How a Fortune 500 CEO avoids mediocrity

Mike McNamara has nearly 40 years of experience under his belt, but he can’t get his head around all the bad coffee out there.

“Somebody opens up a coffee shop down the street; the cappuccino isn't better than the other guy,” said McNamara, the former CEO of tech company Flex. “If your cappuccino isn't better, why are you opening?”

McNamara’s made a name for himself outside of the caffeine industry — he helped grow Flex, a 200,000-employee electronics and original design manufacturer from $150 million in revenue to $25 billion — and he’s done it by avoiding the hole that so many corner coffee shops fall into: mediocrity. “Mediocrity and averageness is a very difficult thing to be in companies, and particularly as companies grow and develop,” he said at an April 4 Innovative Leadership Series event. “Averageness as a business is the kiss of death. Think about six companies in an industry. The top two probably create value, the bottom two probably destroy value, the two in the middle probably don't do anything. In business you will die being average.”

Here’s McNamara's advice for beating the curve and staying alive. 

Establish expectations and set measurable objectives

Understand the competitive marketplace and understand what’s better than average, McNamara said.

“Things like yield are really important. If everybody else is achieving 95%, we have to have an expectation that we achieve 97%,” McNamara said. “Day one is knowing the world is at 95; then set your bar at 97. When you set the bar at 97, you have to have accountability and responsibility through the team. You have to have measurable objectives, you have to have clear accountability, you have to have reward systems and bonus structures that are built around attaining the result.”

McNamara said he’s had too many managers come to him and say the company is at 95% yield and that’s as good as anybody else.

“I go, ‘Well, as good as anybody else is the definition of averageness and mediocrity, and we’ll fail.’”

Set the bar high and build a culture around it

While a leader should never accept mediocrity, he or she does have to be realistic about limited resources.

That doesn’t mean telling the financial team it can be average while setting a higher bar for the engineers.

“I think a way to do it is you have to tilt capital investment to areas that have more leverage,” McNamara said. “Maybe engineers get a little more investment but that doesn’t mean we don’t drive continuous improvement in the finance organization.”

That starts with building the corporate culture itself around not accepting mediocrity, McNamara added. 

“Every single person in your company has to feel that. Everybody has to drive for a little bit more.”

Every decision should yield competitive advantage

Every decision, investment, and implementation should be built around gaining a competitive advantage.

McNamara said he’ll often see companies investing in various things, like a new human resources system. But if everyone is using the same system, how are they gaining an advantage?

“Why not put in an HR system that actually gives you competitive advantage,” McNamara said. “Every decision should be built around creating superior quality, creating superior efficiency, creating superior customer responsiveness, whatever it takes. And build systems that are sustainably different. If you can't get to a sustainably different system either in cost or quality, or innovation, you won't get margin differentiation, and as a result you'll become average and you'll be mediocre.”