My friend Will Herman is on a blogging tear these days.  Today, he wrote a long, excellent post titled “When To Get Rid of the ‘Best’ People That Work For You.”  Will has 25 years of technology / entrepreneurial management experience and he knows of what he speaks.  In one week, he’s penned two posts – the other being “When Firing Someone, Focus on Those Who Remain” – that should be read by anyone who is an entrepreneur.  Nice writing Will.

I’ve given a number of interviews on Work Life balance since the post I wrote about it a year ago.  Eric Bergman interviewed me the other day – it’s a short 10 minute piece that I think he did a good job with.

At dinner I was pondering the answer I gave on the post How An Entrepreneur Can Protect Himself Post-Funding.  Something was bothering me about it and I thought to myself “do I practice what I preach?” (Amy suggested that I should be bothered by my title of the post, which should have been “… Can Protect Himself or Herself …”)

My first reaction was that I had never had an employment agreement with any company that I’ve worked for.  As I thought about it a little harder, I realized that I’ve had a few employment agreements, but they never gave me much protection – in each case they protected the company I was working for more than they protected me.  In addition, these agreements were either tied to a non-compete associated with an acquisition or as part of my role in a public company.

In the one case where I could have enforced the employment agreement, I simply ignored it and told the person I was working for to do whatever he thought was fair (he did, and it was.)  In another case, I voluntarily gave up the consideration I was getting when the company I was involved was struggling financially.  Neither of these were cases of “altruism” – rather, I simply did what I thought was the right thing at the time.

There is a difference between an employment agreement associated with an entrepreneur in an early stage company and one associated with senior management post an acquisition (almost always when a non-compete is involved.)  My comments in How An Entrepreneur Can Protect Himself Post-Funding pertain to an entrepreneur in an early stage company; Jason and I covered some thoughts about the acquisition situation it our Letter of Intent series under the topic Employee Matters. 

My conclusion – after chewing on this more – is that I’m comfortable with my answer in the context of an early stage company.  And – yes – I think I practice what I preach – most of the time.

My post on talking more about failure resulted in a surprisingly large amount of email and positive feedback.  In addition to plenty of private emails and a few comments, Andrew Fine emailed that he was inspired to write about the recent failure of his company Cryptine Networks.  He’s just put up a post titled Key Lessons From Cryptine Network’s Failure.  While I don’t personally know anything about what happened, Andrew writes a balanced and thoughtful summary of what he thinks went wrong.  Praise to Andrew for being brave enough to write publicly about this in a way that is instructive.

Irving Wladawsky-Berger – IBM’s VP of Technical Strategy and Innovation (and one of the few “must-read” IBM employee blogs that I’m aware of) has a good post up summarizing Eric von Hippel’s work on Democratizing Innovation.  Eric was my doctoral advisor at MIT (I didn’t finish) and has built 30 years of really important academic research (and a worldwide research community) on the idea he stated around 1978 that “innovation comes from users, not manufacturers.”  Today we might say something like “yeah – uh huh”, but in 1978 this was a radical thought.

There was plenty of discussion about “users” and the importance of them – especially in the product development cycle – at Gnomedex last week.  Wladawsky-Berger does a nice job condensing von Hippel’s ideas down into a few paragraphs.  Eric’s latest book – Democratizing Innovation – is full of examples that build out his framework (and is available as a free PDF and licensed under a Creative Commons License.)

As a wise man once said to me when I was a young student, “wouldn’t manufacturers be irrelevant without users?”

My long time friend (since 1984 – wow) and extremely experienced entrepreneur / CEO Will Herman has another great post up today – this time it’s about firing someone.  Will’s advice – When Firing Someone, Focus on Those Who Remain – is important and well articulated.

As I sit in the Seattle airport waiting to board my delayed flight to Anchorage (Dear Alaska Airlines: Since it’s a “mechanical delay”, please feel free to delay it as long as you want until you are absolutely sure the airplane works), I was pondering a conversation I had at the very end of Gnomedex with an entrepreneur that I’d met for the first time.

We had a good chat about his business (definitely interesting stuff) and then he asked me a few questions.  One of them was something like “what are the characteristics of the best CEOs that you’ve worked with”?)  This was in the context of him currently being a CEO, but feeling like he should ultimately be the CTO and was starting to think about bringing a CEO into the company.

While answering this question, I commented that the “not so great” CEO’s often “overcompensate for their strengths.”  I guess this was either a good sound bite or an incomprehensible comment because he stopped me and asked me to tell me more about what I meant.

CEO’s of entrepreneurial companies tend to come from five backgrounds: (1) random, (2) engineering, (3) sales, (4) finance, and (5) operations.  Forget about random, or the first time entrepreneur / CEO – let’s just focus on the experienced CEO that is hired into a company or is a first time CEO, but multi-time entrepreneur.  Let’s also talk only about the “not so great ones.”

In these cases, the weakest part of the leadership of the organization is often the CEO’s strength.  So – a CEO that used to be a VP of Sales often does not hire a strong VP of Sales.  Same with the ex-CFO – his CFO tends to be less experienced.  The engineering oriented CEO does better, but often ends up with several “engineering leads” rather than a super strong VP Engineering.

Now – this doesn’t always translate into a weak organization below the leadership.  For example, while the sales oriented CEO might hire a weak VP of Sales, he overcompensates for this, spends a lot of time “leading sales”, and ends up with an effective sales organization.  However, the CEO neglects other parts of their organization because he spends to much time on sales, and as a result is a less effective CEO.

I’ve experienced this a number of times.  I amusingly recall a discussion I had with a first-time CEO of one of the companies I had done a first round investment in.  He was a very experienced COO / CFO of two previously successful startups where he was a founder.  This was the first company that he’d founded as a CEO.  For the first six months, the financials were extraordinarily well analyzed, the board packages were beautifully done, and the processes within the company were rock solid.  However, we were making less progress than we would have liked on the product, the strategy, and the early customer relationships.  At some point, we had a hysterical conversation in a board meeting where I said something like “dude – the financials are irrelevant – I know you have $1.5m in the bank and are spending $150k / month ramping to $200k and I can figure out the number of months left before you slam into the wall.  Ok – that took 15 seconds.  Let’s spend the next 1 hours, 59 minutes, and 45 seconds talking about what we are going to do to make this business great.”  Fortunately he immediately got what I was trying to say.  The last two years with him at the helm of the company have been very satisfying.

If you are a CEO, step back and think about your historical background / strengths. Then – think about the person you have in the VP of Your Strength role.  Is this person an absolute superstar?  If so, get out of her way and spend most of your time on the other parts of the business that you might be less comfortable with.  If not, go get a rock star for this position so you can stop overcompensating.

If you are a CEO or a VP of Sales, you should read Will Herman’s great post titled “Just Say No To Weighted Average Sales Forecasting.”  Will’s a very accomplished CEO of both private and public companies, has spent many years managing “the sales number”, and has a very straightforward message about sales forecasts.

A few days ago I wrote that there wasn’t enough talk about failure.  I had an awesome run tonight in the mountains behind my house and pondered – among other things – some of my early failures.  As my mind wandered and I tried to keep from stumbling on the rocks, my thoughts drifted to my first software company – Martingale Software.

I co-founded Martingale Software in 1984 with three fraternity brothers.  Three of us were second term freshman (me, Andy Mina, and Sameer Gandhi) and one was a senior (Dave Jilk).  After Martingale failed, Dave joined Viewlogic Systems as their first non-founder employee and – after having success there – went on to start Feld Technologies with me (which succeeded.)  After college, Sameer had a strong run at Oracle in the late 1980’s, then spent some time at Broadview, before joining Sequoia Capital, where he’s been since 1998.  I’ve lost track of Andy.

Martingale’s mission was to write software for the Apple Macintosh computer.  We were all in love (at least I was) with the first Mac and thought there’d be a huge market for software for it.  Of course, we had no idea what kind of software we were going to write, how to market and sell it, or when we were actually going to find the time since we were all going to MIT full time.  We ignored those challenges and just barreled ahead.  We were all excited about the idea of simply starting a company.

As with most good stories, this will be a multi-part post so you can digest it in quick chunks.  I’ll try to have at least one lesson in each post, although you might have to work a little to find it.  In this case, the first lesson is that our excitement about starting a company dominated – not surprising for a bunch of undergrads, including three freshman.  We were wrapped up in the notion of “starting a company”, not in the idea of what we were actually going to do.