Hackoff – The Blook, Part II

A few weeks back, I posted about a new blook (book delivered in single episodes via blog) called Hackoff.com – An Historic Murder Mystery Set in the Internet Bubble and Rubble, by Tom Evslin.  A few weeks into it, and I’m hooked.  It’s:

– complete and total brain candy, or mental floss as Brad calls it

– a great 2 minute break in the middle of the day (episodes are delivered once a day during the week)

– a very entertaining reminder about some of the wacky things that went on back in the Internet heyday

– a good look into some of the processes that go on behind the scenes in taking a company public

If you haven’t started the blook yet and want to give it a try, you can catch up on all of the first episodes and subscribe to the new ones here.   You can also preorder a hardcover copy of the book here on Amazon.com.

Counter Cliche:  How Much Paranoia is Too Much Paranoia?

Fred’s VC cliche of the week this week, Opening the Kimono, is a good one.  He talks about how much entrepreneurs should and should not disclose when talking to VCs and big partners — companies like Microsoft or Google, for example.

In response to another of Fred’s weekly cliche postings back in April, I addressed the issue of opening the kimono with VCs in this posting entitled Promiscuity.  But today’s topic is the opposite of promiscuity, it’s paranoia.

I was talking with a friend a few months back who’s a friend and fellow CEO of a high profile, larger company in a similar space to Return Path.  He was obsessing about the secrecy surrounding the size of his business and wouldn’t tell me (a friend) how much revenue his company had, even within a $20mm band.

He pursued this secrecy pretty far.  He never shared financials with his employees.  He never told anyone the metrics, not even his close friends and family.  He even withdrew his company from consideration for a high-profile award for growth companies which it had entered into and won in prior years since someone might be able to string together enough years of data to compute their size.

Why?  Because he didn’t want any venture capitalists to figure out how big they had gotten and decide to throw money at upstart competitors.  Talk about a closed kimono!

I’m much more open book than that with Return Path, but I have a tremendous amount of respect for this guy, so I gave the matter some thought.  There are certainly some situations which call for discretion, but I couldn’t come up with too many that would drive my guiding principle to be secrecy.

1. Being “open book” with employees is essential.  Your people need to know where the business stands and how their efforts are contributing to the whole.  More important, they need to know that you trust them.

2. Using some key metrics to promote your company can be very helpful.  I challenge you to show me a marketing person who doesn’t want to brag about how big you are, how many customers you have, what market share you have.

3. There’s no reason to worry about Venture Capitalists.  Sure, they can fund a competitor, but they’ll do that without knowing exactly how much revenue you have, how quickly.  The good ones are good at sniffing out market opporunities ahead of time.  The bad ones, you care about less anyway.

4. All that said, you can never be paranoid enough about the competition.  Assume they’re all out to get you at every turn, that they’re smarter, richer, quicker, and better looking than you are.  Live in fear of them eating your lunch.

Paranoia is healthy (just ask Andy Grove), but it does have its limits around the basics of your business, and around how you treat employees.

I received in the mail yesterday (by overnight priority mail, no less), a 400+ page prospectus from Mittal, a Dutch company in which I apparently own a few shares of stock through a managed mutual fund I’m part of. This book was BIG – well over 2 inches thick and big enough to have a binding strip instead of staples. And it had enough legalese in it to put anyone to sleep.

What did I do with it? After ranting about how silly it was to ever print such a thing for mass push distribution to an audience that largely doesn’t care about it — straight into the trash. With a big thud, of course.

What a ridiculous waste. Why print it on paper at all? Make it available online via pdf. Email shareholders or send them a postcard or leave an automated voicemail and ask them if they want a hard copy. Figure out which shareholders are in a managed fund, and send a single copy to the fund manager, since the individuals don’t even know they’re shareholders or don’t make decisions about individual stocks in the fund. Do something that costs less and doesn’t destroy trees that 99% of people will never read.

Shame on Mittal and their bankers, proudly displayed on the cover of the book — Goldman Sachs, Citigroup Credit Suisse, HSBC and Societe General.

Last week, I wrote about Bringing People Along for The Ride by involving people in the process of ideating and creating change in your organization. That’s the most important thing you can do to make it easy for people to handle change.

But what about the people you don’t or can’t bring along for the ride in that way? If you organization has more than 10 people in it, there will inevitably be people where you’re IMPOSING CHANGE ON THEM. And honestly, even people who are involved in designing change still have to live through its impact.

Today’s post is about managing the actual impact.

The best thing you can do as a leader in helping your organization navigate change is to be empathetic to the fact that, even if you involve people in designing the solution, you are, in fact, making changes to their day to day lives. One of the best books I’ve ever read on this is Transitions: Making Sense of Life’s Changes, by William Bridges. And while there’s a lot more to the book than this one point, I’ll share two graphics from the book and its offshoots that say a lot.

Bridges’ basic concept is to think about changes as having three phases. The end of the old thing, the beginning of the new thing, and the time between the two – when the new thing has been announced, but the it hasn’t taken effect yet. Here’s a look at one powerful graphic on this front, where the point is that productivity (the red line) tanks briefly during the time of uncertainty with the overlay of human emotions at each phase.

Next let’s look at Bridges’ model for how to think about these three phases. This part is critical. They are not discrete phases, where everyone finished “ending” and moves onto “neutral” and then moves on to “new.” From the moment a change is in the offing, until after the change is implemented, people are simultaneously operating in all three zones at the same time, in different proportions.

That means when change starts, you’re already helping them understand that there will be a period of confusion followed by a bright new future. And it means that even when the bright new future has arrived, you’re still mindful of the confusion as well as the things that were special about the past.

I wrote about this a little bit in the second edition of Startup CEO and in this blog post on transitions and integration. The paragraph I’ll call out is:

For ourselves as leaders and me as CEO, knowing most of us would leave almost immediately post-deal, I wanted to have as elegant an exit as possible after 20 years. Fortunately, I had a good partner in this dialog in Mark Briggs, the acquiring CEO. Mark and I worked out rules of engagement and expenses associated with “the baton pass,” as we called it, that let our execs have the opportunity to say a proper goodbye and thank you to our teams, with a series of in-person events and a final RP gift pack. This was a really important way we all got closure on this chapter in our lives

The Baton Pass is a helpful analogy to think about this process. In a relay race, the two runners run alongside each other for a little while until they are at the same pace and proper spot, THEN one hands the other the baton. It’s the time when the past and the future collide, in a neutral zone. When you mark the great things and painful learnings that came before and launch into the bright new future.

The best thing you can do as a leader who is driving change through an organization is to Bring People Along for the Ride. Part of that is involving people in the creation of the new world. But it’s also recognizing that humans have to process change, and that takes time.

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

Chief Privacy Officers who aren’t scaling well past the startup stage are the ones who typically have the following characteristics and you should look for some of these telltale signs.

First, if your Chief Privacy Officer looks at you sideways when you ask for a strategy or even a mitigation plan for a breach, then you might have a bigger problem than the fact that you don’t have a plan.  While we like to talk about things like Privacy by Design and using data protection as an offensive strategic weapon, the reality is that Chief Privacy Officers need to have actionable plans in place at all times for the areas where they judge your company to be the most vulnerable.  If you ask to see the plan or get briefed on it and you get back a blank stare, you know you have a reactive person on your hands for what needs to be a thoughtful proactive role.

Second, you might have a Chief Privacy Officer who is not scaling if they would rather lecture you on GDPR than talk about why your data protection plan will win business.  Privacy people can be geeky, legally-oriented, policy-focused and very technical.  All that is well and good but there is so much more that a great Privacy Officer can do. For example, if your Chief Privacy Officer can’t engage in strategy with you and other executives and understand the levers of your business and how their role can help further them, you may as well use an outside law firm instead of taking up a valuable seat at the table internally.

The Privacy team can be small and somewhat insulated from the business, but your Chief Privacy Officer needs to be able to engage the entire company, they need to be thinking strategically about the business, and they need to have short- and long-term plans in place for contingencies and forseeable roadblocks. If they can’t bring these skills to the table at startup scale, how can they bring them to the table when things really take off?

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

Post 4 of 4 in the series on Scaling CFOs – other posts are How to Engage with Your CFO, When it is Time to Hire Your First Chief Financial Officer, and What Does “Great” Look Like in a CFO?)

While all the functions of a team are needed, perhaps the most critical function to make sure your company is able to scale is the CFO. Cash flow, investments into the business, compensation, budgets—nearly everything that happens in a company flows through the CFO—and it should. So, getting this role right is one of the most important tasks of any startup team. But how do you know if your CFO is up to the task of scaling?

For CEOs, one of the first things that’s a telltale sign is what I call the gut check: do you have an uneasy feeling about cash, either that you’re running out of cash, or that you’re unsure how much cash you’re burning through and how fast you’re spending it?  Do you spend a lot of your time dealing with finance-related issues like fundraising, debt, investors, or cap table questions? Are you on the hot seat during board meetings on finance-related questions, metrics, runway, cash burn, or other issues? Trust your gut. If you have even a little uneasiness about how your CFO is operating, it’s probably worth heeding. You might not have a person capable of scaling, or you might have to invest more resources (time, mentor, fractional executive) to level up your CFO.

For members of the executive team, a telltale sign is whether or not your CFO engages with you and your team to understand your part of the business. Do they spend time learning and steeping in the substance of the business? Do they interact with all the functional leads like product, marketing, and People? Do they spend time in-market with customers, partners, or vendors? Sure, a CFO can understand the business by looking at the numbers, but you’ll never be able to scale if that’s the primary focus of your CFO because the numbers—all of them, and all of the time—are lagging. It’s impossible to be proactive if your CFO is totally focused on the numbers but doesn’t understand your functional issues, timelines, upcoming events or expenditures—and why. A CFO who is capable of scaling doesn’t see their role as “corporate,” as “administrative,” or as an enforcement function. They see it as strategic and as a partner to other parts of the business.

Other Signs Your CFO Isn’t Scaling

One sign of a CFO that can’t scale is whether or not they’re scrambling to hit deadlines. Everybody has to pull an all-weekend stint or over-nighter—occasionally, but if it happens regularly…it probably isn’t going to improve over time as things become more complex in the business. There’s always a pending crunch time that requires their personal attention and a ton of manual work – the monthly close, the audit, the budget, commission planning, compensation cycles.  These things are not surprises, and they come up the same time every month, quarter, or year. CFOs who are mired in doing all these things personally and manually haven’t built the systems, teams, or processes required to scale the business.

Another sign that your CFO can’t scale is if their solution to problems is to throw more people at it. If the accounting teams swells in size you might have a CFO who can’t think strategically about creating innovative processes and systems. “Throwing bodies at the problem” is easy because it’s the path of least resistance, but would your CFO allow other teams to do that? Accounting teams in particular tend to be the most traditional, paper-based teams and don’t need to be. Your CFO should be thinking strategically about how to scale financial systems with process and procedure rather than adding headcount.

A final obvious sign that your CFO isn’t scaling is if they get forecasts wrong, or don’t even try to do them.  Especially while your startup is in burn mode and constantly calculating its runway and months until the next required financing, regular and accurate/conservative forecasts are critical.  Even without a ton of revenue visibility on forward looking sales, good CFOs should have enough of a grip on expenses, cash flow, and order-to-cash dynamics to produce good, rolling 12-month cash forecasts. Anything short of that and you’ll be blindsided in the market, unable to take advantage of opportunities, or limping along with so-so growth for a long time.

In many startups people are learning on the fly but at some point you’ll begin to wonder whether everyone’s able to keep up or, more importantly, whether the people you have will be able to help your company scale. The CFO role touches every part of the organization and it’s critical to figure out earlier rather than later if your CFO can scale or whether you need to go in another direction.

(Posted on the Bolster blog here).

I have an end of year work routine that’s a pull-up and self-assessment. I’ve been doing this for years, and I’ve written about its evolution in Part I and Part II of this series.

I’ve always taken a few minutes at this time of the year to ask myself these four questions:

• Am I having fun at work?
• Am I learning and growing as a professional?
• Is my work financially rewarding enough, either in the short-term or in the long-term?
• Am I having the impact I want to have on the world?

If I answer at least 2.5 of these questions as yes, I feel like things are on track. If I am below that, or even at 2.5 sometimes, it’s time for a rethink of what I’m doing or how I’m doing it.

I was having lunch with my friend Bryton, the CEO of Aquabyte, a few weeks back, and that conversation spurred on a 5th question, which I’ll now add to my end of year routine:

• Am I excited about what I’m doing?

I’ve realized now that I’m over two years into the journey at Bolster that there’s a significant value in being really into the subject matter of the business. I thought I was at Return Path…but now I realize that I wasn’t nearly as excited about what I was doing as I could have been. Our work at Bolster of helping founders be more successful is more personally meaningful to me than solving email deliverability challenges. That work had real impact on the world…but I just wasn’t into it as much.

And that makes a big difference in answering the general question of “Am I on track?” at the end of the year. I’ll skip next week and see you all in 2023. Happy New Year and Happy Holidays, everyone!

Across 22 years and two companies now, our system of giving performance feedback has evolved significantly. I thought I’d take a pass at chronicling it here and seeing if I had any learnings from looking at the evolution. Here’s how things evolved over the years:

• Written performance reviews. The first year of Return Path, we had a pretty standard process for reviews. They were more or less “one-way” (meaning managers wrote reviews for their direct reports), and they only happened annually.
• Written 360 reviews. We pretty quickly moved from one-way reviews to 360s. I wrote about this here, but we always felt that being able to give/receive feedback in all directions was critical to getting a full picture of your strengths and weaknesses.
• Live 360 reviews. In addition to the above post/link, I wrote about this a bit further here and here. The short of it is that we evolved written 360s for senior leaders into facilitated live conversations among all the reviewers in order to resolve conflicting feedback and prioritize action items.
• Live 360 reviews with the subject in the room. I wrote about this here…the addition of the subject of the review into an observer/clarifying role present for the facilitated live conversation.
• Peer feedback. At some point, we started doing team-based reviews on a regular cadence (usually quarterly) where everyone on a team reviews everyone on a team round-robin style in a live meeting.

The evolution follows an interesting pattern of increasing utility combined with increasing transparency. The more data that is available to more people, the more actionable the feedback has gotten.

The pluses of this model are clear. A steady diet of feedback is much better than getting something once a year. Having the opportunity to prioritize and clarify conflicts in feedback is key. Hearing it firsthand is better than having it filtered.

The biggest minuses of this model are less clear. One could be that in round robin feedback, unless you spend several hours at it, it’s possible that some detail and nuance get lost in the name of prioritization. Another could be that so much transparency means that important feedback is hidden because the people giving the feedback are nervous to give it. One thing to note as a mitigating factor on this last point is that the feedback we’re talking about coming in a peer feedback session is all what I’d call “in bounds” feedback. When there is very serious feedback (e.g., performance or behavioral issues that could lead to a PIP or termination), it doesn’t always surface in peer feedback sessions – it takes a direct back channel line to the person’s manager or to HR.

The main conclusion I draw from studying this evolution is that feedback processes by design vary with culture. The more our culture at Return Path got deeper and deeper into transparency and into training people on giving/receiving feedback and training on the Difficult Conversations and Action/Design methodologies, the more we were able to make it safe to give tough feedback directly to someone’s face, even in a group setting. That does not mean that all companies could handle that kind of radical transparency, especially without a journey that includes increasing the level of transparency of feedback one step at a time. At Bolster, where the culture is rooted in transparency from the get go, we have been able to start the feedback journey at the Peer Feedback level, although now that I lay it out, I’m worried we may not be doing enough to make sure that the peer feedback format is meaningful enough especially around depth of feedback!

The old carpenter’s axiom of being extra careful to plan before executing is something not enough executives take to heart in business. Just like cutting a piece of wood a little too long, sometimes you execute in ways that can be modified on the fly; but other times, just like the cases where you cut a piece of wood too short, you can’t. And of course, in business, sometimes it’s somewhere in between. Some examples:

• One example that’s a little more literal is around cutting staff or planning a layoff. Layoffs are traumatic for everyone involved – mostly those impacted, but for you as CEO and for your remaining organization as well. Being thoughtful about how much you cut and (unlike the case of a piece of wood) erring on the side of cutting more than you think you need to can prevent you from having to do a second set of even more traumatic layoffs down the road
  
• Getting a lease on a new office? Plan, plan, and plan again – you can end up spending too much if you get too much space and can’t sublet it…you have a real headache if you don’t get enough space and need to scramble for more
  
• Planning a major investment in a new product? You don’t want to spin up a whole new effort internally and hire people before you’ve done enough discovery and planning to know it’s worth it

It’s an interesting question as to whether or not this axiom conflicts with the startup mentality of moving quickly and with agility. I don’t think it does, although in the startup ecosystem, a lot of fixed decisioning has moved to variable, which means you may be faced with fewer times where you need to measure twice. For example, a lot of SaaS licenses you have to buy are per-seat, or AWS costs are fluid. All that is much easier than perpetual license software models or standing up servers in a data center.

I’m a big fan of Eisenhower’s line that “plans are nothing but planning is everything.” That’s why I like to measure twice, cut once when I’m working on something big. It just raises the odds of getting it right, whatever it is.

I used to describe our culture and our employees and our leaders at Return Path as a family.

That was a mistake. It was just plain wrong. It served us well in some respects, but it bit us in the ass on others.

Great groupings of people at work are teams, not families. You can have a highly functional family. But you don’t have high performing families. Work teams need to be high performing.

Here’s what I mean.

The family metaphor worked well at Return Path around the principles of caring for people and lifting each other up. Those elements of a culture are absolutely critical. I don’t regret them for a minute.

But the downside of that metaphor is that families by definition stay families. Sure, spouses can get divorced, but usually not after years of trying to make it work. And kids and parents can’t stop being relatives. Families also don’t typically have metrics and have a structural impetus to improve how they relate to each other, or to some kind of tangible output.

The practical problem with the family metaphor comes down to holding on to people too long when those people aren’t performing well. While I am a big believer that past high performance is both an indicator of future high performance and earns you as an employee a little extra grace when something goes wrong, those things can’t be absolute in business, and they have a clock on them. High performing businesses go the extra mile for their people when their people are going through a rough patch in their lives, and they should be willing to invest in coaching and development when their people need a boost or some kind of corrective action. But not indefinitely.

So even with all the caring and lifting each other up…the family is just the wrong metaphor for a business.

Here’s why the team is the right one, and I’ll use the language of sports teams here a bit more than I normally do.

Teams train together. They have a common goal, which is winning. They know that they are only as good as their weakest link. They have leaders like coaches, managers, GMs, and captains, who they look to for guidance and direction. They are disappointed when they fall short of their goals.

But — and this is the critical learning — the best teams, the highest performing teams in the world, don’t only focus on performance, metrics, and improvement. They care about their people and lift them up. Sure, there are winning teams with tyrannical bosses like the 1970s Yankees. But would you have rather been on one of the George Steinbrenner/Billy Martin teams, or worked for Joe Torre or even Joe Girardi?

The best groupings of people at work are high performing teams…AND they care about each other as people. They just don’t care about each other as people to the detriment of the team, at least not longer than a very brief cure period would allow when something goes sideways.

You can lead your organization to have the orientation of a team, with some of the best elements of families. But not the other way around.

I’ve gotten to know a number of Bolster members over the last few years, and one who I have come to appreciate quite a bit is Tim Porthouse. I’m on Tim’s email list, and with his permission, I’m reprinting something he wrote in his newsletter this month on the topic of CEO engagement in politics and current events. As you may know, I’ve written a bunch on this topic lately, with two posts with the same title as this one, Should CEOs wade into Politics (part I here, part II here). Thanks to Tim for having such an articulate framework on this important subject.

Your Leadership Game: “No Comment.”

Should you speak up about news events/ politics?

Most of the time, I say, no!

Startup CEOs feel pressure to speak up on news events: Black Lives Matter, Abortion, LBGTQ+ rights, the conflict in Israel/Palestine, Trump vs. Biden. Many tell me they feel pressured to say something, but are deeply conflicted.

Like you, I am deeply distressed by wars, murder, restrictions on human rights, bias, and hate. But if we feel something, should we say something?

Before you speak up, ask the following questions:

1.      Mission relevance. Is your startup’s success or mission on the line? Are customers or employees directly impacted? Example: It makes sense for Airbnb to advocate when a city tries to ban short-term rentals. It makes sense to advocate for your LBGTQ+ employees when a state tries to restrict their rights.

2.      Moving the needle. Will speaking out change anything? If you “denounce” something or “take a stand,” what really happens? Example: If you have employees in a state banning abortion and you tell them your startup will support them as much as the law allows, this could create great peace of mind for employees. But if your startup does not operate in Ukraine or Russia, then denouncing Russia does little (and Russia does not care!)

3.      Expertise. Do you have a deep understanding of the situation? It’s usually more complicated than it appears, especially at first. Once you speak out, you have painted yourself into a corner you will be forced to defend.

4.      Precedence and equivalence. If you issue a statement about today’s news event, will you react to tomorrow’s event? Why not? Where do you draw the line?Someone will be offended that you spoke up about X but not Y.

5.      Backlash. Are you ready to spend significant time engaging with those who disagree with you?It can get ugly quickly, and mistakes can be costly. Plus, the American public is tiring of business leaders commenting on the news.

6.      Vicarious liability. Who are you speaking for? When you say, “Our startup denounces X”?Does the whole company denounce it? You don’t know, and probably not. Does the Leadership Team? They may feel pressured to support you. What you are really saying is, “I denounce X!” OK, great, then say it to your friends and family. Leave your startup to talk about business.

If your answers are “yes,” – then speak out.

If not, I recommend keeping quiet.

In my opinion, our job is to build great companies, not debate current events.

By not speaking out, you can say, “We don’t talk politics here.” You can shut down any two-sided arguments at work and say, “Let’s get back to work,”removing a big distraction. Remember when employees protested because Google was bidding for Pentagon contracts?

I realize that you will be challenged to make a statement, that, “Saying nothing is unacceptable/ complicit.” But whoever challenges you will only be satisfied if you support their view.

If you still want to speak out, I respect your choice. Some of you will be angry with me for writing this, and I accept that. I’m asking you to think carefully before you make a statement.