Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.
By Gerry Langeler
I was recently involved in a CEO search for one of our portfolio companies. During the process of interviewing a number of very successful, seasoned business leaders, I was struck by the number of times I was told in resonating tones, “I believe in no surprises management.” Of course, this was designed to impress me as a Board member and major investor. However, quite the contrary. I usually responded with something like, “I guess you’ve never been in a start-up before.”
In fact, I could just as easily have responded with either, “I guess you’ve never been in business before,” or better yet, “I guess you’ve never been alive before.” As far as I can tell, life, business, and especially start-up business is a series of surprises. Do you really know what is going to happen tomorrow? Really?
- Yesterday, I didn’t know a branch would fall out of one of our trees and cut off power to the whole neighborhood (we are SO popular today! – or should I say poplar?)
- Yesterday, I didn’t know that VC seed financing for start-ups was going to come in well above previous quarters in Q3. (Yea!)
- Yesterday, I didn’t know one of our portfolio companies was going to get a major order from a customer we thought had gone to sleep on us. (Double Yea!)
One bad surprise, two good surprises, but surprises nonetheless. Anyone who really thinks they can avoid being surprised by the ebbs, flows and uncertainties of business is just not paying attention.
So, why all this chest beating about “no surprises” management. I think what these CEOs really wanted to say, but didn’t quite have the right language for was “completely transparent and alert” management. This means not that they don’t get surprised, but that when they think they see a surprise coming much less get one, they let their Board know essentially immediately. And, when they think there is a probability of a surprise (does that make it not a surprise?) they plan for that eventuality so there is an action plan ready to deal with it. It even means going hunting for potential surprises to find them earlier, when they may be less disruptive.
To give you an example: Early on in my VC days I was asked to step in as back-up for one of my partners on a deal. We do this to get a second set of eyes on the prize, and also try to provide more value-added to the company. At the first Board meeting I attended (as an observer) I listened to the sales VP present her outlook for the quarter, this meeting coming about mid-way through the last month of that quarter. All the PowerPoint slides indicated that her team was going to make their number. I’m sure she was trained to present like this in previous jobs, and frankly most good sales executives can’t fathom the notion of reporting in advance they are going to miss their quota.
But, having had a number of sales VPs report to me when I was an operating exec, the first thing I did when the meeting was over was to turn to my partner, as well as the CEO, and say something like, “Guys, I’m new here. However, I’ll bet you the price of a good dinner that you are going to miss your plan.” They both pushed back hard. But indeed, a few weeks later that’s what happened. And to them, it was a surprise. But it wasn’t to me simply because I had enough scar tissue from missing quarters in my previous life, that I knew when a Sales VP was giving me the body-swerve clues, preparing the ground for the excuses to come. That doesn’t happen when a sales VP is really confident.
So, here’s a case where the CEO could have questioned my judgment (always a wise move) but still accepted my experience and gone hunting for more indicators on his own. If he had, and kept us informed along the way, we still would have had the sales miss. But the Board and the company would have been much better prepared for the corrective actions that needed to happen afterward.
Claiming you ascribe to “no surprises” is false bravado. I’d much rather have a CEO who I knew in my heart had the intestinal fortitude to come to the Board not only with real bad news, but with his or her gut feel of possible bad news coming, even if there was no concrete data to support that yet. We’ve always said that in start-ups, the distance from euphoria to panic is one phone call. And we’ve all gotten that call.
Likewise, I don’t mind if potential good news is shared (everyone likes to do that) but along with the clear expectation from management that the Board won’t take it to the bank, and won’t bang on the team if the good potential doesn’t prove out. In the third bullet point above, the CEO – who is a master of completely transparent management – had shared with us both the bad news that this big customer had appeared to go to sleep, but also that there was no obvious reason for that. So, when we first got a glimmer of the giant waking up, and then yesterday concrete evidence in the form of orders and delivery requests moving in, we were happy, but not overly surprised.
Transparent and alert – that’s what we like to see from the CEO, and from the entire management team.
