Tuesday, July 17, 2018

High Growth Handbook! LIVE!

After two years of hard work the High Growth Handbook is now available for sale on Amazon, Kindle, and Kobo. An Audible book will be live within a week or so. The High Growth Handbook is a labor of love. And by “love” I mean “I love that this was easier than launching a startup. Oy vey startups are hard!”.

The High Growth Handbook is based on my experiences working with companies post product-market fit as they scaled from a handful of engineers, and maybe a business person or designer, to multi-hundred or multi-thousand person organizations. The book covers topics like the role of the CEO, hiring and managing an executive team, doing re-orgs, managing your board of directors, buying other companies, raising late stage rounds, and the development of new functional areas like product management, marketing, and PR. 

My own frameworks, observations, and tactical advice[1] reflected in the book are complemented by interviews with some of the leading operators and investors in tech. There are Sam Altman, Marc Andreessen, Patrick Collison, Joelle Emerson, Erin Fors, Reid Hoffman, Claire Hughes Johnson, Aaron Levie, Mariam Naficy, Keith Rabois, Naval Ravikant, Ruchi Sanghvi, Shannon Stubo Brayton, and Hemant Taneja. I personally learned a lot from these discussions and am grateful for the time and perspectives these leading figures in technology and entrepreneurship provided.

The High Growth Handbook is not meant to be read end-to-end, although you can do that if you want (thanks mom!). Rather, you can flip to a specific section that may be relevant to something your company is grappling with, or read through all the interviews at once. Justin Kan summarized it nicely on Twitter.

In the book, I steered away from the canned, generic, useless advice found in your average business book like “A players hire A players”. I also avoided writing a 500 page book on a single concept. Instead I focused on detailed tactics for how to scale recruiting or what specifically to look for in executives. One key thing to keep in mind as you read this book—all startup advice needs to be filtered through the unique context of your own situation or company. The only good generic startup advice is “there is no good generic startup advice”.

The book is being published by Stripe, and in particular, a new experimental publishing imprint called Stripe Press. Stripe was a natural fit as a publisher given their focus on helping entrepreneurs to start and scale enduring companies. My hope is that the High Growth Handbook can be of use to entrepreneurs, investors, and people working at startups around the world. I am excited to be the first in what may end up being a long line of books about startups, business, and self learning—all crucial when kicking off a new enterprise.

Thank you to all the startups, founders, and investors, who have been kind enough to let me be part of their journey. Startups and technology are fundamentally forces for good. Literal hundreds of millions of people have been lifted out of poverty by entrepreneurship and technology and by the ability to obtain and share knowledge, to buy and sell products, and to participate in a global conversation and economy at scale. It has been an honor to be part of the technology world and many of its leading companies. 

I am excited to see what the coming decades bring and what you, dear reader, go on to create. Onwards!

[1] I joined Google at around 1500 people and left at 15,000. I sold my first startup, MixerLabs, to Twitter when Twitter was just ~90 people, and left the company at around 1500 employees. I am also an investor in companies like Airbnb, Coinbase, Gusto, Instacart, Stripe, Square, Pinterest, Wish, Zenefits and others. In some cases I invested as early as just the founder(s), and in others later in the life of the company.

Monday, July 2, 2018

Better Meetings

As a company scales the number of meetings initially grows faster then headcount. With more people comes more coordination. Most companies have bad meeting etiquette, which means an enormous amount of time is wasted. The following steps help increase meeting efficiency:

1. Determine who is necessary in the meeting.
Are there really 20 people needed in the room? Separate the must haves, from the nice to haves, from the politically expedient to be there.

2. Send out an agenda in advance.
What will be discussed? How much time do you really need to spend per topic? Maybe the 60 minute meeting should really be 30 minutes? Like wedding planning, meetings fill the time available to them.

Similarly, what preparation should people do in advance? Is there a document to pre-read or data to look at in advance so people come prepared?

3. Set up (projecting, hangout or conference line, etc.) in advance if you can.
If you are running the meeting and are able to do so, arrive in advance. Dial into the conference line or start the Hangout and start projecting. Instead of wasting 5 minutes in setup with 10 people there, do it early.

If your conference rooms are always fully booked back to back (often the case as the fast growing companies are always running out of space), it is hard to get into the room 5 minutes early. Companies can facilitate this by having an :05 policy. I.e. meetings start at 2:05 but the meeting owner books the room starting at 2:00 so has 5 minutes to set up.

4. Kick off the meeting with objectives.
Review the agenda and purpose of the meeting. Is it to make a decision on a product? To brainstorm a new feature? To review a sales pipeline and prioritize leads? If the meeting does not have a clear objective, you should cancel it. If the same topic is repeated over and over in a weekly meeting without progress, decide if escalation or another method of breaking a bottleneck is needed. The same meeting should not take place 5 times.

5. Assign a note taker.
Who is responsible for taking notes in the meeting? Any meeting with more then 3-4 people should send out notes. The meeting owner can assign/delegate note taker up front.

6. Send out meeting notes.
Meeting notes help the rest of the company know what was discussed or decided. It allows different stakeholders to follow up if they were unable to attend. Notes increase cross-company transparency dramatically [1].

Meeting notes would optimally include:
a. Subject/topic of meeting
b. Date
c. Attendees
d. Actions/decisions
e. Agenda
f. Detailed notes

7. Clean up the meeting calendar ongoing.

Unnecessary regular meetings accumulate like rust on a company. Ask all meeting owners to go through and kill meetings once a quarter. (a) What meetings are still necessary or useful? (b) Who should still attend? People can be dropped and added as well to rebalance who should attend.


[1] There may be legal reasons to not take notes in specific meetings. Consult with the company's GC or external counsel on training for meeting note etiquette.

You can pre-order the High Growth Handbook here.


Thursday, June 28, 2018

Preemptive Rounds

One of the biggest shifts of the last 6 months is the degree to which pre-emptive funding rounds have become the new normal in Silicon Valley. While pre-emptive rounds used to be reserved for celebrity or serial entrepreneur founders, they have recently become almost the default for a subset of companies. I have seen multiple seed companies receive pre-emptive series A fundings in the last few months without any specific milestones hit. Similarly, late stage companies like Bird have seen their valuations skyrocket in the course of months or even weeks. Why all the fuss to pre-empt?

Traditional venture rounds track progress
In a typical venture financing the money is invested behind a big company milestone, or due to an ongoing business ramp. The later the round of funding, the more likely it is to reflect updated progress of a company hitting its user or revenue goals.

As an example, Instagram's March 2010 $500K seed round was at a valuation in the low millions. The investment was behind a team without a launched product.

Instagram's February 2011 series A with Benchmark was in the mid-20 millions market cap which reflected a rapidly scaling, but newly launched, consumer product that had just launched. The launch of the product and early customer traction created a big step up in valuation from the seed round, which was an investment in a team.

Sequoia's April 2012 $50M series B investment in Instagram at a $500M valuation was in a company that had continued to scale its userbase exponentially and whose growth was actually accelerating with scale. Future rounds for Instagram, had it not been bought by Facebook, would likely have tracked this exponential growth.

Preemptive rounds are investments without a catalyst
In each financing round example above for Instagram, there was a clear change in progress or major milestone hit between rounds. In a pre-emptive round, there is no material change in progress between rounds. Rather, the investor is so excited to invest, or believes the company valuation should be much higher than the last investment, that she is willing to push up the company valuation without any new progress or information.

Bird's latest rounds is a good example of pre-emption. While Sequoia led an investment in Bird at a $1 billion valuation, it is rumored Bird is closing another round at $2 billion just a few weeks later.

Why more pre-emption?
The trend to pre-emption is driven by a few factors:

  • Outcomes are bigger then ever before. Technology companies can now get bigger faster and reach billions of online customers faster then ever before. As outcomes get larger, a subset of later stage rounds remain attractive from a return or cash on cash multiple perspective.
  • "Greed" worked.  Alongside outcomes that are bigger then ever, a few VCs also continued to re-up or invest large checks in companies they backed. Investors realized that Airbnb at a $5 billion valuation was actually still a great investment, so why cede that round to new investors? Public successes like Sequoia with Whatsapp and A16Z with Github showed that doubling down on the same companies can lead to outsized returns. This has led some venture funds to take the stance that they want to keep funding their winners the whole way, when before many funds stopped at the series B or C.
  • Bigger funds. More VCs are raising funds over $1 billion in size including Sequoia, General Catalyst and others. Softbank's $100 billion fund is of course the extreme of this. With bigger funds two things happen: (i) VCs want to buy more of the companies they own as they need to own a bigger proportion of the best outcomes to make money on their funds and (ii) a $10 million check from a $1 billion fund is equivalent to a $3M check from a $300 million fund. In other words, a "small check that gives you optionality" is quite large for a megafund.
  • Fewer high quality companies. The ratio of great to so-so companies has been on a negative slope from a qualitative perspective. If you ask the average investor today what are the new break out companies few would have a long list. This is particularly true of consumer where investors will quickly throw money at anything with a heartbeat and a handful of teenaged users. A lot of money is now chasing a few companies. 

While some venture funds are pre-empting gracefully, others seem to be throwing money haphazardly at companies with the hope that if they pre-empt the next Uber, the other investments won't matter. Some funds will do extremely well due to pre-emption while others will see a big negative impact to their returns. Picking, as always, matters. Picking without more data is hard.

From an entrepreneur's perspective, fast, cheap, and easy money with an investor you already know tends to be a good thing. In general, there are few negatives to a pre-emptive round from a founders perspective.

However, if it is the same firm that has led one or more rounds in the past, there are deeper implications.

A founder's plusses of a pre-emptive round may include:
  • Can stay focused on building a company. Without having to go out to fundraise, founders can keep focused on building.
  • Board & investor stability. Typically, pre-emptive rounds do not include a change in your board of directors. Often a founder will take a preemptive round from an investor they already know and trust. In some cases, this will lead to a new board seat (e.g. when going from a seed to a series A) but it will be with someone the founder already wants to work with.
A founder's negatives of a pre-emptive round with an existing investor may include:
  • Investor diversity. Investors are there to help you build your company. If you do not add more investors, you will have a more limited network for hiring, future fundraises, or customer introductions.
  • Investor control. As investors buy more of a company, they may effectively end up with control of multiple rounds of preferred of the company. Depending on the rights you give with each round, it might either benefit or harm the company to have control concentrated.
  • Fewer voices. In general, keeping private boards small tends to be a good idea. If done right, you spend less time on board management and more time on building a company. However, having multiple board members and major investors sometimes leads to stronger discussion and richer ideas for the path a company should be on. Investors may end up balancing each other out with different voices optimizing for different approaches. Having a single large investor may negatively impact this positive dynamic if carried along for too many rounds.
  • Non-competitive round. In general I would suggest a founder take terms that are good enough with investors they would be happy to work with for the next 10 years. Optimizing on valuation doesn't always yield the best outcomes. Pre-emptive rounds are definitionally non-competitive, so as a founder you may or may not get the best price for your round.
You can pre-order the High Growth Handbook here.

Raising Money

Managing Investors

Wednesday, May 2, 2018

Core Cryptocurrency Use Cases

As a market driven investor, I am skeptical of 99% of the crypto projects under development today. That said, there are a core set of use cases with massive market sizes that cryptocurrencies currently fill (and in some cases will soon fill)[0]:

1. Store of value (SoV) & investment
A digital store of wealth such as bitcoin can have multiple advantages over traditional ones such as gold ($7 trillion plus asset), USD, art, or land. This includes seizure resistance (a badly acting government or thief will find it hard to steal) and ease of transport (cryptocurrencies allow you to cross a border with literally a billion dollars in your pocket or mind).

This use case is already a real one for cryptocurrencies and generationally many millennials view cryptocurrencies as a digital asset to own. The primary drawback to cryptocurrencies as SoV is their volatility, which should decrease with adoption, liquidity, and derivatives. Until volatility decreases cryptocurrencies will still be used as an investable asset and partial store of wealth. Many people are willing to trade crypto price volatility for security or avoidance of high inflation in unstable economic or political regimes (see e.g. Venezuela). Similarly, some governments may want to hold assets divorced from the action or whim of other government-driven currencies. This is a multi-trillion dollar opportunity.

2. Offshore capital: Private assets & payments
Over $20 trillion dollars are believed to be stored in the Cayman Islands and in Swiss bank accounts. These offshore accounts are used due to their discretion and privacy. Digital privacy tokens like Monero and Zcash will subsume this use case over time[1].

On a related but different note, privacy tokens may be well optimized for grey or black market use cases. That said, it should be possible to build a privacy coin whose primary use case is discretion of assets (Cayman Islands/Swiss accounts) versus nefarious purposes (buying drugs online).

3. Money wrapped in code: Securitization platforms & asset ledgers 
A wide range of assets in the traditional financial system are value wrapped in contractual code - for example a stock certificate (or electronic form thereof) is really just contractual ownership of future cash flows or value of a company. Similarly, escrows, titles, loans, mortgages, trusts, wills, and derivatives are all value wrapped in contracts. Contracts are really an analog form of code. Smart contracting platforms like Ethereum, or regulatory compliant approaches like Harbor, are going to take analog contracts and convert them to digital ones. We should see lending, options, hedging, and other aspects on blockchain.

The nearest term example of this are ICOs, with $5.6 billion in ICOs are thought to have been raised in early 2018. Many of the tokens sold in ICOs are ERC20 tokens based on the Ethereum smart contracting platform. This is the earliest large use case in the conversion of financial contracts into code running on a blockchain, as well as unlocking global 24/7 markets. Smart contracts today are most interesting in their ability to create massive crowdfunding markets for all types of assets.

4. Persistent digital goods 
Adoption of ERC721 based persistent digital goods is early (see Cryptokitties), but this area will accelerate in the coming years as traditional gaming talent enters this market. This market will be smaller then the three other markets above, but it will be in the billions of dollars in its own right. Example applications may include games, esports, collectibles, and eventually fine art.

In summary, there are multiple large, multi trillion dollar use cases for cryptocurrencies today as financial products to store wealth, to maintain privacy and discretion of assets, and to convert analog contracts to smart digital ones (money wrapped in code). Additional, a smaller but real use case exists in persistent digital goods on blockchain.

Are there any markets I missed? Let me know on Twitter.

Thanks to Avichal Garg and David King for comments on this post.

[0] Payments are an obvious large use case cryptocurrencies were originally designed for. Bitcoin and Ethereum are used to buy into ICOs or to transact on exchanges today, while Monero is adopted on some grey or black market sites. However, high scale payments for cryptocurrencies have not taken off yet.  Part of this is due to technical limiations (hooray for Lightning!), part of it is due to price volatility (hence the call for stable coins) and part of it is regulatory (tax code or other issues). I do think payments will be a major area in the future, however have focused this post on current or nearer term uses.

I also think a lot of crypto projects are too early today. More of the technology and infrastructure in general need to be built out. Just as the first internet wave contained ideas that did not work out in one form, that came back and worked ten years later in another form (e.g. Webvan and Instacart), crypto will have similar failures today that will be successful 10 years later as a new approach.

[1] You can also imagine e.g. integration of Bulletproofs, zk-STARKs or zk-SNKRs into bitcoin or other chains as well taking on this use case. For now it seems these may be different (but overlapping) use cases with different regulatory implications. There are also interesting new protocols like Grin and Signal is workin on Mobilecoin. This is an area to watch.


Monday, April 16, 2018

Sell Your Startup To A Breakout Company

A startup CEO recently pinged me about an offer their company had received from a larger, fast growing, breakout company. He did not know how to assess the offer. Here are some of the components a founder should consider when receiving an offer from a breakout company:

Financial considerations.

If you have a $100 million offer from a break out company, it is actually worth a lot more. Considerations:

1. Company upside multiplier. 
Suppose you had an offer from Airbnb a few years ago when it was worth $10 billion.  If Airbnb ends up at its current valuation of ~$30 billion (I think it could be worth much more) then the $100 million offer may turn into $300 million or so at exit as Airbnb itself has grown 3X (ignoring dilution).

2. Dilution.
If instead of selling to Airbnb, you kept going as an independent company and needed to raise money, you would experience further dilution. For example if you still needed to raise a series A, B, and C and issue more options to employees, you may dilute another 30-50%. Assuming that you will dilute on the low end of this (e.g. 25%) you will have needed to exit on your own for $400 million later to achieve the equivalent of the $100 million exit to Airbnb in the past (3X multiple, and then 25% dilution). If you experience 50% dilution then the Airbnb offer was worth $600 million.

3. Risk adjusted time value.
One key element is timeline and risk. The average M&A exit takes ~6 years from founding. During that time a lot can change in the industry. In parallel a Stripe or Airbnb has a dominant enough position that momentum will continue to carry them forward and likely increase valuation. This means that on a risk adjusted basis exiting to a breakout company is, for high dollar acquisition offers, the right thing to do. For a lower value offer (e.g. $5 million exit) depending on your financial situation it may make sense to keep going unless you are running out of money or energy.

The decision in part depends on where the acquirer's own valuation is likely to go. For example, when we sold my last startup MixerLabs to Twitter we assumed the company had a 5-10X in upside as a minimum (it is now almost 20X more valuable).

4. Vesting.
The financial downside of an acquisition offers may lie in vesting. If you leave the company that buys you before you fully vest, you may lose much of the value of the acquisition. When thinking through the value of a purchase, you should consider whether the acquirer would truly be a long term home for you.

5. Other considerations. 
Selling your company is not a purely financial decision. Impact your product could have on the world, the joy of building your own company (or selling and learning from others), who you get to work with, and other factors all matter. However, the purpose of this post is the financial aspects.

Ease of sale

Many founders fail to consider that the lower your valuation, the easier it is to sell your company. M&A offers tend to fall into a set of ranges. The higher the range, the harder it is to exit and the fewer companies can afford you.

  • <$20M. Companies with $1 billion or more can make a fast decision to buy others in this range.
  • <$100M. Companies worth $5 billion or more can make a fast decision in this range. At less then $1 billion in valuation $50 million to $100 million equates to 10% of a company and is a major buy requiring a lot of agonizing and board discussion.
  • $100M to $250M. OK for a $10 billion company but will take real discussion and back and forth. Only will happen if truly existential or strategic for a $1 billion company.
  • $250 to $500M. At this point only companies worth $5 billion or more can even consider it, and you will generally need valuations above $10 billion in many cases to pull it off. This will require real debate. For a Google or Facebook scale company, some of these buys can still happen quickly as it is small as a proportion of market cap.
  • $1B+. Acquisitions of this size are very rare and generally requires extensive discussion and few buyers can get there. In general you need to be worth tens of billions to buy a company worth a billions plus, and you must hold strategic value to the acquirer. Since exits of this size are broadly reported on they seem common. In reality billion dollar startup acquisitions are rare.

Example exits. Instagram versus Friendster.

Both Instagram and Friendster were companies that had early acquisition offers. Friendster famously turned down a $30 million offer from Google in 2003 (probably worth billions today) and then eventually sold for $26 million in 2009 after raising tens of millions of dollars. While not selling Friendster at the time was the right decision given its traction, in hindsight enormous upside was lost for the founders. In contrast, Instagram sold to Facebook in 2012 for $1 billion. With Facebook's appreciation this is now many billions of dollars. However Instagram would probably be worth tens of billions today as a stand alone. One could argue Instagram sold too early, although the founders and investors obviously did well.




Tuesday, April 10, 2018

Product To Distribution

Startups tend to succeed by building a product that is so compelling and differentiated that it causes large number of customers to adopt it over an incumbent. This large customer base becomes a major asset for the company going forward. Products can be cross sold to these customers, and the company's share of time or wallet can expand.

Since focusing on product is what caused initial success, founders of breakout companies often think product development is their primary competency and asset. In reality, the distribution channel and customer base derived from their first product is now one of the biggest go-forward advantages and differentiators the company has.

This pattern of distribution as moat and competitive advantage was used ruthlessly by the prior generation of technology companies. Microsoft bought or built multiple franchises including Office (Word, Powerpoint, Excel were all stand alone companies or market segments), Internet Explorer, and other products and then pushed them down common business and consumer channels. Cisco has purchased dozens of companies that were then repositioned or resold to their enterprise and telecom channels. SAP and Oracle have exhibited similar patterns of success.

Of the most recent crop of technology giants, Facebook and Google realized the power and importance of distribution early in their respective lives. While Google's reputation is that of organic growth, in reality the company bought placement on the Firefox homepage, as well as paid hundreds of millions of dollars per year to have Google search toolbars distributed via download with other applications. Google then used its search customer base to bootstrap other products and distribute Maps (Where2 acquisition), Gmail, Chrome, Docs (Writely and other acquisitions), and other products. Similarly, Facebook invested heavily in growth efforts and acquired multiple companies for email scraping (Octazen), low end feature phone distribution (Snaptu acquisition) and other approaches. It then used this distribution to help accelerate acquisitions like Instagram to the global market.

In all cases, the steps to success have been:
1. Build a product so good that customers will use you over an incumbent. Build a large userbase on the back of this first product.

2. Be aggressive versus complacent about customer growth early. Outsized companies like Google, Facebook, and Uber were aggressive and calculated about growth from their earliest days. In contrast non-metric driven, less aggressive companies failed to reach the next level of success. Too many companies get complacent about distribution if their core product "just works".

3. Realize your customer channels are a primary asset of the company. Build new products or buy companies and push them down your sales channel. Uber has been trying to do this more recently with Uber Eats and its Jump acquisition.

4. Realize that your company will not be able to build everything itself. Buy more companies and push them down the channel. Most companies need to overcome internal resistance to buying companies. A common set of arguments are made about how easy it would be to build something in house instead, or integration challenges will be too hard. In reality, breakout companies never have enough resources to do everything and should buy more startups.

The smartest companies realize they are also in the distribution business, and will buy (or build) and then redistribute a range of products.


Thursday, April 5, 2018

How To Do A Re-Org

When I was at Google, it grew 10X from 1500 or 2000 people when I joined to 15,000+ people when I left 3.5 years later.  My startup MixerLabs was acquired when Twitter was ~90 people, and I left Twitter 2.5 years later at 1000+ employees. 90% of the people at Twitter had not been with the company just 2.5 years earlier, and Google added 13,000 people in a little over 3 years.

If your company is in hypergrowth, you will be doubling the team every 6-12 months on average. At that pace you could go from 20 to ~300 people in 2 years and to 500 or 1000 people in 4 years. You will be adding new functions rapidly (finance, HR, legal), potentially expanding internationally, while product roadmaps will expand and new areas will be launched or acquired into the company.

You will effectively be working at or running a different company every 6-12 months, with most of the people at the company having joined in the last 12 months. 

As the company scales and increase in complexity you will also need to change the organizational structure of the company to reflect new executives, new functions, more employees, and changing alignment against your market and product. In other words, re-orgs will occur at the company frequently.

Early on many of the reorgs will be at the executive level and then cascade down. As you add more functional areas, there will be finer division of executive roles. If you add a CMO or other CX-level person then some of the executive roles may consolidate under that individual.

Once you hit 500 to 1000 people, you should expect fewer company level re-orgs and many more interfunctional re-orgs. For example a change within the structure of the sales team, versus changes across all teams simultaneously. Some teams such as sales are more likely to re-org frequently at that point as they scale, while others like product and engineering tend to be more stable. Part of this has to do with where head count grows and needs change most rapidly in a company as it switches from being solely product-centric, to focusing more on go to market. The biggest cross-company re-orgs later as the company scales will occur when changing product/engineering/go-to-market simultaneously, adding new product areas or acquisitions, if a company flips from a matrix to business unit-like organization, or flips between centralized and decentralized internationalization.

Early on, you as CEO will need to be adept at re-orgs. Later as re-orgs shift more frequently to functional organization, you will need to make sure your leadership team knows how to approach them. Most companies and new managers screw up their first re-org or two, causing unnecessary pain in the organization. Below is a simple guide to re-orgs.

1. Decide why you need the new org structure.
Determine what the right structure is and the logic for why this is better then before.  Do you need renewed focus on a specific area?  Are there collaboration issues?  Has the team grown dramatically and now needs additional management?  Has something changed in your market that means you need to re-align functional priorities or the set of people working together?  Spell out to yourself the logic of why you need to re-org first, and then think through the leadership and org structure that works best.

2. Org structure is an exercise in pragmatism.
Who on your leadership team is overloaded and who has bandwidth?  Who is building out a great management layer?  What areas would fit well together?  Sometimes, there is no single right answer, and you need to balance managerial bandwidth with the logic of the situation.

As you determine who needs to work on what, and the proper reporting structure, remember that nothing you come up with will be 100% perfect and that is OK.

Should you have cross functional product and eng organizations or verticalized product units?  Should international be distributed or centralized?  These sorts of questions come up all the time as companies grow, and some companies flop between structures over time (Oracle supposedly flips its international org every few years).

Relatedly, reporting is an exercise in tie breaking - i.e. you want people who are likely to disagree to eventually report in to a single tie breaker (this may be the CEO, or it may be someone lower down in the org).

3. Get buy in from the right people before implementation.
If possible, you should consult with a handful of executives whose functions would be most impacted by the change.  They may have good feedback about how e.g. changing the org in your function impacts their own functional area (e.g. changing the org structure for product may impact how engineering and design are structured).

Re-orgs should never be open conversations with the whole company (or a functional area) about what form the new organization structure should take.  This only opens you up to lobbying, internal politicking, and land grabbing.  It also prolongs the angst - re-orgs should happen swiftly and with as little churn as possible.

4. Announce and implement the re-org soup to nuts in 24 hours. 
Once you have decided what form the new organization will take, discuss it with your reports in their 1:1s.  Your executives should have a clear plan for how and when to communicate the changes to their team members.  If there are key people deeply affected or likely to be unhappy with the change, you or one of your reports can meet with them either right before or right after the announcement to hear them out and re-affirm the logic for the changes.  

You should never drag out a re-org or pre-announce it.  E.g. don't announce "this week we will re-organize product, and next month we will change engineering".  If possible, all elements of the re-org need to be communicated and implemented simultaneously. If you pre-announce a portion of the re-org, that team will not get any work done until the re-org happens.  Instead, there will be hushed conversations in conference rooms full of gossip and speculation, crazy rumor-mongering, and executive lobbying.

5. Every person on the leadership team should be briefed on the re-org and be ready to answer questions from their team about.  If the re-org reaches or impacts enough of the company, the executives of the company should be briefed ahead of time.  Write up an internal FAQ if needed and circulate it.

6. Remove ambiguity.  Know where ~100% of people are going.
Don't do a partial re-org.  When the re-org is announced, you should know where ~100% of people are going if possible.  The worst possible situation for people is to not know what their future entails.

Make a list of the people most likely to be unhappy with the change and reach out to them quickly after the announcement, or speak to them before the change if necessary.   Make sure to later be accessible to these people so you can explain the reasoning first hand.

7. Communicate directly and clearly, and compassionately.
Don't beat around the bush when doing the re-org.  Explain in clear language what is happening and why.  Listen to people's feedback but be firm about the change.

There will always be people who are unhappy with the shift in org structure.  They may feel passed over for promotion or demoted, even if this is not the case.  Listen carefully and see if you can meet their needs in the future.  However, keep backtracking to a minimum.  You are making this change for a reason, and if you start making exceptions to the squeekiest wheels you may reverse the whole reason you are making the change, as well as show people you are open to being politicked.

Just like letting people go, a re-organization can be unpleasant. There will undoubtedly be people disappointed by their new role or diminished responsibilities. If done right however, your company will function more effectively and be aligned to win. Re-orgs have to occur for the long term success of the company.  

Hiring Employees and Executives


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