The Hard Thing About Hard Things: Building A Business When There Are No Easy Answers

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3 Sentence Summary

Ben Horowitz, one of Silicon Valley’s most respected entrepreneurs, shares many invaluable and humbling lessons he learned during his time as the CEO of Opsware. Each chapter is filled with practical business wisdom that might help you avoid costly leadership mistakes. However, rather than being a playbook for how to do things right, this book is more likely to be a source of inspiration when you inevitably get it wrong and need to find the courage to persevere.

5 Key Takeaways

1. Know your priorities in life. If you don’t, it’s easy to make choices that sacrifice them.
2. If you’re going to eat shit, don’t nibble.
3. Tell it like it is. Tell your employees the truth and give the problem to the people who can not only fix it, but who will also be personally excited and motivated to do so.
4. Spend zero time on what you could have done, and devote all your time on what you might do. Because it the end, nobody cares; just run your company.
5. Don’t quit. Both the hero and the coward feel the same fear. The difference is what they do in the face of that fear.

The Hard Thing About Hard Things Summary

Introduction

• The problem with [self-help or management] books is that they attempt to provide a recipe for challenges that have no recipes. There’s no recipe for really complicated, dynamic situations.
• There’s no formula for dealing with hard things. Nonetheless, there are many bits of advice and experience that can help.

From Communist to Venture Capitalist

• Being scared doesn’t mean that you’re gutless. What you do in the midst of being scared is what ultimately matters.
• There are no shortcuts to knowledge, especially knowledge gained from personal experience. Following conventional wisdom and relying on shortcuts can be worse than knowing nothing at all.

Leadership is the ability to get someone to follow you even if only out of curiosity.

Colin Powell

• When the “facts” seem to dictate a certain outcome, learn to look for alternative narratives and explanations coming from radically different perspectives to inform your outlook.
• The simple existence of an alternate, plausible scenario is often all that’s needed to keep hope alive among a worried workforce.
• Flowers are cheap. Divorce is expensive.
• Be careful not to make choices that sacrifice your most important priority in life (faith, family, friendships).

“I Will Survive”

• The most important rule of raising money privately: Look for a market of one. You only need one investor to say yes, so it’s best to ignore the other thirty who say “no.”
• No matter who you are, you need two kinds of frineds in your life. The first kind is one you can call when something good happens, and you need someone who will be excited for you.
• The second kind of friend is somebody you can call when things go horribly wrong—when your life is on the line and you only have one phone call.
• If you are going to eat shit, don’t nibble.
• Having a deadline, and going past it, is better than not having one.

Gentlemen, I’ve done many deals in my lifetime and through that process, I’ve developed a methodology, a way of doing things, a philosophy if you will. Within that philosophy, I have certain beliefs. I believe in artificial deadlines. I believe in playing one against the other. I believe in doing everything and anything short of illegal or immoral to get the damned deal done.

Michael Ovitz

This Time With Feeling

• Be as upfront and transparent with your employees as you can. Always tell them the truth.
• Encourage people with one foot out the door and those who have their doubts to leave. Know who is with you and who you can count on. You can’t afford to bleed out slowly.
• Whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project.
• Product strategy is all about walking away from requirements that you know to be true to pursue something that you think will help. Figuring out the right product is the innovator’s job, not the customer’s job.
• The customer only knows what she thinks she wants based on her experience with the current product. The innovator can take into account everything that’s possible, but often must go against what she knows to be true. As a result, innovation requires a combination of knowledge, skill, and courage.
• In my weekly staff meeting, I inserted an agenda item titled “What Are We Not Doing?” Sometimes the things you’re not doing are the things you should actually be focused on.
• Conventional wisdom often has nothing to do with the truth… Markets aren’t “efficient” at finding the truth; they are very efficient at converging on a conclusion—often the wrong conclusion.
• It’s a good idea to ask, “What am I not doing?”

When Things Fall Apart

• Startup CEOs should not play the odds. When you are building a company, you must believe there is an answer and you cannot pay attention to your odds of finding it. You just have to find it. It matters not whether your chances are nine in ten or one in a thousand; your task is the same.
• There is no secret to being a successful CEO. But if there is one skill that stands out, it’s the ability to focus and make the best move when there are no good moves.
• It’s the moments where you feel most like hiding or dying that you can make the biggest difference as a CEO.
• Keep death in mind at all times. If a warrior keeps death in mind at all times and lives as though each day might be his last, he will conduct himself properly in all his actions.

Some Stuff That May Or May Not Help You In The Struggle

• Don’t put it all on your shoulders. You won’t be able to share every burden, but share every burden that you can. Get the maximum number of brains on the problems even if the problems represent existential threats.
• This is not checkers; this is mother-fuckin’ chess. Technology businesses tend to be extremely complex.
• Play long enough and you might get lucky.
• Don’t take it personally.
• Remember that this is what separates the women from the girls.

CEOs Should Tell It Like It Is

• My single biggest personal improvement as CEO occurred on the day when I stopped being too positive.
• Employees will handle losses much better than the CEO. Afterall, they aren’t married to the company.
• Give the problem to the people who can not only fix it, but who will also be personally excited and motivated to do so.

Why It’s Imperative To Tell It Like It Is

1. Trust. Without trust, communication breaks. The required amount of communication is inversely proportional to the level of trust. As a company grows, communication becomes its biggest challenge. Execution demands good communication.
2. The more brains working on the hard problems, the better.
3. A good culture is like the old RIP routing protocol: Bad news travels fast; good news travels slow. If you investigate companies that have failed, you will find that many employees knew about the fatal issues long before those issues killed the company. A company that discusses its problems freely and openly can quickly solve them. Beware management maxims that stop information from flowing freely. Maxims like, “Don’t bring me a problem without bringing me a solution.”

The Right Way to Lay People Off

• After seeing friends laid off, some employees may no longer be willing to make the requisite sacrifices needed to build a company. Therefore, it’s important to lay people off right in order to preserve the culture.

Step 1: Get Your Head Right

• During a time like this [laying people off], it is difficult to focus on the future, because the past overwhlems you—but that’s exactly what you must do.

Step 2: Don’t Delay

• Once you decide that you will have to lay people off, the time elapsed between making that decision and executing that decision should be as short as possible.
• You will have more problems if word leaks.

Step 3: Be Clear in your own mind about why you are laying people off

• You are laying people off because the company failed to hit its plan.
• If individual performance were the only issue, then you’d be taking a different measure. Company performance failed. This distinction is critical because the message to the company and the laid off individuals should not be “This is great, we are cleaning up performance.” The message must be “The company failed and in order to move forward, we will have to lose some excellent people.”

Step 4: Train your managers

• If you send your managers into this super-uncomfortable situation with no training, most of them will fail.
• Training starts with a golden rule: Managers must lay off their own people.
• Why so strict? Why can’t the more confrontational managers just handle this task for everyone? Because people won’t remember every day they worked for your company, but they will surely remember the day you laid them off. They will remember every last detail about that day and the details will matter greatly. The reputations of your company and your managers depends on you standing tall, facing the employees who trusted you and worked hard for you. If you hired me and I busted my ass working for you, I expect you to have the courage to lay me off yourself.
• Equip managers to:
  1. They should explain briefly what happened and that it is a company rather than a personal failure.
  2. They should be clear that the employee is impacted and that the decision is nonnegotiable.
  3. They should be fully prepared with all the details about the benefits and support the company plans to provide.

Step 5: Address the entire company

• Prior to executing the layoff, the CEO must address the company.
• The message is for the people who are staying. The people who stay will care deeply about how you treat their colleagues.
• Still, the company must move forward, so be careful not to apologize too much.

Step 6: Be visible, Be present

• Be present. Be visible. Be engaging. People want to see you. They want to see whether you care.
• Talk to people. Help them carry their things to their cars. Let them know that you appreciate their efforts.

Preparing to Fire An Executive

Step 1: Root cause analysis

• The reason you have to fire your head of marketing is not because he sucks; it’s because you suck.
• The wrong way to view an executive firing is as an executive failure; the correct way to view an executive firing is as an interview/integration process system failure.
• Reasons for failure may include:
  1. You did a poor job defining the position in the first place.
  2. You hired for lack of weaknesses rather than for strengths.
  3. You hired for scale too soon. If you hire someone who will be great in eighteen months but will be poor in the next eighteen months, the company will reject her before she ever gets a chance to show her stuff.
  4. You hired for the generic position rather than the specific version that you need for your company.
  5. The executive had the wrong kind of ambition.
  6. You failed to integrate the executive.

Step 2: Informing the Board

• You have two options: (a) alarm the board or (b) enable an ineffective executive to remain in her position. While choice (a) is not great, it’s a heck of a lot better than choice (b).
• You should have three goals with the board:
  1. Get their support and understanding for the difficult taks that you will execute.
  2. Get their input and approval for the separation package.
  3. Preserve the reputation of the fired executive.
• Firing an executive is better handled with individual phone calls than in dramatic fashion during a board meeting. It takes a bit longer, but it’s well worth the effort.

Step 3: Preparing for the conversation

• Script or rehearse what you plan to say so that you do not misspeak. The executive will remember the conversation for a very long time, so you need to get it right.
• Three keys to getting it right:
  1. Be clear on the reasons. Don’t equivocate or sugarcoat it.
  2. Use decisive language. Don’t leave the discussion open-ended. Use “I have decided” rather than “I think.”
  3. Have the severance package approved and ready.
• Let the executive decide how the news whould be communicated to the company and the outside world. You cannot let him keep his job, but you absolutely can let him keep his respect.

Step 4: Preparing the Company Communication

• The correct order for informing the company is:
  1. The executive’s direct reports—because they will be mosst impacted
  2. The other members of your staff—because they will need to answer questions about it
  3. The rest of the company
• Generally, its smart for the CEO to act in the executive role in the meanwhile. If you do act in the role, you must really act—staff meetings, one-on-ones, objective setting, etc. Doing so will provide excellent continuity for the team and greatly inform your thinking on whom to hire next.

Demoting A Loyal Friend

• You must always consider first of all the other employees and second your friend.
• The most important thing to decide is that you really want to do this.
• As part of the decision, you must get comfortable with the thought that the employee may quit the company. Given the intense emotions he will feel, there is no guarantee that he will want to stay. If you cannot afford to lose him, you cannot make this change.
• An alternative, if appropriate, would be to move him to another area of the company where his skills, talent, and knowledge will help.
• Keys to being fair and honest:
  1. Use appropriate, decisive language. Avoid putting the employee in the awkward position of wondering whether he should lobby for his old job. You can’t tell him what he wants to hear, but you can be honest.
  2. Admit reality. Don’t dodge the fact that you are likely just as underskilled for your job as he is for his.
  3. Acknowledge the contributions. The best way to do this, if appropriate, is to couple the demotion with an increase in compensation.

Lies That Losers Tell

• People have a tendency to take action on positive leading indicators and only look for alternative explanations on the negative leading indicator.

Lead Bullets

• Sometimes there are no silver bullets, only lead bullets. Meaning: You have to do the hard work of building a better product.
• If you find yourself running when you should be fighting, you need to ask yourself, “If our company isn’t good enough to win, then do we need to exist at all?”

Nobody Cares

• When things go wrong in your company, nobody cares. The media don’t care, your board doesn’t care, your investors don’t care, your employees don’t care, and even your mama doesn’t care. Nobody cares.
• Spend zero time on what you could have done, and devote all your time on what you might do. Because it the end, nobody cares; just run your company.

Take Care of the People, The Products, and The Profits—In That Order

• Hire executives for the strengths, not for their lack of weaknesses.
• Taking care of your people means that your company is a good place to work.

A Good Place to Work

• In good organizations, people can focus on their work and have confidence that if they get their work done, good things will happen for both the company and them personally.
• Everyone can wake up knowing that the work they do will be efficient, effective, and make a difference for the organization and themselves. These things make their jobs both motivating and fulfilling.
• In a poor organization, people spend too much of their time fighting organizational boundaries, in-fighting, and broken processes. They are not even clear on what their jobs are, so there is no way to know if they are getting the job done or not.

Why Startups Should Train Their People

• People at McDonald’s get trained for their positions, but people with far more complicated jobs don’t. It makes no sense.
• Training is one of the highest-leverage activities a manager can perform.
• If you don’t train your people, you establish no basis for performance management. As a result, performance management in your company will be sloppy and inconsistent.
• Employees who are rapidly hired without training propogate mistakes.
• Employees quite for two primary reasons: (1) They hated their manager, or (2) they weren’t learning anything. An outstanding training program can address both issues head-on.

What should you do first?

• Start with the topic most relevant to your employees: the knowledge and skill that they need to do their job. This is called functional training.
• Management training is the best place to start setting expectations for your management team. Do you expect them to hold regular one-on-ones? Do you expect them to give performance feedback? If you do, then you’d better tell them.
• Teaching can also become a badge of honor for employees who achieve an elite level of competence.

Implementing Your Training Program

• Enforce functional training by withholding new employee requisitions.
• Enforce management training by teaching it yourself.
• The biggest obstacle to putting a training program in place is the perception that it will take too much time.
• Keep in mind that there is no investment that you can make that will do more to improve productivity in your company.

Is It Okay to Hire People From Your Friend’s Company?

• The Reflexive Principle of Employee Raiding: If you would be shocked and horrified if Company X hired several of your employees, then you should not hire any of theirs.
• In order to avoid these sticky situations, many companies employe written or unwritten policies that name companies where it is not okay to hire without CEO approval.

Why It’s Hard to Bring Big Company Execs Into Little Companies

1. Rhythm mismatch: Big company exects are conditioned to wait for the phone to ring, emails to come in, and meetings to get scheduled.
2. Skill set mismatch: The skills needed to run a big company are wildly different than creating and building an organization.

Interview questions that will help you screen for mismatches

• What will you do in your first month on the job? Beware of answers that overemphasize learning. Look for candidates who come in with more new initiatives than you think are possible. This is a good sign.
• How will your new job differ from your current job? Look for self-awareness of the differences here. If they have the experience in what you need, they will be articulate on this point.
• Why do you want to join a small company? Beware of equity being the primary motivation. One percent of nothing is nothing. It’s much better if they want to be more creative.

Aggressively integrate the candidate once on board

• Force them to create. Give them monthly, weekly, and even daily objectives to make sure that they produce immediately.
• Make sure that they “get it”. Every executive must understand the product, the technology, the customers, and the market.
• Put them in the mix. Give them a list of people they need to know and learn from. Require a report from them on what they learned from each person.

Hiring Executives: If You’ve Never Done The Job, How Do You Hire Somebody Good?

Step 1: know What You Want

• Realize how ignorant you are and resist the temptation to educate yourself simply by interviewing candidates.
• It’s easy to fall into the trap of hiring on “look and feel” or hiring somebody who fits who you imagine that person should be.
• The very best way to know what you want is to act in the role.
• Bring in domain experts. Learn what makes them great at what they do. Figure out which of their strengths most directly match the needs of your company.

Step 2: Run a process that figures out the right match

• Write down the strengths you want and the weaknesses that you are willing to tolerate.
• Develop questions that test for the criteria.
• Assemble the interview team. Who will best help you figure out whether the candidate meets the criteria? Who do you need to support the decision once the executive is on board?
• Assign questions to interviewers based on their talents. Make sure that the interviewer who asks the questions deeply understands what a good answer will sound like.
• CEO must conduct the reference checks herself. Backdoor references can be an extremely useful way to get an unbiased view.

Step 3: Make a Lonely Decision

• The decision should ultimately be made solo.
• Consensus decisions about executives almost always sway the process away from strength and toward lack of weakness.

When Employees Misinterpret Managers

• Metrics are incentives. If pushed, people will focus intensely on metrics to the exclusion of other goals.
• It’s important to supplement a great product vision with a strong descipline around the metrics, but if you substitute metrics for product vision, you will not get what you want.
• Managing strictly by numbers is like painting by numbers.
• Some things that you want to encourage will be quantifiable, and some will not. If you report on the quantitative goals and ignore the qualitative ones, you won’t get the qualitative goals, which may be the most important ones.

Management Debt

• Management debt is when you make an expedient, short-term management decision with an expensive, long-term consequence.
• Really good, really expereinced CEOs tend to opt for the hard answer to organizational issues.

1. Putting Two In the Box

• Putting two good employees into a role designed for one person.
• Doing so makes every engineer’s job more difficult. Now they have two bosses to deal with when making decisions.
• You will also remove all accountability from the role.

2. Overcompensating a key employee because she gets another job offer

• Other employees will get wind of her pay raise.
• Everyone in enginnering will conclude that the best way to get a raise is to generate an offer from another company and then threaten to quit.

3. No Performance management or employee feedback process

• Directions with no corrections will seem fuzzy and obtuse.
• People rarely improve weakness they are unaware of.

Management Quality Assurance

• Quality can’t build you a high-quality product, but it can tell you when the development team builds a low quality product.
• Likewise, HR can’t make you a well-managed company with a great culture, but it can tell you when you and your managers are not getting the job done.

Requirements to be great at running HR

• World-class process design skills.
• A true diplomat. If an HR leader hoards knowledge, makes power plays, or plays politics, he will be useless.
• Industry knowledge of compensation, benefits, best recruiting practices, etc.
• Intellectual heft to be the CEO’s trusted advisor.
• Understanding things unspoken.

6. Concerning The Going Concern

• Sometimes an organization doesn’t need a solution (or a policy); it just needs clarity.
• As CEO, you must consider the systemic incentives that result from your words and actions. While it may feel good in the moment to be open, responsive, and action oriented, be careful not to encourage all the wrong things.

How to Minimize Politics in Your Company

• Politics is when people try to advance their careers or agendas by means other than merit and contribution.
• One way to invite politics is to give people raises when they ask for them, rather than soley based on performance.
• Minimize politics by hiring people with the right kind of ambition—ambition for the company’s success with the executive’s own success only coming as a by-product of the company’s victory.
• Build strict processes for potentially political issues and do not deviate. These scenarios come up most often with performance evaluations and compensation, organizational design and territory, and promotions.

Titles and Promotions

• Employees want titles, and eventually, people need to know who is who.
• Because titles will be used to calculate relative value, they must be managed carefully.
• Peter Principle: In a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent, and there they remain being unable to earn further promotions.
• Law of Crappy People: For any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title.
• The best way to mitigate both the Peter Principle and the Law of Crappy People is with a properly constructed and highly disciplined promotion process.
• Start with an extremely crisp definition not only of the responsibilities at each level but also the skill required to perfrom the duties.
• You might think that so much time spent on promotions and titles places too much importance on silly formalisms. The opposite is true. Without a well thought out, disciplined process for titles and promotions, your employees will become obsessed with the resulting inequities.

When Smart People Are Bad Employees

• Intelligence is not the only important quality. Being effective in a company also maneas working hard, being reliable, and being an excellent member of the team.

1. The Heretic

• Rather than identifying weaknesses so that he can fix them, the heretic looks for faults to build his case that the company is hopeless and run by a bunch of morons.
• Why does he do this?
  1. He feels disempowered. Complaining is his only vehicle to get the truth out.
  2. He is fundamentally a rebel.
  3. He is immature and naive.

2. The Flake

• This employee cannot be relied upon to get their work done on time.

3. The jerk

• When used consistently, asinine behavior can be crippling.
• The behavior can become so bad that nobody brings up any topic when the jerk is in the room. As a result, communication across the executive staff breaks down and the company slowly degenerates.
• Note that this only happens if the jerk in question is unquestionably brilliant. The bite only has impact if it comes from a big dog.

When Do You Hold the Bus?

Old People

• Hiring someone who has already done what you are trying to do can radically speed up your time to success.
• The proper reason to hire a senior person is to acquire knowledge and experience in a specific area.

Managing Senior employees

• Demand cultural compliance.
• Watch for politically motivated tactics and do not tolerate them.
• Set high and clear standard for performance.
• Be careful not to set a low bar because you have not done the work to know what good is.
• Interview people who you see doing a great job in their field. Find out what their standard is and add it to your own.

Measuring senior executives

1. Results against objectives.
2. Management. Are they building a strong and loyal team?
3. Innovation. Are they reaching their current goals by ignoring the future? Or are they setting the company up for future success as well?
4. Working with peers. Are they effective at communicating, supporting, and getting what they need from the other people on your staff?

One-On-One

• Absent a well-designed communication architecture, information and ideas will stagnate, and your company will degenerate into a bad place to work.
• A one-on-one is the employee’s meeting, not the manager’s meeting.
• The employee should set the agenda and give it to their manager in advance.
• The manager should do 10% of the talking and 90% of the listening.
• The manager should try to draw the key issues out of the employee. This is more important for introverted employees.

Effective Questions

• If we could improve in any way, how would we do it?
• What’s the number-one problem with our organization? Why?
• What’s not fun about working here?
• Who is really kicking ass in the company? Whom do you admire?
• If you were me, what changes would you make?
• What don’t you like about the product?
• What’s the biggest opportunity that we’re missing out on?
• What are we not doing that we should be doing?
• Are you happy working here?

Programming Your Culture

• The primary thing that any technology startup must do is build a product that’s 10X better at doing something than the current prevailing way of doing that thing. 2-3X better will not be good enough to get people to switch to the new thing fast enough or in large enough volume to matter.
• The second thing that you must do is take the market. If it’s possible to do something 10X better, it’s also possible that you won’t be the only company to figure that out. Therefore, you must take the market before somebody else does.
• Until you do both of these things, your culture won’t matter one bit.
• The world is full of bankrupt companies with world-class cultures. Culture does not make a company.

So why bother with culture at all?

1. It matters to the extent that it can help you achieve the above goals.
2. As your company grows, culture can help you preserve your key values, make your company a better place to work, and help it perform better in the future.
3. After you go through the inhumane amount of work that it will take to build a successful company, it will be an epic tragedy if your company culture is such that even you don’t want to work there.

Examples of culture shock factor

• If you put something into your culture that is so disturbing that it always creates a conversation, it will change behavior.
• Desks made out of doors. Jeff Bezos did this in the early days to demonstrate that Amazon’s culture was going to embrace frugality. They would be hyper focused on delivering value to rather than extracting value from its customers.
• Ten dollars per minute. Marc Andreeson didn’t want venture capitalists at his firm to be late to meetings with entreprenuers. So he instituted a strict $10/minute fine for every minute that you were late to a meeting.
• Move fast and break things. Mark Zuckerberg believes in innovation and he believes there can be no great innovation without great risk.

Taking the Mystery Out of Scaling A Company

• Start with specialization. Dedicate people and teams to specific aspects of the business.
• Specialization will introduce complexities, potentially conflicting agendas, and more difficult communication. Therefore, you will need to be thoughtful about organizational design and process to mitigate these issues.
• Think of the organizational design as the communications architecture for your company. If you want people to communicate, the best way to accomplish that is to make them report to the same manager.

Keys to organizational design

1. Figure out what needs to be communicated. Start by listing the most important knowledge and who needs to have it.
2. Figure out what needs to be decided. How can you design the organization to put the maximum number of decisions under the domain of a designated manager?
3. Prioritize the most important communication and decision paths.
4. Decide who’s going to run each group. Notice that this is the fourth step, not the first. You want to optimize the organization for the people—for the people doing the work—not for the managers.
5. Idenitfy the paths that you did not optimize.
6. Build a plan for mitigating the issues identified in Step 5.

Process

• The purpose of process is to facilitate communication.
• A process is a formal, well-structured communication vehicle.
• If you are looking for the first process to implement in your company, consider the interview process. It usually runs across organizational boundaries, involves people from outside the company, and is critically important to the success of the company.
• The people who are already doing the work in an ad hoc manner are the people who should design the process.
• It’s much easier to add new people to old processes than new processes to old people.
• Formalize what you are doing to make it easy to onboard new people.

Process design

• Focus on the output first. What should the process produce? Start with the goal and work backwards.
• Figure out how you’ll know if you are getting what you want at each step. How will you measure success?
• Engineer accountability into the system. Which organization and which individual is responsible for each step? What can you do to increase the visibility of their performance?

How to Lead Even When You Don’t Know Where You Are Going

• Focus on what you need to get right and stop worrying about all the things that you did wrong or might do wrong.
• Learn how to manage your own psychology.
• At a certain size, your comapny will do things that are so bad that you never imagined that you’d be associated with that kind of incompetence.
• As CEO, you need to strike a balance between taking things too personally and not taking things personally enough.
• Ideally, the CEO will be urgent yet not insane. She will move aggressively and decisively without feeling emotionally culpable.

Techniques to Calm Your Nerves

• Make some friends. Talk to people who have been through similarly challenging decisions.
• Get it out of your head and onto paper.
• Focus on the road, not the wall. When someone learns to drive a race car, one of the first lessons taught is that when you are going around a curve at 200 mph, do not focus on the wall; focus on the road. If you focus on the wall, you will drive right into it. If you focus on the road, you will follow the road.

Don’t Punk out and don’t quit

• Great CEOs face the pain. They deal with the sleepless nights and the cold sweats.
• Whenever I meet a successful CEO, I ask them how they did it. Mediocre CEOs point to their brilliant strategic moves or their intuitive business sense or a variety of other self-congratulatory explanations. The great CEOs tend to be remarkably consistent in their answers. They all say, “I didn’t quit.”

The Fine Line Between Fear and Courage

• Both the hero and the coward feel the same fear. The difference is what they do in the face of that fear.
• People who watch you will judge you on what you do, not how you feel.
• Every time you make the hard, correct decision you become a bit more courageous and every time you make the easy, wrong decision you become a bit more cowardly.

Follow the Leader

• What makes people want to follow a leader? We look for three key traits:
  1. The ability to articulate the vision
  2. The right kind of ambition
  3. The ability to achieve the vision
• Truly great leaders create an environment where the employees feel that the CEO cares more about the employees than she cares about herself. In this kind of environment, an amazing thing happens: A huge number of employees believe it’s their company and behave accordingly.

Making Yourself A CEO

• Giving feedback turns out to be the unnatural atomic building block atop which the unnatural skill set of management gets built.
• To become elite at giving feedback, you must elevate yourself beyond the basic technique like the shit sandwhich. You must develop a style that matches your own personality and values.

Keys to Being effective

• Be authentic.
• Come from the right place. It’s important that you give feedback because you want them to succeed and not because you want them to fail. Make this obvious.
• Don’t get personal.
• Don’t clown people in front of their peers.
• Feedback is not one-size-fits all.
• Be direct, but not mean. Watered down feedback can be worse than no feedback at all because it’s deceptive and confusing to the recipient.

More notes on giving feedback

• Feedback is dialogue, not a monologue. It should open up, rather than close down discussion.
• As CEO, you should have an opinion on absolutely everything. Let people know what you think. By doing so, hearing feedback will become commonplace and it won’t feel personal. It also gets people to become comfortable discussing bad news.

How to Evaluate CEOs

Does the CEO Know what to do?

• Strategy: In good companies, the story and the strategy are the same thing. As a result, the proper output of all the strategic work is the story.
• The story of the company goes beyond quarterly or annual goals and gets to the hard-core question of why. Why should I join this company? Why should I be excited to work here? Why should I buy its product? Why is the world better off as a result of this company’s existence?
• The story is not the mission statement; the story does not have to be succinct. It is the story. Companies can take as long as they need to tell it, but they must tell it and it must be compelling. A company without a story is usually a company without a strategy.
• Decision making: At the detialed level, the output of knowing what to do is the speed and quality of the CEO’s decisions.
• Some employees make products, some make sales; the CEO makes decisions. Great decisions come from CEOs who display an elite mixture of intelligence, logic, and courage.
• As CEO, you must continuously and systematically gather knowledge in the company’s day-to-day activities so that you will have as much information as possible when the decision point arrives.

Can the CEO get the company to do what she knows?

• In order for a company to execute a broad set of decisions and initiatives, it must:
  • Have the capacity to do so: Have the necessary talent in the right positions to execute the strategy.
  • Be a place where every employee can get things accomplished.

Is the CEO Building a World-class team?

• The CEO is responsible for the executive team plus the fundamental interview and hiring processes for all employees.
• In well-run organizations, people can focus on their work (as opposed to politics and bureaucratic procedures) and have confidence that if they get their work done, good things will happen both for the company and for them personally.
• By contrast, in poorly run organizations, people spend much of their time fighting organizational boundaries and broken processes.

Did the CEO Achieve the desired results against an appropriate set of objectives?

• CEOs should be evaluated against their company’s opportunity—not somebody else’s company.

First Rule of Entrepreneurship: There Are No Rules

Solving the Accountability Vs Creativity Paradox

• To be a world-class company, you need world-class effort.
• Holding people accountable for their promises is a critcal factor in getting things done. This changes as the degree of difficulty in fulfilling the promise increases.
• Accountability for results should vary based on seniority. More experienced people should be able to forecast their results more accurately than junior people.
• Accountbaility for results should also vary on degree of difficulty and the type of risks they took to try to achive the result. If someone missed a result, did she take obviously stupid risks that she just neglected to consider, or were they excellent risks that just did not pan out?

Staying Great

• There are two kinds of cultures in this world: cultures where what you do matters and cultures where all that matters is who you are. You can be the former or you can suck.
• But, what about being loyal to the team that got you here? If your current executive team helped you grow your company tenfold, how can you dismiss them when they fall behind running the behemoth they created? The answer is that your loyalty must go to your employees—the people who report to your executives. The people who are doing the work. You owe them a world-class management team. That’s the priority.

Should You Sell Your Company?

• When analyzing whether you should sell your company, a good basic rule of thumb is if (a) you are very early on in a very large market and (b) you have a good chance of being number one in that market, then you should remain stand-alone.

The End of The Beginning

• Hard things are hard because there are no easy answers or recipes. They are hard because your emotions are at odds with your logic. They are hard because you don’t know the answer and you cannot ask for help without showing weakness.

Appendix

Operational Excellence Questions

Managing Direct reports

• What do you look for in the people working for you?
• How do you figure that out in the interview process?
• How do you train them for success?
• What is your process for evaluating them?

Decision-making

• What methods do you use to get the information that you need in order to make decisions?
• How do you make decisions (what is the process)?
• How do you run your staff meeting? What is the agenda?
• How do you manage actions and promises?
• How do you systematically get your knowledge?
  • Of the organization
  • Of the customers
  • Of the market

Metric Design

• Describe the key leading and lagging indicators for your organization.
• Are they appropriately paird? For example, do you value time, but not quality?
• Are there potentially negative side effects?
• What was the process that you used to design them?

Organizational design

• Describe your current organizational design.
• What are the strengths and weakenesses? Why?
• Why did you opt for those strengths and weaknesses?
• What are the conflicts? How do they get resolved?

Confrontation

• If your best executive asks you for more territory, how do you handle it?
• Describe your process for both promotion and firing.
• How do you deal with chronic bad behavior from a top performer?

Less Tangible

• Does she think systematically or one-off?
• Would I want to work for her?
• Is she totally honest or is she bullshitty?
• Does she ask me spontaneous incisive questions or only pre-prepared ones?
• Can she handle diverse communication styles?
• Is she incredibly articulate?
• Has she done her homework on the company?

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