Amp it Up

What's up, everyone? Welcome back to another episode of Founders Journal. I'm Alex Lieberman, co-founder and executive chairman of Morning Brew. Before hopping into the episode, I would love to hear from you. Shoot me an email. Introduce yourself. There is nothing better than getting to meet my listeners and getting to learn about them. Just say what's up at bare minimum, or share a sentence or two about who you are, and I will 100% respond. My email is alex@morningbrew.com. Now let's get into it. Yesterday, it was announced that Frank Slootman, the CEO of Snowflake and former CEO of Data Domain and ServiceNow, was going to retire. On the news, Snowflake stock was down 24.5% or $17 billion in market cap. Think about how profound that is to be such a successful and well-respected CEO that your existence at a company is worth almost $20 billion. So in honor of Slootman's amazing leadership over the years, defined by high standards and high intensity, I'm going to read an article that he wrote in 2018 about the way in which he runs his companies. I may have a comment here or there, but in general, I'm going to let Frank's words do the talking. So let's hop into it. Amp It Up by Frank Slootman, May 13th, 2018. As the former CEO of both Data Domain and ServiceNow, 2 successful tech companies in recent years, I am often confronted with questions. What did you guys do? What is the secret sauce? How did you do it? We never thought of ourselves as that different. We certainly didn't think we had stumbled on a silver bullet. Did we just get incredibly lucky twice in a row? With hindsight and reflection, there are observations worth making that may benefit others. Bottom line, there is room up in organizations to boost performance by amping up the pace and intensity. Considerable slack naturally exists in organizations to perform at much higher levels. The role of leadership is to convert that lingering potential into superlative results. The opportunity is right under our noses, but for some reason it does not enter the consciousness. This notion is not limited to business enterprises. We see in professional sports all the time how teams go almost overnight from losing to winning with basically the same roster but different leadership. Call it what you want, the X factor, whatever. It is real. Anybody can dial into this, but not many do. I'm just gonna comment here that I think the reason that most leaders do not, quote unquote, amp it up is either because they settle into and get comfortable with a lower than exceptional standard that just becomes the norm for them, so they don't spot what exceptional performance looks like, or leaders— and Frank, we'll talk about this in a minute— are worried about how people perceive them. They want to be more popular than they want to be exceptional. And so leaders are afraid about calling out mediocrity. In an effort to stay popular. It is not easy because you will drive people out of their comfort zones. There will be resistance. Change is hard. Some will vote with their feet. If you want to be popular as a leader, this may not be for you. The role of a leader is to change the status quo, step up the pace, and increase the intensity. Leaders are the energy bunnies and pacemakers of the organization. Some people drain energy from organizations, not leaders. They engulf organizations with energy. Data Domain and ServiceNow. Data Domain and ServiceNow, the companies we ran between 2003 and 2017, had things in common. They were outliers on performance, though they were quite different businesses in different markets and in different eras. They shared the same CEO and a good portion of the executive and extended management teams. Culturally, they hung together and were like-minded. Therein lies a clue. Data Domain took in $28 million of net capital and 6 years later returned $2.4 billion to shareholders. That is absurd. Revenue grew from $0 to $600 million annually. The company went public on Nasdaq in mid-2007. Post-acquisition by EMC in 2009, the business grew to multiple billion dollars in annual revenues a year. It was a storage business with software margins. We joined Data Domain pre-revenue and it had typical cross-the-chasm challenges. I wrote about that episode in a 2009 book, Tape Sucks: A Silicon Valley Growth Story. ServiceNow, on the other hand, a San Diego-founded cloud software company, was already on a tear when I joined as CEO in early 2011. The proverbial chasm had been scarcely a speed bump, but ServiceNow was approaching $100 million in revenues with the maturity of a popsicle stand. I've never heard that saying before, but love it. The operational challenges were epic, but we gradually reined in the bucking bronco and hit overdrive on growth. ServiceNow was also bootstrapped with no more than $6.5 million in external funding, only the second cloud software company after Salesforce to hit $1 billion in revenues. ServiceNow reached $2 billion in revenue just 2 years later. High growth at scale that is continuing to this day. ServiceNow went public on the New York Stock Exchange mid-2012. The stock price has increased tenfold since then, with a market cap exceeding $100 billion. Well, that is a mic drop resume for Frank Slootman, if you didn't already know who he is. Okay, let's keep it going. Amping it up. Our companies were built and run for performance, full stop. We were single-minded in our pursuit of goals and drove our people to become the best version of themselves. For the best people, it was an incredibly liberating experience. Most everybody subscribes to the notion of a so-called performance culture, even claim to have one, but few appreciate what that means, what that takes, and what you have to give up. I love this comment, this line he's about to say. Our companies were all Marine Corps, Not much Peace Corps. We did not come in peace. Emerging companies like ours fought giant incumbents for their existence every single day. We were paranoid and felt constantly threatened with our survival. You hear over and over great leaders talk about the importance of paranoia. You could not escape the combat mentality at our companies. We were in a shitfight all the time. I feel like I'm listening to a drill sergeant talk about business. Few things drive home a performance culture like the compensation philosophy. In our case, the company had to earn it first so that the bonus pool could be funded each quarter. We would fund the pool depending how well we did that period. Then the process of allocation started. Managers were not allowed to, quote unquote, peanut butter out the money with everybody getting the same share of the pool. We insisted on a bell-shaped distribution. We did not always pay full bonuses, and I would personally explain why in our quarterly all-hand meetings. It is not that we worried about bonuses for substandard performers, but that we were under-bonus our A-players and to To pay A-players more, managers had to take that money from the other end of the performance spectrum. It allowed us to be informed of who the strong performers were, as well as those not in good standing. Each employee had a money conversation each quarter with their manager relating to performance. These were in lieu of written performance reviews. When it came time to separate with a person, it was a lot easier, cheaper, and quicker when there was a below-average bonus history. It's tough for a manager to have performance compensation conversations with each employee every quarter. Employees have grown up in companies where bonuses are not really earned; they are counted on so much as they may as well be part of the base pay. Sure sign of an entitlement culture. I just want to call it that. I think Frank is spot on here that bonuses for employees have become quasi-expected parts of total compensation, not things that actually change from year to year. And so, in a really bad way, at a lot of companies, whatever you were given in your bonus in a previous year, employees come to expect that their bonus is going to be at least what they received in the last year. Regardless of what performance of the business or that employee themselves was in that given year. ServiceNow internally advocated employees being drivers, not passengers. I love this analogy. Passengers end up in the same place as drivers, but they are dead weight. If that was a subtle distinction, there would be work to do. Ask yourself at the end of the workweek, did it really, really matter that I was there at the end of the month? Tough questions many would rather avoid. It is a call to action to make sure you can answer that question to yourself and others with overwhelming conviction. Changes our sense of security, confidence, and self-worth. What stands out to me without Frank saying it is like he just created a culture where there was full accountability and there was nothing to hide behind. And I just want to say that analogy again and the question he asked, because I think it's so good. He says ServiceNow internally advocated employees being drivers, not passengers. Passengers ended up in the same place as drivers, but they are dead weight. Ask yourself at the end of the work week, did it really, really matter that I was there at the end of the month? Tough questions many would rather avoid. I think that is such a good exercise for every employee, and it reminds me of what Harley Finkelstein has said at Shopify, which is the idea that every year every employee should think about did they requalify for their job at the company? There are many other dimensions and aspects of a full-on performance culture, but for the purpose of this discussion, I will outline 3 vectors that together make up a performance execution framework. Our companies ran at higher velocity with higher standards and a narrower focus than most. Going faster, maintaining higher standards, and with a narrower aperture sounds simple. The question is how you go about amping up your organization. How much faster do you run? How much higher are your standards? How hard do you focus? It is a performance triad because they amplify each other. The compound effect can be electrifying. It is breathtaking how slow, substandard, and unfocused many companies out there get through the day and think nothing of it. The lack of energy is palatable. There's performance upside everywhere. As a leader, your opportunity is to reset in each of these dimensions. You do it in every single conversation, meeting, and encounter. You look for and exploit every single opportunity to step up the pace, expect a higher quality outcome, and narrow the plane of attack. Then you relentlessly follow up and prosecute at every turn. Yes, it is confrontational. That is pretty much what CEOs do all the time— confront people, issues, and situations. Just another reminder from Frank that if you are trying to win a popularity contest, you are in the wrong role as a CEO. It's not a quick transformation. In fact, it never ends. The shock to the system will be profound, or you are perhaps not taking it far enough. People may squeal, but consider that a sign you are bringing it on. A leader can ignite a culture, but the management ranks need to embrace it or the energy will not reverberate through the org. You can go slow, Boil the frog, so to speak. But how can we be a fan of slow? Not everybody will come along. The right people will rise to the occasion. Culture sorts like-minded people from the rest of the pack. You will find out who your keepers are and some who are not. And now he's going to go into kind of the 3 vectors of velocity, quality, and focus. Increasing velocity. Without leaders driving the tempo in an organization, it will naturally settle into a lethargic pace. If you have ever worked in or with government, you have seen extreme examples of this. There is no urgency about anything other than quitting time. It's suffocating being in such organizations as if everybody is swimming in glue. People get visible pep in their step. They exude energy. Somebody would ask me if he could get back to me about something next week, and I would reply, how about tomorrow morning? Might be completely unreasonable. Did not matter. The point was to change people's sense of urgency. We were always compressing cycle time on everything. Did we sometimes take it too far? Of course we did. You don't know what's possible until you try. Same thing applies in interactions with other stakeholders, especially customers who all have expectations about reasonable response times. It is easy to differentiate yourself by changing cycle times because few bother to do it. Stepping up the pace doesn't just cause people to do things faster. They start doing things differently. They become more demanding of others. This is precisely what we want in an organization. ServiceNow had a relentless get-shit-done culture and And they were proud of it. The culture enthusiastically embraced those who got things done, and it repelled those who did not. The pace has to be profound, palatable, breathtaking, order of magnitude type change. You want to go 20% faster? It's barely discernible, and you will be back in your old mode before long. In the world of software, we often sit around tables talking about what we need in the product and when we could expect to see it. Development teams tend to come back with unacceptable timeframes because they are doing things linearly and are not thinking with enough urgency. But with pressure applied, somebody all of a sudden figures out how to do things differently and get things dramatically sooner. Pressure changes things. This reminds me of the recent podcast episode with Lenny Rachitsky and Brian Chesky, the CEO of Airbnb, where Brian is known for pushing his team to think 10x bigger than they're thinking. So if they have a goal for getting a million users, he'll say, what about 10 million? And just the idea of framing something to an extreme gets people to work in a different way, even if it is not realistic. And this feels very reminiscent of now what Frank Slootman is saying in this essay. Over time, an organization settles into a tempo and pace that is theirs and generally understood inside. You don't have to work at it as much anymore as everybody operates at a cadence the organization generally expects. Of course, in high-growth companies, new people show up all the time. They need to be properly indoctrinated. It is not a trivial change. Organizations resist going faster than their natural, quite glacial pace. We had some new hires quit in a matter of weeks, confessing they could not handle the pace and intensity at ServiceNow. Too big a shock to their system. You need an energetic cast that wants to let it rip. These were exactly the people we wanted to attract and retain. You don't drive the pace, you start losing the people who need a fast-paced culture, and the best people do. Quicking the pace also drives a narrow focus. You simply can't move very fast when you're pushing on too many fronts at the same time. More about this further down. Now, the second thing, the second leg of the stool for amping it up, raising standards. When stepping up the pace, inevitably excuses are made about quality. We can't possibly move this fast and maintain quality. We would agree because we are going to move faster and raise quality. It has a compound effect on productivity. It's not defying gravity. It's beating reams of slack out of the system until the pressure is on. We don't even know how much better and faster we can be. One place where we stood out was our commitment to the customer. It was the highest standard of service and support we knew how to apply. There was nothing more important than making customers successful. Customers had to sing our praises, really feel we had their backs. We wanted them to not just like us, they had to love us. Our net promoter scores were high, and that was no accident. It is hard to maintain such standards, but our culture had it deeply ingrained. Next one I'm about to read is one of my favorite paragraphs in this entire essay. I enjoyed quoting the late Steve Jobs, who had just 2 classifications. It's either insanely great or it's total shit. There is no middle ground. Steve took it away. Are people easily related to this way of talking? Don't we all want to be insanely great? The word started to creep into daily interactions when people judge somebody else's work to not be insanely great. A polite way of saying that it was total shit. Another way we would pursue this conversation was asking people whether they liked their work or whether they loved it. Like it? Yes. Love it? No. So let's resolve to love what we produce, not just like it. Feel strongly, even passionate about what you are producing. It changes things perceptibly. Moving mental boundaries. That is what this is. Mediocrity is the silent killer. Organizations are not getting killed by their C players. Everybody knows who they are and performance eventually is addressed. The people who kill organizations are your B players. It's the scourge of the enterprise because there are many and they are generally accepted. Often they are seen as not bad enough to fire, but not good enough to keep. They are the ultimate passengers. I think that is so important and I think it's so true when you have mediocre employees, but not really bad employees. These are the people that you make justifications to not fire for a long time because there is always some higher priority bad employee that you need to focus your energy on. B players need to be paired. They either become A players or they become C players and get flushed out. You can help by raising standards, by refusing mediocre outcomes. Channel your inner Steve Jobs. And the third leg of the stool, narrowing the focus. The fastest way to move a dial is narrow the focus. People naturally resist focus because they can't decide what is important. Therein lies a problem. People can typically tell you after some deliberation what their top 3 priorities are, but they struggle to decide on just one. They may also be incorrect about their priorities, so there is potential for misallocation of resources. What is too much and what is too little focus? Do you ever even discuss this? Most teams are not focused enough. I rarely encountered a team that employed too narrow an aperture. It goes against our human grain. People like to boil oceans. Just knowing that can be your advantage. When you narrow focus, you are increasing the resourcing on the remaining priority. It doesn't have to time slice and compete anymore with a bunch of other stuff. And then things begin to move. Stuff is getting done and we move to the next thing. Many people and organizations are focused a mile wide and an inch deep. It can't be a surprise when they progress at snail's pace. Logjams get broken when you sift through the reams of activities and you create fewer and clearer objectives. Do less at a time. I've often felt that providence moves too when you unclutter priorities like an invisible hand. All of a sudden things are on the move. It's not just an effectiveness problem. We need to sort out what is truly important and what isn't. And when we procrastinate on that by declaring multiple priorities, makes us sound thoughtful and comprehensive, but it completely lacks punch and impact. Pointed critical thinking is rare. I've been in board meetings where CEOs would declare as many as 10 priorities. Reminds us of Mark Twain, who wrote us a long letter because he had no time for a short one. At the company level and as a CEO, I worked to create blinding clarity and singularity of purpose. My job as a CEO was to increase the value of the franchise. That's because I was appointed to work for the investors, which included our employees. I only did things and applied resources that had a compelling line-of-sight relationship with that goal. In tech, value is a function of growth. So we ran our companies for growth, period. It was an easy call when spending proposals came forward that had no discernible relationship with the mission. Investors were obviously in violent agreement. We compensated the ServiceNow exec team on just one metric. It was unquestionably the purest performance metric for a cloud software company. Our board fought me on this. They were convinced a grown-up company had to have a balanced scorecard, arguably the worst idea to ever come out of academia. People say they want focus, but their actions do not bear it out. Quite the opposite. Focus is hard once you understand what that means. What are you not going to do? Similarly, we ran the companies for attracting and retaining talent regardless of gender, race, or ethnic origin. We valued people for their contribution to our goal, not because they had a preferred skin color, gender, or ethnic background. Either you are completely focused on and aligned with your goals, or you let in all kinds of noise that dilutes your limited resources. I have nothing against diversity and inclusion as long as it results from our goal-oriented modes of execution. We are not a university or a nonprofit. This is a business. You lack focus at the top. It will be much more so at the bottom. Data Domain and ServiceNow hired you on merit, not because you checked a box. Good people don't want to be hired because they fit a demographic. We made a lot of money for our people and we delivered more social justice this way than we ever could have pursuing other people's ideas of that. I also did not make public statements about anything that did not relate directly to what we do. Focus is a discipline. I avoided having high-minded societal ambitions as part of my role. I am not the leader of the free world, just a CEO working to increase the value of the franchise entrusted to him. Up to this point, I've talked about leaders driving these modes of execution. Leaders are not people with management titles per se. Leaders set standards of performance for others to follow. High-performance organizations exhibit leadership coming from all directions. It is not an exclusively top-down phenomenon. Anybody, any time can decide to be a leader. It is just a different mode of getting up and going to work in the morning. In recent years, I've advised CEOs and management teams on these topics and many others. They asked and we told them. We could sometimes hear a pin drop as people internalized these modes of execution. It made them uneasy. There was a mixture of being intrigued but fearing the perceived fallout. Fear is not good counsel. Casual observation shows that it is hard for leaders to act on this. It struck them as unduly hard-assed and they feared backlash, people walking out the door and so on. Everybody wants results, but not everybody wants to do what that takes. Still, I am also seeing leaders swarm to this, dramatically amp up their org, produce amazing results, and never look back. Performance-centric thinking like this doesn't trend well with prevailing attitudes. Companies have become more fixated on their employees' NPS scores than their customers. They coddle their people. They get caught up in things that have nothing to do with their mission. It takes conviction and courage to execute like this. As William Wallace said in Braveheart, people don't follow title, they follow courage. You will be immensely popular when good results come in. That's all people want from you anyway. And that is Amp It Up by Frank Slutman. If you enjoyed the essay and want to go deeper into Slutman's philosophy, I highly recommend you read his 2022 book, Amp It Up, which you will absolutely love. As always, thank you so much for listening to Founders Journal, and I'll catch you next episode.