Startup Lessons Learned: Hiring

I spent 3 years at Get Satisfaction, going from around 10 employees to 70’ish at the peak. Leaving was not an easy choice but after 3 years I needed to do something different, not better just different; I detailed my reasons and next move here. After much contemplation I decided to write a blog post in an effort to document my lessons learned about what worked and did not, in an effort to hold myself accountable for personal and professional development. I wrote it and posted it, then immediately took it down because I realized this was far too long for a single post. so instead I rewrote it as a series of posts, the first of which goes up today.

As you might imagine, I learned about more than just a business in my time at Get Satisfaction, and with the benefit of hindsight I was able to reflect on the subtle but critical lessons learned through mistakes and successes over my time there. This is not an easy series for me to write because while the thoughts are crystal clear I don’t wish to reflect poorly on my former colleagues, therefore take what I write with the intention it is written, that of self-reflection for the purpose of learning and self-improvement.

1) Hiring decisions will make or break you, sometimes all at once: The axiom that great companies are built with A team players could not be more true. There are 2 dimensions to this that are worth highlighting, hiring the best people and then structuring them to succeed, which will be addressed in a later post.

It’s not my intention to backstab people after the fact but the fact remains that we hired some people who were simply not up to the task that was in front of us. A worse failing than hiring the wrong people up front was keeping them in place after it became evident that they were not succeeding and taking the rest of the company down with them.

This dynamic is interesting to explore and reflects the challenges of hiring good people in Silicon Valley but more critically reflects the sense of ownership that the executive management team has over top level hires, and the subsequent desire to not have bad hires exposed for what they are, a failing of process and judgment. It happens, everyone is human and in the final equation it is better to just acknowledge a bad hire and move on rather than stick with someone who will impair the business the longer they stay in place.

A bad executive hire is like a cancer and the treatment for a cancer is to get rid of it, not get rid of it and replace it with something else, just get rid of it. I wrote a post about fear shapes personal behavior that was directly in response to my frustrations in dealing with a colleague who was failing in his role.

What makes a good executive hire? If I had to pick one thing in particular I would say good judgment is what is missing in every executive hire gone bad. People skills, execution capability, cross team collaboration, and many more skills essential for the modern executive can all be learned and adapted to different teams, but good judgment is as much a function of DNA as it is education and discipline. Good judgment trumps all because it brings with it focus, confidence, and optimal outcomes relative to execution effort.

Staff hires are no less critical and again the tendency to stick with people who are not A or even B team quality just to have a body in place reflects the challenge of hiring people in the Valley. However the fact remains that if you have a D team member and your aspiration is to bring them up to a C level, what exactly is your strategy? A and B quality people don’t just contribute disproportionately to the success of the company, they inspire other people of similar quality to join as a result of them being there while D quality people drive away the highest quality people you will attract.

In the spirit of full transparency and disclosure, hiring is something I do not consider a particularly strong point in my favor. My personality tends to attract to people who have similar “strange attractors” in their own character and for better or worse I tend to evaluate people on my gut level reaction to them. This has made me more attuned to my own judgment and forced me to be very strategic and deliberate about hires, at any level. Time will tell if I am getting better at it but without a doubt I am more conscious of the consequences of bad hires and looking beyond resume and personality when considering prospective hires.

I have 7 additional posts to publish over the coming weeks, detailing everything from fundraising to product/competitive strategy to managing your board of directors. Stay tuned.

Ron Johnson Out: The Customer Experience Files

I was in a cab yesterday with my wife, who works in the fashion industry, and she casually mentioned that Ron Johnson was out at JCP. I can imagine that everyone in the retail and fashion industry was aware of this 12 hours before the rest of us.

This morning I was watching Squawk Box on CNBC and Richard Branson along with Virgin America CEO David Cush were being interviewed. Cush was asked about JCP and replied that the key lesson is that you don’t destroy your existing business model before ensuring that the new one works. This is good advice but I think it radically oversimplifies challenges at JCP and creates false comfort for business executives prone to thinking that methodical change is better than radical change.

JCP is interesting to look at from the standpoint of customer experience and Johnson deserves credit for doing things that ultimately will prove to be essential retailers in all segments. What Johnson got wrong is that brand doesn’t drive customer experience, but rather brand reflects customer experience and a new logo, splashy store displays and forward leaning messaging can’t overcome what happens when actual people interact with the environment you create and worse, interact with other people called employees. If everyone isn’t up to the new task you will end up failing and doing real damage, this is the lesson I took away from the Ron Johnson era at JCP.

Brand Keys Customer Loyalty Engagement IndexBrand Keys is a company that measures brand engagement, specifically the emotional engagement that customers have with the brands they interact with. The 2013 survey was revealing on several levels in that across the 54 retail categories they survey, 39,000 consumers, several consistent themes are evident and all refute what Johnson actually did at JCP, which had a brand engagement score that s between 11-20 points below retail category leaders, they have been demonstrably failing at connecting with customers.

Customers today connect more strongly on brand values than at any previous time and this is critical because even in durable goods categories you don’t purchase things one-off. you come back and buy again, or make purchases of products in adjacent categories that reflect that brand experience you are striving for. Brands that have had consistent brand positions and deliver on that with everyday action also benefit from higher brand engagement, and companies like J. Crew, Apple, and Virgin America are good examples of this.

JCP is a mess and likely will not get better, they have lost connection with customers, who are now shopping at Macy’s and Kohl’s and unlikely to return. The physical retail experience is improved but the integration of digital and physical is weak, impairing their ability to convert customers from other brands, but most debilitating is the demoralized workforce that is the front line of customer experience. It’s a death spiral and I would not be surprised if JCP were acquired in the next 12 months. The new normal is unforgiving and punishing for brands that ignore it.

Jive Comes Around, Focus on Customers

Social communities are instrumental to both social media and customer support strategy

Jive’s announcement this past week to focus more on Social Customer Service is further validation that customer communities are instrumental to both social media (marketing) and customer support strategy. Employee collaboration software offers an array of benefits for companies but increasingly what they are finding is that if they want to deliver not just on behind the firewall ROI but change their business in a way that can deliver sustainable competitive advantage, then they need to put the customer front and center.

It’s not enough to give your employees a better way to work… leading companies in every sector are discovering that they also need to deliver on a better way to collaborate with their customers!

If you will excuse me for taking a minute to pitch Get Satisfaction, this is exactly what we are entirely focused on, a better way for companies and customers to engage each other online.

People often ask me “why don’t you guys offer a help desk system?”. The answer is that while we offer a product that a business buys, the primary user is a customer and we don’t believe that pushing more stuff into a ticket based system, with the heavy workflow and attendent costs, is what will deliver a better company-to-customer experience.

I’m tempted to say that our mission is to make the help desk system less important to you, as a business, but in reality we hope to make it more important by focusing it on the issues that defy self-service help and customer-to-customer interaction.

With Get Satisfaction your customers get something better, and it’s not focused exclusively on complaints and problems. Instead of customer service around issue management we offer customer service through relationship management and what that means is that problems get resolved – certainly, this is a primary need – but questions get answered, positive feedback means doing more of what works, and questions get answered, by you, your advocates and other customers.

Get Satisfaction has as it’s core DNA that concept that a customer is at the center or a customer community. We offer a better, faster, and cheaper model than traditional enterprise software solutions, and perhaps most strikingly, we have delivered a platform that meets the needs of the very largest of companies, while also remaining approachable and productive for the smallest of startups.

I am glad to see Jive recognize that the Social Customer is an integral part of any social business. This won’t be easy for them or anyone else to deliver on, enterprise software doesn’t easily translate into strong customer experiences because it is a solution designed around a business process and employee experience first… but acknowledging that the Social Customer is the foundation is a good first start.

 

HP Self Destruction Fully Implemented

This is a devastating expose on the dysfunctional upper echelon at HP:

“The company is coming apart at the seams,” said one person familiar with H.P.’s operations. “Because they may or may not be selling the PC business, the enterprise side is completely frozen. The business customers who buy tens of thousands of these machines along with support contracts are shutting them out. Dell and Lenovo are all over these accounts. They’re having a field day. H.P. is self-destructing.” A full-page ad in major newspapers trying to reassure PC customers did little to assuage doubts.

I feel sad and pissed off at the same time… HP is a company that literally defined Silicon Valley at one point but has become in more recent years the laughingstock as the company that went out of it’s way to snatch defeat from the jaws of victory.

When Apotheker was hired there was a lively Enterprise Irregulars thread on the news and several people expressed dismay that HP had just hired a CEO who understood only $4b of HP’s $126b in annual revenue, and that observation has never been more poignant than it is today.

In the wake of the last week’s public airing of Apotheker’s fate, he is done at HP and I feel bad for him personally because after this it is hard to imagine any scenario where his professional reputation recovers. While he should have known this was not a good fit for him the fact is that HP’s Board of Directors was tasked with finding the right person for the job, not the person who would say yes.

HP’s Board also should be overhauled, and by overhaul I mean completely replaced. Shareholders have suffered tremendously on their watch and the history of Board dysfunction going back to Fiorina needs to be addressed. Exhibit A for the case that they are unwilling to acknowledge their failings is the news that they are considering Meg Whitman as interim CEO.

UPDATE: Kara Swisher is reporting that Whitman will in fact get the CEO role at HP, as early as today. HP has gone from a CEO with experience in 3% of their business to a CEO with experience in 0.00%. Brilliant.

 

Lunarr Is Going Dark . . .

Like Tom, I am also a big fan of the team at Lunarr and over the last year and a half have become good friends with Hideshi Hamaguchi, who is one of the most interesting and generous of heart people you will have the good fortune of meeting.

I’m a big fan of the team behind Lunarr, a startup based in Portland, OR, and led by two of Japan’s top entrepreneurs: Toru Takasuka and Hideshi Hamaguchi. I was sad to hear that Lunarr is shutting down its service by May 10.

[From Lunarr Is Going Dark . . .]

When Hideshi told me they were shutting Lunarr down I was saddened but not surprised. Their tale is emblematic of the challenges that startups have getting a consumer/SMB products launched and to critical mass when the demands for features and integration to third party services exceed the ability of startup resources to deliver them, and it is also worth remembering that software development is still a time and resource intensive process even with the range of tools that are available.

The cost of acquiring customers is not insignificant either, especially when the macro environment favors the stability of large brands leading to a big getting bigger dynamic. The demand for features coupled with an increasingly fickle consumer market means that getting it right from the start is more critical than ever and even when you do generate some buzz and interest, converting tryers into users remains a significant challenge.

With an ability to self fund the operation of this company well into the future, it is apparent that Toru and Hideshi looked at Lunarr’s prospects objectively, not as founders but as investors, and could not see a disruptive event propelling forward. I admire this discipline because it’s rare in Silicon Valley where we demonstrate an institutional bias that favors hope over experience.

While I am saddened by the demise of Lunarr, I take with me great satisfaction in the knowledge that my relationship with Toru and Hideshi transcends any single company.

Relationship Management for Restaurants

Great idea, I still think they should have named it “RuhRoh”.

To do this, he has enlisted the help of a Mountain View startup called BooRah, which is launching a new “reputation management” service for restaurant owners. The 2-year-old company, which started as a restaurant search site, is expanding to create summaries of everything that’s being written about a particular dining establishment. It uses technology developed in-house to analyze the sentiments in online reviews and then generate scores, rankings and summaries.

[From New site gives restaurateurs data on reviews]

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MS on Vista’s “Challenges”

At this point I doubt there is any new information available that would dissuade people from the notion that Vista was one very screwed up launch, so I guess Microsoft’s PR strategy momentarily shifted to stating the obvious.

The answers we got during this mid-June background conversation were brutally honest: Our source, a high-ranking Windows product manager, conceded that Microsoft botched the Vista launch. He added that the company’s biggest concern wasn’t the OS but rather the eroded faith in Microsoft’s flagship product among users of all types and experience levels.

[From Exclusive Interview: Microsoft Admits What Went Wrong with Vista, and How They Fixed It]

I don’t think Vista is that bad or fatally flawed, in fact once it’s working people seem to be okay with it. But that’s the problem, you should get more for your money than simply not being annoyed anymore… but the real problem is probably that Vista is the desktop equivalent of fighting the last war. The referenced “eroded faith in Microsoft” cuts to the very core of what Microsoft has to maintain at all costs, trust.

Apple successfully shifted the debate to “the OS is a commodity, it’s everything on top of the OS that matters” and Microsoft has never been prone to shipping useful or even tolerable applications with their OS releases. They prefer to preserve that option for upselling you a separate package later. The notion of utility has shifted from being able to faithfully support other people’s apps to value that I get out of the box and on this latter point Microsoft is far far behind Apple.

Worse for Microsoft is that their distribution strategy weakens their customer advocacy position by allowing PC manufacturers to crapify the desktop of your new machine, further adding to bloat and annoyance.

The folks in Redmond will get this sorted out and in the end it could be the catalyst that leads to major strategy shifts for the desktop business unit. As has been noted many times throughout the history of this company, they are always at their best when they have something to target.

Ironically, while Microsoft diligently works to sort itself out it may be that Apple is just passing the apex of it’s meteoric rise of recent years. MobileMe has been an acknowledged black eye, the iPhone 3G has been plagued by issues related to battery life and network performance, and there have been quality issues (MagSafe and iPod Nanos catching fire). Apple’s shine isn’t quite as glossy and this has people asking “what’s next?”.

YellowBot – Local Search that Works

Over the years I have been thoroughly unimpressed with Yellowpages.com for local search, yet in a display of cognitive dissonance I keep using them when I need to find a local business. Almost every time I give up and Google, which itself is okay but not great for local search. The yellowpages.com categories are confusing, their notion of local doesn’t map to mine (they returned South El Monte for something… that’s LA), the reviews are practically non-existent, and the interface is confusing.

So yesterday I need to find an appliance parts store and after yet another frustrating experience with yellowpages.com, I ended up googling and by chance found local search engine YellowBot.com. What a pleasant surprise.

The interface is smart, using tags and skipping categorization altogether while instead relying on good search. I searched on a couple of different business types and in each case the list of returned items was pretty damn good. The review data is spotty but that’s not surprising, it looks early stage, but in some categories it’s not bad. I have two standard searches that I use to test local search, “pizza” and “car wash” and in each case I was impressed with the results.

I haven’t tried the mobile version yet but suspect it will be similarly useful.

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Piling on the VMW Mess Today

Lot’s of commentary today about VMware missing their number and CEO Greene out of the top job. For the record, when I was at SAP Ventures we looked at this deal but passed because of the husband/wife team (generally a big red flag for venture deals). It worked out for Diane and Mendel, and it would be stating the obvious to say that I regretted we passed on that deal but not just for the financial implications, Diane is the kind of entrepreneur you want to deal with, sincere and genuine but also really really smart.

Having said that, I think comments like this are misplaced and reactive:

Er, VMware may have tweaked its revenue forecast for 2008 to be “modestly below” previous guidance of 50 per cent growth. Few executives of multi-billion dollar companies usually get fired for 49 per cent growth, especially with an imploding worldwide economy in the background.

[From EMC CEO’s ego has cost investors billions | The Register]

VMW has been at the center of a lot of confusion about their revenue forecasts and actual performance. Following the catastrophic Jan 28th conference call with analysts there was a lively discussion on the Enterprise Irregulars message board about their call and the details. In Q4’07 the company put up $412m against a $417m forecast… which being off $5m doesn’t seem disastrous but the fact that they came up $5m short while sitting on $550m in deferred revenues made no sense.

On that Jan 28th call they forecast that revenue would grow from $1.3b to $1.9b in 2008, 50% growth which again does not look bad. What that meant is that the company would need to add about $650m in 2008 revenue to meet their growth target of 50%, but when you consider that $550m in deferred revenue on the books it means they were really treading water for 2008. Basically they weren’t growing 50% at all but rather just covering their bases… and this from a company that had reliably put up 80% revenue growth.

At the time there was a line of thought that the company was resetting Wall St. expectations but today we can comfortably suggest that the company has some serious competitive and market challenges facing them. Blame Wall St. for being overly reactive but what investors were challenging is that apparent deceleration in VMW’s business and no substantive answers for what was going on.

More on this topic (What's this?)
VMware Worn Out
VMware Inc Approaches The 50-Day Moving Average
Time to Revisit the Trouble Maker
Read more on VMware Inc. at Wikinvest

Dayak – The Recruiting Marketplace

Dayak is one of the most interesting companies I saw at the Launch Silicon Valley event yesterday. What I liked about it is that they don’t seek to disintermediate the recruiting market, they attempt to optimize the existing marketplace dynamics by enhancing the opportunity to recruiters (the intermediaries) to make more money through the ability to cast a wider net for new job listings.

Secondly, professional recruiters tend to focus only on management and high annual salary technical positions, which is not surprising considering that recruiter compensation is a function of flat fee and a variable fee tied to the salary of the position they are placing. Dayak is expanding into lower salary blue and white collar positions and having success at both posting job reqs and getting recruiters to actually submit resumes.

Neat company, something that I never would have thought would have interested me but after listening to the pitch I was sold.

Posting jobs is absolutely free and employers pick their own fee for a successful hire. Employers create a detailed job profile that gives recruiters the information they need to quickly identify the right candidate for the position. Once posted, employer jobs are only visible to a network of professional recruiters (not job seekers).

[From Dayak – The Recruiting Marketplace]