SCALING TEAMS Point Nine Saas Summit

Oct 27, 2013, Berlin

http://www.michaelrwolfe.com @michaelrwolfe michael.wolfe@stanfordalumni.org

The Start

Product Market Fit

Scale

YOU ARE HERE   Trying to get here  

Notes: Most of the companies here have achieved some level of product/market fit and are now starting to scale. Everyone is to be congratulated – very few people ever manage to get a company started, much less get customers and raise money. This is why I hate to ever see a company that got this far not get to the next level – it is such a squandered opportunity and is often avoidable.

SCALE:

“Maintain excellent execution during rapid growth in

customers, revenue, and people”

( And WIN )

2002 – co-founder

I’ve been through it

2007 – 175 people, $50M bookings

2007 - $350M acquisition,

I became GM of the group, then CTO of Enterprise Group

1996 – employee #2, VP Engineering 2000 – 1,200 people, $ 180M run rate, $10B IPO

First web analytics company, Saas-based 1995-1997, employee #2, grew to 150 people 1999 acquisition, ~$200M

2x Entrepreneur in Residence Computer science, teaching, mentor at StartX Several advisory boards and boards of directors Quora, blogging Currently on sabbatical in Barcelona

Also

Notes: I’ve been through the scale phase of a company three times, plus have been involved in many more. I also had one company that did not succeed. I’ve seen lots of things that have gone wrong, but I’ll talk about some things I think almost always work. Most stories and photos are from Vontu. (thanks Joseph Ansanelli for the photos and for helping build a great culture there)

The bad news

What got you here won’t get you there •  New skills •  New people •  New ways of doing

things

The good news

•  It is under your control

•  The solutions are well known and apply across companies

•  Boards have a strong bias against replacing founders

Notes: One of the first things that trips up companies is that what they had to do to get started will not necessarily help them scale. In fact, it often works against scale. The good news is that when companies start to scale, lessons learned at other companies apply pretty well – people are people. And, your board, employees, customers, are all rooting for you to succeed.

What helps you scale

You must kick ass in three areas:

Product Understand your customers and design and deliver the product they want

Customers Help customers find you, try you, buy from you, and say good things about you

People Get the best people, keep them engaged and aligned around a few key priorities

Product  

Customers  

People  

Start   P/M Fit   Scale  

The right founding team

can get you started

Notes: A good founding team and a few great employees can get you pretty far – for the companies at this conference, it has gotten you to product/market fit. Since you are one happy family sitting in the same room together, the “scale” issues aren’t a factor.

Product  

Customers  

People  

Start   P/M Fit   Scale  

The companies that scale excel at all things people

Which lets them keep getting better at everything else, without founders/

CEO as the sole drivers

Notes: The companies that successfully scale tend to be relentlessly focused on getting the best people and keeping them engaged and working on the right things. Which should let you keep kicking ass at product and customer, even with rapid growth. In other words: not only will you be hiring a ton of new people to do new things, most things you are doing today will be done by someone else soon!

•  Recruiting •  Training

•  Management

•  Planning •  Communication

•  Culture

Notes: A good way to envision what you are trying to build is to imagine what you’d like people to say about your company. It doesn’t matter what you *want* to happen and *think* is happening in your culture if the people in your company don’t feel it.

“When I interviewed, the people I met were totally charged up, in sync, and I was never asked the same question twice”

Notes: Many companies focus a lot on their engineering processes and customer acquisitions processes, which is good. But too few really focus on the recruiting process, which is actually more important. You should write it down, debate it, and constantly improve it. Make sure that anyone who interacts with your company walks away with a positive experience – even if you don’t hire them, they will tell their friends!

“I had to answer some tough technical questions, do a presentation, and they checked tons of references, including ones I didn’t give them!”

Notes: Interviews are quite unreliable for figuring out who will fit in at a company and be a top performer. Create a recruiting process that is tough to get through – hard technical questions, role playing, lots of references, and probe deeply on backdoor references. At Vontu, each candidate gave a presentation to the company as a final step – it really solidified the culture. See http://michaelrwolfe.com/2013/10/19/should-i-trust-my-gut-with-hiring-decisions/

“The founders took the time to sell me on the company, told me the history, and answered my questions”

Notes: The best candidates already have jobs and need a reason to join your company. The founders needs to be very involved with recruiting almost every new team member, which means taking time to sell on the vision and ask questions. Everyone in the company will spend a day a week or more recruiting – more than 50% of your time if you are a founder or manager.

“On my first day, my computer was set up, I had a checklist on how to get up and going, and I had several orientation sessions already on my calendar”

Notes: Most of the money and effort in your company goes towards getting the best people in. So why not kick ass at what happens next – when someone joins they should have a computer, a checklist of things to do to get set up, and have some orientation sessions planned. You would not believe how far this goes in solidifying the candidate’s decision to join the company in those fragile early days.

“When someone isn’t working out, we take care of it quickly and professionally.”

Notes: I’ve never known a great company that wasn’t good at handling bad hires. And, no matter how good your recruiting processes are, at least 20% of your hires will be mistakes. You never want to fire someone who thought he was doing a good job, so start the feedback/coaching process for new employees early so you can start to build a strong groundwork. But don’t let that process be an excuse for procrastination – once you know for sure it is the right thing, do it.

“We have a flat organization, but I sit down with my manager regularly and get and give feedback and coaching”

Notes: Flat organizations tend to work the best for a long list of reason. Beware creating management positions just to accommodate people who think they should be managers. Anyone who is a manager should be primarily focused on recruiting, training, and managing their team, even if they still have individual contributor responsibilities. “Player/coaches” are common in the early phases, but they tend to flame out as you grow. See http://michaelrwolfe.com/2013/10/19/do-i-really-need-to-do-1-1s-with-my-team-members/

“We’re always getting trained on something”

Notes: In terms of bang-for-buck, training is one of the most effective things a company can do. “Training” can be as simple as a short PPT and an hour meeting. But the effects can be magic. It forces you to write stuff down – pretty soon a primer for your company emerges. It also performs a social function – getting people across departments working together, especially if you do regular offsite events (we did quarterly)

“It is clear who is responsible for every decision and how others participate in that decision”

Notes: One of the most powerful things a company can do is be explicit about who makes what decisions in the company. Often, when employees complain about “process” and “bureaucracy”, what they are really complaining about is slow and obscure decision making See: http://michaelrwolfe.com/2013/10/25/how-can-we-make-faster-and-better-decisions-at-my-startup/

“Everyone knows the strategy, goals, and the numbers. We replan often and review the board meeting notes each month

Notes: The strategy of the company and the major priorities and objectives should always be known by everyone in the org. Replan often – at least quarterly. Walking the company through the board meeting notes after each meeting is a good discipline.

“We hire and reward people according to the culture. When someone violates their co-workers’ trust, they are out.”

Notes: Culture is “what is happening” at your company, not “what you want to happen” The dials you have to turn to impact culture are 1-who you hire, 2-how you reward people, 3-how you behave Get rid of good performers who are poor cultural fits, especially if they are disloyal to their teammates.

“We celebrate our victories every week, and people hang out across departments”

“People love that place. I’m going to try to get a job there”

Notes: Once you become known as a well-run company with tough hiring standards, a buzz develops around you. People want to join your company – even people who were rejected by your recruiting process tell their friends that they should join you. It is hard to detect or measure this, but the “word on the street” about your company is perhaps the largest determiner of successful recruiting

"OK, sure, all good.

Why doesn’t every company do

these?”

“A man may conquer a million men in battle, but one who conquers himself is, indeed, the greatest of conquerors.”

- The Buddha

“Some of the greatest battles will be fought within the silent chambers of your own souls”

- Ezra Taft Benson

Notes: Few people would disagree that these are all good things to do in theory. But I walk into very few companies that do them. Let’s take some time to ask why they don’t happen.

“We don’t have time”

Four little words that kill

companies

“We don’t have time to:”

“We do have time to:”

Interview a lot of candidates for a role

Onboard and train new people

Have meetings

Spend hundreds of hours dealing with a bad hire

Make mistakes, miss deadlines, lose deals

Waste time working on the wrong stuff

Just come in and do your

own work You  

Everyone  

Today   P/M Fit   Future  

Optimize for the whole

company over the long term

Leader  

Individual    Contributor  

Notes: Practically every company has said “we don’t have time” when debating investments that have longer-term payoffs. This often represents a difficulty transitioning from “individual contributor mode” in the early days to operating through your team. It can represent inexperience – if you haven’t yet seen these things in action you might not completely understand their power. Your job as a leader is to prioritize these investments and drop your focus on your own day-to-day productivity – it will take some time to pay off, but it is powerful when it does

“I can’t delegate that”

Hire people better at it than you, train them, and turn them loose Give people a chance and let them fail a few times

Notes: Really important decisions about product and customers seem very hard to delegate. First, you need to get the right people in place. Once you do, train them – you should never have a piece of information that drives your decisions that the people working for you don’t also have. You need to trust them and let them make some mistakes. It is an investment. And you need to be clear about where you want to give input – your “founder magic” needs to be represented, especially with product decisions, but insert that magic at a few well-defined points, not arbitrarily

“I just dread difficult conversations”

Don’t worry – everyone does (unless they are psychopaths) It gets easier with practice Read this book

Notes: Any startup founder regularly wakes up at night, dreading a set of hard discussions she needs to have – firing people, making a hard decision, cancelling a product, giving someone critical feedback. You need to develop habits to “seek out” this pain and hit it head-on. No, it doesn’t get easy, but you will feel a (perverse?) satisfaction that comes from doing something that was hard. “Crucial Conversations” is an amazing tool to give you a framework for these talks.

“We don’t want it to feel like a big company”

This is probably what they meant:

Clear direction and focus

Empowered people

Transparent communication

Rapid decision making

Notes: Lots of companies resist meeting and process – they don’t want to lose the magic of being a small company. Effective scaling is precisely the ability to get larger without losing that magic. Letting the culture evolve without guiding it is where red tape is born. That means evaluate these techniques and others on their ability to make faster decisions, remove roadblocks, provide transparency, and make people closer. Also note that you *want* to become a larger company – if you do have employees who don’t want the company to grow, you may have a mismatch.

The goal is not perfection – just make progress every day

It is a marathon, not a sprint

Above all

CREDITS RECOMMENDED READING

•  Joseph Ansanelli – Vontu CEO/co-founder, chief photographer •  Margie Mader-Clark – Vontu VP HR

•  Jerry Colonna – www.themonsterinyourhead.com •  Jason Lemkin -www.saastr •  Joel York - www.chaotic-flow.com •  Hubspot blog and culture preso •  Ben Horowitz - www.bhorowitz.com •  Joseph Ansanelli - www.ansanelli.com •  “Crucial Conversations” – Kerry Patterson •  My Blog – www.michaelrwolfe.com

–  See posts on decision-making, 1-1’s, hiring, others

SCALING TEAMS

http://www.michaelrwolfe.com @michaelrwolfe michael.wolfe@stanfordalumni.org