The Hard Thing About Hard Things, page 14
Specifically, you will be rewarding behavior that has nothing to do with advancing your business. The employee will earn a raise by asking for one rather than as a result of your rewarding them for outstanding performance. Why is this bad? Let me count the ways:
1. The other ambitious members of your staff will immediately get the point and agitate for raises as well. Word always gets out. Note that neither this campaign nor the prior one need be correlated with actual performance. You will now spend time dealing with the political issues rather than actual performance issues. Importantly, if you have a competent board, you will not be able to give them all out-of-cycle raises, so your company executive raises will occur on a first-come, first-served basis.
2. The less aggressive (but perhaps more competent) members of your team will be denied off-cycle raises simply by being apolitical.
3. The object lesson for your staff and the company will be that the squeaky wheel gets the grease, and that the most politically astute employees get the raises. Get ready for a whole lot of squeaky wheels.
Now let’s move on to a more complicated example. Your CFO comes to you and says that he wants to continue developing as a manager. He says that he would like to eventually become a COO and would like to know what skills he must demonstrate in order to earn that position in your company. Being a positive leader, you would like to encourage him to pursue his dream. You tell him that you think that he’d be a fine COO someday and that he should work to develop a few more skills. In addition, you tell him that he’ll need to be a strong enough leader, such that other executives in the company will want to work for him. A week later, one of your other executives comes to you in a panic. She says that the CFO just asked her if she’d work for him. She says that he said you are grooming him to be the COO and that’s his final step. Did that just happen? Welcome to the big time.
HOW TO MINIMIZE POLITICS
Minimizing politics often feels totally unnatural. It’s counter to excellent management practices such as being open-minded and encouraging employee development.
The difference between managing executives and managing more junior employees can be thought of as the difference between being in a fight with someone with no training and being in a ring with a professional boxer. If you are in a fight with a regular person, then you can do natural things and they won’t get you into much trouble. For example, if you want to take a step backward, you can pick your front foot up first. If you do this against a professional boxer, you will get your block knocked off. Professional boxers train for years to take advantage of small errors in technique. Lifting your front foot first to take a step backward will take you slightly off balance for a split second and that’s all your opponent will need.
Similarly, if you manage a junior employee and they ask you about their career development, you can say what comes naturally and generally get away with it. As we saw above, things change when you deal with highly ambitious, seasoned professionals. In order to keep from getting knocked out by corporate politics, you need to refine your technique.
THE TECHNIQUE
As I developed as a CEO, I found two key techniques to be useful in minimizing politics.
1. Hire people with the right kind of ambition. The cases that I described above might involve people who are ambitious but not necessarily inherently political. All cases are not like this. The surest way to turn your company into the political equivalent of the U.S. Senate is to hire people with the wrong kind of ambition. As defined by Andy Grove, 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.
2. Build strict processes for potentially political issues and do not deviate. Certain activities attract political behavior. These activities include:
Performance evaluation and compensation
Organizational design and territory
Promotions
Let’s examine each case and how you might build and execute a process that insulates the company from bad behavior and politically motivated outcomes.
Performance evaluation and compensation Often companies defer putting performance management and compensation processes in place. This doesn’t mean that they don’t evaluate employees or give pay raises; it just means they do so in an ad hoc manner that’s highly vulnerable to political machinations. 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.
Organizational design and territory 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.
Promotions Every time your company gives someone a promotion, everyone else at that person’s organizational level evaluates the promotion and judges whether merit or political favors yielded it. If the latter, then the other employees generally react in one of three ways:
1. They sulk and feel undervalued.
2. They outwardly disagree, campaign against the person, and undermine them in their new position.
3. They attempt to copy the political behavior that generated the unwarranted promotion.
Clearly, you don’t want any of these behaviors in your company. Therefore, you must have a formal, visible, defensible promotion process that governs every employee promotion. Often this process must be different for people on your own staff. (The general process may involve various managers who are familiar with the employee’s work; the executive process should include the board of directors.) The purpose of the process is twofold. First, it will give the organization confidence that the company at least attempted to base the promotion on merit. Second, the process will produce the information necessary for your team to explain the promotion decisions you made.
Be careful with “he said, she said” Once your organization grows to a significant size, members of your team will from time to time complain about each other. Sometimes this criticism will be extremely aggressive. Be careful about how you listen and the message that it sends. Simply by hearing them out without defending the employee in question, you will send the message that you agree. If people in the company think that you agree that one of your executives is less than stellar, that information will spread quickly and without qualification. As a result, people will stop listening to the executive in question and the executive will soon become ineffective.
There are two distinct types of complaints that you will receive:
1. Complaints about an executive’s behavior
2. Complaints about an executive’s competency or performance
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.
Complaints of the second type are both more rare and more complex. If one of your executives summons the courage to complain about the competency of one of their peers, then there is a good chance that either the complainer or the targeted executive has a major problem. If you receive this type of complaint, you will generally have one of two reactions: they will be telling you something that you already know, or they’ll be telling you shocking news.
If they are telling you something that you already know, then the big news is that you have let the situation go too far. Whatever your reasons for attempting to rehabilitate the wayward executive, you have taken too long and now your organization has turned on them. You must resolve the situation quickly. Almost always, this means firing the executive. 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.
On the other hand, if the complaint is new news, then you must immediately stop the conversation and make clear to the complaining executive that you in no way agree with their assessment. You do not want to cripple the other executive before you reevaluate his performance. You do not want the complaint to become a self-fulfilling prophecy. Once you’ve shut down the conversation, you must quickly reassess the employee in question. If you find he is doing an excellent job, you must figure out the complaining executive’s motivations and resolve them. Do not let an accusation of this magnitude fester. If you find that the employee is doing a poor job, there will be time to go back and get the complaining employee’s input, but you should be on a track to remove the poor performer at that point.
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.
THE RIGHT KIND OF AMBITION
When hiring a management team, most startups focus almost exclusively on IQ, but a bunch of high-IQ people with the wrong kind of ambition won’t work. I have already stressed that you should strive to hire people with the right kind of ambition. As I’ve talked about these ideas in the last few years, I have received a mixed response. Some think it’s good advice, while others question it.
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). No matter how well the CEO designs the personal incentive programs, they will never be perfect. In addition, career incentives like promotions and territory ownership fall outside the scope of bonus plans and other a priori management tools. In an equity-based compensation structure, optimizing for the company’s success should yield better results for individuals as well. As my Opsware head of sales Mark Cranney used to say, “Two percent of zero is zero.”
It is particularly important that managers have the right kind of ambition, because anything else will be exceptionally demotivating for their employees. As an employee, why would I want to work long hours to advance the career of my manager? If the manager cares more about his career than the company, then that’s what I’d be doing. Nothing motivates a great employee more than a mission that’s so important that it supersedes everyone’s personal ambition. As a result, managers with the right kind of ambition tend to be radically more valuable than those with the wrong kind. For a complete explanation of the dangers of managers with the wrong kind of ambition, I strongly recommend Dr. Seuss’s management masterpiece Yertle the Turtle.
SCREENING FOR THE RIGHT KIND OF AMBITION
As with any complex character trait, there is no way to perfectly screen for the right kind of ambition in an interview, but hopefully some of these thoughts will prove useful.
At a macro level, everybody views the world through her own personal prism. 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.” Note the use of my to personalize the company in a way that it’s unlikely that anyone else at the company would agree with. In fact, the other employees in the company might even be offended by this usage. People with the right kind of ambition would not likely use the word play to describe their effort to work as a team to build something substantial. Finally, people who use the “me” prism find it natural and obvious to speak in terms of “building out my résumé” while people who use the “team” prism find such phrases to be somewhat uncomfortable and awkward, because they clearly indicate an individual goal that is separate from the team goal.
On the other hand, people who view the world purely through the team prism will very seldom use the words I or me even when answering questions about their accomplishments. Even in an interview, they will deflect credit to others on their previous team. They will tend to be far more interested in how your company will win than in how they will be compensated or what their career path will be. When asked about a previously failed company, they will generally feel such great responsibility that they will describe in detail their own misjudgments and bad decisions.
When we hired the head of worldwide sales for Opsware, using this screen proved to be quite valuable. Since this was a sales position, I should mention (in reference to the commenter above) that ambition for the company above one’s own goals is particularly important for the head of sales. The reasons are many:
The local incentives in sales are particularly strong and difficult to balance without the right kind of leadership.
The sales organization is the face of the company to the outside world. If that group optimizes for itself, your company will have a major problem.
In high-tech companies, fraud generally starts in sales due to managers attempting to perfect the ultimate local optimization.
Throughout our interview process, we met with a lot of candidates who took sole credit for landing extremely large deals, achieving impressive goals, and generating company success. Invariably, the candidates who claimed the most credit for deals would have the most difficult time describing the details of how the deal was actually won and orchestrated. During reference checks, others involved in the deals would tell a very different story.
When I spoke to Mark Cranney, on the other hand, it was difficult to get him to discuss his personal accomplishments. In fact, some of the other interviewers felt that Mark was standoffish and even obnoxious in the way he bristled at certain questions. One interviewer complained, “Ben, I know that he increased the size of the Nike deal from one million to five million, because our contact at Nike told me that, but Mark wouldn’t go into any detail on it.” When I interviewed Mark, he really only wanted to discuss how his old company won. He went into great detail about how his team diagnosed weaknesses versus the competition and how he worked with another executive to advance the product. He then talked about how he worked with the CEO to revise the way the sales force was trained and organized.
When the conversation turned to Opsware, Mark had already interviewed sales reps at our number-one competitor’s company and knew what deals they were in. He relentlessly questioned me on how we were going to win the deals that they were in and how we planned to get into the deals that we weren’t in. He wanted to know the strengths and weaknesses of everyone else on the team. He wanted to know the game plan for winning. The topics of his potential compensation and career advancement didn’t come up until the very end of the process. And then he only wanted assurances that compensation was performance- and not politically based. It was clear that Mark was all about the team and its success.
During Mark’s tenure, sales increased more than tenfold, and our market capitalization increased twentyfold. More to the point, voluntary attrition in the sales organization was extremely low, customers were managed fairly and honestly, and our legal and finance teams often commented that first and foremost, Mark protected the company.
FINAL THOUGHT
While it may work to have individual employees who optimize for their own careers, counting on senior managers to do all the right things for all the wrong reasons is a dangerous idea.
TITLES AND PROMOTIONS
Often when I meet with startups, the employees have no job titles. This makes sense, because everybody is just working to build the company. Roles needn’t be clearly defined and, in fact, can’t be, because everyone does a little bit of everything. In an environment like this there are no politics and nobody is jockeying for position or authority. It’s rather nice. So why do all organizations eventually create job titles and what is the proper way to manage them? (Thanks to Mark Zuckerberg for contributing to my thinking on this subject.)
WHY DO TITLES MATTER?
Two important factors drive all companies to eventually create job titles:
1. Employees want them. While you may plan to work at your company forever, at least some of your employees need to plan for life after your company. When your head of sales interviews for her next job, she won’t want to say that despite the fact that she ran a global sales force with hundreds of employees, her title was “Dude.”
2. Eventually, people need to know who is who. As companies grow, everybody won’t know everybody else. Importantly, employees won’t know what each person does and whom they should work with to get their jobs done. Job titles provide an excellent shorthand for describing roles in the company. In addition, customers and business partners can also make use of this shorthand to figure out how to best work with your company.
