Lessons from The Hard Thing about Hard Things by Ben Horowitz

https://a16z.com/books/the-hard-thing-about-hard-things/

Ben Horowitz is today most known for being half of the eponymous VC firm Andreessen-Horowitz, but he has written two popular books based on lessons learned in his life before VC. Horowitz started his career at Silicon Graphics before joining Netscape, where he met Marc Andreesen, and then went on to co-found Loudcloud, which eventually become Opsware. Below is a summary of his lessons from being CEO of Loudcloud and Opsware through IPO and acquisition.

• The beginning of being a CEO can be very sunny, but eventually when things get hard, everyone goes through the struggle. In the struggle, remember the following:

1. Don’t put it all on your shoulders
2. This is not checkers, this is motherfuckin’ chess
3. Play long enough and you might get lucky
4. Don’t take it personally
5. Remember that this is what separates the women from the girls

• When things get hard, CEO’s should tell it like it is
• Without trust, communication breaks
• The more brains working on the hard problems, the better
• Bad news travels fast, good news travels slow
• The right way to handle layoffs

1. Get your head right — focus on the future, not the past
2. Don’t delay
3. Be clear in your own mind about why you are laying people off
4. Train your managers — managers must lay off their own people
5. Address the entire company
6. Be visible, be present

• The right way to fire an executive — treat your executive fairly and improve your company

1. Root Cause Analysis: executive firings should not be viewed as a failure of the executive, but rather as a failure of the interview / integration system.
2. Informing the board: the primary goals here are to (a) get their support and understanding, (b) get their input and approval for the separation package, and (c) preserve the reputation of the executive.
3. Preparing for the Conversation: tell the executive, be clear on the reasons, use decisive language, and have the severance package approved and ready.
4. Preparing the Company Communication: tell the executive’s direct reports, then other members of your staff, and finally the rest of the company. Keep the message positive and preserve the executive’s reputation.

• Demoting a friend:
• use appropriate language, admit reality (you are both underskilled for your jobs), and acknowledge their contributions.
• Don’t tell loser lies — it’s easy to fall into the trap of telling lies to
• Employee attrition is usually categorized in one of three buckets — people who quit, people who got fired, and people who quit but the company didn’t want them anyway.
• Validate statements that might be lies that people tell themselves and other people to make them feel better.
• Hard times:
• Lead bullet vs silver bullet — know when to fold ‘em
• Take care of the people, the products, and the profits — in that order
• Being a good company saves the team when things go wrong, and things always go wrong at some point. Being a good company is an end in itself.
• Investment in people should continue far beyond the interview process:

1. Productivity — training is one of the highest-leverage activities a manager can perform.
2. Performance management — if you don’t train your people, you establish no basis for performance management.
3. Product quality — training people is the only way to avoid even more expensive mountains of tech debt
4. Employee retention — most people quit because they either hate their managers or weren’t learning anything. Both can be solved with good training.

• Good product managers are the CEO’s, don’t focus on the nitty gritty, understand the market, think about the bigger stories, communicate clearly, value discipline, and are accountable for their products.
• If hiring from someone’s company puts you in a sticky situation, then set up a policy such that any hires from that company requires CEO / executive approval.
• When hiring big company execs for small companies, the two dangerous mismatches are rhythm or skill-set mismatches. To avoid these, screen for mismatches in the interview process and take integration as seriously as interviewing.
• Hiring executives — if you’ve never done the job, how do you hire somebody good?

1. Know what you want
2. Run a process that figures out the right match
3. Make a lonely decision — the CEO should ultimately make the decision.

• Different forms of management debt:
• Putting two in the box: if you have two outstanding employees with complementary skill sets who fit in the same place in the org-chart, you may think to place them both in the box, but this removes accountability, and complicates decision-making.
• Overcompensating a key employee because she gets another job offer: but eventually people find out and get upset and that’s even more debt.
• No performance management or employee feedback process: companies execute well when everybody is on the same page, and everybody is constantly improving.
• A high-quality HR organization cannot make you a well-managed company with a great culture, but it can tell you when you and your managers are not getting the job done.
• Cultures will continuously change at a company, it’s important to grow and change with the company.
• A CEO create politics by encouraging and incentivizing political behavior — often intentionally. Minimizing politics often feels totally unnatural. Two ways to deal:
• Hire people with the right kind of ambition
• Build strict processes for potentially political issues and do not deviate.
• Hierarchies, promotions, and job titles:
• All companies eventually create job titles because employees want them and people need to know who is who when the company is too big for everyone to know each other.
• The Peter Principle — in a hierarchy, members are promoted so long as they work competently, and sooner or later they are promoted to a position at which they are no longer competent.
• The Law of Crappy People — So, for any title level in a large organization, the talent on that level will eventually converge to the crappiest person with the title.
• The best way to mitigate the Peter Principle and the Law of Crappy People is with a properly constructed and highly disciplined promotion process.
• Smart people can be the worst employees — they might build a case against the company, be unreliable, or be abrasive. You can’t hold the bus for everyone because too many bad employees will churn everyone else, but you should hold the bus for the best of the best.
• Hiring senior people should be to acquire knowledge and experience in a specific area. But they can also be risky because they come with their own culture, they know how to work the system, and you don’t know the job as well as they do. So, it’s important to demand cultural compliance, and to measure senior people in results against objectives, management, innovation, and ability to work with peers.
• 1:1’s are essential for employees to get feedback on ideas, flag issues, and identify any variants in life. Employees should set the agenda, ideally sending it to you in advance.
• Company cultures maintain core values as companies scale — think desks for doors (Amazon), ten dollars per minute (A16z), or move fast and break things (Facebook).
• Organizational design — this should be the communications architecture for your company. You can figure this out in a few steps:

1. Figure out what needs to be communicated
2. Figure out what needs to be decided
3. Prioritize the most important communication and decision paths
4. Decide who’s going to run each group
5. Identify the paths that you did not optimize
6. Build a plan for mitigating the issues that are not optimized.

• Don’t try to anticipate scaling, build for what you know.
• Being a CEO is hard. With all of the responsibility, the CEO tends to either take things too personally or not personally enough, staying calm and taking care of themselves is important.
• Managers who are happier setting the direction of the company are Ones and those who enjoy making the company perform at the highest level are Twos.
• Ones like gathering information from a broad variety of sources, making decisions, and have strategic minds. Most founding CEO’s are Ones.
• Twos insist upon super clear goals, don’t like shifting goals, and can stress over strategic discussions or big decisions. You need both to be a good CEO. Both sides are important for peacetime vs wartime.
• People will follow a leader if they have the ability to articulate the vision, the right kind of ambition, and the ability to achieve the vision.
• Evaluating CEO’s: Does the CEO know what to do? Can the CEO get the company to do what she knows? Did the CEO achieve the desired results against an appropriate set of objectives?
• Being CEO is all about tradeoffs. Accountability vs creativity. Expectations vs loyalty.
• Acquisitions: Technology acquisitions fall into one of three categories, based on what the acquirer is paying for:

1. Talent / technology — range from 5–50m
2. Product — acquired for its product but not its business, range from 25m — 250m
3. Business — acquirer takes the entiere operation, this one is not bounded.