Category Archives: Management

On the Perils of Taking Advice from Successful Business People

One of the hardest things about running a startup is you’re never sure who to listen to.

Your board members own big stakes in the company, but that doesn’t automatically align them with you.  Your late-stage investors want low multiples on big numbers.  Your early-stage investors want big multiples on small numbers.  And they have their own specific needs driven by their funds and their partnerships.  Your rank-and-file employees own relatively small stakes which, ceteris paribus, should make them want you to swing for the fences — but, in these days of decade-to-liquidity, you may have employees so jaded on equity compensation that they’d just like to keep their well-paying jobs.

Your executive team wants to hit their targets, earn their bonuses, and maybe some of them are deeply motivated by winning in the market, but maybe not.  With a 0.5% to 1% share, a $500M exit can mean a $2.5M to $5.0M pop.  Maybe some would prefer to take the early exit, upgrade the house in Menlo Park, and go do it again somewhere else, as opposed to riding it out for the long term.

The idea that giving everyone some equity is a good one, but as I wrote nearly ten years ago, it’s quaint to think that doing so aligns everyone.

So, if you can’t really look inside the company, what then?  Well, if you’re like many, you look outside.  You might read books, subscribe to blogs, or listen to podcasts.  You might seek out advisors or create an advisory board.

In all such cases, you’ll be taking advice from business people who have gone before you, have had anywhere from some to considerable success, and interested in sharing their learnings with others.  You know, people like me [1].

Look, I’m not going to argue that getting advice from successful people is a bad idea — it certainly seems preferable to the alternative — but I am going to point out a few caveats, most of which aren’t obvious in my estimation:

  • Successful people don’t actually know what made them successful.  They know what they did.  They know it worked.  They have hunches and beliefs.  Causality, not so much.  Some of them can be quick to forget that, so you shouldn’t be [2].  There was no control group.  If Marc Benioff carried a rabbit’s foot, would you?
  • Too many successful people are rinse/repeat [3].  I’m frankly surprised by how many successful people are chomping at the bit to do exactly what worked for them at their last company with total disregard for whether it applies to yours.  Beware these folks.  Interview question:  so could you tell me about a situation where you wouldn’t do that?  It’s not foolproof because most will catch the hint, so this is really something you need to listen for before asking.  Do they diagnose-then-prescribe or prescribe without diagnosing?
  • Their situation was likely different from yours.  In fact, in the land of disruption, as Kelly Wright points out in this podcast, it almost certainly was.  Are you creating a new category without competition?  Are you in an over-funded next-big-thing category?  Are you competing against a big company transitioning product lines?  Are you trying to get people to buy something they don’t believe they need or pick among alternatives when they know they do?  Are you disrupting technology, business model, or both?  Are you filling a need that is in the midst of being created the rise of another category?

Should you listen to these people?  I think yes [4].  But try to find ones who have seen both success and failure, seen success in many situations (not just one), and who are thoughtful about a company’s specific situation, and approach the advisory process and their own prior success with humility.

# # #

[1] While I’d characterize my own success as towards the left of that spectrum, I am advising and/or have advised over 20 startups, some of them stunningly successful.

[2] One of my favorite quotes of this ilk is from former Harvard marketing professor, Theodore LevittNothing in business is so remarkable as the conflicting variety of success formulas offered by its numerous practitioners and professors.  And if, in the case of practitioners they’re not exactly “formulas,” they are explanations of “how we did it” implying with firm control over any fleeting tendencies toward modesty that “that’s how you ought to do it.”  Practitioners filled with pride and money turn themselves into prescriptive philosophers, filled mostly with hot air.

[3] By the way, “I made $1B doing it this way” is one of the more difficult arguments you’re probably wise not to take on.

[4] “Duh.”

Marketing Exists to Make Sales Easier

Many moons ago when I was young product marketing manager, I heard a new VP of Marketing speak at a marketing all-hands meeting.  He spoke with a kiwi accent and his name was Chris Greendale.  What he said were six words that changed my career:

Marketing exists to make sales easier

While this has clearly been a theme in Kellblog posts over the years, I realized that I’ve actually never done a dedicated post on it, despite having written reductionist mission statement posts for both professional services (“maximize ARR without losing money”) and human resources (“help managers manage”).

Being a math type, I love deriving things from first principles and this seemed the perfect first principle from which to derive marketing.  First, you hire a team to build your product.  Then, you hire a team to sell it.  The only reason you need marketing is to help the second team do its job better.

At my next job, I remember bumping into Larry, our fresh from the used-car lot VP of Business Development, who in frustration (as he often was), one day came to work with a bunch of t-shirts that looked something like this

Enterprise software is a two-engine plane and those two engines are quota-carrying salesreps (QCRs) who sell the software and storypoint-burning developers (DEVs) who write it [1].

Everyone else is “the help” — including marketing, finance, sales supporting roles (e.g., SCs, SDRs), engineering-supporting roles (e.g., QA, PM, TPM), customer service, and yes, the CEO.  The faster you understand this, in my humble opinion, the better.

And, while we’re in realization mode, the other thing to internalize is that it costs about twice as much to sell an enterprise software product as it does to build it.  Per KeyBanc, typical S&M spend is 45% of revenue and R&D runs about half that.

But back to the mantra, make sales easier.  Why did I like it so much?

First, it put marketing in its proper place.  At the time, there was something of a power struggle between sales and marketing, and CPG/brand management types were trying to argue that product marketing mangers should be the generals and that sales were just the foot-soldiers.  Looking both around me and at the P&L that just seemed wrong.  Maybe it worked in consumer products [2] but this was enterprise software.  Sales had all the budget and all the power to go with it.  We should help them and, ego aside, there’s nothing wrong with being a helper.

In fact, if you define your mission statement as “help” and remember that “help is defined in the mind of the recipient,” you’ve already gone a long way to aligning your sales and marketing.

Second, there was nothing written in stone that limited the scope of that help. Narrow thinking might limit marketing to a servile role.  That’s not my intent.  Help could take many forms, and while the primary form of requested help has evolved over time, help can include both the tactical and the strategic:

  • Giving sales qualified leads to work on.
  • Building training and tools that helps sales sell more.
  • Providing competitive information that helps win more deals.
  • Creating an ideal customer profile (ICP) that helps sales focus on the most winnable deals.
  • Building industry-specific messaging that helps sell in given verticals
  • Working with PM [3] to build product that is inherently more salable [4].
  • Corporate strategy development to put the company in the right markets with the right offerings.

When I say help, I don’t mean lowercase-h tactical help.  I mean help in all its forms, which can and should include the “tough love” form of help:  “I know you think you want that, but let me demonstrate that I’ve heard your request and now explain why I think it’s not a good idea.”

Being helpful doesn’t mean saying yes to everything.  I hearken back to Miracle on 34th Street whenever I’m drawn into this problem (quote adapted):

Kris Kringle:  No, but don’t you see, dear?  Some <salespeople> wish for things they couldn’t possibly use like real locomotives or B-29s.

If sales is asking you for a real locomotive or a B-29 you need to tell them.

For the rest of my marketing career, I took Greendale’s mantra and made it my own.  If sales were my customer and I were helping them, then:

  • We’d run sales satisfaction surveys to see how happy sales was with marketing and where they wanted us to invest and improve [5].
  • We’d make ourselves accountable.  One of the biggest stresses in the sales/marketing relationship was, to paraphrase an old joke, sales felt like the pig while marketing was the chicken.  We’d publish objectives, measure ourselves, and be honest about hits and misses.
  • We’d bring data to the party.  We’d leverage syndicated and custom research to try and made data-driven as opposed to opinion-driven decisions.
  • We’d stop back-seat drivers.  I’d remind anyone that got too uppity that “quotas are available” and they should go take one [6].
  • We wouldn’t be the marketing police, scolding people for using out-of-date materials.  If sales were using a deck we’d decommissioned quarters ago, our first response wouldn’t be “stop!” but “why?”
  • We’d market marketing.  We’d devote some time to internal marketing to let the sales organization know what we were doing and why.

We’d even do something that tested the limits of HR (particularly when I was in France).  I’d use the sales satisfaction survey to rank every customer-facing marketer on a matrix.

This gave me hard data on who sales knew in the department and what they thought of them.  If we’re going to make messaging for sales to present to customers, we’d better prepared to — and be good at — presenting it ourselves [7].

Overall, the mantra served me well, taking me from product marketing director to VP of product marketing to VP of corporate marketing to overall VP of marketing and a great run at Business Objects.  I’ve had plenty of people challenge me on it over the years — usually it’s because they understand it as purely tactical.  But it’s served me well and I encourage you to use it as your North Star in leading your marketing team.

After all, who doesn’t like help?

# # #

Notes

[1] You’d be wise to add those two figures to your one-page key metrics.  Somehow it’s always easier to hire the supporting staff than the “engine” staff, so keep an eye on the raw numbers of QCRs and DEVs and, for more fun, track their density in their respective organizations (QCRs/sales and DEVs/eng).

[2] Shout out to my daughter Stephanie who works in brand management on a consumer product and who can now inform me directly of how things work in that world — and it is different.

[3] PM = product management.

[4] Either in the sense of better solves the problem or in the tactical sense of wipes out competitive differentiation.

[5] One of my favorite results was the sales and SCs often wanted exactly the same thing, but that sales wanted it more (i.e., roughly the same priority curve but sales would rank everything even more important than the SCs).

[6] Most didn’t, but a few did, and some did remarkably well.

[7] We were probably a $100M company around the time we started this, so I’m not suggesting it for a 2-PMM startup.  And yes, I’d put myself on the matrix as well.

On Recruiting: The Must-Have / Nice-to-Have List

I’m amazed by the number of times I see companies performing searches, even for key positions, without a clear idea of what they’re looking for.  Rephrasing Lewis Carroll, “if you don’t know what you’re recruiting for, any candidate looks great.”

lewis

I liken executive recruiters to Realtors.  If you don’t give a Realtor specific guidance on what you want to see, they’ll show you whatever’s on the market.  Moreover, even if you do tell a Realtor that you want a 4-bedroom on a cul de sac with great schools, you are likely to end up visiting a 3-bedroom “charmer” on a main thoroughfare that they just had to show you because it has a certain “je ne sais quoi.”  That know-not-what, by the way, is that it’s for sale.

This is a moment of truth for your relationship with your Realtor because if you do not say “if you show me another house that doesn’t meet my must-have criteria I’ll be working with another Realtor,” then three years hence you’ll be wondering, to the sound of passing traffic, why you live in a 3-bedroom and the kids are in private school.

Let’s stick with the house metaphor.  It’s actually fairly easy to make a list of criteria.  Make a two-column list, with one column titled “Must Have” and the other “Nice to Have.”  (One way things go wrong is when you mix up the two.)

Must Have Nice to Have
4 bedrooms Hot tub
3 baths Ranch (one level)
Quarter-acre lot Half-acre lot
Great schools (K-12) Less than 20 years old
No swimming pool Walk to downtown
$1.0 to $1.5M price

This process has a number of advantages:

  • It forces you and your spouse to discuss what you really want.  What’s truly a must-have vs. a nice-to-have criteria?  You might be surprised.
  • It provides a crystal-clear basis of communication with your Realtor.
  • If you provide the list before engaging with Realtor, they have the chance to refuse the business if they think your criteria are unrealistic, e.g., given your price point.
  • Once engaged, it gives you the basis for holding the Realtor accountable for showing you only what you want to see.

Let’s switch to executive recruiting.  What do we typically find in an executive job specification?  This is excerpted from a real CEO spec:

The ideal candidate will be or have:

  • A track record in building and leading high-performance teams
  • Confidence to interact with and inspire belief from present and future investors
  • The ability to articulate and define relevant methodology
  • An excellent communicator, effective in front of Customers, Employees, Analysts
  • Sound judgment and maturity
  • A leader who recognizes and respects talent outside of his/her own and recruits that talent to work close to and complement him/her within the company
  • Unquestionable integrity
  • Organizational tolerance:  ability to work with fluidity and ambiguity

That ambiguity tolerance starts right with this spec.  Think for a minute:

  • Are these as clear as our house spec?  A track record for how long, two quarters or ten years?
  • Are they measurable in any way?   How do I know if they respect talent outside their own or have sound judgement?
  • Are they well thought out?  (“There, I just questioned your integrity. We’re done.”)
  • Are they specific?  Which relevant methodology should they be able to define?

Compared to our house criteria, this is a mess.  And there are 17 more bullets.

How does this happen?  It’s just a tradition in executive recruiting; these sorts of specs get created. These bullets were probably selectively copied and pasted from other specs by an associate at the search firm.  While the selection was likely based a conversation with the company about what they want, it’s clear that nobody did any hard thinking about what they really needed.

A big clue that they have no must-have criteria is this “ideal candidate” nonsense.  Our house spec didn’t say “the ideal house will have” and then describe some fantasy house we can never afford.  We decided what the house must have, and then added some things that would be nice to have as well.

Let’s make an example of what an must-have / nice-to-have list could look like for an EVP of Sales at $50M startup.  This list makes a lot of assumptions about company needs and is far from perfect.  But it’s a heck of a lot better than the bullets above.

Must Have Nice to Have
Previously led all sales at an enterprise SaaS startup as it grew from $50M to $100M in ARR Knowledge of the CRM space
Has previously established detailed operational metrics and processes to run a velocity sales model Ability to quickly recruit a strong VP of salesops
A network including top reps and regional managers that can be  immediately recruited Prior experience creating and growing a sales enablement  function with onboarding and certification
At least 3 years’ experience managing international sales Prior experience selling or managing outside of North America
At least 5 years’ experience managing a three-level sales organization with at least 50 sellers Early-career experience in a technical or pre-sales role
Demonstrated compatibility with the organization’s culture and values Technical undergraduate degree plus MBA

What’s most important is that the process of making this list — writing it down, talking to peers about it, sharing it with the board, discussing it with prospective search firms — will clarify your own thinking and help you build consensus around precisely who is needed to do the job.

Otherwise, you’ll just get an “athlete” that the recruiter had in inventory.

Should Customer Success Report into the CRO or the CEO?

The CEO.  Thanks for reading.

# # #

I was tempted to stop there because I’ve been writing a lot of long posts lately and because I do believe the answer is that simple.  First let me explain the controversy and then I’ll explain my view on it.

In days of yore, chief revenue officer (CRO) was just a gussied-up title for VP of Sales.  If someone was particularly good, particularly senior, or particularly hard to recruit you might call them CRO.  But the job was always the same:  go sell software.

Back in the pre-subscription era, basically all the revenue — save for a little bit of services and some maintenance that practically renewed itself — came from sales anyway.  Chief revenue officer meant chief sales officer meant VP of Sales.  All basically the same thing.  By the way, as the person responsible for effectively all of the company’s revenue, one heck of a powerful person in the organization.

Then the subscription era came along.  I remember the day at Salesforce when it really hit me.  Frank, the head of Sales, had a $1B number.  But Maria, the head of Customer Success [1], had a $2B number.  There’s a new sheriff in SaaS town, I realized, the person who owns renewals always has a bigger number than the person who runs sales [2], and the bigger you get the larger that difference.

Details of how things worked at Salesforce aside, I realized that the creation of Customer Success — particularly if it owned renewals — represented an opportunity to change the power structure within a software company. It meant Sales could be focused on customer acquisition and that Customer Success could be, definitionally, focused on customer success because it owned renewals.  It presented the opportunity to have an important check and balance in an industry where companies were typically sales-dominated to a fault.  Best of all, the check would be coming not just from a well-meaning person whose mission was to care about customer success, but from someone running a significantly larger amount of revenue than the head of Sales.

Then two complications came along.

The first complication was expansion ARR (annual recurring revenue).  Subscriptions are great, but they’re even better when they get bigger every year — and heck you need a certain amount of that just to offset the natural shrinkage (i.e., churn) that occurs when customers unsubscribe.  Expansion take two forms

  • Incidental:  price increases, extra seats, edition upsells, the kind of “fries with your burger” sales that are a step up from order-taking, but don’t require a lot of salespersonship.
  • Non-incidental:  cross-selling a complementary product, potentially to a different buyer within the account (e.g., selling Service Cloud to a VP of Service where the VP of Sales is using Sales Cloud) or an effectively new sale into different division of an existing account (e.g., selling GE Lighting when GE Aviation is already a customer).

While it was usually quite clear that Sales owned new customer acquisition and Customer Success owned renewals, expansion threw a monkey wrench in the machinery.  New sales models, and new metaphors to go with them, emerged. For example:

  • Hunter-only.  Sales does everything, new customer acquisition, both types of expansion, and even works on renewals.  Customer success is more focused on adoption and technical support.
  • Hunter/farmer.  Sales does new customer acquisition and non-incidental expansion and Customer Success does renewals and incidental expansion.
  • Hunter/hunter.  Where Sales itself is effectively split in two, with one team owning new customer acquisition after which accounts are quickly passed to a very sales-y customer success team whose primary job is to expand the account.
  • Farmers with shotguns.  A variation of hunter/hunter where an initial penetration Sales team focuses on “land” (e.g, with a $25K deal) and then passes the account to a high-end enterprise “expand” team chartered with major expansions (e.g., to $1M).

While different circumstances call for different models, expansion significantly complicated the picture.

The second complication was the rise of the chief revenue officer (CRO).  Generally speaking, sales leaders:

  • Didn’t like their diminished status, owning only a portion of company revenue
  • Were attracted to the buffer value in managing the ARR pool [3]
  • Witnessed too many incidents where Customer Success (who they often viewed as overgrown support people) bungled expansion opportunities and/or failed to maximize deals
  • Could exploit the fact that the check-and-balance between Sales and Customer Success resulted in the CEO getting sucked into a lot of messy operational issues

On this basis, Sales leaders increasingly (if not selflessly) argued that it was better for the CEO and the company if all revenue rolled up under a single person (i.e., me).  A lot of CEOs bought it.  While I’ve run it both ways, I was never one of them.

I think Customer Success should report into the CEO in early- and mid-stage startups.  Why?

  • I want the sales team focused on sales.  Not account management.  Not adoption.  Not renewals.  Not incidental expansion.  I want them focused on winning new deals either at new customers or different divisions of existing customers (non-incidental expansion).  Sales is hard.  They need to be focused on selling.  New ARR is their metric.
  • I want the check and balance.  Sales can be tempted in SaaS companies to book business that they know probably won’t renew.  A smart SaaS company does not want that business.  Since the VP of Customer Success is going to be measured, inter alia, on gross churn, they have a strong incentive call sales out and, if needed, put processes in place to prevent inception churnThe only thing worse than dealing with the problems caused by this check and balance is not hearing about those problems.  When one exec owns pouring water into the bucket and a different one owns stopping it from leaking out, you create a healthy tension within the organization.
  • They can work together without reporting to a single person.  Or, better put, they are always going to report to a single person (you or the CRO) so the question is who?  If you build compensation plans and operational models correctly, Customer Success will flip major expansions to Sales and Sales will flip incidental expansions back to Customer Success.  Remember the two rules in building a Customer Success model — never pair our farmer against the competitor’s hunter, and never use a hunter when a farmer will do.
  • I want the training ground for sales.  A lot of companies take fresh sales development reps (SDRs) and promote them directly to salesreps.  While it sometimes works, it’s risky.  Why not have two paths?  One where they can move directly into sales and one where they can move into Customer Success, close 12 deals per quarter instead of 3, hone their skills on incidental expansion, and, if you have the right model, close any non-incidental expansion the salesrep thinks they can handle?
  • I want the Customer Success team to be more sales-y than support-y.  Ironically, when Customer Success is in Sales you often end up with a more support-oriented Customer Success team.  Why?  The salesreps have all the power; they want to keep everything sales-y to themselves, and Customer Success gets relegated to a more support-like role.  It doesn’t have to be this way; it just often is.  In my generally preferred model, Customer Success is renewals- and expansion-focused, not support-focused, and that enables them to add more value to the business.  For example, when a customer is facing a non-support technical challenge (e.g., making a new set of reports), their first instinct will be to sell them professional services, not simply build it for the customer themselves.  To latter is to turn Customer Success into free consulting and support, starting a cycle that only spirals.  The former is keep Customer Success focused on leveraging the resources of the company and its partners to drive adoption, successful achievement of business objectives, renewals, and expansion.

Does this mean a SaaS company can’t have a CRO role if Customer Success does not report into them?  No.  You can call the person chartered with hitting new ARR goals whatever you want to — EVP of Sales, CRO, Santa Claus, Chief Sales Officer, or even President/CRO if you must.  You just shouldn’t have Customer Success report into them.

Personally, I’ve always preferred Sales leaders who like the word “sales” in their title.  That way, as one of my favorites always said, “they’re not surprised when I ask for money.”

# # #

[1] At Salesforce then called Customers for Life.

[2] Corner cases aside and assuming either annual contracts or that ownership is ownership, even if every customer technically isn’t renewing every year.

[3] Ending ARR is usually a far less volatile metric than new ARR.

How Startup CEOs Should Think About the Coronavirus, Part III — Useful Links

This post in part III in a series.  Part I covers the basics of employee communications.  Part II provides information on how several leading companies are handling the situation and offers specific thoughts on financial planning.  This part, a set of curated links that I have found useful, was formerly at the end of part II, but I figured it really should be a standalone post.

While I will try to prevent the list from getting too long, I will update this post from time to time as I find high-quality information resources.

Coronavirus Resources: Silicon Valley / Business Orientation

Coronavirus Resources: Authorities on Twitter

Coronavirus Resources: Public Health Agencies

 

Stopping the Sales & Marketing Double Drowning

I earned my spending money in high school and partially paid for college by working as a lifeguard and water safety instructor. Working at a lovely suburban country club you don’t make a lot of saves. One day, working from the deep-end chair, I noticed two little kids hanging on a lane line. That was against the rules. I blew my whistle and shouted, “off!”

Still young enough to be obedient (i.e., under 11), the two kids let go of the line. The trouble was they couldn’t swim. Each grabbed the other and they sank to the bottom. “Oh my God,” I thought as I dove off the chair to make the save, “I just provoked a double drowning.”

While that was happily the last actual (and yes, averted) double drowning I have witnessed, I’ve seen a lot of metaphorical ones since. They involve adults, not kids. And it’s always the VP of Sales in a deadly embrace with the VP of Marketing. Sure, it may not be an exactly simultaneous death — sometimes they might leave a few months apart — but make no mistake, in the end they’re both gone and they drowned each other.

How To Recognize the Deadly Embrace

I believe the hardest job in software is the VP of Sales in an early-stage startup. Why? Because almost everything is unknown.

  • Is the product salable?
  • How much will people pay for it?
  • What’s a good lead?
  • Who should we call on?
  • What’s the ideal customer profile?
  • What should we say / message?
  • Who else is being evaluated?
  • What are their strengths/weaknesses?
  • What profile of rep should I hire?
  • How much can they be expected to sell?
  • What tools do they need?
  • Which use-cases should we sell to?
  • What “plays” should we run?

You might argue every startup less then $50M in ARR is still figuring out some of this. Yes, you get product-market fit in the single-digit millions (or not at all). But to get a truly repeatable, debugged sales model takes a lot longer.

This painful period presents a great opportunity for sales and marketing to blow each other up. It all begins with sales signing up for (or being coerced into) an unrealistic number. Then, there aren’t enough leads. Or, if there are, the leads are weak. Or the leads don’t become pipeline. Or pipeline doesn’t close.

At each step one side can easily blame the other.

Sales SaysMarketing Says
There aren’t enough leadsThere are, but they’re all stuck with your “generation Z” SDRs
The SDRs are great, I hired themThe SQL acceptance rate says they are passing garbage to sales.
The SQLs aren’t bad, there just aren’t enough of themYour reps are greasing the SDRs by accepting bad SQLs
We’re not getting 80% of pipeline from marketingWe’re delivering our target of 70% and then some
But the pipeline is low quality, look at the poor close rateThe close rate is poor because of your knuckleheaded sellers
Those knuckleheads all crushed it at my last companyYour derail rate’s insane
Lots of deals in this space end up no-decisionMaybe they derail because we don’t follow-up fast enough
Our message isn’t crisp or consistentOur messaging is fine, the analysts love it
We’re the greatest thing nobody’s ever heard of We’ve got a superior product that your team can’t sell
We’re being out-marketed!We’re being out-sold!

Once this ping-pong match starts, it’s hard to stop. People feel blamed. People get defensive. Anecdotal bloody shirts are waived in front of the organization — e.g., “marketing counted five grad students who visited the booth as MQLs!” or “we lost an opportunity at BigCo because our seller was late for the big meeting!”

With each claim and counter-claim sales and marketing tighten the deadly embrace. Often the struggling CRO is fired for missing too many quarters, guns still blazing as he/she dies. (Or even beyond the grave if they continue to trash the CMO post departure.) Sometimes the besieged CMO quits in anticipation of termination. Heck, I even had one quit after I explicitly told them “I know you’re under attack, but it’s unfair and I’ve got your back.”

Either way, in whatever order, they go down together. Each one mortally wounds the spirit, the confidence, or the pleasure-in-work of the other.

How to Break Out of It

Like real double drownings, it’s hard for one of the participants to do an escape maneuver. The good news is that it’s not hard to know there’s a problem because the mess is clearly visible to the entire organization. Everyone sees the double downing. Heck, employees’ spouses probably even know about it. However, only the CEO can stop it and — trust me — everyone’s waiting for them to do so.

The CEO has four basic options:

  • Take some pressure off. If the primary reason you’re missing plan is because the plan is too aggressive, go to the board and reduce the targets. (Yes, even if it means reducing some expense budget as well.) As Mike Moritz said to me when I started at MarkLogic: “make a plan that you can beat.” Tell them both that you’re taking off the pressure, them them why (because they’re not collaborating), and tell them that you’ve done your part and now it’s time for them to do theirs: collaborate non-defensively to solve problems.
  • Force them to work together. This the old “this shit needs to stop and I’m going to fire one of the two of you, maybe both, if you can’t work together” meeting. A derivation is to put both in a room and tell them not to leave until either they agree to work together or come out with a piece of paper with one name on it (i.e., the one who’s leaving). The key here for them to understand that you are sufficiently committed to ending the bullshit that you are willing to fire one or both of them to end it. In my experience this option tends not to work, I think because each secretly believes they will be the winner if you are forced to choose.
  • Fire one of the participants. This has the effect of rewarding the survivor as the victor. If done too late (before death but after the mortal wound — i.e., after the victor is far along in finding another job), it can still result in the loss of both. To the extent one person clearly picked the fight, my tendency is to want to reward the victim, not the aggressor — but that discounts the possibility the aggressor is either correct and/or more highly skilled. If they are both equally skilled and equally at fault, a rational alternative is to flip a coin and tell them: “I value you both, you are unable to work together, I think you’re equally to blame, so I’m going to flip a coin and fire one of you: heads or tails.” An alternative is to fire one and demote the other — that way it’s very clear to all involved that there was no winner. If fights have winners, you’re incenting fighting.
  • Fire both. I love this option. While it’s not always practical, boy does it send a strong message about collaboration to the rest of the organization: “if you fight, are asked to stop, and you don’t — you’re gone.” Put differently: “I’m not firing them for fighting, I’m firing them for insubordination because I told them not to fight.” Odds are you might lose both anyway so one could argue this is simply a proactive way of dealing with the inevitable.

One of the hardest things for executives is to maintain the balance between healthy cross-functional tension and accountability and unhealthy in-fighting and politics. It’s the CEO’s job to set the tone for collaboration in the company. While Larry Ellison and his disciplines may love “two execs enter, one exec leaves” cage fights as a form of corporate Darwinism, most CEOs prefer a tone of professional collaboration. When that breaks down, weak CEOs get frustrated and complain about their executive team. Strong ones take definitive action to define what is and what isn’t acceptable behavior in the organization and put clear actions behind their words.

How Startup CEOs Should Think About the Coronavirus

I just reached out to the CEOs I work with with on this topic and figured I should also do a quick post to speak to the CEOs who follow Kellblog as well.

The primary purpose of this post is to remind busy startup CEOs that an important part of your job is to be out ahead of things. Usually that means customer needs, market trends, and competitors. I’d argue it also includes potential epidemics, such as the one threatened by COVID-19.

Nobody wants to work for a CEO who’s panicking. But nobody wants to work for a CEO without a plan, either. You owe it to your employees, customers, and (yes) shareholders to start thinking about the impact of the Coronavirus on your business. That starts with your first action item: having a conversation about it at your next weekly e-staff meeting, if you’ve not done so already.

My thinking is based largely on this Scientific American article about what individuals should do to prepare for an eventual outbreak. On the theory that most startup employees are relatively young and healthy, the reality appears to be that the lives you save may not be your own — but instead those of the sick, elderly, weak, or otherwise vulnerable around you [1].

The driving principle behind the article is the best thing people can do to slow the spread of a virus is to stay away from each other for a few weeks. That’s not easy for a business to do, but at least in software we rarely rely on physical supply chains so we have one less major factor to consider in our planning.

So, with that warm up, let’s jump into a list of things you should consider:

  • Researching how other companies are responding to help inform your own response. Call a few of the CEOs or Chief People Officers in your portfolio peer group. Or go online and read documents like Coinbase’s four-tier response framework [2].
  • Sending an all-hands note letting people know you’re on top of this, perhaps with some links to practical, authoritative information.
  • Issuing a friendly reminder on the basics of preventative personal hygiene such as hand-washing, face-touching, etc. Basic as they are, they appear the number one tool in the fight.
  • Letting people know that elbow bumps are becoming the new handshake, though this is surprisingly not without controversy [3].
  • Sending a strong message telling people not be a hero and stay home when they’re sick. Startups are full of people who give it their all, so it’s not uncommon for folks who are not feeling well to come into the office for that big presentation or meeting [4].
  • Placing restrictions on travel, including not only guidelines for travel to affected areas but also guidelines for what you should do if you have recently traveled to one [5].
  • Taking the pressure off live attendance. Tell employees they don’t have to come into the office if they don’t want to or don’t need to. Heck, you might even see a spike in productivity as a result.
  • Changing the format of regular, periodic meetings. Most startups have some form of quarterly business review (QBR), typically a live two- or three-day meeting. Now is a great time not only to try it as a videoconference but to re-invent it while you’re at it [6] [7].
  • Encouraging customers and prospects to do videoconferences, particularly if they are uncomfortable with a live meeting. While salespeople love live meetings (and so do I), a videoconference is far superior to no meeting at all. We need to keep deals moving through the pipeline, so if someone suggests delaying a few weeks, I’d counter with a videoconference every time. For both the customer’s business and our own, the show must go on.
  • And, while some folks will probably trash me for saying this, if you have a natural, non-contrived marketing angle that can keep your business moving, don’t be afraid to gently say it [8]. Examples: (1) it’s more important now than ever to have real-time supply chain information, (2) in times like these business analytics have never been more important, (3) we all have an obligation to our employees, customers, and shareholders to keep business moving ahead.

Additional Resources

Let me end by providing links to some other excellent thoughts on this and related subjects:

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[1] Thus, there’s an argument that it’s not only your duty as CEO, but your civic duty, to think about this.

[2] Which I personally think is a bit heavy but nevertheless quite useful to read.

[3] See here for a contrarian viewpoint on elbow bumps.

[4] Yes, it appears that infected people who are asymptomatic can also communicate the virus so this may not solve as much as we hope, but it’s certainly a start.

[5] Coinbase’s framework dives pretty deep here.

[6] There’s a reason Zoom stock was up 6% yesterday in a market down 5%.

[7] On the theory that you should almost certainly get a better result if you re-invent the agenda based on the format, rather than simply video-conferencing the existing meeting and format. Something about paving cow paths comes to mind.

[8] And how you say it makes all the difference. I can think of genuine, sincere, intelligent ways to do so and I can think of absolutely stone-handed ways of doing so as well. If you’re considering this, bounce the idea off lots people within your company and with your family and friends for a sniff test.