Thoughts on being a CEO

I’ve had the opportunity to speak about how to be a CEO recently and thought I’d share some of those thoughts.  A founder CEO is very different from a non-founder CEO.  My comments will be limited to the non-founder CEO.

The primary role of a CEO is to articulate the Vision, Values and Team.  While the CEO doesn’t create the vision, the CEO had better be able to articulate it.   At first I found everyone asking me , “What’s the big idea?””What’s next?” I answered it with a wisdom of the crowds approach.  I created a culture and team that can answer those questions. Values largely do come from the leader of an organization.  Either the organization will adopt the leaders values or the leader will be rejected by the organization. The most visible aspect of being a CEO is managing the management team. 

The temptation to ‘do stuff’ as CEO is great.  If your background is in technology, you will want to tinker with the technology.  If your background is in sales, you will want to get involved in the sales process.  However, whenever you are tempted to parachute in to do something, take that as a sign that your team needs strengthening in that area. Let your organization feel the pain of its weakness so it is motivated to create a permanent fix.

You are responsible for an organization’s pace.    What is the cadence of the org? Does it vary by function? Does it vary by the calendar?  I strive for a sustainable pace for every employee (what I call rested racehorses), but twice a year, I reserve the right to ask for unsustainable work for up to 30 days at a time.

Two interesting things happen the further up an organization you go: first, your time horizon lengthens and secondly your voice is amplified.  As CEO, you should be thinking in annual cycles as the norm; quarters occasionally as well as looking 3-5 years ahead occasionally.  With the voice amplification, you have to be careful what yo say; what you say has a way of instantly becoming policy and cutting off what could otherwise be very productive conversation.

To become a CEO, you need to have an organization-wide perspective.  This is attained by mastering at least two of the three key areas of a business: Tech, Sales or Finance.   Also, you should be merely good, not great in these areas.  Be good, but recognize greatness.  Hire your replacement who is great and create a team of direct reports that are better than you in every functional area.  This will help you avoid the temptation to meddle in their affairs.  Make sure they are doing things you disagree with and are making mistakes big enough to be included in your board packet.  Furthermore, recognize that the management team is the first team for each VP.  A VP should be 51% VP and 40% functional.

The role of a CEO evolves over time. And it is rare for one person to take a company through more than one or two stages of growth.  Be prepared for the transition.  Also, being a CEO is lonely. You are a team of 1.  Be friendly, but not familiar.  This is why there are CEO peer networks; you can relate to them in ways you cannot relate to the management team, employees, board members or shareholders.

The Four H's

Organizational Performance via Cultural Consistency, Part 1.

When I first became a CEO, I thought I’d struggle with operational questions such as which products and services should we focus on; how we should take them to market, etc. But I found that I was able to address those reasonably well through well-designed high functioning teams.  However, I was surprised to find out how hard shareholder/board communications are for me.  

Much has been written about shareholder best practices, so I know what I should be doing, but nonetheless find that my energy is focused on either what’s in front of me or what’s next.  I just never think to stop and tell shareholders how things are going. We of course have a great CFO who does financial reporting, but only I can give them a sense for where my head is.  One would think that if things were going poorly one would avoid the painful discussion.  And while that certainly has been true for me, I have also found that I just never think to do shareholder communication even when things are going well. Tactics I’ve tried include calendar reminders, email shortcuts, coversheet to fin packet, etc., but I just feel myself resisting.  Part of the resistance comes from blowback. It seems when you do send out an update, there is often follow up questions that require time/energy that I’m spending elsewhere.  As a shareholder/LP, I try to be very quiet because I feel the pain of having to explain yourself over and over again.  I don’t think I’d like working in politics.

So, when I first became a CEO, I was surprised how much organizational energy goes towards activities that are something other than creating new products and selling them.  Also, the employees wanted to know what they could expect of me.   I hadn’t had time to prepare, so I said if an organization takes on the values of its leader, then they could expect the 4H’s = Honest, Hungry, Humble and Happy. 

Day One, Again

Somewhere along the line in school or life I got the notion that raising venture capital was an ending rather than a beginning.  Prior to having raised venture money, I thought that all of our problems would be solved if we only had more money. 

Boy was I surprised the day after I first raised money (from Sequel Ventures.)  No customer traction? Difficult to recruit and retain employees? Difficult product or pricing decisions? All still there.   And raising money can have unintended consequences such as reducing urgency and creativity.  Nothing like needing to make payroll to focus a team.

I used to have golden brown hair, which turned grey and now white.  Maybe it was genetics, but I’ve got to believe that running a business on no cash for a long time had something to do with it.   I know some people are natural bootstrappers (Bart Lorang), but for me I’d rather raise the money if I can.  Business is already hard enough.  I’m just not that good to make the right decisions without some room for error.  Financing gives you that room for error.

I’m very happy to welcome Byron Deeter to our board and Bessemer as our investment partner to grow SendGrid from Day One,  again.   As I tell the startups that I work with, you are always fundraising.  Time to work on Series C.

Co-Founder Dynamics/ Champion, Skeptic, Arbiter

Having worked with dozens of founding teams over the last twenty years, I've noticed there its some magic to the number 3.  Having 3 founders, covering 3 roles and needing 3 types of decision dynamics.  For the this post, I'll be describing the best practices around the 3 types of decision dynamics. 

In any start-up, there are hundreds of decisions to be made.  From "what business should we be in?" to location or logo, the founding team needs a healthy dynamic around how those decisions are made. In each decision, there is usually a champion, a skeptic and an arbiter.  

The champion typically says "wouldn't if be great if..." and focuses on the upside of the decision.  The skeptic says "that is risky/costs a lot/is de-focusing." And the arbiter is in the middle weighing the relative tradeoffs.  

A few key thoughts are:

1. Be aware of this dynamic

2. There are many decisions to be made.  Note if the same person is always in the same role.  If so, then intentionally switch up the roles.  See "Six Hats Thinking" for a related analysis of this idea.

3. It's tough to have a healthy dynamic in this regard if you don't have three founders.  So, this reinforces the idea that 3 founders is the right size for starting something (big enough to get stuff done, but small enough you can stay coordinated.)

So healthy teams have an awareness of these roles, rotate them frequently and are not overly-invested in any particular decision.  If your point of view does not carry the day on this issue, there is always the next one.