STANWOOD insights

The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers - Ben Horowitz

May 11, 2019 5:09:03 PM / by Hannes Kleist

This book is a treasure for anyone who feels alone and overwhelmed by the demands of running a company.

All other management books are written for good times. This book is the only one for the hard times.

Hannes Kleist - May 2019

Introduction

The hard thing is when those "great people" develop a sense of entitlement and start demanding unreasonable things.

I am not sure about "demand", but I noticed that the ball posts are shifting. Regardless of how many bad practices you remove every year, it never feels "done". Moreover, I consider that a good thing.

The hard thing is waking up in the middle of the night in a cold sweat when the dream turns into a nightmare.

I have been there. A lot. Sometimes for weeks on end. That's the price to pay if you want to build something meaningful. If it were simple and without sacrifice, anyone would do it.

Chapter 1: From Communist to Venture Capitalist

There are no shortcuts to knowledge, especially knowledge gained from personal experience.

Very true. Regardless of how many books you read, you need to have been in a situation to appreciate third-party advice.

wisdom and relying on shortcuts can be worse than knowing nothing at all.

Word. There is no shortcut to life.

On hiring friends

Most business relationships either become too tense to tolerate or not tense enough to be productive after a while.

The founders of Stanwood broke up because we were not honest enough with one another. I had hired friends later: Never ended well.

As you need to consider that every team member will at some time leave you or you her, the separation will become unbearably hard both professionally and personally for you - but also for your team.

Chapter 2: "I Will Survive"

IF YOU ARE GOING TO EAT SHIT, DON'T NIBBLE

Always good advice. You need to own a terrible situation and solve it completely.

Chapter 3: This Time With Feeling

All that I ask is that if you have decided to quit that you quit today. I won't walk you out the door—I'll help you find a job. But, we need to know where we stand. We need to know who is with us and whom we can count on. We cannot afford to slowly bleed out. You owe it to your teammates to be honest. Let us know where you stand.

Wow. That's strong. I did something similar when a key team member left a few days ago. Not sure how that went yet.

I'd learned that all decisions were objective until the first line of code was written. After that, all decisions were emotional.

Not sure about that. However, we need to spend more time with our clients before the official quote. Meet at least five times for 3-4 hours and discuss and iterate wireframes. The last two meetings we should walk with our clients through every single screen and review every element.

I was sick. I couldn't sleep, I had cold sweats, I threw up, and I cried.

Alright: It seems I have not hit rock bottom yet. Feeling sick, not sleeping, cold sweats... Been there. Throwing up and crying I have yet to experience. Cannot wait :-))).

Chapter 4: When Things Fall Apart

high schools should get rid of calculus and replace it with statistics, which is really important and actually useful.

I could not agree more. I have never needed vector math, differentials and integrals in my professional life. Statistics I need daily.

It is easy to think that the things that bother you will upset your people more. That's not true. The opposite is true. Nobody takes the losses harder than the person most responsible. Nobody feels it more than you. You won't be able to share every burden, but share every burden that you can.

@tal, @richard, @marcin: Be prepared :-))))))

You made the decisions. But you knew the job was dangerous when you took it. Everybody makes mistakes. Every CEO makes thousands of mistakes. Evaluating yourself and giving yourself an F doesn't help.

That's some fine pep talk!

This is what separates the women from the girls.

I love how Ben alternates genders in this book.

If you want to be great, this is the challenge. If you don't want to be great, then you never should have started a company.

More fine pep talk :-)))

My single biggest personal improvement as CEO occurred on the day when I stopped being too positive.

Something @milosz called me on this week.

If the employees fundamentally trust the CEO, then communication will be vastly more efficient than if they don't.

This should be the fundamental question we ask ourselves when working for a company. If you do not: Quit.

"Don't bring me a problem without bringing me a solution." if the employee cannot solve an important problem? For example, what if an engineer identifies a serious flaw in the way the product is being marketed? Do you really want him to bury that information?

I am guilty of this as well. But I still do it, when an engineer brings an issue. How in the world does she expect me i.e. an android programming issue about surface views?

If you run a company, you will experience overwhelming psychological pressure to be overly positive. Stand up to the pressure, face your fear, and tell it like it is.

Will try.

Keep in mind what former Intuit CEO Bill Campbell told me—The message is for the people who are staying.

That's how we construct posts when people leave.

Yes, the reason that you have to fire your head of marketing is not because he sucks; it's because you suck.

I cannot stress this enough. If you have to fire someone: It's your fault not theirs.

You hired for lack of weakness rather than for strengths. This is especially common when you run a consensus-based hiring process. The group will often find the candidate's weaknesses, but they won't place a high enough value on the areas where you need the executive to be a world-class performer.
Wow. Quite a counter to everything I read this year. Not sure, I agree. We have been burned by bad hires a lot more than any rock star brought in value.
There is no such thing as a great CEO, a great head of marketing, or a great head of sales. There is only a great head of sales for your company for the next twelve to twenty-four months.

Well. We do not face that issue, as there are no remote agencies.

"Ben, you cannot let him keep his job, but you absolutely can let him keep his respect."

This is Bill Campbell talking. That man is a legend. And he is absolutely right. Swallow your damn pride and help the person that you fire/that quits keep his dignity.

The correct order for informing the company is (1) the executive's direct reports—because they will be most impacted; (2) the other members of your staff—because they will need to answer questions about it; and (3) the rest of the company.

Good advice and tricky. People will always feel you should have talked to them sooner than you did.

You must consider first all of the other employees and second your friend. The good of the individual must be sacrificed for the good of the whole.

Indeed. The team is more important than you or your friend.

Use appropriate language. Make clear with your language that you've decided. As previously discussed, use phrases like "I have decided" rather than "I think" or "I'd like."

Extremely important. But always. We should be more careful and precise with our language.

you are just as underskilled for your job as he is for his. 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.

So true. All your fault.

Talking about moving somebody from one position where they failed to another job.

The best way to do this, if appropriate, is to couple the demotion with an increase in compensation. Doing so will let him know that he's both appreciated and valued going forward.

I am not a fan of using compensation that way.

Spend zero time on what you could have done, and devote all of your time on what you might do. Because in the end, nobody cares; just run your company.

Good advice for life in general.

Do not blame. Do not ask: "Where did we fuck up?" Instead ask: "What will we do differently next time?"

Chapter 5: Take Care of the People, the Products, and the Profits—in That Order

"We take care of the people, the products, and the profits—in that order."

Oh, I love that. For us that would be: Team, clients, client's users, profits - in that order.

In good organizations, people can focus on their work and have confidence that if they get their work done, good things will happen for both the company and them personally.

Easy in an agency, actually.

Being a good company doesn't matter when things go well, but it can be the difference between life and death when things go wrong.  Things always go wrong.  Being a good company is an end in itself.

Agreed! We do not need a lofty mantra like "organising the world's information".

"Building the best place for engineers to build software in the world" is good enough.

Good product managers send their status reports in on time every week, because they are disciplined. Bad product managers forget to send in their status reports on time, because they don't value discipline.

Ben wrote a manuscript "Bad vs. good product managers"

We should do something similar for all roles to refine the expectations...

Force them to create. Give them monthly, weekly, and even daily objectives to make sure that they produce immediately. The rest of the company will be watching.

On new managers: I would go even a step further. Do this publicly.

Put them in the mix. Make sure that they initiate contact and interaction with their peers and other key people in the organization.

How?

it's critically important that the CEO conduct the reference checks herself.

Ok.

Early on at Loudcloud, many people would do crazy things backed up by "Ben said."

This happened to us once and lead to a big misunderstanding. If you do that, use my handle so I can check.

"technical debt" is now a well-understood concept. While you may be able to borrow time by writing quick and dirty code, you will eventually have to pay it back—with interest.

Oh, the "with interest" part is super.

management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence.

Oh, damn. That is so true.

Here are three of the more popular types among startups: 1. Putting two in the box 2. Overcompensating a key employee, because she gets another job offer 3. No performance management or employee feedback process

Well. We are missing "performance management". On it.

Do you sharply understand the skills and talents required to succeed in every open position?

We do not know that yet. Need to work on this.

Shortly after joining, how well does an employee understand

We need to give new members clear goals for week 1, month 1, quarter 1.

I'd developed CEO Tourette's syndrome—the profanity was involuntary.

:-))))

the right kind of ambition is ambition for the company's success with the executive's own success only coming as a by-product of the company's victory.

Sure. But how do you screen for that?

Generally, the best way to handle the first type of complaint is to get the complaining executive and the targeted executive in the room together and have them explain themselves.

Can we do that with clients?

Do not attempt to address behavioural issues without both executives in the room.

Just leads to politics.

In top dojos, in order to achieve the next level (for example, being promoted from a brown belt to a black belt), you must defeat an opponent in combat at that level.

That fits well with our key question on hiring: Will this new candidate raise the median of the team? When considering a promotion we could ask: Is that person better than the median of the other members on that level.

At Facebook, by contrast, Mark Zuckerberg purposely deploys titles that are significantly lower than the industry standard. Senior Vice Presidents at other companies must take title haircuts down to Directors or Managers at Facebook. Why does he do this? First, he guarantees that every new employee gets releveled as they enter

I like this with our approach as well. You start two levels below your target position. After three months we reassess.

This is why when the head of engineering gets promoted from within, she often succeeds. When the head of sales gets promoted from within, she almost always fails.

Interesting...

On 1:1s...

A good practice is to have the employee send you the agenda in advance. During the meeting, since it's the employee's meeting, the manager should do 10 percent of the talking and 90 percent of the listening.

That is good advice. 90/10.

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.

How does that translate to us?

Ideally, a cultural design point will be trivial to implement but have far-reaching behavioral consequences. Key to this kind of mechanism is shock value.

Ohhh. This was interesting. We need to find shock mechanism to drive home our culture. Like making our wages public.

Specifically, the following things that cause no trouble when you are small become big challenges as you grow:  Communication  Common knowledge  Decision making

I would have never thought that five years ago.

That employee writes and tests all the code, does all the marketing and sales, and manages herself. She has complete knowledge of everything in the company, makes all the decisions, needn't communicate with anyone, and is totally aligned with herself. As the company grows, things will only get worse in each dimension.

Oh, so true. ON AIR iOS was so simple. It was just me, myself and I.

The first rule of organizational design is that all organizational designs are bad.

Not true. Squads rock! :-))))

Think of the organizational design as the communications architecture for your company.

That is pure gold.

By far the most difficult skill I learned as CEO was the ability to manage my own psychology.

So true, from my own personal experience.

Seeing people fritter away money, waste each other's time, and do sloppy work can make you feel bad. If you are the CEO, it may well make you sick.

Yessir.

And to rub salt into the wound and make matters worse, it's your fault.

:-))))

If someone was promoted for all the wrong reasons, that was my fault. If we missed the quarterly earnings target, that was my fault. If a great engineer quit, that was my fault. If the sales team made unreasonable demands on the product organization, that was my fault. If the product had too many bugs, that was my fault. It kind of sucked to be me.

Our leadership mantra.

CEOs often make one of the following two mistakes: 1. They take things too personally. 2. They do not take things personally enough.

Good thing you can only go wrong here ;-)

Tip to aspiring entrepreneurs: If you don't like choosing between horrible and cataclysmic, don't become CEO.

"Aspiring entrepreneurs" would listen to this. I didn't.

every company goes through life-threatening moments.

We had three. Already looking forward to the next three. :-(

Great CEOs face the pain. They deal with the sleepless nights, the cold sweats, and what my friend the great Alfred Chuang (legendary cofounder and CEO of BEA Systems) calls "the torture."

Yessir. I will not fail you!

Every time you make the hard, correct decision you become a bit more courageous and every time you make the easy, wrong decision you become a bit more cowardly. If you are CEO, these choices will lead to a courageous or cowardly company.

Yessir. I will be more courageous.

two core skills for running an organization: First, knowing what to do. Second, getting the company to do what you know.

Our solution: I pose the question and have the teams work it out by gently moderating the process.

execution details required to run a company, such as process design, goal setting, structured accountability, training, and performance management.

I should ask all new managers, how they do those things.

measure of the quality of a leader: the quantity, quality, and diversity of people who want to follow her.

A bit too "ex-post" for my taste.

We look for three key traits:  The ability to articulate the vision, The right kind of ambition, The ability to achieve the vision

Good. Really good.

Truly great leaders create an environment where the employees feel that the CEO cares more about the employees than she cares about herself.

I sincerely hope, I can deliver on that.

A huge number of employees believe it's their company and behave accordingly. As the company grows large, these employees become quality control for the entire organization. They set the work standard that all future employees must live up to. As in, "Hey, you need to do a better job on that data sheet—you are screwing up my company."

Yeah!

Andy Grove will always be my model of CEO competence.

I will read his book next.

A CEO should never be so confident that she stops improving her skills.

I feel I am at 20%.

Andy Grove once said to an employee who entered the meeting late, "All I have in this world is time, and you are wasting my time."

:-)))))))

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.

We do both at the same time...

If you do what feels most natural as a CEO, you may also get knocked cold.

After four years of running a company of more than five years, I agree. You cannot become a CEO naturally. You need to read a lot, get training and mentoring.

THE SHIT SANDWICH

The basic idea is that people open up to feedback far more if you start by complimenting them (slice of bread number one), then you give them the difficult message (the shit), then wrap up by reminding them how much you value their strengths (slice of bread number two).

I do that every time, but I get annoyed when people do that with me.

"Spare me the compliment, Ben, and just tell me what I did wrong."

Word!

you should strive never to embarrass someone in front of their peers.

Indeed. Do that face to face, 12-24 hours later to cool down.

Some employees are extremely sensitive to feedback while others have particularly thick skin and often thick skulls.

"Skulls" :-))))

HIGH-FREQUENCY FEEDBACK

If the CEO constantly gives feedback, then everyone she interacts with will just get used to it.

Trying. Both asking for it and giving it.

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.

I will print this and hang it over my computer.

Chapter 8: First Rule of Entrepreneurship: There Are No Rules

accountability across the following dimensions: promises, results, and effort.

Oh, that is really good.

Appendix: Questions for Head of Enterprise Sales Force

OPERATIONAL EXCELLENCE QUESTIONS Managing Direct Reports  What do you look for in the people working for you?  How do you figure that out in the person. How do you run your staff meeting? What is the agenda?  How do you manage actions and promises?  How do you systematically get your knowledge?  Of the organization  Of the customers  Of the market Core management processes—please describe how you've designed these and why.  Interview  Performance management  Employee integration  Strategic planning Metric Design  Describe the key leading and lagging indicators for your organization.  Are they appropriately paired? For example, do you value time, but not quality?  Are there potentially negative side effects?  What was the process that you used to design them? Organizational Design  Describe your current organizational design.  What are the strengths and weaknesses? Why?  Why did you opt for those strengths and weaknesses (why were the strengths more important)?  What are the conflicts? How do they get resolved? Confrontation  If your best executive asks you for more territory, how do you handle it? Describe your process for both promotion and firing.  How do you deal with chronic bad behavior from a top performer? Less Tangible  Does she think systematically or one-off?  Would I want to work for her?  Is she totally honest or is she bullshitty? Does she ask me spontaneous incisive questions or only pre-prepared ones?  Can she handle diverse communication styles?  Is she incredibly articulate?  Has she done her homework on the company?