The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

Metadata

• Title: The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers
• Author: Ben Horowitz
• Book URL: https://amazon.com/dp/B00DQ845EA?tag=malvaonlin-20
• Open in Kindle: kindle://book/?action=open&asin=B00DQ845EA
• Last Updated on: Tuesday, October 31, 2023

Highlights & Notes

There’s no recipe for really complicated, dynamic situations. There’s no recipe for building a high-tech company; there’s no recipe for leading a group of people out of trouble; there’s no recipe for making a series of hit songs; there’s no recipe for playing NFL quarterback; there’s no recipe for running for president; and there’s no recipe for motivating teams when your business has turned to crap.

It taught me that being scared didn’t mean I was gutless. What I did mattered and would determine whether I would be a hero or a coward.

There are no shortcuts to knowledge, especially knowledge gained from personal experience. Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all.

Former secretary of state Colin Powell says that leadership is the ability to get someone to follow you even if only out of curiosity.

Looking at the world through such different prisms helped me separate facts from perception. This ability would serve me incredibly well later when I became an entrepreneur and CEO. In particularly dire circumstances when the “facts” seemed to dictate a certain outcome, I learned to look for alternative narratives and explanations coming from radically different perspectives to inform my outlook. The simple existence of an alternate, plausible scenario is often all that’s needed to keep hope alive among a worried workforce.

By doing everything, I would fail at the most important thing. It was the first time that I forced myself to look at the world through priorities that were not purely my own. I thought that I could pursue my career, all my interests, and build my family. More important, I always thought about myself first. When you are part of a family or part of a group, that kind of thinking can get you into trouble, and I was in deep trouble. In my mind, I was confident that I was a good person and not selfish, but my actions said otherwise.

Either people challenge each other to the point where they don’t like each other or they become complacent about each other’s feedback and no longer benefit from the relationship.

“Did you think I’d crumble? Did you think I’d lay down and die? Oh no, not I I will survive.” —GLORIA GAYNOR, “I WILL SURVIVE”

During this time I learned the most important rule of raising money privately: Look for a market of one. You only need one investor to say yes, so it’s best to ignore the other thirty who say “no.”

The first kind is one you can call when something good happens, and you need someone who will be excited for you. Not a fake excitement veiling envy, but a real excitement. You need someone who will actually be more excited for you than he would be if it had happened to him. The second kind of friend is somebody you can call when things go horribly wrong—when your life is on the line and you only have one phone call. Who is it going to be? Bill Campbell is both of those friends.

Nonetheless, the close call was a sign to me that the entire operation was far too fragile.

Some things are much easier to see in others than in yourself.

Nobody besides me could get us out of the trouble, and I was through listening to advice about what we should do from people who did not understand all the pieces. I wanted all the data and information I could get, but I didn’t need any recommendations about the future direction of the company. This was wartime. The company would live or die by the quality of my decisions, and there was no way to hedge or soften the responsibility.

“Gentlemen, I’ve done many deals in my lifetime and through that process, I’ve developed a methodology, a way of doing things, a philosophy if you will. Within that philosophy, I have certain beliefs. I believe in artificial deadlines. I believe in playing one against the other. I believe in doing everything and anything short of illegal or immoral to get the damned deal done.”

Only a CEO who had been through some awful, horrible, devastating circumstances would know to give that advice at that time.

As I listened to their lengthy objections, it became clear to me that the features the engineers wanted to add all came from Loudcloud requirements. As painful as it might be, I knew that we had to get into the broader market in order to understand it well enough to build the right product. Paradoxically, the only way to do that was to ship and try to sell the wrong product. We would fall on our faces, but we would learn fast and do what was needed to survive.

An early lesson I learned in my career was that whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project.

Of all the times I think of at Loudcloud and Opsware, the Darwin Project was the most fun and the most hard. I worked seven days a week 8 a.m.–10 p.m. for six months straight. It was full on. Once a week I had a date night with my wife where I gave her my undivided attention from 6 p.m. until midnight. And the next day, even if it was Saturday, I’d be back in the office at 8 a.m. and stay through dinner. I would come home between 10–11 p.m. Every night. And it wasn’t just me. It was everybody in the office. The technical things asked of us were great. We had to brainstorm how to do things and translate those things into an actual product. It was hard, but fun. I don’t remember losing anyone during that time. It was like, “Hey, we gotta get this done, or we will not be here, we’ll have to get another job.” It was a tight-knit group of people. A lot of the really junior people really stepped up. It was a great growing experience for them to be thrown into the middle of the ocean and told, “Okay, swim.” Six months later we suddenly started winning proofs of concepts we hadn’t before. Ben did a great job, he’d give us feedback, and pat people on the back when we were done.

turns out that is exactly what product strategy is all about—figuring out the right product is the innovator’s job, not the customer’s job.

The customer only knows what she thinks she wants based on her experience with the current product. The innovator can take into account everything that’s possible, but often must go against what she knows to be true. As a result, innovation requires a combination of knowledge, skill, and courage. Sometimes only the founder has the courage to ignore the data;

Now that we’d improved our competitive position, we went on the offensive. In my weekly staff meeting, I inserted an agenda item titled “What Are We Not Doing?” Ordinarily in a staff meeting, you spend lots of time reviewing, evaluating, and improving all of the things that you do: build products, sell products, support customers, hire employees, and the like. Sometimes, however, the things you’re not doing are the things you should actually be focused on.

Early in my career as an engineer, I’d learned that all decisions were objective until the first line of code was written. After that, all decisions were emotional.

Note to self: It’s a good idea to ask, “What am I not doing?”

“Well, boys, if you are going to have a dog race, then you are going to need a rabbit. And Oracle will be one hell of a rabbit.”

There has been a powerful shift toward the idea that statistical ways of thinking are going to drive the future.” —PETER THIEL

Startup CEOs should not play the odds. When you are building a company, you must believe there is an answer and you cannot pay attention to your odds of finding it. You just have to find it. It matters not whether your chances are nine in ten or one in a thousand; your task is the same.

People always ask me, “What’s the secret to being a successful CEO?” Sadly, there is no secret, but if there is one skill that stands out, it’s the ability to focus and make the best move when there are no good moves. It’s the moments where you feel most like hiding or dying that you can make the biggest difference as a CEO.

In doing so, I follow the first principle of the Bushido—the way of the warrior: keep death in mind at all times. If a warrior keeps death in mind at all times and lives as though each day might be his last, he will conduct himself properly in all his actions. Similarly, if a CEO keeps the following lessons in mind, she will maintain the proper focus when hiring, training, and building her culture.

“Life is struggle.” —KARL MARX

The Struggle is when you wonder why you started the company in the first place. The Struggle is when people ask you why you don’t quit and you don’t know the answer. The Struggle is when your employees think you are lying and you think they may be right. The Struggle is when food loses its taste. The Struggle is when you don’t believe you should be CEO of your company. The Struggle is when you know that you are in over your head and you know that you cannot be replaced. The Struggle is when everybody thinks you are an idiot, but nobody will fire you. The Struggle is where self-doubt becomes self-hatred.

Play long enough and you might get lucky. In the technology game, tomorrow looks nothing like today. If you survive long enough to see tomorrow, it may bring you the answer that seems so impossible today.

Don’t take it personally. The predicament that you are in is probably all your fault. You hired the people. You made the decisions. But you knew the job was dangerous when you took it. Everybody makes mistakes. Every CEO makes thousands of mistakes. Evaluating yourself and giving yourself an F doesn’t help.

Remember that this is what separates the women from the girls. If you want to be great, this is the challenge. If you don’t want to be great, then you never should have started a company.

When you are in the Struggle, nothing is easy and nothing feels right. You have dropped into the abyss and you may never get out. In my own experience, but for some unexpected luck and help, I would have been lost. So to all of you in it, may you find strength and may you find peace.

My single biggest personal improvement as CEO occurred on the day when I stopped being too positive.

In my mind, I was keeping everyone in high spirits by accentuating the positive and ignoring the negative. But my team knew that reality was more nuanced than I was describing it. And not only did they see for themselves the world wasn’t as rosy as I was describing it; they still had to listen to me blowing sunshine up their butts at every company meeting.

After all, I was the founding CEO. I was the one “married” to the company. If things went horribly wrong, they could walk away, but I could not. As a consequence, the employees handled losses much better.

Even more stupidly, I thought that it was my job and my job only to worry about the company’s problems. Had I been thinking more clearly, I would have realized that it didn’t make sense for me to be the only one to worry about, for example, the product not being quite right—because I wasn’t writing the code that would fix it.

A much better idea would have been to give the problem to the people who could not only fix it, but who would also be personally excited and motivated to do so.

Another example: If we lost a big prospect, the whole organization needed to understand why, so that we could together fix the things that were broken in our products, marketing, and sales process. If I insisted on keeping the setbacks to myself, there was no way to jump-start that process.

Without trust, communication breaks. More specifically: In any human interaction, the required amount of communication is inversely proportional to the level of trust.

Telling things as they are is a critical part of building this trust. A CEO’s ability to build this trust over time is often the difference between companies that execute well and companies that are chaotic.

2. The more brains working on the hard problems, the better. In order to build a great technology company, you have to hire lots of incredibly smart people. It’s a total waste to have lots of big brains but not let them work on your biggest problems. A brain, no matter how big, cannot solve a problem it doesn’t know about. As the open-source community would explain it, “Given enough eyeballs, all bugs are shallow.”

A healthy company culture encourages people to share bad news. A company that discusses its problems freely and openly can quickly solve them. A company that covers up its problems frustrates everyone involved. The resulting action item for CEOs: Build a culture that rewards—not punishes—people for getting problems into the open where they can be solved.

If you run a company, you will experience overwhelming psychological pressure to be overly positive. Stand up to the pressure, face your fear, and tell it like it is.

He replied that the layoffs inevitably broke the company’s culture. After seeing their friends laid off, employees were no longer willing to make the requisite sacrifices needed to build a company.

You are laying people off because the company failed to hit its plan. If individual performance were the only issue, then you’d be taking a different measure. Company performance failed. This distinction is critical, because the message to the company and the laid-off individuals should not be “This is great, we are cleaning up performance.” The message must be “The company failed and in order to move forward, we will have to lose some excellent people.” Admitting to the failure may not seem like a big deal, but trust me, it is. “Trust me.” That’s what a CEO says every day to her employees. Trust me: This will be a good company. Trust me: This will be good for your career. Trust me: This will be good for your life. A layoff breaks that trust. In order to rebuild trust, you have to come clean.

Training starts with a golden rule: Managers must lay off their own people. They cannot pass the task to HR or to a more sadistic peer.

If you hired me and I busted my ass working for you, I expect you to have the courage to lay me off yourself.

Once you make it clear that managers must lay off their own people, be sure to prepare them for the task: 1. They should explain briefly what happened and that it is a company rather than a personal failure. 2. They should be clear that the employee is impacted and that the decision is nonnegotiable. 3. They should be fully prepared with all of the details about the benefits and support the company plans to provide.

me—The message is for the people who are staying. The people who stay will care deeply about how you treat their colleagues.

In other words, the wrong way to view an executive firing is as an executive failure; the correct way to view an executive firing is as an interview/integration process system failure.

You did a poor job defining the position in the first place. If you don’t know what you want, you will be unlikely to get it. Far too often, CEOs hire executives based on an abstract notion of what they think and feel the executive should be like. This error often leads to the executive not bringing the key, necessary qualities to the table.

If you don’t have world-class strengths where you need them, you won’t be a world-class company.

It’s great to hire people who can run a large-scale organization if you have one. It’s also great to hire people who know how to grow an organization very fast if you are ready to grow your organization very fast. However, if you do not or you are not, then you need someone who can do the job for the next eighteen months.

You hired for the generic position. There is no such thing as a great CEO, a great head of marketing, or a great head of sales. There is only a great head of sales for your company for the next twelve to twenty-four months.

Running a two-hundred-person global sales organization is not the same job as running a twenty-five-person local sales team. If you get lucky, the person you hired to run the twenty-five-person team will have learned how to run the two-hundred-person team. If not, you need to hire the right person for the new job. This is neither an executive failure nor a system failure; it is life in the big city. Do not attempt to avoid this phenomenon, as you will only make things worse.

Nothing will ensure your success like hiring the right executive who has grown an organization like yours very quickly and successfully before.

Also, do not hire this person if you are not ready to give them lots of budget to grow their organization; expect them to do what they do. The successful fast-growth executive is so important to building successful startups that recruiters and venture capitalists often advise CEOs to bring them in before the company is ready.

Leaving a failing leader in place will cause an entire department in your company to slowly rot. Let that happen and the board will be more than alarmed.

you cannot let him keep his job, but you absolutely can let him keep his respect.”

The correct order for informing the company is (1) the executive’s direct reports—because they will be most impacted; (2) the other members of your staff—because they will need to answer questions about it; and (3) the rest of the company.

Generally, it’s smart for the CEO to act in the executive role in the meanwhile. If you do act in the role, you must really act—staff meetings, one-on-ones, objective setting, etc. Doing so will provide excellent continuity for the team and greatly inform your thinking on whom to hire next.

When you expect your employees to act like adults, they generally do. If you treat them like children, then get ready for your company to turn into one big Barney episode.

You must consider first all of the other employees and second your friend. The good of the individual must be sacrificed for the good of the whole.

When a company starts to lose its major battles, the truth often becomes the first casualty. CEOs and employees work tirelessly to develop creative narratives that help them avoid dealing with the obvious facts. Despite their intense creativity, many companies often end up with the same false explanations.

“Just because we missed the intermediate milestones doesn’t mean we won’t hit our product schedule.” In engineering meetings where there is great pressure to ship on time—a customer commitment, a quarter that depends on it, or a competitive imperative—everybody hopes for good news. When the facts don’t align with the good news, a clever manager will find the narrative to make everybody feel better—until the next meeting.

Andy explained that humans, particularly those who build things, only listen to leading indicators of good news. For example, if a CEO hears that engagement for her application increased an incremental 25 percent beyond the normal growth rate one month, she will be off to the races hiring more engineers to keep up with the impending tidal wave of demand. On the other hand, if engagement decreases 25 percent, she will be equally intense and urgent in explaining it away: “The site was slow that month, there were four holidays, and we made a UI change that caused all the problems. For gosh sakes, let’s not panic!”

If this advice sounds too familiar, and you find yourself wondering why your honest employees are lying to you, the answer is they are not. They are lying to themselves. And if you believe them, you are lying to yourself.

All these approaches reinforced to me was that we weren’t facing a market problem. The customers were buying; they just weren’t buying our product. This was not a time to pivot. So I said the same thing to every one of them: “There are no silver bullets for this, only lead bullets.” They did not want to hear that, but it made things clear: We had to build a better product. There was no other way out. No window, no hole, no escape hatch, no back door. We had to go through the front door and deal with the big, ugly guy blocking it. Lead bullets.

There comes a time in every company’s life where it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself, “If our company isn’t good enough to win, then do we need to exist at all?”

A great reason for failing won’t preserve one dollar for your investors, won’t save one employee’s job, or get you one new customer. It especially won’t make you feel one bit better when you shut down your company and declare bankruptcy.

All the mental energy you use to elaborate your misery would be far better used trying to find the one seemingly impossible way out of your current mess. Spend zero time on what you could have done, and devote all of your time on what you might do. Because in the end, nobody cares; just run your company.

In enterprise software companies, the two most important positions tend to be VP of sales and VP of engineering.

I’d learned the hard way that when hiring executives, one should follow Colin Powell’s instructions and hire for strength rather than lack of weakness. By running sales, I understood very clearly the strengths we needed. I made a careful list and set out to find the sales executives with the right skills and talents for Opsware.

In times of peace, one has time to care about things like appropriateness, long-term cultural consequences, and people’s feelings. In times of war, killing the enemy and getting the troops safely home is all that counts.

“We take care of the people, the products, and the profits—in that order.” It’s a simple saying, but it’s deep. “Taking care of the people” is the most difficult of the three by far and if you don’t do it, the other two won’t matter. Taking care of the people means that your company is a good place to work. Most workplaces are far from good. As organizations grow large, important work can go unnoticed, the hardest workers can get passed over by the best politicians, and bureaucratic processes can choke out the creativity and remove all the joy.

If your company is a good place to work, you too may live long enough to find your glory.

The more I thought about it, the more I realized that while I had told the team “what” to do, I had not been clear about “why” I wanted them to do it. Clearly, my authority alone was not enough to get them to do what I wanted. Given the large number of things that we were trying to accomplish, managers couldn’t get to everything and came up with their own priorities. Apparently, this manager didn’t think that meeting with his people was all that important and I hadn’t explained to him why it was so important.

Me: “Let me break it down for you. In good organizations, people can focus on their work and have confidence that if they get their work done, good things will happen for both the company and them personally. It is a true pleasure to work in an organization such as this. Every person can wake up knowing that the work they do will be efficient, effective, and make a difference for the organization and themselves. These things make their jobs both motivating and fulfilling. “In a poor organization, on the other hand, people spend much of their time fighting organizational boundaries, infighting, and broken processes. They are not even clear on what their jobs are, so there is no way to know if they are getting the job done or not. In the miracle case that they work ridiculous hours and get the job done, they have no idea what it means for the company or their careers. To make it all much worse and rub salt in the wound, when they finally work up the courage to tell management how fucked-up their situation is, management denies there is a problem, then defends the status quo, then ignores the problem.”

Being a good company doesn’t matter when things go well, but it can be the difference between life and death when things go wrong.   Things always go wrong.   Being a good company is an end in itself.

In fact, the only thing that keeps an employee at a company when things go horribly wrong—other than needing a job—is that she likes her job.

If you do nothing else, be like Bill and build a good company.

People at McDonald’s get trained for their positions, but people with far more complicated jobs don’t. It makes no sense.

Would you want to stand on the line of the untrained person at McDonald’s? Would you want to use the software written by the engineer who was never told how the rest of the code worked? A lot of companies think their employees are so smart that they require no training. That’s silly.

Then I read chapter 16 of Andy Grove’s management classic, High Output Management, titled “Why Training Is the Boss’s Job,” and it changed my career. Grove wrote, “Most managers seem to feel that training employees is a job that should be left to others. I, on the other hand, strongly believe that the manager should do it himself.”

but the most important statistic is missing: How many fully productive employees have they added?

Training is, quite simply, one of the highest-leverage activities a manager can perform. Consider for a moment the possibility of your putting on a series of four lectures for members of your department. Let’s count on three hours preparation for each hour of course time—twelve hours of work in total. Say that you have ten students in your class. Next year they will work a total of about twenty thousand hours for your organization. If your training efforts result in a 1 percent improvement in your subordinates’ performance, your company will gain the equivalent of two hundred hours of work as the result of the expenditure of your twelve hours.

When you fired the person, how did you know with certainty that the employee both understood the expectations of the job and was still missing them?

If you don’t train your people, you establish no basis for performance management. As a result, performance management in your company will be sloppy and inconsistent.

I found that there were two primary reasons why people quit:   They hated their manager; generally the employees were appalled by the lack of guidance, career development, and feedback they were receiving.   They weren’t learning anything: The company wasn’t investing resources in helping employees develop new skills. An outstanding training program can address both issues head-on.

The other essential component of a company’s training program is management training. Management training is the best place to start setting expectations for your management team. Do you expect them to hold regular one-on-one meetings with their employees? Do you expect them to give performance feedback? Do you expect them to train their people? Do you expect them to agree on objectives with their team? If you do, then you’d better tell them, because the management state of the art in technology companies is extremely poor. Once you’ve set expectations, the next set of management courses has already been defined; they are the courses that teach your managers how to do the things you expect (how to write a performance review or how to conduct a one-on-one).

Teaching can also become a badge of honor for employees who achieve an elite level of competence.

The first thing to recognize is that no startup has time to do optional things. Therefore, training must be mandatory.

there are only two ways for a manager to improve the output of an employee: motivation and training.

Enforce management training by teaching it yourself. Managing the company is the CEO’s job. While you won’t have time to teach all of the management courses yourself, you should teach the course on management expectations, because they are, after all, your expectations. Make it an honor to participate in these sessions by selecting the best managers on your team to teach the other courses. And make that mandatory, too.

Ironically, the biggest obstacle to putting a training program in place is the perception that it will take too much time. Keep in mind that there is no investment that you can make that will do more to improve productivity in your company. Therefore, being too busy to train is the moral equivalent of being too hungry to eat. Furthermore, it’s not that hard to create basic training courses.

At this point, you might be thinking, “If Mitchell is leaving, then logically my friend Cathy should want him to go to my company rather than to a competitor or a company with a CEO whom she doesn’t like.” Maybe Cathy will see it that way, but probably not. People generally leave companies when things are not going well, so you should assume that Cathy is fighting for her company’s life. In this situation, nothing will cut her deeper than losing a great employee, because she knows that the other employees will see that as a leading indicator of the company’s demise. Even more damaging for Cathy is the fact that her employees will perceive your move as an act of betrayal—Cathy’s so-called friend is raiding her company. They will think, “Cathy is such an ineffective CEO that she cannot even keep her friends from hiring her people.” In this way, a logical issue quickly becomes an emotional one.

So you’ve achieved product market fit and you are ready to start building the company. The board encourages you to bring in some “been there, done that” executives who will provide the right financial, sales, and marketing expertise to help you transition from a world-class product to a world-class business.

In contrast, when you are a startup executive, nothing happens unless you make it happen. In the early days of a company, you have to take eight to ten new initiatives a day or the company will stand still. There is no inertia that’s putting the company in motion. Without massive input from you, the company will stay at rest.

Make sure that they “get it.” Content-free executives have no value in startups. Every executive must understand the product, the technology, the customers, and the market. Force your newbie to learn these things. Consider scheduling a daily meeting with your new executive. Require them to bring a comprehensive set of questions about everything they heard that day but did not completely understand. Answer those questions in depth; start with first principles. Bring them up to speed fast. If they don’t have any questions, consider firing them. If in thirty days you don’t feel that they are coming up to speed, definitely fire them.

Nothing will accelerate your company’s development like hiring someone who has experience building a very similar company at larger scale. However, doing so can be fraught with peril. Make sure to pay attention to the important leading indicators of success and failure.

The biggest difference between being a great functional manager and being a great general manager—and particularly a great CEO—is that as a general manager, you must hire and manage people who are far more competent at their jobs than you would be at their jobs. In fact, often you will have to hire and manage people to do jobs that you have never done. How many CEOs have been head of HR, engineering, sales, marketing, finance, and legal? Probably none.

Tony Robbins says, “If you don’t know what you want, the chances that you’ll get it are extremely low.”

Valuing lack of weakness rather than strength The more experience you have, the more you realize that there is something seriously wrong with every employee in your company (including you). Nobody is perfect.

The very best way to know what you want is to act in the role. Not just in title, but in real action. In my career, I’ve been acting VP of HR, CFO, and VP of sales. Often CEOs resist acting in functional roles, because they worry that they lack the appropriate knowledge. This worry is precisely why you should act—to get the appropriate knowledge. Indeed, acting is really the only way to get all the knowledge that you need to make the hire, because you are looking for the right executive for your company today, not a generic executive.

Our hockey stick was so bad that one quarter, we booked 90 percent of our new bookings on the last day of the quarter. Sales patterns like this make it difficult to plan the business and are particularly harrowing when you are, as we were, a public company.

Sun Tzu, in his classic work The Art of War, warns that giving the team a task that it cannot possibly perform is called crippling the army.

At a basic level, metrics are incentives. By measuring quality, features, and schedule and discussing them at every staff meeting, my people focused intensely on those metrics to the exclusion of other goals. The metrics did not describe the real goals and I distracted the team as a result.

It’s important to supplement a great product vision with a strong discipline around the metrics, but if you substitute metrics for product vision, you will not get what you want.

The white box goes beyond the numbers and gets into how the organization produced the numbers. It penalizes managers who sacrifice the future for the short term and rewards those who invest in the future even if that investment cannot be easily measured.

It is easy to see that there are many ways for leaders to be misinterpreted. To get things right, you must recognize that anything you measure automatically creates a set of employee behaviors. Once you determine the result you want, you need to test the description of the result against the employee behaviors that the description will likely create. Otherwise, the side-effect behaviors may be worse than the situation you were trying to fix.

While you may be able to borrow time by writing quick and dirty code, you will eventually have to pay it back—with interest. Often this trade-off makes sense, but you will run into serious trouble if you fail to keep the trade-off in the front of your mind.

Like technical debt, management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence. Like technical debt, the trade-off sometimes makes sense, but often does not. More important, if you incur the management debt without accounting for it, then you will eventually go management bankrupt.

1. Putting two in the box 2. Overcompensating a key employee, because she gets another job offer 3. No performance management or employee feedback process

Your company now employs twenty-five people and you know that you should formalize the performance management process, but you don’t want to pay the price. You worry that doing so will make it feel like a “big company.” Moreover, you do not want your employees to be offended by the feedback, because you can’t afford to lose anyone right now. And people are happy, so why rock the boat? Why not take on a little management debt? The first noticeable payments will be due when somebody performs below expectations: CEO: “He was good when we hired him; what happened?” Manager: “He’s not doing the things that we need him to do.” CEO: “Did we clearly tell him that?” Manager: “Maybe not clearly …” However, the larger payment will be a silent tax. Companies execute well when everybody is on the same page and everybody is constantly improving. In a vacuum of feedback, there is almost no chance that your company will perform optimally across either dimension. Directions with no corrections will seem fuzzy and obtuse. People rarely improve weakness they are unaware of. The ultimate price you will pay for not giving feedback: systematically crappy company performance.

Every really good, really experienced CEO I know shares one important characteristic: They tend to opt for the hard answer to organizational issues. If faced with giving everyone the same bonus to make things easy or with sharply rewarding performance and ruffling many feathers, they’ll ruffle the feathers. If given the choice of cutting a popular project today, because it’s not in the long-term plans or you’re keeping it around for morale purposes and to appear consistent, they’ll cut it today. Why? Because they’ve paid the price of management debt, and they would rather not do that again.

Ironically one of the first things you learn when you run an engineering organization is that a good quality assurance organization cannot build a high-quality product, but it can tell you when the development team builds a low quality product. Similarly, a high quality human resources organization cannot make you a well-managed company with a great culture, but it can tell you when you and your managers are not getting the job done.

Sometimes an organization doesn’t need a solution; it just needs clarity.

Sometimes the right policy is the one that the CEO can follow.

In fact, it’s often the least political CEOs who run the most ferociously political organizations. Apolitical CEOs frequently—and accidentally—encourage intense political behavior.

What do I mean by politics? I mean people advancing their careers or agendas by means other than merit and contribution.

Minimizing politics often feels totally unnatural. It’s counter to excellent management practices such as being open-minded and encouraging employee development.

The difference between managing executives and managing more junior employees can be thought of as the difference between being in a fight with someone with no training and being in a ring with a professional boxer.

As defined by Andy Grove, the right kind of ambition is ambition for the company’s success with the executive’s own success only coming as a by-product of the company’s victory. The wrong kind of ambition is ambition for the executive’s personal success regardless of the company’s outcome.

Build strict processes for potentially political issues and do not deviate. Certain activities attract political behavior. These activities include:   Performance evaluation and compensation   Organizational design and territory   Promotions

By conducting well-structured, regular performance and compensation reviews, you will ensure that pay and stock increases are as fair as possible. This is especially important for executive compensation, since doing so will also serve to minimize politics.

Ideally, the executive compensation process should involve the board of directors. This will help ensure good governance and make exceptions even more difficult.

You should evaluate your organizational design on a regular basis and gather the information that you need to decide without tipping people off to what you plan to do. Once you decide, you should immediately execute the reorg: Don’t leave time for leaks and lobbying.

Every time your company gives someone a promotion, everyone else at that person’s organizational level evaluates the promotion and judges whether merit or political favors yielded it.

Therefore, you must have a formal, visible, defensible promotion process that governs every employee promotion. Often this process must be different for people on your own staff. (The general process may involve various managers who are familiar with the employee’s work; the executive process should include the board of directors.)

Be careful with “he said, she said” Once your organization grows to a significant size, members of your team will from time to time complain about each other. Sometimes this criticism will be extremely aggressive. Be careful about how you listen and the message that it sends. Simply by hearing them out without defending the employee in question, you will send the message that you agree.

There are two distinct types of complaints that you will receive: 1. Complaints about an executive’s behavior 2. Complaints about an executive’s competency or performance Generally, the best way to handle the first type of complaint is to get the complaining executive and the targeted executive in the room together and have them explain themselves. Usually, simply having this meeting will resolve the conflict and correct the behavior and improve the relationship (if it was actually broken). Do not attempt to address behavioral issues without both executives in the room. Doing so will invite manipulation and politics.

While I’ve seen executives improve their performance and skill sets, I’ve never seen one lose the support of the organization and then regain it.

On the other hand, if the complaint is new news, then you must immediately stop the conversation and make clear to the complaining executive that you in no way agree with their assessment. You do not want to cripple the other executive before you reevaluate his performance. You do not want the complaint to become a self-fulfilling prophecy. Once you’ve shut down the conversation, you must quickly reassess the employee in question. If you find he is doing an excellent job, you must figure out the complaining executive’s motivations and resolve them. Do not let an accusation of this magnitude fester. If you find that the employee is doing a poor job, there will be time to go back and get the complaining employee’s input, but you should be on a track to remove the poor performer at that point.

As CEO, you must consider the systemic incentives that result from your words and actions. While it may feel good in the moment to be open, responsive, and action oriented, be careful not to encourage all the wrong things.

At a macro level, a company will be most successful if the senior managers optimize for the company’s success (think of this as a global optimization) as opposed to their own personal success (local optimization).

Nothing motivates a great employee more than a mission that’s so important that it supersedes everyone’s personal ambition. As a result, managers with the right kind of ambition tend to be radically more valuable than those with the wrong kind.

At a macro level, everybody views the world through her own personal prism. When interviewing candidates, it’s helpful to watch for small distinctions that indicate whether they view the world through the “me” prism or the “team” prism.

Since this was a sales position, I should mention (in reference to the commenter above) that ambition for the company above one’s own goals is particularly important for the head of sales.

The local incentives in sales are particularly strong and difficult to balance without the right kind of leadership.   The sales organization is the face of the company to the outside world. If that group optimizes for itself, your company will have a major problem.   In high-tech companies, fraud generally starts in sales due to managers attempting to perfect the ultimate local optimization.

While it may work to have individual employees who optimize for their own careers, counting on senior managers to do all the right things for all the wrong reasons is a dangerous idea.

Because titles will be used to calculate relative value, they must be managed carefully.

The Law of Crappy People states: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title.

Ideally, the promotion process should yield a result similar to the very best karate dojos. In top dojos, in order to achieve the next level (for example, being promoted from a brown belt to a black belt), you must defeat an opponent in combat at that level. This guarantees that a new black belt is never a worse fighter than the worst current black belt.

To begin, start with an extremely crisp definition not only of the responsibilities at each level but also of the skill required to perform the duties. When describing the skills, avoid the generic characterizations such as “must be competent at managing a P&L” or “must have excellent management skills.” In fact, the best leveling tools get extremely specific and even name names: “should be a superstar recruiter—as good as Jenny Rogers.”

One way to level across groups is to hold a regular promotions council that reviews every significant promotion in the company. When a manager wishes to promote an employee, she will submit that employee for review with an explanation of why she believes her employee satisfies the skill criteria required for the level. The committee should then compare the employee with both the level’s skill description and the skills of the other employees at that level to determine whether to approve the promotion.

You might think that so much time spent on promotions and titles places too much importance and focus on silly formalisms. The opposite is true. Without a well thought out, disciplined process for titles and promotions, your employees will become obsessed with the resulting inequities. If you structure things properly, nobody other than you will spend much time thinking about titles other than Employee of the Month.

In business, intelligence is always a critical element in any employee, because what we do is difficult and complex and the competitors are filled with extremely smart people. However, intelligence is not the only important quality. Being effective in a company also means working hard, being reliable, and being an excellent member of the team.

A company is a team effort and, no matter how high an employee’s potential, you cannot get value from him unless he does his work in a manner in which he can be relied upon.

As a company grows, its biggest challenge always becomes communication.

“If you hold the bus for everyone on the team, then you’ll be so late you’ll miss the game, so you can’t do that. The bus must leave on time. However, sometimes you’ll have a player that’s so good that you hold the bus for him, but only him.”

The short answer is time. As a technology startup, from the day you start until your last breath, you will be in a furious race against time.

Hiring someone who has already done what you are trying to do can radically speed up your time to success.

But CEO, beware: Hiring senior people into a startup is kind of like an athlete taking performance-enhancing drugs.

The proper reason to hire a senior person is to acquire knowledge and experience in a specific area.

One good test for determining whether to go with outside experience versus internal promotion is to figure out whether you value inside knowledge or outside knowledge more for the position. For example, for engineering managers the comprehensive knowledge of the code base and engineering team is usually more important and difficult to acquire than knowledge of how to run scalable engineering organizations. As a result, you might very well value the knowledge of your own organization more than that of the outside world.

In hiring someone to sell your product to large enterprises, the opposite is true. Knowing how your target customers think and operate, knowing their cultural tendencies, understanding how to recruit and measure the right people in the right regions of the world to maximize your sales—these things turn out to be far more valuable than knowing your own company’s product and culture. This is why when the head of engineering gets promoted from within, she often succeeds. When the head of sales gets promoted from within, she almost always fails. Asking yourself, “Do I value internal or external knowledge more for this position?” will help you determine whether to go for experience or youth.

• @gabrielhdm

Senior people pose several important challenges:   They come with their own culture. They will bring the habits, the communication style, and values from the company they grew up in. It’s very unlikely these will match your environment exactly.   They will know how to work the system. Because senior people come from larger environments, they usually develop the skills to navigate and be effective in those environments. These skills may seem political and unusual in your environment.   You don’t know the job as well as they do. In fact, you are hiring them precisely because you don’t know how to do the job. So how do you hold them accountable for doing a good job?

Perhaps most important, set a high and clear standard for performance. If you want to have a world-class company, you must make sure that the people on your staff—be they young or old—are world-class.

Be careful not to set a low bar because you have not done the work to know what good is.

Once you determine a high yet achievable performance bar, hold your executive to that high standard even if you have no idea how they might achieve it.

It’s not your job to figure out how to create an incredible brand, tilt the playing field by cutting a transformational deal, or achieve a sales goal that nobody thought possible—that’s what you are paying them to do. That’s why you hired them.

He breaks performance down into four distinct areas: 1. Results against objectives Once you’ve set a high standard, it will be straightforward to measure your executive against that standard. 2. Management Even if an executive does a superb job achieving her goals, that doesn’t mean she is building a strong and loyal team. It’s important to understand how well she is managing, even if she is hitting her goals. 3. Innovation It’s quite possible for an executive to hit her goal for the quarter by ignoring the future. For example, a great way for an engineering manager to hit her goals for features and dates is by building a horrible architecture, which won’t even support the next release. This is why you must look beyond the black-box results and into the sausage factory to see how things get made. 4. Working with peers This may not be intuitive at first, but executives must be effective at communicating, supporting, and getting what they need from the other people on your staff. Evaluate them along this dimension.

But if you want to make something from nothing, you have to take risks and you have to win your race against time. This means acquiring the very best talent, knowledge, and experience even if it requires dealing with some serious age diversity.

Perhaps the CEO’s most important operational responsibility is designing and implementing the communication architecture for her company. The architecture might include the organizational design, meetings, processes, email, yammer, and even one-on-one meetings with managers and employees. Absent a well-designed communication architecture, information and ideas will stagnate, and your company will degenerate into a bad place to work.

The key to a good one-on-one meeting is the understanding that it is the employee’s meeting rather than the manager’s meeting. This is the free-form meeting for all the pressing issues, brilliant ideas, and chronic frustrations that do not fit neatly into status reports, email, and other less personal and intimate mechanisms.

Some questions that I’ve found to be very effective in one-on-ones:   If we could improve in any way, how would we do it?   What’s the number-one problem with our organization? Why?   What’s not fun about working here?   Who is really kicking ass in the company? Whom do you admire?   If you were me, what changes would you make?   What don’t you like about the product?   What’s the biggest opportunity that we’re missing out on?   What are we not doing that we should be doing?   Are you happy working here?

Ask ten founders about company culture and what it means and you’ll get ten different answers. It’s about office design, it’s about screening out the wrong kinds of employees, it’s about values, it’s about fun, it’s about alignment, it’s about finding like-minded employees, it’s about being cultlike.

The primary thing that any technology startup must do is build a product that’s at least ten times better at doing something than the current prevailing way of doing that thing. Two or three times better will not be good enough to get people to switch to the new thing fast enough or in large enough volume to matter. The second thing that any technology startup must do is to take the market.

If it’s possible to do something ten times better, it’s also possible that you won’t be the only company to figure that out. Therefore, you must take the market before somebody else does. Very few products are ten times better than the competition’s, so unseating the new incumbent is much more difficult than unseating the old one.

So, why bother with culture at all? Three reasons: 1. It matters to the extent that it can help you achieve the above goals. 2. As your company grows, culture can help you preserve your key values, make your company a better place to work, and help it perform better in the future. 3. Perhaps most important, after you and your people go through the inhuman amount of work that it will take to build a successful company, it will be an epic tragedy if your company culture is such that even you don’t want to work there.

If you put something into your culture that is so disturbing that it always creates a conversation, it will change behavior.

Shock is a great mechanism for behavioral change.

Designing a proper company culture will help you get your company to do what you want in certain important areas for a very long time.

So, if you want to do something that matters, then you are going to have to learn the black art of scaling a human organization.

When you scale an organization, you will also need to give ground grudgingly. Specialization, organizational structure, and process all complicate things and implementing them will feel like you are moving away from common knowledge and quality communication. It is very much like the offensive lineman taking a step backward. You will lose ground, but you will prevent your company from descending into chaos.

Your goal is to choose the least of all evils. Think of the organizational design as the communications architecture for your company. If you want people to communicate, the best way to accomplish that is to make them report to the same manager. By contrast, the further away people are in the organizational chart, the less they will communicate. The organizational design is also the architecture for how the company communicates with the outside world. For example, you might want to organize your sales force by product to maximize communication with the relevant product groups and maximize the product competency of the sales force. If you do that, then you will do so at the expense of simplicity for customers who buy multiple products and will now have to deal with multiple salespeople.

A process is a formal, well-structured communication vehicle. It can be a heavily engineered Six Sigma process or it can be a well-structured regular meeting. The size of the process should be scaled up or down to meet the needs of the communication challenge that it facilitates.

Who should design a process? The people who are already doing the work in an ad hoc manner. They know what needs to be communicated and to whom. Naturally they will be the right group to formalize the existing process and make it scalable.

It’s good to anticipate growth, but it’s bad to overanticipate growth.

You should evaluate your team at least once a quarter on all dimensions.

The relevant question isn’t whether an executive can scale; it’s whether the executive can do the job at the current scale.

Asking yourself whether an executive is great can be extremely difficult to answer. A better question: For this company at this exact point in time, does there exist an executive who I can hire who will be better? If my biggest competitor hires that person, how will that impact our ability to win?

Predicting whether an executive can scale corrupts your ability to manage, is unfair, and doesn’t work.

Perhaps the most important thing that I learned as an entrepreneur was to focus on what I needed to get right and stop worrying about all the things that I did wrong or might do wrong.

It’s like the fight club of management: The first rule of the CEO psychological meltdown is don’t talk about the psychological meltdown.

Generally, someone doesn’t become a CEO unless she has a high sense of purpose and cares deeply about the work she does. In addition, a CEO must be accomplished enough or smart enough that people will want to work for her.

The first problem is that everybody learns to be a CEO by being a CEO. No training as a manager, general manager, or in any other job actually prepares you to run a company.

Seeing people fritter away money, waste each other’s time, and do sloppy work can make you feel bad. If you are the CEO, it may well make you sick. And to rub salt into the wound and make matters worse, it’s your fault.

If someone was promoted for all the wrong reasons, that was my fault. If we missed the quarterly earnings target, that was my fault. If a great engineer quit, that was my fault. If the sales team made unreasonable demands on the product organization, that was my fault. If the product had too many bugs, that was my fault. It kind of sucked to be me. Being responsible for everything and getting a 22 on the test starts to weigh on your consciousness.

Ideally, the CEO will be urgent yet not insane. She will move aggressively and decisively without feeling emotionally culpable. If she can separate the importance of the issues from how she feels about them, she will avoid demonizing her employees or herself.

The key to getting to the right outcome was to keep from getting married to either the positive or the dark narrative.

If you don’t like choosing between horrible and cataclysmic, don’t become CEO.

When someone learns to drive a race car, one of the first lessons taught is that when you are going around a curve at 200 mph, do not focus on the wall; focus on the road. If you focus on the wall, you will drive right into it. If you focus on the road, you will follow the road. Running a company is like that. There are always a thousand things that can go wrong and sink the ship. If you focus too much on them, you will drive yourself nuts and likely crash your company. Focus on where you are going rather than on what you hope to avoid.

Great CEOs face the pain. They deal with the sleepless nights, the cold sweats, and what my friend the great Alfred Chuang (legendary cofounder and CEO of BEA Systems) calls “the torture.” Whenever I meet a successful CEO, I ask them how they did it. Mediocre CEOs point to their brilliant strategic moves or their intuitive business sense or a variety of other self-congratulatory explanations. The great CEOs tend to be remarkably consistent in their answers. They all say, “I didn’t quit.”

The man who is yellow refuses to face up to what he’s got to face. The hero is more disciplined and he fights those feelings off and he does what he has to do. But they both feel the same, the hero and the coward. People who watch you judge you on what you do, not how you feel.”

Because the founders do not have the courage to decide who is in charge, every employee suffers the inconvenience of double approval.

Frequently, some of the employees and board members are more experienced and more intelligent than the CEO. The only reason the CEO can make a better decision is her superior knowledge.

In life, everybody faces choices between doing what’s popular, easy, and wrong versus doing what’s lonely, difficult, and right. These decisions intensify when you run a company, because the consequences get magnified a thousandfold. As in life, the excuses for CEOs making the wrong choice are always plentiful.

Every time you make the hard, correct decision you become a bit more courageous and every time you make the easy, wrong decision you become a bit more cowardly. If you are CEO, these choices will lead to a courageous or cowardly company.

Over the past ten years, technological advances have dramatically lowered the financial bar for starting a new company, but the courage bar for building a great company remains as high as it has ever been.

I will focus the discussion on two core skills for running an organization: First, knowing what to do. Second, getting the company to do what you know.

details required to run a company, such as process design, goal setting, structured accountability, training, and performance management.

The primary purpose of the organizational hierarchy in a company is decision-making efficiency.

If you’re a One, it can be counterproductive to have another One on your staff, because she will want to set her own direction rather than follow yours. This kind of strategic contention can confuse the organization and send employees in opposing directions. As a result, many great One CEOs employ primarily Twos and Functional Ones on their staff.

CEO transition is hard. If you bring people in from the outside, you lower your chances for success. If you promote from within, you must deal with the One-Two phenomenon. Ideally, you’ll promote a One and the rest of the executive team will be glad you did. Too bad things are rarely ideal.

For our purposes, we can generalize this to be the measure of the quality of a leader: the quantity, quality, and diversity of people who want to follow her.

The ability to articulate the vision   The right kind of ambition   The ability to achieve the vision

The first thing that any successful CEO must do is get really great people to work for her. Smart people do not want to work for people who do not have their interests in mind and in heart.

Truly great leaders create an environment where the employees feel that the CEO cares more about the employees than she cares about herself. In this kind of environment, an amazing thing happens: A huge number of employees believe it’s their company and behave accordingly.

A CEO should never be so confident that she stops improving her skills.

In the end, some attributes of leadership can be improved more than others, but every CEO should work on all three. Furthermore, each attribute enhances all three. If people trust you, they will listen to your vision even if it is less articulate. If you are super-competent, they will trust you and listen to you. If you can paint a brilliant vision, people will be patient with you as you learn the CEO skills and give you more leeway with respect to their interests.

Peacetime in business means those times when a company has a large advantage over the competition in its core market, and its market is growing. In times of peace, the company can focus on expanding the market and reinforcing the company’s strengths. In wartime, a company is fending off an imminent existential threat. Such a threat can come from a wide range of sources, including competition, dramatic macroeconomic change, market change, supply chain change, and so forth.

In peacetime, leaders must maximize and broaden the current opportunity. As a result, peacetime leaders employ techniques to encourage broad-based creativity and contribution across a diverse set of possible objectives. In wartime, by contrast, the company typically has a single bullet in the chamber and must, at all costs, hit the target. The company’s survival in wartime depends upon strict adherence and alignment to the mission.

If you do what feels most natural as a CEO, you may also get knocked cold.

Being CEO requires lots of unnatural motion. From an evolutionary standpoint, it is natural to do things that make people like you. It enhances your chances for survival. Yet to be a good CEO, in order to be liked in the long run, you must do many things that will upset people in the short run. Unnatural things.

Doing so would be quite bizarre, but evaluating people’s performances and constantly giving feedback is precisely what a CEO must do. If she doesn’t, the more complex motions such as writing reviews, taking away territory, handling politics, setting compensation, and firing people will be either impossible or handled rather poorly.

Giving feedback turns out to be the unnatural atomic building block atop which the unnatural skill set of management gets built. But how does one master the unnatural?

Watered-down feedback can be worse than no feedback at all because it’s deceptive and confusing to the recipient.

You may be the CEO and you may be telling somebody about something that you don’t like or disagree with, but that doesn’t mean you’re right. Your employee should know more about her function than you. She should have more data than you. You may be wrong. As a result, your goal should be for your feedback to open up rather than close down discussion. Encourage people to challenge your judgment and argue the point to conclusion. Culturally, you want high standards thoroughly discussed. You want to apply tremendous pressure to get the highest-quality thinking yet be open enough to find out when you are wrong.

Once you’ve mastered the keys, you should practice what you’ve mastered all the time. As CEO, you should have an opinion on absolutely everything. You should have an opinion on every forecast, every product plan, every presentation, and even every comment. Let people know what you think. If you like someone’s comment, give her the feedback. If you disagree, give her the feedback. Say what you think. Express yourself.

If you are a founder CEO and you feel awkward or incompetent when doing some of these things and believe there is no way that you’ll be able to do it when your company is one hundred or one thousand people, welcome to the club. That’s exactly how I felt. So did every CEO I’ve ever met. This is the process. This is how you get made.

1. Does the CEO know what to do? 2. Can the CEO get the company to do what she knows? 3. Did the CEO achieve the desired results against an appropriate set of objectives?

The CEO must set the context within which every employee operates. The context gives meaning to the specific work that people do, aligns interests, enables decision making, and provides motivation. Well-structured goals and objectives contribute to the context, but they do not provide the whole story. More to the point, they are not the story. The story of the company goes beyond quarterly or annual goals and gets to the hard-core question of why. Why should I join this company? Why should I be excited to work here? Why should I buy its product? Why should I invest in the company? Why is the world better off as a result of this company’s existence?

When a company clearly articulates its story, the context for everyone—employees, partners, customers, investors, and the press—becomes clear.

The CEO doesn’t have to be the creator of the vision. Nor does she have to be the creator of the story. But she must be the keeper of the vision and the story. As such, the CEO ensures that the company story is clear and compelling.

The story is not the mission statement; the story does not have to be succinct. It is the story. Companies can take as long as they need to tell it, but they must tell it and it must be compelling. A company without a story is usually a company without a strategy.

Some employees make products, some make sales; the CEO makes decisions. Therefore, a CEO can most accurately be measured by the speed and quality of those decisions. Great decisions come from CEOs who display an elite mixture of intelligence, logic, and courage.

As already noted, courage is particularly important, because every decision that a CEO makes is based on incomplete information. At the time of any given decision, the CEO will generally have less than 10 percent of the information typically present in the post hoc Harvard Business School case study.

What are the competitors likely to do?   What’s possible technically and in what time frame?   What are the true capabilities of the organization and how can you maximize them?   How much financial risk does this imply?   What will the issues be, given your current product architecture?   Will the employees be energized or despondent about this promotion?

Winning strategies are built on comprehensive knowledge gathered in every interaction the CEO has with an employee, a customer, a partner, or an investor.

In order for a company to execute a broad set of decisions and initiatives, it must:   Have the capacity to do so. In other words, the company must contain the necessary talent in the right positions to execute the strategy.   Be a place where every employee can get things accomplished. The employees must be motivated, communication must be strong, the amount of common knowledge must be vast, and the context must be clear.

The CEO is responsible for the executive team plus the fundamental interview and hiring processes for all employees. She must make sure the company sources the best candidates and the screening processes yield the candidates with the right combination of talent and skills.

Ensuring the quality of the team is a core part of running the company. Great CEOs constantly assess whether they are building the best team.

The second part of the evaluation determines whether the CEO can effectively run the company. To test this, I like to ask this question: “How easy is it for any given individual contributor to get her job done?”

The skills required range from organizational design to performance management. They involve the incentive structure and the communication architecture that drive and enable every individual employee.

CEOs should be evaluated against their company’s opportunity—not somebody else’s company.

The white-box CEO evaluation criteria—“Does the CEO know what to do?” and “Can the CEO get the company to do it?”—will do a much better job of predicting the future.

I am telling this story today because just when you think there are things you can count on in business, you quickly find that the sky is purple. When this happens, it usually does no good to keep arguing that the sky is blue. You just have to get on and deal with the fact that it’s going to look like Barney for a while.

It’s true that if you sign up for something and you don’t do it, you let everyone in the organization down. This type of letdown can be contagious. Holding people accountable for their promises is a critical factor in getting things done. This changes as the degree of difficulty in fulfilling the promise increases. Promising to complete a piece of marketing collateral or send an email is different from promising to meet an engineering schedule that involves solving some fundamentally hard computer science problem.

1. How senior is she? If she’s your chief architect, you’ll need her to get better at scoping her work or she’s going to trash the organization. If she is more junior, this should be more a teaching moment than a scolding moment. 2. How hard was it? If it was a miracle that you ever made that piece of crap scale, then you shouldn’t yell at her. In fact, you should thank her. If it was a relatively trivial project that just took too long, then you need to address that. 3. Was the original risk the right one to take? Would the product really have run out of scale in the short-to-medium term? If the answer is yes, then whether it took three months or nine months, it was the right risk to take and if faced with the same situation again, you probably should not change any of your actions. You shouldn’t be wringing your hands about that.

In the technology business, you rarely know everything up front. The difference between being mediocre and magical is often the difference between letting people take creative risk and holding them too tightly accountable. Accountability is important, but it’s not the only thing that’s important.

The very next day I informed the head of Sales Engineering and the head of Customer Support that they would be switching jobs.

So we begin with a strong bias that whoever we hired must be world-class even before performing one day of work. To make matters worse, executives who start off world-class often deteriorate over time.

There are two kinds of cultures in this world: cultures where what you do matters and cultures where all that matters is who you are. You can be the former or you can suck.

You did not know everything when you hired her. While it feels awkward, it is perfectly reasonable to change and raise your standards as you learn more about what’s needed and what’s competitive in your industry.   You must get leverage. Early on, it’s natural to spend a great deal of time integrating and orienting an executive. However, if you find yourself as busy as you were with that function before you hired or promoted the executive, then she is below standard.   As CEO, you can do very little employee development. One of the most depressing lessons of my career when I became CEO was that I could not develop the people who reported to me. The demands of the job made it such that the people who reported to me had to be 99 percent ready to perform. Unlike when I ran a function or was a general manager, there was no time to develop raw talent. That can and must be done elsewhere in the company, but not at the executive level. If someone needs lots of training, she is below standard.

“You are doing a great job at your current job, but the plan says that we will have twice as many employees next year as we have right now. Therefore, you will have a new and very different job and I will have to reevaluate you on the basis of that job. If it makes you feel better, that rule goes for everyone on the team, including me.”

loyalty must go to your employees—the people who report to your executives. Your engineers, marketing people, salespeople, and finance and HR people who are doing the work. You owe them a world-class management team. That’s the priority.

1. Talent and/or technology, when a company is acquired purely for its technology and/or its people. These kinds of deals typically range between $5millionand$50 million. 2. Product, when a company is acquired for its product, but not its business. The acquirer plans to sell the product roughly as it is, but will do so primarily with its own sales and marketing capability. These kinds of deals typically range between $25millionand$250 million. 3. Business, when a company is acquired for its actual business (revenue and earnings). The acquirer values the entire operation (product, sales, and marketing), not just the people, technology, or products. These deals are typically valued (at least in part) by their financial metrics and can be extremely large (such as Microsoft’s $30 billion–plus offer for Yahoo).

If the company achieves product-market fit in a very large market and has an excellent chance to be number one, then the company will likely remain independent. If not, it will likely be sold. This is one good method to describe the interests of the investors in a way that’s not at odds with the interests of the employees, and it is true.

We needed to change the rules by which entrepreneurs evaluated VCs. We thought there was an opening to do this, because times had changed.

We needed to be better, but we also needed to be different. As we thought about what would make us both better and different, two core ideas greatly influenced our thinking: First, technical founders are the best people to run technology companies. All of the long-lasting technology companies that we admired—Hewlett-Packard, Intel, Amazon, Apple, Google, Facebook—had been run by their founders. More specifically, the innovator was running the company. Second, it was incredibly difficult for technical founders to learn to become CEOs while building their companies. I was a testament to that. But, most venture capital firms were better designed to replace the founder than to help the founder grow and succeed.

1. The CEO skill set Managing executives, organizational design, running sales organizations and the like were all important skills that technical founders lacked. 2. The CEO network Professional CEOs knew lots of executives, potential customers and partners, people in the press, investors, and other important business connections. Technical founders, on the other hand, knew some good engineers and how to program.

“I know you think my life is good cause my diamond piece But my life been good since I started finding peace.” —NAS, “LOCO-MOTIVE”

Hard things are hard because there are no easy answers or recipes. They are hard because your emotions are at odds with your logic. They are hard because you don’t know the answer and you cannot ask for help without showing weakness.

On my grandfather’s tombstone, you will find his favorite Marx quote: “Life is struggle.” I believe that within that quote lies the most important lesson in entrepreneurship: Embrace the struggle.

Of course, even with all the advice and hindsight in the world, hard things will continue to be hard things. So, in closing, I just say peace to all those engaged in the struggle to fulfill their dreams.