Great piece by Mark Leslie on First Round Review:
Successful enterprises have a cycle of life. Startups build a product or service, enter the market and attract customers. Once they’re over these initial hurdles, they enter a growth phase, rapidly increasing their revenue and market share with big gains year-over-year. They continue to work on their product, fine-tuning it as revenue starts to flatten and margins stabilize at lower but still attractive levels.
As these companies mature, growth slows even more, eventually flattening out — yet operational expenses continue to climb as they strive to compete with new players in the market. Finally, unable to keep up, burdened with bloated budgets, companies spiral into negative growth, marked by layoffs, high burn rates and eventual bankruptcy or liquidation.
This paints a pretty bleak picture — especially if one considers the inevitability of this pattern — but it’s important to note that this cycle plays out over drastically different time lines for different companies. Many successful companies have prolonged their relevance for decades, and some for over a century. Technology companies are just like “real companies” except that the cycle is shorter so everything happens faster.
I love his explanation of the so-called Opportunity-Driven leaders:
You can identify this type of leader by their ability to not just see the future but seize it, their comfort with unconventional strategies, and their acceptance of bold risk. They don’t measure their success by rankings, quarterly earnings or liquidity events. They have a more grandiose vision to change the world, build a global brand, upend an existing industry.
People often ask me, “What is the biggest barrier to your company’s success?” The answer is always the same: finding and hiring great people. I’m not alone. This problem is top-of-mind for nearly every company I know. Finding a list of names isn’t difficult — there are tools out there to make searching and networking quite easy. The difficult part is figuring out if someone has the right blend of skills to be successful and make an impact.
Over the past three years, we’ve been very successful at finding great people that fit and grow our company culture. Some of the hiring wins were intentional and by design. Other wins, I’ll admit, were happy accidents. The common thread throughout every great hire (and every hiring blunder) was simple: the balance between hard and soft skills.
The Hard Skills
Most companies focus hiring on hard skills. If you’re a developer: can you write great code? Can you solve complex architecture problems? Can you self-manage your tasks? Can you ship code on time, without a lot of bugs? If you’re a designer: Can you use Photoshop? Do you have a great feel for user-experience design? Are you well-versed in color theory, typography, and whitespace? I could ask these questions in an interview and get a basic idea of how adept someone is at the hard skills for the job.
Asking questions is easy, yet hard-skills interviews are tough. How can you tell in a limited amount of time how someone will perform when given the tasks of the job? The tech industry has done a poor job of assessing hard skills in recent years. There are horror stories from established tech companies weaved with tales of confusing white-board drills, puzzles, and lame exercises that seem more geared toward fueling the interviewer’s ego than identifying a great candidate. Even if someone passes these tricks and teasers with flying colors that doesn’t mean they will be a great fit for a company, or will even be any good at their job.
The challenge of hard-skills interviewing can be solved by not relying entirely on those skills. In other words, hard skills are important, but they aren’t everything.
The Soft Skills
There are many soft skills that make up great people and great teammates: Leadership. Critical thinking. Empathy. Humility. The ability to handle stressful situations with clarity. If this was a grade school report card, we’re also trying to check the all-important box that reads “plays well with others.” Soft skills are crucial to assess during the interview process, and they are often overlooked in favor of great hard skills.
Great emotional intelligence — which I’ll loosely define as identifying and using emotions to communicate effectively with those around you — is the biggest difference maker between good and great hires. Emotional intelligence is watching someone’s facial expressions when you’re talking with them. Are they interested? Are they leaning forward or frequently looking away? Are they engaging with two-way conversation or have they been talking for the past 10 minutes uninterrupted? If someone can’t pick up on the nuances of a normal conversation, then they have room to grow in their soft skills. Poor emotional intelligence leads to awkward situations, mistrust, and productivity misfires.
We’ve all worked with someone that went on long tangents in meetings and dominated every conversation. Eventually it doesn’t even matter what this person is saying. They may be on the right side of a debate, and they often are, but the room has tuned them out. This person doesn’t have the emotional intelligence to realize that they are monologuing and everyone has turned them off. When we focus on hiring people with great soft skills, we keep people like this out of our company.
Soft skills are important, but just like hard skills they aren’t a silver bullet. Depending on someone’s specific role, they will always need to have some amount of hard skills. If they are a programmer, no amount of emotional intelligence is going to write that line of code. The perfect employee and teammate is someone that matches hard skills with soft skills.
The Perfect Balance
Most companies hire for a majority of hard skills and some passable soft skills. They bring in someone with great technical skills, but find out later that no one wants to work with that person because they have such a huge ego or they are miserable to be around. This type of hire is cancerous to a company culture. I don’t care how great someone is at design, if they are a jerk and treat people without respect they have no place on my team.
I believe in a 50/50 split between hard and soft skills. This means that we emphasize the ability to relate with others, the ability to think critically, and the ability to work with other humans with just the same (if not higher) priority than someone’s ability to use Photoshop, or write amazing code. Many companies hire with a huge emphasis on hard skills. The opposite is also true. If someone is emotionally aware, a joy to work with, and always brings clever ideas to the table yet they show few hard skills then the chance of a hiring success is also slim. The ideal situation is a pure balance.
Universities and colleges have known this for decades. It’s the reason your parents pushed you to join clubs and put outside activities on your college applications in addition to your GPA. University admissions officers know that just because someone earns good grades that doesn’t make them a well-rounded person to bring into their school. Yet, so many companies do exactly the opposite when looking to hire: they find the best, smartest, and most talented people and bring them on board without thought around soft skills and cultural fit. I want that kid that earned good grades and was able to live their life outside of a classroom, learning how to relate to and work with others.
With a clear focus on the balance between hard and soft skills, we can hire a company of people that are well-adjusted, smart, great at their jobs, and great at working together.
Dr. Travis Bradberry on Emotional Intelligence for Inc.com:
When the concept of emotional intelligence was introduced to the masses, it served as the missing link in a peculiar finding: people with average IQs outperform those with the highest IQs 70 percent of the time. This anomaly threw a massive wrench into what many people had always assumed was the sole source of success—IQ. Decades of research now point to emotional intelligence as the critical factor that sets star performers apart from the rest of the pack. […]
Of all the people we’ve studied at work, we’ve found that 90 percent of top performers are also high in emotional intelligence. On the flip side, just 20 percent of bottom performers are high in emotional intelligence. You can be a top performer without emotional intelligence, but the chances are slim.
Danny Sullivan on growing the old-fashioned way:
It’s what I once called the “SimCity” model of growing. I used to often play the game years ago. I would take two approaches. One was to use the “FUNDS” cheat to get all the money I needed to build everything at once. But in doing this, I often found my cities built that way didn’t thrive. Instead, naturally growing my city slowly over time allowed it to stablize [sic] and do well.
Third Door Media has taken this SimCity natural approach, over the years. Our growth has continued. Two years ago, we were even able to take money out to return to some of our early employees, who have shares in the company. We’ve made the Inc. 5000 list four times in a row. We’ve done three hires this year and have several others planned, bringing our overall staff to nearly 50 people. This will all be funded by our own revenues, not because we had VC money pouring in. We also have a solid cash balance in the bank because our CEO Chris Elwell is dead serious (and right) on being conservative and being prepared.
Shane Parrish, summarizing a few great tips from Essentialism: The Disciplined Pursuit of Less:
We rarely have the time to think through what we’re doing. And there is a lot of organizational pressure to be seen as doing something new.
The problem is that we think of execution in terms of addition rather than subtraction. The way to increase the production speed is to add more people. The way to get more sales is to add more salespeople. The way to do more, you need more—-people, money, power. And there is a lot of evidence to support this type of thinking. At least, at first. Eventually you add add add until your organization seeps with bureaucracy, slows to an inevitable crawl, centralizes even the smallest decisions, and loses market share. The road to hell is paved with good intentions with curbs of ego.
My favorite, is removing the obstacles:
To reduce the friction with another person, apply the “catch more flies with honey” approach. Send him an e-mail, but instead of asking if he has done the work for you (which obviously he hasn’t), go and see him. Ask him, “What obstacles or bottlenecks are holding you back from achieving X, and how can I help remove these?” Instead of pestering him, offer sincerely to support him. You will get a warmer reply than you would by just e-mailing him another demand.
We’ve been told by society that it is a negative trait, that it’s a flaw. It’s been perceived that way and reinforced for so long that it’ll take a long time to change that perception. But I truly believe that it can be one of your greatest strengths.
What is wrong with wanting to give? Being positive? Making sure everyone around you is happy? To me, these sound like the furthest things from a “weakness” and it blows my mind why people would want to label it as such. However, it can become a problem, but not in any of the ways I just listed.
When does it become a problem?
When you don’t know how to ask for something in return.
If you haven’t seen or read this piece on Jonathan Ive yet in the New Yorker, it’s worth your time. Great insight into one of the most successful designers in modern history.
The growing universe of digital news outlets includes a great many amalgamators, recyclers of other people’s reporting. Some report their own stories, but it is the Times that provides by far the most coverage of the most subjects in the most reliable way. The Times is a monster, a sprawling organization, the most influential print newspaper and digital news site in the world.
But it still makes most of its money by selling paper, and the paper on which tonight’s edition is being printed arrived, as it does each week, from four different paper mills—two in Quebec, one in Ontario, and one in Tennessee—where it was packaged into rolls large enough to serve as the business end of a steamroller: 2,200 pounds each and fifty inches in diameter. Eighteen-wheelers carried them to a Times storage facility in the Bronx, where more trucks took twenty rolls each from there to the plant in Queens, where manned forklifts deposited each one in a four-story warehouse that can hold 2,231 just like it. The rolls now sit stocked in eight rows on nine shelves, four deep, like soup cans in a grocery store for giants.
A fascinating look at how one of the world’s largest (and oldest) news organizations adapts and runs over time.
Good tips from Dick Costolo on leadership style. I especially liked this bit about meetings and sidebar conversations:
A typical week for Costolo involves 12 to 15 standing meetings, so he has a few rules for efficiency’s sake. First, no canceling. Freeing up that time may be tempting, but it’s how small problems become big ones. “I’m the connective tissue between all these groups,” he says. “It’s important for me to have context for the issues and challenges everyone’s dealing with.”
Second, no sidebars, ever. Nothing irks Costolo more than someone approaching him in private and saying, “I didn’t want to bring this up in front of everyone, but…” That rewards politics over process, he says: “Everyone on my team knows that that’s not a valid way to start a conversation with me.”
Finally, no PowerPoint. Meetings are for communicating, not wasting time on pretty slides. Instead, Costolo asks managers to type briefings. “If that sounds straight out of the Jeff Bezos playbook, it’s because it is,” he says. “I totally agree with that.”
This whole piece on Slack’s fast growth to a $1 billion valuation is great and it’s hard to pick out just one quote. Although, this part about constant feedback struck a chord with me:
Take Rdio, for example, one of Butterfield’s biggest beta-test companies. “In Slack, you create channels to discuss different topics. For a small group of people, those channels are relatively easy to manage and navigate. With a team that large, though, everyone was creating channels, and there was no way for people — particularly new hires — to figure out which ones they should join.”
Once they understood that, the Slack team quickly identified small changes that had a big impact: Within the list of channels, they added fields for a description and the number of people using that channel. “In the grand scheme of things, that’s a fairly trivial example, but those were things that would make Slack unworkable for certain teams. Beta-tester feedback is crucial to finding those little oversights in a product design.”
Now, a year after Slack’s public launch, that reverence for user feedback is part of the company’s DNA. “We will take user feedback any way we can get it. In the app, we include a command that people can use to send us feedback. We have a help button that people can use to submit support tickets,” says Butterfield. They’ve got eyes all over Twitter for comments good and bad. “If you put that all together, we probably get 8,000 Zendesk help tickets and 10,000 tweets per month, and we respond to all of them.”
You would think with as much success as Slack has had, it would relax its feedback mechanisms a bit and start to develop a bit of a corporate ego. Happy to see its leaders are sticking with the ideals that got them where they are today.
Some great tips from Joelle Emerson on making diversity a priority in 2015:
Just as developing skills and habits early in life makes them far more intrinsic and sustainable, the foundation laid early in a company’s life cycle becomes ingrained, increasingly difficult to change as the organization scales. For companies that depend on innovation and build products for a diverse customer base, diversity should be understood not simply as a social imperative, but as a business priority warranting early investment. Diversity makes teams smarter, leads to better decisions and helps groups solve problems more effectively. It also helps businesses better understand the needs of existing and potential customers.
We all need to get better, now.
Unlimited vacation policies are surprisingly controversial. The name sounds too good to be true. The skeptics have the same basic argument: unlimited vacation policies will make employees take less days away from work and are therefore bad for employees, but good for the company.
The theory behind the argument is that companies have a set amount of vacation time and it expires at the end of the year. Basic human tendency dictates that we don’t want to “lose” something that we’ve earned, so people try to use all of these earned days. Employees use their vacation days - but not too many - and everyone is happy. A set number of vacation days is safe, predictable, and is the industry standard for benefits.
In contrast, an unlimited vacation policy lacks a fixed number of days and therefore lacks the urge to use vacation days before you lose them. The popular belief is that without the fear of losing vacation days, employees will take less time and end up working more hours and more days. With this belief the company ends up getting more overall output under the disguise of a new employee benefit. Is this theory true or is this the skeptical Human Resources manager working hard to justify a complex and limiting benefits package? There is also the general fear of the direct opposite: employees will abuse the privilege and take entirely “too much” vacation time.
Both arguments had a hint of paranoia, but I couldn’t be sure until we tried it ourselves.
A New Policy
Prior to beginning 2014 we decided to change our vacation policy from a fixed number of days to an unlimited policy1 of “take what you need” with no strings attached.2
At the beginning of the year, I was concerned about the basic negative arguments on unlimited vacation policies. Many questions crossed through my head: How can I keep a culture that thrives on results but also encourage a great work/life balance? How would I approach situations in which people abuse the policy? Did I have a hidden meaning of what policy abuse meant to me, that was unclear to everyone else? How could I encourage vacation for those people that tend to not take breaks and were made worse without the fear of losing vacation days?
When we created our unlimited vacation policy our thinking was that we are all adults, and we are all working hard towards our personal goals and the goals of the company. We specifically hire people that have a passion for great work and results. We know that we have great people that work hard, but we also wanted to reward that behavior with less process and restrictions around personal time away from work. If someone is crushing it all year, I don’t want to hold them back from taking all of the vacation they want. We are adults and professionals and we know what it takes to make something succeed. Each employee also knows how much time off they need to rest and recover. Let’s leave the decision of when and how much vacation to each person and trust their judgement, just like we trust them to do great work.
A Year in Review
Now that 2014 is in the record books, I took a look back at the numbers.3 For comparison, before instituting the unlimited vacation policy in 2014, we had a very reasonable policy already in place during previous years. In 2013, we offered around 4 weeks of paid time off. I don’t believe in forcing people to accrue vacation time, the practice always seemed weird to me, so from the time you start at the company you could have taken up to 4 weeks time before 2014. The average actual amount of vacation taken in 2013 was just over 3.9 weeks. The least amount of vacation time taken by any employee that was with the company for more than 6 months was 3.2 weeks. Roughly, vacation time was about 8% of the total hours logged for the entire year. During 2013 no one took advantage of vacation, and everyone took what they were allotted or just a bit less. It is also worth noting that only one employee took time off for a new baby paternity leave during 2013. More on this later.
Starting with January 1, 2014 we began the policy of unlimited vacation. The average number of weeks vacation across the company was just under 6 weeks for those employees that were with the company for the entire year. The average for all employees in the company, regardless of starting date in 2014 was about 5 weeks. Across the board, people took more time off away from work in 2014 than 2013. Even those that tend to not take as much vacation ended up taking more time during 2014 than before. The least number of weeks taken in 2014 was 4.3, barely up just a few days from 2013 but still overall better. In 2014, the time spent on vacation was about 13% of the total hours logged for the entire year.
For both 2013 and 2014, the time of year when vacation time occurred was fairly predictable. Most people spent a few weeks of vacation during the summer, and a few weeks towards the end of the year for the holidays. Then the rest of the year was sprinkled with weekend trips and the occasional week away. Overall, the lack of limitation on vacation time did not negatively affect a single project or product milestone. In general, people were respectful of their project teams and scheduled time in advance or around these milestones to avoid conflicts.
In contrast to 2013, where only one employee took paternity leave, we had 5 employees take several weeks off for paternity leave. The vacation policy was a blessing to these people as they were able to be with their families during these times, without having to sacrifice their entire year’s worth of vacation. I was excited to be able to let them focus on their families, knowing they could take the time they needed then and throughout the rest of the year without penalty.
Does it work?
The numbers for unlimited vacation met my expectations and overall the policy has been an incredibly positive experience for the company. The time spent away from work increased incrementally for most people, and in very few cases did anyone take advantage of the policy.4
There are a lot of criticisms of the unlimited vacation policy. Every company will be different in how it handles and manages time off for its employees. In our case, we had nothing but success with the policy. People had more time away from work to spend with their families. The company met its goals, and shipped great work. As with anything, we’ll continue to work on our vacation policy and adapt it over time to ensure we have a sustainable great place for people to work. Despite the criticisms, an unlimited vacation policy can work, and we’ll be putting it to use again in 2015.
The great Teehan+Lax agency is shutting down, and its leadership is joining the Facebook team:
We have made a big decision that in 2015, we will join Facebook and the Facebook Design team. This is a significant move for us, professionally and personally.
Good news for the partners, but what about the rest of the company? From the outside it is difficult to tell the full story, but the appearance is that about 40 people were let go as a result of the move.
Most of all, software as a whole just isn’t good enough. There have been a few magical leaps in the evolution of software, products and operating systems that dramatically improved productivity and yes, joy among users. But given how cheap (compared to cars, building materials or appliances) it is to revamp and reinvent software, and how urgent it is to create tools that increase the quality of what we make, we’re way too complacement [sic].
Fix all bugs. Yes, definitely. But more important, restate the minimum standards for good enough to be a lot higher than they are.
We need better design, more rigor and most of all, higher aspirations for what our tools can do.
Time to get to work.
David Ulevitch, CEO of OpenDNS:
I’ve recently started talking to investors again and one of them asked me this highly poignant question: “Is what you do hard?” I don’t know. Is anything hard? If anything, things are easier now. You have frameworks for frameworks for frameworks. SMTP was hard. TCP/IP was hard. SSL was hard. Today there are truly amazing development tools like Meteor and Parse. You have AWS! Most applications and services I use on the Internet are mediocre, at best. The bar to be simply interesting is low. The bar to succeed isn’t much higher. It’s not depressing, it’s an opportunity.
This one is a bit old but it popped up again a few places today. Well said then, and now.
Nolan Caudill on the Slack blog:
At Slack, we want to work with people that have the skills to do their job and the gumption to do it well. They possess great empathy, as designing and building a great product is made up of countless acts of empathy, not only for the users but for those you do the work alongside. Diligence, persistence, an unrelenting bull-headed pursuit of Quality - this drive is what compels the kind of person we look for.
These traits are not intrinsic to any category of sex, creed, origin, race, or any of the other petty reasons others have used to determine who is able to do this kind of work. We believe that the above qualities are a deeper, better, and truer measure of what makes someone successful at Slack.
Specifically, our industry has for decades been directed and built by a mostly homogenous group, and has downplayed the accomplishments of others not in this group. We recognized our own shortcomings in this area and thus wanted to be explicit about what Slack stands for, what we are trying to build, and who we want here to help us build it. By focusing on how we build Slack first, we can hopefully improve the greater industry, in whatever measure.
Last year we topped 40 people at Basecamp. And that’s when I began to notice that we didn’t know as much about each other as we used to when we were smaller.
When any group gets to a certain size, it naturally begins to splinter into smaller groups. Cliques form and conversations often stay inside those cliques. That’s natural and OK, but I thought it would be nice to force some cross-clique personal conversations so everyone could get to know everyone else a little bit better again.
So I had this idea to bring together five random people (plus me and David) once a month for a one-hour free-flowing anything goes conversation, and then share the conversation with the rest of the company after it was over.
I admire the folks at Basecamp, specifically Jason, for constantly striving to know each person in their growing company. Once you are past a few dozen employees it becomes a big challenge, but it doesn’t mean you have to give up. Focusing on knowing people just needs to be an intentional part of your daily work.
Brian Cardarella, CEO of Dockyard on the company’s 2014 year-in-review:
This year’s story is one of how we nearly went out of business twice yet still managed to pull off our most successful year yet.
His entire story is very transparent and clearly presents some seldom-discussed aspects of small software companies. I’ve dealt with most of his same issues personally as I grow my own software consultancy. Hiring is hard. Maintaining a quality rate is hard. Building a business development team is hard. Maintaining sufficient margins is hard. Culture is hard. But when it all pays off that hard work is rewarding. Here’s to another great year, Brian.
I wish more people would share the real stories of small companies like this.
The problem with time, though, is it’s not actually measuring value. It’s measuring cost as a proxy for value.
Advertisers don’t really want your time – they want to make an impression on your mind, consciously or subconsciously (and, ultimately, your money).
As the writer of this piece, I don’t really want your time – I want to make an impression on how you think. If my rhetorical skills let me do that in less time (for me and you), all the better.
Great piece. This part sounds a lot like actionable vs. vanity metrics too.
Cabel Sasser on the Panic company blog:
Panic is a multi-million dollar business that has turned a profit for 17 years straight.
It just hit me, typing those words, that that’s a pretty insane thing to be able to say. (And, sure, we barely qualify). Believe me, I know it won’t last forever - but wow, what a kind of crazy deal.
If you’re curious about some business stuff, our setup couldn’t be more cut-and-dry. We still have no investors or debt. The overwhelming majority of our revenue goes to employee salaries and benefits, which is just the way we want it. Then there’s our rent, our internet, some donuts and chips, etc. Anything left over goes into the magical Panic Savings Account for future projects or emergencies - we’ve always felt it was important to have some wiggle room for who-knows-what. (In the past we’ve actually reduced that warchest by simply distributing it to employees as a bonus.) We also continue to operate on standard office hours, avoiding weekends and crunchtimes with ferocious overprotectiveness, for better or worse. Maybe the most controversial thing we have is an open office, but since we have no sales or marketing teams things are usually library-quiet.
Panic is the gold standard for software development shops doing it right.