Scaling Me

Two things have come up over the last couple years for me that are frustrations for me as a CEO of a high growth company.  These are both people related — an area that’s always been the cornerstone of my leadership patterns.  That probably makes them even more frustrating.

Frustration 1:  Not knowing if I can completely trust the feedback I get from deep in the organization.  I’ve always relied on direct interactions with junior staff and personal observation and data collection in order to get a feel for what’s going on.  But a couple times lately, people had been admonishing me (for the first time) when I’ve relayed feedback with comments like, “of course you heard that — you’re the CEO.”

So now the paranoid Matt kicks in a bit.  Can I actually trust the feedback I’m getting?  I think I can.  I think I’m a good judge of character and am able to read between the lines and filter comments and input and responses to questions I ask.  But maybe this gets harder as the organization grows and as personal connections to me are necessarily fewer and farther between.

Frustration 2:  Needing to be increasingly careful with what I say and how I say it.  This comes up in two different ways.  First, I want to make sure that while I’m still providing as transparent leadership as I can, that I’m not saying something that’s going to freak out a more junior staff member because they’re missing context or might misinterpret what I’m saying.  Ok, this one I can manage.

But the tougher angle on this is having unintended impact on people.  Throwing out a casual idea in a conversation with someone in the company can easily lead to a chain reaction of “Matt said” and “I need to redo my goals” conversations that aren’t what I meant.  So I’ve done some work to formalize feedback and communication loops when I have skip-level check-ins, but it’s creating more process and thought overhead for me than I’m used to.

Nothing is bad here – just signs of a growing organization – but some definite changes in how I need to behave in order to keep being a strong and successful leader.

The Best Laid Plans, Part I

One of my readers asked me if I have a formula that I use to develop strategic plans.  While every year and every situation is different, I do have a general outline that I’ve followed that has been pretty successful over the years at Return Path.  There are three phases — input, analysis, and output.  I’ll break this up into three postings over the next three weeks.

The Input Phase goes something like this:

Conduct stakeholder interviews with a few top clients, resellers, suppliers; Board of directors; and junior staff roundtables.  Formal interviews set up in advance, with questions given ahead.  Goal for customers: find out their view of the business today, how we’re serving them, what they’d like to see us do differently, what other products we could provide them.  Goal for Board/staff: get their general take on the business and the market, current and future.

Conduct non-stakeholder interviews with a few industry experts who know the company at least a little bit.  Goal: learn what they think about how we were doing today…and what they would do if they were CEO to grow the business in the future.

Re-skim a handful of classic business books and articles.  Perennial favorite include Good to Great, Contrarian Thinking, and Crossing the Chasm.

Hold a solo visioning exercise.  Take a day off, wander around Central Park.  No phone, no email.  Nothing but thinking about business, your career, where you want everything to head from a high level.

Hold senior staff brainstorming.  Two-day off-site strategy session with senior team and maybe Board.

Next up:  the Analysis Phase.

Taking Stock

Every year around this time, I take a few minutes to reflect on how the business is doing, on my goals and development plans, and on what I want to accomplish in the coming year.  Although most of that work is focused on how to move the business forward, I also make sure to take stock of my own career trajectory.  I always ask myself three questions when I do this:

1. Am I having fun at work?
2. Am I learning and growing as a professional?
3. Is my work financially rewarding enough, either in the short term or in the long term?

Of course, I always shoot for 3 YES responses.  Then I know my career is on track.  But as long as I get 2 YESses, then I feel like I’m in good shape, and I know which one to work on in the coming year.  I’m not sure I’ve ever had a situation in the dozen years of running Return Path where I’ve had 0 or 1 YESses.  If I did, I’d probably spend more time thinking about whether I was still in the right job for me.

I think these three questions can work for anyone, not just a CEO.  Hopefully everyone takes the time to take stock like this at least once a year.  It’s healthy for everyone’s career development.

Book Short:  Awesome Title, So-So Book

Strategy and the Fat Smoker (book, Kindle), by David Maister, was a book that had me completely riveted in the first few chapters, then completely lost me for the rest.  That was a shame.  It might be worth reading it just for the beginning, though I’m not sure I can wholeheartedly recommend the purchase just for that.

The concept (as well as the title) is fantastic.  As the author says in the first words of the introduction:

We often (or even usually) know what we should be doing in both personal and professional life.  We also know why we should be doing it and (often) how to do it.  Figuring all that out is not too difficult.  What is very hard is actually doing what you know to be good for you in the long-run, in spite of short-run temptations.  The same is true for organizations.

The diagnosis is clear, which is as true for organizations as it is for fat people, smokers, fat smokers, etc.  The hard work (pain) is near-term, and the rewards (gain) are off in the future, without an obvious or visible correlation.  As someone who has had major up and down swings in weight for decades, I totally relate to this.

But the concept that

the necessary outcome of strategic planning is not analytical insight but resolve,

while accurate, is the equivalent of an entire book dedicated to the principle of “oh just shut up and do it already.”  The closest the author comes to answering the critical question of how to get “it” done is when he says

A large part of really bringing about strategic change is designing some new action or new system that visibly, inescapably, and irreversibly commits top management to the strategy.

Right.  That’s the same thing as saying that in order to lose weight, not only do you need to go on a diet and weigh yourself once in a while, but you need to make some major public declaration and have other people help hold you accountable, if by no other means than causing you to be embarrassed if you fail in your quest.

So all that is true, but unfortunately, the last 80% of the book, while peppered with moderately useful insights on management and leadership, felt largely divorced from the topic.  It all just left me wanting inspirational stories of organizations doing the equivalent of losing weight and quitting smoking before their heart attacks, frameworks of how to get there, and the like.  But those were almost nonexistent.  Maybe Strategy and the Fat Smoker works really well for consulting firms – that’s where a lot of the examples came from.  I find frequently that books written by consultants are fitting for that industry but harder to extrapolate from there to any business.

There have been many postings about Microsoft’s recent announcement to use Ironport’s Bonded Sender Program as one of its many tools to fight spam and reduce false positives. I won’t belabor them here, but there are three common misconceptions I’m reading on the web and in blogs that I thought I’d point out and try to clarify.

Misconception #1: Bonded Sender is a Microsoft product, and Microsoft will profit from it. Why it’s not true: Bonded Sender is operated by Ironport, Inc., a completely separate company from Microsoft. Bonded Sender and its cousin, Sender Base, are used by over 20,000 domains. Microsoft is just the latest, and highest profile, user. I don’t believe that Microsoft is making any money from their use of Bonded Sender, but at a minimum, it’s not their product.

Misconception #2: With Bonded Sender, spammers can now buy their way into your inbox. Why it’s not true: While the premise behind Bonded Sender is that commercial emailers should put their money where their mouth is and have a financial penalty associated with spam complaints, that doesn’t mean any old mailer can join the program and pay to play. In fact, senders have to quality for the program by undergoing a fairly rigorous application process that is overseen by TrustE. If anyone doubts this, have a look at the application’s “email standards” section. I know a bunch of legitimate mailers who wouldn’t pass this — let alone spammers.

Misconception #3: Bonded Sender won’t do anything to stop the spam problem. Why it’s not true: Sure, it won’t stop it tomorrow. Nothing will. And it may not be the exact right approach to solving the problem, either. But starting to quantify and publicize mailers’ reputations, and starting to remove the economic free ride associated with spam, are important steps in the war on spam. Bonded Sender will inevitably change over time as the program gets market tested, but let’s give credit where credit is due for a good start.

Scaling the Team

(This post was requested by my long-time Board member Fred Wilson and is also running concurrently on his blog today.  I’ll be back with the third and fourth installments of “The Best Laid Plans” next Thursday and the following Thursday)

When Return Path reached 100 employees a few years back, I had a dinner with my Board one night at which they basically told me, “Management teams never scale intact as you grow the business.  Someone always breaks.”  I’m sure they were right based on their own experience; I, of course, took this as a challenge.  And ever since then, my senior management team and I have become obsessed with scaling ourselves as managers.  So far, so good.  We are over 300 employees now and rapidly headed to 400 in the coming year, and the core senior management team is still in place and doing well.  Below are five reasons why that’s the case.

1. We appreciate the criticality of excellent management and recognize that it is a completely different skill set from everything else we have learned in our careers.  This is like Step 1 in a typical “12-step program.”  First, admit you have a problem.  If you put together (a) management is important, (b) management is a different skill set, and (c) you might not be great at it, with the standard (d) you are an overachiever who likes to excel in everything, then you are setting the stage for yourself to learn and work hard at improving at management as a practice, which is the next item on the list.
2. We consistently work at improving our management skills.  We have a strong culture of 360 feedback, development plans, coaching, and post mortems on major incidents, both as individuals and as a senior team.  Most of us have engaged on and off over the years with an executive coach, for the most part Marc Maltz from Triad Consulting.  In fact, the team holds each other accountable for individual performance against our development plans at our quarterly offsites.  But learning on the inside is only part of the process.
3. We learn from the successes and failures of others whenever possible.  My team regularly engages as individuals in rigorous external benchmarking to understand how peers at other companies – preferably ones either like us or larger – operate.  We methodically pick benchmarking candidates.  We ask for their time and get on their calendars.  We share knowledge and best practices back with them.  We pay this forward to smaller companies when they ask us for help.  And we incorporate the relevant learnings back into our own day to day work.
4. We build the strongest possible second-level management bench we can to make sure we have a broad base of leadership and management in the company that complements our own skills.  A while back I wrote about the Peter Principle, Applied to Management that it’s quite easy to accumulate mediocre managers over the years because you feel like you have to promote your top performers into roles that are viewed as higher profile, are probably higher comp – and for which they may be completely unprepared and unsuited.  Angela Baldonero, my SVP People, and I have done a lot here to ensure that we are preparing people for management and leadership roles, and pushing them as much as we push ourselves.  We have developed and executed comprehensive Management Training and Leadership Development programs in conjunction with Mark Frein at Refinery Leadership Partners.  Make no mistake about it – this is a huge investment of time and money.  But it’s well worth it.  Training someone who knows your business well and knows his job well how to be a great manager is worth 100x the expense of the training relative to having an employee blow up and needing to replace them from the outside.
5. We are hawkish about hiring in from the outside.  Sometimes you have to bolster your team, or your second-level team.  Expanding companies require more executives and managers, even if everyone on the team is scaling well.  But there are significant perils with hiring in from the outside, which I’ve written about twice with the same metaphor (sometimes I forget what I have posted in the past) – Like an Organ Transplant and Rejected by the Body.  You get the idea.  Your culture is important.  Your people are important.  New managers at any level instantly become stewards of both.  If they are failing as managers, then they need to leave.  Now.

I’m sure there are other things we do to scale ourselves as a management team – and more than that, I’m sure there are many things we could and should be doing but aren’t.  But so far, these things have been the mainstays of happily (they would agree) proving our Board wrong and remaining intact as a team as the business grows.

Business Week just ran an interesting article entitled “I’m a Bad Boss? Blame My Dad,” which unfortunately I can’t link to because Business Week online is for subscribers only. The premise of the article is that our past is always with us…that the patterns of behavior established in our home environments as children inexorably follow us to the workplace.

You may or may not agree with the premise — certainly, there is at least a little truth in it — but the article had another interesting statement:

CEOs often get hired for their skills, and fired for their personalities.

I’ve always felt that Boards and CEOs need to view “personality,” that is to say, the softer skills, as equally important to the classic skills: strategy, analytics, finance, sales, and hard-nosed execution. People who can do all of those things well but who can’t inspire others, show empathy, balance self-confidence with humility, communicate properly and clearly, and operate with a high degree of integrity, will fail as a CEO in the long term. I’m not sure how Boards and hiring committees can adequately screen for those characteristics in advance, but they certainly should!

And for the record, if I’m a bad boss, I blame myself. If I’m a good boss, I am happy to give my parents credit.

How to Negotiate a Term Sheet with a VC, Part IV

Brad is making  new postings easy this week.  Here’s another good one from the VC’s perspective on liquidation preference.

With all the hype in the world of blogs in the past few months about RSS taking over the world, I’ve been getting myself up to speed on the space by meeting with some of the companies in it and by publishing my own blog here.

Two of the CEO’s I’ve met with in the RSS business are super smart and are doing everything they can to get the technology ready for prime time. What do I mean by that? I mean:

Critical Mass: 10 million or more end users using RSS, not just the tech/finance/journalist axis that dominates usership today. Hundreds of mainstream publishers and marketers using RSS, not just a handful of businesses and loads of individuals or small sites.

Ease of Use: Easy to get in the game as a consumer, easy to publish as a business. It is called Really Simple Syndication, after all, and it’s not even close yet, either in terms of technology or awareness.

Organization: Making sure RSS doesn’t quickly fall into the “information overload” bucket as the number of publishers proliferates and as the number of hours in people’s day remains constant.

Multi-Channel: Making it work with other channels the same way email has come to work with direct mail and banners have come to work with brand advertising.

Presentation: Giving publishers greater control over exactly how end users see feeds.

Revenue: Whether it’s ads in feeds, driving people to web sites, subscription revenue, or something else, the world has to figure out how RSS will contribute to the bottom line for it to be commercially viable.

Accountability: Good stats, reporting, and tracking. A pay-to-play function for marketers who use addressable media.

It will be interesting to see how this space unfolds, but my money’s on Dick Costolo of Feedburner, and Greg Reinacker of Newsgator, to be two of the pioneers who figure it all out.

A New VC in Town…Sort of

My friend and Board member Fred Wilson just announced last week the formation of his new VC firm, Union Square Ventures, along with his partner Brad Burnham.  Brad Feld beat me to the “way to go” posting, so while I chime in with my congratulations to Fred and Brad and assert to the rest of the VC/tech blogging world that this firm will succeed famously, I thought I’d comment on two other aspects of Union Square Ventures’ formation.

First, NYC has long been a haven for later stage private equity and buy-outs, and there’s a big need in the NYC area (even the DC-Boston corridor more broadly) for top tier early stage venture capital players.  While there are fewer core techonlogy companies in the area, there are an increasing number of application and service companies that are building great businesses in this part of the country, and there are not enough great VCs to keep up.  West coast VCs are often (but not always, as I’ve seen in my investors Brad from Mobius and Greg Sands from Sutter Hill) allergic to east coast deals, and sometimes it’s just good to have one of your main investors walking distance away.  Fred and Brad have the reputations, track records, and networks to at least partially fill this void.

Second, as Fred noted in a subsequent posting on Flatiron and its remaining portfolio companies (including Return Path), Fred and his former partners from JP Morgan are not abandoning their prior investments.  This speaks volumes about the kind of people they are and the commitment they have to their entrepreneurs.

I’m sure Union Square Ventures will be successful, and I’m glad I have the opportunity to see it up close.

How Many Thermometers Do You Need to Know the Turkey’s Done?

Full credit to my colleague Jack Abbot for using this awesome phrase in an Engineering Management meeting I observed recently. It’s a gem. Filed!  The context was around spending extra cycles creating more metrics that basically measure the same thing. And in theory, sure, you don’t want or need to do that, even if you do have a cool data visualization tool that encourages metric proliferation.

But as I was thinking about it a bit more, I think there are situations where you might want multiple thermometers to tell you about the done-ness of the turkey.

First, sometimes you learn something by measuring the same thing in multiple ways.  Triangulation can be a beautiful thing.  Not only does it work for satellites, but think of a situation where you have a metric that is really made up of multiple underlying metrics.  Net Promoter Score is a good example.  Aren’t you better off knowing the number of Promoters and Detractors as well as the Net?

Second, sometimes redundant metrics aren’t bad if there is a potential failure of one of them.  For critical systems metrics that are measured in automated ways, sometimes automation fails. The second thermometer could be thought of as a backup.  You can have an internal web performance monitoring system, but wouldn’t you feel better with Keynote or Gomez as well, just in case your internal system fails?

Finally, sometimes metrics move between “lagging” and “leading,” which are fundamentally different and useful for different purposes. For example, we talk about sales in a couple different ways here.  There are bookings, which are forward-looking, and there is recognized revenue, which is backwards looking.  They are both about revenue.  But looking only at recognized revenue tells you nothing about the health of new business.  And looking only at bookings tells you very little about the current and next quarter.

Jack, thanks for this gem of a phrase, and for the thinking it provoked!