Better metrics for better culture, part 1, with Kapor Capital’s Mitch Kapor & Dr. Freada Kapor Klein

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1:25And right now, you can get six months of Rippling free when you sign up at rippling.com slash scale. That's R-I-P-P-L-I-N-G dot com slash scale. Don't get sad, get rippling. Terms and conditions apply. In the 60s, I remember seeing a television show called Queen for a Day. The host would interview these ladies. Wait till I tell you everything. And then the audience would decide through something called the applause-o-meter. Let's hear it for contestant number one. Mm-hmm. Contestant number two.

2:08I'm thinking to myself, oh my gosh. Oh my gosh. What a way to engage the audience so that they are part of the show.

2:23That's Fred Firestone. He's the co-founder and emcee of the long-running comedy pun competition, The Punderdome. You are about to experience New York's most pun-tastic competition, the Punderdome. Are we ready to do the dome? As Punderdome's co-creators, Fred and his daughter, comedian Joe Firestone, were faced with a challenge. How do you create metrics for something as subjective as wordplay? That's when Fred remembered Queen Friday's applause meter. So he and Joe created their own version, the human clap-o-meter. Clap-o-meter. Which is a person who sits on the stage blindfolded, holding a hand-painted barometer.

3:13They listen for the crowd's reaction, then translate the cheers and groans into a final score. That's a 9.6 for a score of wonderful. We have a winner. Congratulations. But in 12 years and 137 punderdomes and counting, Fred has continued to evolve his criteria for what makes a prize-worthy pun. I'm a dad. I'm a granddad. But I don't want to do dad jokes. I don't want an eye roll. I want a freaking side split. And that's how we roll, okay? Fred also realized there was one criterion he'd failed to articulate. We had a punter who stood up, and he dissed on another individual's appearance. That don't rock with me.

4:03I cannot stand comedians that get up and have to put other people down for laughs. What that made us do was put together a rules of engagement, and we read that every punterdom.

4:18There's no hate. We won't put up with it. And if we hear it, we'll stop it, and they're gone. Creating rules of engagement around the show set a clear metric for success. To win Punderdome, you have to be clever, but you also have to be kind. And this benchmark shifted the culture of Punderdome for the better. That's where I believe that when you choose your metrics, you also choose your culture. So set benchmarks that you can be proud of for the life of your organization. You've got to have incredible talent at every position. It's like this huge push. There are fires burning when you're going home.

5:00Can you believe it? Such an idiot. And then you go back to, this is totally going to be amazing. There are so many easy wins. I'm supposed to know what to do. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a three-bedroom apartment. Stuff that just seems absolutely nut balls. Ten years later, we're like, well, that's just how you do it. We haven't made it just how you do it. This is Masters of Scale.

5:31I'm Reid Hoffman, co-founder of LinkedIn, partner at Greylock, and your host. And I believe that when you choose your metrics, you also choose your culture. So set benchmarks that you can be proud of for the life of your organization. Picture for a moment a world-class ice skater making their debut at the Winter Olympics.

5:54Their carbon steel blades slice a path across the ice. A hush falls over the arena as the crowd and the officials lean forward, ready to render their judgment. What will a skater be judged on? It depends on whether the athlete in your mind's eye is a speed skater, a figure skater, or part of a hockey team. You wouldn't judge the figure skater on how fast they get from one side of the rink to the other. And you wouldn't penalize a speed skater for their lack of triple sal cows. The benchmarks for success are totally different for each sport. In business too, the metrics you set define what's most important for your company.

6:37The way you meet those metrics naturally shapes the culture of your organization. For better or worse.

6:46I wanted to speak with Mitch Kapoor and Dr. Frieda Kapoor-Klein about this because his co-founders of the investment firm Kapor Capital, human-centered metrics have been at the heart of their approach to scale. And they've shared their strategies in a new book called Closing the Equity Gap. Mitch co-founded Lotus, the 1980s business software juggernaut that predated Microsoft Office and sold to IBM in the 90s for$3.5 billion. He was also the founding chair of Mozilla and a driving force in the independent internet movement. And Frida has spent decades at the forefront of making workplaces safer and more equitable.

7:25As two of Uber's earliest backers, they also became two of its most vocal critics during the culture crisis that shook Uber's foundations. We'll dig into that chapter in part two of this two-part episode. But we'll start our story in the greater Boston area, back in the wild and woolly days of early personal computing. This is the late 70s, early 80s. Personal computers were still very new. Not much in the business world, not really taken seriously hobbyists. That's Mitch. Unlike much of the business world at the time, he took computers very seriously. In 1978, while pursuing a master's at MIT, he bought his first Apple II and co-created a program called Tiny Troll.

8:12It helped users turn their data into charts and graphs, giving them more power over their metrics. It was an add-on to the early spreadsheet program, VisiCalc. VisiCalc was the first spreadsheet for the Apple II, and business started buying it. Then IBM announced a personal computer, and it was greeted with skepticism in the hobbyist community. But I looked at it and said, oh, I think this is going to be a big deal. A 16-bit computer with 10 times as much memory, 640 kilobytes, oh God, that's huge. Seeing an opportunity, Mitch and a fellow programmer at MIT, Jonathan Sachs, co-founded Lotus Development Corporation to make a spreadsheet product for this wondrous new machine.

8:56They called it Lotus 123. We knew we'd built a great product that took advantage of the machine. what we were not expecting was the magnitude of success. As Mitch raised funding, he set what he thought was a realistic benchmark. He told his investors he hoped that Lotus would make$3 million its first year. That's not exactly what happened. We had$53 million in sales, and this is 40 years ago, so multiply that by three or four to get the equivalent today. And then the next year, it tripled to$156 million. We went public. We had thousands of employees. Lotus really overnight and unexpectedly became the high growth software company of the 1980s.

9:45Having blown past every conceivable metric for success, Mitch found himself suddenly leading a massive organization. Whatever goals he set next would have big implications for Lotus and its thousands of employees. And he found himself asking, what kind of company do I really want to build?

10:08My experience growing up was being an outsider, being bullied. I was two years younger than everyone because I skipped a grade because I was good at math. And that formed my basic stance of being on the outside looking in. So when, unexpectedly, Lotus was this huge success, I didn't want to send a rocket ship to Mars. I wanted to make the company be a place where people who felt they didn't fit in could actually fit in, to be included. Mitch wanted to build an inclusive culture, which meant hiring someone who could help him scale it. That's when a young researcher named Frida Klein entered the story.

10:50I was finishing my dissertation on sexual harassment in 1984. 20 ,000 research subjects, 10 ,000 men, 10 ,000 women, and Lotus came knocking.

11:06Frida came from a background of activism, starting at age 12, when she cut class to join a farm worker strike led by Cesar Chavez. As an undergraduate at UC Berkeley, she volunteered at a rape crisis center, answering calls on their hotline. And she continued her volunteer work after graduation at a crisis center in Washington, D.C. That is when I got my first call where somebody wanted help who had been an attempted sexual assault by a congressman. I called the Capitol Police. The police officer said to me, lady, I'm going to lose my job if I file this report. Frida was taken aback until she learned that the woman who had called her about the congressman didn't want to take her boss to court either.

11:56She knew he'd never be locked up. What she wanted was some mechanism that could keep her job and keep her safe at work and to get him to stop harassing her and other women. What we realized is that the rape crisis protocol didn't apply to what we now call sexual harassment. With that, Frieda co-founded a group dedicated to preventing sexual harassment in the workplace. It was the first of its kind in the U.S. We called it the Alliance Against Sexual Coercion because we understood that there was something implicitly coercive about someone who's got more power than you at work or even a peer. Frida's work with this group deepened her interest in addressing workplace culture violations, so she pursued a doctorate in social policy and research focusing on employment.

12:52That made her a sought-after corporate consultant and trainer, which is how Lotus recruited Frida to become their first director of employee relations. The job description was to make Lotus the most progressive employer in the United States. That I could wholeheartedly sign up for. I don't know of any other time that that has been put in a job description. Well, I had not seen that in any job description prior to 1984. And the really sad thing is I haven't seen it since. So I think it's time for a revival. becoming the most progressive employer in the u.s was and is an unusual goal though as frida said it probably shouldn't be her challenge was how to turn this broader objective into an okr or objective and key results once the objective is set the key results are the metrics by which you judge how well you're doing i asked her about this in our conversation how did you go about implementing it.

13:56I wanted to focus on culture, on diversity, and on accountability of senior management in particular. Quality of work-life surveys were not all that common, and we didn't have any of the technology that's now available for pulse surveys, but we started surveying early. That is how I took my marching orders.

14:25Because pulse surveys are shorter and deployed more often than a yearly employee survey, they accomplish exactly what their name suggests. They take the pulse of an organization. With her research background, Frida knew she wouldn't be able to measure the state of Lotus's culture only once. To set the right metrics, she'd have to measure again and again. And to get honest data, she'd need to remove the implied stigma around criticizing the company. So she got creative. We started something called the Lotus Grapevine. We had these big purple boxes on the wall and these paper forms. I wanted them to play the Motown song, Heard It Through the Grapevine, when you opened the lid, but couldn't quite get senior management to go along with that.

15:06These surveys were either confidential or anonymous, which put employees at ease. We had people raise a question, a concern, a suggestion, and we would get better than a 95 % response rate. These confidential surveys were valuable in two ways. They gave Frida important data about how to improve workplace culture, but also the act of asking employees for their input and viewed a culture of open communication across the company. Employees felt heard, and then they saw their words put into action. We asked every employee, how did you see your immediate manager, your boss's boss, and the VP who reported to Mitch, how did you see each of them live each value in the day-to-day work life?

15:55Those responses got rolled up and translated into variable compensation. So managers got rewarded for taking the time to know their employees and treat them well. Tying managers and directors' compensation to feedback from direct reports was at the time a pretty radical concept. A decade before the 360 Review came into vogue, this was a way to quantify Lotus' success at building an inclusive culture. Another way was to start a diversity council with representatives from all levels of the organization. Every division and department was represented. In 1984, we had out gay representation. That is amazing.

16:40Having LGBTQ representation on their diversity council had a tangible impact on Lotus. In fact, it led them to becoming one of the first corporate sponsors of an AIDS walk in the U.S. Today, that act might seem unremarkable. But at the time, there was a layer of panic and silence around the disease in most corporate settings. Frida knew it would be a risk, especially for a publicly traded company. So she called other businesses around the country to gather data. I'm calling Levi Strauss and I'm calling Wells Fargo. I'm calling a lot of San Francisco-based companies because that was the epicenter of AIDS action, if you will, to say, what are you doing?

17:23And even these progressive companies that were doing something about AIDS said, no, we don't have permission to do that. Everybody's worried. It's going to tank our stock price. Our shareholders are going to revolt. We're not going to do it. And so I went to Mitch's management team and said, let's do it. And because of the most progressive company, was it a straightforward decision or was it a contested one? It was pretty straightforward. It seemed like the right thing to do. It was consistent with our entire approach. It was an urgent community issue. And we were already so much of an outlier anyway that doing this was not going to create any more perception issues than we might have already had.

18:12So, yeah, it was straightforward. If Lotus's biggest goal was to maximize near-term shareholder value, they might have behaved just like the other companies free to call. but they'd set a different, more human-centered benchmark for success. One they believe would build more value in the long run. On that scale, sponsoring an AIDS walk when so many businesses wouldn't put them exactly where they wanted to be. The fact is, leaders have a choice when it comes to which metrics to weigh. How you choose matters.

18:55This is Mike Nicholas, Capital One business customer and co-founder of Ansett Uncles, a plant-based restaurant and community space in Brooklyn, New York. And he's telling us how they started a product line. We already had a space in the community. The food was an extension of our lifestyle and our values. So we know we wanted to create something that was an offshoot to that. Our pepper sauce. That's my grandmother's recipe. That's like a liquid gold, right? If someone wants to approach us and ask us, what do we do? We provide flavor. Growing a product line is no small investment, but Mike and his wife and co-founder Nicole were able to manage with the help of their Capital One Business Card.

19:33Working with Capital One Business, we're able to leverage our limits and utilize those points, making sure we can continue the scale at the speed that we need it to go. To learn more, go to CapitalOne.com slash business cards. Most single-function AI tools just gum up your workflow. Project management becomes a tedious relay race of copying, pasting, and switching tabs until you forget what you were even doing. Say hello to Superhuman, the AI productivity suite that gives you superpowers everywhere you work. With the intelligence of Grammarly, Mail, and Coda built right in, you get things done faster and collaborate seamlessly.

20:14Superhuman lets you handle multiple tasks wherever you're working. No more copy-pasting, no more jumping between AI tools, and there's no learning curve. Superhuman gets what you really need from day one. It understands your writing style, helps you focus on what matters, and proactively offers the next best step. Unleash your superhuman potential with AI that meets you where you work. Learn more at superhuman.com slash podcast. That's superhuman.com slash podcast. We all remember the choices that shaped the course of our lives. In business, world-renowned venture capital firm Sequoia Capital calls them Crucible Moments.

20:52Their podcast brings you inside the pivotal decisions that defined some of today's most influential companies like Stripe, Klarna, Zipline, and Supercell. Tune into Sequoia's new season of Crucible Moments to discover how some of the most transformational companies of the modern era were built. Crucible Moments is available everywhere you get your podcasts and at cruciblemoments.com. Go listen to Crucible Moments today. We're back with Mitch Kapoor and Dr. Frida Kapoor-Klein. If you're enjoying this episode, share it with friends by clicking the share button on your podcast player. Before the break, Mitch and Frida were telling the story of building a human-centered culture at Lotus through setting specific metrics, including publicly supporting communities dealing with AIDS as early as 1984.

21:41But just two years later, Mitch was thinking about his next move. I'm a serial entrepreneur. I like to start things. I like to mentor. And Lourdes had become a big company, thousands of employees. And I really didn't want to run something big. Mitch felt it was time to make an exit. But as a first-time CEO of a massively skilled company, he didn't have experience making leadership transitions. So this one was bumpy. I just said, I'm leaving. I'm going on to the next thing. And it was disruptive, disruptive for the company, disruptive for me. In hindsight, I would have spent much more time building a management team where we were more values aligned, and it would have been a much, much better succession.

22:31As soon as he left leadership, Frida says, the change could be felt. Mitch's leaving and becoming just chair and no longer CEO made a palpable difference in the day-to-day culture of the company. I had more disagreements and tussles, if you will, with the senior management team. I regard the succession there when I left as one of my least successful chapters from which I have absolutely learned the most. Planning your own exit is actually an underappreciated piece of maintaining a healthy culture. Because it's not just the leader of an organization that sets and upholds that culture. You need the entire company on board.

23:14If your directors aren't aligned on human-centered metrics, attention can drift to more short-term measures of success. With Mitch gone from leadership and the pushback Frida was receiving over these day-to-day culture issues, Lotus was no longer vying for the title of most progressive employer. About a year after Mitch departed, Frida followed suit. I was getting a lot of headhunter calls. And I actually went to the COO at the time, Mick Prokopis, and told him that I had these offers and that I was thinking about leaving. And he said, you're in your 30s, go do it now. You can always come back to corporate America, which was really wise.

23:58So I left, and I left with Lotus as my first client when I started my own consulting training and survey business. Note, at the time, Frieda and Mitch were not a couple. They had been strictly colleagues at Lotus. But over the course of the next decade, their paths sometimes overlapped. Mitch's exit from Lotus gave him the means to start angel investing, and he made a series of smart plays around the opportunities of a budding internet. and Frida's consulting business, Klein Associates, thrived. Her roster of consulting clients included the United Nations, McKinsey, and the World Bank, placing her as a prominent expert in workplace conduct.

24:39Every once in a while, there'd be a story in the Boston Globe. I would send her a note. She was on air during the Hill-Thomas hearings as the expert on NBC next to Tom Brokaw. Those hearings in which Professor Anita Hill testified to allegations of sexual harassment by Supreme Court then-nominee Clarence Thomas focused a glaring spotlight on the issue of workplace harassment. Frida provided viewers with much-needed context about how to judge coercion and hostility at work. And she had an idea for a business that would flip the incentives for companies dealing with complaints. I wanted to set up a way that companies could effectively handle complaints of bias, harassment, and discrimination instead of the awful, knee-jerk, legalistic response that companies sadly still have.

25:35Frida saw how companies calculated the metrics for winning discrimination and harassment lawsuits. And those metrics were badly skewed against the victims. Businesses in hot water put the most value on shutting down complaints, even if it meant destroying the victim's professional reputations. I wanted to start a third-party ombuds business. We had reserved an 800 number, Ombuddy. Frida believed she could change these organizations' incentives for good behavior, and her third-party complaints facilitation, or Ombud Service, could help her do it, which is what inspired her to reach out to Mitch for some entrepreneurial wisdom.

26:16We met once in, I think, was it February of 1996? The plan was still really in formation. I said, look, when it's more fully baked, come back and we'll sit down and have the follow-up. And in the interim, a number of things happened. For me, the most notable was that the marriage I was in disintegrated. Not only was Mitch's marriage ending, it was ending publicly. By the time there was a second meeting on the books, his personal turmoil was in the gossip section of the Boston Globe. The day we were to meet, her staff, as they did every day, went through the papers, looked at her appointment calendar, saw who was mentioned, and faxed her the clippings so she would be fully briefed.