On July 27, Better.com, a digital mortgage company, added Daniel Lewis, a hedge fund manager and longtime shareholder, to its board to help with governance and capital allocation. Founder and CEO Vishal Garg publicly praised the move, saying Lewis would help “sharpen strategy, improve capital allocation, and create long-term shareholder value” under Garg’s own continued leadership. This would hardly be newsworthy, yet in a twist usually reserved for movies, Lewis took Garg’s job seven days later.
Not surprisingly, Garg calls the decision a betrayal and is suing the board, alleging Lewis “hoodwinked” him by praising the company to win a board seat, then used his board access to build support for Garg’s removal. Better disputes that version of the story and points instead to a board decision grounded in Garg’s performance and conduct. Well, let’s take a quick look at how bad was Garg performing?
Garg had spent three years cleaning up a mess largely of his own making, including a $303 million loss in 2021 from overhiring. You may recall Garg’s name from his 2021 mass firing of 900 employees over a Zoom call which was not the most graceful way to correct things. Yet, Better’s operating business has been recovering steadily every year since, with real momentum over the last six months. If they had been willing to live with Garg’s challenges in 2021, it seems odd that he would be replaced approximately five years later during a clear company recovery.
I really do not want to debate his firing but instead focus on Garg’s advocacy to bring in the person who led his ouster. Lewis wasn’t a stranger as he held a 5.8% stake in the company over a year and had been informally advising the company before he ever got a board seat. Garg felt the advice was only reinforcing his strategies and that he had a real advocate and partner in Lewis. He clearly trusted Lewis and felt the trust was mutual.
In hindsight, we see that his trust was misplaced. One of the biggest weaknesses that we have in assessing trust is that our ego and desire to be liked often blind us to what is really going on. In Win Via Trust, I argue to move away from subjective decision-making that relies on gut to a framework containing only two variables: weighing someone’s track record against the difficulty or stakes of the role or project called the Trustworthy Decision Matrix.
A board seat is clearly a role of high stakes, but more importantly, Lewis had a track record of twice pressuring boards at Strategic Hotels & Resorts, Partners REIT and at Global Net Lease to block deals or force significant change. While the matrix would have certainly flagged the risk to Garg, he extended it on the strength of a year of praise and informal help. A track record of being agreeable was never going to be enough evidence for a decision carrying that much risk.
THE BOTTOM LINE
Trust isn’t just a question of whether someone has been good to you so far. Leaders need to objectively assess appointments and resource decisions using frameworks like the Trustworthy Decision Matrix if they are going to succeed. Lewis had a decade-long history of pressuring boards to force change elsewhere. Garg extended him the seat anyway, prioritizing the existing relationship instead of the facts that were available for everyone to see.
Flattery grants the trust that scrutiny would never approve.
WINNING MOVES
Move away from relying on your gut. The Trustworthy Decision Matrix provides the discipline to focus on the key decision variables to better assign roles and resources that will improve decision making and reduce bias.
Keep your ego in check. Just because someone praises and agrees with you does not make them a trustworthy partner or colleague. Resist the temptation to surround yourself with fans and remain critical of yourself and others.
Maintain a pulse on your team or organization. While the stakes are higher at the board level, every leader needs to understand if their organization sees them as steering for success or standing in their way. That will allow you to refine your actions before you are walking the plank.
If you want to dig deeper into the trust side of leadership, please read Win Via Trust or subscribe below for future Trust Lens newsletters.