Book: The Hard Things About Hard Things
Author: Ben Horowitz
Key takeaways: This is book for the CEOs from ex-CEO, and now VC Horowitz.
WHEN THINGS FALL APART
The Right Way to Lay People Off: It is difficult to focus on the future, because the past overwhelms you, but that’s exactly what one must do. Once you have decided, you have to do it as soon as possible, because if the word leaks (which it inevitably will), if the managers don’t know they’ll look stupid, or worse, if they do, it contributes to the leak/they have to lie. When the announcement is made, make sure it is not about individual performance, but company performance (a layoff breaks the trust with employees, and to rebuild, you have to come clean). The firing has to be done by the manager, and they should explain (a) what happened and how it’s a company failure vs. a personal failure, (b) that the decision to let the person go is non-negotiable, and (c) details re benefits/company plans post-firing. After the firing, the CEO must address the company and that address is for the people who’re staying. After that, be present, visible, engaging and let people see you care.
Preparing to Fire An Executive: The wrong way to view an executive firing is an executive failure; the correct way to view an executive firing is an interview/integration process system failure. The reasons can be: (a) poor job of defining the position, (b) hiring for lack of weakness rather than for strengths, (c) hired for scale too soon, (d) hired for a generic position, (e) executive had the wrong kind of ambition, (f) failed to integrate the executive.
Once you have decided, you have 3 goals with the board: (a) get their support, (b) get their input and approval for the separation package, (c) preserve reputation of the fired executive. When you update the company, you might worry about employees mis-interpreting the news and thinking the company is in trouble, but do not try to maneuver around such a reaction (when you expect the employees to act like adults, they generally do).
How to Demote an Old Friend: When you break the news, your friend will likely feel two emotions (a) embarrassment, and (b) betrayal, so be ready for an intense discussion. Also, if you yourself boot-strapped your way in the CEO position, it probably won’t be lost on the friend that you’re just as unskilled for your job. Admit as much, saying that if you were a more experienced CEO, you might be able to develop him into the role, but this is not a place for two unexperienced people to find their feet.
TAKE CARE OF PEOPLE, PRODUCTS, AND PROFITS—IN THAT ORDER
Why Start-ups Should Train People: People at McDonald’s get trained for their positions, but people with much more complicated jobs don’t; it makes no sense. Aside from economics, people quit (Netscape during a particularly high attrition period) because of two key reasons: (a) the manager gave no guidance, career development optty, feedback, and (b) they weren’t learning anything. A good training program can fix both of these issues. Since no start-up has time to do optional things, training should be mandatory, and this should be enforced by the CEO by teaching it oneself (ala Andy Grove).
Why It’s Hard to Bring Big Company Execs Into Little Companies: Job of a big-company exec is very different from that of a small-company exec. At a big company, you spend most of the time optimizing and tuning the existing business—most of the work is “incoming”. On the other hand, as a start-up executive, nothing happens unless you make it happen.
To avoid hiring a wrong big-co. exec, you can do two things: (a) take integration as seriously as interviewing (force them to “create”, force them to learn a lot, and put them in the mix), and (b) screen for devastating mismatches:
- what will you do in the 1st month at the job? (see whether the candidate can personally set the pace, comes in with a whole bunch of new initiatives, and watch out for answers that over-emphasize learning—there’s not much to learn at a start-up)
- how will your new job be different from your current job? (watch for self-awareness)
- why would you want to join a small co (look out for people who cite equity as their primary reason)
Management Quality Assurance: One of the things you realize that the QA team cannot ensure a good-quality product, BUT, it can tell you when the development team is building a low-quality product. Similarly, a high-quality HR is not going to make for a well-managed company with great culture, but it will tell you when you and the managers are not doing a good job.
CONCERNING THE GOING CONCERN
One-on-one: This is very much related to Andy Grove’s High Output Management. While it’s not managers’ job to set the agenda/do the taking, the manager should try to draw the key issues out of the employees with questions such as:
- if we could improve in any way, how would we do it?
- what’s the #1 problem in our organization? why?
- what’s not fun about working here?
- who is doing really well at the company? who do you admire?
- what changes would you make?
- what’s the biggest opportunity we’re missing out on?
- are you happy working here?
HOW TO LEAD
High-Frequency Feedback: As a CEO, you should have an opinion on everything because (a) if the CEO constantly gives feedback, then everyone gets used to it, and feedback won’t be taken personally, and (b) people will become comfortable discussing bad news.