Oops, They Fired All Their Workaholics

Wow, quite a firestorm on a weekend over whether startups should hire only workaholics or not. It’s tip #11 on Jason Calacanis’s How to save money running a startup list that ticked off many readers:

Fire people who are not workaholics. don’t love their work… come on folks, this is startup life, it’s not a game. don’t work at a startup if you’re not into it–go work at the post office or starbucks if you’re not into it you want balance in your life. For realz.

The edits show how Jason re-wrote this point after harsh criticism like Calacanis Fires People Who Have A Life on TechCrunch and Fire the workaholics by 37Signals. I don’t think he had to edit it, anyone who had been at a startup, who understands startup dynamics should “get it”.

He is talking about the need to have highly passionate team members, who at a certain stage of their life and the startup’s life are willing to – and happy to – shift their priorities. You can’t force people to be workaholics, all you get is slaves in a sweatshop, and that not only causes burnout, it does not produce quality results anyway. David at 37Signals is right:

If your start-up can only succeed by being a sweatshop, your idea is simply not good enough. Go back to the drawing board and come up with something better that can be implemented by whole people, not cogs.

Agree. But great founding teams are often made up of workaholics – it has to come from the fire within, not forced. These guys locked up in a live-and-work apartment probably did not have 8-hour workdays, yet didn’t look too unhappy. A year later they are growing, picked up two rounds of funding, have 20 employees and even put TechCrunch in the toilet.smile_wink I don’t expect their 20th employee to be just as passionate as the Founders, but it can’t be a 9-5 type person either. At this stage they still need driven Team Members, not simply employees.

Most startups that grow to a certain point will lose this team atmosphere at some point. They will start to hire more “regular employees”, many of whom are opportunity seekers, in for quick ride, ready to jump ship any time. Too bad, but it’s a fact of life.

Not everywhere, though. 37Signals is still a small team (by choice) but not really a startup anymore. They seem to have found the golden balance between work and life, having introduced 4-day workweeks, funding team members’ passions, be it flight lessons, cooking classes…whatever. I don’t think they whine if (when) the occasional crunch comes. Another “startup” (not really, anymore) I often write about is Atlassian: at $30M revenue and 130 employees they still preserve a unique culture, do a lot of programs together, and generally working there is a lifestyle, not just employment.

The above two have something in common, other than having good products: they did not take VC investment. They can pretty much do whatever they like. Maintaining a great team is no just a means to business, it’s part of their ultimate purpose.

The weekend firestorm comes completes a full circle: in a second TechCrunch article Mike Arrington comes to Calacanis’s defense: Startups Must Hire The Right People And Watch Every Penny. Or Fail. This is a very good article, I wholeheartedly agree with it. And while at it, let me also refer you to Startups: Executive Hiring Challenges or Beware of the Suits.

On a lighter note, the CEO of another self-funded former startup, Zoho apparently heeded 37Signals advice, and fired all his workaholics.

(Not really… Watch out for a major product announcement next week.smile_wink)

Update: This quick rant by Bob Warfield is worth reading:  Startups Need Starters


Startups: Executive Hiring Challenges or Beware of the Suits

In a recent post about Atlassian’s quest to hire a VP of Marketing, I hinted at a bigger subject: the dilemma almost all successful and fast-growing startups face at some point.  When they reach 150-300 employees, should they still hire “startup talent”, or is it time for them to bring in some grey hair, and the corporate experience that comes with it?

I’ve seen this movie too many times, and it’s not a particularly good one. In the 90’s startup Founders rarely had the chance to make the decision themselves: they typically were heavily VC funded, and the VC-dominated Board’s standard formula was to bring in “4-star generals”: ex-corporate VPs, SVPs, who would likely have  the experience to take the business to “the next level”.  Or not.  I’ve seen too many of these  fail, in fact I personally experienced the pain of two businesses: aggressive growth, 300 or so employees, hiring top-notch (per their pedigree) Executives and mid-management, and a year later the Founders were wondering just where their ROI was… big $ spent, nothing got done.   With more of the corporate-types on board, politicking began, and soon the early employees, really more members than employees, who defined the very fabric of the company started to leave.

During the post-bubble, nuclear 2000-2002 when the job market was essentially dead, this trend only got worse. The surviving startups still had loads of VC money, and their Boards  felt survival depended on smart hiring.  In came the Executive Recruiters, who often did not even understand the business, they just ticked off items on their shopping list.  Experience, experience, experience: you had to have been there, done it – in the exact same position, title, and preferably five times.

The only problem with this hiring mentality was that it completely ignored human nature. If you’ve “done it all”, there’s little challenge left in the new job.  And challenge you need: that’s what makes you strive to become an over-achiever, which is what a startup needs.  The “been there, done that” types often have a sense of entitlement, having descended on the startup world, they expect smooth sailing till the IPO, than retirement.  Smooth sailing is not what you need in a startup: you need fighters.  Don’t hire somebody who steps down into the role for the equity; ideally don’t even hire someone making a lateral move.  You need hungry, driven fighters, who while have the skills and experience, will truly step up to the new job.  You need someone who does not want a job, but a passion, a lifestyle.

Another problem with hiring former corporate hotshots is that they  often turn out to be quite incapable of performing without their previous support infrastructure and staff.  They are leaders, not doers – a startup needs both in one person.

I remember interviewing for a VP position at a well-funded startup: the rounds with the CEO and his co-founders went well,  not only did we “click”l on a personal level, but my enterprise software background was a perfect match and  we had intense business conversations right from the first moment. Then I met the freshly minted VP of Sales, who just got hired from Siebel (which was a good brand back than).   Mr. Sales was a corporate BS-er who had absolutely no clue about the business. He avoided answering any specific questions on market positioning, differentiation,  giving me the “our product is best” generic BS, and any initiatives we discussed started with “I’m about to hire a manager for this”.  In minutes I knew that not only it was the end of my application there, but worse, the company was in big trouble, too.  I felt bad for the founding team: they were so proud of their latest hire (“big fish from Siebel, so he must be good, so we’re on track with sales…) – but as an applicant I was in no position to open their eyes.  Lo and behold, a good year later the company was out of business: they got picked up in a garage-sale.

But enough of the negative examples:  let’s look at the success stories.  Back to Atlassian, where this story started: when Mike Cannon-Brookes and Scott Farquhar started their business in 2001, drawing $10k against their credit cards,  they had no clue just how successful a business they would build – yet 7 years later they are now running a $30 million fast growing international business, and are celebrated as Entrepreneurs of the Year.   Back then they certainly would not have been hired for *this job* by a recruiter firm.  And perhaps the best testament comes from Google: I read one of the Founders say that their current recruiting filters are so excruciatingly tough hat he himself could not get hired by Google today. ( I can’t locate the quote – would appreciate any reader help).

Perhaps the invasion of the suites is inevitable in any business – I don’t know if it happens at having 1000 employees… 5000.. or more, but it should certainly not happen at the 1-300 level, when a (former) startup is about to implement some management structure and processes for the first time.   Experience, some track record of course never hurts, but I think startups and “recent graduates” of startup-life owe it to themselves to hire someone with exceptional skills, drive, who would have major challenges and for whom the current job is a clear step up.  That’s the growth engine you give up when you bring in the suits, and IMHO, you should put it off as long as possible.

Disclaimer: I’ve been a Management Consultant, Startup Executive (President, VP), but not Founder of a successful startup… so what do I know?  I know I have CEO readers, also VC Board Members, so please come in here and comment below.

Update:  With perfect timing this old post showed up in my reader again.  Xobni’s Gabor Cselle talks about the three waves of startup hires:

    1. First-wave people want to create success from nothing.
    2. Second-wave people want to make something popular more successful.
    3. Third-wave people want to join a successful environment and preserve the status quo.

I was surprised to find my own comment on Gabor’s old post, essentially summarizing the above long rambling in one sentence:

Startups typically get into trouble when the Founders realize they need 2nd-wavers, work with “pro” recruiters and end up with a bunch of “big name” expensive 3rd-waivers.

Update (9/1/08): Since I started this post with Atlassian’s quest to hire a VP of Marketing, it’s only appropriate to follow up on it.   Atlassian President Jeffrey Walker reports:

All but one of our best candidates came from referrals

None from recruiters.   Even though many are smarter than this.   Takeway: network, network, network.

Related posts:

Update: This quick rant by Bob Warfield is worth reading:  Startups Need Starters


Dream Job for a Software Marketing VP @ Atlassian

Atlassian, a fast-growing, successful enterprise software company is looking for a VP of Marketing. I don’t normally broadcast job searches here, but am breaking that rule now for I believe this is a truly exceptional opportunity with a truly exceptional company. (Disclaimer: I have no business affiliation with Atlassian, but admit to being positively biased, as the company exemplifies a lot that I stand for.)

They are best known for two products: Jira, the issue tracking & software project management application was their first hit, putting the company on the fast growth track and establishing a loyal fan-base in the IT community.  Their existing reputation in the IT community certainly helped the second product, Confluence, the enterprise wiki gain traction: it is now equally popular in the IT and business community.  Wikis in general  have become more commonly known in the past two years; once a tiny market niche, today a growing field where new entrants pop up left and right, claiming to be best in this and that….  But numbers talk, and the verdict is clear: Confluence is the undisputed enterprise wiki market leader. 
Atlassian is not sitting on their laurels: in the past year they diversified, acquiring several companies and launching new products on their own.  Frankly, I lost track, but I believe  their portfolio currently includes 8 products, all part of an “IT toolkit”, with the exception of Confluence, which is seeing fast adoption amongst business users, too.  

The customer list is impressive: IBM, HP, SAP, Citigroup, Boeing, BMW, Shell, McDonalds, Pfizer … just about all the Fortune 1000, as well as non-profits, Universities, Government Agencies, totaling over 9000 customers worldwide. (The chart is a bit misleading: Atlassian’s fiscal year starts in June, and the FY08 bar shows the current figure only, excluding projections.)

How did they achieve this?  They must have an excellent sales force.  Wrong! Atlassian has no sales force at all.  They don’t sell: customers simply buy their products on their own.   I often talk about  the pull-model that’s replacing the traditional, expensive enterprise sales process (6-9 months, high touch, flights, meetings, wine-and-dining, entertaining, in the end often nuked by politicssmile_baringteeth) – but that’s typically in the context of Software as a Service, and in the SMB (small business) market.  Atlassian’s products are mostly on-premise (although they now have a hosted version of Confluence) and their primary market is the large Enterprise.  Yet they pulled off what amounts to a small miracle:  essentially took the, tucows style model we all know as consumers, and ported it to the enterprise space. 

Of course having customers try-and-buy through the Internet is not as simple as firing your Sales team ( or not hiring one).  It’s not a matter of a decision: it’ s a consistently applied philosophy, that you have to implement in every aspect of your business.  The key components are:

  • lightweight software
    • well-defined function set, meets specific user need, small user groups can get started
    • ease of use (both easy to learn and easy to use)
    • well documented, well supported
  • transparency
    • features (what you’re getting, no surprises)
    • issues (Atlassian’s bug tracker is open to the public)
    • pricing (simple, upfront pricing, no fill-out-contact-form-wait-for-sales-to-call-back BS)
  • low price (“expensable, not approvable” – to quote a former competitor)

The “pull-model” means customers will need to find you- which is why Marketing is a critical function.  With Sales gone, Marketing becomes sales (actually, Atlassian’s CEO proudly says everyone is in Sales, especially Support).  So if you are a marketing superstar,  or know one, want to be part of a successful team, work for celebrities , you owe it to yourself to apply.

Atlassian is not only about business – it’s about people.  I know, old cliche.. but here it works.  The unique culture this team maintained throughout their super-growth even now that they have 130 people is a large part of their success.

So what is this culture like?  Tough. When he doesn’t make his numbers, Atlassian President Jeffrey Walker is forced to make up for it as ticket-scalper on the street. smile_omg OK, joke apart, this photo was shot last August, when the entire San Francisco office went to see a Giants game together. (Incidentally, just a day before Jeffrey became cancer dude). This wasn’t a rare occasion, either: both the San Francisco and the Sydney teams have a lot of fun together:  Cutlassian, Mission: Atlassian, theme-filled staff events, abound throughout the year.   Their new office  building in Sydney is right next to a pub (hint: when will you guys realize you’d be better off buying the entire pub?beer)  I wonder when the San Francisco office will move into a winery…  Perhaps you get the picture by now: Working for Atlassian isn’t just a job  – it’s a lifestyle.  But don’t for a minute think it’s a bunch of rowdy kids having fun only:  they bring in $30 million a year.  And if you don’t perform, this is what awaits you.

So that’s the magic formula: combine business success with a fun, team-focused culture and you’ve got the makings of the ultimate job.  (Are you still reading, or have you alerted your Marketing superstar friend yet?)

Now, if this is the ultimate job, there’s one question unanswered: How come it hasn’t been filled yet?  I wanted to hear the answer straight from the horse’s mouse so to speak, so I asked Atlassian President Jeffrey Walker, who responded below:

We were inundated with resumes, and found a few excellent capable candidates. Unfortunately, one of the growing pains of companies like ours is we were not quite ready for the right candidate. Incorporating someone of the caliber we need takes preparation. Our search began prematurely. Lesson learned. After the founders and I took another few ‘long walks’, we came out aligned and ready. This time I fully expect to complete the search. Just need the right remarkable individual.

Well, I did not walk with Jeffrey and the Founders, but I certainly hope they will not change a lot:smile_wink.  I have a lot to say on the subject of hiring, but it’s not specific to Atlassian, so I’ll break it out to a separate post.  In the meantime, if you are that “remarkable individual”, what are you waiting for?