The Hard Things About Scaling: Executive Hiring with Ben Horowitz and Ali Ghodsi

0:00If you're giving them a lot of ideas like more ideas than you're getting out, then that's probably a way to make them work. If I have a new executive, I call them every day. When they're new, I call them every day. When do I call them? Do we have a scheduled time? No, I just call them. Can you run a playbook or can you write a playbook? To spend the energy, spend the time. This is one of the most important decisions you could ever make as a leader in your company. Spend the energy. I got to make a decision about am I keeping your peer or am I keeping you? The stakes are cost. The stakes take between a year and a half to two years.

0:28I always find if you give somebody a task and they get super emotional, then they're done. I think companies quickly form a culture and fortunately are unfortunately the more successful they are. They become a little bit arrogant. So companies typically are not super open to massive change. You think you're being like objective and factual, what you're really being is emotional, defensive and afraid of the actual truth. And the actual truth when you fire somebody is mistakes were made. The holy grail of company building is finding product market fit. But what most people don't tell you is that finding product market fit brings its own challenges.

1:08All of a sudden you need to scale really quickly, and scaling really quickly is actually really hard. One of the hardest yet most critical aspects of scaling is finding the right leaders at the right time. And while the growth stage of a company is hard, it doesn't need to feel like things are are constantly breaking. If you're like two people and you find product market fit, you can grow 10 people or something like that in a year. So that'd be like a 5x. But if you're at scale and you try to 5x, then you're going to completely blow up the company. It's pretty rare to see like a big giant corporation that's figured out how to really be a team of small companies, a small business unit.

1:44At some point, they're going to reach a level of scale and complexity where like one guy just can't run every fight. And you're going to need to bring in the experts, right? the experts that technically trained experts, the managers. The growth team at A16Z has spent the last year calling the hard -earned insights of dozens of leaders across the firm and late -stage startups to literally write the book on hiring executives at scale. You can find that book at A16Z .com slash growth slash executive -hiring. But in today's podcast, two of those leaders, A16Z co -founder Ben Horowitz and Databricks co -founder and CEO Ali Godsey sit down to talk about hiring and firing executives, including the most common reason in exec fails, why sometimes micro management is actually a good idea, and the difference between someone who has written a playbook and someone who has only run one.

2:37Ben also sits on the board of Octa, Databricks and more, and he scaled up several organizations in his past, including Loud Cloud that went public in 2001. Ali, on the other hand, took over Databricks in 2016 and has since scaled the company to over 5 ,500 employees. Before we jump in, just a few quick notes. The first is a language warning. You'll also hear Ali refer to super ICs. ICs refer to individual contributors without direct reports. You'll also hear Ben and Ali refer to some of the executives that they've worked with. Mark Cranny was Ben's former head of sales at Opsware, while Ron Gagrisco is Databricks current CRO.

3:16Alright, let's kick this conversation off with where executive firing often begins, recognizing the hard truth that you've outgrown someone. As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that the A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details including a link to our investments, please see A16Z .com slash Disclosures.

3:57How do you know when you've outgrown and existing later? It's when you're asking other people what do you think? But when you're starting to have the thoughts of like, is this the right person or is it not the right person? You're done. I always find if you give somebody a task and they get super emotional, then they're done. Right. Like, I can't handle anything else when you can even process it. Yeah. Somehow, like it's gotten away from you. Another one that I find is kind of leverage, right? Like if you have somebody who's really doing the job, what you always find as CEO is they're kind of teaching you about how the function should expand, how should it grow.

4:35And if you're giving them a lot of ideas, like more ideas than you're getting out, then that's probably not going to work. I agree with that, but that's a high bar. If they still add value in their work and they make the company better and so on, you might want to keep them. That kind of leverage, we're saying this person just takes care of that thing and they're so good at it. I'm just trying to keep up. Can you keep me in the loop of how you even do this thing? I'm learning. I'm taking notes. That's phenomenal. We should strive for that. That's what you know like when you pay guy all that equity and all that money That's what you expect right I agree that that's what you strive for but then what happens is turns out They are like that, but they're terrible communicator or they're amazing communicator and they're super awesome about it But they just blab forever so they'll have like weaknesses.

5:20They'll have like big weaknesses Yeah, yeah, but you always take the weakness against the magnitude of this right exactly and then Then the causes for people running out of gas always find are also many. You could be, you know, you promoted them and they continue to do their old job and they never actually figured out what the new job was or the company just outgrew them. Or like sometimes there's like actual personal, like they've got a drug problem. They're getting divorced. Like something happens and the person you hired and you had for a while, isn't that person? And that one is very confusing to me always because you're like, you thought you knew who they were, but they're not that anymore.

5:59There's something else. I also think confidence is important. Yeah. Once the executive feels like it's not working and they're on the back foot. They spiral. Yeah, they spiral and it's very hard to actually like turn it around, right? Yeah. To get back into it. Well, then if they lose the team, it doesn't matter. The one thing that's always true is, if the team doesn't believe in the executive anymore, it doesn't even matter. Like say whatever you want to me, Ali, I still have to fire you because nobody's following you. You're almost better off starting a new somewhere else. Yeah, as opposed to wrecking your reputation by continuing here.

6:35Yeah. When do you give somebody a chance to grow? Well, I think, as you said, there has to be a superpower there that you have identified. You know, they can come up with an amazing product or they're amazing communicators or they can really get the team to execute. But then the question is, can you just put them in a position where you can accentuate that strength and then fill in the gaps? Yeah. Like, patch up. The other thing I'd say is I think a mistake a lot of companies make is, you know, in engineering and in product and so forth, the knowledge of how your company works is really, really valuable.

7:04But in sales and marketing, the knowledge of how other people's companies work is actually the more valuable thing. And so if you take somebody who only knows your company and they have to go learn the world, you're kind of harming everybody in the company because if you're going to pay somebody to do that, go pay somebody who knows the world. Like go buy the knowledge, go buy the acceleration as opposed to, and I don't really care how much potential your internal smart MBA who doesn't have any experience has, the idea that they're going to run worldwide sales for you if you've got a killer product and get that done fast is probably wrong.

7:41I just think it's because people with the wrong background are trying to figure out the other side. You know, so you typically have tech CEOs and founders who really good at tech they're smart Maybe they have an engineering degree and like well how hard can the sales or marketing? Yeah, it turns out very hard. Yeah, you know if you have somebody who runs out of gas then do you Fire them do level them. I definitely think that you can put people in new roles and it can succeed in it There's circumstance right so there's I've got an early team And everybody's doing everything in the beginning. Yeah, and people are taking on roles that are eventually gonna be bigger than them Then there's I hired a high -end VP of marketing, gave her, gave him a point and a half equity and a big salary.

8:26I can't level them, can I? You can. I think it's going to be hard to put them in a new role and remove all their equity and it's too hard to take those away. What I have done is look, it turns out I don't think you're really like you don't need to express it this way, but this person is not amazing at running a big team and they're really a super IC. It's very often I see super ICs who went into management and it doesn't need to be on the tech side You find them in all kinds of roles. They're just so good that eventually they started managing But actually they're not good people leaders and you know eventually their team is just doing random things And they don't kind of care because they're business super ICs Doing the work of two three people themselves In those cases I've been able to take them out and say hey look I'll give you fancy title you move over here and Do the super IC stuff?

9:08Yeah, and you're extremely valuable because honestly you're better than most of these people that you used to manage because you're a super IC. But don't try to lead also a team of 200 people because you're actually not leading them. Yeah, so that's a use case that you think works. That you're switching them back, you're saying, look, you do great work. So we over promoted you to something that you're not good at. Yeah. And let's put you back what you're good at. And I'll still pay a lot of money and give you good title. But you got to not lie to yourself if you do that. Because it's easy to lie to yourself and say, well, this person has some great strengths.

9:36So that way, I don't have to fire him. I can just put him in this other thing and overpay him. Yeah, look, there is a failure mode which I've seen, which is you move a person to a new role and then what happens is they start checking out, they're like checked out. Where is there actively disengaging? Well, that one is maybe at least you'll know, but the person you like who's kind of just disengaged and kind of just phoning it in is the hardest one. So I think you have to do a hard thing about hard things and there I think there's really no option but to have the conversation and they know. You put them and say, look man, you're checked out.

10:05It's not working. We tried it. Let's move on. And I have found in those cases they all like sort of feel shamed and like, yeah, I know, I know I'm gonna get in Yeah, and I've got some important kind of part of it and kind of get some x -ing which is okay How do you have the conversation and the mistake I see CEOs make is okay? The way to have the conversation you know particularly engineers is to be correct Stick to the facts stick to the facts and numerate them fast. Yeah, the undisputable facts about why you should be right You're wrong. Where you're bad. Yeah, why you suck. What are you doing your job?

10:36Which is the worst starting point at all, right? Yeah, ironically, you think you're being like objective and factual. What you're really being is emotional, defensive, and afraid of the actual truth. And the actual truth when you fire somebody is mistakes where if you're being objective, it's always partially your fault, usually more than half your fault, if you're honest. And so if you start from a place of the truth, which is kind of what you're talking about, but hey, you're not putting in an effort, is always a much better than, let me tell you all the places where you came up short. Like if you started the conversation there, they have no choice but to get very defensive and say, well, I don't agree with that.

11:17Like, if you really actually thought you were right, you might get squeezed into not actually even finishing the firing. So you kind of have to just start from the place of most honesty. Like, when this is a done decision too, it's my fault too. Or like, if you're not ready to fire them, You want to know why there works, X, to say, hey, here's what I observe, what's going on. That's just the 101, right? It's just the 101 where you're like, hey, what's going on without the other thing? And things happen in those conversations. You find shit out. And it could actually help them. I was talking to an entrepreneur the other day.

11:49And he's like, he starts it on me with the exact thing that you always started. And I'm trying, I'm struggling with being a CEO with her. I want to be empathetic, but am I tough enough? and I'm like, who are you talking about firing? You're not being tough enough. And of course, there was a super talented guy slacking off and so forth. I said, just start it there. Don't put so much pressure on yourself that you got to go right to firing him. Just find out what's going on with this guy. And the interesting thing was he has the conversation. He finds out it was a personal life issue. And once a guy admitted it, he was like, you know what?

12:23Fuck this person I'm fighting with. I want to work here and go hard. And let that, like, literally that conversation that just like a little bit of honesty, but to get to that honesty, you have to start by being honest with yourself. And if you don't tell yourself the truth, if you lie to yourself, then there's no way you're going to get the truth out of the other person. There's no way you're going to get to the right answer. You know, it's this question that you ask executives a lot in this and that, you know, like, have you fired somebody, did it, did it. And why is that an important question?

12:53I think it's important because if you don't know how to do that, you don't actually know how to get to the truth. And it gets harder and harder, and the bigger the company gets, the more political it gets, the more difficult it gets, you have more regions, more countries, more people, more functions, and they're professional execs who know how to manage it up. Oh yeah, well, and then you take it all personally. This is my company, I built this, so it's all fucked up. Exactly. I don't want to get to that truth. Exactly. Just like you don't want to get to the truth about yourself. And the CEOs who can't do that always eventually fail.

13:22I would say for me, you said it. For me, the number one thing I try to do in the conference, If I've decided this is done, we're parting ways. My first question is usually, how do you think it's going? And 50 % of the cases will say it's not going well. It's not. From then, it's much easier to take it to the next. It's not working. And so we've tried it for a while. We've tried all kinds of things. It's just not working. I found that if you can get a person to start it there, instead of saying, hey, here are the things you're doing wrong. I don't like this. So just start with like, is it working?

13:52And if they're not there, then I think step number one just to get them there to realize that look, it's not working. Like marketing is not doing a great job, or sales is not, or like engineering is not humming, and we're missing the SLAs. There's outages left and right. And yeah, it's lots of people involved. It's not just, you know, your department. But phrasing is important. It's not working. How's it going? That's how are you doing? Yeah. Like because as soon as it gets personal, that's when the defensive people have to put up their guard. Yeah, and I'll put it out and I'll say, look, we're having outages left and right.

14:23This is going to be a really hard problem to fix. And you've been at it for six months. We've been at it for six, 12 months. In fact, it's increasing. If anything is getting harder. And I know it's not just engineering. It's like other departments, sales, and things, and customers are doing things. But in any department, you could have this conversation. They'll kind of eventually say, yeah. But it's hard, man. It's like, it's tough. It's left and right outages. We don't have the right people. I'm not getting any help from sales. I'm not this and this and that. Then you've gotten them to a place where like, look, I think we can bring in someone that can actually fix the date.

14:54Someone can bring in the right people, or someone that has dealt with nasty, nasty outages like this, or someone who can actually sell to these really, really big conglomerates. Wouldn't that be the right thing for the company? So I try to abstract this away from them. So it's not about you. And it's like, what's best for this company? Once we've accomplished this, I've actually seen many execs get to that point. Then they kind of turn to me and then they say, they actually will say, okay, I get it. But what about me, like my career or my path? then it's like, okay, that's a separate thing. We're going to take care of you.

15:23Actually, you bring up a really good point, which a lot of CEOs don't do this, and it's so important that when you talk about your expectation for an executive, it's not what you and your people can do. It's what you and your people can do in the context of the organization, and that means working with your peers so effectively that you get what you need. Yeah. And if you can't do that, then I've got to make a decision about am I keeping your peer or am I keeping you? Because that is the requirement. And I think that a lot of CEOs get themselves into trouble because they give executives a pass on that.

16:02Oh, no, that's my job to make you guys work together. This is a great point. Like, you're in legal. And so yeah, but the sales team is like, they're giving away liability and indemnification and so on. And what can I do? Like, there's nothing I can do. Or you see this execs doing that, right? But it's really, no, no, no, no. The right leader, trust me, the right head of legal that comes in here will not tolerate that. They will actually pick up the phone and tell the salesperson, hey, here's the framework I've been using. Yeah. We're going to have an escalation if it's like in the notification above this limit, if it's liability of this sort, this is what's going to happen.

16:32And they kind of push the whole organization in direction. Whereas the leaders that aren't making the cut, they kind of just, you know, they let it faster down. It's faster, you know, the organization gets abused and they can't actually achieve anything in their nut position. And then they say, look, it's not my fault. Look at these other departments. They're the ones doing it to me. That's when you know that, no. With the right leader there, the right leader will not let these other departments do that. So when you get them all the way there and they go, okay, what about me? What's your philosophy on the package, the conferences, read Hastings in his book, which I argued with him about after he wrote it, said they send an email at Netflix saying, and we fired this guy.

17:19How do you think about all that? Yeah, I disagree with that. I think from then on, it's you owe them, you're the one that made the mistake of hiring them to be as generous as possible within reason. Yeah. You have a company to run, you have future duty. But as much as you can, if you squint and in the big scheme of things, it's not gonna hurt the company, it doesn't really matter. Be as generous as you can possibly be, both in terms of taking care of them compensation -wise, but more importantly, I think, being there for them psychologically, finding them the next job, being a reference for them, helping them as much as possible.

17:49I think that goes a long way, and actually you'd be surprised. You can have great relationship with these folks for many, many years to come. Put it on your CV as long as you like. Yeah. You know, who cares? And if you need a reference, I'm here. And then on the compensation, as generous as you can be, but there's fairness and there's equity and there's fiduciary duty and so on. But I found you can be more generous. Some people are very, very stingy in these kind of situations. And then there's a couple of things about that. One is if you are kind of more supportive and generous, and you know you're going to have a relationship afterwards, it's easier to fire the next one because it wasn't like a dramatic car ball like Ivan.

18:22And then, you know, my old friend Bill Campbell used to say he'd be like, Ben, you have to take his job, you do not have to take his dignity. That is not necessary. And I think that that just goes a long way also for the people who are still in the company. Yeah. They see how he treat them. Yeah. Absolutely. And no matter how bad not an executive is, they have some supporters. They have some people who like them. Yeah. And it's nuanced. They're two sides of the coin. Yeah. And that executive is going to talk to them, and it's going to matter how you treat it. We started at the end of the process.

18:53You got to fire the guy. Let's talk about bringing them in. And how do we stop them from getting fired? So if you bring in a new exec, how do you help ensure their success? Because the failure rate on that is pretty high. It's almost always retrospectively people call it fit, but fit isn't entirely determined by the higher. It's what happens after you hire him. So how do you think about solving that? I actually literally give them the article that you published. It's on my commandagement by the Horowitz, where you battle Mark Andreessen, who says, you have to delegate and you have to respect the people and you hire them.

19:30and they do the job, they stay away, and you say, no, you gotta micromanage them. So I actually give them that article, and I just tell them, this is what we're gonna do next. He called it micromanagement, I call it training. Okay, training. Because I think it's an expectation thing, because the thing is if you start micromanaging a person that's new in your organization or training them as you called it, some people might be offended, hey, I don't like this, what am I getting into? This is a new relationship, and you're gonna be breathing it out on my neck like this, 24 -7, like I'm not sure this is like a good thing for me.

19:57They get freaked out. This article kind of says, hey, It's just a transitor thing. It's a normal thing. Everybody here went through it. We're gonna do it here. So that's kind of just the same. So they don't feel like they're being singled out. And in fact, some people might be like, hey, you're actually not that bad even. Like after reading that article, I thought you were gonna be all over the... Right, right, right. You said they expectation very fast. And then I think stay as close as you can to them, weekly one on one, and so on. That's not gonna cut it. You know, you gotta call them every day.

20:24If I have a new executive, I call them every day. When they're new, I call them every day. When do I call them? Do we have a schedule time? No, I just call them. A lot of times they'll notice I'm just shooting a shit I'm not even really actually. I don't have really an agenda But it's beginning to know each other so we can build up trust and understand yeah in context and we're sharing this so much that's shared in those and After a couple months you're gonna feel much more like okay. I know this person You know, I've had so many interactions with really no Ali like I know how he thinks and all his weaknesses and strings I think the kind of point that you make is really fundamentally important because what I always get from COs is there like well, how do I manage a CFO?

21:02I don't know how to set up a proper control structure or whatever it is that a CFO does. Like how do I manage these guys who are doing jobs that I've never done and you kind of hit on it which is they may know their function. They better know their function better than. But they don't know data bricks better than you like nobody knows data bricks better than you. And you've made every flip and higher, every good and bad architectural decision in the product. You're aware of every customer that blew up, you know about like you know the comprehensive history of the place and then you know all the people and what they're good at and what they're not good at and so forth.

21:40And somebody coming from the outside doesn't have any of that. They know zero. Exactly. You're like a large language model. Yeah. You're playing on trillions of trillions. Yes. You don't even know what you know. Yeah, you know many many years of everything every little detail all the context why how it went wrong How it went right what to do what to not do and that we're having watched executives fail That's the number one thing they fail on is they don't have the context so they'll come in And in the first three months They'll start working on whatever made sense that their last company and they're like well You hired me for what I did there right because that's where I came from and then everybody somebody who works for them and everyone around them says, wow, I'll pay this guy, all this money, giant equity package, and he came in and he did nothing.

22:23And then once the team goes that, that's it. It's over right there. And so you have to guard against that by giving them the context and that daily conversation. By the way, that is essential. And it doesn't have to go for five years. It goes maybe 30 days. And sometimes a conversation can be just, hey, what are you gonna do tomorrow? And what always find if you ask an executive what they're going to do tomorrow and they're new they'll always say at least one thing that makes no fucking sense at all and so you just couldn't do that. By the way that's a great thing that you want to do tomorrow.

22:56Yeah. We have huge fire right here. Like it's going to burn up the whole house. Yeah. Why don't you help us put out this fire instead of that thing? And by the way if you put out the fire everybody's going to consider your hero because that thing was on fire before you got here. But then like I don't even know where is that which floor is it what fire is that I didn't even hear. Oh, you don't know. This is the biggest dumpster fight we've had here. You know, it's on the third floor. Go there and look. Oh, I didn't tell him more about it. Oh, here. Let me tell you the history of how that happened.