The Management Team - Guest Post From Phil Sugar

Continuing our MBA Mondays series on The Managemet Team, we are deep into the guest post phase. This guest post comes from AVC regular Phil Sugar. I've never met Phil, but his comments here at AVC tell me that he's a very experienced entrepreneurial manager. And so I reached out to him to ask for a guest post. And he responded with this post below. There are so mant great lines in here, I'm tempted to reblog a bunch of them.


Best Friends, Buddies, and Co-Workers

Since there is no way I am going to be more insightful than Matt or JLM about management process, I am going to go through three early stages of company growth and describe some of the management challenges I’ve faced at each.  As Fred pointed out in his original post, a company’s management evolves.  This is purely environmental, it’s going to happen and you are much better off knowing what to expect. 

At a very early stage: a couple of gals in a garage, nothing gets done unless somebody goes out and does something.  No customers are going to call, no partners are going to want to meet, no bankers, lawyers are going to reach out.  Everything is outward.  Nothing happens unless you do something and frankly anybody calling in to you is probably suspect but that’s another post.  You know exactly what each person is doing because there are so few of you.

As the company becomes a leader in its market with a hundred or so employees, everything is incoming.  Everybody wants a piece of your time, everybody is calling.  You have departments with managers that are larger than your original company.  Managing is critical because of the leverage; the difference between a dozen well managed people in a department achieving goals and a dozen people going in different directions is huge, people specialize in very distinct areas.

It is a gut wrenching challenge to go from one to another.  Once you decide to make the leap from one stage to the next, going back is excruciatingly painful if not fatal.  You can’t hope to meander from one stage to the next because it is a chasm.  It doesn’t mean you have to go to the next stage, many companies are better off not leaping, they are a “lifestyle business” serving a small market, but you better know, not hope the market is big enough to go to the next stage.  Once you scramble these eggs it’s tough to go back, the producers will burn out and the management layer will try to hang on for dear life when you’re caught in the middle.

I’ll start with three management philosophies that stay constant for me.  Understand that once a company gets past 100 or so employees, my skills don’t apply I’m the guy leaving so the company can scale.

I am in charge of recruiting.  I will have somebody managing the process as we grow; departments do the interviewing, but bottom line, if my people are better than your people I win.  College football is a great analogy.  Look at the top coaches.  They always win because they have the best talent.  In college the players pick the team, in the pro’s the teams pick the players.  You bet Nick Saban goes on recruiting trips.  Don’t for a second be lulled into the notion that you are picking employees.  They are picking you and you better be the one they want to pick.  You better have an on-boarding process and it better be good.  My biggest legacy is the network of people I’ve hired and what they’ve gone on to do.

I go on as many sales calls and customer visits as I can.  I’ve been told that once I hire a Head of Sales, I should stay out of the process.  I totally disagree.  I am not going to be the one managing the process, but I want to hear what the market is saying directly.  A salesperson can’t be objectively assess the market, they are too close, their livelihood depends on the sale, same for the VP.  They have to be optimistic, they have to try and make the fit whether it’s pushing the company to do something or pushing the customer to accept something.  The best information you are getting from them on your market is second-hand hearsay.  I’ve sat on boards and watched as projections get trashed as sales get pushed from one quarter to the next and the CEO sits by helplessly, not knowing why as they weren’t on the calls.  I am not going to be that guy.

The top producer makes more than the manager.  If the only way people think they can make the most money is to manage you lose your best producers in sales and development, and they generally don’t make good managers, they are just too good at doing.  This is the only way you can keep the producers happy, it’s the same in pro-football: great players make more than the coaches.  The very important corollary is that everybody knows everybody’s salary no matter how hard you try, so you can’t fake it.

Best Friends:  When you are a handful of people trying to make something out of nothing there are no management challenges.  Everybody knows what everybody is doing and everybody does anything.  The real challenge is do you have a team with the right skill-set to complement each other and just get the job done and is the market there?  Nothing less than total blind commitment works at this stage.  If you achieve your goal, get traction and the market smiles on you remember these people.  They are the team that you came on the field of battle with against great odds and succeeded.  You don’t leave the field without them.  You help position and grow them.

Buddies: This is when you have up to twenty people.  People say you can only manage eight, but I think if you’ve hired great people that can stretch to twenty.  You are going to have department leads but they aren’t really managers as much as they are the leading producer or a manager that is back in the role of producing.  In this stage the biggest challenge is getting the right mix.  You need people that are willing to work their tail off to get to the next level and you need people that are used to working at the next level that are willing to go outbound because they believe in the vision.  I.e. roll up their sleeves and code, carry a bag etc.   A big challenge is some of those senior people don’t fit into your current salary structure because of their work history.  The lesson I’ve learned over and over is to either pay the salary and move other people up or not pay the salary.  Paying the salary and not moving people up means:  “I put in huge sacrifices and now you bring in some guy from outside and pay him what?”  

You are going to have to start tracking commitments because there is going to be interplay between small departments.  Don’t run the company with email, setup a process.  Set the stage where the only people that can make commitments are those that are delivering.  Sales can’t be committing for development, development has to take sales input.  Orchestrate between the departments.  Don’t let one area dominate over the others.  That’s tempting to do especially in the area where you are strong.  

Keep administration as simple and lean as possible, try and think how do I make things simple and cheap? Not we need to act big and big is complicated and expensive.  Remember your biggest strength is your agility, don’t lose it.  You can make the wrong decision three times and get it right on the fourth faster than BigCo can make a decision.  Keep meetings short and tight, there should be minimal meetings of internal employees only, nothing happens inside your office.   If you are like me you need to find a good operations person, one that manages all of the details.

Co-Workers: Now you’ve decided to make the mad dash from 20 to 100 employees.  The reason it’s a mad dash is because you will have to put in all the overhead of formal departments and management but you won’t have the revenue and people to offset the cost.  

People are going to try to build fiefdoms.  Keep it lean, keep it flat.  Always make sure that you have one less person in each department than people think you need.  Keep politics out of it.  Make sure people realize that if they complain about somebody without going directly to them first, they most likely might be the person in trouble.  

There are going to be resentments if people get passed by, hopefully they’ll be few; there are going to be issues where the first employees feel like it’s not the place it once was because what was a company where you could go grab a beer with friends at a table, has grown past the stage where buddies can just show up to a bar, and has graduated to the point where you need to plan events for employees.  

Hopefully the vast majority of those that were with you at the early stages can look back and say: “Look what we’ve built and how I’ve grown!!”

#MBA Mondays

Comments (Archived):

  1. Mordy Kaplinsky

    Awesome post @philipsugar:disqus !

  2. Rohan

    What stands out to me is an incredible amount of humility and pragmatism.Thanks Phil. 🙂

  3. Cindy Gallop

    Oh, Phil Sugar. You had me at the first line of the second paragraph. 🙂 #changetheratioGreat post.

    1. Tereza

      Me too. I’m in love with Phil Sugar.

      1. Cynthia Schames

        Me three. #changetheratio indeed

      2. Dave Pinsen

         You gals are easy.

        1. Tereza

          I see no reason to hold out, when you love how you’re being treated.

  4. jason wright

    Reading between the lines, isn’t managing a team a constant engagement with that one enduring theme, the hard wired tendencies of our own human nature?  

  5. William Mougayar

    Well said across the board, Phil. It’s tough to argue with any of your points, because it’s obvious they are based on tried and true experiences. Many quotable and memorable lines.I would have titled the piece: Going from the FAST & FURIOUS to the FAST & ORDERLY.

  6. RichardF

    Nice post Phil, so much truth in everything you have written, gleaned at the coal face. “People are going to try to build fiefdoms” – this happens so many times when a company get’s VC money to the point where that’s all they care about not the company.  It’s particularly the case to look out for when you recruit someone from BigCo.

    1. PhilipSugar

       Yes, that could be a whole post.

      1. mike gilfillan

        Great post!  Been through all of that — your description is spot on.  Please do considering doing a whole post on Richard’s comment — politics and fiefdoms definitely caught me off guard after raising money and hiring from big companies.

        1. PhilipSugar

           I will that is a good idea.

        2. Donna Brewington White

          It’s all about role and mindset — some roles transfer more easily between company sizes and some people in big companies have the right mindset to transfer to a startup or smaller company. Hopefully, you found those people.

          1. mike gilfillan

            I found it depended more on the person’s attitude than the role.  It was interesting to see the variety of personalities that came out (from everyone) after raising money and hiring a few “pros” from big companies.  Definitely something to be aware of, manage and discuss. 

        3. PhilipSugar


          1. mike gilfillan

            Wow, just wow (head in hands) I wish I had read this 17 years ago when I was starting out.  Politics – check  Fiefdoms – check  Headcount envy – check  Budget envy – check  Spend to Budget – check  Gossip – check  Coalitions – checkYou should add some headers – each one of these could be a post/article in and of themselves.   Any entrepreneur that reads your article (http://justanentrepreneur.c… will appreciate your effort to educate.  Thank you.

      2. Donna Brewington White

        So…you going to write it?

        1. PhilipSugar


          1. Donna Brewington White

            Brilliant, Phil!  So glad you wrote this.  A great follow-on to what you’ve written here.  I hope people find their way over to this — really, really good:  Fiefdoms and Politics

    2. Donna Brewington White

      It is interesting to see companies get funded and then suddenly begin populating the job boards with openings.  Not making a judgment, because I don’t know what’s going on inside those companies and they could really be at the stage to scale at that level — and had just been waiting for the capital to do so.But in my earlier days as a recruiter I was part of some of those massive hiring pushes (for clients) only to realize later how poorly planned the hiring strategy was.  Misplaced BigCo thinking.

      1. RichardF

        This is where the CEO needs to keep a close eye on what is happening with recruiting.Just because you drew up an organisational structure and based your spreadsheet calculations on it to raise your round does not then mean the first thing you do is hire VP of this and that and then let them build their kingdoms because that is what they will do if you let them.One of the main issues I have seen is that in order to lure someone away from BigCo they are promised a nice title and the ability to hire a team underneath them that they can just manage rather than get in the trenches.Phil hit the nail on the head when he said about hiring one less than you need.  It’s too tempting to hire in advance for the anticipated overoptimistic revenues that were calculated and placed in the business plan. 

        1. Donna Brewington White

          Yes!  BTW, where does the board come in on “keeping a close eye on what is happening with recruiting.”  Is this too much micromanagement from the board?  Because…well, I hate to say it but…sometimes the CEO is the one going bonkers with hiring.  (I am careful saying this because startup CEOs are among my greatest heroes.)And I see that you have a new “badge.”  😉

          1. RichardF

            It’s probably a case by case issue Donna depending on the ceo ‘s experience. If this is the first time round for the CEO then someone at board level should be keeping a friendly eye out.Unfortunately its usually the case that headcount becomes the main focus when things are not going as planned. which is pretty much after the horse has bolted.

  7. awaldstein

    Phil…thank you.I kept visualizing circumstance after circumstance from a career built on the cusp of Buddies to Co-workers.Have sent this along to a few of my clients.My only add as a BD/Marketing guy during the growth phases was that ‘the call I didn’t get around to answering was the one that could really matter’. Don’t let that happen.

  8. Kasi Viswanathan Agilandam

    Classic. Very polite and authoritative post without dashing word games.The outward and inward stage explanation is exceptional. Three best quotes i take home “I want to hear what the market is saying directly.””Don’t for a second be lulled into the notion that you are picking employees.””Always make sure that you have one less person in each department than people think you need. “I just passed on the link to the post to our board members. Thanx Phil.

  9. Mark Essel

    I’d love to hear more about the mad dash from 20-100, applying a formal structure onto the buddies flat structure without sufficient revenue/resources sounds next to impossible.Any thoughts on why a company can’t remain flexible post 100? Fundamental limit of people management, customer demands, and business complexity? Does optimizing for market X require a rigid business structure?

    1. William Mougayar

      I totally agree Mark with your last point. In my book, “entrepreneurial” can (and should) carry through way beyond 100. I think Phil was saying that he prefers to hand the keys to someone else over 100. I’ve worked for a very entrepreneurial large company. Planning and strategy are centralized, but implementation can stay very entrepreneurial. As long as objectives are reached, there can be lots of freedom and creativity for achieving them.

      1. awaldstein

        Very large exception William in my experience.

        1. William Mougayar

          True. But Exceptions make Exceptional things and companies happen! – posted via Engagio

    2. PhilipSugar

       I think you can remain totally flexible past 100.  My point is once you go past 20 there is no humanly way possible you personally can keep track of everything.  Hence a one very thin management layer.Past that….I don’t know but I think you have to add another layer and that to me is where I exit stage right.

      1. Mark Essel

        Gotcha, two layers of indirection is enough :).I think this is one of those experiential only knowledge points. I won’t know how managing 20 works until I manage 3, etc.

  10. Johan J.

    Your blog and guest posts should be part of my curriculum for my bachelor thesis international business! More insights in the last 4 weeks than my last 4 years in study. (I still value my official education, but these posts humble me)

  11. JimHirshfield

    ” You can make the wrong decision three times and get it right on the fourth faster than BigCo can make a decision”Brilliant Phil!

    1. William Mougayar

      Very true. Iteration is not just for software development. 

      1. Elia Freedman

        I just finished a deal with a BigCo that took a year to close. It was insane the amount of hand-holding. Can never charge BigCo’s enough for the amount of time they waste.

        1. William Mougayar

          I agree. And those that are going at that pace think it’s totally normal, and we’re the crazy ones on the outside. – posted via Engagio

          1. Donna Brewington White

            …and we are.

    2. Kasi Viswanathan Agilandam

      Here is a quote that resonates well with Phil’s thoughts.”Success Comes Through Rapidly Fixing our Mistakes Rather than Getting Things Right the First Time” – Tim Harford

    3. fredwilson

      That’s one of the reblog candidates

    4. leigh

      Yes that’s going into a presentation right now…..

    5. Aaron Klein

      What’s crazy is how true this is…and any startup working with partners who are BigCos have to really keep that in mind.I’ve had BD execs describe to me the 17 layers of bureaucratic approval they’ll need to achieve before moving ahead on a deal.When nobody can make a decision, decisions won’t get made.

      1. ShanaC

        that’s insane.

        1. awaldstein

          Beware of a quick return on any business meeting that starts with 10 minutes of slides on the org chart.

      2. JimHirshfield


      3. awaldstein

        Never count on the big deal to close on any schedule. Chase it but don’t build your biz around it. 

      4. LE

        When working on deals where one party hides their identity you can determine the size of the hidden company (or number of decision makers) by the amount of time it takes them to get back to you on any particular detail being negotiated. A single or two person decision making team (hiding identity) same day or next day. Large companies hiding identity,  week to two weeks or longer. The larger the company the harder it is to use a bluff to try and close a deal. They simply don’t have the ability to make decisions quickly.

  12. ShanaC

    One note”I’ll start with three management philosophies that stay constant for me.  Understand that once a company gets past 100 or so employees, my skills don’t apply I’m the guy leaving so the company can scale.”should be either,”I’ll start with three management philosophies that stay constant for me.  Understand that once a company gets past 100 or so employees, my skills don’t applyas I’m the guy leaving so the company can scale.”Or”I’ll start with three management philosophies that stay constant for me.  Understand that once a company gets past 100 or so employees, my skills don’t apply. I’m the guy leaving so the company can scale.”

  13. ShanaC

    How do you get people to scale through this process?

    1. PhilipSugar

       See Matt’s post for this it was awesome.  I could pickup some pointers.

  14. Tereza

    Much to love here — great post Phil — but I have to say “a couple of gals in a garage” jumped right out at me. AWESOME!

    1. PhilipSugar

       I would point out this post was done a week ago.  Interesting coincidence on yesterdays topic.

      1. Tereza

        I know it was coincidental. But you’ve always been a supportive guy. That is no surprise at all.

  15. William Mougayar

    This may sound like an odd request…Phil, can you give us some context about your background/experience? What have you done previously to gain all this wisdom?

    1. PhilipSugar

      My background is not a secret especially with a name like mine.My first successful company was the Sugar Brother’s Lawn Mowing service which employed five.  I don’t think I’ve ever had so much cash in my hand as then.I went to the University of Pennsylvania’s Jerome Fisher’s Management and Technology Program which combines and undergrad degree from Wharton School of Business and the Moore School of Engineering.Now here is the good and the bad’s of my career.I went to work for Mitsubishi Corporation.  I sold the first big voicemail switch ever in Japan to a cell phone company called DDI.  NTT thought cell phones would never take off in Japan too small.  I learned what a glass ceiling was because when you look up and see nobody that looks like you above you it is disconcerting.I went work for NBS turning around companies, it was owned by a fraternity brother.  We turned around Medical Data and sold it.  Great place to learn about what not to do. His Dad was just a great entrepreneur.From there I started EnviroMetrics with a guy I met through a childhood friend.  He know is a lifelong friend.  We sold Environmental software to the Fortune100.  We bootstrapped and grew quickly to 100 people.  I did many things right and wrong there that would be a long post.  We sold to another company that did Emergency Preparedness Software.  The concept was to go to IPO.  We raised $8M and made a push.  The person who took over was much older (and supposedly wiser than us) but I learned a lot from his mistakes.  We fought a lot and I finally left walking out on a boardroom dispute.  I was right and he was wrong but it didn’t do me much good as his wrong bankrupted the company and the VC’s exercised all of their preferred.  Eventually sold to IHS.My buddy at EnviroMetrics started ReturnCentral raised $8M out of the chute.  I saw what that does as a board member and advisor.  Sold to Manhattan Associates.Two of the best programmers left EnviroMetrics and started SmartButton.  I am CEO.  We do the rewards programs for retailers: Hot Topic, Aeropostale, Things Remembered, Hospitality and Gaming Companies: KOA almost every horsetrack, almost every sports book in Vegas (yesterday was busy) We process hundreds of millions of transactions on tens of millions of consumers every month.I got my brother to start a human compliant wearable robotics company where I funded it and lead efforts.  You have seen our robots in National Geographic the Discovery Channel etc.  One is a robotic ankle that makes amputees walk like normal the other is an exoskelton that makes a 90lb pack feel like its 25lbs.My fraternity for some reason has a ton of Entrepreneur CEO’s: LinkedIn, Zino Platinum, , Smart Button, Mobiquity, Datran Media, SpringActive, Perky Jerky, Zoom Info, EnviroMetrics, Precision Corporation, Reality Technologies,, ASI, Primordial , Games, Krytar, Elements Cuisine, Pragmotos Consulting, Interlaken Capital, Diagnostics Intelligence Group, Quench, Oxeon , Useful Networks, Mobliss, Wandering Eye Pictures, Tribe, Coremetrics, Concept Worldwide, Live IntentI live far from NYC  (1.5 hr train) in a town called Chesapeake City, MD.  My 1839 house is the second newest.  It is at the head of the Chesapeake, Northernmost Eastern Shore town.  Very bucolic and conservative.  I have a deadrise in the harbor.  It is a place where the lift on your pickup truck is the status symbol.  Not kidding my wife came home the first day after I got her dream truck and asked me how high it was lifted.  I had wondered why she wanted a truck.Best regards.

      1. Anne Libby

        There’s nothing like a turnaround for developing management skills.

        1. PhilipSugar

          I would totally agree.  I don’t know how people do it for long though.It was the best experience ever.  You know you can’t screw it up worse than it is, and you get to see every mistake in the book.

      2. ShanaC

        Springactive sounds amazing.  Though also hellish because of the FDA.Actually, do you got any comments about FDA and computing?  They seem to be a bit lost about that.

        1. PhilipSugar

           We specifically do not break the skin or put anything inside anybody.  Makes it much easier.

      3. William Mougayar

        Very impressive! You could have given us the short version: “Been there, done that”. – posted via Engagio

      4. Mark Essel

        Enjoyed the background, thanks for sharing it here and @William for asking

      5. Dave W Baldwin

        Thanks for the background and great post.  Agree with everyone else about the doing it, correcting it four times before the big boys can make a decision.

  16. leigh

    “I’m the guy leaving so the company can scale”  #newguestblogpostplease 

  17. Guest

    Great post Phil Sugar  ~ Geoffrey

  18. Tom Labus

    So many people start business thinking they can avoid the “customer”.  Thanks for reminding us that it’s always best to as near as you can to the customer.  The gulf between what’s in a customer’s mind and what is being prepared/sold/developed for him can get distorted pretty fast.  It’s best not to rely on someone else’s interpretation.Managing expectations is a crucial skill that comes from listening closely to the customer. 

  19. Richard

    Don’t for a second be lulled into the notion that you are picking employees.  They are picking you and you better be the one they want to pick. Wow, that’s a powerful line. So networking is bidirectional! 

  20. David Noël


  21. Aaron Klein

    Awesome post, Phil. The failure of CEOs to continue visiting customers and partners is astounding to me, yet I’ve seen it over and over again.It’s like telling someone else to eat and sleep for you – see how long that works.

  22. Alan Minor

    “You bet Nick Saban goes on recruiting trips.”Are you saying he does or doesn’t go on recruiting trips? I can’t tell.(I ask because I’m a diehard BAMA fan, and I follow recruiting closely.)

    1. PhilipSugar

      He goes.Sandra Bullock said the thing she was most taken aback by during filming of the blindside was how good the coaches were, .  She said they were scary good.  Saban was one. See the end of this clip where she says “they were scary good”

      1. JamesHRH

        I believe Saban’s rep is that he is unparalleled, ‘in the room with Mom’, no?Something Les Miles could, apparently, have worked on with Gunnar……

        1. Alan Minor

          According to many folks, he’s the best in the business at that. However, he has rubbed a few parents the wrong way.Did you see the Les Miles comment about Kiel?… 

      2. Alan Minor

        Yes, Saban is a relentless recruiter — so much so that the NCAA has changed some of the rules with regard to recruiting because of him. (Source:… He even started using Skype to chat with recruits to get around rules limiting face-to-face contact and the number of phone calls and text message interactions a head coach can have with prospects.However, I asked the question because I wasn’t sure where you were going with that statement. Perhaps I’m misinterpreting your comment, but I think you are oversimplifying recruiting to an extent. In many cases, particularly with Coach Saban and Alabama, the dynamic is more of picking recruits than the other way around. Case in point:”Alabama has become the gold standard in terms of dream schools for kids,” said National Analyst Mike Farrell. “It used to be Florida, or USC before that. But when we ask [class of] 2013 kids what’s your dream offer, the answer is usually Alabama.”(Source:…There are different types of offers though. There are unconditional offers: “We will hold a spot for you and you can choose to sign whenever you want.” Then there are conditional offers: “We want you as part of our class, but you need to make a commitment by a certain date because we only have X amount of slots left in this class” or “We want you in this class, but we’re only going to have room for you if you graduate from JUCO by December.” Most offers are conditional — especially for the Blue Blood programs. Demand (number of recruits wanting to sign) is greater than supply (number of scholarships available). Alabama offered well over 100 recruits this season. (Source:… We only signed 26 players. There were several players who wanted to sign with Alabama, but were unable to because there wasn’t enough room in our class.I agree that it’s much different than the NFL where players, particularly draftees, have little choice in the matter, but based on my knowledge of college football recruiting I’m not sure if the analogy holds up. Could you elaborate more on your position? (I don’t mean to nitpick — I would love to hear a more detailed characterization of how recruiting goes on in the startup world.)

        1. PhilipSugar

           My point is Alabama didn’t get that way by accident, it wasn’t a fluke.  They don’t pay Saban $6M a year because they hope he gets good recruits.Yes, I have rejected tons of people.  By definition I really like to have a hard pick among qualified candidates. But that doesn’t make me think for a minute that people don’t pick me.People either want to come work for you or they don’t.  My point is many people forget that.

          1. Otto

            People don’t quit. They fire their managers.

      3. Alan Minor

        Hmmm. I think you can definitely make a comparison between startups and up-and-coming college football programs in terms of having “recruits” pick them. In the same breath, you could say that established companies (e.g. Apple)  and Blue Blood programs who are performing well (e.g. Alabama) do the picking. 

    2. Elia Freedman

      Saban does. He closes. All the great college coaches do.

  23. JamesHRH

    Great stuff Phil.I totally agree with your post and can even send you a slide deck entitled The Switchbacks that I used w startup founders!I have always thought that most lifer BigCo managers would be surprised to hear that there are 3 separate stages, with accompanying philosophies, structure and culture, before you get to 100 folks.Fred is right – there are 6 to 10 one liners in your post that could anchor an entire new post.My question: do you have any keys or tip on identifying people who are not going to fit or who look great but aren’t? I always like fresh perspectives on finding blue-chippers.

    1. PhilipSugar

       I’d love to get it.  My email is philipsugar at the google service.The key to interviewing is to delve deep into somebody’s experience.  Find out all of the details.  So for instance if its a sales person ask them about any sale they want to talk about.  Get into the nitty gritty, I mean down to where they stayed the night before the call.  Same for developers.  I want to totally understand the project they were on, review some code.Kids directly out of school.  GPA and how personable they are.

      1. Ana

        One of the things I really see in your post is that you seem to get how crucial the bits of intimate minutia are.It’s the tiny moments and choices, like staying the night before the call, which add up to who a person really is. You can’t gloss over that. 

  24. JamesHRH

    There are so many goodies in here, I wasn’t going to pick one out, but I changed my mind!”They are the team that you came on the field of battle with against great odds and succeeded. You don’t leave the field without them. You help position and grow them.”That sounds like something JLM would say – I think that is the highest rung of the AVC compliment ladder too?8 or 10 anecdotes come to mind on this and only 1 or 2 of them are positive and those are the companies that succeeded.

  25. nadime

    I want to work at your company!

  26. Peter Kadas, Dr.

    Words of wisdom. Scaling mindsets as the company scales over time is one of the biggest challenges. 

  27. Pradeep Kumar Mishra

    “Orchestrate between the departments.  Don’t let one area dominate over the others.  That’s tempting to do especially in the area where you are strong.”  Very nice!!!

  28. kirklove

    Such a great post, Phil. Thanks.I worked for a company that went from 40 employees to over 500. And you nailed it. Working now for a startup of just seven folks I’m back at stage one and loving the challenge. One sobering reality is the part you mention up front, “No customers are going to call…no one is going to reach out.” It’s up to you and the team. It’s invigorating.

    1. Otto

      How do you go from the garage or bedroom phase to the “wow, it’s a real office and legit people are calling” phase? That’s much easier said than done and a good book or blog on this subject is something I would get much value from.

      1. kirklove

        Otto, you’ll have to ask someone else that question, I’m sorry. I’ve never had the balls to go from garage to real office. 😉

      2. PhilipSugar

        That is what I love.  I suppose if I really put my mind to it I could do the 100 person to 1,000 person deal.Although I don’t like measuring companies by people, rather by what they do, but the number of people dictates management.Anyway by this time in my career I realize I am thoroughly unemployable so its a challenge I won’t have to face. I will try and do a post on that.

  29. fvRyan

    Phil, loved the post and added your blog to my queue.We’re currently in between the “Best Friends” and “Buddies” stages building the business.  You addressed an important concern I’ve had, which is bringing on experienced team members at higher salaries than original founding team and early best friends/buddies. 

  30. tgodin

    Great post, Phil.   re: bringing in folks from outside.  “A big challenge is some of those senior people don’t fit into your current salary structure because of their work history. The lesson I’ve learned over and over is to either pay the salary and move other people up or not pay the salary.”So true, and I think your approach is right on.   To do otherwise is to incur “management debt” – making a reasonable short-term decision with adverse long-term consequences.Ben Horowitz didn’t use this particular scenario example in a recent  post (… ), but I think its one more example.

    1. PhilipSugar

       That is a great post.  Like Ben I don’t post enough so I haven’t been following….but that is so true.  I love the term “management debt”

  31. iggyfanlo

    Truly awesome post. Practical usable formula. Nicely done.

  32. Otto

    The part about how the best salespeople sometimes make the worst managers reminds me of my time at Wells Fargo, where the Peter Principle was often on full display. Then again, Wells Fargo is now more of a sales organization than a bank (branches were called “stores”). Managers were more like cheerleaders, wannabe self-help gurus, or overbearing parents rather than good leaders. The theatrical presentation to customers (never called depositors) seemed relatively orderly. Internally it was a fiefdom and cult of personality. The company survives on brand name, 150 years of history, and the Federal Reserve system. If it were a start up or relatively young company it would likely be a spectacular failure because the fiefdoms are generally resistant to change.

  33. JLM

    In small companies, highly skilled professional employees — with other options, the kind of folks you want —  always pick you.When you sell the concept of the company to the new folks, they are evaluating you as much as the plan.They are joining your gang.This is not just business, this is also social.  We all want to be in a gang which is respected.  We all want to associate with folks who are doers.

  34. JLM

    I love how Phil uses the evolving size of the employment base as a yardstick for organizational dynamics and management philosophy.Best friends, buddies, co-workers are good measures of size, management style and control.Short, tall, grande, venti — works for me and the visualization is powerful.Staying in touch w/ the customers is vitally important and old school techniques like focus groups and customer satisfaction surveys work just fine but there is nothing as powerful as having a “chat” with a customer which is not tied to a pitch or sales call.As the company grows, don’t forget to engage w/ your own employees.At “best friends” that means having a sandwich together once a week.At buddies, that means spending a couple of hours together with a degree of formality which ensures everyone still remembers the original and revised game plans.  Once a month.At the co-workers level that means individual department heads making a presentation to ensure their plans dovetail with everybody else.  Every 2-3 months.Answer a lot of questions along the way and don’t end a meeting without taking at least 5 questions.

  35. JLM

    One of the best most pragmatic techniques for ensuring communication at any size organization is the Tuesday morning 8:00 AM (I personally prefer 7:00 AM) Go Round Check In Meeting.Everybody is on a video conference call and gets 3-5 minutes to outline their most important imperatives, their problems they need support for or any intelligence they have gained.As the CEO, you are getting the best 5 minutes of everybody’s time and you can get the sense of exactly what is going on in the entire company.  You can also redirect focus and energy on the spot.I have a form set up on tabloid paper and spend 30 minutes before the meeting getting ready for the meeting and put subjects into the “follow up” list after the meeting.I end every participant’s comments with — what help do you need and what can I help you with?It is highly effective at any size company.

    1. NicolasVDB

      JLM: You must have a any of my start-ups, if I had done such 7am Go Round Check In Meeting, the number 1 help request would have been for a software-developer-proof alarm clock (haven’t found those yet), and a close second would have been “how can we get the CEO to re-schedule this [insert expletive] weekly call?”  🙂

    2. K_Berger

      It seems we are hitting a real need for this at the 20 person mark. There is just too much going on that we can’t keep track without a little bit of structure.  Below the ‘buddies’ stage this can still be accomplished informally.Good ending line.  I’ll be stealing that, thanks.

  36. LE

    Great stuff Phil.I go on as many sales calls and customer visits as I can.  I’ve been told that once I hire a Head of Sales, I should stay out of the process.  I totally disagree.  I am not going to be the one managing the process, but I want to hear what the market is saying directly.  A salesperson can’t be objectively assess the market, they are too close, their livelihood depends on the sale, same for the VP.This stood out and is true for many reasons.Not keeping in touch with a customer makes it easier for them to leave if their salesperson leaves. There is no connection to the company. It’s a connection to the salesperson. A personal relationship. Of course this depends on the product – so if you are selling a proprietary product or a service with a barrier for the customer to switch less of a concern. Many smaller companies fail when the salesperson who controls a book of business decides (and is able to legally) skip to a new company.

  37. Donna Brewington White

    Phil — Love this post!  So much wisdom packed in here and really enjoy how you express things.  So many quotes to take away.  I hope you don’t mind that I reblogged the paragraph on recruiting .One of your statements leapt out at me:  “They are picking you and you better be the one they want to pick.”   Even during a recession, this is true.  I have seen companies think they are in the position to “pick” because the job market is tight (and unfortunately some take advantage of this — or so they think), but just because someone comes to work for you because they “need a job” doesn’t mean they will keep working for you or give you their absolute best.  Retention is the true test — much more so than recruiting.  I am impressed that you went straight from a statement about recruiting to a statement about onboarding.What every good recruiter knows is that a company’s success has much less to do with attracting the right people than it does with keeping them.  But here is the statement that says the most to me and what I personally look for when given the opportunity to help an organization seek a leader:  “My biggest legacy is the network of people I’ve hired and what they’ve gone on to do.”  This statement alone speaks volumes, Phil.  Volumes.

  38. sigmaalgebra

    This tread is a keeper. I hope to need it and intend then to use it.”Always make sure that you have one less person in each department than people think you need.”There is similar advice in: Robert Townsend, ‘Up the Organization: How to Stop the Corporation from Stifling People and Strangling Profits’, Alfred A. Knopf, New York.with a little more detail. E.g., if everyone in the department is seriously overworked, then they will welcome one extra person. Otherwise they will fight with the extra person and within themselves.Here are some problems I’ve seen, hope I don’t encounter, but am unsure just what I would do if I did so encounter:(1) “Arrogant, inwardly directed, process oriented.”Can happen to organizations and is close to fatal. How to stop it?(2) “Fighting with people down the hall instead of the competitors outside the building”.Been there; seen that; been attacked in such fights. How to stop this absurd fighting?(3) “If the customers want to buy, then they can look up my phone number. But they shouldn’t expect to find me on Wednesday because that would ruin two weekends.”This is a parody but of attitudes I’ve seen. How to stop it?(4) Cliques and informal coalitions. People can form coalitions, control a crucial part of the business, and then basically shakedown the organization.Seen that. It was very destructive,(5) A bozo explosion. A manager can deliberately hire weak people so that the manager looks more important and less easy to replace. A case of goal subordination.(6) Beat down someone with a new idea. A middle manager with a subordinate with a new idea can see only downsides: If the idea fails, then the manager has a failure in his group. If the idea is successful, then the subordinate might get promoted over the manager.Net, maybe only the CEO can approve work on new ideas. Bummer.(7) Manager knows more. In simple terms, much of management still wants to be like a factory floor 100 years ago where the manager understood the work and the subordinates were there only to add muscle to the knowledge of the manager.While today it is often just crucial for technical non-managers to need to know much more about their work than their manager does, the norms continue to conflict with this fact. E.g., when a report on the work is to be given up the management chain, who gives the report, the manager who doesn’t much understand the work or the non-manager who did the work and does understand it? Is the organization willing to give credit to the manager for his role in the project’s success?

    1. PhilipSugar

       I like your point 7.  I always say one of my biggest strengths was that growing up I knew I wasn’t the smartest.  People laugh when they see my education or if I told them my SAT’s but when you have one brother that is a renowned PhD and another that was runner up for Rhodes Scholar it was based in reality.  Makes it much easier for me now to rely on smarter people.

      1. LE

        “I knew I wasn’t the smartest”I saw that happen in my cousin’s and friends families. One child was the “smart” child one was not. I have about n=7 on this issue (And I only need three to make my mind up).It goes like this. The special child gets the attention and resources. The less special child (hey look at Phil, right?) is always compared to the other(s).They know they will never be better than the special child (at what they are special at which sometimes is what the parent has some interest in) so they don’t even try. Remember it was JFK’s brother Joe Jr. who was the apple of Joe Sr’s eye before he died?But  they could actually be quite capable when compared to the neighbors kids. (It’s like being in an elimination contest and your first bout is the person who wins the tournament). Or a genius at something the parents would never even think is a career.Attention to all parents to be. Under no circumstances are you to let one child think the are the best or give them a disproportionate amount of the attention or make them think they are the apple of your eye because they are living your dream.  Would Fred be happier now being an engineer? Hey, why did he go to MIT?Famous Philadelphia restauranteur Marc Vetri (owner of what is called the best italian restaurant in America by some critics) parents wanted him to be a lawyer like his mother or in his father’s business. He was out of his element in his family (and also stuttered) but went on his own to LA and got a job with Wolfgang Puck and then traveled to Italy (against his parents wishes) and the rest is history.  (I grew up next door to him in Phila).

        1. PhilipSugar

          I wasn’t the smartest, but I always felt I was the most loved, to be clear I missed a perfect SAT by 80 points on the verbal.  I have a board member from Israel that makes my family look downright stupid.I think the blessing of my parents was that all of my siblings felt the same.Actually its really funny because my Mom who came from a family of eleven siblings has a Uncle that I loved that started every introduction with “I’m Bernard, the one Mom loved best!”  If you think I’m good with one liners he truly was the best.I hope my kids feel the same.

          1. Ben Apple

            Who laughs at someone who goes to an Ivy league school and scores 99th percentile on the SATs?  

          2. PhilipSugar

             Me 🙂

        2. sigmaalgebra

          I could add several examples to your current n = 7, but for those examples there was a single pattern, and I will provide just the pattern instead of the examples:For whatever reason from the distant past, as a child A had some high goals X. But as a relatively young adult A got married, had some children, the first of which was B, and never accomplished goal X.For not accomplishing goal X, parent A felt ashamed, like a failure, and believed that being a parent was a waste of their life, promise, and goals and resented being a parent.Then parent A wanted their child B to accomplish goal X. To this end, parent A used a carrot and a stick:  The stick was to criticize, ignore, and show contempt for child B whenever the child did not do really well pursuing goal X. The carrot was the child got praise, acceptance, approval, affection, privileges, presents, and a sense of belonging and security if and only if they did well pursuing the goal X.Eventually, say, in their early 20s or so and away from the constant carrot and stick of parent A, child B can wonder just why it was they really should be pursuing goal X:  That goal was never theirs but always that of their parent A. Child B pursued goal X with exhausting effort since otherwise they were just terrified of the reactions of parent A.So, in their early 20s, child B can give up on goal X, start to fail, encounter the first failure in their life, lose self-esteem and motivation, and encounter ‘burn out’.  Bummer.Meanwhile, back at the family home is child C, younger sibling of first child B. Parent A mostly just ignores child C, that is, uses neither the carrot nor the stick, makes the child feel like just a tolerated visitor.  Also with all the high accomplishments of older sibling child B, child C gives up on competing with child B and avoids any effort or direction comparable with that of child B.Child C does have a chance:  They can find an interest Y of their own and pursue it from just their internal motivation or internally directed effort to get praise, acceptance, approval, and security from wherever.  If the interest Y is a good one and the pursuit is good, then child C has a chance to do better than both parent A and first, respected child B.The good news is that some, but not all, raptor parents let younger siblings have an even more, if only slightly more, difficult chance at life!  Maybe also true for some reptiles and insects!Still better news is that Darwin has a solution for such situations!  Darwin Services, the gene pool clean up people, always ready to serve!This situation is a special case of a more general one:  With humans, commonly the irrational, poorly considered, emotionally wacko, dysfunctional, destructive nonsense continues and grows worse until it is so bad it hits hard, practical constraining walls.  It’s unusual for people, consciously, deliberately, and effectively, to stay well away from the hard constraining walls.  Staying away, while unusual, is not such a strange lesson and goes back to just, say, a squirrel who saves nuts for the winter and the story of The Three Little Pigs 

          1. LE

            (Really) Excellent pattern example. Great.My question is this. I was able to avoid this with my children based on my observations of the behavior in my cousins and others. (I’m also practicing the same with my stepchildren now.)  It’s not something that was I taught in school. Just like they don’t teach you that if you have sex in high school it will screw up your life basically.Can this be taught in school? Should it be taught in school? (I’ll add it to the list of things that are more important than whatever is being taught now that I have).   Maybe more important for 95% of people than the War of 1812 or Astronomy?

  39. Donna Brewington White

    Fred, do you know how damaging it is to productivity to post MBA Mondays on a Monday?And, yet, it still seems like the perfect day.  

    1. fredwilson

      it’s also the day i spend in internal meetings so it’s hard for me to be active in the comments. great day for a guest post!

  40. Morooka

    Nice archetypes. The moral being, the characters in the workplace should compliment each other and fit the needed skill sets. A team of 12 will output more than a team of 50 every time if communication, roles and skill sets towards the task at hand gel.

  41. K_Berger

    Great post, Phil.  Thanks.Finding the best talent is still my number one biggest challenge.

  42. benricho

    Love this point:”Make sure people realize that if they complain about somebody without going directly to them first, they most likely might be the person in trouble. “

    1. fredwilson

      yeah, that is great

  43. Ashwin

    Just one thing I’d add about the chasm that exists between 5-50-500 scaling process.Most often its about not knowing what that chasm is all about and what tools you need to cross it. If we put in a data culture fairly early in the company, its easy to revisit the data every once in a while and start questioning the assumptions & variables that we took for granted in each stage.Between the ones that scale and the ones that dont, the difference is the timing and accuracy of intervention. Data helps to get both these things right.

    1. sigmaalgebra

      The time I saw some scaling from 5 to 50 to 500+, there was a way for the CEO to begin to identify and remove the weeds:Have a weekly senior management meeting in, say, the board room or around the folding tables, door panels on saw horses, or ping pong tables, that serve as the board room, with maybe 20 of the highest managers at the meeting.The CEO goes around the table and from each manager gets a 1-2 minute report.  For each such manager and each issue that can’t be resolved right there, the CEO asks the manager to gather more information and raise the issues at the next meeting.Okay, that’s the test, and it’s been given!Somewhere off on the side the CEO has a staff assistant taking notes.For an early indication about how a manager will do, at the meeting do they take notes on the issue and the ‘assignment’ due in one week?  For a still earlier indication, does the manager come to the meeting with, say, a notebook, open, with a page for the meeting, with time and date, and an appointment book (or electronic equivalent)?Then for the application of the test, at the next meeting the CEO uses the notes taken by the assistant and goes around the table and asks for the reports from each of the managers on their ‘open issues’.Expectation:  For a meeting with 20 senior managers with one issue each, there’s a good chance that the number of managers who will get the ‘assignment’ done on their issue is zero.Part of the mission of the CEO, and he has to accept it, is to get those assignments done close to 100%.More generally for this test at the senior management meetings a goal of the CEO is to establish an atmosphere of ‘discipline’ where the strong norm and assumption is that such meetings are very serious and any such ‘assignment’ needs to be done appropriately well in the context and nearly always on time, or else something we don’t want to think about.  The the hope is that all the work of the managers will be done as well but without such explicit tracking. 

  44. Kenneth

    This is probably one of the best management posts I’ve read in awhile. I just wanted to say thanks for writing this Phil.

  45. reece

    @philipsugar:disqus amazing post. thanks so much for sharing…we’ll be 10 people soon and already i see the changes in how the team functionsi’ve been holding fast to a few instincts around what we do and don’t need and your post supports them. again, thanks

    1. PhilipSugar

      Thanks.  I get to NYC at least once a month.  I’d love to grab coffee.

      1. reece

        i’d like that. reece [at] shelby [dot] tv

  46. FlavioGomes

    An absolutely spot on post! Completely and accurately mirrors my own experience

  47. Michael Diamant

    Wow great article, this says it exactly as it is.  Learning to say “no” is one of the most important lessons you can learn!  I have a slightly different perspective on a CEO going on sales calls though.  My opinion on this was like yours but changed after I hired a really strong head of sales.  Yes, there’s a real urge to stay in direct communication with customers and go to all key account sales meetings, but i’ve found that as you get bigger, going on sales calls changes the dynamic of the meeting and also usurps the authority of the sales exec…  it becomes harder for your sales exec to “get down to business” with their counterpart when the CEO/owner in the room.  That’s my experience with corporate customers… a strong head of sales can bond more closely with their colleague without the distraction of the CEO present… and she can also choose to defer any decision when put on the spot in the same way a CEO can by “having to talk to the board.”  Very useful when the best course of action is to evaluate more before making snap decisions during a negotiation. This doesn’t change the need to always know what your customers are saying about you, but i needed to find other ways (good data helps because most customers eventually talk with their wallets).

    1. Glenn Crist

      I like your point – I have the same trepidation regarding owners/partners/execs going on “sales calls”  staying plugged in is essential no matter how good your sales team or leaders are.  However, if your not careful you can put short pants on your Sales Manager in a hurry, in the eyes of the client and the manager, if your not really careful.

    2. PhilipSugar

      That is a very good point.  I agree there is a downside as well as an upside.  I try to mitigate by making sure that the customer knows the sales person is going to run the process not me, and I stick to that.  I’ll take the downside for the upside.

  48. RonP

    Having been around this block a few times I will add my suggestions that have been learned through (sometimes) painful experience:”Culture always trumps process” Peter Drucker”Process is the last refuge of scoundrels” Me”Just when you know the answer, I change the question”  Rowdy Roddy PiperSeriously though one of the biggest lessons to be learned is that even as your enterprise is getting big you must always think small.  Personal Assistants are not their to shield you they are there to make sure you get your work done as efficiently as possible – you must constantly be “touching” your people.  The biggest danger is allowing your team to shield you from what is going on in the cheap seats.  The only way you will really know what is going on is if you are willing to hang out with your employees – they will tell you what is really going on.  Early stage growing companies must be run like a tribe – there needs to be a tribal mythology which is handed down from generation to generation of hires – this is the real corporate identity that your employees not only need to own but want to own.  A company must have an ongoing internal dialogue that is free and without fear of reprisal.  My only rule was that any employee can say anything they like to an executive as long as it is not personal and that if it is a complaint it is followed up by a potential solution.  My other rule is that innovation is never birthed in committee.  It is seeded in the field like wildflowers and weeds – every employee should be encouraged to experiment with an idea no matter how messy it might be. no one and everyone owns it.  to quote Chairman Mao, “let a thousand flowers bloom.”  This, in my opinion how you earn not only respect but empathy so that when things go bad (and they always do) you have employees who want to help, want to go through walls to succeed, who want to be part of the campfire stories that are told when your company is 5000 people and billions in revenue.

    1. PhilipSugar

      Great comment.  I love the Rowdy Roddy Piper quote. I am stealing that.You can steal this one:  “Everyone has a plan until they get punched in the face” Mike Tyson.

  49. DJ Freschman

    I wanted to wait and read the other readers comments. I am proud to have known and worked with Phil Sugar for over 20 years and watched how he grew as a CEO and professional manager.  This guy practices what he preaches.  Hands on.  Customer touch.  Nimble. Creates a team of hardworking members who quickly become close friends pulling in the same direction. Our Delaware Innovation Fund financed his most recent company SmartButton at first launch and had the pleasure to watch it grow and prosper.  Congrats on a terrific blog!

  50. Pedro Moore

    Very insightful post Phil.  I like the comment regarding you not staying out of the sales process when you hire a new Head of Sales.  I agree with you too for the same reason.  The CEO of ING Direct does the same, he takes customer service calls so that he can gain direct insight from the market instead of solely relying on statistics.Everyone at Delaware Innovation fund agrees that Phil practices what he preaches which is why we invested in his company, Smart Button years ago.

  51. Pedro Moore

    If you are free, you should swing by our new office.

  52. Rodney Mesriani

    A very insightful post and I definitely learned a lot from this.

  53. PhilipSugar

     Gosh, I really don’t think I’ve taken a lot of hits.  I know that when I posted how I bought out my VC’s at SmartButton people thought it was a tale of woe, it was one of joy.Yes life has its bumps, I’d definitely do things differently, but I wouldn’t want to be a different person.

  54. JamesHRH

    Grey haired CEO story sounds like a hit – but also sounds like one you maximized via the lesson learned ledger.

  55. Donna Brewington White

    “I’d definitely do things differently, but I wouldn’t want to be a different person.”What a statement!

  56. PhilipSugar

     Very true.  Maybe my coping mechanism is to forget them.  What’s the saying? Time smooths all memories?

  57. Rohan

    And I’m sure your sense of humor helped too!

  58. Rohan

    Maybe it should be written stand up then? :)And you know Phil, I’d checked out your blog a while back and put it in my reader.I took it off after a while as I figured you weren’t updating it.Just added it back again. Would love to have you post more frequently! 🙂

  59. iggyfanlo

    Another saying. In life you just need two things. Good health and a bad memory

  60. PhilipSugar

     You know I don’t think I’m funny, but about once a month somebody tells me I should do stand up.I can’t even imagine it

  61. PhilipSugar

     True.  That was a big hit because I had so much paper.  Still keep those certificates.  I think Fred does too.

  62. PhilipSugar

     I’m much better at returning serve rather than serving it up.I don’t know how Fred stays so creative.  Its why I couldn’t do standup.  I could sit there and reply as good as anybody, but I’d need a heckler to get me going.

  63. PhilipSugar

     I should tighten that to: I’d do things differently but I wouldn’t want to be different.Isn’t always strange when you hear somebody say “I wouldn’t have done a thing differently?”Damn, I’ve already got a list of stuff I’d have done differently today, including that quote.

  64. Donna Brewington White

    Ha — I recently read an ancient prayer that says “grant me an unflawed beginning today, for I have done nothing yet.”You know, as far as the comment about doing things differently, I think I prefer the way you said it the first time.  BTW, one of my life’s mottoes:  I learn ergo I am.  (How’s that for an anti-aging remedy.)