Good Hygiene (employment edition)

I’m spending a lot of time with offer letters these days.  In the very early stages of a company, in “prove” mode, these tend to be loosely written.  In particular, bonuses are unspecified, benefit aren’t mentioned, and key requirements are left unwritten.  It’s not ideal but perfectly understandable.

Fast-forward to “build mode”, though, and this won’t work anymore.  One primary concern is intellectual property, and in particular that created by developers or people who interact with a company’s customers, operations or sales process – that is, everyone.  Another is that people who are pretty intelligent become mysteriously confused once they quit about being paid bonuses for things that might have happened had they stayed.  The list goes on.

When times are good, this is a headache.  When times turn bad, it could be the end of your company.  WeWork is about to get tested for how their offer letters were written.  My membership lapsed over a year ago and I still have a membership card that works anywhere in the world, so I’m guessing their operations overall are pretty sloppy.  They are about to find out what happens when you terminate thousands of employees who have unclear and unrealistic expectations.

To execute on this appropriately, I implement a checklist for my companies that includes the following:

  • Offer letters that specify that we will need to check citizenship (I’m in the middle of one of these right now – it’s amazing that in this environment that people don’t take this more seriously) and require you to sign a form NDA and assignment of inventions. Yes, the offer letter is in part sales document, which is appropriate.  It is also a document that you might need to rely upon someday.
  • Bonus templates that very clearly specify conditions under which bonuses are paid, when they are paid (pro tip: don’t promise them in the first payroll of the next month if you pay biweekly) and exactly how they are calculated. If you want to force adherence to a particular policy (example – keep Salesforce updated), this is the place to do it.
  • NDAs that are straightforward and to the point
  • Assignments of Inventions that ask employees if they’ve brought anything with them and make clear that what they develop on your payroll belongs to you. This is going to feel like overkill and could save your company one day.  VC’s in particular want to see this before they write a 7 or 8 figure check
  • Handbooks that lay out vacation and other benefits, but also are your opportunity to make your anti-discrimination, harassment and other policies crystal clear.  You won’t want to need them, but someday, you will.  Then you’ll want to stick to what they say.

 These are the basics.  As you move into scale mode, the compliance headaches will multiply.  Even more reason for good employment hygiene while you are in build mode.

2 kinds of people, analyst edition

In an earlier post, I suggested that there are 2 kinds of people in business, those who have the money and those who need the money. I stand by this oversimplification. To it, I added another about accounting people vs. finance people.  I stand by this one too.

Let me add another: analysts and operators.

Generally, operators make things happen in the present, and analysts look at the past in an effort to predict the future.  Analysts often say they are really “operators at heart”, which might be true, but they almost never are operators in practice.  Operators know how to get sales comp plans published, manage a hiring funnel, place ads on the MBTA, use LTV/CAC to make marketing decisions today, implement a travel policy, blow out a pipeline to make a quarter when it’s desperately needed, perfect a cash conversion cycle, time product introductions, make a hire when no one else can recruit… you name it.

Analysts can’t do many of these things.  What they can do is look at a dizzying array of data on the business and figure out what is really going on, and what that suggests about what might happen in the future.  Most importantly, they how to tell the story, and because they are not in the weeds about, say, comp plans, they can stay big picture and compare the right broad metrics across companies, or industries.  The part they play is not more important – but as a company gets bigger, it becomes at least as important.  It is challenging to be a very effective operator and a good analyst at the same time.

Over a drink many years ago, a colleague I respect suggested that I had to choose between being an analyst (which I think I was then) and an operator (which I think I am now).  I like to work with build stage companies where making things happen is valued over broad-based analytics, so this suits me well.  In raising money, you need just enough analyst so that you can point to broad metrics, but much of attracting and closing captial is about managing a process and a pipeline.  I still have some of this DNA as well even if I don’t work these muscles as often as I could.

In a few of the companies I work with, I collaborate with Board members or advisors.  In almost all cases, they like to say that they are entrepreneurs or operators at heart.  (Note: maybe they are, but if you’re a venture capitalist and not a founder of your firm, almost by definition you are not an operator.  Self-awareness is important).  The best ones collaborate by providing a view across similar businesses or industries using data that the management team already has.

Put another way: effective (and self-aware) analysts paired with effective (and self-aware) operators make a great combination.