The Great CEO Within: The Tactical Guide to Company Building

Metadata

• Title: The Great CEO Within: The Tactical Guide to Company Building
• Author: Matt Mochary and Alex MacCaw
• Book URL: https://amazon.com/dp/B07ZLGQZYC?tag=malvaonlin-20
• Open in Kindle: kindle://book/?action=open&asin=B07ZLGQZYC
• Last Updated on: Saturday, July 22, 2023

Highlights & Notes

I used the basic three learning methods: reading, talking to subject matter experts, and practicing. And by practicing, I mean the ultimate learning vehicle: teaching.

There are many reasons to create a company, but only one good one: to deeply understand real customers (living humans!) and their problem, and then solve that problem.

Owning much of something is better than owning 100 percent of nothing. Find a partner, someone who has complementary skills to yours. Share the emotional burden with them. That will ease the load significantly. Give up a large percentage of the company. It’s worth it.

Your partner’s purpose is not to be value-add forever. As your company grows, you will likely find people with far greater skills whom you will hire. That’s okay. Your co-founder’s purpose is to help you achieve success in your march to product-market fit.

And when you do find a partner, avoid one cardinal mistake: do not create a 50/50 partnership. While 50/50 sounds ideal, it actually leads to real pain if there is no easy way to break a deadlock.

Y Combinator has another strong belief: founding teams should never grow beyond six until there is true product-market fit. Product-market fit (PMF) is the milestone of having created a product that customers are finding so much value in that they are willing to both buy it (after their test phase) and recommend it. Metrics that show whether PMF has been achieved include revenue, renewal rates, and Net Promoter Score.

For a B2B company, know that enterprise customers have budgets just for testing new technology and will buy your product to do just that. This does not mean that you have achieved PMF. For these types of customers, only long-term contracts are an indication that they actually value your product and want to use it.

There is no magic metric, but for a B2B company, it’s hard to imagine PMF at anything less than $1 million in annual recurring revenue. Why not grow beyond six team members before reaching PMF? Three main reasons: morale, communication and organization, and speed.

By contrast, with six or fewer people, the environment feels like a team in battle. Chaos is expected. So when chaos is actually encountered, the team meets it with glee. People who join small teams crave the challenge of new things. They want things to be hard.

Startups don’t usually fail because they grow too late. They usually fail because they grow too early (i.e., before they have achieved product-market fit).

For this reason, every well-functioning hospital separates its triage room from its waiting room and keeps the triage room absolutely clear. To be efficient, you must do the same with your inbox. This means addressing all the urgent cases right away and maintaining Inbox Zero every day.

batch your time and clean out your entire inbox at those times. I recommend checking your inbox only twice a day (once in the morning, once in the afternoon).

Greg McKeown, who wrote a phenomenal book on productivity called Essentialism: The Disciplined Pursuit of Less, boils this down to one key concept: Schedule two hours each day (i.e., put an event in your calendar) to work on your top goal only. And do this every single workday. Period.

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The earlier in the day you schedule this top goal time, the better, so as to avoid other issues (and people) from pressing for your attention.

During this top goal time, do not respond to emails, texts, calls, and messages. Only work on your top priority (your top goal for the current quarter) during these two hours. If you follow this pattern each workday, you will achieve amazing things.

Whenever you find yourself saying something for a second time (to a second audience or in a second situation), it is highly likely that you will end up saying it again and again in the future. To vastly improve the quality of the communication and reduce the amount of time that you spend communicating the information, write it down.

Confirmation bias is the phenomenon that whatever belief we start out with, we will discover evidence to support it. A corollary to this is that whatever question we ask, we will focus on the answer.

It turns out that we perform our best when we are having fun and feeling good about ourselves.

So how do we take advantage of this knowledge to generate a good feeling in ourselves? We ask the right question: “What is good about this situation?” “What is good about this team member?” “What is good about my company?” “What is good about my life?” Or we simply fill in the overarching statement “I am grateful for ________.” Be as specific as possible: names of people, actions they did, and so on.

Another way to make this a regular habit is to use a journal like Intelligent Change’s Five-Minute Journal. Keeping the book by your bedside is itself the trigger, as you will see it when you wake up and just before you go to sleep.

For the cynics out there, being grateful doesn’t mean that you will suddenly ignore all the areas of your life or your company that could use improvement. Just the opposite. It only means that you will bring an attitude of joy, as opposed to desperation, when addressing those areas. Life and company building don’t have to be hard or painful. Daily gratitude helps us realize that.

The benefits of this practice are threefold: The recipient will feel better about themselves. And we now know what happens when people feel better about themselves. The recipient will feel connected and appreciative to you for having brought them this good feeling. You will start to view the recipient more positively, since you are now focusing on a positive aspect about them.

In a First Round Review article titled “How to Become Insanely Well-Connected,” Chris Fralic of First Round Capital says that he reserves one hour each week for follow-ups and outreach, most of which include appreciations. I recommend that you do the same.

Just as with gratitude, giving appreciation should be as specific as possible, as in this example: “John, I appreciate you for writing down our sales process and adding it to the wiki. Thank you.” And when receiving appreciation, there is only one correct response: “Thank you.” Do not feign humility by downplaying the act with statements like “It was nothing, anyone could have done it.” No. The person is trying to make you feel appreciated. Anything other than “thank you” will rob them of their goal.

It is important to maximize your energy. You perform best when you are doing things that energize you. Your goal should be to spend most of your time (75–80 percent) doing things that energize you. If you do, magic will occur.

What is the Zone of Genius? Well, there are four zones: Zone of Incompetence Zone of Competence Zone of Excellence Zone of Genius

Tasks in the Zone of Incompetence are the things that other people probably do better than you (e.g., fix your car), and therefore you should outsource if they don’t give you joy. Tasks in the Zone of Competence are the things that you do just fine, but others are as good as you (e.g., clean your bathroom), and therefore you should outsource if they don’t give you joy. Tasks in the Zone of Excellence are the things that you are excellent at (i.e., better than others) but don’t love doing. This is the danger zone. Many people will want you to keep doing these things (because they gain significant value from you doing them), but this is the area that you should also look to move away from. This is the hard one! Finally, tasks in the Zone of Genius are the things that you are uniquely good at in the world and that you love to do (so much so that time and space seem to disappear when you do them). This is where you can add most value to the world and yourself. This is where you should be driving toward spending most, if not all, of your time.

It turns out I had seriously underestimated two things: sales is critical to gaining trust, and customer success is critical to overcoming technical hurdles.

If your company is like 99 percent of SaaS businesses, you’ll find that self-service doesn’t work. If we had relied on it, our revenue would have flattened and never recovered. As soon as we added a sales team, our revenue rocketed. Sales might not be the most efficient thing in the world, but it works. And it will continue to work as long as humans are the ones doing the buying. The good news is that sales is incredibly tried and tested; there are many books, tools, and successful examples you can use to pave the way. Don’t just respect sales, embrace it.

In my experience, the best person for this role has high EQ, medium technical understanding, and a fantastic work ethic. I’ve found a good indicator of their ability is if they understand (or can quickly learn) SQL.

Unfortunately that couldn’t be further from the truth. What I’ve learned is that the vast majority of people are struggling for air and barely staying afloat in the face of technological changes. Every time they’re asked to learn some new tool or concept, they sigh and think to themselves, “Not again. I just finished learning the last thing.” It’s an uphill battle, but a battle you must fight if you want your customers to be successful. So what’s the best way of addressing this? Is it making your product simpler, improving your help docs, or streamlining your onboarding process? All those things are important, but the only real answer I’ve found to this problem is customer success. You need dedicated support agents who will hand-hold your customers through the onboarding process, answer questions along the way, and be on hand for any technical issues that crop up.

Building a company will take a physical and mental toll. All the work you put toward your company will be for naught if it costs you your health. It is incredibly important that you focus on both your physical and mental health, and take active measures to improve them.

So start by placing your liquid assets in a brokerage firm. Then invest all the cash into US Treasuries while you decide on your investment strategy.

Creating Buy-in One of the core challenges in leadership is how to get your team to buy into a decision. It’s often easy to make a decision, but it can be much harder to get your team to invest emotionally in that decision. It is important for your team to be invested in a decision; otherwise, their execution will be half-hearted (or won’t even happen). You create buy-in when you make people feel that they are part of the decision and that their input contributes to the final outcome. The more influence they feel they have on the outcome, the more they’ll be invested in the final result.

So which method should you use? It depends on how significant the decision is and how important buy-in is. For everyday, low-impact issues (e.g., the venue for the holiday party), Method 1 is sufficient. For major, core issues (e.g., ten-year company vision), Method 3 is necessary. For everything in between (the vast majority of important decisions), Method 2 is optimal.

Peter Reinhardt, CEO and co-founder of Segment, says, “Apparently at Amazon they require the most junior people to speak and ask questions first. [This] also becomes a great way to show off junior talent, give more senior folks a chance to observe and give feedback, etc.”

A very common cause of inefficiency in startups is sloppy agreements. People don’t show up to meetings on time, and they don’t complete the goals that they declare (or they don’t declare goals at all). The result is a spreading virus of unproductiveness and decreased morale. The antidote for this is simple: impeccable agreements. These are (a) precisely defined and (b) fully agreed to (which almost always means written) by all relevant people.

An impeccable agreement would be as follows: Decision: Expand to Europe Actions: Assign five-member advance team to seed the European office, DRI is head of business operations, to be completed by June 1 Locate office building, DRI is head of operations, to be completed by June 12 Hire GM Europe, DRI is head of people, to be completed by August 15

If, however, you fail to inform the agreement circle, then you have broken that agreement. The other attendees are unable to adjust, and both productivity and morale slip.

If the person continues to fail at these, there is only one consequence that makes sense: they can no longer be part of the company.

Share all relevant information with your team, both positive and negative. Here are some examples: The good: “We hit $20 million in annual recurring revenue this month.” The not good: “Our VP of sales is leaving the company. She made tremendous contributions, but I was unable to create an environment that kept her motivated. To correct this going forward, I will be asking for candid feedback from all of my reports in each of my weekly one-on-ones.”

There are only two pieces of information most companies choose not to share openly: (1) individuals’ compensation and (2) individuals’ performance reviews (particularly performance improvement plans). Public knowledge of these items often causes heated debates, relative comparisons, and even shame, all of which are big distractions.

When our egos make us afraid to be wrong, that fear leads us to defend our ideas at all costs and to work hard to convince others that we are right—often with anger. This works to break a company apart, not build it up. By contrast, conscious leadership is about recognizing when these emotions (fear, anger, sadness) have gripped our thought processes; and releasing these emotions and shifting back to a state of curiosity where we are receptive to all ideas and creativity, even if they seem to contradict our own. It is in a state of playful curiosity that truly elegant solutions are achieved.

Being “right” doesn’t cause drama, but wanting, proving, and fighting to be “right” does.

Leaders and teams have found that seeing reality clearly is essential to being successful.

Conscious listening takes courage: we must listen for the content (head center), the emotions (heart center), and base desire (gut center) being expressed by the other person. It is best to start with candor in relationships only when you have a shared commitment to it, along with the necessary skills, including being able to speak unarguably.

I commit to the masterful practice of integrity, including acknowledging all authentic feelings, expressing the unarguable truth, keeping my agreements, and taking 100% responsibility.

I commit to living in appreciation, fully opening to both receiving and giving appreciation.

commit to creating a life of play, improvisation, and laughter. I commit to seeing all of life unfold easefully, and effortlessly. I commit to maximizing my energy by honoring rest, renewal, and rhythm.

Most leaders resist play because they think they will fall behind if they aren’t seriously working hard. Organizations that take breaks to rest and play are actually more productive and creative. Energy is maximized when rest, renewal, and personal rhythms are honored.

Exploring the Opposite I commit to seeing that the opposite of my story is as true as or truer than my original story. I recognize that I interpret the world around me and give my stories meaning. Conscious leaders practice simple ways to question the beliefs that cause suffering, starting with “Is it true?” and “Can I absolutely know it is true?” The turnaround exercise allows leaders to practice shifting their beliefs from knowing to curiosity. When conscious leaders let go of the righteousness of their beliefs, they open to curiosity and align with their deepest desires.

Joy versus Fear When people start diving into the conscious leadership work, they quickly lose their fear. And just as quickly, they realize that fear was their primary motivator—fear of failure, fear of letting people down. Once fear is gone, their life becomes much better, but their business suffers. If you find yourself in this situation, keep pushing forward with the conscious leadership work quickly to get to a place where you are motivated by joy. Then you will have the best of all worlds. Joy is an even better motivator than fear, so your business will thrive. And your life will be amazing!

Conflict Resolution Interpersonal conflict arises often. And almost always it is due to people (a) not fully sharing their feelings and thoughts and (b) not feeling heard.

For you, as a company leader, to resolve conflict, you only need to get each person to state their deepest, darkest thoughts, and then prove that each has heard what the other has said.

Realize that any conclusions drawn from the other person’s actions are simply stories in their head, only the feelings one has, and any specific actions are facts.

This physical connection symbolizes the new understanding and puts a capstone on the event.

In my experience, when two people who previously felt hatred toward each other have shared their thoughts (and been heard) around all five of the basic emotions they feel toward the other, they create an understanding and respect for each other, even if they still do not agree with the other’s positions.

Remember that you are not making a product—you are solving a customer problem. It is therefore critical that you continually live that customer problem. Only then can you solve it well. To live the customer problem, you must sit with the customer, ask them about their life, and observe their daily routine, on a regular and constant basis.

If you actively listen to your customers’ pain, they will trust you to decide which solution will best erase that pain. Use the phrase “I think I heard you say…” often. This will make the customer feel heard. If you do not listen to your customers’ pain, then they will do the thinking and make demands about what the solutions should be, no matter how impractical. Once those demands are voiced, it’s hard to walk them back.

Once your team has a referenceable shared set of values, they can make decisions without you and, more important, evaluate candidates for culture fit.

Once you have agreed on your values, use them to guide your hiring and firing. Bring in people who want to live by these principles, and let go of people who don’t. Otherwise, your values will have no meaning.

Fun When creating company culture, do not underestimate the value of fun. If people are having fun, they spend more time, energy, and awareness at the company. This leads to better problem-solving and collaboration, which leads to a stronger company that creates more value.

Celebration Most companies are so focused on improving that they forget to celebrate. But celebration, like fun, is a key to building positive morale. Celebration doesn’t mean lavish drunken parties. Quite the opposite. Celebration means taking a moment to appreciate the good that the company has achieved, as well as the good that departments, teams, and individuals have achieved. Here are some ways to celebrate: • Publicly acknowledge these achievements at all-hands and team meetings. ○ Remember to celebrate the very necessary but often overlooked teams on the core product. ○ You don’t need to celebrate every team at every meeting. Create a rotation. • Create a standing demo meeting where teams can show off their most recent creations. ○ This should not be a required meeting, but rather should occur over a meal (lunch) or drinks (Friday afternoon).

If you are creating and tracking goals, habits, agreements, and key performance indicators (see chapter 23); openly receiving and providing feedback (see chapter 27); and creating fun, then people will be naturally motivated to work hard. They’ll see where the company is going, how it’s moving forward, and how their efforts and their team members’ efforts are contributing. They’ll know that they are heard, and they’ll be having fun.

Remember to always lead by example. Be the first one to show up each day. Be the last one to leave. Once you have department heads, they should also set this example for their departments. Do not hire department heads who are unwilling to do so. Whatever your teams’ working hours end up being, make sure there is a core period of the day when everybody is available (whether online or in the office). Set a regular meeting (a short stand-up meeting) at the beginning of this core set of hours.

One solution that I’ve seen work is to randomly assign team members every week to meet, get a coffee, or hang out virtually. There are tools like Donut (donut.com) to facilitate this.

Politics Minimalization Politics are created when someone successfully lobbies the CEO or their manager for some kind of benefit. Others see this, so they in turn lobby. They then gain benefit, and the virus spreads quickly throughout the organization, all the while directing company energy away from customer problem-solving.

The only way to prevent politics is to never allow lobbying to be successful, and the only way to do this is to have a written policy about as many situations as possible, particularly around compensation, raises, and promotions. Apply this policy to all team members, all the time. It is difficult to create objective criteria for compensation, raises, and promotions, but there are models. The most successful method I know of is called grade level planning (GLP)—at least, that’s what Tesla calls it (another common term is “Levels and Ladders”). It calls for a very detailed definition of every position in the company and every seniority level, along with specific compensation metrics for each position and level. This is then shared throughout the company. Team members can then clearly see what they need to do to receive the next compensation and title level. Managers must not deviate from this written schema.

If you continue to stay at arm’s length, the result will be…Lord of the Flies. The absence of governance leads to civil war. This is not healthy.

In conclusion, your culture is the behavioral norms of your company. If you are unintentional about how you and others behave, you likely won’t enjoy the results. Instead, be intentional. Identify the behaviors that you would like to see. Then document them, model them, hire for them, and enforce them.

Infrastructure Just as an efficient city requires comprehensive and trustworthy systems to move its traffic, goods, and by-products, your company requires reliable systems to maintain its data and communications flow. Without a solid infrastructure, your brilliant and talented team members won’t be able to function to their full potential. The key components to a solid company infrastructure are a company folder system and wiki, goal-tracking tools, areas of responsibility, no single point of failure, and key performance indicators. Let’s break each of those down.

It may seem obvious, but every company should have a structured folder system for storing documents, such as Google Drive. Each department should have its own folder, and all team members should have access (at least for viewing, if not editing) to all folders except for the one containing compensation, performance reviews, and performance improvement plans.

This applies to manager onboarding too. Ryan Breslow, founder and CEO of Bolt, shares: “We have noticed that whenever we hire a new manager, they want to instantly bring in their own processes. But then we lose all of our hard-won institutional knowledge that led to the creation of our original process. So we now require that all managers use the existing Bolt processes for at least three months before making any changes. After they know our system in this way, they are free to make the changes they want to. And yet most make relatively minor changes after that.”

In each company, dozens of new challenges arise each week. Some might be critical, but others will be mere distractions, cluttering up your team’s time and energy. Commit to a systematic goal-tracking system to maintain focus and to prevent the clutter from overwhelming your operation.

Individual Keep it simple. Evernote, OmniFocus, and Culture Code’s Things are great tools to track individual goals and tasks. For maximum benefit, use them to implement the GTD system (chapter 3). They are inexpensive and easy to use.

There are many excellent systems. They broadly break down between task tracking (Asana and Trello) and goal tracking (Betterworks, 15Five, and Lattice).

Task-tracking systems are excellent at transforming issues to next actions and tracking progress from meeting to meeting. They’re a key part of forming impeccable agreements (chapter 13) between people. Whenever two people form an agreement, it should be recorded in the task-tracking system and have an owner, a comprehensive description, and a due date. Goal-tracking systems are much better at showing the team their progress over many weeks and months, therefore boosting morale.

Goal-tracking tools are a key part of ensuring an efficient infrastructure, so take the time to find the right system for your company and onboard everyone so it’s used effectively.

“Tragedy of the commons.” When several people share responsibility for an action or process, often that action doesn’t get done well or at all.

To prevent this from happening, group tasks into functions and assign each function to one—and only one—person. These are your areas of responsibility. Apple pioneered AORs in Silicon Valley, but now most successful tech companies use this method.

Notice how each department’s tasks are grouped together, the task is succinctly described, and there are both a main person responsible for the task and a backup person. This infrastructure ensures no task falls through the cracks because people thought it was another person’s responsibility.

A single point of failure is a function that one person performs when no one else has full knowledge of how that function works. If that person becomes sick or leaves the company, functionality suffers. A well-run company has no single point of failure. To create a team with no single points of failure, do two things: Write down all processes. As soon as you or your team members find yourselves doing something for the second time (see chapters 7 and 19), you should write down the steps of that process exactly. Place these written processes in a company-wide wiki. Cross-train a second person for each role. Map each function in the company (from the AORs) to a backup person. Have the backup person co-work with the primary until the backup knows how to perform the role. (Of course, having all the processes already written down will vastly improve this training process. So have your team write down all the processes first.) It’s a good standard practice for at least two people to know how to do any given task in the company so that if the lead person is too busy, is sick, or leaves the company, they can request that the secondary person assume the responsibility. This way, no task should fall through the cracks.

It is critical to objectively measure the performance of the company. You can only manage what you can measure. Key performance indicators (KPIs) allow you to do this. KPIs are the one or two significant metrics for each major function that show the entire team in an instant how the company is doing and where the issues are. Here are some examples: Department Metric Finance Monthly cash burn; cash in the bank Sales…

Determine the company’s five or six most significant KPIs, then track them religiously and make them available for the entire company to easily see on a daily basis. Post the metrics on a TV screen in a central place in the office, using a tool such as Geckoboard. As we learned from Andy Grove, former Intel CEO and author of the book High Output Management, it is also important to define and…

Create and measure your metrics carefully and in context to give your team the best possible view…

One of the most dangerous transitions that a company makes is going from fewer than ten team members to more than twenty in a short time. During this time, communication and productivity usually break down. The system of group organization that existed when the company was all sitting in the same room together suddenly no longer works when team members are not all sitting next to one another. Once your company has over twenty team members,…

They share the following key functions: Setting vision and goals for the company, each department, and each individual on a regular basis (usually quarterly) Communicating that vision and those goals to every team member Tracking and reporting progress toward those goals on a regular timetable (usually weekly) Eliciting feedback from all team members on what is going right and (much more important) what is not going right and needs to be changed The system streamlines and organizes information flowing out, so the CEO can inform team members of the company’s priorities, and information flowing in, so team members can provide feedback to the CEO about what is and isn’t working.

In my experience, it is very easy to copy this system if you see it in operation. But it is very difficult to implement such a system by reading instructions (including these). When you get to this point in your company’s life cycle, I recommend doing one of two things: Hire a COO who was a manager at a large, well-managed company (over two hundred employees) to implement and run this system for you Hire an ex-CEO to come in as a one-day-a-week CEO to implement this system. This person should be able to do so in eight to twelve weeks. Have this person then watch you run the system for two weeks to ensure that you are doing it correctly. Then run it yourself going forward.

Once you have achieved product-market fit, that is the right time to blitzscale and win the race to market share. You’re going to need to diversify your skills and grow your team. To do this, you will need to create massive awareness (marketing), walk many customers through the sales process (sales), hold those customers’ hands as they set up and use your product or service (customer success), harden your infrastructure to withstand many users at once (DevOps), get rid of technical debt and add all the features promised in your roadmap (engineering), update the product roadmap to meet the most urgent needs of your customers (product), and all the nontechnical operations (people [recruiting, training, and HR], finance, legal, office). All of this requires hiring talented and experienced people to fulfill those functions. First raise the money needed to hire this team, and then begin hiring.

That is the reason you need to implement a formal management system. It will be painful. You will no longer be able to just “work on the product.” You and your team will likely have to spend one full day per week preparing for and participating in team and one-on-one meetings. These meetings and this system will feel like pure overhead. They are. And without them, your company will never scale successfully.

The good news is that the same system that allows your company to operate well with twenty-five people will also allow it to work well with twenty-five thousand. Neither the system nor the amount of overhead will change. It is a one-time hit.

The leadership team typically consists of the following people: CEO Head of product Head of engineering Head of sales Head of marketing Head of customer success Head of operations (people [recruiting, training, and HR], finance, legal, and office)

When it comes to background, the best chiefs of staff that I have seen are highly organized, are excellent communicators (both written and oral), and have broad strategic business knowledge. A background that almost always ensures these skills is four to eight years at a top management consulting firm (e.g., Bain, BCG, or McKinsey). I am partial to Bain, as I find ex-Bain consultants also have excellent financial modeling skills (akin to those they would have learned had they worked as an associate at an investment bank).

In Silicon Valley, major tech companies such as Google and LinkedIn built up functions called business operations. The functions were staffed mainly by top-tier consultants from Bain, McKinsey, and BCG. I first encountered BizOps at Coinbase, where Emilie Choi scaled the group out as the company was going through hypergrowth. The team was viewed as mini-CEOs who could provide the following support: Parachute into any problem area, dig in, and fix it Generally help build and drive processes that help the company scale, including running quarterly business reviews, setting OKRs and KPIs When a manager is not succeeding, join that manager’s team and take over the project and people management duties while keeping the former manager as the architect (i.e., the subject matter expert who determines the roadmap: “These are the things that we need to get done, and this is how to do them”) and managing the team to ensure the roadmap is completed Effectively run any meeting and train managers how to do so Act as chief of staff to the CEO Creating these functions has been a big success for Coinbase. I highly recommend that you designate a team to carry out these functions.

Board of Directors The board of directors is related to the executive department. By law, C corporations must a have a board of directors, which must meet regularly in order to be informed about the company’s operations and provide fiduciary oversight. Organizations are incorporated in order to shield their owners from personal liability for the debts of the company. It is important to have a partner or set of thought partners to keep you accountable when it comes to picking the best goals and then marching toward those goals. This can be a coach, an advisory board, or your actual board. As a corporation, you must have regular board meetings. Therefore, if you trust and like your actual board members, then making them your thought partners is best practice. If that is the case, then I recommend that you follow the best-practice model below. If you do not have full trust in your board, I highly recommend that you get to a place of full trust through facilitation or replacing board members. But if you are still unable to create the board of full trust right now, then follow the minimal model below.

Here are my board meeting best practices: 1. Share the board meeting information (the board packet) with all board members in writing in advance of the meeting. a. Format: Memo or deck (My preference is memo, as it lends itself more to reading.) b. Days in advance: Delivered to the board at least three days in advance, but ideally one week in advance c. Information included: i. Update on KPIs: a). Summary financials b.) Product roadmap c). Hiring roadmap d). Sales pipeline ii. What we accomplished last quarter (OKRs) iii. From both KPIs and OKRs: a.) What went (or is going) well b). What didn’t go (or isn’t going) well c). Why d). What we are doing to fix it iv. What we hope to accomplish this quarter (OKRs) v. Issues: One or two strategic questions or problems that we are grappling with (could be from the update above) a). The issue or choice written out thoroughly b). Our proposed solution i). Most board members have useful pattern-matching advice on forward-looking strategic questions (e.g., should we expand to Europe? Should we launch an adjacent product?) but don’t have enough detailed knowledge of the particular situation to opine on internal operating issues (e.g., our CMO is struggling, what should we do?). Stick to the forward-looking questions in the board meeting. vi. Requests a). Specific action requests of board members i). Most board members have strong networks. Take advantage of this by asking for warm introductions to potential customers, partners, recruits, and other investors. vii. Feedback a). How could the company’s and CEO’s interaction with the board be better? 2. Collect responses. a. Ask board members to pose questions about and write responses to the board packet at least two days before the meeting. b. During the next forty-eight hours, you or your internal team write answers to all board member questions. 3. Meet (phone call) with board members one-on-one just before the board meeting. a. Ensure that they have digested the information. b. Elicit their questions and concerns so that they come to the board meeting already feeling heard (this is critical for creating trust). 4. At the board meeting: a. Invite the executive team to attend. This allows board members and executives to get to know one another and gain comfort with one another. b. Spend the first fifteen minutes allowing board members to read the responses to all board…

Keep the board to an odd number of seats (to avoid a deadlocked vote) and as few seats as possible. The ideal number is three.…

Create a very complete presentation with the following information: i. Full financials and metrics/KPIs ii. The good and the bad from these metrics iii. What we accomplished since the last board meeting (OKRs) iv. What we plan to accomplish until the next board meeting (…

After the board presentation, where there are hopefully few to no questions, give the board members homework. Give each one a very specific assignment. Don’t worry, none of them will actually do the homework. They also are then not likely to give you unsolicited advice. This is the true goal of the homework. If a board member does give you advice, take notes. Summarize what the board member said, and ask if you got it right. Once they say, “Yes, that’s right,” thank them for their advice and let them know that you will seriously consider it in…

A product manager is someone who both has the social skills to sit with customers and is (or can learn to be) technical enough to know what can and cannot be done technically. Whether the product manager has to have a background as an engineer is a hot point of contention. Some say that there is no other way; others say that it doesn’t really matter. From my experience, technical knowledge is very helpful; however, it is not a deal breaker, especially if the product…

Product must have the final authority in the discussion around feature prioritization. If either engineering or sales and marketing has the authority, the decision will get skewed. Ideally, therefore, product is its own department and reports directly to the CEO.

If, for some strange reason, product cannot report directly to the CEO, then better to have it report to sales and marketing. It is critical that the voice of the customer remain strong within the company. This voice almost always gets lost if product reports to engineering.

There are three functions within engineering: architect, project manager, and individual contributor. Project management is the essential skill of the engineering manager. Good engineering management is a rare skill and most often can only be learned by observing others who do it well. Therefore, hire an engineering manager who has experience at a company with a reputation for excellent engineering management (Google, Facebook, Apple, etc.). Engineering managers with this pedigree will be hard to convince and expensive to win. Make the effort and pay the price. It’s worth it! Another common problem is that adding engineers often adds significant coordination challenges. These challenges create a net drag on productivity. Unless you have a superior manager, a team of three to four excellent engineers is often more productive than that same team with an additional three to four average engineers.

From the team members’ perspective, benefits are paid with pretax dollars, effectively doubling their purchase power. Discover what your team members truly value (medical insurance, meals, retirement plan, gym membership, commuting allowance, etc.) and then give them those benefits. Of course, the cost of the benefit should be taken out of the overall compensation number. Thus, startup cash plus equity plus benefits should equal market compensation (which also should include benefits).

Instead, I recommend starting with a PEO when the benefit is highest: at the beginning.

When you’re first starting out, it can be quite tempting to hand out titles without much process; after all, they’re free. However, a misplaced title can come back to haunt you. Take, for example, the circumstance of making a senior hire and asking an existing team member to report to them. If you’ve already handed that existing team member a fancy title, this will be viewed as a demotion and you may lose them. One easy solution is to call everyone “head of X.” That way, when it’s finally time to hire senior VPs, they can slot easily into the organization without “demoting” anyone.

The organizational structure, while important, isn’t as important as the culture and systems you build within it. The best corporations emphasize accountability, coaching, and transparency, and they use a meeting system built on these principles and organized for efficiency.

For an organization to work well, three things must occur at every level of the organization and be apparent at every meeting: Accountability Coaching Transparency These form an easy-to-remember acronym: ACT. Accountability is declaring a destination (vision, OKRs, KPIs); the action steps to get there (actions); and whether those actions steps were taken (and eventually the destination achieved).

The overhead—20 percent of the standard workweek—can feel tremendous to a startup CEO who is accustomed to the organic information flow of a small group working together in the same room. But without this one-day-per-week investment, a larger team will never fully know what to do, nor will the CEO get the needed feedback on their performance or the company’s performance.

Paul Graham of Y Combinator points out that makers (engineers) need long stretches of uninterrupted time to be productive, whereas managers are most effective when meeting. The compromise is to schedule days when no meetings are allowed. The schedule that works best for a five-day workweek is as follows: One day of internal meetings One day of external meetings (e.g., interviewing candidates) Three days of no meetings It isn’t critical when these days are, although it helps to space the two meeting days apart from each other.

There are two exceptions to the advice above: In the very early days of a company when a department has just one person, the department lead can set a recruiting schedule that works for them as they build their team. Departments that are entirely nontechnical and don’t require focused work time can set their own recruiting schedule.

When creating the schedule for the day of internal meetings, I recommend the following order: One-on-one meetings Leadership team meeting CEO open office hour All-hands meeting Company-wide social event

As the company grows and each department becomes its own team, have each department do their meeting on a day other than that of the CEO’s meeting day. Department meeting days serve as preparation for the CEO’s meeting day (updates, issues, etc.) and therefore should occur before the CEO’s meeting day. And as the company begins to have subteams, schedule their meeting day before the department meeting day.

Each meeting needs to have a designated meeting lead, who is sometimes, but not always, the group’s manager. This person is responsible for making the meeting run well. Therefore, their tasks are as follows: Publishing the agenda, hoped-for outcome, and attendee list of the meeting to all participants Ensuring that all meeting participants submit their updates and issues in writing in advance and show up on time Ruthlessly sticking to the timeline during the meeting and, whenever something off-topic comes up, noting it but scheduling the discussion for another time Without an effective meeting lead, meetings quickly become inefficient, and people come to resent them.

At the leadership team meeting, the CEO and key decision makers discuss issues that came up during the leader one-on-ones or the department one-on-ones. This is the time to address all issues and either resolve them or move them to a RAPID decision-making process. All nonsensitive decisions from the leadership team meeting can then be shared at the all-hands meeting. In order to support the company’s quarterly goals, each team must meet weekly (or biweekly if the team runs very smoothly), following the ACT model: Hold each other accountable to the actions they need to perform. Surface and resolve any issues in the company. Give each other feedback.

Leadership team meetings that take three hours when done verbally can take thirty minutes (and be more effective) when done in writing.

Leadership versus VPs Meeting As the company grows, each team will become a large entity (BizOps, design, communications, compliance, etc.). An individual product may grow large enough to warrant being its own business unit with its own general manager. Thus there will be many VP-level execs. You will want to keep them informed and empowered. You will be tempted to invite them to attend the leadership team meeting. Do not.

Who are the key minds you need to hear from to make great decisions? And who runs the major business units that you need to make sure are continually unblocked? These should be the attendees of the leadership team meeting. Do not add any other attendees to salve their ego.

For all the rest of your department and team leads, there is a VPs meeting (or leads meeting). At this meeting, decisions that were just made in the leadership team meeting are announced.

To understand the scale of these meetings, I posit that the leadership team should be, and remain at, about eight people (six to ten is fine). The VPs meeting, by contrast, should grow as the company scales. At a company of one thousand employees, the VPs meeting often has fifteen attendees. At Microsoft, this same meeting is over 150 attendees, or so I’ve been told.

CEO Open Office Hour The CEO open office hour (which I highly recommend) can be scheduled anytime in the day. Each manager should set aside one hour each week for an open office hour, during which anyone can come introduce an issue. This ensures that all employees feel that they can be heard but limits the amount of time required to a predictable level for the manager.

“We use all-hands meetings for sharing across teams of what teams are accomplishing and working on, celebrating wins (reinforce our values), and offering recognition broadly…plus bringing in customers to talk.”

Vision To create the ten-year company vision, imagine it is ten years from now. You are the dominant company in the industry. Ask yourself: What industry do you dominate? Who is your customer? (This should be a real live human being, not a corporate entity.) What pain are you solving for the customer? What is unique about your solution that causes the customer to choose you over the competition? What asset (human or physical) do you control that makes it difficult for any competitor to copy your solution? In other words, what is your moat?

A simple one is to complete the following sentence: “The rest of you in the company can make all of the decisions from now on, as long as you…” This is appropriate when the company is small and values are entirely aspirational.

OKRs For your quarterly goals, or OKRs (objectives and key results), the target is three and three: three objectives, with three key results for each objective. Create these OKRs for the company, then for each department (based on the company OKRs), then for each team (based on the department OKRs), and then for each individual (based on the team OKRs). (Warning: A common mistake is to create department OKRs without creating company-level OKRs. This leads to siloed fiefdoms that neither work together nor trust each other.) The objective (O) answers the question, “Where do we want to go?” This objective should tell a compelling story, akin to the tagline of a Hollywood movie. It does not need to be measurable (ironically, it can be subjective). But it should be inspiring. Key results (KRs) answer the question, “How do we know that we’re getting there?” KRs should be objectively measurable. Here are examples: Objective: Massively grow revenues Key results: Reach $500,000 in monthly recurring revenue. Hire ten additional sales development reps. Hire a sales operations person to project manage the sales team. Company OKRs should be broad enough that they encompass the whole company; each department and team should feel that their work is contributing to at least one of the company’s priorities. Here are some examples of typical company-level OKRs: Profits: Massively grow revenues while minimizing expense. Product: Delight our customers. People: Create a positive and transparent environment where we are all inspired to do our best work.

Forming Various Levels of OKRs At the end of every quarter, gather the leadership team together and collaborate on the coming quarter’s OKRs during the quarterly off-site meeting. I’ve found the process that gets the best results and most buy-in is to use structured brainstorming: Ask every member of your leadership team to separately write up what they think the global OKRs of the company should be. Then simply combine everyone’s ideas into one document. You will see common themes and have a healthy debate about the company’s priorities.

For all OKRs that are far off track, require that the DRI create a written description of the issue and solution to get back on track.

My CEO mentees tell me that this meetings system is the single most valuable part of the coaching experience for them, so implement it in your company too. You’ll be glad you did. But remember, it’s a complicated system at first. I highly recommend hiring an experienced COO full-time or a one-day-a-week CEO to come in and implement this system for you.

Frequent, transparent feedback is critical for building a strong culture and a thriving business. Feedback is instrumental for building trust. Without trust, communication breaks down. Building a culture of feedback and transparency starts and ends with the founders.

“What feedback are you afraid to give because you think it might hurt my feelings? Please tell me that.”

Here is a template for providing good feedback, adapted from the book Nonviolent Communication by Marshall B. Rosenberg. Ask for permission. Give the receiver a little heads-up of what’s coming. It can be enough to say, “I have something to communicate to you. Is now a good time?” State the trigger behavior or event (fact). Try to be factual (“When you are late to meetings…”) as opposed to interpretative (“When you disrespect me…”). State how that trigger behavior makes you feel in terms of anger, sadness, and fear (feeling). This is perhaps the hardest part for many founders to do. Talking about your feelings might not be something you are used to, so it might be challenging at first. However, doing so is crucial for the other person to truly understand where you are coming from and to take your feedback to heart. State the thoughts, opinions, and judgments (story) you have around this situation. Make a request of what you would like to see. Try to frame it as positive action (“Do x”) rather than a negative (“Don’t do y”). Ask if the person accepts the feedback and the request. If yes, hold them accountable to doing it.

This works because no matter how rational we appear, we are most often guided by our emotional responses. We make instinctive, gut choices, and our rational brains do an excellent job of retrofitting logic over those choices.

Build Trust and Like Think about the people you like. Do you like people who just talk about themselves and show no interest in or curiosity about you and your life? Or do you like people who ask about you, listen attentively, and are genuinely curious about what makes you tick?

To summarize, the four keys are as follows: Ask them about their lives. Prove that you heard them by saying, “I think I heard you say…” Prove that you remember by saying at the next meeting, “The last time we talked you said…” Let them know what you appreciate about them.

“At the risk of giving up my secrets, I’d suggest handwritten thank-you notes. The response I get to my handwritten notes is incredible. People are floored. And often remember me as ‘the handwritten note guy.’”

So make it a practice to regularly go through your contact list and send out messages of appreciation. You will be shocked by the massive goodwill that it generates. Andy suggests making this a formal process. He says, “Every day I review all my interactions and send (or schedule) thank-yous as appropriate. It ensures I don’t miss anyone and am prompt. And it takes literally a few minutes.”

Tyler determined the ultimate structure for telling one’s story in a humble way: Credit: “It could not have happened without [name the others involved].” Hard work: “We had to put in so much to make it happen, for example, [describe the hard work].” Vulnerability: “It was most difficult for me when…” Duty: “We were driven by our dream to [noble motive].” Gratitude: “I am so proud and thankful that…”

Here are some examples of inflection points: Hiring a capable engineering team Signing up your first three paying customers Exceeding $1millioninannualrecurringrevenue(ARR),whichdemonstratesproduct-marketfitHiringacapablesalesteamExceeding$5 million in ARR, which demonstrates the effectiveness of your sales team Hiring senior managers for all departments

Ask your lawyers to set up “FF shares with ten times or twenty times voting rights” prior to investors being on the cap table (SAFEs are fine).

Liquidity In addition, FF shares allow founders to get liquidity at each priced round without raising the fair market valuation of the options granted to other team members. This allows founders to continue to pay themselves low salaries (excellent optics within the company) but still get enough liquidity to not worry about committing themselves to the company for the long term. Again, these should be created prior to having equity investors.

The key is efficiency. And to be efficient, you must spend as little time as possible with the candidates you don’t hire (quick evaluation) and as much time as possible with the candidates you want to and do hire (building a relationship and onboarding/training). Remember that each minute you spend with a candidate you don’t hire is a minute that you aren’t spending with the candidate you want to hire.

Scorecard The scorecard is a document created by the hiring manager that describes exactly what they want a person to accomplish in a specific role. The scorecard includes a mission, outcomes, and competencies that define the job. • The mission describes the business problem and its solution. For example, “The operations lead will create and manage a world-class department that will support every team member by providing the environment, information, tools, training, and habits they need to succeed in their role and make the company a massive success.” • The outcomes are what the person must get done. There should be three to eight outcomes (target is five) ranked by order of importance. They should be measurable and have an accomplish-by date. For example, “Turn every team member into a ninja user of our internal tools (Asana, Salesforece, Notion) and methodologies (GTD, Inbox Zero, management by objectives, active listening) by October 31.” • The competencies are the traits or habits that are required to succeed in the role and fit in at the company. They are the how—the behaviors that someone must exhibit in order to achieve the outcomes. Here are some examples: ○ Organized: Follows the GTD method and stays well aware of all to-dos and events ○ Innovative: Seeks to make process improvements to make their role and the team more efficient going forward ○ Collaborative: Reaches out to peers and cooperates with managers to establish an overall collaborative environment ○ Persuasive: Is able to convince others to pursue a course of action ○ Coachable: Wants to improve and is open to feedback and acts on that feedback

Creating a good scorecard will help you find A players who can do the job that is needed today and have the flexibility and adaptability for what their role may become tomorrow.

There are three sources for finding candidates: Referrals from your network Recruiters Researchers

Referrals from your personal and professional networks are by far the most effective. Use this process for sourcing such referrals: Create a list of the ten most talented people you know. Commit to speaking to at least one of them each week for the next ten weeks, asking them, “Who are the three most talented people you know?” Continue to build your list and continue to talk with at least one person per week. Document everything in your company’s applicant tracking system (ATS).

Other strategies for sourcing from your network include hosting a sourcing party and offering referral bonuses. To host a sourcing party, schedule it, gather the team in one room, and then ask all attendees to reach out to as many candidates in their network as possible. Gamify the process. Make it fun. Give a prize to whomever reaches out to the most people (or whatever other metric you want to use).

Instead, use the interviews to collect facts and data about how the candidate has performed in the past. There are four types of interviews to conduct: Screening interview Topgrading interview Focused interview Reference interview

Screening Interview The goal of the screening interview is to eliminate people who are inappropriate for the position as soon as possible. This interview is conducted by phone and should not last more than thirty minutes. Schedule the call for fifteen minutes, then extend it to thirty minutes during the call only if the candidate appears to be excellent.

If you can’t definitively say, “This is an A player,” then hit the gong. It is better to miss out on an A player than to waste many precious hours on a borderline case that turns out to be a B or C player. If you weed harshly, you will be able to spend more time with candidates who are known A players.

If you think the candidate is an A player, let them know that you think they’re great and that you are open to extending this phone interview to get to know them more and answer their questions about the job and the company.

Topgrading Interview The goal of the topgrading interview is to understand the candidate’s story and patterns. These stories and patterns are predictive of the candidate’s future performance.

Ask about the three Ps. Use the three Ps (performance, plan, and peers) to clarify how valuable an accomplishment was in context. ○ “How did your performance compare to the previous year’s performance?” ○ “How did your performance compare to the plan?” ○ “How did your performance compare to that of your peers?” • Determine push versus pull. People who perform well are generally pulled to greater opportunities. For each job change, determine if it was a push or a pull. ○ Push: “It was mutual.” “It was time for me to leave.” ○ Pull: “My biggest client hired me.” “My old boss recruited me to a bigger job.”

Here’s a sample script: “The purpose of this interview is to talk about [the outcome and competency to be reviewed].” “What are your biggest accomplishments in this area during your career?” “What are your insights into your biggest mistakes and lessons learned in this area?”

Only choose candidates whose skill (what they can do) and will (what they want to do) match the scorecard. This is their skill-will profile.

Here are some red flags to watch out for during the interview process that signal problems: Candidate does not mention past failures. Candidate exaggerates answers. Candidate takes credit for the work of others. Candidate speaks poorly of past bosses. Candidate cannot explain job moves. Candidate’s family doesn’t want them to take this job. For managerial hires, candidate has never had to hire or fire anybody. Candidate is more interested in compensation and title than in the job itself and the company. Candidate tries too hard to look like an expert. Candidate is not curious about us or others. (Candidate is self-absorbed.) Follow these steps to the selection process: Update all the scorecards. Rate each candidate. If you have no As, restart the process. If you have one A, make the candidate an offer pending reference interviews. If you have several As, rank them and make an offer pending reference interviews to the best A among them. Try to find another role at the company for the other As.

Pick the right references—bosses, peers, and subordinates (sometimes two to three levels down). Do not use the reference list that the candidate gave you. Ask the candidate to contact the references you choose and set up the calls. The hiring manager conducts at least two (but preferably four) reference interviews, and other team members do at least one (but preferably three) for a total of at least three (but preferably seven). Here’s a sample script: “In what context did you work with the person?” “What were the person’s biggest strengths?” Get curious by using the “What? How? Tell me more” framework. “What were the person’s biggest areas for improvement back then?” It is very important to say back then. This liberates people to talk about real weaknesses, assuming that the candidate has improved them by now. (In reality, past performance is an indicator of future performance.) “How would you rate their overall performance in that job on a scale of 0–10? What about their performance causes you to give that rating?” “The person mentioned that they struggled with ________ in that job. Can you please tell me more about that?”

Just as in fundraising, building a relationship with a recruit will vastly increase the likelihood that they will want to join your company. The best candidates can work anywhere. Make sure that they want to work with you.

Speed There is another key variable to making the recruit want to accept your offer: speed! A recruit wants to feel loved. The easiest way to accomplish that is to have a fast process from start to finish. Each day of delay sends the message “We don’t have conviction about you.”

In recruiting, you would make an offer to the candidate “pending reference interviews.” Here’s what a streamlined process looks like: 1. You contact a candidate and schedule a short phone interview. 2. At the phone interview, the candidate appears to be an A player. 3. You immediately schedule a full-day, on-site interview to meet with all the needed interviewers. This is easily done because you already follow a calendar cadence, and so all needed interviewers have scheduled to be at the office on recruiting day, ready to interview. (Using this method, you can have several candidates for on-site interviews on the same day.) a. At the end of that day, the interview team convenes and makes a decision. b. If “yes,” you reach out to the candidate that evening and say, “We love you. We want you to work at our company. We’d like to make you an offer pending reference interviews.” c. You have a verbal discussion about what a successful offer would look like. You ask them to complete this phrase: “I would join your company as long as _________.” d. You address each request. If all are doable, you move on to the next stage. 4. You conduct the reference interviews. 5. If those are positive, you reach back out to the candidate: “The reference interviews were great. We’d like for you to join our company. If we make you the following offer (explain every detail of the offer including benefits, etc.), would you accept?” Go back and forth until you have a verbal agreement. 6. You invite the candidate in for an “offer ceremony,” wherein you make them the offer and they accept. (There is more detail on the offer process below.)

Compensation How much compensation do you offer new team members? How much cash and equity? Here’s my preferred method for setting these benefits: Discover the market compensation for the position (role and seniority). There are plenty of online compensation studies that show this. Market compensation is whatever a big company (Microsoft, Facebook, Google) is paying for this position. Discover the amount of cash that the new team member would need to live comfortably (housing, food, transportation, child expenses, etc.).

Making the Offer Before making an offer, it is critical to know that the candidate will accept. Once you have the offer prepared, contact the candidate and ask them to complete the following sentence: “I will join the company as long as…” They then should state all their requirements. If you are willing to provide each of these, then you are going to have a successful hire. If there is one that you cannot provide, discuss it with the candidate to see if there is some alternative that you both can accept.

If the candidate says yes, then make the offer. If you skip this step and simply make the offer, then it is very common for the candidate to ask for a few more things after the fact (signing bonus, moving expenses, etc.). You will then be in the awkward position of either having to give these (and thereby allowing a political culture to begin) or starting the relationship on a negative note by saying no. It is far better to get the candidate to pre-agree in full detail before you make the offer. Then the relationship begins with a resoundingly positive “Yes! Thank you! I’m so excited!”

The granting and accepting of a job offer is a very emotional moment for a person. Making a big deal out of it is a good thing. Make a ceremony out of it. Invite the candidate to receive the offer in person. Create a ritual out of this process. Here are some possibilities: Hand the written offer to the candidate with two hands and a ceremonial bow. Give company schwag. Give hugs and high fives. Whatever you do, make it fun and memorable.

Onboarding Most companies spend extraordinary resources of time, money, and equity to bring on a new team member, and then almost entirely drop the ball on quickly getting that team member onboarded and up to speed on how the company works so that they can begin making a full contribution. Don’t make this mistake! Give onboarding even more attention, time, and energy than you give to recruiting. After all, many of the people you are spending time with during recruiting will not become team members, whereas 100 percent of the people you spend time with during onboarding are already team members. Focus your energy there!

If you want to minimize the chance of one of these lawsuits occurring, then create written documentation. A secondary benefit of this documentation is that there is a small chance that the person will begin to perform. Here are the steps: Create a written performance improvement plan (PIP) that states objective milestones and dates over a seven-, thirty-, sixty-, and ninety-day period. Meet weekly to check progress against the written milestones. At thirty days, if the team member hasn’t hit one of the milestones, then you let them go. At sixty days, the same. And at ninety days, the same. If, at any of these stages, the team member does not hit a milestone and you do not fire them, then you have completely invalidated the value of the written document, because you have established a provable pattern that the written document was not meaningful.

When you do fire someone, put yourself in their shoes. It is a devastating event emotionally. And it is a real setback financially. Your team will also be watching closely to see how you treat ex-employees; a vindictive attitude will make everyone feel unsafe! Put real effort into helping the person find their next job, and quickly. Offer them a severance package that gives them enough time to realistically find another job and have the pay begin. This is one month minimum, but more realistically two to three months. And then help them find work within that time frame. Because you value transparency, make an announcement to the company about the person’s departure, or allow the person to do it themselves. When you make the announcement, praise the person’s contributions to the company, and take ownership yourself for the fact that you weren’t able to match their skills to the company’s needs. Do not blame or criticize the person. Instead, take responsibility for the situation.

Feel this anger, and then let it pass. Recognize that you have responsibility here. Your recruiting, training, and managing (or lack thereof) helped create this situation. It is your responsibility to help the person find a job and a company that is a better fit. If you want to save your company’s resources, then help that person find that job more quickly. And then look at your recruiting,…

Yes, doing the right thing often pays for itself…

I call the process above “firing well.” If you learn how to do it, then you also get the benefit of being able to let people go sooner, once you realize that they are not a fit, because doing so will not create trauma for the person, the company, or you. You can also take more chances on hiring people with high potential but less proven experience, since you now have a safe mechanism for ending the relationship if…

Sales and marketing are often grouped together because the goal of both is to get the product into customers’ hands and money into the company’s bank account. They are unique in their timing and processes, though. Salespeople directly interact with customers to identify if the product meets their needs and, if so, to close the sale. Marketing is the strategy that…

Making a Sale To make a sale effectively, you need to do the following three things: Build trust Identify the customer’s specific pain Sell results, not features

You may wonder how to get meetings in which you aren’t required to talk about your product or service. Here are some ways: Be explicit about not talking about your company. “Before we talk about what we do, I’d like to start by getting to know your situation, to know if we’re even the right solution for you.” Ask for a very limited amount of time so that the burden is low. “Let’s have a short introductory call for ten minutes.” “Let’s get together for a quick coffee.” Invite them to a purely social event. “We’re hosting drinks at ____ on ____. Please join us.” “We’ve got seats at the US Open. Please join us.”

Identify the Customer’s Specific Pain To identify the customer’s specific challenge, you must ask the right questions. This can be done either after you’ve built initial trust with the customer or as a way to build trust, since it involves listening to the customer. Either way, you need to understand your customer’s pain before you present your solution. By doing so you will achieve three things: You will know what the customer is looking for so you can present your solution in those same terms. The customer will know that your proposed solution is specifically intended to solve their specific challenge. You will weed out customers who aren’t a good fit for your product and save time to focus on those who are. So how do you do this? You ask a series of questions with the aim of understanding these three things: What are their goals? What are the challenges preventing them from reaching those goals? What are their ideal solutions to overcoming those obstacles?

Sell Results, Not Features It’s a classic founder issue to dive directly into the product functionality. After all, you’ve spent countless hours building this product, thinking through every feature and technical challenge. The reality, however, is that most people don’t care about your product functionality. They don’t care about your features. They care only about their business results.

What matters is that it helps you achieve more.

The chip is the how; achieving more is the why. Focus on the why. Focus on painting the vision of a world where the customer’s desires are fulfilled with the help of your product.

So what results are you providing to your target customers?

Beware the Dangers of Overselling As a startup founder, you may be very tempted to be a yes-man to potential customers. After all, shouldn’t you be trying to do everything possible to get revenue through the door? As a result, many founders end up overselling, which leads to an inability to fully deliver. We do not recommend taking this route. Not only because it is ethically wrong—the customer trusts you to be honest about what you can and cannot do, and you are intentionally breaching that trust—but also because it has several quantifiable consequences for your business: Reputation: Customers talk to one another. There are only so many bridges you can burn before you burn your entire reputation in the market. Development team: Generally when founders oversell the product, they turn around and apply exorbitant pressure on the development team to meet the customer’s oversold expectations. This can cause a lot of stress on the development team. Culture: Founders think it’s okay to oversell because they are in control of the product. However, if the founders oversell, it is very likely that the sales hires will also oversell, since they will adopt the culture from the top. Once you create a culture of overselling, it is very hard to go back. Overselling is a form of laziness. Instead, take the time to build trust. Then your customer will buy from you even though your product does not yet solve every one of their challenges. They trust that you will soon build in those features.

You should hire a sales team only when two conditions are met: You have found an initial version of product-market fit. This means that a significant proportion of your paying customers are renewing their contracts. You have figured out what you are selling and whom you are selling to. Keep in mind that as you grow your sales, you also need to grow the infrastructure to meet the need of the sales from the new salespeople. This includes the onboarding process, customer support, and more.

Generating leads and closing deals are distinct functions that must be split. Generating leads is a game of breadth: it requires emailing and talking to a lot of different leads to filter out the nonqualified ones as fast as possible. Closing deals is a game of depth: it requires building deep relationships and understanding with the qualified leads in order to close the deal. The people who close deals are often much more senior than the people who generate leads. This is because the relationship-building skill set often requires experience to develop. Senior salespeople are expensive, so their time is best spent focusing on the most high-value activity: closing deals. If your salespeople are also generating leads, they are wasting valuable time and getting unnecessarily stressed by having to fulfill different functions in parallel.

Start hiring AEs only once you have a predictable flow of leads being generated and have farmers in place to tend to your customers. This means that you first want to hire a qualifier and a farmer while you act as the closer, and only once this system is running smoothly do you want to invest in an AE.

Seeds: Seeds are generated from word of mouth, usually from customer referrals or prior relationships. Pros: They tend to close fast, have high win rates, and grow into your best customers. Cons: It is really hard to proactively grow them; the best thing you can do is build an awesome product and customer success team.

Nets: Nets are generated from your marketing, such as events, SEO, white papers, and ad campaigns. They are called nets because you are going for quantity over quality. Your inbound reps will then qualify the leads. Pros: If done well, they can be very scalable and cost-effective. Cons: There are serious costs and time associated with building, optimizing, and maintaining this channel.

Spears: Spears are generated from direct outbound outreach by your outbound reps, usually through email outreach or LinkedIn mining. They are called spears because they are hypertargeted and you are going for quality over quantity. Pros: They are predictable, hypertargeted, and deliver immediate results. Cons: They require having full-time outbound reps and may not be profitable if your average annual deal size is under $10,000.

Your outbound reps can then use a platform like Reply.io to send drip email campaigns and generate leads more effectively.

Every company has their own specific qualification checklist. Generally, a qualified lead is one that feels the pain point that your product is solving, has the desire to solve that pain point, and has the power to purchase your product.

Once the qualifier has qualified the lead, they must pass it off to the AE. This is best done by introducing the AE in the email thread with the prospect or by having the AE join the next call with the prospect. Qualifiers should be compensated either on a flat fee for each qualified lead they generate or on a percentage of the deals that they generate that are closed by the AE. For this reason, it is imperative that the AE be the one who decides if a lead is actually qualified. Generally the AE is the one who marks the lead as qualified in the CRM, not the qualifier.

Sales KPIs While there is an art to building relationships, scaling a sales engine is a science that can be optimized and predicted. In order to do so, you and your team must be rigorous about your KPIs and process. Let’s start with KPIs. The metrics you choose to track are the metrics you will optimize around, so choose them wisely. Here are some of the main KPIs I recommend that you track: Average deal size: Average dollar amount per customer New revenue per month: Total new revenue closed in a given month; can be split between what channel it came from and whether it came from an existing customer or a new customer Average sales cycle length: Average time it takes from when a lead is qualified to when it is closed Number of SQLs per month: Number of qualified leads passed off to AEs per month Cost per lead: Average cost per qualified lead passed off to AEs Customer acquisition cost: The total cost of acquiring a new customer,…

Marketing: Segment, Target, Promote Marketing can be defined as understanding the problems of customers (strategic marketing) and what solutions are offered in the marketplace (competitive analysis), creating a solution that more effectively solves the customer problem (product management), and letting customers know that your solution exists (tactical marketing). The essential goal of strategic marketing and competitive analysis is choosing your target beachhead. The essential…

But history tells a different story. The greatest risk of a startup is not that they moved too slowly in dominating the entire marketplace, but rather that they spread their scarce resources too thin and ended up securing few or no customers at all. Every customer already has a legacy solution in place, and those legacy providers are far larger with more resources than you. They have deep and long-standing relationships with their customers. Even if…

Do the same. Study the marketplace. Segment it into different customer types. Determine which segment is the least satisfied with their current solution and for whom your solution is the best fit. Concentrate all your sales and engineering efforts toward this segment. Land a few of these customers. Continue to focus on this segment until you dominate it. Only then expand to other customer segments (or add other products). The best way to choose a target beachhead is to follow the steps outlined in the book Disciplined Entrepreneurship by Bill Aulet. There is no need to reinvent the wheel here; that book outlines the steps clearly.