Counter Cliche:  Who’s The Dog in this Scenario?

Fred’s VC cliche of the week is a good one — “If you lie down with dogs, you’ll come up with fleas.” His point is a good and simple one, that VCs shouldn’t take people risks in deals and shouldn’t try to back management teams they have serious concerns about (ethical or otherwise) in the hopes of trying to change the team or change management.

The obvious counter cliche is that entrepreneurs run that same risk in accepting capital from less-than-savory venture investors.  An ethically-challenged investor can wreak havoc on a young company, potentially tying the company up with peripheral legal problems or even damaging the company’s attempts at raising future rounds of capital.  So, VCs can be the dog in the scenario as well.

But I think there’s a broader counter cliche here, which is that one’s reputation in business is always tied, to some extent, to the company one keeps.  This applies to investors, and also to clients, vendors, and partners.  The appearance of a connection to an unsavory character, even if it’s just an appearance, and even if “unsavory” is in the grey area instead of black-and-white, is almost as problematic as a real connection.

Our business at Return Path is a good illustration of this principle, as is the case with many companies in email marketing, since email marketing has some very visible bad guys (spammers), good guys (think eBay and Expedia), and lots of companies that operate in shades of grey in between.  One of our lines of business, Delivery Assurance Solutions (email deliverability), is particularly critical in terms of us having a great reputation in the industry, since we work on behalf of email marketers to get their mail accepted (not blocked/filtered) at major ISPs.  No matter how you cut it, this business invariably involves making some judgment calls from time to time on who’s a “good guy” vs. a “bad guy” in the email marketing world.

We try to be as clear as possible with our prospects and clients about what kinds of behavior we wil or will not accept from clients, since our reputation in this business is everything to us.  We won’t, for example, help a client with ISP relations or monitoring tools if they don’t sign reps and warrantees in our contract about their email practices that go well beyond CAN-SPAM in terms of compliance with industry best practices.  We can’t accept clients into the Bonded Sender whitelist program unless they jump through all kinds of hoops with our third-party watchdog partner, TRUSTe.  And as painful as it is from a revenue perspective, we do fire clients periodically who we discover to be either not in compliance with their reps and warrantees to us, or who we discover to have a particularly poor reputation in the industry.  All of these things are designed to make sure we stay flea-free.

One area that’s particularly tricky for us is what to do with a “bad guy” who comes to us asking for help to become a “good guy.”  While it’s hard to be completely objective about this type of situation, we have an emerging policy around it.  We WILL work with clients who the world perceives as a “bad guy,” but only on a consulting basis to teach them email best practices and how to become a “good guy” (one of my Board members, Scott Weiss from IronPort Systems, calls this Return Path’s 12-step program).  If those clients take our advice and make meaningful and measurable changes to their email programs, we will continue to work with them and will slowly allow them to use our other services over time.  If those clients resist our advice or are too slow to change their ways, we will stop working with them immediately.

I guess the point of the counter cliche is that sometimes it’s hard to tell, as Sally told Harry in the movie, who is supposed to be the dog in a particular scenario.

Counter Cliche:  Win The Peace

Fred’s VC cliche of the week this week is a good one, Hope for the Best and Prepare for the Worst.  It’s certainly true, as he says, for startups going through a financing, and in many other instances.  I may regret mixing business and politics here, but since Fred has done that before (with the same caveat), I’ll give it a shot as well.

As important as it is to prepare for the worst, entrepreneurs and politicians alike need to make sure they’re also planning to win the peace — in other words, planning for a successful outcome. 

How much happier would we be as a country at war right now if our administration had had a full plan in place for what to do after they toppled Saddam?  Similarly, CEOs need put some cycles against scenario planning for successful outcomes so they’re not caught flat footed when things go well.  How can lack of planning to win the peace come back to bite you?  Here are a few ways:

– You’re not staffed properly to support a big contract that comes in — and you have no pipeline of candidates or contractors to backfill

– You don’t have media buys lined up for an marketing campaign you want to run as soon as the financing closes

– You haven’t started an integration plan before a tenuous acquisition closes, so integration doesn’t happen quickly enough

There are certainly other examples as well, in war as in comapny-building, but what it all comes down to is the need to scenario plan for best cases as well as worst cases.  It’s all about avoiding costly lead times.

Counter Cliche:  I Know When I See One, Too

I haven’t written a counter to one of Fred’s VC Cliche’s of the Week for a while now, but today’s was too good to resist.  While I haven’t (and most entrepreneurs haven’t) worked with 200 VCs, I have seen, heard about, been one (sort of), and worked with enough of them to know enough to comment as follows:  as is the case with Fred and entrepreneurs, I’m not sure I can define what makes a great VC in one phrase, but I know one when I see one, and here are some of the characteristics they exhibit:

– Major pattern recognition — "I’ve seen this movie before, and I know how it ends…";
– Deep understanding of the market and/or customer set to add strategic value;
– Fundamental desire to be a product manager or marketing manager of your product, but also —
– Ability to stay out of the weeds with day-to-day details when the Board meeting ends;
– Always ready with a story or bon mot about other crazy investors or even crazier entrepreneurs to make you feel better about your own life;
– Complete transparency about the motives of his/her fellow GPs and LPs and ability/appetite for follow-on financings (and needless to say, no/limited blocking of transactions that are clearly in the company’s best interests but might run counter to his/her firm’s own short-term interests);
– Willingness to jump into a debate with the strongest of convictions, yet without 100% of the facts, since 100% of the facts are never available;
– Equal willingness to admit being wrong if a clear and compelling argument comes forth; and of course the most critical —
– No fear of yielding to Management when Management knows best!
– Note — note included — major rolodex (a nice to have, but not required)

The other part of the counter cliche is that I’m sure there are some great entrepreneurs who only exhibit a few of Fred’s list of traits…much as I’m sure there are some great VCs who only exhibit a few of my list above.

Book Short:  Just One Minute

What The One Minute Manager does for basic principles of management and goal setting, The One Minute Manager Meets the Monkey does for delegation.  Both are blessedly quick reads (the classic “airport” book), and Ken Blanchard really nails some of management’s most critical components with simplicity and grace.

I’m a fan of the One Minute Manager school, and it does work well for some of the basics, but it has its limitations in terms of how broadly it can be applied.  My colleague Whitney McNamara‘s words in an email to me a few months back say it all:

OMM has actually been useful.  I have to agree that it’s got a bit of a “Jonathan Livingston Seagull” mystical simplicity thing going, but as you say, simple is sometimes what works best.

It’s really strong in that the basic lessons are at root so simple that they’re easy to forget about day to day…having them articulated in a similarly simple way, so that they stick at the top of mind easily, is nice.

The other side of that is that it presents such a simplified, best-of-all-possible-worlds sort of scenario that I did sometimes find myself wanting to set fire to the OMM’s office building and scream “let’s see you deal with *this* in 60 seconds, buddy”…but on balance a pretty good experience. 🙂

In the end, it’s not that good management is easy — but it can be quick and relatively painless if done well and regularly.

Doing Well by Doing Good, Part IV

This series of posts has mostly been about things that people or companies do that help make the world a better place — sometimes when it’s their core mission, other times (here and here) when it becomes an important supporting role at the company.

Today’s post is different — it’s actually a Book Short as well of a new book that’s coming out later this fall called Green to Gold:  How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, published by Yale Press and written by Daniel Esty (a Yale professor and consultant), and a good friend of mine, Andrew Winston, a corporate sustainability consultant.

Green to Gold is a must-read for anyone who (a) holds a leadership position in business or is a business influencer, and (b) cares about the environment we live in.  Its subtitle really best describes the book, which is probably the first (or if not, certainly the best) documentation of successful corporate environmentalstrategy on the market.

It’s a little reminiscent to me of Collins Built to Last and Good to Great in that it is meticulously researched with a mix of company interviews/cooperation and empirical and investigative work.  It doesn’t have Collins “pairing” framework, but it doesn’t need to in order to make its point.

If you liked Al Gore’s movie, An Inconvenient Truth, this book will satisfy your thirst for information about what the heck the corporate world is doing or more important, can do, to do its part in not destroying our ecosystem.  If you didn’t like Gore’s movie or didn’t see it because you don’t like Al Gore or don’t think that many elements of the environmental movement are worthwhile, this book is an even more important read, as it brings the theoretical and scientific to the practical and treats sustainability as the corporate world must treat it in order to adopt it as a mainstream practice — as a driver of capitalistic profit and competitive advantage.

This is a really important work in terms of advancing the cause of corporate social responsibility as it applies to the environment.  Most important, it proves the axiom here that you can, in fact, Do Well by Doing Good.  If you’re interested, you can pre-order the book here.  Also, the authors are writing a companion blog which you can get to here.

Book Short:  You’d Never Run Your Business This Way…

I am an unabashed conservative, so you might wonder what I was doing reading  A Country That Works, by union chief Andy Stern, the President of SEIU (Service Workers International Union) this weekend.  Well, part of it is that my mother-in-law Carmen works for him.  Part was that he was quite inspiring during his recent appearance on the Colbert Report a week or two ago.  And part was that I always like reading about different points of view, especially with the current, somewhat dismal state of the Republican leadership in Washington.

The book was very short and a worthwhile read.  I may not agree with Stern on some of his illustrations of the problems — his statistical presentations were a bit apples-to-oranges at times — and some of his solutions, which were a bit high on the big-government-tax-and-spend side for me, but the book was very plain-speak, apolitical, and solution-oriented, all of which I found refreshing.

He certainly had at least one underlying premise about “labor as electricity ” (compete on something else other than forcing wages to go lower) that is making me think hard about my long-standing philosophical opposition to federally-mandated minimum wages.  His notion of the importance of a global labor movement to act as a check/balance on corporate globalization both make sense.  Actually, now that I think about it, those two things put together start working well as one plank in a solution to global poverty.

But the best part of the book was the fact that Stern is clear that, like his ideas or hate them,  he is at least proposing that we DEAL with them.  America is missing serious debate about some critical issues facing our society.  Anyone who doesn’t think we have serious problems facing our future around retirement savings, education, and health care is not facing reality.  The debate happening in Washington today is weak at best, and over-politicized.

The bottom line is that I think we’re in danger as a country of boiling the frog when it comes to some major structural issues in our society, and, most important to me, You’d Never Run Your Business This Way.  Any good entrepreneur knows that when danger lurks around the corner, you have to reinvent yourself, and we as a country aren’t doing that at this moment when we’d benefit from it greatly for the long term.  Stern displays that mix of optimism for the future and serious reality check today known as the Stockdale Paradox and revered by Jim Collins in his two books on corporate leadership, Good to Great and Built to Last.

My biggest criticism of the book was that it was too short.  It was basically 1/3 Andy’s story, 1/3 SEIU’s story, and 1/3 labor’s story — and it could have been at least twice as long and gone into more detail on Stern’s points, especially in the last chapter where he starts spelling out his plan to get America back on track.  But presumably when Stern runs for national office or gets a cabinet appointment someday (no inside knowledge here, but the book certainly reads that way), he’ll flesh things out a bit!

Humbled at TED

I’m at my first TED Conference this week, and while I’ve watched countless other bloggers around me pounding out post after post summarizing different presentations (which I won’t do — feel free to see the site for official stuff), I’ve been struggling to find something to write about.  Then it hit me today.  I kind of feel at this conference the way I did when I started college.  Totally humbled.

I was #2 in my class in high school.  Straight As, a few A+s thrown in for good measure.  Then I got to Princeton and felt like an idiot.  I was convinced I was bottom quartile at best.  Everyone around me was either like me or better, smarter, more intellectual, more well rounded, taller, thinner, better looking, better teeth, the works.

This conference so far has been the same, and I mean that in a good way.  The sessions have varied from fascinating to boring to Bill Clinton cool to Paul Simon and Jill Sobule entertaining to completely over my head.  My fellow TED attendees include royalty, billionaires, captains of industry, Oscar winners, and dignitaries.  Add it all up, and there is a giant aura of accomplishment and intellectualism in the room that makes me feel like bottom quartile at best, maybe more like bottom decile.  That’s a great thing, though.  It’s always good to have a reminder of the larger global issues, picture, and opportunities, and a window into the people thinking about solving them.

Staying Power

I interview a lot of people.  We are hiring a ton at Return Path, and I am still able to interview all finalists for jobs, and frequently I interview multiple candidates if it’s a senior role.  I probably interviewed 60 people last year and will do at least that many this year.  I used to be surprised when a resume had an average job tenure of 2 years on it — now, the job market is so fluid that I am surprised when I see a resume that only has one or two employers listed.

But even the dynamic of long-term employment, as rare as it is, has changed.  My good friend Christine, who was a pal in college and then worked with me at MovieFone for several years before I left to start Return Path, just announced that she’s finally leaving AOL — after almost 11 years.  Now that’s staying power.  But most likely the reason she was able to stay at MovieFone/AOL for over a decade is that she didn’t have one single job, and she didn’t even work her way up a single management chain in a single department.  She had positions in marketing, business development, finance, operations, planning, strategy.  Most were in the entertainment field, so they did have that common thread, and some evolved from others, but the roles themselves had very different dynamics, skills required, spans of control, and bosses.

That’s the new reality of long-term employment with knowledge workers.  If you want to keep the best people engaged and happy, you have to constantly let them grow, learn, and try new things out or run the risk that some other company will step in with a shiny new job for them to sink their teeth into.  Congratulations, Christine, on such a great run at AOL — it’s certainly my goal here to keep our best people for a decade or more!

The Boomerang Club, or How to Quit Your Job, Part II

My post last week on How to Quit Your Job has generated about two dozen comments as well as a really lengthy thread on Y Combinator’s Hacker News.  My various replies to comments are worth summarizing here – this is a reprint of my comment on Hacker News:

First, my post was not intended to be general advice to employees of all companies on how to handle a situation where they’re starting to look for jobs.  Of course, many environments would not respond well to that approach.  My point was just that that’s how we encourage employees to handle the situation at Return Path, and we have created a safe environment to do so.  By the way, it doesn’t happen here 100% of the time either, by any stretch of the imagination.  But I wish it did.  When it happens, it’s better for everyone — the company as well as the employee, who either (a) ends up staying because we resolve some issue we weren’t aware of, or (b) has a less stressful and more graceful transition out.

Second, the way we run our business is around a bit of a social contract — that is to say, a two-way street.  And just as we ask employees to start a dialog with us when they are thinking of leaving, we absolutely, 100% of the time, are open and transparent with employees when they are in danger of being fired (other than the occasional urgent “for cause” situation).  We give people ample opportunity to correct performance and even fit issues.  In terms of someone’s question below about lay-offs, we fortunately haven’t had to do those since 2001, but if I recall, even then, we were extremely transparent about our financial position and that we might need to cut jobs in 30 days.

But I wanted to take this post to emphasize a related, second point.  If it’s a given that you are going to quit your job, then HOW you quit your job becomes super important.  And this is general advice, not something specific to Return Path.  Even if you’re unhappy – even if you feel totally wronged or burned in some way – there is never a good reason to burn bridges on the way out the door.  In fact, the opposite is what I would consider best practice:  make the transition as easy as possible for your company.

Document your job really well, including specifics of all open projects.  Work with your manager and teammates to hand off all responsibilities.  Be frank and constructive in your exit interview.  Make the extra effort to leave things in good working order.

We have a long history of hiring back former employees here.  We proudly call it The Boomerang Club, and there have been a dozen or so members over the years.  We try to make it easy to come back if you leave.  First, we celebrate the return of a former employee pretty widely, and we obviously modify our usual extensive interview process.  If you come back in less than a year, we pretend that you never left in terms of giving you credit for continuous service.  If your gap is more than a year, we don’t give you credit for the time you were gone, but we do give you full credit for the time you’d been here before you left.

But you can’t really be a member of The Boomerang Club if you leave your job in the wrong way.  HOW you do that says a lot about you, and everyone at your company will take note and remember it.

The 90-Day Reverse Review

Like a lot of companies, Return Path does a 90-day review on all new employees to make sure they’re performing well, on track, and a good fit.  Sometimes those reviews are one-way from the manager, sometimes they are 360s.

But we have also done something for years now called the 90-Day Reverse Review, which is equally valuable.  Around the same 90-day mark, and unrelated to the regular review process, every new employee gets 30 minutes with a member of the Executive Committee (my direct reports, or me if the person is reporting to someone on my team) where the employee has a chance to give US feedback on how WE are doing.

These meetings are meant to be pretty informal, though the exec running the meeting takes notes and circulates them afterwards.  We have a series of questions we typically ask, and we send them out ahead of time so the employee can prepare.  They are things like:

-Was this a good career move?  Are you happy you’re here?

-How was your onboarding experience?

-How do you explain your job to people outside the company?

-What is the company’s mission, and how does your role contribute to it?

-How do you like your manager?  Your team?

-Do you feel connected to the company?  How is the company’s information flow?

-What has been your proudest moment/accomplishment so far?

-What do you like best about the company?

-If you could wave a wand and change something here, what would it be?

We do these for a few reasons:

-At the 90-day mark, new employees know enough about the company to give good input, and they are still fresh enough to see the company through the lens of other places they’ve worked

-These are a great opportunity for executives to have a “Moment of Truth” with new employees

-They give employees a chance to productively reflect on their time so far and potentially learn something or make some course correction coming out of it

-We always learn things, large or small, that are helpful for us as a management team, whether something needs to be modified with our Onboarding program, or whether we have a problem with a manager or a team or a process, or whether there’s something great we can steal from an employee’s past experiences

This is a great part of our Operating System at Return Path!

Lean In, Part II

My post about Sheryl Sandberg’s Lean In a couple months ago created some great dialog internally at Return Path.  It also yielded a personal email from Sheryl the day after it went up encouraging me to continue “talking about it,” as the book says, especially as a male leader.  Along those lines, since I wrote that initial post, we’ve had a few things happen here that are relevant to comment on, so here goes.

We partnered  with the National Center for Women & IT to provide training to our entire organization on unconscious bias.  We had almost 90% of the organization attend an interactive 90 minute training session to explore how these biases work and how to discuss these issues with others.   The goals were to identify what unconscious bias is and how it affects the workplace, identify ways to address these barriers and foster innovation, and provide practice tools for reducing unconscious biases.   While the topic of unconscious bias in the workplace isn’t only about gender, that’s one major vector of discussion.  We had great feedback from across the organization that people value this type of dialog and training.  It’s now going to be incorporated into our onboarding program for new employees.

Second, as I committed to in my original post, we ran a thorough gender-based comp study.  As I suspected, we don’t have a real issue with men being paid more than women for doing the same job, or with men and women being promoted at different rates.    That’s the good news.  However, the study and the conversations that we had around it yielded two other interesting conclusions.  One is that that we have fewer women in senior positions than men, though not too far off our overall male:female ratio of 60:40.  On our Board, we have no women.  On our Executive Committee, we have 1 of 10 (more on this below).  On our Operating Committee, we have 8 of 25.  Of all Managers at the company, we have 32 of 88.  So women skew to more junior roles.

The other is that while we do a good job on compensation equity for the same position, it takes a lot of deliberate back and forth to get to that place.  In other words, if all we did was rely on people’s starting salaries, their performance review data, and our standard raise percentages, we would have some level of gender-based inequality.  Digging deeper into this, it’s all about the starting point.  Since we have far more junior/entry level women than men, the compensation curve for women ends up needing to be steeper than that of men in order to level things out.  So we get to the right place, but it takes work and unconventional thinking.

Finally, I had an enlightening process of recruiting two new senior executives to join the business in the past couple of months.   I knew I wanted to try and diversify my executive team, which was 25% female, so I made a deliberate effort to focus on hiring senior women into both positions.  I intended to hire the best candidate, and knew I’d only see male candidates unless I intentionally sourced female candidates.  For both positions, sourcing with an emphasis on women was VERY DIFFICULT, as the candidate pools are very lopsided in favor of men for all the reasons Sheryl noted in her book.  But in both cases, great female candidates made it through as finalists, and the first candidate to whom I offered each job was female – both superbly qualified.  In both cases, for different reasons I can’t go into here, the candidates didn’t end up making it across the finish line.  And then in both cases, when we opened up the search for a second round, the rest of the candidate pool was male, and I ended up hiring men into both roles.  Now my resulting exec team is even more heavily male, which was the opposite of my intention.  It’s very frustrating, and it leaves us with more work to do on the women-in-leadership topic, for sure.

So…some positives and some challenges the last few months on this topic at Return Path.  I’ll post more as relevant things develop or occur.  We are going to be doing some real thinking, and probably some program development, around this important topic.