Losing The Team
Boards can be pretty patient. They can put up with a lot of failings, particularly in the early days of a startup when the product isn't where it needs to be. But one thing a Board cannot tolerate is when a CEO loses the confidence of the team.
I feel that I must say this because I know that many folks in our portfolio read AVC. This is not a post about any specific company or any CEO or any team. This is just a statement of fact that I wanted to put out there because I was thinking about it.
If I think about the times I have had to remove a CEO, by far the most common reason was the loss of confidence of the team in the CEO. You get the call from one of the senior team members. They tell you that they are going to leave and so is everyone else on the senior team unless you do something about the leader. It is a palace coup. No guns are fired. But the boss has to go. And so he or she does. No Board can ignore that call.
So if you think the Board is the most important group you need to manage, you are dead wrong. The most important group you need to manage is your team. If you lose them, you lose your job.
A symptom of managing up…never works.
When the call happens, that means the employees will managing up, no intent do work until they can satified in some way
If you have waited for that call, it means that things probably have been deteriorating for a while.One factor is that a CEO could filter things & mask potential internal issues for a while before issues become more visible.Btw- this scenario can happen within teams too. When employees complain to the manager’s boss, same issue might be in play.One way to be more predictive about this is to conduct regular confidential employee surveys. They could be revealing.
This type of message is listened to from the top not the middle IMO.As a VP or C level you end up going to dinner more than you take a survey. They want to stay close to the generals and these things bubble up over time if the relationships are there.
In good times, yes. But in bad/critical times, dynamics could change. The direct reports may not be as forthcoming in person for fear of losing their jobs. A confidential survey gives them a more effective voice.
But you have to really believe it is confidential…
There are outside agencies that administer it, and one pre-requisite is they can never slice the data fine enough to pinpoint an employee. It does work better for larger organizations, prob 100+. and especially if the teams are dispersed.
In companies less than 50 people which is most start ups surveys as an information gathering process for the senior team just doesn’t happen in my experience.As senior management you simply talk to each other and to your board connections.
I agree about the size factor. Even prob 100+.
I was nudging you in the direction ;)If you have over 100 people you are not a start up playing by the same rules as a 20 person company. At 50 certainly 100 you have revenue and customers and metrics to judge success. Earlier not so.Start up as a term that is relevant to the 10 person and the 100 person company is not very useful. Gets bandied about and to me, means less and less used generally.
As an exec, making the call to the board is not a warning sign, it’s action sign.As an exec, not the CEO, you think long and hard before you make this call. Happens infrequently, but yup, does happen.
that’s why the call has so much power
I’ve seen this play out where the smartest senior manager figures out early on that the CEO is not the right fit…and so the sr manager leaves. CEO learns/iterates for a while before next sr manager realizes they too need to move on. And so on. You’re not always so lucky to have a groundswell (a coup, as you say). At least in a coup it can happen sooner and quicker.
Agree…people simply move on.
once the revolving door starts, it takes a lot to stop the momentum
Marketers and salespeople come and go in packs usually following the leader so when the head leaves, reorg is usually not far behind.
Why would you want that kind of senior manager if they’re not willing to help out the greater cause, even if that means leading to CEO getting fired?
It’s not always apparent or gotten to the point that everyone (or most) that report to the CEO see there’s a problem with the CEO.
Fair enough. I imagine not everyone would have the ability to see the problems that may exist either.
It can be a long, hard, bitter process — becomes the job more than the job itself. Sometimes, it is not just the CEO, but the system that has developed around the CEO and this is hard to unravel. “System” includes people who for one reason or another are invested in maintaining the dysfunction (often without being aware of this). It takes a certain type of person to take on this type of challenge. Not everyone is a change agent. It is hard to “heal” a person or a situation that does not want to be healed. There is also a huge risk that you (the senior manager) will be the one ousted and will be seen as the bad guy.You have to choose your battles.
Fair enough. I guess I pick massive battles relating to changing things – I wonder if I’ll ever be able to stop, though I don’t think I’ll rest until the world is more on a path that it needs to be; We’re close, though that can be seemingly far, too. Extraordinary people like Elon Musk are motivating to me, though I’m years from being able to be in the same place as him, maybe a decade from doing the scale and importance of his projects – though that could be underselling myself, too.
Let’s face it. You will never rest. 😉
Yooouu knnooww itt…Side note .. I just bookmarked an article entitled “The Key To Getting Motivated: Give up” – http://99u.com/articles/147… – it’s actually pretty solid advice.
There could be another option. If the CEO is also a founder & strong in product management or as a CTO, then a solution might be to relegate them to that role while bringing in a more seasoned CEO.But I’m not sure this always works well in the long term. It would work better if the CEO pro-actively replaces themselves & doesn’t wait for the palace coup.
That is very hard to make work. Brad Feld has mastered this move. I have not.
Would kinda be like someone’s wife agreeing that you are better served by another woman. “That’s ok honey, I want what’s best for you!”
It’s really hard to do well. I’ve done it a few times, but I also have learned the power of a partnership – rare but possible – between CEO and COO where the CEO owns product and the COO owns everything else.It’s all very fragile until it’s not.
Is what happened this week at awe.sm between Fred & Jonathan a good case where the founding CEO replaced themselves to focus on product development? http://jonathanhstrauss.com…
To quote a poorly made Leo movie, the Beach, “Out of Sight, Out of Mind”..When the CEO is replaced, the tides calms and every1 gets back to work.
This is why I make sure all employees owe me a grave personal debt.
you have a devious mind 🙂
Don Corleone: … What have I ever done to make you treat me so disrespectfully? If you’d come to me in friendship, then this scum that wounded your daughter would be suffering this very day. And if by chance an honest man like yourself should make enemies, then they would become my enemies. And then they would fear you.Bonasera: Be my friend. Godfather.[The Don shrugs, Bonasera bows toward the Don and kisses the Don’s hand.]Don Corleone: Good. Someday, and that day may never come, I’ll call upon you to do a service for me. But until that day, accept this justice as a gift on my daughter’s wedding day.Andy “The Godfather” Swan?
“all employees owe me a grave personal debt”There are people reading this who are laughing and there are people reading this who are saying “exactly”.That’s actually a good ping to make in an employment interview. I like using stories to figure out where people’s heads are at.
“So if you think the Board is the most important group you need to manage, you are dead wrong.”I once read the blog of a CEO – that was looking to hire an assistant. I was taken back after reading the post that most of the Job Description was worrying about / planning for the Board, meetings, arrangements, calls etc…..It did not sync w/ much of what we talked about here at AVC.
It was the job description of the assistant correct??? If you have a board that wants super formal, super polished materials, to be coddled (provide for their travel etc), and to meet often you do need an assistant for that.
Yup…Thought about that after I posted the comment…my recollection after reading this person’s blog post was that they were both spending a lot of time managing up.
It’s very simple. Startups are about growth. That includes people growth.If the CEO (or any employee) doesn’t grow accordingly as the startup evolves, then the fit is no longer there.If you don’t grow,You will go.
Being ignorant is fixable, being ignorant “of” your ignorance is terminal.
One of the most valuable sources of knowledge, information and peceptions for a CEO is the team. The most unhealthy and dysfunctional companies that I come across in my work (and unfortunately have been part of which is partly why I am so passionate) are those in which the CEO (or other significant leader) has closed him/herself off to this information source. It should be tapped for all it is worth and it is worth A LOT!What you don’t know CAN hurt you. Better to know and have the choice to do something about it.
William, I agree with your idea, People should move one with the group going, if not, then they do not have the ablity to adapt it, then he or she will be abandoned
STARTUP IS GROW.GROW WITH IT.
Swapping out the CEO doesn’t mean that things will improve and in some cases can get worse.
Tom, sometimes, that is right, usually it has something to do with the next CEO. if he were the same as the previous one, then another coup would happen again, and the situation would be worse in that way.
I agree. That’s why Boards often wait too long to do it.
I’d hope / imagine CEOs would help as much as they can in the transition, or does that not usually happen due to the state of current issues?
IMO, self-awareness is key to stay in tune with your people, your business and your life.Perhaps it happens the CEO doesn’t even realize that he is slipping up with his own people because he could be fighting his own demons – be it professional or personal. Could be caught up in his own web of thoughts till that wake-up call from the Board.
hard decision but how awesome is that? in a corporate environment, that CEO would get a huge bonus and then get the entire team underneath them fired.the team is the product. making sure they are inspired is everything.
Well said. You can’t get anything done without a great team.
Actually I’d say that public company CEOs are fired at a much higher rate than their private company counterparts, and are far less likely to find a “soft landing” in another lateral position.That’s why golden parachutes are there… because the person taking the public company CEO job knows that they are doing so at a fairly significant career risk.
Didn’t say public — said Corporate — 🙂
managing people. toughest thing in business and the most expensive cost input. why we don’t spend more time on it in business school I don’t know.I also dislike CEO’s that only talk abut the big exit. It pays to set small goals to get there. Achieve the small ones, and you achieve the big ones.
I totally agree with you here. Focusing on the big exit (or giant goal of some kind) is folly in my opinion, the only way to reliably accomplish large things is to decompose them into bite size chunks and go to town on accomplishing them. It is much easier to accomplish a small thing, but another thing that getting in the small details gives you is the opportunity to see alternative paths to Rome.Here is a little analogy. Perhaps you are a governor of a small city state in the ancient world, and your end goal was to say rule all of Italy. You can either focus on the giant goal or you can figure out how to accomplish it in detail and set little goals along the way. If you focus on the big goal you raise a giant army and you tell your generals to prepare for a very costly in man and materials frontal assault. If you instead take the detail oriented path, in the process of building your strategy and military you might notice that you can build a new kind of navy and you could rule the whole mediterranean, not just Italy. Or you might figure out that to conquer your enemies by brute force is unnecessary, you can instead plant assassins and don’t have to go through the expense and logistical difficulty of breaching the primary defenses of the country.In my mind its always better to set the little goals and get down and dirty in the details. The things you find along the way give you a lot of insight in how to accomplish the big things. They might even find you a better Golden Goose in the end.
I dislike CEO’s that are too focused on thinking on having an exit, instead of building a sustainable business
So true. Leadership has never happened in a vacuum. And when this happens in a company where there is no board and no accountability, the dysfunction and chaos is the stuff novels are made of.
Neil Armstrong disagrees
LOL. Okay, I’ll give you that one. 🙂
have you ever switched two CEOs between companies in your portfolio?
Jason is actually on to a good concept for a reality tv show.CEO swap.
That would be awkward, no?
the investment thesis ‘selects’, and i wonder if the companies being selected by the thesis are being internally shaped by their large network of engaged users in a similar way to each other, a modular way, with interchangeability a possibility?thesis as template.
Right, and I could see it working with two well-functioning CEOs – but if one is found to not be working in one environment, they may not fair well in another of the same?
Just had exactly this happen, post an M&A transaction that didn’t close. The team was looking at another two to three years of hard work and wanted a new leader. Dreaded talking to the CEO/Founder but it all has worked out well so far.
dread is a good word for that moment. but you have to do it.
Views on team and board confidence from a removed CEO:* http://urbanhorizon.wordpre…
IF NO ONE LIKE CENTER LION, VOLTRON NOT GOING TO HAPPEN.
GL–i have no idea what this means!
Ha – I have vague memories of basically the team of robots come together and create a super robot; Looking it up, Voltron, is the name of said super robot – http://en.wikipedia.org/wik…Images at https://www.google.ca/searc…
haha – loved those lions!
That is the best metaphor I have ever heard for this! +100000000000
GOOD ATTITUDE TO BE BETTER JOB….
very simple advice, but extremely nuanced
Fred: But if the CEO owns a majority of the equity how do you remove him/her?
I’m assuming he’s referring to a situation where he doesn’t. Complicated either way.
been there. you can’t.
You need to make sure that it is truly a palace coup and not potentially one disgruntled exec – it was written that way in the post (though I assume there would be verification about them telling you about “everyone else”
yes. very true.
True also in regular jobs – if you lose confidence in your boss, you’re probably not in the right job.Also true in relationships. It is beyond trust, it is confidence
“Also true in relationships.”High chance of this happening if the person in question puts you on a pedestal and especially for the wrong reasons. Live by the sword die by the sword.
Every time that I lost confidence in a boss, I left. Not always quickly since I have a bit of change agent in my makeup.”It is beyond trust, it is confidence.” This made me think. The two are inextricably liniked, but there is a difference, albeit nuanced.
Before egos is the company then both team and CEO reached a crossroad. If any company has reached that unfortunate spot there is not much to do about the company.
That’s an excellent test for true leadership abilities. Many times I’ve wondered why a CEO would get rid of their best senior executives. Maybe it’s to prevent mutiny. One thing for sure. You couldn’t ever put one of the complaining senior execs in the CEO position. It would show whimsical decision making on the part of the board.
So many sports analogues here; probably hundreds of examples over the years of a Coach losing his team, only to have a season saved by a new one, with new ideas, a different gameplan, different motivational techniques.One of the reasons why I strongly prefer to work on teams with a lot of team sports experience mixed in throughout all levels, top to bottom. The lessons learned through sports are invaluable.
i think Woodson is doing a good job. but his players, particularly JR, have not stepped up in the Pacers series.
.As always an interesting blog post.There does seem to me — having been a CEO for 33 years — to be a note of desperation which is indicative of a fundamental problem (perhaps a failure, really) in the Board’s oversight of their company.Not to put too fine a point on things but it is “their” company whether they have a control position or not given their fiduciary obligation to ALL shareholders including the CEO; and, their unfettered authority and duty to oversee the company.The Board and the CEO both have a vested interest in having a grip on reality that is hopefully based on the same facts and the same reality. That means they have to have the same data from which to evaluate that reality.A VC makes a bet on a jockey — CEO — and is obligated therefore to do a bit of due diligence and ensure they know with whom they are getting into bed. It is also prudent to model all the things that may go “bump in the night” before plunking down your money.From time to time, it is essential to weigh and measure the jockey — surely no less frequently than every 6 months. One of the elements of that performance appraisal should be the quality, esprit de corps and morale of the team.How?An anonymous Company Survey from which the results are transcribed — not in any way compromising the anonymity — and shared with the Board.This is a simple management exercise that should be a standard policy of any well run company. We are talking a 12 question Survey Monkey exercise here not the re-writing of the Magna Carta.It should be configured to ask the same question as least two or three different ways:1. Is the company headed in the right direction?2. Tell me three areas we could improve upon — why and how?3. If you were President what are three things you would change immediately?If you are about to have a mutiny, these three questions will likely smoke it out. Then the Board needs to meet amongst itself and plan the next steps rather than be the recipient of that phone call.This is simple business intelligence gathering.As a CEO, I used to do this annually and never failed to learn something — something surprising. One of the things that was always consistently revealed was the “trend line” of some measure of morale and happiness.I note this because I don’t think a Board should be surprised by a wind shift in confidence in the sentiment of the team. But you do have to measure it and do it frequently. The regular measuring of sentiments that such a Company Survey would deliver is an essential and necessary exercise for the Board and the company.JLM.
good advice and semi annual or at least annual reviews are essential. but there are times when Boards know they have a problem but don’t act for a variety of reasons
.Isn’t “not acting” really an action? A reasoned decision?Nothing wrong with not acting as long as the Board understands that this may be a missed opportunity to do something — something else.I am a huge advocate of Board’s appointing either manually or by nature a single seasoned gray haired member to develop a strong relationship with a CEO — like a spy handler assigned to a single spy.I suspect that almost every startup CEO will eventually come under scrutiny and very few are fit for the CEO job the company will ultimately require when it has grown — particularly hyper growth situations.So, this is a problem that Boards should envision from the start.JLM.
“So if you think the Board is the most important group you need to manage, you are dead wrong. The most important group you need to manage is your team. If you lose them, you lose your job.”I think people would be surprised in situations like this where power actually lies and for what reasons.One of the first lessons I learned being in business when selling is that the top guy wasn’t the person that mattered it was the admin person or secretary (in this particular case at least). That was the person who ultimately made the buying decision (this was for printing and graphics). I got my first big deal by figuring that out and sucking up to that person who happened to be the secretary to the head of the hospital.  Anyway, even if the boss wanted to use you he wasn’t going to override the decision of his admin because if she didn’t support the choice all he would get is headaches and problems. (This is similar to the concept where people want to use a single vendor so nobody can point the finger.) The bad news is that the admin is not always right and many times gets themselves into a primadona position at the company. If that is the case simply apply more suction! In another case when I was in college I spent the summer surveying industrial buildings for a nation RE company that had expanded to the east coast. I was confirming information that I had gathered with the CEO of that company and he asked me if I could come in and talk to him about all the data because he thought they could use it. Sensing an opportunity to sell the data to him, I agreed and packaged it ready to close the sale. I had the meeting in his office, he liked the data, and sent me down to talk to his sales vp or manager to work out details having agreed to the price we haggled over. The manager took one look at the info and said “all this is great but the one thing you never do is change sales people’s territories so I can’t use it”. Everything ended right there. The CEO wasn’t going to question or override the decision of his underling. When I was in printing there was no way I would ever tell a pressman what type of ink to use (they are superstitious like athletes). I might suggest it but no way would I override the default choice. If the ink didn’t “lay” right the pressman would just say “yeah that never happened when I used Braden inks”. I used this info later when evaluating a paint business opportunity figuring correctly that painters would operate the same way. Non starter unless you get the defacto “decider” on board and it becomes his idea or somehow benefits him (spifs are a shortcut).
it’s like a sports team not getting results. the players never get the sack. always the coach.
Oh, Fred, this post resonates with my passion around “building the team” which really is more about leading/managing the team than hiring even though I’ve stolen this phrase as my mantra as a recruiter.Of course you are the master of putting an idea out there and letting the community take the ball, and the community is doing a great job with it from what I’ve read so far. But this is a big topic and really does deserve more airplay.How does a CEO not get to this place??? This is huge.
being self aware, working with a coach, getting good mentoring, listening to the board
@fredwilson:disqus do you have an email address I can contact you with? I want to ask you something.
Are you sure? I’d rather let Fred answer me.
Be a smart-ass somewhere else. Perhaps TechCrunch.
there is a contact link at the bottom of avc.comclicking that will generate an email to me
Alright thanks Fred!
This is somewhat unrelated but I’m curious. What’s the longest anyone here has worked for one company? Has this number declined in the last decade? Our parents worked for the same companies for 20+ years. I suspect the average here is no more than 5. What does this say about “team” in today’s workforce?
i agree,debt is not nice,and not always the one who is in debt to blame,we all need some help sometimes,cause sometimes we have no choice
Very good post.It is very hard to know, as a board member, what is going on inside of a company, and often you find out too late when people start leaving. Building a personal relationship with the executives in the company is a great way to ensure that you will have your finger on the pulse of what is going on.I wrote about the same topic below. The comments threads are worth a read.http://www.businessinsider….
Replace CEO with any VP or senior level director…regardless, those that can make changes need to listen when the masses are starting to revolt.
There’s something not quite right about this. To be sure, I only have the experience of the nonprofit world, where this happens all the time — the staff develop grudges and hatreds of the executive director and start informing on him to the board. The hapless ED is crushed between the over-expectant board and the sullen and under-performing staff.Maybe tech teams are magical. But are they always right when they complain about their boss? They can’t go to this boss directly, they have to blow him into the board behind his back? Is that really necessary?Of course, there is always the problem of the little dictators in any organization, but if you have process, if you have communication, if you have rules, this antagonism shouldn’t happen. But it is an inherently antagonistic situation, to be squeezed between the uber management — the board that hired you and can fire you — and the labour with this power to ruin your life, and anonymously at times.
Yeah I’ve seen this happen as a consultant.A strong seasoned CTO decides to leave after building a solid team and a great product. He or she takes an offer at another firm. A new CTO is hired. Soon the ranks begin to thin as people jump ship.Overall team confidence in leadership is soo important.
Fred- how about a post on the tension between the need to make CEO change and the unnatural act of removing a founder from the company he/she created?
Great post Fred,Responsibility *always* lies with the CEO of a company to have the team look up to him as a motivational leader.IF this doesn’t happen there are two options:a) the CEO has made a series of wrong hires (in which case he should have realized and corrected that before things span out of control)b) the CEO doesn’t realize what his responsibility and duties are in which case he should be made aware and be given a chance to correct things swiftly.Most of the time when something like what you describe happens the damage is too big to correct and so there is no other way but for the CEO to step aside graciously.Not ALL Founders are born CEOs and not all CEOs are great founders so you have to self-assess where you stand.Sometimes it just makes more sense to hire a professional CEO as soon as that is financially possible given the stage of the company and funding stage.
well said…winning makes everything before it the way it had to be.
Charlie, viewing your comments, I see that you have well experienced of these, that is good ways to solve the avoid the coup as the author wrote.well said.
Great comment. Agree with it all.I think Fred was being brief when he said you get a call from a team member. I believe its just like when an employee comes to you about their boss there are one of two situations:1. You knew there was a problem with the leader not a shadow of a doubt.2. It is completely out of the blue.Case 1 toxic leader, Case 2, toxic employee. Middle case doesn’t seem to happen.
“2) If anyone in your management team holds you hostage and you’re doing a good job, don’t tolerate that. Cut out the toxic parts. ”Possible strategy is to be the crazy driver that others look out for. I’ve found that if being nice doesn’t work with a particular group you have flip to being the opposite. You just have to work harder than the effort that the others are putting in. The saying “I don’t have to outrun the bear I just have to outrun you” comes to mind. Hopefully the others will be busy coaching soccer or something like that. As the joke about the man’s private part and the doctor goes “I don’t have to cut that off it’s going to fall off all by itself”. Oh, here it is:http://www.jokeswarehouse.c…
“If you’re running a transparent, communicative company it’s a lot easier to handle.”Bravo! (Actually, the entire comment deserves a “bravo”)But don’t you think this type of company is also less likely to have these problems? Or at least can seek early intervention which may avoid or mitigate these problems?
Honestly, invariably this happens to everyone in some fashion unless you are the super rarity that stays forever.When I was writing this post a few weeks ago http://arnoldwaldstein.com/… it made me remember the old saying in the movie biz that every studio exec will one day come to work and get fired.True honestly for (most) everyone. Natural order of life.
How subtle was this talk or were there people hinting to you about it? Or gut from changes in behaviour?
Charlie is a maven without a doubt.
When he speaks, I listen.
“it’s easy to piss off boards by failing to communicate”I don’t have experience w/ boards – but the failing to communicate is a sign of a poor team member in any scenario. There is nothing more frustrating than someone who refuses to communicate regularly. As a founder, I can’t run a company if I don’t know what team members are doing – failure to communicate is a death sentence that can’t be tolerated at a young company.
Ownership is nice.Bootstrapping to get their is truly a slog. A noble one but a slog none-the-less.
Honestly effort, even really smart effort, and success are not by nature a guarantee nor always connected.But we all do our best to create our own luck and bend reality towards our dreams.I’ve been lucky at this and wake every day with the belief that indeed I will make it so. And have some fun along the way.
Ah. So I wonder if people regularly meet in private and be like “is there anything going on that I need to fix?” etc.. obviously it will could be scary for people unless they’ve seen similar situations be brought forward and not bad consequences occurring as a result.
I’m just curious what kind of actions would lead to someone owing a grave personal debt..
“wake every day with the belief that indeed I will make it so”That’s the key. The belief/confidence.
This is true. My biggest worry on this type of thing is not as a CEO, its the office politics.If you let people talk about other people behind their back you have started office politics.So if an employee comes to me and says I don’t like so and so, my first question is how have you discussed it with them.If the answer is I haven’t or worse: don’t tell so and so but, “insert character assassination here,” and somebody doesn’t get in grave trouble, you are just opening the door.What you are telling people is go behind the persons back and you will get ahead. Setup a coalition with others and move ahead.If a board fosters this at the top, it will pervade the organization like a cancer.Frankly, I bet Fred has somebody reach out to him today saying wow, so right, me and the team have lost confidence in the CEO. If you signal you tolerate this behavior, you will get it.My first thing is to say we are all going to sit down and talk about it. If the person really is putting out a SOS then they should be fine, if they say, no, no!!! Then I’m immediately suspect and tell the person that, they are now in trouble.Wrote about that: http://justanentrepreneur.c…
This is exactly what happens at poor PubCo BoD.