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Leadership

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.