You Can Never Fire Someone Too Early

Posted on July 9, 2016 | 9 comments

The first time I heard the VC adage “you can never fire someone too early,” it rubbed me the wrong way.  It sounded harsh and unfeeling.  It seemed flippant. It felt trite.  It seemed, frankly, like one of those things people say in the press box, but never on the playing field.

But slowly, as with most VC adages, I found the truth in it.  Once you dismiss the initial tendency to rebuff it for its harshness, and try to really understand what it means, it’s hard to disagree with.

So what does it mean?

  • As an executive, by the time you find out there’s a problem, there has already been considerable damage done and you need to fix it right away to prevent more damage.
  • As an executive there will always be a time lag between when coworkers know there is a problem and you learn there is one.  Respect for hierarchy and politesse are just two things that delay signal transmission.  Rationalization, conflict avoidance, and denial are three others.
  • As the hiring manager you will tend to rationalize away problems because you hired the person.  Firing them would show a concrete mistake on your part and put you in the position of having to make a re-hire.  Deep down, you are rooting for individual-X to succeed and that biases your perspective and delays your decision.
  • You want a team of stars and superstars.  If you are even considering terminating someone it means, definitionally, they are not a star or superstar.  Ergo, you should not want them on your team.  This is a tough one to internalize, but it’s true.  Harsh as it may sound, the mere act of questioning whether you should terminate someone means that you probably should.
  • People who have known about the problem longer than you have are waiting and watching.  How long will you tolerate the behavior?   What does that mean about standards of competence you set?  How many subordinates will respond to recruiter calls while you figure this out?  And because your learning of the problem is definitionally phase-lagged, people may have been waiting quite a while.  You may have lost some already.
  • Empirically, when you ask seasoned managers about this topic, virtually everyone says that they never fired someone too early, but have often done so too late.  “Hire slow, fire fast” as the other hiring adage goes.

9 Comments

Posted in HR, Management

Whose Team Is It Anyway? The 90 Day Rule.

Posted on June 5, 2016 | 5 comments

Say you’re an experienced executive joining a new company.  When you start, you inherit a team of people.

The first thing you must realize is that over time, “the team” will silently transform into “your team.”  Warts and all, you’re going to fully own that team at some point in time.  In the beginning, you might boast about the stars you’ve inherited and gripe about the clowns.  But at some point they’re not your predecessor’s clowns any more. They’re your clowns.  You own them.

The second thing you must realize is how quickly that will occur.  Typically, I’d say it takes about 90 days before the organization — e.g., your boss, your peers — perceives “the team” as “your team.”

That’s not a long time, so you need to use it well.

A key part of any new executive’s job is not just to assess the business situation, but also to assess his or her team.  You may have inherited some great people and some weak ones.  You might have great people who are in the wrong roles.  You may have some great people who are beaten down and need to be uplifted.  You may even have some people who really need to go pursue that career in real estate that they’ve always wanted.

Whether you’ve inherited The Bad News Bears, The A Team (fool), or something in between, you don’t have a lot of time before that team becomes your team.

So, what should you do about it?

  • Invest a lot of your early time in understanding your team.  Their strengths and their weaknesses.  What their internal customers think of them.  What you think of their work.  What coworkers think.  Understand their backgrounds, interview them, and go review their LinkedIn profiles or CVs.
  • Remember that it’s not black and white.  It’s not as simple as “good person” vs. “bad person.”  Oftentimes, it’s about the role — is that person a great product manager who’s over his head in a director role?  Is that person a great customer success person, but she’s currently struggling with a direct sales job?
  • Remember that it’s about the climate.  Maybe the team is a bunch of great people who are just feeling down.  Or maybe they’re good people, on fire and already performing at 98% of their potential.  The climate can turn stars into dogs, and vice versa, so you need to figure out who’s sailing into a headwind and who’s benefiting from a tailwind.
  • Remember that it’s about direction.  If the team executed a bad strategy really well and failed, that’s quite different from executing a great strategy poorly.  To what extent was the team aimed well or aimed poorly in terms of direction?
  • Remember that it’s about personal wants and needs.  Where do your team members want to be in a few years?  Do they see a way to get there from here at your company?  Are they happy with short-term constraints or are they struggling to get out of meetings in time to hit childcare before those draconian fines kick in?

Once you’ve gathered that data, then sit down with your manager, deliver the assessment and make a proposal.  Because after about 90 days it’s not the team any more.  It’s your team.  So you better focus on having the right people sitting the right chairs on day 91.

5 Comments

Posted in Leadership, Management, Startups

Can the Media Please Stop Referring to Company Size by Valuation?

Posted on May 23, 2016 | 1 comment

The following tweet is the umpteenth time I’ve seen the media size a company by valuation, not revenue, in the past few years:

mktcap

Call me old school, but I was taught to size companies by revenue, not market capitalization (aka, valuation).

Calling Palantir a $20B company suggests they are doing $20B in revenues, which is certainly not the case.  (They say they did $1B in 2015 and that’s bookings, not revenue.)  So we’re not talking a small difference here.  Depending on the hype factor surrounding a company, we might be talking 20x.

Domo is another company the media loves to size by its market cap.

domo

I’ve heard revenue estimates of $50M to $100M for Domo, so here again, we’re not talking about a small difference.  Maybe 20x.

When my friend Max Schireson stepped down from MongoDB to spend more time with his family, the media did it again (see the first line of text below the picture)

mongodb

I love Max.  I love MongoDB.  While I don’t know what their revenues were when he left (I’d guess $50M to $100M), they certainly were not a “billion-dollar database company.”  But, hey, the article got 4,000 shares.  Inflation-wise, I’m again guessing 10-20x.

So why does the media do this?  Why do they want to mislead readers by a factor of 20?

  • Because if makes the numbers bigger
  • And makes the headlines cooler
  • And increases drama

In the end, because it (metaphorically) sells more newspapers.  “Wow, some guy just quit as CEO of a billion-dollar company to actually spend more time with his family” just sounds a whole lot better than the same line with a comparatively paltry $50M instead.  Man Bites Dog beats Dog Bites Man every time.

But it’s wrong, and the media should stop doing it.  Why?

  • It’s misleading, and not just a little.  Up to 20x as the above examples demonstrate.
  • It’s not verifiable.  For private companies, you can’t really know or verify the valuation.  It’s not in any public filing.  (While private companies don’t disclose revenue either, it’s much more easily triangulated.)
  • Private company valuations are misleading because VCs buy preferred stock and employees/founders have common stock. So you take a preferred share price and multiply it by the total number of outstanding shares, both preferred and common.  (This ignores the fact that the common is definitionally worth less than the preferred and basically assumes an IPO scenario, which happens only for the fortunate few, where the preferred converts into common.)
  • In the past few years, companies are increasingly taking late-stage money that often comes with “structure” that makes it non-comparable in rights to both the regular preferred and the common.  So just compound the prior problem with a new class of essentially super-preferred stock.  The valuation gets even more misleading.
  • Finally, compound the prior problem with a hyped environment where everyone wants to be a unicorn so they might deliberately take unfavorable terms/structure in order get a higher valuation and hopefully cross into unicorn-dom.  The valuation gets even-more-misleading squared.  See the following Tweet as my favorite example of this phenom.  (OH means overheard.)

ego

When was the last time I saw the media consistently size companies by valuation instead of revenue?  1997 to 2001.  Bubble 1.0.

Maybe we’ll soon be talking about eyeballs again.  Or, if you like Stance, the company that has raised $116in VC and has “ignited a movement of art and self-expression,” in socks (yes, socks) then maybe we’ll be talking about feet.

# # #

(And while I’m not sure about the $116M, I do love the socks.)

 

1 Comment

Posted in Bubbles, Silicon Valley, Startups, VC

Myths of the Headless Company

Posted on May 18, 2016 | 1 comment

In the past year or so, two of our competitors have abruptly transitioned their CEOs and both have perpetuated a lot of mythology about what happens and/or will happen in such transitions.  As someone who’s run two startups as CEO for more than a combined ten years, been the “new guy” CEO twice after such transitions, sat on two startup boards as an independent director, and advised numerous startups, I thought I’d do a little myth-busting around some of the common things these companies say to employees and customers when these transitions happen.

“Everythings’s fine, there is no problem.”

If everything were fine, you would not have changed your CEO.  QED.

Houston, there is a problem.

“Uh, the actual problem is we’re doing too well, … so we need to change our the CEO for the next level of growth.”

This reminds me of the job interview response where you say your biggest weakness is perfectionism.

Look, while successful companies do periodically outgrow their executives, you can tell the difference between an organized scale-driven CEO swap out and something going wrong.  How?

Organized transitions are organized.  The CEO and the board agree that the company is scaling beyond the CEO’s abilities.  A search is started.  The new CEO is found.  The old CEO gracefully hands the reins over to the new CEO.  This can and does happen all the time in Silicon Valley because the problem is real and everyone — both the VCs and the outgoing CEO — are all big shareholders and want what’s best for the company, which is a smooth transition.

When a CEO is exited …

  • Abruptly, without notice, over a weekend, …
  • Without a replacement already identified
  • Without even a search firm hired
  • At an awkward time (e.g., a few days before the end of a quarter or a few weeks before the annual user conference)

You can be pretty sure that something went wrong.  What exactly went wrong you can never know.  But you can be sure of thing:  the conversation ended with either “I’m outta here” or “he’s (or she’s) outta here” depending on whether the person was “pushed’ or “jumped.”

“But we did need someone for the next level of growth.”

That’s quite possibly true and the board will undoubtedly use the transition as an attempt to find someone who’s done the next level of growth before.  But, don’t be confused, if the transition is abrupt and disorganized that’s not why the prior CEO was exited.  Something else is going on, and it typically falls into one of three areas:

  • Dispute with the board, including but not limited to disagreements about the executive team or company strategy.
  • Below-plan operating results.  Most CEOs are measured according to expectations set in fundraising and established in the operating plan.  At unicorns, I call this the curse of the megaround, because such rounds are often done on the back on unachievable expectations.
  • Improprieties — while hopefully rare — such as legal, accounting, or employment violations, can also result in abrupt transitions.

“Nothing’s going to change.”

This is a favorite myth perpetuated on customers.  Having been “the new guy” at both MarkLogic and Host Analytics, I can assure you that things did change and the precise reason I was hired was to change things.  I’ve seen dozens of CEO job specs and I’ve never a single one that said “we want to hire a new CEO but you are not supposed to change anything.”  Doesn’t happen.

But companies tell customers this — and maybe they convince themselves it’s true because they want to believe it — but it’s a myth.  You hire a new CEO precisely and exactly to change certain things.

When I joined MarkLogic I focused the company almost exclusively on media and government verticals.  When I joined Host, I focused us up-market (relative to Adaptive) and on core EPM (as opposed to BI).

Since most companies get in trouble due to lack of focus, one of the basic job descriptions of the new-person CEO is to identify the core areas on which to focus — and the ones to cut.  Particularly, as is the case at Anaplan where the board is on record saying that the burn rate is too high — that means cut things.  Will he or she cut the area or geography that most concerns customer X?  Nobody knows.

Nobody.  And that’s important.  The only person who knows will be the new CEO and he/she will only know after 30-90 days of assessment.  So if anyone tells you “they know” that nothing’s going to change, they are either lying or clueless.  Either way, they are flat wrong.  No one knows, by definition.

“But the founder says nothing’s going to change.”

Now that would be an interesting statement if the founder were CEO.  But, in these cases, the founder isn’t CEO and there is a reason for that — typically a lack of sufficient business experience.

So when the founder tells you “nothing is going to change” it’s simply the guy who lacks enough business experience to actually run the business telling you his/her opinion.

The reality is new CEOs are hired for a reason, they are hired to change things, that change typically involves a change in focus, and CEO changes are always risky.  Sometimes they work out great.  Sometimes the new person craters the company.  You can never know.

 

 

 

1 Comment

Posted in CEO, Management, Silicon Valley, Startups, Strategy, VC

The Worst Interviewing Advice Ever

Posted on April 23, 2016 | 6 comments

I remember years and years ago attending a training class for job candidates on how to improve their interviewing skills.  The crux of the course was this:

  • Most people are bad interviewers.
  • Since they don’t know what to ask, you need to tell them what they need to know regardless of what you’re asked.
  • What they need to know is the skills you possess, the duties you’ve performed, and the results you have accomplished.

I was reminded of this the other day when interviewing a very qualified candidate.

Me:  “Think about the best manager you’ve ever worked for, and get a picture of him/her in your head.  Do you have one?”

Candidate:  “Yes.”

Me:  “Now describe him or her.”

Candidate:  “I like managers who are supportive to me and tough but fair.”

Me:  “I’m sorry, perhaps you didn’t get the exercise.  Do you have a favorite boss?”

Candidate:  “Yes.”

Me:  “I don’t need to know his/her name, but do you have a specific person in mind?”

Candidate:  “Yes.”

Me:  “Now, describe them, perhaps by using a list of adjectives.”

Candidate:  “I like bosses who mentor me and teach me to do things better.”

Me (thinking):  Penalty, Evasion, 15 yards.  1st and 25.

I almost cut off the interview right there.  But I didn’t.  Despite a repeated pattern of not answering my questions, I voted no-hire but didn’t veto the candidate because he did seem qualified.  I discussed what happened with the hiring manager.

Me:  “I would not hire that person.  He is evasive and doesn’t answer questions.”

Hiring manager:  “Maybe he didn’t answer because he didn’t know the right answer.”

Me:  “There is no right answer, per se.  I’m not trying to make the candidate describe you; I’m trying to get them to describe their best boss ever so I can do a comparison of that style with my perception of yours.”

Hiring manager:  “I get it, but he obviously knows it’s a risky question so maybe he deliberately didn’t answer it.”

Me:  “OK, go to talk to him and find out what happened.”

In the end, the hiring manager was right.  The candidate didn’t want to give a clear answer to the question because he was worried it would backfire.  And the core of that old training class sprung immediately back to mind “don’t answer the question they asked, tell them what they need to know regardless of what they ask.”  Which, I believe, is the worst interview advice ever.

I ask questions.  I ask them on purpose.  I ask them for a reason.  If you stonewall my efforts to interview you I will vote no — and I will often throw an outright veto on top.

It’s amazing how often I have to say it:  answer the question.  Job interviews are no exception.  In fact, quite the opposite.

Don’t assume you’re smarter than the person interviewing you.  Don’t play games.  The purpose of my line of questioning was simple:  “I wanted to figure out if I thought you could work with your hiring manager.”  That’s a very important question — and one both sides should want to answer sooner not later.  Don’t assume I’m an idiot and want you to describe the hiring manager.  Assume I’m asking for a reason and even if you can’t figure out the reason or the “right” answer, answer the question.

If you don’t you’ll be lucky to get the job.

6 Comments

Posted in Hiring, Management, Recruiting