Irreplaceable vs. Replaceable

Here's the story of a company and a founder that has been told many times.

A company has become huge. They've had overwhelming success. But they've become slow and bureaucratic, and innovation has slowed. It's become a boring place to work.

A star employee, let's call her Jane, sees a clear opportunity to improve the company's situation. She has some great ideas on how to breathe fresh growth into the company. Jane's ideas are ignored. Nobody listens to her.

But Jane can't get her ideas out of her head. She needs to pursue her idea. So she leaves the company, raises some money, and builds a product and a company around her idea.

In order to succeed, Jane needs to build a great team. Because there are so many challenges in launching a new company that will beat the incumbents, she needs a team of superstars. She needs to hire people that are amazing. People that are able to run through walls. People that are irreplaceable.

So Jane builds a team full of stars.

And it works. The team of stars is able to take market share and grow rapidly. They have lots of success. They scale and have hundreds of employees. Soon they have thousands of employees.

Now, Jane's burden isn't to disrupt a business or industry; her burden is to protect what she's built. At this point, Jane needs to hire people that are replaceable. If someone is irreplaceable, that's a problem. She needs to build systems and processes and support around her employees so that no single employee is critical to the company's success.

Jane's company has gone from requiring people that are irreplaceable to requiring people that are replaceable. And the cycle continues…

As startups grow, they shift from breaking new ground to protecting their ground. This shift happens gradually and impacts some functions and roles before others. It's very difficult for companies to make this shift. It requires adaptable people, different people, and lots of process building. And you obviously will always need lynchpin employees in some roles.

The irreplaceable vs. replaceable concept is a simple framework for how to think about company building in the later stages of growth.

Put A Stake In The Ground

When you start a new venture — a company, a team, a job, a product, a project — setting goals around its success can be stressful. You don't know how fast things will move and how successful you'll be.

Further, lots of people are afraid of being held accountable, much less being held accountable for something that isn't yet understood.

So there's a temptation to just get started without setting goals and see how things go.

For example, I've seen many startups not set sales goals in the early days because they feel like they don't have enough information.

This is a bad idea.

Setting a goal gets you and your team rallied around a target. If you meet or exceed the target, the team will feel great, and you can celebrate. If you miss, you can surface learnings and insights relative to the goal you set.

If you're hitting or exceeding your goals, surfacing learnings is less important. If you're missing, learning is crucial. A learning that isn't connected to a goal is much less powerful and much less interesting than one that is. This will also create the habit of being held accountable and reporting on failure as much as you report on success.

Put a stake in the ground. Set a goal. If you hit it, great. If you miss it, you'll feel a great deal of pressure to surface high-quality learnings that will get you closer next time.

Best Books For New Sales Leaders

The other day a friend of mine asked me what books an individual contributor that just took a sales management job should read. Here's what I told him:

For tactical management, I’d have to recommend the Effective Executive by Peter Drucker. I try to read it every few years.

For higher-level leadership concepts, I’d recommend Leadership and the Art of Self Deception: Getting Out of the Box by the Arbinger Institute. 

For culture, read What You Do Is Who You Are: How to Create Your Business Culture by Ben Horowitz.

And for tactical sales process and leadership, definitely read The Sales Acceleration Formula: Using Data, Technology, and Inbound Selling to go from $0 to $100 Million by Mark Roberge. 

How To Structure A Commercial Organization

There are several different ways to structure a commercial organization. Markets, products, segments, etc. The model I prefer is to structure the teams around metrics. This does a few things:

1/ It ensures that the organization has a metrics mindset. Sometimes people forget what metric their work moves. Building the org around metrics makes this nearly impossible.

2/ It ensures everyone knows they’re contributing. There’s nothing worse than coming to work each day and doing a bunch of work that doesn’t actually contribute to a business objective.

3/ It helps with prioritization. Teams should prioritize their work based on the impact it’ll have on the metrics. Focus on low effort/high return work, and avoid high effort/low return work. It’s amazing how few people have this mindset.

I separate a commercial org into three buckets. If you’re not directly contributing to one of these three buckets or supporting someone that does then you’re on the wrong team. Commercial orgs only do three things:

1/ They sell stuff.
2/ They implement stuff.
3/ They retain stuff.

Everyone should be impacting at least one of those things. Then assign a set of metrics with targets against each. Here are some examples:

1/ Selling stuff (bookings, upsells, expansions, new logos).
2/ Implementing stuff (speed to go-live, quality of implementation, cost of implementation).
3/ Retaining stuff (retention, renewals, net promoter score, user activity).

I’ve found that structuring the team around these three activities and some set of metrics ensures that everyone has clarity on their role, their value, and how they’re impacting the business in a positive way.

The Job Of A Sales Leader

A sales leader’s job isn’t to hit the number.

A sales leader’s job is to hit the number while simultaneously ensuring that those prospects that choose not to buy have a positive experience and that the sales team doesn’t overcommit or redirect product and engineering resources.

The best way to do this at scale is to hire a sales leader that shares this perspective and knows how to build the right kind of sales culture from the start. It’s extremely difficult to change a sales culture once counterproductive norms have been established.

*adapted from this podcast with David Sacks.

First Principles

If you believe the world is going to end tomorrow, and your significant other doesn’t, you’re likely going to have very different opinions about what to have for dinner tonight.

You'll be inclined to go to an expensive restaurant and live it up. Maybe a great steak with some expensive wine. Why not? It's all going to end tomorrow. Your partner, on the other hand, may just want a quiet, normal night at home. Maybe order a pizza or have leftovers or make something with whatever is in the refrigerator. You may end up having a big argument about what to have for dinner tonight.

But that's not the thing you should be arguing about. You should be arguing about the first principle: whether or not the world is going to end!

This happens all the time inside of companies. Colleagues argue about the small, day-to-day issues on the ground and forget about first principles. This is perfectly understandable. When you're moving fast, you're going to run into one another on micro issues that you're not aligned on. The key is to recognize when this becomes a trend, and then pull your head up, get the right people on a call, and get aligned on the high-level first principle that’s causing the disagreement.

Here are some examples of first principles inside of a company:

We err on the side of being transparent with employees.

We should pay employees above market.

Profit margins will suffer for a while while we invest in new products.

Diversity, equality, and inclusion inside of our company is a high priority.

Employees should be able to make their own decisions on how to spend company dollars.

Often, getting alignment on first principles is easy. The hard part is pulling up and out of the day to day noise and recognizing and calling out the misalignment. It's important to create forums — meetings, Slack channels, or some kind of document — that allows people to easily surface the misalignment. Companies that do this well can avoid an enormous amount of friction and will move much faster and smoother as a result.

Management Lessons From Keith Rabois

Keith Rabois is a very successful operator and tech investor. A couple of weekends ago, I listened to this talk he gave at the First Round Summit back in 2013. He shared some great insights on management and leadership in here, so I jotted down some notes on the things that resonated with me the most:

1/ Optimize around hiring people that are "relentlessly resourceful". 

2/ When managing someone, ask yourself if you're "writing" or "editing" their work? If you're writing for them, you need to fix it or replace them. For a sales leader, are you closing their deals for them, or are you coaching and tweaking little things?

3/ Everything can't be perfect. One of the hardest things President Eisenhower found when he became president was that he had to sign letters that were below his writing standards. There's too much to do. Get comfortable with 80% perfect for most things. Seek out the things that are important and get those right.

4/ A huge piece of hiring someone that can scale is finding someone who knows what they know and what they don't know. Knowing the difference is so important. People that know what they don't know will avoid big mistakes. 

5/ Be transparent. Seek to be so transparent that everyone on your team would make the same decision that you're making because they're operating under the same context.

6/ Politics in a company is driven by different people having different information. Avoid widespread politics by giving everyone the same information.

7/ Hire thought diverse people but pay attention to important first principles (particularly when hiring leaders). e.g. if you want to build a closed software platform, hire people that support that approach. Otherwise, you'll spin and keep coming back to first principles. 

8/ Hire and promote people that see things you don't see. This is invaluable. And create an environment where they can freely tell you what you're missing.

People At Work Podcast

The nice folks at Jostle were kind enough to have me on their People at Work podcast. We discussed a variety of topics around leading teams through hypergrowth. You can listen to the podcast on Apple here or Spotify here.

The Importance Of Customer Discovery In A Crisis

A few weeks ago, I wrote about some best practices on how sales organizations can keep their revenue machines running through the COVID pandemic.

One thing I didn't spend enough time on in that post was the importance of understanding how things have changed for your existing customers. Your customers were living in a different world when they purchased your product. At the time, your product was likely solving a top 3 problem for your buyer. With COVID, things may have changed. Your product might be significantly more valuable now than it was prior to COVID — or significantly less valuable. Either way, you need to find out quickly.

Most companies are going to be cutting expenses, and you must understand whether or not your product is on the shortlist of things to cut. Reversing that reality may require hard pivots, so you need to know now.

Here are some key questions to ask your customers as you have conversations or complete account reviews:

1/ How has COVID impacted you? How has it impacted your customers?

2/ How have your top 3 or 4 priorities changed due to COVID?

3/ What kinds of products are you buying now (if any)? What kinds of products are you cutting?

4/ Are you cutting staff? Will the users that historically have used our product change?

5/ Before COVID hit, our product was addressing a top 3 priority for you. Is that still true?

6/ Is our product more or less important to you than it was prior to COVID? Do you expect to use it more? Less? Why?

7/ Are you using our product differently now than you did prior to COVID? How?

8/ What parts of our product are more useful to you now? Less useful?

Push your customers to give you hard answers to these questions — even if you don’t want to hear them. And make it easy. Send simple surveys. Quickly run through these questions at the beginning or end of calls or Zooms.

Finally, it’s worth noting that commercial teams tend to be extremely optimistic. This project requires intense pessimism and a search for the real truth. This is not the time to sugarcoat what's happening in your market. Get to the truth as quickly as possible. If needed, reset expectations, find ways to repackage your solution around new problems, or (in rare cases) rebuild your solution to solve the emerging problems your customers are facing in this new world.

Working For Jeff Bezos

I’m reading Amazon’s Management System by Ram Charan and Julia Yang. I absolutely love this excerpt:

As former Amazon executive John Rossman put it: “If you want to succeed in Jeff’s relentless and fiercely competitive world, you cannot:

• Feel sorry for yourself

• Give away your power

• Shy away from change

• Waste energy on things you cannot control

• Worry about pleasing others

• Fear taking calculated risks

• Dwell on the past

• Make the same mistakes over and over

• Resent others’ success

• Give up after failure

• Feel the world owes you anything; or

• Expect immediate results

The most successful are those who can excel in the pressure cooker, week in and week out, shaking off the occasional failure and the subsequent tongue-lashing, put their heads down, and keep on driving.”

This is a near perfect description of the best people I’ve worked with over the years.

Hiring Your First Head Of Sales

By far, the most frequent question I get from founders is this: How do I go about hiring a Head of Sales? I've literally received this question four times in the last six or seven weeks.

Hiring a Head of Sales at a startup is a very difficult, important, and scary thing for a founder. Making a mistake on this hire can set the company back several quarters. I try to avoid making declarative statements to founders because context is so important and each situation is unique. That said, here are a few things that will help reduce the risk associated with hiring a Head of Sales for the first time:

1/ Ensure the candidate has been an ultra-successful individual contributor. I know, I know, the best salespeople aren’t necessarily the best managers. You don't need the best salesperson in the world, but you do need someone who has done it before. In startup sales, you can't lead the calvary if you can't sit in the saddle. Strong sales capabilities (both to sell direct and to sell salespeople on joining the company) are crucial in this role. If this candidate can't sell, they likely can't recruit. It’s not worth that risk.

2/ Ensure the candidate has sold into (roughly) similar-sized organizations in the past. If you're selling to large enterprises, don't hire an SMB expert, and vice-versa. It's not impossible to make the transition, but it's relatively unlikely that it will be successful. Often, the things that make people good at SMB sales make them bad at enterprise sales. Also, do consider the candidate's experience with the vertical you're selling into. Ideally, you will be able to find someone who has sold into that vertical in the past. I wouldn't make this a requirement in every situation. The importance of this is industry dependent. But if the industry has a steep learning curve, optimize around that set of experience.

3/ If you have the capital, hire a headhunter to help. Doing this search right requires an expertise and time investment that most founders can't afford. This is a good opportunity to outsource.

4/ Hire a “stretch VP.” A stretch VP is a rising star (generally Director level) that needs to level-up a bit to become a sales leader at a larger organization. This type of candidate will generally lean towards execution but will have the potential to recruit and run a team. This is a good hedge. If the candidate levels-up and can run the whole sales organization, that's great. If they can't, it'll be easier to “level” them with a more senior candidate. If you hire someone too senior, you run the risk that they won't be execution-focused, and it will be difficult/impossible to level the candidate if things don't work out. A stretch VP is a good way to reduce risk.

5/ Overinvest in intrinsics. This candidate is going to be accepting a very difficult job. Make sure they have the intrinsics that will make them successful in a high-pressure startup environment — grit, humility, adaptability, and curiosity. More on that here. Also, this is hard to do, but make sure the candidate is someone that is at a stage in their life and career they simply aren’t willing to fail. Some call this “personal exceptionalism” — more on that here.

Things That Don't Scale

I recently started using Superhuman, the popular $30 per month email application, that's getting lots of buzz. It's a wonderful product. It solved my email overload problem.

I would've started using it sooner, but before they would grant me access, I had to complete a thirty-minute consultation with one of their staff members to configure my email and learn how to use the product most effectively. That seemed unnecessary to me, so I passed.

I eventually got desperate and agreed to the consultation. I now see why they force this — they go deep on how you use email, do some real-time customizations, and make sure you know how to use the product. All of this makes users much less likely to churn.

That said, it's surprising that Superhuman, an application with thousands and thousands of users, would make this kind of investment in onboarding new users. For a $30 per month consumer email application, this seems like the definition of something that won't scale.

I recently came across an interview with Superhuman's co-founder, Rahul Vohra, where he talked about the importance of these consultations and was asked if he thinks they can scale. He responded by saying that organizations need to identify the things they do that won't scale and decide which of them they should keep on doing. These are things that, from the outside, may seem small and wasteful but are actually core differentiators consistent with the heart of the organization's strategy and competitive advantage.

I've been thinking about this a lot lately. As an organization scales, the things that aren't scaling start to become really obvious. And smart companies find ways to outsource, automate or completely stop doing them.

The hard part of all of this is identifying those things that, on the surface, seem like they obviously won't scale but actually drive big value.

At the Ritz-Carlton, every single employee (even the maintenance folks) has a budget of $2,000 per guest to make things right. On the spot, without asking.

Zocdoc, the medical appointment booking service, sends a $10 Amazon gift card to users every time a doctor reschedules an appointment.

Zappos maintains a 24/7 call center, posts their phone number on every page of their website, and doesn’t have a phone tree.

In the early days, most startups will tend to overinvest in high-touch and high-cost activities. They have to do this because they're forcing their way into a market. They can't cut corners and scale isn't an issue.

One-on-one product training. High-touch recruiting and employee onboarding. Ultra-fast customer service response times. Even small things like sending hand-written holiday cards to every customer. These are obvious and easy to do in the early days. But many of them won't scale and there’ll be pressure to stop doing them over time.

The easy part is dropping things that don’t scale. The hard part is continuing to do them.