Failing to Communicate
Words Matter

Communication can make or break a startup. From board meetings to employees, from delivering good news to bad, communicating effectively can help make sure all the hard work pays off. Communicating ineffectively can infect an organization and waste incredible amounts of time and capital: developers build the wrong features while marketing prepares the wrong messages.

Bad communication often comes from failing to set expectations or not communicating at all. That can result in tough board meetings. Or, even worse, you can lose customers or users to the competition. People will forgive failure—but only if you communicate transparently with them about what’s going on and right any wrongs. So why do so many leaders communicate so poorly, causing startups to fail, and how can you do it better?

Communicating Your Vision

Entrepreneurs are in the business of setting larger-than-life expectations. When you’re creating something from nothing, you have to be. You have to wake up every morning believing in yourself and your vision—in the face of numerous potential investors, employees, and users all telling you that no, you’re wrong. Your approach to the market won’t work, your product won’t work, your capital model is wrong, or they’re just plain not interested in what you’re doing. Up against all that negativity, entrepreneurs must continue to believe—and they must communicate that belief.

One of the biggest challenges entrepreneurs must address is balancing the day-to-day challenges of running the business while painting the picture of the big, transformative nature of their vision to investors, potential employees, and the public.

I recall one time when I was pitching my very first company to investors. It was the dark days of 2001, and not only were we on the road all the time talking to potential investors and customers, but when we were in the office, we were there until one or two in the morning and often later. Then we were back at it as soon as we woke up. To add even more stress, we were angel- and self-funded and had the fear of an impending empty bank account bearing down on us. An experienced investor who was a former entrepreneur met with us and listened to our pitch. He was, as they say, a serious guy, not one to mince words or use a lot of them.

I’ll never forget what he told us. “You guys are back on your heels,” he said. “I’ve been where you’re at.” We looked at him with raised eyebrows, skeptical. “You need to take a break, get some rest, and come back when you’re fresh.” It was the best piece of advice we had received in a very long time.

It also forced a very important issue. We were doing too much, and we couldn’t do it all. We had to divide up our responsibilities and trust that they would get done; and we also needed to focus on what mattered. We couldn’t continue to take meeting after meeting; we had to be more selective. As great as it was for relationship-building to meet someone in person, we had to start qualifying people first. And we had to narrow the scope of what we were building and get the core functionality right before we added more features.

Being frazzled meant that we weren’t communicating well. We needed to refocus so that we could communicate our vision in a way that led to successful investment pitches and customer meetings. We stopped getting lost in the weeds when we were pitching because we weren’t lost in the weeds in the day-to-day business.

It didn’t mean we paid less attention to detail—if anything, we paid more attention. But by doing less, we were able to get more done, more successfully. And just as important, when we met with investors and customers, we focused on what mattered to them—not the minutiae of the day-to-day issues and details, critical as they were, that were very literally keeping us up at night.

Setting Expectations

Should you shoot for the stars and try to accomplish the seemingly impossible? Absolutely—that is what great startups are all about. That is your BHAG—your Big, Hairy, Audacious Goal. But never confuse your BHAG with what you need to accomplish day to day and the milestones you’ve promised to deliver on.

Identifying and communicating your BHAG and milestones separately makes everything easier and clearer: here’s what we’re shooting for, and here’s where we are on the path to accomplishing that goal. That enables you to remain visionary while communicating actual progress and metrics.

To be an entrepreneur, you have to be somewhat irrational. The odds of failure are high. Yet the challenge of beating those odds, and the potential rewards, both personal and financial, are a big part of what makes entrepreneurship the calling that it is.

Hand in hand with that irrationality, however, go irrational expectations for yourself and your team. As a result, it’s easy to fall into the trap of promising growth goals, such as revenue, profits, or users, which are wildly unrealistic.

The CEO of Company E was an incredible saleswoman. She had great success during the dot-com bubble, making hundreds of millions of dollars for her investors and herself. She was charismatic, and people were impressed with her from the moment they met her. She told investors what they wanted to hear: that her company was going to transform the industry by delivering a product that was 10 times more efficient than existing offerings. Not only that, but due to her relationships in the industry, she would be able to secure customer deals that others would only dream of. It seemed too good to be true—and it was.

Yet based on a combination of her past performance, her charisma, her relationships, and the vision she painted, investors flocked to her like moths to a candle. Having been through the fund-raising process many times before, she knew exactly how to manage it for an optimally priced capital raise. Once invested, investors became believers. They had to; after all, they had committed tens of millions of dollars to the endeavor, and to admit that the company was going to fail was to admit that they had made a very poor investment. With so many people saying it was a good investment, the company created a sort of frenzy, raising more and more capital, and making bigger and bigger promises. Of course, people from investors to employees had their doubts, but few wanted to question a CEO who could raise money so effectively and who seemingly carried so much weight in the industry.

CEO E didn’t fail to set expectations. She overset them by miles. She lost track of the difference between her BHAG and the reality of where Company E’s product and execution really were. In her mind, vision and reality became one and the same, and it was impossible, when she was communicating, to tell what was real and what was vision; the future and the present merged in her mind and in her communication. After spending more than $80 million in investor capital, CEO E’s board replaced her, the company cut more than half of its staff, and the product remains a mirage.

CEO F, on the other hand, didn’t overset expectations—he failed to communicate at all. After figuring out that his market was large but too early for his product, he withdrew behind his computer screen. Previously he had been a vice president at a large, public software company. He was used to things being a lot easier, and he was accustomed to pre-existing demand for a product.

As a vice president, his role was to iterate on a market-leading product that customers already wanted. Although managing a large team and working tirelessly to understand and prioritize new customer requirements was hard, it paled in comparison to the struggle he faced in finding product-market fit as head of his own company.

He faced a challenge he was unsure how to tackle, and he was too proud to admit that his original product-market thesis was incorrect. The struggle consumed him. He stopped communicating with the company and his management team. The last weeks of the quarter often found him on vacation. Meanwhile, he continued to promise unrealistic revenue and customer goals to his investors, even after his board gave him strong feedback to re-plan.¹

Ultimately, faced with an unresponsive leader and still believing in the market opportunity, the board hired a Chief Operating Officer to run all of product, operations, and sales, leaving the founder as CEO in title only. Ironically, his board members were very successful entrepreneurs in their own right. Had he found the courage to ask them for help and had the willingness to receive it, they surely would have been happy to provide it.

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Managing Board Meetings

If you’ve been a founder or executive at a company that’s taken external financing, chances are you’ve been to a board meeting. Some people look on board meetings as a time suck—CEOs and their management teams spend days preparing for them and then sit through three or four agonizing hours of the meeting while board members often send and receive e-mails on their Blackberrys or iPads. Each month, these management teams look to the board calendar not as an opportunity but as a cost of having taken capital. There’s a sentiment that’s not all that uncommon: “If only my investors would leave me alone, I could actually get some work done.”

A board meeting done right can be an opportunity not only to communicate important company information to the board—progress, challenges, key hires, financial metrics, and the like—but also to have real and valuable strategic discussions. It all comes back to expectations.

I don’t have enough fingers and toes to count the number of founders and CEOs who have confided in me that they’re worried about offending person X or a colleague of person X by calling that person out on something—their tardiness, their Blackberry use, or even a lack of expertise as it applies to the issues of the company. It’s the founder or CEO’s job to set expectations for board meetings, solicit input on what board members would like to have covered, and direct the meetings so they can be productive and efficient.

Toward that end, it’s never too late for you to sit down with individual board members to communicate your expectations around the board meeting and understand what they would like to cover. Not having seen a board slide deck before isn’t a problem—failing to ask for help is. Your board members and other CEOs are usually more than willing to share what has worked well and what hasn’t.

Intimidated by the decades of experience some of your board members have? Don’t be. Spending four hours accomplishing nothing is as much a waste of their time as it is yours.

Do board members consistently show up late? Talk to them offline, and then always start on time. Set a schedule for every meeting, and stick to it. Include specific times for breaks so people know there’s one coming up and can plan their biological, e-mail, and telephone needs accordingly.

It may seem obvious, but make water and coffee readily available during the meeting, and provide snacks during the breaks. Staying focused during long meetings requires hydration and energy. Both are required to ensure the meeting keeps progressing. Avoid having a board meeting run through lunch if at all possible—the eating and noise will distract you and your board members. If you want to eat a meal with your board members, do so—just make it a separate event.

Send out board-meeting materials ahead of time so people have time to review them, and don’t be shy about reminding them to review the materials before the meeting. Always include details like the start time, duration, and location of the meeting, and dial-in information even if no one has said they will be dialing in. Put simply, square away as many of the logistics as possible so you can make the time productive for yourself and everyone involved.

Tell your executives how much time they have, and get them to stick to it. Sloppy board meetings that start late and run late are often a sign of sloppy companies. Getting bogged down in an issue that clearly requires further discussion? Suggest a separate follow up. Is there a big issue on the table that no one is taking the initiative to discuss? Get it out of the way first; avoid letting the issue remain the elephant in the room and thereby causing the board meeting to fail.

Cover less material. Some CEOs feel it necessary to drill down in gory detail on every section. The reality is, it’s not the job of your investors to critique the nitty-gritty details of your marketing programs, sales approach, or product features. They may have experience and opinions in some or all of those areas, but they invested in you because of the promise that you would innovate, manage, and lead.

Be your own toughest critic. Ask yourself the hard questions, instead of waiting for others to do so. If an area of your company is operating poorly, deal with the issue or hire someone to own it, rather than looking to your board to solve it for you.

Some CEOs shy away from giving details. By sticking purely to the big picture, they believe they can avoid being held accountable. Although this may be a strategy for raising money, it isn’t a long-term strategy for success. Ultimately, many companies operated by these kinds of leaders suffer sudden and painful deaths or restarts.

In the case of Company B (a composite), the founder loved to talk about the product. He spent much of his time discussing the product, which was consistent with how he spent most of his time day to day. He did little else. Investors avoided confronting him about this but were a lot more interested in whether the product worked than in the details of how it worked. Unfortunately for the company, a lot of promises the founder made about what the product would do and how much revenue it would generate did not materialize. The product kept slipping as the company introduced ever-newer features.

No one wanted to be the bad guy. The founder was a temperamental individual who would surely hold a grudge. Moreover, none of the board members wanted to suffer the potential reputation cost of delivering bad news.

The investors had backed the entrepreneur and his vision, and they believed their only options were to fire him or give him more money. And the entrepreneur was very good at raising money, so there was a limited sense of urgency around forcing the discussion. The board members were worried that without the founder, other investors wouldn’t back the company, employees would leave, and the company would be sold for pennies on the dollar.

The story didn’t end well. A new investor, who believed in the market but had other ideas for the team, came in and recapitalized the company. The entrepreneur was offered an advisory position and remained on the board, but with no real input into product or strategy. Had the entrepreneur confronted the issues sooner, the story might have ended differently.

Delivering Bad News

Some founders—and even many experienced executives—shy away from delivering bad news. The best advice I ever received when being coached on how to communicate was, “Just say it.” Not going to hit the numbers? Just say it. Hired someone who isn’t going to work out? Just say it. But don’t leave it there. Articulate your plan—what you’re going to do about the issue.

What if you don’t yet have a plan? Just say it. “We have this issue. We don’t yet have a plan, but we’re working on one, and we’d like to do a follow-up on—give your board members a specific date—to discuss the plan.” It’s a distant second to having a plan, but it demonstrates your leadership to your team and your board. Plus, the question is bound to be asked, so don’t wait for it. Ask it yourself, and then answer it.

The other kind of bad news many people dislike giving is firing someone. I remember the very first person I ever had to fire. I agonized over it for weeks. How was I going to do it, and when? How would the team react?

Over and over again, founders have told me they’ve had the same experience: the team already knows that someone isn’t working out and is waiting for you to take action. As much as you may agonize over letting someone go—perhaps that person was even introduced to you by an investor or a board member—your team is agonizing even more. Your team is working around that person, making up for issues, and expending effort to overcome a lack of chemistry.

It’s one thing to talk about treating people with respect and another to do it. We’ve all read the cliché: firing someone–or getting fired—is really doing that person a service so they can go find what they’re good at. There is some truth in that. But the key questions when delivering bad news are: Was it a surprise? Did you take action quickly? Did you deliver the news humanely? If the news came as a surprise—and it’s critical to separate a person’s emotional reaction to the news from the news itself—that is a failing on your part as a manager and leader. Again, it all comes back to setting and agreeing on clear expectations.

Delivering Good News

Suffice it to say that good news should be delivered far and wide. People like feeling appreciated, and when most people leave a job voluntarily it isn’t because they were dissatisfied with their compensation but because they felt underappreciated.

Of course, great leaders set the bar high and have incredibly high expectations of their people. But they also communicate their appreciation when a team member goes above and beyond.

Recognition and appreciation are the most inexpensive yet most underutilized forms of compensation available. Don’t give them out unless they’re earned; but when they’re merited, be generous with them.

Communicating with Your Team

One founder I know had to go away for two weeks due to a personal matter. He got back to discover that his small team of five engineers had all been hard at work—but on different features than they had talked about working on! When he asked them about this, each told him their version of what they thought they had agreed to work on. Of course, every developer had interpreted their work items through their own personal lens, interests, and sense of priorities.

An experienced executive shared with me a simple tactic he used for addressing a similar issue. He communicated key goals and then asked his team to write down the goals they had heard. He read what they had written down, they discussed it and had a good laugh about it (often what they had written was far different than what he said, or what he thought he said)—and then he communicated it again.

Team communication needs to be simple, clear, and frequent. It’s not sufficient to follow the old rule: Tell ’em what you’re going to tell ’em, tell ’em again, and then tell ’em what you told ’em. Communication can’t be one-way—it has to be more interactive.

E-mail and social networks have revolutionized personal communication, making it much more frequent and interactive. When communicating with your business team, the same principles apply. As a result, the old rule, updated and adapted for startups, is as follows:

• Communicate your BHAG.
• Enlist your team in developing sub-goals and milestones.
• Communicate those goals to everyone clearly and concisely.
• Ask them what they heard.
• Repeat.

In other words: Tell ’em, ask ’em, repeat. Do more than tell—engage and interact.

Communicating with Customers

Communicating about events like new product releases is relatively easy. It’s the crises that really test a startup.

At some point in its life, every startup faces a major product or customer failure. Intel, the chip manufacturer, faced such an issue in 1994 when a bug was discovered to be causing numerical calculation errors in its Pentium chip. The company initially decided to replace processors on the basis of need rather than request. Although the bug impacted very few people, the company was criticized for the way it handled the situation.

Legendary CEO Andy Grove later issued a full apology, saying that Intel’s policy, “seemed arrogant and uncaring. We apologize. We were motivated by a belief that replacement is simply unnecessary for most people. We still feel that way, but we are changing our policy because we want there to be no doubt that we stand behind this product.”

While it was late in coming, the Grove apology had a very positive impact on the company. Some marketing experts have even suggested that although the company had to take a short-term financial hit to reserve against possible product returns, the company’s brand ultimately came out stronger than it began.

More recently, Airbnb, a web site that helps travelers find homes for rent, apologized publicly to a woman who rented out her home and then returned to find she had been robbed. Unlike the Intel blow-up, which took time to build, the Airbnb crisis came to a head virtually overnight.

Communication on the Web is near-instantaneous, and it means that once a negative story hits, it’s all over the Web, all at once. People circulate stories in e-mail; they post, comment and tweet about them; and then they re-tweet and repost some more. That makes it more important than ever for startups to take the high ground and respond quickly when customer issues arise.

For Airbnb, the process was stressful for the company’s management team and very painful for the woman whose home was robbed. It forced the company into action and produced a good outcome. The company created a new Trust and Safety Center and added an insurance policy for all those who rent out their homes.

Customer crises happen to every startup. In today’s ultra-connected world, bad news spreads fast. Whatever the mistake, apologize to your customers and do it quickly. More often than not, you’ll come out ahead.

Communicating Your Story

Some entrepreneurs are natural promoters. They have an inherent desire to be at the center of attention. Without delving too deeply into the psychology, the motivations are often simple: insecurity, narcissism, and/or a need for external affirmation. The result quite often is immense publicity for anything with which the entrepreneur is associated. Of course, when those same companies fail, the craters they leave behind tend to be big ones.

Other entrepreneurs are more inwardly focused and less promotional as a result. Some don’t like the spotlight at all; others believe, as the old saying goes, that if you build a better mousetrap, the world will beat a path to your door. The reality is, promoters often have an easier time raising money, recruiting people to their cause, and getting user or customer adoption.

If you’re not a natural promoter, hire someone who will work with you to get your story out, and commit to becoming a promoter yourself. Often the best promoters have a support staff behind the scenes booking them speaking engagements, getting them article placements, and helping them tweet and post.

Getting your story and point of view out is different than marketing your company’s products. Communicating your point of view is about telling a much more personal story—it’s about you and your vision of how you intend to do something transformational through the company you’re building.

If you’re three or four years in and you find yourself going along linearly, with no signs of increased growth, ask yourself if there’s a way to reframe and position your story in a much more game-changing and human light. Become the go-to expert in your space. If you’re intimidated or embarrassed by the thought of speaking at conferences, appearing on television, or being quoted, remind yourself of the upside: free marketing and publicity for your startup, which will create more customer demand, thereby reducing your chances of failure. And get some coaching; it may seem expensive if you’re boot-strapped, but it will pay for itself many times over.

Summary

With the technology available today, communication is expected to be frequent and interactive.

Failure comes from

• Confusing your ultimate goal with your actual progress
• Mis-setting expectations
• Not apologizing for mistakes
• Poor management of communication logistics
• Failing to communicate interactively
• Not verifying that people heard what you said

To succeed:

• Separate your ultimate and short-term goals.
• Communicate frequently, especially during tough times.
• Set expectations.
• Apologize for mistakes, and make things right.
• Hold productive meetings with your board.
• Make communication interactive.