Evolving from founder to great CEO
Joel Trammell, ex-CEO of NetQOS
CEO: command, management, leadership
- management is power granted by your position
- leadership is power granted freely because of a follower’s perception of your credibility, competence and caring.
- leadership is influence
- credibility is that folks believe what you say is true (whether it is true or not). that the person is honest with you. it’s one thing to not tell a lie. it’s another thing to be open & transparent. you can be authentic without being mean or cruel.
- MSFT took 8 years to get to $50MM in revenue! So if you have a business plan that says you’ll get to $100M in revenue in 3 years or something... maybe that’s not the most credible.
- caring - followers have to perceive that you do care about them
The CEO job. Why is it so different?
If you haven’t sat in the chair, you have no idea why it’s so different. It’s not just the ‘next step’ up in your exec career.
- You don’t get honest feedback. You’re always curious about the motives of people talking to you (be it employees, vendors, board members…) Everything is put in their perspective & a reason to engage with you.
- Decisions aren’t expert-based. In the past, when you were director, VP, etc. people brought things to you because you are the expert. Now suddenly, 9/10 problems have nothing to do with your expertise. You must learn to make decisions when you are no longer the expert in that area.
- You have no peers at the company anymore.
- You have total responsibility. If the company succeeds, you get great rewards. If the company fails, you are like the football coach that went 1-13.
- You have to act through people instead of doing things.
##The Stages of a Company
- “Lay the egg” phase. Coming up with the idea and an aha moment.
- Project Manager CEO. Get that thing shipped and get a real customer.
- Create a business. At this point there’s a transition that takes place. You have to start taking off every hat that you wore in phase 1 and give those to someone else. Many founders struggle with this; they struggle with it because they don’t now know what to do. What the hell does a CEO actually do?
- If you have a bit of success - can you scale the company. Can you raise money at a higher valuation?
- Deliver return to shareholders.
The first two stages are not real CEO work. Real CEO work starts at step 3.
Responsibilities of a CEO
- Own the vision. (strategy). What it is that we’re actually going to go do — but it’s bigger than that. You know that you really own the vision when you can tell the story to the most technical person at your company, and also your 15-year-old son. As a CEO you spend a lot of time telling the story, fine-tuning it, and pitching it differently for groups.
- Provide the proper resources.
- Humans: If you nail this, you can do poorly at other areas of the company and still be successful. CEOs should spend a lot of time finding the right people to work for them.
- Capital. Unless you’re in SV, you have to generate your own capital; if you’re a successful business you should be doing that.
- Only the CEO can bring this in. Lots of CEOs “don’t have time” to meet with vendors, but vendors often can give you education about an area. They are ultimately the experts.
- Build the culture. You are mom and you are dad. The culture is however you are as CEO. The culture is not what employees want the culture to be; it is how you behave as CEO: what behaviors do you reward, what behaviors do you not reward? This requires a process of self-awareness as to how you are, not how you want to be. You might need other people to help you explain that to yourself. Also, it becomes harder when the company grows and not everyone is in the same room anymore (meaning the company gets to a big enough size that you have regional offices, remotes, etc.) so you have to be more explicit. You must explain to folks what you reward, and how you are, and what behaviors you expect. And this is a role that only the CEO can do.
- Make good decisions. They are the fuel of a company. Generally speaking, the faster you make decisions, the better the flywheel turns. Also, it’s not just about you making decisions. It’s also about teaching others to make good decisions and what decisions they’re empowered to make. If you do this, in many situations you are only needed to tiebreak between areas of responsibility where there’s a conflict. Be clear with VPs about what decisions are yours, and what decisions are theirs. Also, be explicit about why you made a decision the way that you did. Founder CEOs struggle with this a lot b/c they don’t want to give up responsibility for every decision, but when you transition to CEO, you can’t do that anymore. (Like the color of the walls, the logo on the business cards, the way a product is coded, etc.)
- Deliver performance. If you get the first 4 right, they are the foundation of 5. Be very clear about what “winning” is. The football coach doesn’t tell players to “go win”; the coach defines it. Make sure there’s a translation between the top-levels of the organization to "who do I go block" (football analogy) as the individual contributor in the org. If you don’t have a clear work-breakdown from how you get from your strategy to the actions that people take, you’re not doing a good job. (Joel’s current company, Khorus, is all about making a written-system-of-record of how to get from strategy to actionable items for individual contributors.)
“The better you are as CEO, the less you have to do each day, but the more you can do."
One of the ways Joel can tell if a CEO is good, is just to visit them for a day. If they are constantly fighting fires and being interrupted, chances are they aren’t running a very good organization. A good CEO actually looks like they’re not doing very much.
The best CEO is a ship's captain looking out for the future; future icebergs, charting a path, etc. But if the CEO's up there spinning the wheel all the time, he’s not a very good CEO. He makes his turns months ahead of time.
The challenge for CEOs, especially first-time CEOs: they think they have a lot of responsibility but quickly realize they don't have a lot of control. You cannot order people to be engaged, creative, excited, etc. by fiat. Like a jockey, for example, doesn't have a lot of control over the horse. But if the jockey did a huge amount of prep ahead of time and developed trust with the horse, then they have a lot of influence over the animal, and can do wonderful things with just a nudge. (“be one with the beast”)
How should you spend your time as CEO? What should you be doing?
- The player hat. Many CEOs wind up doing this a lot (dipping into sales, banking, development, whatever). As you get bigger and bigger you should spend less and less time doing this.
- The coach hat. Hiring and developing people. (If I get allstars on my team, they’ll figure it out)
- The architect hat. Owning the vision and strategy. (Once a quarter I should sit down with people and ask the questions about constructing the business)
- The engineer hat. Operating the business. With subordinates — what are the three key metrics that are going to tell me if you’re doing a good job or not? For example, “revenue” is not a good metric for whether a VP Sales is good or not. e.g. in enterprise sales - because the close time is 120-150 days, you should know within the first 2 weeks of a quarter. Thus, a VP sales should be able to know the end of quarter revenue. NetQOS was within 3% of prediction 9 out of 10 quarters.
- The learner hat. If you dropped out of an Ivy League school because you were bored (Zuckerberg, Jobs, Gates), it means you’re a fast learner.
- The priest hat. This is where you worry about how the company feels. We like to think that humans make decisions based on logic, but in fact we make emotional decisions, and then use our analytical skills to justify those decisions. How’s the morale of the company? The CEO is to act as a shock absorber. Example: bring everyone down when you got a great deal, got great funding, etc. Conversely, in bad times, you have to bring them up. If you get too depressed, the game’s over.
Ways to fail as CEO!
- The firefighter CEO. No strategic bone in his body. He feels he has to take action every day!
- The super VP CEO. If the CEO comes to every sales meeting, for example, they are now the VP sales... not the CEO.
- The master strategist. He sits in his office, comes up with the strategy and … then does nothing. He might give the 30 minute talk, but then… nothing. ... and there are about 20 other failure modes in the book.
Remarks from Q&A
- Someone (a female CEO) asked about the pervasive use of "he" in the talk. Joel said it's not intended to be sexist and thinks things would be better if we had more female CEOs.
- CEOs are very industry specific. Joel says he is an enterprise software CEO and obviously wouldn't do well in retail. You've got to get the CEO that is right for your industry and growth phase.
- Joel would rather hire a CEO that's been a CEO before instead of taking for example, a GM from a multinational and dropping them into the role, because they are two totally different jobs.