The best way to build a startup is to have everyone in a single physical location, but that isn’t always possible.  I’ve had to deal with virtual teams on multiple occasions, and my last employer, The Electric Sheep Company, took it to an extreme, with 75 people mostly scattered around the country.  Here are a few lessons I’ve learned over the years in making virtual teams work effectively.

1. No Substitute for Facetime: Humans are social creatures. We tend to only go the extra mile for colleagues we have met, like and respect.  I learned this lesson in one of my first jobs out of college. We were working on a trans-Atlantic deal, but whenever I needed something from my British compatriots, somehow it always felt like my requests went to the bottom of the heap.  Halfway through the deal, I got to meet and have a beer with my Brit colleagues.  All of a sudden, I was real to them. I was a presence they liked and respected. They would pick up the phone when I called, and pull an all-nighter if I needed it.  I shifted from “the guy asking for stuff” to a compatriot and teammate.  The sooner you can get new hires in a room with everyone else, the more productive everyone will be.

At Electric Sheep, we found that we needed to do company-wide retreats every 3-4 months to get people back on the same page, strengthen relationships, and re-energize everyone. (Note: while the ability to hire anyone, anywhere certainly helped the business when it needed to staff up quickly to meet demand, the broad distribution of the company was a serious impediment when the company’s prospects became more difficult.)

2. Flexibility with Accountability: I’m sure you’ve faced it — a fire drill pops up and the critical person is nowhere to found.  Or, you are getting into the zone and suddenly find yourself bottlenecked because your colleague isn’t reachable to answer a simple question.

Personal freedom is important, but for collaborative work, flexibility cannot come completely at the expense of team productivity.  Working remotely requires extra levels of communication. This includes sharing your availability and how you can be reached. If your work is collaborative, it also means working when other people are working. One way to add structure is to have everyone agree on a specific time window where they will work and collaborate in real-time.  On the flip side, you might also consider time windows where people can be deep-focus productive and *not* have to be instantly responsive to IM and email, save for emergencies.

3. Empower individuals: This is important for all startups, but especially critical with remote teams.  It is very easy for a remote employee to fall into passivity or even negativity.  In an office, you can draft off of the energy, intensity, and activity of others on a down day.  Mark Pincus coined a great phrase: “everyone should be a CEO of something.” Flip people out of the mode of “doing what they are told”, and help them take charge of solving problems and creating new opportunities.

4. Weekly 1-on-1’s: Managers need to talk to their reports 1-on-1 every week, in-person or over the phone.  Do not leave this to email, IM or group meetings — you won’t get honesty, and relationships will atrophy.  As CEO, you might not be able to physically “manage by walking around”, but you should do your best to connect with individuals and keep your finger on the pulse of the organization. Furthermore, you can really boost morale simply by listening to people’s ideas.  Even if their ideas don’t get adopted, most people want to be heard and respected.

5. Level up in email: a lot of communication happens in email, which requires both efficiency and etiquette. If you are not effective at text communication, then working remotely might not be for you.  If you cannot inspire people in text, then you should not try to lead a distributed organization.

Everyone needs to be extra-careful with written communication, because you won’t have “water cooler” interaction to keep things civil and patch things over. Before interpreting something in a negative light, try to give the author the benefit of the doubt. Before sending that angry note, stick it in your draft folder for an hour or two. I once witnessed a truly spectacular email flame-out by a frustrated, angry employee. What began as a rant quickly degenerated into an email war with 20 other people, and ended in a firing.  That was an extreme unpleasant case, but as a rule, you want to be extra-sensitive in email when working remotely. When in doubt, switch to the phone (which leads directly to my next point…)

6. Escalate off of text *immediately*: text communication is ripe for mis-communication and misunderstandings.  The instant something gets frustrating to explain, get off email and pick up the phone.  The instant you start feeling anger or irritation, take a deep breath, and pick up the phone.  This applies to interactions with colleagues, customers, vendors, and partners.

A 30-second phone call can save hours of wasted time writing emails. A 30-second phone call can prevent unnecessary drama, or pop it like a balloon. When people are irritated, their reaction is to stay off the phone, but this is the worst possible idea. (p.s. you will probably need to push software developers to do this, since many hate the telephone, but I cannot stress it enough).

7. Experiment with tools: Every team has it’s own preferences for collaboration tools.  I am partial to Yammer because it is lightweight and asynchronous, and thus easy for people to share and interact.  I use IM a lot, but many remote dev teams like IRC. A good document sharing tool is also effective, whether it be Google apps, Dropbox, etc. For the product/dev side of things, a lot of people like using Pivotal Tracker and/or Basecamp for higher-level organization. Some people like email lists; I’m not a huge fan personally, but if you don’t have them, you need other tools to make up the gap.  You’ll never get unanimous approval on any single tool, but you do need general buy-in for something to work.

8. Choose your work style consciously: When you work from home, the lines between work and personal life start to blur.  Be careful that work doesn’t expand to take up all available space.  I’ve seen plenty of people who work 14-16 hour days, but actually get the same amount done as those who put in 8-10 hours of intense, high-concentration time. It can come down to personal preference, but make it a conscious choice.  For me personally, it depends on the tasks at hand — I find creative work harder to do effectively in unbroken bursts. And of course, if you are finding the house too distracting, switch to a coffee shop or co-working facility.

9. Keep conference calls short and small: In general, try to have the fewest people at any virtual meeting as possible, and always end your conference calls early!

Interesting Related posts:
Mark Suster, The Power of “In Person” – Why Distributed Teams are Less Effective
Mark Suster, People Management: Startup Teams Should Dip but not Skip
Ben Horowitz, CEOs Should Tell It Like It Is

Thank you to Chris, Becky and Jessie for contributing their tips on working remotely.

I was just catching up on the Chirp conference care of GigaOm when I stopped dead at this sentence,

“With more than 100,000 applications created on its platform to date, it’s frankly amazing that Twitter hadn’t formalized its road map and addressed competition with developers before … [t]hough with $160 million in the bank you’d think the company could have been a little quicker and savvier.“

I don’t want to comment about Twitter.  I want to talk about money.  Money isn’t a magic wand.  For as much as it frees your business from some debilitating constraints, it can also be extremely dangerous, which I’m sure Ev knows well.  With startups, and frankly anything in life, if you spend money too fast, you usually end up wasting a lot of money and making bad decisions (just look at U.S. spending in its conflicts overseas).

I don’t begrudge Twitter trying to grow carefully.  Frankly, the last company I was involved in would have benefited from raising less money.  It would have hired slower and better, taken on fewer parallel projects, and most likely had more credibility and flexibility with investors when it came time to pivot (although it is hard to say — they were unusual early stage investors, which is a whole other lesson unto itself).  To be clear, there were bigger problems at work than amount of capital raised, but I do think the money exacerbated things by letting the company take bigger, and more, bets which ultimately did not pan out.

Once you get passed a certain level, more money cannot significantly speed up the amount of time it takes to find good hires, learn about your market, or develop key strategies.  Nor can you purchase product-market-fit.

My dream is to have lots of money in the bank, and spend it very carefully, finding that elusive balance between over-cautious and over-zealous.  There are exceptions to caution: if you discover a really great and scalable customer acquisition method, you can pour money into that channel as long as returns are solid (either profitable or delivering on key growth or market-share metrics).

For as obvious as all this is, I am always amazed at how often you hear comments that equate money in the bank with a fast solution to a startup’s challenges.

When you are in the weeds building, testing, and iterating, communication challenges can pop up.

• First, you want everyone on the same page as to how the “value proposition” has evolved, what needs to be validated next, and why.
• Second, when your business feels like a moving target, sometimes it can be awfully hard to explain to others in clear English what it is you are doing.

Back in January, Kent Beck made a wonderful recommendation on the lean startup circle: write a short, fictional letter from a happy customer. His advice stuck with me and we put it into practice today. I loved the results.

Kent’s suggestion was as follows: “tell the story of their dilemma before they happened to find your site, how they found it, how they interacted with it, and what happened subsequently. It doesn’t need to be long–just 4-5 sentences will do.”

I actually recommend quickly writing three or four letters.  Don’t agonize over them, keep it real, and keep them short.  They don’t all need to include everything in Kent’s list but they should all list one reason why the customer is happy with your service.  I also think you can have some or all of them end with a criticism or suggestion.

Have your teammates do the same exercise, without reading anyone else’s letters.  Then share.

This exercise helps you channel your customer and spell out your value in plain English. It also allows you to see the entire team’s individual assumptions both on the mission, and, if you write fictional criticisms/suggestions, where the company might be falling short.

Give it a shot.  It takes no time, and I bet you’ll find the exercise quite useful.

Bijan Sabet of Spark Capital today posed the question of how a startup maintains speed once it hits adolescence. His conclusion is that “speed is really the result of a having the company aligned.”

Howard Lindzon, the colorful CEO of Stocktwits, responded with the following comment:

“we deal with this today. managing feature creep is key.
obviously being aligned is good as long as you are aligned around the right path.
just a real tough question but a real belief in the model ahead is what does keep things aligned.”

Howard’s line, “obviously being aligned is good as long as you are aligned around the right path,” really hit home with me.

The last startup I was involved in, wearing various VP hats, was highly “non-lean”. It started out as a land grab on a new, fast-growing technology platform, and while we sold some incredible customers, grew revenue, and built a leadership position in our sector, about 2 years into the business we realized that the core strategy was not going to work. We needed to downsize quickly and pivot.

Downsizing was painful but necessary. We got it done and kept the ship from foundering. The real problems emerged with the need to pivot. We had been a team on a mission, backing up a CEO with a strong vision. Now, we found ourselves with a fundamental disconnect as to how the business should re-define itself, and the disconnect existed across the board-seated investors, CEO & founder, those of us at the VP-level, and across the entire organization.

What do you do when a bunch of smart, talented people simply cannot agree? When the differences aren’t incremental but fundamental?

In this case, we stuck it out for a while. We all retained the hope that we could regain the greatness of the first two years.  We believed in the talent of the team.  I personally was not ready to give up on the company after working so hard to get it off the ground. It’s not a unique startup story by any means.

But this post is about alignment.  For better or for worse, I am hard-wired to fight, and fight hard, for my beliefs. I’m open to being convinced of a better path, but nothing was convincing me in this scenario. Whether I was right or wrong back then is irrelevant. I had some good ideas and some stupid ones. What I do know, however, is that my disagreements on direction hurt organizational alignment and I went from being a force and productivity multiplier to, at times, the opposite.

We were never going to agree on direction, but with that in mind as I look back, I still puzzle over what I, and the CEO, should have done.

Putting myself in the CEO’s shoes, I probably would have fired me. He’s a very loyal guy (to a fault), and I had played a big role in building our initial success, but the world had changed and we were no longer on the same page. If he and the board had truly made up their mind on direction, I now think that they should have shed everyone not 100% in agreement. They would have lost a lot of the remaining talent, but they would have cut the cash burn way down and bought more time to see if their ideas were the right ones. (of course, the reality was more muddled and complex)

Looking back at my own shoes, I still puzzle over whether I did the right thing by sticking it out for another 18 months. Since I didn’t have control over direction, and I fundamentally disagreed with the chosen direction, perhaps I was an idiot for staying. My intuition says that yes, I should have left and started my own company much earlier. But with loyalty to colleagues, inherent stubbornness, not wanting to chalk up huge amounts of effort to “Fail”, and my wife expecting a baby, it was all rather complicated. I stayed. For the record, I don’t regret it as I grew in some useful ways.

Conclusion

At the end of the day, you need people aligned. The CEO needs to make his or her best judgment as to the right path, and the board should either back that up or replace the CEO. If as CEO, you cannot get all the members of the team on the same page, you probably need to change up the team.

Yes, he should have fired my ass.

* * *

(image cropped from Tug Of War – Colour Edit, by tj.blackwell, Creative Commons)

Hiten Shah tonight sent out an interesting tweet, “The more you know, the more you no.”  Interestingly enough, Matt Henrick riffed back, “the less you know, the more you will try.”  My brain went in a different direction: how experience teaches you what not to do.  I thought it would be fun to talk about some great no’s in a startup.

No, we’re not going to do that

A startup has limited resources, so focus is paramount.  Your decisions for what *not* to do are as important as what *to do*.  “No” means less feature creep, less consumer confusion, more team productivity, more focused commitment to a central mission, and better allocation of cash resources.  That’s why I loved Matt Blumberg’s quarterly stop/start/continue reviews.  It’s why Caterina Fake blogged about working on the right thing.  It’s fun and easy to dream up a million features, but that will kill you.

No, we’re not going to buy your product

This one sucks, but it’s better than a non-committal answer which wastes your time.  During customer development, a “no” can save you from building the wrong product or targeting the wrong demographic.  In enterprise sales, a concrete no from a prospect allows you to focus your resources on better opportunities.  However in both this example and the one below, “no” might end the sales effort but do not let it end the relationship.  The head of sales at my last company was fabulous at keeping in touch with those who said no. Periodically, she would give them updates and try to add value.  Those no’s would sometimes convert to yes, or refer great new prospects who were a better fit.

No, we’re not going to invest

The next best thing to a clear yes from a VC is a clear no.  Many VCs hate to say no.  I’d guess it’s partly because they never like to burn a bridge, partly because they don’t want to bother explaining why not, and partly because if things radically change (the cynic would say, another VC wants to do the deal), they might end up wanting in after all.  Unfortunately, you can waste huge amounts of time trying to document X or model out Y.  No entrepreneur trying to raise capital wants to hear no, but as with customer prospects, the string-along “maybe” is a resource killer.  Unfortunately it can be hard to judge when you are dealing with serious requests or delays and need to keep chasing the deal, and when you should just cut your losses. Entrepreneurs are not known for giving up easily.

No, we’re not going to hire him/her

If you are lucky enough to have the problem of rapidly scaling your business, the pressure to hire becomes very intense.  People are stretched thin, possibly risking burnout, and you just need more bodies!  Famous last words. It’s not as easy as it sounds to hire and quickly fire if it’s not a clear cut case.  Once you hire someone, you’re expected to give them a chance.  Once they aren’t working out, you’re supposed to give them feedback and give them a shot at improvement (and document it all).  All the while, they are consuming your precious cash and killing the morale of your high performers, or burning bridges with customers, or spoiling good leads.  Unfortunately, I’ve seen every one of those things happen.  My conclusion is that if instincts signal the least bit of hesitation about a hire, no matter the pressure to grow the business, I have to say no. A majority vote is not good enough.

No, I disagree

Startups have this weird dynamic where you need people marching to the same tune, but you also need an environment where people can question things.  You want to avoid group think.  You want to hear where your people are seeing problems.  As you get bigger, this gets tougher.  It gets harder for the CEO to hear dissatisfaction or brewing cynicism.  I’ve seen different techniques, but at the end of the day, somehow you as CEO have to create trust that people can question without risk, that their comments will be taken seriously, and that there is a reasonable chance that real action will take place or, failing that, a logical explanation why not.

Addendum

For another interesting list of no’s, check out Chris Dixon’s Things startups do and don’t need (I don’t agree with *everything* on the list, but it’s good).

What other “no’s” are great in a startup?

Matt Blumberg posted some great managerial advice today on the problem of “what gets said isn’t necessarily what gets heard.“  I totally agree with his recommendations of “playback” and email follow-up.

This advice also applies to upward or sideways management.  This is for the “what gets said isn’t necessarily what gets remembered” problem.

It can be a boss, a peer, a client, a board member, or a sales person asking for support on an prospect: you can run into hot water when someone asks for something, but as time passes, their brain changes what they asked for.  It is unfair, but usually not malicious — simply that their needs and context have changed.

If you are given an important task, don’t just say “yes, I’m on it!”  Matt’s managerial advice applies in this situation too: play back what you heard at the time of the request, and get a verbal confirmation. Then summarize the request in an email and get confirmation on the request and the understood deadline.  If something takes a *very* long time, you should go back periodically and doublecheck that the original request still stands intact.

This isn’t just CYA stuff to prevent conflict and misunderstandings — this kind of clarity can help improve the overall performance of the business.  If you are in a services business and you do this with clients, it can save you a lot of money as well.

Last night, Matt Blumberg of Return Path discussed some of the pivots his business has taken on its journey at a Lean Startup Meetup in NYC.  Matt has a first post up about it here, with the great quote:

the larger your business is, and the more investors have a stake in it, the harder it is to make BIG pivots or any kind of jumps.  Innovation is still critical, but innovating from a well-protected core is what it’s all about, not chasing new shiny objects.

My favorite gem from Matt came up at the end, where he mentioned a fabulous practice they have at Return Path.  Focus is critical to startups, and part of focus is knowing when to say no — not just before something begins, but once it is underway and has resources and momentum.  In other words, killing projects off, pruning for health.

Each quarter, every employee at Return Path has to make and share a list of the projects they think the company should STOP, START, and CONTINUE.

I think it is a simple and fabulous idea, and I believe that it would be essential that 1. everyone gets a voice and 2. that the CEO makes sure to listen to every voice (i.e. avoid the danger of a middle manager stifling voices to protect a job or project).

Also on this topic: Caterina Fake, Working on the right thing, Part II

(Update: fixed typo in title. Quartlerly, eh. Glad I can spell.)

I was reading Fred Destin’s post on why entrepreneurs hate VCs, when a quote caught my eye: “Learning from mistakes is far less useful than emulating success.“  It’s a message that 37Signals likes to harp on as well.  I’d argue that you have an equal shot at learning from mistakes or successes, as long as you take the time to objectively dissect the facts.

However, all this misses the real point.  No matter what you are learning from, the key is to correctly translate it to your new context.

People will preach, “this is what worked for me, so it will work for you.”  Just don’t swallow it whole.

I don’t care what philosophy or framework you are interested in — whether the Blank/Ries lean startup approach or 37Signals ethos — don’t get religious.  Tech startups share huge commonalities, yet the devil is in the details and you need to filter everything for your details — your team, your timing, your product, your competition, your market noise, your financial resources, etc.

When it comes to marketing, definitely study your and others’ successes, but remember that you are not alone.  Lately, I’ve been looking at Mint.com’s trajectory, but so is everyone else (a VC friend of mine said he’s getting tired of hearing, “We’re the Mint.com of X”).  Mint lived in its context.  Some of their strategies will work for my startup, and some won’t.  In my new context, I have to decide where copycat marketing noise will degrade effectiveness. (here’s a long post on tactics)

So two messages:

1. It doesn’t matter whether you won or lost, don’t fight the last war.
2. When you get a piece of advice, use your brain and make it your own.

Thanks to a tumble from Hiten Shah, I just watched and loved Dan Pink’s TED talk on incentive structures and performance. Dan makes a case that monetary performance-based incentives increase productivity for mechanical tasks, but not for complex creative ones. Instead, you need to focus on three things:

1. autonomy
2. mastery
3. purpose

This is exceptionally true in software startups.  Yes, people dream of valuable equity, but for the day to day, freedom and flexibility trump bureaucracy and control.  Pride trumps fear.  Inspirational goals and love of team trump incremental bonuses.

If you have an employee for whom this is not the case, then they probably do not belong in your startup.

The one area where monetary performance incentives really do need to exist alongside those 3 listed above is sales.  In general, employees should be free to set their own schedule that gets the work done.  Vacation policies should be irrelevant for all but accounting purposes.  Meetings should be kept to a minimum, with minimum number of attendees wherever possible.

This does not mean anarchy.  Employees need to communicate when and how they are reachable (you can’t have an emergency and have someone totally AWOL).  If someone needs to be awake and in the office with other teammates in order to accomplish a task or effectively brainstorm, then so be it — it is a necessary constraint  to “getting work done”.  If someone is flaking out and abusing the system, then you need to quickly get them back on track and, failing that, fire them.

If you have a great software development team, don’t forget to let them look up from the high-pressure dev plan (in some cases, you might have to force them!), and take a breather now and then to work on something fun, new and challenging.

I first met Dan over a decade ago when he wrote Fast Company’s cover story “Free Agent Nation“, and I was building an online marketplace for freelance work and knowledge exchange.  He’s tackled one relevant topic after another and I look forward to reading this book when it comes out.

I love despair.com’s line “none of us is as dumb as all of us”.

A big part of startup success is tied to the quality of people and how well they work together.  That’s why I’m always sad when I see situations where a business has hired someone really good, and then refuses to empower them as an expert.  Occasionally this happens with a micro-managing executive who has to control every decision, but often it is due to an attempt to manage by consensus.

The trouble with consensus is that everybody has opinions, but the best decision isn’t always made by the majority or by the people who are most aggressive in a meeting.

It doesn’t matter whether your team is arguing about SEO, a database scalability approach, user interface design, a game reward mechanism, or some other topic — if you’ve hired someone who’s an expert on a topic, back them up and let them be an expert.  Yes, ask questions and let others express opinions in an effort to get to the best decision, but don’t let decision making be a slave to the group.

I also believe in A/B testing and data-driven iteration, but I just wanted to stop and highlight a simple point that can make your business faster and your high-quality employees much happier.

Hire great people, and make sure you empower them to be awesome.