I’ve watched more than a few CEOs face the same choice. Hit the quarterly number by cutting corners, or miss it by doing things right.
Most choose the number. And most regret it.
I sat on a board where the CEO recognized revenue early to make his projections. Technically defensible. Practically sketchy. He made his number. The board was pleased. Investors were happy.
Six months later, customers started complaining. The product hadn’t delivered what was promised. SaaS Renewals tanked. The sales team couldn’t close new deals because references were calling prospects to warn them.
That CEO spent the next two years rebuilding trust. We never got that momentum back.
Compare that to another CEO I backed. Three quarters into the year, he told the board we weren’t going to hit our revenue target. A key customer had churned. The pipeline rebuild would take time.
The board was not happy. Some investors wanted him out.
[Email readers, continue here…] But he refused to pull revenue forward or push the team into bad deals. Instead, he laid out exactly what went wrong, what he was fixing, and what realistic growth looked like.
Twelve months later, that company had the strongest customer retention in its market. Sales cycles were shorter because prospects trusted what they heard. Top talent wanted to work there because they knew the CEO wouldn’t sacrifice people for numbers.
Here’s what I’ve learned from my own tech company years ago and by observing CEOs over the years as investor, board member or coach that have taught me about this choice:
The CEOs I backed who cut corners to hit numbers hit the numbers once. Then they spent years rebuilding trust. Customers left quietly. Investors asked harder questions. Top performers started looking for exits.
The CEOs who told hard truths and kept their word? Customers stayed. Investors came back with more money. Talent didn’t leave during the hard times.
Revenue is what you earn today. Integrity is how you earn tomorrow.
Here’s the math nobody teaches in business school: A dollar earned by cutting corners is worth less than a dollar earned with integrity. Because that second dollar compounds.
It compounds into reputation. Into relationships that survive mistakes. Into customers who renew not because of contract terms but because they trust you. Into employees who stay when competitors offer more money.
I’ve never—not once in fifty years—seen a company succeed long-term by optimizing for short-term revenue at the expense of doing things right.
And I’ve never seen a company fail because the CEO chose integrity over a quarterly number.
The scale always tips toward what you build versus what you extract.
The question isn’t whether you can afford integrity. It’s whether you can afford to cut corners.
Because the cost of the second one doesn’t show up in this quarter. It shows up in every quarter after.
Great article Dave. I have found that operating with integrity creates the glue that keeps talented people in smaller businesses. Loyalty is bought with the integrity of leadership.
Who hasn’t been caught up in this battle? You don’t hire an aggressive VP of Sales expecting them not to fight for every last deal, or to look for ways to bend the rules and find “new meanings” for words. We don’t usually partner with people who share our exact traits – we find someone who fills our gaps and builds out the parts of the organization we could never manage alone.
Some years ago, following a major business crash, I read an article about universities adding or expanding ethics courses. I opined at the time that it seemed a little late—where were their mothers?!
As our own business grew rapidly, I knew we couldn’t always know where our people came from or what their mothers had taught them. So, I took it upon myself to lead a session at every new hire training. I wanted to explain exactly what ethics meant to our organization and what kind of interactions they should expect within the firm. To me, this was a “trusty” safety mechanism. You can’t teach people what to do in every possible circumstance, but you can teach them about “the right stuff”, “the smell test” and what to expect from their peers and their managers.
After moving on from a supplier role to Dave’s old software company and starting my own business, it was an obvious choice to keep Dave as an advisor. I chose him for exactly the reasons he wrote this excellent post: a man of explicit integrity. It has been a priviledge, Dave.
Berni,
Ah shucks. Thanks for the compliment. And you have lots of stories to tell. I’ve been urging you to share your book now half-written – with the world. Lots of lessons and lots of laughs.
-Dave
An especially good missive today
AMEN!
This is my story and plight…thanks for telling the world
😉
Integrity
Transparency and delivering on your commitments and promises is a lost art and apparently negotiable…when you are beholden to banks, investors, partners and procurement departments who only care about the numbers which are nothing more than a snap shot in time!
Keep up the great work.
I appreciate your perspective.
John