The Hard Thing about Hard Things

Ben Horowitz Also available in audiobook: Download our app for free listening.

Have you ever imagined yourself as the CEO of a high-growth technology company in the middle of the internet bubble of the 2000s? No? Well, this is the scenario and adventure that Ben Horowitz tells in this masterpiece of digital entrepreneurship. The book tells Ben’s saga in charge of a startup called Opsware which was later sold to HP for $1.6 billion. Mandatory reading for first-time CEOs, high-growth startups, and investors who want to know what it's like to be on the other side of the negotiating table. The book addresses the challenges of going through difficult times without giving up and always focusing on developing the business despite adversity.

Being a CEO is being able to bet when there are no options. There are dozens of management and leadership books written by CEOs and top executives. The problem with these books is that they explain what to do in a company when the direction is relatively clear, and the business is focused on becoming the market leader and continue to grow. But the day-to-day running of a founding CEO of a company is very different.

It's complicated being a CEO, but if there is one critical skill that stands out in the best CEOs is the ability to do the right thing even when there are no good options. There are times when you will want to hide, and things will not be going well, but it is in those hours that you can make the biggest difference as a CEO.

Ben Horowitz, at his company Opsware, had to deal with the internet bubble burst of 2000 and start over again his product line to prevent the company from bankrupting. The situation was so critical that Ben held a meeting at Opsware and asked employees who were thinking about resigning to do so at the time.

This action forced the remaining professionals who believed in the company to focus on growth and allowed the others to leave. This effort to ensure that only those members of the team who truly believed in the business stayed, was the right choice and, in the long run, pushed the stock price from cents to $ 7 in record time.

Decider Or Executor?

There are two types of CEOs. The first type has a decision-making profile, with a focus on defining the organization's path, vision, and strategy, but prefers not to focus specifically on day-to-day implementation, management and performance. Founding CEOs have this profile.

Bill Gates, for example, set an early clear vision for Microsoft: to have a PC on every table of every person in the world. This profile likes to make important strategic decisions and play chess, coldly calculating the game against its competitors. However, they do not like execution very much, consisting of training, performance management, process design, among others. This sometimes causes organizations managed by this profile to become disorganized and chaotic.

On the other hand, CEOs with a more implementation-focused profile tend to be more focused on the process itself, in performance and do not tend to make big decisions or strategic moves. Often, this type of management can result in organizations that, faced with a major decision, slow down or make more consensual decisions which are risky.

Regardless of the CEO profile you are, you need to understand your weaknesses and work to develop them.

Knowing How to Fire Is As Important As To Help

If you're a CEO, you're going to have to fire people at some point. And if you feel that this time has come, you have to be fast and fair. Holding low potential professionals in the company or who are not going according to the expected lowers the productivity of the whole team and also damages the company culture.

Knowing who and when to dismiss is as important as knowing how to hire and you need to know how to communicate this type of situation. If a CEO does not take action on badly performing professionals and does not communicate the facts according to the company's expectations, rumors spread, and some stop believing in the culture and management of the company. However, not all professionals a CEO has to fire are necessarily bad.

In many cases, as in the author's example, external situations force the company to cut costs. At these times, it is crucial to be fair and engage with those being fired. It is important that the company invests in fair resignation plans, relocation plans, recommendations for other companies and everything else that is possible to help the professional in this difficult time. This is essential for maintaining team morale and also for hiring in the future. When it is a justified dismissal of a senior executive, such as a director, VP or senior managers, more attention is needed.

You must understand that, as CEO, you are responsible for the hiring mistake and communicate this to the shareholders and the board of directors. Also, you need to understand what caused the error and how to ensure that it is avoided in the future. When it comes time to talk directly to the executive, you have to be very careful about how to communicate, planning the language first, making it clear that the decision is final and never humiliating the professional.

In addition to communicating with the executive him/herself, it is also necessary to communicate to the team and ensure that the business continues to run normally and that it is moving forward. As the legendary coach of CEOs in Silicon Valley said, you cannot let them stay, but you have to let them keep their dignity.

Human Resources And Training. Invest In It Now

Many companies say that communication is a priority, but few really know that a big company relies on taking care of the people who make it. For a good CEO, people always come before products and profits. Therefore, it is crucial that he/she ensures the company has a good human resources department and that it detects signs of visible problems in your organization.

HR is like a quality sector of the business itself. It is not able to deliver the product itself but it tells if you are offering good products and if the quality standard is improving or not. If for example, your company's compensation or career plan is not competitive, it is up to HR to diagnose this and work with the CEO to ensure that it is corrected. It is also crucial to invest in training to ensure that all company employees master their responsibilities. That is achieved through clear internal training processes. All training must be functional, giving employees the skills they need to achieve their goals and succeed.

Besides, training should be constant and always revisited. In addition to having all company professionals trained, it is also crucial to train managers. It is essential always to make clear what is expected, what performance standards, leadership, and management practices have to be followed. It is also important to create a continuous feedback loop, where it is always explicit to practitioners and managers what they did right and what they could do better. Good HR and ongoing training for managers and executives will help managers multiply a culture of learning.

The Power of One-to-One Meetings

The CEO's biggest role is to design and implement the company's communications machine. This architecture includes standard meetings, processes, etc. However, one of the most important rites is the one-to-one meetings each executive and manager must have with their direct reports. The one-to-one meeting exists to ensure that communication is continuously enhanced and to allow ideas to flow within the company. For a manager to have a good one-to-one meeting with his / her leader, the important thing is to make it clear to the employee that the meeting is there for him/her, not the other way around. The one-to-one meeting is an opportunity for the employee to share progress and challenges and it is up to the manager to help him/her overcome them.

Focus On Quality When Hiring

When recruiting, your priority is to know what skills are required for the person to be truly successful in his or her position. At Opsware, Ben was looking for a good executive to lead the company's sales team. The seemingly more qualified candidate had all the skills necessary to be a great VP of sales, but he did not have a good fit with the company's culture, which upset many at the time. Ben hired the candidate, despite the general mistrust and differences but this positively changed the company's history.

The VP of sales who had several weaknesses but was extremely qualified was much better than a perfect candidate with few flaws. You must ensure that you hire someone whose experience is consistent with the size of the company. An executive role in a small business is very different from an executive role in a large organization.

In large companies, executives are expected to have the ability to prioritize and analyze large volumes of incoming projects individually. In a startup, they should create their own projects and ensure they run at high speed. These discrepancies can create problems in the work expectations regarding speed and goals to be achieved in the company at different times.

Abolish Office Policies

Internal political moves can become a challenge to creating a robust company culture. Undeserved promotions, gossip, and conflicts between areas are evils which must be cut at the root. To avoid this kind of behavior, one must hire only ambitious people to the company itself and not just for their careers. Especially in the management and executive team, it is necessary that members focus on company success and not on political maneuvering.

It is essential to create an environment that is transparent and has regular performance evaluations, making it difficult to promote people who do not achieve their goals or only become involved in political intrigues. Always communicate to your employees the importance of their roles and how their work will be evaluated to ensure the company's performance continues to evolve. Having a clear hierarchy and positions such as manager, director, and vice president really mean something, so make sure to have the best possible people occupy each of them.

Hierarchy helps people understand the value of their work and how much they have to be strategic to stay in that position.

Wartime VS Peacetime

Companies are like a roller coaster and have their ups and downs. High or low, the CEO needs to adopt different positions. In times of peace, the company already has an advantage over other competitors in the market, and it is the role of the CEO to focus on increasing this advantage, guaranteeing prosperity.

A peacetime strategy is the case of Google, a company that has never faced competition and remains focused only on improving its products, so its priority is to increase the speed with which people access the internet. Google has a search engine, and many extremely popular services and faster connections could make them even more popular.

In times of peace, the CEO focus is on developing the creativity of its employees. When Google offers 20 percent of its time to new initiatives, it's saying times are good and thriving. In times of war, everything changes.

With a different macroeconomic context, new challenges arise in the technological scenario, and they can challenge the survival of the company. The CEO in wartimes has a huge responsibility. The life and death of the company are in your hands and depend on your decisions.

Take into account Andy Grove, who was CEO of Intel in the 1980s. At that time more than 80% of his team was producing computer memories, and the company was attacked by Japanese semiconductor companies producing superior products at a much lower cost.

Grove decided to change the direction of the company and invest in microprocessors, a decision that at the time seemed insane but later proved to be a sound strategy. In times of war, you have to be willing to take risks and take strategic steps to ensure that the company stays on track.

Get Out of Your Comfort Zone

Many investors and company boards wonder if CEOs are a natural born way or nurtured over a lifetime. The truth is that good CEOs mature on a daily basis. To lead a business, you need to develop specific skills and characteristics for this challenging position. That means it's almost impossible to say whether a CEO will be successful early in his career or his first job as CEO.

It is necessary to be aware of the characteristics that big CEOs tend to exhibit, and for the first-time CEO, it is important to assimilate and repeat them. One of the most important points is the ability to offer good feedback. A good technique is called "Shit sandwich.” For each difficult or delicate topic, always try to put it between two other positive topics. Mature executives tend to see this approach as rehearsed and insincere, so it works best with younger collaborators.

Finally, CEOs need to learn to feel comfortable doing things that are essentially uncomfortable. Just as boxers need to train skills involving their legs, it is the CEO's role to do unnatural tasks in a natural way.

Selling Your Company Is An Emotional And Rational Process

There are 3 types of business acquisitions in the technology industry. The first is the acquisition of talent / intellectual property, and usually, it occurs in the range of $ 5 to 50 million. The second is the acquisition focused on bringing the purchased company's products so the buyer can sell them to their current customers and thus expand their product portfolio. These acquisitions are in the range of $ 25-250 million. The third type is when the company to be acquired may break with the business model of the company it buys, as in the case of HP's purchase of Opsware for $ 1.6 billion in 2007.

Every acquisition is hard to handle emotionally and justified rationally. The emotional difficulty stems from the feeling of selling out the team and getting out of a business that had a consistent revenue volume and steady growth. You can not let these emotions take away your rationality and your decision-making power.

Communicate with all stakeholders and align expectations to ensure that the goals of all those involved in the business are clearly communicated. Also, make sure you, as CEO, have a competitive salary at the company to ensure that your interest in the business is not compromised by your personal finances. By taking a rational perspective, you will always wonder if selling is a right choice.

One rule of thumb is to not sell if you have the advantage of first moving into a large market that you believe will lead. That is hard to estimate and, therefore, this subject requires a great analysis by company managers and mainly the CEO.

Final Notes:

Being a CEO is a difficult, lonely and challenging task. You need to know how to deal with your emotional and also understand how it impacts people's lives. You must know how to hire and fire quickly and ensure fair treatment and constant training. Learn to work with pressure, stress and all the challenges that come with the idea of being the CEO of a startup, so at the end of the journey, the payoff can be great.

12min tip: Read High Output Management. This book seems to have been brutally inspired by it ;)

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