Some love for middle managers

inspiration

Middle managers don’t get much respect. In fact many CEOs of late have tried to flatten out their management hierarchies to get rid of as many middle managers as possible.

Thus I was surprised to read The Wall Street Journal article The Economy’s Last Best Hope: Superstar Middle Managers sub-titled Anemic growth, millennial malaise, you name it—blame a lack of inspiring bosses. Superstar middle managers sounded like an oxymoron to me.

The problem posited by Sam Walker, the article’s author, is lack of growth in the economy. As he writes, “For the better part of three decades, economists have worn out their chalkboards trying to map a path back to the glory days of 7% growth. So far, the only point they agree on is that we must be doing something wrong.”

What triggered the article and the possible solution to lack of economic growth was a survey of the future of work.

Five years ago, the Gallup organization embarked on one of the most ambitious deep dives it has ever conducted; an analysis of the future of work based on a decade of input from nearly 2 million employees and more than 300,000 business units. The results confirmed something Gallup had seen before: a company’s productivity depends, to a high degree, on the quality of its managers.

What no one saw coming, however, was the sheer size of that correlation—something Gallup calls “the single most profound, distinct and clarifying finding” in its 80-year history. The study showed that managers didn’t just influence the results their teams achieved, they explained a full 70% of the variance. In other words, if it’s a superior team you’re after, hiring the right manager is nearly three-fourths of the battle.

You can read a lot more about this in Gallup’s forthcoming book, It’s the Manager.Gallup found that today that people they surveyed ranked having a rewarding job as their number one priority, unlike previous decades when they ranked family, having children, owning a home and living in peace above having a good job. Today’s workers are engaged with work when it generates feelings of purpose and personal growth.

What sort of return can businesses expect from doing this? According to Gallup, the top 10% of companies, ranked by engagement, posted profit gains of 26% through the last recession compared with a 14% skid at comparable employers.

Mr. Walker’s solution to flat-lined productivity growth is that companies need to hire better managers, going against the mistaken practice of promoting superstar individual contributors into management. As I’ve posted elsewhere, that often results in losing a superstar individual and gaining a lousy manager.

His formula is that better managers will generate higher levels of engagement in their teams, resulting in greater worker productivity.

So forget about the $1,000 expresso machines, the free back massages, the endless supplies of food, none of these attempts to galvanize workers can touch the power of providing them with a fulfilling, rewarding job. Save your money and put it into hiring effective middle managers, who will inspire your teams. And you might want to set aside a few dollars to buy a copy of Mr. Walker’s book, The Captain Class: The Hidden Force That Creates the World’s Greatest Teams, because the true organizational measure of any company is not the division or the department but the team, and every team needs a great captain in order to win.

 

 

 

How Barack Obama made tough decisions

obama

I’ve been interested in how people make decisions ever since I enter the decision-driven world of fast paced tech startups nearly 40 years ago. In fact I tell people interested in joining startups that they are really going to join decision machines – they will be making more decisions, and more consequential decisions, than every before in their lives. And perhaps more than ever again in their lives, unless, like Barack Obama, they become President of the United States. The article Barack Obama shares his approach to handling tough decisions by Lila MacLellan on Quartz at Work holds lessons for founders of new ventures as well as executives of well-established companies. She quotes extensively from an on-stage interview Obama gave Qualtrics CEO Ryan Smith.

By definition, if it was an easily solvable problem, or even a modestly difficult but solvable problem, it would not reach me, because, by definition, somebody else would have solved it,” he said. “So the only decisions that came were the ones that were horrible and that didn’t have a good solution. They said, ‘Let’s send this to Obama, I don’t know what to do.’” That way, he joked, “when things got all screwed up,” people could blame him.

Become comfortable with probabilities

First he needed, like founders in a startup, to become comfortable in dealing with probabilities, as there were no certainties. Not only must founders become comfortable with probabilities, but unlike decision makers in large, established companies, they must also become comfortable making decisions with far less information. As Obama puts it:

…being comfortable with the fact that you’re not going to get [a] 100% solution, and understanding that you’re dealing with probabilities, so that you don’t get paralyzed trying to think that you’re going to actually solve this perfectly.

In other words, avoid paralysis by analysis. As I’ve written elsewhere, most successful entrepreneurs will assert that any decision is better than no decision at all.

Get the facts, recruit the best minds

One of the first things I learned at Software Arts, where I started my high tech career, was to hire people who were smarter than I was. This was easy, as the dozen or so people in the company when I arrived were all smarter than I was, with perhaps one or two exceptions. Given that I rarely knew what I was doing, not being either a software engineer nor experienced marketeer, I tried to hire people who did know what they were doing. Obama took a similar approach:

Probably the last piece of this that was most critical was having the confidence to have people around you who were smarter than you, or disagreed with you, or have perspectives that were different than yours.

And is the case in many situations, asking questions is the best modus operandi. I found that instead of trying to conceal my ignorance I used it to my benefit. It turned many times that the experts weren’t necessarily right.  As Obama said:

Also key  was feeling certain you would understand what those experts were saying.  To that end, he wouldn’t stop asking questions until the facts were clear to him. “I am pretty proud of this: I always would say to somebody, if they’re talking about a really complicated issue, ‘I don’t understand what you’re saying. Explain it to me in English.’”

Little hat, big decision

There’s a great story Obama shares about how the solution to the BP Deep Horizon oil-spill disaster of 2010 was solved. Long story short, Obama asked Steve Chu, his Nobel-winning physicists to work on the problem and in three weeks he had a solution.

While founders may imagine the White House as like the rest of the government – slow and stodgy – Obama points out that is far from the case, the pace is like a startup, but the decisions could literally affect life or death.

“People’s idea of government is like the DMV, or the post office, when you used to go to the post office,” the former US president said, “but that’s not how the West Wing operates.”

 

 

The one question you need to ask of job candidates!

uncle meat

I’ve been a fan of Frank Zappa since seeing him play at Michigan State University in the late 1960’s. I immediately went out and bought his firm album – perhaps the first double album released, or second to Dylan’s Blonde on Blonde, depending to who you believe – and many albums since then.

So what does Frank Zappa have to do with recruiting staff to your start up? Plenty! Zappa built and rebuilt the Mothers bands many times over the years as well as putting together other ensembles. He had vast experience judging and recruiting musicians, not only for their talent but for their cultural fit with him and his bandmates. That’s why I love this story about Ian Underwood, who despite or because of being a classically trained musician, still had to audition for Frank. Here’s the story courtesy of the Genius site as recorded live on stage in Copenhagen:

Ian: My name is Ian Underwood and I’m the straight member of the group
(Ha ha ha!)
Suzy: Wowie Zowie!
Ian: One month ago I heard The Mothers of Invention at the theater. I heard them on two occasions, and on the second occasion I went up to Jim Black and I said, “I like your music, and I’d like to come down and play with you.” Two days later I came up to the recording session, and Frank Zappa was sitting in the control room. I walked up and said, “How do you do? My name is Ian Underwood and I like your music and I’d like to play with your group.” Frank Zappa says, “What can you do that’s fantastic?” I said, “I can play alto saxophone and piano.” He said, “All right, whip it out.”

I was taught by the VCs never settle when hiring; A players hire A players, but B players tend to hire C players as they feel threatened by A players, and C players, of course, hire D players in downward spiral of mediocrity. As I’ve said elsewhere, hire slowly, fire quickly.

So what’s to learn from Ian’s story?

  • Ask your candidates to show you, not tell you, why you should hire them. Giving them a problem to solve – the HBS case method – is a great way to do this.
  • Give the candidate a chance to show off their talent – notice Frank asks the question What can you do that’s fantastic?  rather than telling Ian to play a piece of difficult music. What the candidate chooses to do or show gives you real insight which you don’t get by being more directive.
  • Frank wants and needs the best. That’s why the “fantastic” – you should be as demanding as Frank and seek out the fantastic as he did

 

 

Be wary of hiring from large companies if you are a startup

snap

The Wall Street Journal front page story Snap Finance Chief Joins Executive Exodus, Tim Stone to depart Snapchat’s parent company after less than a year; much of bonus left behind reminded me of a lesson I learned decades ago that is worth passing on to founders today. Seems like the rats may be leaving a sinking ship:

The surprise exit comes amid continued executive turnover at Snap. A company spokesman said the head of human resources, Jason Halpert, left the company this week after four years. Snap also lost several high-profile employees last year, including Chief Strategy Officer Imran Khan. Mr. Khan said in September he would be leaving the company.

Analysts have said the turmoil at the top appears to be weighing on the company. “There’s a revolving door going on in the senior management team,” said Brent Thill, an analyst at Jefferies who follows Snap.

Mr. Stone had spent 20 years at Amazon before joining Snap.

Back in the early 1980’s I worked for one of the hottest software companies around, Software Arts, whose founders created the world’s first electronic spreadsheet, VisiCalc. For reasons unknown to me I kept get promoted until I was a vice president responsible for every company function except for software development. As a result of the company’s growth and my position I ended up doing a lot of hiring.

What I found was that there were a lot of executives at big companies who wanted to get in on the personal software revolution and saw a job at Software Arts as their ticket to ride. As I recall, I hired one of these guys and quickly learned that he was literally a fish out of water. Large companies had administrative assistants or AA’s as we called them, for every executive. They handled all of an execs scheduling, correspondence and similar secretarial duties. A lot of these 1980’s execs had never used a PC and many had never even learned how to type. At Software Arts we handled our own correspondence via email and required a bare minimum of secretarial support.

But this wasn’t the worst of it. Their big company culture was rife with politics and bureaucracy. Decisions were made by committee, there was no accountability. To make a long story short, after one very bad experience, I vowed never to hire an executive directly from a large tech company like IBM ever again. However, there’s an interesting twist to this. What I found was there is definitely talent at large companies, but I didn’t want to be the one to send them to reform school to get rid of their bad BigCo habits. However, if they had left a large company, then spent a couple of years at a well respected startup like Intuit they would have left their bad culture and bad habits behind and were then well worth considering for a hire.

While I found that it was company culture that was the major problems with execs coming from large established companies there’s another thing for you founders to watch out for: buy in to your vision.

Analyst Brent Thrill at Jefferies follows Snap and had this to say about Snap’s problems hanging on to its executives: it was unclear whether corporate culture or the vision for the company was behind the executive exodus. It might have been both! But if you do end up recruiting an exec from a big company, and vcs will often insist on adult supervision such as a well seasoned CEO, test that your prospective hire gets your vision.  Don’t explain it to him or her. Let them interview with a number of people at the company. Then when you touch base with them after their round of interviews ask them: So what do you understand our company’s vision to be? The answer, both in words and body language, will tell you all you need to know about whether they buy in to the vision or just have a vision of a rich IPO dancing in their head.

 

If you want to build a company it will take a team

team

Business Insider has a typical teaser headline: The best advice billionaire AOL cofounder and investor Steve Case gives entrepreneurs is a truth about long-term success. I don’t  believe in teaser headlines but I do recommend the article. .

In an episode of Business Insider’s podcast “This Is Success,” Case said the best advice he can give to entrepreneurs is that building a productive team of people with complementary skill sets is of utmost importance.

It’s got some pithy quotes from Mr. Case, including: the common saying, “If you want to go quickly, you can go alone. If you want to go far, you must go together,” This sums up the cost – need for shared decision making, and the benefit – more brainpower and experience – of partnerships.

Case considers the best advice he gives as, “It ultimately comes down to people and teams, that entrepreneurship is a team sport, it’s not about any one person.” He warns against the ego boost that can come from external expectations of the founder. “The founding CEO tends to get most of the attention, but it really is a team effort,” he said.

CEOs remind me of quarterbacks in football. When the team wins they get all the credit; when the team loses they get all the blame. Well there are 22 players in modern football, 11 on offense and 11 on defense, no to speak of another 11 on special teams, so it’s way off the mark to give the quarterback so much credit or so much blame. And of course pro football teams have squad of about about 53 players plus another dozen on the practice squad. And companies range from dozens, to hundreds to thousands of employees. Here’s another great quote from Case on teams:

If you get the people right, almost anything is possible,” he said. “If you don’t get the people right, I’d argue nothing is possible.

These quotes all come from the This is Success podcast.

I virtually never see a full management team at my mentoring sessions because most of my mentees are at the zero stage and it’s usually just one or two founders. But what I also don’t see is a hiring plan to bring on the balance of the management team and even director level and individual level staff below that. I started my first company with a detailed spreadsheet listing position, hiring date, and projected salary for the first dozen or so hires beyond the management team, so I’m amazed that most of the founders I see have barely thought beyond hiring another engineer!

There are multiple reasons to have a team:

  • Startups are a lot of work. Spreading work amongst a group means the company is not totally dependent on a single individual, which is very risky.
  • No single person will have the engineering, marketing, sales, and support skills and experience to fill all those roles.
  • All founders have strengths and weaknesses. I was taught long ago by successful entrepreneur Bill Warner not to try to strengthen my weaknesses but rather to hire staff with complementary skills to mine and to leverage my strengths.
  • All teams needs a variety of perspective, which only comes from a diversity of teams. Research has shown that diverse teams – men and women, whites and people of color – make better decisions than homogenous teams.
  • You can’t be two places at once! Successful companies are usually national in scope if not international. No matter how smart you are you can’t be negotiating deals in New York, Austin, Beijing, and Silicon Valley simultaneously.
  • Managers only have so much reach, meaning they can only direct so many staffers before they hit overreach. That number varies with the individual, but all individuals no matter how talented and experienced have a limit. The buspeak term is “span of control.” Even if it’s as high as 20, that’s a drop in the bucket in a company of 1,000.

Personally, lacking any individual skills aside from being good at recruiting talent, I love working in a small team. The best ideas always get better, the bad ideas get killed off. And it’s much more fun. That’s a term rarely used in the startup world, but if you aren’t having fun you will burn out. Have some, it’s free.

Unfortunately Steve Case does not go on to provide advice on how to build a team. However, I have a post based on an interview with Julie Larson-Green of Microsoft. There you will find some actionable tips on how to build a team. Another post I can recommend to you is Talent Tracking, which you need to start now, if you haven’t already.

If  you want to build a product you can do that by yourself or with another engineer or two. But if you want to build a company that will take a team. This requires you to know thyself, the absolutely necessary first step for any would-be founder.

Avoiding the big danger in promotions

JeterOnce you are past the startup stage in your venture and you start building your organization there’s a new challenge that you may have run into if you’ve worked in a large organization. That’s how you manage promotions.

The best way to avoid the tangles of promotions is to have a very flat organization: as few levels of management as possible. Each manager has a relatively large number of direct reports – perhaps as many as 15 or 20. This avoids layers of bureaucracy. Managing that many direct reports requires skill and discipline. But with online tools like Slack and Trulio and others it can and is done.

But eventually you will have a management job opening to fill. Say director of customer support. All job openings should be posted internally first, to give your current staff the chance to apply before you look at recruiting outside the company. Growing your own, recruiting from within, provides a career path for your staff and removes a major risk with new hires: cultural fit.

But there’s a real danger lurking when you promote from within. It’s called the “Peter Principle.”

The Peter principle is a concept in management developed by Laurence J. Peter, which observes that people in a hierarchy tend to rise to their “level of incompetence”. In other words, an employee is promoted based on their success in previous jobs until they reach a level at which they are no longer competent, as skills in one job do not necessarily translate to another. The concept was elucidated in the 1969 book The Peter Principle by Peter and Raymond Hull.[1]

I’ve seen the Peter Principle at work in two places: sales and software engineering. Perhaps it is because it is so difficult to manage these two functions that, for example, a very successful sales rep gets promoted to manage a sales territory. Sales people are great at selling themselves, so you have to go beyond the traditional interview to know if they are really suited for the position they are applying for. Otherwise you risk losing a great sales person and gaining a lousy manager! I’ve found a similar problem with software engineering. Not being an engineer I lack the technical background to thoroughly vet an engineer applying for an engineering management job. Microsoft very early in its history recognized why great engineers applied for management jobs and how to avoid the Peter Principle. The reason engineers apply for management jobs is that they pay a lot better, in both salary and stock! So Microsoft and Apple created parallel individual contributor tracks where great engineers could get promoted to “higher levels” and receive the concomitant compensation similar to managers or directors, but didn’t need to take on any management responsibility. Thus great engineers were rewarded  and not lost to management. Besides all engineers hate managers!

There’s a similar phenomena to the Peter Principle amongst the newly rich. The New York Times article You’ve Become Rich. That Doesn’t Mean You’re Great at Everything by Sendhil Mullainathan is a great picture of how new found wealth can have unintended consequences. Just because you have become wealthy in one area, typically technology these days, doesn’t mean that you have the skills and ability in another. 

A hedge fund manager who buys a newspaper has the power to decide what constitutes news. A rich app developer who starts a foundation can decide which philanthropic projects are worthwhile. A real estate developer who donates heavily to a local theater may have considerable influence over which plays will come to life.

People tend to think because they have been successful in one area, playing a sport for example, means that this great talent can be applied in another area, running a restaurant or even a sports team. And there are many examples of the latter, the best known being basketball player Michael Jordan, now owner of the the Charlotte Hornets basketball team, which has yet to reach the heights of success Mr. Jordan achieved on the court.

If you really want to dig into the Peter Principle you can read the journal article by three academics, Promotions and the Peter Principle.  Or just read the Times article.  We all enjoy watching the rich and famous stumble, right?

And may your startup be so successful that you run the danger of the Peter Principle yourself!

No one with experience need apply!

jobs and woz

Earlier this year Business Insider had an article entitled The idea that most successful startup founders are in their twenties is a myth — the average entrepreneur is much older. 

The article states that:

… the average age of entrepreneurs who started a company that went on to hire just one employee was 41.9, and the average age of founders who started a high-growth company is even older, at 45 years old.

The study also examined the age of entrepreneurs in sectors like specialized tech employment, venture capital investing, and patent firms, which yielded similar results: The average age of these people, too, was somewhere in their early-to-mid forties.

“Our primary finding is that successful entrepreneurs are middle-aged, not young,” the study reads. “Founders in their early 20s have the lowest likelihood of successful exit or creating a 1 in 1,000 top growth firm.”

The study contradicts everything I’ve every read about high tech startups, starting with Microsoft, which was founded by two college dropouts in the 1970s up to Google and Facebook and beyond.  VC like their founders young – the younger the better! Young people aren’t married, don’t have mortgages, are happy to sleep in the office, work in a bullpen, and will trade off salary for equity. They can work long hours because often they don’t have any one to come home to, certainly not children.

There’s a reason why virtually every high tech company’s offices look like college campuses – these companies want to recreate the campus atmosphere for students they hire fresh off of a college campus. It makes their transition from student to employee seamless. And with the rising cost of health insurance, young healthy hires in their early twenties are so much cheaper than middle-aged breadwinners with a spouse and kids, whose insurance cost can be four or five times that of a single recent college graduate.

I was reminded of the study recently when I read a New York Times Corner Office piece on inventor James Dyson: The Public Wants to Buy Strange Things, subtitled He made billions selling vacuums. Now he is backing Brexit, building an electric car — and making antiquated comments on ‘racial differences.’

james dyson

I can see Bill Gates and Mark Zuckerberg nodding in agreement reading these quotes:

The point is, here’s this longhaired art student in the mid-’60s, getting asked to design something he knew nothing about. Then he’s told to set up a company, which he knew nothing about. That’s what I do today with my people. I try to recruit everybody as a graduate, because they have no baggage, they have enthusiasm and curiosity. I think experience can be fine in certain situations and with certain companies. But when you’re doing something very different, it’s often best done by people who have done nothing before.

Yes, this is just one data point, but it totally jibes with my experience of seeing hundreds of startups founded by college students, college drop outs, and recent graduates who, surprise, want to hire people who look just like themselves (which is why young white males and young Asian males dominate the management and employee population of tech industry growth ventures.)

James Dyson may be in the mold of British genius eccentrics, but from my experience all these accelerators, incubators, co-working spaces, and startup companies are populated by young people. If you are older than 25 and looking to found or join a startup, be prepared to demonstrate your enthusiasm, curiosity, and evidence of doing wild and crazy things!