The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

by Ben Horowitz

An early lesson I learned in my career was that whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project.

Note to self: It’s a good idea to ask, “What am I not doing?”

In the end, I did find the answer, we completed the deal with EDS, and the company did not go bankrupt. I was not mad at Bill. To this day, I sincerely appreciate his telling me the truth about the odds. But I don’t believe in statistics. I believe in calculus.

People always ask me, “What’s the secret to being a successful CEO?” Sadly, there is no secret, but if there is one skill that stands out, it’s the ability to focus and make the best move when there are no good moves.

Don’t put it all on your shoulders. It is easy to think that the things that bother you will upset your people more. That’s not true. The opposite is true. Nobody takes the losses harder than the person most responsible. Nobody feels it more than you. You won’t be able to share every burden, but share every burden that you can.

This is not checkers; this is motherfuckin’ chess. Technology businesses tend to be extremely complex. The underlying technology moves, the competition moves, the market moves, the people move. As a result, like playing three-dimensional chess on Star Trek, there is always a move.

Play long enough and you might get lucky. In the technology game, tomorrow looks nothing like today. If you survive long enough to see tomorrow, it may bring you the answer that seems so impossible today.

Don’t take it personally.

Remember that this is what separates the women from the girls. If you want to be great, this is the challenge. If you don’t want to be great, then you never should have started a company.

As the highest-ranking person in the company, I thought that I would be best able to handle bad news. The opposite was true: Nobody took bad news harder than I did. Engineers easily brushed off things that kept me awake all night.

There are three key reasons why being transparent about your company’s problems makes sense:

1. Trust. Without trust, communication breaks. More specifically: In any human interaction, the required amount of communication is inversely proportional to the level of trust.

The more brains working on the hard problems, the better. In order to build a great technology company, you have to hire lots of incredibly smart people. It’s a total waste to have lots of big brains but not let them work on your biggest problems.

Too often the answer is that the company culture discouraged the spread of bad news, so the knowledge lay dormant until it was too late to act.

If you run a company, you will experience overwhelming psychological pressure to be overly positive. Stand up to the pressure, face your fear, and tell it like it is.

Training starts with a golden rule: Managers must lay off their own people.

It turns out that the actual act of firing an executive can be relatively easy compared with any other firing. Executives have experience being on the other side of the conversation and tend to be quite professional.

When disclosing the firing to the direct reports, make sure that you have a plan for whom they will report to in the meantime and what’s next (executive search, reorganization, internal promotion, or something else). Generally, it’s smart for the CEO to act in the executive role in the meanwhile. If you do act in the role, you must really act—staff meetings, one-on-ones, objective setting, etc. Doing so will provide excellent continuity for the team and greatly inform your thinking on whom to hire next.

Ironically, the key to an emotional discussion is to take the emotion out of it. To do that, you must be very clear in your mind about what you’ve decided and what you want to do.

There may be nothing scarier in business than facing an existential threat. So scary that many in the organization will do anything to avoid facing it. They will look for any alternative, any way out, any excuse not to live or die in a single battle. I see this often in startup pitches. The conversations go something like this: Entrepreneur: “We have the best product in the market by far. All the customers love it and prefer it to competitor X.” Me: “Why does competitor X have five times your revenue?” Entrepreneur: “We are using partners and OEMs, because we can’t build a direct channel like competitor X.” Me: “Why not? If you have the better product, why not knuckle up and go to war?” Entrepreneur: “Ummm.” Me: “Stop looking for the silver bullet.” There comes a time in every company’s life where it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself, “If our company isn’t good enough to win, then do we need to exist at all?”

Sometimes you have to go to war with competitors

My old boss Jim Barksdale was fond of saying, “We take care of the people, the products, and the profits—in that order.” It’s a simple saying, but it’s deep. “Taking care of the people” is the most difficult of the three by far and if you don’t do it, the other two won’t matter. Taking care of the people means that your company is a good place to work.

If your company is a good place to work, you too may live long enough to find your glory.

Being a good company doesn’t matter when things go well, but it can be the difference between life and death when things go wrong. Things always go wrong. Being a good company is an end in itself.

the only thing that keeps an employee at a company when things go horribly wrong—other than needing a job—is that she likes her job.

Good product managers assume members of the press and the analyst community are really smart. Bad product managers assume that journalists and analysts are dumb because they don’t understand the subtle nuances of their particular technology.

Good product managers err on the side of clarity. Bad product managers never even explain the obvious. Good product managers define their job and their success. Bad product managers constantly want to be told what to do.

Make sure that they “get it.” Content-free executives have no value in startups. Every executive must understand the product, the technology, the customers, and the market. Force your newbie to learn these things.

Nothing will accelerate your company’s development like hiring someone who has experience building a very similar company at larger scale. However, doing so can be fraught with peril. Make sure to pay attention to the important leading indicators of success and failure.

The very best way to know what you want is to act in the role. Not just in title, but in real action. In my career, I’ve been acting VP of HR, CFO, and VP of sales. Often CEOs resist acting in functional roles, because they worry that they lack the appropriate knowledge. This worry is precisely why you should act—to get the appropriate knowledge.

Like technical debt, management debt is incurred when you make an expedient, short-term management decision with an expensive, long-term consequence. Like technical debt, the trade-off sometimes makes sense, but often does not. More important, if you incur the management debt without accounting for it, then you will eventually go management bankrupt.

Every really good, really experienced CEO I know shares one important characteristic: They tend to opt for the hard answer to organizational issues. If faced with giving everyone the same bonus to make things easy or with sharply rewarding performance and ruffling many feathers, they’ll ruffle the feathers. If given the choice of cutting a popular project today, because it’s not in the long-term plans or you’re keeping it around for morale purposes and to appear consistent, they’ll cut it today. Why? Because they’ve paid the price of management debt, and they would rather not do that again.

Apolitical CEOs frequently—and accidentally—encourage intense political behavior. What do I mean by politics? I mean people advancing their careers or agendas by means other than merit and contribution.

Minimizing politics often feels totally unnatural. It’s counter to excellent management practices such as being open-minded and encouraging employee development.

Similarly, if you manage a junior employee and they ask you about their career development, you can say what comes naturally and generally get away with it. As we saw above, things change when you deal with highly ambitious, seasoned professionals. In order to keep from getting knocked out by corporate politics, you need to refine your technique.

Hire people with the right kind of ambition.

the right kind of ambition is ambition for the company’s success with the executive’s own success only coming as a by-product of the company’s victory.

Build strict processes for potentially political issues and do not deviate. Certain activities attract political behavior. These activities include: Performance evaluation and compensation Organizational design and territory Promotions

It is particularly important that managers have the right kind of ambition, because anything else will be exceptionally demotivating for their employees. As an employee, why would I want to work long hours to advance the career of my manager? If the manager cares more about his career than the company, then that’s what I’d be doing.

At a macro level, everybody views the world through her own personal prism. When interviewing candidates, it’s helpful to watch for small distinctions that indicate whether they view the world through the “me” prism or the “team” prism.

They will tend to be far more interested in how your company will win than in how they will be compensated or what their career path will be.

The sales organization is the face of the company to the outside world. If that group optimizes for itself, your company will have a major problem.

Two important factors drive all companies to eventually create job titles: 1. Employees want them.

Eventually, people need to know who is who.

The rationale behind the law is that the other employees in the company with lower titles will naturally benchmark themselves against the crappiest person at the next level. For example, if Jasper is the worst vice president in the company, then all of the directors will benchmark themselves against Jasper and demand promotions as soon as they reach his low level of competency.

When describing the skills, avoid the generic characterizations such as “must be competent at managing a P&L” or “must have excellent management skills.” In fact, the best leveling tools get extremely specific and even name names: “should be a superstar recruiter—as good as Jenny Rogers.”

For promotions

Andreessen argues that people ask for many things from a company: salary, bonus, stock options, span of control, and titles. Of those, title is by far the cheapest, so it makes sense to give the highest titles possible. The hierarchy should have Presidents, Chiefs, and Senior Executive Vice Presidents. If it makes people feel better, let them feel better. Titles cost nothing. Better yet, when competing for new employees with other companies, using Andreessen’s method you can always outbid the competition in at least one dimension.

Mark Zuckerberg purposely deploys titles that are significantly lower than the industry standard. Senior Vice Presidents at other companies must take title haircuts down to Directors or Managers at Facebook.

In fact, both the hiring and onboarding processes at Facebook have been carefully designed to encourage the right kind of employees to select themselves in and the wrong ones to select themselves out.

You might think that so much time spent on promotions and titles places too much importance and focus on silly formalisms. The opposite is true. Without a well thought out, disciplined process for titles and promotions, your employees will become obsessed with the resulting inequities. If you structure things properly, nobody other than you will spend much time thinking about titles other than Employee of the Month.

If you want to have a world-class company, you must make sure that the people on your staff—be they young or old—are world-class. It is not nearly enough that someone on your staff can do the job better than you can, because you are incompetent at the job—that’s why you hired them in the first place.