How to Start a Startup: Week 8 Reading

Making Yourself a CEO – Ben Horowitz

CEO’s are not born, it is a skillset that takes years to develop and it is extremely difficult to know whether a CEO will make it. Being a CEO takes a lot of ‘unnatural motions’- from an anthropological standpoint, it is natural to do things that make people like you as it enhances your chances of survival. To be a good CEO, in order to be liked in the long run, you need to do things that upset people in the short run – unnatural things. The key one that Horowitz starts with is giving feedback. It is unnatural to be critical of other people that you want to like you, but evaluating people’s performance and constantly giving feedback is what a CEO must do. If you cannot even do this, it only gets harder with writing reviews, taking away territory, handling politics, setting compensation, and firing people.

How do you handle the unnatural? -one method is “The Shit Sandwich” – a technique described in The One Minute Manager.  The concept is that people open up to feedback far more if you start by complimenting them (slice of bread #1), then you give them the difficult message (the shit), then you wrap up by reminding them how much you value their strengths (slice of bread #2). This also focuses the feedback on the behavior than the person, because you establish up front that you value the person.

  • This can tend to be overly formal since you have to plan and script the sandwich to make sure it comes across correctly
  • After a few times, it can lack authenticity
  • Senior executives will recognize the shit sandwich immediately

Ben’s alternative to the “shit sandwich” approach is that you need to elevate yourself above this approach. To do that, you need to match your own personality and values:

  • Be authentic- don’t try to manipulate the person’s feelings. Don’t fake it.
  • Come from the right place – if you decide to fire somebody, fire them. Don’t prepare them to get fired, prepare them to succeed. If they don’t take the feedback, that’s a different conversation
  • Don’t clown people in front of their peers – never embarrass somebody in front of their peers. If you do, your feedback will have very little impact other than to a) cause the employee to be ashamed and b) cause the employee to hate you
  • Feedback is not one size fits all – everybody is different. Your tone needs to match the employee’s personality, not your mood.
  • Be direct, but not mean – watered down feedback can be worse than no feedback at all because it is deceptive and confusing. Don’t beat them up though, because you want to create a dialogue, not a monologue.

Feedback is a dialogue, not a monologue- just because your CEO doesn’t mean you’re right. Your employee should know about their function than you do, so you might be wrong. Therefore, the goal of your feedback should be to encourage people to open up vs. close down discussion. Encourage people to challenge your judgement and argue the point to conclusion. You want to apply pressure to get high quality thinking, but be open enough to find our when you are wrong

High Frequency Feedback – once you have mastered these keys, you need to practice it all of the time. As CEO you should have an opinion about absolutely everything. Say what you think, both positive and negative. This will have two positive effects:

  • Feedback won’t be personal in your company – if it is consistent, people will get used to it. People will focus on the issues, not see it as a performance evaluation.
  • People will become comfortable with discussing bad news- if people are comfortable with talking about what each other are doing wrong, it will be very easy to talk about what the company is doing wrong.

More unnatural skills – As CEO, you need to learn a lot more unnatural skills than just this. You will feel awkward or incompetent when you are doing some of these things. This is the process, this is how you get made.


A Good Place to Work – Ben Horowitz

At his company Opsware, he would teach management expectations – specifically the expectation to have regular meetings with their people. He even instructed them on how to have a good 1 on 1 meeting. He realized that these meetings were not happening and took a step back to think through why they are important.

What is a good place to work? “In good organizations, people ca focus on their work and have confidence if they get their work don, good things will happen for both the company and them personally. People wake up knowing that the work they do will be efficient, effective, and making a difference both for the organization and themselves. These things make their jobs both motivating and fulfilling.”

A bad place to work? “In a poor organization, on the other hand, people spend much of their time fighting organizational boundaries, infighting and broken processes. They are not even clear on what their jobs are, so there is no way to know if they are getting the job done or not….” Ben then went on to threaten the executive he was talking to and the manager in question that they will lose their jobs if they do not comply within 24 hours. He says it was necessary to be this harsh for a couple of reasons:

  • 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 – in bad companies, when the economics disappear, the employees disappear. In tech companies, when the employees disappear, the spiral begins, value declines, etc.
  • Being a good company is itself an end!


How to Minimize Politics in Your Company – Ben Horowitz

Corporate politics almost always starts with he CEO. Contrary to what you might imagine, it is often the least political CEOs that run the most ferociously political organizations: Apolitical CEOs frequently accidentally encourage intense political behavior. Ben defines politics as people advancing their careers or agendas by means other than merit and contribution. – this is the kind of politics that really bother people.

How it happens –  An example given is executive compensation – a senior employee comes to you and requests a raise. Suggesting that he is paid far less than current market value – even that he has a competitive offer in hand. If you give the employee a raise, it creates a strong incentive for political behavior. You were rewarding behavior that has nothing to do with advancing your business. The employee will earn a raise by asking for one rather than you rewarding them for outstanding performance. How is this a bad?

  • Other ambitious staff members will immediately ask for raises. Now you have to deal with political issues vs. actual performance. Also, if you have a competent board, you will not be able to give them all out-of-cycle raises so these executive raises will be on a first-come, first-serve basis
  • The less aggressive members will be denied off-cycle raises simply by being apolitical
  • The object lesson for your staff and company is that the squeaky wheel gets the grease and the political employee gets the raise

How to minimize politics – Technique in 3 keys

  • Hire people with the right kind of ambition – Which means that they have ambition for the company’s success with the executives own success only coming as a by-product of the company’s victory.
  • Build strict processes for potentially political issues and do not deviate – Activities that attract political behavior are:
    • Performance evaluations and compensation
      • Protect your company by conducting well structured and regular performance and compensation reviews. This should be an airtight compensation policy. Ideally it should involve the board of directors.
    • Organizational design and territory
      • You need to be careful of what you say when an issue like this is brought up. Generally it is best to say nothing at all – at most ask “why?” but be careful not to react to the reasons. If you are going to re-org, do so quickly and do not allow time for lobbying and politicking.
    • Promotions
      • Every time your company gives somebody a promotion, everyone else will evaluate if that promotion was for merit or political favors, then react in one of three ways:
        • Sulk and feel undervalued
        • Outwardly disagree, campaign against the person and undermine them in their new position
        • Attempt to copay the political behavior that generated the unwarranted promotion
      • To avoid this, have a formal visible, and defensible process for promotions. The executive level promotions should include the board of directors.

Be careful with the “he said, she said” – There are two specific complaints you will hear:

  • Complaints about an executive’s behavior – in this case, get them into a room and have them explain themselves – make sure both executives are in the room (complaining and targeted executives). Failure to have both present will invite manipulation and politics
  • Complaints about an executive’s competency or performance – These are much more complex and rare. It is likely if you are getting one of these complaints that it is something you a) already know or b) is completely shocking.
    • If it is A, you know you have let the situation go on too far, you must resolve the situation quickly – usually meaning the executive needs to be fired. Even if the executive can improve their performance, they will lose the support of the organization and never regain it.
    • If it is B, you need to stop the conversation immediately and make sure it is known that you in no way agree with their assessment. You don’t want the complaint to become a self-fulfilling prophecy. You should then re-assess the employee in question, if they are doing an excellent job, figure out the complaining executive’s motivations and resolve them.




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