The true test – when things go off the rails

 

19HUFFINGTON1-superJumboVirtually all startups are very exciting – at the start. But virtually all startups hit speed bumps, or worse yet, go totally off the rails.

A crisis is the true test of your investors and fellow founders. It’s very easy to be supportive and enthusiastic as the company moves from idea to prototype to product to actual paying customers. Everyone gets very caught up in the excitement of a fast growing company.

But what happens when things go wrong? That’s when you will find out what your Board and senior execs are made out of. At Course Technology we had a major problem with our printer, which meant our book/disk product would not ship in time for our customers. Our CEO accompanied a bunch to their plant to help the printer’s staff get the product out on time. No one panicked. I’m not even sure if the Board knew that we had run into a major problem that seriously jeopardized revenue and customer relationships or how it got solved.

There’s a great quote from Ariana Huffington, founder of The Huffington Post (and a Board member at Uber!) in The New York Times about crises:

“Knowing how to deal with crises without being overwhelmed — keeping one’s head while people all around are losing theirs — is the most important leadership quality. In times of crisis, people often overreact and move into very dark places where they have a hard time seeing their way out.”

So how will you know how your executive team and your investors will react when your company runs into trouble? One thing is to make sure every interview you conduct includes the question, “Tell me about a time when something went seriously wrong and you were responsible for fixing the problem.” The second thing to do is ask this question of your employees or investors references: “How did they react when the company had a major problem?”

I think the reason that sports and “adventure trips” are popular amongst founders is they are good proxies for business. How do  your employees react when their team loses, and loses badly? How do teammates react when one of them makes a bad error that might even result in a loss? Of if the team is off mountain climbing, how do they deal with an unexpected snowstorm?

Every startup will go off the rails at some point. Knowing your team has helped put another company back on track will provide you with the confidence that you can handle your problem too.

While I’m not sure that handling crises is the most important leadership quality – in my opinion it’s the ability to inspire the company and set direction – it’s certainly critical. So don’t wait until you have a crisis to find out what your team and investors are made of. Perform your due diligence before they join the company and consider what sort of activities can test your teams ability to handle problems. As the say goes, “When the going gets tough, the tough get going.”

 

Your company’s guiding principles

 

compass

Google, Facebook, and Amazon all have sets of guiding principles. It is interesting both to compare them and to explore the idea that your startup should have its own set of guiding principles, or not. I’ve copied each list directly from the company’s web site.

Google

  1. Focus on the user and all else will follow.
  2. It’s best to do one thing really, really well.
  3. Fast is better than slow.
  4. Democracy on the web works.
  5. You don’t need to be at your desk to need an answer.
  6. You can make money without doing evil.
  7. There’s always more information out there.
  8. The need for information crosses all borders.
  9. You can be serious without a suit.
  10. Great just isn’t good enough.

Facebook

  1. Freedom to Share and Connect
    People should have the freedom to share whatever information they want, in any medium and any format, and have the right to connect online with anyone – any person, organization or service – as long as they both consent to the connection.
  2. Ownership and Control of Information
    People should own their information. They should have the freedom to share it with anyone they want and take it with them anywhere they want, including removing it from the Facebook Service. People should have the freedom to decide with whom they will share their information, and to set privacy controls to protect those choices. Those controls, however, are not capable of limiting how those who have received information may use it, particularly outside the Facebook Service.
  3. Free Flow of Information
    People should have the freedom to access all of the information made available to them by others. People should also have practical tools that make it easy, quick, and efficient to share and access this information.
  4. Fundamental Equality
    Every Person – whether individual, advertiser, developer, organization, or other entity – should have representation and access to distribution and information within the Facebook Service, regardless of the Person’s primary activity. There should be a single set of principles, rights, and responsibilities that should apply to all People using the Facebook Service.
  5. Social Value
    People should have the freedom to build trust and reputation through their identity and connections, and should not have their presence on the Facebook Service removed for reasons other than those described in Facebook’s Statement of Rights and Responsibilities.
  6. Open Platforms and Standards
    People should have programmatic interfaces for sharing and accessing the information available to them. The specifications for these interfaces should be published and made available and accessible to everyone.
  7. Fundamental Service
    People should be able to use Facebook for free to establish a presence, connect with others, and share information with them. Every Person should be able to use the Facebook Service regardless of his or her level of participation or contribution.
  8. Common Welfare
    The rights and responsibilities of Facebook and the People that use it should be described in a Statement of Rights and Responsibilities, which should not be inconsistent with these Principles.
  9. Transparent Process
    Facebook should publicly make available information about its purpose, plans, policies, and operations. Facebook should have a process of notice and comment to provide transparency and encourage input on amendments to these Principles or to the Rights and Responsibilities.
  10. One World
    The Facebook Service should transcend geographic and national boundaries and be available to everyone in the world.

Amazon

Customer Obsession

Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.

Ownership

Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say “that’s not my job”.

Invent and Simplify

Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here”. As we do new things, we accept that we may be misunderstood for long periods of time.

Are Right, A Lot

Leaders are right a lot. They have strong judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.

Learn and Be Curious

Leaders are never done learning and always seek to improve themselves. They are curious about new possibilities and act to explore them.

Hire and Develop the Best

Leaders raise the performance bar with every hire and promotion. They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop leaders and take seriously their role in coaching others. We work on behalf of our people to invent mechanisms for development like Career Choice.

Insist on the Highest Standards

Leaders have relentlessly high standards – many people may think these standards are unreasonably high. Leaders are continually raising the bar and driving their teams to deliver high quality products, services and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.

Think Big

Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.

Bias for Action

Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.

Frugality

Accomplish more with less. Constraints breed resourcefulness, self-sufficiency and invention. There are no extra points for growing headcount, budget size or fixed expense.

Earn Trust

Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team’s body odor smells of perfume. They benchmark themselves and their teams against the best.

Dive Deep

Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdote differ. No task is beneath them.

Have Backbone; Disagree and Commit

Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.

Deliver Results

Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.

The differences amongst these three giants of the Internet are stark. Google’s are brief and somewhat lightweight (You can be serious without a suit.). Facebook’s are focused almost entirely on information (ex Ownership and Control of Information) and are outward facing. Amazon’s are all focused on leaders. Does that imply that Jeff Bezos considers every employee at Amazon a leader? Or that everyone at Amazon should act like a leader? One of the dictums I was taught about startups early on was that “everyone should act like an owner.” And by issuing options to everyone in the company from the receptionist (yes we had those positions in days of yesteryear) to VPs and Directors everyone in my companies was an owner.
Interestingly enough though failure is extolled and failing fast is seen as a guiding principles of high tech companies, none of the big three incorporate this concept into their guiding principles. Should it be one of yours?
Obviously With Google and Facebook each having 10 guiding principles and Amazon eschewing numbers, but I count 14, I doubt the founders and leaders assume everyone in the company can recite them all at will. So what are the reasons to create a list of principles?
  1. Alignment. For a startup to be successful its founders must be aligned. I can think of no better exercise to generate alignment – or if necessary flush out founders who aren’t aligned – than developing a set of guiding principles.
  2. Employee orientation. One of my guiding principles and I believe one that’s been mentioned by Mark Zuckerberg lately, is that everyone wants to be and benefits from being part of something larger than themselves. For some it’s a religion. But for those in a startup it’s the company. I can think of no better way to orient new employees than to walk them through the company’s guiding principles.
  3. Decision making. As I’ve written elsewhere, startups are decision machines. At no time in your career will you ever make as many decisions as you will in a startup. And what distinguishes decisions in a startup from those in a mature company is that often those decisions have to be made with less than complete information. So when it comes down to making tough and even contentious decisions, there’s no better referee than the company’s guiding principles.

So my advice to entrepreneurs is two fold: one, study the guiding principles of the companies you admire – there is no shame in borrowing guiding principles from them. And two, as soon as you have a team, get them off site and develop your company’s own set of guiding principles.

If I had to choose amongst the three lists I would choose Amazon’s, as I see it’s guiding principles as focused inwards on the company and how everyone behaves towards customers, partners, and each other. Company culture is the invisible hand of management. While company culture has to be built over time by behavior, not words, I can’t think of a better way to start building your company culture and aligning your team than creating your own set of guiding principles. And I’d also suggest that you revisit this list at least yearly and make any necessary changes, as companies can and do change with the times.

So my first guiding principle is to have a set of guiding principles!

Develop respect for domain expertise

Late Night with Jimmy Fallon - Season 5

Reid Hoffman, founder of LinkedIn, has a new podcast called Masters of Scale in which he talks to friends about how they grew their companies from zero to massive scale and what we can learn from them.

According to this article on Time.com, in his most recent episode he asked Bill Gates what he would tell his younger self about hiring.

Gates responded by saying that he wished he had hired more people with a narrow but profound knowledge of a certain subject, like sales management. He thought he’d be able to handle something like that himself, but he was wrong.

“I thought partly because of myself, or misperceptions of self, ‘Hey I can learn sales, what is that? Profit and loss, you take sales and subtract the losses…Do you need to go to biz school? I don’t think so,'” Gates said. “I didn’t have enough respect for different deep knowledge. I didn’t have enough respect for good management, what really good management is.”

Having worked with engineers for about 40 years I feel safe in saying that Bill Gates lack of respect for the sales profession is endemic amongst engineers. Engineers tend to regard sales people as mere order takers. The engineers build a great product and if they weren’t busy doing great things they could take those orders just as well themselves. Sales people are a necessary but vastly over-paid evil in their estimation.

When I was working with Bill Warner at his incubator Warner Research, I heard a great story about engineers and sales from Eric Peters, co-founder and CTO of Avid Technology  about an Avid sales call in Vermont. As I recall, the sales guys (and they were all guys) at Avid got sort of tired of being dissed by the engineers and one of them decided to invite a few engineers along on a visit to a sales prospect, a video editing suite in Vermont that was testing the Avid system. (If you aren’t familiar with Avid it was the first commercial grade video editing system used by Hollywood and TV studios to edit films and TV shows) now the world leader.)

The owner of the editing suite gave the engineers a tour of his facility, all the while criticizing the Avid System every which way to Sunday. He didn’t have a single positive thing to say about it and many negative ones. Finally, after the tour and his total smackdown of Avid, the owner invited the salesman and the Avid engineers into his office to wrapup. After a few more negative comments directed at the salesman the Avid engineers were all hanging their heads – staring at the floor. The system they had worked so hard on was a failure, there was no way they would make a sale here! The Avid salesman looked the video suite owner in the eye and said, “Thanks for all of the very valuable feedback. We all really appreciate it and we’ll get to work fixing those issues right away. Now, how many systems did you say you were going to buy?” The owner looked at him, paused, and said, “Well, I think I’ll start with six.” That was the last time anything negative was ever said or even implied about the sales team at Avid!

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