Category Archives: Career

Things to Avoid in Selecting an Executive-Level Job at a Software Startup

Posted on August 13, 2019 | 7 comments

This is a sister post to my recent one, Career Decisions: What to Look For in a Software Startup. That piece is all about what to look for when considering taking a job at a software startup. This piece is kind of the opposite: what to look out for when considering an executive job at a software startup.

This post isn’t simply the inverse of the other and I didn’t approach writing it that way. Instead, I started blank slate, thinking what are the warning signs that would make me think twice before taking an executive-level job at a software startup.

Before jumping into the list, let me remind you that no startup is perfect and that unless your name is Frank Slootman that you are unlikely to get a C-level offer from a startup that has all eight of the things I say to look for and none of the eight I say to avoid. The rest of us, to varying degrees, all need to make intelligent trade-offs in facing what is effectively a Groucho Marx problem [1] in our career management.

That said, here’s my list of things to avoid in selecting an executive-level job at a startup:

1. Working for TBH, i.e., working for a boss who is to-be-hired. For example, if a company’s board is leading the search for a new CMO while the CEO slot is also open, the CMO would be working for TBH. Don’t do this. You have no idea who the new CEO will be, if you will like them, and whether their first act will be to fire you. Ignore any promises that “you will be part of the process” in hiring the new boss; you may well find yourself interviewing them as you notice an offer letter sticking out of their backpack, suddenly realizing that you’re the interviewee, not the interviewer. Read my post on this topic if you’re not convinced.

2. The immediate need to raise money. Particularly for a CEO job, this is a red flag. The problem is that unless you are a tier 1 rockstar, investors are not going to want to back the company simply because you’ve arrived. Most investors will want you to have about a year in the seat before considering investing. If you’re immediately dispatched to Sand Hill Road in search of capital, you’ll be out pitching the company poorly instead of learning the business and making plans to improve it. Moreover, to state the obvious, joining a company that immediately needs to raise money means joining a company that’s in the midst of running out of cash. That means either the company gets lucky and does so (often via an inside round [2]) or it doesn’t and your first quarter on the job will be focused on layoffs and restructuring instead of growth. Think: “I love you guys; call me back once you’ve done the round.”

3. Key internal customer TBHs. For example, the VP of Sales is the VP of Marketing’s key internal customer, so Marketing VPs should avoid taking jobs where the VP of Sales is not in place. Why? As your key internal customer, the VP of Sales has a lot of power in both assessing your performance and determining your continued employment [3], so you really want to know if you get along and see eye-to-eye before signing up for a new job. Moreover, even if you are work-compatible, some Sales VPs like “travel with” their favorite VP of Marketing. Think: “Mary’s great. I just want to work with Joe like I have done at my last two companies.” Bye Mary.

4. Strategic “traveling” violations. “Pivot” is one of my favorite startup euphemisms. While many great startups have indeed succeeded on their second try, after a strategic pivot [4], some startups seem to want to make the pivot into an annual event. Let’s remember that pivots mean strategic failure and the virtual write-down of any VC that went into funding the failed strategy. While pivots can save a troubled company from continuing to execute a doomed strategy, they’re not something you want to do at all, let alone on a periodic basis. In basketball, you get called for traveling if you (a) take more than two steps without dribbling or (b) move an established pivot foot. I call startups for traveling when they (a) do two or more strategic pivots or (b) pivot to a new strategy that has nothing to do with the old one [5] (i.e., moving both feet).

5. N^th-place Vendors (for all N>=3). Most high-tech markets have increasing returns effects because customers like to reduce risk by buying from market leaders. In the early 2000s, these normal increasing returns effects were compounded by network effects [6] in many markets. Today, machine learning is compounding increasing returns yet again [7]. In short, it sucks to be third in Silicon Valley, it always has, and it’s likely to suck more in the future than it does now.

Therefore avoid working at vendors who are not #1 or #2 in their category. If you’re considering a #N vendor, then it should be part of it moving to a focus strategy to become #1 at a product or vertical segment. Don’t get sold the idea that a mega-vendor is going to acquire #4 after being rebuffed by the market leaders or to get a better price. Mega-vendors greatly prefer to acquire market leaders and recent history has shown they are more than willing to pay up to do so. Tuck-ins and acqui-hires still happen, but typically for very early-stage companies and not at great valuations.

6. Sick cultures and/or dishonest leaders. Silicon Valley companies often make a big deal about “culture” but too often they conflate culture with ping pong tables, free lunch, and company parties. Culture, to me, is the often unwritten code [8] of what the company values and how business gets done. Alternatively, to paraphrase Henry Ford’s thoughts on quality, culture is what happens when no one is watching. While many Silicon Valley leaders — going all the way back to HP — are “true believers” trying to build not only unique products but also create unique places to work, there are unfortunately charlatans in our midst. Some leaders are disingenuous, others dysfunctional, and a few downright dishonest. If you sense cultural sickness during your interview process, back-checking references, or reading Glassdoor [9], then I’d say tread carefully.

7. Low post-money valuations. You’ll hear this argument a lot with Nth-place companies: “well, the good news is we only got an $80M post-money valuation on our last round of $20M, whereas we heard LeaderCo was valued at $240M — so if you come here you’ll start making money off $80M, not $240M.” At one level, it’s persuasive, especially if you think LeaderCo and NthCo are similar in many respects — “it’s like buying shares at 2/3rds off,” you might think. But that thinking basically assumes the venture capital market mispriced LeaderCo. You might justify that position by thinking “valuations are crazy right now” but if LeaderCo got a crazy valuation why didn’t NthCo get one too, raising in the same market? While some people will try to market low valuations as opportunities, I now see them as problems.

Think not: wow, what a great arbitrage play. Think instead: (a) what don’t I know [10] such that the market priced NthCo at 1/3rd the price of LeaderCo, and (b) what effects that will have on future financing — i.e., it’s likely LeaderCo will continue to have better access to capital going forward. (Remember, the IPO class of 2018 raised a median of around $300M.)

In olden days, the rule was if the market leader went public at a valuation of $1B, then number two was worth about $500M, and number three $250M (4x, 2x, 1x). Today, with companies going public later, more access to capital, and stronger increasing returns effects, I think it’s more like $4.5B, $1.5B, and $300M respectively (15x, 5x, 1x). Given that, and increasing returns, maybe a “crazy” early valuation gap isn’t so crazy after all.

8. First-time, non-founder CEOs. First-time, founder CEOs are the norm these days and VCs do a good job of helping surround them with a strong executive team and good advisors to avoid common mistakes. Personally, I believe that companies should be run by their founders as long as they can, and maybe then some. But when a founder needs to replaced, you get a massive signal from the market in looking at who the company is able to attract to run it. Back in the day, if you were Splunk, you could attract Godfrey Sullivan. Today, if you’re Snowflake, you can attract Frank Slootman.

My worry about companies run by first-time, non-founder CEOs [11] is less about the difficulty for the first-timer in transitioning to the CEO job — which is indeed non-trivial — and more about the signaling value about who would, and more importantly, who wouldn’t, take the job. Experienced CEOS are not in short supply, so if a company can’t attract one, I go back to what don’t I know / what can’t I see that the pool of experienced CEOs does?

That’s not to say it never works — we did a fine job building a nice business at MarkLogic under one first-time, non-founder CEO that I know [11]. It is to say that hiring a non-founder, first-time CEO should prompt some questions about who was picked and why. Sometimes there are great answers to those questions. Sometimes, things feel a bit incongruous.

# # #

Notes

[1] Marx often quipped that he wouldn’t want to be a member of any club that admitted him, the rough equivalent to saying that you wouldn’t take a C-level job at any startup that would offer you one.

[2] As one VC friend so tersely put it: “our job isn’t to put more money into a company, it’s to get other people to put more in at valuations higher than the one we invested at.” (This somehow reminds me of the General Patton quote: “the object of war is not to die for your country, but to make the other bastard die for his.”)

[3] The number one “cause of death” for the VP of Marketing is the VP of Sales.

[4] I particularly like when those pivots are emergent, i.e., when the company is trying one thing, spots that another one is working, and then doubles down on the second thing.

[5] In the sense that they moved an established pivot foot by changing, e.g., both the target customer and the target product. Changing your strategy to sell a different app to the same buyer, or the same app to a different buyer feels much more like a pivot to me.

[6] Everyone wants to be on the social network that their friends are on, so the more your friends pick network A over B, the more newcomers want to pick network A. Back when there was competition in consumer social networks, entire high schools went either Facebook or MySpace, but virtually none went both.

[7] Where machine learning (ML) is an important part of the value proposition, you have even stronger increasing returns effects because having more customers, which means having more data, which means having better models, which means producing superior results.

[8] In cases there may be a very public written code about company culture. But, to the extent the written culture is not the one lived, it’s nothing more than public relations or a statement of aspiration.

[9] While Glassdoor has many limitations, including that reviewers are not verified and that most reviewers are recently-terminated job-seekers (because the requirement to look for a job is to write a review), I still use it in researching companies. My favorite dysfunctional pattern is a litany of detailed, fact-filled, seemingly sincere negative reviews, followed by a modest number of summary, high-level, HR-buzzwordy positive reviews followed by someone saying “I can’t believe management is feeding positive reviews to people in order to up our ratings.”

[10] An economist friend once taught me that when economists studied established practices in any field, e.g., the need for a second-serve (as opposed to just hitting two first serves) in professional tennis, they start out assuming the practice is correct, i.e., that the professionals really do know what they’re doing, and then see if the statistics justify the practice. One might apply the same philosophy to valuations.

[11] Yes, I was one at MarkLogic. In terms of signaling value, I was at least CMO of $1B company before starting and while I’d not been a CEO before, I did bring an unusual amount of database domain expertise (i.e., Ingres, Versant) to the party.

7 Comments

Posted in Career, Management, Silicon Valley, Startups, Uncategorized

Career Decisions: What To Look For In a Software Startup

Posted on July 18, 2019 | 10 comments

So, you’re thinking of taking a job at a startup, but are nervous about the risk, perhaps having trouble telling one from another, and unsure about knowing what’s really important in startup success. In this post, I’ll share what I consider to be a great checklist for CXO and VP-level positions, which we’ll try to adapt a bit to be useful for all positions.

1. Great core/founding team. Startups are about people. We live in a founder-friendly VC era. Thus, there is a good chance one or all of the founding team will be around, and in influential positions, for a long time. If you’re CXO/VP-level, make sure you spend time with this team during your interviews [1] and make sure you think they are “good people” who you trust and who you’d want to work with for a long time [2]. You might well be doing so.

2. Strong investors. In venture capital (VC) land, you should view investors as long-term partners in value creation. Their investments give them contractual rights (e.g., board seats) and you can assume they will be around for a long time [3]. Companies need two things from their investors: advice (e.g., the wisdom acquired from having built a dozen companies before) and money. While good advice is always important, money is absolutely critical in today’s startup environment where a hot category can quickly evolve into a financial arms race to see which company can “buy” the most customers the fastest [4].

While I won’t do a tiering of Silicon Valley VCs here, you want to see investors with both deep pockets who can fund the company through thick (e.g., an arms race) and thin (e.g., inside rounds) and strong reputations such that other VCs are willing and eager to invest behind them in future rounds [5].

3. Newer company/technology. I’ll give you the hint now that this is basically a list of key factors ranked by difficulty-to-change in decreasing order. So the third hardest-to-change key factor is technology. If you’re considering going to work at a twelve-year-old startup [6], understand that it’s very likely built on twelve-year-old technology premised on a twelve-plus-year-old architecture. While the sales-and-marketing types will emphasize “its proven-ness” you will want to know how much technical debt there is associated with this old architecture.

Great startups are lead by strong technologists who ensure that technical debt is continuously addressed and retired via, e.g., trust releases. Bad startups are feature addicts who pile feature upon feature atop a deteriorating architecture, creating an Augean Stables of technical debt. But even in good startups, routine debt-retirement doesn’t prevent the need for periodic re-architecture. The best way to avoid an architectural mess of either type is to go to a newer startup, led by strong technologists, where the product is most probably built atop a modern architecture and where they definitionally cannot have accumulated a mass of technical debt [7].

4. Clean cap table. I once took a job at a company where a VC friend of mine said, “they have a good business, but a bad cap table.” Since I didn’t entirely understand what he meant at the time, I took the job anyway — but, wow, do I wish I’d spent more time trying to understand the phrase “bad cap table.”

A capitalization table (aka “cap table”) is simply a list of investors, the type and amount of shares they hold, shares held by founders, shares allocated to the stock option pool, warrants held by suppliers and/or debtholders, and along with information about any debt the company has acquired. So, strictly speaking, how could this table be inherently good or bad? It just “is.” Nope. There are good cap tables and bad cap tables and here’s a partial list of things that can make a cap table bad in the eyes of a future investor.

Upstream investors who they don’t know and/or don’t want to work with. That is, who holds the shares matters.
Ownership division that gives either the founders or employees too few shares. Most VCs have the right to retain their percentage ownership going forward so if the company is already 60% owned by VC1 after the Series A and 20% owned by VC2 after the Series B, the new investor may believe that there simply isn’t enough to go around. Strong VCs truly believe in founder and employee ownership and if there isn’t enough of it, they may walk from a deal.
ARR not commensurate with total funding. Say a company has consumed $50M in capital but has only $5M in ARR to show for it. Barring cases with exceptional product development entry barriers, that’s not a great ratio and most likely the result of a pivot, where the company started out on hypothesis A and then moved to hypothesis B. From the new investor’s perspective, the company spent (and wasted) $30M on hypothesis A before switching to hypothesis B and thus has invested only $20M in its current business. While some new investors might invest anyway, others would want some sort of recapitalization to reflect the business reality before investing.
Parasites, such as departed founders or incubators. Founders A and B, aren’t going to be that excited over the long term for making money for founder C while she is off doing a new startup. And why would a future VC want to make money for founder C, when she has already left the company [8]? These are problems that need to be addressed from the viewpoint of a new investor.
Network effects among investors. If VC1 owns 40% and VC2 owns 20% and VC2 works almost exclusively with VC1, then you can assume VC1 has control of the company. This may not be a deal killer, but it may make a new investor wary.
Undesirable structure. While VCs almost always buy preferred shares (as opposed to the common shares typically held by founders and employees), the specific preferences can vary. New VC investors typically don’t like structure that gives preferred shares unusual preferences over the common because they worry it can demotivate employees and founders. Such structure includes participating preferences, multiple liquidation preferences, and redemption rights.

And that’s only a partial list. At the CXO level, I think you have the right to ask about the cap table, but it’s much harder for job titles below that. So I understand that you won’t always be able to access this information, but here’s what you can do: (1) look at Crunchbase for financial history to try and identify some of these problems yourself, and (2) try to find a VC friend and get his/her opinion on the company. VCs, particularly those at the bigger firms, are remarkably well informed and look at lots of deals, so they can usually give you an inkling about potential problems.

5. Strong market opportunity. I’ve always done best when the need for the product was obvious. Best example: Business Objects in the 1990s — data warehouses were being built and it was obvious that there were no good tools to access them. Business Objects eventually sold for nearly $7B. Best counter-example: MarkLogic in the 2000s — several years after Gartner wrote a note called XML DBMS: The Market That Never Was. That nearly twenty-year-old company is still not liquid, though through exceptional execution it has built a nice business despite strong headwinds; but there was nothing either obvious or easy about it. In my other direct experience, the markets for Ingres (RDBMS), Salesforce.com, and Host Analytics (cloud EPM) were obvious. The market for Versant (ODBMS) was not.

Another test you can apply to the market is the Market Attractiveness Matrix, which positions the type of buyer vs. the need for the product. Selling SFA to sales, e.g., would be in the most attractive category while selling soft productivity improvement tools to HR would be in the least.

mam

Finally, I also like markets where the pricing is tied to something that inherently goes up each year (e.g., number of salespeople, size of stored documents, potentially usage) as opposed to things that don’t (e.g., number of HR or FP&A people, which increases — but in a more logarithmic fashion).

6. Strongest competitor in the market. The problem with obvious market opportunities, of course, is that they attract multiple competitors. Thus, if you are going to enter a competitive market you want to ensure the company you’re joining is the leader in either the overall market or a specific segment of it. Given the increasing returns of market leadership, it is quite difficult to take away first place from a leader without they themselves faltering. Given that hope is not a strategy [9], unless a runner-up has a credible and clear plan to be first in something [10], you should avoid working at runner-up vendors. See the note below for thoughts on how this relates to Blue Ocean Strategy [11].

7. Known problems that you know how to fix. I’ve worked at epic companies (e.g., Business Objects, Salesforce) and I’ve worked at strugglers that nearly clipped the tree-tops on cash (e.g., Versant) and I can assure you that all companies have problems. That’s not the question. The questions are (1) do they get what really matters right (see previous criteria) and (2) are the things that they get wrong both relatively easy to fix and do you know how to fix them?

Any CXO- or VP-level executive has a set of strengths that they bring to their domain and the question is less “how good are you” than “does the company need what you bring?” For example, you wouldn’t want a sales-and-marketing CEO — no matter how good — running a company that needs a product turnaround. The key here is to realistically match what the company (or functional department) needs relative to what you can bring. If you’re not a CXO- or VP-level executive, you can still apply the same test — does the company’s overall and functional leadership bring what the company needs for its next level of evolution?

8. Cultural compatibility. Sometimes you will find a great organization that meets all these criteria but, for some reason, you feel that you don’t fit in. If that happens, I’d not pursue the opportunity because you are likely to both be miserable on a daily basis and not succeed. Culture runs deep in both people and in companies and when it’s a not a fit, it’s very hard to fake it. My favorite, well-documented example of this was Dan Lyons at HubSpot, detailed in his book Disrupted. HubSpot is a great company and I’m pretty sure Dan is a great guy, but wow there was a poor fit [12]. My advice here is to go with your gut and if something feels off even when everything else is on, you should listen to it.

I know it’s very hard to find companies that meet all of these criteria, but if and when you find one, I’d jump in with both feet. In other cases, you may need to make trade-offs, but make sure you understand them so you can go in eyes wide open.

# # #

Notes

[1] A lack of desire to spend time with you during the recruiting process should be seen as a yellow/red flag — either about you as a candidate or their perceived importance of the position.

[2] In this context, “a long time” means 5-10 years. The mean age of high-growth SaaS IPO companies in last year’s IPO class was 14 years.

[3] While “shareholder rotations” are possible (e.g., where firm B buys out firms A’s position) they are pretty rare and typically only happen in older companies (e.g., 10 years+).

[4] In my opinion, VC a few decades back looked more like, “let’s each back 5 companies with $20M and let the best operators win” whereas today it looks more like, “let’s capitalize early and heavily on the increasing-returns effects of market leadership and stuff (i.e., foie-gras) our startups with money, knowing that the market winners will likely be those who have raised the most cash.” Note that while there is debate about whether this strategy yields the best returns (see foie gras link), there is less debate about whether this generates large companies in the market-leader pack.

[5] As one later stage investor told me: “we prefer to work with syndicates with whom we’ve worked before” suggesting larger firms with more deals are preferable upstream and “if it ends up not working out, we’d much rather be in the deal with a highly respected firm like Sequoia, Accel, Lightspeed, or A16Z than a firm no one has ever heard of.” Your upstream investors have a big impact on who is willing to invest downstream.

[6] Quip: what do you call a twelve-year-old startup? Answer: a small business. (Unless, of course, it’s high-growth and within striking distance of an IPO.)

[7] I would argue, generally, that newer startups tend to be built with newer business model assumptions as well. So picking a newer company tends to ensure both modern architecture and contemporary thought on the business model. For example, it’s hard to find a five-year-old enterprise software company built on an on-premises, perpetual license business model.

[8] Or, if an incubator makes itself a virtual cofounder in terms of common stock holdings in return for its incubation services.

[9] i.e., hoping the other company screws up.

[10] Either a segment or a segment that they believe will grow larger than today’s overall market.

[11] I feel obliged to mention that not all non-obvious market opportunities are bad. As a big fan of Blue Ocean Strategy, I’d argue that the best market opportunities are semi-obvious — i.e., obvious enough that once you dig deeper and understand the story that they are attractive, but not so obvious that they attract a dozen ocean-reddening competitors. Of recent enterprise software companies, I’d say Anaplan is the best example of Blue Ocean Strategy via its (emergent) strategy to take classic financial planning technology (hypercubes) and focus on sales planning in its early years.

[12] Note that I am not saying HubSpot is a perfect company and we can argue at great length (or more likely, quite briefly) about the strengths and weaknesses in typical Silicon Valley cultures. And that’s all interesting academic debate about how things should be. What I am saying is that when it comes to you, personally, for a job, why make yourself miserable by joining an organization where you know up-front that you don’t fit in?

10 Comments

Posted in Career, Startups, Strategy, Uncategorized, VC

Eight Words that Can Limit Your Career: “Let Me Get Back To You On That”

Posted on January 9, 2018 | 2 comments

As executives there are certain things we are expected to know — in our heads — about our jobs and our functions. Sometimes I call this “the 3:00 AM test” because someone should be able to wake you up at 3:00 AM in the middle of a sound sleep and you should be able to answer questions like:

What’s the forecast for the current quarter? (Sales, Finance)
How many MQLs did we generate last week? (Marketing)
How many customer bugs are outstanding? (Engineering)
What’s the monthly PR retainer? (Marketing)
What’s the ending cash forecast for the quarter? (Finance)
How many unique visitors did we get on the website last week? (Marketing)
What are the top three deals in the current quarter? (Sales)

In another post, I playfully called these the other kind of in-memory analytics, but I was focused mostly on numbers that you should be able to recall from memory, without having to open your laptop, without having to delegate the question to your VP of Ops (e.g., salesops, marketingops), and without having to say the dreaded, cringe-worthy, and dangerous eight words: “let me get back to you on that.”

The same logic that applies to numbers applies to other basic questions like:

What’s our elevator pitch against top-rival? (Marketing)
What’s the structure of the sales compensation plan? (Sales)
Which managers are the top 2-3 hot spots in the company? (People)
What are the top three challenges in your department and what are you doing about them? (Any)

You see, when you say the dreaded eight words here’s what everybody else in the meeting is hearing:

“I can’t answer that question because I’m not on top of the basics, and I am either not sufficiently detailed-oriented, swapped-in, or competent to know the answer.”

And, worse yet, if offered unapologetically:

“I’m not even aware that this is the kind of question that everyone would reasonably expect me to be able to answer.”

Here are three tips to help you avoid falling into the eight-words trap.

Develop your sensitivity by making a note of every time you hear them, how you feel about the specific question, and how it reflected on the would-be respondent.
Make a list of questions you should be able to answer on-the-spot and then be sure you can. (If you find a gap, think about what that means about how you approach your job.)
If you feel the need to say the dreaded eight words see if offering a high-confidence range of values will be enough to meet the audience’s need — e.g., “last week’s web visitors were in the 10,000 to 11,000 range, up a few percent from the week before.”

And worst case, if you need to say the dreaded eight words and you think the situation warrants one, offer an apology. Just be mindful that you don’t find yourself apologizing too often.

2 Comments

Posted in Career, Leadership, Management

Are You a Challenging or Simply a Difficult Direct Report?

Posted on August 14, 2017 | 6 comments

Most managers, save for true sycophants, want to challenge their boss. Few managers want to be puppet yes-people to the boss. They’ve worked hard to get where they are. They bring years of wisdom and experience. They want to push and challenge. But many don’t know when or how. More importantly, they don’t know what they don’t know.

How often do you think you’re challenging the boss when he/she thinks you’re just being plain difficult? Challenging direct reports keep their positions and rise with the organization. Difficult ones get jettisoned along the way.

There are two great ways you can figure out how often you’re being which:

Think of things from the boss’s perspective
Ask the boss

Think from the Boss’s Perspective

Bosses want to get things done. Things generally fall into two buckets: easy and hard. Easy things may still entail a lot of work and planning, but there’s nothing really conceptually difficult or unknown about them.

Running the company’s presence at a tradeshow you attend every year might be a lot of work, but I’ll consider it easy for this conversation because that work is known.

Deciding to terminate a problem employee is easy. (Note inclusion of word “problem.”) If you see a problem, the adage goes, everyone else has probably already seen it for months and the damage done is more than you know. This decision is hard from a personal perspective — I’ve never met anyone who enjoys terminating people. But firing someone who routinely misses deadlines, training sessions, and team meetings isn’t hard in this context.

Launching the new version of a product is easy. Yes, the positioning may be hard, but managing the overall launch process is easy. It’s hopefully done a few times per year. Yes, it’s a lot of work and planning, but there’s nothing conceptually difficult about running the process.

Difficult direct reports make easy things hard. How?

Complexification. When you ask someone the time you discover that there are three types of people in the world: those who tell you the time, those who tell you how to build a watch, and those who tell you how to build a Swiss village. Simplifiers go far in organizations, complexifiers get stuck.

Lack of follow through. Bosses want to talk once about a project, agree to it, and then have it get executed. As my friend Lance Walter always said bosses want “set it and forget it” direct reports. If you have a question, come ask. But otherwise I assume you are tracking our agreed-to objectives and they’re going to happen without me having to check and re-check. Ditto for feedback given along the way.

Drama. Difficult directs tend to take things personally. They turn criticism of work into criticism of them. They view a heavy workload as dramatic sacrifice and not a prioritization problem. They are sensitive to criticism, defensive when questioned or given feedback, and often unable to separate bad performance from bad intent.

The result is that over time the boss starts to loathe the idea of meeting with the direct report which results in a downward spiral of communication and relationship.

Challenging direct reports keep easy things easy. They get shit done without a lot of supervision, complexification, or drama. On the flip side, challengers don’t just go along for the ride when it comes to inherently hard things like fixing a break in the sales pipeline, selecting company or product strategies, or working on a competitive campaign strategy. They weigh in, sometimes challenging the majority or consensus view. They provide good arguments for why what everyone else is thinking could be wrong. Their selective Devil’s advocacy helps the company avoid groupthink and the organization make better decisions. And they do this without going overboard and positioning themselves as the resident contrarian.

Simply put, when you say something to the boss or in a meeting, imagine how the boss will react and then count the ratio between the following two reactions

God, what a pain in the ass.
Wow, I hadn’t thought of that.

Ratios above 1.0 indicate you are a net difficult direct report. Ratios below 1.0 indicate you are a net challenger.

Ask the Boss

Since knowing is always superior to guessing, I’ll give you a set of good questions that can help you figure out where you stand.

If you had to rank your direct reports from top to bottom in terms of difficultly, would I fall above or below the median and why?
Can you please list 3-5 things I do that make it difficult to manage me so I can work on them?
To what extent do you find me difficult/contrarian for difficulty’s sake vs. genuinely challenging ideas and helping the company reach better decisions?
When it comes to strategic debates do you feel that I sit on the sidelines too much, participate too much, or strike a good balance?
If there is a pattern of skipped/cancelled 1-1’s (a sign of avoidance) or higher frequency 1-1’s with other directs, then ask why?

Sycophants know they are sycophants. Challengers usually know they are challengers. The risk is that you are a difficult when you think you’re a challenger — and that rarely ends well. So think about, ask, and take appropriate measures to correct the situation. Before your boss doesn’t want to talk to you anymore.

6 Comments

Posted in Career, CEO, Leadership, Management, Startups

Career Development: What It Really Means to be a Manager, Director, or VP

Posted on March 8, 2015 | 32 comments

It’s no secret that I’m not a fan of big-company HR practices. I’m more of the First Break all the Rules type. Despite my general skepticism of many standard practices, we still do annual performance reviews at my company, though I’m thinking seriously of dropping them. (See Get Rid of the Performance Review.)

Another practice I’m not hugely fond of is “leveling” — the creation of a set of granular levels to classify jobs across the organization. Leveling typically results in something that looks like this:

While I am a huge fan of compensation benchmarking (i.e., figuring out what someone is worth in the market before they do by getting another job), I think classical leveling has a number of problems:

It’s futile to level across functions. Yes, you might discover that a Senior FPA Analyst II earns the same as a Product Marketing Director I, but why does that matter? It’s a coincidence. It’s like saying with $3.65 I can buy either a grande non-fat latte or a head of organic lettuce. What matters is the fair price of each of those goods in the market — not they that happen to have the same price. So I object to the whole notion of levels across the organization. It’s not canonical; it’s coincidence.

Most leveling systems are too granular, with the levels separated by arbitrary characterizations. It’s makework. It’s fake science. It’s bureaucratic and encourages a non-thinking “climb the ladder” approach to career development. (“Hey, let’s develop you to go from somewhat-independent to rather-independent this year.”)

It conflates career development and salary negotiation. It encourages a mindset of saying, “what must I do to make L10” when you want to say, “I want a $10K raise.” I can’t tell you the number of times people have asked me for “development” or “leveling” conversations where I get excited and start talking about learning, skills gaps, and such and it’s clear all they wanted to talk about was salary. Disappointing.

That said, I do believe there are three meaningful levels in management and it’s important to understand the differences among them. I can’t tell you the number of times someone has sincerely asked me, “what does it take to be a director?” or, “how can I develop myself into a VP?”

It’s a hard question. You can turn to the leveling system for an answer, but it’s not in there. For years, in fact, I’ve struggled to find what I consider to be a good answer to the question.

I’m not talking about Senior VP vs. Executive VP or Director vs. Senior Director. I view such adjectives as window dressing or stripes: important recognition along the way, but nothing that fundamentally changes one’s level.

I’m not talking about how many people you manage. In call centers, a director might manage 500 people. In startups, a VP might manage zero.

I am talking about one of three levels at which people operate: manager, director, and vice president. Here are my definitions:

Managers are paid to drive results with some support. They have experience in the function, can take responsibility, but are still learning the job and will have questions and need support. They can execute the tactical plan for a project but typically can’t make it.

Directors are paid to drive results with little or no supervision (“set and forget”). Directors know how to do the job. They can make a project’s tactical plan in their sleep. They can work across the organization to get it done. I love strong directors. They get shit done.

VPs are paid to make the plan. Say you run marketing. Your job is to understand the company’s business situation, make a plan to address it, build consensus to get approval of that plan, and then go execute it.

The biggest single development issue I’ve seen over the years is that many VPs still think like directors. [1]

Say the plan didn’t work. “But, we executed the plan we agreed to,” they might say, hoping to play a get-out-of-jail-free card with the CEO (which is about to boomerang).

Of course, the VP got approval to execute the plan. Otherwise, you’d be having a different conversation, one about termination for insubordination.

But the plan didn’t work. Because directors are primarily execution engines, they can successfully play this card. Fair enough. Good directors challenge their plans to make them better. But they can still play the approval card successfully because their primary duty is to execute the plan, not make it.

VP’s, however, cannot play the approval card. The VP’s job is to get the right answer. They are the functional expert. No one on the team knows their function better than they do. And even if someone did, they are still playing the VP of function role and it’s their job – and no one else’s — to get the right answer.

Now, you might be thinking, “glad I don’t work for Dave” right now — he’s putting failure of a plan to which he and the team agreed on the back of the VP. And I am.

But it’s the same standard to which the CEO is held. If the CEO makes a plan, gets it approved by the board, and executes it well but it doesn’t work, they cannot tell the board “but, but, it’s the plan we agreed to.” Most CEOs wouldn’t even dream of saying that. It’s because CEOs understand they are held accountable not for effort or activity, but results.

Part of truly operating at the VP level is to internalize this fact. You are accountable for results. Make a plan that you believe in. Because if the plan doesn’t work, you can’t hide behind approval. Your job was to make a plan that worked. If the risk of dying on a hill is inevitable, you may as well die on your own hill, and not someone else’s.

Paraphrasing the ancient Fram oil filter commercial, I call this “you can fire me now or fire me later” principle. An executive should never sign up for a plan they don’t believe in. They should risk being fired now for refusing to sign up for the plan (e.g., challenging assumptions, delivering bad news) as opposed to halfheartedly executing a plan they don’t believe in and almost certainly getting fired for its failure later. The former is a far better way to go than the latter.

This is important not only because it prepares the VP to one day become a CEO, but also because it empowers the VP in making their plan. If this my plan, if I am to be judged on its success or failure, if I am not able to use approval as a get-out-of-jail-free card, then is it the right plan?

That’s the thinking I want to stimulate. That’s how great VPs think.

# # #

Footnotes:

[1] Since big companies throw around the VP title pretty casually, this post is arguing that many of those VPs are actually directors in thinking and accountability. This may be one reason why big company VPs have trouble adapting to the e-staff of startups.

32 Comments

Posted in Career, HR, Leadership, Management, Startups