Build A Strong Middle Management

Managers backlit

One of the most important elements of scaling a business is you must develop a strong middle management layer. Often when a company first starts to expand, people are made managers somewhat haphazardly. Perhaps they are the least worst for the job, the most outspoken, the first hired, the tallest or some other random criteria. Sometimes people become managers without ever being told what that entails. Some figure it out. Many do not.

Yet, the middle management layer is the key to scaling a company. If you don’t have a solid front line management and second level directors, you are unlikely to build a high-performance culture, no matter how good your executive team is.

Why is that? At a fundamental level, the middle managers outnumber the executives. They also have more direct impact on the work of their teams. So the span of influence of the middle managers is greater than that of the executives. You can come up with all the great ideas and strategies at the executive level, but without buy-in and leadership from front line managers, very little will get done.

So it is critical that you develop the performance of the middle managers. Their influence and abilities will determine whether your company will scale to great heights or whether you will be a company with brilliant strategy and lousy execution.

The guiding principal should be to push as much decision making as you can further down into the organization, close to where the action is. The idea is that those closest to the problem usually have the best context on how to solve the problem. You want to empower front line managers to make the decisions on what work gets done, how to prioritize and when to make exceptions.

But, wait a second — how can you trust these inexperienced managers to make decisions?

It helps if you have a meaningful set of values and principals that guide your operations. These can’t platitudes. They must be guidelines that will actually help people.

As an example, at Gatsby one of our values was to prioritize the customer. But we didn’t just talk about it, we lived it. We would go the extra mile to help customers out when they were going live into production with our product. Sometimes that meant 5am calls with our engineers and managers working side by side with customers. It won the customer’s trust and support. It also demonstrated inside the company, that we were serious when it came to providing great service. And if a customer was unhappy with the service, for whatever reason, we would let them out of their contract. And it wasn’t me making these decisions. It was the front-line managers.

It isn't easy to be customer focused. But over time, we turned it into a competitive advantage. We often won customers from competitors because they felt screwed-over or trapped into contracts that left them angry. Everyone in the company understood the competitive value of helping our customers. They saw that the managers and executives focused on customers, so they did, too. We gave examples in our regular town hall meetings. Values like customer focus were part of our annual review process. When someone was promoted, we showed how they helped customers. This encouraged employees to take initiative themselves, without having to ask for permission.

At Zendesk, I remember one time Mikkel the CEO asked me “Why do I have a line outside my door every morning?” It was because he was letting people escalate decisions to him. With every decision Mikkel made, he was reinforcing the behavior, instead of encouraging people to make decision themselves.

I never like it when people bring me decisions that they should handle themselves. It makes me anxious because they likely have more context than I do. And often, by the time the decision gets to me it’s become quite a thorny customer situation or a struggle between two different departments. If I can, I will ask questions to elicit more information, discuss the tradeoffs and encourage the manager to make the decision based on our values.

Scott, our director of Finance at Zendesk came to me one time and asked me to implement a discount approval schedule, along the lines of sales reps could approve up to a 10% discount, managers 20%, directors 30% and perhaps the VP up to 40%. Anything beyond that would require my approval.

I said no.

Scott was stunned. “What do you mean?” he stammered.

I told him we didn’t need a discount schedule. I trusted the sales VPs and their managers to implement whatever discounts they felt were necessary.

“So you’re saying if Matt wants to discount the product to 90% you are ok with that?”  (Matt ran our European operations and was one of our most trusted executives.)

“Yes,” I said. “Matt is an experienced guy. He’s not going to discount something if he doesn’t need to. He’s also not likely to do anything radical without discussing it with me. He runs his region and he knows his customers and the market in Europe better than we do. So if he needs to provide a discount, he’s the best person to make that decision.”

Scott walked off infuriated. He was used to a command-and-control model where headquarters made the rules and slapped people down when they got out of line. I understood where Scott was coming from. After all, that was the model at every large software company, including Salesforce where Scott had worked previously.

But the role of an executive is not in approving things. The goal is to add value. The best way to do that is to create a resilient, high-performance culture. One of the ways to do that is to empower your front line managers and executives and teach them to make good decisions. If people want my input, I provide it. But I don’t hire people so that I can second-guess them. I want managers to grow in confidence so that they are making good decisions, developing action plans and communicating.

In my experience pushing decision making close to the action is the best way to operate. Most people will think things through when it’s their call. I want to cultivate an organization so that when the stuff hits the fan, managers don’t panic and instead they muster their problem solving and communications skills to tackle the problem. And they can’t do that if they’ve never been given the responsibility and trust to make decisions.

How does your organization make decisions? What decisions come your way that could be handled by someone closer to the issue?

Setting and Measuring Objectives


One of the things that I see routinely in early stage startup companies is a lack of accountability around execution. Sometimes this is because there are unclear objectives. Or sometimes there’s a process around objectives which has become dysfunctional or fallen by the wayside.

When I joined Duo Security, the founders Dug and Jon were proud of having an OKR (Objectives / Key-Results) system in place. But as I went around the company to speak to various managers, it became evident there were problems. People wrote down all kinds of ambitious objectives at the beginning of the quarter, but then no one looked at them again until the quarter was over. There was a perfunctory assessment of the results, they were shared in an all-hands meeting and life went on, un-impeded by the objectives. 

OKRs were originally developed at Intel and then became more widespread in the startup world after Google used them. Unfortunately, somewhere along the way, OKRs were corrupted. One of the main problems that I discovered with startups using OKRs was the belief that objectives should be extremely ambitious (also known as “stretch goals.”) Therefore, if you only got 70% of your objectives that was considered a good outcome. I am not sure if there are other disciplines where 70% attainment is graded as 100%. 

Unfortunately, this is a primary source of OKR dysfunctionality. Because it can lead to an almost random de-prioritization or dropping of 30% of the objectives. What happens if the Engineering team commits to an ambitious set of features to be delivered in the quarter and then mid-way through the quarter drops 30% of them? What if Marketing spent the first month of the quarter working on launching those capabilities and instead dropped some other features from their list? And what if Sales has been training people on new features that no longer exist? 

It becomes quite clear that by being overly ambitious, we have created a lot of thrashing across departments. The intersection of what needs to be done is hampered by sub-optimal decisions made at a departmental level. 

The solution at Duo was to create a less ambiguous process and brings a higher-level of clarity and coordination across departments. It begins by having a small but clear set of objectives at the corporate level. In an early stage company this likely includes things like:

  • Launch new Enterprise edition by July 15

  • Expand into EMEA with translated product in German, French

  • Improve reliability by having no unplanned downtime 

  • Raise Net Promoter Score (NPS) to 30 or higher

  • Generate 1,000 MQLs and sales pipeline of $2m

  • Generate $1m in new bookings

Each department that worked for me (which was initially sales, marketing, product, customer service) would create their departmental objectives, taking into account the overall company objectives. However, we were not obsessed about forcing departmental objectives to line up with specific corporate objectives. Sometimes a departmental objective is just its own thing. Worrying too much about which initiative departmental goals align to can obscure the more fundamental decision: is it worth doing or not? 

Although there are lots of different tools that you can use for writing and managing goals, in my experience the tools don’t matter. (And in fact, fancy tools with too many capabilities can add more confusion, for example surfacing debate about how to weight various objectives.)

I like to keep things simple.  Write out the top 8 or 10 or 12 objectives in a text document in an enumerated list. I weight them all equally. So if one goal is substantially bigger or harder than others, consider breaking it into two. The objectives should be SMART, e.g. Specific, Measurable, Attainable, Realistic, Time-based. Most fundamentally, at the end of the quarter, we should be able to determine whether the goal was completed or not. I like to make sure that executives have skin in the game so we tied half of executives bonus to be paid based on company objectives (usually oriented around the Annual Recurring Revenue, or Sales bookings) and half based on attainment of their departmental objectives.  

I also make it clear that the executives must coordinate with their colleagues across departments. So, for example, the head of sales and the head of marketing must be in agreement about what are the appropriate objectives around lead generation, sales tools, training and so on. It helps to reinforce the “client” relationship that exists between departments.  That is, I want the head of marketing and the head of sales to recognize that a big part of the marketing department’s role is to help sales close more, bigger deals faster. I want them to work out these things together rather than throwing it over the wall, or worse, sending it up the organization to the c-level executives to determine the appropriate trade-offs. If the heads of two departments can’t work together on the same side of the table to prioritize goals, then its unlikely that people in their departments will work together either. The executives must set the standard for collaboration. (If they can’t, they probably shouldn’t be in the company.) 

My direct reports are usually fairly senior, so I tell them if they get 80% or higher of their objectives, life is good and their bonus will reflect their accomplishment. At 70% it means we did not set the right objectives or I did not manage them well enough, so I will manage them more closely. At 60% or below, they can’t work for me. Since I also say this in the interview process, it helps candidates who are not goal-oriented or do not want to be held accountable to opt out of the process. 

However, I try to be flexible in one respect. I tell people that they can come to me any time during the quarter and if there’s something they set as a goal that they view as no longer useful to the company, we can strike it from the list. However, we don’t drop something because it is hard, only because it’s no longer the right priority. In my experience, it’s fairly rare for people to take me up on this, but it prevents people from working on something they realize is no longer important. I also remind them that they cannot come to me at the end of the quarter and say the accomplished a whole bunch of other work instead of what we agreed to.

It’s good to follow up with people mid-quarter or in some cases, monthly, to review their progress on the goals. This is an important reminder process sometimes things have either not started or we’re not yet seeing good results. It also helps frame a conversation around the objectives, what is blocking them, and how we can increase the likelihood of success. 

Setting objectives at the company level and even the departmental level is not easy. It requires focus and discipline. Often high-growth companies are filled with people who are ambitious and want to do lots of initiatives. Most organizations in a growth phase benefit from doing fewer things better rather than being spread too thin on too many things. You have to say no to some things. 

Of course, there are many more things that get done in a department than the eight or ten top objectives. But it helps to identify what are the most important items that will move the company forward. 

I have found that if you roll this kind of framework for setting, measuring and rewarding objectives at the top level after one or two quarters, it can be rolled out more broadly, to the next level of management. I would not suggest rolling it out out across the entire company all at once. When rolled out too quickly, it can easily lead to chaos at the end of the quarter with employees chasing down their colleagues in other departments to do work in pursuit of “their” objectives. It is better to take a measured approach. Get good at setting objectives at the departmental level before you expand broadly.

How does your company set goals? Does everyone know the overall company goals for the next quarter? How often do you follow up on the goals? 

Get Your Positioning Right


One of the topics that comes up a lot in startup companies is around positioning. As in, “we need to hire a marketing consultant / guru who can help position our product.”

Positioning is super important, but it’s not something that can be done after the fact. You can’t build a boat and position it as a car. It works best if you think about how you want to position your product (and your company) before you build it.

While there is some art to all of this, at a minimum you should answer the questions:

  • Who is the product for?
  • What problem does it solve?
  • What are the competing options customers have?
  • How does your product solve the problem better than any others?

There is a huge discipline in modern product management around “jobs to be done” which can help you build a good perspective. If someone buys your product, what is the job they are hiring your product to do? This works equally well for consumer products as business products.

You must focus on how your product is the best and how you want it to evolve over time. Keep in mind “best” is in the eye of beholder. It has to matter to your buyer.

For a CIO buying a SaaS product “better” might mean:

  • Fastest implementation time
  • Easiest for users so there’s less training
  • Most secure / least risk
  • Most advanced reporting
  • Integrates with the broadest range of products

When you start, you might only be better in one way. But as you build your product strategy over many releases, it’s good to continue to concentrate your strengths.

Positioning is by no means easy. But there is a template I have used many times. This came from some “bullet-proof positioning” workshops my friend and colleague Jeff Wiss ran for dozens of different companies including MySQL, Duo Security and others.

It’s based on a deceptively simple template to factually describe a product’s key attributes. Positioning written in this style is not intended to drive a tagline or creative marketing. Rather it should be used to evaluate whether your marketing is “on message” to your target audience. 

Here’s the template:

To Target Market, XYZ Product is the Frame of Reference or Category that Point of Difference because Justification.

Here’s how Fed Ex’s early positioning would be described in the template:

To deadline-oriented business people, Federal Express is the overnight package delivery service that is the most reliable because of its sophisticated package tracking system.

The key point of positioning in this way is to identify a singular vector of differentiation and the supporting proof or feature. In the above example Fed Ex could show they were the most reliable by pointing to their sophisticated package tracking system. This was the proof behind “how” they were able to be more reliable. This positioning worked for Fed Ex because their customers wanted to make sure that if they sent something via Fed Ex it got there the next day. Otherwise, they would have just sent it by regular postal service.

Of course, the positioning template is not the slogan Fed Ex used in their print and television advertising. They used a creative embodiment of the position: “When it absolutely positively has to be there overnight.” Which resonated emotionally with the buyer.

However, if you start by writing the tagline, it’s almost impossible to get to clarity. Instead you will likely end up arguing over the adjectives for hours “wordsmithing” the tagline until everything sounds the same.

Here’s a second example template that illustrates Amazon’s early positioning:

To people that like to read, is the online bookstore that is the best place to purchase books because it has the widest selection.

The creative rendition was: The world’s largest bookstore. That’s a very focused message for people who are looking for a wide range of books they might not find at their local mall store.

Finally, here’s the positioning statement that we developed for MySQL:

For web developers and DBAs, MySQL is the world’s most popular open source database because it reduces the Total Cost of Ownership by 90%.

While the template is simple, it can take many hours to work through an exercise in positioning. Jeff and I led several such workshops when MySQL was acquired by Sun Microsystems in order to help other teams throughout the company improve their positioning. In many cases it resulted in greater clarity for the team about what their appeal was in the market place.

However, in a few cases, it became apparent that positioning alone was not going to be sufficient. I remember when we met with one of the hardware server teams. We went around and around for a long time when finally I asked what I hoped would be a question to get them enthused. I asked “How will you win?” 

After a bit of hemming and hawing it was clear that no one on the team thought that they could win. Their product line had suffered from two years of delay and was far behind the competition. Commodity Intel x86 servers were destroying the traditional price/performance ratios and no one wanted to pay Sun’s premium prices for higher levels of reliability. That said, there was still an installed base who would continue to buy Sun’s servers. So we helped them focus on that. It was a grim reminder that no amount of positioning can make up for a product that is not competitive.   

The most important thing about positioning is to focus your efforts on what makes your product uniquely valuable to your customers. When done right, positioning acts as your North Star to provide a clear direction in which to expand your company’s capabilities for many years.

How would you describe your company’s position using the template above? If someone goes to your home page is it obvious within 10 seconds who the product is for and who it’s not for? Is it clear how it’s better than the competition? Does everyone in the company understand your positioning?

Does your positioning stand out? Let me know by posting a comment below.

What Does Your Brand Stand For?

Mac hello 3

The early days of my career were in Product Management and I eventually became a Vice President of Marketing (later title inflated to Chief Marketing Officer.) But I never worried about things like company logos, colors and taglines.

I had and still have a strong bias that in a startup, company strategy means product strategy. Brand is important, but we must not get confused about what it means.

A brand is the promise that a company makes combined with the experience customers have.  So if you ask me if I like a brand, it depends very much on my experience with the company’s products. The Apple brand, particularly in the first few decades, stood for innovation, ease of use and creativity. Over the years, Apple invested extensively in its brand advertising to support these ideas. Their advertising, in print and on television to launch the Macintosh supported this idea. It was a computer “for the rest of us” meaning, for non-technical people trying to do creative work. 

However, my perception of the Apple brand is also grounded in my experience (and probably many people’s) with their actual products. The Mac was easier to use than the contemporary DOS-based IBM-compatible personal computers in the mid 1980s. There was an elegance to the hardware and software design that elevated the product experience, especially when compared to the very utilitarian computers from IBM, Compaq and others. Apple clearly cared about it’s product design, in a way that other companies did not. Apple products were in the same league as icons of design such as the Fender Stratocaster, Bang-Olufsen stereo equipment or Ilya coffee machine. And like those products, you paid a premium for that experience.

Later, when Apple stumbled, and its products were not very competitive, the brand suffered. Windows machines eventually got to a comparable level of ease-of-use and much higher levels of performance using commodity Intel processors. In part, this was due to a virtuous cycle from the “Wintel Duopoly” of Microsoft and Intel such that every year or two CPUs got faster, memory got cheaper and more and more applications were written for Windows. During the 1990s, Apple consistently lost market share and as they did, more and more of the innovative software was written for Windows rather than the Mac. Ultimately, Apple’s market share fell to below 5%.

It’s not clear what the Apple or Macintosh brand represented during this time. As many people did, I abandoned Apple in the late 1980s and had become a regular user of Windows machines for the next twenty years. But I can tell you that the Windows brand was strong on attributes like high-performance, good value and fun. After all, the best software, including games, were running on Windows, rather than the Mac.

When Apple fell behind, it was not because there was something wrong with their logo. It was because their products no longer had a unique and valuable position in the marketplace. Apple’s brand marketing people could have shouted from the rooftops “Our products are better…” but the market response was a clear “I don’t think so!” as people rushed to wait inline to buy their copies of Windows ’95. (Yes, that actually happened!)

Astute readers will of course know that the situation didn’t stay this way. The industry is always changing and evolving and new product innovation can surface changing billion dollar markets.

When Steve Jobs returned to Apple in 1997 with the acquisition of his failing company Next, there began a steady improvement in the company that would last for several decades. Jobs focused on fixing the Apple brand. But what he really did, was he strengthened the “promise” that Apple made in creating products that were unique and valuable to people who worked in creative fields. Sure, a Windows machine might be the standard in corporate accounting, but designers, lawyers, writers all wanted something easier to use and more fun.

Jobs cut mediocre, undifferentiated products and focused his efforts on a new and colorful computer called the iMac. It was an all-in-one design that was easy to set up and get going. Over time, Jobs expanded the appeal of the Mac to software developers, engineers, data scientists and pretty much everyone.

Jobs brought out a ground-breaking easy-to-use MP3 player in 2001. In 2006 he moved Apple to Intel CPUs. In 2007 he introduced the iPhone. And in 2010, in failing health, he introduce the iPad.

Jobs re-ignited the Apple brand helping to make it one of the most valuable companies in the world. But it was not a marketing exercise, it was not about the logo, the tagline, the colors. It was about delivering products that customers could not live without.

So when you think about your company’s brand, what is the promise you are making to customers? How can you improve your products and services to better deliver on that promise? There are lots of ways to differentiate your product in the market, but your logo isn’t going to make a difference.

The Cost of Poor Performers

Thumbs down 2
It’s always tough to deal with poor performers. No one likes to manage laggards or to admit to a hiring mistake. When companies are growing at a fast rate (50% year over year or higher), managers will often focus more on recruiting new people than in managing the team they have.

So what happens?

Inevitably, as a company hires beyond its network (of known good people) there will be some number of bad hires. Maybe they bluffed their way through the interview process, or no one checked references.  Sixty or ninety days out, when someone asks the manager how new guy Fred is performing the answer is “the jury’s out.” 

This is nonsense.

If you can’t tell what impact a new employee has had in their first couple of months, it means there isn’t any and in all likelihood there won’t be much improvement down the line. Because if you hired someone who was good at their job (or ideally excellent) you would already be seeing the results immediately.

So now you have the pain of managing someone out. Put together a performance improvement plan, give them a second chance, if it makes sense and get them up or out.

Actually, it’s worse than that.

In any organization that’s growing quickly, once you get beyond about 30-50 people it’s likely there are some people who are not quite getting the job done. Everyone deserves the benefit of the doubt and feedback on how they can improve. This is especially important in an early stage company where much of the culture is implicit and not necessarily documented or understood by newcomers.

In most cases, poor performers are doing their best to just survive and put up a good front. If managers are busy, they may assume their new hires are getting things done and not even notice any problems.

But the new employee's colleagues, with whom they spend more time, are much more aware of who is getting the job done and who isn’t. They might be inclined to help a new employee come up to speed, but they have their own work to worry about. If left too long, the top performers will wonder why no one is taking action with the poor performers.

Few people like to grouse about a peer’s shortcomings. But they all see it. If you’re in an office, they will see it and hear it. In a distributed environment, it will be harder to notice, but sharp observers and hard workers will wonder why Fred is taking so long to do something that they could have handled in a few hours.

If you’ve worked with great people in a high-performance culture, your tolerance for mediocre performers, bureaucrats and talkers starts to fall. And once the number of poor performers gets to a certain level, the best people will leave. If management can’t  tell the difference between good and bad performers, why would they stay? And when you lose top performers, you lose the creativity and drive that is essential in building a great company.

You need to give clear feedback to employees when they are meeting objectives and when they are not. You can’t wait until the end of the quarter or worse, until the annual review process. Set clear expectations: here’s what you need to deliver in order to continue working here. Follow up in writing. Help them improve. But remember, as a manager, you are the coach. You have a stopwatch, you set the goal, but they must run the mile.

I have a very high expectation of employees. I want everyone to be excellent in their job, whether they are a product manager, a programmer, a sales person or an administrative assistant. So the two questions I ask are:

  • Are they excellent?
  • If not, can they become excellent?

If they can’t become excellent, I would rather cut them loose and invest in someone else with higher potential. In all the years I have helped managers with these decisions, no one has ever come back and said “I wish I’d given them more time.” Usually, it’s the opposite. They wish they’d moved faster so it was less of a drag on them and the team. The good news is, when you do make a change, everyone’s productivity goes up. And when you let someone go, treat them with respect and help them leave with their head held high. 

How do you evaluate the performance of people in your company? How often do you give feedback about what is expected and when? What happens when someone doesn’t get the job done? Do you give them a second chance? A third? A fourth? Do you wait until the end of the quarter to give feedback? Why?