Category Archives: Team

Performance Reviews That Don’t Suck

I recently completed my end of year personal feedback process. I have long been an advocate of collecting personal feedback as I try to live my life as a process of continuous improvement. How can I improve if I don’t know where I am weak?

I find it surprising how few people solicit feedback and how few startups have an employee review process. I suspect that “performance reviews” remind everyone too much of large companies so they avoid them like the plague. It’s a shame, since early stage companies need employee feedback more that anyone else. In fact, doing regular performance reviews early in the life of your company can build a culture of continuous improvement that will be an asset when you grow.

The key is making it easy.

How to make reviews painless

Most people hate performance review processes for a few reasons:

  1. They take too long to complete.
  2. They hate hearing bad things about themselves.
  3. They hate saying bad things about others.
  4. They don’t think they add any value.

All of which are likely true for most processes. However, over the years I’ve found a simple process that is easy and most people find very useful.

Step 1. The Two Threes

Both the reviewer (usually the boss) and the person being reviewed (reviewee) prepare beforehand. They both assemble a list of the three top strengths of the reviewee, and the three top areas for improvement (weaknesses). Note that this means the reviewee is completing a self-assessment while the reviewer is doing a third party assessment.

It is important to identify specific examples that involve the identified strengths and weaknesses so that there can be useful discussion later. In fact, the more detail the better.

Step 2. The Review

The actual review should be an in person meeting at a casual setting (not a windowless room). The person being reviewed should go over their list of three things they think they do well and both people should discuss them. Then the reviewer should go over their list of three things the person does well and more discussion should ensue. The person being reviewed then should go over the three things they want to improve. Finally, the reviewer should go over the three things they think the person should improve. For all areas of improvement, there should be discussion of practical steps that can be taken.

The order is important since you want to start with the positives, which will put everyone at ease. It is also important that the reviewee goes first because their review is the hardest, and the most likely to be biased by the other.

The focus should be on the differences. Do both people identify the same strengths and weaknesses? Very rarely. In many cases, it is the differences in the lists where the most interesting insights come about.

Step 3. The Plan

It’s then up to the person being reviewed to decide what to do with the feedback. Most people will assemble a set of goals to tackle the areas of improvement that became clear through the discussion. It becomes a great way to set goals for yourself and check in on them during the next review. Whatever they decide, you cannot force someone to improve. If they choose to disregard the feedback, you’ll know because the same three areas of improvement will appear next time.

For bonus points, you can collect similar lists of 3 strengths and 3 weaknesses for someone from other members of the team and assemble it into anonymous feedback for the reviewee. That is called a 360 degree review since you get feedback from all sides.

What I like about this style of review is that you can do it as often as you like since it does not take very long. While people think of performance reviews as an annual activity, I find that six months is as long as you want to wait between them – especially at a fast paced startup.

Okay, what about your review?

To prove that I don’t just blog about these things, I wanted to share the feedback I received this year. I had to modify the process above for 2014 since I haven’t had a full time job for most of the year. Instead, I reached out to all the companies, founders and firms I advise/mentor/coach and asked them these three questions:

1. What was the most helpful thing I did for you in 2014? (Feel free to say ‘nothing’)
2. What did I not do for you in 2014 that would have been the biggest help?
3. What is the most important thing I can do to help you in 2015?

The feedback was fairly consistent and is summarized below:

1. What was the most helpful thing I did for you in 2014? (Feel free to say ‘nothing’)

I asked hard strategic questions which helped keep the founders focused on the big picture instead of getting lost in the details.

2. What did I not do for you in 2014 that would have been the biggest help?

I did not provide enough introductions to potential customers and investors.

3. What is the most important thing I can do to help you in 2015?

Continuing asking hard questions and provide more customer introductions.

The good news is that this provides a straightforward personal improvement plan for 2015. I will be finding ways to help the companies I work with source customers and investors.

So, what is your feedback for 2014?

 

The Founder Spectrum

Understanding your own weakness is very difficult. Most people have a positive self image, and company founders tend to have an extremely positive self image. That self confidence is what allows us to persevere when everyone else is saying stop, and can carry you through the worst parts of The Struggle. However, it also prevents you from objectively evaluating your own weakness.

Many start up failures can be traced back to founder weaknesses that are either exacerbated under the heavy stress of starting a company or are never compensated for by the rest of the team. No one is perfect, and understanding your weaknesses will allow you to compensate for them before they become risks to your business.

One way to make sure you are objectively evaluating yourself is to find entrepreneurs similar to you and examine their weaknesses. While all founders are created differently, you can group founders together at a very high level. I call these groupings the Founder Spectrum and there are many.  One of my favorite, and most useful, founder spectrums is what I like to call the Scientist, the Expert and the Outsider.

The Scientist

Many of the exciting start up companies you read about in the news are started by university researchers who have been developing new technologies for many years. This is not a coincidence, since pushing the boundaries of what is possible can take a long time and require deep study. These founders have created new technology that was never possible before, and are true innovators in their field. Their companies use this technology as their core asset to build a new business and compete with existing companies. An example Scientist is Tillman Gerngross (GlycoFi, Adimab) who has repeatedly pushed the boundaries of protein synthesis.

Strengths

  • Through their technology, Scientists have a head start on the rest of the industry. It may take many years for competitors to match them.
  • Through their deep expertise, they can maintain that head start by continuing to improve the technology.
  • If they are part of a university, they can spend many years developing the technology without worrying about burn rates and capital requirements.

Weaknesses

  • If the technology fails for any reason, the company will fail. While their expertise is deep, it is not broad and everything is bet on the specific technology.
  • If the technology is too new, it may take a long time to convince customers to buy it. Something truly innovative will be strange to customers who might not have any idea how to value how much it is worth.

How to compensate

  • Test the market value and potential of the technology as much as possible before founding your company. Make sure that companies are willing to pay for the products enabled by the technology starting on day one.

The Expert

Experts are people who have worked in a given industry long enough to understand all of the nuances and details that make it run. While they might lack the deep technical expertise of the Scientist, they make up for it by understanding the business deeply. That understanding brings with it the ability to see opportunities that are not available from the outside, while maintaining a wide perspective that isn’t limited to a single technology. Examples of experts include Lew Cirne (Wily Technologies, New Relic) and Craig Walker (Dialpad, Grand Central, Uber Conference).

Strengths

  • Deep understanding of the industry allows Expers to see opportunities that no one else can see.
  • Able to adjust within their market as things change, staying flexible. In many cases they see changes coming before others.

Weaknesses

  • Can have difficulty getting out of the rut of industry thinking and see things differently than everyone else. This becomes more true the longer they spend in the industry.
  • Limited to their industry of choice, even if that industry is challenged.

How to compensate

  • Change your environment as much as possible (office, people, places) to encourage new ways of thinking. Bring in advisors from outside the industry to challenge your thinking and open up new avenues of exploration.

The Outsider

Sometimes, it takes someone from outside of an industry to see opportunities and create new innovations.  While an outsider might lack the deep expertise of the Scientist or the Expert, they are also free of any preconceived notions of what is possible. That freedom can allow them to approach problems in novel ways that change the way the business works. Examples of outsiders who have changed industries where they had no previous experience include Elon Musk (Tesla, SpaceX) and Palmer Luckey (Oculus Rift).

Strengths:

  • Fresh perspective on the industry which allows them to find new solutions to existing problems.
  • Lacks any preconceived notions of what is possible or what might have been tried before.

Weaknesses: 

  • Prone to making a large number of mistakes as they learn the nuances of the industry.
  • At the start they have a disadvantage against existing companies due to their lack of relationships, experience and reputation in the industry.

How to compensate

  • Constant customer development and market validation of ideas while developing the first product. The more customer feedback you get, the less likely you will veer off in directions that prove fruitless.

The best founding teams (See 5 Rules for Choosing a Co-Founder) are made up of many different types of people. In fact, some of the best founding teams have a Scientist, an Expert and an Outsider. Having such a diverse team compensates for the weaknesses of any given member while building up a wider array of strengths.

If you read those descriptions and found one that matches you, then you are very self-aware and ahead of the game. If not, don’t worry. Remember, this is a spectrum so there are many people that fall in between these categories.

This is one way to think about the spectrum of founders, but there are many more. The most important thing is to understand your strengths and weaknesses and how they compare to those of your competitors. If you do, you can recruit the kinds of co-founders that will make you stronger.

The Art of Being Unreasonable

Starting a business from nothing requires you to Impossible_cube_illusion_angle.svgconstantly overcome unreasonable problems. You have no resources, no time and an infinite list of tasks to complete. In pursuing your goals, you are asking both yourself and your team to do unreasonable things.

However, there is a fine line between being unreasonable and being unrealistic. If you lose sight of that line, you will fail.

Learned Helplessness vs Self Confidence

One of the most depressing psychological principles that you will ever encounter is called learned helplessness. It is a mental state where the subject is trapped and subjected to adverse stimuli (pain, abuse) from which they cannot escape. Eventually, the subject learns that there is no escape from the adverse stimuli and, even when given the chance to escape, fails to even try. They have learned to be helpless.

While I am sure you will never abuse your team, subjecting them to unrealistic goals which they can never achieve can have a similar effect. Eventually, after being subjected continuously to nothing but unattainable goals, people begin to disassociate from such goals and will fail to treat them seriously. People will give up before they even start.

On the other hand, there is a clear tie between motivation and setting ambitious goals. Self efficacy is a psychological term for the confidence a person has in their ability to achieve a goal. Research has shown that optimal performance is reached when a person’s self efficacy is slightly above their actual ability, meaning that they are in a little over their heads.

So, how do you set goals that are just beyond reach but not so far as to make the goal meaningless?

Unreasonable vs. Unrealistic

As with anything in your new company, finding the balance between aggressive goals (unreasonable) and impossible goals (unrealistic) will require testing. In the early days of decision making, you will set some unrealistic goals which backfire and some unreasonable goals which will drive your team to do amazing things. The more goals you set, the easier it will be to tell the difference.

It will be hard to tell the difference if you lack faith in your team, as you will question whether your goals are unrealistic or if your team is not pushing themselves hard enough. This is yet another reason why you should never compromise on the quality of your team, especially in the early days. You should never waste time wondering if your team is working as hard as possible.

Don’t fear setting unrealistic goals, it is part of building a company, but beware setting too many of them. Instead, you should strive to be unreasonable.

Image made available via Creative Commons by Wikipedia user 4C. 

Closing the Loop

Today, I am currently an advisor/mentor/investor in 10 early stage start up companies, 3 accelerators and 1 venture fund. I pride myself on spending a lot of time with each company and getting as involved as possible, in many cases having projects assigned to me. Regardless, I am regularly shocked by a simple fact:

Only one of these companies sends me a regular update.

I know I shouldn’t be shocked, as the early days of building a company are hectic and busy so updating advisors and investors is never a high priority. There is also a natural fear of bad news, so if things are not going extremely well it is easier to say nothing than admit things are hard.

Unfortunately, the side effect of a lack of updates is that I’m not as engaged as I could be. As a founder you live through a hundred battles everyday, but if I never see them then I can’t understand. For all the time I spend with a company, not knowing about the struggles, the victories and the defeats means that when I do help it is with only a limited perspective. Even worse, I have no idea if the advice that I provided proved useful as I rarely get told the end results of any given decision.

But it’s not the fault of these companies. Almost all entrepreneurs are really bad at closing the loop.

Closing the Loop

One of the fundamental components of Corkscrew_(Cedar_Point)_01continuous improvement is feedback. If you don’t know how you are doing today, you can’t get better tomorrow. Modern engineering processes such as Scrum or Kanban encompass feedback as a core part of the process through the use of retrospectives. This is why the engineering teams at many startups are the best run teams, since they have a clear and well understood process to follow. So what of the rest of the company?

The best way to make sure your company is focused on continuous improvement is to make sure you always close the loop. For every decision that’s made, for every goal that is set you check back on it in the future to see whether it worked. Did that strategic partnership pay off? Did you meet your goal of 10% weekly growth? Make it part of your company culture to always review decisions and goals in the future, and learn from them.

All companies make decisions and set goals, but surprisingly few will review them on a regular basis. Many start up board meetings involve a review of key metrics, but not a review of key decisions and how they worked out. If you don’t review the decisions you made and the results of those decisions, what do the key metrics matter?

It can be scary to review past decisions since many of them will not work out well. However, fear of bad news will slowly paralyze your decision making because it will evolve into fear of failure. If you develop a habit of sharing news, both good and bad, you will feel a weight lifted from your shoulders – the weight of that fear.

Communication as a Core Competency

Making sure your team closes the loop is easy if you’ve set communication as a core competency of your team. If you have done that, then you already have plenty of tools and structures for communicating, you just have to make sure you communicate retrospectively.

Some examples of how you can close the loop:

  • Regular Updates. Send regular updates to your team, investors and advisors on your progress that review the results of key decisions (Leo has a great template for these kinds of updates that is short and easy). These serve not only to update the team around you but force you to put in writing what has worked and not worked on a regular basis.
  • OKR Reviews. Many companies use OKRs, but not many have regular public OKR reviews. Such a public review of individual OKRs should not serve as a punishment or a reward, but instead a chance for everyone to learn from what worked and what did not.
  • Waterfall Financials. When projecting your company’s financials, the only guarantee is that those projections will change (a lot). Keeping track of changes in your projections will help you understand the flaws in your forecasting models and waterfall financial reporting is a great way to do that.

The best way to make sure you are closing the loop is to make it part of your corporate culture. Any decision that gets made comes with a report on how it faired later. Remember, the goal of closing the loop is not to punish failure but to learn from your mistakes.

We all make plenty of mistakes, why not turn them into assets?

Image made available via Creative Commons by Coasterman1234.

The Snowball Effect

I spend a lot of my time advising 113026147_9ce84baa38_zand mentoring entrepreneurs, including coaching at three awesome accelerators. Since almost all the companies I work with are at the pre-Seed stage (translation: very very early), I end up hearing the same questions quite a lot. They are, in order of frequency:

  1. How do I convince my co-founder to quit their job and join full time?
  2. How do I close my first customer?
  3. How do I raise my first seed financing?

These are very fundamental questions for building your business, so it’s no surprise they come up so often. The good news is that the first step towards answering any of them is exactly the same: build up your snowball effect.

The Fear of Being First

If you turn around each of those questions, you realize that the person on the other end represents a first for your company. You are trying to convince the first employee, the first customer or the first investor to believe in you. Being first, while exciting, brings with it the most risk since you clearly have not proven your business if they are the first. Most people have a very justifiable fear of being first which makes it hard to convince them to take that first step.

However, you need to have a first because if you don’t then you will never have a second, a third and so on. So how do you overcome that fear?

The Power of Momentum

One of the best ways to overcome the fear of being first is to use an even more powerful force: the fear of missing out. The more momentum you build up for your company and the more progress you make before asking someone to be the first, the more likely that they won’t want to miss the opportunity. You want to make your company move as far as you can as fast as you can to make it an attractive bandwagon for people to jump on.

Having a brilliant idea is not enough. If you have a brilliant idea and nothing else, nothing separates you from the hordes of other dreamers whose dreams will never see reality. An idea has little value itself, you need to turn it into reality or at least as real as you can make it.

So, how do you get that momentum going in the early days? You don’t need to build a finished product (although that works well), there are many ways to build momentum without a product:

  • Invest In Yourself. You should be investing in your own company, using your own money. The more you invest, the more you will show commitment to your vision and building your business. You cannot ask others to invest or believe in you if you cannot demonstrate that you believe in yourself. It only costs a few hundred dollars to form a legal corporation – how much more than that do you believe in yourself?
  • Prove Demand. One of the most important things you can do in the early days of your company is prove that your idea has customer demand. Building a product can come later, but you can start by talking to prospective customers, industry experts and investors about a product and how much demand exists. The more you can quantify and prove there is demand, the more likely you are to convince others that your idea has value. Along the way, you’ve also lined up a list of prospective customers that make your company seem a little less risky for employees and investors.
  • Sell Your Friends. There is no rule that says your first customer(s) need to be strangers that you cold call. In fact, almost all successful companies start out by selling to friendly customers whom they knew well before they got started. YCombinator, one of the best accelerators, goes to great lengths to get their companies to become customers of each other to overcome the first customer problem. This strategy won’t scale, but it will get you started.
  • Spread Your Message. While your idea might not have value, communicating about the problem you are solving and building a voice in the community does. Set up a blog, join Twitter and start a mailing list to talk about the industry, market or problem. The more you participate in the discussion the more you can start to build your company’s brand even before you get started.

Most of all, be creative. I know non-technical founders that hired people to stand in front of conferences wearing sandwich boards to raise awareness of their company which had no product. I’ve seen founders hire armies of people on oDesk to gather hard to find data on the web to create valuable industry blogs. Even Mattermark, a great market data start up, got started from a blog post.

Accelerators are in the business of helping you build this momentum, at the cost of a small amount of equity. Many accelerators require that you have a working prototype, but if you do have a prototype they can give you a big boost of momentum and help you get past a lot of these early hurdles.

The Snowball Effect

So, what is the snowball effect? The great thing about building up your momentum is that it becomes a virtuous cycle if you can maintain it. You are more likely to raise your first investment if you can close your first employee, which in turn makes it more likely to close that first customer. Then it becomes easier to hire that second employee, close the second customer and so on. Eventually, making progress on all fronts makes it easier to make more progress on all fronts.

That is the snowball effect. Just like a snowball rolling down a hill, the more momentum you have the larger you can get and the more momentum you will get.

All you need to do is start the ball rolling.

Image made available via Creative Commons by redjar.

Speaking, Fast and Slow

Avoid the trap of thinking everyone sees the world the same way you do.

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I belong to a great science fiction writer’s meetup here in the bay area and we have a problem. If you’ve never participated in such a group, the format is simple: each month a few members submit pieces they have written and everyone else in the group reads them. Then, the group meets to provide feedback and discussion for the author.

As with any group of people, there is a wide variety of personality types in this group. There are introverts, extraverts and everything in between. Finding a format that allows everyone to participate in the meetings each month is very hard. If you give every person a turn to talk by going around in a circle, everyone participates equally but there is no discussion and the meeting is very slow. If you have an open discussion, the extraverts dominate the discussion and the introverts are alienated, often choosing not to participate. How can you get everyone to participate effectively? That is the problem.

By the way, this is a problem you have at your company as well.

Personality and Productivity

One of the most popular personality type classification is called the Myers-Briggs Type Classification (also known as the Myers-Briggs Type Indicator or MBTI). While it is hard to quantify human personalities, the Myers-Briggs system uses four different characteristics, each of which have two values. This creates sixteen different possible personality types to which a given person could belong.

Of those sixteen types, none comprises more than 14% of the US population. That means that any group of people larger than one is likely to contain at least two different personality types. Your company of 100? You probably have most of the sixteen represented.

This is good news. Teams comprised of people with different personality types are more effective, assuming they complement each other. Homogenous teams tend towards group think and difficulty defining roles, while diverse teams can provide multiple points of view and more easily fill complementary roles. In short, you want to have a lot of different kinds of people on your team to succeed.

Even people with neurological disabilities, such as autism, which may prohibit normal social interactions can be critical members of successful teams. For example, many autistic people excel at detail oriented repetitive tasks that others might find boring, such as data entry or quality assurance testing, and there are consulting companies set up that allow you to hire autistic people for such tasks.

Designing Teams

Since having diverse personality types makes your teams more effective, you need to make sure that your company is set up to recruit and empower a diverse group of people. Some simple ways to get started:

  • Watch for Personality Bias in Recruiting. It is often much easier to get along with someone of the same personality type, which is why you are so similar to your friends. When recruiting, this can cause you to favor people who have a similar personality type even if someone else might be a better fit. Make sure your entire interview team keeps an open mind and considers all the factors, not just personal affinity for the candidate.
  • Mix Up Your Teams. Just as you will gravitate towards similar personalities when recruiting, social groups of similar personalities will form at your company. Be careful not to let these social groups become teams or else your company will divide itself into personality driven teams. On a regular basis, change the composition of your teams so everyone has a chance to work with a different group of people and watch for productivity gains. It should be clear when you have a good team that clicks together, even if they are very different.
  • Have Many Ways to Communicate. Not all people do well in group discussions and not everyone will speak up when they have a problem. Do not rely on town hall meetings and group message boards to be the voice of all your employees. Make sure your leads speak to their people one-on-one and ask how they are doing instead of waiting for them to complain to you. Make sure employees have ways to express their ideas that does not require them to overcome a fear of public speaking. Don’t just tell everyone that you have an open door policy and wait for them to come to you, you should go to them.
  • Recognize Great People, In Whatever Form They Take. It’s always easy to recognize the star salesperson that everyone loves, but what about the quiet engineer that works long hours and does amazing work while keeping to herself?  Make sure your company is set up to recognize contributions of all kinds so that everyone feels involved and appreciated. Remember that not everyone will be appreciated in the same way, either, so buying wine for someone who doesn’t drink alcohol might not go over well.

The most important thing you can do is to avoid the trap of thinking that the other people in your company see the world the same way you do. It is easy to use yourself as the prototype for your employees when you make decisions about the work environment, processes and communication but that will often lead you astray. Always ask instead of assuming.

I take all of this one step further and seek out people who have very different personality types to mine. I find that such people keep me out of my comfort zone and constantly challenge my assumptions, while often succeeding in changing my mind about important matters. I would rather work with someone where I need to put effort into our professional relationship but I feel that I am at my best, than someone where working together comes easily but I get lazy.

So, What About the Writing Group?

I honestly don’t know what the solution is for our writing group, and I fear that it will inevitably disband as most volunteer and unstructured groups do. However, as testament to the positive impact of diverse personality types, we are tackling the problem head on by trying different kinds of formats to see if we can find one that works. In the meantime, the extraverts try to be less extraverted and the introverts try to be less introverted and we all learn something along the way.

The title of this post is in honor of the great book Thinking, Fast and Slow by Daniel Kahneman, one of the founders of behavioral economics. The image was dedicated to the public domain by Mamoru Masumoto.

Who is in charge?

In the early days of starting Flurry, my co-founders and I made all of our decisions by  consensus. It wasn’t hard, since we had similar opinions and were spending all of our time in development which we knew very well. The camaraderie of working together late nights and building something new fueled the excitement we had about our new path of entrepreneurship.

After about six months, we had a working product and were thinking of raising our first angel funding. One of our friends, a venture capitalist, offered to listen to our pitch as practice before we presented to potential investors. We spent a long time putting together the perfect pitch for our business and practiced it until it was second nature. When we pitched our friend the VC, he listened to the pitch, asked questions along the way and seemed generally impressed. Until, at the end, he derailed our entire company with a single question.

“So, who is the CEO?”

That question hit at our biggest weakness which we shared with most first time entrepreneurial teams. But before we talk about why, let’s talk about making decisions.

Democracy vs. Dictatorship

Democracy and Dictatorship are both ways of making decisions for groups of people. Democracy requires a majority to agree before a decision can be made which means a democracy makes fewer decisions, but will avoid making very bad decisions. In contrast, a dictatorship consolidates all decision making power in a single person allowing it to make many decisions very quickly, but with a higher chance of very bad decisions.

For a government, avoiding very bad decisions is the primary concern and the cost of not making any decision at all is often low so democracy thrives. However, in the military where there is a premium on making decisions quickly and it is dangerous to make no decision at all,  dictatorship is used. The decision making framework needs to match the needs of the organization making decisions.

Companies are much like armies, where the premium is on making decisions quickly. You have limited time to execute your plan before you run out of funds, your competition picks up or the market moves. Making a decision quickly and doing something, instead of endlessly debating, is critical to your success.

Companies need CEOs

When we were getting started in those early days, we put off the decision about who was in charge because we were friends first and co-workers second. While I carried the CEO title, I did not act like the CEO nor did everyone treat me like a CEO. This was a dangerous thing to do, as I have seen teams fall apart after 6-9 months fighting about who should be the CEO and I am glad we survived.

Had we been clear about the CEO authority day one we could have set up the right decision making frameworks from the beginning, and avoided any chance of decision paralysis if the team disagreed on what to do. As it was, we had to change the way we made decisions which slowed us down during a critical period of the company.

Note that just because the CEO has ultimate decision making power does not mean they make all the decisions. A good CEO delegates decision making to his team as much as possible, and the best CEOs make sure their teams feel ownership of all decisions even if they don’t make themselves. Still, it is not always possible to make everyone happy with every decision which is the hardest part about being a startup CEO.

Who is the CEO?

I am glad that our friend asked “Who is the CEO?” because it forced us to confront the question of authority very early in the life of our company. It was also a wake up call to me, as the CEO, to step up as the leader I should have been all along. The team also needed me to become that leader, as it allowed us to move more quickly and overcome some of the challenges we had faced.

And it prepared us for the even harder journey ahead.

This post originally appeared on the FounderDating blog as a guest post.