By: Leigh Buchanan. Source: INC.
Ben Horowitz minces few words in his new book, The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers. As the title suggests, it’s no roundup of feel-good stories about passion and vision. Instead, Horowitz, who is co-founder of the VC firm Andreessen Horowitz and the software company Loudcloud (later Ops-ware), offers blunt advice on surviving the rough stuff startup life dishes out. He spoke recently with Inc. editor-at-large Leigh Buchanan.
What you call “the struggle” of startup life will either kill a CEO or make him stronger. How can you improve the odds of that second outcome?
A lot of being a successful CEO is not quitting. It sounds almost corny. Winners never quit andquitters never win. But there’s something deeper. When you’re in it, you are building a tremendous amount of knowledge about the company, about the market, about the customer, and about the product. The longer you have to apply that, the better your chances are. If you can somehow stay in the box, then, amazingly, you might find yourself in a good position.
You advocate getting bad news out quickly. In the fragile early stages of a company, how do you do that without destroying morale?
As CEO, you feel as if you’re the daddy who has got to protect the children from bad news. Because if it hurts you, then it is going to devastate them. The opposite is true. Employees are not nearly as married to the company as you are. They do not take the losses as hard. And they want the chance to work on solving those problems. Culturally, once you deliver bad news a few times, people get over the worrying part. Employees think, Every week, Ben is telling us something else that’s wrong with the company. He tells us, we fix it, and that’s great.
In all kinds of lousy situations–including firing people–you want the CEO to accept that the failure is her own. Why is that so important?
Because it’s true. To get a job as an executive in a company, someone has to have tremendous credentials coming in. I’ve never fired executives because they didn’t work hard or they weren’t smart. The issue is always that they had the wrong background and the wrong skill set for the company at that point in time. Whose fault is that? You’re the one who knew your company. And you’re the one who got the chance to assess the candidate. You got it wrong. Or else you failed to integrate the person. [Accepting the failure as your own] also puts you in a much more fair position in terms of the message you deliver to the person being fired. As my friend [Intuit chairman] Bill Campbell says, when you fire people, you have to take their job but you don’t have to take their dignity.
What forces encountered in the startup crucible work against your ability to create a great place to work? How can you counteract them?
One of the biggest things that can work against a startup being good is growth. A lot of what makes a company good is common knowledge. If everybody in a company knows everything, then generally it is going to be a pretty good place to work. Communication is super high fidelity. Everybody is on the same page, and 99 percent of the work people do actually impacts the company. The bigger you get, the more siloed information gets, the less common knowledge you have, and the more likely people are working on something that ultimately the company cares nothing about. There’s politics and backbiting and nonsense. The challenge for the CEO is to make sure that as the company gets bigger, there is a good communication architecture. That’s a really hard thing.
For most companies, culture evolves over time. But you advocate creating “cultural design points” that strongly influence people’s behaviors. How do you do that?
You’ve got to think about things that are both important to the business and that differentiate you. When we started Andreessen Horowitz, we knew that one of the most frustrating things for entrepreneurs is that VCs do not respect their time. As entrepreneurs, every time we’d visit a VC, we’d wait in the lobby for 30 to 45 minutes. So at the core of the firm, we wanted a cultural tenet to be respect for the entrepreneur and the entrepreneurial process.
But how do you get that into people’s minds? The mechanism I came up with was to tell VCs that if you are late for a meeting with an entrepreneur, then the fine is $10 a minute. That is a very big fine. It is shocking to people who have to pay it. And that’s the point. Because every time somebody pays a fine, we get to tell the story of why the person is paying so much money. It really locks it in.
What do you like about difficult decisions?
There are the decisions that you think are a good idea and everybody else agrees. Those are easy. Then there are decisions that you think are a good idea and most people think are a bad idea. If you go with the crowd and get it wrong, then everyone will forgive you because none of them saw it coming. But if you do what you think is right and you’re wrong, then everyone is going to know you are an idiot. So it’s hard to make the decisions that nobody else likes. When Larry Page decided to focus on artificial intelligence, people thought it was the craziest thing in the world, but it ended up creating the technology for an $8 billion business.That’s the harsh reality of the job. You have to do what you think is right. If you don’t, you are not a leader.
Bad advice from VCs or veteran entrepreneurs can make hard things even harder. Ben Horowitz offers three examples of conventional wisdom that’s not so wise:
The advice: Bring in big-company executives early.
The problem: The job of a big-company executive is very different from the job of a small-company executive. That creates a potential mismatch that prevents the hire from contributing immediately.
The advice: Strive for consensus on executive hiring decisions.
The problem: The opinions of people who have not done a particular job may not be relevant to identifying a world-class hire.
The advice: Match competing offers for key employees.
The problem: Word gets out, and soon everyone thinks the best way to get a raise is to threaten to quit.