Thursday, July 10, 2014

The Hard Thing About Hard Things

Personal notes taken on "The Hard Thing About Hard Things" - a brilliant book by Ben Horowitz.

An early lesson I learned in my career was that whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project. An engineer might get stuck waiting for a decision or a manager may think she doesn't have authority to make a critical purchase. These small, seemingly minor hesitations can cause fatal delays. I could not afford any hesitation, so I scheduled a daily meeting with Anthony, Jason, and the team- though they were now based in Plano.The purpose was to remove all roadblocks. If anyone was stuck on anything for any reason, it could not last more than twenty-four hours-the time between meetings.
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After confirming that acquiring would be superior to building, we negotiated a deal to buy Rendition Networks for $33 million. Within three months of competing the acquisition, John negotiated a deal with Cisco Systems- the world's largest networking company-to resell our product. The included an agreement to prepay us $30 million for advanced licenses. As a result, the Cisco deal alone paid more than 90 percent of the acquisition costs. Note to self: It's a good idea to ask, "What am I not doing?"
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In the end, I did find the answer, we completed the deal with EDS, and the company did not go bankrupt. I was not mad at Bill. To this day, I sincerely appreciate his telling me the truth about the odds. But I don't believe in statistics. I believe in calculus.
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I put this section first even though it deals with some serious end-game issues such as how to fire an executive and how to lay people off. In doing so, I follow the first principle of Bushido- the way of the warrior: keep death in mind at all times. If a warrior keeps death in mind at all times and lives as though each day might be his last, he will conduct himself properly in all his actions. Similarly, if a CEO keeps the following lessons in mind, she will maintain the proper focus when hiring, training, and building her culture.
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Struggle is when you wonder why you started the company in the first place.
The Struggle is when people ask you why you don't quit and you don't know the answer.
The Struggle is when your employees think you are lying and you think they may be right.
The Struggle is when you don't believe you should be CEO of your company. The Struggle is when you know that you are in over your head and you know that you cannot be replaced. The Struggle is when everybody thinks you are an idiot, but nobody will fire you. The Struggle is where self-doubt becomes self-hatred.
The Struggle is when you want the pain to stop. The Struggle is unhappiness.
The Struggle is when you go on vacation to feel better and you feel worse.
The Struggle is when you are surrounded by people and you are all alone. The Struggle has no mercy.
The Struggle is the land of broken promises and crushed dreams. The Struggle is a cold sweat. The Struggle is where your guts boil so much that you feel like you are going to spit blood.
The Struggle is not failure, but it causes failure,. Especially if you are weak. Always if you are weak.
Most people are not strong enough.
Every great entrepreneur from Steve Jobs to Mark Zuckerberg went through the Struggle and struggle they did, so you are not alone. But that does not mean that you will make it. You may not make it. That is why it is the Struggle.
The Struggle is where greatness comes from.
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Prior to executing the layoff, the CEO must address the company. The CEO must deliver the overall message that provides the proper context and air cover for the managers. If you do your job right, the managers will have a much easier time doing their jobs.Keep in mind what former Intuit CEO Bill Campbell told me-The message is for the people who are staying. The people who stay will care deeply about how you treat their colleagues. Many of the people whom you lay off will have closer relationships with the people who stay than you do, so treat them with the appropriate level of respect. Still, the company must move forward, so be careful not to apologize to much.
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Once you have decided to hire someone above your friend and decided on the alternatives that you'd like to offer him, you can have the conversation. Keep in mind that you cannot let him keep his old job, but you can be fair and you can be honest. Some keys doing that:

  • Use appropriate language. Make clear with you language that you've decided. As previously discussed, use phrases like "I have decided" rather than "I think" or "I'd like." By doing this, you will avoid putting the employee in the awkward position of wondering whether he should lobby for his old job. You can't tell him what he wants to hear, but you can be honest.
  • Admit reality. If you are a founder-CEO like I was, it probably won't be lost on the employee that you are just an underskilled for your job as he is for. Don't dodge this fact. In fact, admit that if you were a more experienced CEO, you might be able to develop him into the role, but two people who don't know what they are doing is a recipe for failure.
  • Acknowledge the contributions. If you want him to stay in the company, you should say that and make it crystal clear that you want to help him develop his career and contribute to the company. Let him know that you appreciate what he's done and that your decision results from a forward-looking examination of what the company needs, not a review of his past performance. The best way to do this, if appropriate, is to couple the demotion with an increase in compensation. Doing so will let hom know that he's both appreciated and valued going forward.

Through all of this, keep in mind that it is what it is and nothing you can say will change that or stop it from being deeply upsetting. Your goal should not be to take the sting out of it, but to be honest, clear, and effective. Your friend may not appreciate that in the moment, but he will appreciate it over time.
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My old boss Jim Barksdale was fond of saying, "We take care of the people, the products, and the profits-in that order." It's a simple saying, but it's deep. "Taking care of the people" is the most difficult of the three by far and if you don't do it, the other two won't matter. Taking care of the people means that your company is a good place to work. Most workplaces are far from good. As organizations grow large, important work can go unnoticed, the hardest workers can get passed over by the best politicians, and bureaucratic processes can choke out the creativity and remove all the joy.
When everything went wrong from the dot-com crash to NASDAQ threatening to delist the company, the thing that saved us were the techniques developed in this chapter. If your company is a good place to work, you too may live long enough to find your glory.
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Ironically, the biggest obstacle to putting a training program in place is the perception that it will take too much time. Keep in mind that there is no investment that you can make that will do more to improve productivity in your company. Therefore, being too busy to train is the moral equivalent of being to hungry to eat. Furthermore, it's not that hard to create basic training courses.
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Another challenge is a phenomenon that I call the Law of Crappy People. The Law of Crappy People states: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title.
The rationale behind the law is that the other employees in the company with lower titles will naturally benchmark themselves against the crappiest person at the next level. For example, if Jasper is the worst vice president in the company, then all of the directors will benchmark themselves against Jasper and demand promotions as soon as they reach his low level of competency.
As with the Peter Principle, the best that you can do is mitigate the Law of Crappy People and that mitigation will be critically important to the quality of your company.
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Ask ten founders about company culture and what it means and you'll get ten different answers. It's about office design, it's about screening out the wrong kinds of employees, it's about values, it's about fun, it's about alignment, it's about finding like-minded employees, it's about being cultlike.
      So what is culture? Does culture matter? If so, how much time should you spend on it?
      Let's start with the second question first. The primary thing that any technology startup must do is build a product that's at least ten times better at doing something than the current prevailing way of doing that thing. Two or three times better will not be good enough to get people switch to the new things fast enough or in large enough volume to meet. The second thing that any technology startup must do is to take the market. If it's possible to do something ten times better, it's also possible that you won't be the only company to figure that out. Therefore, you must take the market before anybody else does. Very few products are then times better than the competition's, so unseating the new incumbent is much more difficult than unseating the old one.
      If you fail to do both of those things, your culture won't matter one bit. The world is full of bankrupt companies with world-class cultures. Culture does not make a company.
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Over the past ten years, technological advances have dramatically lowered the financial bar for starting a new company, but the courage bar for building a great company remains as high as it has ever been.
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In peacetime, leaders must maximize and broaden the current opportunity. As a result, peacetime leaders employ techniques to encourage broad-based creativity and contribution across a diverse set of possible objectives. In wartime, by contrast, the company typically has a single bullet in the chamber and must, at all costs, hit the target. The company's survival in wartime depends upon strict adherence and alignment to the mission.
      When Steve Jobs returned to Apple, the company was weeks away from bankruptcy-a classic wartime scenario. He needed everyone to move with precision and follow his exact plan; there was no room for individual creativity outside the core mission. In stark contrast, as Google achieved dominance in the search market, Google's management fostered peacetime innovation by enabling and requiring every employee to spend 20 percent of their time on their own new projects.
      Peacetime and wartime management techniques can both be highly effective when employed in the right situations, but they are very different. The peacetime CEO does not resemble the wartime CEO.
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Be aware that management books tend to be written by management consultants who study successful companies during their times of peace. As a result, the resulting books describe the methods of peacetime CEOs. In fact, other than the books written by Andy Grove, I don't know of any management books that teach you how to manage in wartime like Steve Jobs or Andy Grove.
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If you are a founder CEO and you feel awkward or incompetent when doing some of these things and believe there is no way that you'll be able to do it when your company is one hundred or one thousand people, welcome to the club. That's exactly how I felt. So did every CEO I've ever met. This is the process. This is how you get made.
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Addressing the skill set issue proved to be difficult because, sadly, the only way to learn how to be a CEO is to be a CEO. Sure, we might try to teach some skills, but learning to be a CEO through classroom training would be like learning to be an NFL quarterback through classroom training. Even if Peyton Manning and Tom Brady were your instructors, in the absence of hand-on experience, you'd get killed the moment you took the field.
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When I first became a CEO, I genuinely thought that I was the only one struggling. Whenever I spoke to other CEOs, they all seemed like they had everything under control. Their businesses were always going "fantastic" and their experience was inevitably "amazing." I thought that maybe growing up in Berkeley with Communist grandparents might not have been the best background for running a company. But as I watched my peers' fantastic, amazing businesses go bankrupt and sell for cheap, I realized that I was probably not the only one struggling.
      As I got further into it, I realized that embracing the unusual parts of my background would be the key to making it through. It would be those things that would give me unique perspectives and approaches to the business. The things that I would bring to the table that nobody else had. It was borrowing Chico Mendoza's shocking yet poetic style to motivate and focus the team. It was my understanding of the people underneath the persona and skin color that enabled me to put Jason Rosenthal together with Anthony Wright to save the company. It was even my bringing in to the most capitalistic pursuit imaginable what Karl Marx got right. On my grandfather's tombstone, you will find his favorite quote: "Life is struggle." I believe that within that quote lies the most important lesson in entrepreneurship: Embrace the struggle.

The amazing "The Hard Thing About Hard Things" on the top.