On Scale – Lessons on Culture, Hiring, Operating, and Growth

One of my favorite thought exercises to do when I meet with founders who have reached the A- and B-stages (or beyond) is:

“What will his/her company look like if he/she is no longer there?”

The Preface

While the question looks like one that’s designed to replace the founder(s), my intention is everything but that. Rather, I ask myself that because I want to put perspective as to how the founder(s) have empowered their team to do more than they could independently. Where the collective whole is greater than the sum of its parts. Have the founders built something that is greater than themselves? And is each team member self-motivated to pursue the mission and vision?

It reminds me of the story of a NASA janitor’s reply when President Kennedy asked: “Hi, I’m Jack Kennedy. What are you doing?”

“Well, Mr. President,” the janitor responded, “I’m helping put a man on the moon.”

From the astronaut who was to go into space to the janitor cleaning the halls of NASAs space center, each and every one had the same fulfilling purpose that they were doing something greater than themselves.

And if the CEO is able to do that, their potential to inspire even more and build a greater company is in sight. Can he/she scale him/herself? And in doing so, scale the company past product-market fit (PMF)?

For the purpose of this post, I’ll take scale from a culture, hiring, operating, and product perspective, though there are much more than just the above when it comes to scale. Answering the questions, as a founder:

• How do you expand your audience?
• How do you build a team to do so?
• And, how do you scale yourself?

And to do so, I’ll borrow the insights of 10 people who have more miles on their odometer than I do.

While many of these lessons are applicable even in the later stages of growth, I want to preface that these insights are largely for founders just starting to scale. When you’ve just gone from zero to one, and are now beginning to look towards infinity.

The TL;DR

1. Build a (controversial) shocking culture.
2. Hire intentionally.
3. Retaining talent requires trust.
4. Build and follow an operating philosophy.
   • Create, hold, and share excitement.
   • Align calendars.
5. Upgrade adjacent users as your next beachhead.
6. Capture adoption by changing only 1 variable per user segment.

The deep dive

As your business scales, your team will likely scale as well. From a team of 2-3 to a team of 50, it’s important to build a team who can each work well with every other employee. You’re a small family. And regardless of each team member’s job description, together, you’re putting on multiple hats to make this collective dream a reality. When, on average, you’re doubling your team every 12-18 months (if you’re growing fast), it becomes increasingly hard for every team member to know every other. Past 150 employees, as Josh Coyne at Kleiner Perkins says, “information diffuses more slowly and culture becomes exponentially harder to re-establish and/or change.” So…

1. Build a (controversial) shocking culture.

That’s why it’s important from day 1 to set culture. And I don’t mean catered food or dogs in the office. I mean, “create shocking rules”, as Ben Horowitz puts it in one of my favorite books I read last year, What You Do is Who You Are: How to Create a Business Culture, and don’t compromise. While it may seem extreme, what you let slide will define the new culture, with or without your explicit approval.

While he provides examples from Haiti’s revolution to prison culture to bushido, I’m always reminded by someone I wish he included in his book, Sun Tzu, one of history’s greatest generals and author of The Art of War. If you’re curious as to how Sun Tzu created his own ‘shocking’ culture when asked to train the king’s concubines for war, I recommend checking out this post.

Setting Culture

Why is setting your cultural values early important? As you scale, they “help you make smart decisions consistently and to avoid the big dumb ones”, in the words of Chris Moody, partner at Foundry Group and starting his budding YouTube career, Venture Kills.

2. Hire intentionally.

At the same time, “shocking”, and arguably controversial, values help you self-select candidates in and out of your hiring funnel. If not, just as your values aren’t unique and differentiated, your (potential) hires won’t be either. And it also means it’s harder to find folks who are truly passionate about what you’re building. Moreover, I don’t mean controversial in the bad way where you’ll be breaking 20 different moral codes. But controversial as in not everyone will want to agree with where you stand, but they can see why and where you’re coming from. Be a good person.

Some examples of “shocking”/controversial:

• Be entrepreneurial. Be a product owner.
• Everyone has the potential to have a seat in the executive meeting, if it’s a great idea you can back up.
• Work hard. Play hard.
• No managers/leadership gets their own corner office.
• Managers leave last.
• Maternity and paternity leave.
• If one team gets to work from home, everyone can work from home.

A brilliant venture capitalist once told me, “Hire passion; train skill.” When you have a shocking culture, it’s easier to find culture fits. When you hold shocking values and virtues, when someone is still passionate about you, your business and the culture you started (and they will take part in building), they are true fans.

“If you don’t stick to your values when they’re being tested, they’re not values: they’re hobbies.”

– Jon Stewart, former host of The Daily Show

3. Retaining talent requires trust.

At the same time, keep in mind how restrictive your values may be as you scale. While it is useful to be strict early, requiring all employees to wear flannel with misaligned polka-dotted buttons every day will make it hard to scale your team. From the lessons of Carly Guthrie, who ran HR for Per Se, one of Thomas Keller and New York’s hottest restaurants, and at multiple startups:

1. Trust your employees. And make sure your managers trust their team members, as well. Trust in the process of how and why you hired them.
2. Deeply respect your employees’ time outside of work. This may be easier said than done for many founders, especially those who hold themselves to a high working standard.
3. Foster a community of trust and care. “The hallmark of a healthy culture is that people feel comfortable bringing up problems with and offering feedback to their leaders and vice versa.”
4. Let mentorship happen organically. You don’t have to force, but let your team know that the option is always open.

As you scale, hire world-class HR people who can build upon the above. As Guthrie puts it, “hire or contract someone who has the ability to tell you hard things you don’t necessarily want to hear — someone you can trust to give you a good reality check when you need it.” And your friends in HR may help to serve this purpose. At the same time, as vital as it is to trust your talent, trust the system you build.

4. Build and follow your operating philosophy.

You, as the founder, at ~50 strong, will need to shift from being product-centric to distribution-centric. In the theme of distribution, you must have a rock-solid operating philosophy. It’s impossible to build a house on an unstable foundation. As David Sacks of Craft Ventures, one of the best SaaS VCs, puts it on his guest appearance on This Week in Startups podcast, you hire your first product manager, meaning you won’t be involved in every day-to-day product discussion. Although his approach is highly tailored to growing a SaaS startup, many of his lessons on having an operating philosophy are synonymous with growing non-SaaS businesses as well. Namely, setting exciting milestones for your team to celebrate on, like an annual launch event, and aligning each department’s calendars.

Create, hold, and share excitement.

It’s easy, especially in this pandemic, but equally true outside of it, to lose sight of what you’re building when there’s no foreseeable future. I call it the third leg of the race. Every day, not only for you, but also for each and every member of your team, will feel the same as the day before. You might be self-motivated. But if:

1. You don’t communicate that to your team properly, and,
2. You don’t sent tangible, concrete goals,

… everything everyone does will feel nebulous. Just like Comic Con, the Oscars, or planning the biggest, baddest birthday party for your best friend, it feels incredible to be privy to world-changing news – to be in on a mutual company secret that’ll wow the world – and to finally share it with explosive excitement. An annual launch event is both hype for your customers and a toast to your team for their hard work.

Celebrate small wins. And create opportunities to celebrate big wins, too.

Align calendars.

As you scale past PMF, you’ll realize you can no longer fit everyone in the same room. And frankly, you can’t tell each person what to do anymore. So, you hire managers to oversee each function of the business. Just as I mentioned above with Josh Coyne, information diffusion becomes a lot slower. In this case, aligning specific calendars together will help information and plans diffuse more easily.

David Sacks recommends differentiating the sales-finance calendar from the product-marketing calendar. Finance, by accounting requirement, runs on the fiscal year. While the year-end can mean December 31st or January 31st, most sales-driven companies end on January 31st to avoid ending the year during the holidays. The reason sales and finance, in his perspective of enterprise SaaS, go hand-in-hand is that sales is directly tied to cash flow, aka finance. Board meetings should also follow the sales-finance calendar since it’ll make it easier for you when the numbers are still fresh, within a few weeks of the quarter-end.

Similarly, product and marketing calendars go together since marketing is tied to what new features and updates the product/engineering guys create. And, that big annual launch event is tied this bad boy of a calendar here. The nuance here is if you’re marketing-driven company, like most consumer businesses (rather than enterprise businesses), your marketing, product, and finance calendar also fit onto the same timeline.

5. Upgrade adjacent users as your next beachhead.

You see, product folks, engineering folks, and you are, by the nature of your jobs, power users of the product. On the adoption curve, the innovators, not even the early adopters.

Admittedly, that makes you, the founder(s), and your product and engineering friends in the company unreliable reference points for building and scaling a product beyond your initial market. So, to find your next set of dedicated users, look towards, what Bangaly Kaba, former VP of Growth at Instacart and former Head of Growth at Instagram, calls, the adjacent users. In his Adjacent User Theory.

These adjacent users are aware of the product, may have signed up already, but barely touched it after day 1. Kaba categorizes those circles as: Power, Core, Casual, Signed Up, and Visitor – each circle bigger than the last, all “orbiting” those within. Unfortunately, they have an equal or greater chance to fall out of orbit than ‘upgrade’ their orbits. These users are adjacent to each of their respective smaller concentric circles. Here your goal is to optimize for engagement and retention, rather than adoption, on your way to grow your concentric circles. Make your product lovable. For instance, for a consumer app, converting core users (i.e. usage of 3 days/week, <1 hour per day) to power users (i.e. 5-7 days/week, multiple actions per session, hours of usage per day). Or signed up users (D1 active, but radio silent) to casual users (1-2 times/week login).

In upgrading each of these circles, there comes the dilemma of gaming the system and each of these metrics. For example, when looking at retention (i.e. # of sessions), you can make it either:

• Easier to log in;
• Or, harder to log out.

I’m a strong proponent of the former, which shows true stickiness. Most definitely due to my trauma with trying to unsubscribe from a few products and paid newsletters out there.

6. Capture adoption by changing only one variable per user segment.

There are multiple vectors when assessing a user segment. Kaba lists a few:

Gender	Tech Enablement
Age	Customer Maturity
Income	Device Capability
Geography	Use Case for Product
Language	Role
Price Sensitivity	Company

While it’s tempting to pursue more than one variable at once, don’t. Stay focused. Change only one variable at a time, holding all else constant – ceteris paribus. Gain visibility into their usage/life habits. Get to know them by watching, talking, visiting, maybe, if possible, being them. Empathize with where they’re coming from. What do their needs look like? How do they weigh their own Maslow’s Hierarchy of Needs?

Don’t worry, as you enable one set of adjacent users, like dominoes, new market opportunities will open up. It’s also important to remember that not all adjacent users are near-term market opportunities.

“As you explore your adjacent users, you are going to find a lot of possible segments. But just because they exist, does not mean you should choose to serve them. The key here is that the segment still needs to align with the strategic direction of where the product is going.”

– Bangaly Kaba

In closing

Starting and growing a company is scary. I have so much respect for founders who commit years of their life to doing so. Changing reality into their own distortion fields, but at the same time, keeping their finger on the pulse on reality. Garry Tan at Initialized Capital puts it best when he references the Stockdale paradox.

“You have to know you’re going to succeed no matter what, but you have to accept reality as it is. It’s easier said than done.”

Or, as James Stockdale, the highest ranking US officer captured and imprisoned during the Vietnam War, of which the paradox is named after, puts it:

“You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality, whatever they may be.”

As you find your PMF, your next brutal fact is to scale. How many people actually love your product rather than do people love your product. And in scaling the company, you have to scale yourself first. The job description for a CEO of a growth stage company is very different from that of a founder concepting and testing an idea. While COVID has shifted many of our timelines forward, there are many industries that are being stress-tested. And just like how a CEO’s role is changes over time, PMF is fluid, as well. Just because you have it yesterday doesn’t mean you have it today or tomorrow. Keep your finger on the pulse.

And, if you’re building something you really love to solve something you really hate, let’s talk. Stay awesome out there!

Cover photo by Tj Holowaychuk on Unsplash

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