on the financials.” The new format is, “What's our purpose, how does our work impact clients, are we being effective in serving them, and are we doing okay financially?”
Gianoni says, “It's more important to have our associates understand why we get up and go to work each day. At the end of the day, if you have a healthy culture, if everyone is focused on client success, if your leadership is made up of the right leaders, who have integrity and are building a team that is focused on delighting clients, and our culture reflects decisiveness and an action-orientation, when all that happens, the financials fall into place. The financials are at the bottom of that, not at the top of that.”
He says, “That's how companies actually work, that's why we do our All Hands meetings that way.”
Gianoni recognized the truism, that profit and other quantitative metrics are lagging indicators. Qualitative metrics like what gets discussed at meetings, how do managers coach, and customer success are what ultimately drive the financial results.
Gianoni started bringing customers into All-Hands meetings. At one meeting, the director of the Wings for Kids program described how her organization teaches emotional intelligence to struggling kids, and the impact it has on their lives. She explained how Blackbaud's software enables them to serve more kids, and raise money, in more effective ways.
Gianoni says, “In that moment, the engineer who built that solution is sitting there saying, ‘I helped create something that is making a positive difference in the world.’ That's what people go home and talk to their spouses about. They don't go home and talk about EBIDAT and stock price. That's for me and Tony [CFO Anthony Boar] to worry about.”
Over the course of a year, the cadence and tone at Blackbaud shifted. Vice President of Sales Patrick Hodges says, “Now we spend more time talking about customer impact than stock price. That's a change from the way it was before Mike joined. The senior leaders still cover stock price. Yet people walk away from the meeting, thinking, ‘Damn, I am glad we are doing well, and look how we are helping all these organizations.’”
Hodges's team, which is part of the General Markets Business Unit, articulated their aspirations for their clients by crafting their own purpose statement, “We accelerate your Noble Purpose.” One salesperson said, “When our software helps these organizations raise more money, and run their operations more successfully, we are literally helping humanity around the entire world.” Hodges says, “In sales you have to get your people feeling good and excited about it. That's half the battle.”
Hodges began a weekly Sell it Forward email, spotlighting a different client each week. Hodges asked the salespeople to describe clients by answering these questions: What's the client's mission? What's their ethos? What are their values? He asks them to describe the impact their solutions have on their clients: How will this client be better as a result of doing business with Blackbaud? How will the success of our project impact their mission? Salespeople began to compete to have their clients included. Hodges' Sell It Forward emails started spreading across the organization. He was the internal champion who stuck to it week after week.
Gianoni was an avid reader of the Sunday night emails. He would often comment, forwarding along his enthusiasm and compliments for the way Blackbaud was helping their clients fulfill their mission and purpose.
Product development people began to look forward to hearing about clients' organizations. One Sunday night, Hodges' son was ill, and he didn't send the regular email. First thing Monday morning, a product development manager marched into his office, saying, “Where's the email? I need it for my weekly meeting.” The product development team was sharing the stories each week; it gave them pride in their jobs, and fueled them to be more innovative. They were motivated to help these clients in bigger, bolder ways. In that moment, Hodges realized that his emails were doing more than just motivating his team, they were engaging everyone.
The Sell It Forward emails served as an ongoing sharing system that kept customer impact at the front of the organization on a weekly basis. The marketing team used the customer-impact stories to create more compelling collateral. One year later, when they launched a new product the marketing team focused on how the software would help their clients better accomplish their missions. Hodges says it was a totally different launch, “In the past, we would have spent most of the time on the technical features. Instead, this launch was about client impact, and how we could give our customers the ability to do more good for those they serve.”
Eighteen months after Gianoni joined Blackbaud, the organization has an entirely different ethos. They've captured more market share. They've successfully launched a new product. Recurring revenue now exceeds 75 percent of total revenue for the first time in the company's history. That means Blackbaud is keeping their clients and gaining new ones. They have a stable revenue stream that allows them to be even more innovative in the future.
And the ultimate proof: Under Gianoni's leadership Blackbaud's stock rose from $37 a share to $60 a share, as of this writing (see Figure 1.1).
Figure 1.1 Blackbaud's Stock Pre- and Post-Mike Gianoni's Purpose-Driven Leadership
Blackbaud's