Steve Vamos: ‘The toughest choices are between bad and badder’

When I interview tech veteran Steve Vamos over a video call, he is conducting business from his apartment. But unlike many of us who have been working from home since the beginning of the year, he does not have to be away from the office.

The chief executive of Xero, the online accountancy software business that has become the crown jewel of New Zealand’s tech sector, is based in Wellington, where Covid-19 rates are near zero and life has pretty much returned to normal.

He has spent the New Zealand day at his office in the city, as he now does every day. But he is entering a second working phase as he prepares for a round of meetings with staff in the company’s UK operation.

“It is better for me to do this stuff at home,” he says.

When we talk over a conference call, Mr Vamos, 62, looks relaxed in a black T-shirt and jeans, but has made his home look like an office by erecting a Xero banner behind him. More than half of Xero’s 3,000 employees worldwide now work from home, he says.

“This way of working is not alien to us because of the way we are set up. We are fortunate to have the tools to enable us to work this way,” he says.

“Before lockdown I would be travelling 60 per cent of my time to our operations in the US, the UK and Australia. But I have barely travelled outside New Zealand since Covid hit.

“There is less jet lag. But you know at the end of a week you have spent more time on a screen. So I think the work week is more intense when it comes to the meetings involving technology, but it hasn’t fundamentally changed the nature of my role and the way I work.”

The pandemic has been a mixed blessing for Xero, which was founded in 2006 and reported its first full-year net profit after tax in the year to March 31 on the back of a 30 per cent increase in revenues to NZ$718m and a 26 per cent growth in subscribers to almost 2.3m accounts, boosted by people looking for online financial services during lockdown.

It added 6,139 subscribers during the second quarter of the calendar year 2020 after the pandemic took hold, 3.6 per cent more than the same period in 2019 and the largest second quarter year-on-year increase for the business since 2012.

Instead of furloughing or cutting staff, Xero increased its headcount by 21 per cent in the previous financial year and has added more employees since that finished in March. “We have got people who have been with us for a few months now who have never been in the office,” Mr Vamos says. “We consider ourselves fortunate.”

Xero’s small business clients, however, have been bearing the brunt of the economic crisis created by the health emergency. The company’s response has been to allow customers in distress to downgrade or suspend their subscriptions until the pandemic passes, which means Xero’s finances have taken a hit, Mr Vamos says.

He believes that being empathetic to your customers and staff is vital — as is engaging with them to allow them to be honest about things that are not going well. “My leadership style is very much centred around a mental model that I have of what’s important to making sure that you create an environment where your people do great work,” he says.

“At the centre of that model is making it safe. Making it safe for people to challenge you, but also challenge the way things are done. Some people call it psychological safety. That you can be you, you can say what you think, and you can do that comfortably.”

The second element, Mr Vamos adds, “is to encourage really good challenging conversations and to make choices, which are often trade-offs between good things. The toughest choices are between bad and badder, not good and bad, right?”

Mr Vamos became Xero’s chief executive two and a half years ago, having been hired as a consultant to advise Xero’s founder Rod Drury about the next steps for the company.

He has a deep knowledge of the tech sector, having spent 14 years with IBM before moving to become Apple’s vice-president for Asia Pacific in the 1990s, witnessing the return of Steve Jobs as chief executive. His last executive role before Xero was as a vice-president at Microsoft, where he ran the software group’s worldwide MSN online services group.

“I had a 40-year career in tech and by that point what I was really interested in doing was coaching and mentoring executives who were running fast-changing and growing businesses because of the experiences I had had over the years running businesses at IBM, Apple and Microsoft,” Mr Vamos says.

“I got introduced to Rod through a mutual connection — and Rod said ‘Steve, I want to take Xero to the next phase and we need someone who has experienced global tech scale businesses to help me’. So we worked together for 18 months, and at that point Rod called me and we had a chat . . . Basically, he got to interview me for 18 months, which I think . . . is a pretty good way to see whether I am compatible with the company.”

Covid-19 is forcing businesses to think and work differently, which means being more attentive to staff needs, in particular their mental health, Mr Vamos says. “As a leader you have to stay calm because we all know, as tough as things are, it will pass and there is no great benefit in panic and becoming caught up in the emotion of it.

“You must also make sure your people feel safe, make sure they feel connected to you — so I try to provide a lot of communication — and make sure that they feel you are there.”

One way Xero has done this was by offering all staff an extra day off for World Mental Health day on October 10.

Three questions for Steve Vamos

Who is your leadership hero?

My dad was a phenomenal example to me. He had a tremendous respect for humanity and he had no tolerance at all for speaking ill of people or drawing conclusions or judgments about people. Certainly, whenever I thought I was better than anybody else out there he was the first to make sure I understood the reality that I was not.

If you were not a CEO/leader what would you be?

I would be a coach. One of the things I aspire to do in the future is to coach my grandkids’ football teams, but I love being a coach to businesspeople. There is nothing better than seeing someone grow and develop and succeed and to have some influence over that journey.

What was the first leadership lesson you learnt?

When I was a university student working on the driveway of a liquor store in Sydney and I was asked to mop the floor. The guy who ran that place tapped me on the shoulder and said to me, ‘Stevo, you are a good guy but you don’t know how to mop the floor. Let me show you how.’

So, he took the mop, showed me how to mop the floor and handed the mop back to me and said: ‘You are a good mate, so away you go now.’ What I learnt from him was that you can give criticism kindly to anyone — if you are prepared to take the time to do that in a constructive and very positive way. I remember thinking: ‘You are a good boss.’

“We know our people in the broader context of their lives are experiencing different stresses,” he says. “The intensity of how people have been working is what we want to address. It is important to rest.”

For several years Xero has funded a telephone and online support and counselling service, called Xero Assistance Programme, for its staff in New Zealand. Last year, it extended this free service to its subscribers, as well as their staff and families, in New Zealand, reaching an estimated 850,000 people.

“Going into uncertain times you need to constantly review your priorities. But you have got to distinguish between short-term issues and your longer-term aspirations,” Mr Vamos says, saying he started taking lunchtime walks around Wellington as a result of thinking more about his mental health in the wake of the coronavirus outbreak.

“In the short term, we might pivot a bit,” he adds. For example, the company has created a business dashboard to make it easier to see a whole company’s performance, and there is a new starter subscription package to make it less expensive to sign up to Xero.

“However, if you say to me: ‘Has our aspiration for 2030 changed as a result of Covid?’ The answer is no. We still have the same aspirations for 2030, to become the global leader in accountancy services for small businesses.”

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