What Startups are Really Like

This blog entry comes from a link from my fellow Shifting Gears cohort bud Brian Pinkelman -- Thanks, Brian!

Paul Graham is one of the partners in Y Combinator, a venture firm in California specializing in funding early stage startups. Graham was trying to develop topics for an upcoming Startup School event for new entrepreneurs. So he asked the founders of the startups that had already been funded by his firm, "what haven't I written about yet?"

So I sent all the founders an email asking what surprised them about starting a startup. This amounts to asking what I got wrong, because if I'd explained things well enough, nothing should have surprised them.

I'm proud to report I got one response saying:   What surprised me the most is that everything was actually fairly predictable!   The bad news is that I got over 100 other responses listing the surprises they encountered.

There were very clear patterns in the responses; it was remarkable how often several people had been surprised by exactly the same thing.

Graham continues on 19 items that were revealed as common themes in the responses. He also ties the list together, which could be quite surprising for anyone looking to move from the traditional working world to entrepreneurship.

Link to Paul Graham's essay here...

Sometimes a Little Micromanagement is a Good Thing

Hello All! It's been a while since we updated our blog, and this topic is a great example of how having flexibility in your leadership toolkit is a great thing -- especially if you want to get stuff done. And what entrepreneur doesn't want to get stuff done?

Modern entrepreneurs and managers of growing companies have long boasted about the benefits of a flat, lean organization. Surrounding themselves with smart, motivated colleagues allows the boss to focus on the big picture -- the cohort accomplishes more because the boss doesn't have to help with the details and micromanage. This leadership style is welcomed by the team, who appreciate the respect and trust of the leader -- and appreciation manifests itself in even higher job satisfaction and productivity.

But in the December 2009 / January 2010 issue of Inc magazine Joel Spolsky makes a case for why entrepreneurs need to keep the ability to sometimes micromanage in their leadership toolkits. In his How Hard Could it Be column, Spolsky's article When and How to Micromanage sums up the recognition for micromanagement like this:

"At the top of every company, there's at least one person who really cares and really wants the product and the customer experience to be great. That's (the entrepreneur and close staff). Below that person, there are layers of people, many of whom are equally dedicated and equally talented. But at some point as you work your way through an organization, you find pockets of people who don't care that much. For them, it's a job. They just want to get through the day and don't find (less-than-awesome performance) upsetting.
If you're lucky, none of those people are employed by your company. But the minute you begin to rely on outside vendors, you expose yourself to their people, some of whom inevitably just won't care enough or know enough or have the right skills to deliver the awesome experience you're trying to deliver."

So -- sometimes the most motivated for results have to get into the gritty details and help the team work out the issues. Handing out objectives ("Get the phones hooked up by Thursday...or else") is probably not as effective as helping the team with the details of building a process and/or checklist (determine the number of phones, select system, schedule service provider, etc.) -- especially if the task is complex and you really want to get it done right. Applied strategically with planning and care, micromanagement is a powerful leadership tool.

Compensation Rules

Darren Dahl writes The New Rules of Compensation in the July/August 2009 issue of Inc and talks to four entrepreneurs about changes they made in their employee compensation strategy. The tactics are varied, but the results all point to a better bottom line AND HAPPIER EMPLOYEES!

Go figure. What works? How about:

• Eliminating a 5% premium over competing employers by paying market rates as an alternative to layoffs.
• Changing the commission structure so salespeople earn a bigger commission the less they discount the price.
• Making a fast price change to reflect new market realities, and then restoring a previous pay cut to compensate the team's hard work.
• Using the opportunity to replace B-Team players with A-level performers. "When we replace the B-level performers, it actually elevates morale" says the owner.

Dahl refers to today's economy and it's effect on employee compensation as "unprecedented". Managed carefully, entrepreneurs can lever the circumstances to create win-win opportunities for both themselves and their employees.

Jerkiness and Bad Decisions

Tom Davenport's NEXT BIG THING BLOG on the harvardbusiness.org site has an interesting entry Why Jerks Are Bad Decision-Makers which dives into the correlation between the jerkiness and the bad decision making of executives. Davenport recalls some of the all-star executive a******s and their world-class blunders, including:

• Joe Cassano, CEO of AIG, and Credit Default Swaps for Subprime Mortgages.
  
• Jimmy Caen, CEO of Bear Stearns, and how overconfidence destroyed an 85 year old investment bank.
  
• Dick Fuld, CEO of Lehman Brothers, and how arrogance and personal disrespect may destroyed any hope of a US Treasury bailout for the firm.

Davenport's summary points certainly resonate with the values I hold -- basically, extensions of the "Golden Rule". But his closing line is what gives me pause:

"Jerks often seem to get ahead in firms and advance through the ranks, but that's a dangerous phenomenon. If you want good decisions in your organization, don't hire, promote, or retain jerks."

Dangerous phenomenon? Yeah, I guess the utter destruction of billions of dollars of investor wealth and the near collapse of the world financial system due to personal arrogance, greed, and pettiness could be thought of as beyond risky.

So, why do so many jerks end up hired, promoted, and retained in some of the most powerful positions at the most powerful companies?

Product Development at the Improv

While buying books for my son's high school summer reading assignment on Amazon.com, I stumbled on Improvisation for the Spirit: Live a More Creative, Spontaneous, and Courageous Life Using the Tools of Improv Comedy by Katie Goodman. Goodman is an improv comedian who has recognized the correlation between skills required for comedic improv -- quick-thinking, collaboration, getting out of your own way, and being in the moment without being a perfectionist -- and skills required to be more effective in working with others in everyday life.

My interest in these skills stems from my comfort zone and my own social style and feedback I've received -- the situations of being uncomfortable without a script, worrying too much about the past and future, and negating someone's idea all sounded too familiar. The book includes exercises, and I found those quite challenging as well. But I'm looking forward to the growth opportunity and the chance to try something new.

Bottom line, I've found the book interesting, useful, and applicable to the product development process. The book opens with the "The First Four Skills of Improv", which are great skills to have in any collaborative situation:

#1 - You Must be Present and Listen Carefully -- "To be creative with others and to brainstorm solutions, you must first understand where everyone is coming from, and to do that, you've go to listen. (And not sneak a peek at your incoming text messages.)"

#2 - Don't Negate -- "Negation is when you deny someone's idea. The classic example actors use to explain negation is this:

One actor says, "Hey, look at the that pink elephant!"
The other actor says, "What are you talking about? There's no pink elephant."
Plop. The first actor is shot down, and there's nowhere to go."

#3 - Affirm and Add -- "You accept what your partner is suggesting, and you add to it."

#4 - Always be Willing to Surrender your Plans -- "In improv, you must be willing to give up your idea if it isn't working or the time to offer it has passed. You might be tempted to negate a new idea simply because you're attached to your original one. But the better approach is to go with flow and alter your course."

Good stuff, and an interesting approach to improving collaboration and team-building.

btw - my fave quote from the book: "Is anal-retentive spelled with or without the hyphen?"

The Power of Personal Metrics

Finally getting caught up on some reading, and came across The Nike Experiment: How the Shoe Giant Unleashed the Power of Personal Metrics by Mark McClusky in the July 2009 issue of Wired. Most of you who know me know I've lost a significant amount of weight over the past two years (~40 lbs.) largely through increased exercise. Although I do not use the Nike+, I do use a Polar heart rate and speed / distance monitor and log my training on the PolarPersonalTrainer website. I've also started to use the MapMyFitness.com and Facebook sites to track my progress and share the results with friends. The results, for me, have been incredible. The tracking of metrics has allowed me to chart progress and identify what works well and what doesn't. And sharing my progress has generated words of encouragement that keep me motivated. Any operations manager will tell you that if you want to improve something, measure it objectively and set goals for improvement. Turns out it works for weekend-warrior athletes as well as olympians and companies.

While your at it, check out Wired's 10 Gadgets We’d Like to Throw Into a Black Hole.

Wisdom for Entrepreurs

In the July/August issue of Inc. Street Smarts columnist Norm Brodsky answers questions from readers on a variety of start-up and growing business issues. Some highlights:

"Entrepreneurs don't make good employees. What's more, they are often crummy managers."

"It's a bad idea to offer ownership in a new business to people who are making no investment but their time."

"In times like these, it is natural to worry about survival [cash flow]. But you need to remember that recessions don't last forever. Just don't make the usual mistakes. Now is not the time to cut back on your marketing and product development. Whatever you do, don't fall into the trap of cutting prices. Offer additional services instead."

Check out the rest of the Norm's column here.

Also, check out Norm's 10 Things Every Entrepreneur Needs to Know. Good stuff.