PURPOSE

Leadership Lessons

An Interview with James D. Robinson III, General Partner and Co-Founder, RRE Ventures

EDITORS’ NOTE Jim Robinson fascinated by the dynamics of change about it like weeds in the lawn – they come up also sits on the private boards of a and watching the extent to which peo- every day so we have to be on guard to make number of portfolio companies, ple, companies and countries respond sure they don’t strangle what we’re trying to including , CoverHound, to change or fail to respond to change. accomplish. Fast Performance and NerdWallet. Most often, we have a bell-shaped In a smaller company, change sometimes Additionally, he serves as President curve with those that lead change and rears its head in a different fashion. of J. D. Robinson, Inc. He was then we have a bunch in the middle A number of companies, including some Chairman and Chief Executive and then there is the tail that resists we have started, go out to do X and after nine Officer of change until they are irrelevant. months, they fi gure the market isn’t interested Company from 1977 to 1993 The companies we deal with are in X so they change into Y. and Non-Executive Chairman of not all aimed at disrupting, but they’re Then several months later, they fi gure that Bristol-Myers Squibb from 2005 to aimed at the enterprise or network Y isn’t it either but, in the process, they have 2008, where he sat on the board James D. Robinson III level, or the consumer level, of using learned a lot and fi gure it has to be Z – some- from 1979 to 2008. Previously, new technologies brought about by times this can be a superb moment of change Robinson held several executive positions within the digital world to do things better, cheaper that leads to great success. American Express, was a general partner with and faster. The dynamics are different than in the White, Weld & Co., and served as Assistant Is change more diffi cult once companies big companies because of the size of the to the Chairman and President of Morgan reach a certain size or is it more about hav- organization. Guaranty Trust Company. He also served ing a culture that is adaptable and employees Even so, somebody has to have the author- from 1975 to 2015 as a director of The Coca- who aren’t afraid of change? ity to make the decision to make change or not Cola Company. He has served on the board I would look at the umbrella of change. It to make it. of Memorial Sloan-Kettering Cancer Center should apply to big, small and medium compa- When you look at opportunities, is it since 1970 including as Honorary Chairman; nies as well as to governments, etc. more about the product, solution and inno- he is an Honorary Trustee of The Brookings Knowing when to change is the challenge vation that can happen within that space Institution; and Chairman Emeritus of the that a CEO or board faces. Knowing how to or is it more about the people and manage- Partnership for City and the World change gets into the details, because entities ment team? Travel & Tourism Council. Robinson holds an can have a lot of legacy systems and people I think it has to be both. The bets we’re M.B.A. from Harvard Business School and a around who want to keep things the way they making, particularly in the A round and B round B.S. from Georgia Institute of Technology. have been. bets, require that we believe in the individual That is fi ne – we have to respect the his- and team and their passion. We think they have COMPANY BRIEF Since its founding in 1994, tory that created the platform we’re now deal- enough domain experience to not do stupid RRE Ventures (rre.com) has worked alongside ing with. One of the big concerns, however, is things that aren’t going to work, and it is the talented management teams and has helped to that any management must watch out for the package of those things together that leads to build industry-leading companies. The fi rm now arrogance of success because that sets them up success. manages $1.8 billion in assets dedicated to for failure. Often, in a number of our companies, at a investment in early-stage technology companies. Big companies have the silos of the prod- certain point, we change the CEO. More often RRE’s investment professionals focus on rapidly uct people, the P&L managers, the corporate than not, this is because the CEO, who is the growing markets in the information technology, staff, compliance, fi nance, PR, HR, so the ques- founder, realizes that he or she is having to software, communications, and fi nancial ser- tion of accountability and who has the authority spend time on managing a lot of people and it vices industries, and back entrepreneurs and to decide change is confused. isn’t as much fun as being in the laboratory or management teams that possess vision, industry An organization needs to make decisions creating a new product or being at the point knowledge and discipline. and to execute. Any of the few big decisions of sale. that can change the dynamics of the com- When we say, should this be a fi ne cottage You created RRE with a clear interest in invest- pany are things I want to get involved with industry company or something big and impor- ing in emerging technology companies. When and see if my instincts and thinking says it tant, they almost always say the latter and they you look at RRE today, has it developed how is a sensible thing to do and that the timing want to fi nd someone who can take it to that you had envisioned? is right. level and they go back to the lab. I started RRE with my son, Jim, and Stuart Even as successful as Amazon is, they have When you look at where the world Ellman 25 years ago, which is longer than I was to worry about how to avoid a slowdown in the is today, one issue that many leaders in with American Express. gears because of the organization structure, the the U.S. are concerned about is income We focus on the early stage venture busi- authorities and the matrix of the organization. inequality and the separation of haves ness. For me, that is an exciting part of the Change and keeping an innovative spirit and have nots. How concerned are you world around us primarily because technology as part of the DNA in a big company can only about this and what can be done to drives change. Throughout my life, I have been happen from the top down. We have to worry bridge this gap? 58 LEADERS POSTED WITH PERMISSION. COPYRIGHT © 2019 LEADERS MAGAZINE, INC. VOLUME 42, NUMBER 2 I’m very concerned about it because the Are you optimistic that CEOs will Has globalization played a role in middle class and the gap between the haves address this issue? the divide? and have lesses is continuing to grow. This It probably takes a number of dynam- Yes, from the standpoint of goods from is not something the government alone can ics to get their attention and, by that, I China and Mexico coming in. We didn’t need address. mean that many of the CEOs recognize that new trade agreements – we just needed to We see the progressive viewpoint is to this is a problem, but they don’t want the use the policing mechanism in the existing let the government do it. The government is government telling them how much to pay ones to make a difference. never going to do anything, except in rare employees. Is Trump right in challenging unfair trade circumstances, with the efficiency the private Then they should decide, but they in some of the practices in China? Yes, and sector can. should do so with a different thinking cap on those will get better. The other side of that coin, however, than has been used traditionally. However, we want the world to also is that managements, particularly at the big They are part of the income inequal- show economic growth, and I’m talking not companies, have to take a different viewpoint ity equation. What are they going to do to just the industrial world, but also the devel- on the issue of who the stakeholders are. show some leadership to change it, at least oping world. When the focus shifted to the shareholder, I for their own employees, and hopefully the It’s a good thing if countries in Africa think this was a dangerous risk, because it communities around them and the customers see income levels rising. Coca-Cola commit- has been a part of allowing the income gap they’re selling to? ted to hiring five million women in Africa to grow. It’s interesting to look at all of the Is there a role for government in try- by 2020 and putting them into a position anger at the concept of raising the minimum ing to drive this or is this going to have where they can earn money in their com- wage. to come from the private sector? munities. They are being provided with Whether it ought to be $12 or $15, should There is always going to be a role for containers that are converted into both it be mandated by government? Companies government, but simply focusing on leg- digital hubs as well as water purification should realize that we’re talking about their islating a $15 minimum wage is what centers. employees, the communities around them, will happen if they don’t see the problem The individual actions of a num- where their customers live and work – they being addressed in a significant enough ber of companies, such as Bristol Myers should want that group of employees to way. Squibb, in terms of building medical have money to be able to spend and help My view is to get the C-suite into the facilities, are examples that can make the local community grow along with their game and figure out whether it’s in their a difference. own income. best interests to start doing things differ- The problem in some of those countries It’s not that the government is forcing ently. They need to adopt a number of is the corruption factor to deal with and the them to do this; it has to be seen as taking a measures that were common practice years testosterone of leadership. We can’t solve step in leadership that will make employees ago, like profit sharing and stock purchase all of those issues, but we want to work even more loyal and be greater supporters plans, which have been cut out as they with those who have the vision. We know of the company. Pay based on performance strive to expand margins and quarterly that central planned economies do not and delivery is appropriate and that needs guidance. work. Market-oriented economies work, to apply to the broader employee base as Why isn’t that happening when CEOs but there has to be respect for law and well. know how critical this issue is to the order and for the legal system and the judi- Over the past few decades or so, the future of the country? ciary system to work in a transparent and compensation of senior management has They shrug and say it’s political, and fair way. gone way up and that of the employee there’s nothing they can do, but there is If those are in place, you are going to base has gone flat or up a few percent- something they can do. It can happen one by attract investment dollars and with those age points. That is ridiculous because we one by leaders showing what an intelligent you can build. The private sector needs to want our employees to have the money to policy looks like. be a major part of that rather than just the invest in their communities, to save and to I can guarantee it’s not what has been government sector. spend. When that happens, the communi- happening for the past few decades where If you look at the many challenges ties do well. every year the C-suite salaries and bonuses that the world faces today, is it diffi- This requires a different perspective. The and the other perks go up and with generous cult to be optimistic and is the U.S. still CEOs must give serious thought to whether options on top of it. the leader in the world in setting the their cash compensation is way out of line. I’m not knocking options or restricted standard? Should they take a smaller percentage to stock, particularly those that are performance Some of the diplomatic principles make more available to the employees? based and not just time based, but all the of the world order since World War II It can be stock purchase plans with tools of incenting employees have, for the have been frayed by personalities. If we stock purchase being at a discount with most part, gone to the most senior people step back and evaluate what is the best matching amounts or other approaches for in the company. Those that have been at a world for us to live in, it’s one in which broad-based rewards. These are good ways company for a long time will have the low we’re doing very well and our neighbors to engage the employees as part of the com- option prices and that builds and builds as are doing very well; one where remote pany and its success. Stock options probably new awards are made. Those programs have countries are doing well and not raising mean the most to the top 20 or so – they’re gotten out of hand and there are CEOs who Jihadists because, with no jobs, that is the the ones that can make the difference there. recognize this and are toughening up on it. only thing they can do. I would separate stock performance from That is great to see. That is not going to be driven from the the cash compensation, which has become This is a major problem because commu- U.S. In my view, it has always been that too big. nity after community being disenfranchised. the examples of what works successfully in I would redistribute that in a way that That is what leads to some of the ideas by the U.S., hopefully, will be copied by other answers the question, “Are we really increas- the progressives gaining traction. countries. The solution is not going to come ing the take-home pay of our employees so The concern I have with that is that almost from our being the ugly American preaching; they can be even better members of the com- none of the progressives have ever created real it’s going to come from our being a success- munity?” If they are, they’re going to be even private sector jobs and they cannot run a suc- ful dynamic country with income levels ris- better employees of the company. cessful country without those. ing at the middle-class level.• VOLUME 42, NUMBER 2 POSTED WITH PERMISSION. COPYRIGHT © 2019 LEADERS MAGAZINE, INC. LEADERS 59