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

by Ben Horowitz

As CEO, you should have an opinion on absolutely everything. You should have an opinion on every forecast, every product plan, every presentation, and even every comment. Let people know what you think. If you like someone’s comment, give her the feedback. If you disagree, give her the feedback. Say what you think. Express yourself.

Feedback won’t be personal in your company. If the CEO constantly gives feedback, then everyone she interacts with will just get used to it.

People will become comfortable discussing bad news.

Does the CEO know what to do? 2. Can the CEO get the company to do what she knows? 3. Did the CEO achieve the desired results against an appropriate set of objectives?

I evaluate two distinct facets of knowing what to do: Strategy In good companies, the story and the strategy are the same thing. As a result, the proper output of all the strategic work is the story. Decision making At the detailed level, the output of knowing what to do is the speed and quality of the CEO’s decisions.

When a company clearly articulates its story, the context for everyone—employees, partners, customers, investors, and the press—becomes clear. When a company fails to tell its story, you hear phrases like These reporters don’t get it. Who is responsible for the strategy in this company? We have great technology, but need marketing help.

Some employees make products, some make sales; the CEO makes decisions. Therefore, a CEO can most accurately be measured by the speed and quality of those decisions. Great decisions come from CEOs who display an elite mixture of intelligence, logic, and courage.

As a result, the CEO must have the courage to bet the company on a direction even though she does not know if the direction is right.

As CEO, there is never enough time to gather all information needed to make a decision. You must make hundreds of decisions big and small in the course of a typical week.

She must make sure the company sources the best candidates and the screening processes yield the candidates with the right combination of talent and skills. Ensuring the quality of the team is a core part of running the company.

In well-run organizations, people can focus on their work (as opposed to politics and bureaucratic procedures) and have confidence that if they get their work done, good things will happen both for the company and for them personally. By contrast, in a poorly run organization, people spend much of their time fighting organizational boundaries and broken processes.

ACCOUNTABILITY FOR EFFORT This is the easy one. To be a world-class company, you need world-class effort. If somebody isn’t giving it to you, they must be checked.

As CEO, you know that you cannot build a world-class company unless you maintain a world-class team. But how do you know if an executive is world-class? Beyond that, if she was world-class when you hired her, will she stay world-class? If she doesn’t, will she become world-class again?

You must hold your people to a high standard, but what is that standard? I discussed this in the section “Old People.” In addition, keep the following in mind: You did not know everything when you hired her. While it feels awkward, it is perfectly reasonable to change and raise your standards as you learn more about what’s needed and what’s competitive in your industry.

You must get leverage. Early on, it’s natural to spend a great deal of time integrating and orienting an executive. However, if you find yourself as busy as you were with that function before you hired or promoted the executive, then she is below standard.

As CEO, you can do very little employee development. One of the most depressing lessons of my career when I became CEO was that I could not develop the people who reported to me.

If someone needs lots of training, she is below standard.

it’s neither necessary nor a good idea to evaluate an executive based on what her job will be two years from now. You can cross that bridge when you come to it. Evaluate her on how she performs right here and right now.

If you have a great and loyal executive, how do you communicate all this? How do you tell her that despite the massive effort and great job she is doing today, you might fire her next year if she doesn’t keep up with the changes in the business? When I used to review executives, I would tell them, “You are doing a great job at your current job, but the plan says that we will have twice as many employees next year as we have right now. Therefore, you will have a new and very different job and I will have to reevaluate you on the basis of that job. If it makes you feel better, that rule goes for everyone on the team, including me.”

So, the judgment that you have to make is (a) is this market really much bigger (more than an order of magnitude) than has been exploited to date? and (b) are we going to be number one? If the answer to either (a) or (b) is no, then you should consider selling. If the answers to both are yes, then selling would mean selling yourself and your employees short.

After eight years of running Loudcloud and Opsware, I had learned so many hard lessons that building the team was easy. I understood the importance of hiring for strength rather than for lack of weakness, and I understood the meaning of “fit.” There are lots of smart people in the world, but smart is not good enough. I needed people who were great where I needed greatness. I needed people who really wanted to do the jobs they were hired for. And I needed people who believed in the mission—to make Silicon Valley a better place to build a company.

Hard things are hard because there are no easy answers or recipes. They are hard because your emotions are at odds with your logic. They are hard because you don’t know the answer and you cannot ask for help without showing weakness.

On my grandfather’s tombstone, you will find his favorite Marx quote: “Life is struggle.” I believe that within that quote lies the most important lesson in entrepreneurship: Embrace the struggle.