Transparency Rules

I think each and every one of our 13 core values at Return Path is important to our culture and to our success.  And I generally don’t rank them.  But if I did, People First is a leading contender to be at the top of the list. The other leading contender would be this last one in the series:

We believe in being transparent and direct

The big Inc. Magazine story about us last year talked a lot about our commitment to transparency and some of the challenges that come with being transparent and direct with people. I’d like to highlight here some of the benefits of being transparent, and the benefits of being direct (sometimes those two things are the same, sometimes they are different).

Transparency’s benefits are so numerous that it’s hard to pick just one or two themes to write about, but my favorite benefit is empowerment.  Especially in a world where information is increasingly available and free, hoarding it comes at a high cost.

• If everyone in the company knows that you’re short of plan and disappointed about that, the majority of people will exercise hawkish judgment about expenses.  The opposite is true as well.  If people know you’re running ahead of plan, they will be more willing to take risks and make investments. Without transparency of financials, people are just more in the dark and looking for all answers and judgment to come from above
• If everyone on your staff understands the process you went through to make a tough call about an element of your strategy, they are not only more likely to understand and support the decision, but they learn from you how to make decisions in the first place
• If your Board knows you’re having a tough quarter from the get go, they’re not surprised at the quarterly meeting and don’t force you to spend painful and precious minutes in the meeting On the firing line reporting on the details. Instead, they can spend time leading up to the meeting thinking about the details of the problems and how they can help or what insights they can bring to bear

Transparency does have some limits, even today.  There are three main limits we run into. One is compensation — still too touchy and wrapped up in people’s self esteem to post on the wall (though I have heard about a couple companies that do that, believe it or not). Another is terminations. Although you might want to tell the company that you fired Sally because she wasn’t carrying her weight, the long term value you derive from dignity and kindness trump any short term value you might derive from such a statement (plus, people know when Sally isn’t carrying her weight, anyway). The third limit to transparency is around half-baked ideas. Although you might sometimes want to try ideas on for size publicly, you have to be careful not to send people scurrying off in the wrong direction just because you blurted something out in a meeting.

The second half of this value statement is about being direct.  Being direct mostly has benefits in terms of efficiency. You can be direct and still be polite and kind.  But being direct means not beating around the bush, being political, or being conflict avoidant.  It means nipping problems in the bud and saving yourself time or money in the long run.

• If you are direct with an employee who is not performing well with data to back it up, the employee has a much better shot at improving than if you delegate the feedback to HR, wait for the next annual performance review, or go passive and skip the feedback entirely
• If you are direct with a boss who you think is treating you unfairly, your odds of fixing the situation go way up
• If there’s bad news to deliver, be direct about it — look the other person in the eye, deliver the news crisply and succinctly, and as quickly as you can after finding it out or deciding on it yourself

Avoid euphemisms at all cost. Telling someone you “might have to rethink things” is not the same as saying “I will have to fire you if xyz don’t happen in the next 30 days.” Saying “xyz would be good for you to do” is not the same as saying “the way for you to get promoted is to consistently do xyz.”

Being transparent and direct are increasingly table stakes for successful companies full of knowledge workers who want to be empowered and clear on where they stand.

I’ve really enjoyed writing all of these values out in living color. I will do a wrap up post shortly.

Picking Professional Services Firms

One of the most important things you can do as an entrepreneur is to surround yourself with a great lawyer (as I mentioned in my posting on negotiating term sheets) and a great accountant.  Brad’s advice here is excellent:

Choose professionals carefully: It may be tempting to use your wife’s brother’s friend’s neighbor as your lawyer, because he will give you a great rate and you see him at the neighborhood barbecue, but you get what you pay for. The same is true for accountants and other services that your business will use. Find professionals who know what they are doing and have experience with young companies.

I echo that and would add to it a cautionary note about big, brand name firms.  Our experience at Return Path hasn’t been great with them.  It’s not that they’re necessarily bad, they’re just not compatible with startups.  They have lots of overhead and have to charge for it.  They put junior people on your account who don’t have the depth of experience you need to properly advise you.  Or you can work with a partner and pay $900/hour for him or her to come up to speed on your business since you’re not his or her million dollar account.

Some larger firms have “emerging company” programs with discount rates for young companies – I’d avoid those as well.  The rates always creep up over time, and you’ll still be a second-class citizen to them in the interim because their margin is lower when they talk to you.

Find a good boutique law firm that specializes in venture financings, M&A, and general counsel, where you can get a partner working on your account and good advice without paying a fortune.  (There are, of course, exceptions to this — one or two in Silicon Valley come to mind that are larger firms but with specialization in this kind of law.)  Find a second-tier accounting firm (not one of the big four, but the next rung down), where you aren’t in competition with Fortune 1000 firms for time and attention. You’ll be much happier in the end.

To Err is Human, To Admit it is Divine

Forget about forgiveness.  Admitting mistakes is much harder.  The second-to-last value that I’m writing up of our 13 core values at Return Path is

We don’t want you to be embarrassed if you make a mistake; communicate about it and learn from it

People don’t like to feel vulnerable.  And there’s no more vulnerable feeling in business than publicly acknowledging that you goofed, whether to your peers, your boss, or your team (hard to say which is worse — eating crow never tastes good no matter who is serving it). But wow is it a valuable trait for an organization to have. Here are the benefits that come from being good at admitting mistakes:

• You’re not afraid to MAKE mistakes in the first place.  Taking risks, which is one of the things that vaults businesses forward with great speed, inherently involves making mistakes. If you’re afraid to shoot…you can’t score
• You teach yourself not to make the same mistake twice.  Being public about mistakes you make really reinforces your leanings.  It’s sort of like taking notes in class.  If you write it down, you’re more likely to remember it, even if you’re a good listener to the teacher
• You teach others not to make the same mistake you made.  Not everyone learns from the mistakes of others as opposed to the mistakes of self, but being public about mistakes and learnings at least gives other people a shot at learning

We’ve gotten good over the years at doing post-mortems (which I wrote about here) when a major snafu happens, which is institutional (large scale) admission and learning. But smaller scale post-mortems within a team and with less formal process around them are just as important if not more so, to make them commonplace.

We have also baked this thinking into our entire product development process.  We are as lean and agile as possible given that we are closing in on 300 employees now in 11 offices in 8 countries.  Our entire product development process is now geared around the concept of “fail fast” and killing projects or sending them back to the drawing board when they’re not meeting marketplace demand.  Embracing this posture has been one of the hallmarks of our success as we’ve scaled the business these past few years.

One trick here:  If this is something you are trying to institutionalize in your company — make sure you celebrate the admission of a mistake and the learnings from it, rather than the mistake itself. You do still value successful execution more than most things!

The Ultimate Sales Job

In a moment of productive tension a couple months back, one of my sales people said to me, “What do you know about selling?  You’ve never carried a bag in your life!”  Technically, the sales person was correct — I’ve never been a member of a sales department.  But as a product manager, GM, and CEO over the last 17 years, I have actually spent a significant of time directly selling customers.  But this comment got me thinking about the role of a CEO and just how much of a sales job it is.

My conclusion:  it’s not a just a sales job, it’s the ultimate sales job!  Why?

• Assisting on sales calls is the most obviously basic sales component to the job.  While some CEOs are more “in the market” than others, and even ones who are active with customers and prospects don’t do it every day, most CEOs that I know have either closed or assisted their sales reps on scores of deals
• Articulating a vision for where the company is headed is selling to the team and building consensus that keeps everyone’s eye on the ball
• Raising money to start or expand the business is selling the company, the vision, the management team, and the market to investors (some of the world’s toughest customers!)
• Recruiting talented employees is selling that same vision as well as your leadership capabilities to a prospective member of your team
• Speaking at conferences and trade shows maybe a subtle form of sales, but it usually involves presenting the image and expertise you want to present to be “on message” to drive new business in the door
• Building strategic partnerships is similarly selling a potential partner on how you can channel the core assets of your business to work for the partner company

In the end, most successful startups end up either going public or getting acquired.  Selling the actual company — now that’s the ultimate sales job within the ultimate sales job.

B+ for Effort?

Effort is important in life.  If Woody Allen is right, and 80% of success in life is just showing up, then perhaps 89% is in showing up AND putting in good effort.  But there is no A for Effort in a fast-paced work environment.  The best you can get without demonstrating results is a B+.

The converse is also true, that the best you can get with good results AND without good effort is a B+.

Now, a B+ isn’t a bad grade either way.  But it’s not the best grade.  In continuing with this series of our 13 core values at Return Path, the next one I’ll cover is:

We believe that results and effort are both critical components of execution

We’ve always espoused the general philosophy that HOW you get something done is quite important.  For example, if the effort is poor and you get to the right place, maybe you got lucky.  Or even worse, maybe you wasted a lot of time to get there.  Or if you burned your colleagues or clients in the process of getting to the right place, a positive short-term result can have negative long-term consequences.

But when all is said and done, even with the most supportive culture that values effort and learning a lot (more on that in the next post in this series), results speak very loudly. Customers don’t give you a lot of credit for trying hard if you’re not effectively delivering product or solving their problems.  And investors ultimately demand results.

Our “talent development” framework at Return Path – the thing that we use to measure employee performance, reflects this dual view of execution:

The X axis is clearly labeled “Performance,” meaning results, and the Y axis is labeled “Potential – RP Expectations,” which basically means effort and fit with the culture at Return Path.  We plot out employees on the basis of their quantitative scores coming out of their performance reviews on this grid every year.  Which box any given employee falls in has a lot to do with how that employee is managed and coached in the coming months.  We’re always trying to move people up and to the right!

The definitions of the different boxes in this framework are telling and speak to the subject of this post.  To be an A player here, you have to excel in both effort and results – that’s our definition of successful execution.

Happy Thanksgiving, everyone!  We’re getting to the end of this series…only two more to go.

This is the hardest thing I’ve ever had to write in 12 years as Return Path’s CEO. I hope it never has an equal.

One of our long-time employees, J.D. Falk, passed away last night after a year-long struggle with cancer. J.D., which most people don’t know was short for Jesse David, was only 37 years old. Although I cannot claim to be a close friend of J.D.’s, I have known him fairly well in the industry going back about eight years, and he has been a trusted member of our team here for the last four+ years.

J.D. did great work for us at Return Path, but my admiration for him goes beyond that. I admire him first for his willingness to work for the common good as much as, or even more than, his own good. J.D.’s tireless pro-bono work with anti-abuse non-profits MAAWG, CAUCE, and the IETF complemented the work he did here for a salary. And although he had a very positive and enduring impact on us at Return Path in terms of how we run our business and think about the delicate balance between email senders and receivers, he had an even bigger, broader impact through his standards work, papers, and tireless work on event programming and committee chairmanship. He did all that work not for money, not for thanks, but because it was, he felt, the right thing to do.

I also admire J.D. tremendously for his extremely principled, but thoughtfully considered, approach to life. His principles around internet users are well known and very “Cluetrain.” And yet, in a world increasingly filled with people whose opinions are intransigent, he was always open-minded and willing to engage in productive dialog with people who had different points of view than his own, sometimes changing his own thoughts and actions as a result of those conversations. That quality is all-too-rare in today’s society.

J.D.’s wife Hope told me a great story that sums up the fiber of J.D.’s being earlier this week. Just last weekend, from his hospital bed, J.D. realized that he and Hope had concert tickets they would be unable to use because of his illness, so he wanted to give them to friends. However, the tickets were only in electronic form on J.D.’s work laptop. Hope said, “J.D., just give me your password, and I’ll go home and print them out so we can give them away.” His response? “I can’t give you my password – that’s against company policy, but bring the laptop here to the hospital, and I can log in myself and forward you the tickets.”

Today is a sad day for me and for all 300 of us at Return Path as we lose a friend and colleague for the first time in our company’s history. And of course today is a sad day for the anti-abuse community that J.D. has been such an integral part of for his entire career. But more than that, today is a sad day for the internet and for the billions of humans that use it – sadder in some ways because they don’t even know that one of the people integrally involved in keeping it safe for them has left us.

I will post again as soon as I can with details of the memorial service for J.D. as well as details of where to make some kind of donation or contribution in his honor. I will post again as soon as I can with details of the memorial service for J.D. as well as details of where to make some kind of donation or contribution in his honor. In the meantime, I encourage J.D.’s many friends and colleagues around the world to post their memories to this memorial site.

Protecting the Inbox

We only have one out of our 13 core values at Return Path that’s closely related to the content of our business. But as with the other values, it says a lot about who we are and how we approach the work that we do. That value is:

We believe inboxes should only contain messages that are relevant, trusted, and safe

We occupy a pretty unique space in the email universe – we serve senders and receiving networks, but aren’t directly in the mail stream and therefore don’t directly touch end users.  So much of our business, from our Certification or whitelisting business, to our new Domain Assurance anti-spoofing/anti-phishing business, revolves around building trust in our company that this core value is critical to our survival. If we ran afoul of this core value — and it comes up all the time — we’d be dead in the water.

Here’s how it comes up:  because our Certification program is the closest thing on the Internet to guaranteed universal email delivery, every spammer and grey mailer in the world wants to be on it. We don’t just SELL access to our whitelist. Even once a prospect has been converted to an under-contract client, they have to APPLY for Certification.

It’s not easy to GET Certified. You have to be a really, really good mailer. Not just a real entity. Not just a big spender. You have to send mail that is safe and secure and wanted by end users. We have a variety of qualitative and quantitative methods we can use to determine this, and the requirements for Certified status and therefore Inbox placement are carefully negotiated and regularly reviewed with our ISP partners. Once a client is Certified, it’s not easy to STAY Certified because we are monitoring all of those same standards in real time, 24×7. Clients who go out of bounds get immediately suspended from the program until they are back in bounds. Clients who go out of bounds enough, we just terminate from the program for good.

By the way, just because we won’t certify a particular client isn’t an indictment that they are a spammer. It just means that their email programs still need to be subject to all the state of the art filtering and security measures that our ISPs have in their arsenal.  And most of the time, it doesn’t mean that we won’t work with them to improve the quality of their mail programs so their messages are relevant, trusted, and safe.

But at the end of the day, we’d rather not take money from questionable clients than compromise the quality of our Certification program. That’s a hard decision to make sometimes.  I’ve had to call large clients who are poor mailers and fire them more than once, and I’ve had to take angry phone calls and threatened legal action from clients or prospects many times over the years.  But for us, respect for end users and inbox security are deeply baked into the culture.  It’s why we developed the Domain Assurance product and launched it earlier this year.  And that’s why it’s one of our core values.

Learning to Embrace Sizzle

One phrase I’ve heard a lot over the years is about “Selling the sizzle, not the steak.”  It suggests that in the world of marketing or product design, there is a divergence between elements of substance and what I call bright shiny objects, and that sometimes it’s the bright shiny objects that really move the needle on customer adoption.

At Return Path, we have always been about the steak and NOT the sizzle.  We’re incredibly fact-based and solution-oriented as a culture.  In fact, I can think of a lot of examples where we have turned our nose up at the sizzle over the years because it doesn’t contribute to core product functionality or might be a little off-point in terms of messaging.  How could we possibly spend money (or worse – our precious development resources) on something that doesn’t solve client problems?

Well, it turns out that if you’re trying to actually sell your product to customers of all shapes and sizes, sizzle counts for a lot in the grand scheme of things.  There are two different kinds of sizzle in my mind, product and marketing — and we are thinking about them differently.

Investing in product sizzle (e.g., functionality that doesn’t actually do much for clients but which sells well, or which they ask for in the sales process) is quite frustrating since (a) it by definition doesn’t create a lot of value for clients, and (b) it comes at the expense of building functionality that DOES create a lot of value.  The way we’re getting our heads around this seemingly irrational construct is to just think of these investments as marketing investments, even though they’re being made in the form of engineering time.  I suppose we could even budget them as such.

Marketing sizzle is in some ways easier to wrap our heads around, and in some ways tougher.  It’s easier because, well, it doesn’t cost much to message sizzle — it’s just using marketing as a way of convincing customers to buy the whole solution, knowing the ROI may come from the steak even as the PO is coming from the sizzle.  But it’s tough for us as well not to position the ROI front and center.  As our Marketing Department gets bigger, better, and more seasoned, we are finding this easier to come by, and more rooted in rational thought or analysis.

In the last year or two, we have done a better job of learning to embrace sizzle, and I expect we’ll continue to do that as we get larger and place a greater emphasis on sales and marketing — part of my larger theme of how we’ve built the business backwards.  Don’t most companies start with ONLY sizzle (vaporware) and then add the steak?

More Than 1/3 of Your Life

When I was a kid, so my parents tell me, I used to watch a lot of TV. For some reason, all those episodes of Gilligan’s Island and Dallas still have a place in my brain, right next to lyrics from 70s and 80s songs and movies. I also tend to remember TV commercials, which are even more useless (not that JR Ewing or Ferris Beuller had all that many valuable life lessons to impart).  Anyway, I remember some commercial for some local mattress company which started out with the booming voiceover, “You spend 1/3 of your life in bed — why not enjoy that time and be as comfortable as you can be?”

Well, we humans frequently spend MORE than 1/3 of our lives at work. Why shouldn’t we have that same philosophy about that time as the mattress salesman from 1970s professed for sleep?  Another one in my series of posts about Return Path’s 13 core values is this one:

We realize that people work to live, not live to work

There are probably a few other of our core values that I could write about with this same setup, but this one is probably the mother of them all.  I even wrote about it several years ago here.  Work is for most people the thing that finances the rest of their life — their hopes and dreams, their families’ well-being, their daily lives, and ultimately, their retirement. I think many people wouldn’t work, at least in most for-profit jobs as we know them, if they didn’t have to. And that’s where this value comes from.

How does this value play out?

First, we are respectful of people’s time in the daily thick of things.  We know that society has changed and that work and personal time bleed into each other much more regularly now than they used to.  As I’ve written about before in this series of posts, we have an “open” vacation policy that allows employees to take as much time off a they can, as long as they get their jobs done well. One of the real benefits of this, besides allowing for more or longer vacations, is that employees can take slices of time off, or can work from home, as life demands things of them like dentist appointments and parent-teacher conferences, without having to count the hours or minutes.

Second, an important part of our management training is to make sure that managers get to know their people as people.  This doesn’t mean being buddies or pals, though that happens from time to time and is fine. Understanding everything that makes a person tick, from their hobbies, to their kids, to their pets or pet causes, really helps a manager more effectively manage an employee as well as develop them. And as Steven Covey says, it’s important to “sharpen the saw,” which a good manager can help an employee do ONLY if they are in tune to some extent at a personal or non-work level.

Finally, our sabbatical policy — beyond our fairly generous and flexible vacation policy — ensures that every handful of years, employees really can go off and enjoy life. We’ve had employees buy around-the-world plane tickets and show up at JFK with a backpack. We’ve had people take their families off for a month in an exotic tropical destination. We even had one employee spend a sabbatical in a coffee shop learning how to write code (names masked to protect the innocent).

The challenge with this value is that not everyone treats the flexibility and freedom with the same level of respect, and occasionally we do have to remind someone that flexibility and freedom don’t mean that work can be left undone or delayed.  We believe that by providing the flexibility, people will work even harder, and certainly more efficiently, to still go above and beyond in terms of high performance execution.

In my CEO fantasty world, I’d like to think that given the choice, most of our employees would still come to work at Return Path if they didn’t have to for financial reasons, but I’m not that naive. Hopefully by setting the tone that we understand people work to live and not vice versa, we are allowing people to enjoy life as much as possible, even in the 1/3+ of it that’s spent working.

Outrunning the Bear

Did you ever hear the joke about outrunning the bear?  It goes something like this:

Two friends are in the woods, having a picnic.  They spot a bear running at them.  One friend gets up and starts running away from the bear.  The other friend opens his backpack, takes out his running shoes, changes out of his hiking boots, and starts stretching.

“Are you crazy?” the first friend shouts, looking over his shoulder as the bear closes in on his friend.  “You can’t outrun a bear!”

“I don’t have to outrun the bear,” said the second friend.  “I only have to outrun you.”

Sometimes, it’s easy to get caught up in doing something absolutely well as opposed to relatively well.  We were in a situation once with a competitor where our mantra was to win all the available customers for a particular product.  Then we realized one day — we didn’t have to win all of the customers that minute, or even that year.  All we had to do was win every account that the competitor was going after to win the battle at hand.  Once the battle at hand was won, it was then time to go back and figure out how to win the war.

Beyond Policy

Policies are an important part of managing employees. Similarly, contracts are an important part of running the commercial side of the business.  But it’s impossible to legislate every potential down-the-road situation ahead of time. That’s why one of the 13 core values at Return Path is

We believe in doing the right thing

I’ll admit that more than most of our values, this one sounds like Motherhood and Apple pie. Who doesn’t want to do the right thing?  The reason this value is an important part of our culture is that when we are in a tough situation, we stop and ask ourselves the most basic, yet thought provoking question — what’s the right thing to do here?

• When you fire an employee immediately before a major block of stock options vest, what’s the right thing to do?  Vest the options
• When you have a client who for some reason can no longer use your product or service or legitimately can’t pay their bill, what’s the right thing to do?  Let them out of their agreement, or at least let them suspend their agreement, even if it’s a long term contract
• When you make a payroll mistake and the employee doesn’t notice it but you discover it after the fact, what’s the right thing to do?  Let the employee know…and make them whole (the reverse is true of course as well, in cases where employees are the beneficiaries of an unnoticed payroll error – the right thing is to let the company know and make the company whole)
• When you have a choice of a car service (price equal) that runs only hybrid cars or more luxurious gas guzzlers for your routine trips to the airport, what’s the right thing to do?  Go green, baby!
• When you make a mistake and a client is adversely impacted but doesn’t notice it, what’s the right thing to do?  Fess up, quickly and thoroughly

I’m sure we don’t always get the tough calls right. That’s part of being a community of humans with emotions and faults. But we know that our reputation as a business goes well beyond following our policies and contracts and try to do the right thing as circumstances dictate.