Posts from management team

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.

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.

Every board meeting should end with an executive session. The term executive session is an oxymoron because it is a meeting of all the board members other than the executives of the company.

The first time most CEOs hear of this idea, they hate it. The words "we want to meet without you" strike fear in the hearts of most CEOs. And understandably so.

But it is a critically important part of the Board's job to manage the CEO and to some extent the CEO's senior management team. The Board is required to regularly discuss the performance of the CEO and the senior team, to address their compensation, and to work to make sure the CEO and senior team are working together as well as they can.

You can't do that job with the executives of the company sitting in the meeting. And yet, you want the executives of the company in the Board meeting. The more the better in my opinion, at least for most of the meeting.

So "best practices" says that you should end every Board meeting with an executive session. Some executive sessions last 5 minutes or less. There is simply very little to discuss. Some executive sessions last hours. That's generally not a good thing. Most last 20 to 30 minutes.

I've been sitting on Boards since 1990 and have probably participated in over a thousand Board meetings. To be honest most of them did not end with an executive session. In addition to the CEO's discomfort, there is also the issue of timing. Most Board meetings end in a rush. It is seldom that the CEO's agenda fits into the set time slot. And Board members have schedules to keep. So it is the executive session that often gets skipped.

So I don't totally practice what I preach. But after having participated in a particularly excellent executive session recently, I am recommitting myself to executive sessions. I will need all of your help. Entrepreneurs and CEOs should embrace them and make sure they happen. And fellow VCs should do the same. They are incredibly important and we have a fiduciary duty to do them.