How To Start A Startup Lecture: How To Manage

Presenter – Ben Horowitz

  • One Management Concept: When making a critical decision, you must understand how it will be interpreted from each person’s point of view and its impact on the union of the individual views. i.e. culture.
    • See your decisions through the eyes of the company.
  • Demotions
    • Do you demote or fire?
      • Hard working and well liked person that is over their head.
        • If you demote
          • will he keep his equity package?
          • Is he going to work as hard being the guy who reports to the guy?
          • Do I respect him as much after I demote him?
        • Ben seems to be firmly in the “fire” camp. It is a lot cleaner.
  • Raises
    • Excellent employee asks for a raise
      • Your perspective
        • You want to retain them
        • they have done great work, so its ‘fair’
        • They will like you if you give them the raise and you want to be liked
      • Employee’s Perspective
        • They have thought about it a lot
        • it is a very serious thing
      • Everyone else’ perspective
        • Unfair that I didn’t get a raise
          • “you either need to be the guy that asks for the raise, or quit and go to the company that evaluates performance”
        • I did better work, it is unfair
        • Maybe I should quit
      • Cultural conclusion
        • every employee feels they have a fiduciary responsibility to their family to ask for a raise all of the time
      • Right answer
        • Formal performance evaluation process
        • all the right inputs
        • Run as frequently as needed
        • No raises outside the process
          • message to the employees- “you can lobby all you want outside of the process, but it will not be reviewed until the evaluation process is completed”
  • Evaluation of Sam Altman Blog Post
    • The way almost all stock options work in Silicon Valley is that when you leave the company, you have 90 days to exercise the options. If you do not buy that stock in that period, it is gone.
      • Your perspective
        • you want to be fair
        • Don’t want employees that don’t plan on staying long term
      • Perspective from employee who leaves
        • I worked for my shares; i shouldn’t be prevented from getting them due to economics
        • Did you tell me the truth when you hired me? If you didn’t, I will tell everyone I know about it
      • Perspective of employee who stays
        • Is it smarter to stay or leave economically?
        • Are my colleagues being treated fairly?
        • Does my loyalty matter?
      • Situation Analysis
        • Turnover is around 10%
        • Losing stock is a big incentive to stay
          • good news is that people stay
          • bad news is they are staying for the wrong reason
        • Cultural statements:
          • Give them 10 years to exercise your stock if you are fired or quit
          • Up front, say you are guaranteed to get your salary, you must vest, you must stay until we exit or have the cash to exercise, make the company worth something. We do this because we massively value the people who will see this through…
    • Tousant
      • Born a slave
      • most brutal form of slavery in Haiti
      • Vision – end slavery, take control of slavery, and make it a first class country
      • When he would conquer an army, he would incorporate them into their culture
      • Perspectives
        • Soldiers
          • We want to pillage
          • They were trying to kill us, we should kill them
      • What do you do with the slave owners
        • Slaves
          • free us, we fought for this
          • kill them
          • give us their land
        • Toussaint
          • Economy is key to being a first world country and sugar is our top expert by far. Sugar plantations are critically important
          • No experience in sugar plantations
        • Slave owners
          • business cost structure was predicated on slave labor
          • Paid a lot of money for the slaves up front
          • paid a lot of money for the land
          • have to know the trade
        • Solution
          • End slavery
          • Let owners keep their land
          • Require plantation owners to pay salaries to workers
          • Lower the taxes of the plantation owners so they could keep business thriving
        • Results
          • Only successful slave revolt in human history
          • let plantation owners keep their land
          • total defeat of Napoleon
          • Booming economy + world class culture
          • Under Toussaint, Haiti had more export income than the USA
  • Conclusion – you need to see the perspective of all of the people in the company.

Q&A

  • Firing someone – when you hire people, you try to hire the best. The reason they typically fail is that you did not match them to the needs of your company well enough. Explain the situation – and how you have to move on. How to explain the situation to the employees – nobody feels good about it, thank them for their work, let people know that they are moving on. Leave the people with their dignity
  • How did you deal with the stress of being a CEO? Doesn’t have a great answer for it – helps to be married to someone supportive. Stay focused on what you can do, not what is happening to you.
  • How did Toussaint get the French Generals to work for them? They were surprised they weren’t going to kill them, and was able to make them extremely loyal. The army had English, French, Slaves, etc. on in his army.
  • As the leader, if somebody is your enemy and you want to convert them. Show them the way. Elevate your culture, mission, way of doing things. Make it compelling.

RG

 

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