It taught me that being scared didn’t mean I was gutless. What I did mattered and would determine whether I would be a hero or a coward.
Until you make the effort to get to know someone or something, you don’t know anything.
There are no shortcuts to knowledge, especially knowledge gained from personal experience. Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all.
Former secretary of state Colin Powell says that leadership is the ability to get someone to follow you even if only out of curiosity.
The simple existence of an alternate, plausible scenario is often all that’s needed to keep hope alive among a worried workforce.
I thought that I could pursue my career, all my interests, and build my family. More important, I always thought about myself first. When you are part of a family or part of a group, that kind of thinking can get you into trouble,
With Marc and me, even after eighteen years, he upsets me almost every day by finding something wrong in my thinking, and I do the same for him. It works.
People often ask me how we’ve managed to work effectively across three companies over eighteen years. Most business relationships either become too tense to tolerate or not tense enough to be productive after a while. Either people challenge each other to the point where they don’t like each other or they become complacent about each other’s feedback and no longer benefit from the relationship.
Media companies focused on things like creating great stories whereas technology companies focused on creating a better way of doing things.
During this time I learned the most important rule of raising money privately: Look for a market of one. You only need one investor to say yes, so it’s best to ignore the other thirty who say “no.”
IF YOU ARE GOING TO EAT SHIT, DON’T NIBBLE
The only way out of the cloud business without going bankrupt was through higher sales, because even if we laid off 100 percent of the employees, the infrastructure costs would still kill us without a sharper sales ramp.
Needs always trump wants in mergers and acquisitions.
If we hadn’t treated the people who were leaving fairly, the people who stayed would never have trusted me again.
“Frank, I will do exactly as you say. I’ve heard you loud and clear. This is a terrible moment for you and for us. Allow me to use your phone, and I will call Ben Horowitz and give him your instructions. But before I do, can I ask you one thing? If my company made the commitment to fix these issues, how much time would you give us to do that?”
An early lesson I learned in my career was that whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project.
It turns out that is exactly what product strategy is all about—figuring out the right product is the innovator’s job, not the customer’s job.
The customer only knows what she thinks she wants based on her experience with the current product. The innovator can take into account everything that’s possible, but often must go against what she knows to be true.
Early in my career as an engineer, I’d learned that all decisions were objective until the first line of code was written. After that, all decisions were emotional.
Markets weren’t “efficient” at finding the truth; they were just very efficient at converging on a conclusion—often the wrong conclusion.
It’s a good idea to ask, “What am I not doing?”
Startup CEOs should not play the odds. When you are building a company, you must believe there is an answer and you cannot pay attention to your odds of finding it. You just have to find it. It matters not whether your chances are nine in ten or one in a thousand; your task is the same.
In doing so, I follow the first principle of the Bushido—the way of the warrior: keep death in mind at all times. If a warrior keeps death in mind at all times and lives as though each day might be his last, he will conduct himself properly in all his actions.
Remember that this is what separates the women from the girls. If you want to be great, this is the challenge. If you don’t want to be great, then you never should have started a company.
A much better idea would have been to give the problem to the people who could not only fix it, but who would also be personally excited and motivated to do so.
In any human interaction, the required amount of communication is inversely proportional to the level of trust.
The more brains working on the hard problems, the better.
A brain, no matter how big, cannot solve a problem it doesn’t know about. As the open-source community would explain it, “Given enough eyeballs, all bugs are shallow.”
A good culture is like the old RIP routing protocol: Bad news travels fast; good news travels slow.
Build a culture that rewards—not punishes—people for getting problems into the open where they can be solved.
You are laying people off because the company failed to hit its plan.
If individual performance were the only issue, then you’d be taking a different measure. Company performance failed.
Managers must lay off their own people.
The message is for the people who are staying.
They should explain briefly what happened and that it is a company rather than a personal failure.
They should be clear that the employee is impacted and that the decision is nonnegotiable.
They should be fully prepared with all of the details about the benefits and support the company plans to provide.
You did a poor job defining the position in the first place. You hired for lack of weakness rather than for strengths.
Review any performance reviews or written performance conversations to understand any inconsistencies in your prior communication.
“Ben, you cannot let him keep his job, but you absolutely can let him keep his respect.”
Be clear on the reasons.
Use decisive language.
Have the severance package approved and ready.
Get their support and understanding for the difficult task that you will execute.
Get their input and approval for the separation package.
Preserve the reputation of the fired executive.
Firing an executive turns out to be a piece of news that’s handled better with individual phone calls than in dramatic fashion during a board meeting.
The executive will be keenly interested in how the news will be communicated to the company and to the outside world. It is best to let her decide.
After you have informed the executive, you must quickly update the company and your staff on the change. The correct order for informing the company is (1) the executive’s direct reports—because they will be most impacted; (2) the other members of your staff—because they will need to answer questions about it; and (3) the rest of the company. All of these communications should happen on the same day and preferably within a couple of hours.
Generally, it’s smart for the CEO to act in the executive role in the meanwhile.
You must consider first all of the other employees and second your friend.
Acknowledge the contributions.
Use appropriate language.
As part of the decision, you must get comfortable with the thought that the employee may quit the company. Given the intense emotions he will feel, there is no guarantee that he will want to stay.
If you cannot afford to lose him, you cannot make this change.
Your goal should not be to take the sting out of it, but to be honest, clear, and effective.
The customers were buying; they just weren’t buying our product. This was not a time to pivot. So I said the same thing to every one of them: “There are no silver bullets for this, only lead bullets.” They did not want to hear that, but it made things clear: We had to build a better product.
All the mental energy you use to elaborate your misery would be far better used trying to find the one seemingly impossible way out of your current mess. Spend zero time on what you could have done, and devote all of your time on what you might do. Because in the end, nobody cares; just run your company.
In times of peace, one has time to care about things like appropriateness, long-term cultural consequences, and people’s feelings. In times of war, killing the enemy and getting the troops safely home is all that counts.
“We take care of the people, the products, and the profits—in that order.”
Taking care of the people means that your company is a good place to work. Most workplaces are far from good. As organizations grow large, important work can go unnoticed, the hardest workers can get passed over by the best politicians, and bureaucratic processes can choke out the creativity and remove all the joy.
Being a good company doesn’t matter when things go well, but it can be the difference between life and death when things go wrong. Things always go wrong. Being a good company is an end in itself.
“Most managers seem to feel that training employees is a job that should be left to others. I, on the other hand, strongly believe that the manager should do it himself.”
How many fully productive employees have they added?
When you fired the person, how did you know with certainty that the employee both understood the expectations of the job and was still missing them?
They hated their manager; generally the employees were appalled by the lack of guidance, career development, and feedback they were receiving.
They weren’t learning anything: The company wasn’t investing resources in helping employees develop new skills.
The best place to start is with the topic that is most relevant to your employees: the knowledge and skill that they need to do their job. I call this functional training.
You expect them to hold regular one-on-one meetings with their employees? Do you expect them to give performance feedback? Do you expect them to train their people? Do you expect them to agree on objectives with their team?
As Andy Grove writes, there are only two ways for a manager to improve the output of an employee: motivation and training.
Enforce management training by teaching it yourself. Managing the company is the CEO’s job.
Being too busy to train is the moral equivalent of being too hungry to eat.
Good product managers know the market, the product, the product line, and the competition extremely well and operate from a strong basis of knowledge and confidence. They are responsible for right product/right time and all that entails.
Good product managers don’t get all of their time sucked up by the various organizations that must work together to deliver the right product at the right time. They are not part of the product team; they manage the product team.
Good product managers crisply define the target, the “what” (as opposed to the “how”), and manage the delivery of the “what.”
Good product managers anticipate the serious product flaws and build real solutions. Bad product managers put out fires all day.
Good product managers focus the team on revenue and customers. Bad product managers focus the team on how many features competitors are building.
Good product managers define good products that can be executed with a strong effort.
Good product managers decompose problems. Bad product managers combine all problems into one.
Good product managers think in terms of delivering superior value to the marketplace during product planning and achieving market share and revenue goals during the go-to-market phase.
Look for candidates who come in with more new initiatives than you think are possible.
The most important difference between big and small companies is the amount of time running versus creating.
Force them to create.
“If you don’t know what you want, the chances that you’ll get it are extremely low.”
The very best way to know what you want is to act in the role. Not just in title, but in real action.
What will this person do in the first thirty days? What do you expect their motivation to be for joining? Do you want them to build a large organization right away or hire only one or two people over the next year?
Will the executive be world-class at running the function?
Is the executive outstanding operationally?
Will the executive make a major contribution to the strategic direction of the company? This is the “are they smart enough?” criterion.
Will the executive be an effective member of the team? Effective is the key word. It’s possible for an executive to be well liked and totally ineffective with respect to the other members of the team. It’s also possible for an executive to be highly effective and profoundly influential while being totally despised. The latter is far better.
Consensus decisions about executives almost always sway the process away from strength and toward lack of weakness.
To get things right, you must recognize that anything you measure automatically creates a set of employee behaviors. Once you determine the result you want, you need to test the description of the result against the employee behaviors that the description will likely create.
1. Putting two in the box 2. Overcompensating a key employee, because she gets another job offer 3. No performance management or employee feedback process
Directions with no corrections will seem fuzzy and obtuse. People rarely improve weakness they are unaware of. The ultimate price you will pay for not giving feedback: systematically crappy company performance.
High quality human resources organization cannot make you a well-managed company with a great culture, but it can tell you when you and your manmagers are not getting the job done.
Managers must believe that HR is there to help them improve rather than police them.
Sometimes the right policy is the one that the CEO can follow.
How to Minimise Politics in Your Company
By conducting well-structured, regular performance and compensation reviews, you will ensure that pay and stock increases are as fair as possible.
Formal, visible, defensible promotion process that governs every employee promotion.
It will give the organization confidence that the company at least attempted to base the promotion on merit.
Process will produce the information necessary for your team to explain the promotion decisions you
The Right Kind of Ambition
At a macro level, a company will be most successful if the senior managers optimize for the company’s success (think of this as a global optimization) as opposed to their own personal success (local optimization).
Nothing motivates a great employee more than a mission that’s so important that it supersedes everyone’s personal ambition.
When interviewing candidates, it’s helpful to watch for small distinctions that indicate whether they view the world through the “me” prism or the “team” prism.
He wanted to know the strengths and weaknesses of everyone else on the team. He wanted to know the game plan for winning.
Titles and Promotions
Peter Principle holds that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent (their “level of incompetence”), and there they remain being unable to earn further promotions.
The Law of Crappy People states: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title.
In fact, the best leveling tools get extremely specific and even name names: “should be a superstar recruiter—as good as Jenny Rogers.”
Andreessen argues that people ask for many things from a company: salary, bonus, stock options, span of control, and titles.
When Smart People Are Bad Employees
Company is a team effort and, no matter how high an employee’s potential, you cannot get value from him unless he does his work in a manner in which he can be relied upon.
If one of your big dogs destroys communication on your staff, you need to send her to the pound.
There is only room for one Dennis Rodman on this team. In fact, you really can only have a very few Dennis Rodmans in society as a whole; otherwise, we would degenerate into anarchy.
“If you hold the bus for everyone on the team, then you’ll be so late you’ll miss the game, so you can’t do that. The bus must leave on time. However, sometimes you’ll have a player that’s so good that you hold the bus for him, but only him.”
The proper reason to hire a senior person is to acquire knowledge and experience in a specific area.
One good test for determining whether to go with outside experience versus internal promotion is to figure out whether you value inside knowledge or outside knowledge more for the position.
One excellent way to develop a high standard is to interview people who you see doing a great job in their field. Find out what their standard is and add it to your own. Once you determine a high yet achievable performance bar, hold your executive to that high standard even if you have no idea how they might achieve it.
Once you’ve set a high standard, it will be straightforward to measure your executive against that standard.
It’s important to understand how well she is managing, even if she is hitting her goals.
You must look beyond the black-box results and into the sausage factory to see how things get made.
Breaking down performance into four distinct areas:
Executives must be effective at communicating, supporting, and getting what they need from the other people on your staff.
Questions that are effective in one-on-ones:
If we could improve in any way, how would we do it?
What’s the number-one problem with our organization? Why?
What’s not fun about working here?
Who is really kicking ass in the company?
Whom do you admire?
If you were me, what changes would you make?
What don’t you like about the product?
What’s the biggest opportunity that we’re missing out on?
What are we not doing that we should be doing?
Are you happy working here?
In the end, the most important thing is that the best ideas, the biggest problems, and the most intense employee life issues make their way to the people who can deal with them.
Programming Your Culture
The primary thing that any technology startup must do is build a product that’s at least ten times better at doing something than the current prevailing way of doing that thing. Two or three times better will not be good enough to get people to switch to the new thing fast enough or in large enough volume to matter.
The second thing that any technology startup must do is to take the market. If it’s possible to do something ten times better, it’s also possible that you won’t be the only company to figure that out. Therefore, you must take the market before somebody else does. Very few products are ten times better than the competition’s, so unseating the new incumbent is much more difficult than unseating the old one.
So, why bother with culture at all? Three reasons:
It matters to the extent that it can help you achieve the above goals.
As your company grows, culture can help you preserve your key values, make your company a better place to work, and help it perform better in the future.
Perhaps most important, after you and your people go through the inhuman amount of work that it will take to build a successful company, it will be an epic tragedy if your company culture is such that even you don’t want to work there.
Design a way of working that will:
Distinguish you from competitors
Ensure that critical operating values persist such as delighting customers or making beautiful products
Help you identify employees who fit with your mission
If you put something into your culture that is so disturbing that it always creates a conversation, it will change behavior.
Desks made out of doors: Very early on, Jeff Bezos, founder and CEO of Amazon.com
, envisioned a company that made money by delivering value to rather than extracting value from its customers. In order to do that, he wanted to be both the price leader and customer service leader for the long run. You can’t do that if you waste a lot of money. Jeff could have spent years auditing every expense and raining hell on anybody who overspent, but he decided to build frugality into his culture. He did it with an incredibly simple mechanism: All desks at Amazon.com
for all time would be built by buying cheap doors from Home Depot and nailing legs to them.
Ten dollars per minute: When we started Andreessen Horowitz, Marc and I wanted the firm to treat entrepreneurs with great respect. We remembered how psychologically brutal the process of building a company was. We wanted the firm to respect the fact that in the bacon-and-egg breakfast of a startup, we were with the chicken and the entrepreneur was the pig: We were involved, but she was committed. We thought that one way to communicate respect would be to always be on time to meetings with entrepreneurs.
Yes, yoga may make your company a better place to work for people who like yoga. It may also be a great team-building exercise for people who like yoga. Nonetheless, it’s not culture. It will not establish a core value that drives the business and helps promote it in perpetuity. It is not specific with respect to what your business aims to achieve. Yoga is a perk.
Every smart company values its employees. Perks are good, but they are not culture.
Taking the Mystery Out of Scaling a Company
When an organization grows in size, things that were previously easy become difficult. Specifically, the following things that cause no trouble when you are small become big challenges as you grow: Communication, Common knowledge, Decision making.
Specialization, organizational structure, and process all complicate things and implementing them will feel like you are moving away from common knowledge and quality communication. It is very much like the offensive lineman taking a step backward. You will lose ground, but you will prevent your company from descending into chaos.
As the company grows, it becomes increasingly difficult to add new engineers, because the learning curve starts to get super-steep. Getting a new engineer up to speed starts to become more difficult than doing the work yourself. At this point, you need to specialize.
Think of the organizational design as the communications architecture for your company. If you want people to communicate, the best way to accomplish that is to make them report to the same manager. By contrast, the further away people are in the organizational chart, the less they will communicate.
Basic steps to organizational design:
Figure out what needs to be communicated. Start by listing the most important knowledge and who needs to have it.
Figure out what needs to be decided. Consider the types of decisions that must get made on a frequent basis: feature selection, architectural decisions, how to resolve support issues. How can you design the organization to put the maximum number of decisions under the domain of a designated manager?
Prioritize the most important communication and decision paths.
Decide who’s going to run each group. Most large mistakes in organizational design come from putting the individual ambitions of the people at the top of the organization ahead of the communication paths for the people at the bottom of the organization.
Identify the paths that you did not optimize.
Build a plan for mitigating the issues identified in step five.
The purpose of process is communication.
A process is a formal, well-structured communication vehicle. It can be a heavily engineered Six Sigma process or it can be a well-structured regular meeting. The size of the process should be scaled up or down to meet the needs of the communication challenge that it facilitates.
Who should design a process? The people who are already doing the work in an ad hoc manner.
Focus on the output first. What should the process produce? In the case of the interview process, an outstanding employee. If that’s the goal, what’s the process to get there?
Focus on the output first. What should the process produce?
Figure out how you’ll know if you are getting what you want at each step.
Engineer accountability into the system. Which organization and which individual is responsible for each step? What can you do to increase the visibility of their performance?
The Scale Anticipation Fallacy
Evaluating people against the future needs of the company based on a theoretical view of how they will perform is counterproductive,
Managing at scale is a learned skill rather than a natural ability.
It’s impossible to make the ‘can this individual scale’ judgement in advance.
The act of judging people in advance will retard their development.
Hiring scalable execs too early is a bad mistake.
So, if you don’t prejudge people’s ability to scale, how do you make the judgment? You should evaluate your team at least once a quarter on all dimensions.
Don’t separate scale from the rest of the evaluation. The relevant question isn’t whether an executive can scale; it’s whether the executive can do the job at the current scale.
Make the judgment on a relative rather than an absolute scale.
How To Lead Even When You Don’t Know Where You’re Going
The Most Difficult CEO Skill
It’s like the fight club of management: The first rule of the CEO psychological meltdown is don’t talk about the psychological meltdown.
Ideally, the CEO will be urgent yet not insane. She will move aggressively and decisively without feeling emotionally culpable. If she can separate the importance of the issues from how she feels about them, she will avoid demonizing her employees or herself.
The key to getting to the right outcome was to keep from getting married to either the positive or the dark narrative.
The Fine Line Between Courage and Fear
"People who watch you judge you on what you do, not how you feel.” —CUS D’AMATO, LEGENDARY BOXING TRAINER
Every time you make the hard, correct decision you become a bit more courageous and every time you make the easy, wrong decision you become a bit more cowardly.
When it comes to CEO succession, internal candidates dramatically outperform external candidates. The core reason is knowledge. Knowledge of technology, prior decisions, culture, personnel, and more tends to be far more difficult to acquire than the skills required to manage a larger organization.
Ones and Twos
Two core skills for running an organization: First, knowing what to do. Second, getting the company to do what you know.
The primary purpose of the organizational hierarchy in a company is decision-making efficiency.
Follow The Leader
So what makes people want to follow a leader? We look for three key traits:
THE ABILITY TO ARTICULATE THE VISION: THE STEVE JOBS ATTRIBUTE
Can the leader articulate a vision that’s interesting, dynamic, and compelling? More important, can the leader do this when things fall apart?
THE RIGHT KIND OF AMBITION: THE BILL CAMPBELL ATTRIBUTE
Truly great leaders create an environment where the employees feel that the CEO cares more about the employees than she cares about herself. In this kind of environment, an amazing thing happens: A huge number of employees believe it’s their company and behave accordingly.
The first thing that any successful CEO must do is get really great people to work for her. Smart people do not want to work for people who do not have their interests in mind and in heart.
THE ABILITY TO ACHIEVE THE VISION: THE ANDY GROVE ATTRIBUTE
If people trust you, they will listen to your vision even if it is less articulate. If you are super-competent, they will trust you and listen to you. If you can paint a brilliant vision, people will be patient with you as you learn the CEO skills and give you more leeway with respect to their interests.
Peacetime CEO/Wartime CEO
Peacetime in business means those times when a company has a large advantage over the competition in its core market, and its market is growing.
In wartime, a company is fending off an imminent existential threat. Such a threat can come from a wide range of sources, including competition, dramatic macroeconomic change, market change, supply chain change, and so forth.
In peacetime, leaders must maximize and broaden the current opportunity. As a result, peacetime leaders employ techniques to encourage broad-based creativity and contribution across a diverse set of possible objectives.
In wartime, by contrast, the company typically has a single bullet in the chamber and must, at all costs, hit the target. The company’s survival in wartime depends upon strict adherence and alignment to the mission.
Peacetime CEO aims to expand the market. Wartime CEO aims to win the market.
Peacetime CEO trains her employees to ensure satisfaction and career development. Wartime CEO trains her employees so they don’t get their asses shot off in the battle.
Making Yourself a CEO
Evaluating people’s performances and constantly giving feedback is precisely what a CEO must do.
Be authentic. It’s extremely important that you believe in the feedback that you give and not say anything to manipulate the recipient’s feelings.
Come from the right place. It’s important that you give people feedback because you want them to succeed
Watered-down feedback can be worse than no feedback at all because it’s deceptive and confusing to the recipient. But don’t beat them up or attempt to show your superiority. Doing so will defeat your purpose because when done properly, feedback is a dialogue, not a monologue.
Culturally, you want high standards thoroughly discussed. You want to apply tremendous pressure to get the highest-quality thinking yet be open enough to find out when you are wrong.
As CEO, you should have an opinion on absolutely everything.
Feedback won’t be personal in your company. If the CEO constantly gives feedback, then everyone she interacts with will just get used to it.
People will become comfortable discussing bad news. If people get comfortable talking about what each other are doing wrong, then it will be very easy to talk about what the company is doing wrong.
How to Evaluate CEOs
By describing how I evaluate CEOs, I am at the same time describing what I think the job of the CEO is. Here are the key questions we ask:
Does the CEO know what to do?
Can the CEO get the company to do what she knows?
Did the CEO achieve the desired results against an appropriate set of objectives?
In good companies, the story and the strategy are the same thing. As a result, the proper output of all the strategic work is the story.
At the detailed level, the output of knowing what to do is the speed and quality of the CEO’s decisions.
The CEO must set the context within which every employee operates. The context gives meaning to the specific work that people do, aligns interests, enables decision making, and provides motivation.
The story of the company goes beyond quarterly or annual goals and gets to the hard-core question of why. Why should I join this company? Why should I be excited to work here? Why should I buy its product? Why should I invest in the company? Why is the world better off as a result of this company’s existence?
It’s important to note that team quality is tightly tied to the specific needs of the company in the challenges it faces at the point in time it faces them. As a result, it’s quite possible that the executive team changes several times, but the team is high quality the entire way and there is no attrition problem.
Early in a company’s development, objectives can be particularly misleading since nobody really knows the true size of the opportunity. Therefore, the first task in accurately measuring results is setting objectives correctly.
CEOs should be evaluated against their company’s opportunity—not somebody else’s company.
The white-box CEO evaluation criteria—“Does the CEO know what to do?” and “Can the CEO get the company to do it?”—will do a much better job of predicting the future.
Solving the Accountability vs. Creativity Paradox
A software engineer identifies a weakness in your current product architecture that will significantly impair its ability to scale down the road. She figures out that she’ll have to slip the product schedule three months to fix it. Everybody agrees that three months is an acceptable slip to correct the problem. The schedule actually slips nine months, but she was right about the problem. Do you reward her for her creativity and courage or hold her accountable for the slip?
ACCOUNTABILITY FOR EFFORT
ACCOUNTABILITY FOR PROMISES
ACCOUNTABILITY FOR RESULTS
There are two kinds of cultures in this world: cultures where what you do matters and cultures where all that matters is who you are. You can be the former or you can suck.
It’s neither necessary nor a good idea to evaluate an executive based on what her job will be two years from now. You can cross that bridge when you come to it. Evaluate her on how she performs right here and right now.
Your loyalty must go to your employees—the people who report to your executives. Your engineers, marketing people, salespeople, and finance and HR people who are doing the work. You owe them a world-class management team. That’s the priority.
Should You Sell Your Company
Most venture capitalists like entrepreneurs that are “all in,” meaning the entrepreneur has everything invested in the company and will have very little to show for her efforts if it does not succeed. As part of this, they prefer the founding CEO to have a very low salary. In general, this is a good idea, because the temptation to walk away when things go poorly is intense and total financial commitment helps him to keep his other commitments.
Hard things are hard because there are no easy answers or recipes. They are hard because your emotions are at odds with your logic. They are hard because you don’t know the answer and you cannot ask for help without showing weakness.