Category: management
Posts
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It’s very difficult question to answer. How do you judge a leader? Is it financial success? The loyalty they engender? Their ability to inspire? There are war-time leaders and peace-time leaders. Leaders may be understated or zealous. I’m not sure we’ll ever be able to say definitively what constitutes a great leader. Regardless, we all want to improve our ability to lead, whether it’s a small team or a Fortune 500.
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Over the weekend, the NY Times interviewed a classmate of mine from Dartmouth and fellow oarsman on the freshman crew team, Cal Newport, about his book and his idea, Deep Work. Here’s the crux of the idea:
Deep work is my term for the activity of focusing without distraction on a cognitively demanding task. It describes, in other words, when you’re really locked into doing something hard with your mind…In order for a session to count as deep work there must be zero distractions.
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Your startup is growing quickly. To hit next year’s target, you may need to hire many people. Where do you start? Bottoms up or top down? Both are viable strategies, but hiring a strong management team at every level provides some key benefits. First, they help you hire more effectively. Second, they will guide new additions to the team to success. Third, they will reduce unnecessary turnover.
As you grow, your company well need to interview and hire large numbers of new people.
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Startups are business machines engineered to grow quickly. The forces of hypergrowth exert enormous strain on every aspect of the company. Internal break all the time as the company moults into a new skin. This is one of the most important things to keep in mind when hiring. Every lead hired today, whether marketing , sales, engineering or product, will have a very different job nine months from now, much less two years from now.
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I met a seasoned executive recently. He made a bold claim. “Management is an art, and one that is overwhelmingly undervalued in Silicon Valley.” I wondered, are we investing enough in our managers?
Talent is the largest investment of an early stage company. 80%+ of startup operating expense flows to compensation. Retaining these employees is good business. Especially in such an expensive and competitive talent market.
Research shows employees leave their jobs because of poor leadership and poor management.
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I first met Elad Gil when I became an associate product manager at Google. Back then, he had an unusual habit I noticed right away. Most people carry their laptop in the same way. The laptop is closed, in hand, between the hand and the hip. Elad carries his laptop open, powered on and by the top or bottom corner. He’s so smart and has so much cognitive bandwidth, he simply doesn’t have time to wait for the computer to wake from sleep.
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Your sales team is starting to close some terrific accounts. As your startup grows, your sales team will experiment with different sales techniques. For example, qualification, pricing, positioning, incentives and contract structure. This is a wonderful phase for a startup. However, there’s a common mistake to avoid.
Your VP of Finance should model the impact and approve each experiment. Many startups don’t do this at the early stages of go to market.
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Over the weekend, I read Tien Tzuo’s book, Subscribed. Tien is the founder and CEO of Zuora, and former CSO/CMO at Salesforce, where he started in 1999. He has been working in SaaS for nearly 20 years. He’s a thought leader in the world of subscriptions, and I learned a tremendous amount from his book.
There were three key themes that resonated with me. First, the shift to a subscription business model reinforces customer centricity.
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You’ve just raised a round of financing. Your next step is to build your management team. There are several criteria for finding the right executive. Competency in the field, cultural fit, communication skills, management experience. All of those should be obvious. There is one that is often overlooked. Network.
Recruiting is one of the most important responsibilities for a head of a department. That head will need to scale the team to meet the objectives of the company.
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Imagine you came across this ad.
Scientists have discovered a revolutionary new treatment that makes you live longer. It enhances your memory and makes you more creative. It makes you look more attractive. It keeps you slim and lowers food cravings. It protects you from cancer and dementia. It wards off colds and the flu. It lowers your risk of heart attacks and stroke, not to mention diabetes. You’ll even feel happier, less depressed, and less anxious.
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At Redpoint’s annual investor meeting earlier this year, I quipped, “The day-trading taxi drivers of the dotcom era have been replaced by crypto-trading Uber drivers.” But over the weekend, a grizzled Uber driver with a mane of grey hair and wind-and-sunburnt cheeks asked me about crypto. “Can you explain to me why public key/private key technology is important on the Blockchain?” He pointed out the Bitcoin ATM that charges 10% from his cigarette-infused Prius.
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“Don’t be so hard on yourself when things go badly and don’t be so proud of yourself when they go well.” I think this is one of the hardest pieces of advice to follow. Chance is an important contributor to any outcome. sometimes we just get lucky. That recent crypto trade in which you made 25% in an hour. The time you met your significant other for the first time.
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“When I die, I want all the people with whom I worked on group projects to lower me into my grave, so they can let me down one last time.” Someone once sent me this e-card as a joke. I laughed and laughed, and never forgot it. I can’t remember a school group project which teammembers contributed equally. Paradoxically, I bet everyone in the group felt the same way.
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You’re two or three years into your startup. You have hired a great team and want to retain them. It’s time to consider refreshing their stock options to motivate them to stay longer. How many options should you grant to each employee?
Startups should pay key people market rate to retain them. Otherwise, they may leave the business, lured by the promise of greater compensation elsewhere. Let’s walk through an example.
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20 years ago, a newly minted billionaire worked in his office. Fluorescent lights, a dingy purple carpet, and a CRT monitor resting on a door. Not a desk - those were too expensive - a door supported by 4x4s, brackets and wood screws. In his 60 Minutes profile, he drives around in a Honda Civic. His rationale? “It’s a perfectly good car.”
The founder of course is Jeff Bezos.
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When a startup takes form, the first weeks and months and years are spent furiously. The team assembles itself. The lightbulb illuminates. It is formed and reformed again and again as customers supply feedback. Eventually the team hews the right product. The startup raises capital. Then the team returns focus to hiring, evolving the product, and closing customers. However, continuing this way isn’t the path to huge scale. There’s a critical step missing.
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Recently, I wrote about customer/revenue operations, an idea that seems to be taking hold at many different SaaS companies. Instead of optimizing the performance of each individual step of the customer lifecycle, customer operations optimizes it over the entire journey. This is a fundamental change in the way a business manages its customers, and it’s now starting to be reflected in the organizational structure of SaaS startups
Two advances in thinking have led to the idea of customer operations.
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“My goal is to make you love rowing.” That’s how my first rowing started. I had never picked up an oar or stepped into a racing shell before. With 100 other freshman men, I had assembled at the boathouse along the maple and conifer lined Connecticut River. I’ll never forget those words.
I had played many sports before. In every other case, the focus, the mission, the motivation had always been to win.
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A friend suggested that I read the Five Dysfunctions of a Team over the weekend. Though I’m passionate about business books, I rolled my eyes. I had seen this one on best seller lists for a long time, and never thought it would have much to offer. I admit my book-cover bias was wrong. The author has a counterintuitive assertion. Meetings shouldn’t be boring.
The book is a fable, describing the journey of a new CEO, Kathryn, who takes the helm of a struggling high-growth startup.
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How quickly do the fastest growing software companies build their teams? The answer is incredibly quickly. In fact, this data bolsters the notion that management team’s top priority is recruiting, especially after the business has reached product market fit and capitalized itself well.
Above, I’ve charted the headcount growth rate for 10 of the fastest growing software companies in recent history. I’ve normalized the years for when all the businesses were roughly at the same headcount - fewer than 50 people.
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Disagree and commit. I first read about this idea in the 2016 Amazon Shareholders letter. But the idea can be traced back to Andy Grove at Intel. Grove wrote about this topic in High Output Management. Disagree and commit is a management technique for handling conflict. There are two parts to it. First, expecting and demanding teammates to voice their disgreement. Second, no matter their point of view, once a decision has been made, everyone commits to its success.
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A startup’s competitive advantage is execution speed. That quickness stems from a CEO’s ability to decide and this ability separates the great from the good. According to a recently published Harvard Business Review article, one of the four key behaviors distinguishing exceptional CEOs is deciding with speed and conviction.
[We] discovered that high-performing CEOs do not necessarily stand out for making great decisions all the time; rather, they stand out for being more decisive.
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How do you help someone when that person knows substantially more about the question than you do? This is one of the most fundamental and frequent questions in management. I came across it first as a product manager. Then as a manager of teams. And last as a board member. In each of these situations, have interacted with people who knew substantially more about their area of expertise.
There are lots of pitfalls when answering the question, “what do you think?
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One of the hardest things for me is to admit is when I’m wrong. It’s hard first to admit it to myself. But harder yet is to admit the error to others. It could be my wife or my colleagues. Most challenging of all is owning the error in a public forum. But admitting mistakes is a key defining attribute of a leader. Owning the mistake accomplishes one critical thing.
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How important is hiring for emotional intelligence? EQ or EI was introduced in 1964 by Michael Beldoch and popularized by Daniel Goleman in 1995. I hear EQ uttered in nearly every job interview and evaluations, and assumed that high EQ correlated to higher job performance. But I read two articles recently that changed my perception of emotional intelligence.
Professor Adam Grant wrote Emotional Intelligence is Overrated in 2010. Professor Grant teaches at Wharton.
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Your startup is growing. You suspect you have initial product market fit. Time to hire the first head of each department. Sales, marketing, customer success, engineering, product management. Some founders might have experience or exposure into one of these teams. But rarely do they understand every one well enough to hire the right department chief. How should you do it? I’ve observed three successful strategies.
First, do the job yourself.
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In the Wide Lens, Dartmouth Entrepreneurship professor Ron Adner explores the risks associated with innovation. Execution risk is the obvious one. Then there’s co-innovation risk, what might be called chained technology risk. For example, to build a new ML focused microchip, a startup relies on the chip fabrication plant to develop 7nm equipment. But the most interesting of the three is Adoption Chain Risk.
Adoption Chain Risk is “the extent to which partners will need to adopt your innovation before end consumers have a chance to assess the full value proposition.
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I’ve been reading Fred Kofman’s book, Conscious Business. Written in 2006, the book summarizes Kofman’s experiences as a management consultant to some of the great leaders in technology and other industries. In the book, Kofman lists 12 questions Gallup used to identify great managers in one of the largest management surveys conducted.
As I read this list of 12 questions, I started answering them for each of the different roles I’ve had.
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I am most grateful for my work experiences that were apprenticeships. Whether it was Philip who taught me how to write a proper Java function (10 lines or less), or Kim and Scott who are great managers, or the partners at Redpoint who invested a huge amount of time to educate me, those collections of experiences have taught me far more than I could’ve expected.
Worklife is nuanced. Reading a blog article here or in HBR article there, a business book or an academic paper only goes so far because these summaries of knowledge lack one key ingredient.
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The New Zealand All Blacks are the most successful athletic team perhaps of all time. A rugby outfit whose name originates from the solid black uniforms, they have won 79% of their international matches spanning 68 years. James Kerr followed the All Blacks, interviewed them and distilled his learnings into a book, Legacy. Kerr organizes the book into 15 life lessons, three of which stood out to me.
Humility is the first.
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In Bias Against Creativity, a team of researchers at Cornell discuss the bias against creativity they revealed in their study. Originally published in 2010, the article resurfaced yesterday on Hacker News. It raises the question of how to evaluate creative ideas and how to engender internal incentives to support creativity.
From the Cornell paper:
People often reject creative ideas even when espousing creativity as a desired goal. To explain this paradox, we propose that people can hold a bias against creativity that is not necessarily overt, and which is activated when people experience a motivation to reduce uncertainty.
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At a recent board meeting, a CEO said, “This experiment will cost $250,000 to run. After three months, we will know whether our new go-to-market strategy is viable.” There’s a brilliance this type of framing. By quantifying the cost of the experiment, the CEO frames company prioritization as asset allocation.
What is asset allocation? Asset allocation is a strategy that aims to balance risk and reward by apportioning a startup’s assets according to a company’s goals and risk tolerance.
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Over the last year in particular, Revenue Ops is a term that’s gaining some mindshare in the SaaS world. Revenue operations teams combine marketing operations and sales operations into one team. Yesterday, I heard time a further refinement of this idea: Customer Operations.
As one SaaS executive described to me, marketing operations teams are the engines of the marketing team. The creative marketing functions produce the fuel – the campaigns, the positioning, the art.
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There are four lies managers tell themselves to avoid one of the hardest conversations in business. Things will improve. Someone in the seat is better than no one in the seat. Let’s transfer the person to another team where things might improve. The termination will hurt morale in the company or the team. I’ve told myself all of these in the past. What’s the best way to move past these and execute the difficult task of letting someone go?
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Calendars contain one of the under-studied data sets within companies. How we spend our days, is of course, how we spend our lives, wrote Anne Dillard. How we spend our days at work determines what we and the company ultimately achieve.
I remember meeting Ryan Fuller of Volometrix several years ago. He shared the story of the business he and his colleagues had built analyzing the way companies spend their days.
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SaaS startups often find themselves in one of three different states when contemplating their burn rate. The first is the David Farragut strategy. Damn the burn rate, full speed ahead. The second is the conservative approach - attaining profitability using only the cash on the balance sheet. Those two are easy. Circumstances dictate the respective aggression or conservatism. Lots of cash or not so much. The more complicated state is the one in between, and that is the one that most SaaS startup operate within.
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If I made a word cloud of the terms in 2016 that dominated Startupland, burn would be among them and perhaps the largest. On the contrary, burn would be absent from the 2015 list, replaced by unicorn. Starting in the end of 2015, Public companies have markedly shifted the way they manage their businesses pushing toward cash flow positive and net income positive. In parallel, startup founders and CEOs have markedly shifted the way they communicate and manage their businesses.
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Success has 1000 fathers and failure is an orphan.
I heard this aphorism in my first year as a venture capitalist having forgotten it. There’s a lot of wisdom to it and I think it’s most applicable when interviewing. I remind myself of the same each time I speak with a candidate for a role.
When I see a sterling resume, I know that I am susceptible to confirmation bias.
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In 1967, Harvard Business Review rejected a paper submitted by Mel Conway. A year later, Conway’s thesis would eventually be dubbed Conway’s Law. Conway graduated from Caltech with a Masters in physics and from Case Western Reserve with PhD in math. He worked on the Pascal compiler among other notable software projects. Over the course of his career, Conway observed a phenomenon. The products software teams created reflected their organizational structure.
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A senior executive described her management philosophy as heavily influenced by Daniel Pink’s book Drive. In his 20 minute TED talk, Pink argues traditional incentive structures like bonuses and raises don’t work for knowledge workers. Instead, autonomy, mastery and purpose motivate them best.
Autonomy grants employees the flexibility to achieve their goals as they see fit. Purpose means serving a goal larger than the self. Mastery provides employees the opportunities to continuously improve their skills.
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Suppose you’ve been selected to participate in a game show. The game show host asks you to pick one of three doors. Behind one, the grand prize awaits. Behind the other two are goats. You choose Door 1. Then the hosts opens Door 3, revealing a goat. The host prompts you again, “Would you like to select Door 2?” Should you choose it?
This statistics question rose to fame in 1990 when Marilyn Vos Savant asked it in Parade Magazine.
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As a startup scales and surpasses its first organizational breaking point of 8 employees, it’s time to start thinking about organizational design. The strategy a startup chooses in their market should determine their organizational design.
In the First Round Review profile of Paul Arnold , the Head of Operations at AppDirect, Paul shares the challenges the initial organizational structure created as the company grew 5x in less than a year.
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As the temperament of the fundraising market shifts, particularly in the later stages, the question of how much a startup should burn will become increasingly important. We’re living in a historic period of very inexpensive venture capital. These cheap dollars have fueled spectacular companies with record-setting growth rates. In such an environment, growth at almost any cost is handsomely rewarded. But we’re observing the ecosystem starting a correction - particularly in the late stage of the market.
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Customer pull is an amazing feeling for a startup. Because the customer demand is visceral, everything seems to move quickly: sales is booking deals quicker than can be on-boarded; product and engineering are rushing to build the features customers request; marketing’s efforts to raise awareness of the business are magnified by word of mouth; and recruiting is doing all they can to fill the looming vacancies.
At seed, the first signs of strong customer pull are the quality of pilot and trial interest.
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While culture may seem an ambiguous and fuzzy concept, strong cultures are the best way for leaders to manage their companies throughout their evolution. One founder/CEO described his company’s rapid growth to several hundred employees in just a few years this way. First, I was one of a few founders. As we grew, I became a manager of people. Then a manager of managers. And now I’m a manager of managers of managers.
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In a book called The Outsiders - Eight Unconventional CEOs and their Radically Rational Blueprint for Success, the author William Thorndike asks the question, who have been the best CEOs ever? And what metric should be used to gauge them?
Thorndike doesn’t choose Jobs or Welch or Gates. Instead, he selects the 8 CEOs whose company’s share price appreciated the most compared to the S&P 500. While Welch grew GE share price at 20% compounded, he did so when the S&P 500 grew at 14% annually.
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Founders often ask, when is the right time to expand geographically, add a second product or pursue another customer segment? Most of the time, the answer is not yet, not until the company is quite large, perhaps in the hundreds of employees and the main challenges and questions for the business have been answered well.
When a startup pursues a new major initiative, the company divides all its key teams by two.
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Of late, I’ve been having lots of conversations with founders about setting goals. It’s a really important topic for many founders, because it’s the way that management teams align incentives and focus an organization on a few important areas. It’s their focus that enables startups to move quickly, one of their key competitive advantages in the market. But, what is the optimal way of setting goals? I first learned about goal setting at Google, which employs the OKR (Objective and Key Result) that Andy Grove developed at Intel.
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McKinsey developed the 9 Box Matrix in the 1970s to help GE prioritize investments across its 150 business units. Not all business units were equally attractive. Some should receive investments and others should be divested. The 9 Box Matrix evaluated business units on two dimensions: industry attractiveness and competitive strength of the business unit.
At some point in the last 40 years, Human Resources teams co-opted this model as a talent management tool, and replaced the two industry axes with people specific ones: performance and potential, as depicted above.
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Orbiting the Giant Hairball is one of the most unusual business books I’ve read. It’s irreverent, full of drawings, and completely chaotic in the most wonderful way. Gordon MacKenzie, the author of the book, worked at Hallmark cards for 30 years to the day. He started initially in the creative department imagining greeting cards and ultimately found himself with the title Creative Paradox. In his book, he described the way he injected creativity into his working life.
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My first major negotiation was a potential advertising agreement between Google and Facebook. I was PM on the social advertising team at the time. There was a call scheduled at 2pm one afternoon, and I had been told that morning about it.
I’m wasn’t an experienced negotiator, so I panicked. I didn’t know how these conversations worked. I called some a few other product managers I knew inside Google, and asked their advice.
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“Is there a bubble?” is a question that seems to be asked every day. But it’s the wrong question - in fact, it’s an unimportant question. Maybe there is a bubble. Maybe there isn’t. Instead of asking the question, let’s just presume we are in a bubble.
Then, the far more important debate surfaces: given the bubble, how should a team manage a startup differently? If I were to survey entrepreneurs and board members, I presume I would hear something like this list:
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Performance reviews tax organizations, managers and employees to such an extent that some companies have abolished them outright. Reviews are emotionally complex conversations. Positive and negative feedback are intertwined with conversations about career progression, raises and equity grants. These meetings are emotional powder kegs; and it’s no wonder they stress us.
In Work Rules, Google’s Chief People Officer Laszlo Bock, argues for a different type of performance review: a split review.
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See also: Innovator’s Solution for SaaS Startups
There’s a familiar path now to SaaS companies that start in the SMB (small-to-medium business) part of the market. Over time, they seem to inevitably begin serving larger customers. Box, Hubspot, Zendesk and among many others have exhibited this pattern. Why does this happen?
I believe we’re seeing Clay Christensen’s Innovator’s Dilemma at play. In short, new startups leverage a distribution advantage to acquire SMB customers at scale.
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In 2011, a team of researchers from Stanford and Harvard led by Teresa Amabile collected daily work journals from more than 250 people at large and small companies in a variety of roles. In each journal entry, an employee described one work event that stood out that day. Over the course of a few months, the study received more than 12,000 responses. From all this data, the team revealed a critical ingredient to be a great manager: managing for progress.
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What percentage of SaaS IPOs in the last four years have the founding CEOs of the business been CEO at the time of IPO?
62.5%. In about two thirds of SaaS IPOs from 2011-2014, the founding CEO is the current CEO.
Is there a meaningful difference between the equity stake of a founder who is CEO at IPO, and a founder who is no longer CEO?
About 1.1 percentage points.
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Most interviews are a waste of time. According to Adam Grant, a professor of Organizational Behavior at Wharton, “standard interviews only accounted for 8% of the differences in performance and productivity.” The typical interview fails to predict performance accurately because it is subject to interviewer biases and candidate biases, and fails to compare the candidates with a consistent rubric.
In a talent market as competitive as today’s, startups who can more accurately assess candidates’ future performance will create a tremendous recruiting efficiency and ultimately execution advantage.
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Yesterday, I attended an event held by the IT team of a major bank. When the data analytics team took the stage, I listened with great interest as the chief of the group described their internal struggles with data and the areas where startups might help them achieve their goals. He articulated his team’s needs and goals in a very concise way by bucketing his users into three personas. I’ve summarized these personas below:
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Hollywood and Silicon Valley often seems worlds apart. While movie making and startup building may always be very different endeavors, great managers use the same techniques in every discipline to empower their teams, hire the right people, and change the world.
Over the weekend, I watched Woody Allen: A Documentary which profiles the great director through the words of his actors, editors and producers. Allen’s management ability shone through every interview.