Category Archives: Management

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:

# # #

[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.

What To Do When Someone Says You’re Not Listening

In work life from time to time you may be accused of not listening. It may not be fair. You may not like it. But you’d be shocked how many people completely flub their reaction when the boss, a coworker, or a customer says, “you’re not listening.”

Here’s my three-part formula for what to do when someone says you’re not listening.

  • Shut up
  • Active listen
  • Keep and use a mental ledger going forward

Shut Up, Immediately

If someone says you’re not listening the first thing to do is immediately begin the demonstration that you can. Acceptable responses:

  • “OK”
  • “I understand”
  • “Tell me more”

Unacceptable, yet nevertheless incredibly common, responses:

  • Keep talking, simply ignoring the comment. Recall the First Rule of Holes: when you’re in one, stop digging.
  • Get defensive. “Of course, I’m listening to you.” “Most people tell me I’m a great listener.” “I pride myself on my listening skills.” Recall Kellblog’s Second Rule of Feedback: defensiveness kills communications.
  • Make pedantic distinctions between listening and hearing. “I’m listening to you, but perhaps I’m not hearing you.” “I’m hearing you just fine — my ears work perfectly — I just don’t agree with you.”

Active Listen

The second part of your listening demonstration is to use active listening. This boils down to showing that you’re listening and confirming understanding using these techniques:

  • Focus on the speaker. Look at him/her. Make eye contact. Don’t engage in any common distractions like looking at your phone or screen.
  • Take notes, even if you have an amazing memory and don’t need them. Taking notes shows that you are engaged and listening.
  • Don’t interrupt. If the speaker says something you disagree with, write it down. I put it in triangle I’ve pre-marked at the bottom of the page. Doing this gives you a third option other than conceding the point or interrupting to dispute it. I’m amazed by how infrequently I come back to these points that, in the heated moment, seemed worthy of interrupting someone.
  • Confirm back. “OK Charlie, I want to make sure I understood what you just said. I’m hearing that you [1] tried to set up the review meeting on Monday, [2] that everyone initially indicated they could come, and [3] that … Did I get that right?”

Keep and Use a Mental Ledger

The first two steps help eliminate basic communication problems. But say it’s deeper. You’re communicating just fine, you just happen to disagree with a lot of the feedback. Examples:

  • You disagree with almost every piece of directive feedback a board member gives you — and he gives you about ten pieces of it [1] every board meeting [2] [3].
  • You are a consultant and you disagree with most of the feedback your client gives you on a draft survey that you’re running.
  • You are a manager and you disagree with most of the messaging in a presentation one of your subordinates is creating.

These are not easy situations and nobody wants to lose on every point, so you need to step back and make a mental ledger of credits (I took your input) and debits (I did not), so you can both ensure you’re somewhat balanced and to get a big picture sense of the score. This will prepare for you for a “you never listen to anything I say” attack, because you have kept some tally of accepts and rejects.

“Well, in fact, I took about 40% of your ideas and rejected about 60% and while I know that might not feel good, it’s simply not true that ‘I never listen to anything you say.’ Now, let’s go discuss the important points on the merits.” [4]

You may think I’m reducing feedback to game theory, and I suppose I am. The three key points are:

  • People do keep some mental tally and it’s almost always biased, so why not actually keep some rough score to inform the conversation.
  • You must keep the power balance in mind when playing the feedback/input game. If you’re a consultant servicing a customer, you want the customer winning. If you’re a manager challenging a senior vice president, you should be hoping to score a few points.
  • More than anything it says choose your battles, keeping the power balance in mind when you do so.

The last point leads to a corollary I love: when you are in the position of inferior power you should never argue about small matters. Why? Because the mental tally is, in my opinion, unweighted, so the smart way to get what you want and let the person with superior power win, is to let them win on issue-count while you win on importance-weighting. Put differently, if it’s a small matter it definitionally isn’t that important, so so why take a mental debit to win? Concede, instead.

Finally, when responding to input, it’s always useful to start not with the numerical tally [5] but with a summary. “Well, Sarah, I agreed with your on these points and I disagreed with you on those.” That starts the conversation in a balanced place which should keep everyone most open for feedback.

# # #

[1] Directive feedback = “You guys should do X.”

[2] The best solution here, if relationship allows, is to ask the board member not to give directive feedback. However, that’s not always possible.

[3] I have a theory that board members should never give CEOs directive feedback. Here’s the proof. Case 1: the CEO wants to do the idea, in which case it will be done anyway. Case 2: the CEO doesn’t want to do the idea and does it only because they were so directed. Thus the only result from directive feedback is to make CEOs do ideas they don’t want to do, which is a terrible practice. QED.

[4] For spouses I recommend an entirely different methodology. Say, “you’re right.” Repeat as necessary.

[5] Which you can keep in your pocket for later if challenged.

The Red Badge of Courage: Helping Overachievers to Manage and Process Failure

When I lived in France for five years I was often asked to compare it to Silicon Valley in an attempt to explain why — in the land of Descartes, Fourier, and Laplace, in a country where the nation’s top university (École Polytechnique) is a military engineering school that wraps together MIT and West Point, in a place that naturally reveres engineers and scientists, why was there not a stronger tech startup ecosystem?

My decade-plus-old answer is here: Is Silicon Valley Reproducible? [1]

My answer to the question was “no” and the very first reason I listed was “cultural attitudes towards failure.” In France (at least at that time) failure was a death sentence. In Silicon Valley, I wrote, failure was a red badge of courage, a medal of valor on one’s resume for service in the startup wars, and a reference to the eponymous classic written by Stephen Crane.

In this post, I want to explore two different aspects of the red badge of courage. First, from a career development perspective, how one should manage the presence of such badges on your resume. And second, from an emotional perspective, how thinking of startup failure as a red badge of courage can help startup founders and employers process what was happened.

Managing Failure: Avoiding Too Many Consecutive Red Badges

In Silicon Valley you’ll often hear adages like “failure is a better teacher than success,” but don’t be too quick to believe everything you hear. While failure is certainly not a scarlet letter in Silicon Valley, companies nevertheless hire for a track record of success. In the scores of C-level position specifications that I’ve read and collected over the years, I cannot recall a single one that ever listed any sort of failure as required experience.

We talk as if we love all-weather sailors, but when it comes to actually hiring people — which often requires building consensus around one candidate in a pool [2] — we seem to prefer the fair-weather ones. Back in the day, we’d all love a candidate who went from Stanford to Oracle to Siebel to Salesforce [3].

But, switching metaphors, I sometimes think Silicon Valley is like a diving competition that forgot the degree of difficulty rating. Hand a CEO $100M, 70% growth company — and the right to burn $10M to $15M per quarter — and it will likely go public in a few years, scoring the company a perfect 10 — for executing a swan dive, degree of difficulty 1.2.

Now, as an investor, I’ll put money into such swan dives whenever I can. But, as an operator, remember that the charmed life of riding in (or even driving) such a bus doesn’t necessarily prepare you for the shocks of the regular world.

Consider ServiceMax who, roughly speaking, was left at the altar by Salesforce with a product built on the Salesforce platform and business plan most thought predicated on an acquisition by Salesforce. That team survived that devastating shock and later sold the company for $900M. That’s a reverse 4½ somersault in pike position, degree of difficulty 4.8. Those folks are my heroes.

So, in my estimation, if Silicon Valley believes that failure is a better teacher than success, I’d say that it wants you to have been educated long ago — and certainly not in your most recent job. That means we need to look at startup failure as a branding issue and the simple rule is don’t get too many red badges in a row on your LinkedIn or CV.

Using Grateful Dead concert notation, if your CV looks like Berkeley –> Salesforce –> failure –> Looker, then you’re fine. You’ve got one red badge of courage that you can successful argue was a character-building experience. However, if it looks like Berkeley –> Salesforce –> failure –> failure –> failure, then you’ve got a major positioning problem. You’ve accidentally re-positioned yourself from being the “Berkeley, Salesforce” person to the “failed startup person.” [4]

How many consecutive red badges is too many? I’d say three for sure, maybe even two. A lot of it depends on timing [5].

Practically, it means that after one failed startup, you should reduce your risk tolerance by upping the quality bar on your next gig. After two failed startups, you should probably go cleanse and re-brand yourself via duty at a large successful vendor. After a year or two, you’ll be re-positioned as a Brand-X person and in a much better position to again take some career risk in the startup world [6].

Processing Failure: Internalizing the Red Badge Metaphor

This second part of this post deals with the emotional side of startup failure, which I’m going to define quite broadly as materially failing to obtain your goals in creating or working at a startup. Failure can range from laying off the entire staff and selling the furniture to getting an exit that doesn’t clear the preference stack [7] to simply getting a highly disappointing result after putting 10 years into building your company [8]. Failure, like success, takes many forms.

But failures also have several common elements:

  • Shock and disappointment. Despite knowing that 90% of startups fail, people are invariably shocked when it happens to them. Remember, startup founders and employees are often overachievers who’ve never experienced a material setback before [9].
  • Anger and conflict. In failed startups there are often core conflicts about which products to build, markets to target, when to take financing, and whether to accept buy-out offers.
  • Economic loss. Sometimes personal savings are lost along with the seed and early-round investors’ money. With companies that fail-slow (as opposed to failing-fast), opportunity cost becomes a significant woe [10].

For the people involved in one — particular the founders and C-level executives — a failed startup feels Janis Joplin singing:

Come on. Come on. Come on. Come on. And take it! Take another little piece of my heart now, baby! Oh, oh, break it! Break another little bit of my heart now Darling yeah, yeah, yeah, yeah.

I was reminded of this the other day when I had a coffee with a founder who, after more than four years, had just laid of his entire team and sold the furniture the week before.

During the meeting I realized that there are three things people fresh from failed startups should focus on when pursuing their next opportunity:

  • You need to convince yourself that it was positive learning experience that earned you a red badge of courage. If you don’t believe it, no one else will — and that’s going to make pursuing a new opportunity more difficult. People will try to figure out if you’re “broken” from the experience. Convincing them you’re not broken starts out with convincing you. (Don’t be, by the way. Startups are hard. Cut yourself some slack.)

  • You need to suppress your natural desire to tell the story. I’m sure it’s a great story, full of drama and conflict, but does telling it help you one iota in pursuing a new opportunity? No. After leaving MarkLogic — which was a strong operational success but without an investor exit — I was so bad at this that one time a VC stopped me during a CEO interview and said, “wow, this is an amazing story, let me get two of my partners to hear it and can you start over?” While I’m sure they enjoyed the colorful tale, I can assure you that the process didn’t result in a dynamite CEO offer. Tell your story this way: “I [founded | worked at] a startup for [X] years and [shut it | sold it] when [thing happened] and we realized it wasn’t going to work. It was a great experience and I learned a lot.” And then you move on. The longer you talk about it, the worse it’s going to go.

  • You need to convince prospective employers that, despite the experience, you can still fit in a round hole. If you were VP of product management (PM) before starting your company, was a founder/CEO for two years, and are now pursuing a VP of PM role, the company is going to wonder about two things: (1) as per the above, are you broken as a result of the experience and (2) can you successfully go back into a VP of PM role. You’ll need to convince them that PM has always been your passion, that you can easily go back and do it again, and in fact, that you’re quite looking forward to it. Only once that’s been accomplished, you can try to convince them that you can do PM even better than before as a result of the experience. While your natural tendency will probably be to make this argument, remember that it is wholly irrelevant if the company doesn’t believe you can return to the role. So make sure you’ve won the first argument before even entertaining the second.

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Notes

[1] A lot has presumably changed since then and while I sit on the board of a French startup (Nuxeo), I no longer feel qualified, nor is the purpose of this essay, to explore the state of tech entrepreneurship in France.

[2] And ergo presumably reduces risk-taking in the process.

[3] And not without good reason. They’ve probably learned a lot of best practices, a lot about scaling, and have built out a strong network of talented coworkers.

[4] Think of how people at a prospective employer might describe you in discussing the candidates. (“Did you prefer the Stanford/Tableau woman; the CMU/Salesforce man; or the poor dude who did all those failed startups?”)

[5] Ten years of impressive growth at Salesforce followed by two one-year failures looks quite different than three years at Salesforce followed by two three-year failures. One common question about failures is: why did you stay so long?

[6] And see higher quality opportunities as a result.

[7] Meaning investors get back all or part of what they are entitled to, but there is nothing leftover for founders and employees.

[8] And, by extrapolation, expected that they never world.

[9] For example, selling the company for $30M, and getting a small payout via an executive staff carve-out.

[10] Think: “with my PhD in AI/ML, I could have worked at Facebook for $1M per year for the past six years, so in addition to the money I’ve lost this thing has cost me $6M in foregone opportunity.”