Category Archives: Management

Not in My Kitchen, You Don’t: Leaders as Norm Setters

There are two types of restaurants:  those where it’s acceptable for a cook to pickup dropped food and serve it, and those where it’s not.

food on floor 2

Sure, when asked, everyone would say it’s unacceptable to serve dropped food in their kitchen.  But is that how their kitchen actually runs?  One of my favorite definitions of culture is, to paraphrase Henry Ford’s thoughts on quality, “what happens when no one is watching.”

And if managers really run such clean kitchens, then why are there so many:

  • Websites with typos?
  • Webinars with logistics problems at the start?
  • Demonstrations where something breaks?
  • Presentations where the numbers don’t foot?
  • Customer meetings that start late?

The fact is most managers say they run kitchens where it’s unacceptable to serve food that was dropped on the floor, but all too often they don’t.  Dropped food gets served all the time by corporate America.  Why?  Because too few leaders remember that a key part of their job is to set norms — in our company, in our culture, what’s acceptable and what’s not.

Defining these norms is more important than defining quarterly OKRs or MBOs — both because they persist over time and because they help define culture — yet few managers treat them as such.  Sure, some managers like to emphasize values, and will frequently story-tell about a focus on Trust or Customer Success.  And that’s great.  But that’s all positive reinforcement.  Part of norm setting — particularly the part that says what’s not acceptable is our culture — needs to be negative reinforcement:  you can’t do that here.

gordon

That’s why I love Gordon Ramsey and his shows like Hell’s Kitchen.  “YOU CAN’T SERVE THAT, IT’S BLOODY RAW!”

He is a clear, if overzealous, communicator who sets very clear norms.  The power of norms is that, once set, the culture reinforces them.  Everyone quickly understands that in our kitchen you don’t serve dropped food and people will call each other out if someone attempts to do so.

I remember over a decade ago, mixed in a deluge of corrections I’d made on a press release, I wrote something like this:

“No, No, No, No, No, Goddammit, No — Never [break this rule and do that].”

The guy who wrote the press release was new.  He complained to HR that my feedback created a hostile work environment.  The complaint made me pause.  Then I thought:  you know what, for someone who writes like that guy does, I want it to be a hostile environment.  Cook like that in someone else’s kitchen.  But not in mine.  (Yes, he quit shortly thereafter.)

Over time I’ve learned that you don’t need to scream like Ramsey (or my younger self) to establish clear norms.  You just need one, simple, almost magical word:  unacceptable.  Just as it’s unacceptable in this kitchen to serve food that’s been dropped on the floor:

  • It’s unacceptable in this marketing team to publish work with typos.  (Work on your writing skills and have a better process.)
  • It’s unacceptable in this events team to have logistical problems at the start of an event.  (Test them all, three times if necessary, before running the webinar.)
  • It’s unacceptable in this SC team to have demos crash during sales calls.  (Test every click before you start, and don’t go off-road for the fun of it.)
  • It’s unacceptable in this finance team to create slides where the numbers don’t foot.  (Cross-check your own work and then have someone else cross-check it again.  Or, better yet, use a system to publish the numbers off one database.)
  • It’s unacceptable in this sales organization to start customer meetings late.  (Our standard practice is to book the meeting room 30 mins before the meeting start, arrive 30 mins early, and test all logistics.)

When it comes to norms, you get what you expect.  And when you don’t get it, you need to be clear:  what happened is unacceptable [1].

Since this is all pretty simple, then why do so few managers spend time defining and enforcing such operational norms?

First, it will make you unpopular.  It’s far easier to be “surprised” that the webinar didn’t work for anyone on Chrome or “understanding” that sometimes demos do crash or “realistic” that we’ll never eliminate every typo on the website.  But remember, even here you are norm-setting; you’re just setting the wrong norms.  You’re saying that all these thing are, in fact, acceptable.

Second, it’s hard because you need to be black-and-white.  A typo is black-and-white.  Numbers that don’t foot are black-and-white.  But amateurish PowerPoint clip art, poorly written paragraphs, or an under-prepared sales presentation are grey.  You’ll need to impose a black-and-white line in defining norms and let people know when they’re below it.  Think:  “this is not good enough and I don’t want to debate it.”

Third, your employees will complain that you’re a micro-manager.  No one ever calls Gordon Ramsey a micro-manager for intercepting the service of under-cooked scallops, but your employees will be quick to label you one for catching typos, numbers that don’t foot, and other mistakes.  They’ll complain to their peers.  They’ll cherry-pick your feedback, telling colleagues that all you had were a bunch of edits and you weren’t providing any real macro-value on the project [2].  You can get positioned as a hyper-critical, bad guy or gal, or someone might even assert that it’s personal — that you don’t like them [3].  A clever employee might even try to turn you into their personal proof-reader, knowing you’ll backstop their mistakes [4].

But, know this — your best employees will understand exactly what you’re doing and why you’re doing it.   And they will respond in kind:  first, they’ll change their processes to avoid breaking any of the established norms and second, they’ll reinforce those norms with their teams and peers.

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Notes

[1] And people who do unacceptable things don’t last long in this organization.

[2] No one would ever say “the ambiance was great, the service prompt, and the customer should have been happy despite the raw scallops,” but somehow many business people will say “the vision was great, the idea creative, and that the CEO should have been happy despite all the typos and math errors.”

[3] Ergo be careful in your approach.  Feedback should always be about the work — criticize the performance, not the performer.  And you must be consistent about enforcing norms equally across all people.  (Norms aren’t just for the ones you don’t like.)  Proof-read only the first page or two of a document and then say, “continued review, but stopped proof-reading here.”  Or, borrowing from The Best Work Parable, you might just stop everything at page two, send the document back, and offer to read only a properly written version of it.

[4] This begs fundamental questions about approvals.  Say you approve a press release about last quarter’s results and it contains both several typos and several incorrect numbers.  Does your approval let people off the hook for those errors?  How will they see it?  What does your approval actually mean?  Are you approving every number and every comma?  Or are you, in effect, approving the release of the headline on a given date and assuming others are accountable for quality of the body?

A Simple Trick To Get Your CEO Closer to Your Team

Startup VPs sometimes lament that their CEOs don’t really know the people on their teams, don’t realize how smart and talented they are, or fully appreciate the value of their teams’ work.  How, they wonder, can they build a better bridge between their boss and their teams?

The answer is simple:  invite the CEO to something.  To what?

  • Your staff meeting
  • A departmental town hall Q&A session
  • Your team’s planning offsite
  • A quarterly business review (QBR) or equivalent

Social gatherings (e.g., team buildings, after-work drinks) are fine a complement, but they don’t actually solve the problem I’m addressing — how to build a bridge between your team and your boss. This is not about knowing their spouses’ names and how many children they have.  This is about seeing them at work, in the workplace.

That the answer is so simple and that so few VP actually do it reveals something [1]:

  • Some VPs like to complain about the problem.  These folks likely harbor insecurity about their teams because they are, in the end, afraid to put the CEO in a room alone with them.  They are afraid their teams may look stupid, or worse yet receive direct feedback that they worry their teams can’t handle.  These VPs would never invite the CEO unprompted, and even when prompted, reply with, “yes, we should do that one day” but somehow that day never seems to come.  These VPs are weak and will likely get stuck in their careers unless they have have more confidence in their teams (or hire better teams, as indicated) and more confidence in their boss.

 

  • Some VPs like to fix it.  These people typically don’t need to be told to build a strong relationship between their team (particularly their direct reports) and their boss.  It’s good for everyone, and the company overall, when such relationships are in place.  These people aren’t afraid their team will embarrass themselves because they know they’ve hired smart, quality people.   These people aren’t afraid that their team will wilt under a bit of direct, executive feedback either — probably because they’re not afraid to deliver such feedback themselves.  If they don’t think of the idea themselves, when prompted, they jump on the idea — and not just once for show — but by building such invites into their standard operating cadence.

My strong advice is that you want to be the second type of VP.  If you’re not trying to build a better relationship between your team overall, your directs, and your boss, then you are failing everyone — including yourself.

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Notes

[1]  Now you could argue I’m projecting here because I’m not a highly invite-able CEO, but I can say across 12 years of CEO experience at two different companies, it was a relatively rare experience to be spontaneously invited by my direct reports to such events.  (And when it did happen, it was always the same VPs doing the inviting.)  What’s more, I can also say across more than a decade of CMO experience at two different companies, I didn’t see a lot of my peers do it, either.

Top Kellblog Posts of 2018

Here’s a quick retrospective on the top Kellblog posts (as measured by views) of 2018.

  • Career Development:  What It Really Means to be a Manager, Director, or VP.  The number two post of 2018 was actually written in 2015!  That says a lot about this very special post which appears to have simply nailed it in capturing the hard-to-describe but incredibly important differences between operating at the manager, director, or VP level.  I must admit I love this post, too, because it was literally twenty years in the making.  I’d been asked so many times “what does it really mean to operate at the director level” that it was cathartic when I finally found the words to express the answer.
  • The SaaS Rule of 40.  No surprise here.  Love it or not, understanding the rule of 40 is critical when running a SaaS business.  Plenty of companies don’t obey the rule of 40 — it’s a very high bar.  And it’s not appropriate in all circumstances.  But something like 80% of public company SaaS market capitalization is captured by the companies that adhere to it.  It’s the PEG ratio of modern SaaS.
  • The Role of Professional Services in a SaaS Company.  I was surprised and happy to see that this post made the top five.  In short, the mission of services in a SaaS company is “to maximize ARR while not losing money.”  SaaS companies don’t need the 25-35% services margins of their on-premises counterparts.   They need happy, renewing customers.  Far better to forgo modest profits on services in favor of subsidizing ARR both in new customer acquisition and in existing customer success to drive renewals.  Services are critical in a SaaS company, but you shouldn’t measure them by services margins.
  • The Customer Acquisition Cost Ratio:  Another Subtle SaaS Metric.  The number five post of 2018 actually dates back to 2013!  The post covers all the basics of measuring your cost to acquire a customer or a $1 of ARR.  In 2019 I intend to update my fundamentals posts on CAC and churn, but until then, this post stands strong in providing a comprehensive view of the CAC ratio and how to calculate it.  Most SaaS companies lose money on customer acquisition (i.e., “sell dollars for 80 cents”) which in turn begs two critical questions:  how much do they lose and how quickly do they get it back?  I’m happy to see a “fun with fundamentals” type post still running in the top five.

Notes

[1]  See disclaimer that I’m not a financial analyst and I don’t make buy/sell recommendations.

[2] Broadly defined.  I know they’re in Utah.

Seven Books Not To Give the Boss for Christmas*

Well, when you run a company focused on corporate finance, you don’t get a lot of Holiday Party scandals.  At Host’s very nice 2018 Holiday Party the closest thing we had was an employee conversing with me about books (Bad Blood) and then wholeheartedly suggesting that I just had to read another book, Drive — which, as it turns out, is about motivating employees.  Hum.

The blowback potential hadn’t occurred to me in real time, but after got home I noticed an email from the person who’d suggested the book, contritely offering that the suggestion wasn’t intended to send a message or anything.  I laughed.

My reply was simple:  I once actually not just recommended but actually bought and gave Death by Meeting to my boss, so I’m not one to be throwing stones.

But, for those with a dark sense of humor, the exchange did get me thinking about the perfect Christmas anti-shopping list for the boss.  Here we go.

Seven Books You Probably Shouldn’t Buy the Boss for Christmas*

  1. (When East Coast people move to California.)  Stop People Pleasing: Be Assertive, Stop Caring What Others Think, Beat Your Guilt, & Stop Being a Pushover.  

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2.  (“Can somebody please make a decision around here?”)  The Perfection Trap: Cultivate Self-Acceptance, Fire Your Inner Critic, Overcome Procrastination, and Get Things Done.

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3. (“I love those all-hands emails.”) Writing to Be Understood: What Works and Why

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4. (“Don’t worry, you can lead without it.”)  The Charisma Myth: How Anyone Can Master the Art and Science of Personal Magnetism

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5. (“If you’ve not checked Glassdoor recently, uh.”) How to Make People Like You in 90 Seconds or Less

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6.  (“I love the team you’ve put together around here.”)  Needy People: Working Successfully with Control Freaks and Approval-holics

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7. (“Executing our new strategy looks like a piece of cake.”)  Endurance, Shackleton’s Incredible Voyage.

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Notes 

* or equivalent.

Lost and Founder: A Painful Yet Valuable Read

Some books are almost too honest.  Some books give you too much information (TMI).  Some books can be hard to read at times.  Lost and Founder is all three.  But it’s one of the best books I’ve seen when it comes to giving the reader a realistic look at the inside of Silicon Valley startups.NeueHouse_Programming_LostandFound

In an industry obsessed with the 1 in 10,000 decacorns and the stories of high-flying startups and their larger-than-life founders, Lost and Founder takes a real look at what it’s like to found, fund, work at, and build a quite successful but not media- and Sand-Hill-Road-worshiped startup.

Rand Fishkin, the founder of Moz, tells the story of his company from its founding as a mother/son website consultancy in 2001 until his handing over the reins, in the midst of battling depression, to a new CEO in February 2014.  But you don’t read Lost and Founder to learn about Moz.  You read it to learn about Rand and the lessons he learned along the way.

Excerpt:

In 2001, I started working with my mom, Gillian, designing websites for small businesses in the shadow of Microsoft’s suburban Seattle-area campus. […] The dot-com bust and my sorely lacking business acumen meant we struggled for years, but eventually, after trial and error, missteps and heartache, tragedy and triumph, I found myself CEO of a burgeoning software company, complete with investors, employees, customers, and write-ups in TechCrunch.

By 2017, my company, Moz, was a $45 million/ year venture-backed B2B software provider, creating products for professionals who help their clients or teams with search engine optimization (SEO). In layman’s terms, we make software for marketers. They use our tools to help websites rank well in Google’s search engine, and as Google became one of the world’s richest, most influential companies, our software rose to high demand.

Moz is neither an overnight, billion-dollar success story nor a tragic tale of failure. The technology and business press tend to cover companies on one side or the other of this pendulum, but it’s my belief that, for the majority of entrepreneurs and teams, there’s a great deal to be learned from the highs and lows of a more middle-of-the-road startup life cycle.

Fishkin’s style is transparent and humble.  While the book tells a personal tale, it is laden with important lessons.  In particular, I love his views on:

  • Pivots (chapter 4).  While it’s a hip word, the reality is that pivoting — while sometimes required and which sometimes results in an amazing second efforts — means that you have failed at your primary strategy.  While I’m a big believer in emergent strategy, few people discuss pivots as honestly as Fishkin.
  • Fund-raising (chapters 6 and 7).  He does a great job explaining venture capital from the VC perspective which then makes his conclusions both logical and clear.  His advice here is invaluable.  Every founder who’s unfamiliar with VC 101 should read this section.
  • Making money (chapter 8) and the economics of founding or working at a startup.
  • His somewhat contrarian thoughts on the Minimum Viable Product (MVP) concept (chapter 12).  I think in brand new markets MVPs are fine — if you’ve never seen a car then you’re not going to look for windows, leather seats, or cup-holders.  But in more established markets, Fishkin has a point — the Exceptional Viable Product (EVP) is probably a better concept.
  • His very honest thoughts on when to sell a startup (chapter 13) which reveal the inherent interest conflicts between founders, VCs, and employees.
  • His cheat codes for next itme (Afterword).

Finally, in a Silicon Valley where failure is supposedly a red badge of courage, but one only worn after your next big success, Fishkin has an unique take on vulnerability (chapter 15) and his battles with depression, detailed in this long, painful blog post which he wrote the night before this story from the book about a Foundry CEO summit:

Near the start of the session, Brad asked all the CEOs in the room to raise their hand if they had experienced severe anxiety, depression, or other emotional or mental disorders during their tenure as CEO. Every hand in the room went up, save two. At that moment, a sense of relief washed over me, so powerful I almost cried in my chair. I thought I was alone, a frail, former CEO who’d lost his job because he couldn’t handle the stress and pressure and caved in to depression. But those hands in the air made me realize I was far from alone— I was, in fact, part of an overwhelming majority, at least among this group. That mental transition from loneliness and shame to a peer among equals forever changed the way I thought about depression and the stigma around mental disorders.

Overall, in a world of business books that are often pretty much the same, Lost and Founder is both quite different and worth reading.  TMI?  At times, yes.  TLDR?  No way.

Thanks, Rand, for sharing.

How To Sales Manage Upside and Unlikely Deals

If your sales organization is like most, you classify sales opportunities in about four categories, such as:

  • Commit, which are 90% likely to close
  • Forecast, which are 70% likely to close
  • Upside, which are 33% likely to close
  • Unlikely, which are 5% likely to close

And then, provided you have sufficient pipeline, your sales management team basically puts all of its effort into and attention on the commit and forecast deals.  They’re the ones that get deal reviews.  They’re the ones where the team does multiple dry runs before big demos and presentations.  They’re the deals that get discussed every week on the forecast call.

The others ones?  No such much.  Sure, the salesreps who own them will continue to toil away.  But they won’t get much, if any, management attention.  You’ll probably lose 75% of them and it won’t actually matter much, provided you have enough high-probability deals to make your forecast and plan.

But, what a waste.  Those opportunities probably each cost the company $2500 to $5000 to generate and many multiples of that to pursue.  But they’re basically ignored by most sales management teams.

The classical solution to this problem is to tell the sales managers to focus on everything.  But it doesn’t work.   A smart sales manager knows the only thing that really matters is making his/her number and doing that typically involves closing almost all the committed and most of the forecast deals.  So that is where their energy goes.

jumpballThe better way to handle these deals is to recognize they’re more likely to be lost than won (e.g., calling them jump-balls, 50/50 balls, or face-offs, depending on your favorite sport), find the most creative non-quota-carrying manager in the sales organization (e.g., VP of salesops) and have him/her manage these low-probability, high-risk deals in the last month of the quarter using non-traditional (i.e., Crazy Ivan) tactics.

This only works if you have happen to have a VP of salesops, enablement, alliances, etc., who has the experience, passion, and creativity to pull it off, but if you do it’s a simply fantastic way to allow core sales management to focus on the core deals that will make or break the quarter while still applying attention and creativity to the lower probability deals that can drive you well over your targets.

This is not as crazy as it might sound, because those in sales ops or productivity positions typically do have prior sales management experience.  Thus, this becomes a great way to keep their saw sharp and keep them close/relevant to the reality of the field in performing their regular job.  What could be better than a VP of sales productivity who works on closing deals 4 months/year?

If your VP of sales ops or sales enablement doesn’t have the background or interest to do this, maybe they should.  If not, and/or you are operating at bigger scale, why not promote a salesperson with management potential into jump-ball, overlay deal management as their first move into sales management?

The Two Engines of SaaS: QCRs and DEVs

I remember one day, years ago, when I was a VP at $10M startup and Larry, the head of sales, came in one day handing out t-shirts that said:

“Code, sell, or get out of the way.”

Neither I, nor the rest of marketing team, took this particularly well because the shirt obviously devalued the contributions of F&A, HR, and marketing.  But, ever seeking objectivity, I did concede that the shirt had a certain commonsense appeal.  If you could only hire one person at a startup, it would be someone to write the product.  And if you could only hire one more, it would be someone to sell it.

This became yet another event that reconfirmed my belief in my “marketing exists to make sales easier” mantra.  After all, if you’re not coding or selling, at least you can help someone who is.

Over time, Larry’s t-shirt morphed in my mind into a new mantra:

“A SaaS company is a two-engine plane.  The left engine is DEVs.  The right is QCRs.”

QCR meaning quota-carrying (sales) representative and DEV meaning developer (or, for symmetry and emphasis, storypoint-burning developer).  People who sell with truly incremental quota, and people who write code and burndown storypoints in the process.

It’s a much nicer way of saying “code, sell, or get out of the way,” but it’s basically the same idea.  And it’s true.  While Larry was coming from a largely incorrect “protest overhead and process” viewpoint, I’m coming from a different one:  hiring.

The two hardest lines in a company headcount plan to keep at-plan are guess which two?  QCRs and DEVs.  Forget other departments for a minute — I’m saying is the the hardest line for the VP of Engineering to stay fully staffed on is DEVs, and the hardest line for the VP of Sales to stay fully staffed on is QCRs.

Why is this?

  • They are two, critical highly in-demand positions, so the market is inherently tight.
  • Given their importance, the hiring VPs can be gun-shy about making mistakes and lose candidates due to hesitation or indecision.
  • Both come with a short-term tax and mid-term payoff because on-boarding new hires slows down the rest of the team, a possible source of passive resistance.
  • Sales managers dislike splitting territories because it makes them unpopular, which could drive more foot-dragging.
  • It’s just plain easier to find the associated support functions — (e.g,. program managers, QA engineers, techops, salesops, sales productivity, overlays, CSMs, managers in general) than it is find the QCRs and DEVs.

Let me be clear:  this is not to say that all the supporting functions within sales and engineering do not add value, nor is this to say that supporting corporate functions beyond sales and engineering do not add value — it is to say, however, that far too often companies take their eye off the ball and staff the support functions before, not after, those they are supporting.  That’s a mistake.

What happens if you manage this poorly?  On the sales side, for example, you end up with an organization that has 1 SVP of Sales, 1 VP of sales consulting, 4 sales consultants, 1 director of sales ops, 1 director of sales productivity, 1 manager of sales development reps (SDRs), 4 SDRs, an executive assistant, and 4 quota-carrying salespeople.  So only 22% of the people in your sales organization actually carry a quota.

“Uh, other than QCRs, we’re doing great on sales hiring,”  says the sales VP.  “Other than that, Mrs. Lincoln, how did you find the play?” thinks the board.

Because I’ve seen this happen so often, and because I’ve seen companies accused of it both rightfully and unjustly, I’d decided to create two new metrics:

  • QCR density = number of QCRs / total sales headcount
  • DEV density = numbers of DEVs / total engineering headcount

The bad news is I don’t have a lot of benchmark data to share here.  In my experience, both numbers want to run in the 40% range.

The good news is that if you run a ratio-driven staffing model (which you should do for both sales and engineering), you should be able to calculate what these densities should be when you are fully staffed.

Let’s conclude with a simple model that does just that on the sales side, producing a result in the 38% to 46% range.

qcr dens

Finally, let me add that having such a model helps you understand whether, for example, your QCR density is low due to slow QCR hiring (and/or bad retention) against a good model, or on-pace hiring against a “fat” model.  The former is an execution problem, the latter is a problem with your model.