Posts from management

Video Of The Week: Patty McCord on Rethinking How We Manage People

The Gotham Gal and I got to see Patty McCord give a talk a few months ago and I was blown away by her pragmatic, no-nonsense, calling out bullshit approach to managing people. Patty helped Netflix build their culture and left about six years ago to advise companies, small and large, how to manage people better.

She’s a breath of fresh air in a world of corporate speak. I think you’ll enjoy her as much as I do.

The Heartbeat

The best companies I work with have a heartbeat, they operate on a pace and a cadence and a rhythm that is perceptible to everyone in and around the company.

I am not talking about just product and engineering, although you can’t have a company with a heartbeat if you don’t have it in product and engineering. A company that doesn’t ship product regularly builds clogged arteries and that becomes pervasive in the culture and you end up with low morale, a lack of confidence, a revolving door, and a mess.

There are many ways to get this beat going and sustain it. There are techniques like agile product development, monthly and quarterly OKRs, weekly show and tells at the all-hands meeting, metrics meetings, etc, etc.

What it comes down to in my view is a mindset around getting stuff done on a regular cadence and then letting that rhythm become a wave and riding that wave.

And it starts with the CEO. They are the drummer in the band. They set the beat and keep the beat. And everyone plays around it.

If you have been in a company that has a heartbeat, you know what I am talking about.

If you haven’t, then you need to find one and join it and learn how it feels.

Becuase a heartbeat is what you want in your company.

Leading The People Side Of The Organization

In yesterday’s post, which seemed to touch a nerve, something I certainly seek to do from time to time, I mentioned the “talent organizations” of our portfolio companies. These are the people who help a founder/CEO build and lead the people who make up the company. It’s an undervalued and under-discussed function.

I have heard multiple founder/CEOs tell me that the biggest sigh of relief they had in building their companies was when they finally hired a really strong leader to sit at their side and help them with the people side of the business. It is not even accurate to say “people side of the business”. People are the business!

I recently listed to two Reboot podcasts in which my friend and former partner Jerry Colonna talked with two people leaders, Nathalie McGrath at Coinbase, and Patty McCord, former people leader at Netflix.

It is worth spending the almost two hours it will take to listen to these two podcasts.

What you will hear from Nathalie is the challenge of marrying a high stress, high performing culture and the concept of work-life balance. It is a near-impossible challenge, but simply trying to make it so is a where you must start. You can’t fake it. It has to be something you want to do and need to do.

What you will hear from Patty is a disdain for the platitudes and processes that you get from most organizations. She and her partner in this work, Reed Hastings, wanted to do it their way and in the process created a culture that is the envy of many tech companies.

And, I hope, you will come away from the two hours of listening, with an appreciation for the job of leading the people team. The people who do this work well are rare and valuable and if you don’t have one by your side, you should go find one.

Stakeholder Analysis

I am a fan of looking at something from all sides and understanding how each side thinks about it.

Consider a neighborhood school. There are students, parents, teachers, administrators, non-teaching staff, taxpayers, the community, homeowners (whose home value is impacted by the quality of the school), and possibly other stakeholders.

In theory every one of those stakeholders has a vested interest in the success of the school but in reality there is often conflict between them.

The teachers would certainly welcome a pay raise, for example. But the taxpayers may not. Or maybe they would because it would keep the quality high and thus the values of their homes.

What if the school wanted to start later and end later? The parents might oppose it because it would make it harder for them to get to work on time in the morning. But the teachers, administrators, and non teaching staff might welcome it because they would find it easier to get to work on time in the mornings.

All complex systems have many stakeholders and while they all want the system to succeed, because they have a stake in it, they rarely view success in the same terms.

Stakeholder analysis is extremely helpful in running a company and governing it (the work of the Board).

And the stakeholders of a company are not just the stockholders. Even when a Board and management is tasked with acting in the best interests of the stockholders, it is wise and prudent to act in the best interests of all of the stakeholders.

Doing so, however, is often impossible because of these conflicts between stakeholders.

Done properly, a stakeholder analysis attempts to determine what each and every stakeholder desires and the impact to them of an important decision. It is like a scorecard. It is often helpful to look at short term, medium term, and long term impacts.

I find that it is often the case that conflicts are the most extreme in the short term and that if you can frame a decision and the impact of it over a very long time horizon, it can be easier to get alignment.

But regardless of whether you can get alignment, a CEO must act and act decisively. And a Board must make sure that the CEO is acting wisely and in the best interests of the stockholders and stakeholders.

So doing a stakeholder analysis, understanding where the issues are and will be, and making a fully informed decision is the best course of action. And you will want a communication plan to mitigate the fallout of the decision as much as possible.

You never want to surprise or be surprised by your stakeholders. They may not like you, agree with you, or even support you. But they must be understood, respected, and considered in your decision making process.

Measuring and Boosting Engineering Velocity

I have been recommending our portfolio company Code Climate‘s relatively new Velocity product in most of my recent Board meetings.

I hear from management teams again and again that they want to understand their engineering utilization and velocity and benchmark it.

Everyone feels like they are not getting enough production out of engineering but have no way of knowing if that is just how they feel or the reality of the situation.

Velocity is a great tool to figure all of that out.

Becuase you can’t manage what you can’t measure.

If you feel like you need more visibility into your engineer team’s production, check out Velocity.

The Employee Equity Project

In the fall of 2010, I wrote a series of nine blog posts about Employee Equity as part of MBA Mondays.

You can read all of them at the links below:

Most of what is in those posts remains valid today.

But the final post, How Much, is very much out of date as the talent market has moved in favor of employees a lot in the past eight years.

That has been particularly true of the top executives and some key talent categories.

Most of the movement has been on the equity side of the comp package.

The How Much post is one of the top posts on AVC.

Though I wrote it 7 1/2 years ago, it was the seventh most popular post on AVC (sixth if you don’t count the home page) in the last year with almost 10k page views.

So I have been concerned that this blog (aka me) is spewing out of date information to a lot of people every day.

And so we are on a mission to fix that.

I have enlisted my colleagues Bethany and Zach on this project and this is what we in the process of doing:

We have collected data on employee equity grants from USV portfolio companies. Many of our portfolio companies use a reporting tool called Advanced HR and through it, we have been able to access anonymized data on every grant that these participating companies have made. Since these are our portfolio companies, we know what their equity is valued at and what it has been valued at over the years. We also understand the context behind many of the outlier grants.

So we have been normalizing the data and bucketing it and looking at distribution curves and understanding it.

We are mostly through all of this work and it is my hope we can publish the data before the middle of May.

As part of that, I will rewrite the How Much post and I will go back and edit the original post with an update section at the end clarifying that the data has changed (a lot).

We also plan to publish a calculator that will help a founder/CEO/HR team understand how to use the numbers we are going to publish.

So stay tuned for this update. It has been a fair bit of work to do this update right and we are excited to get the data out there so all of you can use it.

USV Manager Bootcamp

Our USV Portfolio Network Team built a new offering last year called the USV Manager Bootcamp.

The idea is to offer management training classes to our portfolio companies that are too small to be able to offer those classes themselves.

Last week was the sixth bootcamp and the self reported results are pretty impressive:

As I tweeted out last week, this is something other VC firms can do as well. It’s a perfect example of something that works for a portfolio of companies.

If you want to learn more about how this works, our Portfolio Network Team wrote a blog post about it last week.

Board Feedback

Something I am a huge fan of is Board Feedback. I’ve written about this a lot here at AVC and I am writing about it again today. Because it is important and not done regularly in my experience.

A founder/CEO and their team spend a lot of time preparing for a meeting, and then they give the meeting their all, and often the Board leaves and nothing is really said about it.

That sucks. For everyone, but most of all for the CEO.

Here is what I try to do and mostly do. I sometimes mess this up but not often.

After the meeting ends, at least one director, ideally the Chairman if there is one who is not the CEO, or the lead director, or the director who is there in person, should lead an executive session without the CEO and get feedback from all of the directors and observers and then they should sit down with the CEO and provide that feedback in an honest and open way.

The sooner you do this the better. No CEO should ever be wondering how the Board Meeting went, what people are thinking, and how they are doing.

And yet that is often the case. That is malpractice. It is wrong. It should not happen.

Some Thoughts On Checking References

We do a lot of referencing in our business. We certainly ask around about a team before investing in them. But we do even more referencing post investment when we help the founders and management of our portfolio companies build a team. Investors often have access to references that founders and management don’t. So we can add a lot of value to the hiring process by reaching out to our network and asking about people.

The thing I have learned in thirty plus years of making reference calls is to pay attention to how things are said more than what is said. And pay particular attention to what is not said.

I have also learned to call people instead of sending emails. Most people don’t want to put negative things in writing, but will do so on the phone, particularly with someone they trust.

It is also helpful to talk to people with knowledge of a situation but not handcuffed by it. For example, a CEO may not feel comfortable saying something negative about someone they transitioned out of their company, but a co-worker might be. Or a close friend of a co-worker might be.

I don’t mean to suggest that references are all about finding out the negatives. You should also seek to hear what someone’s strengths are. Most people are good at some things and not so good at other things. Getting a sense of strengths and weaknesses and making sure the person is a good fit for the role is what referencing a person is all about.

But I do believe strongly in hearing the negatives when hiring someone. If you can’t find anything negative about someone, that is a red flag to me. Often negatives in one situation can be positives in another.

If someone says to me, “they were great when the company was small but got lost as the company scaled” that means that person is great at the very early stages of a company’s development. And that is often the most valuable time in a company’s life. Finding people who can operate in that environment is not easy. So I like hearing that about people. I know where to orient them.

I am not a fan of calling the references on someone’s list unless I know those people well. What I do instead is figure out who I know well that knows the person or knows someone who does. And then I reach out and call them. It’s more work but it yields much better results.

I am also a believer in having a group of people do the referencing. Getting multiple angles of attack on a situation is valuable and multiple people will have a much bigger network of close relationships to leverage.

I am not a fan of referencing by checklist questions. I have been on the other end of calls where the person is reading from a list of questions. That strikes me as an odd way to do a reference check. I think a conversation where you can dig into the meat of the issue in a natural way works a lot better. At least it does for me.

Finally, I think you should wait until you have a good sense of the person and are seriously considering them for the role before doing the references. The more information you have about the person and their potential fit for the role, the better your calls can be. But you don’t want to wait too long. If there is a big red flag on a candidate, you want to know that before you spend too much of your time and their time on the hiring process.

Referencing is an art more than a science. Getting people on your team and around you (on your board, your advisors, your investor group) who are good at it can be super helpful. And don’t forget to reach out and use them in your hiring process. It can make a huge difference.

Return On Hard Decisions

I spent much of yesterday going through board decks and other year-end reports.

It was an incredibly gratifying experience after a hard year.

I spearheaded quite a few restructurings this year. A lot of people lost their jobs as a result of those efforts.

It was a year of hard decisions and hard conversations.

But as I sat in my office and read through the reports and decks, what came across loud and clear was that we had made a bunch of right decisions.

A lot of companies that were wandering in the wilderness are now headed in clear and exciting directions.

I continue to feel badly for the people who lost their jobs or quit their jobs in the wake of these restructurings. I realize that many of them had a hard year too and I am sorry for that.

But I feel great for the companies who have been revitalized and for the people who are working in them with a jump in their step and a feeling of optimism and purpose.

This time last year I had a bad feeling in my gut and was having trouble sleeping. I knew what I had to do and dreaded doing it.

Right now, I have a good feeling in my gut and am sleeping like a baby.

That is a nice return on hard decisions.