How To Build A Team That Makes Things People Love (Strauss Zelnick, CEO behind Grand Theft Auto)

Well, I'm not the consumer chief. I'm not a genius at doing anything. I think I've become very good at leading super talented people to do the best work.

I want people to go build value and I don't care what they say to me along the way. Our market cap today is hovering around $50 billion. I think Netflix is around $400 billion. We got a lot of work to do. Our mission is to be the number one entertainment company on earth.

Arrogance is the enemy of continued success. It's lonely at the top. It's lonier at the bottom.

I think so. Yeah, I know. I've told the story. It's at least what I recollect.

I don't know. I probably thought it was glamorous. Now, why a 5-year-old cared about something being glamorous? A separate question. I don't know that I can even answer that.

Well, it wasn't a few, but a whole bunch of stuff had happened in between. Look, I was blessed. You know, I got out of school when I was 26. I went to work in the entertainment business in the very best job I could get, which was international television distribution, which is like if running a movie studio is here, international television distribution's out of frame over here. But it was the only job I could get and I did, I worked hard. I did well and that led to a promotion early and that led to being recruited to work in a pretty senior capacity at what was then the largest independent motion picture company, Vestron. And then pretty quickly thereafter, I became president of that company. And then as luck would have it, the first picture I greenlit was a huge hit. And that led to my getting recruited to be president of 20th Century Fox when I was 32. So it was a pretty quick trajectory from graduating to being president of a major film studio, much quicker than I had expected. And what was it like? Obviously it was incredibly scary because I had the presence of mind to understand that I was thrilled that I got the job but I knew I wasn't remotely qualified to be in that position yet. To say that I was learning on the job is a gross understatement. I was learning on the job.

I don't know. I suppose that would be a healthy way to look at it, but I never really did. I mean, I think I was more likely to be in awe of the people that I met along the way. They were generally speaking much older and much more qualified. The good news is that I'm a learner and I was always interested in learning from those people and I was unafraid to ask questions even if they were dumb. And I do think that helped me. But I know it was not my way to sort of look at someone and see all of their own insecurities. Especially because the entertainment business in those days was still a pretty rough and tumble business and unlike today where traditional film and television has been highly compromised and sort of relegated to the sidelines in the entertainment business. In those days, you know, being inside a major entertainment company, of which there were five at that time. I mean, that was a very, very big deal. And the place was populated with names that were constantly in the business and even consumer press. Totally different than today. And no one possibly could name the head of any major film studio today.

Dirty Dancing. Yeah.

Oh gosh, it's a great story actually because remember I'm not responsible for creative choices at any of the businesses that I'm in. There was a great team at Vestron that was there before I joined the company. The team that was put together by Austin Hurst who was the CEO. I was the chief operating officer, the president chief operating officer. Austin was the CEO and the motion picture division was headed up by a woman named Ruth Vitali and then she sort of had two co-production heads, Mitchell Camel and Steven Ruther. And it was their project obviously. Dirty Dancing, not money, we were making a lot of movies, we were a high volume shop and we were making low-budget movies. And so they bring this project in to be greenlit and this was a very significant project for them. It was a $5.5 million budget. Now, this is a long time ago, but even then, that wasn't very much money. And then I remember the greenlight meeting well because they came in with the director who had previously been a choreographer. This is his first directorial project, Emil Ardolino, and the writer and producer. And they proceeded and Emil was a lovely, lovely person. I just met him in this meeting, but he was so scared that he couldn't speak. And so, the team collectively had to pitch the project and greenlight meetings, you know, generally speaking, are not pitch meetings, but we didn't really know what we were doing at Vestron. So, it was in this instance kind of a pitch meeting for me. And the pitch was, look, this motion picture is going to change the way women dress. It's going to have music that is going to be incredibly successful, have a huge award-winning soundtrack. This picture is going to win an Oscar, and it's going to change the way young women look and feel in society. And I'm listening to all this, and I'm inexperienced, but I'm like, this is all complete, none of this is going to happen. But I was like, I was greenlighting stuff every day, right? Because we were making like 50 projects a year. This is in the heyday of home entertainment. We are a volume company. So, I thought all of that was untrue and agreeing with the picture. Oh, and incidentally, I wasn't even a fan. I didn't like the script. I thought, you know, it was a little hokey. It wasn't for me. But it doesn't matter. I supported the team. The team really believed in it. And this is a story of my career, which is I supported the creative team responsible for making these decisions. I believed in their process and I believed in them. And I did not trust my own judgment. As it turns out, I was very wise and because I don't exercise direct creative judgment. I seem to be a really good judge of talent. Creative talent, executive talent. I don't try to be a judge of the products themselves. Anyhow, I greenlight the picture and it turns out it's the biggest independent hit of all time to that date. Stayed in that position till Blair Witch Project came along. It had an award-winning soundtrack. It won an Oscar and it changed the way young women dressed and comported themselves for a period of time. It did all the things they promised in the greenlight meeting. I mean, that's never happened, I don't think, in history before since.

It didn't really. I mean, my process remained the same which is, you know, hire the most talented people on earth and then encourage them to pursue their passions and then support them through thick and thin.

Proven to be exactly that. Yeah.

Well, remember sometimes I haven't been the one hiring them. I mean the story I just told you, Austin had hired these people. I do think perhaps I have some ability to bring out the best in talented people in addition to hiring them. My hiring process I think looks like everyone else's. You know, you look at the resumes. This is not like I magically run into someone in the street and say, 'Oh my god, you're so talented. Come work at one of my enterprises.' So, we care about people's experience and background. And then we go through a normal interview process. We do today also use, you know, a rigorous assessment tools because I think that doesn't substitute for interviewing, but it certainly does enhance it. But in my case, it's been true that I've often encountered people inside the enterprises that I've come to because I've moved from company to company and then I bought a bunch of companies. So it is not true that I've always been the person recruiting the talent. The history of my career in fact, more frequently has been I've been the person responsible for leading and encouraging those talented people to do their best work whether I recruited them or not.

Well, first you have to agree on a common mission and the mission has to be ambitious but achievable. Second, you have to outline a strategy that's simple and clear and straightforward that people can sign up for. And third, you have to establish a common culture. And then you have to make sure all your financial incentives are aligned with that. So your financial incentives have to be aligned with the mission, the strategy and the culture. If you say the words over here like, you know, we want to be the best entertainment company on earth and your incentives are over there like, I don't know, we'll pay people without regard to how we perform, they're going to follow the money and you're going to get a bad result. In all of the enterprises in which I've worked, we've aligned the two. So at Take 2 for example, people are compensated depending on where they fit inside the company. Either basically primarily the stock because we want to align the incentives of our colleagues with the goals of our shareholders or if they sit in an organization where they really can't have any influence over, you know, where the stock is likely to go. Then we have profit sharing plans so that we align interests and they're trying to increase profits. How do they increase profits? Generate more revenue, and spend less money. So, increase the revenue, decrease the costs. The companies that I think do the worst job of aligning interests are the ones where compensation is discretionary and the discretion is held in the hands of the CEO. Because what that does, if you think about it, is promote a culture where everyone's just trying to please the CEO. And people think that the way you please other people is to like compliment them or tell them what they want to hear. And I am really averse to compliments. And I'm really averse to being told what people think I want to hear. I want people to go build value and I don't care what they say to me along the way. They can not say anything along it. Be nice, be polite. We do believe in being kind. But I just want performance. So we have to align the words with the dollar signs to get the result we want. And very specifically at Take 2, our mission is to be the number one entertainment company on earth. That's a really, really ambitious mission. We're on a pure play basis according to market cap we're within the top five today which is pretty great. But we're not even close to the number one player which is Netflix. But nonetheless, our mission is to be the number one entertainment company. Everyone can sign up for that. Ambitious as it is. If you're in the top five and you want to be number one, like okay, like we can try. The strategy has always been be the most creative, be the most innovative, be the most efficient. We say the words in every internal and external communication. And we make decisions in service of that strategy, consistent of that strategy. And our culture is work as a team, seek excellence in everything you do, be kind.

Become the number one entertainment company. Creativity, innovation, efficiency, excellence, teamwork, kindness. Doesn't take much to bear that in the presence of your mind. And then the comp is if the stock goes up, you get paid. We make money, you get paid. If the stock goes down, we don't. If we don't make money, we don't.

Oh, market cap. Public market. Super easy. Our market today is hovering around $50 billion. I think Netflix is around $400 billion. We got a lot of work to do.

Oh, it doesn't. Except it doesn't really, except that we are a public company and ultimately the job of a public company is to create value for its shareholders. Now how you do that is of primary importance. What we wake up doing every day is trying to create the very best entertainment on earth. That's our day-to-day job.

We do that successfully, we can succeed in our mission.

Well, I'll worry about that when the time comes.

I think it's both. I mean, yes, it's a good rallying cry, but again, the mission of a public company, whether you like it or not, is to create value for the shareholders. If you don't want to do that, then you can't be a public company. Then you have to be something else. And for example, if I owned 100% of the shares of this company and it were like a lifestyle business, then I could decide. And no shame in that, but that's not the structure of our company. There are companies that are different. Plenty of them. For example, you know, there are family businesses where the mission of the business may be a social mission. That's great. Or the mission of the business may be we need to make a certain amount of money to support our family. We're good with that. And you know, after that, we're not focused on anything else. That's also fine. So, I'm not making a value judgment about other people's approaches. But we are a public company. If you're going to be a public company, you have an obligation to create value for a share. So when we acquired Zynga for example in 2022, 65% of the consideration was stock which meant that we were able to do an accretive transaction for our shareholders that benefited Zynga shareholders as well. But that's a deal we simply couldn't have done had we been a privately held company. No way.

It's not really. I don't tend to experience pressure. I mean, I love what I do. I feel blessed that I'm able to do it. I do the very best job that I can. If there's something looming that's really terrible, I can of course feel stressed, but that's atypical for me. Particularly because I've done so many turnarounds and I've had the experience of what real stress and pressure feels like. And once you're a company like Take 2 today with a very, very strong balance sheet, plenty of cash, a great P&L, generating loads of operating income on a pretty regular basis, you know, with some variability, but you know, we've been a profitable company since 2011, I believe, year in year out. And that was coming from a pretty terrible situation when we took over the business in '07. Well, you know, that's not a super stressful experience and I also understand that some of the challenges are part of the game and especially given the job I do because I believe in delegation with information and I encourage my colleagues to do their jobs. So if stuff ends up on my desk, it's not like the happy stuff. Like happy stuff doesn't show up on my desk. That got done outside of my office. If it was coming on my desk, imagine it's probably like not so good or super complex.

So in practice we have a weekly senior management meeting where everyone responsible for running a group plus senior corporate staff get together in a room and we go around the table and share everything that's going on and then share the problems and challenges that we face. And because we do it every week, people are pretty well caught up. So you can get through that meeting in roughly an hour. And it also means I don't have to do one-on-ones. So it's very efficient because the rule is look we don't have any limitations of what we discuss in that meeting. If it's going on in your business, you bring it to that room. And if someone for example who's new to the company like pulled me aside at the end of the meeting and said, 'I don't really want to mention this in the meeting. I just want to talk to you about it.' I'm like, 'Is it personal?' If it's personal, we can talk about it one-on-one. If it's about business, back in the room, everyone's got to know. So the politics diminished greatly. Still a big business. So of course there's some politics but rather limited politics given the scale of the organization because everyone has the information and if there is a conflict it becomes clear in that meeting that there's something we need to sort out. Now maybe we won't sort it out in that meeting but at least I kind of know the lay of the land and so does everyone else. So we don't have a situation where something material is going on in the organization over here and someone over here isn't aware. Everyone's always aware of everything. It's also immensely efficient. So I coach and mentor a lot of people including a bunch of CEOs and I remember a young CEO I was speaking to a few years ago and he looked terrible and I said like and it was a growth business and he was drinking from a fire hose and I said, 'What's going on?' He said, 'Well, I'm sleeping like four hours a night.' I said, 'Why?' He said, 'Well, I'm working so hard.' I was like, 'Okay, I imagine you're working hard, but what's keeping you so busy?' We kept, I couldn't really get there. Finally, I said to him, 'Do you have one-on-one meetings with your direct reports?' And he said, 'Yeah, with all of them.' I said, 'How many direct reports do you have?' He said, '20.' I said, 'How many hours a week you spending on one-on-one meetings?' He said, '20.' I said, 'That's like half a normal work week. How about this? How about trying it my way? Have one one-hour meeting with 20 people.' And he did that and got 19 hours out of his work week.

I think he does something similar, but he didn't learn it from me.

Well, I didn't say you didn't spend time with people. What I avoid doing is having that, you know, cookie cutter weekly or bi-weekly, you know, which hammers 20 hours on your calendar. Exactly. But I spend a lot of time with all of my colleagues in, you know, we'll have meals together. We travel together because I try to go out and see a lot of my offices. So if I go visit a divisional and by definition our offices are divisional. We don't really have corporate offices outside of New York. So I'll be with executives on those trips. So I have time with executives that are, that's one-on-one. It's just not a cookie cutter one-on-one update meeting.

So, I'm sure I'm not America's fittest CEO, but it's very flattering that anyone could use those words. I even know people who are CEOs who are substantially fitter than I, like Willie Walker, who's one of my best friends and the CEO of Walker and Dunlop, and he's an amazing cyclist, which I like cycling, but he's an amazing cyclist. When we, he will tell people we cycle together and I'm like, I'm not Willie, when we're in a cycling trip I'm not even sure we're in the same county, he's so far ahead of me on the road. But anyway, I love fitness that's true and it is my avocation and I do train a lot of people and I train with a group of people regularly, I was training with them this morning. But for me it's more something I'm super passionate about and I do believe that it's a form of taking care of oneself that shows up in a lot of other parts of your life. So, you know, among other things like if you look your best, I think it's a sign of respect for others and respect for yourself. You know, if you look sloppy and terribly out of shape, it's harder to lead people, I think. And the other piece is feeling your best. You know, I feel great. I feel great. I was up this morning at 4:45. I was in the gym with my team working out at 6:45. I'll be in the gym later on today. And I feel really, really good. And that means I can show up with energy and with a smile on my face. Not feeling, you know, sort of blurry eyed, rough around the edges.

Oh, thank God I don't do that. I hire, I hope, the best and the brightest and the most creative.

But I, no, I'm really careful actually about not holding people to a standard, a personal standard to which I hold myself. Everyone's entitled to be on their own journey. And I don't want clones of myself. That would be horrifying. I think it's important for people to be healthy and if you have someone who's unhealthy, they're not going to be as effective for you. But I, you know, no, there's no obligation to like come work out with me to work at one of the businesses. Although during the pandemic, I did lead group workouts on Zoom and we had, you know, like 250 people at times joining the workouts, which was amazing. It was great and actually it really was great for culture and camaraderie. So I enjoy it, but people can show up for themselves in an array of ways. And by the way, someone who is really engaged in fitness and I think reasonably expert in fitness. Remember, if you walk 30 minutes, five days a week, all the evidence shows that that's really, really good for your fitness. That is like state-of-the-art because I think you should do some weight bearing exercise, especially as you age. But if all you did was 30 minutes a day of walking, five days a week, you'd be in pretty good shape. So someone who does that is not going to like show up in my office for a discussion and explain to me that they're like a fitness freak. But that doesn't mean they are not showing up for themselves. They really are actually.

Well, I'm not the consumer-in-chief, and as I said, the creative decision-making is in the hands of our creative experts, and they like it that way, and I like it that way. I certainly know my way around all creative businesses, but I don't lead with being a primary consumer. I didn't when I was in the movie business or the television business or the music business or the live entertainment business, all the other businesses I have been in or currently still in because I'm in an array of these businesses. So I really appreciate what we make here. And while I don't play video games, everything's demoed for me. So I certainly know what the games look like and feel like, and I see experts play them. And I'm reasonably filled at this point in what it takes to make a great video game, but no, I'm not a direct consumer. And I actually think at the level at which I'm supposed to operate, remember, I'm running a business that owns a lot of hit games and is making new ones all the time. Even if I love playing video games, I wouldn't have enough time in my day to play all of our games.