A couple weeks ago, I blogged about some innovations we’d made in People practices around basic benefits. But that post raised questions for me like “Why do you spend money on things like that when all people care about is their salary? When they get poached by another company, all they think of it the headline number of their base compensation, unless they’re in sales and think about their OTE.”

While that is hard to entirely argue against, one thing you can do as you layer in more and more benefits on top of base salary, you can, without too much trouble, produce annual “Total Rewards Statements” for everyone on your team. We did this at Return Path for several years when we got larger, and it was very effective.

The concept of the Total Rewards Statement is simple. At the beginning/end of the year, produce a single document for each employee – a spreadsheet, or a spreadsheet merged into a doc, that lists out all forms of cash compensation the employee received in the prior year and also has a summary of their equity holdings.

For cash compensation, start with base salary and any cash incentive comp plans. Add in all other classic benefits like the portion of the employee’s health insurance covered by the company, any transit benefits, gym memberships or wellness benefits, 401k match, etc. Add in any direct training and development expenses you tracked – specific stipends, training courses, conferences, education benefits, subscriptions, or professional memberships you sponsored the employee attending. All of that adds up to a much larger total than base salary.

If you have some other program like extensive universally available and universally consumed food in the office (or a chef, if you’re Google), you could even consider adding that to the mix, or perhaps having a separate section for things like that called “indirect benefits” so employees can see the expenses associated with perks and investment in their environment.

Finally, put together a summary of each employee’s equity. How many options are vested? Unvested and on what schedule? What’s the strike price? What’s the value of the equity as of the most recent financing? What’s the value of the equity at 3 other reasonable exit values? Paint the picture of what the equity is actually likely to be worth some day.

Yes, you could do these things and still lose an employee to Google or whoever offers them $50k more in base salary. It happens. But if you’re doing a great job with your culture and your business and people’s roles and engagement in general, having a Total Rewards Statement at least makes it easy for you to remind employees how much they *really* earn every year.

Post 4 of 4 in the series of Scaling CPO’s- the other posts are, When to Hire your First Chief Privacy Officer, What does Great Look like in a Chief Privacy Officer and Signs your Chief Privacy Officer isn’t Scaling.

There are a few high-quality ways I’ve typically spent the most time or gotten the most value out of Chief Privacy Officers over the years. Part of it may have to do with the business we were in at Return Path (and now, Bolster), but part of it is understanding what the Chief Privacy Officer needs from the business and working with them in that arena.

For example, I found it helpful to work with the Chief Privacy Officer to help them to deeply understand our business.  Part of what I think we got right in this regard at Return Path was that we almost always made this a fractional role that was combined with other responsibilities — Tom Bartel, Dennis Dayman, and Margot Romary almost always did other senior jobs in operations or product as well.  This is what most likely enabled us to play more offense with the function rather than play defense. Even with an operation or product background, the Chief Privacy Officer is typically focused on external threats and issues and I have found that working with them on business issues not only raises their knowledge, but helps them understand potential security risks.

Another thing I did was to role model training and compliance.  If you mention of the word “compliance” to just about anybody in the organization, you’ll see that it doesn’t usually get anyone’s juices flowing. But it’s important for the company to live up to its obligations with customers and with its own internal policies and we found that if we involved a certain amount of employee training every year around compliance, we were able to build skills and stay on top of changing dynamics.  I always try to be the “first done” on an online training course and make sure to follow related policies so that our Chief Privacy Officer has air cover…and so that I can ask others to do the same with a clear conscience.

During a crisis.  I may interact with Privacy infrequently, but oftentimes when I do, it’s because something has gone wrong, or we’re worried about something going wrong.  That’s ok!  As long as you can be there to support your Chief Privacy Officer on an emergency response basis and practice some level of servant leadership in a crisis (“how can I help here…who do you need me to call?”), you’re doing your best work in this department.

It’s important to have a regular cadence and a strong relationship with the Chief Privacy Officer because when a crisis hits you don’t want to miss any steps. While most of the time things run smoothly in the Privacy domain, the few times when things spin out of control those are the exact moments when you need to hit the ground running, trust your Chief Privacy Officer, and help get everything sorted out.

(You can find this post on the Bolster Blog here)

(Post 1 of 4 in the series of Scaling CPO’s)

 Most startups don’t have a Chief Privacy Officer and just rely on outside advice from external counsel or a privacy consultant. In Startup CXO our Chief Privacy Officer from Return Path, Dennis Dayman, strongly advocates for privacy to be baked into a startup at the very beginning. Some startups probably don’t have any help in this area at all but given the importance of privacy and security issues today that’s a mistake.

If your startup doesn’t start life with a Chief Privacy Officer you’ll have to heed some warning signs and here are some I’ve picked up over the years. First, you’ll know it’s time to hire a Chief Privacy Officer when you wake up in the middle of the night terrified that you’re going to find your company on the front page of the newspaper or served a subpoena to testify before Congress about a data breach. Even if you’re not waking up in the middle of the night you might be concerned about privacy if you are spending too much of your own time trying to understand what PCI Compliance, or HIPAA, or GDPR means to your business. Or if you really don’t see the connections between your business and privacy issues in general, then a Chief Privacy Officer can be very helpful.

You might get tough questions from your board on what your data breach client communication plan is, and if you don’t have a great answer and aren’t sure how to get to one, then it’s time to think about a Privacy Officer.

A fractional Chief Privacy Officer may be the best option for most startups…forever. Sometimes you can find one fractional executive for both the Privacy and Chief Information Security Officer roles. You probably can’t get by without a full-time leader in this area if you are large (>$50mm in revenue) and are sitting on a massive amount of consumer data, especially if that information involves PII, financial, or health information.  But if that’s not you, a fractional Chief Privacy Officer may be the way to go.  While a fractional executive is similar to an outside lawyer or consultant, an executive has a company title for external credibility and the personal commitment to the organization to ensure compliance. A fractional exeuctive is way more than a consultant since they’ll be able to provide guidance to employees and represent the company as if they were a full-time Chief Privacy Officer.

Not every startup needs a Chief Privacy Officer since you can cover your bases with lawyers or consultants, but if you’re collecting lots of data from jurisdictions across the world you’d be wise to get a Privacy officer, or a fractional executive, sooner rather than later.

(You can find this post on the Bolster Blog here)

(This is the third post in the series… The first one When to Hire your first CMO is here, and What does Great Look Like in a CMO is here).

 In Startup CXO I wrote that I always think that the French Fry Theory can be applied to many things, usually other food items. The French Fry Theory is the idea that you always have room to eat one more fry and in my case I always do. But the same idea applies to marketing because you can always do “one more thing.” One more press release. One more piece of collateral. One more page on the corporate web site. One more newsletter. Trade show. Webinar. Research study. Ad. Search engine placement. Vendor. System. Speech. Take your pick.

The world we operate in is so dynamic that marketing (when done well) is nearly impossible to ever feel like you’re completely on top of and it’s near impossible to get closure. There’s always more to be done, and the trick to doing it well is knowing when to say “no” as much as when to charge into something. In my experience, CMOs who aren’t scaling well past the startup stage are the ones who typically do one or all of the following.

First, they’re stuck in “french fry mode” and treat all tasks like french fries. They focus on task execution (eating the next fry) and can’t pull up to think about whether they’re doing the right thing (should they be ordering another plate of fries?) and they are simply not scaling. If your CMO is constantly putting out fires that’s a sign that they may be too task-oriented and not strategic enough.

 Another sign that your CMO isn’t scaling is if they report on activity as opposed to outcomes. This is related to my prior point.  When all the world is a task list, then report-outs are just volumes of tasks but tasks are not the same as productivity or results.  I’m not sure why marketing ended up like this, but it’s frequently the only function in the company that spends time producing beautiful reports on all the stuff they do.  It probably comes from years of working with agencies who report like that to justify client spend.  Regardless, can you imagine seeing reports on activity instead of outcomes from other departments? Do you really need the report from the CFO that talks about how many collections calls the team made as opposed to reporting on bad debt? Or a report from the CRO talking about how many meetings a rep had with no mention of pipeline or closes – seriously?  No thank you.  CMOs who can’t link activity to outcome with a focus on outcome are not scaling with the job and for all you know they may be rearranging the chairs on the Titanic.

A final sign that your CMO isn’t scaling is if they spend disproportionate amounts of time on creative or agency work.  That’s the glamorous and fun part of marketing, for sure.  Having made TV commercials as a head of marketing when I was at MovieFone, I can attest to that.  But even if you’re a big B2C marketer with a lot of agency and creative spend, while you should be supervising that work, spending all your time on it is a sign that you’re not interested in all the other, well, french fries.

Marketing is becoming increasingly complex and differentiated, and it can easily be a service center as opposed to a strategic function. I don’t think that’s ideal, but that may be how a company decides to run it. But even if it is a service function your CMO needs to able to create space in their day for thinking and analysis, they need to be strategic, and they need to be able to stop doing “one more thing.”

( You can find this post on the Bolster Blog here)

This is the third post in the series. The first one When to hire your first CCO is here and What does Great Look Like in a CCO is here).

Although we think of scaling issues as primarily startup issues, any company can face scaleup issues for example, through a merger or acquisition that changes your landscape immediately. Nowhere is a scaling issue felt more deeply than in the company-customer relationship and there are several signs that I use to quickly figure out whether the Chief Customer Officer is up to the task, or even ahead of the game, in scaling.

 A CCO who isn’t scaling well past the startup stage is someone who typically throws bodies at things like support instead of making processes more automated or efficient.  This is true of other functions I’ve written about in other parts of Startup CXO (accounting, for example), but it’s particularly important in Customer Success. As a company scales and takes on more customers the support burden can get out of hand. This is especially true if the product team spends their time and effort building more new features and functions rather than automating internal tools or sunsetting old product modules. Before you know it you have a support team that is spending lots of time on legacy systems or products as well as learning new products. And while sometimes, sure, it may make sense to open up a massive support location offshore, that may be just a less expensive way of avoiding a process redesign or system implementation. Your CCO should be looking far enough ahead to begin thinking early about the amount of support required and working to develop systems and processes that solve the problem, not thinking about how many new hires they need to keep up.

A second sign that your CCO isn’t scaling is if they fail to specialize the service organization as it grows. Just as a startup scales from its founding team as generalists, capable of pitching in on everything, to more specialized roles running different functional areas, Chief Customer Officers have to grow their teams by increasingly specializing roles. It’s easy to get stuck in a pattern of hiring and training expensive generalists because they’re really good, and they don’t require a lot of training.  It’s much harder to break a role down into two or three smaller roles, figure out how to career path existing generalists into the more specialized roles, and redesign systems and processes to execute better and more efficiently. The CCO who can look at all the parts and see where to create specialists will be much more effective at scaling.

(You can find this post on the Bolster Blog here)

(This is the third post in the series… The first one When to Hire your first CBDO is here, and What does Great Look Like in a CBDO is here).

The metrics for understanding whether or not your CBDO is scaling differs from other functions like Sales, People Ops, Customer Service, and Finance because throughout the scaling process the CBDO team is likely to be small. So how do you know if your CBDO is scaling if they’re essentially the same size regardless of what the rest of your company is doing? I have found that CBDOs who aren’t scaling well past the startup stage are the ones who typically operate in the following ways.

First, a CBDO who isn’t scaling is throwing everything over the wall internally. Some people in this role, especially ones who have been long-time bankers or consultants and who are used to having armies of junior resources at their disposal, don’t like or don’t know how to roll up their sleeves and handle execution. The reality is that in-house BD teams are very small, frequently only one or two people, and the person leading the team needs to do a lot of the work, not just the planning and external meetings.

Second, if your CBDO has an over-reliance on outside advisors like bankers and lawyers, that’s a sign that they’re not scaling. The whole reason companies in-source this role is that they expect to have a fair amount of activity — developing partnerships, executing a roll-up strategy, building out the channel.  While external advisors are critical for a number of those activities, knowing when, and when not to hand things off, especially when the advisor bills by the hour, is critical.

A third sign is if your CBDO is focused on quantity rather than on quality.  I have found that there are times when it’s important to be able to show a large number of partners, for example if you’re trying to run an industry-wide coalition or program. And also there are times when it’s important to show a lot of deals in the pipeline, for example if you’re pitching an M&A roll-up strategy to a potential financial sponsor.  But you know your CBDO is in trouble when the focus becomes the number of deals in the pipeline as opposed to making sure there are a few larger ones with deeper, multi-faceted relationships that will move the needle on the business objectives. Your CBDO should be helping to develop the ecosystem and this is done a lot easier by finding and working with the gems rather than developing all sorts of channel partnerships or deals that look good on paper, or get good PR, but don’t actually move the business forward. 

( You can find this post on the Bolster Blog here)

(Post 1 of 4 in the series of Scaling CPDO’s).

For most startups the idea of hiring a CBDO is a pipedream, it’s a role that only global corporations have, right? After all, strategic partnerships and M&A are rare events for a startup and can be handled by the founder/CEO, or potentially by someone in Sales.  If a startup is partner or channel heavy, those areas may be the focus of the Sales team in general.  Or, if there is sporadic M&A activity that can be handled by external advisors or bankers. So how do you know when it’s time to hire your first CBDO?

You know it’s time to hire a CBDO when you are spending too much of your own time on things that a CBDO could be doing. When a deal shows up, it’s a mountain of work because there are countless meetings and conversations both internal and external to the company and with your board; there’s a ton of due diligence that needs to be done, and there’s always thinking about the strategic roadmap moving forward. The problem is that you can’t control when a deal shows up but once it does, a series of processes and tasks that are time-dependent kick in and it can consume all of your bandwidth. It’s worth it to hire a CBDO if you think you’re only going to do one deal just to take all that effort off your plate.

Another sign that you should hire a CBDO is if your board asks you for your M&A roadmap, and you don’t have a great answer and aren’t sure how to get to one. For a startup the stratetgic roadmap might just be to grow the company any way they can, but for a scaleup you’ll have to be much more thoughtful about strategic growth, you’ll need to have metrics, benchmarks, and timelines, you’ll need to know whether you can hit those milestones organically or whether you need to partner, acquire, or sell off parts of the business. A CBDO not only thinks about all the nuances of a stratetgic roadmap, but has done the work to make it easy to pull the trigger when the opportunity arises.

A more practical solution for many startups is to consider a fractional CBDO. A fractional CBDO may be the way to go if you need help defining your partnership or M&A strategy, or you need help creating a market map and you don’t want to rely on an external advisor or banker for those. A fractional CBDO can also help execute a couple of M&A transactions that are too small for a banker so if you’re not sure about whether or not a full-time CBDO makes sense for you, you can experiment with smaller deals first. A fractional CBDO could also help define a major new strategic building block like “creating an indirect sales channel” or “international expansion,” and work with you and your whole leadership team together to create that, especially if no one at your company has experience in doing that. 

You can find this post on the Bolster Blog here.

(This is the second post in the series…the first one on How to Engage with Your CFO is here.)

What comes before a full-fledged CFO?  Lots of startups have nothing more than an outsourced bookkeeper or one junior staff accountant.  Sometimes a founder or a founder’s spouse even steps in on this front.  As startups scale, they are likely to hire a more senior accountant, maybe an AR/AP/Collections staff member, or even a Controller or VP Finance.

Depending on the complexity of your business you might be able to hold off on hiring a full-time CFO, but if you have any of these signs then it’s time to start thinking about bringing someone on board. One sign is intuitive, and it’s just the feeling that you’re concerned about cash. Maybe you wake up in the middle of the night and that’s what’s on your mind—not just that you’re running out of cash, but that you aren’t clear on how much cash you have and how fast you’re spending it. Is it concerning that you’re tight when it comes to payroll? Are you getting calls from vendors about late payments? Are you way under market in compensation and trying to overcome that by offering equity or “perks” to attract top talent? These are all telltale signs that your financial situation may be under duress, and a full-time CFO can be a solution.

 Another telltale sign that you might need a CFO is more tangible: Are you spending too much of your own time managing fundraising, debt, investors, and cap table questions and issues? If you are in the weeds with the financial reporting, either fixing what’s there or creating a lot of things from a blank slate, then there’s an obvious problem, and solution.

 Another sign that you need to hire a full-time CFO comes in the form of things you can’t answer. If your board asks you about some small-to-mid-level analysis or metric like CAC, customer profitability, margins, or ROI, and you don’t have a great answer that’s a signal that your finances are out of control. And if you can’t figure out how to get to an answer, that’s even worse.

 Of course, you don’t have to wait until these telltale signs emerge before hiring a full-time CFO—it’s also possible to have a discussion with your current finance person and figure out together what their career path could be, and what their aspirations are. If your finance person aspires to be CFO but doesn’t have the skills (yet) consider bringing on a fractional CFO. A fractional CFO may be the way to go if your business model is simple…some combination of a limited number of complex accounting issues, a limited number of customers or invoices or transactions, and an insignificant difference between the income statement and the cash flow statement.  If what you need is someone to oversee a gradually growing team, a slow-paced implementation of higher-order systems, basic financial analysis or modeling, or the occasional fundraising event, a fractional CFO may get the job done, for several years. A fractional CFO can also mentor your current finance person in the realities of the CFO role, and they can help you find a qualified CFO who will be a good fit for your company.

While there is no fast and easy answer about when to hire your first CFO, there are some telltale signs that point to that direction and if it’s not in your budget, consider a fractional CFO to help get things under control before you really do run out of cash.

(Posted on the Bolster Blog here)

As Return Path gets older, we are having more and more alums go on to be successful senior executives at other companies – some in our space, some not.  It’s a great thing, and something I’m really proud of.  I was wondering the other day if there’s effectively some kind of “RP Playbook” that these people have taken with them.  Here’s what I learned from asking five of them.

People-related practices are all prominent as part of the Playbook, not surprising for a People First company.  Our Peer Recognition program, which is almost as old as the company and has evolved over time, was on almost everyone’s list.  Open Vacation is also part of the mix, as was a focus on getting Onboarding right so new employees start off on the right foot.  Live 360s were on multiple lists, too, as were Skip-Level 1:1s.

Beyond People-related programs, though, there was general agreement among the five that the mentality of trust in management was something they brought with them in this mythical Playbook.  Specific examples include fostering a culture of idea sharing, having difficult conversations, driving as much self-management as possible, focusing on managing high performers as opposed to spending all our cycles on managing low performers, balancing freedom and flexibility with performance and accountability, and going above and beyond and bending rules for sick employees and their families.

Connections and networking – both internal and external – made the cut as well.  A lot of those, especially external ones, are used to foster benchmarking, best practices sharing, and “leveling up” to help teams and organizations scale by learning from others.

Finally, there were some specific execution-related Playbook items from establishing a vision, to translating it into goals and fostering alignment across the organization, to instituting processes and systems instead of throwing bodies at problems.  One important element of execution cited is the importance of giving new and existing managers the tools to grow as the company grows.

This is hardly an exhaustive Playbook and unscientific in its construction, but I thought the “top of mind” answers from five senior people I respect was an interesting list and probably the beginning of something broader.

Thanks to the following friends for their contributions to this post:  Jack Sinclair, CFO of Stack Overflow; Angela Baldonero, SVP Human Resources for Kimpton Hotels; Tom Bartel, CEO of ThreatWave; Chad Malchow, CRO for Gitlab; and Dennis Malaspina, CRO for Parsley.

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.

Sources of Urgency

Sometimes I wish we were in the hardware business.  Why?  It’s not the margins, that’s for sure.  It’s because hardware businesses usually have externally-imposed deadlines that create urgency in an organization around deliverables.

If you are making a chip that Dell is putting in all of its boxes, and your contract with Dell stipulates that the chip will be ready for testing on X Date and for shipping on Y Date, you darn well better hit the deadline.  If you are making software that gets installed or pre-loaded on all Samsung TVs, same thing.  Maybe it’s not the hardware business per se, but you certainly don’t see this kind of mentality in SaaS businesses very often, either because of the lack of true OEM and ship dates, or because of the now fluid nature of agile software development.

Without that kind of externally-imposed deadline, instilling true urgency gets a lot harder for a leader.  Sure, you can stick an arbitrary deadline out there and rally people to work towards it, but it’s much harder to define the consequences of missing the deadline.  Since there are in many cases no tangible and immediate business consequences, it feels a little more hollow for a leader to say “Why?  Because I said so.”  Yes, you have firing as the ultimate accountability tool in your toolkit, but again, it’s hard to feel good about using that tool when the deadline is arbitrary.

Probably the default method most companies like ours have settled on over the years is around quarterly goals.  That kind of cadence removes the arbitrary part of the problem, but it doesn’t remove the tangible business consequences part of the problem – and often, it doesn’t align with actual project deadlines.  Public companies probably can use quarterly financial results as something more tangible, but those often don’t align with deliverables quarter for quarter.  Customer conferences or marketing events can be other deadlines as well, which are less arbitrary.

I realize my blog is usually more about sharing stories than asking questions, but in this case, I’d love to hear from any reader who has a good answer to this very important management challenge.  If I get a great response, I will reblog it!