How to Lead without Managing
Sea Smoke Cellars
Salutations to you, beloved reader,
When you drive around the beautiful landscapes of Central California, you can only notice the vineyards that surround you. For a few years now, the wine business has become the hot trend. Tasting rooms sprout everywhere, some of which turn out to simply host bachelor parties with bad wine. As for the higher-end wineries, they’re mostly focused on profit growth via retail. They apply an ego-driven, rigorous management, and it’s not unusual to see employees leave under too much pressure. In this wine crowd, one vineyard stands out from the rest. The wine is excellent, growth is exemplary, and never has an order been given. That’s right: at Sea Smoke Cellars, there’s no tasting room and no on-site sales at the winery, no manager, no performance reviews.
It’s a freedom-based company, and like any other freedom-based company, we wondered: is it just a lucky combination of factors? An alignment of the stars? Or is there actually a revolutionary, reproductible model in there?
About Sea Smoke
But first, let’s start from the beginning, shall we? Sea Smoke is made up of 9 full-time employees and several external workers that come give a hand depending on the needs (harvest season being the busiest time of the year). The company stands on its two legs: the office, where all the marketing and compliance activity takes place, and the cellar, where wine is tested, moved around, and matured.
The man behind the plan is Bob Davids, who founded the business in 1998. He’s a serial entrepreneur who decided to invest his own money to build one of the best vineyards you can find in California. It’s actually in the region where the movie Sideways was filmed (if you haven't watched it yet, click here). Looking at the offices, you can feel it’s not a small investment: everything is brand new, the decoration is sophisticated with leather armchairs and there’s a special wine cellar waiting to be opened for special occasions. Bob is the main owner, and even though the capital is shared with another private individual (on a 50/50 basis) since 2012, there are no operational management constraints. The only demand is to produce the best Pinot Noir humanly possible.
Their vision: make the best Pinot noir possible on Earth, and have tons of fun.
The business model and marketing strategy at Sea Smoke are quite ingenious. Back in 2003 they limited farmed crops in order to grow production slowly. This way, they maintained supply slightly below demand. Demand grew by word of mouth thanks to tasting sessions at wine fairs. Bob was patient enough to accept slow ROI growth. This way, Sea Smoke wine became a luxury product. 80% of the revenues come from a private list of consumers (‘list members’, there’s a waiting list too). Members are essentially based in the USA; they pay for the wine in March and get it delivered in December. Talk about having an advantageous working capital!
Sea Smoke Cellars does not necessarily seek growth through volume. Now that they have the demand, they use their profitability levels to raise quality. Victor describes the common vision as “maintaining Sea Smoke as a diamond”. Which is absolutely and totally contrary to multinationals’ objectives.
“I never had a conversation with Bob about how to grow EBITDA by x%. We only talk about raising quality.” Victor
Sea Smoke enjoys one of the best vineyards of California and has an exceptional financial freedom: they can afford to focus on quality, without their hands tied by budgeting and cost cuts. But quality can only be delivered by the team, and this is where unique leadership kicks in.
The vision is accomplished through leadership, not management
Bob Davids’ leadership method was initially shaped by Robert Townsend. Bob is famous in the trust-based management area, and his philosophy contradicts most of what we were told in business school. Management basically means control. And the things you can control in a business are money, time, and quality. That’s what you can manage. But you can’t control people: you can’t manage them, it doesn’t mean anything. You can’t push them to do something, or if you do, the push effect won’t last very long. Pulling them, on the other hand, works much better. And that’s the difference between a manager and a leader, right there.
“Make more mistakes than everybody else. But never make the same mistake twice” Bob
Right. Now, how do you pull people?
First, you make sure your words are clear. It’s a very open and communicative management style. The vision and the expectations are clear and well communicated in a way that your coworkers feel comfortable with them. If not, at least they feel comfortable asking you about them. There are no performance reviews. As Victor puts it, “it just got to be silly”. Once in a while, Victor checks in to see if the work behavior is OK, and if the person is still motivated. Bob himself sometimes barely calls once every 3 months to check with the troops. The rest is just regular feedback.
“Us: how did your performance assessments go?
Meredith: eum… I haven’t had any so far.
Us: what about conflicts, how are they managed here?
Meredith: I can’t think of one that’s come up.”
(Meredith has been part of the Sea Smoke team for 4 years)
Secondly, you trust them. No orders are given, no permission is needed: the vision is supposed to guide all their initiatives. And you don’t blame anyone for making a mistake: no censorship, no punishment, no yelling. It also means that when someone decides to leave work early, there’s a good reason for it: the work is done. There’s no bubble work in the Sea Smoke world.
"The right things are being done for the right reasons at the right time." Julian
Also, they see leadership as a long-term commitment. That’s probably what prevents them from changing the winemaker every two years just to try to get even better wine. This takes a lot of pressure off people’s shoulders and highly contributes to making a group of coworkers an actual team. It also means that career evolution is limited: there is no way of climbing up a ladder. The only way for an assistant winemaker to become the winemaker is for Don, the current winemaker, to give up his position. There is no taking over possible.
You make sure they’re having fun. When Katie got bored at her previous position in the wine cellar, she wanted to switch to sales- and she did. During our interviews, everyone spontaneously told us they were having fun.
“Bob: Does this sound like fun?
Bob: So we’re not doing it.”
(Bob’s reply when Victor presented him some investment growth plans)
Finally, you keep a low ego. The star isn’t Victor, although he’s the everyday leader. It’s not Bob either, although he’s a famous speaker. The star is their land. This means that there’s no double standards, no personal office, no personal parking space. And it’s part of the Sea Smoke DNA not to ask for any of those privileges.
“I don’t know how to manage people (...)
I hire stars and let them do their thing (...)
I guess I’m the leader.” Victor
As a result, the culture is self-perpetuating
The culture at Sea Smoke seems incredibly unique. During each interview, we would hear the words “relaxed”, “fun”, “pride”, “family”. The leadership shows so much trust that everyone feels involved and acknowledged. The focus on quality is a pulling factor; everybody takes ownership in their work.
“The sense of humor is really important here.” Julian
As part of their rituals, lunch during harvest really feels like a special celebration. It became a tradition after the 2002 harvest: working from 5am to midnight, the team felt the need to relax together during a 2-hour lunch break with good food and good wine. Today, Sonseeah cooks absolutely incredible meals (really: it’s mind blowing). Everyone gets together in the lunchroom at noon and you can hear bursts of laughter from the other side of the door.
“Everyday at lunch time it’s like a big party.” Katie
Katie’s a good example of how it works: she was at Sea Smoke from the start. When she felt the need to strengthen her knowledge, Bob paid for her wine education (she didn’t even have the job yet). During the first year she had kids, Victor considered obvious that they could come with her at work. And when it’s more convenient for her to work from home, that’s what she does, twice a week.
Culture is strong, but it’s also inclusive. Joel has been contracted by the firm a few times now, to give a hand when needed. He says he feels welcome and comfortable, although he’s not on the payroll and not technically a year-long part of the team.
Limited and careful hiring is another example of Sea Smoke’s focus on quality
Once again, Sea Smoke has a unique advantage, this time compared to other industries. Wine workers are generally passionate about wine. Surprisingly enough, fewer people seem passionate about shower gel manufacturing or insurance policies. So, a big part of the team motivation is naturally brought in by the employees themselves.
Because growth is not a priority and because leadership is so specific, hiring is very limited. Sea Smoke members really pay attention to who gets in. Julian joined a year ago, but the hiring process took a while. Victor knew him already, he introduced Julian to the team, step by step, to make sure they would be a good fit.
Victor looks for a specific trait of character when considering hiring someone: earnestness. He defines it as:
“a lack of cynism, a child-like sense of integrity, the kind of person that doesn’t let ego get in the way and that is naturally looking to do the right thing for everybody involved”.
You’re not hired based on your skills only, they’re not posting job ads with a full list of personality traits required (you know: ‘proactive, dynamic, autonomous, out of the box, rigorous, flexible…’). We learned that you can hire differently. In a more personal and realistic way, accepting the inevitable subjectivity that kicks in when hiring someone new. Everyone hired by Victor already knew him, he had already judged their character. Bob also talks about a chemistry element when hiring.
But there is more to it than happy circumstances: there is consistency
Looking at the big picture, we can only observe that the context in which Sea Smoke has been set up undeniably contributes to the success of their way of working.
First and foremost, they are (and feel) lucky to have one of the best pieces of land you can find in California for Pinot noir. Secondly, the whole wine industry is very specific in the sense that it is made of passionate people. During our roadtrip, we (unexpectedly) came across a bunch of winemakers. They all come in different shapes and sizes, but one thing is unanimously shared: passion (and extraordinary friendliness too, but that’s not our topic today). Also, they’re not running out of money and never have been. Unlike many businesses, funding has never been a problem. That turned into stunning margins, which naturally opens up a comfortable path towards increasing quality, no matter if it involves investing in expensive infrastructure. In other words, they can afford to be so focused on quality because they don’t have that financial stress.
However, something makes all the difference. They’re consistent. And that’s something any business can be. Should be.
The vision is to make the best Pinot noir possible, right? To guarantee that top quality, you make sure you get the best production process. All the way. At the starting point of their process, they logically picked biodynamic farming. It is complex and not quantity-friendly but it is the best way to take care of the grape. That’s just the beginning: their interpretation of quality is consistent through the whole value chain. It has to be. If you want your final product to be the best on Earth, each step of production needs to reflect that. If it’s not balanced, if it only relies on Step 3 for example, then it’s not the best product on Earth: it’s only the product that was made with the best Step 3 on Earth.
That’s why they maintain a low ego: ego is a threat to a harmonious, quality-focused production process in many ways. Ego gets you used to doing things right and you don’t always challenge yourself as you should. It can also prevent crystal clear communication, leading to conflicts and other people losing their motivation.
Talent is best expressed in a worry-free, job secure environment; especially when you’re naturally motivated. Also, low ego is rare. Firing and hiring includes the risk of losing a low ego talent for a high ego one. In other words, changing people every so often in order to perfect one step of the process could jeopardize that harmony.
So that’s why they do it that way. For quality. There’s no room for compromise. The heartwarming culture and the skyscraping talent retention at Sea Smoke is nothing else but a natural consequence of this consistency.
It’s not over yet: consistency trickles down all the way down to the customers. Sea Smoke is so systematic that you may be Oprah Winfrey, you’ll still have to wait according to your position on the list. Yes, that actually happened. Sea Smoke refused to make an exception for Oprah Winfrey.