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

Horowitz states that as a company grows, it is bound to change. The rules that worked on a small scale may no longer be appropriate over time. In this chapter, Horowitz shares some insights on how to navigate the growth process.

How to Minimize Politics in Your Company

CEOs are usually responsible for the political climate of a company, often unintentionally. To this end, they need to be careful in regard to the messages they send, especially to their management team. Some processes are more vulnerable to political exploitation and need to be handled carefully. Performance evaluations and compensation procedures must be formalized. Otherwise, they risk being manipulated by individual managers. Another risky area is organizational design and territory in which managers might compete to expand their own influence and control.

Promotions must be based on clear guidelines to limit the discontent of employees who feel undervalued. As an organization grows, gossip and complaints may escalate. The greatest danger for a CEO, argues Horowitz, is to incentivize the wrong kind of behavior in the management team.

The Right Kind of Ambition

Horowitz offers that personal ambition that supersedes ambition for the company can be a problem: “It is particularly important that managers have the right kind of ambition, because anything else will be exceptionally demotivating for their employees” (155). This trait can be detected during the interview phase via the amount of “I” or “me” comments when compared to talking about the achievements of the candidate’s team.

Titles and Promotions

Because startups are such fluid enterprises, employees often fulfill many roles. Horowitz, however, advocates for clear job titles as this avoids confusion both for workers and customers. In order to avoid promoting people to a point of incompetence, Horowitz suggests a clearly-articulated set of requirements for each position: “One way to level across groups is to hold a regular promotions council that reviews every significant promotion in the company” (162).

Horowitz mentions two schools of thought about fancy titles. His co-worker, Marc Andreessen, advocates big titles to make people feel better. Mark Zuckerberg of Facebook levels titles throughout his organization. Horowitz recommends giving the subject some thought, no matter which theory is ultimately utilized.

When Smart People Are Bad Employees

Horowitz states that in a tech startup, intelligence is valued above all else. However, Horowitz learned that some extremely smart people can make terrible employees. The Heretic, for example, is an employee who devotes a large amount of energy to pointing out all the flaws in current management practices. This sort of person is difficult, if not impossible, to change. The Flake is a certified genius who is unreliable in meeting deadlines when the company needs to rely on consistent performance. This person might have a drug addiction or have an undiagnosed mental health condition. The Jerk, while perhaps self-explanatory, is a person who can be particularly damaging at the management level. If The Jerk is particularly gifted, one might want to make an exception for their bad behavior, but only one exception should be allowed.

Old People

Although startups are usually staffed by young employees, acquiring expertise from a more mature source can be useful. This may be risky for a young CEO who might be intimidated by a senior staffer, and there can be pitfalls associated with hiring them due to generational differences. However, Horowitz contends that older employees are politically astute and know their jobs better than most CEOs know theirs. Horowitz suggests creating clear guidelines for senior performance that measure their results, ability to manage teams, ability to innovate, and ease of working with peers.

One-on-One

A startup CEO needs to develop a strong communication architecture, and this includes learning how to conduct one-on-one meetings. Horowitz has received feedback from his blog readers suggesting that these meetings are a waste of time. He suggests letting the employee set the agenda: “The best ideas, the biggest problems, and the most intense employee life issues make their way to the people who can deal with them. One-on-ones are a time-tested way to do that” (178).

Programming Your Culture

Defining a company’s culture is critical for long-term success. Horowitz has a very precise focus on what company culture is supposed to do. Initially, it is supposed to distinguish your company from the competition. It should also enable your teams to create products that consumers want. Lastly, it should help a CEO hire employees who are in sync with their mission.

Taking the Mystery Out of Scaling a Company

When startups are small, they are fluid, and much structure isn’t necessary. This is especially true when one is dealing with a one- or two-person operation. Over time and as the business scales up, new challenges appear. Specialization comes into the picture when individuals stop handling all the company’s functions and focus on smaller sets of tasks instead. Organizational design also becomes critical when teams proliferate and their duties aren’t clearly defined. Horowitz states that there are six steps to accomplish this:

1. Identify communication needs.
2. Identify decision points.
3. Prioritize items from 1 and 2.
4. Appoint managers for each group.
5. Note any communication paths not yet optimized.
6. Plan for how to deal with problems discovered in #5.

Finally, processes need to be formalized when scaling up. Horowitz says, “A process is a formal, well-structured communication vehicle” (191). To help design a process, he offers three suggestions:

1. Start by focusing on the end result.
2. Decide if the desired results arrive each step of the way.
3. Build accountability into the process.

The Scale Anticipation Fallacy

The preceding section gives advice on how to scale a company’s growth appropriately. However, there is a danger in projecting too far into the future regarding assumed growth. Instead, a management team should be evaluated once each quarter. Horowitz offers a pair of suggestions to sidestep this trap:

1. Evaluate your managers at their current scale.
2. Avoid absolutes in terms of ideal scaling. Stay in the present.