Aligning Incentives

One of the most important things you can do to optimize the chance of getting a positive or successful outcome is to align incentives at the beginning. We think of this often at a micro level when designing compensation such as commission plans or bonus plans but it is true at a macro level in general organizational design and even for marketing and business strategy. The aligned incentives need to be inherent and structural to the strategy and organization. When you get it right it’s like biking downhill – everything takes less effort. When incentives are not aligned there is a resultant continual management overhead dealing with the consequences.

My experience managing both advertising-based businesses such as Yahoo Mail as well as subscription businesses such as SugarSync and Catch taught me that aligned incentives between company and customer make it so much easier to manage day-to-day implementation against strategy. At Yahoo mail we were constantly trying to balance competing interests – we needed a large enough volume of advertising impressions and impression formats that were aggressive enough to yield clicks but not too many or to obstructive so as to detract from the user experience beyond the point where it would reduce usage. There was no science behind this balance leading to endless organizational thrash and, arguably, poor decisions and eventual loss of market share.

A freemium business model approach such as the one SugarSync took while I was CEO from 2009-2013 had the opposite dynamic. The more our customers used the product, the more data they would store, the more likely they were to run out of storage and upgrade from free to paid or to a higher paid plan. The marketing tactic in this situation was simple – improve usability and/or add features such that people will want to use it more. Unlike the ad supported example, usability and revenue are tightly aligned. Day-to-day decisions were therefore more straightforward and easier to delegate. Other freemium businesses have experienced this same phenomenon, certainly it was true for Catch.com and for Evernote as explained here by Phil Liblin’s.

If you find yourself as a constant arbiter of small decisions and prioritization questions ask yourself where incentives or goals might be misaligned.

Just as organizations can be misaligned I believe that same misalignment can apply to the inherent design of products. We have seen it frequently in particular in apps that focus on anonymous communication. I read an interesting article about the army of labor being employed to fight bullying and other harmful behaviors on the various anonymous apps (Secret, Whisper etc).  They simply can’t keep up with the volume of the problematic behaviors that are rife in these apps. While of course there are many well-intentioned posts, anonymous apps are a draw to those who want to harm. Almost any application will suffer from abuse and the app provider will need to come up with some method, usually a combination of automated and manual intervention, to manage it. But the situation described by Gigaom shows, in my view, that the incentives built into the app actually encourage abuse. It is, as the underwriters say, a form of adverse selection. Sick people are quicker to buy health insurance and the bullies are quicker to join apps and troll on sites that allow them to abuse with impunity.

Recent examples have only served to heighten my concern about the harm caused by anonymous apps and anonymous commenting by trolls. People who are obviously vulnerable and suffering such as Zelda Williams just after the death of her father are attacked. In fact any public figure is likely to suffer at the hand of internet trolls. But you don’t even need to be famous to be a victim of trolls. We are witnessing a dramatic chilling effect – misogynistic trolls have silenced many serious articulate female voices.

Does anonymity encourage bad behavior? Psychologists and sociologists have long observed that we restrain ourselves from self-interested bad behavior based on two systems – our internal conscience or “superego” as designated by Freud as well as societal pressure and feedback. Our relationships, commitments, values, norms, and beliefs and desire to participate fully in society encourage us to meet societal behavioral norms. Take away the societal element through anonymity and we’re left with only our individual consciences. For most people our conscience and empathy is enough to keep us following the “golden rule” but the internet is so vast that a small percentage of the population can make things miserable for many people.

Yes, there are some excellent reasons to allow anonymity (as described by the EFF here  and further discussed here by Fred Wilson). But the harm from anonymity enabled trolling and messaging is a very real, even deadly problem.

I suppose that any technology that can be used for good can be used for harm.  Twitter is a great example of this. There has been harm, as in the Zelda Williams example, but also very important and positive social benefits have occurred where the cloak of anonymity has protected the vulnerable. But we must not stand behind the shield of the legitimate benefits of anonymity when there are some technologies and settings that seem to be at worst, designed for harm or, at best, designed in such a way that the ratio of harm to good is negatively balanced.

It does not have to be this way.  I find it amazing that smart application design and community standards can make seemingly scary things like selling valuable goods over the internet or renting your guest room to strangers surprisingly secure while poor design can make you the “go to” app for cyberbullies. If your app requires an army of labor in the Philippines to police user behavior its time to question what are you really trying to do. It comes down to aligning incentives.

 

 

Dependent -> Independent -> Interdependent

I was reminded of this psychological construct popularized by Steven Covey when chatting with an entrepreneur today.   I was encouraging the founder to seek help with a particular product issue – he resisted at first, expressing that it would show a weakness to “need help”.

The ever popular Stephen Covey, in his Seven Habits of Highly Effective People describes the maturation process from dependent to independent then interdependent. The independence stage is where we demonstrate mastery and competence. This is the developmental task of children and peaks for teens and young adults. Parents need to allow children space for this development even when that feels risky. Independence is very much encouraged in today’s world. It seems logical that it would take someone with a strong sense of independence and competency to leave the security of a university or large company to start a company. Our society admires and encourages this independence and some of the entrepreneurs’ energy may be derived from their desire to demonstrate independence. I believe this was true for me. But we can be stuck in our independence and I believe that startup founders are at risk of this trap by their very personality.

Many of the most rewarding experiences in life, however, happen when we transition from independence to embrace interdependence. Biology is full of interdependence examples.  Common_clownfish_curves_dnsmplFamily is obviously one of the most cherished interdependent structures in our society. Many musical and sports activities are interdependent. Interdependence is, I believe, the essential quality in business environments today which absolutely require teamwork and good leadership.   Interdependence at a societal level has had profound impact – countries that are interdependent with one another are less likely to resort to war to manage conflicts.

It seems that the more successfully independent we were as a young person, the more difficulty we have during the inevitable later bumps in the road where we need the support of others.  Appropriate interdependence is not automatic – it is learned and takes practice. I was empathizing with one of my young adult children over a particularly difficult research paper they were writing. It was an esoteric topic outside their comfort zone. I asked if they had brainstormed with peers – the answer was “no” as it might be viewed by the professor as “cheating”. I found this interesting as I cannot remember the last time I wrote an important document – e.g. presentation or business plan completely by myself. That’s simply not how the business world works. Even if I were fairly independent in developing the content I would certainly show it to colleagues to find ways to improve – everything from graphics and language to logic and examples. And often the core idea is developed in a collaborative manner.

In my own life, I have found that the times when I have done something significant to seek  support or collaborate – taking what felt like a risk – have directly correlated with the times when I’ve had the most significant personal breakthroughs. When we are encouraged to seek support or other help, it is easy to perceive it to be a step back towards dependence when, in fact, accepting that support is moving forward towards interdependence and progress.

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The Danger of Assumptions

An assumption is something we take for granted or accept as true without proof.  Assumptions are a necessary and important part of life – without them we would waste a tremendous amount of time verifying every detail of life’s operations. Assumptions make daily living more practical in matters ranging from interacting with our family to driving a car and doing complex projects at work.

But assumptions can be dangerous – they can limit our options and creativity, even our growth and development.  My focus here, however, is when assumptions lead us to errors in our actions and judgement with negative consequences.  I’ll give an example.

Early on at SugarSync we identified the need to improve many of our written documents – marketing, support articles, product documentation etc.  We were still small and only had  budget for a part time contractor.  One of our team members knew of such a person from a prior technical company where she also was a part-time contractor.  She is a mother with young children, her husband traveled quite a bit for work and at the time she wanted a part-time flexible arrangement.  This was a great mutual fit and she joined our team in this capacity.  She was highly competent and well liked by her colleagues.  As SugarSync grew we realized that we really needed full-time efforts on this function.  It didn’t occur to us that she would be interested in such a role so we started recruiting.  A couple of months later (we hadn’t hired the full-time person, in part because they didn’t measure up) our contractor gave notice that she had a full-time offer.  How could this be?  She assumed that we must not have liked her very much if we didn’t offer her the position.  We assumed that she was not interested in full-time work or would have spoken up when the workload increased or when we posted the position.  Fortunately this situation had a happy ending and she joined SugarSync full-time but it was an unnecessarily close call with a lot of avoidable heartache and time spent by both sides on recruiting.

This was a reminder to all involved about the need for extra communication and especially about the need to validate assumptions.  These types of assumptions about an individual’s career goals are particularly risky and can be incorrectly influence by gender.  Assumptions that were once valid can become erroneous in even short periods of time.  People change, their situations change.  Marketplaces and business, especially in technology, are extremely dynamic making assumptions particularly risky.

I believe that consciousness of our assumptions is one of the key foundations of critical thinking skills.  Engaging in a Socratic thought process of “what are we assuming” “how did we choose those assumptions” and “what could we assume instead” can raise this consciousness and open up creative avenues for solving existing problems with new ideas.

Assumptions are at the heart of bias and stereotypes and recognizing and questioning our assumptions is the key to change.  I believe the overwhelming evidence that diverse teams create better results is founded on the higher likelihood of those teams to overcome false assumptions and biases.  Successful leaders foster an environment that challenges assumptions and associated limits.  Innovative companies by definition have successfully challenged widely-held assumptions.  That’s why my favorite saying on the topic is this one by Ken Olson “The best assumption to have is that any commonly held belief is wrong”

I’d love to hear any examples you want to share of interesting or important false assumptions!

Familiarity Breeds Empathy

Like many others, I’ve been glued to the news following the conflict in the Middle East.  After working for an Israeli company for 4 years I have many friends in Tel Aviv plus family in Jerusalem.  I fear for their safety and mourn the bloodshed that has occurred.  I feel very angry about the rocket fire against Israel that occurred prior to this current escalation.  That fear turned anger continued as I even found myself thinking it’s the “fault” of those in Gaza for “starting” the violence.  But that limbic emotional cycle was interrupted.

In the midst of watching the news I was checking my Facebook page and saw updates from two of our Palestinian TechWomen Alumnae.  They are currently in Gaza, without power and are not far where the bombs have struck.  Gaza is relatively a small geographic area so their proximity to violence is not surprising.  Their anguish was apparent in the posting and just as I can picture my Israeli cousin Lexi trying to entertain 3 children under 5 in a bomb shelter I can similarly picture Hwayda and Lama, afraid, in the dark with the sound of bombs nearby.   Rola who interned with me here at SugarSync is from the West Bank originally.  Though most of her family is now in Amman she still has family both in Gaza and in the West Bank and I’m sure they are anguishing over their safety.

Suddenly my feelings of anger changed.  Rola, Hwayda and Lama are brilliant kind women who I came to respect during their time here.  This is a human tragedy on both sides and both sides of this conflict deserve empathy and security.  Rola and I ventured to talk a bit of politics when she was here.  It was difficult and we disagreed on several topics but it was good to hear the other side and associate it with a human being who I respect.  It is hard to maintain hate when you are reminded of friendship.

As you get to know people personally you are reminded of their humanity and hence, how we are more similar than different.   A political or religious difference is smaller than the shared experience of family and community.  Familiarity does indeed breed empathy.

I believe that familiarity leading to empathy is the fundamental basis of the success of the gay rights movement in the last 40 years.  The willingness of gays to be open about their orientation has been the key.  As people realized that gays and lesbians are their friends, family, and coworkers whom they loved and respected many of the stigmas began to go away.  I’m not saying that discrimination based on sexual orientation does not exist – it does – but the pace of change and improvement is unprecedented.

Unfortunately, for what I believe is the same reason in converse , we have not seen similar change regarding choice.  The percentage of those who are anti-choice has remained constant or even gone up in the last 39 years since Roe v. Wade.  I don’t think religion is the difference from the reduction in homophobia as there are religious dictates against both homosexuality and abortion – I think it is the private nature of abortions.  For completely understandable reasons, our friends, coworkers and even family members have kept their abortions private and they will likely never come out of the closet.  I believe this is appropriate but it means less social and political impact.  We will need to find other ways to build empathy for those in this situation.

More than ever before we need a bigger dose of empathy in our society.  Either to build bridges across political parties so that our government can function, to step away from violence and war in the Middle East and even just to be kind to all of our neighbors.  This is a change I would really be thankful for.

Learning to be a CEO

There have been a couple of good posts recently about startup CEO’s serving on the boards of other startups.  Brad Feld wrote one and Mark Suster continued the thought here.

The logic is that you gain an independent and important perspective on many of the key activities you do yourself by serving on another board.  In particular Brad lists these advantages:

  • “You’ll extend your network. 
  • You’ll view a company from a different vantage point. 
  • You’ll be on the other side of the financing discussions.
  • You’ll understand “fiduciary responsibility” more deeply. 
  • You’ll have a peer relationship with another CEO that you have a vested interest in that crosses over to a board – CEO relationship. 
  • You’ll get exposed to new management styles. You’ll experience different conflicts that you won’t have the same type of pressure from.”

Of course the trick is balancing the additional time commitment with the CEO’s own responsibilities.

I have been lucky at SugarSync to have had a CEO/Entrepreneur on my board.  When I first got to SugarSync, Bud Colligan (cofounder of Macromedia) was a board member.  When he left we recruited Paula Long (cofounder of EqualLogic and now CEO of DataGravity) to the board.  They both have brought a great deal of sensitivity to both the practical and strategic as well as organizational issues and have given me great coaching.  They both had financial “skin in the game” but could take a broad strategic view.

I have not yet served on another startup company board but would look forward to that opportunity for the reasons above.  Because of their importance I have sought out other ways to get some of these experiences.  While it is natural to have peer colleagues at an executive level while working in a company the CEO has no natural peers in the company – you need to seek them out outside.  The first thing I did on this front, based on the advice of an experienced CEO friend and non-profit board colleague was to join an organization called Vistage.  I believe there are a few similar organizations that serve this purpose – I can only share my experience with this one.

Although there are other educational resources and coaching as part of Vistage, I find the core value comes in the monthly meetings with the CEO group.  There are about 15 members of the group – existing members make certain that when members join there is no potential business competition or other conflicts within the group.  The setting is confidential and discussions are moderated by the chairperson.  Our group is about half tech businesses and half from a range of industries from services to heavy equipment.  Over time the members learn enough about each other’s business to have a basic perspective.  After about an hour where each member gives an update there are about 2-3 hours where the group can process a handful of issues identified during the update.

It is incredibly helpful to have a dozen peers with no personal agenda such as their own role or financial investment help you process an issue, alert you to blind spots and share their diverse experiences and wisdom.  They are not expert in your business but have a wealth of experience managing boards, investors, M&A transactions, fundraising, dealing with lenders, personnel issues – many of the common challenges CEO’s face.  Of course the learning goes both ways – when listening to the discussion about another person’s issues – you learn about yourself and how you might deal with your own future challenges.

I’ve been fortunate to have a couple of other venues to network and share experiences with other CEO’s.  Two of my investors, Sigma Partners and DFJ both host annual CEO summits.  I’ve also formed an informal women tech CEO group – we have dinner every couple of months.  These groups don’t have the frequency or consistency of Vistage but the larger network is very valuable.

Developing my skills as a CEO has been a journey.  There’s no “manager” to train/teach me.  I’ve been learning from my board, my CEO peers, “expert” opinions I read such as blogs and mostly from my team.  I thank everyone who’s been patient with me and look forward to continuing to learn.

You Do What You Have to Do

I’m thrilled to see Yahoo appoint Marissa Mayer as CEO.  I don’t know her personally but from what I’ve heard from her at various conferences I believe it she is a great choice.  I was at Yahoo from 2003 -2004 – Yahoo had already strayed from its product/customer experience roots and while not as apparent publicly was already internally confused as to priorities and inefficiently run – I was frustrated with this and left after a short time.  Mayer appears to be just the antidote to this problem.  This will be a huge step up for her – it is quite different to run a company rather than product divisions but we all have to jump in the deep end when we take those big steps forward and she seems to be quite the fast swimmer.

I wanted to comment on the various hand-wringing going on about her starting a job 6 months pregnant.  It sure feels like you can’t please anyone these days – her comment about her plans to just take a few weeks off is either going to damage her child or set a bad precedent for family leave in general.  I don’t believe either of these ideas are true.  The difficult thing for Mayer is that all of this happens in the public eye but from a practical matter it is the same for parents all over.

In my view this all boils down to the fact that you do what you have to do at the time.  If you are as loving and attentive to your child as possible and have a good support system things will be fine.  I have gone through this 4 times under varying circumstances.  My oldest son was born in the beginning of December during the second year of my masters program at Georgetown.  I had 4 final exams that semester.  I had already taken two then Derek was born the Monday after.  Then back to studying for my last 2 finals.  Todd was born a month after I started my first job at Informix.  I didn’t qualify for disability yet so I just could take 2 weeks of vacation.  Margot was born in June after I had been working for Informix for 5 years.  I enjoyed taking 8 weeks of maternity leave when she was born and since Adam was born right after I left Gupta I also ended up with about 8 weeks off.

Sure – it was very nice to be able to have a “normal” maternity leave with Adam and Margot – it was preferable to the short recuperation time I had with Derek and Todd but I don’t think they turned out any worse for the experience.  It was difficult for sure but I completed my exams and work and got through it with the support from my family.  I don’t think we are any less “bonded” then I am with the younger two and the memory of the stress of juggling work with a newborn has faded.

Of course timing isn’t always perfect to allow men as much time as they would like off either.  Our VP of Marketing Drew Garcia had his first daughter shortly after he joined SugarSync.  At the time he was our only person in Product Management and we were in the middle of a big release so he couldn’t take much time off.  Fast forward 2 years and he had two great employees who could cover for him when his second child was born giving him more flexibility.

Bottom line is a dedicated professional such as Marissa Mayer will get the job done, both professionally and personally.  I wish her, as is customary in Jewish culture, B’Shaah tovah!**

**B’shaah tovah – congratulations to an expectant mother (literal translation “in a good hour,” means “at an auspicious time,” i.e. may whatever time your child is born be a good time.”  Also the correct response to the announcement of a marriage engagement.  In both cases, it is in in anticipation of a “mazal tov” for something to hope for that has not yet occurred.

The Happiness of Pursuit

Despite their amazing foresight, I always thought the founding fathers were just slightly off when they wrote…we are endowed by our “creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness”.  The problem is that I believe we get confused when we pursue happiness itself as a goal.  Typically we imagine some state of being – for instance being accepted to a certain school, living in a beautiful home or attaining a certain financial status as being synonymous with happiness.  It rarely is.

By contrast, working intensely on an interesting project, using your hard-earned skills to build something you are proud of – that can feel really good.  Doing it as part of a team of similarly skilled, committed people – that feels even better.  Sure you are pursuing a goal, hopefully a very worthy one – that makes the work even more gratifying, but you are not pursing the gratification itself.  Most of us typically find our gratification and reward in the work and the process.  That is what I mean by the “happiness of pursuit”.  Beyond family, this is what I believe truly leads to happiness.

Last week, at SugarSync I witnessed and participated in this pursuit.  Both the technical and business teams came together to prepare for an important demo for a prominent journalist.  The timeline was extremely aggressive and it was a real push to be fully prepared.  The team actually added components to make the goal even more challenging.  I couldn’t help but notice the buzz and excitement in the office – it was about working hard and seeing those results turn into something tangible and cool.  Interestingly this way overshadowed the specifics of how the meeting went.

I believe the best part of working in a startup is this happiness of pursuit.  The work is challenging, the contribution everyone is making is visible, the team is tight (no room for slackers) and the goal is clear.   Of course we want that work to be rewarded with a great financial outcome for the team but the day-to-day motivation has got to be from satisfaction and happiness in the pursuit of that outcome.