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Bootstrapped Startup Update: Leveraged Management vs Individual Contributions
Starting 18 months ago, I began more detailed timetracking for MassLandlords, which is a bootstrapped startup. I started noting the difference between what Andrew Grove called “high leverage” activities and what Pratt and Whitney called “individual contributor” activities. This is the first time I’ve made a graph of the results. It’s a prime example of “what you don’t measure doesn’t get better.” It shows that I haven’t been unburying myself the way I imagined.
The graph shows percent “level of effort” (what percent of time I spend on just these two activities) vs time. Each point is four days’ worth of time data, averaged over the last 40 days so it looks smoother. I track my time in four-day intervals because I use a piece of paper on a clipboard that I keep with me at all times, because only four days fit on a sheet, and because weekends are not very relevant anyway =(. I quickly note what I’m doing on paper. I don’t need to use any company-specific information systems like harvest, where maybe I’m not logged in or I need to switch accounts or who knows what is going wrong. (I love harvest for team-level perspectives, but paper is like harvest just for me.)
The blue portion represents time spent doing “leveraged management.” The idea is that one or two hours spent with a direct report, employee, or contractor will enable them to do eight or more hours of work on their own. In the last 18 months, MassLandlords has brought on about 50 hours of work each week (one big and several smaller hires). So I somewhat expected that I would add about ten hours of high leveraged work each week and lose a lot of unleveraged work. The red portion of the graph is “individual contributor,” or things that an employee should be hired to do.
The new hires are definitely working out, but they are exposing weaknesses in customer service, event logistics, and financial controls. All of these areas are largely my “individual contributor” responsibility. On our bootstrapped trajectory, it has been undesirable to lose touch with our customers by hiring for service, and impossible to hire adequately for logistics or controls (these positions seem to require some degree of scale because of the physical nature of the logistics work, and great degree of trust required to hand over financial controls). The increased effort for event marketing, event planning, and advertising have certainly been helpful, but they are generating more customer interactions, more events, and more transactions.
The graph showing total hours gives more insight. The red “individual contributor” line has been climbing as MassLandlords has grown. Our major hire started fall 2016. During their training, the blue “leveraged management” line spiked. It has been declining as they (and other team members) gain experience and ability. The blue line should have stayed high after that major hire. Except with the weaknesses in service, logistics, and controls, the red line shows a lot has landed back on my plate. This has distracted me from focusing on scaling and the next hire.
The trick here seems to be to make sure that some portion of the blue line includes time spent scaling and focusing on the next hire. If that’s the case, then we will eventually successfully pull ourselves up by the bootstraps. On the other hand, if the blue line is being spent just to keep the existing team going, then we must be caught in limbo. Not only will no one be working on scaling, but also, because I am just one person, the red line will eventually max out, customers will go unhappy, churn will increase, and the organization will rebound downward. Understanding this graph is of the first importance. And anyone with a bootstrapped startup probably should be making their own graph, because so much of starting up is “the grind” that produces so little value compared to high-leverage activities.
Random Grumbles and Advice
Service: Knowing what I know now, I would have implemented a customer service process much sooner, maybe at the outset. It would have been possible for me to maintain contact with customers even from inside a framework like zendesk. Now we have a situation where customers are emailing the last team email address they saw, which is pretty much not working out for anyone.
Controls: I also would have prioritized a relationship with a bank that gave granular access controls. Most small business banks — and even quickbooks online, which I otherwise much admire — have laughable separation of controls. The person who enters vendors must not be the person who pays them, and this must not be the person who records the debts in the first place. Most small business systems make all of this accessible to the same user. Thereby, any dishonest schmuck can enter a fake vendor bill, enter the fake vendor billpay, and pay the fake bill to themselves or to their cousin. Sure, they will eventually get caught, but only after much stress and financial loss on our side. I think Avidia Bank will be our partial salvation but until we implement it, I can’t say for sure. QuickBooks online is still not compliant, and I don’t see a way around that yet, so we’re waiting to hire an employee who can be paid enough to come with high “trust factor.”
Logistics: This is a problem particular to MassLandlords, where we basically need to have 23 physical locations one night a month. I don’t think I have any insight to share at this time.
So that’s the latest timetracking update on our bootstrapped startup. I see now why people take capital: just go hire all the people you need.
Hiring Employees, Bosses, and Customers: Part Two of Three, Bosses
Previously I talked about hiring employees and gave an overview of a process that I’ve used to good effect in the past. The perspective there was straightforward: you’re a supervisor or a hiring supervisor and you’re bringing on someone to be a direct report, either for yourself or someone else.
Hiring bosses involves two perspectives, and depending on which best describes your situation you’ll look at it differently.
When you’re choosing who to work for
I think this must be rather frequently overlooked, especially by inexperienced employees. Having a job offer with compensation and responsibilities that match your goals doesn’t mean you should rush to take the job. Your relationship with your boss is going to be critical, and you want to know a little bit about him or her before you sign on. Even if you have to take the job, you should prepare yourself for what’s coming.
There are three things I’d suggest you think about:
- A lot of bosses got to be supervisors and managers by doing good work as individual contributors (sales, engineering, operations, etc.). This leaves them woefully unprepared to manage people. I think Warren Buffet said it, but I can’t find the source just now: it’s as if the final career step for an award-winning cellist was to become the business manager for Carnegie Hall. If your boss-to-be has never been coached, you’ll have to suck it up for a while even if you have the conversational grace to coach them yourself.
- Noam Wasserman wrote in “The Founder’s Dilemmas” that some people (he was writing specifically about entrepreneurs) go into business for wealth, but others go into it for control. It’s important to get a sense for what your boss is after. Behaviors in different situations can vary dramatically. I’ve seen middle-ranking managers make money-losing decisions because it expanded their influence within the organization. And I’ve seen others forego promotions in order to keep doing what’s best for the company. It’s usually easier to work in groups where one or fewer are motivated primarily by control.
- You’re going to spend a lot of your time doing what your boss says. I’m going to quote Buffett again here, because he’s right on: “I learned to go into business only with people whom I like, trust, and admire.” (“Warren Buffett on Business,” edited by Richard Connors, Wiley, 2010, p. 144). This is important in business partners, and if you can find it in a boss, you’ll learn a lot and enjoy the process.
In all these, try to talk to coworkers and the boss to determine their work history and how things have been going.
When you’re choosing a leader for your organization
The above considerations still apply, but you can be a bit more prescriptive when you’re in control of the hiring process. I like Jack Welch’s “Four E’s and a P” approach (Jack Welch, “Winning”):
- high personal Energy
- the ability to Energize others
- having Edge (making decisions quickly)
- Executing (getting results)
When they’re in charge of that group or company you’re hiring for, they’re going to be almost overwhelmed by demands on their time. Many of these will be important and urgent, and they need to be able to go, go, go. In their attitude, they have to be like FDR, chin up and positive, in order to inspire other people that the obstacles they all see can be overcome. And they can’t waste the organization’s time by sitting on decisions that need to be made.
Welch found that some managers that had these things still didn’t get good results. Maybe that’s because they work on the wrong stuff, or because they’re perpetual optimists, or because they’re very quickly making all the wrong calls. So he bundled up all that into the fourth “E,” execution, and looked at candidates’ track records.
“Passion” means they’re personally motivated to take your business and do something more with it than you asked or had imagined. This last is critical, especially for startups, turn-around situations, or other times of crisis.
If you can find all this in a would-be boss, you’re doing good for yourself and for your organization.