August 13, 2013
How To Succeed In Your First 90 Days As CEO

The following is a conversation with Jim Whitehurst, the President and CEO of Red Hat, a $1.1 billion open source software and systems company. (If you’re running Linux, odds are good it’s Red Hat.)

Before joining Red Hat Jim was the COO of Delta Airlines; his job was to lead the company out of bankruptcy. Before that he was a director and vice president of Boston Consulting Group.

We talked about the first 90 days for a new CEO — in particular, someone who has never been a CEO before – and what you can expect when you assume that role.

Tell me what struck you first.

It was definitely strange coming in to Red Hat as the CEO — not because of the company, but because I didn’t anticipate my reaction.

The most shocking thing was the psychological difference. Even if you’ve run a large organization, if you weren’t the CEO, it’s different — there’s always someone behind you.

At Delta I ran operations and had close to 75,000 people reporting to me. When I came to Red Hat it was, at the time, close to 2,000 people. I figured, “Hey, it’s smaller… not a problem.”

But even though most of Delta had reported to me, there was a man behind the curtain, so to speak.

Now I was the man behind the curtain.

Ultimately, there is no peer. You can talk to a board member, but when you talk to someone who works for you… I’ve never had a conversation with a boss that I wasn’t always aware that person was my boss. You lose that group of peers and confidantes you can talk to.

Intellectually I knew that would happen, but until I really faced it I had no idea how different it would feel. Other CEOs I’ve talked to say the same thing.

Did that difference extend to how employees perceive you?

Absolutely. You’re under a microscope — not just for the job you do but for things like what you wear, whether you use a Styrofoam cup instead of a mug and what that says about your environmental consciousness, what kind of car you drive — the microscope is much more powerful than it was when you ran a large organization.

But at least you’re completely in charge.

Yes and no. You still have constraints. You still have people you answer to, and unlike when you were really high up the org chart, it’s not just one person.

Now you have four groups of people you answer to: Your board of directors, your investors (or the sole owner), the press and media and your employees.

CEOs stumble because they lose credibility with the people who work for them. Sure, you’re trying to learn and lead and sometimes make changes, but you must have them on your side.

Coming from the outside you have all these different constituents you need to manage, build credibility with and create space and permission to do what you want to do. You need credibility with Wall Street. You need credibility and buy-in with your board so they will let you do what you think is best. With the press you need credibility so you don’t get beaten up: You personally might have a thick skin, but your employees probably don’t, and they definitely don’t want their company savaged in the press.

You need space to operate, and earning that space starts on day one. You also need to have “permission” to operate. Always remember that as the CEO you have more people to answer to, not less.

Did you make any mistakes early on?

Absolutely. One was under-appreciating the importance of working closely with the board.

I love our board. They took a chance on me, brought me in from outside the industry. I was young and it was my first time as public company CEO, and they wanted to make sure I would be successful.

In my first few months it was crazy: Customers want to meet me, the press wanted to talk to me, financial analysts wanted to talk to me — we’re global so I was traveling around the world, trying to get to know the business — and I didn’t spend much time one-on-one with board members, or even with the whole board outside of board meetings. I didn’t have a continuous cadence of conversation with them, and that was a mistake.

In 2008 we paid over $100 million to buy Qumranet. I remember going to the board in my first year to recommend the acquisition, and I got this “Whoa! You want us to spend 100 million for a company with basically zero revenue…” They had millions of questions, which was fair enough.

We spent a lot of time, answered all the questions, conducted a number of specific board calls, etc. They ultimately got behind us but I underappreciated the fact that board members are ultimately responsible, psychologically especially, for the welfare of the company, and yes they hired me, but that’s not for them to feel comfortable with me. The process could have been smoother and taken less time if I had laid more groundwork with the board.

Build credibility with the board and your relationship can become a lot more peer-to-peer — but it doesn’t start that way, nor should it.

Any other advice for a CEO in his or her first 90 days?

Show what you’ll do differently.

A key part of becoming the CEO is to communicate what is the same and what is different. Not just strategically — we’re doing this, and we’re going to stop doing that — but culturally, too: what behaviors are going to be celebrated and rewarded, and what behaviors will not.

When I started at Red Hat, my predecessor was a huge proponent of open source. People wanted to know if the icons of open source in the company would continue to be celebrated.

Absolutely. I came to Red Hat because of and not in spite of the culture. What you reward and celebrate, and what you discourage, is almost more important than the strategic decisions you make.

How will the place feel? Culture is often a result of which behaviors are rewarded or discouraged. Communicate what is the same and what will be different. That’s where the microscope comes into play again, because you also communicate by how you spend your time, what you laugh at — everything you do communicates your feelings and beliefs.

So, for me, I definitely believed in the general direction of open source, but I also said, “Hey, we need to focus.” We operated and operate in a target-rich environment – there are tons of projects and initiatives we could tackle. I felt we needed to demonstrate more success with our core products, so one strategic decision was to focus on certain key areas. That resonated well with our employees and our customers.

Whenever possible, figure out what you’re good at and apply that to generating revenue.

And always remember, changing culture and capabilities is a lot harder than changing markets or products.