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Leadership

I have so much respect for people who fought online criminals for eBay and PayPal. There hasn’t been a set of websites more highly targeted by cybercriminals and fraudsters.  The founders of Silver Tail, Mike Eynon and Laura Mather, were colleagues on the anti-fraud team at eBay/PayPal for three years and had a front row seat to the newest attack techniques and the most beguiling exploits. It stands to reason that the team pioneering security and anti-fraud techniques at the tip of the spear would come up with a breakthrough technology. This was the genesis of Silver Tail.

After testing with customers, it was clear that Mike and Laura were on to something special but desperately needed help to scale. The product needed many refinements and it was clear that they should bring in a seasoned executive to help them with sales, marketing, and building a team. Enter Tim Eades as their new CEO and partner. Tim had been a longtime sales and marketing executive at IBM and a CEO at Everyone.net. His aggressive, take-no-prisoners competitiveness, indomitable work ethic, and remarkable ability to enroll customers and recruits made him the perfect fit.

When Andreessen Horowitz first started looking at Silver Tail, they had just been named to the Gartner Magic Quadrant (MQ) as the furthest out on the “Visionary” or “X” axis. This MQ position fairly reflected the stage of the company and the founders’ technical breakthrough.

Source: Gartner (February 2011)

On the “Y” axis however, which measures “Execution,” Silver Tail was still in its infancy. They had a total of 15 customers using the product, with only a few paying, and the rest in beta. That said, customers were not on the fence with how they felt about it: “We’ve never seen anything like it!” and “They are charging too little…”

So, they had a proven technology and a few rabidly fanatical customers. At this point, the company’s future was going to revolve around it executing flawlessly to win the market. And they did that and more. The team’s accomplishments are exemplified by the most recent (May 2012) Gartner MQ:

Source: Gartner (May 2012)

It’s the story of how the team, driven by Tim, deployed the product, acquired customers, scaled the company, and accelerated into a tornado in merely 18 months:

  • Almost two thirds of the top US banks have deployed the product or are in the process of deploying.
  • A skeleton crew of 12 expanded to a global team of nearly 100, including top notch teams in Federal and European markets.
  • Three new, world-class executives joined the team to lead product and marketing, engineering and finance. Each one built a remarkable team of rock stars.
  • An irreverent, open-communication, and high-performing culture helped attract and retain top talent.
  • Huge success in ecommerce.
  • Customer responsiveness became a true market differentiator as the team overemphasized quality and support. In fact, existing customer referrals are Silver Tail’ s largest source of new leads.
  • The company was cash flow positive in the first half of their 2012 fiscal year.

This “hockey stick” ramp reflects the disruptive nature of Silver Tail’s Web Session Intelligence technology and the rapidly shifting frame of reference currently underway in the security space. Analyzing “snapshots in time” of network traffic and deploying “signatures” is not keeping up with the innovation of hackers and cybercriminals.

Silver Tail’s success in the market did not go unnoticed. We are announcing today that Silver Tail has signed a definitive agreement to be acquired by EMC/RSA. From the very beginning, Tim and the founders had a vision of helping to eliminate fraud and deploying their technology as widely as possible. With EMC’s worldwide presence and resources, they will achieve these goals much faster and integrate into a broader set of security and anti-fraud technologies.

Please join me in congratulating Tim, Laura, Mike and the rest of the incredible Silver Tail team in marrying the ultimate peanut butter-and-chocolate combo: A breakthrough technology innovation with near-flawless execution!

I would also like to thank my partners, Mark Cranney, Jeff Stump and the entire a16z team for all of their extra effort with Silver Tail – it made a meaningful difference…

As a first time CEO, there were times when I would sit at my desk and think, “What should I be doing today?” This feeling was especially strong after every financing round closed. After our seed round, we had defined the product and the engineers were coding it. I didn’t code. After I hired the executive team and started delegating, most of the bases were covered.

Of course, there is always plenty to do at a startup and the CEO is usually the head cook and dishwasher, but the question of where I should be productively spending my time continued to nag at me.

I was pretty aggressive about reaching out to other CEOs and mentors and this question was my biggest area of inquiry: “Hey, when you think back to when your company was my size, how did you spend your time?”

There were a number of suggestions that were specific to the company lifecycle stage like, “Get some alpha customers teed up” or “Get together a launch plan for Europe.” However, there were also some core, evergreen pieces of everyday advice that applied throughout the company’s growth:

Push the team

After you’ve hired rockstars in every essential VP role, it’s the CEO’s job to challenge them to do extraordinary things. Here are a few things I used to do:

  • Set aggressive goals. As a company we would set three goals every quarter and then I would individually negotiate three specific and measureable goals (such as “Hire a director of X” or “Meet with 20 customers”) for each of my direct reports that supported the company goals. Everybody needed to accomplish something more than just doing his or her job.
  • Give frequent feedback. In addition to giving extensive bi-annual performance reviews (see my previous post on the dysfunctional CEO), I would constantly pull VPs aside after meetings—“I like the way you handled that” or “Dude, that was a bit harsh”.  I’d keep in mind the “shit sandwich”, a piece of constructive feedback in between two specific, positive comments.
  • Hold weekly staff meetings. This was not a rote set of updates but a place where arguments were had and decisions made. After every meeting we’d send out a list of decisions and discussion points to all managers.
  • Schedule bi-monthly 1:1s. I’d usually spend an hour (no interruptions and paying attention!) going through progress on goals, how I could help, what’s going on within their teams, etc. The tone was positive, but I would constantly challenge them to do more with less.

Sell the vision

Shortly after our first round of funding, my co-founder, Scott Banister, turned to me and said, “I’ve heard you tell 100 different people a slightly different version of the same story. I had no idea you spend so much time selling!” He was right, I was constantly selling: soliciting investors and advisors, signing recruiters and PR firms, hiring employees, securing first customers, conducting company meetings, convincing reporters and sparring with industry analysts. They all demanded a compelling story, told with enthusiasm, and the CEO needs to be on the front line with these critical meetings that might turn into the tipping point between success and failure.

When I think about all the important things CEOs must do, succinctly and convincingly articulating “the story” is right up there. But there’s a catch: it must be told with both authenticity and passion—like it’s literally pouring out of them. We refer to the best of these entrepreneurs as “glow in the dark”.

Arbitrate disagreements

Half.com founder and CEO Josh Kopelman once told me that the thing he hated most about being CEO was when two of his smartest people would disagree and he would have to come down on one side: “These decisions were usually 51/49% and I was left having to console the ‘loser’.” He’s right. Arbitrating these disagreements is one of the hardest and most emotionally draining parts of the job, but many CEOs just avoid it and nothing breeds a horrible culture like a CEO who puts offs decisions or, worse yet, makes too many compromises.

I firmly believe that if the VPs aren’t periodically at odds with one another, then the company isn’t being nearly aggressive enough. Why can’t we get the customer feature in the next release? We should pre-announce new functionality and run under the ball! Great sales and marketing VPs constantly push the envelope with engineering, operations, finance and product.

Management By Walking Around (MBWA)

This is one of the few acronyms I retained from my undergraduate finance studies. I vividly remember reading it in some Management 101 textbook and thinking how simple and silly it seemed. Years later, I’ve come to believe that it’s a really important part of being a CEO. I probably spent three to five hours a week on MBWA and would put hour-long blocks in the calendar specifically for this purpose. Just a simple plopping down in an employee’s cube with a “Whatcha working on?” would yield so much valuable information. As the final decision-maker on so many difficult calls in a fast moving business, the CEO’s connection to the people that are actually writing code or talking to customers is critical. And you don’t get it from sitting in your office.

Talk to customers

A CEO should probably be spending about 30% of his or her time with customers, and this is especially true for an enterprise CEO. But this doesn’t mean talking with just the CIO or SVP, who most likely barely remembers signing the purchase order. However uncomfortable, I would insist on talking to the person actually using our product. I want to speak with the guy in the bowels of the datacenter, the one who probably comes into work without having showered and with bedhead. With just a slight prompting of, “Hey, I know you like the product but how can we improve it?”, he would unroll his manifesto of feature requests, bugs and other stuff to think about. Some of our best product ideas came on the plane ride home stitching together all the feedback.

Now, there are certainly a ton of other important activities—like raising money, setting a culture and hiring executives—that fall primarily on the CEO’s shoulders, but the aforementioned list includes the “responsibilities” I would hold myself to every single week.

My father, Alfred “Bud” Weiss, owned a car dealership—“Bud’s Cadillacs” of Miami, Florida. When I’d drop by the office, he would usually pepper me with bits of business wisdom, but as a kid, I wasn’t very receptive. My father and I are pictured here:

My head was usually buried in a comic book, only half listening. However, there was one story that stuck with me and I have struggled to make sense out of it throughout my business career:

Son, you never, ever promote your best salesperson to be the sales manager. This is a classic mistake that other car dealers make. A bunch of my top producers came from their failed attempts as sales managers at other places. You commit two wrongs with these promotions: First, you take your top producer—someone raking in two to five times the average salesperson—off the sales floor. Second, you put them in a new job that they are totally unqualified to do successfully. This usually ends in disaster for everyone involved.

His advice seemed to make sense until later in my career when I was actually faced with the problem. Some of our best salespeople and engineers at IronPort wanted to move into management and if we didn’t give them the opportunity, then it was clear they would go elsewhere. Of course, there’s not much of a dilemma when the high performer is a natural leader and people-person. Promoting great people from within is preferable on so many dimensions: there’s context, history, relationships and it all leads to a much better chance of success than hiring from the outside. The difficult corner case is the high-performing individual contributor that you can tell will likely fail in a leadership position. I’m talking about the sharp-elbowed, passive aggressive salesperson with little self-awareness. Or the my-way-or-the-highway, smartest-guy-in-the-room, workaholic engineer with horrific personal hygiene. How do you deal with that?

If they were really that good and were hell-bent on being a manager, then I came to believe that you had to give them a shot. That said, in my own experience, only about 25% of these experiments succeed in leadership. However, if managed carefully, the majority of the failures can ultimately be coached back into individual contributor roles, which is still a win. The key to all of it is making sure that there’s a sponsoring executive that is willing to spend a boatload of time coaching the budding leader. Here are some specific suggestions:

  • It all starts out with hard, raw conversation about the shortcomings you’ve observed and how they need to be grinded off for them to be a successful manager. E.g. “You can’t keep answering all the questions; leading is getting others to contribute.”
  • The coach needs to meet weekly and do frequent check-ins with peers and subordinates in almost a constant 360 degree-feedback loop. Even if it isn’t working out, the constant coaching and feedback will ensure a soft landing back into their old role.
  • It helps to have some great leadership training. In my experience, most leadership training courses suck. You get two hours of useful information spread out over two weeks of mind-numbing presentations. We put together a rapid fire, two-day course and had our leadership team teach it. Interviewing, performance reviews, 1:1s, career planning, holding staff meetings, etc. We all got together and boiled down the best practices for all the important areas into short, punchy presentations/role plays. Every new manager went through it to give them some tools that were culturally consistent with what we were doing.
  • Develop a legit dual-career track. Bestowing a new title like Principal Engineer or Fellow along with a commensurate bump in salary and equity can help take the sting out of being removed from a leadership role.

I know this all sounds like a ton of work but some people are just that special and totally worth it. Some of our best managers came out on the other side of these experiments and we had at least a handful of failures that we were able to retain as employees. My father built his business with castoffs from these experiments gone wrong at competitors. Perhaps because they had already failed elsewhere, his top performers didn’t aspire to try management again. Only in this context can I make sense of his guidance, as my experience has been quite the opposite.

When I was a kid, I read tons of superhero comic books. I fantasized about superpowers, but the storylines about heroes with massive Achilles’ heels really held my attention the most. They saved the world but had screwed up personal lives, made lots of mistakes, and often acted like complete assholes. In retrospect, l related to their flaws. And, probably not coincidentally, my favorite characters exhibited core weaknesses I had experienced: Spider-Man (immaturity), Iron Man (overconfidence/hubris), and Wolverine (rage).  Ironically, it was often when the character’s weakness would comingle with the superpower that would spur them to succeed against impossible odds.

It was in this context that I was riveted reading Steve Jobs’ biography by Walter Isaacson. Given the number of different interviews and unfettered access granted to Isaacson, it felt like an incredibly authentic account of Jobs’ life. His greatest accomplishments, mistakes, superpowers, and flaws were laid out about as raw as I’ve ever read.  Steve’s superpowers were many: He was wickedly brilliant, could see around corners, and had unparalleled understanding of how people interact with technology, to name just a few.

Did Steve have an Achilles’ heel?  From the book, one could conclude that he was an extremely demanding boss.  Like a beacon, superstars from every function (e.g. engineering, design, marketing, etc.) were drawn to work for Steve. They described his aura as absolutely overwhelming. And Steve pushed these A+ players to extraordinary, impossible achievements.  Steve’s drive for speed and perfection often resulted in harsh, public criticism—usually directed at his very best people.  Steve would constantly look over their work and declare, “This is shit!” or “This really sucks!”  On my Kindle, I searched the words “shit” and “sucks” and counted 24 instances where he used one of those phrases referring to someone’s work/product.

I’ve had a number of entrepreneurs suggest that this persona isn’t unique to Steve Jobs but a common trait among some of the most successful founder/CEOs in the world. Larry Ellison, Bill Gates, Larry Page, and Jeff Bezos have all been reported as similarly caustic at times. Is this something to be emulated?

As I was reading the book, something struck me like a hammer: Despite Steve Jobs’ choice of words, lack of empathy, and sometimes prickly demeanor, he spent a huge amount of time giving his most talented employees constant, hard, critical feedback.  Thinking about how most companies dole out feedback—if they do at all—it’s usually directed at the bottom quartile of performers versus the top. A typical manager at review time spends 80% of their time preparing detailed reviews on the bottom 25%. The top quartile gets lame, short reviews—the equivalent of “You’re doing great, keep up the good work!” So, a manager takes all that time and effort to get someone doing the work of half of a full-time employee (FTE) to do the work of .75 or 1 FTE. In contrast, Steve Jobs—with his feedback energy directed at the top—manages to motivate people already doing the work of 2 or 3 FTEs to do the work of 10, maybe 20 FTEs. Now that’s serious leverage! Could this be a superpower comingling with a weakness?

I’ve found that the A players are comparably lazy with regards to their potential. Without serious motivation, they will never reach it—or even try.  Despite his delivery, I believe Steve’s critical energy was directionally correct.

Here are a few other suggestions for motivating top talent:

  • Flip the feedback equation to 80% of your energy spent on the top quartile.  This is really hard in practice as the feedback is usually more nuanced. And the top performers are usually defensive. 😉
  • Infuse some damn passion.  The best people don’t just want money, they want to go on a crusade and make a difference.  An entrepreneur needs to constantly re-enroll the troops with a compelling, authentic story of how and why we will do the impossible.
  • Set stretch goals and push like hell to meet them.  It’s great if these goals have meaning as well—e.g. we need the software release out before a major industry conference.
  • Find a bogeyman competitor to hate.  (Preferably a company bigger than yours—Microsoft!)  At IronPort, we called out our competitors to the entire company and rallied the team to play catch-up.  We also gave bonuses to the sales teams for rip-outs of a competitor’s appliance and then mounted them like trophies on the wall…
  • Work your ass off by example.  A leader who is always present, ridiculously responsive and contributes real, hard work sets the right pace and tone.

A constant challenge for leaders is to find effective AND positive ways to motivate… The very best companies have inspirational founders who have found a way to coax the superpowers out of their top employees.  When the top quartile contributes at 5x to 10x, it makes a serious difference.

In 1950, my Uncle Ed Kalin opened a small designer furniture store. After years of hard work, he saved up and opened a larger one. Growing up working there, I’d observe him doing things that, at first, were hard for me to understand.

First of all, when he walked around the store, he was constantly picking up trash. Little wrappers, paperclips, cigarette butts and the squashed paper cup that didn’t quite hit the trash can. When I first noticed it, I thought he was trying to drive home a point to me personally—after all, I was the assistant janitor—but it became clear he wasn’t just picking up trash in front of me, he did it all the time, naturally and quietly. You never heard him say, “Can’t they make it into the wastebasket?” He just picked it up and put it in. He was also always straightening: fluffing pillows, righting picture frames, sliding back barstools and getting down on his knees to level a rickety table. One day, the intercom rang out in the back of the warehouse, “Scott Weiss, to the front for a carry out.” Recalling my work ethic in junior high school, I certainly didn’t sprint to get there; I arrived just in time to see my uncle following a lady out with an end table in his hands. “Doh!” He never mentioned it—just did it.

Although this was a high-end furniture store, Uncle Ed was also unusually thrifty. He didn’t cut corners on quality but abhorred waste. “Scott, you don’t need to use that much bubble wrap for a lamp. Here, let me show you.” At home, he would set paper towels on the counter to dry after washing his hands: “They’re not dirty, just wet.” OK, thrifty was an understatement.

There were 80 employees at the furniture store and Ed knew every one of them by name. He knew their families. And whenever he passed anyone, anywhere, he’d have an authentic interaction with them—not a glad-handling schmooze. “When does your son graduate?” “How were you able to fix that scratch? Wow, looks perfect.”  Always with a smile and interested eyes that communicated, “You matter to me.”

In a competitive, low-margin, high-hustle retail business, Ed wanted to project Bloomingdales with a Wal-Mart budget. The showroom had to be beautiful, spotless—just perfect to look the part. Customer service was paramount. In order to be successful, every employee had to have this mentality.

Although we didn’t call it that then, I’ve come to believe that Ed was creating a company culture. We often get wrapped up in Silicon Valley with the “new-new” way that we can forget many times we’re simply rediscovering well worn lessons that date back to the beginnings of commerce.

Like it or not, everyone watches the leader. What does he do? What does he say? What does he not say? How does he react? His behavior is mimicked and amplified throughout the organization. The CEO and the leadership team ultimately set the company culture with their behaviors verses a set of policies rolled out by the HR department. Inspired by Ed, here are a few takeaways that I believe apply to all startup CEOs:

  • Naturally and quietly demonstrate, on a regular basis, that no chore is beneath you: clean up after a conference room lunch, carry the heavy crap to a trade show, replace the water cooler, wipe up the spill. When everyone pitches in a little, you can strip out 5% in overhead.
  • Do your own calendaring and wait as long as possible to hire an assistant because once you do, everybody suddenly needs one. One great office manager can scale to ~50 employees if everyone calendars themselves.
  • Write thorough, thoughtful, candid reviews and be on time with the process. If you don’t take it seriously, nobody will.
  • Get to know everyone by name and something about them—no excuses up to 500 people. This was really hard for me because I have a terrible memory, always have. Get creative: we printed out flashcards from the badge database when I inherited 900 employees at Cisco.
  • Prepare ahead and interview candidates hard—don’t wing it.
  • Be noticeably thrifty: fly coach, stay in cheap hotels, eat in diners.
  • Be unbelievably responsive, available and punctual.

Some of the suggestions above are simply about making a CEO more approachable—one of the hardest and most important attributes for a leader to exude. Are people comfortable disagreeing with him? Will they tell him when something is wrong? In my experience, the more formal the CEO is, the more formal the leadership team is and thus they all become less approachable. And it’s not just about wearing jeans—it’s about behavior. My uncle’s store was a very formal environment: he wore a tie and everyone addressed him as “Mr. Kalin”. That said, he was able to overcome this outward formality with fanatic friendliness, a familiarity with everyone and a willingness to get his hands dirty. Approachability, however you create it, is absolutely critical to creating an innovation environment where employees speak up and challenge the status quo.

I had a real struggle preparing to be a public company CEO. And it had little to do with having scalable internal systems or making the quarterly numbers… I just couldn’t keep secrets from my employees.

As CEO of IronPort, I wanted to be completely transparent with my entire team but my board of seasoned industry veterans was sharply opposed… They raised several serious issues: do you want to leak critical weaknesses to your competitors? Do you want to panic your employees? Do you want to completely reconstruct your culture when you go public? It was just a bad idea. However, the more that I thought about it, the more I believed that sharing absolutely everything would create massive advantages and that we should live with whatever consequences resulted.

So, after board meetings, we would assemble the company and go through every board slide… How much cash in the bank? What’s our burn rate? What are the biggest problems we are facing? Did we decide to build, buy or acquire a critical component? The first couple of go rounds, there was dead silence. No questions—just head nodding and a couple of blank stares. After some probing, we realized that people needed to feel comfortable speaking up, that it didn’t just come naturally. We brainstormed a bunch of different ways to get over this hurdle and here were some experiments that ultimately worked:

  • We amped up the frequency of communication to all employees. Different members of the leadership team would send out weekly emails to all about customer trips, conferences attended, schedules slips and customer issues. These were written very off-the-cuff, informal and in the voice of the different leaders. I suppose we’d be all be tweeting or blogging today…
  • When an employee would reply to an email with a comment or question, we treated it like it came from a customer who deserved an immediate, detailed and thoughtful response.
  • After the weekly staff meetings, we’d send out a summary of the decisions and issues to all of the directors/managers who would then share it with their teams.
  • We emphasized “speaking up” as a core value at every opportunity. Our employee orientation, performance reviews and leadership training all emphasized everyone having an obligation to dissent…
  • We would leave 30 minutes for questions after every all-hands meeting and then press, often uncomfortably, for no fewer than five questions from the group.

Over time, the benefits of transparency coupled with an emerging cultural norm of speaking up became more apparent:

I thought we would surface creative answers faster. When everyone had a clear understanding of the hard problems, their collective brains were on the table for parallel processing. The best information rarely sat with the senior executives but with the employees that were closest to the product and closest to the customers. And the best answers would often come from the most unlikely of places. For example, some of our most innovative features came from customer support reps identifying customers trying to use the product in ways it wasn’t intended.

Initially, it worked better than we expected. IronPort experienced zero voluntary turnover for the first three years. Because we let everyone’s head under the tent, we implicitly trusted them and it worked both ways. For instance, it wasn’t a shocker when we stopped hiring as we were raising money. Everyone knew exactly what was going on: we were running low on cash and had no idea how long the process would last.

Lastly, nobody was confused about what was important and people would point out any inconsistencies and solve them in the background. I remember standing up at a company meeting talking about how excited I was that IronPort anti-spam was working and we’d finally be able to drop our partner Brightmail. After the meeting, the accounts receivable clerk knocked on my door and said, “I thought you should know that two customers are withholding payment because IronPort anti-spam isn’t performing.” Oh crap. But much better to know about it and fix it than go on believing there wasn’t a problem.

As we were preparing to file our S-1, we hired a CFO with public company experience that insisted that we start “practicing” as a public company. Hmm—I knew that our level of transparency would have to change but what did that mean exactly? “You can’t tell everyone how we did this quarter at midnight quarter-end” and “You can’t go through all the board slides like that—too much sensitive information.” So, we started editing, putting shrouds on issues because we were afraid that the information would leak. I remember our first all-hands during the “practice” time. I felt muzzled and cautious, trying to strike a balance between our wonderful transparent culture and an intricate set of Sarbanes-Oxley rules. As it turned out, the practice was critical in working out the kinks. Here are a few things we did:

  • Our CFO and I listened to dozens of public company earnings calls to get a sense for the dynamic and what information was typically shared. The best duos had the CFO as the play-by-play man and the CEO as the color commentator.
  • We then staged mock earnings calls with the employees as the analysts asking the questions. This proved to be a very useful format for reining in my over-sharing and was instructive to the employees as they saw us struggle with what we could and couldn’t reveal.
  • We prepared a mock earnings press release a few weeks after the quarter closed. This helped us practice keeping the numbers quiet, which was difficult because everyone wanted to know how we did at quarter-end.

Although we eventually opted for an acquisition by Cisco versus an IPO, I came to believe that our type of total transparency was a competitive weapon that applied primarily to private companies. In the end, my board members were right—we did have to limit what we shared with employees on the way to going public. That said, I believe it was much healthier to set the default to full disclosure while we were private. When you prepare for an IPO, it’s definitely a high-class problem to have to work backwards with concrete reasons to withhold information from the employees. And when that time comes, they totally understand.