It Is All Connected

We often think of the various functional areas of our business as siloes. Sales is separate from Engineering, which is separate from Customer Success and Finance. We recognize the through thread that connects some of the functions, like sales and marketing, but we still think of them as distinct efforts with independent metrics. When a functional area has ‘issues,’ we consider it their challenge to overcome: Sales missed its bookings target, or engineering had too many bugs, or accounting missed its collections target. The truth is that it is all connected.

One of my favorite business authors, David Marquet, talks about the power of banning the word ‘they’ from our vocabulary. ‘They’ is a divisive word. It separates ‘us’ from ‘them,’ and gives permission to place blame instead of share responsibility. When we banish the word ‘they’ and replace it with ‘we’, our view of metrics and business performance changes radically.

Let’s look at an example where we discover a spike in support tickets being passed to Engineering. The siloed response is that ‘They - Engineering’ need to work harder and increase their solve rate. It is Engineering’s metric, so it is their problem to resolve. Maybe ‘they’ need to assign more resources to drive down the volume.

Think about how the response changes if we say ‘We’ have more support tickets being passed to Engineering. It means every part of the company has to explore how ‘we’ are going to address the issue. We start to ask questions:  Are we seeing more support tickets as a result of recent product enhancements? Did we specify a confusing enhancement? Do we have a coding problem or do we have a QA problem? Do the tickets reflect issues in old code that was never stressed, and is our uptick a result of a change in our implementation methodology? How many of the tickets were ultimately resolved without the need for a code change? Is that a reflection of Support passing things to Engineering that should have been resolved without Engineering’s participation? Do we need more tools to better equip support? Does that take us to a documentation need, or a training need, or perhaps it goes back to a product definition issue that led to a confusing user experience? If we go even further back, does it take us to how we sold the product and what we said it could do? Was our marketing attracting customers with unusual use cases? Did we over-sell?

When we change the ownership of the problem from ‘They - Engineering’ to ‘We,’ all of these leaps and questions naturally evolve. It is no longer Engineering’s metric and responsibility, it is our metric and our challenge to get to the root of it. It becomes a collaborative effort instead of a siloed effort.

A similar example is “‘Sales’ missed its bookings target.” Instead, if we frame the issue as “‘We’ missed our bookings target,” then not only do we look at Sales activities, we go further and look at the product/market fit and our feature set. We look at Marketing and lead quality, and we look at “Customer Success” and our reputation in the market, and, yes, ultimately we look at strategy and addressable market opportunity. When we banish the word ‘they’ and use ‘we’ instead, our perspective on performance changes. It brings us together and forces us to connect the dots and recognize the interconnectedness of the entire business.

It may not feel natural at first, but give it a try. Ban the word ‘they’ from your corporate vocabulary. Invluding when team members discuss customer issues. Instead of addressing customer problems as ‘they’ broke something, try substituting ‘we.’ Instead of ‘they’ broke the system, try ‘we’ broke the system. It may be unnatural, but it forces us to step into the customer’s shoes and recognize that we are responsible for their success, so we are a part of any issues they have. It helps to close the gap between vendor and customer, and it creates customer advocacy internally.

The same we/they thinking translates into the CEO/board dynamic. Board members are separate from daily operations, so it is easy to look at the business and speak of management as ‘they.’ After all, ‘they’ are the ones running the business. However, when board members shift to using ‘we,’ it creates a more collaborative environment. In my early days as a CEO, when there was a problem, my initial instinct was to go to the board thinking it was solely management’s problem. It felt a lot like grade school, going to the principal’s office to confess to our screw up. However, when a board member responded with “what are ‘we’ doing about it,” instead of “what are ‘you’ doing about it,” it was disarming. The tone went from an arms-length posture to a collaborative footing. It is a lesson learned as a CEO that I now practice as a board member. Board members and management have distinct roles to play, but using ‘we’ closes the gap. We are all professionals aiming for the same positive outcomes. ‘We’ can make it a collaboration.

Align The Board Calendar With The Business Cycle

I often hear investors tell CEOs that they do not want board meetings to be too much of a burden - ‘We are only looking for information you are already producing, so just share it with us.’ In my experience, this is a myth. It is true that the information provided to the board should be based upon existing operating analysis and tracking, but the level and form of reporting to run the business is very different from the materials a CEO needs or wants to present to the board. No matter how you cut it, preparing for a board meeting takes work and is a burden on the organization. The good news is that the act of preparing for the board meeting is usually very valuable. It is a moment when the CEO and the management team have to step back from the day to day and actually think about how things are going. It usually brings operations into focus with clarity and heightened awareness. It makes management step out of the tyranny of the urgent and actually look at the arc of the business.

Having said that, preparing for a board meeting does take work and is disruptive. When investors press for frequent (monthly or worse) meetings, the CEO has to ask ‘why?’ Are frequent meetings an efficient use of management time, or is it just an efficient process for busy board members to catch up? There is a better way for management to keep the board informed without the same level of burden imposed by preparing for frequent meetings. Tools like Slack and Teams can offer effective and efficient communication channels to streamline board interactions. A monthly narrative email or message from the CEO accompanied by financial results and metrics from the CFO can be supported by an asynchronous dialog and exchange of questions, comments, and thoughts on Slack - less meetings, more efficient, better communications.

Full-fledged quarterly board meetings are absolutely valuable. However, the CEO and board need to align on the purpose for each meeting. They should view the full year as a business operating system, and consider the themes that occur throughout the year. Typically, meetings occur after the financial close of the quarter, and every meeting will include quarterly performance and forward-looking forecasts. However, in addition to results and projections, each meeting should have a planned theme that follows the business cycle.

We enter the year with operating and financial plans for the new year. The goals and most of the framework for the plans should have been discussed with the board before the end of the prior year, so there should not be any big surprises, but going into the first meeting we now have firm results and a real plan. The theme of the first meeting is to kickoff the year. It is a time for each functional leader to present their plans and goals, and for the board to formally approve the company’s plan and agree on how success will be measured for the year.

The second board meeting follows the end of the first quarter. The plan has had some battle testing, and we can see the trajectory of the business taking shape. The theme for this meeting is the product. Engineering projects take time to complete, so addressing the product early in the year provides the board with a view of what will be completed that can potentially change the business trajectory by the end of the year. A focus on product is also a focus on competitive landscape, strategic direction and product / market fit, which are all important board topics.

The July board meeting is the mid-year mark. We need to assess what is working and what is not, what the outlook is for the second-half and full-year, and whether we need a re-plan. The theme of the meeting is sales and marketing. By mid-year, the marketing programs should have demonstrated effectiveness, and new sales people have had time to onboard, build pipeline, and begin to contribute bookings. For many enterprise products, the sales cycle is approximately six months, so a careful analysis of the pipeline at the mid-year point is a good predictor of sales for the rest of the year. If we do not know a prospect by mid-year, it will be challenging to find and close a new deal by the end of the year with a six month sales cycle. This is the meeting where funnel metrics will tell the story of the remainder of the year.

By October we have even better visibility to the end of the year, so we know how things are likely to turn out. There are two themes for this meeting. The first is the customer base, and the second is a preliminary view of the financial and operational goals for the coming fiscal year. Customer analysis should be an element of every meeting, but this meeting is an opportunity for a more in-depth review of retention and upsell metrics, and the practices, policies, and strategies related to managing the customer base. Focus on why customers stay, how satisfied they are, what drives them to spend more or less, or why they choose to leave. The board needs an understanding of the stability of the ARR going into the new year, which will also validate the product / market fit, and paint a picture of the long-term viability of the business.

The October meeting is also the CEO’s opportunity to test the goals for the coming year, and discuss the contours of the plan: revenue targets, growth rates, profitability, investments, etc. The board and the CEO need to be aligned on the overall framework. If the board is expecting 30% growth, but the CEO is only aiming for 20%, this is the meeting to discuss the disconnect. The non-financial goals, and the financial plan will be built around achieving the agreed outcomes.

There is value in adding one last meeting for the year to review the emerging detailed operating and financial plans. This meeting will take place in December, and the purpose is to see the translation of the October discussion into an actual detailed plan. This is an opportunity for preliminary approval of the plan, or a course correction before the new year starts. Some companies do not bother with this meeting, and leave approval for the early January board meeting. The advantage of having this meeting is it positions the CEO and leadership to kickoff the new year with confidence that the board is fully supportive of the plan. It is also a solid communication step that ensures CEO and board alignment.

Having a full-year board plan puts everyone on the same page, and creates greater efficiency for each meeting. Board members and management know what to expect. The management team is able to prepare for each theme in advance, instead of scrambling to accomodate an agenda that only materializes as the meeting approaches. Adding structure to the full year of board meetings is another tool to create an impactful board and management team collaboration.

Feed Your Board Nutritious Metrics

In an earlier post, I proposed that board members should insist on seeing information presented in the form of trends. I have also advocated that CEOs and management teams need to provide the board with information that puts every element of data into a context that is relevant and understandable by the board. I call this the ‘So What’ test. If you present a fact, put it in the context that explains why it is important, and why we should care about it.

As an example, if marketing reports that there were 20,000 visitors to the corporate website, that is a fact (we hope). If they show it on a trend line over time that shows the number is growing or declining each month, and is a helpful directional indicator. However, it still does not tell us if this is a good result or why we should care about it. In other words, it does not answer the ‘So What’ question.

What was the goal? Why was that the goal? If we did not reach the goal, what are the implications for the business? Why is the number improving or declining? How much are we investing to improve the number? Are we getting a positive ROI on that investment? There are many more questions that all go to the issue of ‘So What,’ but it is clear to see that the fact that we had 20,000 visitors is a hollow statistic. It is like food with empty calories that will not nourish a meaningful understanding of the business.

However, the real ‘So What’ question is ‘why is this number even being reported to the board?’ Too often, in the interest of giving every functional area of the company a voice, CEOs acquiesce to include information from functional leaders that is more like ‘what I did on my summer vacation’ than an important indicator of corporate success. We have all seen these ‘essays’ - “we attended 4 conferences,” “we updated 12 pages on the website,” “we tested 32 new feature points,” etc. These are often feel-good metrics. They may be adjacent to a meaningful measure, and masquerade as a leading indicator, but in reality they are just empty calories.

Take website visits as an example again. For some businesses, this is absolutely an important measure, but for most companies, it is a feel-good metric. Our goal is to drive sales, and in order to do so we have to find and close prospects. We follow a sales cycle that moves prospects through the sales funnel from lead to closed-won, and we identify several clearly defined points along the journey that we can measure. Website visits are at the very top of the funnel, and represent contacts before we even know if the visitor is in our target market. Don’t get me wrong, I am not saying that marketing should stop measuring visits, but many many things can influence website visits. I am saying that as a standalone measure, it is not board-worthy. There is too much noise in the statistic to get a clear signal to communicate to the board. Visits can go up while qualified leads go down. It just means the bait we are using attracted the wrong kind of fish. The reverse can also be true - visits go down, but qualified leads go up - we may have done a better job crafting a more targeted message. A change in traffic may be driven by external factors that are not related to our actions at all. There is just too much noise.

If we are looking for leading indicators of bookings to report to the board, a better path is to work our way backwards up the funnel through each of the defined earlier sales stages that lead to closed-won. This is where we have actual indicators of interest and intent - classic BANT (budget, authority, need, timeline). Focus on conversion rates from one stage to the next (volume), and the pace of movement from one stage to the next (velocity) which will provide a much more valuable insight into future sales outcomes. As a board member, it is a feel-good moment to know that people are visiting the website, but the data that delivers real ‘nutrition’ is the information that is much closer to actual sales and the trends that represent a pattern of progress.

I have focused on marketing and sales as my example, but feel-good metrics abound throughout board books. Examples like the number of hours worked in engineering, when what we care about is feature output. Customer success meetings held, when what we care about is measures of upsell and avoidance of churn, not the number of meetings. If a manager is reporting a statistic or data point, the CEO needs to apply the ‘So What’ question to ensure it is presented in a meaningful context, but they also need to test if it really has meaning and value, or if it is just a feel-good measure that takes up space and does not advance board knowledge.

Board members have limited time, and are often distracted by their own businesses, or other companies where they participate on the board. I refer to the phenomenon of “Board Amnesia” in earlier posts. It is the common occurrence where, from one meeting to the next, board members tend to forget a substantial portion of what was discussed and decided. The CEO has to make the most of the time the company gets from board members, and not burden them with junk calories and hollow data. Crafting a concise business analysis with meaningful metrics and measures, coupled with solid “So What” analysis is an art form, and one that CEOs have to master if they want to nurture an effective board.

Go Looking For Trouble

Board members and CEOs need to keep our eyes open at all times. Some problems happen in a flash, and nobody could have seen them coming. More often, trouble is brewing beneath the surface for a long time, but it is overlooked until it boils over at a critical moment.

Andy Grove of Intel said “Business success contains the seeds of its own destruction. Success breeds complacency. Complacency breeds failure. Only the paranoid survive.” He wanted everyone at Intel to run a little scared and keep looking for the seeds of failure. One of the leading sales training courses teaches enterprise sales people to go ‘looking for trouble.’ An enterprise sale is made to a broad constituency of buyers. If you only focus on the buyers that are positive about what you are selling, you will miss the ones that are going to torpedo your deal. You have to keep vigilant and go looking for trouble. Seek out the person that attends meetings but never says anything. Make sure their silence is not full of objections. Assume somebody does not like your solution, so go find out who and win them over. To quote Joseph Heller “Just because you're paranoid doesn't mean they aren't after you.”

Like the enterprise salesperson, the CEO has to go looking for trouble. I recently wrote about how CEOs face an ‘Optimism Dilemma.’ They need to be the visionary cheerleader, but they also have to stay on the credible side of being overly optimistic. Another layer of the optimism challenge is that looking for trouble requires a healthy level of skepticism. The challenge is to probe and question without being demoralizing to the team. You have to go looking for the bad while projecting the good.

As organizations become larger and deeper, real information is mostly known by the staff on the front line. It tends to be filtered and polished as it gets passed up the corporate ladder. By the time it reaches the CEO, it is a processed food. Processed foods taste good, but are not necessarily good for you. A steady diet of processed information may make the CEO happy, but it is not going to give them the nutrients they need to succeed. CEOs have to go looking for the raw materials, the whole-grains of information to stay on top of what is underlying the corporate results.

For board members, the problem is even more acute. The CEO and CFO typically act as our conduits to what is going on in the company, and they manage the spigot that controls the information flow. CEOs have a natural tendency to want to feed a positive message to the board, so they are often creating their own version of processed food. The difference is that as board members, our ability to dig deep under the covers is much more limited. The healthy separation of roles between the board and the operators makes it inappropriate to just bulldog our way into the business to seek raw information.

As board members, our best tool is to invest our effort to work with the CEO to agree on truly meaningful measures and focus on proven leading indicators (KPIs). Once we know what to look for, we need to watch the trends like a hawk. Trouble typically brews over time, but there are always telltale signs in the KPIs and trends. Small variances can be easily overlooked, but can blossom into wide gaps down the road. Like a rocket headed to the moon, small variances in trajectory at the start will lead to a wide miss the further out the ship travels.

Board members want to believe in the team, but we also need to be looking for trouble. It may be a small miss on bookings, or deals that keep sliding into future quarters, or projects that don’t quite finish on time, or small overages in expense categories, or small declines in NPS scores, or unusually high employee turnover, or any number of small but important variances. In isolation, a small miss here or there may not be a red flag. Businesses are made up of humans, and not everything goes as planned, but trends rarely lie. Minor variations will either work themselves out, or they will start to accumulate over time and manifest as a trend. Spotting the trends that are accumulating, and shining a bright light on the issues can avoid big trouble down the road.

When management delivers performance results to the board, I always ask to see the trends, and not just point-in-time results. My favorite catch-line is “so what?” When presented with a singular fact or result, I want management to answer the ‘so what’ question. How does the fact compare to plan? How does it compare to the trend? Why does it matter to the business? What are the implications of the result? ‘So what’ requires context, and context enables a board member to spot trouble.

‘Only the paranoid survive’ needs to be a guiding principle for CEOs and board members. We all need to go looking for trouble before it finds us. Best case, you will not find any, but if you do spot something, you may be able to address the issue before it flares up into a real problem.

Is Your Board a Competitive Weapon?

I was always a believer in a bright, bold line that separates operational management from the role of the board. As a CEO, I felt that my job was to run the company, and the board’s role was to provide strategic guidance and counsel. If the board did not approve of the way I ran the company, they could remove me. I resisted was the board trying to “help” me by diving into operations.

After multiple CEO positions, and multiple boards, I have mellowed a bit, and developed a more nuanced perspective on the board and CEO relationship. I still believe in a line of demarcation, but it has faded and become fuzzy. After some pretty bad board experiences, I started to study the dynamics of the relationship between the board and the CEO, and how to leverage the board as a weapon. I had a pretty good idea of what did not work, so my goal was to figure out what would work.

One of the first things I realized was that board composition is a huge determinant of building a successful relationship. In venture and private equity backed companies, the board is typically stacked with investors. There is a power dynamic as a result of the CEO working ‘for’ the board, but in a healthy relationship, the parties collaborate and the CEO works ‘with’ the board. Defining what it means to work together is a critical element of building a healthy relationship. For some investors, the model is “it’s our money, so we get to tell you what to do.” There are very successful investors for which this is exactly the formula. They have a playbook, and if they invest, then they call all the shots. There are CEOs for whom this is just fine. There are other investors that believe in ‘bet the jockey’ and look to the CEO to chart a successful path. There are CEOs that relish this autonomy. However, if there is a mismatch of investor type and CEO type, things never go well, so figuring out that dynamic is critical for a positive board/CEO relationship.

Being able to spot a good investment does not necessarily make someone a good board member. However, institutional investors have the benefit of seeing multiple similar businesses. They have been to the movie before, and their pattern recognition tells them how it will turn out. An effective institutional investor will translate their pattern recognition into constructive input for the CEO and allow for the possibility that the CEO may also have experiences and see alternative patterns. This is where a collaborative relationship is vital.

The CEO is much closer to the business than the board, and they typically have a much more nuanced perspective. It is incumbent upon the CEO to effectively communicate the salient facts and background to the board, so they can be informed and helpful. For board members, it is vital that they listen and understand the nuances before jumping in with superficial opinions. The rule should be ‘Ask then tell’ not ‘Tell then ask.’ Listen to what is really going on, ask what the management team is already doing about it. Consider the ideas that have already been tried. Then, and only then, if you still have something to add, tell management your opinion. Too often, I have seen board members hear a few facts and immediately start to pontificate about what management needs to do. All too often, it is exactly what management is already doing, and the exchange is insulting to management’s professionalism. Viewing the board dynamic as a collaborative relationship, and recognizing that the CEO and the board members are all professionals with a common goal to drive for success is critical for a positive relationship.

An effective board can become a competitive weapon. It makes the company better. But, board composition needs to be carefully curated to ensure the right collection of expertise and personalities and relationships. VC and PE investors have a responsibility to keep an eye on their money, but that does not mean they are automatically the most valuable board members. Investment documents grant board seats without much thought as to who will actually fill the seat and whether they will become a weapon for the company or a distraction. It is more of an investor policy matter - if we invest, we get a seat. This is a wrong-minded approach. Investors should put people on the board with the skills and the obligation to add value regardless of whether they are investor partners or just smart people.

Creating a board that is a competitive weapon requires an honest assessment of corporate needs. Some companies need help with internal operations, while others need help with entering markets, or engineering a financial path. Board members with specific expertise can turbocharge the business. They can be helpful to guide executives, or share experiences, or open doors that will help the company mature. Figure out what the company needs, and then go find the best person to bring that skill to the board.

The most important thing for a board member to realize is that their role is not passive. A board meeting should not be management putting on a show with board members in the audience. For the board to be a weapon, they have to join the fight and actually contribute. Investor board members need to have self-awareness to differentiate when they are just watching versus when they are contributing. If they are just watching, then they should become observers and relinquish the seat to someone who will actually get in the game and help.

Non-executive, independent board members play an important role. When curating the composition of a board, the independents can be the most valuable elements of building a competitive weapon. Choose wisely, and know precisely what role an independent will play. Clearly articulate and discuss what the CEO and other board members are expecting of the independents.

Lastly, keep in mind that companies mature and evolve, and the contribution the company needs from the board will change over time. Set board terms, and be thoughtful about extending a board member’s term of service - even for investor board seats. The CEO should be able to have a conversation about the current investor participant, and the opportunity to request a new member. It may be awkward, but so is failure or mediocre performance. Force the board to be the competitive weapon the company deserves.

The Optimism Dilemma

The role of CEO requires a mix of vision, leadership, enthusiasm, inspiration and passion. A big part of the job is to serve as the corporate cheerleader. However, when things are not quite right, members of the team become acutely aware of the vibe coming from the CEO. Like dogs that can detect fear, team members have a sixth sense about what is really going on in a company. They pick up on queues like closed doors, unidentified visitors (“suits”), hushed conversations, unusual absences, etc. On the positive side, team members pick up on confidence, joy, openness, and any number of other traits that convey a calming sense to the organization.

CEOs and executives are often surprised by the efficiency of the corporate grapevine and rumor-mill. We often fool ourselves into believing that nobody will notice when something is not quite right. Certainly in the tech world that I am familiar with, and I am sure it is true in every other environment, employees are quite smart and astute, and nothing gets by them.

As the head cheerleader, CEOs often feel obligated to be upbeat - to put a positive spin on whatever is happening. Team members have a natural disproportionate bias to over react to bad news, so if a CEO delivers a negative message, the way it lands will get amplified by this bias, much more than the impact of a positive message. In the HR world, the corollary is that a manager needs to provide at least four positive messages to offset the impact of one negative message. Similarly, CEOs often go overboard in the positive direction to counterbalance the negativity bias.

The problem is that team members are smart and they see through the BS. You cannot fool them. Over optimism is immediately understood to mean something is wrong. You really cannot spin missed bookings, or churned customers, or staff reductions, or strategic pivots, and expect the team will buy it. The result is a loss of credibility for the CEO. As goes credibility, so goes trust, and trust is very hard to regain. Once the team flips the bit from trust to doubt, it is hard to flip it back.

This balancing act creates the ‘Optimism Dilemma.’ In challenging times, how does a CEO balance optimism and cheerleading with reality? How do you keep the team engaged and moving forward when things seem to be going backwards? It comes down to the CEO’s track record for truth and candor.

Trust is like a bank account. You cannot spend what you do not have, and if you have not built up a balance of trust in your account, there is no quick fix. From day one, a CEO has to be honest and truthful with the team, and present a believable reality. Everyone expects the CEO to be optimistic and see the future vision with a positive outlook. They need to see that the CEO believes in the business, but they also understand that not everything goes as planned, so candor is vital. It is the role of the CEO to put the bad news in a believable context. Explain what it means, what the company is doing about it, and how it effects the future. You can be a cheerleader while still delivering an honest appraisal of results. When things are not ideal, the team needs to hear the CEO say “we screwed this up, but we got that right, and things will be OK.” The cheerleader role is important, but it has to be authentic.

The same Optimism Dilemma exists between the CEO and the board of directors. In a healthy board environment, we are all in this together. The board wants to see the CEO and the company succeed, and they are there to help. A good board can handle bad news, but they want to know that the CEO is on top of things. They can handle the miss if it comes with a believable plan to make things better. However, boards are very discerning and have a fantastic BS meter, so over optimism with the board undermines trust in the CEO. On the other hand, if the CEO projects doom and gloom or uncertainty, just like the employees, the board will run with the negativity. The best course for the CEO is to maintain a healthy dialog with the board so there are no surprises and there is a constant flow of grounded facts and information flowing between the CEO and the board. Transparency and confidence win the day.

The bottom line is that establishing a track record of honesty and candor, balanced with CEO optimism will keep a CEO out of the ‘optimism dilemma’ with all of their constituents.

Snake Skin

As snakes grow they periodically shed their skin to make room for their larger bodies. In many ways, businesses go through a similar, natural process as they grow and mature. The team that led the business up to a certain point may not be the ideal team to foster growth to the next stage of business.

Early stage entrepreneur leaders possess drive and skills to get things going. They are the center of the universe for their company, and they can keep all of the facets of the business and every nuance in their head. As the company grows, more people join the team, and up to a point, a loose structure and minimal written plans and policies can work just fine. However, the level of complexity and the number of people involved soon requires more formality and structure. The business needs governance in addition to vision. Formal procedures and policies make the business predictable and scalable.

The leaders that surround the CEO in the early days may not have the skills or recognize the importance of introducing structure into the business. Key members of the early team tend to wear several hats and perform a range of roles. They thrive on multi-faceted challenges and their ability to make a difference. However, as the company grows, it hires specialists to lead each function, and the original team members’ roles either narrow or becomes redundant. The most important job for the CEO is to ensure that the right people are in the right seats to enable the company to reach its fullest potential. The struggle for the CEO is that the early leaders are colleagues and often friends, so loyalty and friendship are in conflict with the needs of the business. Some of the people that were instrumental to getting the company to where it is, are exactly the people that will keep it from getting to where it needs to go. It is never easy to make these changes, but it is often required for the ‘snake’ to shed some skin so the company can grow. The CEO’s challenge is to keep the entrepreneurial spirit alive while also laying the foundation for a scalable business.

The hardest transition of all is to change the CEO.  It is a rare founder-CEO that can manage a growing business through all stages of growth. There are notable exceptions - Bill Gates, Jeff Bezos, Larry Ellison, and Elon Musk - to name a few billionaires. However, more often the skills that enabled the founder-CEO to succeed in the early days will not be adequate or the same skills needed for subsequent stages of the business. Some individuals are self aware enough to recognize the need to hire an experienced replacement. Some require a bit of a push from the board. A telling question for an entrepreneur is “do you want to be rich or king?” You may need to give up the role of king for the business to thrive and make you wealthy. Maybe it’s time for the snake to shed its skin.

Board Amnesia

In a prior MMM I wrote about the CEO’s responsibility to craft and focus the story for each board meeting. I advocate sending a board update well in advance of the meeting to provide each board member with information about what happened in the last reporting period (quarterly or monthly). The update is not forward looking or aspirational. Like the old TV show saying, it is “just the facts, nothing but the facts.”

VC- and PE- board representatives are typically engaged with several companies in various businesses and at various stages. It is not unusual for a board member to serve on five or six or more boards. From one quarter to the next, a lot happens in every company on their roster, and it is a challenge to keep it all in focus. When a quarter ends, all of the board meetings tend to be compressed into a short window, so individuals with multiple board seats have a flurry of meetings all in a row.

As the CEO, you are 100% focused on your company, and you live and breath it every day. Your mind is packed with all of the nuances of your market, your competitors, your opportunities, your personnel, and your company’s performance. Not so much for a board member serving on a half-dozen boards.

During the board meeting, everyone is focused on your company (hopefully). Typically there are questions raised and requests for follow up information, and there are actions agreed upon. In the moment, these are all clear and well understood. Then the meeting ends, and the board members are on to the next company and the next board meeting, and the memory starts to fade.

This pattern leads to ‘Board Amnesia.’ It is the understandable affliction where board members forget the details and the decisions made from one board meeting to the next. CEOs are often surprised when a board member asks the same question meeting after meeting, or doesn’t remember directing the CEO to take some action or investigate some outcome. As CEOs we find we have to re-litigate decisions that we thought we put to bed at a prior meeting. Board Amnesia is real, and it wastes a ton of our precious board meeting time.

A CEO has to recognize this condition and take action to overcome it. It is not that hard to do, but it does require focus. The starting place is to summarize the actions and requests made during the board meeting, and send them to the board immediately following the meeting along with whatever slides were presented during the meeting. Some CEOs add apendix slides that may not have beed used during the meeting, but provide support for topics discussed during the meeting. That is not a terrible practice, but it requires you to tell the board members why the slides are there and what to make of them. Be as specific as possible when summarizing the meeting, and clearly identify the items the board agreed to, or where action was requested. You are building the memory book for board members with this follow up, so pay attention to carrying your board narrative forward into the summary.

For quarterly meetings, it will be a long 90 days before you get totally focused board time again. Most companies have some form of interim update process. Maybe it is a monthly finance call, or a six week business update, or something less formal. My advice is to make it formal and follow a rigid cadence. You are not just updating the board on results, you are also striving to avoid Board Amnesia, so include update information about the checklist of decisions made during the last meeting. Your purpose is to keep bringing your company to top of mind so they do not forget what is going on.

Between board meetings, it is up to the CEO to remain engaged with board members. Regular, scheduled 1:1 calls are ideal. Too many CEOs only reach out when they need something or have a problem. Think about how you manage the people that work for you with regular meetings and discussions. As CEO you also need to manage your board. Continuous engagement is your second tool to stave off Board Amnesia.

Lastly, we come back to the board update that goes out in advance of the meeting. If you have kept the board involved throughout the reporting period (quarter), this ought to be a routine aggregation of what went on during the quarter and why it is important. In other words “NO SURPRISES.” However, keep in mind that you may still be dealing with Board Amnesia, so use this last opportunity to remind everyone of important conclusions from prior meetings and the narrative that led to those decisions.

As a CEO, manage up as well as down. Recognize that Board Amnesia is a common affliction for busy board members. When you communicate with board members, you are not just picking up where you last left off, you also have to reiterate the journey that led to your current actions and results so that your narrative strengthens and refreshes the board’s memory. Help put an end to Board Amnesia!

Short and Sweet

“If I had more time, I would have written a shorter letter” is one of my favorite quotes. It is often attributed to Mark Twain, but actually started with Blaise Pascal in 1657. The underlying truth is that it takes effort to make things concise. The power of a simple message cannot be over estimated. We see it in marketing all the time. The best marketing messages are short and crisp and memorable. The analogous sales adage is ‘if you are explaining, you are losing.’ We remember clear, simple sales and marketing messages, and we forget the complicated ones.

As it relates to board meetings, the responsibility to ensure clear communication between management and the board falls on the CEO. Most organizations produce materials that go to the board in advance of the meeting, and then a slide deck to drive the conversation during the board meeting. The CEO is responsible for the clarity of the message and it is up to the CEO to keep the materials concise. Typically, functional leaders and executives create the materials that relate to their domains, and the board pack is a mosaic of what has been created. There is a general layout and template so the content hangs together, but without CEO oversight, it will be a collection of stories, and not a novel.

Functional execs are good at crafting their own story to feature their team's accomplishments, metrics, and performance indicators. Over time, questions are raised or comments made in board meetings, and typically the executives try to factor the answers into the materials for the next meeting. Board meeting after board meeting, the list of items that were asked about at some point in the past continues to grow and become preserved in perpetuity in the executives’ materials. Eventually, it will start to crowd the content that conveys the message the exec is really trying to deliver. The stories become muddled with too much noise, and the signal is lost.

The problem with gathering baggage based on questions and requests from prior meetings is that often the request relates to an issue that was timely when it was asked, but once the issue is addressed, the focus moves on. Long ago in a distant galaxy, I developed executive information systems (EIS). The target users were CEOs, and the systems were designed to provide a comprehensive view of the entire company at their fingertips. Teams poured untold amounts of data into these systems and tried to anticipate every request. What we learned was that CEOs flitted from topic to topic at the surface, and only dove deep into a topic when it was a hot-button. Once the issue was resolved, they rarely revisited it again. Teams went nuts gathering data based on prior deep dives, only to find it was a waste of effort because the CEO had moved on. A lot of board inquiries follow the same pattern.

The CEO is not a bystander going along for the ride as each exec prepares board materials. The CEO needs to step back from the details at the start of the process, and determine the theme or plot-line for the board meeting. They need to weed out the extraneous content and determine what story will be told and how the plot will be developed through the materials provided to the board. With a clear theme and story-line, the CEO is in a position to orchestrate the content and edit the various pieces to fit together.

Board members are smart people, but they are not in the thick of the day to day operations. My counsel to CEOs is to be a minimalist with board materials. Tell the whole story but don’t stray from the plot. Board members are going to consume whatever is provided, and too often someone will see something in a random extraneous slide and choose to drill into it during the board meeting. Suddenly, you are dragged down a rabbit hole and twenty minutes of board time is gone. If you don’t want to talk about it, don’t deliver it.

Board meetings are only a few hours long, and every minute is precious. It is up to the CEO to ensure that the board knows what is on the agenda in advance, and what they are being asked to consider and discuss. My best-practice recipe is to send out a retrospective view well in advance of the meeting. The content should be purely facts and historic trends, no forecasts or aspirational claims, only background information. The purpose is to give the board everything they need to be prepared for the discussion during the board meeting. Keep it concise, and make sure every element answers the question “so what?” Rather than simply delivering a piece of data with no context, answering the “so what?” question requires the author to think about why this data is important and meaningful to board members. It helps the CEO curate the package and ensure that the story hangs together. The package also needs a CEO narrative that acts as a roadmap to the data being presented, and describes the theme of the board meeting. The retrospective is the first chapter in the novel that will unfold during the board meeting.

Sending the facts in advance means you do not need to allocate time during the meeting to catch everyone up. Insist that they read the materials and come prepared. It is up to the CEO to frame the discussion, keep the meeting on track, and manage the clock.

When it comes to board communication, CEOs should heed the words of Pascal and take the time to “write a shorter letter.”

Too Much?

In the post-COVID era, many companies have remained virtual organizations, eschewing the traditional office-centric business model. Some companies have morphed to a hybrid model asking people to be in the office certain days, and some have completely reversed course and insisted on the power and benefit of being together in an office on a more permanent basis. Lately, I have become interested in the dynamic of routine meetings in our new reality, and how frequency, scale, and participation has shifted.

During COVID, we had little choice other than virtual video meetings.  We found ways to stay connected, and we created meetings to just get people together for business and culture and fun. A lot of these meetings fell by the wayside as in-person became a thing again. The challenge is that during COVID we also learned that a virtual organization can recruit the best talent from wherever they happen to be in the world. We added key members of staff who cannot routinely be present in corporate offices. As some of the locals return to the offices, the remotes stay remote. The good news is we added great talent. The less good news is we lost the little daily random interactions that are a part of being in the same office space with each other.

The question is how this dynamic influences or changes the frequency of group meetings and the scope of attendance. What I found is that high-growth, fast-paced companies need to increase the number of large group meetings to ensure the dispersed teams remain on the same page. Instead of the sales team getting together to just talk about sales, it has become more efficient to open the meeting up so that it becomes a go-to-market meeting that includes marketing and customer success, and maybe even post-sale services and support people. The sales team may still need their own meeting to talk about forecasts and deals and how to sell, but the broader meeting brings the village together so everyone is hearing the same story and ‘rowing in the same direction.’ The same is true for product teams opening up their meetings, and services teams opening up their meetings, etc.

The advantage of virtual meeting technology is that we can invite more people to participate without all having to pile into a cavernous conference room. All-hands town-hall company meetings have become even more important to keep the culture alive and to build a shared understanding of progress and challenges. In the past, we may have done these quarterly or even less frequently, but in hybrid or remote environments, monthly virtual meetings are doable and valuable. Keeping the remote participants involved and visible is critical. Good etiquette says ‘camera’s on, distractions off.’ Engagement is critical.

I am an advocate for open, honest, transparent information sharing across as broad a spectrum of the team as possible. In any environment, nature abhors a vacuum, and an information vacuum in a corporate setting is typically filled with rumor-mill conspiracies (see my earlier post about the Ladder of Inference). With remote workers, the lack of casual office interactions exacerbates the vacuum. More frequent, more inclusive, and more comprehensive meetings can be an antidote to the rumor-mill. Sports teams huddle after every point for a reason. The individuals know their jobs, but the huddle ensures they are supporting each other and sticking with the same game plan. Businesses need a similar degree of over-communicating, and remote businesses need it even more than ever.

People frequently ask ‘are we meeting too much?’ Or ‘are there too many people in this meeting?’ Or ‘what is the point of these meetings?’ All good and valid questions that should have solid answers. Meetings need a stated purpose. Attendees need to know why they are in the room. Meetings need to have fresh content and serve a communication purpose. But, with all of these caveats, in my opinion it is better to meet and over-communicate than it is to try to be more ‘efficient’ and miss the opportunity to ensure everyone is on the same page and going in the same direction. Keep the meeting content tight, and time-boxed, and lively, and the questions will fade away.

Best If Sold By...

There are many ways to build a growth tech business. Some entrepreneurs are able to self-fund or bootstrap their company and quickly build profitability to support growth, but more typically founders need to rely upon some form of investment to make a go of it. From the first investment dollar, funding decisions will have long-ranging effects on the trajectory of the business.

At the start of a business, there is a bit of a chicken-or-egg problem with funding. An entrepreneur is asking an investor to invest in an idea with no tangible evidence it will succeed. If the financing is in the form of debt, then what is the collateral and evidence the business will be able to repay the debt? If the financing is in the form of equity, then the question is what is the business worth, and how much equity are you selling? Entrepreneurs have grand ideas and huge visions with little evidence. Investors want to share the vision, but for the most part they are pragmatic and avoid being swept up in the entrepreneur’s enthusiasm. The result is an imbalance of valuations. The solution is often to follow a crawl-walk-run approach and agree on a small amount of initial funding to get going, so you can prove the business and live to fight another day about the value of the business when seeking a larger investment.

Whether you are an entrepreneur starting a business, a CEO of an ongoing business, or an executive considering joining a company as a hired CEO, every funding decision is of paramount importance. Once you get past friends and family and angel investors, institutional investors follow fairly defined playbooks, and it is vital you understand what you are getting into.

Most PE and VC firms raise closed funds with a fixed amount of capital and a fixed set of limited-partner investors. Funds have investment rules about how much can be invested in a single company, and they generally have an anticipated lifespan during which investments are made and exited so that investors get their money out. Most firms cannot (or will not) cross invest from one fund to another. If an investment is made from fund 1, and a subsequent capital need arises. If fund 1 is tapped out, it is rare that the firm will make a subsequent investment in the same company from fund 2. Often there are different pools of investors, and it gets messy if fund 2 is perceived as bailing out fund 1, or if the outcomes will be different.

As a CEO, when considering an investment from a new VC or PE firm, you want to know the fund dynamics. You are not just considering an investment firm, you also have to consider the fund out of which the firm is investing. You want to know how old the fund is, and how your potential investment compares to the typical investments in this fund. You also want to know the rules of the fund for follow-on investments and if there are limits on how much may be available to your company as well as if the fund has the capacity remaining to make sufficient follow-on investments.

When considering a first institutional investment, the CEO has to recognize that it is a lot like tattooing a “Best if Sold By” date on their forehead. Institutional funds have a lifecycle, and depending upon where the fund is on that timeline when the investment is made, the best-if-sold-by date will be loosely tied to the expected remaining life of the fund. It is a fair question for the CEO to ask and expect an answer that is more than just BS. The CEO and the investor need to be aligned on timing and what success will look like for the fund, as well as what the firm’s expectation is for eventual exit. Nothing will be hard and fast, but there needs to be alignment, and the CEO needs to recognize that the investor is not in it forever.

As the business grows, it will likely need capital and also likely move through the ranks of institutional investors from angels to venture to growth equity and through various larger tiers of private equity potentially to public markets. Each tier of investor has different expectations and tolerances, as well as different timelines. Every single funding decision has long-ranging implications, and this becomes very apparent as the business grows and seeks additional capital moving up the tiers of investors.

Managing board and investor expectations is a major part of a CEO’s job. This is particularly challenging when the firms around the table come from different investor tiers, and they invested at different stages with different expectations. A venture firm may have invested in a technology business with expectations of >50% growth rates, high gross margins, and limited focus on profitability. A subsequent PE investor may expect more modest 30% growth, greater attention to EBITDA, and a longer hold period. For the CEO, this makes setting strategy and measuring success a challenge. Being aware of investment expectations before accepting an investment, and solving for a common ground early will greatly smooth the board / management relationship going forward.

Committing to board seats, granting decision making blocking rights, preferences, and participation rights at early funding stages can become nightmares at later stages. Large-scale professional investors may be unwilling to have Uncle Bill on the board, even though you promised Bill a seat when he gave you seed money to start the company. They will also object to Bill having the right to block an equity decision, or any real say in the business. As an entrepreneur you have to jealously guard all of the rights that will become critical later in the business, and avoid giving up too much too early. Starting out with 100% of the equity, giving away (or selling) too much early on will result in massive dilution after multiple rounds of institutional capital. You may wake up one day and discover you only own a few percent of the business you poured your heart and soul into for years.

Preference stacks and multiples are the bane of an entrepreneurs existence. Institutional investors typically invest in preferred stock, and too often they require multiples of their initial investment before the proceeds trickle down the preference stack to common shareholders (including the entrepreneur founder and team). If the company has gone through multiple rounds of investment, and each round includes a multiplier, it is not uncommon for all of the proceeds of a sale to be distributed to institutional investors and none to the common shareholders. CEOs need to be aware of the preference stack and conscious of how high the bar is being set before the common shareholders make money. Don’t be surprised.

The bottom line is to create a long-range business plan with realistic projections, and anticipate funding needs long before they materialize. Jealously guard against giving up too much too soon. Be aware of all of the tools investors employ to reduce their risk and increase their returns. Sometimes, it is not only a question of enterprise valuation at the point of investment, you also have to consider the dreaded preference stack and multiples and participation rights. Most importantly, the CEO needs to be aligned with and aware of the investors’ time horizons and expectations, and look out multiple years to plot an appropriate strategic funding course.

How Do You Choose?

In the last few posts, I highlighted the important role of the CEO to ensure that the right executives and managers are in place, and that they know what to do and how to do it. When the CEO finds themself stepping in to do the job of an executive leader, there is probably a problem.

Most of us are guilty of hiring too fast and firing too slowly. Once someone is onboard, we all have heart and know how disruptive it is to the individual and the company to make changes. Our first instinct is to help the individual overcome their challenges, plug the gaps, pick up the slack, or whatever it takes to foster success. To be honest, we pride ourselves on making good decisions and having good judgement about people, so it is hard to admit we may have made a hiring mistake. The problem is our procrastination takes a lot of time, and often in a growth environment, that is the one thing we never have enough of.

Similarly, as companies grow, the challenges change. An executive who was great at an earlier stage of development may not be great when things get bigger and more complex. Like a snake that sheds its skin as it grows, often executive teams have to go through the difficult process of reshaping and replacement as the company grows to the point of needing different skills and capabilities. A great executive from $0 - $20M may not have the skills to get to $50M and beyond, or to get there in the most expeditious way. The challenge for the CEO is to know when it is time to make a change, even though the company owes so much of its success to the individual who helped get it to where it is.

Making these difficult decisions about hiring and firing is one place where an effective board can be very helpful. As a group of involved but external individuals, the board can provide a unique perspective. The CEO should continuously inform and consult the board regarding the effectiveness of the executive team. A healthy ongoing dialog can be very impactful. I am an advocate of the CEO presenting an executive scorecard at every board meeting. A simple ABC grading or a more sophisticated 9 box analysis, or just a discussion of each individual is an important element of every board meeting. During the CEO and board-only time, there needs to be at least a brief review of the exec team. Over time, this simple review step will begin to highlight issues and weaknesses, and add perspective. It forces the CEO to look beyond the day-to-day and honestly see where executive team strengths and weaknesses lie. Trends will emerge and become actionable.

Malcom Gladwell wrote a book titled “Blink” that in essence says we typically know what our decision is in the blink of an eye, and then we spend a lot of time gathering evidence to support our view, all of which leads to our original conclusion. This is true for terminations and hiring decisions. In terminations, it is more of a switch that flips at some point when the CEO recognizes there is a problem. In their gut, they know the outcome, but they are not ready to admit it. The result is we take too long gathering evidence to prove our Blink decision to ourselves. This leads to the problem of firing too slowly.

On the other hand, we hire too fast. It will never be possible to be certain about a candidate’s long-term success during the hiring process, but we can improve the odds by taking the time to do it better. Hiring is where the concept of “Blink” fails us. We know in a blink that we have the ideal candidate, and too often we spend the rest of the process gathering evidence to prove it. This is our downfall. We need to remain impassionate and objective and paranoid. Consider every hire as if a wrong decision will lead to the worst possible outcome, because it probably will. We have to overcome our natural tendency to look in the mirror and hire someone just like us, but the challenge goes much deeper. We have to create objective criteria and be honest with ourselves about how each candidate meets the test. Instead of a ‘blink’ decision, we need to listen to the small voice that may be expressing caution, or we need to respond to our blink reaction by focusing on gathering evidence that we are wrong, instead of evidence that we are right.

I advocate creating a tough scorecard and being a harsh grader when evaluating candidates. Write down the criteria for a successful candidate. At a minimum, the list should include elements that identify: leadership, industry expertise, operational excellence, strategic thinking, problem solving, interpersonal behavior, executive presence, and communication skills. Determine what it will take to be successful and do your best to objectively score each candidate.

In a typical hiring process, a bunch of people interview a candidate, and often they ask very similar questions. After a couple of meetings, the candidate refines their answers and everybody sees the same strengths (and weaknesses). It is much more effective to focus each interviewer on a specific topic and ask them to go deep instead of wide. Five interviews should add five pieces to the puzzle, not five versions of the same piece.

People decisions are among the hardest choices a CEO has to make. There are lots of experts and papers and books that talk about how to improve the probability of a positive hiring outcome. The important thing is to make a plan and follow it with clear objectivity. Hiring an executive is not a time for surface interviews and gut reactions. A CEO should engage board members to provide objectivity and experience evaluating executives. Most board members have been to the movie many times and can predict how it will turn out. Use their experience. Avoid the Blink that is in all of us.

How Can I Help?

There was a popular television program in the States called “New Amsterdam.” It was about an inner-city mega-hospital that gets a new medical director. As he is making his mark on his new team, his oft-repeated line is “how can I help?”  What a powerful line for a new CEO to adopt, or for that manner any leader at any stage in their tenure.

There are many different leadership styles. Some leaders are autocratic, some visionary, some micro-managers, and others see their role as a coach. All of these approaches are potentially successful, but they all share a common theme of the leader being the smartest person in the room. These leaders are essentially telling everyone the ‘answer’ with varying degrees of directness, but in all cases, the leader knows the answer and is guiding the team toward it. While the word ‘leader’ clearly implies you are setting the path for others to follow, you should not assume you have to tell them how to walk.

Leaders need to lead, but they also need to support and provide space for smart people to grow and apply their knowledge and skills to solve problems. A CEO needs to be committed to hiring the best people in each domain. These are experts who presumably will add value to the corporate village because they know more than the CEO about their chosen field. The CEO has to trust them to do the job they were hired to perform.

So, back to the simple question ‘how can I help?’ What a powerful message it sends. It is embodied in what is known as the ‘Servant Leader’ style. With a qualified team, asking this simple question of employees at all levels of your organization makes them feel respected, appreciated and valued. It demonstrates that the CEO is a member of the team and is there to help them succeed. It follows a rule I try to embrace to ‘ask first, then tell’ instead of ‘tell first, then ask.’ We have all experienced a situation where an executive or board member tells you what you should be doing before they ask you what you are doing. It is demeaning. Starting with the simple question ‘how can I help’ will elicit an answer to the question about ‘what are you doing,’ but in a non-threatening manner.

I recently wrote about how a CEO cannot succeed if they try to do it all by themself. As an organization grows the CEO has to step away from being the center of the corporate universe. Putting the right executives and managers in place, who know what to do and how to do it, allows the CEO to evolve to a more supportive role. That does not mean the CEO has to abdicate their role as visionary. Ultimately, they remain the place where the buck stops, but moving out of the center leads to a more collaborative style where the contribution of others is respected and welcomed. ‘How can I help’ conveys a message that says ‘I know you know what to do, so how can I help you get it done.’ It is an offer, by the CEO to empower a valuable team member to be a leader, and it makes it safe to ask for help. For a new CEO or board member joining an existing company, the question is a self-effacing recognition that you respect the experience of the existing team and want to join the company to help it succeed, instead of acting like the new sheriff in town who is coming in with all the answers - ‘ask first.’

Most of the best leaders I have ever known have self-confidence in what they know and self-awareness and the humility to recognize what they don’t know. They are unafraid to acknowledge a team member for their superior expertise, and they are content to take direction in response to the ‘How can I help’ question. There is great strength in being humble.

How can you help?

You Can’t Do It All

Early in my career when I arrived at my first CEO spot, I was faced with finite capital, a company burning cash, and  a very junior inexperienced team (including me). Nobody ever hires a new CEO if things are going great, so as a hired CEO you have to expect that something is wrong and that drove the board’s decision to hire a new person to run the show. I may not have recognized it at the time, but that was the situation at my new company. By this point in my career, I had held a range of leadership roles, so my ego led me to believe that I was up to the task and equipped to sort through any issues. Because we had finite capital and we were burning cash, the words that rang out in my head were “cash is king,” and I was loath to spend money.  Specifically, I thought I could save money by not hiring an experienced executive team. I could do it all myself.

Needless to say, this was a very bad idea. It was like I was staring at a barbell loaded down with weights, and there was no way I could lift that thing all by myself, but I was unwilling to admit it. Fortunately, I had a wise seasoned investor who took me aside and gave me some of the best advice I ever received. He pointed out that the path I was on was going to be slow and arduous, and we would likely spend all the cash we had before we could turn the corner. However, by spending the money to hire a strong team we could accelerate our progress and as a team we would have the strength (and brain power) to overcome our challenges and, in effect, lift that barbell.

Throughout my career, I have seen it time and again where CEOs, particularly less experienced ones, try to follow the same do-it-yourself path I was on. Maybe it is ego, or maybe it is frugality that makes them think they can do it, but invariably it is the wrong path. The corollary problem is when the company has grown, and although there are executives and leaders in the company, they are not up to the task at hand. Rather than recognize the need to top grade the team, too many CEOs move to micromanage the areas that are weak, and end up trying to do too much while at the same time not doing enough of the CEO role.

Often, the company has outgrown the team that got it to where it is, but the CEO, and frankly some boards, are too slow to recognize the need for change. It is in our nature to be too quick to hire and too slow to fire, or at least to identify the need for a change of personnel. Even when some CEOs decide it is time to hire, they struggle with being clear about what they really need, which leads to bad hires or misfits, and once again, the CEO tries to jump in to prop up the new hire by doing their job for them.

One of the most important responsibilities of a CEO is to get the right people in the right roles, particularly the senior leadership team. This is also a place where the board can be most helpful. The board can provide advice and guidance for the CEO and take an active role in hiring the exec team. Many tech company boards are dominated by investors who work across a portfolio of companies. They have been to the movie many times, they know what good looks like, and they can see how bad will turn out. I always maintained a bright line between operations and the role of the board. I did not always welcome ‘help’ running the company, but one area where I learned to seek input was hiring executives. Not only do investors know potential candidates, they also have a keen sense of the CEOs strengths and blindspots, and they can be effective helping to make good hiring decisions that will complement the CEO.

I spent many years participating in a CEO group led by the High-Growth CEO Forum. They have a model of company/CEO growth that truly inspired my thought process about the CEO role. When a company is small, the picture looks like an atom with the CEO at the center and the team as the electrons circling around. When the company matures, it evolves to look more like a molecule made up of atoms where the exec team members are each at the center of their own atoms. The CEO moves from the center of the company universe to become more of a leader orbiting around the edges, inspiring the teams and empowering the executives to be the masters of their domains. The only way this works is if the CEO has hired well and has trust and confidence in the leadership team.

In my experience, this transition starts to happen in software companies as they approach $10M in recurring revenue, and really has to be in full bloom by $20M. When a larger company is still CEO-centric, it is an indicator that  something is not quite right. Maybe there is a talent problem in the leadership team and it is time to top grade some of the execs, or maybe the CEO has failed to let go and is still playing ‘small ball.’ The result inevitably is constrained growth because no CEO can or should do it all. When this happens, it falls on the board to be the mirror that reflects the situation back to the CEO, and the board may need to drive for change. Unfortunately, sometimes it means the company has outgrown the CEO and it is up to the board to act - never a pleasant situation.

Back to that sage advice my board member gave to me in my first CEO role. Put an experienced team in place early and collaborate to drive for success - As a CEO, you can’t do it all alone, and you can’t do it with a sub-par team. Hiring well is a fundamental requirement for a successful CEO, and the task is ongoing as the team will require continuous renewal and up-skilling as the company grows. I recommend including an executive team scorecard in every board meeting. It does not have to be sophisticated, but it will cause the CEO to continually consider each member of the team and share their assessment with the board. Invariable, the scorecard tiggers a few minutes of board discussion and creates an early warning system to spur action when appropriate.

Minimum Successful Product

I recently wrote about creating Mission and Vision statements, and how these documents are critical to set a company on the big journey toward success. However, in the early stages of a business or a new product launch, it is important to have focus and think like a minimalist. The most important thing is to get out there in the real world market, and start letting buyers guide you to success.

In the first release, we don’t have to solve every problem and we don’t have to support every process, but we do have to demonstrate and deliver a solution that seamlessly solves the hard problems. We have to do so in a way that the alternatives cannot get the job done. We want a competitive offering that is clearly differentiated, but we may not need a complete cover for every feature and function the competitors have. Provided our offering has a compelling new approach or feature set, it can gain traction with the early adopters and start us on your journey.

In this 40th anniversary year of the introduction of the Macintosh computer, we cannot forget what the first one looked like. At the time, the IBM PC had a hard drive, high-density floppy disks, color screens, communication ports, slots for all sorts of add-ons, and tons of applications. Apple launched the first Mac with just a small black and white screen, no hard drive, no communication ports, one single-density floppy, and no expansion slots. It sold like crazy (for a while). Apple delivered a graphical user interface that blew the world away – with only two integrated applications: word processing, and drawing. Apple is unique, and maybe we can’t pull off this type of launch, but in our own more mundane market we may be on the verge of launching a new product that can change the landscape. Our challenge is to think like Apple about what will rock the buyer’s world enough that they will see past what is missing.

The goal for the first release is often referred to as a ‘Minimal Viable Product’ (MVP). I have a particular aversion to the term MVP. The ‘minimal’ part suggests that we only have to find the smallest competitive bundle to launch. This sounds like a Macintosh concept, and I am generally aligned with the minimal part of the MVP. However, my issue is with the second word - ‘Viable.’ We may have different interpretations of the word ‘viable', but to me it sounds like we are aiming for an offering that only deserves a ‘C’ or just a mediocre passing grade . Who wants to just eek into a competitive market with a bland minimalist offering that may be slated to become the living dead - not a winner, but also not a total loser? I don’t know about you, but I never want to be just ‘viable.’

I prefer to replace the MVP goal with MSP - Minimum Successful Product. ‘Success’ is so much more energizing and powerful than ‘Viable.’ Aiming for success instead of merely trying to be viable will set a very different tone and direction for the team. It goes to the heart of creating a uniquely differentiated offering, and opens the discussion to build something different and better, instead of something that barely ‘covers’ what is already in the market. In fact, following the Macintosh example, it frees us to think about not covering the features of the competitors at all, but instead creating something innovative and new that is so compelling that people will buy it despite its shortcomings. The key is to surround the compelling new offering with market buzz and a believable roadmap and commitment to finish the feature set in a reasonable time frame. Even Apple had to eventually build a comprehensive offering.

This takes us back to focus. Too many businesses start out with a broad definition and try to do too much - to cover all of the competitor’s features and to be all things to all people. It usually slows down their time-to-market, and creates a posture of ‘me too, plus.’ Gaining traction requires differentiation and focus. If you can only do one thing or solve one problem, what is it going to be? For the early Macintosh it was to deliver a simple graphical user interface. In a prior post, I warned that including a conjunction (‘and’) in a mission statement will cause a lack of focus. The same logic applies to defining an initial product offering. An MSP needs to be tightly scoped, and you need to be confident that it solves a real need for a carefully understood ideal customer profile (ICP). If you know your buyer well, then you know their pain and you can engineer a winning MSP.