CHAPTER TWENTY-SIX
DRIVING ALIGNMENT
During the 2012 presidential campaign, Mitt Romney got a lot of flak when he said, “Companies are people, too.” It was probably (well, certainly) the wrong thing in the context of a presidential election but it can be a useful analogy—especially when discussing alignment. When a major issue comes up at your company, is everybody at the table trying to serve the same “person's” interests? Or is one person serving the engineering team, another person serving the sales team, one board member serving the VC fund, another serving the early-stage angel investors—and another serving the CEOs? Or is everybody serving the company's interests? If they're not, your team is misaligned—“nobody” else's interests are nearly as important as those of the company.
FIVE KEYS TO STARTUP ALIGNMENT
You can't align everybody behind your company's interests if you can't clearly define and communicate those interests. Doing so requires five steps:
- Define the mission. Be clear to everyone about where you're going and how you're going to get there (in keeping with your values).
- Set annual priorities, goals and targets. Turn the broader mission into something more concrete with prioritized goals and unambiguous success metrics, as described in the prior chapter.
- Encourage bottom-up planning. You and your executive team need to set the major strategic goals for the company but every member of your team should be able to design their own path to contribution. Just be sure that you or their managers check in with them to ensure that they remain in sync with the company's goals.
- Facilitate the transparent flow of information and rigorous debate. To help people calibrate the success—or insufficiency—of their efforts, be transparent about how the organization is doing along the way. Your organization will make better decisions when everyone has what they need to have tough conversations and then make well-informed decisions.
- Ensure that compensation supports alignment (or at least doesn't fight it). As selfless as you want your employees to be, they will always prioritize their interests over the company. If those interests are aligned—especially when it comes to compensation—this reality of human nature simply won't be a problem.
I've discussed each of those steps in some detail earlier in this book. Taken in sequence, they're the formula for alignment.
Fig Wasp 879, Revisited
Leadership takes on a different role when the company is aligned. Think back to our example of the 900+ varieties of fig wasp as described by Richard Dawkins. You think fig wasps have a CEO? Or a division president who reports to the CEO that oversees both fig wasps and fig trees, making sure they all cross-pollenate before the end of the quarter? Nope! As a CEO, you may be the most important person in the organization sometimes, or in some ways. I can easily construct the argument that you're the least important person in the shop as well. If you do your job and create an organization where everyone knows the mission, the agenda, the goal, the values, the Big Hairy Audacious Goal (or whatever you want to call it)—without it needing to be spelled out every day—you have done a large swath of your job and can spend more time focusing on building your organization, training your people, building key customer and partner relationships, and looking forward several quarters or years out to start plotting out your next moves as a company.
ALIGNING INDIVIDUAL INCENTIVES WITH GLOBAL GOALS
It's always great to hear people say that they'd do their jobs even if they weren't paid to—but the reality of post-lottery-jackpot job retention rates suggests otherwise. You and every member of your team work for pay. (Though, as I explain the next section, money isn't enough if there isn't purpose behind it.) That's the most global incentive you have to offer.
When I described startup compensation in Chapter 12, I went into a lot more detail about how that compensation can be divided among cash, bonuses and equity. All of that advice can be applied on a case-by-case basis. What about using compensation to align your entire team behind the company's best interests?
At Return Path, our top 30 to 40 executives are on the same incentive plan. Marketers aren't rewarded for hitting marketing milestones while engineers are rewarded for hitting product milestones and back-office personnel are rewarded for keeping the infrastructure humming. Everybody is rewarded when the company hits its milestones.
The results of this system are extraordinary:
- Department goals are in alignment with overall company goals. “Hitting product goals” shouldn't matter unless those goals serve the overall health of your company. When every member of your executive team—including your CTO—is rewarded for the latter, it's much easier to set goals as a company. There are no competing priorities: the only priority is serving the annual goals.
- Individual success metrics are in alignment with overall company success metrics. The one place where all companies probably have alignment between corporate and departmental goals is in sales: the success metrics that your sales team uses can't be that far off from your overall goals for the company. With a unified incentive plan, you can bring every department into the same degree of alignment. Imagine your general counsel asking for less extraneous legal review in order to cut costs!
- Resource allocation serves the company, rather than individual silos. If a department with its own compensation plan hits its (unique) metrics early, members of that team have no incentive to pitch in elsewhere; their bonuses are secure. If everyone's incentive depends on the entire company's performance—get ready to watch product leads offering to share developers, unprompted.
This approach can only be taken so far: I can't imagine an incentive system that doesn't reward salespeople for individual performance! While nobody complains when things go well, it is a challenge when things go poorly—everybody gets dinged if the company doesn't meet its goals, no matter how well they or their departments performed. It's a tough pill to swallow but it's also a lifesaving bit of medication. If your company misses its goals, nobody should have occasion to celebrate.
Sometimes, Things Are Messy
Many people who run companies have highly organized and methodical personality types—that's probably how they got where they are in life! If you work long enough to espouse the virtues of fairness and equality with the way you manage and treat people, it became second nature to want things to be somewhat consistent across an organization.
The longer I've been a startup CEO and the larger my company has gotten, the more I realize that some things aren't meant to fit in a neat box. Sometimes, inconsistency is not only healthy but critical for a business to flourish.
It's taken me a while to embrace messiness in our business. I fully acknowledge that I am one of the more hyperorganized people around, which means this hasn't come naturally to me. The messiness has been very productive for us. I think it's come from the combination of two things: we are a results-oriented culture, not a process-driven culture and we give managers a lot of latitude in how they run their teams.
Let me give a few examples that I've observed over the past few years.
- Our sales team and our engineering team use pretty different methodologies from each other and from the rest of the company in how they set individual goals, monitor progress against them and compensate people on results.
- The structure of our sales and service and channel organizations in Europe are very different from our emerging ones in Latin America and Asia/Australia. Even within Europe, they can vary greatly from country to country.
- Although we have never been a company that places emphasis on job titles, our teams and leadership levels have become even more inconsistent over the years: sometimes a manager or director has a bigger span of control or more impact on the business than a VP does; sometimes individual contributors have more influence over a broad section of groups than a manager does; and so on.
I'm certainly not saying that striving for some level of consistency in an organization is a bad goal—just that it's probably not an absolute goal. Sometimes, embracing messiness makes a lot of sense. Or perhaps phrased more actionably, as long as they follow high-level guidelines and values, allowing individual managers to use their own judgment and creativity in setting up teams and processes can be an incredibly productive and rewarding way of maximizing success across an enterprise.
Management Moment
Create “Stop Doing” Lists
Challenge everyone on your team to make a “stop doing” list, which forces people to critically evaluate all their ordinary processes and tasks and meetings and understand which ones are outdated—and therefore a waste of time. This causes people to do some extra work in the short term but a lot less wasted work in the long term.