Posts from Management

Dr. Dana Ardi is a friend, former colleague, and an expert in the fields of talent management, organizational design, assessment, leadership, coaching, and recruiting. Dana has taught me a ton about these areas and was a partner at Flatiron Partners where we made a big investment in the talent side of the business. I asked Dana to "bat cleanup" on this series on People and she's done that in fine form with snippets from her coming book on Betas, the new archetype of organizational leader.

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“When someone asks you, A penny for your thoughts, and you put your two cents in, what happens to the other penny?” It’s a really great question, as well as being one of my favorite among many George Carlin quotes. And it came to mind when Fred asked me to contribute a guest blog post.
 
Having just put the finishing touches on a book about organizations that’ll be out next year, I’m happy to toss that second penny into the ring.
 
I consider myself a corporate anthropologist. I’ve spent most of my life studying the cultures of organizations, how they evolve and intersect with what’s happening right this second, and how the people in them influence and shape their communities. My consulting mission isn’t to transform established, successful companies – they’re doing fantastically well the way they are. It’s to assist them and other entrepreneurial ventures with the positioning to succeed with today’s workers, in today’s new business environment, and to help them evolve.
 
In the Information Age, workers in today’s organizations are accustomed to being sold, not told. Robert Louis Stevenson once wrote, “Marriage is a long conversation,” but so today is business – which is why companies have to change or else risk going under.
 
It’s pretty clear to me that the Information Age requires a new approach to organizing groups of people, as well as to successfully function within those same organizations. This approach I call Beta, to distinguish it from the old Alpha paradigm, and it trickles down to corporate culture, recruitment, and most of all, leadership.
 
What do all the most successful leaders, companies and workers have in common? In a nugget, it’s the trait we call self-awareness. In Heart, Smarts, Guts and Luck, a recent business title published by Harvard Business Review Press, co-author Anthony Tjan argues that all successful business leaders are skilled at just that. Of the four core qualities that he has observed make up most successful entrepreneurs and business-building, they know when to dial up…or dial town. They know when to emphasize passion, lower the pitch on assertion and bypass analytical smarts in favor of creative thinking or relational skills. In short, they’re as fluid and adaptable as the businesses they run.
 
What if you want to be there, but you’re not there yet? Here are a few things to to bear in mind about today’s and tomorrow’s winning-est organizations.
 
The Most Successful workplaces of the Future…
 
    •    Do away with archaic command-and-control models. Winning workplaces are horizontal, not hierarchical.Everyone who works there feels they’re part of something, and moreover, that it’s the next big thing. They want to be on the cutting-edge of all the people, places and things that technology is going to propel next.
 
    •    Instead of knives-out competition, these workplaces put a premium on collaboration and teamwork, and on building a successful community with shared values.
 
    •    Oh, and I’m not saying workplaces should become democracies – that would never work – simply thatpeople are empowered and encouraged to express themselves.
 
    •    Winning contemporary workplaces stress innovation. They believe that employees need to be given an opportunity to make a difference – to give input into key decisions and to communicate their findings and learnings to one another.
 
Corporate Culture matters more than you think
 
    •    The best teams are hired with collaboration in mind. People who remain in the culture are those who are dedicated to the ideal that that the whole is more than the sum of the parts.  
 
    •    In the most winning corporate cultures, everyone has something to contribute. Leadership is fluid and bend-able. Integrity and character matter a lot. Everyone knows about the culture. Everyone feels the culture. Everyone subscribes to the culture. Everyone recognizes both its passion and its nuance.

    •    In winning corporate cultures, roles, identities and responsibilities mutate weekly, daily, sometimes even hourly. There’s a focus on social, global and environmental responsibility. No, these initiatives aren’t just good ideas, they really matter.
 
Today’s Most Successful Organizations…
 
    •    …look less like an advancing army and more like a symphony orchestra. They are divided up into sections rather than functions. Each section has a leader and every player is a member of a team that works in synchrony. The orchestra conductor may direct what the orchestra does, but he knows he’s not completely in charge. His sole mission: To impel the other orchestra members to play to the very best of their ability, while integrating those efforts into a concerted group effort.
 
    •    In life as in business, most people are not generals, they’re lieutenants. Nor do they necessarily want to be generals – they want to be impact players. Frankly, most of us are happy to have the opportunity to accomplish what we’re good at, and what we enjoy, so long as we receive adequate recognition and reward.
 
    •    The most successful contemporary cultures convey the message that it’s okay to be yourself, and to do your best. You don’t always have to move up; you can also move across. More important is that you are happy, fulfilled, contributing to the community and feeling productive and rewarded.
 
The Leaders of Today have to be self-aware –  and top-down mandates no longer work
 
    •    There will always be the need for decisive leadership, particularly in crisis times (and there’s a touch of the autocrat and control freak inside every successful entrepreneur). But today’s world is all about collaboration –and launching and maintaining that “long conversation” that Stevenson talked about.
 
    •    The leaders of tomorrow need to practice ego management. They should be aware of their own biases, and focus as much on the present as on the future. They need to manage the egos of employees by rewarding collaborative behavior and teamwork.
 
    •    Leaders should strive to become what Michael Maccoby dubbed “Productive Narcissists,” tempering high self-esteem and confidence with empathy and compassion. Mindfulness, of self and others, by boards,executives and employees, may very well be the single most important trait of a successful company. Companies have to define the culture; the culture can’t define them. So pre-define it!
 
    •    Finally, companies need to understand that every individual in the organization is a contributor; and the closer everyone in the organization comes to achieving his or her singular potential, the more successful the business will be. Successful cultures encourage their employees to keep refreshing their toolkits, keep flexible, keep their stakes in the stream.

Rethink Recruiting

    •    Diversity is key – and by diversity I mean of thought, style, approach and background. You’re building a team, not filling a position. Cherry-picking candidates from name-brand universities will do nothing to further an organization and may even work against it.
 
    •    Don't buy resume or credentials. Buy competence, track record, character and culture fit.
 
    •    Avoid hiring only superstars. It’s about company teams, not just the individual. Sure, it’s totally tempting to create an All-Star team, but in case you hadn’t noticed, those people don’t pass the ball, they just shoot it.
 
    •    Hire competencies but remember: hire with your heart. Make sure new workers fit into the preexisting culture, while also importing their expertise. Become their sponsor – onboarding is essential. Spend time listening. Give them what they need to succeed.
 
    •    Sometimes you need to hire aliens – folks outside of the culture who bring new ideas and best practices from other places. These people become culture-influencer and agents of change.
 
    •    New hires are more than just the college or university they attended. In short, don’t hire credentials, hire people.
 
    •    Character matters. Most people don’t succeed in teams not because they are unqualified or incompetent, but simply because they are not a good cultural fit.
 
    •    Act now. One of the big mistakes entrepreneurs make is they don’t act quickly enough. Put aside perfectionism, don’t wait for the perfect person – he or she may not exist. Hire track record and potential.
 
    •    If, looking back, you realize someone is not a good cultural fit, or is not getting it done, don’t wait to make the change. Sometimes it is just as simple as readjusting their position or redefining their role. If they really don’t get it done, then it’s time to make the tough call.

Be on the lookout for signs of a lack of emotional commitment from employees:
 
    •    People complain about the hours they’re putting in;
    •    Turnover is high, particularly among young top achievers;
    •    Recruitment is difficult; there’s little innovation or creative thinking; and
    •    There’s more politicking that there is actual dialogue.
 
Take note of those employees who have an emotional commitment to the organization:
 
    •    People give extra effort voluntarily;
    •    They become your best ambassadors
    •    Employees make personal and professional sacrifices to stay rather than leave;
    •    People feel free to think outside the box; and
    •    Meetings often result in lively debates and team action.

The employees of tomorrow plays to their strengths

    •    Rather than aspiring to omnipotence, and acting as though they’re the masters of all they survey, Betas focus on what I call “motivated skills,” e.g., the things they know they do exceptionally well. And instead of exploiting their peers’ weaknesses in order to attain and hold onto power, they encourage their fellow team-members to play to their own strengths so that the entire team and organization can succeed.

Self-Awareness is all (but don’t think for a moment it means you’re soft)

    •    What is self-awareness but bringing an intellectual and emotional understanding of your strengths and their weaknesses, your goals and their motivations to a given situation?
 
    •    Ensure that you hire self-aware people. Give them the proper tools, techniques and feedback, as well as the proper levers of success and sponsorship. Onboard people with the belief that they’ll be successful. Then make sure it happens.
 
    •    That said, organizations cannot be whole-heartedly responsible for their employees’ development; employees have to play their roles, too. Beta leaders are skilled at assembling employees, encouraging them to think new thoughts in different ways and challenging them to do new things.

 If there’s a single takeaway from years of consulting, recruiting and observing both old and new organizations it’s this: People really truly matter. They are your strategy. They need to be encouraged and coached to pursue what they do best; to keep doing what they enjoy, and to participate in the success of your company.
 
To survive and thrive today and into the future, business leaders need to grow and develop their own self-awareness. Self-awareness means that you are willing and able to collaborate with employees, directors, customers and yes, even your competitors. It means that you understand that every individual in your organization is a contributor with varying degrees of potential – and that the closer everyone comes to attaining a high level of self-awareness, the closer the organization comes to achieving its potential. It means that your self-awareness feeds into your employees’ own self-awareness, which in turn ignites the overall success of the venture.
 
Now that Fred has made me the cleanup hitter, I’ll leave with this parting shot: Hire smart and hire the very best people you can. Don’t just onboard someone to fill a slot. Instead, build a community. Keep asking yourself not just what you want and need, but what’s best for the organization to grow and evolve.  And remember what George Carlin said: “If you haven’t gotten where you’re going, you’re probably not there yet.”

This is the third post in the MBA Mondays series on People. The number of people you have in your company at any time is a very important part of getting the company building process right. Too many and you will slow things down, burn through too much cash, and increase management overhead for no real benefit. Too few and you will be resource constrained and unable to grow as fast as you'd like.

I will say upfront that different types of businesses will require different employee bases and that my experience is really limited to software based businesses and within that sector, mostly consumer internet projects. So if you are working outside of the software business, I am not sure how useful this post will be.

I have a strong bias on this topic and that is that less is more. Time and time again I have seen the entrepreneur who wants to hire quickly fail and I have seen the entrepreneur that is a bit slow to hire succeed. If you took the time to corrrelate success in all of the venture investments my various firms have made over the years with one variable, it might be most highly correlated with a slow hiring ramp, at least in the first few years of company building. Being resource constrained can be a very good thing when you are just getting started. It forces you to focus on what's working and get to the rest of the vision later on.

I have tackled this topic of headcount before in the post on Burn Rate. This is what I said:

Building Product Stage – I would strongly recommend keeping the monthly burn below $50k per month at this stage. Most MVPs can be built by a team of three or four engineers, a product manager, and a designer. That's about $50k/month when you add in rent and other costs. I've seen teams take that number a bit higher, like to $75k/month. But once you get into that range, you are starting to burn cash faster than you should in this stage.

Building Usage Stage – I would recommend keeping the monthly burn below $100k per month at this stage. This is the stage after release, when you are focused in iterating the product, scaling the system for more users, and marketing the product to new users. This can be done by the same team that built the product with a few more engineers, a community manager, and maybe a few more dollars for this and that.

Building The Business Stage – This is when you've determined that your product market fit has been obtained and you now want to build a business around the product or service. You start to hire a management team, a revenue focused team, and some finance people. This is the time when you are investing in the team that will help you bring in revenues and eventually profits. I would recommend keeping the burn below $250k per month at this stage.

A good rule of thumb is multiply the number of people on the team by $10k to get the monthly burn. That is not the number you pay an employee. That is the "fully burdended" cost of a person including rent and other related costs. So if you use that mutiplier, my suggested team sizes are 5, 10, and 25 respectively for the three development stages listed above.

So 5 or less while you are building product, 10 or less when you are finding product/market fit, and 25 or less while you are working on generating revenues and locking down the business model. That's a rule of thumb for software based businesses that don't require a large direct sales force or some other significant labor cost.

Of course, there are all sorts of reasons why these numbers might not work for your business. This is just a "rule of thumb". You can use it as a baseline to think about whether or not you need those extra heads. But you might convince yourself that you do. And you may be right.

But above all else, restrain yourself from hiring early on. Just because you can does not mean you should. Team dynamics are easier in a small group. They get harder in a larger group. Things don't happen as quickly in larger groups. More management overhead is needed. All of these things work against you as a startup trying to get somewhere before someone else does. So hire slowly and wisely instead of quickly. You will be happy you did.

Kicking off our series on People, I am going to talk about the importance of culture and fit in the hiring process. What I have to say on this topic is mostly aimed at companies that are going from five employees to five hundred employees, but I do believe it is applicable to companies of all sizes.

I want to start with something I wrote in another MBA Mondays post, on the management team:

Companies are not people. But they are comprised of people. And the people side of the business is harder and way more complicated than building a product is. You have to start with culture, values, and a committment to creating a fantastic workplace. You can't fake these things. They have to come from the top. They are not bullshit. They are everything. There will be things that happen in the course of building a business that will challenge the belief in the leadership and the future of the company. If everyone is a mercenary and there is no shared culture and values, the team will blow apart. But if there is a meaningful culture that the entire team buys into, the team will stick together, double down, and get through those challenging situations.

So this is what you want to create in your hiring process. Some entrepreneurs and CEOs buy into "hire the best talent available" mantra. That can work if everything goes swimmingly well. But as I said, it often does not, and then that approach is fraught with problems. The other approach is hire for culture and fit. That is the approach I advocate.

Hiring for culture and fit does not and should not mean "hire a bunch of white guys in their late 20s and early 30s." Diversity should be a core value of the team building process. There are many reasons for this but most importantly you want a diversity of thought, experience, mindset, and angle of attack.

Don't hire a token woman. Hire as many women as you can. Don't hire a token person from another country. Hire from all around the world (and become an expert in our bullshit immigration system). Don't hire a token "gray haired" type. Hire up and down the age and experience spectrum.

But most importantly, hire people who will enjoy working together, who fit well together, who will make each other better. This is what hiring for cultural fit means. You start with the founding team and build on top of that. If your engineering team is serious and likes to work until midnight every day, you want to consider that when hiring new engineers. A new engineering team member who wants to go out drinking after work every night is not going to be a good fit on that team.

You also don't want to create silos in your organization. I see companies where the engineers sit on one side of the office and the sales people sit on the other side of the office. And it is like two different companies. That can create issues and cultural divides. It is tempting to set things up like this because sales teams are loud and animated and engineering teams tend to be quiet and serious. But try to connect these different parts of the organizations in as many ways as you can. Make sure everyone is on the same team and enjoys working together.

So when hiring, you must start with what you already have. Take measure of the vibe of the company, the work habits of the company, the strengths and weaknesses of the current team. It's like a jigsaw puzzle that is only half built. You are looking for the next piece that will fit nicely into what is already there.

This jigsaw puzzle analogy is why it is hard and a bit dangerous to hire up super fast. You can fit one new puzzle piece into an existing puzzle fairly easily. But if the puzzle is a moving target because so many pieces are coming in at once, it gets a lot harder. And it is likely you will make a bunch of bad hires who don't fit well into the organization. And when they leave the company, it will be your fault, not theirs.

It helps a lot to have a one pager that outlines the core values of the company. I just saw our portfolio company Twilio's version of that. They call it "Our 9 Things." I wish I could publish it here but I don't have permission from Jeff and so I will resist the urge. It has things like "think at scale" and "be frugal" on it. You get the idea I hope. This "guiding light" is a framework for the culture and values of the organization and each new hire should be assessed against the framework to make sure the fit is good.

You, as the founder and CEO, can drive this for a bit. Maybe up to the first twenty or thirty hires. But you are going to need help as the company grows because this is hard, really hard. So getting a person hired onto the team who is totally focused on the team and team building is critical. And make sure they are a good cultural fit when you make that hire. Because they are going to be the torch carrier for your culture along with you. It will be among the most important hire you will make in you startup. More on that to come as this series develops.

The first MBA Mondays Live class was last monday night.

I had an incredible time and I can't wait to do it again. There isn't much better in life than standing up in front a bunch of eager learners teaching something you know well.

The archive and photos from the event is permantly hosted on this link.

Here's the video of the entire class.

I'd like to get feedback on the class so I can improve it. So I've created a google form with a few questions on it. If you attended or watched the class and have five minutes to give me feedback please click here and fill out the form. I appreciate it.

I have watched the first fifteen minutes of the class and I've got some work to do on my delivery, speed (I was rushing), and crispness. And there are two math mistakes on the whiteboard. That really bugs me. The final dilution number for the founders in the dilution table should be 58.5% not 64.5%. And the number of shares to issue the CFO should be 75k shares not 46k shares. This first class feels a lot like the beta that it was.

My plan is to teach this same material live again, probably a couple more times. If I don't sell out, that will tell me that everyone who didn't get into the first class watched the livestream or the archive and that I should move on to a new topic. But I'm not sure that is the case so I will test that out. I don't plan to livestream this class again since we already have a video version it.

As I develop additional classes, I will livestream and archive the final class on the topic when I've got the material and pacing nailed down. That was a big takeaway from this experience.

All in all, this went extremely well. The basic setup of an in person class with a livestream and an archive is a format that works. I plan to use it to teach as much of the MBA Mondays material as I can in the coming years. That's exciting to me.

This is the final post of the MBA Mondays series on The Management Team. It is my favorite MBA Mondays series so far. The guest posts in particular have been fantastic.

Back when I started this series, I outlined it and decided that I would ask Jerry Colonna to wrap it up for us. Jerry, when he was my co-founder at Flatiron, taught me the people side of the venture capital business. And now as CEO coach to a number of USV portfolio CEOs (and many others), he is teaching the people side of the startup business to some of the best entrepreneurs we work with. He is a people person through and through and management is all about people.

So with that forward, here is Jerry's guest post. It is fantastic and he even threw in a section for Grimlock 🙂

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The Crucible of Leadership

 

Work is difficulty and drama, a high-stakes game in which our identity, our self-esteem, and our ability to provide are mixed inside us in volatile, sometimes explosive ways…Work is where we can make ourselves; work is where we can break ourselves. David Whyte, Crossing The Unknown Sea: Work as a Pilgrimage of Identity.

Fred started this series inspired by Bijan who urged folks to “invest in your team, help them become better managers.” The topic, said Fred with his flair for understatement, “is very important.” Over the weeks, different people looked at the process of building the capacity to actually lead—putting the team in place, scaling people, everyone argued may be the hardest part of building the company.

To me, the hardest part of scaling people is learning to lead your self.

The Crucible

They often come to me, their coach, because they don’t have any place else to put the feelings. They’ll sit on my couch, or pace while they talk on the phone, pausing as we grapple with issue after issue after issue. The common denominator is always people. When I first take on a client I warn that I don’t have a magic wand. Nevertheless their wish for some elixir to mend their relationships is heart-breakingly visceral.

When they start, they often think the hardest part is figuring out what to do but they’re inevitably knocked on their ass by the task of leading.  And when they make mistakes–when they fail to lead–their identity, self-esteem, and ability to provide—as David Whyte notes–sometimes explode.

We all too often break ourselves in the work of becoming a CEO, a manager, a leader.

The only answer, the only balm against the inevitable existential pain of becoming the leader we were born to be is to see the lessons implicit in the practice of becoming.

“In the course of studying how geeks and geezers became leaders,” writes Warren Bennis in the introduction to his classic, On Becoming a Leader, “…I discovered that their leadership always emerged after some rite of passage, often a stressful one. We call the experience that produces leaders a crucible…the crucible is an essential element of the process of becoming a leader…Some magic takes place in the crucible of leadership…The individual brings certain attributes into the crucible and emerges with new, improved leadership skills. Whatever is thrown at them, leaders emerge from their crucibles stronger and unbroken.”

The magic, the alchemy, occurs when what we do mixes with who we are and is cooked by the heat of what we believe.

Take as an example a client I worked with intensely over the last few weeks. She and a co-founder have been killing each other (okay, I have a flair for the overstatement…still, they have both been getting sick with a host of ailments—migraines and stomach problems). The arguments had gotten so bad that neither could stand to be in the same room with the other. Even I was exasperated. During one late night call, I asked my client to forget, for a moment, whether her co-founder was right or wrong. “I don’t care who’s right,” I said with my voice rising. “The only thing we have to focus on is what are you supposed to be learning from this.”

There was a long silence. I thought, “Okay. You’ve really pushed her too far. You and your woo-woo ‘lessons in the pain’ crap.” But then: alchemy. She opened up. “This is really shameful to admit,” she began, “but I know I’m a pain in the ass because I have to be right, all the time. I know it’s wrong but I can’t stop myself.”

And with that we had something to work with. I pressed her: Given this tendency, what do you really believe? What values do you hold? What kind of company do you want to build? And what kind of adult do you want to be?

Over the next few weeks, on guard for her need to be right, we carefully went to work changing her approach to the co-founder. For her, the crucible moment came in facing her shame, acknowledging who she really has been and as a result she got to choose how she wanted to manage and who she wanted to be.

We forge our truest identity by facing our fears, our prejudices, our passions, and the source of our aggression.

The Buddhists teach that for the steadfast warrior to emerge, we’ve got to break open our hearts to what is.

Eat Me If You Wish

“One day,” begins a story re-told by Aura Glaser in the latest issue of Tricycle Magazine, “[the Buddhist saint] Milarepa left his cave to gather firewood, and when he returned he found that his cave had been taken over by demons. There were demons everywhere! His first thought upon seeing them was, ‘I have got to get rid of them!’ He lunges toward them, chasing after them, trying forcefully to get them out of his cave. But the demons are completely unfazed. In fact, the more he chases them, the more comfortable and settled-in they seem to be. Realizing that his efforts to run them out have failed miserably, Milarepa opts for a new approach and decides to teach them the dharma.

“If chasing them out won’t work, then maybe hearing the teachings will change their minds and get them to go. So he takes his seat and begins… After a while he looks around and realizes all the demons are still there…At this point Milarepa lets out a deep breath of surrender, knowing now that these demons will not be manipulated into leaving and that maybe he has something to learn from them. He looks deeply into the eyes of each demon and bows, saying, ‘It looks like we’re going to be here together. I open myself to whatever you have to teach me.’

“In that moment all the demons but one disappear. One huge and especially fierce demon, with flaring nostrils and dripping fangs, is still there. So Milarepa lets go even further. Stepping over to the largest demon, he offers himself completely, holding nothing back. ‘Eat me if you wish.’ He places his head in the demon’s mouth, and at that moment the largest demon bows low and dissolves into space.”

Surrendering to the demons that torment your organization does not mean abdicating your responsibilities to manage. You are still responsible for dealing with the reality of what is. In some cases, the demon is the wrong vision for the company. In others, it might be that you’ve hired the wrong people. In still others, it might be your own failings—like an inability to admit that you’re wrong.

But in all cases, allowing your self to be eaten by the demon that remains—acknowledging the ways you contribute to the problem without descending into pointless self-flagellation–adds to the heat beneath the crucible. Without heat, there is no alchemy.

On Becoming Your Self

When I was a young Padawan, I remember lamenting to my therapist about my own fears as a manager. After a series of infuriating questions, she got me to admit that I was trapped by my own beliefs about success. I finally admitted I would never be satisfied until I was as successful as Bill Gates.

Being myself was never good enough and, as a result, being comfortable in my own leadership was impossible.

“If you bring forth what is in you, what you bring forth will save you. If you do not bring forth what is in you, what you do not bring forth will destroy you.”  Jesus, Gospel of Thomas

It was only later, after allowing myself to bring forth what is in me, that I emerged not only as a leader but a Jedi master.

Joel Spolsky, in his guest post for this series, tackled what I hear all too often in my workshops. He takes the Steve Jobs Question head on.

He writes:

“And yes, you’re right, Steve Jobs…was a dictatorial, autocratic asshole who ruled by fiat and fear.” But, importantly, he points out “you are not Steve Jobs.” Just like I am not Bill Gates.

Indeed, I think what Jesus taught was a simple truth: the only choice that doesn’t destroy you is to be the leader you were born to be. The alchemy of becoming your self is the ultimate act of leadership.

Listen close enough and you’ll hear echoes of this from every conceivable source.

Phil Sugar, tells us who he is and what he believes in the simple statement that, “My biggest legacy is the network of people I’ve hired and what they’ve gone on to do.”

Matt Blumberg, having gone through his own crucible challenged conventional wisdom (and the advice of Fred), choosing instead to invest in his team. “We consistently work at improving our management skills,” he notes adding that, “We learn from the successes and failures of others whenever possible.”

JLM writes:

“Develop a philosophy of management. Write it down. Try it out on some folks whose wisdom you admire. Put it to work…” and, my favorite, “Live it.”

I read in all these thoughts a steady, consistent wisdom: the wisdom of knowing yourself, your own beliefs, and living them.

Enduring the alchemical crucible requires developing the capacity to reflect, to turn the pain of the everyday life as a leader into lessons. Every wisdom tradition I’ve ever encountered—from Fred’s blog to the words of sages—ultimately demands the same thing: we must go inward.

That’s often the biggest obstacle to becoming your self. The frenzied, frenetic, do-it-now, answer-the-email-now-or-the-company-will-die-even-though-it’s-3 a.m. attitude is precisely the wrong process of becoming your self.

Joseph Campbell, writing in The Power of Myth, says,  “You must have a room, or a certain hour or so a day, where you don't know what was in the newspapers that morning…a place where you can simply experience and bring forth what you are and what you might be.”

Call that room, at that hour, the crucible of leadership.

Today's guest blogger needs no introduction. Joel Spolsky one of the best bloggers out there. He also runs one of our portfolio companies, Stack. And his approach to management is unorthodox at times but amazingly effective. I asked him to tell us a little about how he does it. I think you'll enjoy this post, it's great advice on many levels, and its is also full of chuckles. I told you he's a great blogger.

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Very few company founders start out with management experience, so they tend to make it up as they go along. Sometimes they try to reinvent management from first principles. More often than not, they manage their startups the way that they’ve seen management work on TV and in movies. I’ll bet more entrepreneurs model their behavior on Captain Picard from Star Trek than any nonfiction human.

Most TV management is of the “command and control” variety. The CEO makes a decision, and tells his lieutenants. They convey this important decision to the teams, who execute on the CEO’s decision. It’s top-down management. All authority and power and decisions flow from the top. How could it work any other way?

This system probably works very well when you are trying to organize a team of manual laborers with interchangeable skills to sweep up the ticker tape in the street after the Giants parade BECAUSE THE GIANTS WON THE SUPER BOWL IF YOU DID NOT NOTICE.

Command and Control probably worked great in the toothpaste factory where Charlie Bucket’s father screwed the little caps on tubes.

This system is also pretty obvious, so it’s what 90% of startup founders try first.

Seductively, it even works OK for a three person company.

This is dangerous because you don’t notice that it’s not going to scale. And when the company grows from 3 to 30, top-down management doesn’t work, because it doesn’t take advantage of everyone’s brains in the organization.

Turns out, it’s positively de-motivating to work for a company where your job is just to shut up and take orders. In tech startup land, we all understand instinctively that we have to hire super smart people, but we forget that we then have to organize the workforce so that those people can use their brains 24/7.

Thus, the upside-down pyramid. Stop thinking of the management team at the top of the organization. Start thinking of the software developers, the designers, the product managers, and the front line sales people as the top of the organization.

The “management team” isn’t the “decision making” team. It’s a support function. You may want to call them administration instead of management, which will keep them from getting too big for their britches.

Administrators aren’t supposed to make the hard decisions. They don’t know enough. All those super genius computer scientists that you had to recruit from MIT at great expense are supposed to make the hard decisions. That’s why you’re paying them. Administrators exist to move the furniture around so that the people at the top of the tree can make the hard decisions.

When two engineers get into an argument about whether to use one big Flash SSD drive or several small SSD drives, do you really think the CEO is going to know better than the two line engineers, who have just spent three days arguing and researching and testing?

Think about how a university department organizes itself. There are professors at various ranks, who pretty much just do whatever the heck they want. Then there’s a department chairperson who, more often than not, got suckered into the role. The chairperson of the department might call meetings and adjudicate who teaches what class, but she certainly doesn’t tell the other professors what research to do, or when to hold office hours, or what to write or think.

That’s the way it has to work in a knowledge organization. You don’t build a startup with one big gigantic brain on the top, and a bunch of lesser brains obeying orders down below. You try to get everyone to have a gigantic brain in their area, and you provide a minimum amount of administrative support to keep them humming along.

This is my view of management as administration—as a service corps that helps the talented individuals that build and sell products do their jobs better. Attempting to see management as the ultimate decision makers demotivates the smart people in the organization who, without the authority to do what they know is right, will grow frustrated and leave. And if this happens, you won’t notice it, but you’ll be left with a bunch of yes-men, who don’t particularly care (or know) how things should work, and the company will only have one brain – the CEO’s. See what I mean about “it doesn’t scale?”

And yes, you’re right, Steve Jobs didn’t manage this way. He was a dictatorial, autocratic asshole who ruled by fiat and fear. Maybe he made great products this way. But you? You are not Steve Jobs. You are not better at design than everyone in your company. You are not better at programming than every engineer in your company. You are not better at sales than every salesperson in the company.

It is not, as it turns out, necessary to be a micromanaging psychopath with narcissistic personality disorder (or even to pretend to be one) if you just hire smart people and give them real authority. The saddest thing about the Steve Jobs hagiography is all the young “incubator twerps” strutting around Mountain View deliberately cultivating their worst personality traits because they imagine that’s what made Steve Jobs a design genius. Cum hoc ergo propter hoc, young twerp. Maybe try wearing a black turtleneck too.

For every Steve Jobs, there are a thousand leaders who learned to hire smart people and let them build great things in a nurturing environment of empowerment and it was AWESOME. That doesn’t mean lowering your standards. It doesn’t mean letting people do bad work. It means hiring smart people who get things done—and then getting the hell out of the way.

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.

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Next up on our guest posts on the subject of The Management Team is AVC community regular JLM. For those that don't know, JLM runs a public company and before that built and sold a large real estate operation. He's also written one of the best guest posts ever on AVC. With that intro, here's what JLM has to say on the topic. I love the way he ends the post.

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Congratulations, you have built a prototype.  Got it to work.  Debugged it.  Even sold a few copies.  Have some real customers.  Now you are ready to scale up and make some real money.

 

You have crossed that Rubicon from having an idea to having a product and customers.  Now you have to build an organization, a real company, to manage the entire process.  Or your fledging little company has to evolve from crawl to walk to run.

 

You may look yourself in the mirror and say — “Well, I know a lot about my product, even its market and competitors but what the heck do I really know about building a company?”  Can I do this?

 

The simple and truthful answer is “Yes, you can!”  If you don’t think so, here are some tips to take you from the garage to the executive suite.

 

Bad news — your generation did not invent sex.  It does not have to invent the crafting of companies either.  Someone else has also done this before.

 

Create a clever and insightful graphical representation of the business model which will become your company.

1. Identify who the customers are and why they will pay money for your product.  This is the revenue side of the model.

2. Identify the elements which must be incorporated into your product to create it.  This is the expense side of the model.

3. Identify all the management functions which are necessary to transform the ingredients into the product and to educate the customers and to make the sale and to manage the money.

4. Identify the competitive forces that are lurking in the darkness wanting to destroy you — the ones that are real and the imaginary ones.

Make a drawing of all of this on a single very large piece of paper and then marvel at what you have done.  Do it about ten times until you have perfected it.  It keeps getting better each time.

 

This is the company you will have to create.  The one that can operate this business model.  The one which can deliver your product to the marketplace and make a buck in the process.

 

Make an organization chart which shows each of the functions that are necessary to operate the business model.

1. Make it a functional chart and don’t worry that it turns out very close to what every company ever created looks like.  That is good.  Remember, you did not invent sex.

2. Identify the functions which are “essential” and those which are “nice to have”.

3. Now identify what you can afford and what you can stretch to afford and those which are simply out of reach for the time being.

You have now identified your immediate, short term and long term organizational imperatives.

Take the business model and the organization chart and color code it to identify your own personal strengths and weaknesses.  If you have a co-founder, put his up there also.  Now you have identified those elements of leadership and management that you can provide and those you will have to hire from the outside.  Be tough on yourselves; don’t undertake a task you hate just for the ego enrichment of it all.

 

Be prepared to hire people who are fabulous in their fields.  Hire a Chief Financial Officer you cannot possibly afford and tell him he is the “financial conscience of the company”.  Meet with him weekly and never miss a meeting.

 

Now take the business model and the color coded organization chart and create a schedule of how you will build the organization.  Which functions will be added first and why?  The business model will tell you what and the color coded organization chart will tell you who and the schedule will tell you when.

 

That is really all there is to it but you will want to consider the following considerations:

1. It will not be perfect out of the chute.  You will do some stuff that does not work.  Just re-engage and do it over.  It’s going to be OK.  Really punish yourself — just kidding.  Learn to laugh at yourself.

2. Understand that everything in life is iterative.  You do something.  Get better at it.  Get better at it some more and one day you laugh to remember how naïve you were when you started.  Ever learn to ski or snowboard?

3. Do the formulaic and fundamental stuff and get it done but only do what you really believe.

Vision, Mission & Values

1. Vision — big dreams and little dreams all cost the same, so go with the big ones so that if you only accomplish fifty percent, it will still make your Momma proud.

2. Mission — simple, direct and jettison every extra word.  The mission of the Infantry — “Find ‘em. Fix ‘em.  Kill ‘em.”

3. Values — sweat this one because you will have to live this one.  If you are going to take risks and run with the bulls, this is where you let everyone know.  Don’t be afraid to say that “frugal” is a value.  I like frugal.

Every new employee hears the values part of the company from you and only you.  Wear a suit and a crisp white shirt and a tie and tie shoes.  Do it in the first five minutes of their employment.  They will never forget that.  Don’t discuss them, tell them.  Difference between a tattoo and magic marker.

1. Job descriptions — don’t hold out for a Pulitzer but put some thought into it.

2. Copy the absolute best exemplars you can find out there.  They are out there.  Be a copy cat.  Read Drucker.

3. Make all your decisions about equity upfront and don’t be afraid to say that you have to “earn” it.  Understand that equity is an element of compensation and sometimes it is not even in the top three.  

A good comp plan includes: 

1.     Salary;
2.     Benefits;
3.     Short term incentives (measurable performance based bonus);
4.     Long term incentives (equity); and,
5.     Something special (work from Colorado two weeks per year).

1. Develop a philosophy of management.  Write it down.  Try it out on some folks whose wisdom you admire.  Put it to work.  Live it.

2. Get a mentor, a rabbi, a gray haired eminence who is willing to work with you.  Golfers get swing coaches but great swing coaches work on the golfer’s head as much as his back swing.  Get a professional coach.

3. Do not be surprised that everyone in the company does not share your passion.  That is the curse of being an entrepreneur — you see and care about things other people don’t even know exist.  I would rather be a Captain of a rowboat than the second in command on the QE II.

4. Do not make changes, conduct experiments.  Nobody can resist an experiment.  Experiments that work well have a thousand fathers and mothers.  It becomes their idea.

5. Brainstorm at least once a month.  Honest to God, uninterrupted brainstorming.  There are no bad ideas.

6. Learn to critique yourself.  Learn to talk yourself down off the ledge.  Be thoughtful.  Take the lowest echelon of the company to lunch once a month.  And then talk to them.  Listen to them.  Make one change they came up with and you will become a legend.

7. In any organization, you rarely receive power.  You take power.  You wield power.  The most powerful people will things to be done they don’t order them to be done.  That is real power.

Ooops, I see the hook.  So I must go.  Good luck.  Remember — you can do it.

Now that I've completed three posts on The Management Team over the last three MBA Mondays, it's time for four or five guest posts on this topic. The first one is from Matt Blumberg, CEO of our portfolio company Return Path. I've been on Matt's board for over a decade and I've watched him develop into one of the finest managers I've had the pleasure to work with. Here are Matt's thoughts on this topic.

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When Return Path reached 100 employees a few years back, I had a dinner with my Board one night at which they basically told me, “Management teams never scale intact as you grow the business.  Someone always breaks.”  I’m sure they were right based on their own experience; I, of course, took this as a challenge.  And ever since then, my senior management team and I have become obsessed with scaling ourselves as managers.  So far, so good.  We are over 300 employees now and rapidly headed to 400 in the coming year, and the core senior management team is still in place and doing well.  Below are five reasons why that’s the case.

1.       We appreciate the criticality of excellent management and recognize that it is a completely different skill set from everything else we have learned in our careers.  This is like Step 1 in a typical “12-step program.”  First, admit you have a problem.  If you put together (a) management is important, (b) management is a different skill set, and (c) you might not be great at it, with the standard (d) you are an overachiever who likes to excel in everything, then you are setting the stage for yourself to learn and work hard at improving at management as a practice, which is the next item on the list.

2.       We consistently work at improving our management skills.  We have a strong culture of 360 feedback, development plans, coaching, and post mortems on major incidents, both as individuals and as a senior team.  Most of us have engaged on and off over the years with an executive coach, for the most part Marc Maltz from Triad Consulting.  In fact, the team holds each other accountable for individual performance against our development plans at our quarterly offsites.  But learning on the inside is only part of the process.  

3.       We learn from the successes and failures of others whenever possible.  My team regularly engages as individuals in rigorous external benchmarking to understand how peers at other companies – preferably ones either like us or larger – operate.  We methodically pick benchmarking candidates.  We ask for their time and get on their calendars.  We share knowledge and best practices back with them.  We pay this forward to smaller companies when they ask us for help.  And we incorporate the relevant learnings back into our own day to day work.

4.       We build the strongest possible second-level management bench we can to make sure we have a broad base of leadership and management in the company that complements our own skills.  A while back I wrote about the Peter Principle, Applied to Management that it’s quite easy to accumulate mediocre managers over the years because you feel like you have to promote your top performers into roles that are viewed as higher profile, are probably higher comp – and for which they may be completely unprepared and unsuited.  Angela Baldonero, my SVP People, and I have done a lot here to ensure that we are preparing people for management and leadership roles, and pushing them as much as we push ourselves.  We have developed and executed comprehensive Management Training and Leadership Development programs in conjunction with Mark Frein at Refinery Leadership Partners.  Make no mistake about it – this is a huge investment of time and money.  But it’s well worth it.  Training someone who knows your business well and knows his job well how to be a great manager is worth 100x the expense of the training relative to having an employee blow up and needing to replace them from the outside.

5.       We are hawkish about hiring in from the outside.  Sometimes you have to bolster your team, or your second-level team.  Expanding companies require more executives and managers, even if everyone on the team is scaling well.  But there are significant perils with hiring in from the outside, which I’ve written about twice with the same metaphor (sometimes I forget what I have posted in the past) – Like an Organ Transplant and Rejected by the Body.  You get the idea.  Your culture is important.  Your people are important.  New managers at any level instantly become stewards of both.  If they are failing as managers, then they need to leave.  Now.

I’m sure there are other things we do to scale ourselves as a management team – and more than that, I’m sure there are many things we could and should be doing but aren’t.  But so far, these things have been the mainstays of happily (they would agree) proving our Board wrong and remaining intact as a team as the business grows.