Thursday, June 18, 2020

The Spiral

Ben Horowitz writes in his book, The Hard Thing About Hard Things, about "the spiral":
Things always go wrong
There has never been a company in the history of the world that had a monotonically increasing stock price. In bad companies, when the economics disappear, so do the employees. In technology companies, when the employees disappear, the spiral begins: the company declines in value, the best employees leave, the company declines in value, the best employees leave. Spirals are extremely difficult to reverse. 
- Ben Horowitz, The Hard Thing About Hard Things

So how does a CEO get out of the spiral? Here's a few things I would think about

  • Investigation
    • Identify whether your company is actually in a death spiral: high attrition. It's important to not be in denial about this. Be objective about the state of your business and react accordingly.
    • Identify friction in how the makers of the organization (engineers, designers) are able to contribute to the product. If you find an engineer waiting on a decision, you'll soon realize how much more delayed the feature will become. Every decision delayed causes more delays down the road. The goal here is to identify major inefficiencies within your organization.
    • Identify initiatives that do not have an impact on your primary objectives of being default alive (profitable). Communicate and shut down those extra initiatives to focus on hitting your targets.  The goal is to identify effort that is being invested in areas of the business that should be allocated towards the new direction.
    • Identify teammates who aren't aligned with your direction of focusing the company on a clear set of objectives. Some teammates enjoy startup peace time as a way to build new products but during war time, you need your team to be extremely focused.
  • Execution
    • Clarify to the organization what changes must be done in order to stop spiraling out of control. Generally, this can be done in all hands.
    • Conduct 1on1s with your executives and managers to ensure they understand why the company needs to have extreme focus on getting out of the spiral. This will help them explain your new direction to their direct reports.
    • Keep yourself open to office hours. Employees will have questions regarding the company's health and direction, always ensure they have a way to reach you. 
So how do you know if you've reversed the spiral? One way to look at it is by measuring the morale of your team. Managers of the company should be asking their direct reports in 1on1s how they feel about the company's health and direction.

The mind of a CEO is a constant battle of psychology. Not only do they have to project confidence to their organization but they have to constantly battle their inner demons on a daily basis. In a startup, things always go wrong. It is important to understand why this is happening and go through the exercise of identifying and executing changes required to get out of the spiral.