a16z Podcast - The Hard Things About Scaling: Executive Hiring with Ben Horowitz and Ali Ghodsi

Episode Date: June 14, 2023

The holy grail of company building is finding product-market fit. But what most people don’t tell you is that once you’ve found it, product-market fit brings its own set of challenges, particularly when it comes to scaling rapidly and hiring the right executives at the right time.Drawing from their extensive experiences, a16z cofounder Ben Horowitz and Databricks cofounder and CEO Ali Ghodsi sit down to talk about the hardest things about executive hiring and firing, and what is at stake.They dive into the common reasons an exec fails, why sometimes micromanagement is a good idea, and the difference between someone who has written a playbook and someone who has only run one.If you’d like to dive even deeper, the Growth team at a16z has spent the last year compiling insights from dozens of leaders at late-stage startups to literally write the book on hiring executives to scale. You can find that book at: http://a16z.com/executive-hiring-playbookTopics Covered:00:00 - When is it time to let someone go?05:41 - When do you give someone a chance to grow into the role?07:05-  Let go or level?09:27 - How do you have the tough conversation? 16:39 - Exit packages18:40 - Setting a new leader up for success24:27 - The importance of the first quick win 26:24 - The impact a new leader has on culture32:52 - Common ways new leaders fail37:35 - Closing thoughtsResources:Read the Executive Hiring: The Key to Scaling in the Growth Stages: http://a16z.com/executive-hiring-playbookLearn more about Databricks: https://www.databricks.comFind Ben on Twitter: https://twitter.com/bhorowitzFind Ali on Twitter: https://twitter.com/alighodsiStay Updated: Find a16z on Twitter: https://twitter.com/a16zFind a16z on LinkedIn: https://www.linkedin.com/company/a16zSubscribe on your favorite podcast app: https://a16z.simplecast.com/Follow our host: https://twitter.com/stephsmithioPlease note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. For more details please see a16z.com/disclosures

If you're giving them a lot of ideas, like more ideas than you're getting out, then that's probably not going to work. If I have a new executive, I call them every day. When they're new, I call them every day. When do I call them? Do we have a scheduled time? No, I just call them. Can you run a playbook or can he write a playbook? To spend the energy, spend the time. This is one of the most important decisions you could ever make as a leader in your company. Spend energy. I got to make a decision about am I keeping your peer or am I keeping you. Mistakes are costly. Mistakes take between a year and a half to two years. I always find. if you give somebody a task and they get super emotional, then they're done. I think companies quickly form a culture, and fortunately or unfortunately, the more successful

they are, they become a little bit arrogant. So companies typically are not super open to massive change. You think you're being like objective and factual, what you're really being is emotional, defensive, and afraid of the actual truth. And the actual truth, when you fire somebody is mistakes were made. The holy grail of company building is finding product market fit. But what most people don't tell you is that finding product market fit brings its own challenges. All of a sudden, you need to scale really quickly, and scaling really quickly is actually really hard. One of the hardest yet most critical aspects of scaling is finding the right leaders at the right time.

And while the growth stage of a company is hard, it doesn't need to feel like things are constantly breaking. If you're like two people and you find product market fit, you can grow 10 people or something like that in a year. So that'd be like a 5x. But if you're at scale and you try to 5x, I mean, you're going to completely blow up to company. It's pretty rare to see like a big giant corporation that's figured out how to really be a team of small companies,

a small business unit. At some point, they're going to reach a level of scale and complexity where like one guy just can't run everything. And you're going to need to bring in the experts, right? The experts, the technically trained experts, the managers. The growth team at A16Z has spent the last year calling the hard-earned insights of dozens of leaders across the firm and late-stage startups to literally write the book on hiring executives at scale.

You can find that book at A16Z.com slash growth slash executive dash hiring. But in today's podcast, two of those leaders, A16NZ co-founder Ben Horowitz and Databricks co-founder and CEO Ali Godsi sit down to talk about hiring and firing executives. including the most common reason in exec fails, why sometimes micromanagement is actually a good idea, and the difference between someone who has written a playbook and someone who has only run one. Ben also sits on the board of Octa, Databricks, and Moore,

and he scaled up several organizations in his past, including LoudCloud that went public in 2001. Ali, on the other hand, took over Databricks in 2016 and has since scaled the company to over 5,500 employees. Before we jump in, just a few quick notes. The first is a language warning. You'll also hear Ali refer to super ICs. ICs refer to individual contributors without direct reports.

You'll also hear Ben and Ali refer to some of the executives that they've worked with. Mark Craney was Ben's former head of sales at Opsware, while Ron Gabrisco is Databricks' current CRO. All right, let's kick this conversation off with where executive hiring often begins, recognizing the hard truth that you've outgrown someone. As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies

discussed in this podcast. For more details, including a link to our investments, please see A16C.com slash disclosures. How do you know when you've outgrown an existing leader? It's when you're asking other people, what do you think? Or when you're starting to have the thoughts of like, is this the right person or is it not the right person? You're done. I always find if you give somebody a task and they get super emotional, then they're done. Yeah.

Right? Like, I can't handle anything else. When you can't even process it, then somehow like it's gotten away from me. you. Another one that I find is kind of leverage, right? Like, if you have somebody who's really doing the job, what you always find as CEO is they're kind of teaching you about how the function should expand, how should it grow. And if you're giving them a lot of ideas, like more ideas than you're getting out, then that's probably not going to work. I agree with that, but that's a high bar. If they're still adding value and they work and they make the company better

and so on, you might want to keep them. Like that kind of leverage, we're saying, like, you know, this person just takes care of that thing. And they're so good. at it. I'm just trying to like keep up. Can you keep me in the loop of how you even do this thing? I'm learning. I'm taking notes. That's phenomenal. We should strive for that. That's what you know, like when you pay a guy, all that equity and all that money, that's what you expect, right? I agree with that. That's what you strive for. But then what happens is turns out they are like that, but they're terrible communicator. Or they're amazing communicator and they're super awesome about it. But they just blabbed forever. So they'll have like

weaknesses. They'll have like big weaknesses. Yeah, yeah. But you always take the weakness against the magnitude of the strength, right? Exactly. And then the causes for people running out of gas, I always find are also many. Could be, you know, you promoted them and they continued to do their old job and they never actually figured out what the new job was or the company just outgrew them. Or like sometimes there's like actual personal, like they've got a drug problem. They're getting divorced. Like something happens and the person you hired and you had for a while, isn't that person? And that one is very confusing to me always

because you're like, you thought you knew who they were, but they're not that anymore. There's something else. I also think confidence is important. Yeah. Once the executive feels like it's not working and they're on the back foot. They spiral.

Yeah, they spiral. And it's very hard to actually turn it around, right? Yeah. To get back into it. Well, and then if they lose the team, it doesn't matter. The one thing that's always true is if the team doesn't believe in the executive anymore,

it doesn't even matter. Like, say whatever you want to me, Ali. I still have to fire you because nobody's following you. You're almost better off starting a new somewhere else. Yeah, as opposed to wrecking your reputation by continuing here. Yeah. When do you give somebody a chance to grow? Well, I think, as you said, there has to be a superpower there that you have identified.

You know, they can come up with an amazing product or they're amazing communicators or they can really get the team to execute. Then a question is, can you just put them in a position? where you can accentuate that strength and then, yeah, fill in the gaps. Yeah, like patch up. The other thing I'd say is I think a mistake a lot of companies make is, you know, in engineering and in product and so forth, the knowledge of how your company works is really, really valuable.

But in sales and marketing, the knowledge of how other people's companies work is actually the more valuable thing. And so if you take somebody who only knows your company and they have to go learn the world, you're kind of harming everybody in the company because if you're going to pay somebody to do that, go pay somebody who knows the world. Go buy the knowledge. Go buy the acceleration as opposed to, and I don't really care

how much potential your internal, smart MBA who doesn't have any experience has, the idea that they're going to run worldwide sales for you if you've got a killer product and get that done fast is probably wrong. I just think it's because people

with the wrong background are trying to figure out the other side. So you typically have tech CEOs and founders, who are really good at tech, they're smart, maybe they have an engineering degree. And like, well, how hard can the sales or marketing can be? Yeah, it turns out very hard. Yeah. You know, if you have somebody who runs out of gas, then do you fire them?

Do you level them? I definitely think that you can put people in new roles and they can succeed in it. There's circumstance, right? So there's, I've got an early team and everybody's doing everything in the beginning. Yeah. And people are taking on roles so that are eventually going to be bigger than them. Then there's, I hired a high-end, and VP of marketing gave her, gave him a point and a half equity and a big salary.

They can't level them, can I? You can. I think it's going to be hard to put them in a new role and remove all of their equity. And it's too hard to take those away. What I have done is, you know, look, it turns out I don't think you're really, like, you don't need to express it this way, but this person is not amazing at running a big team. And, you know, they're really a super I see. It's very often I see super ICs who went into management.

And it doesn't need to be on the tech side. You find him in all kinds of roles. They're just so good that eventually they started managing But actually they're not good people leaders And eventually their team is just doing random things And they don't kind of care because they're business super I-seeing Doing the work of two, three people themselves In those cases, I've been able to take them out

And say, hey, look, I'll give you a fancy title You move over here and do the super I-C stuff And you're extremely valuable Because honestly, you're better than most of these people That you used to manage because you're a super I-C But don't try to lead also a team of 200 people Because you're actually not leading them Yeah, so that's the use case that you think works, that you're switching them back,

you're saying, look, you do great work, so we over-promoted you to something that you're not good at. Yeah. And let's put you back what you're good at, and I'll still pay you a lot of money and give you a good title. But you've got to not lie to yourself if you do that, because it's easy to lie to yourself and say, well, this person has some bright strengths, so that way you don't have to fire them. I can just put them in this other thing and overpay them. Yeah, look, there is a failure mode which I've seen, which is you move a person to a new role. And then what happens is they start checking out.

They're like checked out. Whereas they're actively disengaged. Well, that one is maybe at least you'll know. But the person you like who's kind of just disengaged and kind of just phoning it in is the hardest one. So I think you have to do a hard thing about hard things. And there I think there's really no option but to have the conversation. And they know. People don't want to say, look, man, you're checked out.

It's not working. We tried it. Let's move on. And I have found in those cases, they all like sort of feel ashamed and like, yeah, I know. I know I'm phoning it in. Yeah. Well, that's an important kind of part of it and kind of gets to the next thing, which is, okay, how do you have the conversation? And the mistake I see CEOs make is, okay, the way to have the conversation, you know, particularly engineers, is to be correct.

Stick to the facts. Stick to the facts. Enumerate them fast. Well, yeah. The undisputable facts about why you should be. Why you're wrong? Why you're bad? Yeah, why you suck. When you're losing your job? You're a bad person. The worst starting point at all, right? Yeah, ironically, you think you're being like objective and factual, what you're really being is emotional, defensive, and afraid of the actual truth. And the actual truth, when you fire somebody, is mistakes were made. If you're being objective, it's always partially your fault, usually more than half your fault, if you're honest. And so if you start from a place of the truth, which is kind of what you're talking about, hey, you're not putting in an effort, is always a much better than, let me tell you all the places

where you came up short. Like, if you start the conversation there, they have no choice but to get very defensive. Yeah. And say, well, I don't agree with that. Like, da-da-da-da. If you really actually thought you were right, you might get squeezed into not actually even finishing the firing.

So you kind of have to just start from the place of most honesty. Look, one, this is a done decision, too. It's my fault, too. Or, like, if you're not ready to fire them, you want to know why there works, X, just say, hey, like, here's what I observe, what's going on. That's just the 101, right? It's just a normal 101 where you're like, hey, what's going on with the output of this thing?

And, you know, like, things happen in those conversations. You find shit out. And it could actually help him. You know, I was talking to an entrepreneur the other day. And he's like, you know, he starts in on me with the exact thing that you always started. And like, you know, I'm trying, I'm struggling with, you know, being a CEO whether I should, you know, I want to be empathetic. But, you know, am I tough enough? And I'm like, who are you talking about firing?

You're not being tough enough. And, you know, of course, like there was a super talented guy slacking off and so forth. I said, just start it there. Don't put so much pressure on yourself that you've got to go right to firing him. Just find out what's going on with this guy. And, you know, the interesting thing was he has the conversation. You know, he finds out as a personal life issue. Once a guy admitted it, he was like, you know what?

Fuck this person I'm fighting with. I want to work here and go hard. And let that, like, literally that conversation solved it. Just like a little bit of honesty. But to get to that honesty, you have to start by being honest with yourself. and if you don't tell yourself the truth, if you lie to yourself, then there's no way you're going to get the truth out of the other person.

There's no way you're going to get to the right answer. You know, it's this question that you ask executives a lot and this and that, you know, like have you fired somebody? And why is that an important question? I think it's important because if you don't know how to do that, you don't actually know how to get to the truth. And it gets harder and harder. And the bigger the company gets, the more political it gets,

and more difficult to get. You have more regions, more countries, more people, more functions. and they're professional execs who know how to manage it up. Oh, yeah. Well, and then you take it all personally. This is my company. I built this.

Oh, it's all fucked up. Exactly. I don't want to get to that truth. Exactly. Just like you don't want to get to the truth about yourself. And the CEOs who can't do that always eventually fail. I would say, for me, you said it. For me, the number one thing I try to do in the conference,

if I've decided this is done and we're parting ways, my first question is usually, how do you think it's going? Yeah. And, you know, 50% of the cases they'll say it's not going well. It's not, from then it's much easier to, you know, take it to the next. Like, it's not working. And so we've tried it for a while. We've tried all kinds of things.

It's just not working. I found that if you can get a person to start it there, instead of saying, hey, here are the things you're doing wrong, or I don't like this or that. Just start with, like, is it working. And if they're not there, then I think step number one is just to get them there to realize that, look, it's not working. Like, marketing is not doing a great job or sales is not.

Or, like, engineering is not humming, and we're missing the SLAs. There's outages, left and right. And yeah, it's lots of people involved. It's not just, you know, your department. Well, phrasing is important. It's not working. How is it going? Exactly.

How are you going? Like, because as soon as it gets personal, that's when the defense of people have to put up their guard. Yeah, and I'll pull it out and I'll say, look, we're having outages left and right. This is going to be a really hard problem to fix. And you've been at it for six months. We've been at it for six, 12 months. In fact, it's increasing.

If anything, it's getting harder. And I know it's not just engineering. It's like other departments, sales is promics and things. And customers are doing it. things, but in any department you could have this conversation. They'll kind of eventually say, yeah, but it's hard man. It's like, it's tough. It's left

and right outages. We don't have the right people. I'm not getting any help from sales. I'm not this and this and that. Then you've gotten them to a place where like, look, I think we can't bring in someone that can actually fix this. Someone who can bring in the right people or someone that has dealt with nasty, nasty outages like this or someone who can actually sell to these really

really big conglomerates. Wouldn't that be the right thing for the company? So I try to like abstract this away from them. So it's not about you. It's just what's best for this company. Once we've accomplished this, I've actually seen many execs get to that point. Then they kind of turn to me and then they say, they actually will say, okay, I get it. But what about me? Like my career or my path? Then it's like, okay, that's a separate thing. We're going to take care of you. Actually, you bring up a really good point, which a lot of CEOs don't do this. And it's so important that when you talk about your expectation for an executive, it's not

what you and your people can do. It's what you and your people can do in the context of the organization, and that means working with your peers so effectively that you get what you need. And if you can't do that, then I've got to make a decision about am I keeping your peer,

or am I keeping you? Because that is the requirement, and I think that a lot of CEOs get themselves into trouble because they give executives a pass on that. Oh, no, that's my job to make you guys work together. This is a great point. Like, you're in legal and so, yeah, but the sales team is like, they're giving away liability and indemnification and so on.

I mean, what can I do? Like, there's nothing I can do. Or you see this execs doing that, right? But it's really, no, no, no. The right leader, trust me, the right head of legal that comes in here will not tolerate that. They will actually pick up the phone and tell the salesperson, hey, here's the framework I've been using. Yeah.

We're going to have an escalation if it's like indemnification above this limit, if it's a liability of this sort. This is what's going to happen. And they kind of push the whole organization. in direction. Whereas the leaders that aren't making the cut, they kind of just, you know... They let it fester to all explodes. It fester. The organization gets abused and they can't actually achieve anything and they're in that position. And then I say, look, it's not my fault. Look at these other departments. They're the ones doing it to me. That's when you know that, no, with the right

leader there, the right leader will not let these other departments do that. So when you get them all the way there and they go, okay, what about me? Like, what's your philosophy on the package, the comp, you know, references Reed Hastings in his book, which I argued with him about after he wrote it, said, like, they sent an email at Netflix

saying, like, we fired this guy. How do you think about all that? Yeah, I disagree with that. I think from then on, it's you owe them. You're the one that made the mistake of hiring them to be as generous as possible within reason.

Yeah. You know, you have a company to run. You have fiduciary duty. But as much as you can, if you squint, and in the big scheme of things, it's not going to hurt the company. It doesn't really matter. Be as generous as you can possibly be, both in terms of taking care of them compensation-wise. But more importantly, I think, being there for them psychologically, finding them the next job, being a reference for them, helping them as much as possible. I think that goes a long way.

And actually, you'd be surprised. You can have great relationship with these folks for many, many years to come. Put it on your CV as long as you like. Yeah. You know, who cares? And if you need a reference, I'm here. And then on the compensation, as generous as you can be, but there's fairness and there's equity. and there is fiduciary duty and so on.

But I found you can be more generous and people are very, very stringy in these kind of situations. And there's a couple of things about that. One is if you are kind of more supportive and generous and you're going to have a relationship afterwards, it's easier to fire the next one because it wasn't like a dramatic carball like event.

And then my old friend Bill Campbell used to say, he'd be like, Ben, you have to take his job. You do not have to take his dignity. That is not necessary. And I think that that just goes a long way also for the people who are still in the company. Yeah, they see how you treat them, yeah. Absolutely. And no matter how bad an executive is, they have some supporters.

They have some people who like them. Yeah, and it's nuanced. They're two sides of the coin. Yeah, and that executive is going to talk to them, and it's going to matter how you treat it. We started at the end of the process. You got to fire the guy. Let's talk about bringing them in, and how do we stop them from getting fired? So if you bring in a new exec, how do you help?

ensure their success, because the failure rate on that is pretty high. It's almost always retrospectively, people call it fit. But fit isn't entirely determined by the hire. It's what happens after you hire them. So how do you think about solving that? I actually literally give them the article that you published. It's on micromanagement by Ivan Horowitz, where you battle Mark Andreessen, who says, you know, you have to delegate and you have to respect the people and you hire them, and they do the job, you stay away, and you say, no, you've got to micromanage them. So I actually give them that article,

and I just tell them, this is what we're going to do next. He called it micromanagement. I call it training. Okay, training. Because I think it's an expectation thing. Because the thing is, if you start micromanaging a person that's new in your organization, or training them, as you call it, some people might be offended.

Hey, I don't like this. What am I getting into? This is a new relationship, and you're going to be breathing down my neck like this 24-7. Like, I'm not sure this is like a good thing for me. They get freaked out. This article kind of says, hey, it's just a transduiter thing. It's a normal thing.

Everybody here went through it. We're going to do it here. So that kind of just sets the stage. So they don't feel like they're being singled out. And in fact, some people might be like, hey, you're actually not that bad even. Like, after reading that article, I thought you were going to be all over the... Right, right, right. You set the expectation very high.

Exactly. And then I think stay as close as you can to them, weekly one-on-one and so on. That's not going to cut it. You know, you've got to call them every day. Yeah. If I have a new executive, I call them every day. When they're new, I call them every day. When do I call them? Do we have a scheduled time? No, I just call them.

A lot of times they'll notice I'm just shooting the shit. I'm not even really, actually. I don't have really an agenda. But it's we're getting to know each other so we can build up trust and understand. Yeah, and context. And we're sharing it. There's so much that's shared in those. And after a couple months, you're going to feel much more like, okay, I know this person. You know, I've had so many interactions with it. I really know Ali. Like, I know how he thinks and all his weaknesses and strengths. I think the kind of point that you make is really fundamentally important because what I always get from

CEOs, is they're like, well, how do I manage a CFO? I don't know how to set up a proper control structure or whatever it is that a CFO does. Like, how do I manage these guys who are doing jobs that I've never done? And you kind of hit on it, which is they may know their function. They better know their function better than you. But they don't know Databricks better than you. Like, nobody knows Databricks better than you. and you've made every flip and hire,

every good and bad architectural decision and the product you're aware of every customer that blew up you know about, like you know the comprehensive history of the place, and then you know all the people and what they're good at and what they're not good at and so forth. And somebody coming from the outside

doesn't have any of that. Exactly. They know zero. You're like a large language model trained on trillions of trillions of text documents. You don't even know what you know. Yeah, you know many, many years of every. Everything, every little detail, all the context, why, how it went wrong, how it went right, what to do, what to not do.

And that, having watched executives fail, that's the number one thing they fail on is they don't have the context. So they'll come in, and in the first three months, they'll start working on whatever made sense at their last company. And they're like, well, you hired me for what I did there, right? Because that's where I came from. And then everybody who works for them and everyone around them says, well, Ali, he paid this guy all this money, giant equity package. and he came in and he did nothing. And then, like, once the team goes that, that's it. It's over right there.

And so you have to guard against that by giving them the context. And that daily conversation, by the way, that is essential. And it doesn't have to go for five years. It goes maybe 30 days. And, like, sometimes a conversation can be just, hey, what are you going to do tomorrow? And what I always find if you ask an executive what they're going to do tomorrow and they're new, they'll always say at least one thing that makes no fucking sense at all. And so you just got that to do that.

By the way, that's a great thing that you want to do tomorrow. Yeah. We have huge fire right here. Like, it's going to burn up the whole house. Yeah. Why don't you help us put out this fire instead of that thing? And by the way, if you put out the fire, everybody's going to consider you're a hero. Because that thing was on fire before you got here.

But they're like, I don't even know. Where is that? What fire is that? I didn't even hear. Oh, you don't know. This is the biggest dumpster fire we've had here. You know, it's on the third floor. Go there and look.

Oh, and tell me more about it. Oh, here. Let me tell you the history of how to happen. Yeah, and let me tell you exactly how to fix it. Because that one I know, I just haven't had the time to do it. That gets them off to the right start. And then also kind of, that's how I always find you teach somebody to the organization because they go, oh, well, I'm going to go work on this.

And they're like, oh, well, you need to talk to Ed because, like, Ed knows all about that. Yeah. Oh, I didn't even know who Ed was. But why Ed? He's not C-level or church. He's just a random dude. Yeah. Who you would never know about it unless I told you.

And you would waste months trying to figure out what Ed and knew. Yeah. And so, like, that kind of thing, I think. That's what people miss. And Andy Grove used to call it task-relevant maturity. Yes. Which is like classic Andy like... Complicated phrase.

Complicated, but like if you dig into it, that's exactly what it is. Yeah. Which is, oh yeah, you're a great sales exec. I don't need to train you how to do that, but I need to train you the tasks that are relevant to us until you're mature on them. And then we don't have to talk every day. Exactly. And that's really what the micromanagement means. Hey, let me go back to you said something really, really important.

I actually think this is extremely important. I actually think when you hire a new exec, they come in and usually the organization is also, it's not just you. Everybody's looking. Who is this new guy or gal? Oh, yeah, everybody's looking, right? Because I know he paid him a lot of money. And I don't make them much money.

You're sizing them up, you're looking up and down and like, you know, what are they doing here? What are they going to do here? I think it's super important. Like getting that first win. And it's got to be in the first two to four weeks, yeah. Quickly. Yeah. Get that quick win.

And similarly, if it's like a big trip up and fall and, and, you know, big splash, you know, people like, oh, my God, you know, who is this person? You know, what do you think? And they all will talk to each other. And once it's socialized, yes. It's a very rare bird that will back off the position they took during that socialization. People are watching that first success, quick first success is important, which then means don't do eight things. Yeah, right. Do the thing. Do the one simple win here. Let's get them. And it's your job as a manager to say, look, hand that on a silver platter to them. It's still going to be hard. Trust me. New company.

new people. Everything is different. Get them to get that first win. I once had an executive came and he had read the Stephen Covey Seven Habits, a highly effective people. And he's like, well, what I'm going to do is first I'm going to seek to understand and then be understood. And I'm going to spend like a month like just talking to everybody. I was like, you're going to be fired in a month if you do that. I was like, I'll help you understand. So I've actually found that for new people, you know, they come in, especially the ambitious ones. They come in like, there's like, I have so much to add here. I don't know where to start. But we have like these eight things we have to fix.

I'm going to fix X, Y, Z, A, B, C. I'm going to fix all of these things. And that's when you got to stop them, say, hey. Which one is the most important? Yeah, let's get one win here. We're focused on one win. Yeah, one win this week, another win next week. Exactly.

And then on the daily call, remind them, hey, how's that going? That dumps the fire on third floor. Do you put it out? Exactly, exactly. So what's the impact of a new executive on an organization and its culture? And what do you want it to be and what do you not want it to be? Well, I think companies quickly form a culture. Fortunately or, unfortunately, the more successful they are,

they become a little bit arrogant. Companies typically are not super open to massive change. Companies don't like someone coming out from outside and saying, this is amateur hour, okay? We've got to do things quite differently. And I'm going to show you because I come from this really big company over there, and I'm going to show you how we did it over there. You know, and then they're name dropping that company in every other sentence.

You can see people like, if... Don't want to hear about Amazon anymore and don't bring that... This is not Amazon. This is not Amazon. You know, it's not Google, okay? The first thing is just, honestly speaking, just fit in. Just become part of the team. Get those quick wins that we mentioned earlier.

Become part of the team. Once you've been here and people respect you, only once you really rock it, you can start saying that, look, this process that we have, it's taking eight days. I think there's a way we could shorten it to four days. Or I think we could actually, if we tried this thing, we could improve our hiring and engineering. Do we want to do maybe a business review on the biggest deals every quarter?

do you want to try that out? So I kind of think you have to become part of the organism and you have to kind of succeed in it to change it. I think it's very hard otherwise from the outside. Let's say you need a pretty sharp cultural change. And you guys did at Databricks early on where you were very engineering centric, I'll just say. And then you needed a sales organization. And you brought in a sales leader. And you could have as CEO stopped him from bringing what was like a large dose of enterprise software culture into what was a more academic technology-oriented culture. So how did you stop the company from just rejecting, because that was so different. Look, I think that, like I said earlier, companies get arrogant and they don't want to change. One thing that really helps you is failure. Yeah. You guys weren't selling it. You know, it humbles you.

And you realize, you know, I need help. I need a helping hand. I'm drowning here. The database had huge success to 2015, and we had done a great job with the open source software, and it was an awesome company, but we had problems with the revenue. And it was clear that the product-led growth, PLG, that we believed in, we called it Zero Touch at that time, was not working. People, you couldn't just build it when they come.

They weren't swiping their credit cards left and right and paying us. And we could not do a deal that was bigger than 2030K. So it was just impossible. So we needed a big change, and so we need to embrace. But I think one important thing is that insight, the CEO has to embrace it. I knew we had a problem. We had not been able, me included, to fix the problem. And so in 2016, we knew that the shift has to happen.

And it was still a give and take. I was myself a little bit like, you know, do I want to really? So to my CRO's credit, that first year, I told him we're still going to do a lot of the PLG. Yeah. Because PLG is still our future. Yeah. But we're going to also do the thing that you're going to bring in that you know really, really well. But don't forget PLG, it's super important.

It wasn't until he then went at it for one year. and the end of that year suddenly half of our revenue was Enterprise, it was very clear. He's right. This PLD thing is just overrated for the kind of business we have in the kind of market we are in. Then I embraced that change and we put up, you know, a gong

that we would hit when we close the deal. And in fact, I embraced it and the engineers loved it so much that they would steal it and they would go hit and say, hey, guys, you can't do that. This is when we close a big deal. Okay, and like, well, this is a big deal. We just develop software.

It's like, yeah, yeah, but you're like eroding the whole You're like going hitting that thing every 10 minutes just because you're happy. So we had a great thing. And then at all hands, we actually really try to embrace the culture change. For the first time, I had that all hands. 50% of the time, we're going to look at sales deals that we did. And we're going to have the salesperson present how they did. And we kind of motivated both sides.

We said that, look, we're doing transformational change with software. That's going to change the world. But these organizations are not ready to accept data and AI. The people that are going to help us get that software into the doors there for the large enterprises are the sales folks. let's embrace it. You know, when executives come in and they are good, sometimes I'll want to bring like a small piece of culture that is just incompatible. And I think that can be very insidious if you're not careful. There are certain things that you believe in as a company that

you've kind of drilled into everybody. And if you bring in an executive who doesn't want to do it, and you don't make them assimilate, then you basically destroy that whole piece of things. And I remember when I was at Opswear, we had been through so much, I was just like, look, maybe nobody gets rich on this thing, but nobody's going to have a bad work experience here. I was just, like, very hard on that. And I was like, everybody's getting a performance review. Like, I don't care. Like, you're writing your reviews.

And Cranny comes in, and he was like, man, fuck you. Like, I don't need to write reviews. So he didn't write the review. And I just, I withheld all the raises, equity, ups everything for his organization. I was like, everybody else in the company got their equity and their money. He's like, why has my team got done? I was like, you haven't written your reviews. And the interesting thing about it, like to his credit, his reviews were the best reviews.

Well, they're competitive, right? In the whole, like, yeah, very competitive. They're competitive people. So, look, I hired an amazing CRO, came in, Ron, right? And took us from zero to billions. But one of the things I heard them saying in one of the meetings was they're like, nah, damn it, it's SPD. I was like, what's SPD?

I was like, no, no, no, nothing. I didn't say anything. And I started digging, what is SPD? Oh, sales prevention department. I was like, what the hell is that? And so, well, the whole company is sales prevention department. They're trying to prevent us from doing our job of closing these deals, engineering, can't build the features. And I said, hey, I added zero tolerance for that.

I went to Ron. I went to all the people. I said, don't ever use that phrase here. It's like zero tolerance here. Because, you know, the big companies form cultures like this. Like big companies were the different departments. Yeah, well, that's against him. Yeah.

It's like the different departments hate each other more than they hates the enemy. So they end up fighting with each other and said, no, we're small company. We're working together. And to their credit, they, you know, they said, no, no, 100%. I'm not going to use that phrase. Like, you know, it's like, no, we're all in it together. We touch on this a little bit, but what are the most common ways that a new leader fails? One is too much, this is not the right way to do things, too much destructive, and we're going to have too much copy-pasting what they saw in their previous company.

But actually, the copy-paste is also an interesting thing in the hiring, because this is where people also make mistakes. They're like, well, do I really have to hire an enterprise software guy to run my enterprise software? Yes, because whoever you're hiring is going to copy-paste to some degree. You need that. You're buying the domain expertise. You're buying the stuff that you don't know. So like if you go and hire like an enterprise sales guy who's selling Google AdWords, he's 100% going to fail. I think when you hire someone, you want them to have seen or done the thing that you need now. And this is, you know, I think how a lot of people fail or how you hire a lot of wrong people. You need to figure out sales. You hire a guy who's been closing $10 billion for some big company. And he's so good, he managed 10,000 salespeople. And you have 10 salespeople. and you have 10 salespeople. You know, like, that's great. You know, that's not going to work.

Really make sure that they've seen the scale you're at and they've done that phase. And really did it. Yeah. That were around the ball. Yeah, exactly. They had the ball. Exactly.

And then there's the people that are like, this person is perfect. Perfect culture match. I think they're great. They can come in and do this. But we have about 500 salespeople and this person has done 100. Yeah.

Have they ever done 500? No, well, once they used to work three years in a company that had 40,000 salespeople. Yeah, that's not going to translate to the challenge. as you have right now at this particular stage. So there's a difference between just running the existing programs in a large company and creating the programs.

Almost like an organizational founder is the way I kind of think about it. Right. Yeah, like the person who works at a company is the person who built the company. And the person who works in an organization is not the one who built it. They really do need to have built it. Yes. Like the right along is not the same. The people that are just purely blatantly trying to call it.

copy paste. Like literally. They weren't a huge organization. They were one of the cogs and they just saw that big cog and they're just saying, look, we need exactly a wheel that big and we need to copy paste it over here. And it's like, yeah, but we don't even need it. We can't even fit a wheel that big in here. Can he run a playbook or can he write a playbook? And writing the playbook. And it's amazing when you actually interview for that, like, okay, tell me what you did at your last company exactly. How is it built? How was it constructed? Okay, now imagine like you're here. How would you write this playbook? That'll screw people up if they've not done it, right?

Like, if they only saw it, it's a very tough question for them. By the way, that's how we found Ron was on that question. The way he answered that question for us, even though he came from a company we'd never heard of, selling a product that didn't make any sense. That's how he got into the Databricks interview process. And he was like the most left field candidate, but he ended up being the best candidate. You know, I remember there was a question we had for him, which was, you know, I need to invest in sales enablement, is what he said.

Yeah. And I teach people to sell this product. And we said, well, we don't have time for that. We're a very fast growing company. And we're, you know, we want to get to these targets and so on. We don't even time for enablement. We're going to grow so fast. We're going to hire so many people that there's, like, just no resources.

Because we thought he's a big company guy. He's going to come in and bring in all these different processes. And he said, okay, if you want to grow that fast, then I need to do way more sales enable than I said. Yeah. There's a way, that didn't make any sense. And he said, no, because we have all these new people who want to hire. They're clueless.

They're going to show up here at the elevator and they're just going to look around and say, what am I selling here, right? We've got to enable them. So then we've got to double down even more on enablements. Yeah, so double that budget. And if you had hired a guy who had only knew how to read a playbook, he would have agreed with you. Yeah, 100%. Yeah, so do the five whys?

Just keep asking, okay, so why do you do that? Why do you do enablement? Who runs enablement? What kind of enablement? Okay, what did they do there? And just keep asking the wise. And the people in the interview process that kind of tap out, they're like, oh, that's a good question. I don't know the answer.

I've got to go figure out. You can see that it's very surface level. You've kind of seen it somewhere. And now you're trying to copy-paste it over here. They're probably not going to be able to build it. Whereas builders really can tell you, oh, then where do we start? How many hours do we have?

Yeah, it's like, you know, exactly. Then, you know, there's like a depth. He's done like enablement 15 ways. And then, you know, so keep going deep, deep, deep. Don't put up with surface level answers or just one shot answer questions. Go many, many, many levels deep. That's where you kind of can see how deep they are in the subject area.

All right. Closing thoughts. All right. Any other kind of final thoughts on hiring, integrating, firing executives, dealing with executives? Start early, your searches. Any search for a person has a trade-off. The trade-off between quality of the person and, you know, how fast will you get them, right? So, like, yeah, if I take forever, I can find the best person. Or I can quickly close the search immediately and find someone, but it's going to be a terrible person.

And mistakes are costly. I say mistakes take between a year and a half, to two years. Takes you six months, juries out. Nobody wants to fire someone within six months of hiring someone, right? So you're taking six months. Then you need to have this conversation. You need to reach an agreement. You need to figure out what it is. You need to procrastinate because you want to have the conversation. Exactly. You need to ask 100 people whether should I or should I not. Then once you let the person go, now you have to start a new search. Guess what? The second time, you're more nervous. Now you don't trust yourself in your own instincts because you screwed up last time. Now you hire a new person. Okay, you hired the new person. You finally trust yourself.

Now you've got to ramp the new person to get them back in. Okay, you lost two years. So then how do you avoid that mistake? Start early so that you can kiss a lot of frogs and do a lot of homework, backdoors, really to make sure that you're kind of nailing it. Yeah, that makes a lot of sense. I would say the other thing, particularly for new CEOs, is how do you know what's good? What's a good head of sales? What's a good CFO?

Well, like, the best way to know is actually to talk to a bunch of CFOs. Ask them how they know what's good. what's the difference between a good CFO and a great CFO? How do you know that? How do you interview for that? Like all those kinds of things, that knowledge you only get from, you know, you can learn a lot from interviewing candidates. A lot. And if you start early and you're not even filling the position, then you can ask them whatever you want. Exactly.

And then that ends up being basically the script to figure out, like, what it is. There's a great point. I've seen CEOs who say, I'm going to have my assistant do the backdoor checks, your reference checks. I don't have time for the executive recruiting meeting this week. You know, I'm delegating this. But once we get to the final stages, I'm going to pick, if you're new and you don't really know what a great CFO or CRO or VP of engineering looks like, you should be immersing yourself, spending all the time, interviewing everyone, doing backdoors everyone,

doing dinners with people you can't get. Well, is your assistant going to say to the back door? Is this the best CFO that you've ever seen? Oh, he's not. Who is it? Oh, can you give me her number? Exactly. Okay.

Yeah, yeah, they're never going to do that. Spend the energy, spend the time. This is one of the most important decisions you could ever make as a leader in your company. Spend energy. You can't be spending too much time on this. Thanks for listening to the A16C podcast. If you like this episode, don't forget to subscribe, leave a review, or tell a friend. We also recently launched on YouTube at YouTube.com slash A16Z underscore video,

where you'll find exclusive video content. We'll see you next time.