The Good, The Board, and The Ugly, Part II

Much has been written of late on various VC and entrepreneur blogs on effective management of a Board of Directors, Board materials, running good Board meetings, and the like.  A couple years ago, I even wrote out a few tips for those things myself.

But here’s one critical ingredient of a good Board you won’t find in all those posts:  have fun!  This picture was from today’s Halloween Board meeting at Feedburner…as one of Dick’s colleagues labeled it, The Dawn of the Living Costolos.

Happy Halloween!

I’ve posted a lot over the years about feedback in all forms, but in particular how much I benefit from my 360 reviews and any form of “upward” feedback.  I’ve also posted about running a 360 process for/with your Board, modeled on Bill Campbell’s formula from Intuit.

I have a lot of institutional investors in our cap table at Return Path.  I was struck this week by two emails that landed in my inbox literally adjacent to each other.  One was from one of our institutional investors, sharing guidelines and timetables for doing CEO reviews across its portfolio.  The other was from one of our other institutional investors, and it invited me to participate in a feedback process to evaluate how well our investor performs for us as a Board member and strategic advisor.  It even had the Net Promoter Score question of would I recommend this investor to another entrepreneur!

The juxtaposition gave me a minute to reflect on the fact that over the 18 years of Return Path’s life, I’ve been asked to participate in feedback processes for Board members a few times, but not often.  Then I went to the thought that all of my reviews over the years have been self-initiated as well.  Just as it can be easy for a CEO to skip his or her review even when the rest of the company is going through a review cycle, it can be easy for investors to never even think about getting a review unless they get one internally at their firms.  I suspect many CEOs are reviewed by their Board, if not formally, then informally at every quarterly Board meeting.

It’s unfortunately a rare best practice for a venture capitalist or any other institutional investor to ask for CEO feedback.  I bet the ones who ask for it are probably the best ones in the first place, even though they probably still benefit from the feedback.  But regardless, it is good to set the tone for a portfolio that feedback is a gift, in all directions.

Like all CEOs and VCs, I’m a big believer in the power of pattern matching. I just wrote a whole blog post about the limits of pattern matching after hearing the quote above at a board meeting recently. But then a little alarm rang in the back of my head, and realized that I wrote about the value and limitations of pattern matching here years ago with an even better quote from my father-in-law:

When you hear hoof beats, it’s probably horses. But you never know when it might be a zebra.

So rather that rewrite that entire post, I thought I’d just add onto it a bit here with a current example in my head about executive recruiting and hiring executives. But then I realized I wrote that as well – the myth of the playbook. Think I’ve been blogging too long now, or what?

So let’s focus on these two angles instead: first, how do you know when you’re in a situation where You’ve Seen One, You’ve Seen Them All, or if you’re in a situation where You’ve Seen One, You’ve Seen One? And second, how can you protect yourself from a “seen one, seen one” situation when you are approaching the situation as “seen one, seen them all”?

Here are three ways to think about the decode – is this a pattern or is it a one off?

1. The list is long. It’s not actually Seen One… so much as it’s Seen X. The longer the list, the more likely you’re seeing a link in a chain instead of a one-off
2. The item is more everyday/less bespoke. Back to my example in the playbook post I referenced above, hiring a late-stage CFO is bespoke. Hiring an entry level collections person for your AR team is a lot more everyday
3. The item is more specialized. No two companies are exactly alike. No two SaaS companies are alike, but they’re more alike than two random companies. No two B2B SaaS companies are alike, but they’re even more alike than two SaaS companies. B2B SaaS companies with email marketing platforms. B2B SaaS companies with email marketing platforms serving SMBs. You get the idea

And here are a couple tactics to mitigate against calling a pattern where a pattern doesn’t exist:

1. Do a premortem (I wrote about this concept in this post) and ask yourself “If this turns out to be wrong, what are the possible reasons it was wrong?”
2. Build a very small bullet-point level mitigation plan against the top three reasons you come up with

There’s no guarantee that the sound you hear is horses and not zebras. But these indicators may help raise the odds that your pattern match is on point or protect against an unexpected herd of zebras.

One of my top 10 scaling tips for CEOs as they take a business from startup to scaleup keys in on communication patterns. As your company grows from 0-25 employees to a place where you no longer work hands-on with most of the team, which is really >25 but gets more and more true at every step beyond that, you need to rethink how you handle employee conversations in many ways. My tip sounds confusing, but let me break it down.

Spend less time talking. The less you know about the day to day details of everyone’s job and experience, the more time you need to spend learning and keeping in touch with those details from others. The only way to do that is by asking questions, listening to responses and watching body language, and then asking follow-up questions. As I mentioned here in Inquiry vs. Advocacy, you know what you have to say…what you don’t know is what the other person has to say! The more you listen and learn as your company scales, the more effective you can be at steering the ship.

And yet…Spend more time talking. This isn’t as contradictory as it sounds. What I mean by this is that the further away you are from the front lines and the smaller the percentage of the team who really know you and have casual interactions with you, the more time you need to spend repeating key messages – things like what the goal is, critical metrics and progress, how each team and person’s work rolls up to the big picture. I always appreciate the “rule of three” around things like this, which is simply that people need to hear the same message three times before they start to internalize it. What that means for you is that just as soon as you get tired of saying the same thing over and over in various groups internally…it’s finally starting to hit home, and you need to keep doing more of the same.

How and when you communicate with the company may also change – the mix and frequency of 1:1 meetings, small group meeting, large group meetings, and email/written communications will need to evolve. But that evolution of the “what” is secondary to the above principles of the “how.”

One of the CEOs I mentor asked me the other day asked me this question:

I need to start making my organization think differently – more like a startup that needs to scale and less like a project. People need to start doing more specific jobs and not swarm all over everything. How do I get people to “get” this without freaking out?

Every CEO faces dilemmas like this all the time.

One of my management mantras over the years has been, “You have to bring people along for the ride.” Fundamentally, that means two things. I’ll write about one of them here today and save the other for next week.

First, bringing people along for the ride means you have to involve the people in the organization in the origins and design of the change you’re seeking to drive.

Let’s face it. No one really likes change. But what people really don’t like is change being IMPOSED ON THEM, especially where THEY DON’T UNDERSTAND WHY.

Without being disingenuous, you as a leader can set the stage for others in your organization helping you with changes — even if you generally know the changes you want to drive. Bring people together. Talk about the challenges you see that are related to the solution you’re contemplating. Get people talking, brainstorming, grabbing post-its and whiteboard pens. Talk a little bit – bring in your perspective and help shape the discussion. But also listen closely and be open to people’s ideas and let those shape the outcome as well.

Then, bring people back for a second and third meeting to then react to some of your idea distillation and even straw man plans. You’ll find that process not only produces a better solution but also makes people comfortable with the solution, because you’ve added more transparency to the equation and brought people along for the ride. Nothing done in the vacuum of the CEO’s mind achieves this same level of impact.

More thoughts on this to come in some related posts over the next couple of weeks around some geeky sounding terms like The Ladder of Inference, Inquiry vs. Advocacy, and Double Loop Learning. Next week’s post will be about how to think about transitions and the way to lead people through them once you’ve involved them in creating the transition. Its link won’t be live until April 20, but it’s here for future reference.

I wrote a little bit about the experience of being a multi-time founder in this post where I talked about the value of things like a hand-picked team, hand-picked cap table, experience that drives efficient execution, and starting with a clean slate. The second lap around the track (and third, and fourth) is really different from the first lap.

Based on what we do at Bolster, and my role currently, I spend a lot of time meeting with CEOs of all sizes and stages and sectors of company, as they’re all clients or prospects or people I’m coaching. Lately, I’ve noticed a distinct set of work and behaviors and desires among CEOs who are multi-time founders and operators that is different from those same things in first-time founders. Not every single multi-time founder has every single one of these traits, but they all have a majority of them and form a pretty common pattern. I’ve noticed this with non-profit founders as well as for-profit ones.

• They have an Easier Time Recruiting team members and investors. That may sound obvious, but there are significant benefits to it. They also tend to have Much Cleaner Cap Tables, because they lived the horrors of a messy cap table when they exited their last company without thinking about that topic ahead of time!
  
• They have a Big Vision. Once you’ve had an exit, whether successful or not or somewhere in between, you don’t want to focus on something niche. You want to go all-in on a big problem.
  
• They are interested in creating Portfolio Effect. A number of repeat founders want to start multiple business at the same time, are actually doing it, or are creating some kind of studio model that creates multiple businesses. Once you have a big team, a track record with investors, and a field of deep expertise, it’s interesting to think about creating multiple related paths (and hedges) to success.
  
• They are driving to be Efficient in Execution and Find Leverage wherever they can. One multi-time founder I talked to a few weeks ago was bragging to me about how few people he has in his finance team. At Bolster, our objective is to build a big business on a small team, looking for opportunities to use our own network of fractional and project-based team members wherever possible.
  
• They are Impatient for Progress. While being mindful that good software takes time to build no matter how many engineers you hire, repeat founders tend to have fleshed out their vision a couple layers deep and are always eager to be 6 months ahead of where they are in terms of execution, which leads me to the next point, that…
  
• They are equally Impatient for Success (or Failure). More than just wanting to be 6 months ahead of where they are in seeing their vision come to life, they want to get to “an answer” as soon as possible. No one likes wasting time, but when you’re on your second or third company, you value your time differently. As a friend of mine says in a sales context, “The best answer you can get from a prospect is ‘yes’ – the second best answer you can get is a fast ‘no’.” The same logic applies to success in your nth startup. Succeed or Fail – you want to find out fast.
  
• They are Calm and Comfortable in Their Own Skin. At this stage in the game, repeat founders are more relaxed. They know their strengths and weaknesses and have no problem bringing in people to shore those things up. They know that if things don’t work out with this one, there’s more to life.
  
• They are stronger at Self Management. They are more efficient. They exercise more. They sleep more. They spend more time with family and friends. They work fewer hours.

Anyone else ever notice these traits, or others, in repeat founders?

I lived one of my favorite metaphors last week as we announced the closing of Bolster’s Series B financing and had our first post-round Board meeting, and I realized I’ve never blogged about it before: that raising rounds of financing is like having a good night at the blackjack table.

When I go to Vegas or AC — and admittedly I haven’t done that in several years — I usually start playing Blackjack at the $5 table. It’s lightweight entertainment, low stakes, good way to warm up and remind myself how to play. If I start winning and accumulating a bigger pile of chips, I move to the $10 table. Rinse and repeat, to the $25 table and the $50 table. I’m not sure I’ve ever been to a $100 table, and I assume there’s a somewhat tense and scary back room somewhere with higher stakes tables. As I progress through an evening, it’s more fun, but it’s also more stressful.

Raising successive rounds of financing has the same feel to it.

You’re playing the same game as you progress from Series A to Series B to Series C. You’re still CEO of your company. You may be playing with different strategies, more or less aggressive. But it feels different. It’s a little more stressful. Every bet is a higher percentage of your net worth, upside as well as downside. Expectations are higher, and external expectations are more noticeable.

What if blackjack isn’t going so well? If I am doing so-so, I just stay at the $2 table, and ultimately get bored with treading water. That’s probably the equivalent of running a company that’s just going sideways. I won’t go deep on extending the metaphor to a bad night of blackjack, but I’m sure it has a lot in common with down rounds and ultimately things like Chapter 11. Those loom large in lots of situations, too, but they’re not where my head is today!

(This is the first in a series of three posts on this topic.)

Harry Potter was lucky.  He had, in Albus Dumbledore, the ultimate wise elder, in his corner.  Someone who could teach him how to be a better human being (er, wizard), how to be more proficient with his wand and spells, how to think strategically and defeat the bad guys.

All of us would benefit from having an Albus Dumbledore in our lives.  But most of us don’t — and most of the people we’d call on to be that wise elder in our corner aren’t capable of the full range of advice and counsel that Dumbledore is. 

Why work with a Coach or a Mentor?  I’ll start this post with a quick argument in favor of CEO Coaches and Mentors (sometimes called Advisors).  Even as a 20-something first-time CEO years ago, I was deeply skeptical of the value of a Coach, but that was in 1999 or 2000 when coaches weren’t so commonplace.  Now that their value seems much more obvious, and there are so many amazing Mentors and Coaches available, I’m surprised by how many CEOs I speak to still seem skeptical about their value.  Just think — the world’s greatest athletes, the ones who get paid zillions of dollars because they are the best in the world at something, use MULTIPLE coaches DAILY to perfect their craft and keep them focused.  Why should Rafael Nadal or Serena Williams have a trainer and a coach, but not you?

I’ve benefited over the years from the advice of more people than I can ever count or thank.  But when it comes to being a CEO, I have leveraged the counsel of a CEO Coach or Mentor principally in three different areas:

1. Functional topics on the craft of being a CEO from the lofty “how to run a board meeting” to the nitty gritty details of “how to do a layoff”
2. Developmental/behavioral topics like “how I show up as a leader in the organization,” or “how to be a better listener”
3. Team Effectiveness topics like “how do I get the most out of my leadership team,” or “why doesn’t Person X trust Person Y and how does that impact team performance?”

In some unusual circumstances, you can find a person who does all three of these things for you and can scale as you and your company grow.  But for the most part, getting all three of these things requires engaging two different people, and maybe even more mentors.  

What’s the difference between a CEO Mentor and a CEO Coach?  Counsel on Item 1 above — what I would call CEO Mentorship — almost certainly requires someone to have been a CEO — preferably multiple times, or for a long period of time, or through multiple stages of company growth, or two or three of those qualifiers.  This is the kind of person who can literally teach you how to do CEO things.  These people are super busy, they won’t have open ended amounts of time for you, but you should expect sage wisdom and answers when you need them.  And you can have more than one of them at a time, or change them out as your company evolves and your needs change.

Counsel on items 2 and 3 — what I would call CEO Coaching — frequently come together in a professional who is and has been for a while, a coach.  The person might have had a significant career in business before becoming a coach but wasn’t necessarily a CEO.  The person probably has some kind of academic grounding, like a Master’s degree in Organizational Development or Industrial Psychology, or a Certificate in Coaching.  This is the kind of person who can do things for you and your team like facilitate meetings, run assessments like Myers-Briggs or DISC, and coach other leaders on your team.  This person is dedicated to helping you be the best leader, professional, and CEO that you can be and must be both empathetic and comfortable pushing you hard.  

Sometimes you get mentorship and coaching in the same person, but almost only with CEO Coaches who are also CEO Mentors by my definition above.

Five signs you need a CEO Mentor and/or Coach:

• You are playing ‘whack-a-mole’ — running from crisis to crisis in your organization and are not able to make time to think, be current with email, or make time for important things like hiring senior executives
• Your board is getting frustrated with you, your team and/or the lack of progress in the business
• The company isn’t scaling as fast as it should
• Your leadership team is not a cohesive team and you are in the middle of all decisions
• The company has high employee turnover and/or poor reviews on Glassdoor 

Do yourself and your company a favor and invest in a CEO Coach and Mentor(s). It’s an investment in accelerating your own and your company’s success. In later posts, I’ll talk about how to hire and best leverage both Coaches and Mentors. 

Next post in the series coming:  How to Select a CEO Mentor or CEO Coach

Fred Wilson wrote an iconic blog post years ago entitled What a CEO does. In it, he outlined three broad themes:

A CEO does only three things. Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires, and retains the very best talent for the company. Makes sure there is always enough cash in the bank.

I wrote a response in a post entitled What Does a CEO Do, Anyway?, in which I added some specificity to those three items and added three key behaviors of successful CEOs. I also added to Fred’s list when I wrote Startup CEO, CEOs have to build and lead a board of directors, CEOs have to manage themselves, and CEOs ultimately have to think about and execute exits.

But recently, as I’ve been coaching a few CEOs, I’ve answered the question differently, because the questions have been a little less about the broad themes and more about how to prioritize — how to know what NOT to do. So in addition to Fred’s wisdom and my other thoughts above, here’s the answer I’m giving CEOs these days:

• First, do what you MUST do. There are some things that are in your job description. Do them first. You have to run your board meeting. You have to pitch investors. You have to write performance reviews for your direct reports.
• Second, do what ONLY YOU can do. There are also some things that, while not in your job description, are things that CEOs and/or founders have special impact when they do. No one can call a team member who just lost a parent or spouse and offer support and sympathy like you can. No one can get on a plane and save a key customer from leaving you like you can. No one can congratulate a sales rep on a key win like you can.
• Third, do what you’re BEST IN CLASS at. Finally, there are things that may be in other people’s job descriptions, but where you’re the stronger executer. I remember reading years ago that Bill Gates, long after he even stopped being CEO of Microsoft and was Chairman, still got involved in some major technical architecture decisions and reviews. Whatever your superpower is, or whatever it was when you were in your pre-CEO jobs, there’s no reason not to jump in and help your team excel at (and ideally train/mentor them) whenever you can.

After that, you can fill in the rest of your time with other tasks. In the world of Covey’s big rocks, this is all the sand. All the other things that come by your desk or inbox that people ask of you. They are the least important. Hopefully this is another helpful lens on how CEOs should spend their time.

The 2×4

I took a Freshman Seminar in my first semester at Princeton in 1988 with a world-renowned professor of classical literature, Bob Hollander.  My good friend and next-door neighbor Peggy was in the seminar with me.  It was a small group — maybe a dozen of us — meeting for three hours each week for a roundtable with Professor Hollander, and then writing the occasional paper.  Peggy and I both thought we were pretty smart.  We had both been high school salutatorians from good private schools and had both gotten into Princeton, right?

Then the first paper came due, and we were both a bit cavalier about it.  We wrote them in full and delivered them on time, but we probably could have taken the exercise more seriously and upped our game.  This became evident when we got our grades back.  One of us got a C-, and the other got either a D or an F.  I can’t remember exactly, and I can’t remember which was which.  All I remember is that we were both stunned and furious.  So we dropped by to see Professor Hollander during his office hours, and he said the same thing to each of us:  “Matt, sometimes you need a 2×4 between the eyes.  This paper is adequate, but I can tell it’s not your best work, it’s decent for high school but not for college, and almost all the others in the class were much more thoughtful.”

Ouch.

Ever since then, Peggy and I have talked about the 2×4, and how it helped us snap out of our own reality and into a new one with a significantly higher bar for quality.  That phrase made it into Return Path‘s lexicon years ago, and it means an equivalent thing — sometimes we have to have hard conversations with employees about performance issues.  The hardest ones are with people who think they are doing really well, when in reality they’re failing or in danger of failing.  That disconnect requires a big wakeup call — the 2×4 between the eyes — before things spiral into a performance plan or a termination.

Delivering a 2×4 between the eyes to an employee can feel horrible.  But it’s the best gift you can give that employee if you want to shake them back onto a successful trajectory.

Last week, I wrote about surrounding yourself with the best and brightest.  Next in this series of posts  is all about Creating an environment of trust.  This is closely related to the blog post I wrote a while back in my series on Return Path’s Core Values on Transparency.  At the end of the day, transparency, authenticity, and caring create an environment of trust.

Some examples of that?

• Go over the real board slides after every board meeting – let everyone in the company know what was discussed (no matter how large you are, but of course within reason)
• Give bad news early and often internally.  People will be less freaked out, and the rumor mill won’t take over
• Manage like a hawk – get rid of poor performers or cultural misfits early, even if it’s painful – you can never fire someone too soon
• Follow the rules yourself – for example, fly coach if that’s the policy, park in the back lot and not in a “reserved for the big cheese” space if you’re not in Manhattan, have a relatively modest office, constantly demonstrate that no task or chore is beneath you like filling the coke machine, changing the water bottle, cleaning up after a group lunch, packing a box, carrying something heavy
• When a team has to work a weekend , be there too (in person or virtually) – even if it’s just to show your appreciation
• When something really goes wrong, you need to take all the blame
• When something really goes right, you need to give all the credit away

Perhaps a bit more than the other posts in this series, this one needs to apply to all your senior managers, not just you.  Your job?  Manage everyone to these standards.