Founder to CEO
The Great CEO Within
(Formerly: Founder to CEO)
How to build a category-killing company from the ground up
By Matt Mochary
Part I -- The Beginning
Chapter 1: Getting Started
Chapter 2: The Team
Part II — Individual Habits
Chapter 3: Getting Things Done
Chapter 4: Inbox Zero
Chapter 5: Top Goal
Chapter 6: On Time and Present
Chapter 7: When You Say It Twice, Write It Down
Chapter 8: Gratitude and Appreciation
Chapter 9: Energy Audit and Zone of Genius
Chapter 10: Health
Part III — Group Habits
Chapter 10: Decision-Making
Chapter 11: Loudest Voice in the Room
Chapter 12: Impeccable Agreements and Consequences
Chapter 13: Transparency
Chapter 14: Conflict Resolution and Issue Identification
Chapter 15: Conscious Leadership
Chapter 16: Customer Obsession
Chapter 17: Culture
Part IV — Infrastructure
Chapter 18: Company Folder system and Wiki
Chapter 19: Goal-Tracking System
Chapter 20: Areas of Responsibility (AORs)
Chapter 21: No Single Point of Failure
Chapter 22: Key Performance Indicators (KPIs)
Part V — Collaboration
Chapter 23: Meetings
Chapter 24: Feedback
Chapter 25: Organizational Structure
Part VI — Processes
Chapter 26: Fundraising
Chapter 27: Recruiting
Chapter 28: Sales
Chapter 29: Marketing
Part VII — Other Departments
Chapter 30: Executive
Chapter 31: Product
Chapter 32: Engineering
Chapter 33: People
Chapter 34: Finance
Chapter 35: Legal
Part VIII -- Appendices
Appendix A: Common Mistakes
Appendix B: Recommended Recruitment Process
Appendix C: Sample Area of Responsibility (AOR) List
Appendix D: Board of Directors
Appendix E: Further Reading
Appendix F: Personal
About the Author
Who am I? Why am I writing this book?
I coach tech startup CEOs (and tech investors) in Silicon Valley, most of whom are young technical founders. They include the CEOs of Reddit, Postmates, Plaid, Brex, Coinbase, OpenAI, OpenDoor, Grammarly, Atrium, Clearbit, Newfront, Front, Lambda School and Rippling.
In my coaching, I found several things:
In this book, I have simply written down the solutions that my mentees and I have came up with. Hopefully it will serve as a compendium so that you can become a great CEO in the very little time you have to do so.
This book goes from high-level (an outline of many of the issues that a CEO will face) to the mid-level (a recommended initial process for each of these issues, written in such a way that it can be copy-and-pasted into a company playbook) to the low-level (specific suggestions of phrases to use in specific oft-recurring situations). The book, therefore, has both breadth and depth.
If you are a CEO, new or experienced, this book is meant for you. If you are a first-time CEO, then this book will give you frameworks and answers for your current and future challenges. If you are an experienced CEO, this book will be a good checklist of best practice benchmarks against which you can rate your company’s performance as an organization, and your performance individually. In the areas where you discover that you are wanting, the book will give you the target to hit, and tools to implement immediately.
This book is organized into 8 sections:
The Beginning briefly covers how best to start a company and launch a team.
Individual Habits covers the most crucial habits to be an effective individual in a company, no matter what your position is. This includes organization (GTD, Inbox Zero) and effectiveness (Top Goal, On Time, Write it Down).
Group Habits covers the most crucial habits to be an effective group, no matter what the group’s function or size (Writing vs Talking, Decision-Making, Agreements, Transparency, Conscious Leadership, Customer Obsession and Culture).
Infrastructure covers the tools used to facilitate company effectiveness (Wiki, Goal-Tracking, AORs, KPIs, No Single Point of Failure).
Collaboration reviews techniques used to keep an organization working well together (Meetings, Feedback, Org Structure).
Process covers the systems used for each major function of the company (Fundraising, Recruiting, Sales and Marketing).
Other Departments covers the remaining functions in a company (Executive, Product, Engineering, People, Finance and Legal).
And finally, the Appendices cover a variety of things that didn’t neatly fit anywhere else (Essential Reading, Challenge of the Technical CEO, Recruiting Process, Sample AOR List, Board of Directors, IPO, Personal).
There are many ways to create a company, but only one good one: To deeply understand real customers (living humans!) and their problem, and then solve that problem.
This is explained clearly and thoroughly in Disciplined Entrepreneurship by Bill Aulet. I won’t repeat or even summarize what he wrote. If you haven’t yet launched or achieved Product Market Fit (>$1 million of revenue), go read Bill’s book first.
Starting a company is hard. There are long hours, constant fear of failing, many rejections, etc. This burden is further intensified if you try to do it alone. Solo founders have high rates of burnout. The emotional burden is just too high. As with any trend, there are exceptions. But the rule generally holds.
YCombinator has a strong bias toward accepting co-founder teams (versus solo founders) for this reason. Owning much of something is better than owning 100% of nothing. Find a partner, someone who has complimentary skills to yours. Share the emotional burden with them. That will ease the load significantly. Give up a large percentage of the company. It’s worth it.
Your partner’s purpose is not to be value-add forever. As your company grows, you will likely find people with far greater skills whom you will hire. That’s OK. Your co-founder’s purpose is to help you achieve success in your march to Product-Market Fit. Once you get there and begin the blitz-scaling process, be pleased if they continue to add value beyond that point.
And when you do find a partner, avoid one cardinal mistake: do not create a 50/50 partnership. While 50/50 sounds like an ideal, it actually leads to real pain if there is no easy way to break a deadlock. Unanimous decisions are tiresome to create day after day after day. Knowing that one person has the ability to decide actually eases the burden for all involved, and leads to far better outcomes.
As Alex MacCaw, Founder and CEO of Clearbit writes: “This is key. Two of my previous companies were destroyed by a 50/50 split.”
From Peter Reinhardt, Founder and CEO of Segment, shares a different perspective: “There are ways to avoid deadlock (e.g. third co-founder with small stake a la Charm), and splitting evenly aside from that has been totally fine in my experience with both Segment and Charm. Over time, vesting, cash investment, or differential compensation is a natural way that ownership can diverge.”
And in all of this, there is a big exception. If you have done this before, have the majority of skills (technical, social, financial) needed to start a company, and are a masochist, then by all means begin on your own.
From Alex MacCaw: “The key for me in doing it alone is a strong friend group that supports me.”
While it is critical to have a partner to share the emotional burden of starting a company, each additional team member (co-founder, partner or employee) adds additional complexity in geometric fashion. Each new member must somehow grock the priorities, vision and actions of the other team members in order to place their efforts in the same direction. The more team members you have, the geometrically harder it is to share what is currently going on with everyone, as well as have everyone be emotionally bought in to the decisions being made. Do not underestimate this cost. It is much larger than most founders think.
YC has another strong belief: Founding teams should never grow beyond six until there is true product-market fit. (Later, I will dive deeper into what Product-Market Fit is, but for now, let’s say it’s greater than $1mm in recurring revenue for an enterprise company.)
Why? Three main reasons:
If you are a startup in Silicon Valley and have discovered a large potential market, then you will be able to raise significant capital early. This will allow you to hire many people. Investors may well pressure you to do so in order to “win the race to market share”. Resist this pressure. It is misplaced.
Startups don’t usually fail because they grow too late. They usually fail because they grow too early (ie- before they have achieved Product Market Fit).
What is Product-Market Fit? I define it has having created a product that customers are finding so much value in that they are willing to both buy it (after their test phase) and recommend it. Metrics that show whether PMF has been achieved include: revenue, renewal rates, NPS (net promoter score).
The first goal of the company should be to achieve real PMF, not metrics that fool people inside and outside the company that PMF has been achieved.
For a B2B company, know that enterprise customers have budgets just for testing new technology, and will buy your product to do just that. This does not mean that you have achieved PMF. For these types of customers, only long-term contracts are an indication that they actually value your product and want to use it.
There is no magic metric, but for a B2B company, it’s hard to imagine PMF at anything less than $1mm ARR.
Once you have achieved Product-Market Fit, that is the right time to blitz scale and win the race to market share. To do this, you will need to create massive awareness (Marketing), walk many customers through the sales process (Sales), hold those customers hands as they set up and use your product or service (Customer Success), harden your infrastructure to withstand many users at once (DevOps), get rid of technical debt as well as add all the features promised in your roadmap (Engineering), update the product roadmap to meet the most urgent needs of your customers (Product), and all of the non-technical operations (People [Recruiting, Training and HR], Finance, Legal, Office). All of this requires hiring talented and experienced people to fulfill those functions. First raise the money needed to hire this team, and then begin hiring.
Once you bring on remote workers, and your team scales beyond 15-20 people, most likely things will begin to fall apart. You will hire very talented people and they simply won’t perform in the way that you hope or expect. You will end up doing more and more work yourself, working longer and longer hours, just to keep the company afloat. You will extrapolate this trend, and realize that soon you will break.
It is at that moment that you need to implement a formal management system. It will be painful. You will no longer be able to just “work on the product”. You and your team will likely have to spend one full day per week preparing for and participating in team and one-on-one meetings. These meetings and this system will feel like pure overhead. They are. And without them, your company will never scale successfully.
The good news is that the same system that allows your company to operate well with 25 people, will also allow it to work well with 25,000. Neither the system nor the amount of overhead will change. It is a one-time hit.
The rest of this book walks through the implementation of such a system.
Great companies are made up of great individual performers who work well together as a team. As CEO, you are both the architect of the culture and the central hub in the wheel of information flow that enables the team to function effectively. Your example inspires your team, and your efficiency determines the efficiency of the team. Therefore, the first thing to optimize is yourself.
I have found the following habits and methods to be the most effective for fostering individual productivity.
Everyone needs an organizational system to track goals, priorities, and tasks. The majority of successful CEOs that I know use the system outlined in the book Getting Things Done: The art of stress-free productivity, by David Allen. While the book is dense, it is definitely worth reading in its entirety. The essence of Allen’s system is:
Each day, process every single item in your Inbox (defined broadly as all Inboxes [email, Slack, text] and all to-do’s). If the action takes <2 minutes to complete, do it immediately. If not, then write down what the required action is, and place it on one of the following lists:
1. Next Actions: These are the next tasks on your priority list separated into areas of context.
Tasks should be written as single actions (as opposed to broad goals). The key is to not have to think about what needs to be done again once the Next Action has been written down. The Next Action should be written so clearly that all you need to do is follow its direction when you read it next.
Write first draft of 10-year Company Vision and 3-month Roadmap
Write first draft of Sales Playbook
John 650-555-3452 schedule company offsite
Mary 415-555-1234 review draft financing docs, paragraph by paragraph
Walgreens - pick up prescription
Clean out garage
2. Waiting For: This is the list of things that you have asked others to do, and are waiting for them to complete. List the person to whom you have delegated, the requested action, and the date on which you made the request. You can then easily scan your Waiting For list and see which aging requests are still outstanding. Move these aging requests to your Next Action list and ask the person again for the item.
Sarah- feedback on Sales Playbook, 3-18
Jim - Write-up issue for next Leadership Team Meeting, 3-19
Bill- time to meet, 3-19
3. Someday/Maybe: This is the list of things that you one day want to do, but don’t need to get done now (e.g. read a book).
Schedule a guitar lesson
Order the book Getting Things Done by David Allen
4. Agenda: Inefficient leaders waste a lot of time reaching out about, or responding to, one-off issues in real-time. A much more efficient method is to batch your issues and discuss them all at once. This does not apply for urgent issues. Those need to be addressed immediately. But by addressing many issues on a regular basis, soon urgent issues will disappear.
To do this, create and use an Agenda list. This is your list of regular meetings. When you think of something that you want to discuss with someone with whom you meet regularly, write it down on your Agenda list. Then, when you meet with that person, check your Agenda list and review everything accumulated there.
What should we do for our winter holiday?
Connect- listen to each other’s day for 10 minutes each
Are we having enough fun?
10-year Company Vision
3-month Company Roadmap
5. Projects: This list is for projects that have more than one Next Action that can only be done one after the other (serially). Write out all of the Next Actions required to get to completion. Then simply add them chronologically to your Next Actions list as the previous action is completed.
6. Review: This is your pace for reviewing the lists above.
Daily: Next Action and Waiting For
Weekly: Someday/Maybe, Agenda and Projects
And finally, use your calendar to schedule Next Actions that need to happen on a certain day or at a certain time. I recommend that you actually put your reviews (#6 above) in your calendar.
7. Goals: This is not part of Allen’s GTD, but I use it and find it very helpful. Later in the book, I recommend that you create for your company a 10 Year Vision and Quarterly OKRs, as well as Department, Team and Individual quarterly OKRs. I keep a copy of this Vision and these OKRs on the Goals list. I refer to it regularly to flesh out my Next Action list.
Tools: There are many tools that will help you maintain a GTD system, from the simple (Evernote) to the potent (Omnifocus). Choose one that fits your level of willingness to learn new functionality.
We all get deluged on a daily basis with Inbox messages from email, text, Slack, CRMs and other online tools. It’s critical to have a thoughtful methodology for dealing with them all—otherwise, you’ll be buried in communications and you’ll risk missing time-sensitive messages.
Think of your combined inboxes as a single triage room at a hospital. Some cases that come in are urgent, others not so much. It is critical to notice the urgent cases immediately, and get them in to see a doctor now. To do so, you must keep the triage room clear. If you use the triage room as a waiting room as well, then a new patient can enter the room, sit down in a chair, and bleed out from his stab wound before you even realize he is there. For this reason, every well-functioning hospital separates its triage room from its waiting room, and keeps the triage room absolutely clear. To be efficient, you must do the same with your inbox. This means addressing all the urgent cases right away, and maintaining Inbox Zero every day.
If you check your email incessantly, multiple times an hour, you are wasting hours of productivity. Instead, batch your time and clean out your entire inbox at those times. I recommend checking your inbox only twice a day (once in the morning, once in the afternoon). Each time, follow this process:
1. If the email/message takes less than two minutes to address, do it immediately.
2. If it takes more than two minutes, write down a Next Action for it (according to the Getting Things Done methodology) and then place the email in its correct location (Next Action, Waiting For, Someday/Maybe, or Reference).
The best way that I have found to do this when using Gmail is to read and implement Andreas Klinger’s iconic blogpost on GTD in Gmail. In it, Andreas explains how to use Gmail’s Multiple Inbox feature to create an inbox for Next Action, Waiting For, Someday/Maybe, and Reference. You can set the system up in 15 minutes.
3. Repeat until you get to Inbox Zero. If you are truly fearless, you get can get to Inbox Zero within the hour (yes, even if you have 1,000s of emails in your Inbox right now).
In startups, fires never cease to burn. One of the most common complaints I hear from CEOs is that on a day-to-day basis they seem to have infinite things to do, yet weeks will go by and they don’t feel like they have accomplished anything. This is the result of getting bogged down with the small immediate things and losing track of the important long-term ones.
The Top Goal framework will help you fix this. Greg McKeown, who wrote a phenomenal book on productivity called Essentialism, boils this down to one key concept: Schedule two hours each day (ie- put an Event in your calendar) to work on your Top Goal only. And do this every single work day. Period.
The earlier in the day you schedule this Top Goal time, the better, so as to avoid other issues (and people) from pressing for your attention. There is also strong researched-backed evidence to show that we have more decision and thought-processing energy early in the day when our brain is freshly rested. Take advantage of this high-quality brain functioning by doing the important stuff first.
During this Top Goal time, do not respond to emails, texts, calls, and messages. Only work on your top priority (your top goal for the current quarter [3 months]) during these two hours. If you follow this pattern each workday, you will achieve amazing things.
If you have never scheduled this kind of focused work time, starting off with two hours a day will likely be too great of a leap. Instead, start by scheduling 30 minutes for tomorrow early in the day. If that goes well, then schedule 30 minutes each weekday morning for a week. If that goes well, increase the daily scheduled time to one hour. Continue increasing each week until you find the right balance, knowing that the recommended target is two hours.
It is critical to be on time for every appointment that you have made, or to let the others involved in the meeting know that you will be late as soon as you realize it. This is common decency, yes, but it has a greater importance.
There is someone else on the other side of your agreement to start the meeting at a certain time. They have stopped what they are working on to attend the meeting on time. If you do not show up on time, they cannot start the meeting, but they also cannot leave, because they don’t know if you’ll show up the next minute or not.
Each minute that they are away from their work is a minute of productivity that you have stolen from them. This is not only disrespectful but also counterproductive. If they are a customer, investor, or recruit, they will not engage with your company. If they report to you, they will keep quiet but resent you. There is no winning scenario when you waste someone’s time.
But life happens. A previous call or meeting may run late. Traffic doesn’t always cooperate. Even with careful planning, it’s not possible to be on time for every meeting. The good news is that you don’t need to be.
It is only critical to let the other members of the meeting know that you will be late as soon as you realize that you will be. And you must come to this realization (and let the other attendees know) before the meeting starts, through whatever channel will get to them the fastest. Ideally, you’d let them know about the delay before they have to break away from whatever they are doing before the meeting.
In addition to being on time, you must also be present. Being present means that you are composed, prepared, and focused on the subject matter. It can take a few minutes to “get present” -- prepare for the meeting, research the topic and the attendees, go to the bathroom between back-to-back meetings, get a drink/snack, and so on.
Therefore, I recommend that you plan to arrive to an outside meeting fifteen minutes before it is scheduled to begin. For a meeting in your office, wrap up your current project or previous meeting five to ten minutes prior to the scheduled time for the next meeting.
To make this easy, I recommend scheduling 25 and 50 minute meetings only (Google Calendar even has an automated setting for this). This will give you 5 minutes each half-hour and 10 minutes each hour to maintain yourself.
When in the meeting, I often see CEOs making the mistake of constantly checking their messages. They cannot get away from being “on,” if even for a second. This is not only disrespectful, but it defeats the purpose of the meeting, which is collaboration with the attendees present. It sends a message that the meeting’s content is relatively unimportant. Furthermore, it also breeds a bad habit for the entire company—one that will be hard, if not impossible, to break down the line.
During every meeting, leave your phone in your pocket or face-down. Sticking with the strategies in Chapter 4 (“Inbox Zero”) will help you to focus on your meetings and make the most out of your assembled—and expensive—talent. And if the meeting is not efficient, then make it so (see Chapter 21).
Whenever you find yourself saying something for a second time (to a second audience, or in a second situation), it is highly likely that you will end up saying it again and again in the future. To vastly improve the quality of the communication, and reduce the amount of time that you spend communicating it … write it down.
Then, the next time you need to communicate that message, you can simply share it in written form. If it is something that all members of the team should know and remember, put it in a company-wide Wiki. If it is truly seminal to the organization, post it on a wall for all to see.
From Alex MacCaw, Founder and CEO of Clearbit:
“Once you see this system working for yourself, start encouraging others in your company to do likewise. Everytime you see a question answered on Slack (for example), prompt the questioner to document the response in your company wiki.”
Confirmation bias is the phenomenon that whatever belief we start out with, we will discover evidence to support it. A corollary to this is that whatever question we ask, we will focus on the answer.
In any situation, we can ask ourselves “What is wrong here?” or “What is right here?” From an early age, our parents, teachers, and employers have taught us to ask the former question. They cannot be faulted. They had the best intentions. In the earliest years of our life, they were trying to keep us alive. Unfortunately, an unintended consequence is that we learned to focus on the negative, and so we continually see the negative. This leads to objectively very successful people being not fully satisfied with their lives, themselves, etc. If that is where it ended, I wouldn’t touch it, as this book is about becoming a great CEO, not about maximizing a feeling of fulfillment. However, that is not where it ends.
It turns out that we perform our best when we are having fun and feeling good about ourselves.
If you want proof of this, go to any kid sports event where you know the names of the kids. Start cheering positively for the team that is losing, with specific compliments to specific kids: “Great pass Jimmy.” “Way to be in position, George.” When a kid takes a shot but misses … “Good idea Joey, it was the right thing to do.” Within 5-10 minutes, the tide of the game will start to change toward the team that you are giving specific compliments to. (I have done this many times. And it has worked every time!)
If you are not a parent, and don’t have access to kid sports, you can try the same technique at the adult sports games that you (or someone you know) participates in. It works just as well (actually, often better) with adults.
So, how do we take advantage of this knowledge to generate a good feeling in ourselves? We ask the right question: “What is good about this situation?” “What is good about this team member?” “What is good about my company?” “What is good about my life?” Or, we simply fill in the overarching statement: “I am grateful for ________.” Be as specific as possible: names of people, specific actions they did, etc.
I recommend making this a daily practice. I do it first thing every morning. To remember to do it, create a trigger for yourself.
A trigger is something that you will see at the time that you want to do the action. Using a trigger allows you to easily create a habit. The easiest trigger, in this case, is a piece of paper with the word “Gratitude” printed on it, taped to your night-table, or wall by your bed, or mirror in your bathroom. When you see it each morning, you say the phrase “I am grateful for ______” five times with a different ending each time. (You don’t have to say it out loud; you can say it silently to yourself.) The key is to be specific as possible when you declare what you are grateful for.
Another way to make this a regular habit is to use a journal like the The Five-Minute Journal. Keeping the book by your bedside is itself the trigger, as you will see it when you wake up, and just before you go to sleep.
If you do this gratitude practice regularly (don’t worry if you miss days here and there), your view of your life and yourself will begin to change for the better. And soon afterward you will begin to perform better in life as well, just like the kids on the sports field.
For the cynics out there, being grateful doesn’t mean that you will suddenly ignore all of the areas of your life or your company that could use improvement. Just the opposite. It only means that you will bring an attitude of joy, as opposed to desperation, when addressing those areas.
Life and company-building don’t have to be hard or painful. Daily gratitude helps us realize that.
Appreciation is simply an outward extension of gratitude. In gratitude, you speak to yourself. In appreciation, you speak to others. The content is the same.
When you catch yourself feeling grateful about someone or something that they have done, let them know. When you hear something nice said about someone, let them know.
The benefits of this practice are threefold:
Chris Fralic of First Round Capital in his iconic blogpost on networking says that he reserves one hour each week for follow-ups and outreach, most of which include appreciations. I recommend that you do the same.
Just as with gratitude, giving appreciation should be as specific as possible, as in this example: “John, I appreciate you for writing down our sales process and adding it to the wiki. Thank you.”
And when receiving appreciation, there is only one correct response: “Thank you.” Do not feign humility by downplaying the act with statements like “It was nothing, anyone could have done it.” No. The person is trying to make you feel appreciated. Anything other than “thank you” will rob them of their goal.
It is important to maximize your energy. You perform best when you are doing things that energize you. Your goal should be to spend most of your time (75-80%) doing things that energize you. If you do, magic will occur.
Get two highlighters, pens, or pencils of different colors (red and green are ideal, but any will do). Print out the last week of your calendar when you were working. Go through each workday hour-by-hour and ask yourself “Did that activity give me energy or drain my energy?” Highlight in green those that gave you energy, and in red those that drained your energy. There are no neutrals, ever hour must be marked one color or the other.
When finished, look for patterns of where and how your energy is drained. Now think of ways to outsource or eliminate those activities.
Keep doing this Energy Audit each month until 75% or more of your time is spent doing things that give you energy. If you do, you will be able to achieve far more in less time. Because you will perform far better. You will be in your Zone of Genius.
What is the Zone of Genius? Well, there are four zones.
Zone of Incompetence are the things that other people probably do better than you (ie- fix your car), and therefore you should outsource if they don’t give you joy.
Zone of Competence are the things that you do just fine, but others are as good as you (ie- clean your bathroom) and therefore you should outsource if they don’t give you joy.
Zone of Excellence are the things that you are excellent at (ie- better than others), but don’t love doing. This is the danger zone. Many people will want you to keep doing these things (as they gain significant value from you doing them), but this is the area that you should also look to move away from. This is the hard one!
Zone of Genius are the things that you are uniquely good at in the world, and that you love to do (so much so, that time and space likely disappear when you do them). This is where you can add most value to the world and yourself. This is where you should be driving toward spending most, if not all, of your time.
Some people worry that if each of us operates solely in our Zone of Genius that no one will be available to do the un-fun stuff. This is a false fear. There are many personality types. For every activity that feels un-fun to you, there is someone out there who not only excels at it, but loves it. (Yes, even the “horrible” tasks, like firing people.) The key in any organization is for people to be transparent about what their Zone of Genius is, and then map all activities to the right people through an AORs list (see Chapter 20).
By Alex MacCaw
Building a company will take a physical and mental toll. All the work you put towards your company will be for naught if it costs you your health. It is incredibly important that you focus on both your physical and mental health, and take active measures to improve them.
Ideally take some form of exercise everyday, but at least ensure that you’re working out multiple days a week. Figure out what exercise works for you, be that lifting, running, or boxing. If you find your self-motivation is slipping, get a buddy to train with, sign up for group activities (e.g. Barry's Bootcamp), or get a trainer. If you can’t afford a trainer, get the company to pay for it. Your investors won’t mind; your physical health is paramount.
Company building takes an emotional toll too. It is important that you have someone to speak to, listen to you, and help feelings flow through you. The alternative is bottling up anger, sadness, fear until you and your company self-destruct. Build a CEO support group comprised of your peers. Learn to be vulnerable in front of the company and practice Conscious Leadership (Chapter 15). Get a therapist; even if you think you don’t need one, you will invariably find it useful.
Meditation is also tool to help focus and quiet the mind. A good company perk is to buy a team account for a meditation app like Calm (calm.com) or Headspace (headspace.com), and then set aside a room in your office for meditating. Stick an event in your calendar every day to remind you to meditate, and make it public to the company to lead by example.
No matter how original and innovative your ideas might be, and no matter how efficient and productive your own habits might be, you won’t be able to build a truly exceptional organization alone. Your company’s success depends on how well its members work together. Just as individuals develop habits, so do groups. And just as with individuals, it’s much easier to start off with good group habits rather than have to change your bad group habits down the line.
When two people are discussing an issue, the need to be efficient is important. When a team is discussing an issue, the need to be efficient is paramount, because each inefficient minute is multiplied by the number of people in the discussion.
If you want the most effective and efficient decision-making process, require that anyone who wants to discuss an issue write it up, along with the desired solution, ahead of time. The goal of this write-up is to be thorough enough that at the time of decision-meeting, there are few or no questions. This can be achieved one of two ways:
1. The hard way: Write an extraordinarily thorough analysis from the get-go.
2. The easy way: Write a draft, circulate it to the meeting participants before the meeting, and invite comments and questions. Then write out responses to all of these comments and questions prior to the meeting.
Jeff Bezos, founder and CEO of Amazon, is famous for using this written method. He requires that anyone who wants to bring up an issue or proposal must write up the item fully prior to the decision meeting (with someone else writing up a counterproposal if necessary). The meeting is then spent reading the write-ups. Once the decision-making team has read them all, a decision is made. If consensus is not reached, an appointed decision-maker makes the call. If there are still open questions, then the decision-maker assigns one or more people to research, and of course write, the needed follow-up. At the end of the next meeting, the decision is made.
This method, though time-consuming for the sponsor, yields extraordinarily thoughtful decisions in a very short amount of time. The extra effort and work by one person creates a net savings in time and energy across the whole group.
Imposing this process on a group is daunting. Here is a way to ease a group into it:
1. Reserve the first 15 minutes of the meeting for all participants to write out their updates and issues. Then use another 10 minutes of the meeting for all participants to read each other’s updates and issues. Then discuss and decide. Use this method for 2-3 meetings, then ...
2. Require that all participants write their updates and issues prior to the meeting. Do not allow people to bring up an issue that they have not already written up. Use the first 10 minutes of the meeting for all participants to read each other’s updates and issues. Use this method for 1-2 meetings, then …
3. Require that all participants write their updates and issues by a certain time prior to the meeting (eg- 6pm the evening before). Require that all participants read and comment on each other’s updates and issues prior to the meeting. People prove that they have read the docs by having their comments in the docs themselves. Do not allow people to make comments in the meeting if they haven't already commented on the docs themselves. This will make your meetings much more efficient and ensure that meeting time is spent effectively.
One of the core challenges in leadership is how to get your team to buy into a decision. It’s often easy to make a decision, but it can be much harder to get your team to invest emotionally in that decision.
From Alex MacCaw of Clearbit: “It is important for your team to be invested in a decision as otherwise their execution will be half-hearted (or won’t even happen).”
You create buy-in when you make people feel they are part of the decision, and that their input contributes to the final outcome. The more influence they feel they have on the outcome, the more they’ll be invested in the final result.
Broadly, there are three ways to make a decision. Each has a different time requirement, and creates a different level of buy-in. There are no free lunches here, unfortunately—the method that creates the most buy-in also takes the most time.
The methods are:
1. Manager makes the decision, announces it to the team, and answers questions.
Pro: Takes very little time.
Con: Creates very little buy-in from the team. And gets no benefit from their collective knowledge and experience.
2. Manager creates (or assigns someone to create) a written straw man (a hypothetical answer designed to inspire discussion), shares it with the team, invites team to give feedback (written and verbal), facilitates group discussion, determines final answer.
Pro: Creates more buy-in. Gets some minimal benefit from the collective wisdom of the team.
Con: Takes more time.
3. Manager invites team to a meeting where dilemma is discussed from scratch with no straw man. Manager and team equally share ideas. Final decision is determined by consensus if possible.
Pro: Creates the most buy-in. Gets a lot of benefit from the collective wisdom of the team.
Con: Takes the most time, and is the hardest to push in the direction you think you want.
Not surprisingly, the greatest benefits require the most work. If you want more buy-in and a better decision, you need to take more time in making the decision.
So, which method should you use? It depends on how significant the decision is, and how important buy-in is. For everyday, low-impact issues (eg- the venue for the holiday party), Method 1 is sufficient. For major, core issues (eg- Company 10-Year Vision), Method 3 is necessary. For everything in between (the vast majority of important decisions), Method 2 is optimal.
Team members will often want to bring up an issue and discuss it verbally. This is both inefficient (writing takes longer than reading) and ineffective (only the most forward people speak up and get heard).
Instead, require that anyone who presents an Issue at a team meeting do so in writing. The write-up should include both a detailed description of the Issue as well as their Proposed Solution. They may say “I don’t know the answer.” It doesn’t matter. They should take a guess. Even if they only have 10% confidence that their answer is the right one. And they should phrase the Proposed Solution in very bold, directive terms. (“Do this ….”) This may seem aggressive, but creates a flag in the sand which generates a much more productive discussion and a quicker decision-time, which ultimately is the more important than appearing to be humble.
I recommend that all Issues/Proposed Solutions be presented at the weekly Team Meeting. Allow 5 minutes of discussion for each Proposed Solution. If in that time, consensus is reached, great. The Solution is turned into a Next Action with a DRI (Directly Responsible Individual) and Due Date.
If not, DO NOT spend more time talking about the Issue. Instead turn to the RAPID framework described below.
Emilie Choi, VP of Corporate and Business Development at Coinbase, introduced me to a tool developed by Bain Consulting to make fully-informed decisions with buy-in when:
It is called RAPID. In this process:
Here is an example.
Once a company starts this process, it is helpful to both track all of the RAPIDs that are in process, as well as collect feedback on how to improve the process. For each of these, I recommend a doc:
In his iconic 2015 Shareholder Letter, Amazon’s Jeff Bezos introduced us to light-weight, distributed decision-making. He wrote:
“Some decisions are consequential and irreversible or nearly irreversible – one-way doors – and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that – they are changeable, reversible – they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups.
As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention.1 We’ll have to figure out how to fight that tendency.”
Each time there is a decision to be made, rate it as Type 1 or Type 2. If Type 2, allow one of your reports to be the D (Decision-Maker in the RAPID process). The decision will be made faster, your report will get the chance to exercise their decision-making muscle, and you will have the chance to gain confidence in your reports’ ability to make decisions well.
(This chapter was inspired by a conversation with Anthony Ghosn, CEO of Shogun.)
Whenever you choose to use Method 3 to get full buy-in, know that, as CEO, your voice will be the “loudest in the room”. In order to get full buy-in, you will have to elicit people’s truest thoughts. Once people hear your perspective, some percentage will naturally alter their own views to more closely match yours. This % is much higher than you might imagine. People assume that as CEO you have more information than they do, and therefore your perspective is probably more correct. Later, these same people will not feel fully bought-in to the outcome, because internally they will know that their true thought was not actually heard.
So, in order to get the full benefit of your team’s knowledge and to make sure that they get to full buy-in, be careful not to “tip your hand” before all others have shared theirs. The most effective way to do this is to either have people write down their vote or their thoughts prior to you sharing your perspective. Or by having everyone give a simultaneous thumbs-up / thumbs down vote”
For an excellent example of this phenomenon and the solution, CJ Reim of Amity Ventures pointed me to 13 Days by Robert F Kennedy about the Cuban Missile Crisis.
From Peter Reinhardt, CEO and co-founder of Segment: “Apparently at Amazon they require the most junior people to speak and ask questions first. Also becomes a great way to show off junior talent, give more senior folks a chance to observe and give feedback, etc.”
A very common cause of inefficiency in startups is sloppy agreements. People don’t show up to meetings on time, and they don’t complete the goals that they declare (or they don’t declare goals at all). The result is a spreading virus of unproductiveness and decreasing morale.
The antidote for this is simple: Impeccable Agreements. These are 1) precisely defined, and 2) fully agreed to (which almost always means written) by all relevant people.
“Precisely defined” means that a successful follow-through of the agreement can be judged by an objective third party. For example, “We’ll start back up again after lunch” is not precisely defined. A participant could have lunch, take a two-hour walk, and then come back to the meeting and still have adhered to the “start after lunch” requirement. An Impeccable Agreement would be: “It is 12:04 pm now. We will start the meeting again at 1:00 pm. We all agree to be in our seats and present prior to 1:00 pm.” The agreement is now precisely defined, including calibration of time shown on each person’s device.
An Impeccable Agreement should be written down in a location that is easily accessible by all participants. The only exception is when the agreement is so small, or so regular, that all participants are sure not to forget what the exact agreement is.
As discussed in Chapter 6, “On Time and Present,” there will, of course, be times when you realize you will not be able to keep an agreement you have made. No problem. As soon as you realize you won’t be able to keep the agreement, you let the other members of the agreement circle know. You also let them know what you can do. This gives them the opportunity to adjust and maintain productivity.
1. You agreed to be at the Team Meeting by 10:00. But because of unusual traffic you estimate that you will reach the office at 10:05. You immediately contact your team and let them know that you will be at the meeting by 10:10. The other attendees can begin with agenda items that don’t require your input.
2. You are the VP of Sales, and you agreed to bring in more than three new customers and more than a million dollars in new annual revenue by the end of the quarter. By the end of the second month of the quarter, the pipeline shows only one new customer potentially closing before quarter-end. You immediately let your CEO know that you are not going to hit this goal, and you tell him what you realistically will be able to do. He can then jump in to help process customer leads to help meet the target.
If, however, you fail to inform the agreement circle, then you have broken that agreement. The other attendees are unable to adjust and both productivity and morale slip.
There must be consequences for breaking agreements. Implementing these consequences is a two-part process. The first time someone doesn’t meet an agreement, you point it out to them immediately. If they apologize, you respond that apologies are not needed, and all that is required is that they only make agreements that they can commit to, and that they meet all of the agreements they make, whether by adherence or by prompt communication that they need to alter the agreement.
If the person continues to fail at these, there is only one consequence that makes sense: They can no longer be part of the company.
Your team members are smart. When there are problems, they know it. Hiding negative information from them does not make them feel better. If anything, it makes them more anxious.
Just as you don’t know if your team members will share negative information with you until they do so for the first time, your team members don’t know if you are willing to share negative information with them until you do. Our imaginations are much more powerful than reality.
Share all relevant information with your team, both negative and positive. This will give them great comfort and enable them to use their brilliance and talents to adapt.
There are only two pieces of information most companies choose not share openly: 1) compensation and 2) performance reviews (particularly performance improvement plans). Public knowledge of these items often causes heated debates, relative comparisons, and even shame, all of which are big distractions.
However, there are some companies that choose radical transparency, sharing both of these with success. Such complete sharing should only be done if the entire company is trained in radical transparency.
One such training comes from the Conscious Leadership Group (see Chapter 15).
Interpersonal conflict arises often. And almost always it is due to people:
There is a laughably simple method to solving this issue. Stephen Covey shared the technique in his iconic The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change. Michael Rosenberg codified it in Nonviolent Communication: A Language of Life. And Chris Voss showed its effectiveness in his excellent Never Split the Difference: Negotiating As If Your Life Depended On It. I recommend reading all three of these books to get fully immersed in their techniques, but here is the thousand-foot view:
Most feel hatred for each other, because they feel unheard. For me to respect you, I don’t need for you to agree with me. But I do need for you to hear what I have to say. When I tell you my perspective (which I of course believe to be right) and you aren’t immediately convinced, then I assume that you didn’t really hear or understand what I said. If you start sharing your perspective, I will be uncompelled and unwilling to truly listen, because you haven’t been willing to consider mine. And the cycle spirals downward to hate and acrimony.
There is a simple fix. I only need to prove to you that I have “heard” you. And to do that, I only need to repeat back what you’ve said (summarized, of course) until you say “That’s right!” Then you will feel heard. You will now be open to hearing what I have to say.
(Here is an experiment that proves this principle. The next time you encounter a person who is repeating themselves, stop them and ask if you can state back what they’ve already said. They will say “yes.” You then summarize what they’ve said and ask if you got it right. If they say “yes” again, then watch to see if they continue to repeat themselves. They will not.)
To resolve conflict, you only need to get each person to state their deepest, darkest thoughts, and then prove that each has heard what the other has said. This can be done verbally or in writing. I far prefer the written method as it takes about ⅓ the time, requires almost no facilitation (ie- its easy to stay on script), and the action items that come out of it are impeccable agreements.
If you are the facilitator, here’s how it works (the written method):
Step 1: Ask each person to write down their deepest thoughts about the other person.
As facilitator, look at both docs and make sure that they are filled out correctly. Encourage the separation of fact and judgement as much as possible. Make sure they are as specific as possible about the actions the other person did and how it made them feel. Realize that any conclusions drawn from the other person’s actions are simply stories in their head, only the feelings one has and any specific actions are facts. Make sure there are no sweeping statements or value judgements.
If one or both are reluctant to say anything, which is often the case, you supply the thoughts that you might have if you were in their shoes. Be dramatic. Become an actor. Get into the role. State the thoughts as explicitly as they would appear in your own mind. Use swear words.
The person will start to guide you. They are likely to say: “That’s close, but not quite it. The thoughts I have are more like …” When they slow down or don’t seem willing to go further, again state the thoughts for them. Each time you do so, it allows them to go further. Do this until each person has written down their raw, unvarnished thoughts around Anger toward the other. Once they get that right, they can usually get through Fear, Sadness, Joy and Excitement on their own.
Now ask each participant to cut-and-paste the Joy and Excitement sections to the top of the doc. For the person sharing their emotions and thoughts, it is hard to feel Joy and Excitement until they have first written down their thoughts around Anger and Fear. But when the recipient reads the doc, it is best for them to first see how the sharer actually has positive thoughts about the recipient. This validates the relationship and motivates the recipient to do what is needed to repair that relationship. Therefore, it is important for the recipient to read the thoughts around Joy and Excitement first.
Step 2: Person A (the person with less power in the relationship) shares access to their doc with Person B.
Person B reads Person A’s thoughts around Joy and Excitement about Person B. Person B should simply say “thank you” to Person A when she reads these thoughts.
Person B then reads Person A’s first thought around Anger about Person B. You, the facilitator, then follow this script:
Step 3: Person B shares access to their doc with Person A.
Repeat the same script as in Step 2.
Now both Person A and Person B have:
Step 4: When the ah-ha moment of understanding occurs, seal it with a physical connection: a hug, a handshake, a high-5.
When Step 3 is complete, there will usually be a moment of understanding and compassion for each other. When this moment occurs, seal it with a physical connection. If the two have hugged in the past, ask them to do so again now. If the most they have done in the past is shake hands or high-five, then ask them to do that now. This physical connection symbolizes the new understanding and puts a capstone on the event.
Step 5: Ask each person for feedback on the process.
What did they like that you (as facilitator) did? What did they wish that you had done differently?
Step 6: Set a meeting for 1-2 weeks out between Person A, Person B and the Facilitator.
At that meeting, confirm that both Person A and B have completed their action items. This will prove to each other that there is a real desire for a positive relationship.
Do Steps 2-4 on the remainder of issues identified under Anger and Fear for each person.
In my experience, when two people, who previously felt hatred towards each other, have shared their thoughts (and been heard) around all five of the basic emotions they feel toward the other, the two create an understanding and respect for each other, if even they still do not agree with the others’ positions. Please let me know if you experience something different.
There are two excellent ways that I know of to encourage people to identify the key issues in the company that need to be solved.
Ask each person to imagine that they are the CEO and ask themselves the question: “What are the most important issues (maximum 3) for me to solve in the next 90 days?” Allowing people permission to put themselves in the CEO role gives them permission to think like an owner.
Just as people’s fullest thoughts about someone can be drawn out by sourcing Anger, Fear, Sadness, Joy and Excitement, so too can someone’s thoughts about the company.
At every quarterly offsite that I facilitate:
It is a very simple and very effective exercise. I recommend that you do it with everyone in the company on a quarterly basis.
Conscious Leadership is about being more interested in learning than being right. When our egos make us afraid to be wrong, that fear leads us to defend our ideas at all costs, and to work hard to convince others that we are right—often with anger. Conscious Leadership is about:
Jim Dethmer, Diana Chapman, and Kaley Warner Klemp explain this concept thoroughly in their book The 15 Commitments of Conscious Leadership.
The challenge of course is to shift from wanting to be right to wanting to learn. Here are some videos that help with that shift.
Spiritual teacher and author David Deida goes one step further and teaches that empathy is the key to success. To truly feel the feelings of those around you—customers, investors, and team members alike—you must get very curious about their situations and then really imagine yourself in their shoes. If you do this, people will sense it and immediately trust and like you, because they will feel that you care about them and understand their circumstances. They’ll trust you to lead them because they know you’ll truly consider their interests in your guidance.
When people start diving into the Conscious Leadership work, they quickly lose their fear. And just as quickly, they realize that fear was their primary motivator. Fear of failure, fear of letting people down. Once fear is gone, their life becomes much better, but their business suffers.
If you find yourself in this situation, keep pushing forward with the Conscious Leadership work quickly to get to a place where you are motivated by joy. Then you will have the best of all worlds. Joy is an even better motivator than fear, so your business will thrive. And your life will be amazing!
Many CEOs that I coach have deeply embraced the principles of Conscious Leadership. Alex MacCaw, founder and CEO of Clearbit, is one of them. He has written this excellent summary of the Conscious Leadership principles, found in Appendix A.
So what does it mean, for practical purposes, to be conscious, and to have empathy for your customers? Remember that you are not making a product—you are solving a customer problem. It is therefore critical that you continually live that customer problem. Only then can you solve it well. To live the customer problem, you must sit with the customer, ask them about their lives, and observe their daily routine, on a regular and constant basis.
This focus should permeate every part of the company, from sales to engineering. It is particularly important to instill this mindset in your engineering department, because the engineering department tends to sit the farthest away from the customer and only hears about the customer in abstract terms.
The solution is to have customer support and sales leaders distill feedback and meet with the product team once a month to ensure feedback gets in the next cycle.
Your sales department will already have a customer-centric mindset but it is important for them to not prioritize every customer request. Customers know exactly what pain they are feeling, and they know that they want relief. But they don’t know how feasible each solution is. You do.
If you actively listen to your customers’ pain, they will trust you to decide which solution will best erase that pain. If you do not listen to your customers’ pain, then they will do the thinking and make demands about what the solutions should be, no matter how impractical. Once those demands are voiced, it’s hard to walk them back.
Build trust with your customers quickly by actively listening to their pain. Really imagine what it’s like to have their needs and frustrations. Voice what you perceive back to the customer. (“It seems that you feel anger when ….”) When your customer says “That’s right!”, trust will be established. Teach this methodology to everyone in your company, and have them practice it regularly using role-play.
Culture is the unspoken set of rules that people in a group follow when interacting with each other. You act differently when you’re in a bar than when you’re at a family dinner. That’s because the rules that run the interactions between the different nodes in the networks have changed. Culture is the name for those rules.
By Alex MacCaw
Values are a critical element in your company’s culture, and your company will function at its most efficient if your employees understand and share them. Once your team has a referenceable shared set of values they can make decisions without you, and more importantly evaluate candidates for culture fit. As the team grows interactions between new hires and the core team, who defined the company values, diminishes. Having a set of established and referenceable values helps disseminate those values to new team members without daily interactions.
One misnomer CEOs sometimes have is thinking they get to choose the values. By the time you’re 30 or so employees your company has a set of values whether you like it or not. It’s now your job to codify what’s already there. While it is possible to change a value, it will take a lot of work.
Agreeing on what your values are is the kind of statement that needs maximum buy-in, so it should involve your whole company. Send out a survey and gather contributions from everyone. Ask your team to suggest both a value and the name of an employee who exemplifies it. Then arrange all the suggestions into common themes and have your leadership team vote on the final cut.
Once you have agreed upon your values, use them to guide your hiring and firing. Bring in people who want to live by these principles and let go of people who don’t. Otherwise, your values will have no meaning.
Distribute your values, print them out and repeat them until your team knows them back-to-front. Every week at the all-hands highlight a value and a person who’s actions best exemplifies that value that week.
The following are an example of Clearbit’s values. They combine a short pithy statement (easily rememberable), with a longer description for clarity.
When creating company culture, do not underestimate the value of fun. If people are having fun, they spend more time, energy, and awareness at the company. This leads to better problem-solving and collaboration, which leads to a stronger company that creates more value.
Host events that you enjoy, and then invite (but don’t require) your teammates to join you. Your litmus test is whether your teammates are hanging out with you and each other outside of work. If yes, you are likely creating good culture. If not, increase your efforts to practice Conscious Leadership (Chapter 15) and keep working to create buy-in for your values.
Alex MacCaw, CEO/Founder of Clearbit shares his favorite fun company-wide activities:
1. Boozy fridays, take the team out for lunch at a local restaurant
2. Suggested times for lunch (with cal event)
3. Really awesome offsites in international locations (e.g. Tulum)
4. Team sports like dodgeball & soccer
5. Renting out a local movie theater. (They are almost always available for a morning screening.)
Most companies are so focused on improving that they forget to celebrate. But celebration, like fun, is a key to building positive morale. Celebration doesn’t mean lavish drunken parties. Quite the opposite. Celebration means taking a moment to appreciate the good that the company has achieved, as well as the good that departments, teams and individuals have achieved.
The question of working hours is inevitable in every company. Should you enforce specific starting and ending times? Total number of hours?
Remember, the key metric is output, not hours. If you impose hours, people often will simply put in the required hours, but without effort or enthusiasm, and you’ll make little progress. The key is to inspire and motivate your team so that long, hard-working hours are not an imposition, but a choice.
If you are creating and tracking goals, habits, agreements, and key performance indicators (KPIs), openly receiving and providing feedback (Chapters 19-23) and creating fun, then people will be naturally motivated to work hard. They’ll see where the company is going, how it’s moving forward, and how their efforts and their team members’ efforts are contributing. They’ll know that they are heard and they’ll be having fun.
Furthermore, if your team are hitting their individual goals and OKRs, ask yourself does enforcing set times in the office really matter, or are you just enforcing them for appearance sake? The same goes for working at home - it’s really all about the output rather than the location or time spent working.
Remember to always lead by example. Be the first one to show up each day. Be the last one to leave. Once you have department heads, they should also set this example for their departments. Do not hire department heads who are unwilling to do so.
Whatever your teams’ working hours end up being, make sure there is a core period of the day when everybody shows up in the office so that collaboration can occur. Set a regular meeting (a short stand-up) in the morning at the beginning of this core set of hours.
Offering meals is a particularly positive benefit. It allows team members to bond organically and with a wide range of people. Having people go out to get their own food usually causes them to stick with the same small subgroup each day.
Offering lunch thus creates a more bonded overall team. Offering breakfast and dinner allows people to easefully extend their work day. Thus, there are benefits to offering meals beyond simply the pre-tax calculus.
(The pre-tax calculus is that meals are a commodity. If you provide the meals company-wide, then you can deduct the expense as a business expense. If you do not, your teammates must use post-tax dollars to buy those meals. Thus, providing meals is a way of providing benefits to your team on a pre-tax basis.)
Encourage team members to be “present” at meals so that they interact with each other. This means no electronics (phones or laptops) at the meal table. Encourage the team to meet at the same time each day by creating a shared calendar event. All this will improve team bonding and trust.
As your company grows you’ll find that communication between members of disparate teams slows to a halt. This is especially prevalent between engineers and the rest of the company. This is only amplified if a good portion of your team is remote.
One solution that I’ve seen work is to randomly assign team members every week to meet, get a coffee, or hang-out virtually. There are tools like Donut to facilitate with this.
In this context, “politics” means lobbying to gain personal benefit. Politics are poison for a company. They direct energy away from customer problem-solving, and once they take hold the result is a quick race to the bottom.
Politics are created when someone successfully lobbies the CEO or their manager for some kind of benefit. Others see this, so they in turn lobby. They then gain benefit, and the virus spreads quickly throughout the organization.
It often begins very innocently: “Excuse me, can I please talk to you about a raise? I have been at this company for a year now, and have shown utter dedication by doing such-and-such, and I believe that I now deserve a raise…”
This sounds compelling, and you, of course, want to reward dedication. But if you give a raise based on this conversation, then the whole company will learn that the way to get a raise is to simply ask you for it.
Suddenly everyone will be trying to curry your favor. Be very careful here. You may enjoy this behavior, but it is toxic for the company.
The only way to prevent politics is to never allow lobbying to be successful, and the only way to do this is to have a written policy about as many situations as possible, particularly around compensation, raises, and promotions. Apply this policy to all team members, all the time.
It is difficult to create objective criteria for compensation, raises, and promotions, but there are models. The most successful method I know of is called Grade Level Planning—at least, that’s what Tesla calls it. It calls for a very detailed definition of every position in the company, and every seniority level, along with specific compensation metrics for each position and level. This is then shared throughout the company. Team members can then clearly see what they need to do to receive the next compensation and title level. Managers must not deviate from this written schema.
When a company is smaller (fewer than fifty employees or so) and growing fast, there is often so much fluidity that it can be difficult to implement Grade Level Planning (GLP). Most companies end up doing GLP at 150+ employees, but that is often too late. The compromise is somewhere in the middle. I recommend starting to think about GLP at twenty-five to fifty employees, and then implementing as soon as is practical after that.
Inevitably, conflict arises in any organization. When it does, it is up to you to teach your team members how to give and receive non-violent feedback, and ensure that they do.
Many managers do not enjoy dealing with people in conflict, and therefore instead say “You two, work it out amongst yourselves.” But unless your team is already proficient at non-violent communication and radical candor, then the two will likely not be able to work it out on their own. If you continue to stay at arms-length, the result will be … Lord of the Flies. The absence of governance leads to civil war. This is not healthy.
To stop this behavior, you must step in to adjudicate when your team members are unable to work it out on their own. Give them one chance to do so. If they are not able to, then step in to decide the issue, or mediate the conflict. If you don’t want to do it yourself, hire a coach to teach and facilitate the feedback sessions. Whatever you do, do not simply leave the participants on their own to work it out. If you do, you will be responsible for the emotional bloodshed that ensues.
Just as an efficient city requires comprehensive and trustworthy systems to move its traffic, goods, and byproducts, your company requires reliable systems to maintain its data and communications flow. Without a solid infrastructure, your brilliant and talented team members won’t be able to function to their full potential.
It may seem obvious, but every company should have a structured folder system for storing documents, such as Google Drive. Each department should have their own folder, and all team members should have access (at least for viewing, if not editing) to all folders except for the one containing compensation, performance reviews, and performance improvement plans.
You should also create a Wiki page, which need be nothing more complicated than a document containing links to all of the other important company documents. Make sure that reading this Wiki from beginning to end is part of every employee onboarding. As of 2018, Notion.so is my favorite template for a Wiki.
After creating a Wiki, the question then becomes: “What should we document?” And here is the painful answer: “Everything.”
A well-run company documents every aspect of its operations, so that its team members can easily step into a new role when needed.
An easy way to do this is: Whenever you find yourself doing something twice, write down exactly what it is that you did. Place these written processes in the company Wiki. This allows the other members of your team to learn from your experience.
Require that all members of the team also follow this practice to share their knowledge.
If you use this process, and spread the writings amongst the whole company, you can likely document every process in your company within 3 months.
These written processes then became your company’s onboarding curriculum. Each new hire reads all the processes they will be asked to do. You can now safely scale your team knowing that they will have effective onboarding.
Ryan Breslow, Founder/CEO of Bolt shares: “We have noticed that whenever we hire a new manager, they want to instantly bring in their own processes. But then we lose all of our hard-won institutional knowledge that led to the creation of our original process. So, we now require that all managers use the existing Bolt processes for at least 3 months before making any changes. After they know our system in this way, they are free to make the changes they want to. And yet most make relatively minor changes after that.”
In each company, dozens of new challenges arise each week. Some might be critical, but others will be mere distractions, cluttering up your team’s time and energy. Commit to a systematic Goal-Tracking System to maintain focus and to prevent the clutter from overwhelming your operation.
Keep it simple. Evernote, Omnifocus and Things are great tools to track individual goals and tasks. For maximum benefit, use them to implement the GTD system (Chapter 3). They are inexpensive and easy to use.
For small groups, there is no need for a dedicated group system—it’s easy enough to track company goals in a Google Doc. But as soon as you grow to more than a handful of people, you will need a dedicated group Goal-Tracking System.
Task-tracking systems are excellent at transforming Issues to Next Actions and tracking progress from meeting to meeting. They’re a key part of forming Impeccable Agreements (Chapter 12) between people. Whenever two people form an agreement, it should be recorded in the Task-tracking system, have an owner, a comprehensive description, and due date.
Goal-tracking systems are much better at showing the team their progress over many weeks and months, and therefore boosting morale.
Whatever system you choose, be careful to use it judiciously, as it is very common for people to become overwhelmed with actions from your tracking system. When this happens, they’ll stop using the system altogether. To avoid this, follow two simple rules:
“Tragedy of the commons”. When several people share responsibility for an action or process, often that action doesn’t get done well, or at all.
To prevent this from happening, group tasks into categories, and assign each category to one—and only one— person. These are your Areas of Responsibility. Apple is famous for having pioneered AORs in Silicon Valley, but now most successful tech companies use this method.
Create a document listing every possible function in the company. Next to each function, list the directly responsible individual (DRI). This is the AOR list. It serves as a routing layer for any questions and ensures that no functions fall through the cracks. Make sure everybody in the company knows how to access the list, and update it as new functions arise or as responsibilities shift.
For an example, see Appendix C for a sample AOR.
A single point of failure is a function that one person performs, when no one else has full knowledge of how that function works. If that person becomes sick or leaves the company, functionality suffers. A well-run company has no single point of failure. To create a team with no single points of failure, do two things:
1. Write down all processes. As soon as you or your team members find yourselves doing something for the second time (see Chapter 7), you should write down the steps of that process exactly. Place these written processes in a firm-wide Wiki.
2. Cross-train a second person for each role. Map each function in the company (from the AORs) to a backup person. Have the backup person co-work with the primary until the backup knows how to perform the role. (Of course, having all of the processes already written down will vastly improve this training process. So have your team write down all the processes first.)
It is critical to objectively measure the performance of the company. You can only manage what you can measure. Key Performance Indicators (KPIs) allow you to do this. KPIs are the one or two significant metrics for each major function that show the entire team in an instant how the company is doing, and where the issues are. Here are some examples:
Monthly Cash Burn; Cash in the Bank
Monthly Recurring Revenue (MRR)
Percentage of tickets closed
Percentage of offers accepted
It is important to determine the company’s five or six most significant KPIs, then track them religiously and make them available for the entire company to easily see on a daily basis. Post the metrics on a TV screen in a central place in the office, using a tool such as Geckoboard.
As we learn from Andy Grove, former Intel CEO and author of the book High Output Management, it is also important to define and track counter-metrics to provide necessary context, because metrics are sometimes optimized to a fault.
For example, engineering tickets will vary in importance, so if your engineers have closed the critical tickets, they’re doing better than if they close most tickets but only the easiest ones. Similarly, if the half of candidates that accept your job offers are less skilled than the half that decline, then you’re doing worse than the raw percentage indicates.
Create and measure your metrics carefully and in context to give your team the best possible view of your company’s heath.
One of the most dangerous transitions that a company makes is going from less than ten team members, to more than twenty. During this time, communication and productivity usually break down. The system of group organization that existed when the company was all sitting in the same room together (no system at all) suddenly no longer works when team members are not all sitting next to each other. Once your company has over 20 team members, you will hire great people, but they won’t know what to do, and you will be frustrated by their lack of output.
Luckily, there is an answer. It has a time-cost. But once you implement it, it will allow your company to become productive again, and will continue to be effective as your company scales from 10s of team members to 100s to 1,000s to 10,000s.
Every successful large technology company uses this system. It has no single name—Google, for example, calls theirs “Objectives and Key Results (OKRs)”—but the systems are essentially the same from company to company. They share the following key functions:
The system streamlines and organizes:
This information exchange takes place through a deliberate series of goal-oriented meetings, which comprise the core of the system.
In my experience, it is very easy to copy this system if you see it in operation. But it is very difficult to implement such a system by reading instructions (including these). When you get to this point in your company’s life cycle, I recommend doing one of two things:
The remaining chapters in this Part, give you a blueprint for such a system. But, again, it is impossible for me to convey in writing the detail and nuance. The following chapters serve more as a notional checklist than a set of instructions.
One of the measures that you have successfully implemented this system is that your original team members continue to perform as excellent managers even as their departments grow massively. If there is no system, then you will be forced to hire ever-more-experienced managers who will layer over your original team members. When that happens, a tremendous amount of institutional knowledge is lost, and ultimately the company can never perform as well.
This dichotomy is clear when looking at NBA teams. The Golden State Warriors were a mediocre team under Mark Jackson. Once Steve Kerr joined and brought an effective system, the exact same roster of players become dominant and won the championship. (Yes, they brought in Kevin Durant, but that was only later.) By contrast, the Cleveland Cavaliers and Houston Rockets had no system and simply relied on individual talent. Even against remarkable talent, the system inevitably wins.
The dichotomy can be seen in companies as well. Many members of Facebook’s original leadership team continue to be on the leadership team today. This is because Sheryl brought a management system to the company that elevated all who used it. By contrast, Twitter has not developed a similarly effective system. Instead, they have hired individual superstars. And while the people at Twitter are remarkably talented, the company as a whole does not function nearly as well as Facebook.
For an organization to work well, three things must occur at every level of the organization.
(I use these particular words only because they form an easy-to-remember acronym: ACT.)
Accountability is declaring:
Coaching is declaring:
Transparency is declaring:
This accountability, coaching and transparency needs to happen in both directions (from CEO to the company, and from the company to the CEO) at every level (company, department, team and individual).
This is best achieved through a regular series of meetings:
Each manager should plan to devote a full day each week to internal meetings. The weekly team meeting will be the longest (up to three hours in the beginning, until teams learn the habit of writing down all input prior to the meeting, then it can get down to 30 minutes). The weekly one-on-one meetings and office hours will consume the remainder of the day. This timing determines how many team members a single manager can effectively oversee. If one of your managers can’t fit all the necessary meetings into a single day, she’s got too many people reporting directly to her, and you need to re-organize, or she needs to run more efficient meetings.
The overhead—twenty percent of the standard work week—can feel tremendous to a startup CEO who is accustomed to the organic information flow of a small group working together in the same room. But without this one-day-per-week investment, a larger team will never fully know what to do, nor will the CEO get the needed feedback on her performance or the company’s performance.
Paul Graham, of YCombinator, famously points out that makers (engineers) need long stretches of uninterrupted time to be productive, whereas managers are most effective when meeting. The compromise is to schedule days when no meetings are allowed. The schedule that works best for a five-day work week is:
- 1 day of internal meetings
- 1 day of external meetings (i.e. interviewing candidates)
- 3 days of no meetings
It isn’t critical when these days are, although it helps to space the two meeting days apart from each other.
The above schedule often comes under fire from recruiters, who worry that:
First, your hire and close rate for candidates should be very high (approx. 75%)— otherwise, you are losing incredible amounts of time by doing all-day in-person interviews with many candidates that you don’t want to hire, or that don’t want to work for you. Therefore, unless you are already hitting the 75% metric, you should start screening candidates more effectively (ie- brutally) in your phone interviews and lower the number of in-person interviews.
Second, it is true that some candidates can only come on specific days or times. However, the benefits of having meetings on only one set day, as measured by increased productivity of the company, far outweigh the cost of losing out on a few candidates. Additionally, if the candidate cannot find the time to make it on the set day within two or three weeks, it is quite likely that they won’t take the job anyway.
There are many other high-level candidates out there. You can find another one. But there are only a finite number of productive work hours within the company. Once lost, there is no way to recapture them.
There are two exceptions to the advice above:
The guidelines above are for when there is already a team in place, which requires uninterrupted days for its work. This is particularly important for the Engineering team.
When creating the schedule for the day of internal meetings, I recommend the following order:
The 1-1 meetings are a time to ensure that each report is fully prepared for the team meeting. (As reports begin to prepare fully for their 1-1 meeting in advance, then their Accountability and Coaching can be pushed into the Team Meeting, allowing more time for Transparency during the 1-1).
At the Leadership Team meeting, all Issues are surfaced and either resolved or moved to a RAPID decision-making process. All decisions from the Leadership Team meeting can then be shared at the All Hands meeting. The CEO Open Office Hour (which I highly recommend) can be scheduled anytime in the day. And finally, if you have a regular company social event (which I also recommend), the internal meeting day is a logical day to have it, as this is the day when the majority of your team will be in the office.
As the company grows, Department meetings (both 1-1s and Team) will likely have to happen on a different day. Just as the 1-1s are prep for the team meeting, the Department meetings are prep for the Leadership meetings. I therefore recommend scheduling Department meetings the day prior to the Leadership meetings.
It is important that each meeting have a designated Meeting Lead, who is sometimes, but not necessarily, the group’s manager. This person is responsible for making the meeting run well, which also means ensuring that all meeting participants submit their updates and issues in writing in advance and show up on time. The Meeting Lead must be ruthless about sticking to the timeline and, whenever something off-topic comes up, they should note it but schedule the discussion for another time. Without an effective Meeting Lead, meetings quickly become inefficient, and people come to resent them.
To understand the basis for these meetings, I recommend that all team members read the same book to get on the same page about what the purpose and structure of these meetings will be.
If you manage managers, then that book should be the best one: Andy Grove’s High Output Management. This book is the gold standard for how to effectively manage a team. But it is not short.
If you manage individual contributors who are unlikely to read a long book like High Output Management, then instead ask the team to read The One Minute Manager, by Kenneth Blanchard and Spencer Johnson. It’s a very short read (30 minutes) and it contains simple, effective advice. Assigning it uniformly will make sure your whole team has a common basis for proceeding.
The first One-On-One Meeting should occur soon after the onboarding process is complete. Have both the manager and the team member come to the meeting with written, measurable OKRs for the new team member. When the manager and team member reach a consensus on a set of OKRs (ideally three or fewer), merge these into one list.
Run subsequent meetings according to the following template.
Schedule these meetings regularly, at a fixed day and time. The schedule is usually weekly, but can be bi-weekly or even monthly once a team member develops expertise at her tasks if her goals remain consistent over time. Another alternative is to set different paces for Accountability, Coaching and Transparencies. Ie- Meet weekly for Coaching and Transparency, but do Accountability on a bi-weekly or monthly cadence.
On your day set aside for meetings, schedule One-On-One meetings prior to the team meeting. Schedule them back-to-back, and allot twenty-five to fifty minutes for each one. If there is a serious issue to discuss, such as serious job dissatisfaction, then use your Open Office Hour (see below) later that day to fully address the issue.
One-On-One and Team Meetings can be merged if a team is small enough, but be cautious about giving negative feedback in a group setting. Unless your team has agreed to radical transparency and actively wants this public negative feedback, shame is likely to arise. Most companies, therefore, opt to provide negative feedback only during One-On-One meetings.
That being said, I do recommend moving to a culture of radical transparency. Doing so will allow you to merge all One-On-One meetings into the Team meeting. This can save you 4-6 hours on your day of internal meetings.
But radical transparency first requires explicit buy-in from every team member, and training in how to do it effectively. Conscious Leadership Group runs excellent 1-day trainings in radical transparency. The investment of time may seem large, but usually pays itself back within a few weeks (ie- saving a half-day per week).
In order to support the company’s quarterly goals, each team must meet weekly (or bi-weekly if the team is very smooth-running) to:
In order to ensure that all participants are prepared for this meeting, I recommend holding all 1-1s in the morning just prior to the team meeting. The 1-1s then serve as preparation for the team meeting.
During the team meeting, each attendee should:
The agenda for the meeting then becomes:
Team Meetings follow the same information flow as the 1-1s: Accountability, Coaching and Transparency. In fact, as the team is effectively preparing in writing in advance for its meetings, the Accountability and Coaching portion of the 1-1s can simply be moved to the Team Meeting. This is actually more effective and efficient, allowing more time during the 1-1s for Transparency.
It is important to time-box all agenda items, so that the meetings don’t run on, and all issues get addressed. This is done by putting a number before each agenda item. Five minutes is indicated as . At the end of the allotted time, move on. If there are still decisions to be made, create a RAPID.
It is critical that everyone submit all of their updates, issues and feedback in writing prior to the meeting, as discussed in Chapter 8 (“Writing vs. Talking”). This allows others to read the submissions, make comments, and ask questions prior to the meeting. This massively increases information flow, and allows for consensus to be reached before the team meeting even begins. Team meetings that take 3 hours when done verbally can take 30 minutes (and be more effective) when done in writing.
Each manager should set aside one hour each week for an open office hour, during which anyone can come introduce an issue. This ensures that all employees feel that they can be heard, but limits the amount of time required to a predictable level for the manager.
On a cadence that varies between once a week and once a month, it is important to have a Company-Wide Meeting where the results of the most recent leadership team meeting are shared. Follow the same format. Allow time, as always, for anyone in the company to bring up their own issues or to provide feedback.
For another perspective, Peter Reinhardt of Segment shares: “We use all hands for sharing across teams of what teams are accomplishing, working on, celebrating wins (reinforce our values), and recognition broadly... plus bringing in customers to talk. I find this much healthier than an obsession with whatever leadership team is talking about (although we do present the board deck + board topics once per quarter.)”
Once a quarter, the leadership team (and eventually the entire company), which consists of all the department heads, should take a day or two to:
I recommend scheduling these offsites on a Thursday/Friday, so that you can then offer an optional weekend unstructured event with spouses. Team members oftentimes would like to get to know each other, but they are waiting for you to organize the events that will allow them to do so.
To create the ten-year vision, imagine it is ten years from now. You are the dominant company in the industry. Ask yourself:
There are many ways to create your company values.
A simple one is to complete the following sentence: “The rest of you in the company can make all of the decisions from now on, as long as you ….” This is appropriate when the company is small and values are entirely aspirational.
Another version is to acknowledge the culture that you already have. To do this, each Leadership Team member should pick one person in the company who is NOT on the Leadership Team and exhibits a value that you wish would be a universal behavior. Name the person and the behavior. Then select 3-5 such examples. This method is best used when the company already has a sizeable team and existing culture.
For your quarterly goals, or OKRs (Objectives and Key Results), the target is 3 and 3. Three Objectives, with three Key Results for each Objective. Create these OKRs for the company, then for each department (based on the company OKRs), then for each team (based on the department OKRs), then for each individual (based on the team OKRs).
(Warning: A common mistake is to create Department OKRs, without creating Company-level OKRs. This leads to siloed fiefdoms that do not work together nor trust each other.)
The Objective (O) answers the question: “Where do we want to go?”. This objective should tell a compelling story, akin to the tagline of a Hollywood movie. It does not need to be measurable (ie- ironically, it can be subjective). But it should be inspiring.
Key Results (KRs) answer the question: “How do we know that we’re getting there?” KRs should be objectively measurable.
Here are examples:
Objective- Massively grow revenues.
Company OKRs should be broad enough that they encompass the whole company, so that each department and team can feel that their work is contributing to at least one of the company’s priorities. Typical company-level OKRs include:
At the end of every quarter, gather the leadership team together and collaborate on the coming quarter’s OKRs. I’ve found the process that gets the best results and most buy-in is to ask every member of your leadership team to separately write up what they think the global OKRs of the company should be. Then simply combine the ideas of everyone into one document. You will see common themes and have a healthy debate about the company’s priorities.
The key thing to keep in mind when forming OKRs is that they are clearly defined and measurable so a third-party could adjudicate whether or not they were completed.
Once your leadership team has come up with the company’s OKRs, share them with the wider team and instruct each department head to perform the same process within their department, and then at the individual level during one-on-ones.
Keep in mind it is much better for people to come up with their own OKRs (that align with the companies) rather than just handing them down. That way they feel personally invested and have ‘buy-in’.
The OKR creation process is usually a distracting one. Therefore, keep it to one week or less if at all possible. Make this an Admin Week, and do all the other required quarterly admin processes (last quarter’s OKR de-brief, performance management, etc) during that same week.
Here is a potential timeline for OKR creation during Admin Week:
Create an OKR tracking system. Either use a third-party tool (15Five, Betterworks) or create a traffic-lighted (Green, Yellow, Red) Sheet. The system should show, week-by-week, which OKRs are on track (Green), slightly off-track (Yellow) and far off-track (Red). Here is an example.
Prompt the leadership team to update the status of their OKRs (on-track, lagging, poor) as part of the one-on-one process, and ask your managers to do likewise.
For all OKRs that are far off-track, require that the DRI (directly responsible individual) create a written Issue/Solution to get back on track.
Frequent, transparent feedback is critical for building a strong culture and a thriving business. Feedback is instrumental for building trust. Without trust, communication breaks down. Building a culture of feedback and transparency starts and ends with the founders.
Critical feedback in particular should be cherished. Your team members are in the trenches every day. They have knowledge about the company that you do not have. Only if you open up the door to negative feedback will your team feel comfortable giving it. Think about it from the other side—it can be quite scary to criticize someone who has power over you. You might feel you’re risking your job!
If you do not proactively collect feedback, you will quickly find the following problems emerge:
Therefore, if you are to receive real, honest feedback and improve, and keep your team communicating, YOU must make the effort to seek it out. Do so using the three A’s:
1. Ask for it: Make sure your team understands that giving you negative feedback will not be punished, but cherished. It is important to explicitly say this to them, preferably in a one-on-one setting. When asking for feedback on the company in general, it is useful to ask, “If you were CEO, what would you change?” You can do this in-person or through an anonymous survey. When asking for feedback about himself as a manager, Lachy Groom of Stripe asks “What feedback are you afraid to give because you think it might hurt my feelings? Please tell me that.”
2. Acknowledge it. Confirm that you heard it correctly by saying “I think I heard you say …” Summarize what they said. Then say “Is that right?” If they yes, you are done. If they say no, ask them to say it again until you are able to summarize it correctly.
This is the single most powerful tool that I know of to create trust and connection. People want to feel heard. And they can only know that you heard them if you actually say back their words to them.
3. Appreciate it. Don’t interrupt your team member. Don’t give excuses. Your job is to listen and try your utmost to understand. Say “thank you” for the precious gift that you are receiving. Only once you understand the issue, and you’ve repeated it back to them, and they know that you’ve understood their issues, can you initiate a conversation about potential solutions.
4. Accept it (or not). Declare whether or not you accept it. If you do, then ...
5. Act on it. Co-create an action item that will effectively address the feedback. Put a due date on it. Do it. And then let the feedback-giver know that you did the action. When you do, you will have completed the feedback loop. And the feedback-giver will then have gained trust that you actually want feedback and are committed to improving. Publish this feedback and action item widely to the organization. Only then will your team members feel confident that their voices are heard, and safe enough to give you further feedback.
When giving feedback, it is critical to use a 2-way communication method (in person is best, video call is OK, audio call is least good). This is so that you can see the person’s reaction. If they get defensive and angry, you will be able to see that and say: “I didn't intend to make you feel angry. My intent was to be helpful." This will hopefully mollify their anger.
If, on the other hand, you use a 1-way communication method (email, text, voicemail), then the recipient can easily become defensive and angry without you realizing it. And because you don’t notice the anger, you won’t be able to address it. Unaddressed, that anger will soon turn into resentment towards you. Therefore, DO NOT use a 1-way communication method (email, text, voicemail) to give feedback, unless it is 100% positive. There is one exception to this rule: If you already know the person to be open, curious and desirous of critical feedback.
Here is a template for providing good feedback, adapted from the book Nonviolent Communication, by Marshall B. Rosenberg.
Giving and receiving frequent and transparent feedback may be painful at first. Often when companies start implementing this, it brings up a lot of underlying resentment and repressed issues. However, if you hang in there, you will find the amount and intensity of feedback diminishes substantially, and your team will be noticeably happier and more productive.
In the early stage of a company, before Product Market Fit, when your team is 6 people or less, there is little value in creating a formal organizational structure, or in creating a distinction among co-founders as to who the CEO is. But when Product Market Fit is achieved, it is time to scale rapidly. And this will entail growing the team significantly (Sales, Engineering, Customer Success, etc). Suddenly, a structure is required, because not everyone can fit effectively in one team meeting. Separate teams must be created, and each requires a Manager.
The answer is to both identify the CEO and create a written organizational structure. The org structure should be determined by who attends what team meeting.
The Leadership Team is typically:
Each of these department heads then has a team that they manage. Once you adopt an organizational structure, write it down and make it public to the company. There should be no confusion about who reports to whom, and what team meeting each person attends.
By Alex MacCaw
When you’re first starting out, it can be quite tempting to hand out titles without much process; after all they’re free. However a misplaced title can come back to haunt you. Take for example, the circumstance of making a senior hire and asking an existing team member to report to them. If you’ve already handed that existing team member a fancy title, this will be viewed as a demotion and you may lose them.
One easy solution is just to call everyone ‘Head of X’. That way when it’s finally time to hire senior VPs, they can slot easily into the organization without “demoting” anyone.
As the company grows, each Team will become a large entity (ie- Biz Ops, Design, Communications, Compliance, etc). An individual product may grow large enough to warrant being its own business unit with its own GM. Thus there will be many VP-level execs. You will want to keep them informed and empowered. There will be a temptation to invite them to attend the Leadership Team meeting. Do not.
If someone needs to attend a meeting in order to be informed about what occurs in that meeting, then you have not yet created a transparent system. Each meeting should have clear notes of all updates given, and decisions made (other than those around compensation and individual performance improvement). Those notes should be freely published to the company. So, everyone can know what happened in a meeting without actually attending.
The meeting then just becomes a way of making good and fast decisions.
The Leadership Meeting should be attended by your Brain Trust. Who are the key minds that you need to hear from to make great decisions? And who run the major business units that you need to make sure are continually unblocked? These should be the attendees of the Leadership Team meeting. Do not add any other attendees to salve their ego. They will just make the meeting less efficient.
For all the rest of your Department and Team Leads, there is a VPs Meeting (or Leads Meeting). At this meeting, decisions that were just made in the Leadership Meeting are announced. There is then a “speak now or forever hold your peace” moment. If any of these decisions will have unintended negative consequences, now is the time for the VPs to raise their hand and say “That is a terrible idea for these reasons …”. The decision then gets kicked into a RAPID. But for the vast majority of decisions, the VPs will be fine with it, and then the decision gets published to the company, likely in All Hands.
To understand the scale of these meetings, I posit that the Leadership Team should be, and remain at, about 8 people (6-10 is fine). The VPs Meeting, by contrast, should grow as the company scales. At a company of 1,000 employees, the VPs Meeting often has 15 attendees. At Microsoft, this same meeting is over 150 attendees, or so I’ve been told.
Re-orgs, like terminations, are always disruptive and cause people angst, even if the logic for them is glaringly obvious. Full buy-in is impossible to achieve because you cannot solicit opinions from a wide group of people beforehand. Department Heads should indeed be consulted ahead of time and then asked to prepare for the rollout, but this consulting/prep time should be very short (to minimize leakage of the re-org pre-announcement). The exercise then becomes akin to group crisis therapy. The key is that the detailed explanation and Q&A session (first in All Hands, and then moving to Departments, and finally individual teams) should happen immediately after the announcement of the re-org. A second key is to batch organizational changes. The org will need time to heal. Even if you recognize needed org changes 6 weeks later, batch them. I recommend 3 months as a bare minimum between org changes, but 6 months is better.
Inside your company’s walls you’ve got your key personnel in place and functioning effectively, your data systems up and running, and information is flowing easily from your managers to your team members and vice-versa. The last piece of the puzzle, of course, is your dealings with the outside world—with investors, recruits, and customers. These processes—fundraising, recruiting and sales—are all identical processes. They only differ in the contents of the exchange.
In fundraising, you are selling the company’s equity and debt as a high-quality investment, and the investor is compensating you with capital. In recruiting, you are selling the company as a high-quality employment opportunity, and the new employee is giving you their time and effort as payment. In sales, you are selling your product as a high-quality solution, and the customer is giving you money as payment.
In each of these cases, someone is making the decision to invest in you or your company, whether with money or time. As such, you’ll need to build trusting relationships with these decision-makers in order to fundraise, recruit, or sell.
Peter Reinhardt of Segment correctly points out: “It is also a process of aligning a huge number of complex stakeholders to accomplish something together.”
When you raise money, you also get an investor. Make sure you get the partner that you believe will add value and be good to work with. Don’t allow the choice of partner to be made by the firm. Find out from other founders who at each firm is the good person to work with. Make sure they’re going to be with the firm for the long-term. Then approach them.
The introduction is a key part of the fundraising process, and you only get one chance at it. I recommend using the Triangulation Method
When you want to be introduced to an investor, first find three to five people in your network who know that person. Then ask each to send an email to the target investor, letting her know how great they think you are, and highly recommending that she meet with you. After receiving several such emails, the investor will proactively reach out to. She has received recommendations before, but never three or more for the same person. She concludes that you and your company must be truly great, so she is already inclined in to invest in you before she even meets you.
From your side, stack all of the referrals in a short period of time (within a week). Just as with PR (Chapter 27), you are trying to achieve critical mass and have the referrals rise above the noise of other referrals. Stacking the referrals close together ensures that they rise above the noise.
It's important not to hand each referrer the same potential text to send onward. If they end up sending the same language, then the referrals are revealed to be orchestrated by you. Therefore, either give your referrers different suggested language or no suggestion at all.
There are two ways to raise money: the Traditional Method and the Relationship Method.
The Traditional Method is when you pitch an investment firm with your story, most often with a slide deck, that describes the customer problem, your solution, market size, unit economics, financial projections, competition, team members, traction, go-to-market strategy, and so on. You might run through your presentation dozens of times before you find a spark of interest, in either you or your company.
The Relationship Method is to build a trusting, friendly relationship with an investor before ever discussing what your company does. This takes more time, but it dramatically increases the close rate. This works because no matter how rational we appear, we are most often guided by our emotional responses. We make instinctive, gut choices, and our rational brains do an excellent job of retrofitting logic over those choices.
The very first time you talk about your company, the investor will make a decision about whether or not she wants to invest. If she does not yet like or trust you, then your company had better be optically perfect—and more often than not it isn’t. So, the key is to wait to talk about your company until you are sure that the investor likes and trusts you personally. By then, the investor will have a positive bias toward you, and will be inclined to invest your company, warts and all.
But how do you get the investor to like and trust you?
Think about the people you like. Do you like people who just talk about themselves and show no interest or curiosity about you and your life? Or do you like people who ask about you, listen attentively, and are genuinely curious about what makes you tick?
When meeting potential investors for the first time, ask them about themselves. Get genuinely curious about their lives, both at work and at home. Ask them lots of questions. Prove to them you’re listening by saying, “I think I heard you say…” and then repeating back to them the highlights of what they said to you. When the meeting ends, write down as much information about the person as you remember.
At your next meeting with them, say, “The last time we talked, you said…” and again repeat the highlights. It is heartwarming when we find someone who cares enough about the details of our lives to remember them.
Also, let them know what they have done that you appreciate. If nothing else, you can always appreciate the fact that they took the time to meet with you.
But how do you get a meeting in the first place without the explicit purpose of talking about your company? You can use the Triangulation Method, outlined above, but if you don’t have enough mutual acquaintances, you can simply ask for it. Be explicit about your intent to build a relationship. Say something like, “We only want to work with investors with whom we have a good relationship. So let’s start with a coffee to get to know each other personally.”
After the first meeting, ask for a second. Since the stated purpose is to build a relationship, the investor is likely to say yes. If you have truly allowed them to speak about themselves, they will have enjoyed the meeting and will look forward to another.
These meetings do not need to be long, nor do they need to be in person. A fifteen-minute phone call can be as effective as a one-hour meal if, after time has passed, you demonstrate genuine care and a memory for the details of their life. After two meetings like this, when you listen to them and reflect back what they say, they will trust and like you. Several more and they will love you. You’ll know when the moment comes that they like and trust you. They will likely say it. If not, their body language will show it.
You can then proceed to talk about your company with the confidence that they are already inclined to invest. If you aren’t good at reading body language, just wait. At some point, they will say something like (and this is an actual quote from an investor): “I really like you. I want to invest in you. Now tell me what your company does.”
To summarize, the four keys are:
If you do all four of these things, you will have created a bond, and you then have a willing investor.
When most CEOs hear of this method for the first time, they have a strong negative reaction. This method feels unnatural, and goes against their instincts to close quickly. Later, once they have tried the method, and it works like a charm, they become raving fans. My best advice, therefore, is to try it on a few prospective investors, and see if it is more effective than the traditional approach.
Once you have met with someone a couple of times and demonstrated your memory and care for their lives, you have created a relationship. This is likely enough for them to like you. But why settle for just enough? To further strengthen the relationship, continue to be curious about them, and show them that you remember what they say. Three to five rounds of contact will solidify the relationship. Not every round of contact needs to be an in-person meeting—it can be enough to send a quick message.
Here is an example of a message of appreciation which comes from a Managing Partner at one of the most successful investment firms in the world:
Just wanted to drop a note of thanks. I really enjoyed our talk on Tuesday and brief ones since. Also greatly appreciate you treating me to lunch. Talk soon!
I feel honored that he took the time to appreciate me.
The following comes from Andy Bromberg, Founding CEO of CoinList, who takes it a step further:
At the risk of giving up my secrets, I'd suggest handwritten thank you notes. The response I get to my handwritten notes is incredible. People are floored. And often remember me as “the handwritten note guy.”
So make it a practice to regularly go through your contact list and send out messages of appreciation. You will be shocked by the massive goodwill that it generates. Andy suggests making this a formal process—he says, “Every day I review all my interactions and send (or schedule) thank you’s as appropriate. It ensures I don’t miss anyone and am prompt. And it takes literally a few minutes.”
Cliff Weitzman, CEO of Speechify, realized that it was key to sell himself and not his company. If he was able to do so, he would gain investors for life—investors who would follow him through every pivot, and every company. So, when Cliff realized that trust and like had been established, he shared the story of his life—using a method that his brother Tyler had discovered.
Tyler Weitzman, CEO of BlackSMS, likes to research social situations. As an undergrad at Stanford, he researched a method for conveying one’s achievements (or bragging, if you prefer!) while remaining humble and relatable. Through countless interviews of master storytellers, Tyler determined the ultimate structure for telling one’s story in a humble way:
- Credit: “It could not have happened without [name the others involved].”
- Hard Work: “We had to put in so much to make it happen, for example, [describe the hard work].”
- Vulnerability: “It was most difficult for me when…”
- Duty: “We were driven by our dream to [noble motive].”
- Gratitude: “I am so proud and thankful that…”
I encourage you to tell your story to a friend using this exact structure. See what comes out. Ask your friend for her reaction. I think you will be amazed.
For an example of this method, see the Acknowledgement section at the end of this book.
There are milestones in a startup’s life that, once achieved, make it significantly more likely that the company will eventually succeed. Each of these milestones, or inflection points, greatly reduces the company’s risk, and makes it much easier to raise money. Your company’s value, then, does not rise in a linear fashion, but in a stair-step pattern, as indicated in the chart.
Examples of inflection points include:
The best time to raise money is just after you’ve hit an inflection point. This is because your company has just increased in value, but will not increase further until it hits the next milestone, which could be months away.
A SAFE, and its cousin the Convertible Note, are investments that are used when it is impractical to create a priced equity round, either because the amount raised is too small or you do not have a institutional investor to lead the round. Priced equity rounds usually incur large legal costs, often over $100,000, which the company invariably ends up paying for. SAFEs and Notes are much less expensive, with legal fees often less than $10,000. You should therefore only do a priced equity round if the total money raised will exceed $2M, and preferably exceeds $5M.
SAFEs usually convert at a discount to the next priced equity round, and can also have a valuation cap. I recommend always having a SAFE open, even after you do a priced round. Here is an example of what this might look like:
Institutional investors prefer to invest in priced equity rounds. But family offices, and even strategic investors, who are not accustomed to leading priced rounds, are often very willing to participate in SAFEs, even as the company matures, as long as they have confidence that there will be another priced equity round. Therefore, there is little downside in always raising the first tranche of a round in a SAFE. This money extends your runway to reach the metrics required to raise the next priced equity round.
By Alex MacCaw
At some point you will need to convert your SAFEs and do a proper priced round. This usually happens at the Series A, but can sometimes happen at the seed. Since this involves a lot of custom terms and negotiation it can be an expensive process both in terms of time and cash.
What often happens is that founders receive a bunch of term sheets with artificial timelines. Then they rush through the process and end up signing terms without understanding the long-term ramifications.
It is incredibly important to take your time and not make any mistakes here; they will come back to haunt you! Treat this process as irreversible. Take your time to go through every clause in the term sheet with your lawyers to fully understand them.
Investors have a huge informational advantage over you. They sign these term-sheets all the time. They’re experts at controlling companies as minority shareholders. Often the tools they use are hidden in the ‘special provisions’ set of clauses. While you may think these provisions innocuous at the time, they can be activated out of left field when you least expect it (like when you’re selling your company).
Don’t rely on your lawyers to highlight the ‘dodgy’ terms. What they may consider standard, you may not. Pass your term sheets (scrubbed if necessary) by other founders and investors you trust for feedback. If you do discover unethical terms, blacklist that investor.
You will need a named-brand law firm to manage your priced rounds. They will only be too eager to help, this is one of their favorite ways to bill large amounts. But there is a technique to manage costs and time. If you let them bill however they want to, the end result could easily be over $100,000 for a Series A investment. If you manage them aggressively, however, you can get that bill down to $15,000 or less. This is important because the company is often required to pay for both their own counsel, as well as that of the investor if the bill exceeds a certain amount (usually $25,000).
A typical investment happens like this:
But there is another way. It results in final documents in less than 1 week, and legal bills of less than $15,000 from each side.
Investors must pay for legal bills out of their management fee income. This income would otherwise go into their individual pockets, so investors do not like to pay for legal fees (even their own). They would much prefer to give the company more money (which comes out of the fund’s investment capital) and have the company pay for the investor’s lawyers. Make this accommodation for investors. Require only that the investor support you in enforcing rules of behavior on their lawyers. And those rules are:
If any of these 4 people cannot make the meeting (or call), then the meeting is rescheduled.
In this process, the Lawyer for the company can bill no more than:
4 hours Write up base documents
1 hour Read comments prior to the big meeting
8 hours Attend the big meeting
4 hours Write up final language
17 hours @ $800 per hour = $13,600
In this process, the Lawyer for the investor can bill no more than:
4 hours Write comments on the base documents
8 hours Attend the big meeting
2 hours Read the final language
14 hours @ $800 per hour = $11,200
Mark Zuckerberg retains total control of Facebook even though he only owns a minority of its shares. Why? Because the shares he owns come with extra votes. Now that this structure has been accepted by investors, there is little reason not to set it up in your own company. And the easiest time to do this is prior to having equity investors. Ask your lawyers to set up ‘Founders Shares’ prior to investors being on the cap-table (SAFEs are fine).
In addition, Founder Friendly (FF) shares allow founders to get liquidity at each priced round without raising the fair-market valuation of the options granted to other team members. This allows founders to continue to pay themselves low salaries (excellent optics within the company) but still get enough liquidity to not worry about committing themselves to the company for the long-term. Again, these should be created prior to having equity investors.
Managing stock certificates is painful for both investors and the company. Avoid the hassle by using an electronic system like Carta or even just a simple spreadsheet from Day 1. It costs far less than paying your law firm’s paralegal $300/hr to answer every question your investors have about their ownership. Carta provides instant access to that information for your investors, who likely already have most of their portfolio on Carta. And the attached 409a valuation service costs about a quarter of what other independent 409a services charge.
You will need to do a valuation of your common stock to determine the correct exercise price of any options that you issue. This is a 409a (the IRS code) valuation, and must be done PRIOR to issuing the options. You will need to update this 409a valuation yearly or when you experience a change in company value (new financing, major customer addition, etc.).
When fundraising for a priced equity round, know that investors will want to see enough unissued options (Option Pool) remaining that there will be a 10-20% unallocated option pool AFTER the equity investment. This fact often catches founders by surprise. When the venture firm offers $4M on a post-money valuation of $20M, the founders think that they have been diluted by 20%. But this same offer will almost always require that a large Option Pool be created prior to the equity coming in. This post-money Option Pool plus the new equity therefore represents a 40% dilution to the existing shareholders. There isn’t much that you can do about this. Just be aware of it.
When recruiting, the goal is to find great people and attract them to your company. Since this is so important, you could rationalize throwing lots and lots of time at this problem, and that is what most growing companies do. Unfortunately, this time-suck will grind most of your other functions to a halt.
The key is efficiency. And to be efficient, you must spend as little time as possible with the candidates that you don’t hire (quick evaluation) and as much time as possible with the candidates that you want to and do hire (building a relationship, onboarding/training). Remember that each minute you spend with a candidate that you don’t hire is a minute that you aren’t spending with the team member that you want to hire.
Of all the recruiting systems that I have seen, the best is described in the Who, by Geoff Smart and Randy Street. I have summarized the Recruiting System in Appendix B. If this system resonates with you, I highly recommend reading the book Who to understand the details.
As the hiring manager, write out a ninety-day roadmap for the position you need to fill. This roadmap includes all the goals that the new team member will be expected to hit within the first ninety days of joining. This is critical for successful onboarding. During the interview process, share this roadmap with the candidate to make sure that she is excited about these goals.
The best candidates will get offers from other companies. So, you need to not only evaluate, but also sell, from the very beginning.
Just as in fundraising, building a relationship with a recruit will vastly increase the likelihood that she will want to join your company. The best candidates can work anywhere. Make sure that they want to work with you.
Do this by using the same techniques mentioned earlier. Ask the candidate about herself, reflect back what she says, and remember what she said the next time you meet with her. If you have already used this method during your initial fundraising, you will know how effective it is.
There is another key variable to making the recruit want to accept your offer: speed! A recruit wants to feel loved. The easiest way to accomplish that is to have a fast process from start to finish. Each day of delay sends the message “We don’t have conviction about you.”
If you doubt whether this really exists, just recall when you raised money. Which investors were the most compelling for you? The ones that responded and decided quickly, or those that lingered in their decision process for weeks or months? Benchmark and Sequoia are famous for making investment offers within days (and sometimes hours) of meeting a company that they are excited about.
The offer is always pending due diligence, so there is plenty of time after-the-fact to discover critical information. In recruiting, you would make an offer to the candidate “pending reference interviews”. Here’s what a streamlined process looks like:
This process can take as little as 2 weeks from first contact to accepted offer. If your process becomes that fast, your acceptance rate from top candidates will start to resemble that of Benchmark and Sequoia.
Of course, because your acceptance rate will be so high, you can then afford to become incredibly picky, and choose only the best of the best.
How much compensation do you offer new team members? How much cash and equity?
My preferred method is to:
It is up to the start-up to match the market compensation level, not in cash as the larger companies do, but rather in a much lesser amount of cash (no less than the amount needed to live comfortably), plus equity to bridge the difference.
Here is an example to show how the equity portion is calculated. Let’s say the position is a Level 3 Engineer who is paid $300,000 in total compensation at Google. The team member requires $120,000 in cash to live comfortably, and wants to invest the remainder in startup equity. The amount of equity is calculated by taking the difference between market and cash ($300,000-$120,000=$180,000), and multiplying it by 4 years ($180,000 x 4 = $720,000). This amount is then divided a factor somewhere between 1 and 2, which represents a very conservative estimate of the increase in value of the equity over 4 years. A 1 represents no expected increase in value. A 2 represents a 2x expected increase in value. If 1.5 were used (which is the most common factor used), the final amount would be $720,000 / 1.5 = $480,000. So grant this amount in options, however much equity it purchases at the company’s current valuation. The options vest over four years.
I prefer to then make an offer that allows the new team member to choose how much they want to invest in the startup equity, at three different levels. The lowest cash level would be the level needed to live comfortably.
Here’s an example in which the company is currently worth $50mm. The company will likely need to do another major round of financing along with optional pool refresh before it gets to maturity, which is an expected 50% dilution to the current cap table. A $1 billion eventual value of the company, would result in a 10x increase in value of the equity. (20x increase in company value x 50% dilution = 10x increase in equity value.)
The three options would be:
Expected Value at $1 billion company valuation
The hope is that the new team member believes so fully in the company (and the power of the asymmetric bet) that they choose one of the two higher equity offers. This equity is thus an investment that the team member is making in the company. And with a huge advantage: The investment is made with pre-tax dollars, which doubles its purchasing power.
Before making an offer, it is critical to know that the candidate will accept. Once you have the offer prepared, contact the candidate and ask them to complete the following phrase:
“I will join the company as long as …”
They then should state all of their requirements. If you are willing to provide each of these, then you are going to have a successful hire. If there is one that you cannot provide, discuss it with the candidate to see if there is some alternative that you both can accept.
Once this process is complete, then ask the candidate:
“If we were to make you the following offer (state the offer in full detail, including cash, equity, benefits, etc), would you accept?”
If they say yes, then make them offer. If you skip this step, and simply make them the offer, then it is very common for them to ask for a few more things after-the-fact (signing bonus, moving expenses, etc). You will then be in the awkward position of either having to give these (and thereby allowing a political culture to begin), or starting the relationship on a negative note by saying no. It is far better to get the candidate to pre-agree in full detail before making the offer. Then the relationship begins with a resoundingly positive “Yes! Thank you! I’m so excited!”
The granting and accepting of a job offer is a very emotional moment for a person. Making a big deal out of it is a good thing. We recommend that you make a ceremony out of it. Invite the candidate to receive the offer in person. Create a ritual out of this process. Here are some possibilities:
Whatever you do, make it fun and memorable.
Most companies spend extraordinary resources of time, money and equity to bring on a new team member, and then almost entirely drop the ball on quickly getting that team member onboarded and up to speed on how the company works so that they can begin making a full contribution. Don’t make this mistake! Give onboarding even more attention, time and energy than you give to recruiting. After all, many of the people that you are spending time with during recruiting will not become team members. Whereas 100% of the people that you spend time with during onboarding are already team members. Focus your energy there!
Write a checklist of all of the information that a team member would need to be fully effective. Write all of this information down and make a video of it. Share this checklist, the written/video info, and the 90 day roadmap with each new team member as early as you can, even before they start.
On their first day at the office, have them come in two hours after the normal start of the day, so that there are plenty of people there to greet the new team member. Assign each new team member a buddy with whom they’ll check in each day for fifteen minutes for the first two weeks. This fifteen minutes is for the new team member to ask questions that arise, and for the buddy to ensure that the new team member is actually going through the checklist.
Inevitably, some team members will not perform even with excellent onboarding, roadmap-creation, feedback, etc. When that happens, the chance that they will perform again in the future is very low, and the other team members will know, even more deeply than you do, that this person is not performing. Allowing this non-performance will be a morale-killer for the rest of the team, in addition to a financial drain that the company cannot afford. Therefore, you cannot allow it to continue. For the health of the company, you must let this person go. The expedient thing to do is to let them go immediately. However, if you do not have written documentation of “why” you are firing someone, they can initiate a wrongful termination lawsuit against the company. These lawsuits are rarely successful, but they are distracting to respond to.
If you want to minimize the chance of one of these lawsuits occurring, then create written documentation. A secondary benefit of this documentation is that there is a small chance that the person will begin to perform. Here are the steps:
If at any of these stages, the team member does not hit a milestone and you do not fire them, then you have completely invalidated the value of the written document, because you have established a provable pattern that the written document was not meaningful.
Again, know that there is a very low chance that he will perform. If your team is very small (under 10 people), I recommend simply letting the person go without the PIP. The cost of de-motivating the team is far greater than that of the lawsuit.
When you do fire someone, put yourself in their shoes. It is a devastating event emotionally. And it is a real setback financially. Your team will also be watching closely to see how you treat ex-employees; a vindictive attitude will make everyone feel unsafe!
Put real effort into helping the person find their next job, and quickly. Give them a severance package that gives them enough time to realistically find another job and have the pay begin. This is 1 month minimum, but more realistically 2-3 months. And then help them find work within that time-frame.
Because you value transparency, make an announcement to the company about the person’s departure, or allow the person to do it themselves. When you make the announcement, praise the person’s contributions to the company, and take ownership yourself for the fact that you weren’t able to match their skills to the company’s needs. DO NOT blame or criticise the person. Instead take responsibility for the situation.
It is highly likely that you will be feeling anger toward this person. You will clearly value the rest of your team much more highly than this person. You will not want to give them an extra penny beyond what is required by law (2 weeks). You will want to save those resourc