Notebook for The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers Horowitz, Ben Citation (APA): Horowitz, B. (2014). The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers [Kindle Android version]. Retrieved from Amazon.com Chapter 1: From Communist to Venture Capitalist Highlight (yellow) - Page 4 There are no shortcuts to knowledge, especially knowledge gained from personal experience. Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all. Highlight (yellow) - Page 5 Former secretary of state Colin Powell says that leadership is the ability to get someone to follow you even if only out of curiosity. Chapter 2: “I Will Survive” Highlight (yellow) - Page 28 IF YOU ARE GOING TO EAT SHIT, DON’T NIBBLE Highlight (yellow) - Page 28 During the road show, as a way to break the tension, Marc would say, “Remember, Ben, things are always darkest before they go completely black.” Chapter 3: This Time with Feeling Highlight (yellow) - Page 43 An early lesson I learned in my career was that whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project. Highlight (yellow) - Page 49 figuring out the right product is the innovator’s job, not the customer’s job. The customer only knows what she thinks she wants based on her experience with the current product. The innovator can take into account everything that’s possible, but often must go against what she knows to be true. Highlight (yellow) - Page 50 innovation requires a combination of knowledge, skill, and courage. Sometimes only the founder has the courage to ignore the data; we were running out of time, so I had to step in: “I don’t care about any of the existing requirements; I need you to reinvent the product and we need to win.” Highlight (yellow) - Page 51 In my weekly staff meeting, I inserted an agenda item titled “What Are We Not Doing?” Ordinarily in a staff meeting, you spend lots of time reviewing, evaluating, and improving all of the things that you do: build products, sell products, support customers, hire employees, and the like. Sometimes, however, the things you’re not doing are the things you should actually be focused on. Highlight (yellow) - Page 51 if I’d learned anything it was that conventional wisdom had nothing to do with the truth and the efficient market hypothesis was deceptive. How else could one explain Opsware trading at half of the cash we had in the bank when we had a $20 million a year contract and fifty of the smartest engineers in the world? No, markets weren’t “efficient” at finding the truth; they were just very efficient at converging on a conclusion—often the wrong conclusion. Highlight (yellow) - Page 52 Note to self: It’s a good idea to ask, “What am I not doing?” Chapter 4: When Things Fall Apart Highlight (yellow) - Page 57 “There are several different frameworks one could use to get a handle on the indeterminate vs. determinate question. The math version is calculus vs. statistics. In a determinate world, calculus dominates. You can calculate specific things precisely and deterministically. When you send a rocket to the moon, you have to calculate precisely where it is at all times. It’s not like some iterative startup where you launch the rocket and figure things out step by step. Do you make it to the moon? To Jupiter? Do you just get lost in space? There were lots of companies in the ’90s that had launch parties but no landing parties. “But the indeterminate future is somehow one in which probability and statistics are the dominant modality for making sense of the world. Bell curves and random walks define what the future is going to look like. The standard pedagogical argument is that high schools should get rid of calculus and replace it with statistics, which is really important and actually useful. There has been a powerful shift toward the idea that statistical ways of thinking are going to drive the future.” Highlight (yellow) - Page 58 I learned one important lesson: Startup CEOs should not play the odds. When you are building a company, you must believe there is an answer and you cannot pay attention to your odds of finding it. You just have to find it. It matters not whether your chances are nine in ten or one in a thousand; your task is the same. Highlight (yellow) - Page 59 People always ask me, “What’s the secret to being a successful CEO?” Sadly, there is no secret, but if there is one skill that stands out, it’s the ability to focus and make the best move when there are no good moves. It’s the moments where you feel most like hiding or dying that you can make the biggest difference as a CEO. Highlight (yellow) - Page 59 keep death in mind at all times. If a warrior keeps death in mind at all times and lives as though each day might be his last, he will conduct himself properly in all his actions. Highlight (yellow) - CEOs Should Tell It Like It Is > Page 64 My single biggest personal improvement as CEO occurred on the day when I stopped being too positive. Highlight (yellow) - CEOs Should Tell It Like It Is > Page 64 I thought I should project a positive, sunny demeanor and rally the unburdened troops to victory. I was completely wrong. I realized my error during a conversation with my brother in-law, Cartheu. At the time, Cartheu worked for AT&T; as a telephone lineman (he is one of those guys who climb the poles). I had just met a senior executive at AT&T;, whom I’ll call Fred, and I was excited to find out if Cartheu knew him. Cartheu said, “Yeah, I know Fred. He comes by about once a quarter to blow a little sunshine up my ass.” At that moment, I knew that I’d been screwing up my company by being too positive. Highlight (yellow) - CEOs Should Tell It Like It Is > Page 66 Without trust, communication breaks. More specifically: In any human interaction, the required amount of communication is inversely proportional to the level of trust. Consider the following: If I trust you completely, then I require no explanation or communication of your actions whatsoever, because I know that whatever you are doing is in my best interests. On the other hand, if I don’t trust you at all, then no amount of talking, explaining, or reasoning will have any effect on me, because I do not trust that you are telling me the truth. In a company context, this is a critical point. As a company grows, communication becomes its biggest challenge. If the employees fundamentally trust the CEO, then communication will be vastly more efficient than if they don’t. Telling things as they are is a critical part of building this trust. A CEO’s ability to build this trust over time is often the difference between companies that execute well and companies that are chaotic. Highlight (yellow) - CEOs Should Tell It Like It Is > Page 66 The more brains working on the hard problems, the better. Highlight (yellow) - CEOs Should Tell It Like It Is > Page 66 A brain, no matter how big, cannot solve a problem it doesn’t know about. As the open-source community would explain it, “Given enough eyeballs, all bugs are shallow.” Highlight (yellow) - CEOs Should Tell It Like It Is > Page 67 A good culture is like the old RIP routing protocol: Bad news travels fast; good news travels slow. Note - CEOs Should Tell It Like It Is > Page 67 Should try to add this to Insync processes, if something bad happens let everyone know. Highlight (yellow) - CEOs Should Tell It Like It Is > Page 67 A healthy company culture encourages people to share bad news. A company that discusses its problems freely and openly can quickly solve them. A company that covers up its problems frustrates everyone involved. The resulting action item for CEOs: Build a culture that rewards—not punishes—people for getting problems into the open where they can be solved. Highlight (yellow) - CEOs Should Tell It Like It Is > Page 67 beware of management maxims that stop information from flowing freely in your company. For example, consider the old management standard: “Don’t bring me a problem without bringing me a solution.” What if the employee cannot solve an important problem? For example, what if an engineer identifies a serious flaw in the way the product is being marketed? Do you really want him to bury that information? Management truisms like these may be good for employees to aspire to in the abstract, but they can also be the enemy of free-flowing information—which may be critical for the health of the company. Highlight (yellow) - CEOs Should Tell It Like It Is > Page 67 If you run a company, you will experience overwhelming psychological pressure to be overly positive. Stand up to the pressure, face your fear, and tell it like it is. Highlight (yellow) - The Right Way to Lay People Off > Page 69 STEP 1: GET YOUR HEAD RIGHT When a company fails to hit its financial plan so severely that it must fire the employees it went to great time and expense to hire, it weighs heavily on the chief executive. Highlight (yellow) - The Right Way to Lay People Off > Page 69 STEP 2: DON’T DELAY Once you decide that you will have to lay people off, the time elapsed between making that decision and executing that decision should be as short as possible. Highlight (yellow) - The Right Way to Lay People Off > Page 70 STEP 3: BE CLEAR IN YOUR OWN MIND ABOUT WHY YOU ARE LAYING PEOPLE OFF Highlight (yellow) - The Right Way to Lay People Off > Page 70 The message must be “The company failed and in order to move forward, we will have to lose some excellent people.” Admitting to the failure may not seem like a big deal, but trust me, it is. “Trust me.” That’s what a CEO says every day to her employees. Trust me: This will be a good company. Trust me: This will be good for your career. Trust me: This will be good for your life. A layoff breaks that trust. In order to rebuild trust, you have to come clean. Highlight (yellow) - The Right Way to Lay People Off > Page 70 STEP 4: TRAIN YOUR MANAGERS The most important step in the whole exercise is training the management team. If you send managers into this super-uncomfortable situation with no training, most of them will fail. Training starts with a golden rule: Managers must lay off their own people. Highlight (yellow) - The Right Way to Lay People Off > Page 71 1. They should explain briefly what happened and that it is a company rather than a personal failure. 2. They should be clear that the employee is impacted and that the decision is nonnegotiable. 3. They should be fully prepared with all of the details about the benefits and support the company plans to provide. Highlight (yellow) - The Right Way to Lay People Off > Page 71 STEP 5: ADDRESS THE ENTIRE COMPANY Prior to executing the layoff, the CEO must address the company. The CEO must deliver the overall message that provides the proper context and air cover for the managers. If you do your job right, the managers will have a much easier time doing their jobs. Keep in mind what former Intuit CEO Bill Campbell told me—The message is for the people who are staying. The people who stay will care deeply about how you treat their colleagues. Many of the people whom you lay off will have closer relationships with the people who stay than you do, so treat them with the appropriate level of respect. Still, the company must move forward, so be careful not to apologize too much. Highlight (yellow) - The Right Way to Lay People Off > Page 72 STEP 6: BE VISIBLE, BE PRESENT After you make the speech telling your company that you will be letting many of them go, you will not feel like hanging out and talking to people. You will probably feel like going to a bar and drinking a fifth of tequila. Do not do this. Be present. Be visible. Be engaging. People want to see you. They want to see whether you care. The people whom you laid off will want to know if they still have a relationship with you and the company. Talk to people. Help them carry their things to their cars. Let them know that you appreciate their efforts. Highlight (yellow) - Preparing to Fire an Executive > Page 74 the first step to properly firing an executive is figuring out why you hired the wrong person for your company. Highlight (yellow) - Preparing to Fire an Executive > Page 74 You did a poor job defining the position in the first place. If you don’t know what you want, you will be unlikely to get it. Far too often, CEOs hire executives based on an abstract notion of what they think and feel the executive should be like. This error often leads to the executive not bringing the key, necessary qualities to the table. Highlight (yellow) - Preparing to Fire an Executive > Page 74 You hired for lack of weakness rather than for strengths. This is especially common when you run a consensus-based hiring process. The group will often find the candidate’s weaknesses, but they won’t place a high enough value on the areas where you need the executive to be a world-class performer. As a result, you hire an executive with no sharp weaknesses, but who is mediocre where you need her to be great. If you don’t have world-class strengths where you need them, you won’t be a world-class company. Highlight (yellow) - Preparing to Fire an Executive > Page 74 You hired for scale too soon. The most consistently wrong advice that venture capitalists and executive recruiters give CEOs is to hire someone “bigger” than required. Highlight (yellow) - Preparing to Fire an Executive > Page 75 You hired for the generic position. There is no such thing as a great CEO, a great head of marketing, or a great head of sales. There is only a great head of sales for your company for the next twelve to twenty-four months. That position is not the same as the same position at Microsoft or Facebook. Don’t look for the candidate out of central casting. This is not a movie. Highlight (yellow) - Preparing to Fire an Executive > Page 75 The executive had the wrong kind of ambition. In chapter 6, I will describe the difference between ambition for the company and ambition for oneself. If an executive has the wrong kind of ambition, then despite her skills, the company may reject her. Highlight (yellow) - Preparing to Fire an Executive > Page 75 You failed to integrate the executive. Bringing a new person into your company in an important role is difficult. Other employees will be quick to judge, her expectations may be different from yours, and the job may be largely undefined. Be sure to review and improve your integration plan after you fire an executive. Highlight (yellow) - Preparing to Fire an Executive > Page 78 Preserve the reputation of the fired executive. The failure was very likely a team effort, and it’s best to portray it that way. You don’t make yourself look good by trashing someone who worked for you. Highlight (yellow) - Preparing to Fire an Executive > Page 79 the executive will be keenly interested in how the news will be communicated to the company and to the outside world. It is best to let her decide. Bill Campbell once gave me a critical bit of advice when I was preparing to fire an executive. He said, “Ben, you cannot let him keep his job, but you absolutely can let him keep his respect.” Highlight (yellow) - Demoting a Loyal Friend > Page 82 Embarrassment Do not underestimate what a large factor this will be in his thinking. All of his friends, relatives, and colleagues know his current position. They know how hard he’s worked and how much he’s sacrificed for the company. How will he possibly explain to them that he will no longer be part of the executive team? Highlight (yellow) - Demoting a Loyal Friend > Page 82 Betrayal Your friend will undoubtedly feel something like this: I’ve been there from the beginning, I’ve worked side by side with you. How could you do this? It’s not like you’re perfect in your job, either. How can you be so comfortable selling me out? Highlight (yellow) - Demoting a Loyal Friend > Page 82 the key to an emotional discussion is to take the emotion out of it. To do that, you must be very clear in your mind about what you’ve decided and what you want to do. Highlight (yellow) - Demoting a Loyal Friend > Page 82 The most important thing to decide is that you really want to do this. If you walk into a demotion discussion with an open decision, you will walk out with a mess: a mess of a situation and a mess of a relationship. As part of the decision, you must get comfortable with the thought that the employee may quit the company. Given the intense emotions he will feel, there is no guarantee that he will want to stay. If you cannot afford to lose him, you cannot make this change. Highlight (yellow) - Demoting a Loyal Friend > Page 83 For young employees, getting experience in different areas can be highly valuable. Highlight (yellow) - Demoting a Loyal Friend > Page 83 Use appropriate language. Make clear with your language that you’ve decided. As previously discussed, use phrases like “I have decided” rather than “I think” or “I’d like.” By doing this, you will avoid putting the employee in the awkward position of wondering whether he should lobby for his old job. You can’t tell him what he wants to hear, but you can be honest. Highlight (yellow) - Demoting a Loyal Friend > Page 83 Admit reality. If you are a founder-CEO like I was, it probably won’t be lost on the employee that you are just as underskilled for your job as he is for his. Don’t dodge this fact. In fact, admit that if you were a more experienced CEO, you might be able to develop him into the role, but two people who don’t know what they are doing is a recipe for failure. Highlight (yellow) - Demoting a Loyal Friend > Page 84 Acknowledge the contributions. If you want him to stay in the company, you should say that and make it crystal clear that you want to help him develop his career and contribute to the company. Let him know that you appreciate what he’s done and that your decision results from a forward-looking examination of what the company needs, not a review of his past performance. The best way to do this, if appropriate, is to couple the demotion with an increase in compensation. Doing so will let him know that he’s both appreciated and valued going forward. Through all of this, keep in mind that it is what it is and nothing you can say will change that or stop it from being deeply upsetting. Your goal should not be to take the sting out of it, but to be honest, clear, and effective. Your friend may not appreciate that in the moment, but he will appreciate it over time. Highlight (yellow) - Lead Bullets > Page 89 “There are no silver bullets for this, only lead bullets.” They did not want to hear that, but it made things clear: We had to build a better product. There was no other way out. No window, no hole, no escape hatch, no back door. We had to go through the front door and deal with the big, ugly guy blocking it. Lead bullets. Highlight (yellow) - Lead Bullets > Page 90 There comes a time in every company’s life where it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself, “If our company isn’t good enough to win, then do we need to exist at all?” Highlight (yellow) - Nobody Cares > Page 91 Parcells: “Al, I am just not sure how we can win without so many of our best players. What should I do?” Davis: “Bill, nobody cares, just coach your team.” That might be the best CEO advice ever. Because, you see, nobody cares. When things go wrong in your company, nobody cares. The media don’t care, your investors don’t care, your board doesn’t care, your employees don’t care, and even your mama doesn’t care. Nobody cares. And they are right not to care. A great reason for failing won’t preserve one dollar for your investors, won’t save one employee’s job, or get you one new customer. It especially won’t make you feel one bit better when you shut down your company and declare bankruptcy. All the mental energy you use to elaborate your misery would be far better used trying to find the one seemingly impossible way out of your current mess. Spend zero time on what you could have done, and devote all of your time on what you might do. Because in the end, nobody cares; just run your company. Chapter 5: Take Care of the People, the Products, and the Profits—in That Order Highlight (yellow) - Nobody Cares > Page 98 “We take care of the people, the products, and the profits—in that order.” It’s a simple saying, but it’s deep. “Taking care of the people” is the most difficult of the three by far and if you don’t do it, the other two won’t matter. Taking care of the people means that your company is a good place to work. Most workplaces are far from good. As organizations grow large, important work can go unnoticed, the hardest workers can get passed over by the best politicians, and bureaucratic processes can choke out the creativity and remove all the joy. Highlight (yellow) - A Good Place to Work > Page 99 I recalled a conversation I’d had with my father many years ago regarding Tommy Heinsohn, the Boston Celtics basketball coach at the time. Heinsohn had been one of the most successful coaches in the world, including being named coach of the year and winning two NBA championships. However, he had gone downhill fast and now had the worst record in the league. I asked my father what happened. He said, “The players stopped paying attention to his temper tantrums. Heinsohn used to yell at the team and they’d respond. Now they just ignore him.” Highlight (yellow) - A Good Place to Work > Page 101 In good organizations, people can focus on their work and have confidence that if they get their work done, good things will happen for both the company and them personally. It is a true pleasure to work in an organization such as this. Every person can wake up knowing that the work they do will be efficient, effective, and make a difference for the organization and themselves. These things make their jobs both motivating and fulfilling. Highlight (yellow) - A Good Place to Work > Page 101 “In a poor organization, on the other hand, people spend much of their time fighting organizational boundaries, infighting, and broken processes. They are not even clear on what their jobs are, so there is no way to know if they are getting the job done or not. In the miracle case that they work ridiculous hours and get the job done, they have no idea what it means for the company or their careers. To make it all much worse and rub salt in the wound, when they finally work up the courage to tell management how fucked-up their situation is, management denies there is a problem, then defends the status quo, then ignores the problem.” Highlight (yellow) - A Good Place to Work > Page 102 Being a good company doesn’t matter when things go well, but it can be the difference between life and death when things go wrong. Highlight (yellow) - A Good Place to Work > Page 102 Things always go wrong. Highlight (yellow) - A Good Place to Work > Page 102 Being a good company is an end in itself. Highlight (yellow) - A Good Place to Work > Page 103 the only thing that keeps an employee at a company when things go horribly wrong—other than needing a job—is that she likes her job. Highlight (yellow) - A Good Place to Work > Page 103 There has never been a company in the history of the world that had a monotonously increasing stock price. In bad companies, when the economics disappear, so do the employees. In technology companies, when the employees disappear, the spiral begins: The company declines in value, the best employees leave, the company declines in value, the best employees leave. Spirals are extremely difficult to reverse. Highlight (yellow) - A Good Place to Work > Page 104 If you do nothing else, be like Bill and build a good company. Highlight (yellow) - Why Startups Should Train Their People > Page 105 People at McDonald’s get trained for their positions, but people with far more complicated jobs don’t. It makes no sense. Would you want to stand on the line of the untrained person at McDonald’s? Would you want to use the software written by the engineer who was never told how the rest of the code worked? A lot of companies think their employees are so smart that they require no training. That’s silly. Highlight (yellow) - Why Startups Should Train Their People > Page 105 “Most managers seem to feel that training employees is a job that should be left to others. I, on the other hand, strongly believe that the manager should do it himself.” Highlight (yellow) - Why Startups Should Train Their People > Page 107 Training is, quite simply, one of the highest-leverage activities a manager can perform. Consider for a moment the possibility of your putting on a series of four lectures for members of your department. Let’s count on three hours preparation for each hour of course time—twelve hours of work in total. Say that you have ten students in your class. Next year they will work a total of about twenty thousand hours for your organization. If your training efforts result in a 1 percent improvement in your subordinates’ performance, your company will gain the equivalent of two hundred hours of work as the result of the expenditure of your twelve hours. Highlight (yellow) - Why Startups Should Train Their People > Page 108 After putting economics aside, I found that there were two primary reasons why people quit: They hated their manager; generally the employees were appalled by the lack of guidance, career development, and feedback they were receiving. They weren’t learning anything: The company wasn’t investing resources in helping employees develop new skills. An outstanding training program can address both issues head-on. Highlight (yellow) - Why Startups Should Train Their People > Page 108 The best place to start is with the topic that is most relevant to your employees: the knowledge and skill that they need to do their job. I call this functional training. Highlight (yellow) - Why Startups Should Train Their People > Page 108 Functional training can be as simple as training a new employee on your expectations for them (see “Good Product Manager/Bad Product Manager”) and as complex as a multiweek engineering boot camp to bring new recruits completely up to speed on all of the historical architectural nuances of your product. The training courses should be tailored to the specific job. If you attempt the more complex-style course, be sure to enlist the best experts on the team as well as the manager. As a happy side effect, this type of effort will do more to build a powerful, positive company culture than a hundred culture-building strategic off-site meetings. Highlight (yellow) - Why Startups Should Train Their People > Page 109 The other essential component of a company’s training program is management training. Management training is the best place to start setting expectations for your management team. Highlight (yellow) - Why Startups Should Train Their People > Page 109 the management state of the art in technology companies is extremely poor. Once you’ve set expectations, the next set of management courses has already been defined; they are the courses that teach your managers how to do the things you expect Highlight (yellow) - Why Startups Should Train Their People > Page 109 Take your best people and encourage them to share their most developed skills. Training in such topics as negotiating, interviewing, and finance will enhance your company’s competency in those areas as well as improve employee morale. Teaching can also become a badge of honor for employees who achieve an elite level of competence. Highlight (yellow) - Why Startups Should Train Their People > Page 109 Now that we understand the value of the training and what to train on, how do we get our organization to do what we want? The first thing to recognize is that no startup has time to do optional things. Therefore, training must be mandatory. Highlight (yellow) - Why Startups Should Train Their People > Page 110 The first two types of training (functional and management) can be easily enforced as follows: Enforce functional training by withholding new employee requisitions. As Andy Grove writes, there are only two ways for a manager to improve the output of an employee: motivation and training. Therefore, training should be the most basic requirement for all managers in your organization. An effective way to enforce this requirement is by withholding new employee requisitions from managers until they’ve developed a training program for the TBH, “To Be Hired.” Enforce management training by teaching it yourself. Managing the company is the CEO’s job. While you won’t have time to teach all of the management courses yourself, you should teach the course on management expectations, because they are, after all, your expectations. Make it an honor to participate in these sessions by selecting the best managers on your team to teach the other courses. And make that mandatory, too. Highlight (yellow) - Why Startups Should Train Their People > Page 110 Ironically, the biggest obstacle to putting a training program in place is the perception that it will take too much time. Keep in mind that there is no investment that you can make that will do more to improve productivity in your company. Therefore, being too busy to train is the moral equivalent of being too hungry to eat. Furthermore, it’s not that hard to create basic training courses. Highlight (yellow) - Why Startups Should Train Their People > Page 111 Good product managers know the market, the product, the product line, and the competition extremely well and operate from a strong basis of knowledge and confidence. A good product manager is the CEO of the product. Good product managers take full responsibility and measure themselves in terms of the success of the product. They are responsible for right product/right time and all that entails. A good product manager knows the context going in (the company, our revenue funding, competition, etc.), and they take responsibility for devising and executing a winning plan (no excuses). Highlight (yellow) - Why Startups Should Train Their People > Page 111 Good product managers don’t get all of their time sucked up by the various organizations that must work together to deliver the right product at the right time. Highlight (yellow) - Why Startups Should Train Their People > Page 111 Good product managers crisply define the target, the “what” (as opposed to the “how”), and manage the delivery of the “what.” Bad product managers feel best about themselves when they figure out “how.” Good product managers communicate crisply to engineering in writing as well as verbally. Good product managers don’t give direction informally. Good product managers gather information informally. Good product managers create collateral, FAQs, presentations, and white papers that can be leveraged by salespeople, marketing people, and executives. Highlight (yellow) - Why Startups Should Train Their People > Page 112 Good product managers take written positions on important issues (competitive silver bullets, tough architectural choices, tough product decisions, and markets to attack or yield). Highlight (yellow) - Why Startups Should Train Their People > Page 112 Good product managers focus the team on revenue and customers. Bad product managers focus the team on how many features competitors are building. Good product managers define good products that can be executed with a strong effort. Bad product managers define good products that can’t be executed or let engineering build whatever they want (that is, solve the hardest problem). Highlight (yellow) - Why Startups Should Train Their People > Page 112 Good product managers decompose problems. Bad product managers combine all problems into one. Highlight (yellow) - Why Startups Should Train Their People > Page 112 Good product managers think about the story they want written by the press. Bad product managers think about covering every feature and being absolutely technically accurate with the press. Good product managers ask the press questions. Bad product managers answer any press question. Good product managers assume members of the press and the analyst community are really smart. Bad product managers assume that journalists and analysts are dumb because they don’t understand the subtle nuances of their particular technology. Highlight (yellow) - Why Startups Should Train Their People > Page 113 Good product managers err on the side of clarity. Bad product managers never even explain the obvious. Good product managers define their job and their success. Bad product managers constantly want to be told what to do. Highlight (yellow) - Why Startups Should Train Their People > Page 113 Good product managers send their status reports in on time every week, because they are disciplined. Bad product managers forget to send in their status reports on time, because they don’t value discipline. Highlight (yellow) - Is It Okay to Hire People from Your Friend’s Company? > Page 116 Here’s an easy way to think about the dynamic. If your husband left you, would you want your best friend to date him? He’s going to date somebody, so wouldn’t you want your friend to have him? It seems logical, but this situation is far from logical and you just lost one friend. Note - Is It Okay to Hire People from Your Friend’s Company? > Page 116 On hiring from your friend's company. Highlight (yellow) - Is It Okay to Hire People from Your Friend’s Company? > Page 116 A good rule of thumb is my Reflexive Principle of Employee Raiding, which states, “If you would be shocked and horrified if Company X hired several of your employees, then you should not hire any of theirs.” Highlight (yellow) - Why It’s Hard to Bring Big Company Execs into Little Companies > Page 122 It’s much better if they want to be more creative. The most important difference between big and small companies is the amount of time running versus creating. A desire to do more creating is the right reason to want to join your company. Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 124 “If you don’t know what you want, the chances that you’ll get it are extremely low.” Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 124 you must realize how ignorant you are and resist the temptation to educate yourself simply by interviewing candidates. While the interview process can be highly educational, using that as the sole information source is dangerous. Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 125 The more experience you have, the more you realize that there is something seriously wrong with every employee in your company (including you). Nobody is perfect. Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 126 The very best way to know what you want is to act in the role. Not just in title, but in real action. In my career, I’ve been acting VP of HR, CFO, and VP of sales. Often CEOs resist acting in functional roles, because they worry that they lack the appropriate knowledge. This worry is precisely why you should act—to get the appropriate knowledge. Indeed, acting is really the only way to get all the knowledge that you need to make the hire, because you are looking for the right executive for your company today, not a generic executive. Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 126 In addition to acting in the role, it helps greatly to bring in domain experts. If you know a great head of sales, interview them first and learn what they think made them great. Figure out which of those strengths most directly match the needs of your company. If possible, include the domain expert in the interview process. However, be aware that the domain expert only has part of the knowledge necessary to make the hire. Specifically, she has very little knowledge of your company, how it works, and what its needs are. Therefore, you cannot defer the decision to the domain expert. Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 127 Write down the strengths you want and the weaknesses that you are willing to tolerate. Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 127 Develop questions that test for the criteria (see the appendix). This effort is important even if you never ask the candidate any of the pre-prepared questions. By writing down questions that test for what you want, you will get to a level of specificity that will be extremely difficult to achieve otherwise. Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 128 In assembling the team, you should keep two questions in mind: 1. Who will best help you figure out whether the candidate meets the criteria? These may be internal or external people. They can be board members, other executives, or just experts. 2. Who do you need to support the decision once the executive is on board? This group is just as important as the first. No matter how great an executive is, they will have trouble succeeding if the people around them sabotage everything they do. The best way to avoid that is to understand any potential issues before the person is hired. Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 128 Generally, it’s best to have group two interview finalist candidates only. Highlight (yellow) - Hiring Executives: If You’ve Never Done the Job, How Do You Hire Somebody Good? > Page 128 Backdoor and front-door references. For the final candidates, it’s critically important that the CEO conduct the reference checks herself. The references need to be checked against the same hiring criteria that you tested for during the interview process. Backdoor reference checks (checks from people who know the candidate, but were not referred by the candidate) can be an extremely useful way to get an unbiased view. However, do not discount the front-door references. While they clearly have committed to giving a positive reference (or they wouldn’t be on the list), you are not looking for positive or negative with them. You are looking for fit with your criteria. Often, the front-door references will know the candidate best and will be quite helpful in this respect. Highlight (yellow) - When Employees Misinterpret Managers > Page 131 Sun Tzu, in his classic work The Art of War, warns that giving the team a task that it cannot possibly perform is called crippling the army. Highlight (yellow) - When Employees Misinterpret Managers > Page 133 At HP, the company wanted high earnings now and in the future. By focusing entirely on the numbers, HP got them now by sacrificing the future. Note that there were many numbers as well as more qualitative goals that would have helped: Was our competitive win rate increasing or declining? Was customer satisfaction rising or falling? What did our own engineers think of the products? Highlight (yellow) - When Employees Misinterpret Managers > Page 133 By managing the organization as though it were a black box, some divisions at HP optimized the present at the expense of their downstream competitiveness. The company rewarded managers for achieving short-term objectives in a manner that was bad for the company. It would have been better to take into account the white box. The white box goes beyond the numbers and gets into how the organization produced the numbers. It penalizes managers who sacrifice the future for the short term and rewards those who invest in the future even if that investment cannot be easily measured. Highlight (yellow) - When Employees Misinterpret Managers > Page 133 To get things right, you must recognize that anything you measure automatically creates a set of employee behaviors. Once you determine the result you want, you need to test the description of the result against the employee behaviors that the description will likely create. Otherwise, the side-effect behaviors may be worse than the situation you were trying to fix. Highlight (yellow) - Management Debt > Page 134 management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence. Highlight (yellow) - Management Debt > Page 134 1. Putting two in the box 2. Overcompensating a key employee, because she gets another job offer 3. No performance management or employee feedback process Highlight (yellow) - Management Debt > Page 137 Companies execute well when everybody is on the same page and everybody is constantly improving. In a vacuum of feedback, there is almost no chance that your company will perform optimally across either dimension. Directions with no corrections will seem fuzzy and obtuse. People rarely improve weakness they are unaware of. The ultimate price you will pay for not giving feedback: systematically crappy company performance. Highlight (yellow) - Management Debt > Page 137 Every really good, really experienced CEO I know shares one important characteristic: They tend to opt for the hard answer to organizational issues. If faced with giving everyone the same bonus to make things easy or with sharply rewarding performance and ruffling many feathers, they’ll ruffle the feathers. If given the choice of cutting a popular project today, because it’s not in the long-term plans or you’re keeping it around for morale purposes and to appear consistent, they’ll cut it today. Why? Because they’ve paid the price of management debt, and they would rather not do that again. Highlight (yellow) - Management Quality Assurance > Page 139 THE EMPLOYEE LIFE CYCLE Note - Management Quality Assurance > Page 139 Refer to this section for a lot of golden questions. Highlight (yellow) - Management Quality Assurance > Page 141 Shortly after joining, how well does an employee understand what’s expected of her? Highlight (yellow) - Management Quality Assurance > Page 141 Performance Management Do your managers give consistent, clear feedback to their employees? What is the quality of your company’s written performance reviews? Did all of your employees receive their reviews on time? Do you effectively manage out poor performers? Highlight (yellow) - Management Quality Assurance > Page 141 Motivation Are your employees excited to come to work? Do your employees believe in the mission of the company? Do they enjoy coming to work every day? Do you have any employees who are actively disengaged? Do your employees clearly understand what’s expected of them? Do employees stay a long time or do they quit faster than normal? Why do employees quit? Highlight (yellow) - Management Quality Assurance > Page 142 Understanding things unspoken When management quality starts to break down in a company, nobody says anything about it, but super-perceptive people can tell that the company is slipping. You need one of those. Chapter 6: Concerning the Going Concern Highlight (yellow) - Management Quality Assurance > Page 145 Sometimes an organization doesn’t need a solution; it just needs clarity. Highlight (yellow) - Management Quality Assurance > Page 145 Sometimes the right policy is the one that the CEO can follow. Highlight (yellow) - How to Minimize Politics in Your Company > Page 147 What do I mean by politics? I mean people advancing their careers or agendas by means other than merit and contribution. Highlight (yellow) - How to Minimize Politics in Your Company > Page 150 the right kind of ambition is ambition for the company’s success with the executive’s own success only coming as a by-product of the company’s victory. The wrong kind of ambition is ambition for the executive’s personal success regardless of the company’s outcome. Highlight (yellow) - How to Minimize Politics in Your Company > Page 151 By conducting well-structured, regular performance and compensation reviews, you will ensure that pay and stock increases are as fair as possible. This is especially important for executive compensation, since doing so will also serve to minimize politics. In the example above, the CEO should have had an airtight performance and compensation policy and simply told the executive that his compensation would be evaluated with everyone else’s. Ideally, the executive compensation process should involve the board of directors. This will help ensure good governance and make exceptions even more difficult. Highlight (yellow) - How to Minimize Politics in Your Company > Page 151 If you manage ambitious people, from time to time they will want to expand their scope of responsibility. In the example above, the CFO wanted to become the COO. In other situations, the head of marketing might want to run sales and marketing or the head of engineering may want to run engineering and product management. When someone raises an issue like this with you, you must be very careful about what you say, because everything that you say can be turned into political cannon fodder. Generally, it’s best to say nothing at all. At most, you might ask “why?” but if you do so be sure not to react to the reasons. If you indicate what you are thinking, that information will leak, rumors will spread, and you plant the seeds for all kinds of unproductive discussions. You should evaluate your organizational design on a regular basis and gather the information that you need to decide without tipping people off to what you plan to do. Once you decide, you should immediately execute the reorg: Don’t leave time for leaks and lobbying. Highlight (yellow) - How to Minimize Politics in Your Company > Page 152 you must have a formal, visible, defensible promotion process that governs every employee promotion. Highlight (yellow) - How to Minimize Politics in Your Company > Page 153 Generally, the best way to handle the first type of complaint is to get the complaining executive and the targeted executive in the room together and have them explain themselves. Usually, simply having this meeting will resolve the conflict and correct the behavior and improve the relationship (if it was actually broken). Do not attempt to address behavioral issues without both executives in the room. Doing so will invite manipulation and politics. Highlight (yellow) - How to Minimize Politics in Your Company > Page 153 While I’ve seen executives improve their performance and skill sets, I’ve never seen one lose the support of the organization and then regain it. Highlight (yellow) - How to Minimize Politics in Your Company > Page 154 As CEO, you must consider the systemic incentives that result from your words and actions. While it may feel good in the moment to be open, responsive, and action oriented, be careful not to encourage all the wrong things. Highlight (yellow) - The Right Kind of Ambition > Page 155 At a macro level, a company will be most successful if the senior managers optimize for the company’s success (think of this as a global optimization) as opposed to their own personal success (local optimization). Highlight (yellow) - The Right Kind of Ambition > Page 156 When interviewing candidates, it’s helpful to watch for small distinctions that indicate whether they view the world through the “me” prism or the “team” prism. People who view the world through the “me” prism might describe a prior company’s failure in an interview as follows: “My last job was my e-commerce play. I felt that it was important to round out my résumé.” Highlight (yellow) - Titles and Promotions > Page 160 the Peter Principle holds that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent (their “level of incompetence”), and there they remain being unable to earn further promotions. Highlight (yellow) - Titles and Promotions > Page 161 Law of Crappy People. The Law of Crappy People states: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title. Highlight (yellow) - Titles and Promotions > Page 161 the promotion process should yield a result similar to the very best karate dojos. In top dojos, in order to achieve the next level (for example, being promoted from a brown belt to a black belt), you must defeat an opponent in combat at that level. This guarantees that a new black belt is never a worse fighter than the worst current black belt. Highlight (yellow) - Titles and Promotions > Page 161 To begin, start with an extremely crisp definition not only of the responsibilities at each level but also of the skill required to perform the duties. Highlight (yellow) - Titles and Promotions > Page 162 Next, define a formal process for all promotions. One key requirement of the process should be that promotions will be leveled across groups. Highlight (yellow) - Titles and Promotions > Page 162 One way to level across groups is to hold a regular promotions council that reviews every significant promotion in the company. When a manager wishes to promote an employee, she will submit that employee for review with an explanation of why she believes her employee satisfies the skill criteria required for the level. The committee should then compare the employee with both the level’s skill description and the skills of the other employees at that level to determine whether to approve the promotion. Highlight (yellow) - Titles and Promotions > Page 164 You might think that so much time spent on promotions and titles places too much importance and focus on silly formalisms. The opposite is true. Without a well thought out, disciplined process for titles and promotions, your employees will become obsessed with the resulting inequities. If you structure things properly, nobody other than you will spend much time thinking about titles other than Employee of the Month. Highlight (yellow) - When Smart People Are Bad Employees > Page 168 The great football coach John Madden was once asked whether he would tolerate a player like Terrell Owens on his team. Owens was both one of the most talented players in the game and one of the biggest jerks. Madden answered, “If you hold the bus for everyone on the team, then you’ll be so late you’ll miss the game, so you can’t do that. The bus must leave on time. However, sometimes you’ll have a player that’s so good that you hold the bus for him, but only him.” Highlight (yellow) - Old People > Page 170 Why hire a senior person? The short answer is time. As a technology startup, from the day you start until your last breath, you will be in a furious race against time. No technology startup has a long shelf life. Even the best ideas become terrible ideas after a certain age. Highlight (yellow) - Old People > Page 171 Hiring senior people into a startup is kind of like an athlete taking performance-enhancing drugs. If all goes well, you will achieve incredible new heights. If all goes wrong, you will start degenerating from the inside out. Highlight (yellow) - Old People > Page 171 if you are considering hiring a senior person do not chase an abstract rationale like “adult supervision” or “becoming a real company.” A weak definition of what you are looking for will lead to a bad outcome. The proper reason to hire a senior person is to acquire knowledge and experience in a specific area. Highlight (yellow) - Old People > Page 172 when the head of engineering gets promoted from within, she often succeeds. When the head of sales gets promoted from within, she almost always fails. Asking yourself, “Do I value internal or external knowledge more for this position?” will help you determine whether to go for experience or youth. Highlight (yellow) - Old People > Page 172 Senior people pose several important challenges: They come with their own culture. They will bring the habits, the communication style, and values from the company they grew up in. It’s very unlikely these will match your environment exactly. They will know how to work the system. Because senior people come from larger environments, they usually develop the skills to navigate and be effective in those environments. These skills may seem political and unusual in your environment. You don’t know the job as well as they do. In fact, you are hiring them precisely because you don’t know how to do the job. So how do you hold them accountable for doing a good job? Highlight (yellow) - Old People > Page 173 you should demand cultural compliance. It’s fine that people come from other company cultures. It’s true that some of those cultures will have properties that are superior to your own. But this is your company, your culture, and your way of doing business. Do not be intimidated by experience on this issue; stick to your guns and stick to your culture. If you want to expand your culture to incorporate some of the new thinking, that’s fine, but do so explicitly—do not drift. Highlight (yellow) - Old People > Page 173 set a high and clear standard for performance. If you want to have a world-class company, you must make sure that the people on your staff—be they young or old—are world-class. It is not nearly enough that someone on your staff can do the job better than you can, because you are incompetent at the job—that’s why you hired them in the first place. Highlight (yellow) - Old People > Page 173 Be careful not to set a low bar because you have not done the work to know what good is. For example, I’ve seen many a young CEO excited about her company’s competency in marketing and PR because she got a bunch of positive stories on her launch. That’s not a high PR standard. Highlight (yellow) - Old People > Page 173 One excellent way to develop a high standard is to interview people who you see doing a great job in their field. Find out what their standard is and add it to your own. Once you determine a high yet achievable performance bar, hold your executive to that high standard even if you have no idea how they might achieve it. It’s not your job to figure out how to create an incredible brand, tilt the playing field by cutting a transformational deal, or achieve a sales goal that nobody thought possible—that’s what you are paying them to do. That’s why you hired them. Chapter 7: How to Lead Even When You Don’t Know Where You Are Going Note - The Fine Line Between Fear and Courage > Page 210 Apply machine learning technique here: one-hot encoding. If a decision scores higher, set it to 100% and the others to 0 and never second guess yourself. Note - The Fine Line Between Fear and Courage > Page 213 Be brave and do hard things.