Endeavor is pleased to make public the following transcript and video from a presentation at the 2011 Endeavor Entrepreneur Summit in San Francisco. The event, which assembled over 450 entrepreneurs and global business leaders, featured dozens of entrepreneurship-related presentations by top CEOs and industry experts.
Leo Tilman: President, L.M. Tilman & Co, Faculty at Columbia University and author of Financial Darwinism
Jeff Housenbold: President and CEO, Shutterfly; former eBay Executive
Gina Bianchini: Former CEO, Ning; has been listed in Fortune’s “40 under 40″
Tricia Tomlinson: SVP, Human Resources, Genomic Health
Leo: At this panel, “CEO Best Practices for Scaling Fast Growth Companies,” we wanted to talk about the challenges facing CEOs of fast growth companies, compare and contrast that with challenges that face leaders of large and complex organizations, and leverage the lessons learned, so that we can anticipate and prepare as your companies change and also as environments change. And we wanted to take as holistic a view of these topics as possible and talk about strategic vision of these firms, organizational alignment and culture, and even touch on some of the topics that are not particularly common in these discussions, such as risk management. And we know that when it all comes together, not only do your organizations get excited as people get countless problems to solve, and get very exciting and engaging jobs, but contribute to economic growth, and last but not least, it presents all of you with amazing opportunities for self-discovery.
On that note, I am very privileged to moderate a panel of truly visionary executives and entrepreneurs. Each one of us will take five minutes to talk broadly about the challenge at hand and then we’ll turn it into the Q&A.
Jeff: Thank you for having me here today. I thought I’d provide a little context in my background. I’ve been fortunate that I’ve been in hyper growth companies, the last six companies that I joined. Previous to Shutterfly I joined eBay as employee 1,132 and left at 14,000 and went through that hyper growth scale period. Before that I was at AltaVista, before that a startup with four people founded by three 20-year old college dropouts called Raging Bull and CMGI and Windstar. So I really have gone through hyper growth and scale, and the challenges at the different phases that you go through as a company. When I joined Shutterfly six and a half years ago as the CEO we had about 103 employees; today we have about 1,000. We had about $50 million in revenue, and today we have approaching $500 million in revenue. And so it’s been an exciting adventure.
Some of the things I thought about when I joined the company, I want to share with you and hopefully it’s relevant as you think about growing and scaling your organizations. First was when I came in, it was really a turnaround situation. We were a very undifferentiated product, undifferentiated brand, and a company with limited strategy and vision of where we could go forward. I was the fourth CEO in four years and the company was demarcated by a culture of survivorship. It had raised $60 million in 1999 and had survived the dot-com bust and it was really all about “we survived” instead of “we’re going to thrive.” And so I spent a lot of time think about what is the strategy, making sure that it was differentiated, that it was a game that we could play and win. So how do we compete against the likes of Walmart and Walgreens, Yahoo!, AOL, Microsoft, Facebook, Google, Apple, Kodak, HP, Dell? As a small startup, we were facing giant Goliaths and we had to figure out what game could David play and try to beat the Goliaths.
So we spent a lot of time making sure the strategy was right. And I think one of the fundamental things that’s part of good strategic planning is being very, very clear about what are the two or three things that you’re going to do and in being very overt in talking about the things you’re not going to do. So there’s a lot of other good ideas of things you should do, might get to do, but if you try to do too many things, particularly at the early formation stages, you end up spreading yourself too thin. So really focus on what you’re going to do and be very articulate about what you’re not going to do. And so when I came in I put in place management objectives — we call them nested objectives — on a quarterly basis, and what I constantly say to people is if you’re working on something that’s not one of our top three strategic imperatives, don’t do it. Go see your manager, come see me, and we’ll realign what you’re being asked to do against those three objectives.
The second thing was really evaluating the team and thinking about what’s the right organizational design. And I always start with—take names out of the box. Too often we get clouded in our judgments about how to organize based upon the personalities, the loyalties, the people that we have today. Start with a clean slate and decide what you think the right organizational structure is for that stage, for that competitive environment, for the industry, and the nature of where you are, then fill in the boxes with people you have and assess where the gaps are and figure out where you need to add, where you need to change. I think that’s really important from an organizational design standpoint. Make sure you tie the rewards and the performance metrics to the outcomes that you’ve envisioned that are aligned with your strategy. And then think about, as you continue to grow, the different stages. I’m on my third executive team in six and a half years, not because the people aren’t good people and not because they’re not talented, but I inherited a team that was the wrong team, swapped out for a team that got us from 50 to a couple hundred million dollars, and now have a team that’s capable of building multi-billion dollar companies because they’ve done it in the past. And really figuring out what the harmony is, and that mosaic of portfolio of skills across the team and how we’re going to operate against a number of key principles and values that we hold.
And then make sure as a CEO you’re going to say the same thing over and over and over again. And you’re going to be bored. But someone once told me that repetition doesn’t kill the prayer, and you have to keep evangelizing what is your values, what’s your behavior, what’s your vision, what are the key strategic imperatives and hammer it in every meeting until it becomes part of the DNA of the company. So a couple of things to think about as we’re getting started here in the discussion, as you’re growing and scaling your organizations.
Gina: I think there are three stages of hyper growth companies. There’s before you hit hyper growth, which I think all of us in this room who are entrepreneurs can relate to; you’ve started something, you’re like, “well I have this idea, I have no idea if it’s going to work, but I think it’s gonna work.” And that’s phase one, which is: Is this thing gonna work? Phase two is, “Okay, wait, this is working, this is good, what do we have to do to not screw it up?” And then the third phase of being an entrepreneur in a hyper-growth situation is like, “Oh gosh, this is really working; we really, really have to make sure we don’t screw it up.”
In terms of the emotional journey of being an entrepreneur in hyper growth and being a leader in hyper growth, those have been the three stages that I’ve seen and experienced first-hand. And now I’m in a situation where I started up something new, will launch it in the next couple months, but going all the way back to, “Okay, I think I’ve got this idea, I think it might work, I think this might all happen.” So it’s been interesting for me, going through those three phases, and then coming back to phase one in terms of being able to look forward.
As for takeaways, one is — and I think Bing Gordon (Partner, Kleiner Perkins Caufield & Byers; Former CEO, Electronic Arts) said it so eloquently — is focus on the inputs. Focus on the things that I can control, that my team can control, and define success—especially in a highly dynamic market, where things are changing everyday, and that you could actually have a full-time job paying attention to what’s happening outside of your company, to actually do the exact opposite and really stay focused on the things that you and your team can control–and as the leader, defining success by what it is you can control. So, the quality of the team that you have together. The output, or I should say the job that people are doing, the way the team is coming together. And really focusing in on how do you bring new people into that team, which is again something you can control; how do you train the people and inspire the people that are on your team which is something that you can control. How do you basically set that vision and set those three top priorities as Jeff was talking about? That’s something within your control and everything else is noise. How are you delighting your customers is something that you can control. For me, that has been really freeing to again to be able to have permission to just stay focused on the things that I can control and my team can control.
I look back over my experience at Ning and as I go into this new company, this new experience, that is a lot of fun, I’m always playing out the next two waves. The ability for an entrepreneur and a leader to be able to stay focused on the current phase that you’re in—in those three phases—but then know what you have to do in the next one, so that at any point in time, you’ve put in place all the things that you need so that if you need to move quickly to expand your executive team, to hire a lot more rapidly, to shift focus, you’re able to make sure that your team is trained for something external coming in and changing strategy or crushing your spirit, you’ve actually spent all the time making sure that that’s not going to happen, andou can make the transition from one phase to another phase when they in fact require you to do different things and have different perspectives. I think that when you look at the fact that these markets that all of us are in are actually so much more dynamic than they were even three or five years ago, insofar as you can create a zero to 100 million dollar business on the internet today in less than two years. As an entrepreneur you need to make sure that you can think ahead three or four or six chess moves into what you have to do and then be able to still stay focused on the present. So, it’s how do you train yourself to be able to move back and forth very easily between these different phases, these different inflection points and it becomes a heck of a lot easier if you ask yourself every morning and at the end of the day, Did I stay focused on the things I can control?
Leo: When you talk to senior executives at large firms they typically talk about different levers that they can pull to affect change at their firms, but without any exception every one of them says that culture and people is probably the most powerful one of all. So, how does this factor in in terms of high growth companies, Patricia?
Patricia: I have to say, it’s very gratifying to listen to just the few conversations I’ve had today because people are saying it’s all about people, it’s all about people. And I’ve been saying that for 30 years. I’ve run Human Resources or been in Human Resources for 30 years and the organizations which I tended to gravitate towards were the organizations that were trying to do something new, or they were in a high rate of change. And it was all about the people. I have to tell this story; I did not get my husband’s approval but I’m going to tell it anyway because I think it’s appropriate. My husband went to Harvard Business School and in the first year, everybody had to take this class called Organizational Behavior. And all of them did not call it Organizational Behavior, they called it Obvious Bologna, or other terms if you would. And I remember looking at them and saying look—you guys are not going to be first-line supervisors, that’s not your aspiration. You want to be CEOs, you want to be CFOs, you want to be heads of organizations. That’s the most important class you will take. And I have to tell you, they sort of blew me off, but every single one of them has called me over the years when they have gotten into that role.
So, I do think that your workforce, your talent in the organization, which by the way now includes not just your direct employees, but it’s vendors, and consultants, and your outsource partners, and sometimes even your customers, really becomes your talent and your workforce, so that changes necessarily how you think about it. That can be and should be our competitive advantage, because if you can get the right people, in the right jobs, doing the right things for you, that’s really a force to be reckoned with.
And as I thought about the topic of best practices, I’ve actually come to the conclusion that there isn’t a one size fits all and in fact the best practices are what works for you, and figuring that out. I think that it’s really great in this environment you get a lot of ideas and then you pick and choose what’s right for you. But I do think one of the most effective tools you can have in your suite of tools to address it, is your culture. And the focus on culture is really important. It informs how people act, it’s how they relate to each other. It’s really the wrapper in which everything else happens. And then helps you achieve your outcome.
I think it’s really important to focus on culture, and in my career people always come up to me and say, “Oh, I know culture always changes as companies grow. And my response is, it doesn’t have to. Every organization has a culture. You will end up with a culture. But unless you focus on it and pay attention, you will end up with something that you don’t want, I guarantee it. So you can pay attention and if you pay attention, and really define what’s special, what’s the soul—and I will get touchy feely with you in a minute—what’s the soul and the essence of your organization, you can have that show up in every iteration that you have with the growth in your company. So just a couple of things to think about.
We know a few things. First of all, high growth, high change can often outstrip human beings’ abilities to deal with it. You know we actually are creatures of habit and so we don’t like change very much. We have to learn new things, we have to go through transitions, we have to not be successful, we have to relearn how to be successful, so we don’t really like it. Some people can move through that faster than others, but everyone has to go through it. Organizations as they grow and change hit certain inflection points. So what happens is, I think you can feel like you wake up one morning and everything that used to work no longer works. And it’s really driven by the complexity of your business. You operate very differently if you have five people than when you have 50 people, when you have one product or two products, if you’re working in one country or you’re working in several countries. So you have to change how you operate, but again you want to make sure that what’s special about your organization comes through. And the other thing is that we all know you can’t do it yourself.
So as you think about building this tool to use—culture—you need your organization to help you move through these stages of rapid change. You want them making the right decisions, you want them doing the right things, maybe as well as you are doing it, or even better. So I suggest you think about three things in designing a good culture. One is clarity. Be really, really clear about what your values are, what your non-negotiables are. Because you’re going to have to walk the talk. Actions speak louder than words. And it’s really clear that you can say one thing, and if you do another, that’s what’s going to happen.
I think the other thing is consistency. Everything you do, once you articulate that, you’ve described it, you’re really clear about it, everything you do—every process you put in place, every interaction you have, everything that you do in your business should be designed and aligned with supporting that. An example might be, at Genomic Health we have a bonus program and we work really hard to do stretch objectives. Well sometimes that means that we can’t achieve the goal, which is fine. Because we’re changing so rapidly, sometimes it looks like the goal changes and we shouldn’t be doing it. So what we want to make sure we do is that the employees do the right thing where they stand up and say you know that goal no longer makes sense, we shouldn’t be doing that, we shouldn’t be spending money there. But we also don’t want them to have to choose between doing the right thing for the company and impacting their own pocket. So again you want to make sure that everything is aligned with that.
And then I think the last thing to think about is diligence. You have to pay attention to it every day. You cannot just put it on the wall, or say it once. You have to catch people doing things right, you have to fix things that are going wrong, and ultimately, at the end of the day, you’ve gotta make the tough decisions and make the tough calls. And I wanna close on one note about fit with culture, because I think it is really important that people fit with a culture, but on the other hand, fit does not mean sameness because I think we all know that if you can embrace diversity, you really have a much stronger organization, you don’t get into group think. So I would suggest that fit comes again at the values level; what’s really special, what are you passionate about, what are you trying to achieve. And then, the diversity you’re seeking in terms of style, or opinions, or approaches to things, is much easier to find.
Leo: Let me pick up on three things that we heard from the first presentation today and in our panel.
1. Match your time allocation to your priorities
2. It’s all about the vision and the rest is noise
3. There’s no such thing as best practices
So, let me fast forward from the stage you all are in today to a CEO of a very large and complex organization. And it’s very instructive to have a call with that person at 9 o’clock in the morning some time. What you typically would hear is that they’ve been up since 6am fighting fires, and responding to emails, they’re scheduled in 30 minute increments, every hour on the hour for the next three weeks, and the rest of the organization spends most of their time in meetings, discussions, and so on. So, this overwhelmed nature of focusing on organizational issues and routine obscures the actual task at hand. And stepping back, and defining that type of a clarity or vision, in a very complex global setting is actually very tough.
One of the ways that we try to inspire this conversation is to have folks visualize that, in fact, in between meetings and organizational issues, they’re actually driving an extraordinarily complex airplane. And when you walk into the cockpit of the airplane—first off all you look out the window and what you see is strategy. Where are you going, what are you seeing, what are the emerging risks and opportunities, do you have a broad enough perspective, and systemic knowledge to understand the trends and things. And then when you look down, you see the dashboards. These are the metrics to which you manage the enterprise. Are they aligned to where you want to go? Do you miss anything? And last but not least, you have the levers. These are things that you actually pull to steer your organization, and some of them are business levers and some of them are financial levers, some of them are people levers. And the alignment that we talk about is that entire process where you go from vision to metrics to levers, and the entire organization is on the same page.
And three things stand out when you do this exercise. One is the clarity of vision, values, and philosophy of how you do that. Two is the decision-making framework. How do you make decisions? Next time you decide to do an acquisition, next time you decide to develop a new product, next time you decide to expand into a new part of the world. How do you make these decisions? Who is doing that? What kind of tools do you use to evaluate opportunities? And three is the actual cultural alignment, and organizational alignment.
And it becomes, in a large and global setting, an ongoing process where periodically you step back and say, this is what the world used to look like and this is what my role used to be in that world. Here’s how the world changed, and here’s my new role in this world and here’s the action plan on how to get there. And maintaining that clarity and continuity requires setting aside the processes and people and skills today to anticipate these challenges. So as your companies grow, and become more global and more complex, that clarity, these processes, etc. remain in place.
So on that note, let’s switch gears a little bit and open this up to Q&A. And I will start with one question to the panel, and then we will go to the audience. One subject that is rarely discussed is the subject of risk, and when you ask folks about what they mean by that, how they define it, how they manage risk, you will get drastically different answers depending on who you talk to, and depending on the stage at which they’re at in terms of their company and environment. So I wanted to pose this question to our panel and say, how do you think about risk? How do you define it, how you manage it, in a setting of a high growth company?
Jeff: As Leo said there’s lots of different kinds of risk. I think about risk of the enterprise—are you going to go out of business or not? Risk as a public company—are we going to hit our quarterly numbers or not and what does that mean for our stock price, for employee motivation? The risk of hiring this person, and the risk of not firing this person and what’s the impact to the overall team and the culture and the dynamics and the ability to grow? The risk of betting on a new product or service or a new geographic market that we’re entering into.
And so lots of risks happen every day and I think the key is having a framework, as we talked about, for you to be able to measure that risk and think about where are the areas you are willing to take more or less risk. So for example, we’re in the process right now of doing a reorganization of the firm. We just bought a company for $350 million a couple of weeks ago, and now we’re thinking about as we come together, what’s the new organizational structure? And we’re going to have different GMs of different business lines. And for a business that has a $500 million P/L, I’m going to take a different risk profile or bet on a person. We’re incubating two new businesses, I’m thinking about the risks of putting a young up-and-comer into one of those new businesses, because if they’re wrong what’s the risk to the overall portfolio, right? So the risk of that reorganization, what it means to some people who are going to be perceived as winners, and some people perceived as losers in that reorg?
So if you’re thoughtful going into the key decisions you’re making, how are you going to measure risk, how are you going to manage a portfolio of risk, where are the areas you’re willing to take bigger bets, where are the absolutes that you can’t take that kind of risk because it may mean the whole enterprise goes under, I think it’s really important. I was one of those Harvard Business School grads who took Organizational Behavior, but then I went on to take other classes, and everything you learn in business school doesn’t matter, except for OB. You can hire someone to un-lever and re-lever a weighted average cost-to-capital, you could hire someone to come up with a branding strategy, but really understanding how to attract, grow, motivate, and retain people—that’s job number one as a CEO. And I think the second biggest risk or mistake we make, is not hiring the right person. And I think the biggest is once we figure that out—and I posit it takes you not 90 day review as being suggested, it takes you about two weeks—is not moving fast enough to rectify that situation.
But make sure you’re recognizing it, coaching through it, and making the tough decisions early. Because the great people in your organizations hate to be around mediocre people. Focus your efforts on the top 25% of your organization, continue to raise the bar, stretch them, encourage them to do more collectively than any individual thought possible, and that will lift all boats, and those people will attract people just like them. But if you focus on the middle, which is what the tendency is—the average—then you get an average organization. So focus on the best, be willing to take risks on people who are younger, less experienced, but have raw talent, but fit your culture, and your values, and your behaviours.
Gina: I don’t think about managing risk and actually, if you have a vision of where you’re going, you have a set of core principles by which you’re managing against, and you are paying attention maniacally to your customer and your purpose for existing as a company, then you just basically put different things that you want to do through those filters. And if you are learning every week, if you are debriefing and doing a retrospective on a Friday and saying, “What do we want to learn going into Monday?” — if you break it down into just a series of small actions — I think you’re much better off than standing back and saying, “Oh, is this risky? This feels really risky” and thinking about it through that lens of cost of failure as opposed to building everything so that you’re practicing and you’re building the muscles you need both as an individual CEO and also as a company to just continue to execute better and better and better every day, every week, every month, every quarter, every six months, every year.
And I don’t say any of this naively. There’s stuff that happens every single day that works in your favor and that works against you. But I think that the idea that you let risk become something big and scary, then you probably should go work and a big company and you probably shouldn’t be here in San Francisco on this beautiful summer day, because I think entrepreneurship is fraught with risk and it’s a matter of the confidence and the wide-eyed, as objective as possible way in which you actually take every decision and pay attention to every decision that you’re making, all with the goal of forward movement. And taking advantage of the opportunities in front of you as best as you possibly can and you know that’s all you can ask of yourself and that’s all we can ask of each other.
Patricia: I agree with my co-panelists up here. I think there’s risk in everything. I actually think there’s risk in any organization that you go into, big or small. But what I’ve seen in my career, one of the things that’s really concerning for people is the ambiguity. You know you’re trying to do something new, you’re really moving fast, and there is no confirmed roadmap to success with what you’re trying to do. So that’s where you think about risk. So what do you do with that? And I think you can actually train for, you can recruit for, you can talk about building the skills in your workforce, in your people to deal with ambiguity. It’s really the competence of driving in the face of uncertainty, of ambiguity. And I think you can build that, because what it takes is, you probably have really smart people, who come from a variety of backgrounds; you want them to think through things, you make it ok for them to make mistakes, as long as it’s a calculated risk that they’re taking, or mistake, you do lessons learned, you put all those things in place, where I think you help build the competence of figuring out the risk, driving in the face of ambiguity, and then just keep moving. So I think there’s risk in everything, but again coming back to the workforce, you can build a competence around that.
Leo: From my perspective, it’s interesting to talk about the evolution of risks that have faced companies as they grow. So Jeff talked about the risk of not firing someone soon enough, Gina talked about the risk of not embarking on a new venture because you’re afraid. And then there is the risk of not raising funding. And then you become global and you become exposed to movements of currencies around the world. Then you raise debt and you become exposed to movements in interest rates and economies. Then you decide to vertically integrate and build a plant, and all of a sudden you’re exposed to movements of commodities around the world.
So the portfolio of these risks grows, and as you become larger, more global and complex, it becomes a very interesting combination. And the question is one, which risks am I in the business of taking and which risks am I not in the business of taking? And that goes to the clarity of vision that Jeff talked about. And another one is a matter of process. So as the portfolio grows, you have a process that tries to identify these risks, there is a process that tries to connect these dots so that people are empowered to make decisions under uncertainty. And last but not least, to Gina’s point, there is a process to identify opportunities and turn risk and uncertainty into opportunities. And when you do that on a large scale, as you become more and more exposed to different types of risk, and you can truly optimize that, it becomes a very powerful exercise that goes in parallel to business decision-making in human resources.
Question: For Gina, since you passed your position as CEO to Jason Rosenthal, when is the right moment to replace the CEO with one who’s an executive not an entrepreneur? Another question is for everyone. Most of the people here are entrepreneurs and when we hear something like “process to make decisions”…I make decisions in nanoseconds, I don’t think very much about it, I just feel that it’s right, and I want to understand if you think this is a kind of superpower of entrepreneurs to make decisions very quickly, or is it naïve or a mistake?
Gina: Let me start by answering the first question, and then we go on to the next question. I think it’s a personal decision. I think in my case, me, my cofounder, the team, we definitely diverged in terms of vision for the company. They wanted to go in one way, I wanted to go in another way, and it just made sense. I felt very confident that I was leaving the company in good hands, with people who could execute on a strategy that they really believed in and I had an opportunity to go and take everything that I believed in terms of where the future of a social product that I wanted to build could go.
Generally speaking, I think professional CEO is wrought with risk. And I think that it’s incredibly important and one of the things I’m grateful for in the context of Ning, is that my cofounder is still involved in the company and is working very closely with the COO, now CEO. And I think that’s really healthy and really good for Ning. I think generally speaking there are many more examples of entrepreneur-driven companies that are successful when the founders are still involved, and find a way to bring in professional executives that can execute against that vision, but that you don’t lose the power of a founder-CEO in a company.
That being said, and I think we’ve all talked about this today, there is no right plan. If there was one path for all of us, then this wouldn’t be interesting, and wouldn’t be nearly as much fun—as I like to think of it, playing a game of three-dimensional chess every day when you wake up in the morning. I think that staying as actively involved as a founder and leader as you can, makes a ton of sense and there really is no other person in a company that has the vision and the sort of sixth sense about what that idea in their brain looks like and what is that thing that made them get up in the morning and made each of us get up in the morning and say, we’re going to go do this, and it doesn’t exist today and we’ve got to go convince people to build it, to buy it, to grow it, to love it, to love it even more, and to find more people to love it, and I think it is the greatest challenge and the greatest opportunity in the world.
Jeff: Let me just provide an adjacent point to what Gina was saying, which is I’ve observed founders who stay too long at companies in the CEO spot. So I believe that if you can have a founder that maintains that passion and that positive force in a company, then finding the right role for that person based upon their skill set—chief product person, Chief innovator, chief technologist, chief saleperson—it doesn’t have to be the CEO. Because as you grow, the CEO job changes dramatically. So today seven years later, I’m spending more time with Wall Street, and accountants, and external constituents than when I first started, and so as your enterprises grow the role of the CEO will change as well. I think it’s really important to stay involved, but also find out what you’re good at, and don’t force yourself into it because there’s prestige or perception that you should be the CEO if that’s not your key skill. You may be the technologist and that might be the right place.
In terms of the balance between moving fast and using fact-based, I actually don’t think they’re orthogonal. I think you can do both, and great leaders are able to make decisions under uncertainty with limited data. But the key is to have a framework in which you’re making that decision. So fact-based decision making doesn’t mean you have all the facts. But look at the data, understand what are the key metrics on that dashboard, understand are you in the phase where you’re focused on getting awareness, or trial, or conversion or repeat? Are you in the stage where you’re just trying to acquire users to come to the site or are you trying to monetize them? So if you have a set of metrics, the levers you think that are most important for the stage of the company given the competitive dynamics, the macroeconomic, the business model, it’s okay to move fast, but great companies over the long term can’t just do it by gut. Because you’re going to have to institutionalize gut and you don’t scale that way. So you have to think about what’s the right dashboard, and have a couple, because as internet companies, I think Bing Gordon said, we can measure everything, we have plenty of data. How do you go from data, to analysis, to insight, to recommendation, to action? And focus on the action. People focus too much on data because you can measure everything. Pick three, four, five metrics, not 20.
Leo: And supplementing it with systemic knowledge. Do I understand the world I’m in? Do I understand the trends? Can I detect all of this? It goes hand-in-hand with metrics and levers and so forth.
Question This is a question for Gina. When you mentioned the three phases at the beginning of your presentation, I was wondering about the implications of each phase, in terms of what does it mean for you as a leader to be in each phase, and what things actually change in the different phases?
Gina In the first phase, one of the key goals is to keep your costs as low as possible so you learn as fast as you possibly can with as much runway as you possibly can. So you’re constantly trying to learn lessons on the cheap and you are hiring people, for example, that are the absolute most critical people that you need. And you don’t in many cases even in any place where there is the available capital, you’re still actually making decisions with the smallest number of people you can, in the scrappiest way, and just trying to learn as much as you can, as quickly and cheaply as you can.
When something starts to work and you’re starting on that inflection point into hyper growth, you actually have to flip that almost entirely. And it’s about getting capital and getting as much capital as you can. Finding great people and hiring—probably no more than six months—but you’re hiring ahead of the full-blown need for that person because you need to have a little bit of time to train them, make sure that they’re the right person, get rid of them if they’re not the right person. And you want to actually start getting more and more aggressive. That’s very different than when you are in a position where you’re trying to be as lean and scrappy as possible. So making that transition so that you’re making good decisions but you’re being much more aggressive with the amount of capital that you’re bringing in and what you’re doing with that capital is critical to then be able to take on and get the most effective running start into hyper growth, which is that now hopefully all those people that you hired ahead of needing them, or the capital that you raised ahead of needing it is actually starting to translate into being able to scale the company from 50 to 500 employees in a very, very short period of time.
So that actually requires a completely different skill set which is, in phase two you hopefully have more direct reports who can actually scale their organizations, and in phase three it’s making sure that you’re not too many steps removed and having filtered information from people who are on the front lines, and really sort of making sure it all works. And thinking about what are those new markets, what are those new products, what are those new revenue streams, what are those new people, all those different things that you need. And the stronger foundation you can build on from phase one to phase two to phase three, the more successful you will likely be in phase three. But it starts with being able to recognize the fact that that you have those different inflection points and you’re going to need to almost become almost a chameleon and change from phase one to phase two very, very quickly and from phase two to phase three probably even more so.
Question: As a CEO, because we’re not born CEO, sometimes we feel that we are out of control. Have you ever felt that you are out of control and how did you deal with that feeling?
Gina: We talked a lot at Ning and I had long conversations with my cofounder there about this. It will always feel like there is twice as much work to do as you could possibly do and that’s actually the new normal. So if you’re not feeling like you’re drinking out of a firehouse that is basically shooting into your face at 100 miles per hour and right on the edge, then you’re probably not pushing yourself hard enough and you’re probably not fully taking on the realm of opportunity that you and your company could possibly take on. I always think about that when things are out of control—oh yeah, that’s what this is supposed to feel like.
Question When Bing Gordon spoke he talked about the boards of directors and that sometimes you have to put up with board members that are imposed on you in some way. Have any of you gone through that process of reducing your obligatory board meetings to half an hour and creating an advisory board that really helped and how do you get your board involved with people that actually add value?
Jeff: In terms of boards, at least in Silicon Valley, we’re fortunate to have the luxury that there’s lots of capital and there’s a lot of VCs. I see entrepreneurs often try to maximize the value of their pre money in that round, and you don’t think about the fact that I’ve got to live with that person for the next five to 10 years. And so it doesn’t matter if you got a six million dollar pre or an eight million dollar pre. Figure out, do you trust this person, what’s the track record of the firm, of that individual, how do they treat their entrepreneurs? Do as much diligence on them as they’re doing diligence on you, if you’re fortunate to be in a multiple source.
If you’re not, I went through a transition where I inherited a board when I came on of very brilliant, very accomplished, very rich people. And at some point, our vision started to go apart. And so I had a conversation and said, I want to make you richer. Can you get out of the way so I can do that? It wasn’t easy. It was probably one of the two hardest things I’ve done in the last seven years. To ask a couple of billionaires to step away. And I brought in a whole new board of independent people who were accomplished, who were successful, who didn’t have actually the same type of financial stake. And so they were able to think a little broadly, a little longer-term and get people who fit the stage of the company in which you need.
So if any of you are bringing in an institutional venture capitalist and they have to be on your board, make sure you’re balancing them with independent people you bring on that can provide counterbalance and excuse me for my language, but make sure they have big enough balls that they’re going to go tell whatever famous VC to go to hell. Because that’s what you need. So I always think about balancing the board with people who have the skills, that have my back as well as the back of all shareholders, not just my LPs in the fund that I’m managing. It’s hard, but do it upfront because it gets harder the longer they’re sitting there.