Musings of a VC in NYC

MBA Mondays: Guest Post From Scott Kurnit

 When I announced the MBA Mondays series on People and mentioned I would end with a number of guest posts, I got an email from my friend Scott Kurnit, founder of About.com and Keep Holdings. Scott said, "Culture that is something I have thought a ton about. I'd love to contribute a guest post."

So what follows are Scott's thoughts and experiences on building culture in an organization.

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Culture

Every company has a culture. The issue is - do you let it happen by accident or do you shape it?

- The CEO is the culture driver. It can’t be done by HR or anyone else. You either live it… or don’t bother.

- Many cultural imperatives are the same at every company. That doesn’t mean you shouldn’t write them down and socialize them, but come up with the 3 or 4 that make your company special, that make someone want to join your company… or not. Your people ARE your culture. The culture quickly takes on a life of its own.

- My favorite cultural imperatives are: Be Adaptive, Be Adoptive, Encourage Push Back, and Cherish Input, but NOT consensus. That said, these are ours – adopt what you like, but make your culture your own.

I think about company culture every day, but last week was especially poignant with About.com back in the news. We “pre-set” the About culture on day one and it’s one of the half dozen reasons the company is around 15 years later after six CEOs, four owners and almost no investment for the last decade.

As Fred noted in his May post kicking off the culture discussion, you can get away with an accidental culture for the first 20 or 30 hires – but then culture takes on a life of its own. I’d say that you’re better off doing what we did with About when from the outset Bill Day and I locked ourselves in a room and thought it through. What kind of people did we want to work with? What was going to make us strong all the way through to a thousand team members (yes, we banned the word employee). Were we going to trust our people or manage tightly? Were we willing to pay top dollar or save money and hire at the 50th percentile? Who was going to be most important - senior management, staff, Guides, advertisers or users – and in what order? What would our decision making process be? Would we come in early or stay late? Did we care if people were in the office or working remotely? Etc., etc.

Culture was extra important to the About model since our business needed to get big fast, but it also showed me that defining a culture sooner than later builds the best business foundation. It seems so obvious, but out of 150 start-up CEOs I’ve discussed this with I found only three who pre-determined their culture. That’s crazy!

It doesn’t matter what your culture is, but have one. The sooner everyone knows what makes the place tick, the sooner you’ll hire the right team members and then they’ll hire the right ones and then them and them and them.

While I list all 10 of the Keep Holdings culture imperatives below, I’ll pull out a few that are religion for me and likely the most controversial.

Be Adaptive: We’re working in an amazingly dynamic industry. Be prepared to change on a dime. If I hire you to do X but need you to do Y tomorrow, buck up and go with it… or don’t come in the first place. You sure get a different kind of person when they’re game to ride the waves. Don’t want to ride waves, go work at Big Slow Corp Inc. and good luck with that.

Be Adoptive: Hey, we work in the Internet – Invent like crazy, but don’t be afraid to adopt good ideas from everywhere. Don’t tread on someone’s patented business process, but if you like someone’s ideas, build on them. Yes, that’s legal – and it’s OK to admit you don’t have all the great ideas.

Pushback: Everyone should know why they’re doing something. I’ll never forget when I asked a colleague at Showtime for some quick data analysis. When I asked him the next day where it was and he told me he needed another day I realized *I* screwed up by not telling him I only wanted the info if he could do it in 10 minutes. Everyone should be encouraged to say, why, how long should I spend, what should I not do instead and are you sure it’s worth the effort? While this was about saving some time, this simple concept now makes our company more transparent and productive at every turn – whether for little tasks or big strategic issues.

Input, not consensus: This may be the biggest for me since it’s the major thing I can point to for why AOL crushed Prodigy in the pre-internet online world. I still have nightmares of 18 people sitting around a table trying to make a pricing decision. It took Prodigy over a year to adjust pricing to be more in line with – and trump AOL and it took Steve Case’s AOL one measly day to respond. One year… one day. I still get chills. Rather than have the indecision of 18 people, pick one to be the decider as the very first action. Trust me, that person feels the weight and authority when they own the decision. They’ll get a ton of input… rather than having endless discussions. Group decision-making makes people fearful of engaging with the concern that it will never end. When one person’s in charge… they want to hear it all. And fast. And get it right. And crisp. And done!

OK, here’s the whole list that drives Keep.com, TheSwizzle and AdKeeper. Feel free to Adopt as appropriate… but make sure you live it. These are not for everyone… but you should all have those that work for you.

Consumers always come first.
We operate as an “upside-down pyramid:” customers first, those who directly engage with customers second, management last.
We respect individual privacy and aim to give consumers greater control of their web experiences.
We embrace community, with users in control.

We maximize value to our partners.
We love brands, products and services!
We partner with brands to help them succeed on the web.
But user experience trumps money every time.

We operate with the highest integrity.
We are straight shooters and demand integrity in principle and practice.
We don’t tolerate politics.
We admit and confront our mistakes… and learn from them.

We are adaptive, flexible and nimble.
We race towards opportunity.  We spin on a dime.
We move at Internet speed – ahead of the crowd.
Jobs can change at any time.

We are adoptive, embracing good ideas from all sources.
We embrace diversity in perspective, viewpoint, thinking and actions.
All ideas are welcome and appreciated.

We encourage teamwork, risk-taking, creativity, and speed-to-market
Teamwork makes better products, but can slow things down.
So, we encourage single ownership, creativity, risk and speed.

We value input (& push-back), not consensus.
We value everyone’s opinions but recognize the power of crisp and quick decisions.
Decision-owners must solicit input, welcome push-back, and ultimately make the call and execute.

We are strategically focused.
Our work is market focused.
We build and evolve world-class products.
Our offerings will be powerful, relevant, scalable and low friction.

We only want to work with the best people, those who are prepared to work harder than the competition.
We are positive in our outlook and behavior.
We will compensate better.
We will have more fun.
We will sprint a marathon and win our races.
We will succeed together.

We exist to build long-term value for our investors.
Everyone who works here is an owner.

How to Be in Business Forever: A Class On Sustainability

Last fall I wrote a post on Sustainability and ended it with this thought:

I am tempted to develop a course on this topic. I think we need a lot more of this type of thinking in business. It seems in such short supply these days.

So I am excited to announce that I am going to teach a class on this topic. It will run the entire month of October and it will be integrated into MBA Mondays for the month of October.

I am using our portfolio company Skillshare's brand new Hybrid Class model so that anyone in the world can take this class.

Here is how it works (taken from this page outlining the course):

- This is a project-based class. You’ll work collaboratively with other students to complete your project at your own pace. Along the way, you’ll have project milestones, weekly resources, and office hours to help you with your project. Our project will be to build a "Sustainable Business Model Canvas."

- Every Monday morning, you’ll receive a weekly email with resources, readings and questions to guide you through your project. This will also be my weekly MBA Monday blog post for those who are regular AVC readers.

- Use the Discussions tab in the Skillshare class page to ask questions, share resources, and get feedback on your projects. You can also host or join a Local Workshop in your city to meet with other students in person.

- I will will host weekly livestreamed online Office Hours where I will answer questions, give feedback, and guide you to successfully complete your project.

If you want to take this class, you can sign up here. If you are a regular AVC reader or regular MBA Mondays reader, you are going to at least audit this class because it's going to be taking over the monday posts for the entire month of October. Either way, I am excited to do this. Sustainability is a big issue in business today and I think this is a great opportunity to get the key ideas and issues out there in a way that as many people as want can consume them.

MBA Mondays: Guest Post From Susan Loh

When I introduced this series on People, I stated that it was going to have a bunch of guest posts because there are many people who know a lot more about the people side of business than I do. One of them is Susan Loh who is Head of Talent at Foursquare.

I asked Susan to write a guest post explaining how they manage both recruiting and HR at Foursquare. And she has done just that.

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Foursquare’s approach to Recruiting & HR

In Fred’s previous post, he described the importance of having a tight relationship between culture and hiring. I agree 100%, which is why I’ve always struggled with HR and recruiting being separate teams. At my previous companies, Google and Yelp, there was always a swift hand-off from recruiting to HR on the new hire’s first day. It made life easy for each party, but was it the best for the employees? For this post, I’ll describe the challenges I experienced with having split teams and how I’m trying something different at foursquare.

Recruiting vs HR

As a recruiter, the most important part of the job is to close offers. This often means setting high expectations for how wonderful the new opportunity will be. Whatever it takes – always be closing. But what if we over-promised? At previous companies, it was tough to keep tabs on my new hires because I was so focused on the next set of recruits. Sometimes I didn’t know what team they landed on. Often, I didn’t know if they were happy and engaged. There was no feedback loop for me to know that what I was selling to my candidates was actually true. This is risky and has potential to cause serious turnover.

On the flip side, as an HR manager, your ultimate goal is to retain great talent. You build compensation structures, learning & development programs, performance management systems, and rewards programs to help you achieve this goal. But to succeed, you have to gather feedback from employees and know what they need. You have to be accessible and provide a safe haven for employees to come vent to you. You have to have a pulse on the entire organization.

But in reality, think about how often the average employee interacts with HR. Based on my experience, I only saw HR on my first day and on my last day. If I had a question, I emailed a ticketing system and they got back to me a couple days later. There is no feedback channel or safe haven. For so many reasons that could warrant a separate post, traditional HR departments have a tendency to be pushed to the side, disconnected from the organization, and as a result, ineffective at having a positive impact. And this is a huge bummer because every HR manager I’ve met wants to do so much more.

A new approach

When the time came to figure out how to scale HR & Recruiting at foursquare, I felt that I could solve the above issues by merging the two organizations into one unified Talent Team. I view the Talent Team as a full service organization that is with you from the day you apply to the company to the day you leave the company. We are responsible for recruiting, onboarding, training, developing, and retaining great people. Our performance is measured by the performance of the people we hire, not by the sheer number of people we hire.

In practice, this means recruiters need to be so much more than just recruiters. My team meets monthly to find ways to tweak and refine the onboarding experience for new hires. We schedule regular check-ins with each person we hired to see how they are doing and figure out how we can better support their career growth. We come up with innovative programs to develop and motivate employees. We escalate feedback we’re hearing to the executive and management teams. Above all, we provide one trusted point of contact for all candidates and employees to turn to when they need something.

The Talent Team in action

Here are just a couple of examples of where I’ve noticed the advantage of a Talent team over Recruiting/HR.

1) Fulfilling promises – When recruiters have to play the role of HR, they are held accountable for fulfilling the promises they made during the closing process. For example, many of our candidates have strong entrepreneurial spirits and talk of founding their own company. To close them, I sell them on how much they will benefit from being part of the foursquare story, helping us get from small startup to big successful company. It’s these ambitious, entrepreneurial employees that become the stars of your company, so the more you make good on this promise, the longer you’ll retain them. So how do you do it? The company has to be transparent on everything – company decisions, user growth metrics, competitive threats, etc. It’s ultimately up to senior management to lead by example but the Talent Team serves as a gut check. If we notice the culture changing, or morale dropping, or frustrations building, we have a vested interest to inform management immediately and help them troubleshoot the situation.  

2) Compensation reviews - In the traditional model, recruiting determines the starting compensation package, usually working within bands provided by HR. When review time comes, HR works with management to determine performance-based raises. Some companies have standard percentage-based raises for ‘meets expectations’ and ‘exceeds expectations’ but there’s a key piece of information missing. How hard did the employee negotiate their initial offer? Some candidates accept on the spot while others push their recruiter so close to the edge that the recruiter almost gives up and walks away from the negotiation table. If HR works purely off a compensation analysis spreadsheet and assigns standard raises, the candidates that accepted on the spot will always be paid less than their tough-negotiating peers. This is unfair. Recruiters have to be part of these conversations and with the Talent Team model, they are.

3) The little details – During the traditional hand-off between recruiting and HR, you are at risk for dropping the ball on something. There are just too many moving pieces in the onboarding process – start date, offer paperwork, relocation, immigration, IT preferences, team allocation, and more. With the Talent Team model, you have fewer cooks in the kitchen. The recruiter should know everything the new hire needs so it’s more efficient and reliable for the recruiter to be responsible for the onboarding process. First impressions do matter – do everything possible to ensure your new hire’s first week goes smoothly.

Upcoming challenge

The Talent Team model is still new and we haven’t figured everything out yet. So far, what I love most about this model is we have such a strong pulse on the organization. If employees are unhappy about something, we are usually one of the first to know, and employees look to us for help.  And the best part? We can help. Information and feedback from all directions flow through the Talent Team, and we are uniquely positioned to take everything we are hearing and turn it into constructive action.

Our biggest challenge is staying small and lean, while the larger organization continues to grow at a quick pace. The only way we can keep up is if we do a good job of building the foundation. Off the top of my head, I think that means a culture based on open feedback, strong hiring values that sync with company values, and a well-trained management team that we can leverage for help. But I’m sure I’m missing pieces of the puzzle and I look forward to continuing the conversation with you. Thanks for reading!

MBA Mondays: Guest Post From Chad Dickerson

Chad is the CEO of Etsy and I think I'll skip the intro because this post speaks for itself.

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Recruiting & Culture

When Fred asked me to write a guest blog post, I told him initially that I was going to write about recruiting and culture. Both are topics that I've learned a lot about in nearly twenty years working in companies of all kinds and contexts: public and private, large and small, struggling and ascendant, on the east and west coasts. As I sat down to write, I realized that how you recruit people and your recruiting approach defines and continually reveals the culture of your company, and it quickly became clear to me that recruiting and culture are yin and yang. In recruiting, a successful outcome usually means a candidate saying yes to your company, and at that moment, the candidate becomes part of the company culture. Below are some of the things I've learned to do over the years when it comes to recruiting and culture.

Make recruiting a top priority at the CEO level

Former IBM CEO Lou Gerstner wrote a book about IBM's late-90s turnaround and said: "culture isn't just one aspect of the game, it is the game."" The word "recruiting" can easily be substituted for culture. In my career, I've participated in a number of searches for HR executives and staff. Without fail, the least successful ones were those where the premise was "we need someone/a team to own the culture and/or recruiting." (This is a similar corporate pitfall to looking for someone to "own innovation" but that's another post.) A great head of HR is critically important but culture and recruiting are owned by everyone if they are successful. As Gerstner noted, one of a CEO's most important responsibilities is tending to the culture. To that end, a CEO must not only drive recruiting at the executive level but at any level where it will make the difference in closing a critical candidate. On a practical day-to-day level, that means that I will drop nearly anything I am doing to help close a key candidate. Talent is that important and it's always worth my time.

Communicate the company vision broadly and directly

In his legendary recruiting pitch at Apple, Steve Jobs said to John Sculley, "Do you really want to sell sugar water, or do you want to come with me and change the world?" A strong vision can quickly set your company apart from others. In his pitch, Jobs understood the power of the appeal to something larger than simple manufacturing of goods for a particular market. As Antoine de Saint-Exupery wrote, "If you want to build a ship, don't drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea." Jobs' conversation with Sculley happened 1-on-1, but the forms of communication available today mean that you can communicate the mission and vision of your company more broadly and directly than ever, which is what I did when I blogged in May about our long-term vision for Etsy. It has never been easier to tell your own story and talk about your company directly with the people you want to reach. Talking to the media is good, too, but traditional media outlets have their own publishing schedules, editing quirks, and editorial voices, so you should always keep a direct channel open. On a purely pragmatic level, communicating directly gives candidates a deeper sense of what your company is trying to do and they come into the process knowing what your company is all about, often self-selecting to your mission. I've found that this takes the recruiting process up a level.

Challenge traditional notions of corporate transparency

A compelling vision is just the beginning of a conversation. To be successful in recruiting efforts, you have to have tangible substance to what you say. Current and potential staff demand greater transparency into your company than ever before. Typically, candidates want to know two basic things about your company: 1) how is the company doing from a business standpoint? and 2) does this company operate in a way that I can believe in? The second is arguably more important than the first, since performance metrics rise and fall, valuations go up and down, and stock prices fluctuate. Culture and values persist.

Most private companies don't disclose any financial information, but for years now, we at Etsy have been publishing key metrics from the Etsy marketplace in a monthly "weather report." Our main goal in publishing this information is to let the Etsy community know how the marketplace is doing overall, but publishing this data also helps immensely in recruiting. When you're trying to convince a candidate to move across the country or choose between you and a company that holds its numbers close to the vest, providing this kind of information can be the deciding factor.

Measuring how a company operates from a values standpoint is much more challenging than reporting financial numbers because it is inherently difficult and there are few standards. Fortunately, new models are emerging to make such measurements possible. At Etsy, we believe that as a community-based business -- a business where our company's success is entirely linked to the success of our larger community -- our company should hold itself to a higher standard of social responsibility and transparency. We are not alone, and an entirely new form of business -- the "benefit corporation," or B Corp -- is developing to address the challenge of running for-profit businesses within a values-based framework. The non-profit B Lab has created a quantitative independent third-party assessment to measure companies' success against rigorous values and responsible practices. Etsy recently took the assessment and qualified to become a Certified B Corporation ™. Any potential employee can see how we measured up by looking at our score on the B Lab web site. We passed, but as you can see, there are areas where we clearly could do better. Diversity is one area for improvement, and we're actively and transparently working to improve our score. Recently, we provided scholarships for women to attend Hacker School to address systemic issues in bringing women into software engineering by providing training. We also announced our support of Code:2040, a program to increase minority representation in software engineering. We are doing all of this in the full view of the world. Over time, our community, staff, and potential candidates will be able to see how our company practices measure up to our stated values and where we are making improvements. I believe top talent is going to increasingly expect this type of transparency and companies that provide it will have a recruiting advantage as they compete against companies that are merely selling the metaphorical "sugar water" from Jobs' recruiting pitch.

Be patient: "Slow Recruiting"

Relationships are the currency of recruiting, and while recruits sometimes appear almost out of nowhere and close quickly, the truly great candidates can take a long time. John Allspaw runs technical operations at Etsy and I think John is the best in the world at what he does. When I hired John at Etsy in 2009, the near-term recruiting process was a few months, but the actual recruiting process had been going on for a decade. Nearly ten years earlier when I was CTO at Salon.com in San Francisco and John ran the ops team there, he came to me and said he needed to move back to Boston for family reasons, so he had to leave the company. I said, "Why? You can just work from there. We'll keep the same salary and nothing will change except where you work." John went back to Boston, the family situation improved, and John came back to San Francisco a year later. He never left the company and we made a difficult situation much easier for him. Since then, we have worked together at three different companies. Our relationship has persisted through boom and bust business cycles, massive upheavals in our personal lives, and changes in our business relationship. Looking back, I started to recruit John to lead Etsy's ops team when I found a way for him not to leave Salon in 1999. I call this (with tongue slightly in cheek) "Slow Recruiting."

Recruiting too slowly for key positions can be a liability in a fast-paced industry, but the larger point is that the way you and your company treat people over longer periods of time has more impact on your recruiting efforts than anything else. Whether it's making a tough situation like John's work and turning it into a win-win, talking patiently with someone at a conference when your time is constrained, or thoughtfully answering an email from a college student seeking advice, recruiting goodwill adds up over time. If you're just entering the industry and expect to be recruiting at any point in your future, I assure you that people will remember things you said to them fifteen or more years later. Keep that in mind at all times. It could be the difference in closing a key candidate ten years from now.

Open-source your culture: generosity of spirit

Most people really want to work for successful companies with really smart people where generosity and helping are the cultural norm. There are specific ways to institutionalize sharing in your company and demonstrate that spirit to the world, particularly in engineering where recruiting is most intense. In early 2010, we launched our engineering blog and named it Code as Craft, tying the mission of engineering back to the larger culture of craftsmanship in the Etsy community. Several months later, we formally introduced the concept of "generosity of spirit" at Etsy and asked every engineer do one of the following things within the year: 1) present at a conference, 2) write a blog post for the engineering blog, or 3) contribute to open source. Since then, the team has open-sourced 40+ projects, written over 70 blog posts, and posted over 50 engineering presentations, spawning a Code as Craft speaker series in the process. The team does these things because they love sharing their work, but as recruiting activities, they are incredibly effective because the software and information we provide helps potential candidates solve real problems. Cold-calling candidates doesn't come close to the warm intro of a candidate using the software you've open-sourced and thoughtfully explained to them.

Kellan Elliott-McCrea (Etsy CTO) says: "If your culture isn't explicitly leaky, if it doesn't aspire to change the world beyond the walls of your business, if it isn't captured in the product you're building and your users' experience, then it probably isn't culture, it's just cheerleading and team spirit burning up expensive inputs of time and company outings. Culture is lived, and it's why generosity of spirit is such a key piece of our team culture" (and therefore a key part of our recruiting philosophy and approach).

Cultivate the spirit of the organization

In his 1954 classic, The Practice of Management, Peter Drucker devoted an entire chapter to what he called the "spirit of an organization," writing: "Management by objectives tells a manager what he ought to do. The proper organization of his job enables him to do it. But it is the spirit of the organization that determines whether he will do it. It is the spirit that motivates, that calls upon a man's reserves of dedication and effort, that decides whether he will give his best or do just enough to get by." At the end of the day, a candidate will look most closely at the spirit of your company and the visceral sense he/she gets from visiting your office, reading your blog posts, following what members of your team say on Twitter, and reading about you in the press. It's hard to quantify this spirit, but you know it when you've got it, and you know how painful it is when you don't. When it comes to recruiting and culture, a leader is mostly responsible for tending to the spirit of the organization, and for making whatever adjustments need to be made to keep that spirit strong and powerful. In the end, that spirit matters more than anything.

Thanks to Kellan Elliott-McCrea (Etsy CTO) and Randy Hunt (Etsy Creative Director) for their feedback on this post.

MBA Mondays: Guest Post From Angela Baldonero

Angela is SVP of People and Client Success at Return Path. She joined Return Path over five years ago to focus on the People job and she has added responsibilities since then. I asked Angela to write one of the guest posts in this series on People because she and Matt Blumberg have built one of the most impressive cultures I have seen and I asked her to tell us how they did it.

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Just Say No

When Fred asked me to guest blog, I asked if there was a particular topic he wanted me to focus on. Fred replied “write about the single biggest move you and Matt made at Return Path to impact culture, teamwork, and development throughout the organization.”

For me, the biggest shift that we made was when we decided to stop trying to be like every other company and to instead actively resist changes that would not make sense for us. We started saying no, regularly and forcefully, to policies, systems and procedures that many companies adopt as they grow.  

Return Path was on a path to becoming a standard, if better-than-average company, with fun perks and all the systems and programs that you’re supposed to implement as you grow. However, that also meant that there was a demand for more policies and rules, it was getting harder to make decisions and people were often frustrated with the pace at which things got done. Collaboration was sometimes confused with consensus and creativity was getting stifled. There was a better way forward where people make good decisions without a phone book of instructions.

The day we committed to no, we were at an executive team offsite and trying to figure out how to implement some changes that would give more power to individuals to get stuff done. We kept getting caught up in the inevitable “What if someone screws up or makes a bad decision?” discussion. But then we stopped because we realized that we’d spent enough time on problems and exceptions. What if we turned the entire conversation around and focused on managing to the top? What if everything we do is focused on our top performers, the people we trust, the people who make great decisions, the people who can think critically and creatively and as a result can handle a bit of ambiguity? We set out to say no in four key areas.

Just Say No to Useless Brilliance

We’ve all worked with that brilliant person that the organization thinks it cannot live without. Unfortunately, that brilliant person can’t communicate or work on a team. So, most organizations put them in a box in an attempt to minimize the damage they inflict on the organization. But it never works because the boxes pile up and so do the silos.  And no matter how well constructed the box is, that brilliant person can simultaneously demotivate 20 co-workers AND usually doesn’t contribute much in the silo. It’s not worth it. We don’t tolerate brilliant assholes.

Just Say No to Policy Paralysis

Policies and rules are created to guard against people doing stupid things to control time and resources. Examples: paid time off, sick time, expenses, work hours, comp, social media, dress code, discipline and -- my favorite -- “the code of ethics.” The reality is, with clear direction 99% of our people make great decisions every day. The couple of misses we’ve had have been quickly resolved after a clarifying conversation. Instead of locking things down, we set them free. We’ve said no to creating a policy for every situation we might encounter.  Instead, we have unlimited vacation and sick time.  We have a common sense expense reimbursement philosophy (“spend the money as if it was your own”).   

Just Say No to Values Dilution

This is the toughest category and the one that requires the most courage. Saying no to things that conflict with your organization’s values is essential to ensuring your culture is alive and thriving. Not paying attention will quickly lead to meaningless values posted on the wall. For example, we value transparency which means we share the good, the bad and the ugly openly (and often). Our commitment to transparency was dramatically tested when we decided to spin off part of the business and needed to decide if we should alert staff ahead of a formal sale. We did what most companies wouldn’t – we told the staff. It was such a unique approach that we got written up in Inc. magazine (see article).  Our value – up there, on the wall – is that we say no to secrecy and withholding.  If we hadn’t told the staff about the transition we would not have been living that value. And everyone would have known it.

Just Say No to Executive Dysfunction  

We’ve all seen the all-important and all-knowing executive team. The team that has all the answers and yet isn’t able to execute. I’ve seen too many executive teams where personal relationships and politics are the real business drivers behind-the-scenes. Business is done over cocktails, after hours and not in broad daylight. Personal agendas trump team goals. People smile and nod politely in meetings, then leave the meeting and corner the CEO to say what they “really think.” At Return Path, we are fiercely committed to the health of the executive team.  We check in with each other on our individual and team development and are rigorous about giving each other feedback and holding each other accountable.  We work with a team coach (Marc Maltz) to work through the 5 Dysfunctions of a Team and develop our ability to be Multipliers within the organization. We are brutally honest with each other and exhaustive about looking in the mirror. We say no to executive dysfunction, personal agendas and being too busy to live our values. And it is the best team I’ve ever worked with.  

A new world of work is being born around us. Most traditional HR practices are ineffective and irrelevant. The courage to say no to the status quo has given us the freedom to blaze a new path of freedom, flexibility and creativity.  And it’s a competitive advantage for us. Our turnover is lower than nearly any other company – in our industry or any other industry. Most of our new employees come in as referrals from existing employees. And our application to hire percentage is about 1.5% -- meaning Return Path is harder to get into than Princeton.

My advice to you is to set your people free to focus on important, high impact work and solve challenging business problems. That’s how companies will win now.

MBA Mondays: Guest Post From Donna White

Now we start the guest post part of this MBA Mondays series on People. First up is AVC regular Donna White. In this post, Donna explains that recruiting is fun if you approach it the right way. I know many founders who don't really enjoy recruiting so this post is for all of you.

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Recruiting is Fun!

My husband convinced me to use this title for my post.  This is his observation of how I approach my work as an executive recruiter.

I can honestly say that I do find recruiting to be fun.  Perhaps this why it is still fresh and interesting to me after close to two decades.  Don’t get me wrong, recruiting is hard and strenuous work.  I probably don’t have to tell most of you this.  Yet, the more challenging it is, the more I seem to enjoy it.  

This is one of the many reasons I am attracted to recruiting for startups where you have to hold both the present and the future in your head at the same time and, simultaneously, be both visionary and pragmatic, among other challenges.  

Here is an excerpt from a Twitter exchange that I had with AVC regular, Aaron Klein, Founder/CEO of Riskalyze:

Aaron’s words represent what I enjoy most about recruiting.  It wasn’t until after this exchange that it occurred to me – these words could also describe running a startup: challenging, exhilarating, high stakes.

As I thought about writing this post, I wondered if, in general, people for whom recruiting is part of other responsibilities have a different perception than I do as a professional recruiter.  I used the Honestly Now site (Tereza Nemessanyi, Founder/CEO) and Quipol (Max Yoder, Founder) to do some cursory research.  As of this writing, the votes on whether or not people enjoy recruiting are about 50/50 from both sources (excluding those who chose “none of the above”).  Perhaps, not conclusive, but indicative.

I thought it would be interesting to bring the Quipol over to this post so that AVC readers could also chime in:

In the end, it is not my enjoyment of the work of recruiting that represents my true motivation. 

The true motivation and why it is a passion is summed up in a statement made by Fred in another MBA Mondays post earlier in the year:   “Building the business largely means building the management team. They are one and the same.”  I have a passion for helping entrepreneurs build businesses.  

Fred’s words represent why many of you who are founders and/or CEOs have shared in the AVC comments that recruiting is one of the most important things that you do.  In questioning William Mougayar (Founder/CEO, Engagio) about his underlying motivations in recruiting, one of the reasons that he gave was:  “I need to find the best talent that can give me a competitive advantage.”  

It is not a matter of whether or not you enjoy it, it is something that needs to be done.  The life of your company depends upon it.  As Aaron said, the stakes are high.

There are a number of directions that I could take from here, but I am going back to the beginning of the post.  It would be understandable if you thought “So what!  Who cares whether or not recruiting is enjoyable. It just needs to get done.”  

Even for me, as someone who does enjoy recruiting, the enjoyment in itself is not what motivates me.  However, enjoyment is a huge contributing factor toward excelling in my work and approaching a client’s hiring need with excitement and enthusiasm.  I believe that doing something that you enjoy turns out a better quality product on a more consistent basis.  Attitude and perspective in recruiting influence results and may even produce a better team in the long run.

Some ideas for transforming your perception of recruiting:

Recognize recruiting as a source of opportunity beyond hiring.   The insights gained, and discoveries and contacts made during the recruiting process can be an invaluable investment into your business.  For instance, you may learn of business opportunities, build your network, gain market intelligence, be exposed to new ways of thinking and of doing things, and introduce your product to people who will become evangelists.  

Use the activities involved in recruiting to strengthen abilities that will contribute to your overall effectiveness.  There are elements of recruiting that you probably already enjoy and that exercise the same abilities that you use in other aspects of running your business, such as:  creating something out of nothing, analyzing and solving problems, devising strategies, making new contacts, crafting and relaying your company’s story, negotiating and closing deals. 

Think of your staffing need in terms of an opportunity rather than filling a job.  What is the opportunity that you are presenting and why is it great?  What problem is being solved by this hire?  What challenge is being met?  What opportunities will your business be better positioned for?

Create a recruiting culture.  Build elements of recruiting into the fabric of your business and use this to galvanize your team and increase their engagement.  More in this post.

The goal I had in writing this post was to share my enthusiasm for recruiting in the hope that some of you will be inspired and will take a fresh look at recruiting.  One thing I appreciate about this community is that a post doesn’t need to supply all the answers and typically merely serves as a conversation starter.  I look forward to where you take this.  Carry on, please…

MBA Mondays: Leveraging Your Partners To Grow And Develop Your Team

This is the final post I am writing in this MBA Mondays post on People. Next week we will start with the guest posts and I've lined up about a half a dozen of them. I am going to finish off my posts with something I know a fair bit about which is leveraging your partners to grow and develop your team.

In talking about "your partners", I will focus on your investors, because that is what I am. A VC. Most of this advice can be used to a degree with other partners, advisors, independent board members, consultants, etc.

There are a lot of investors who can write checks. But there are not a lot of investors who can help you build and manage a team. If you have a choice in your investors, which not everyone will have, you should select investors who can do the latter.

The best investors, the ones who have been at it for a while and have great reputations, will have a large network of people they have worked with over the years. Their network will also include people who they want to work with and who want to work with them. They can and do play matchmaker between their network and their portfolio companies. I suspect the partners at USV spend at least 25% of our time on things that would be considered "recruiter" functions. And we should probably spend more of our time on this. I don't know of a better way to positively impact the performance of our investments.

But not every portfolio company gets equal benefit out of our recruiting function. Like all things in life, the squeeky wheel gets the oil. We love all of our investments equally but some demand our time and attention and others do not. The ones who demand get. The others get too, but not as much. So rule #1 is demand that your investors help you grow and develop your team. Ask for results, expect results, get results.

Rule #2 is to be very specific about what you want and request help in frequent small asks. One of our portfolio companies that I am actively involved with sends me an email each week with up to three specific asks. No more than three. I can do three each week. What I can't do is a vague open ended request once in a while with a very large ask.

Rule #3 is to communicate actively with your investors. Make sure they know what you want and what you don't want. I know a lot of investors who spam their portfolio companies with resumes. That is not helpful. Make sure your investors know the jobs you are actively recruiting for. And let them know about the roles you are "opportunistically" recruiting for. And most importantly, make sure they know what you are not looking for and why. When you get resume spam, instead of ignoring it and deleting it, reply back with a courteous but clear message about why that was not helpful.

Rule #4 is to selectively engage your investors in the recruiting process. Use them when they can help. Use them to close an important candidate. Use them to get a second or third opinion on a particularly important hire. Don't give your investors control over your hiring decisions but engage them as trusted advisors. As the Gotham Gal likes to say "you get what you give." Give someone a role and a feeling of being involved and you will get help.

Rule #5 is to expose your investors to your team. Give them a sense of the culture of the company and the composition of the team. Give your best and brightest "air time" with your investors. Your employees will like it and so will your investors. I really enjoy being invited to speak to an all hands meeting, or to have lunch with the team, or to go play paintball with a couple portfolio companies. It allows me to help with retention, it allows me to think more clearly about who might fit with the team, it allows me to help the company in more ways, and most of all, it makes me feel good about the work that I am doing.

There is a limit to all of this. You should not let your investors become too engaged in the company. You and your team must run the company and there needs to be a very clear line between what is advice, assistance, and help and what is a shadow management function. If your investor is running your management team meeting, you know you've crosssed the line. That is a bad place to be.

But many entrepreneurs overcompensate for this by stiff arming their investors and that is a mistake too. You can't do everything yourself. Your investors can help. They operate at 30,000 feet and as a result they see a lot more of the markets that matter to you than you do. That includes the market for talent. So leverage them in the war for talent. Use them wisely. And you will see that it will pay dividends.

MBA Mondays: Asking An Employee To Leave The Company

I don't like using terms like "fire" or "terminate." To me they have too much emotion attached to them to be appropriate when splitting with an employee. I like to say that "fred was asked to leave the company" or "fred, we need you to leave the company." That works better for me and, I think, it also works better for the person who is being asked to leave the company.

But more than how to say it, I think how you do it is paramount. Here are some simple rules along with some color commentary on each:

1) Be quick - once you've made a decision to let someone go, move quickly to do it. Don't procrastinate. Do get things buttoned up (terms of departure, departure date, how it will be communicated, etc) but once you've got things in order, have the conversation.

2) Be generous - Unless the employee has acted in extreme bad faith or done something terribly wrong, I like to be generous on the way out. I like to give some severance even if it is not required by company policy or contract. I like to vest some stock that may not be required to be vested. I like to paint the departure in as favorable light as possible. And I like to say good things about the person once they are gone. I like to be generous in financial terms and emotional terms. It makes things go easier for everyone.

3) Be clear - Do not beat around the bush. Start the conversation with the hard stuff. They will be leaving the company. Be clear about when and how. And be clear about the financial terms and other aspects of the separation. Do not mince words and do not say confusing things. Most employees in this situation will ask for reasons. Have them lined up in advance and be clear and crisp when describing the reasons. The reasons for a split do not have to be the employee's fault. They can, and often are, the company's fault. In startups, employees are almost always at will and it is the CEO's right to ask anyone to leave the company for any reason. So just be as honest as possible, be clear and crisp about the reasons, and don't turn this into a long involved discussion.

4) Get advice - There are some situations where the company has some potential legal exposure in these situations. When you are a small company, ask your lawyer about the specific situation so you know when you have one of them on your hands. When you are a larger company, your HR team should know when you have one of these situations on your hands. But make sure you are appropriately advised about a departure before sitting down and having the conversation. In the off chance you have a tricky situation, you will need to handle it differently and you will need advice on how to do that beyond what is written in this post.

5) Communicate - Once the employee has been told about their departure, you should immediately communicate it to those who will be affected in the company. For executives and co-founders, that means the entire company. So figure out how you are going to have that conversation immediately after you have the conversation with the departing employee. Be consistent with your messaging. Don't tell a departing employee one thing and the team another. People talk. And they will quickly figure out that you are spinning, bullshitting, or something worse if you give different messages.

When an employee is asked to leave the company there are two constituencies you need to think about. The first is the departing employee. The second are the remaining employees. How you deal with the departing employee will be noticed by the remaining employees. Even if the departing employee was not liked, a bad cultural fit, or worse incompetent, the remaining employees will have some empathy for them on the way out and if you handle it well, that will send an important message to the team. I find that a lot of inexperienced managers miss this nuance and it hurts them. They think they need to "look strong" to the team. They do. But they also need to look fair and humane. This is a big opportunity to do that.

I will finish with a few words aimed at the boss' own psyche and then suggest some further reading on this topic.

Asking someone to leave the company is never easy. I don't know anyone who enjoys doing it. But it comes with the territory. You don't have to learn to like it, but you have to learn to do it well. The thing that helps me and, I believe, helps everyone in this situation is knowing that you are doing the right thing for the company, the remaining team, and all the stakeholders in the business including customers, partners, investors, etc. When you put it in those terms, doing this unpopular chore becomes a bit easier.

If you'd like to read more on this topic, I think Ben Horowitz has written well on this subject a few times. I found these links below from Ben's writings and would encourage you to go and read them.

Preparing To Fire An Executive

Demoting A Loyal Friend

Lies That Losers Tell

MBA Mondays: Retaining Your Employees

I hate to see employees leave our portfolio companies for many reasons, among them the loss of continuity and camaraderie and the knowledge of how hard everyone will have to work to replace them. Many people see churn of employees in and out of companies as a given and build a recruiting machine to deal with this reality. While building a recruiting machine is necessary in any case, I prefer to see our portfolio companies focus on building retention into their mission and culture and reducing churn as much as humanly possible.

There isn't one secret method to retain employees but there are a few things that make a big difference.

1) Communication - the single greatest contributor to low morale is lack of communication. Employees need to know where the company is headed, what they can do to help get there, and why. You cannot overcommunicate with your team. Best practices include frequent one on ones between the managers and their team members, regular (weekly?) all hands meetings, quick standup meetings on a regular basis for the teams to communicate with each other, and a CEO who is out and about and available and not stuck in his/her office.

2) Getting the hiring process right - a lot of churn results from bad hiring. The employee is asked to leave because they are not up to the job. Or the employee leaves on their own because they don't enjoy the job. Either way, this was a screwup on the company's part. They got the hiring process wrong. The last MBA Mondays post (two weeks ago) was about best hiring practices. Focus on getting those right and you will make less hiring mistakes and experience less churn.

3) Culture and Fit - Employees leave because they don't feel like they fit in. Maybe they don't. Or maybe they just don't know that they do fit in. Another post in this series on People was about Culture and Fit. You must spend time working on culture, hiring for it, and creating an environment that people are happy working in. This is important stuff.

4) Promote from within. Create a career path for your most talented people. The best people are driven. They want to do more, develop, and earn more. If you are always hiring management from outside of the company, people will get the message that they need to leave to move up. Don't make that mistake. Hire from within whenever possible. Take that chance on the talented person who you think is great but maybe not yet ready. Work with them to get them ready and then give them the opportunity and then help them succeed in the position. Go outside only when you truly cannot fill the position from within.

5) Assess yourself, your team, and your company. We have discussed various feedback approaches here before. There is a lot of discomfort with annual 360 feedback processes out there. There is a growing movement toward continuous feedback systems. Whatever the process you use, you must give your team the ability to deliver feedback in a safe way and get feedback that they can internalize and act upon. You must tie feedback to development goals. Feedback alone will not be enough. Build a culture where people are allowed to make mistakes, get feedback, and grow from them. I have seen this approach work many times. It helps build companies where churn rates are extremely low.

6) Pay your team well. The startup world is full of companies where the cash compensation levels are lower than market. This results from the view that the big equity grants people get when they join more than makes up for it. There are a few problems with this point of view. First, the big option grants are usually limited to the first five or ten employees and the big management positions. And second, people can't use options to pay their rent/mortgage, send their kids to school, and go on a summer vacation with the family. Figure out what "market salaries" are for all the positions in your company and always be sure you are paying "market" or ideally above market for your employees. And review your team's compensation regularly and give out raises regularly. This stuff matters a lot. Most everyone is financially motivated at some level and if you don't show an interest in your team's compensation, they won't share an interest in yours (which is tied to the success of your company).

I believe these six things (communicate, hire well, culture matters, career paths, assessment, and compensation) are the key to retention. You must focus on all of them. Just doing one of them well will not help. Measure your employee churn and see if you can improve it over time. A healthy company doesn't churn more than five or ten percent of their employees every year. And you need to be healthy to succeed over the long run.

MBA Mondays: Best Hiring Practices

Hiring is a process and should be treated as such. It is serious business.

The first step is building a hiring roadmap which should lay out the hiring plan over time by job type. This should be built into your operating plan and budget. You want to be very strategic about how you invest your scarce resources into hiring and think carefully about when you need to add resources.

Once you have done that, you want to have a system for opening up these positions for hire. This should not be done lightly because each position will require a fair bit of work by a bunch of people to hire for. Don't open up your hiring process lightly.

The first step in opening up a position for hiring is to define the position you are looking for. Most companies call this a job specification (or spec). The spec should outline the role that is being filled and the characteristics of the person who will be successful in the job. Here is a job spec for a brand strategist job in Twitter's office in NYC. If you click on that link, you will see that it starts with a high level description of the role within the context of the larger Twitter organization. Then it gets into what it will take to be successful in the role. Then it lays out specific responsibilities and finishes with the background and experience that Twitter is looking for in the candidate.

The manager who is directly responsible for the person being hired should draft the job spec and it should be signed off on by the CEO and whomever is in charge of HR (which could be the CEO in a small company). Once this job spec is published on your jobs page, this position is officially open for hire and the process begins.

Your company should have a jobs page. Even if you are a five person startup, you should have one. It should articulate what it is like to work at your company and list any open jobs. It should be linked to at the bottom of your webpage, right next to the link to your about page. This is important. Don't put it off. Here is Etsy's "careers page". It's a good example of what you want to do on your jobs page.

There are web-based solutions to get your open positions onto your jobs page, track the candidates through the hiring process, and provide workflow for your hiring team. In the industry vernacular, these systems are called Applicant Tracking Systems (ATS). Many of our portfolio companies use Jobvite, but there are plenty of other options out there as well. You do not need to build this stuff yourself.

Once the position is open, you want to crank up the sourcing process. We talked about where to find strong talent two weeks ago. Do not take the "put the job opening up and let the applicants come" approach. That will not get you the best people. You must go out and find the talent you want to hire. You can use your existing team, that is where the best leads always come from. You can use your network. You can use recruiters, both contingency and retained, and you can use services like LinkedIn and Indeed. You want to cast a wide net and work hard to source the best candidates you can. This is a time intensive process. Many companies will hire an in-house recruiter to help with this process, particularly when recruiting engineers, designers, and product talent. I've seen companies as small as ten employees bring on in-house recruiters. I am a big fan of making that investment because it pays dividends in terms of better talent.

Once the candidates start coming in, you will need to vet them to determine who gets an interview and who does not. Someone inside the company must lead this process. If there are HR resources, this vetting process starts with them. But the manager who is hiring for this position must be directly engaged in this vetting process. A HR professional can identify the candidates who don't come close to meeting the requirements of the job and filter them out. But the hiring manager should go through the applications of everyone who is close to being a viable candidate. He or she knows best what the job entails and can make the kind of "gut calls" that often lead to the best candidates.

You will want to interview a decent number of folks for every position. There are no hard rules for this, but the more people you meet, the better job you will do with the hire. Of course you can't meet everyone. Many companies like a 15 minute phone call (the phone screen) as the first filter into the interview process. A skype video call is also a good way to do this.  At USV we have experimented with a video application (using a service called Take The Interview), with good results. The phone or video screen is an efficient way to identify the small group (a half dozen to a dozen) that you will want to do a face to face interview with.

Once you get to face to face interviews, you will want to figure out how to get as many folks in the company to meet the candidates as possible. Our portfolio company Return Path has each candidate meet with four to eight employees during their interview process. That is a lot but Return Path makes a huge investment in team, culture, and their employees and they feel it is worth it. It may be worth it for your company as well.

Many employees don't know how to interview and you should teach them the basics as well as educate them on what you are looking to learn from their interview. Some training on interviewing as well as a quick feedback form for each employee to fill out will provide consistency and clarity from the employee interview process.

Most CEOs I know interview every hire their company makes until they get to be more than 100 employees (or more). Even if you have a head of HR and a top notch recruiting team, the responsibility for hiring is yours and yours only. A bad hire is your fault. A good hire is your success. So do not abdicate your responsibility to make the final call on each hire until your company is developed enough and strong enough to start making these hires themselves. This is how you build a great team, a great culture, and a great company.

Once the successful candidate is identified, you will want to do some checking on the person. I am a fan of making reference calls on everyone. They are not that hard to do and you will learn more from them than any other source of background checking. LinkedIn is particularly good for this. If you connect to the candidate on LinkedIn, you can quickly figure out who you know that knows them. Call those people and do your homework. It is also pretty wasy to do a simple background check for criminal or civil information. We don't do that at USV but I know a lot of companies that do it as a matter of good corporate practice.

When you are ready to make the hire, you must prepare an offer letter. The offer letter will outline the compensation you are offering and any other salient terms of the employement offer. Have your lawyer help you draft the first one you send out and use it as a template for all future hires. Offer letter are written agreements between you and the employee and treat them as such. Sign the employment offer and have the employee sign it to acknowledge that they are accepting it.

That's the hiring process. Done right, it involves a huge investment in each and every position. So many startups cut corners on it because they simply don't have the time or the resources to do it right. I would encourage everyone to take a step back and think about the costs of not doing it right and commit themselves and their companies to doing it right. You will see the benefits in time. And they are large.